Budgetary Policies and Procedures

Kansas law prescribes the policies and procedures by which the City prepares its annual budget. The City maintains budgetary control to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the City's governing body. The annual budget contains an itemized estimate of the anticipated revenue and the proposed expenditures necessary to meet the City's financial needs, detailed by program and object of expenditures. The annual budget must be balanced so that total resources equal obligations. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) is established at the fund level. The City also maintains an encumbrance accounting system as one technique of accomplishing budgetary control. Encumbered amounts not disbursed are carried over as a designation of fund balance for the following year.

ANNUAL OPERATING BUDGETS REQUIRED FOR CERTAIN FUNDS

Kansas Statutes (K.S.A.§ 79-2927 et seq.) require that an annual operating budget be legally adopted for the General Fund, Special Revenue Funds (unless specifically exempted by statute), Debt Service Funds, and certain Enterprise Funds.

A legal annual operating budget is not required for the Capital Projects Fund or Trust Funds and the following Special Revenue Funds:

Airport Improvement Fund

Outside Agency Fund

Capital Improvement Reserve Fund

Wee Folks Scholarship Fund

Equipment Reserve Fund

Fair Housing Assistance Fund

Guest Tax Reserve Fund

Community Development Fund

Liability Reserve Fund

Rehabilitation Escrow Fund

Sales Tax Reserve Fund

Home Program Fund

Law Enforcement Grant Fund

Transportation Planning Fund

Worker's Compensation Reserve Fund

Law Enforcement Trust Fund

Summer Youth Fund

BUDGET CALENDAR

The state statutes provide for the following sequence and timetable in the adoption of the legal annual operating budget:

a.

Preparation of budget for the succeeding calendar year on or before August 1 of each year.

b.

Publication of proposed budget and notice of public hearing on or before August 5 of each year.

c.

Public hearing on or before August 15 of each year, but at least ten days after public notice.

d.

Adoption of final budget on or before August 25 of each year.

In addition to state statues, the budget calendar is developed according to an administrative policy.  The 2005 Budget Calendar can be found on the following pages.

MAKING CHANGES TO THE BUDGET

The state statutes allow for the governing body to increase the originally adopted budget for previously unbudgeted increases in revenue other than ad valorem property taxes.  To do this, a notice of public hearing to amend the budget must be published in the local newspaper.  At least ten days after publication, the hearing may be held and the governing body may amend the budget at that time.

The statutes permit management to transfer budgeted amounts between line items within an individual fund.  However, such statutes prohibit expenditures in excess of the total amount of the adopted budget of expenditures of individual funds (the legal level of budgetary control).  Budget comparison statements are presented for each fund showing actual receipts and expenditures compared to legally budgeted receipts and expenditures.

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BASIS OF ACCOUNTING

All governmental and fiduciary funds are reported using the modified accrual basis of accounting.   Revenue are recognized when they become both measurable and available to pay current liabilities in a particular period.  Expenditures are recognized when the related liability is current (the encumbrance method of accounting.) Interest on unmatured general long-term debt is recognized when due.  The enterprise funds are reported on the accrual basis of accounting.

BASIS OF BUDGETING

The city budgets for governmental funds, which include the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Projects Fund, based on the modified accrual basis of accounting.  Under this method, revenues (income) are recognized in the period they become measurable and available to finance expenditures of the period.  Expenditures (expenses) are recorded when incurred with the exception of principal and interest on long term debt, which are recorded when due.

Exceptions to the modified accrual basis of accounting are as follows:

l  encumbrances are treated as expenditures in the year they are encumbered, not when the expenditures      occurs.

The budgets for all proprietary funds, which include Enterprise Funds and Internal Service Funds, are prepared using the accrual basis of accounting, with exceptions listed below.  Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred.

l  Encumbrances are treated as expenditures in the year they are encumbered, not when the expenditures      occurs. l  Capital outlay is budgeted as an expenditure in the year purchased. l  Depreciation is not budgeted. l  Encumbrances are treated as expenditures in the year they are encumbered, not when the expense occurs. l  Grants obtained for the construction of assets are considered to be revenues, not capital contributions. l  Gains or losses on the early retirement of debt are considered to increase or decrease the funds available in      the year in which they occur and are not capitalized and amortized over the life of the bonds.

Operating expenditures are controlled at the fund level and may not exceed appropriations at that level.  Capital project expenditures are controlled at the fund, department and project levels and may not exceed appropriations at any of those levels.  Budget transfers within a department may be made with administrative approval provided that the transfer is within the same fund.  Increases in total appropriations require City Council approval by ordinance.

Spending in funds which are not subject to the legal annual operating budget requirement is controlled by federal regulations, other statutes, or by the use of internal spending limits established by the City.

ADMINISTRATIVE POLICIES, DEPARTMENT POLICES, AND OTHER PLANS USED TO DEVELOP THE BUDGET

Administrative policies of the City that guide the development of the budget include policies regarding the issuance of industrial revenue bonds, temporary notes and bonds, cash management, fixed assests, investments and payroll.  Policies are in place regarding the accumulation of reserves (fund balance) in the general fund, the procurement of city vehicles and the allocation of the transient guest tax. In addition to written administrative policies, there are a number of  departmental policies and procedures that effect the budget.  For instance, there are unwritten policies for the replacement of city vehicles as well as computer hardware.

Horizon 2020 and other long range and strategic plans also effect the City's budget.  These plans allow the various city departments to forecast their future staffing, equipment, and facility needs and the costs associated with them based on growth and population projections.  This allows city staff to estimate the revenue that will be needed to meet these needs, to what amount the issuance of debt will be necessary, if fee and rate increases will be required, etc..

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THE BUDGET DEVELOPMENT PROCESS

Early each year, each department submits a budget request including payroll projections, capital outlay requests, and program improvement decision packages.  Due to the revenue shortfalls anticipated for 2005, it was necessary to make adjustments and reductions to the budget proposals submitted by department directors.

A number of study sessions are held throughout the year with city staff and the City Commissioners to discuss various elements of the budget.  A goal setting session is held, giving the Commissioners an opportunity to determine priorities for the budget year.  Staff in the various departments can then work toward accomplish of those goals through their daily operations.  The City Commission goals are on the following pages of this document.

Other sessions are held to discuss the  multi-year Capital Improvement Plan, to review Debt, and to provide the City Manager and staff with direction for allocation to contractual agencies [see pages B- 48 (general overhead), C-1 through C-3 (Guest Tax), G-1 through G-3 (Special Alcohol)].

The City Commissioners holds budget conferences with each department.  The conferences provide the Commissioners the opportunity to review the requests with department staff, learn more about program improvement packages, and ask questions about the issues presented by department staff in their budget proposals.

The first opportunity for public comment is in June.  Another study session is held to review the Multi-year CIP Budget (see pages P-1 through P-10 for the Capital Improvement Budget) and to allow the Commissioners to provide additional direction to staff.

The City Manager then prepares a recommended budget that is reviewed and revised by the Commissioners before being published in the Journal World.  The recommended budget is available on the City's website.

A second opportunity for public comment is held in early August.  A final budget is then adopted by the City Commission and filed with the County Clerk in late August.

The budget is then formatted into this printed document, reproduced and made available for the public.  In addition to dollar amounts, this documents contains narrative information on the purpose and mission, the accomplishments, goals and objectives, and performance indicators of each department and division.

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