220-01
BUDGET PREPARATION AND CONTROL CURRENTLY UNDER REVIEW

Department: FINANCE

Effective Date:    8/1/85

Supersedes:    

Staff Contact:    M. Mulcahy

Approved by:    Barbara Shinpoch

1.0 PURPOSE:

To define levels of budget preparation responsibility and provide guidelines and procedures for expenditure control and budget amendments.

2.0 ORGANIZATIONS AFFECTED:

All departments/divisions and City officials.

3.0 REFERENCES:

RCW 35A.33, Optional Municipal Code.

State Budgeting, Accounting, Reporting System (BARS).

4.0 POLICY:

To provide a comprehensive process for financial planning, control and evaluation of the City's revenues and expenditures which complies with legal requirements and provides adequate financial information and controls.

4.1    Budget Preparation:

4.1.1    Department head required to prepare Line Item Budget request.

4.1.2    Mayor/Finance staff prepares and submits balanced Preliminary Budget for City Council consideration.

4.1.3    City Council adopts Final Budget at fund level, by Ordinance.

4.2    Budgetary Control and Expenditure Restrictions:

4.2.1    Overexpenditures are not allowed at the fund level. Transfer of funds or appropriation of unappropriated fund balance of excess revenue (if available) must be made.

4.2.2    Overexpenditures are allowed within divisions of a department, within a fund, provided department and fund total will not be overspent, except:

All unbudgeted capital items in excess of $500 shall be approved by the Mayor before expenditure is made. A written request shall be submitted to the Mayor explaining the need for any unbudgeted items. If the department or fund budget will be overspent, a transfer of funds will be required.

4.2.3    Salary levels (grade and step) as approved in the adopted Budget cannot be increased without Personnel Department review and approval, Finance Department approval that funding is available, Mayor and Council approval. (See Reclassification procedures.)

4.2.4    Overexpenditures caused by mandatory overtime, retirement payoffs, or other mandatory salary and benefit expense do not require Mayor or Council approval unless a transfer of funds is required. Whenever possible, sufficient funds should be included in the department budget request to cover expense of said items.

4.2.5    Part-time temporary help overexpenditures (not including project related personnel) are allowed if the department budget within a fund will not be overspent. This will require underspending other line items accounts to cover the excess expense. Prior approval is required if the part-time help overexpenditure is substantial or requires a transfer of funds.

4.2.6    Work in progress may be carried forward to the ensuing year without Council approval, provided:

The item was encumbered or committed to be spent during the current year and payment could not be made before the end of the current year, and

The amount of the item is material (over $500.00) and would cause a hardship on the following year's budget, and

the fund has unappropriated moneys in an amount large enough to provide the resource for the work in progress items (fund's actual beginning balance must be greater than the estimated beginning balance, in an amount sufficient to cover the work in progress), otherwise a new Council appropriation will be required.

4.2.7    Continuing appropriations, once established by ordinance, can be carried forward without further legislative action until altered, revoked or expended.

Example: Housing and Community Development Block Grants.

Construction projects funded by bond proceeds.

Other grant sources.

4.2.8    In the event it is determined during a fiscal year that budget resources will not meet expenses as proposed, a "freeze" may be placed on expenditures. Written procedure for expenditure control under this circumstance will be forwarded to all departments.

5.0 DEFINITIONS:

5.1    Line Item Budget: Expenditure appropriations at the Object/Sub-Object level of accounting. Example follows:

Fund Program Dept. Basic Acct. Element Object Sub-Obj.

000 000 04 514 10 40 00 Other Services & Chgs.

41 13 Profess. Serv./Audit

42 01 Postage

........43 19 Travel

5.2    Preliminary Budget: The Mayor's proposed revenues and expenditures for the ensuing year.

5.3    Adopted Budget: Final Budget for the fiscal year including all City Council amendments, as adopted by Ordinance.

5.4    Budget Amendment: Any adjustment to the Budget as adopted. Examples follow:

Ordinance: Council authority to increase, decrease, revoke or recall budgetary appropriations. Requires legal publication.

Resolution: Council authority to transfer moneys between funds; does not increase the Budget. Does not require legal publication.

Work in Progress and Continuing Appropriations: Have been approved by Council in prior year's budget process or by separate ordinance and therefore can be incorporated into the next year's budget without further Council action.

5.5    Cumulative Reserve Funds: Established for specific purposes and requires transfer of funds to the appropriate operating budget before being expended. If transfers from cumulative reserves are included in the adopted Budget (operating transfer-out of cumulative reserve fund and operating transfer-in to the operating fund revenues), the transfer can be accomplished during the fiscal year without additional legislative action unless the ordinance establishing the cumulative reserve fund stipulates otherwise.

5.6    Contingency Fund: Provides funding for unforeseen expenditures. Requires Council action (resolution) to transfer funds. The total accumulation in the fund cannot exceed the equivalent of 37-1/2 per $1,000 of assessed value of property within the City (RCW 35A.33.145).

5.7    Operating Budget: Group of funds which primarily provide basic City services such as fire, police, parks, streets, library, general administration and general obligation bond debt service. Also referred to as "tax supported" funds.

6.0 PROCEDURE:

6.1    Budget Preparation:

6.1.1    Establish Budget Policy Guidelines: Finance Director meets with Legislative and Executive officials to establish overall Budget Guidelines and Priorities, considering revenue trends, economic prospects, major projects, and service levels.

6.1.2    Budget Calendar, Instructions and Forms: Finance staff identifies appropriate preparation periods and deadlines which meet statutory requirements; prepares and distributes Budget Calendar to all involved parties. Finance staff prepares packet including Budget calendar, general guidelines and policies established by Legislative and Executive officials, steps in budget preparation, and instructions to complete required budget forms (forms included).

6.1.3    Department Budget Request and Review: Department heads and staff prepare a line item budget request at the division level which includes adequate justification for requests. Finance staff provides salary and benefit cost estimates. Finance staff reviews department requests and prepares a document including all requests and justifications for review by the Executive staff and the department heads.

6.1.4    Preliminary Budget: Mayor makes any amendments to Department Budget Requests. Finance staff incorporates Executive amendments, includes estimated resources and proposed expenditures with adequate justification; provides a description of major issues which Council must address; and completes and files balanced Preliminary Budget with the City Clerk 60 days before the ensuing fiscal year (on or about November 1). Preliminary Budgets are made available to the public not later than six weeks before January 1 (on or about November 19). City Clerk publishes Notices of Filing of Preliminary Budget and Notice of Public Hearing on Final Budget once a week for two consecutive weeks (first two weeks in November).

6.1.5    Property Tax Levy: Set by Ordinance on or before the Wednesday following the first Monday in October, or deadline as otherwise established by the King County Assessor (provides the City with property tax calculations).

6.1.6    Council Hearings on Proposed (Preliminary) Budget: City Council schedules hearings with department heads prior to final Budget Hearing (during month of November).

6.1.7    Final Hearing on Proposed (Preliminary) Budget and Proposed Use of Federal Revenue Sharing: City Clerk publishes Notice of Budget Hearing at least 10 days prior to final Budget Hearing, including Notice of Availability of proposed uses of Federal Revenue Sharing in context of the proposed Budget, a summary of the proposed Budget, copy of the entire proposed Budget. Final Budget Hedaring is held on or before the first Monday of December; may continue from day to day, but no later than the 25th day prior to the beginning of the next fiscal year.

6.1.8    Adoption of the Budget: The Budget is adopted by Ordinance following the Public Hearing and prior to the beginning of the next fiscal year; includes all Council amendments. City Clerk publishes Notice of Availability of Adopted Budget in summary form within 30 days after Budget adoption. Final Budget document is prepared and distributed.

6.2    Budget Control:

6.2.1    Adopted Revenues and Expenditures Recorded: Finance staff records adopted revenue estimates and expenditure appropriations in subsidiary ledger to provide for revenue and expenditure control during the fiscal year.

6.2.2    Departmental Monthly Expenditure Control Reports: Each department receives a monthly expenditure control report showing all transactions during the month. This report should be reviewed by the department, and any problems should be reported immediately to the Finance Department.

6.2.3    Quarterly Report Submitted to City Council: Report shall include revenue estimates and all receipts to date from all sources and expenditure appropriations and all expenses to date.

6.2.4    Work in Progress and Continuing Appropriations: (See Policies 4.2.6 and 4.2.7.) Requests for work in progress to be carried forward from the prior year should be made in writing to the Finance Department in January and should include the expenditure account number, account title, purchase order number if applicable, and amount to be carried forward.

6.2.5    Overexpenditures: (See Policies 4.2.1 - 4.2.5.) If a transfer or appropriation of funds is required, follow Agenda Bill procedures (Policy & Procedures #230-01).

6.2.6    Revenue and Expense Review: The Finance staff will review revenues and expenditures periodically and problems will be reported to the department so that proper action may be taken.

6.2.7    Expense Projections: Departments will be called upon as necessary to provide the Finance Department with expenditure information for investment of funds and to project the following year's beginning fund balances for budget purposes.