• A request for services or facilities is received. The cost will be paid for by a private individual, corporation or company, or by another governmental unit, and the amount of the request could not have been known at the time the budget was prepared. • Proceeds from the involuntary destruction, involuntary conversion, or sale of property has necessitated the immediate purchase, construction or acquisition of different facilities in order to carry on the governmental operation. • A sufficiently greater amount of ad valorem taxes than estimated to be collected are received during the fiscal year. The difference will significantly affect the level of government operations to be funded by those taxes as provided in the budget for the current year. There are specific instances when a supplemental budget is not required to make additional appropriations. See Exceptions to Local Budget Law at the end of this chapter. When is a Supplemental Budget Not Allowed? In a November 17, 1967, letter the attorney general opined that a supplemental budget cannot be used to spend revenues that could have been estimated and adopted in the regular budget. A supplemental budget cannot authorize spending an unappropriated ending fund balance, except when necessitated by involuntary conversion or a civil disturbance or natural disaster (ORS 294.371, 294.455). It also cannot be used to spend the tax raised above the estimated amount stated in the ballot for a rate local option tax [ORS 280.075(2)]. Process and Preparation After it has been decided that a supplemental budget is necessary and appropriate, the process for preparing it must be determined. A supplemental budget may adjust one fund or several. For the purpose of preparing a supplemental budget, fund expenditures in the current budget do not include unappropriated ending fund balance, interfund transfers, or contingency amounts. Less than 10 percent When the supplemental budget will adjust a current budget fund by less than 10 percent of that fund’s expenditures, then the process used to adopt the supplemental budget is fairly simple. If the supplemental budget is adjusting more than one fund, the adjustment to each fund must be less than 10 percent to use the simpler process. The simple process for adjustments of less than 10 percent is: 1. The supplemental budget is adopted by the governing body at a regularly scheduled board meeting. The budget committee is not required. 60 2. Notice of the regular meeting at which the supplemental budget will be adopted is published by one of the publication methods not less than five days before the meeting. The notice includes the name of each fund being adjusted and the amount of change in each fund’s resources and expenditures. 3. At the meeting, a resolution adopting the supplemental budget and making appropriations is approved. 10 percent or more When the supplemental budget will adjust a current budget fund by 10 percent or more of the expenditures of that fund or will create a new fund, then a longer process must be used to adopt the supplemental budget. 1. A special hearing must be held to discuss and adopt the supplemental budget. The hearing is held by the governing body. The budget committee is not required to be involved. 2. Five to 30 days before the hearing, a notice of hearing and a summary of the proposed supplemental budget is published using one of the publication methods. Follow the guidelines outlined in Chapter 8—Publication Requirements, Notice of Budget Hearing and Budget Summary. The Department of Revenue provides a form that can be used to publish the supplemental budget. The form is titled Notice of Supplemental Budget Hearing, 150-504-022, and is included in the packet of budget forms sent to budget officers each year. 3. The governing body may resolve to adopt and appropriate the supplemental budget following the hearing. Adjusting the Current Budget When preparing the budget for the coming fiscal year, revise the figures in the current adopted budget to reflect the changes made by any supplemental budgets. Exceptions to Local Budget Law In order to lawfully spend money, a local government must comply with the requirements of Local Budget Law [ORS 294.326(2)]. However, certain expenditures have been made exceptions to the requirements of Local Budget Law. Be sure to refer to ORS 294.326 for all the exceptions. The most common exceptions are: 1. Expenditures in the year of receipt of grants, gifts, bequests or devises transferred to the local government in trust for a specific purpose may be made after enactment of a resolution or ordinance authorizing the expenditure [ORS 294.326(3)]. However, expenditure in the year of receipt of undesignated general purpose grants, gifts, bequests or devises can only be made after adoption of a supplemental budget.
Specific purpose grants, gifts, bequests or devises that will be spent, in whole or in part, in the fiscal year following receipt, must be included as a resource in the regular budget of the upcoming year. 2. Expenditures of proceeds from the sale of certain bonds may be made during the current year without a supplemental budget [ORS 294.326(5) and 294.483(2)]. It is recommended that a special revenue fund or a capital projects fund be established to account for the bond proceeds and that a resolution or ordinance be enacted to appropriate the proceeds. 3. Expenditures to pay debt service on certain bonds which are authorized and issued during the fiscal year may be made without adopting a supplemental budget (ORS 294.483). 61 It is recommended that a debt service fund be established to account for the bond principal and interest expenditures and that a resolution or ordinance be enacted to appropriate the debt service payment. 4. Expenditure of funds irrevocably placed in escrow for the purpose of defeasing and paying bonds [ORS 294.326(6)]. 5. Expenditure of funds to deal with involuntary conversion or damage or destruction from a civil disturbance or natural disaster may be made after enactment of a resolution or ordinance authorizing the expenditure or after adoption of a supplemental budget (ORS 294.455). 6. Expenditures of money refunded after a purchase has been returned may be made after enactment of a resolution or ordinance authorizing the expenditure [ORS 294.326(10)].