The Budget Process

• Assets – resources owned or held by a government that have a monetary value. Current assets can be made readily available to finance current operations or pay current liabilities, while fixed assets are long term and intended to be held, such as land, buildings, and equipment. General fixed assets are used in the operations accounted for by governmental funds and include all fixed assets not accounted for in proprietary funds or Trust and Agency funds.
• Budget – a plan of financial operation embodying an estimate of proposed expenditures for a given period and the proposed means (revenue sources) of financing them.
• Budget Calendar – A budget calendar is a tool used to establish a timeline for the completion of each step in the budget process leading up to the new fiscal year. The budget calendar includes deadlines for departments to submit information to the budget officer, dates for advertising and conducting public hearings, and a timeline for adoption of the budget.
• Expenditure – decreases in net financial resources. Expenditures include current operating expenses requiring the present or future use of net current assets, debt service, and capital outlay, and intergovernmental grants, entitlement, and shared revenues.
• Expense – decreases in net total assets. Expenses represent the total cost of operations during a period regardless of the timing of related expenditures.
• Fiscal Year – the 12-month period in which a local government operates for financial accounting purposes.
• Fund – a fiscal and accounting entity with its own set of financial accounts recording cash and other financial resources (assets), together with all related liabilities and changes in these assets and liabilities.
• Liabilities – future debts or obligations owed by one entity (debtor) to another entity (creditor) payable in money, goods, or services.
• Revenue – a city’s annual income in the form of taxes, charges for services, fees, and government transfers which are used to meet expenses.

Local Government Funds

• Governmental Funds – make up most of the budget and account for records of all operations that are not normally found in private enterprise. There are five types of governmental funds:
  • General Fund – government’s basic operating fund used to set revenue and spending levels for routine, ordinary management and operation of the city government and the provision of most city services.
  • Special Revenue Funds – funds from specific revenue sources that are limited for specific identifiable purposes.
  • Debt Service Funds – funds designated for the repayment of long-term debt.
  • Capital Project Funds – funds that account for the construction, rehabilitation, and/or acquisition of capital assets, such as new buildings, roads, or equipment.
  • Permanent Funds – resources that cannot be expended but can be invested to generate additional revenue.
• Proprietary Funds – funds that account for business-type activities of the local government, where a government provides a service and recovers the cost through user fees or charges.
• Fiduciary Funds – funds used to account for assets held by a government in a trustee or agent capacity (e.g., pension plan).