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CITY OF RO SEV ILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2006 NOTE 2 - RECONCILIATION OF GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS - (Continued) B. Explanation of certain differences between the governmental fund statement of revenues, expenditures and changes in fund balances and the governmental -wide statement of activities The governmental fund statement of revenues, expenditures, and changes in fund balances includes reconciliation between net changes in fund balances -total governmental funds and change in net assets of governmental activities as reported in the government -wide statement of activities. one element of that reconciliation explains that "governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense." The details of this difference are as follows: Capital outlay $ 5,620, 842 Depreciation expense (3,572,926) Net change in fund - balances -total governmental funds and change in net assets of governmental activities $ 1,7472916 NOTE 3 - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. Budgetary information Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for the governmental funds classified as the general fund and special revenue funds. No budgets are prepared for other governmental funds which include the debt service and capital projects. All annual appropriations lapse at fiscal year -end. On or before mid -May of each year, all departments and agencies of the City submit requests for appropriations to the City's manager so that a budget may be prepared. Before September 15, the proposed budget is presented to the city council for review and approval. By September 15, the proposed budget and tax levy must be submitted to the county auditor. The Council holds public hearings and a final budget and tax levy must be prepared, adopted and submitted to the county auditor, no later than December 28. The appropriated budget is prepared by fund, function and department. The City's department heads may make transfers of appropriations within a department with approval of the City's manager. Transfers of appropriations between funds require the approval of the Council. The legal level of budgetary control (i.e. the level at which expenditures may not legally exceed appropriations) is at the fund level. The Council made several supplementary budgetary appropriations for the general fund and various special revenue funds in 2006. Those supplementary budgetary appropriations were not significant. 54