Budget Process
Budget preparation and management is the primary responsibility of the Office of Budget and Evaluation Development. This year around function is a key component of the City's overall management of both finance and policy. Our goal is to develop and execute budgets that serve the City as the following four ways:
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Policy Document
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Financial Plan
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Operations Guide
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Communications Guide
Budgets are prepared and managed on the basis of a fiscal year, which begins on July 1st and ends June 30th. As a general term, the "budget" is comprised of two documents: the Annual Operating Budget and the Five-Year Capital Improvement Plan. The Annual Operating Budget specifies the collection of revenues and allocation of expenditures across services of government for a specific fiscal year, while the Five-Year Capital Improvement Plan outlines the sources of and uses for government funds in regards to major infrastructure projects over a five-year period, starting with the fiscal year for the corresponding Annual Operating Budget.
Overall activity with a budget for a given fiscal year occurs over a two-year period. Preparation of the budget takes approximately six months, followed by the year in which the budget is in effect and managed. After the closing of the fiscal year, the financial records are audited and used to create the Comprehensive Annual Financial Report, which provides information on the City's fiscal responsibility, budget management performance, and financial condition. Typically, this Office is working with budgets for three different fiscal years at the same time: preparation for the upcoming year, management of the current year, and closure of the prior year.
Preparation
Most budget preparation activity occurs between November and May. The first step is preparation of the Five-Year Capital Improvement Plan (CIP), a document that represents a plan for projects involving public infrastructure and major equipment for the coming fiscal year and four subsequent fiscal years. Departments make updates to existing projects and propose new initiatives that are reviewed by the City Manager, Assistant City Managers, Finance Director, and the Budget Office. Following deliberation, a comprehensive plan is prepared that schedules capital activities, balances workload with available resources, and respects financial capabilities. The City Manager presents the CIP to the City Council in late winter, and it serves as the guideline for capital appropriations in the following fiscal year budget.
Once departments complete their CIP submissions and review, instructions are provided by the City Manager and Budget Office regarding the Annual Operating Budget for the coming fiscal year. Preparation starts in early February with the review of personnel listings to project costs of salaries and wages and certify that staff counts, including listed vacancies, are at budgeted levels. By mid March, departments prepare a budget submission that includes establishing funding levels for managed accounts, updating of goals and performance measures, and presenting requests for increases associated with maintaining existing services or expanding to reflect community changes and resident requests. They are delivered to the Budget Office, and reviewed and analyzed with respect to past performance and evaluation of the City's anticipated financial performance.
In late March and early April, departments review their budgets with the City Manager, Finance Director, Assistant City Managers, and Budget Office. Changes are made during these deliberations in many areas, including allocation of financial resources and determination of acceptable and preferred performance levels. Additional modifications are made to balance expenditures with anticipates revenues, as required of a budget submission under North Carolina Law.
The City Manager presents his Proposed Annual Operating Budget to the City Council in mid May. Over a period of several weeks, the Council discusses and revises the proposal through a series of work sessions open to the public. Following consolidation of their changes to the budget, the Council holds a public hearing, as required by North Carolina Law, to provide citizens a chance to comment on the proposal. Council adopts the budget once the hearing closes and final modifications are made in response to citizen concerns. This typically occurs in early or mid June.
Management
Following adoption, the Budget Office works with the Finance Department to establish the Annual Operating Budget as the financial and administrative policy of the City in time for the start of the fiscal year, July 1st. Actions include preparing a final budget document for distribution to staff, City Council, and the public, and installation of budget information into the City's financial management system. The City also prepares necessary action with regard to changes in personnel that are part of the budget, including the hiring or new positions and transfer or deactivation of existing ones.
Upon the start of the fiscal year, the financial parameters established by the Annual Operating Budget serve as primary guidance for City staff. While a purpose of the preparation phase is to create a budget that meets the needs of the City and maintains fiscal responsibility, revisions have to be made to accommodate changing conditions. These modifications are in the form of either transfers or amendments. Transfers are internal modifications proposed by a Department Director to move appropriated funds from one account to another within an operating fund (i.e., General Fund). They are reviewed and approved by the Budget Office, responsible Assistant City Manager, and City Manager, then entered into the financial management system. No City Council action is required, as staff is granted the authority to implement these changes by Ordinance.
Budget Amendments are ordinances proposed to and adopted by the City Council that involve adding or reducing revenue or the transfer of appropriations between operating funds (i.e., from General Fund to General Capital Fund) or from fund balance. The Budget Office reviews requests by departments and prepares the text of the Ordinance, which is included on the agenda of a regular meeting of City Council. Both transfers and amendments are infrequent in nature, with transfers being more common.
During the course of the fiscal year, ongoing analysis reviews performance with respect to revenues and expenditures to determine whether they are in line with established budget level, and if not, identify the actions necessary to ensure that the City does not incur expenditures greater than actual revenues. Reports that review current activity and project results for the entire year and prepared following the closing of each financial period (or month) of the fiscal year for review by the Finance Director and City Manager. Starting in spring 2007, these reports will be consolidated on a quarterly basis for presentation to the City Council, renewing past practice.
Closure
At the end of the fiscal year, steps are taken to reconcile the budget with respect to actual revenues and expenditures and apply differences between actual and established budget level in the future. Necessary transfers and amendments are made so that the final budget appears relatively balanced, with expenditures at or below revenues. Senior staff evaluates how to use any excess revenues or expenditure savings. Choices include amending the budget of the next fiscal year to "carry forward" these funds for use as one-time, non-recurring expenditures that do not result in base adjustments, or applying it to improving the City's financial condition through contribution to fund balance.