[Porma Fierles]

Hey, is the answer to this question off or is it just me?

Vale City legally adopts a cash-basis budget. What basis should be used in Vale’s combined statement of revenues, expenditures, and changes in fund balances—budget and actual?

Correct A.
Cash

B.
Modified accrual

C.
Accrual

D.
Modified cash

You are correct, the answer is A.

For various reasons, governments may prepare their annual operating budgets on an accounting basis other than modified accrual and may therefore present the budgetary comparison schedule using an accounting basis other than modified accrual. However, GAAP requires that governments prepare the combined statement of revenues, expenditures, and changes in fund balance on the modified accrual basis. Comparing modified accrual “actual” amounts with other-basis (such as cash) “budget” amounts would be meaningless. Thus, GASB 2400.103 requires that the budgetary comparison schedule be accompanied by information, either in a separate schedule or in notes to required supplementary information (RSI), reconciling the budget amounts with GAAP amounts.

In other words, if a government facility uses cash basis for the budget, it can use it for the actual. GASB 2400.103 requires modified accrual basis, so the government facility needs to include a separate schedule or notes to the required supplementary information that reconcile the budget amounts with the GAAP amounts (modified accrual basis).