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Local Budgeting Manual, 150-504-420 - Oregon State Library - State ...

Local Budgeting Manual, 150-504-420 - Oregon State Library - State ...

Basis of Accounting

Basis of Accounting Local governments (municipal corporations) are required by ORS 294.445 to maintain accounting records by fund using a cash, modified accrual, or accrual basis of accounting. The selection of the basis of accounting is up to each local government. Any change in the basis of accounting must be explained in the budget message for the year in which the change is planned. You must explain the reasons for the change and its effect on the fiscal operations of the district. Once a new basis of accounting is adopted, that basis is used in the fiscal year for which the budget was prepared [ORS 294.445(2)]. Estimating Resources Chapter 6—The Budget Document Each local government must estimate and budget all of its anticipated resources for the upcoming fiscal year [ORS 294.361(1)]. The budget must be constructed so that the total resources equal the total requirements for each fund [OAR 150-294.352(1)-(B)]. For biennial budgets, see Chapter 15. Budget resources include but are not limited to: the cash balance, cash equivalents, and investments or net working capital that will be carried forward from the previous fiscal year; prior–year taxes; current–year taxes; fees; fines; interest on deposits or securities of any kind; endowments; annuities; sales of property or other assets; grants; interfund transfers; and revenues from any and all other sources [ORS 294.361(2)]. Budget resources do not include moneys accumulated under an approved employee deferred compensation plan and the interest earned on such moneys, the estimate for the ensuing year of discounts under ORS 311.505, or the estimates of uncollectible amounts of taxes, fees, or charges for the ensuing year [ORS 294.361(3)]. Beginning Cash Estimates “Each municipal corporation shall estimate in detail its budget resources for the ensuing year by funds and sources” [ORS 294.361(1)]. Generally, an “estimate” is: defined as a rough calculation or an opinion formed from imperfect data. All resources should be based upon a “good faith” estimate (OF 1439-V; 6-15-71). Estimate the beginning cash balance as follows: 1. Establish the cash balance on hand at the time the budget is prepared. 2. To this amount, add the amount of revenue estimated to be received from all sources to the end of the current fiscal year. 19 3. From the sum of numbers 1 and 2, subtract a reasonable estimate of expenditures for the rest of the fiscal year. The remainder will be the estimate of the beginning cash balance to be used in preparing the budget for the next fiscal year. Previously Levied Taxes Every local government that imposes a property tax receives revenue from taxes that were imposed in previous years from the collection of delinquent taxes. These prior years’ taxes are treated as nontax resources in the budget. The amount of prior years’ taxes can be estimated using history. The county tax collector can also help the district with estimating the amount of prior years’ taxes. The money collected from the taxes of all districts is placed in the unsegregated tax collection account. Money is disbursed from this account using a percentage distribution schedule (ORS 311.390). This schedule shows the percent that each local government’s taxes imposed represents of the total of all taxes imposed in the county. At the same time current taxes are being collected, delinquent taxes from prior years are also being collected and placed in the unsegregated tax collection account. Prior year’s taxes are disbursed by the county treasurer using the percentage distribution schedule from the year for which the taxes are paid. When county treasurers disburse tax moneys to local governments, most provide a statement to accompany each payment. The statement breaks down the payment to show the amount collected for the current year and the respective amounts for each prior year. The treasurer’s statement provides accountability for taxes and a clear audit trail for the county records. Each local government should have the information necessary to make full disclosure of the correct receipt of tax moneys and disbursement to the funds that levied the tax. Local governments should account for property tax revenues by allocating the moneys on a consistent percentage basis to each fund that imposed a tax based on the amount of tax imposed by the assessor for each fund (ORS 310.170). Proper accounting methods and schedules of tax collections provide accurate historical information to support resource estimates for the following fiscal year. Grants Grants for general purposes must be budgeted as a resource if the district is aware of the grant before June 30. Specific purpose grants must also be budgeted as a

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