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NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.(CONT.INUED) N. Budgets and Budgetary Accounting Budget amounts ai-e presented on tile-niodified accrual bafsis-of accounting. Each fall, the City Council adopts a General. Fund budget for the.following fiscatyear beginning January 1. The City has established budgetary control at the fund level. Budget appropriations lapse at year-end. Expenditures exceeded budgeted amounts in the General Fund byM,667.. O. Risk Management The City isexposed to various risks of loss related to torts: theft of -damage to,.and destruction of assets; errors and omissions; injuries to employees; and natural'disasters. The City continues to carry commercial insurance, for all risks of: loss, including disability and. -employee health insurance. Settled claims resulting from these ri$ks-have nqt exceeded insurance coverage -in any of the past three.fiscal. years. There were -no significant.reduotioris.in insurance coverage in the:cormnt year. P. Use of Estimates The preparation of firiancial'statements; in accordance. with accounting principles generally accepted in the: United States of America,. requires management to make estimates and assumptions that affect amounts reported in the financial statements during the reporting.period. Aetual results could differ from such estimates. Q. Interfund Receivables and Payaples In thw fund* fiinancial statements, activity between funds that is. representative of lending or borrowing arrangements is reported. as either "due:tolfrom other funds" (current. portion) or "advances to/from.other. funds." All other outstanding balances between funds are reported as "due to/from other funds." Any residual balances outstanding between the governmental activities and. business -type: adtivities are reported in the government -wide financial statements as "internal balances." R. Deferred Outflows)InfloWss of Resources. In addition to .assets and liabilities, statements of financial position, or balance sheets, will sometimes reportdeferred outflows or inflows of resources. Tbeseseparate financial statement.elenients represent a wnsumption or acquisition of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) or an inflow of financial resources (revenue) until then. Unavailable revenue arises only under a modified accrual basis of accounting and, therefore, is only reported in the governmental funds financial statements. The governmental finds report unavailable revenue. from two sources: property taxes and special assessments. These amounts are deferred and recognized as inflows of resources in the period .they become available. -24-