(A) General. The city's accounting systems shall be maintained in accordance with generally accepted accounting principles ("GAAP") as applied to governmental units. The Governmental Accounting Standards Board ("GASB") is the accepted standard setting body for establishing governmental accounting and financial reporting principles.
(B) Effect of GASB Statement #10.
(1) GASB Statement #10, entitled Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, provides guidance for recording the cost associated with risk retention activities. The standard requires a governmental unit to record liabilities and expenses when risk of loss has not been transferred to a third party and both of the following conditions are met:
(a) Information available before the financial statements are issued indicates that it is probable that an asset has been impaired or a liability had been incurred at the date of the financial statements. It is implicit in this condition that it must be probable that one or more future events will also occur confirming the fact of the loss; and
(b) The amount of loss can be reasonably established.
(2) The standard allows the use of the general fund or an internal service fund to account for the risk management program. In order to avoid the potential of significant variances within the general fund annual budget, which can occur from inconsistent claims activities, the city elects the use of internal service funds.
(Ord. passed 4-7-2003)