If a state law requires that local governments prepare General Fund and special revenue fund budgets on a basis that differs from GAAP, how should the budgetary comparison schedule be prepared?

• A. The actual amounts should be reported using GAAP basis
• B. The actual amounts should be reported using the government's budgetary basis
• C. The actual amounts should be reported using modified accrual basis
• D. The actual amounts should be reported using cash basis

Answer: (B)

The budgetary comparison schedule is meant to show how actual results compare to the legally adopted budget on the same basis used for budgeting. If the state law requires a basis different from GAAP, the actual amounts should be reported using the government's budgetary basis so readers can evaluate variances and compliance against the budget in the same framework that was approved. Using GAAP would distort the comparison because revenues and expenditures are recognized differently in GAAP than in the budget. The schedule should reflect the budgeted basis to provide a meaningful, apples-to-apples comparison of appropriations and actual activity.