FY 2021 2122 ADOPTED OPERATING AND FY 2021 2526 CIP BUDGETS

Glossary (continued)

Audit A systematic examination of the City’s financial records and processes which concludes in a written financial report. It includes test of management’s internal accounting controls and is intended to: 1. ascertain whether financial statements fairly present financial positions and results of operations; 2. test whether transactions have been legally performed; and, 3. identify areas for possible improvements in accounting practices and procedures Balance Sheet A statement which presents the financial position of an entity by disclosing its assets, liabilities, and fund equities as of a specific date. Bond Debt (Debt Instrument) A written promise to pay (debt) a specified sum of money (called principal or face value) at a specified future date (called the maturity date) along with periodic interest paid at a specified percentage of the principal (interest rate). Bonds are typically used for long-term debt to pay for specific capital expenditures. Budget Document The official document prepared by the Finance and supporting staff which presents the proposed budget to the City Council. Budget (Operating) A plan of financial operation listing an estimate of proposed expenditures (appropriations) for a two-year period and the proposed means of financing them (revenue estimates). 1. Under ‘modified accrual” amounts are recognized as revenue when earned, only so long as they are collectible within the period or soon enough afterwards to be used to pay liabilities of the current period. 2. Encumbrances outstanding at year-end are reappropriated in the next year and reported as reservations of fund balance. Budget Calendar The schedule of key dates or milestones which the City follows in the preparation and adoption of the budget. Budget Message A discussion of the proposed budget presented by the City Manager in writing as a part of, or supplement to, the budget document. The budget message, also referred to as the Transmittal Letter, explains principal budget issues against the background of financial experience in recent years and presents recommendations made. BMR Below Market Rate Budgetary Basis of Accounting Morgan Hill budgets using the modified accrual basis plus encumbrances.

GENERAL INFORMATION 57