HomeMy WebLinkAbout(2011, 09/27) - F-3 - AmendedF-3
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BUDGET ADOPTION AND ADMINISTRATION
PURPOSE
To establish the policy for the preparation, adoption, and administration of the City's
Annual Budget.
POLICY
A. Budget Development.
The City shall prepare and adopt an annual budget by June 30, of each year, as
required by Section 1104 of the City Charter. The budget shall incorporate a
results-based budgeting approach that allows the public and the City Council to
prioritize City expenditures strategically aligned with core community values.
City Council directs and controls the planned use of reserves through budget
appropriation process. Appropriations for operating expenditures shall be
balanced in relation to current revenue sources and will not over-rely on one-
time revenue sources or reserves. This is not intended to limit the periodic use of
financial resources that were accumulated over time for a specific project or
purpose.
The budget may be developed with one or more contingency plans to protect
against volatile or unexpected events. When significant uncertainty exists
concerning revenue volatility or threatening/pending obligations, the City
Council and City Manager reserve the right to impose any special fiscal control
measures, including a personnel hiring freeze, and other spending contro ls,
whenever circumstances warrant. The City Council may authorize the use of
Contingency reserves only during emergency situations as set forth by Council
Policy F-3.
B. Organization of the Annual Budget.
The Annual Budget is published in three volumes, the Performance Plan, the
Budget Detail and the Capital Improvement Program (CIP).
The Performance Plan provides an overview of each department’s mission,
departmental programs, core functions, goals, work plan, budget and
performance measures. It also provides summary information regarding the
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Capital Improvement Program, as well as summary information for budgeted
and historical overall City revenues, expenditures, and fund balances.
The Budget Detail provides historical trends of summary level information and
contains line by line detail regarding operating expenditures for the prior year,
current year and budget year. Operating expenditures are categorized into four
classifications within the Operating Budget. These are Salaries and Benefits,
Maintenance and Operations, Capital Outlay and Other Financing Uses.
The CIP document provides a summary of current and future planned projects,
basic descriptions of each project, the funding source and the scope of work to be
performed. CIPs are generally major facility or infrastructure improvement
projects managed by the Public Works Department.
C. Budget Process.
During December of each year, the Finance Department shall prepare updated
revenue estimates and fund balance projections for the current year and prepare
preliminary revenue projections for the next fiscal year. In January of each year,
the Finance Department shall prepare a budget calendar and issue budget
instructions to each department for use in preparation of the next year's City
budget. Included in these instructions will be budget guidelines and
appropriation targets for each department. These guidelines will be developed
by the Finance Director and approved by the City Manager.
After further refinements of revenue estimates and the completion of
Department proposed expenditure appropriation requests, the Finance
Departments will summarize department requests for review by the City
Manager. After the City Manager has reviewed and amended the Department
Head requests, the Finance Department shall prepare the City Manager’s
proposed budget for the next fiscal year and shall submit it to the City Council.
The City Council shall hold as many budget study sessions as it deems necessary.
All proposed Council changes to the City Manager's proposed budget shall be
itemized on a budget checklist of revisions. The City Council shall hold a budget
hearing and adopt the proposed budget with any checklist revisions on or before
June 30 by formal budget resolution. When adopted, the proposed budget along
with the finalized checklist, become the final budget.
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D. Administration of the Annual Budget.
During the budget year, Department Heads and their designated representatives
may authorize only those expenditures that are based on appro priations
previously approved by City Council action, and only from accounts under their
organizational responsibility. Any unexpended appropriations, except valid
encumbrances, expire at fiscal year end unless specifically reappropriated by the
City Council for expenditure during the new fiscal year. Department Heads are
responsible for not authorizing expenditures above budget appropriations in any
given expenditure classification within their purview, without additional
appropriation or transfer as specified below. Appropriations may be transferred,
amended or reduced subject to the following limitations:
1. New Appropriations. During the Budget Year, the City Council may
appropriate additional funds for special purposes by a City Council
Budget Amendment. The City Manager has authority to approve requests
for budget increases not to exceed $10,000 in any Budget Activity or
Capital Project. (This must be specifically included in each year's Budget
Resolution to remain valid.)
2. Grants & Donations. The City Manager may accept grants or donations of
up to $30,000 on behalf of the City. However, if a new or additional
appropriation is required, the City Manager’s authority to create new
appropriations is limited to $10,000 as stated above. The City Council will
be formally notified of such actions on a quarterly basis by way of the City
Manager newsletter to the City Council. (This provision must be
specifically included in each year's Budget Resolution to remain valid.)
Additionally, grant appropriations approved by City Council may be
carried forward to the following fiscal year(s) as long as the grant terms
remain valid, the expenditures are consistent with the previous Council
authorization, and the funds would otherwise need to be returned to the
granting or donor agency. Also, see Council Policy F-25 for specific grant
acceptance and administration procedures.
Grant agreements and restricted donations in excess of $30,000 must be
specifically approved by the City Council. Occasionally, the terms and
conditions of a grant are approved by City Council in a year prior to when
the program activity will take place and therefore, the funds are not
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appropriated to carry out the grant at that time. In such cases, the City
Manager may appropriate the funds when they are received, provided the
expenditures clearly meet the amount, terms, nature and intent of the
grant or donation previously approved by City Council.
3. Assessment District Appropriation. Assessment district projects are
typically funded by property owner contributions and bond financing
secured by property assessments. City staff will initially seek
appropriation to advance City resources for the assessment engineering
and the design work related to a proposed assessment district. Since the
City’s advance is at risk until a district is formed at a public hearing, the
appropriation related to advanced resources shall be subject to the normal
budget policies. However, once the district has been formed at a public
hearing, the City Council will adopt a “project-length” budget for the
district and City staff will be allowed to roll the appropriations forward
into future fiscal years without rebudgeting the project through the formal
CIP process.
When assessment bonds are issued to finance the improvements, the bond
issuance costs are estimated at the maximum amount that would be
required to complete the improvements because it is not known how
many property owners will opt to pay the assessment in full during the
cash collection period. Finance staff will also have the authority to reduce
Council appropriations (related to bond issuance costs) after bonds are
resized and sold.
4. Transfers within Departments. During the fiscal year, actual expenditures
may exceed budget appropriations for specific expenditure line items
within departmental budgets. If a total departmental budget, within a
specific Classification, is not exceeded, the Finance Director has the
authority to transfer funds within that Classification and Department, to
make the most efficient use of funds appropriated by the City Council
(Salaries and Benefits, Maintenance and Operations, Capital Outlay and
Other Financing Uses are the City’s four Classifications within the
operating budget).
5. Transfers between Departments. Further, funds may be realigned
between one Department and another, within the same Classification,
with City Manager approval. For example, if a Fire Department function
and the employee who accomplishes it are replaced by a slightly different
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function assigned to the Police Department, the City Manager may
authorize the transfer of appropriate funds to support this function.
6. Transfers between Expenditure Categories. Any reprogramming of funds
among the three Classifications (Salaries and Benefits, Maintenance and
Operations, and Capital Outlay and Other Financing Sources) within a
given fund requires the City Manager’s approval. Any budget revision
that changes the total amount budgeted for any fund (other than the
minor provisions contained in paragraphs C.1. and C.7.b.) must be
approved by the City Council.
7. Transfers between Capital Improvement Projects (CIP). Budget Transfers
between Capital Improvement Projects shall be subject to the following
parameters:
a. Excess Project Appropriations or savings may be transferred to a
“Project Savings Account,” within the same fund. Funds may be
reappropriated to a new or existing project with the approval of
City Council. Any appropriation balance remaining in the Project
Savings account will lapse at Fiscal Year End.
b. Excess Project Appropriations may also be transferred from one
CIP project to another, provided that the projects utilize the same
funding source and are for substantially the same project purpose
and physical location. Project appropriation transfers of this nature
require the approval of the City Manager.
All proposed budget amendments and transfers will be submitted to the Finance
Director for review and processing prior to City Manager or Council
authorization.
All unexpended and unencumbered appropriations will be canceled on June 30
of each fiscal year. Incomplete projects may be reappropriated by the City
Council during the budget process or by separate Council action.
E. Management Authorization & Responsibilities. . Once the final Budget has been
approved by the City Council, specific City Council approval to make
expenditures consistent with the Budget will not be required except as provided
by other Council Policies and Administrative Procedures. It is the responsibility
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of the City Manager and management to administer the City’s budget within the
framework of policy and appropriation as approved by the City Council.
1. The Finance Director is responsible for checking purchase requests against
availability of funds and authorization as per the approved Budget.
2. Unless otherwise directed, routine filling of vacancies in staff positions
authorized within the Budget, will not require further City Council
approval. However, new positions, not addressed by the adopted budget,
do require City Council approval.
3. At fiscal year end, the Finance Director is authorized to record accruals
and transfers between funds and accounts in order to close projects or the
books of accounts of the City of Newport Beach in accordance with
generally accepted governmental accounting principles as established by
the Government Accounting Standards Board, Government Finance
Officers Association, and other appropriate accounting pronouncements.
Any net shortage within a Fund will be recorded as a decrease in Fund
Balance. Any net excess will be recorded as an increase to one or more
appropriate Reserve Accounts as recommended by the Finance Director
and approved by the City Manager or as is otherwise dictated by Council
Reserve Policy (F-2). The net change in fund balances will be reported to
City Council through various documents including Quarterly Financial
Reports, the Comprehensive Annual Financial Report (CAFR), Budget
Documents and other financial presentations. Funds that exceeded
appropriations during the year or ended the year with a deficit fund
balance are reported annually in the CAFR notes to the financial
statements. (Information regarding the policy parameters and
administration of City Reserves is contained in City Council Policy F-2.)
Adopted - January 24, 1994
Amended - February 27, 1995
Corrected - February 26, 1996
Amended - May 13, 1996
Amended - May 26, 1998
Amended - August 8, 2000
Amended – May 8, 2001
Amended – April 23, 2002
Amended – April 8, 2003
Amended – April 13, 2004
Amended – September 13, 2005
Amended - October 10, 2006
Amended – August 11, 2009
Amended – September 27, 2011
Formerly F-10, F-11, F-12, and F-21