Each year, the City undergoes a financial audit from an independent firm to examine and verify the accuracy and completeness of the City's financial statements and to receive an opinion as to whether the financial statements are presented in conformity with Governmental Accounting Standards Board (GASB) principles.
Sterling uses a modified accrual basis of accounting. Modified accrual is a combination of cash basis and full accrual basis. Revenues are recognized when they are both measurable and available. Measurable generally means that the cash flow from the revenue can be reasonably estimated. Available generally means the revenue is available to finance current expenditures, which is within 60 days. Expenditures, however are recorded on a full accrual basis because they are always measurable when they are incurred.
The measurement focus of governmental funds affects which transactions are recognized in the operating fund. If transactions are not a current resource or use, they are not reported in the operating fund of the fund financial statement (for example, capital assets or long-term liabilities). Under GASB 34, these noncurrent activities are reported on the government-wide statements only. Depreciation expense is not recorded for governmental funds under the modified accrual basis; instead, assets are expensed in the operating fund when purchased because they are a current use of funds.