Budget Development
Budget Process
Normally every two years, the City Council would approve a Bi-Annual Budget that would serve as a work plan as well as a financial plan. Due to the current economic climate and continued downturn, the City Council has requested only an Annual Budget presentation.
The Annual Budgets are developed utilizing the City Council's goals and objectives of promoting public health and safety; fostering economic prosperity; ensuring the physical, cultural, and social well-being of the City; and maintaining and operating the City's public facilities and infrastructure, in order to serve and support the public and private sectors within the city.
Definition & Purpose of a Budget
The Budget process is the formal method through which the City establishes its goals, program priorities, and identifies the resources required to achieve the desired service levels for the upcoming fiscal period. Essentially, it is a process through which policy is made, programs are articulated, and resources are identified in order to put them into effect.
One of the widely accepted definitions of a Budget is utilized by the Municipal Finance Officers Association on Governmental Accounting states:
"A Budget is a plan of financial operation embodying an estimate of proposed expenditures for a given period and the proposed means of financing them."
The Biannual Budget is one of the most important management tools available to City policymakers and management personnel. It serves as the City's fiscal plan and identifies how services will be financed. The Biannual Budget also provides the City Council with an opportunity to review the costs and benefits of various programs.
From a practical point of view, the Biannual Budget process is intended to:
- Provide the City Council with information regarding the City's total fiscal plan for all Funds;
- Allow the City Council to comprehensively review the City's public services and identify what has been and will be accomplished by each program;
- Comparatively, evaluate different programs and objectives in relationship to one another and in relation to associated costs;
- Provide an opportunity to reconsider and reevaluate services provided;
- Provide a link between the City and the community. The City develops the budget utilizing citizen input regarding the types of public services that will be offered and services that should continue to be provided;
- Serve as an instrument for carrying out public policy, legally, honestly, and efficiently. In this regard, the budget provides the legal basis for revenue, and expenditures; allows for a systematic reevaluation of internal operations from the perspective of efficiency, effectiveness, and economy; and provides the framework for accounting and fiscal accountability.
The adopted Biannual Budget provides a clear and precise document of the services that will be provided, along with identifiable program measures, and a comprehensive outline of related personnel, supplies, and capital outlay expenditures.
Budget Principles, Goals & Objectives
The following principles, goals, and objectives are the underlying foundation for Budget Development:
- The Budget must be balanced; overall estimated revenues equal appropriations;
- Wherever possible, the Budget should be balanced with ongoing and known revenue sources equaling ongoing and reasonably expected expenditures;
- Onetime money should not be used for ongoing operations;
- Service levels should be maintained at the highest level, within funding constraints;
- Reduce expenditures and maximize revenues through organizational consolidation of functions and/or streamlining City operations;
- Prudent Contingencies and Reserves should be maintained to guard against future uncertainties (10% and 15% of overall City appropriations respectively);
- Accuracy and accountability should be used in estimating and monitoring both revenues and expenditures throughout the fiscal year.
Budget Control, Adoption & Responsibility
The City maintains extensive budgetary controls. The objective of these controls is to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the City Council. Activities of the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Projects are included in the annual appropriated budget. The level of budgetary control (i.e., the level at which expenditures cannot legally exceed the appropriated amount) is at the Fund and Department level. The City also maintains an encumbrance accounting system as one method of maintaining budgetary control. Encumbered amounts lapse at year-end, however, outstanding encumbrances generally are re-appropriated, with City Council approval, as part of the following year's budget.
It is the primary responsibility of each Department Director to maintain their departmental expenditure levels within the approved budget and to collect the full amount of revenues that have been estimated/budgeted.