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~6"7 budget by the first week of June and thereafter schedules one or two public study sessions to review the recommendations and obtain public comments. The Finance Director usually submits the City Council approved budget for final public hearing and adoption in mid-July. From the effective date of the budget, the several amounts adopted as expenditures become appropriated to the several departments offices and agencies for the objects and purposes named. All appropriations lapse at the end of the fiscal year to the extent that they have not been expended or lawfully encumbered. At any public meeting after the adoption of the budget, the City Council may amend or supplement the budget by resolution adopted with a majority vote of the members of the Council. Each fiscal year the City Council employs an independent certified public accounting firm which examines the accounting records, internal controls and the financial statements. As soon as practicable after the end of each fiscal year, these financial statements and the independent accountant's report are submitted to the City Council. At the request of the department head through the City Manager, the City Council may, by resolution, transfer appropriations between subprograms and funds, but shall not change total appropriations. Any increase or decrease to the total appropriations provided for in the budget must be carried through by ordinance passed by the City Council. The City Manager may authorize the transfer of funds between object categories within a subprogram of a department. Financial Statements Attached as APPENDIX B are portions of the audited financial statements of the City (the "Financial Statements") for Fiscal Year 2004-05, which include financial statements for the Enterprise, prepared by the City Department of Finance and audited by Caporicci & Larson of Oakland, California (the "Auditor"). The Auditor's letter concludes that the Financial Statements present fairly, in all material respects, the financial position of the City as of June 30, 2005, and the results of its operations and the cash flows of its proprietary fund type for the Fiscal Year then ended in conformity with accounting principles generally accepted in the United States of America. The Financial Statements should be read in their entirety. The City has not requested nor did the City obtain permission from the Auditor to include the audited financial statements as an appendix to this Official Statement. Accordingly, the Auditor has not performed any post- audit review of the financial condition or operations of the City. In addition, the Auditor has not reviewed this Official Statement. Enterprise Accounting The Enterprise is accounted for as an enterprise fund with a separate set of self- balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. The enterprise funds are used to account for operations (a) that are financed and operated in a manner similar to private business enterprises--where the intent of the governing body is that the costs of providing goods or services to the general public on a continuing basis are to be financed or recovered primarily through user charges, or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred or net income is appropriate for capital maintenance, public policy, management control, 32