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A budget is essential to keep expenses down, because it allows the allocation of city funs on the basis of priorities. It is a useful tool to evaluate the level and quality of services rendered during the year. The budgeting process includes reports to the city council that explain key fiscal developments and note significant deviations from the budget. Elected officials are notifieA wh~iaever-~hanging operations or economic developments require budget revisions: ........ tn addition to the annual operating budget, the city considers advanced planning for capital improvements. Efficient capital financing is aided by preparing, adopting, and implementing a multi-year capital improvement program and budget. The multi-year capital improvement program and budget matches available resources with proposed public improvements, facilities, and equipment needs. Budget Format Two aspects of the budget format need consideration: the actual forms city officials use in preparing the budget and the classification of accounts or account tides for summarizing the data. The state auditor has prescribed a standard chart of accounts for use in city budgeting and accounting. Every city must follow this classification not only in mainta/ning finm~cial reco~'xts, but also in preparing the annual budget. Separate budgets should be developed for every fund, whether or not there is a separate tax levy. Atthough cities do not have to budget for revenues from utilities and special assessments, the council may include them when malcing budget estimates. The financial activity in these funds depends on the number of special assessments or the business activity of the utility operation. Because it is not always possible to anticipate these activity levels in advance, accurate budgeting is difficult. For expenditures couu'ol, however, some advance estimates are hetpful. Estimating Revenues and Expenditures The first step in estimating revenues is to individually iden~y the revenue sources. The city then looks at each source and its past performance and future expectations, taking into consideration an), economic trends or institutional changes that might disrupt the pattern. After estimating all other revenues and assessments, the city determines the amount of money needed from property taxes. This sum is generally an amount sufficient to balance the budget. When possible, the property tax levy should bring the projected year end fund balance to the level necessary to cover emergencies and contingencies. Following this process results in a balance budget. If the property tax levy in the budget is already at the allowable maximum and the projected fund balance shows a deficit, the city takes immediate action to reduce budgeted expenditures or to increase locally controlled revenues such as charges, fees, fmes, licenses and/or service charges. Cities must estimate several kinds of expenditures, such as current expenses, capital outlay expenditures, and debt redemption. Certain current expenses, sometimes called basic expenditures, consist ot relatively fi.xed charges and are comparatively easy to estimate. These are items such as rent, interest expense, salaries, contracr,.:~ costs~ :~.nd other charges which the city establishes by agreement and whici~ it camnot cSm~nish oujSng th~ ~dget year. Budgetary allowance for these costs can be on the basis of past experience plus necessary increases such as salary increases. It is generally only these increases, and not the basic costs themselves, which the budget officer or the council can alter.