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-28- NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The City reports the following nonmajor proprietary fund: Recycling Fund – The Recycling Fund accounts for the recycling service charges, which are used to finance the City’s recycling operations. Additionally, the City reports the following fund type: Internal Service Funds – The internal service funds account for the financing of goods or services provided by one department or agency to other departments or agencies of the City, or to other governments on a cost reimbursement basis. The City’s internal service funds account for risk management, engineering, central garage, and technology services. E. Budgets and Budgetary Accounting Budgets are legally adopted on a basis consistent with accounting principles generally accepted in the United States of America. Annual appropriated budgets are legally adopted for the General Fund and all special revenue funds. Budgeted expenditure appropriations lapse at year-end, but may be adopted in the subsequent year. The City follows these procedures in establishing the budgetary data reflected in the financial statements: 1. The city administrator submits to the City Council a proposed operating budget for the fiscal year commencing the following January 1. The operating budget includes proposed expenditures and the means of financing them. 2. Public hearings are conducted to obtain taxpayer comments. 3. The budget is legally enacted through passage of a resolution. The appropriated budget is prepared by fund, function, and department. The City’s department heads, with the approval of the city administrator, may make transfers of appropriations within a department. Transfers of appropriations between funds require the approval of the City Council. The legal level of budgetary control is the fund level. Budgeted amounts are as amended by the City Council. 4. The city administrator is authorized to transfer appropriations within any fund budget. Adjustments to appropriations between funds, and budget additions and deletions must be authorized by the City Council. 5. Formal budgetary integration is employed as a management control device during the year for the General Fund and special revenue funds. 6. Legal debt obligation indentures determine the appropriation level and debt service tax levies for the Debt Service Fund (if necessary). Supplementary budgets are adopted for the proprietary funds to determine and calculate user charges. These debt service and budget amounts represent general obligation bond indenture provisions and net income for operation and capital maintenance, and are not reflected in the financial statements. 7. A capital improvement program is reviewed annually by the City Council for the capital project funds. However, appropriations for major projects are not adopted until the actual bid award of the improvement. The appropriations are not reflected in the financial statements. For the year ended December 31, 2018, actual expenditures exceeded budgeted expenditures in the EDA Revolving Fund and EDA TIF District No. 4 Fund by $34,208 and $90,559, respectively. These variances were financed by revenues in excess of budget and available fund balance.