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Municipal Budgeting Basics

Municipal Budgeting Basics. Presented by: The Department of Municipal Affairs. Introduction to Budgeting. The budgeting process is the first phase of a municipality’s financial management cycle

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Municipal Budgeting Basics

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  1. Municipal Budgeting Basics Presented by: The Department of Municipal Affairs

  2. Introduction to Budgeting • The budgeting process is the first phase of a municipality’s financial management cycle • It will produce a valuable planning tool to use as a guide to the management and operation of the municipality • The budget is a written plan, expressed in dollars • It is only as accurate as the information collected and the thoroughness of the process

  3. The Importance of Budgeting • Sets standards for controlling costs • Allows regular comparisons between estimated and actual costs • Allows timely adjustments to programs and services • Must be done to establish tax rates • Ensures realistic planning and estimates • Communicates council’s plans to others • Provides an opportunity for evaluation of programs and services

  4. Budget Categories Categories: 1.Current/Operating – expenditures for goods and services which will be used within one year. 2.Capital – expenditures on equipment and infrastructure expected to last for a number of years.

  5. Developing a Realistic Budget Preparation of a realistic budget emphasizes: • Council giving clear direction to the staff regarding financial priorities, goals and objectives • The need for accurate, up-to-date information • Completing expenditures estimates BEFORE revenues Scaling expenditures to “FIT” the available revenues is NOT a very good practice.

  6. Who Does the Budget? The clerk or manager is responsible for the actual preparation of the budget, but it is the Council which must adopt the budget. • Council may appoint a Finance Committee to guide and coordinate the budget process • A typical Finance Committee would include: • The mayor • One or two councillors • The clerk or manager

  7. Deadlines and Time Frames • Municipal Fiscal Year - January 1 to December 31 • The Budget Cycle - October 1 through one full year • Budget Time Frames: • September 1 - start gathering information • By December 1 - prepare and adopt budget… • By December 31 - submit budget to Minister…

  8. Deadlines and Time Frames EXCEPTION • Time frames may be different in the case of an election year or revised budget.

  9. Six Steps to Successful Budgeting • Establish a Budget Calendar • Actions to be completed • Who is responsible • Dates when these actions are to be completed

  10. Six Steps to Successful Budgeting....Sample Budget Calendar

  11. Six Steps to Successful Budgeting....Sample Budget Calendar

  12. Six Steps to Successful Budgeting • Collect all necessary information • Assessment Roll • Loan payment schedules • Past budgets • Goals & objectives of Council • Tax collection statistics • Audited financial statements, internal financial reports and bookkeeping records

  13. Six Steps to Successful Budgeting • Collect all necessary information • Financial policies and procedures • The current year’s “year-to-date” operating costs as well as forecasted amounts for the balance of the year • Annual evaluations of Council programs, services, and activities • Program statistics

  14. Six Steps to Successful Budgeting 3. Request information from others • Review financial statements of funded groups • Request budget estimates from groups seeking funding • Review reports and program evaluations on previous year’s activities • Meet with groups seeking funds

  15. Six Steps to Successful Budgeting 4. Review information and prepare draft • What to Review: • Goals and objectives of council • Differences between past budgets and actual expenditures (Financial Statements) • Effectiveness, cost implications and benefits of all council activities – on-going or proposed • Financial policies and procedures . . . Are they still relevant?

  16. Six Steps to Successful Budgeting • Review information and prepare draft, cont’d • Preparing the draft • Complete the Debt Charges Summary • Reminder: ensure that the totals for Council Annual Payment & Provincial Annual Payment are recorded in the proper place under Expenditures (7.1 – Debt Charges From all Sources) • Reminder: ensure that the total for Provincial Annual Payment is recorded in the proper place under Revenues (4.1.2 – Provincial Portion of Debt Charges)

  17. Six Steps to Successful Budgeting • Review information and prepare draft, cont’d • Preparing the draft, cont’d • Estimate and record expenditures • Estimate and record expected revenues • Prepare draft for presentation to Council

  18. Six Steps to Successful Budgeting 5. Review the draft and make adjustments • If there is a Finance Committee - draft is reviewed and adjustments made to balance the budget • If there is no committee, council thoroughly reviews draft and approves any adjustments • Several meetings may be needed to finalize the budget

  19. Remember… • The draft budget review process is an excellent opportunity to: • Help Councillors to better understand the budget process and the overall financial picture of the municipality • Take the time to ask questions about the relevance and viability of municipal programs, services and activities

  20. Remember… • Approved budgets MUST be balanced. Revenues = Expenditures

  21. Six Steps to Successful Budgeting 6.Adoption & submission of budget • Adoption by December 1 at a regular council meeting • Budget notes/highlights to be made available • Adopted budget is transcribed onto official form and sent to Municipal Affairs for ministerial review • Municipal Affairs staff will review and Council will be advised if revisions are required

  22. Did You Know That…? • All tax rates for the coming year should be set and approved by resolution of council …Section 101(1) • Even though no changes are made. . . Tax rates should be re-adopted each year for the record • This practice is essential when taking court action against taxpayers in arrears • You have an official record of the tax rates in effect for previous years • March 31 is an important date . . . Why? • Tax rates cannot be changed after March 31…Section101(4)

  23. Did You Know That…? • A council shall publish annually a copy of its tax structure in a newspaper circulated in a municipality and by public notice in a municipality…Section 109(1)

  24. The Municipal Budget Submission Form There are five main sections: • Front Page • Debt Charges Summary • Expenditures • Revenues – Includes tax rates information • Summary of the Municipal Budget Submission Form

  25. The Front Page Here is where you identify: • Your municipality • The budget period • The date of approval • The individuals, by their signature (mayor, clerk/manager) who verify the adoption of the budget

  26. Debt Charges Summary • If council owes money for loans received, the Debt Charges Summary must be completed • The lending sources are typically the Banks, the Newfoundland and Labrador Municipal Financing Corporation (NMFC), and the Canada Mortgage and Housing Corporation (CMHC)

  27. Debt Charges Summary • Using the loan information obtained from the lender(s), complete the table in the summary • Your previous audited statement should contain a summary of all loans for the previous year • ALL loans must be reported • You should complete the Debt Charges Summary BEFORE you prepare your draft budget. WHY?

  28. Debt Charges Summary • Loan Number • Name of Creditor • Purpose (Water/Sewer; Roads; etc.) • Original Principal • Maturity Date • Council Annual Payment • Provincial Annual Payment

  29. Debt Charges Summary • TOTAL Council Annual Payment • TOTAL Provincial Annual Payment 7.1 – Debt Charges from all Sources(Under Expenditures, Fiscal services, p. 4) • TOTAL Provincial Annual Payment 4.1.2 – Provincial Portion of Debt Charges(Under Revenues, Government Transfers, Provincial Government Grants and Subsidies, p. 9)

  30. Expenditures/Revenues and Summary Expenditures: • Estimated expenditures are entered here Revenues: • Estimated revenues are entered here • The budget form requires that the various tax rates set by a municipality be recorded in the appropriate boxes in this section Summary of the Municipal Budget Submission Form: • This is an “at-a-glance” summary of the reported expenditures and revenues

  31. The Municipal Budget Submission Form - Expenditures • 1.0 General Government • 2.0 Protective Services • 3.0 Transportation Services • 4.0 Environmental Health • 5.0 Planning and Development • 6.0 Recreation and Cultural Services • 7.0 Fiscal Services

  32. The Municipal Budget Submission Form - Expenditures • 1.0 GENERAL GOVERNMENT • 1.1 Council • 1.1.1 Remuneration for Councillors • 1.1.2 Travel

  33. The Municipal Budget Submission Form - Expenditures • 1.0 GENERAL GOVERNMENT • 1.2 General Administration • 1.2.1 Salaries • 1.2.2 Employee Benefits • 1.2.3 Payroll Burden • 1.2.4 Travel • 1.2.5 Supplies • 1.2.6 Purchased Services (other than Insurance) • 1.2.7 Professional Services • 1.2.8 Insurance

  34. The Municipal Budget Submission Form - Expenditures • 1.0 GENERAL GOVERNMENT • 1.3 Municipal Elections & By-Elections • 1.4 Property Assessment Services • 1.5 Common Services • 1.5.1 Engineering Services • 1.5.2 General Maintenance • 1.5.3 Professional Development and Training • 1.5.4 Public Relations

  35. The Municipal Budget Submission Form - Expenditures • 2.0 PROTECTIVE SERVICES • 2.1 Fire Protection • 2.2 Emergency Preparedness and Response • 2.3 Animal and Pest Control • 2.4 Municipal Enforcement • 2.5 Other Protective Services and Inspections

  36. The Municipal Budget Submission Form - Expenditures • 3.0 TRANSPORTATION SERVICES • 3.1 Vehicle and Fleet Maintenance • 3.2 Road Transport • 3.2.1 Streets, Roads, Sidewalks, etc. • 3.2.2 Snow Removal • 3.2.3 Street Lighting • 3.2.4 Traffic Services • 3.3 Public Transport • 3.4 Other Transportation Services

  37. The Municipal Budget Submission Form - Expenditures • 4.0 ENVIRONMENTAL HEALTH • 4.1 Water Supply • 4.2 Sewage Collection and Disposal • 4.3 Garbage and Waste Collection and Disposal • 4.4 Other Environmental Health Services

  38. The Municipal Budget Submission Form - Expenditures • 5.0 PLANNING AND DEVELOPMENT • 5.1 Planning and Zoning • 5.2 Community Improvement and Development • 5.3 Regional Development • 5.4 Tourism and Marketing • 5.5 Other Planning and Development

  39. The Municipal Budget Submission Form - Expenditures • 6.0 RECREATION AND CULTURAL SERVICES • 6.1 Recreation Administration • 6.2 Recreation Facilities • 6.2.1 Recreation and Community Centres • 6.2.2 Parks, Playgrounds, etc. • 6.2.3 Stadium • 6.2.4 Swimming Pool

  40. The Municipal Budget Submission Form - Expenditures • 6.0 RECREATION AND CULTURAL SERVICES, cont’d • 6.3 Cultural Facilities • 6.4 Recreation and Cultural Programs, Activities, etc. • 6.5 Other Recreation and Cultural Services

  41. The Municipal Budget Submission Form - Expenditures • 7.0 FISCAL SERVICES • 7.1 Debt Charges From All Sources • 7.1.1 Council Annual Payment • 7.1.2 Provincial Annual Payment

  42. The Municipal Budget Submission Form - Expenditures • 7.0 FISCAL SERVICES • 7.2 Transfers to Authorized Reserves and other Funds • 7.2.1 Provision for Uncollectible Taxes, Fees, & Charges • 7.2.2 Operating Deficit of Prior Year • 7.2.3 Accumulated Deficit Reduction Plan • 7.2.4 Discounts, Losses, Allowances • 7.2.5 Capital Expenditures Out of Revenue • 7.2.5.1 Gas Tax • 7.2.5.2 All other (please provide list)

  43. The Municipal Budget Submission Form - Expenditures • 7.0 FISCAL SERVICES • 7.2 Transfers to Authorized Reserves and other Funds • 7.2.6 Authorized Transfers to Reserves & Other Funds • 7.2.6.1 Gas Tax • 7.2.6.2 All Other (please provide list) • 7.3 Bank Charges & Other Fiscal Services

  44. Dealing with HST REMINDER: • HST paid out or rebated isnot recordedin the budget • TheEFFECT of HST is reflectedin the budget for expenditures that aretaxable

  45. Dealing with HST Budget Item:Office supplies for council office Value:$200 Clerk will budget for $216 . . . Here is the calculation: Cost of Supplies ……$200 Plus HST . . . . . . . ….+$26 (5% GST is $10 ; 8% PST is $16) Total………....$226 Less GST rebate …. - $10 (100% of GST, which is $10) ($200 + $26) - $10 = $216 Budget for supplies: $216

  46. Dealing with HST • Budgeting without including the applicable taxes will result in an under estimation of costs • Including the full 13% HST and not factoring in the rebate will result in an over estimation of costs In some cases, the dollar amounts involved can be significant !!

  47. The Municipal Budget Submission Form - Revenues • 1.0 Taxes and Related Revenues • 2.0 Sales of Goods and Services • 3.0 Other Revenue From Own Sources • 4.0 Government Transfers • 5.0 Other Transfers

  48. The Municipal Budget Submission Form - Revenues • 1.0 TAXES AND RELATED REVENUES • 1.1 Property Tax Information • 1.1.1 Residential Property Info. • 1.1.1.1 Mill Rate Method • 1.1.1.2 Minimum Tax Method • 1.1.1.3 Residential Grants in Lieu • 1.1.1.4 Residential Exempt Properties

  49. The Municipal Budget Submission Form - Revenues • 1.0 TAXES AND RELATED REVENUES • 1.1 Property Tax Information • 1.1.2 Commercial / Non-Residential • 1.1.2.1 Mill Rate Method • 1.1.2.2 Minimum Tax Method • 1.1.2.3 Non-Residential Grants in Lieu • 1.1.2.4 Tax Agreements • 1.1.2.5 Non-Residential Exempt Property

  50. The Municipal Budget Submission Form - Revenues • 1.0 TAXES AND RELATED REVENUES • 1.2 Water and Sewage Tax Information • 1.2.1 Residential Water and Sewage • 1.2.1.1 Number of households NOT connected • 1.2.1.2 Water and Sewage Tax • 1.2.1.3 Water Tax Only (if separate tax) • 1.2.1.4 Sewage Tax Only (if separate tax) • 1.2.1.5 Other Residential Water and Sewage Tax

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