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I I I I I I I I I I I I I I I I I These questions should be considered after tentative agreement has been reached on the budget as a whole. Whether or not a city is operating under Op- tional Plan B, approval of the budget in its final form should be made by resolution of the council. An ordinance is not required for this purpose. Furthermore, a simple majority of the council will suffic~ in passing thc resolution. Thc resolution, which must be adopted by October 1 in Plan B cities, should set forth the total amount budgeted for each purpose or fund. It should also contain whatever detailed breakdown of expenditures the council deems necessary for adequate budget control. Budget Execution The preparation of a budget is, in itself, mean- ingless unless subsequent steps are taken by the council to make sure that the budget is rigidly followed during the ensuing calendar year. When coupled with the procedures mentioned in the following paragraphs, budgeting can be the corner- stone of an effective system of city financial administration. The controls needed for an adequate system of budget execution obviously depend in large part upon 'the size of the city and its government. Larger cities should use the system of periodic allotments and encumbrance accounting in which the money budgeted for any specific purpose (the police department, for example) is allocated to that purpose (the police department) in monthly or quarterly installments, thereby preventing exhaustion of the appropriation before the end of the calendar year. Encumbrance accounting is a further control serving the same purpose. (Further information on these and' other techniques on budget execution may be obtained from the League.)' In essence,' there are two minimum controls which should be exercised by every city, regardless of its size. While responsibility for exercising them ultimately belongs to the council, either an ad- ministrative officer responsible to the council or a council committee may implement them in actual practice. 'authorized by the budget resolution or unless the council itself has passed a subsequent resolution allowing the proposed expenditure. Once a budget has been adopted, only the council should authorize any deviation from it. The second essential control is a budget re- porting system. At regular intervals, usually monthly or quarterly periods, the council should require a report showing, for each item in the budget, the amount budgeted, the amount already spent, the amount not yet spent but committed for a particular purpose, and the amount remaining unspent and uncommitted. With this information in hand, the council can scrutinize administrative operations to make sure that the budget is being carefully followed, exercise greater control over future spending, and make any needed adjustments in the budget. A reporting system is undoubtedly the most important facet of any expenditure control pro- gram. Accompanying these budget reports should be a summary of work accomplishments achieved under the budgetary appropriation to date. Only with this information in_hand can the council hope to maintain an adequate check over the enforce- ment of the budget and over the administrative activities of its subordinates. D. LONG-TERM BUDGET PLANNING No discussion of .budgeting is complete without some consideration of long-term financial planning. No properly prepaY'ed budget is based solely upon estimated needs for the forthcoming year. The process of city government does not consist solely of activities occurring in continuous, un~ related'12-month periods. Rather, it is one long, unending process arbitrarily subdivfded into 12-month segments 'for administrative convenience. While each budget is prepared only for the next ensuing 12 months, it must be formed in an atmosphere fully cognizant' and appreciative of the long-range financial problems and demands facing the city. This section will describe briefly the essential elements of a long-term financial plan and then will discuss in somewhat greater detail one of the most important aspects of that plan, the capital improvement budget. The first of these controls is simply a require- Long:Term Financial Plan ment that no expenditure be made until a check has been made to see whether or not an adequate The annual budget is actually only one element appropriation for it remains unspent. In other of a long-term financial plan for the city. Other words, no expenditure should be permitted unless elements of this plan are: -330-