Budgeting Policy and Procedure
The Louisiana Local Government Budget Act [LRS 39:1301-1315] applies to all political subdivisions, including municipalities, of the state of Louisiana with a general fund or a special revenue fund. Furthermore, a Lawrason Act municipality, R.S. 33:404 (A) (5) states that the mayor shall have the duty and power to prepare and submit an annual operations budget and a capital improvements budget for the municipality to the council in accordance with the provisions of R.S. 39:1301 et seq. and any other supplementary laws or ordinances.
The council is responsible for adopting budgets and amending budgets on a timely basis. Certified copies of the adopted budget, budget adoption instrument, budget amendments, supporting schedules, and correspondence related to the budgets are to be retained at the mayor’s office.
Budget Preparation and Adoption Process
- The mayor begins preparation of a comprehensive budget about February (90 to 120 days before the beginning of the new fiscal year) of the preceding year with a complete financial plan for the ensuing fiscal year for the general fund and each special revenue funds. The proposed budget must be completed and submitted to the town’s governing authority and made available for public inspection no later than 15 days prior to the beginning of each fiscal year (June 15th). The introduction of the budget is usually made at the May meeting along with beginning advertisement of it in the official journal, followed in June’s meeting with a public hearing and adoption. The council is responsible for adopting the budgets in an open meeting before the end of the prior fiscal year.
- The mayor meets with department heads to receive/discuss budget requests for the year and analyzes trends of sources of revenue and considers whether any increases/decreases are warranted. Side-by-side comparison of expenditures will be used to identify costs that can be reduced or eliminated and those that may increase.
- No proposed budget shall be considered for adoption or otherwise finalized until at least one (1) public hearing has been conducted on the proposal. The town must comply with the notice, publication and public hearing requirements as required by state law R.S. 39:1307.
- If, at the end of any fiscal year, the appropriations necessary for the support of the town for the ensuing fiscal year have not been made, then 50% of the amounts appropriated in the past budget year shall be deemed re-appropriated for the purposes specified in such resolution. This 50% limitation will continue until a budget is approved (R.S. 39:1312).
- Revenue projections are budgeted by fund and/or department and are based on historical data and known trends. Expenditure projections are budgeted by fund and/or department and based on actual cost and reasonable estimates. General fund balance should be maintained at 5% and 15% of the operating revenues or no less than 1 to 2 months of operating expenses.
- The budget must include a clearly presented side-by-side detailed comparison of information for the current year, including the fund balances at the beginning of the year, year-to-date actual receipts and estimates of receipts for the remainder of the year; estimated expenditures and estimated expenditure for the remainder to the year; the year-to-date actual and estimated fund balances as of the end of the fiscal year; and the percentage change for each item of information as required by state law [R.S. 39:1305 (C) (2) (a)].
- Prepare the budget adoption instrument (an appropriation ordinance or adoption resolution) to adopt and implement the budget document as required by state law {R.S. 39:1305 (D)]. This instrument must define the authority of the mayor to make changes with various budget classifications without approval by the council, as well as those powers reserved solely to the council.
Budget Message
- A budget message signed by the budget preparer which includes a summary description of the prosed financial plan, policies and objectives, assumptions, budgetary basis and a discussion of the most important features shall accompany the proposed budget.
Monitoring
- The mayor is to administer and monitor the budgets and provide the council with monthly financial statements and budget-to-actual comparison, including any warnings of any corrective action needed. The clerk is to prepare financial reports monthly to present to the mayor and council for review/monitoring purposes.
- The mayor must advise the council (R.S. 39:1311) when:
- The total revenue and other sources plus projected revenue and other sources for the remainder of the year, within a fund, are failing to meet total budgeted revenues and other sources by 5% or more.
- Total actual expenditures and other uses plus projected expenditures and other uses for the remainder of year, within a fund, are exceeding the total budgeted expenditures and other uses by 5% or more.
- Actual beginning fund balance, within a fund, fails to meet estimated beginning fund balance by 5% or more and fund balance is being used to fund current year expenditures.
Amendment
- The mayor ensures that the council adopts a budget amendment (using the appropriate adoption instrument) in an open meeting upon receiving notification of a 5% variance or change in operations upon which the original budget was developed.
