If state law requires that local governments prepare budgets on a basis that differs from GAAP, the budgetary comparison schedule should

• A. Be reconciled to GAAP without presenting budget basis figures
• B. Be included with actual figures presented on the budget basis and then reconciled to the GAAP basis
• C. Be shown on GAAP basis with no reconciliation
• D. Be omitted from the budget documents

Answer: (B)

When the legally adopted budget is prepared on a basis different from GAAP, the budgetary comparison schedule must present actual results on the budgetary basis and then reconcile those amounts to GAAP. This arrangement lets readers see how the government performed against the legally adopted budget in its chosen budget basis, while also showing how GAAP recognizes revenues and expenditures. The schedule typically includes the original and final budgets on the budgetary basis, the actual results on that same basis, and a reconciliation to GAAP that explains the differences (such as timing differences, encumbrances, depreciation, or capital outlay treatment). Omitting the budget basis figures or presenting GAAP numbers without a reconciliation would obscure the link between the legally adopted budget and the actual results, which is why this approach is required.