Governments that issue financial statements prepared in accordance with generally accepted accounting principles (GAAP) are required to present budgetary comparisons for their general funds and for any major special revenue funds for which there are legally enacted budgets, either as part of either basic financial statements or required supplementary information. (1) However, the presentation of these mandatory budgetary comparisons is permitted to be at the same high level of aggregation as the governmental funds statement of revenue, expenditures, and changes in fund balance, which means that they generally do not provide enough detail to demonstrate that a government has fully complied with its legally adopted budget.
Therefore, those governments that issue a comprehensive annual financial report (CAFR) are required to include, as supplementary information, budgetary comparison statements that present actual expenditures for the year on the government's budgetary basis, compared to its final amended budget, and detailed down to the legal level of budgetary control for (1) the general fund and any major special revenue funds for which the mandatory budgetary comparisons are not presented at the legal level of budgetary control, plus (2) all other governmental funds with appropriated budgets. (2) These supplementary budgetary comparisons are, not infrequently, a source of reporting deficiencies seen in CAFRs that are submitted to GFOA's Certificate of Achievement for Excellence in Financial Reporting award program, especially with regard to properly identifying the legal level of budgetary control.
Unlike the mandatory comparisons, supplementary budgetary comparisons are not required to present the original adopted budget, nor to reconcile actual results to GAAP. (3) However, supplementary budgetary comparisons must be presented in sufficient detail to demonstrate compliance at the legal level of budgetary control, whereas presentation by function or program is sufficient for the mandatory budgetary comparison.
ACTUAL RESULTS PRESENTED ON THE BUDGETARY BASIS (4)
Again, the key purpose of the supplementary budgetary comparison reporting is to demonstrate compliance with legally adopted budgets, for which actual expenditures need to be measured and presented in the same manner as the budget is presented. Differences arise when the basis of budgeting (budgetary basis) differs from the basis of accounting prescribed by GAAP. (5)