Question 1: The fund equity section of the interim balance sheet of the Freeman Town's General Fund, as of June 30, 2005, was:
Fund Equity:
Appropriations $2,551,600
Less: Expenditures $1,349,000
Encumbrances 112,000 1,461,000
Available Appropriations $1,090,600
Reserve for encumbrances 112,000
Fund Balance 122,600
Total Fund Equity $1,325,200
Question 2: The fund equity section of the balance sheet for the same fund as of December 31, 2005, the end of the fiscal year, was:
Fund Equity:
Reserve for encumbrances $ 32,000
Reserve for Inventory of Supplies 60,000
Total Reserved Fund Equity $ 92,000
Fund Balance 81,600
Total Fund Equity $ 173,600
Question 3: A local newspaper ran a feature article and an editorial on the incompetence of the city administrators in "running the General Fund at a loss of over $1,150,000 in the last six months of 2005," since the Total Fund Equity decreased from $1,325,200 to $173,600.
Is the newspaper correct? Why or why not? If you need additional information in order to be sure of your answer, explain what additional information you need.