Budget Process

Budget Process

The City of Sandy's Biennial Budget process begins in December of even-numbered years, when the Budget Officer (City Manager) distributes the Budget Manual to department heads. The manual provides a summary of the financial outlook for the coming biennium, the city's budget policies, and detailed instructions for preparing and submitting budget worksheets (including "departmental" revenues).

Operating departments are given spending targets that they are expected to remain within. While they are fleshing out the line item details, the city manager and finance director prepare estimates for general revenues, and begin to balance the proposed budget at the fund level.

Departmental budget detail worksheets are due at the end of January. The budget officer (city manager) and finance director then prepare the overall budget document for review by the Budget Committee. For 2003-05, this "document" was the web site that you are now viewing (although prior to changes in the proposed budget that were made by the Budget Committee). This not only allowed the Budget Committee members to see the budget material as it was being prepared, it also allowed any member of the public to view the same information.

The Budget Committee (made up of the City Council plus up to seven city residents) began reviewing the budget in April, and made their final recommendations in May, 2003 (the list of changes made by the Committee is included as a postscript to the Budget Message). The Budget Committee sets the upper limit of total appropriations.

The City Council held a public hearing on the proposed budget in late May, and adopted it by Resolution (Resolution 2003-16) in early June.

The new biennium begins on July 1, 2003.

Basis of Accounting and Budgeting

The City of Sandy 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 and expenditures (expenses) are recorded when incurred with the exception of principal and interest on long term debt, which are recorded when due.

The budgets for all Enterprise Funds, which include the Water, Sewer, Stormwater, and Telecommunications 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.

	Capital outlay is budgeted as an expenditure in the year purchased. Depreciation is not budgeted.
	Interest capitalized on construction projects is budgeted as interest expense. Proceeds from the issuance of debt are considered to be revenues, not an increase in liabilities.
	Principal payments are shown as expenditures rather than reductions of the liability.
	Development and annexation fees are shown as revenues, not capital contributions.
	Encumbrances are treated as expenditures in the year they are encumbered, not when the expense occurs.
	Grants obtained for the construction of assets are considered to be revenues, not capital contributions.
	Receipts of long-term receivables are considered to be revenues, not reductions of the receivable.
	Proceeds from the sale of assets are recognized as revenue; however, the related gain or loss is not.
	Purchases of inventory are considered to be expenditures when purchased, not when sold or used.
	Debt issue and discount costs are considered to be expended when paid, not capitalized and amortized over the life of the bonds.
	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.
	Accrued compensated absences are not considered to be expenditures until paid.
	Interest earned on escrowed cash and investments is not considered to be revenue for budget purposes.

The City's Comprehensive Annual Financial Report ("CAFR") uses "generally accepted accounting principles" (gaap) and reports revenues and expenditures differently for the Enterprise funds, as noted above. The CAFR includes tables that highlight and reconcile the differences between the budget basis and "gaap" basis for these funds.

Operating expenditures are controlled at the department level for General Fund and the category of expenditure (e.g., personnel costs, supplies and services, equipment and capital improvements, etc.) level for other funds and may not exceed appropriations at those levels.

Amending the Budget

Budget transfers within a department (General Fund) or within a category of expenditure (other funds) may be made with administrative approval provided that the transfer is within the same fund. Transfers between departments within the General Fund or between expenditure categories in other funds require City Council approval by resolution. Transfers between funds require City Council approval by resolution or ordinance.

By Oregon law, to increase the total budget of any fund by more than ten percent, the City must go through a supplemental budget process, where the proposed amendment is published in the local newspaper, along with a notice of a public hearing on the proposed change. (The law provides some exceptions, such as when unanticipated grants are awarded).

For an excellent summary of Oregon budget law, see the Oregon Department of Revenue's web site.