the municipal secretary desktop reference manual - Southwestern ...

D. MUNICIPAL BUDGETING
Developing and implementing the municipal budget is the most important function
undertaken during the year. And, it is an error to believe that anyone can prepare the municipal
budget. Skill and knowledge on the part of the budget preparer are essential if elected officials
are to have a budget that will provide accurate information, in a format that will clearly let them
assess the fiscal condition of the municipality and spending priorities. Therefore budget
preparation is the responsibility of an individual, whether elected or appointed, who has been
trained in the area of budgeting, and financial management, in general.
The budget is the only legal means which a municipality can use to determine resource
needs, and which it can use to allocate these resources among competing community needs.
Succinctly, the budget addresses and answers a most fundamental political question: “who gets
what at what cost”?
The “at what cost” part of the budget equation is represented by the local revenues, such
as general revenues, state and federal grants, fees and service charges and any other special
revenue sources.
Given this dependency relationship, it is critical that revenue estimates be sound and
conservative. To make reliable estimates, one must have an understanding of factors which affect
various revenue flows. For each revenue source, there are two essential components: a base,
which is the economic entity to be taxed or assessed a fee and a revenue rate, which is the
amounts levied against the base. Yield from a revenue source is a product of these two figures:
Base x Rate = Revenue Yield - Estimate of uncollectables.
The “who gets what” element is the estimated expenditure program proposed in the
annual fiscal plan. In developing operating expenditure estimates, the most important, and costly,
factor is consideration of the number and types of personnel and expenditures for them. Fiscal
data from this category, together with information from numerous object expenditures, form the
basis for estimating proposed programs or functional expenditures. Under most circumstances,
historical cost plus adjustments to reflect current economic environment factors can be used to
make these estimates. However, the magnitude and nature of past expenditures must be analyzed
to determine whether they should be challenged as being adequate and appropriate.
There should be established procedures, including a budget calendar, which guide budget
preparation and adoption. It is recommended that these procedures also include as least one
public hearing on the budget, after the budget is advertised as publicly available, and held at
least one week prior to its adoption.
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