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

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Presentation on theme: "1 Municipal Budgeting Basics Presented by: The Department of Municipal Affairs."— Presentation transcript:

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

2 2 Introduction to Budgeting The budgeting process is the first phase of a municipalitys 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 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 councils plans to others Provides an opportunity for evaluation of programs and services

4 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 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 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 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 8 Deadlines and Time Frames EXCEPTION Time frames may be different in the case of an election year or revised budget.

9 9 Six Steps to Successful Budgeting 1.Establish a Budget Calendar Actions to be completed Who is responsible Dates when these actions are to be completed

10 10 Six Steps to Successful Budgeting....Sample Budget Calendar What (Actions) Who? (Person/Group) When? (Date) Collect all necessary information for budget preparation Clerk/ManagerSept. 1 Send out notices to request input from committee, group that is supported by Council funds or accountable to Council Clerk/ManagerSept. 1 Submit input to Council; include requests for next years programs and activities and an evaluation of last years programs All departments, committees, groups requesting budgeted funds for the next fiscal year Oct. 1

11 11 Six Steps to Successful Budgeting....Sample Budget Calendar What (Actions) Who? (Person/Group) When? (Date) Review all material and prepare draft budget for presentation to Council Clerk/Manager; Finance Committee Nov. 1 Make adjustments and prepare final budget Clerk/Manager; Finance Committee Nov. 1 Present final budget to Council for approval Clerk/Manager; Finance Committee Dec. 1 Submit budget to the Minister of Municipal Affairs for review CouncilDec. 31

12 12 Six Steps to Successful Budgeting 2.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 13 Six Steps to Successful Budgeting 2.Collect all necessary information Financial policies and procedures The current years 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 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 years activities Meet with groups seeking funds

15 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 16 Six Steps to Successful Budgeting 4.Review information and prepare draft, contd 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 17 Six Steps to Successful Budgeting 4.Review information and prepare draft, contd Preparing the draft, contd Estimate and record expenditures Estimate and record expected revenues Prepare draft for presentation to Council

18 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 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 20 Remember… Approved budgets MUST be balanced. Revenues = Expenditures

21 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 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…Section 101(4)

23 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 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 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 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 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 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 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 – Provincial Portion of Debt Charges (Under Revenues, Government Transfers, Provincial Government Grants and Subsidies, p. 9)

30 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 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 32 The Municipal Budget Submission Form - Expenditures 1.0 GENERAL GOVERNMENT 1.1 Council Remuneration for Councillors Travel

33 33 The Municipal Budget Submission Form - Expenditures 1.0 GENERAL GOVERNMENT 1.2 General Administration Salaries Employee Benefits Payroll Burden Travel Supplies Purchased Services (other than Insurance) Professional Services Insurance

34 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 Engineering Services General Maintenance Professional Development and Training Public Relations

35 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 36 The Municipal Budget Submission Form - Expenditures 3.0 TRANSPORTATION SERVICES 3.1 Vehicle and Fleet Maintenance 3.2 Road Transport Streets, Roads, Sidewalks, etc Snow Removal Street Lighting Traffic Services 3.3 Public Transport 3.4 Other Transportation Services

37 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 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 39 The Municipal Budget Submission Form - Expenditures 6.0 RECREATION AND CULTURAL SERVICES 6.1 Recreation Administration 6.2 Recreation Facilities Recreation and Community Centres Parks, Playgrounds, etc Stadium Swimming Pool

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

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

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

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

44 44 Dealing with HST REMINDER: HST paid out or rebated is not recorded in the budget The EFFECT of HST is reflected in the budget for expenditures that are taxable

45 45 Dealing with HST Budget Item: Office supplies for council office Value: $200 Clerk will budget for $ 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 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 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 48 The Municipal Budget Submission Form - Revenues 1.0 TAXES AND RELATED REVENUES 1.1 Property Tax Information Residential Property Info Mill Rate Method Minimum Tax Method Residential Grants in Lieu Residential Exempt Properties

49 49 The Municipal Budget Submission Form - Revenues 1.0 TAXES AND RELATED REVENUES 1.1 Property Tax Information Commercial / Non-Residential Mill Rate Method Minimum Tax Method Non-Residential Grants in Lieu Tax Agreements Non-Residential Exempt Property

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

51 51 The Municipal Budget Submission Form - Revenues 1.0 TAXES AND RELATED REVENUES 1.2 Water and Sewage Tax Information Commercial / Non-Residential Water and Sewage Number of Commercial / Non-Residential Units NOT connected Water and Sewage Tax Water Tax Only (if separate tax) Sewage Tax Only (if separate tax) Other Commercial / Non-Residential Water and Sewage Tax Industrial & Institutional Water and Sewage (e.g. fish plants, hospitals)

52 52 The Municipal Budget Submission Form - Revenues 1.0 TAXES AND RELATED REVENUES 1.3 Other Taxes Poll Tax Business Tax Utility Tax Municipal Utility (Sales) Tax Direct Seller Tax Other Authorized Taxes

53 53 The Municipal Budget Submission Form - Revenues 2.0 SALES OF GOODS AND SERVICES 2.1 Garbage Collection Fees 2.2 Recreation and Cultural Services 2.3 Transportation Services 2.4 Fire Protection Service Fees 2.5 Animal and Pest Control Fees 2.6 Tipping Fees 2.7 Water Supply 2.8 Other Sales of Goods and Services

54 54 The Municipal Budget Submission Form - Revenues 3.0 OTHER REVENUE FROM OWN SOURCES 3.1 Assessments, Levies, Fees and Charges 3.2 Rental Income 3.3 Interest From Investments 3.4 Interest Collected on Overdue Accounts 3.5 Other Revenue From Own Sources

55 55 The Municipal Budget Submission Form - Revenues 4.0 GOVERNMENT TRANSFERS 4.1 Provincial Government Grants and Subsidies Municipal Operating Grant Provincial Portion of Debt Charges Other Provincial Grants and Subsidies

56 56 The Municipal Budget Submission Form - Revenues 4.0 GOVERNMENT TRANSFERS 4.2 Federal Government Grants and Subsidies Gas Tax Other Federal Grants and Subsidies 5.0 OTHER TRANSFERS 5.1 Operating Surplus of Prior Year 5.2 Transfers from Authorized Reserves

57 57 The Municipal Budget Submission Form – Debt Servicing Ratio (DSR) Municipal Annual Debt Payment Local Revenue + MOG = DSR (%) Follow the instructions on Page 10 of the Budget Submission Form to calculate your municipalitys DSR

58 58 Summary of the Municipal Budget Submission Form From the Municipal Budget Submission Form, transcribe the following onto the Summary Form : Totals of the seven expenditure functions Total expenditures Totals of the five main revenue sources Total revenues

59 59 Monitoring the Budget Ensure that your budget is monitored on a monthly basis: To insure that your goals and objectives will be met To allow council to take corrective action on a timely basis if operational circumstance cause you to stray from your financial plan Use a Budget Variance Report Compares actual expenditures to-date with budgeted figures

60 60 Last updated on October 21, 2010, by Melanie Sheppard


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