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UBC Theses and Dissertations

A budget manual for British Columbia municipalities Thomas, Robert Douglas 1956

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A BUDGET MANUAL FOR BRITISH COLUMBIA MUNICIPALITIES by ROBERT DOUGLAS THOMAS A THESIS SUBMITTED IN PARTIAL FUUTILMEHT OF THE/REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS ADKIHISTB&TIOS We accept t h i s t h e s i s as conforming to the standard required from candidates f o r th© decree of MASTER OF BUSINESS ADMIKISTRA1IOS Members of the Department of THE UHIYERSITT OF BRITISH COLOMBIA i n the School of Cocaserce April, 1956 A BUBSSCT MANUAL SOB F'TPIS'I COLUMBIA MIJIICIIMIT1BS by ROBERT DOUGLAS THOMAS A TfiAHSCRIPT OP A THESIS SUBMITTED IS PARTIAL mmmm OF THE wmmmmm wm THE BBG8EE OF MASTER Of BUSINESS AMtHISIRATtOB ia the School of Gowmwse THE !MI¥ERSITY OF BRITISH COLUMBIA A p r i l , 1956 The .{^ rowing size and complexities of munici-pal governments l a British Columbia requires aa outline of the principals of badgeting for municipalities i n the province. Budgeting i s set out as the only K M by which intelligent planning for the future can be re-alistically accomplished and carried into effect. Chapters 1 to ¥ cover the problems of e s t i -mating general revenues and expenditures as well as finalizing and authorizing the budget. Chapter r-T. deals with the administrative control that can be achieved by budgetary accounting.. Chapters ¥11 and f i l l discuss the Cash Budget and the Capital Budget respectively. While these bud-gets are dependent on and related to the general, or current, budget,, aad many of the estimating aad con-t r o l Hiothods used are the same as for the general bud-get, they ar© sufficiently different i n purpose aad procedure that they each require separate chapters. In© manual i s designed for use i n all British Columbia nmnieipalities except, perhaps, Vancouver whose sia© introduces special problems of co-ordination, and control not discussed* I t i s hoped that the manual, in loose leaf form to permit revisions to keep pace with legal and administrative changes, aay be used by trie chief financial o f f i c i a l s and elected representatives i n the province. Th© p r i n c i p a l s s t a t e d , subject to m o d i f i c a t i o n where the s t a t u t o r y c o n t r o l o f m u n i c i -p a l i t i e s i s b a s i c a l l y diff@a?©nt titan in B r i t i s h C o l -umbia, should be a p p l i c a b l e to muriicipali t i e s in other provinces o f Canada. / ACKNOWLEHMEKTS I would l i k e to acknowledge my a p p r e c i a t i o n to Mr. J.D. Baird of the Department of Municipal A f f a i r s , Victoria, Mr. S.S. McCafferty, Treasurer of the D i s t r i c t of Burnaby, Mr. Dennis A . Young, Comptroller-Treasurer of the City of V i c t o r i a , Mr. Gordon Taylor, A s s i s t a n t Comptroller of the C i t y of Vancouver, and Mr. C a r l S, Brennan of the D i s t r i c t af Saanich for reading the manuscript of t h i s paper and f o r t h e i r valuable comments. To my colleagues and members of my committee no leaa, Professors E . D . MacPhee, R.M. C l a r k and D.B. F i e l d s , I would l i k e to express my g r a t e f u l thanks. , TABLE OF CONTENTS PART A. CHAPTER I. I I . I I I . If. THE REVENUE OR GENERAL BUDGET PAGE INTRODUCTION . . . . . 1 Advantages of Budgeting. . . . . . . . . . . . 5 Th© Value of & Manual i n Budgeting 6 BUDGETARY PROCEDURES 7 Responsibility for the Budget 7 The Budget palendar 8 A Suggested Budget Calendar for B r i t i s h Columbia Municipalities. . . . . . . . . . . 9 The Nature and Basis of Estimates. . . . . . . 1J ESTIMATING REVENUES. . . . 15 Preliminary Estimate Instructions to S t a f f . . 15 Estimating Methods 16 Forms f o r Estimating and C l a s s i f y i n g Preliminary Estimates. . . . . . . . . . . . 18 Discussion and Possible Revision of Estimates. 20 Final Approval by the Budget Off icer . . . . . 21 ESTIMATING EXPENDITURES 22 Prel iminary Estimate Instructions to Staff . . 22 Estimating Methods . . . . 2J A Partial L i s t of Municipal Functions to Which Cost Accounting Can U s e f u l l y be Applied, Together with the .Related Units . . 25 C l a s s i f i c a t i o n of Expenditures . . . . . . . . 27 iv CHAPTER PAGE Forma for Estimating and C l a s s i f y i n g Prel iminary Estimates. » 28 Discussion and Possible Revis ion of E«S 'tr.!llU®.Jtl»08 . » « • • « * * • * • » • # • • » • 23 ¥ . FINALIZING AND ADOPTING THE BDDSST . . . . . . . 55 The Budget Document. . . . . . . . . . . . . . 55 C o u n c i l Consideration. 54 P u b l i c Hearings 55 VI. BXBOUTIJB AND. COHTHOLLISG THE BUDGET 5? Budgetary Accounting a a d Oontrol . . . . . . . 57 A p p r o p r i a t i o n and Encumbrance Accounting . . . 5$ Allotments . . . . . . . . . . . . . . . . . . 45 Revisions of the Budget. . . . . . . . . . . . 5^ Revenues . . . . . . . . . . . . . 44 PART 8. THE CASH BUDGET VII. THE CASH BUDGET 46 Purpose of th© Cash Budget 4 6 Estimating Methods . . . . . . . . . 46 Accounting Records . . . . . . . . . 47 PART C. THE CAPITAL BUDGST VIII. THE CAPITAL BUDGET 4? The Seed f o r a C a p i t a l Budget. . . . . . . . . 4o R e s p o n s i b i l i t y f o r the C a p i t a l Budget. . . . . 4 9 Bstiisating Methods . 50 SELECTED BIBLIOGRAPHY 52 APPENDICES r w i , A A Suggested Code of Revenue and Expenditure Accounts 55 B A Budget Message . . * 6*2 C A Hates By-Law , . 65 v i LIST OF FORMS AND STATEMENTS FORM PAGE I . D e t a i l of Revenue Estimates 19 I I . Summary o f Revenue Estimates 19 I I I . Work Programme Detai ls . . . . . . . . 24 IV. Work Programme Summary 2k V . D e t a i l Estimates of Normal Expenditures. . . . . 29 V I . D e t a i l Esti»»tes of A d d i t i o n a l Expenditures. . . 50 V I I . Summary of Normal Expenditure Estimates. . . . . J l V I I I . Summary of A d d i t i o n a l Expenditure Estimates. . . J l I I . Monthly Appropriat ion Expenditure Statement. . . 40 X . A l t e r n a t i v e Monthly A p p r o p r i a t i o n Expenditure Statement, . . . . . . kQ XI. Allotment of A p p r o p r i a t i o n s . . . . . . . . . . . 42 STATEMENT I. Statement of Receipts, Disbursements, end CHAPTER I INTRODUCTION The p r i n c i p a l source of revenue o f governments i s t a x a t i o n . The p r i n c i p a l source of revenue of Canadian municipal governments i s the prop-e r t y tax.* As w i l l be discussed i n d e t a i l i n Chapters II to IV, i t i s e s s e n t i a l that a municipal c o u n c i l have accurate budget information on expenditures and revenues, other than from the property tax, i n order that the property tax rate be properly s e t . Of even greater importance than t h i s , through the examination and d i s c u s s i o n of the proposed expenditures, a municipal c o u n c i l decides what type and what standard of services the m u n i c i p a l i t y i s going to render to i t s i n h a b i t a n t s . The growing complexities of modern l i v i n g have brought demands f o r municipal services of kinds and of standards never envisaged f i f t y years ago. Despite these demands, m u n i c i p a l i t i e s are having to manage on a smaller p r o p o r t i o n of tb© incomes of municipal ratepayers^ and on a smaller share of the governmental revenues r a i s e d i n Canada.5 These f a c t s i n -dicate c l e a r l y that i t i s more important than i t ever has been that municipal budget-Tasking accurately and q u i c k l y make a v a i l a b l e information needed for i n t e l l i g e n t administrat ive and p o l i c y d e c i s i o n s . 1 Municipal and Intergovernmental Finance.,. 1950-1951, Montreal, Canadian Federation of Mayors and M u n i c i p a l i t i e s , 1951, Table 9. Real property taxes accounted f o r 75*9^ of Canadian municipal government revenue i n 1950? 6}.6$ i n 1959 and 55.5> i n 1951. 2 Annual Report 1955 end 1954, V i c t o r i a , Department of Municipal A f f a i r s of B r i t i s h Columbia, p. xl2. 5 Canadian Federation of Mayors and M u n i c i p a l i t i e s , op. c i t . , p. 44, Table 11. A budget may be defined as a comprehensive p l a n , expressed i n financial terms, by which an operating programme i s formulated, adopted and carried into e f f e c t f o r a given period of t ime. This d e f i n i t i o n applies to both business and government operations and i n both cages the object of the budget i s to c a r r y out the a d m i n i s t r a t i v e programme a t the l e a s t p o s s i b l e cost? i n the case of business primarily to maximize p r o f i t s , and In the case of governments chiefly to minimize taxes. H i s t o r i c a l l y , budgets have been used mostly as a means of sett ing tax r a t e s , often as an a u t h o r i t y (not n e c e s s a r i l y a control) f o r making an expenditure, and o n l y / o c c a s i o n a l l y as a means of planning and admin-i s t r a t i o n . There are good reasons to believe that at present many m u n i c i p a l i t i e s i n B r i t i s h Columbia are not making e f f e c t i v e us© of t h e i r budgets, even i n those cases where a budget i s formally drawn up. With this background, and i n the b e l i e f t h a t the large growth i n size and number of British Columbia municipalities will continue, i t is my objective i n w r i t i n g this paper to prepare a manual that can be used by municipal o f f i c i a l s as a guide to budgetary procedures that will a s s i s t them better to cope with present problems and future growth. Many of the procedures described in the fol lowing pages should be suit-able for small, medium and large municipalities; however, where the needs of small municipalities are not the same as those of l a r g e r ones, alternatives designed for these d i f f e r i n g needs will be presented. The forms and terminology employed throughout t h i s manual will presume that a l l users have at l e a s t a rudimentary knowledge o f accounting principles, and particularly those that apply to governmental accounting. Advantages of Budgeting In a d d i t i o n to i t s absolute necessity i n the s e t t i n g of a r e a l i s t i c property tax rate (commonly c a l l e d the " m i l l rate" because i t i s expressed as thousandths of taxable assessed d o l l a r v a l u a t i o n of the r e a l p r o p e r t y ) , budgeting has many more very b e n e f i c i a l uses i n municipal government. An exhaustive l i s t of these other advantages need not be prepared, but the f o l l o w i n g suaraary i n d i c a t e s some of the major a d d i t i o n a l benefits a m u n i c i p a l i t y may expect to derive froffl an e f f e c t i v e budgeting system* 1, By s e t t i n g out the services required and the expected coat of p r o v i d i n g them, budgets make i t possible f o r the decisions to i n c l u d e , or mot to i n c l u d e , c e r t a i n services (or the decisions to provide some services a t a reduced l e v e l ) to be a r r i v e d a t i n the conscious knowledge not only of what i s to be dene, but a l s o of what i s not to be done. There i s a s i g n i f i c a n t i m p l i -c a t i o n to t h i s * only by conscious weighing of the r e l a t i v e merits of various services (or standards of s e r v i c e ) can the best combination of municipal s e r v i c e s , i n the c o l l e c t i v e ©pinion o f the c o u n c i l , be provided. This d e c i s i o n leads to two important by-products» ( i ) those services (or standards) that are deferred i n the c u r r e n t year w i l l , i n a l l p r o b a b i l i t y , have to be p r o -v i d e d sometime i n the f u t u r e . This should suggest that a planned "thinking ahead" beyond the current year i s desirable.. (See Chapter ¥111 en The C a p i t a l Budget f o r development of t h i s subject .) ( i i ) M u n i c i p a l i t i e s have c o n t i n u a l l y been hard-pressed to adequately define why they should receive larger grants from senior l e v e l s of government, or why they should not be responsible f o r c e r t a i n c e r v i c e s , A l i s t of the s e r v i c e s deferred should provide an organized SUCTSSPry f o r examination by both municipal and senior l e v e l s of government. 2. Budgeting demands that adequate and accurate <ie counting and s t a t i s -t i c a l records by maintained to provide the information needed f o r aotinates of future p o l i c y , 5. The f e e l i n g of being; a necessary pnrt of an administrat ive "team* i s given to ths people who are responsible for v i r i o n s f u n c t i o n s , by r e q u i r i n g them, to raake d e t a i l e d estimates of what w i l l be seeded i n the coming year, h. By d i s c u s s i n g and explaining the estimates s u b a i t t s d , with the people who prepared then, they are made aware of o v e r a l l p o l i c y and the problems of the other departments i n the municipal government. 5. The " p r e - t h i n k i n g * that a budget requires often r e s u l t s i n p o l i c i e s that are very d i f f e r e n t f r o a those that would have otherwise r e s u l t e d . In a d d i t i o n , the habit of careful study before proposing a course of a c t i o n tends to be imbued i n municipal a d m i n i s t r a t i v e personnel. 6. Once the budget has been f i n a l i z e d , frequent (at l e a s t monthly) comparisons between the a c t u a l and budgeted f igures w i l l require analyses of s i g n i f i c a n t di f ferences. These analyses w i l l i n d i c a t e that e i t h e r the o r i g i n a l estimates were i n e r r o r ( i n which cage i t 5 may be possible to revise them, or at least consider the facts disclosed, in preparing future estimates) or that practices have developed that should not have developed (in which case corrective action may be taken before these undesirable practices result in large losses of money or material). 7. fhe comparison between budgeted and actual perfonaaneee keeps the goals to be attained constantly before those responsible for attaining them. This incentive is very valuable in adminis-tration if th® goals are reasonable. 8. By knowing early in the year what is to be needed for the whole year, many municipal departments can plan their work more effi-ciently. The purchasing agent may be able to save money by con-tracting for the whole year's supply of some items and get quantity discounts (this does not imply that delivery need be taken). He aay be able to buy ahead in other items to take advantage of special prices offered in "off* periods. Th© personnel depart-ment should be better able to utilize present or prospective staff and thereby Minimize the il l - w i l l that results from lay-offs, and/ or the extravagance of unnecessary hiring®. Budgeting can be of assistance in co-ordination between depart-ments so that, for example, there is less likelihood of part of a road being taken up to lay new sewerage laains after it has been newly resurfaced. 6 k The Value of a Manual In Budgeting In order to r e a l i z e a l l of the advantages of budge-tin:1; l i s t e d above, i t i s desirable that the various procedures and c l a s s i f i c e t l o n s t o be used by everyone having anything; to do with the preparation and execution of tha budget be w r i t t e n down and r e a d i l y a v a i l a b l e . This Is d e s i r a b l e to assure consistency of a p p l i c a t i o n and c l a s s i f i c a t i o n between periods and between persons. A B&nual i s a l s o h e l p f u l i n t r a i n i n g new employees i n the r e q u i r e -ments ©f e x i s t i n g budgetary and a d m i n i s t r a t i v e procedures. I t Is hoped that t h i s manual, i n l o o s e - l e a f f o r i " to permit r e v i s i o n s , w i l l serve these purposes. 4 The Value o f Manuals, Chicago, Municipal f inance Off icers A s s o c i a t i o n of the United States and Canada,- 1$>53» S p e c i a l B u l l e t i n J CHAPTER II BUDGETARY PROCEDURES R e s p o n s i b i l i t y f o r the Budget Fundamentally, the r e s p o n s i b i l i t y f o r the budget rests with th© municipal c o u n c i l . They must approve the rates by-law and i n so doing, they must decide what l e v e l s and kinds of services they intend the munic-i p a l i t y to provide i n the coming year. Recognition of the l e g i s l a t i v e r e s p o n s i b i l i t y of c o u n c i l , while basic to the philosophy of responsible m u n i c i p a l government, is not the r e s p o n s i b i l i t y that i s of major concern in t h i s manual, Rather, it i s the r e s p o n s i b i l i t y f o r seeing that the c o u n c i l i s supplied with accurate and up-to-date information on which to bag© t h e i r l e g i s l a t i v e d e c i s i o n s , and the continuing r e s p o n s i b i l i t y to see that l e g i s l a t i v e decisions are c a r r i e d out In accordance with the c o u n c i l ' s p l a n s , that are the r e s p o n s i b i l i t i e s around which an adminis-trative manual such as t h i s must be planned. The a d m i n i s t r a t i o n of the budget should be supervised by someone who has had t r a i n i n g and experience i n government f inance, and whose s u p e r v i s i o n aay reasonably be expected to be of a continuing nature. For these reasons i t i s usual that budgetary procedures are the respon-s i b i l i t y of the c h i e f f i n a n c i a l o f f i c i a l of the m u n i c i p a l i t y . I t isay be d e s i r a b l e In larger c e n t r e s , that t h i s o f f i c i a l be chairman of a budget committee, but t h i s arrangement i s necessary i n only a few B r i t i s h Columbia m u n i c i p a l i t i e s a t the present time. There i s no p r e -cis© point a t which a budget committee becomes d e s i r a b l e , but as a general r u l e when the volume and/or complexity of the budget requirements o f a m u n i c i p a l i t y become such that they cannot e f f i c i e n t l y be handled by one person, then i t i s time f o r a budget committee to be formed to divide r e s p o n s i b i l i t y f o r the m u n i c i p a l i t y 1 s budgetary procedures. The Budget Calendar The purpose of a budget calendar i s to formalize the timing of the v a r i o u s steps i n budgetary procedures and to ensure that no steps are omitted. The calendar should be set up so that everyone involved i n the preparat ion and execution of the budget i s informed i n advance as to what they w i l l be required to do and when they w i l l be required to do i t . I t should be p o s s i b l e to make use o f otherwise s lac k periods i n the year for the preparation of prel iminary estimates, and thus allow s u f f i c i e n t time f o r a thorough examination of the needs of each municipal department. Planning ahead f o r items l i k e t h i s i s important i f thoughtful and accurate estimates are to be produced, because s lac k periods may d i f f e r between departments and i n a d d i t i o n some departments aay require more time to prepare t h e i r estimates than others. Proper c o n t r o l of the budget requires continuous review of expen-d i t u r e s , commitments and revenues and a budget calendar a s s i s t s i n making t h i s review systematic. The budget calendar i l l u s t r a t e d below contains a general o u t l i n e of the requirements that should be needed by B r i t i s h Columbia municipal-i t i e s ; however there may be circumstances p e c u l i a r to some m u n i c i p a l i t i e s t h a t w i l l r e q u i r e methods of handling d i f f e r e n t from th® icetbods discussed i n t h i s manual. The dates suggested are tentat ive only and K a y have to be advanced i f the s i z e of the m u n i c i p a l i t y i s large or the nuaber of competent s t a f f i s sma11. 9 A Suggested Budget Calendar for B r i t i s h Columbia M u n i c i p a l i t i e s (the f i s c a l year end Is December J I ) * 1st week i n Kov. A meeting should be c a l l e d by the budget o f f i c e r 2 with depart-ment heads and others concerned with the preparation of both the Interim Budget and the Annual Budget^. This meeting should cover the fol lowing pointss (a) The forms on which departmental est in*teg of revenues and expenditures are to be entered should be d i s t r i b u t e d and explained. The budgetary procedures to be followed should be outl ined and the purpose of each explained. In p a r t i c u l a r , tha methods of a r r i v i n g at revenue and expenditure estimates should be reviewed g e n e r a l l y , (b) The o v e r a l l f i n a n c i a l p o s i t i o n of the m u n i c i p a l i t y should be o u t l i n e d so that department heads can be i n a p o s i t i o n to attempt to keep t h e i r estimates i n balance with the needs of other departments. At t h i s time the need f o r , or r e s t r i c t i o n s on, s p e c i a l expenditures (ei ther new 1 The Municipal Act, H.S.B.C., Chapter 2J2, as amended to 1955, s e c . 105 (1) . 2 Budget o f f i c e r w i l l refer henceforth to the person i n whose charge the c o - o r d i n a t i o n of the budget will be placed. This w i l l generally be the chief financial officer of the municipality, but in the case of large m u n i c i p a l i t i e s , i t can also be taken to refer to a budget cowaittse. 5 Throughout this paper "interim budget" will jr.ear. the prel iminary budget covering normal operating expenditure appropriations for the f i r s t four months of the year, 'Annual budget* w i l l r e f e r to the main budget document used as a basis f o r s e t t i n g the various tax r a t e s . 10 s e r v i c e s or higher standards of e x i s t i n g s e r v i c e s ) should be discussed. During t h i s period a l s o , the f i n a n c i a l department should be preparing revenue and expenditure estimates f o r items not d i r e c t l y connected with any other department, f o r example, the debt requirements. In small m u n i c i p a l i t i e s t h i s work, as well as the estimates f o r some other departments, may be done by the budget o f f i c e r . Kov . -Dec. fhe i n t e r i m budget general ly should cover the normal operating expenditures f o r the f i r s t four months of the year. I t i s designed o f f i c i a l l y to recognize the needed appropriations f o r municipal departments u n t i l the annual tax levies are decided and the Bates by-law i s passed by council. There are several reasons why i t i s necessary to have an interim budget i n B.C. m u n i c i p a l i t i e s . P i r s t , municipal c o u n c i l s take o f f i c e on the f i r s t of January each year and, even though they may be made up mostly, i f not e n t i r e l y , by the sane members as made up the previous council, they cannot, with one exception, be bound by general expenditures authorised by the previous council,^ In a d d i t i o n , the amount of the grants from the p r o v i n c i a l govern-ment i s g e n e r a l l y not known u n t i l March of each year. F i n a l l y wage negotiations -my be c a r r i e d on u n t i l A p r i l 1 yth each year k The exception to t h i s r u l e i s , of course the case where previous c o u n c i l s have, with the consent of the ratepayers, issued debentures. Th® debt charge on account of t h i s funded debt mist be provided f o r annually in the revenue estimates. F u r t h e r consideration of the f a c t o r s connected with debenture issues w i l l be l e f t to Chapter VIII on The Capital Budget. 11 and the outcome of these negotiations must be included i n the y e a r ' s estimates. Since the i n t e r i m budget i s designed to cover only a p p r o p r i -a t i o n s f o r normal operating expenditures, the information needed i n i t s preparation i s much less d e t a i l e d and takes much leas time to prepare than the inforraation needed i n the preparat ion of the budget i t s e l f . January The i n t e r i m budget should be submitted to the incoming c o u n c i l f o r r a t i f i c a t i o n a t i t s f i r s t meeting i n January. Not only does t l i i s provide o f f i c i a l sanction of continuing budgetary c o n t r o l , but a l s o i t provides both old and new c o u n c i l l o r s with a general and prel iminary look a t the expenditures with which they w i l l be contending i n great d e t a i l f o r the next few months. J a n . JI P r e l i m i n a r y estimates f o r the annual budget to be i n the hands of the budget o f f i c e r by t h i s date. Feb.1-15 The budget o f f i c e r should review the prel iminary estimates i n the l i g h t of the o v e r a l l f i n a n c i a l programmes. Where necessary the p r e l i m i n a r y estimates should be discussed with the depart-ment head concerned and revised prel iminary estimates should b© requested or decided upon. Feb. 16 A p r i l 20 The revised prel iminary estimates should be considered i n d e t a i l by the c o u n c i l (or committees of the counci l) and the i n d i v i d u a l department heads. The f igures presented should be on a com-parative basis showing the f i n a l -estimates of the previous year, 12 the a c t u a l revenues and expenditures of the previous year, and the r e v i s e d prel iminary estimates f o r th® current year. I f the labour negotiations are completed before A p r i l 15, i t should be p o s s i b l e to Complete this phase of the work before A p r i l 20. April 20-50 The budget o f f i c e r should take the estimates a f t e r they have passed the general s c r u t i n y of the c o u n c i l (or committees of th© c o u n c i l ) and consolidate them i n suraaary form f o r present-a t i o n to the whole municipal c o u n c i l for f i n a l c o n s i d e r a t i o n . When doing t h i s , t e n t a t i v e tax rates are determined based on the proposed revenues and expenditures. Th© consolidated budget as prepared by the budget o f f i c e r should be presented to th© c o u n c i l with a Budget Message s e t t i n g out th© p r i n c i p a l feature® and proposals of the proposed budget. The Budget Message i s an Important document t o the understanding of what the m u n i c i p a l i t y i s t r y i n g to achieve i n passing the budget. Its ifse should not be r e -s t r i c t e d to saes-bers of the c o u n c i l , but i t should be made a v a i l a b l e to i n t e r e s t e d c i t i z e n organizations a»4 to the l o c a l newspapers. After th® budget has been authorized by the c o u n c i l , the annual Bates by-law should be passed s e t t i n g out the various tax rates to be l e v i e d to r a i s e the budgeted tax revenue for the current year. Ja B . -Dec. J i There should be monthly »ts . t«ae » t6 prepared showing a c t u a l and 15 budgeted figures for the current nonth, the sawe Month" lest year, and the to t a l accumulated f igures for the current year. I f an allotment ©yetew Is used, ellotwents should, also appear on the monthly steto'aento.-' fhe Nature and Basis of Estimates The foundation of the budget i s the estimates that make I t up. Estimates must be more than guesses i f the budget, and indeed the munic-i p a l government i t s e l f , Is to function successfully. While there are many factors that must be considered i n preparing the annual estimates, and others which were tiot thought of and which therefore have distorting e f f e c t s on the o r i g i n a l estimates, the experience gained from proper budget&ry procedures In the past should result i n reasonably accurate estimates over the years. Estimates can be based e n t i r e l y on a cash basis, p a r t i a l l y on cash and p a r t l y on an accrual b a s i s , or completely on an accrual basis. In s p i t e of the f a c t that some municipal revenues cannot properly be accrued but can be recognized Income only when c o l l e c t e d i n cash (e.g., f i n e s , l i c e n s e fees), they can usually be predicted with a large moosure of accuracy. Therefore the estimates discussed i n this paper w i l l be based e n t i r e l y on the accrual basis, unless they are of such an unpredictable nature that t h i s would be unwise. Such unpredictable i teaa ar© u s u a l l y i n e i g n i f l e a n t i n relation to the other municipal revenues. to 5 A complete discussion of the allotment system i s contained i n ptor V I . This chapter also gives a f u l l outline of the procedures be used*In properly exercising control of the budget. Ik I t m * * ! J»r<Jly be pointed out t'.;.t, budgetary • e t l t ^ t e * on fteorual p r i n c i p l e s « m only be e f f e c t i v e l y c o n t r o l l e d i f there Is 0© adequate ©yet*® of Rocntel ftec minting In oper-Pilon* / CHAPTER III ESTIMATING REVENUES P r e l i m i n a r y Estimate Instructions to S t a f f The Budget Calendar o u t l i n e d i n the previous chapter required t h a t a meeting o f department heads and others concerned with the preparation of the budget should be c a l l e d by the budget o f f i c e r i n the f i r s t week i n Hoveraber, By t h i s time i t should be possible for the a c t u a l r e s u l t s of the f i r s t ten months of the year to be known and summarized. Copies of Form I with columns 1 to 5 f i l l e d i n , should be d i s t r i b u t e d a t the beginning of th© meeting. With t h i s information, the budget o f f i c e r should go over with those c a l l e d to the Elect ing, the general r e s u l t s of the current y e a r ' s operations to date, and how those r e s u l t s compare with the estimates f o r the p e r i o d . In t h i s way, the E»in differences between budgeted and a c t u a l performance ar© analyzed and the reasons f o r the differences discussed. The information thus provided should prove v a l u a b l e to a l l those responsible f o r the preparation of past and future estimates, and may be the basis of a d m i n i s t r a t i v e decisions concerning the operations of the l a s t two months of the current year designed to b r i n g budget and a c t u a l f igures c l o s e r together before- the year e n d s . 1 I n a d d i t i o n to analyzing the factors c o n t r i b u t i n g to discrepancies 1 Of course t h i s process of c o n t r o l l i n g a c t u a l and budgeted p e r -formances by constant comparison of one with fhe other i s c a r r i e d on at l e a s t every -month throughout the whole year. I f the differences between the budget and a c t u a l f igures are l a r g e , or appear to be g e t t i n g l a r g e , a d m i n i s t r a t i v e decisions on how to prevent or minimize t h i s s i t u a t i o n should be taken as soon as i t i s r e a l i z e d . I t may be necessary to get a p o l i c y d e c i s i o n from the c o u n c i l i f the matter i s s i g n i f i c a n t . 16 between budgeted and a c t u a l performance In order to better weigh such f a c t o r s when preparing estimates f o r future p e r i o d s , the budget o f f i c e r should i n d i c a t e the f i n a n c i a l p o s i t i o n of th© m u n i c i p a l i t y as a guide to what services i t may reasonably be expected to be able to provide i n the coming year. The general economic condit ions of the l o c a l i t y , the p r o v i n c e , the nat ion and, even, other n a t i o n s , should be reviewed i n order to give some perspective on possible future developments which could i n -fluence the services that the m u n i c i p a l i t y might be expected to provide and i t s a b i l i t y to provide them. After th® budget o f f i c e r has made the above general o u t l i n e , a complete d i s c u s s i o n , with the f u l l e s t possible p a r t i c i p a t i o n by those present, should take p l a c e . Questions should be f u l l y and c l e a r l y answered and the problems and points of view of everyone should be con-s i d e r e d . I t i s important that , so f a r as i t i s possible a t such a meeting, everyone present should have an understanding of the plans and prospects of the m u n i c i p a l i t y and t h e i r part i n them for the coming year. In small m u n i c i p a l i t i e s where there may be only two or three people concerned with budget preparation, the necessity of such a meeting i s no l e s s than i n l a r g e r m u n i c i p a l i t i e s . It Is very d e s i r a b l e t b a t as many o p i n i o n s , and as much f a c t u a l information, as possible be brought to bear i n considering and implementing the isuttieipal budget. Estimating Methods There i s no c l e a r - c u t r.ethod of estimating p r e c i s e l y future happenings, but there are some general factors that should be taken i n t o account i f the estimates are to be r e a l i s t i c . The importance that should be attached to these various factors i s a matter of judgement. C e r t a i n l y 17 experience i n preparing estimates i n the past, together with knowledge of the reasons as to why a c t u a l happenings d i f f e r e d from those estimates, e.r© the best means of a c q u i r i n g the necessary d i s c r e t i o n . I t i s f o r these reasons that columns J, 4 and 5 a*"e provided, &B a summary of past estimated and a c t u a l operations. While these h i s t o r i e s . ! data w i l l be of assistance i n preparing th© coalng y e a r ' s estimates, they must be regarded only In the l i g h t of other historical d a t a . Information aa to changes In population not only i n numbers, but a l s o in terms o f age groups, income, e t c . i s h e l p f u l , A growing population generally means more tax revenue will be a v a i l a b l e , I f only on domestic establishments. I f t h i s new population i s mostly i n the 2 0 - 5 0 age group, i t can reasonably be expected to produce or be the product of , more local industrial and business activity than if the in-crement i s i n the 60 - ?0 age group, and conversely a preponderance of the latter group could increase municipal uncontrollable expenditures. Government legislation (Federal, provincial or municipal) may in-dicate the l i k e l i h o o d of new revenue sources or the l i m i t i n g of old ones. L o c a l economic conditions and resources snay give grounds for hopes of a t t r a c t i n g new businesses or »ay i n d i c a t e that new i n d u s t r i e s w i l l probably be discouraged frota locating in the a r e a . These h i s t o r i c a l data must be evaluated and weighed i n r e l a t i o n to each other and then must be used and re-evaluated in the l i g h t of e s t i -mates of events i n the cosing year. In a n t i c i p a t i n g future events that say affect the municipality's prospective revenues, changes i n l o c a l , p r o v i n c i a l , national, or oven world economic conditions crust be calculated. In a d d i t i o n , the effects of possible or expected government l e g i s l a t i o n must be considered. 18 Forms for Estimating and C l a s s i f y i n g Preliminary Sstlraatsa It should be pointed out here that the c l a s s i f i c a t i o n of revenues (and expenditures) used i n t h i s manual Is the same aa that used i n the Manual of I n s t r u c t i o n s published by the Dosinion Bureau of S t a t i s t i c s ^ with such f u r t h e r d e t a i l as appears necessary.5 Such d e t a i l s as are f i l l e d i n on the various forms ie supplied only as an i n d i c a t i o n of the use of the columns. The forms are completed i l l u s t r a t i n g the prel iminary information f o r the year ending .December J I , 1957. In small m u n i c i p a l i t i e s the d e t a i l s shown i n Form I wj11 probably be unnecessary f o r most/revenues and the summary shown i n Forra II should be s u f f i c i e n t . Most m u n i c i p a l i t i e s w i l l require P o m I for the revenue frois t a x a t i o n unless they have only one source o f taxation. The nature of the colurane on Forms I and II ir. s e l f - e v i d e n t , except that of column 5, "Actual and Estimated - 1956". The f igures i n t h i s column represent the a c t u a l revenues to October J I , to which heve been added the estimated revenues of the l a s t two months of 19%. I t i s an attempt to present the "actual" revenues f o r I956 before the year i s Completed. Two copies of Forra I should be given to each department head f o r each of the major c l a s s i f i c a t i o n s of revenue for which he should be 2 Manual o f I n s t r u c t i o n s , F i n a n c i a l Statements, Accounting Terminology, Population, Area, and Assessment Schedules for Municipal Corporations, Hevised E d i t i o n , Ottawa, Dominion Bureau of S t a t i s t i c s , 1950. 5 See Appendix A f o r a suggested code of accounts using the Mapual of I n s t r u c t i o n s ' c l a s s i f i c a L i o n s . FOR Ml Details of Revenue Estimates The. Corporation of. Fund General De.pt Co Hector's DETAILS OF R£ VENUE ES TIM ATE S t>W* <* *>v for the year ending December 31, 1957 Date Code Source of Revenue Actual Estimated A*t*ol AAO4 EstimtLTid by 3u4ill Passed by No. I95J IS 36 7957 Council 1 2 J 4 5 6 7 8 2 L/cenCes and' fikrmi^s * 4 4 4 f * R.ZI Protc s s ion*./ ^SuStnti s - - - - - -P. Zlfl Tra.de - Sentra/ 17,94$ Io z B, 3oa.oo If, 2l'.3c 2B, 6SO ot> R.ZHZ - Ttui/ 697 oo 700. eo 7/8. So 700 00 &.2I/S - yendmj Mttki/iti So 0. is S,4..2o foo.oo RZ'U Qwfjinj Ptrtrti/s /. 7*2.75 /t 7<re to /,79S.oo /800 ao e.2/i2 S*/e ft Jui/^'"f dy/lMS ///. 90 //*>. *0 //e.42 /OO. n> R. Z/23 P/jtmh/nj Ptrm/ti 4g7. 65 fo.oo 49*So 49o. 00 P.2I24 GaiPtrm'rs - - - /eo.»o R. 2IZ5 Electric*/ fkthtiti '.472.9* /,420.eo Ai4/.SS /.eso.oo R. 2126 Other (sfttl/yj — - _ -S2, 948. 78 35140.n Si,Sot.io $4,170 00 • ' . Tot*./ //eensei t~ flrmrts +3,5/8.25 44, o92.ee 44,167.2} 45.25o.ao FORME Summary of Revenue Estimates The Corporation of_ SUMMARY OF REVENUE ESTIMATES for the year ending December 31, 1957 patt Fund Gen 1 ha I Dtpi Prepared by. Code No. Source of Pt venue Actual 1955 Estimate d 7 9 56 EsHrrnttd 1357 ty gujf it pAtsid by Ce«">cii 5 4 7 8 R. I R. Z e. 3 R 4 R. 5 R.6 Ta.ua lion Licences an d Permits Rents, Concessions a-nd Franch/s e 5 Fines Interest, Tan Pert oit let, etc. Serv/ce Ch*.r/es 310, 107.40 43,518.75 6, o47.9l Z'04.97\ 2,047.(5 /3,019.66 522,901.50 44,092.0O 6,Z90,M> 7,650.40 Z295.SO /3 17500 32S.599.oo\ 44,167.71 t.946.17 e,/8i.0S 2,65304 15,592.35 539,736 *0 4-5, 25000 7, BIO.00 6,200.00 7,468.50 /? 450.00\ 668.417.91 690.47Z.74 693.552.94 696.573 U 20 responsible. '* When column 6 has been completed, one of these forms should be returned to the budget o f f i c e r , and the other kept by the department head f o r h i s own f i l e s . , D i s c u s s i o n and P o s s i b l e Revision of Estimates When the revenue estimates from a l l department heads have been summarized along with the revenue estimates not d i r e c t l y a f f e c t i n g any s p e c i f i c department (prepared by the budget o f f i c e r ) , i t may appear to the budget o f f i c e r that c e r t a i n estimates are u n r e a l i s t i c or are not com-p a t i b l e with e i t h e r expenditure estimates and/or other revenue estimates. In these cases, the budget o f f i c e r should discuss the estimates with the department head concerned and, i f necessary, revise them. t t i s c l e a r l y impossible to know how such taxation revenue w i l l be required u n t i l th© expenditure estimates have been suHuaarized, discussed and approved. At the time of approval, the m i l l - r a t e that i s necessary to raise the taxation revenue which, along with other estimated revenues, w i l l be s u f f i c i e n t to meet the estimated expenditures w i l l be authorized. It may be that revenues, other then taxation, w i l l have to be reviewed i n the light of r e l a t e d expenditure estimates. The estimated revenue from f i n e s may be affected by the estimated expenditure f o r a d d i t i o n a l p o l i c e -men, f o r example. k there are two c l a s s i f i c a t i o n s of revenue i l l u s t r a t e d i n Fora I 2 - Licences and Penalties This Is a y s j o r c l a s s i f i c a t i o n of -——— — & {Specific type of a municipal revenue, 2111 - Trade - general This i s a minor c l a s s i f i c a t i o n of a municipal revenue. 21 F i n a l Approval by the Budget O f f i c e r I t i s l i k e l y , then, that wany revenue estimates cannot be Judged on t h e i r own -merits, but only, or p a r t i a l l y , when reviewed alongside ex-penditure estimates* This o v e r a l l coraparlson i s th® r e s p o n s i b i l i t y of the budget o f f i c e r and w i l l bo discussed a t greater length i n Chapter V. F o r the present i t i s enough to not© that revenue estimates, as submitted by department heads, are subject to review and possibly to r e v i s i o n by th® budget o f f i c e r , before they are presented to the Council (or the Finance Committee of the Council) f o r t h e i r c o n s i d e r a t i o n . CHAPTER I? ESTIMATING EXPENDITURES Prel iminary Estimate Instructions to S t a f f The timing and format of the meeting of department heads and. others concerned with the preparation of the budget was discussed i n Chapter I I I , In t h i s d i s c u s s i o n , emphasis was placed on the problems and procedures f o r making revenue estimates* The purpose of t h i s chapter i s to o u t l i n e the methods of making expenditure estimates. The p r i n c i p l e s involved i n estimating revenues, given i n the previous chapter, apply with equal force to the estimating of expenditures. In a d d i t i o n , estimating expenditures r e q u i r e s decisions as t o : (a) the cost of maintaining present services at e x i s t i n g standards i n view of changing d o l l a r values, population, and other f a c t o r s , (b) the cost of providing new types of services or improving the standards of e x i s t i n g s e r v i c e s . I n the estimating process i t i s very d e s i r a b l e that these two problems be c l e a r l y d i f f e r e n t i a t e d and that th© information i n the budget regarding each be presented separately, This manner o f presentation, which i s i l l u s t r a t e d i n Forms III to '/III, permits th© budget o f f i c e r and/or the c o u n c i l to decide what "extras" are to be provided with a c l e a r understanding of th© costs involved and the a l t e r n a t i v e s rejected. I t i s v i t a l that everyone concerned understands and i s f a m i l i a r with the items of expenditure which a r e , for that m u n i c i p a l i t y , "uncontrollable" by the municipal o f f i c i a l s ( e . g . , debenture debt charges).. 25 Estimating Methods The methods used i n e s t i r » t i n g expenditures can be c l a s s i f i e d as to whether they are based on expenditures to which cost accounting can be a p p l i e d , or on expenditures which i t i e not possible to adequately "cost*. In both cases, i t i s e s s e n t i a l that everyone connected with the preparation of the estimates r e a l i z e s that expenditure estimates should be based on a d e f i n i t e programme of work to be achieved, 1, Expenditures Based on Cost Accounting Expenditures of t h i s type are u s u a l l y those associated with munic-i p a l s e r v i c e s f o r which/ measurable r e s u l t s can be produced i n r e l a t i o n to the expenditures made. Forms III and IV i l l u s t r a t e the a p p l i c a t i o n of c o s t accounting to expenditure estimates for the S a n i t a t i o n and Waste Removal department. In Form IV, th© most basic information as to the service being g i v e n i s ontered. The cubic ycrd of garbage c o l l e c t e d i s used as the cost u n i t (by d i v i d i n g the t o t a l cost of c o l l e c t i n g garbage by the t o t a l number of cubic yards of garb&ge c o l l e c t e d ) , but i t i s affected by the miles covered and the number of stops aade i n the c o l l e c t i o n process. As can be seen from Form IV, the u n i t cost of providing garbage c o l l e c t i o n has dropped m a t e r i a l l y even though the estimated amount of garbage to be c o l l e c t e d i n the cosing year i s expected to increase. This i s so because there are more c a l l s being aade i n an area that i a s u b s t a n t i a l l y unchanged. In other words, population density has increased, making longer runs between stops much less frequent. Form IV would give the c o u n c i l the main features of what i s being done i n t h i s p a r t i c u l a r s e r v i c e . As an i l l u s t r a t i o n , the s l i g h t increase FORM HI Work Programme Dttar/s The Corporation of. DETAILS OF WORK PROGRAMME for the year ending December 51, I95J Fund Genera/ Dept. Public Works Prepared *</ Da fe U0. af Ctlkcfitni Routt 1956 Actual «»4 £\timated Cubic Ya-rdt M>. of Steps 1957 Cubic y a rdi £ 's f/m a No of Stops led Miles I 7 8 2 I I Z I Col ltd ion hi to 4th Street* 5th to 9th Streets lOfh te /8 th lit io 6 th A verges 7 th to llth 2,516 /,/LB 47 Z Z 244 , 311 6,581 /20 t i l 40 118 2* 700 585 5/5 670 475 436 7945 2,400 US5 /,09O 2, 2 80 1/90 /20 / 32 /so //8 85 8/45 585 70 O 58 5 6 ZO 6 70 590 3,165 FORM H Work proqrammc Summary \Codc No. The Corporation of'_ SUMMARY OF WORK PROGRAMME hr the year end/nf December 31 /95J Fund Genera / Dept. Public Works Prepare d by Pate Operation /956 Ac Vaal arid f No of Units U'nit cost it/mated /95 7 Total No. of (Jri i ts Est/ rn 4 i e d Unit Cos! Tot a/ I £. 4 E. 41 £.44 £. 45 £.46 5 6 7 8 Sanitaiian and IVaste Removal Stiver Susiem Street Cleaning Garfraye Waste Collection Qarbool a-nd lYmtt pit pos d i 507 mi/cs Li'71 mi/ei \i,58l Cu.yds i,58icu.ifh. * 5.26 2.41 .48 # 4,262.66\/,307mi/es 6, 364.9911 '78Miles /3,8o6.94\8.l45cu.yes. 3,/84.68\8.l45cu.yds 4 5.S-4-5. 41 /.9$ 39 / 4-,6lB.oo S, 5 72.00 /6. 2ZZ.0O 3, 2oo. oo 25 In garbage c o l l e c t i o n costs of 5^ 15 (U>,8o7 i n 1956; 316,222 estimated f o r 1957) might have been assumed to be the r e s u l t of increasing costs , A comparison of column 5 with column 6, and of column 4 with column 7, c l e a r l y shows that the reverse i s t r u e . The d e t a i l s as to why this i s so can be explained i f Form III i s used. I t should be r e i t e r a t e d that cost accounting techniques can v a l i d l y be a p p l i e d to r e l a t i v e l y few municipal functions a t the present time. Moreover, i n sraa11 Municipalities, the a d d i t i o n a l work or complexities involved may be beyond the competency or a v a i l a b l e time of the s t a f f . However, the use of cost accounting i s recommended for the budgeting of a l l municipal functions that can reasonably be made meaningful by the use of u n i t c o s t s . A p a r t i a l l i s t of municipal functions to which cost accounting can u s e f u l l y be a p p l i e d , together with the related u n i t s , i s shown belows Municipal A c t i v i t y Possible Cost Units P u b l i c Works Surfacing of Streets and Sidewalks 1 . lumber of square yards of various types of new paving to be com-pleted (separating new construc-t i o n , r e c o n s t r u c t i o n , and r e -surfacing) . 2. Nuns be r of square yards of various types of patching to be completed. J , Mum-be r of square yards of various types of sidewalks to be com-pleted (separating new construc-t i o n and r e c o n s t r u c t i o n ) . 4, Humber of l i n e a l feet of curb and gutter to be completed. 5» Miles of streets to be o i l e d or otherwise treated for dust c o n d i t i o n . 26 M u n i c i p a l A c t i v i t y Street Cleaning Garbage and Waste C o l l e c t i o n Garbage and Waste Disposal U t i l i t i e s Water 0as E l e c t r i c i t y Possible Cost Units M i l e s of c leaning to be done ( c l a s s i f i e d by machine sweeping, f l u s h i n g , and hand c l e a n i n g ) . Number of cubic yard® of garbage and waste to be c o l l e c t e d . Number of cubic yards of garbage and wast© to be disposed of* (This may be d i f f e r e n t from the number of cubic yards to be c o l l e c t e d i f disposal i s handled f o r areas which are responsible f o r t h e i r own c o l l e c t i o n . ) 1. M i l l i o n s of gal lons and/or m i l l i o n s of cubic f e e t used ( c l a s s i f i e d between sales to con-sumers and used by m u n i c i p e l i t y ) . 2. Peak d a i l y and hourly consumption. 1, Thousands of cubic feet used ( c l a s s i f i e d between sales to con-sumers and used by the m u n i c i p a l -i t y ) . 2. Peak d a i l y and hourly consumption. Kilowatt-hours used ( c l a s s i f i e d between sales to consumers and used by the a u n i c i p & l i t y ) . 2. Expenditures Hot Based on Cost Accounting Cost Accounting cannot be applied to most municipal functions because of q u a l i t y f a c t o r s inherent i n those functions that cannot be adequately measured by any presently establ ished u n i t s . The expenditure on such important q u a l i t a t i v e services as General Government, Recreation and Community S e r v i c e s , and P o l i c e P r o t e c t i o n cannot be projected i n t o the future based on h i s t o r i c a l u n i t c o s t s . Rather, these functions must be regarded as a whole, and the estimates of expenditures that w i l l be necessary f o r them i n the future should t r y to encompass the many tangible 27 and i n t a n g i b l e f a c t o r s that influence them. I t i s conceivable f o r example, t h a t r a i s i n g s a l a r i e s paid to c o u n c i l l o r s could a c t u a l l y r e s u l t i n a d e t e r i o r a t i o n of the q u a l i t y of the c o u n c i l , b y a t t r a c t i n g I n f e r i o r men who could not earn, as much i n other jobs, rather than making an appeal to more able men on the grounds of p u b l i c s e r v i c e . This should not be taken to imply that those who can a f f o r d to run for elected o f f i c e con-s t i t u t e the only supply of p u b l i c - s p i r i t e d c i t i z e n s . Th© i l l u s t r a t i o n i s used merely to point up th© d i f f i c u l t y i n obtaining meaningful standards to estimate the c o s t of functions that are predominantly q u a l i t a t i v e . / C l a s s i f i c a t i o n of Expenditures I t was pointed out i n the previous chapter that the c l a s s i f i c a t i o n o f revenues and expenditures shown i n t h i s manual i s that shown i n the Manual of I n s t r u c t i o n published by the Dominion Bureau of S t a t i s t i c s . I t i s important to m u n i c i p a l i t i e s that they be able to compare accurately the cost o f one y e a r ' s operations with the cost of the same operations i n other y e a r s . For t h i s reason i t i s e s s e n t i a l that a m u n i c i p a l i t y c l e a r l y define I t s revenue and expenditure c l a s s i f i c a t i o n s and r i g i d l y adhere to them through the years, unless there i s a c l e a r i n d i c a t i o n that past c l a s s i f i c a t i o n s are f a u l t y or need to be changed because of changing con-d i t i o n s . In e i t h e r of these cases, the c l a s s i f i c a t i o n should be amended, and a complete d e s c r i p t i o n of the change and of i t s r e s u l t s should be given on the f i n a n c i a l statements i n the year i n which the change was made, I t i s a l s o important that the cost of on® »unleipal i ty*s operations should be able to be compared accurately with the same operations i n other m u n i c i p a l i t i e s . f o r t h i s reason i t i s desirable that a l l m u n i c i p a l i t i e s 28 i n Canada should adopt th© c l a s s i f i c a t i o n s set up i n the Manual of I n s t r u c t i o n s . Forms for Estimating and C l a s s i f y i n g Prel iminary Estimates The forms used f o r estimating the expenditures f o r the coining year should be set up so as to d i f f e r e n t i a t e c l e a r l y between! ( i ) the "normal" expenditures needed to maintain e x i s t i n g s e r v i c e s a t . e x i s t i n g standards, and ( i i ) the " a d d i t i o n a l * expenditures needed to e i t h e r create new s e r v i c e s or improve the standards of present s e r v i c e s . For both of these types of estimates, there should be forms that s e t out the d e t a i l s of the estimated expenditures and other forms that summarize the expenditures by major c l a s s i f i c a t i o n . Porta V i l l u s t r a t e s such a " d e t a i l " form f o r "normal'' expenditures, using the F i r e Department as an i l l u s t r a t i o n . Form VI i l l u s t r a t e s the d e t a i l needed f o r " a d d i t i o n -a l * expenditures. Forms VII and VIII show the expenditure summaries. I t i s worthwhile noting that Form® I to VIII are of the sasae basic design with the wording changed. This should permit a standard form to be p r i n t e d cheaply and made a v a i l a b l e to a l l m u n i c i p a l i t i e s that car© to make use of i t . Discussion and Possible Rev is io n of Estimates The budget o f f i c e r should review each department's estimates as he receives them, i n r e l a t i o n to the p a r t i c u l a r needs of each department and the o v e r a l l needs (and revenues) of the m u n i c i p a l i t y . While i t may be t h e o r e t i c a l l y possible to r a i s e m i l l rates to pay f o r needed expenditures, most municipal c o u n c i l members w i l l strenuously r e s i s t such suggestions. FORM Y Details Est/mate of Normal Expenditure. Tlit Corporation of_ Fund Genera./ • Pepi Fire. DETAIL S OF NORMAL EXPENDITURE ESTIMATES P"P^ *y for the i/iar endinf December 31,19£I  DtLtc \Cod€ No. Expenditure Actml 135 5 Ettimtted Act** I Anil EilimaJld /9 5 6 Estimated /9S7 RtHHtKHHlltll t<f Budget yinfl oy Count// I J 7 3 U £. till E~. 21(2 F. 2U3 £. nil £ 212 Z Ft re P rare et ion A 4 mini etr*. tio n: Salaries and Wayes Offic e supp/ie s and F/pense M.S. A. Fire Fiyhtinq Forces •• Salaries Equipment operation 4 6046 10 489.H 106.50 4 6,53s.oo 540.00 IZO.QO |/~ 6,644.85 4 6,360oo 507.57 U&5S. 4 6,9SL.oo 7/0. 00 135.00 f 7, 195,00 f 6,98b.07 4 7,80/00 ^28. 329 60 906.85 \f 28,98 loo 94000 \f 78, 704.6 955 35 7V52, '. 548.00 970.00 $47,144.75 f 45645.00 FOQMY (REVERSE SIDE) Fund Deaf. NORMAL SALARIES AND WAGES prepared Date No. Position ht ual Propoied Inert est Propoied 1957 <?cc*mmmd(d by Budlll o/f,cer Ptsstd iy Council 1955 /956 1 Z 3 4 5 6 7 8 1 '/2 1 3 Ajminisrra.rion • Fire Chief Stenographer (shared (Arith Police ) Part-time sterio. Fire Fifkting Forces: Cf-pttins f 4,800.00 1, 700.00 48.70 4 5,100.00 i 100.00 60.00 4 300.00 200.00 96.00 f5,400 OO / 400. OO /56.00 t 6,048.70 t 6,360.00 4 SS6.0O f6.9S6.oo f II, 600 00 4/Z600.00 4 600 00 4/3,200.00 Addition a. I Staff Fire ma.n f~ 3 000. oo\ FORMH Detail Estimates of Additional Expenditures The Corporation o(_ Fund ' Dept. itntrai Fire DETAILS OF ADDITIONAL EXPENDITURE ESTIMATES Pnp^ed for the yetr ending December 31, 1911 Date Codi No. Expinditurt E* plan at ion of Purpose »nd /Y/td of Additional Expenditure \Eshmittd 1957 Raaminindl^ by Buiyif officer Pafltd by Counti I I 3 8 \E.I2-I f 2 / 3 5 Ntm Pumper Truck* * I it uri/l probably be necessary to issue, debentures for this expenditure.) 10 Htu Fin Alarm Bo*es Present pumper truck has not su/ficitnf pressure., in 1 - i addition, it's body and enomc are obsolete^ arid ineft/cilnt. Present-^ pumper was purchased second hand 13 years aye I it was 7 wears old thin). j IVCUJ developments i 15, 000. 00 I 16,750.00\ FormU (Rtnrst Side) ADDITIONAL SALARIES AND WAGES Fund _ DePt._ Prepared t>Y Date &entrgl Fire {Code No. Expenditure Etpianation of Purpose and Hud ot Additional Expenditure Proposed I9S7 fftcamtninjld fa 0*1 fir oif'Ctr Passed By Counti I I 8 E. litl 3 Fire men Needed to h tndlt equipment on proposed new pumper (IAdditional firerr\an needed /or ea. eh shift.) 4 9, OOP. 00 FORM YU Summary of Normal Expenditure Estimates The Corporation of_ Fund. Dept. SUMMARY OF NORMAL EXPENDITURE ESTIMATES Prepared by for the year ending December. 3'I, I9?I o^fc Cod i No. Expend if u rc Actual Estimated Jlerual and Eifim&ied Est/mated I95J Pet«frtK^tn4t4 i7 6u4y*t Pats id by Cc until 1955 1956 O/filer 1 2 3 4 5 6 7 8 E. 1. E.ll £ IZ £.15 Genera/ Government £xecutive and Letislat iVe Admin is Ira ti ve Other t 1,87^-00 24.77i.7i 25.an. 72 # 1,909.00 24, It 7l>0 26.594,00 * ',9/7.91 25,149.50 24 5550O $ /,ez}.oo 25,574.40 26, S4O.40 * jri.99f.97 i 5Z,6<"*0 t 49£ 62142 t Si, 737.40 E. 2 Protection to Per tons and Property B. 21 E. 2 2 Fire Protiefion Police Projection 1 * 4-1,99776 45,5H. 91 $ 4i,5*b.to 4-3,4$4JO i 4U44.75 414&44 it 43,145.00 46,es7,00 ftti.43l II \l(,71i42.oe\$Ui.m.io 1637.99°. M FORM VIII Summary of Additional Expenditure Estimates The Corporation ot_ Fun 4, Dept.. SUMMAPY OF ADDITIONAL EXPENDITURE ESTIMATES P^red t* for the year ending December 31, /9£1 Pate Code Ho. Expenditure Nature ol Additional £ xpendifuret EiUmttid 1957 HitKmnftd by Bu4ftt O/fiH-r Pined by CauneUl 6 E. 17-1 E. 2 Hi E. 3 Fire Protection Public Worki I /Vet* Pumper Truck and Addition al Firemen rhu» needed 4 74,ooo lO »e* alarm bo>(s /. 75Q f\tw pan'nf of road* end sidewalks ' |# 25,750.4* I, 6 SO. 06 1 i 27,400.00 52 With t h i s In mind, the budget o f f i c e r should c a r e f u l l y review, with the department head concerned, the reasons f o r any s i g n i f i c a n t increases In "normal" expenditures or " a d d i t i o n a l " expenditures. It should be most emphatically stated that i t i s SOT the duty of the budget o f f i c e r to decide whether or not standards of present services should be changed, or whether or not new s e r v i c e s should be offered (or whether e x i s t i n g services should be discontinued), These p o l i c y decisions are c l e a r l y the r e s p o n s i b i l i t y of the municipal c o u n c i l . The purpose of the expenditure review by the budget o f f i c e r i s to be c e r t a i n that only c a r e f u l l y reasoned estimates go to the c o u n c i l f o r c o n s i d e r a t i o n . In p a r t i c u l a r , he should be a l e r t to d e t e c t , and deal most severely with, any "padding* of the estimates that might e x i s t . (Padding covers both the del iberate over-estimating of expenditures and the under-estimating of revenues.) In examining " a d d i t i o n a l " expenditures f o r new services, the budget o f f i c e r should c o n s i d e r , In a d d i t i o n to any c a p i t a l cost , the continuing expenditures that w i l l be required i n the future. lew services u s u a l l y mean " a d d i t i o n a l " expenditures i n the period i n which they are begun, but they a l s o create new "norma 1 * expenditures f o r as long as they w i l l be c a r r i e d on. This f a c t should be drawn to the a t t e n t i o n of the counci l when they are reviewing the estimates. CHAPTER V FINALIZING AND ADOPTING THE BUDGET The Budget Document The method o f presenting budgetary Information to the c o u n c i l (or t o the Finance Committee of the c o u n c i l ) should be formalized so that a l l o f the information that the c o u n c i l should require for i t s consideration o f the f i n a n c i a l plans of the m u n i c i p a l i t y w i l l be c l e a r l y euiraarized and supported by adequate d e t a i l s . General ly speaking, the budget document should Include th© f o l l o w i n g * (i) The budget message which sets out the p r i n c i p a l objectives o f the budget In fhe l i g h t of the m u n i c i p a l i t y ' s present and prospective f i n a n c i a l p o s i t i o n s . The m i l l rate necessary to achieve the budget should be i n c l u d e d . * ( i i ) A summary, on one page, presenting the p r i n c i p a l items of estimated revenue and expenditure for the coming year. The Manual of Instructions gives a form f o r a Revenue and Expenditure Account. This form, f i l l e d i n with the e s t i -mates and headed "Estimated Revenues and Expenditures™ would be a very s u i t a b l e summary. The amounts to be shown i n t h i s summary should fa© the f i n a l r e s u l t s of the decisions o f the budget o f f i c e r and the department heads, i . e . « Column 7 1 An example of such a budget message i s contained i n Appendix 8. 2 Manual of I n s t r u c t i o n s , Ottawa, Dominion Bureau of S t a t i s t i c s , 1950, P P . 5&-59. of Forms I I , V I I , and V I I I . ( I i i ) A more d e t a i l e d a n a l y s i s o f the revenue and expenditure estimates than shown on the above summary, i.e. : the i n -formation contained i n columns 1, 2, 5, k, 5» and 7 o f Forms I I , VII and VIII , A column headed "Approval by C o u n c i l " should be l e f t blank on the r i g h t hand side of these d e t a i l s f o r the amounts as authorized to be f i l l e d i n , ( i v ) F o r such municipal services as are a v a i l a b l e , Work Programme Estimates (Forms III and I V ) . (v) An estimated cash budget f o r the year showing short-term loans that w i l l be required from the bank or from other funds (see Chapter V I I ) . ( v i ) Estimated General Fund and C a p i t a l and Loan Fund Balance Sheets as a t the end of the f i s c a l year, ( v i i ) A debt schedule showing p r i n c i p a l and i n t e r e s t requirements by years f o r e x i s t i n g debt and f o r new debentures to be issued under the terms of the proposed budget. A com-p a r i s o n of outstanding debt per taxable assessed v a l u a t i o n s , and/or per c a p i t a (the former being the more important), f o r the present year and the previous f i v e years would be an informative a d d i t i o n to the debt schedule, ( v i i i ) An a n a l y s i s of tax sales and arrears of taxes f o r a t l e a s t the previous f i v e years. C o u n c i l Consideration In large m u n i c i p a l i t i e s It i s desirable that a Finance Committee of the c o u n c i l consider the budget. This committee should c a l l i n each 55 department head to answer questions as the estimates f o r his department a r e being reviewed. fhe budget o f f i c e r should be present, i n a c o n s u l t -a t i v e capacity during the whole time the budget i s being considered. When the review of the Finance Committee i s concluded, the budget as approved by the committee should be presented to the c o u n c i l , s i t t i n g as a committee of the whole. In smaller m u n i c i p a l i t i e s , the Finance Committee review i s usual ly unnecessary and the budget document i s considered by the c o u n c i l s i t t i n g as a committee of the whole. The budget o f f i c e r and the department heads a r e consulted in the same way as in large m u n i c i p a l i t i e s . Once the budget i s approved, the c o u n c i l should approve a Rates By-law^ which sets out the major c l a s s i f i c a t i o n s of the revenue and e x -penditures a u t h o r i z e d . While i t i s desirable to "nave the Rates By-law passed as e a r l y i n the year as possible so that tax b i l l s can be sent out, s u f f i c i e n t time must be allowed to permit a thorough review of the f i n a n -c i a l p o l i c i e s of the m u n i c i p a l i t y by i t s e lected governing body. This can best be achieved by ensuring that the work of preparing the estimates i s begun i n time to allow a complete examination by the c o u n c i l . This again p o i n t s up the need f o r adherence to a budget calendar. P u b l i c Hearings In a democracy i t i s d e s i r a b l e that the way i n which p u b l i c money Is to be r a i s e d and spent should be known by as many of the c i t i z e n s as p o s s i b l e . With t h i s i n mind, the c o u n c i l should consider whether or not i t would be d e s i r a b l e to a d v e r t i s e , i n l o c a l newspapers, a meeting a t 5 See Appendix C f o r a sample Bates By-law. J6 which the budget would be discussed. The apathy of the average c i t i z e n Is unfortunately such that a meeting of t h i s nature w i l l , i n a l l prob-a b i l i t y , a t t r a c t only a small turnout, but i n t e r e s t e d c i t i z e n s should be given the opportunity of expressing t h e i r opinion on the f i n a n c i a l programme of the m u n i c i p a l i t y before i t i s adopted by the c o u n c i l . Preferably before, but a t l e a s t immediately after the budget i s approved by c o u n c i l , the budget message should be given to the l o c a l newspapers so that the widest possible coverage of th© m u n i c i p a l i t y ' s plans i s made known to the p u b l i c . Many m u n i c i p a l i t i e s fol low a p o l i c y of i n c l u d i n g a sms.ll pamphlet with each tax b i l l . This pamphlet shows, by means of graphs, or other v i s u a l a i d s , a s i m p l i f i e d summary of the Municipality's income and outgo items. CHAPTER YI EXECUTING AND CONTROLLING TEE BUDGET Budgetary Accounting and Control Once the budget has been adopted by the c o u n c i l , i t i s the respon-s i b i l i t y of the a d m i n i s t r a t i v e o f f i c i a l s of the m u n i c i p a l i t y to ensure t h a t the s p i r i t and the l e t t e r of the budget objectives are c a r r i e d into e f f e c t . The purposes of budgetary accounting and c o n t r o l ares ( i ) to give the o f f i c i a l s the accurate, up-to-date information / necessary f o r them to achieve these object ives, and ( i i ) to give the budget o f f i c e r frequent reports on how wel l the budgeted objectives are being achieved. I f there are d i s -crepancies between the budgeted and actual performances, new p o l i c i e s may have to be adopted i f the discrepancies a r e to be prevented from becoming l a r g e r . Budgetary c o n t r o l i s b u i l t around four e s s e n t i a l elements? 1 . Adequate a p p r o p r i a t i o n and encumbrance accounting 2. Frequent and regular reports on receipts and expenditures J . Administrat ive audits of expenditures and work programmes o f the main operating departments 4. Q u a l i f i e d personnel capable of evaluating municipal a c t i v i t i e s and formulating f i n a n c i a l plans i n sympathy with th© p o l i c i e s of the administrat ion and the s p i r i t of the budget. 58 A p p r o p r i a t i o n and Encumbrance Accounting fhe achievement of the f i r s t two of the e s s e n t i a l elements l i s t e d above i s quite a mechanical procedure, b u i l t around informative forms and an accurate system of a c c r u a l accounting. Statements on a form such as t h a t i l l u s t r a t e d by Form IX should be prepared and c i r c u l a t e d to depart-ment heads every month. In t h i s way, they are kept informed as to the progress of t h e i r department and how i t i s keeping within i t s budgeted o b j e c t i v e s . f h i s form covers expenditures only since department heads a r e charged with the r e s p o n s i b i l i t y of keeping t h e i r department expenditures w i t h i n t h e i r a p p r o p r i a t i o n s . Form IX could most e a s i l y be prepared as a copy of the a p p r o p r i -a t i o n expenditure accounts posted by an accounting machine. I t could advantageously be prepared In t r i p l i c a t e , the o r i g i n a l remaining as the ledger account} the f i r s t copy going to the department head and the second copy to the budget o f f i c e r . Column 7 would be f i l l e d i n a t the end of the month by adding together the costs represented by a l l the u n f i l l e d purchase orders that are to be charged against the expenditure account when they are f i l l e d . This t o t a l would be f i l l e d i n on the copies going to the department head and the budget o f f i c e r , but not on the o r i g i n a l remaining as the a p p r o p r i a t i o n expenditure ledger account. This procedure requires that a l l purchase orders be "costed", i . e . , that the approximate cost of a l l goods and/or services ordered be f i l l e d i n on the purchase order. This i s , i n i t s e l f , desirable f o r the fol lowing reasons; (a) I t i s important that the approximate cost of goods and/or s e r v i c e s should be known before a purchase order i s approved. The accuracy of these p r i c e s should be aided since they should be considered 59 more c a r e f u l l y because they are needed i n the process of encumbering expenditure accounts. (b) I t probably means that a routine procedure f o r ordering goode should be developed and t h i s should lead to a c e n t r a l i z e d purchasing agent or department. The advantages of having someone i n the o f f i c e who i s r e -sponsible f o r the ordering of a l l goods and/or services are great, even i n the smallest of m u n i c i p a l i t i e s . The s k i l l , knowledge and c o - o r d i n a t i o n of purchasing p o l i c i e s that are b u i l t up should r e s u l t i n better r e l a t i o n s with s u p p l i e r s and more economical purchasing g e n e r a l l y . While i t is/ d e s i r a b l e that one person should be responsible for a l l purchases, t h i s does not mean that t h i s person should not have other duties to perform, I f the s i z e of the m u n i c i p a l i t y i s such that the purchasing f u n c t i o n i s only a part-t ime job. (c) I n t e r n a l c o n t r o l over expenditures end goods ordered should be strengthened by the use of pre-nutnbered purchase orders authorized only by the purchasing agent. The importance of encumbrances i n budgetary control should be s t r e s s e d . Without knowing the committments outstanding against h i s de-partment, a department head could e a s i l y be led (or pretend to be led) i n t o over-expending his a p p r o p r i a t i o n . I f he i s made aware only of the amounts expended, without also being made aware of the t o t a l amounts committed through u n f i l l e d purchase orders, he would not be i n a p o s i t i o n to know a c c u r a t e l y how much of his a p p r o p r i a t i o n i e yet to be committed. The accounting department, using the u n f i l l e d purchase order f i l e s , i s i n the beet p o s i t i o n to see that accurate information regarding, encumbrances i s provided uniformly t o a l l departments, FORM IK Monthly Appropriation Expenditure Statement Tht Corporation of APPROPRIAT ION EXPENDITURES for the month of February Fund General Dcpt Gen. Gov't. 19 57 Code No. Account Ipfyropnoiit E x /o c n d i t u r e s F o l i o Amount Tot a) £rpt»4/r*rt» Cncumkr0tiet ff Tot al 6 t 7 ytmmumatrtd Bait net. I 8 \E.I2t2 Admin. - Office Supplies and Exp. t 35000 do7. Jan. 3 / Vo* I47Z Vo* 14-91 25.42 73.50 130.27 155.69 89.00 318.19 31.81 FCRMT ilturnative Monthly Appropriation Expenditure Statement. The Corporation of_ APPQOPR!ATION EXPENDITURES for the. month Of February 19 57 Fund General Dept. Gen. Gov't. Code No. I E Ii E. IZ £ 13 Account IkfprBpritl.sn Ck i c u f i ve and /.eo iS Iat iV e 4dmir)istrativc Other Enptnditurci f 304.5$ 3, 929.OO 4190.00 t &6Z516 friGtimbrtntil 2 96.40 3,8 92. io 3., f 95.27 i 7856.92 i 37. 50 /o. oo 648.5Q t 69 6 00 Total 4*5 0 306.90 [4 3, 9oz.5o 4343J2 i 8.5SZ-92 UHtmeimbtrtd BUtntl Z.bi 2t>7o 46.23 4 70.44 NOTE . For ml can be filled in with minor account ciaasific a1 ion s meteati ot the major clan ific a lions shown, however, Since Form X is de % iy n ed for small municipalities, the major classificalions shown may be the only accounts nee ded. 41 There are more elaborate systems of r e q u i r i n g that every encum-brance be recorded as purchase orders are f i l l e d and the goods and s e r v i c e s are paid f o r , but these are s u i t a b l e only for m u n i c i p a l i t i e s where the large volume of transactions makes such a d d i t i o n a l work necessary and f e a s i b l e . 1 There are a l s o budgetary c o n t r o l systems that require the estimates of revenues and expenditures to be set up i n the a c c o u n t s , 1 For the average m u n i c i p a l i t y i n B r i t i s h Columbia, I t would appear to be quite acceptable, and less t r o u b l e , to note the amount o f the appropriat ion a t the top of each ledger account as a memorandum. Thus, In Form IX, while columns3, 7, 6, and 9 & r « e s s e n t i a l for the information they c o n t a i n , I t i s column 6 in each account that Is the f i g u r e used to balance the ledger. Form X i s designed to serve the same purposes as Form IX, but i s s p e c i a l l y s u i t e d f o r small m u n i c i p a l i t i e s that do not have accounting machines. I t would have to be prepared by hand. The amounts i n column 4 would be the ledger balance f o r each account, while those i n column 5 would be made up In the same way the encumbrances were aade up for column 7 of Form IX, i n smaller m u n i c i p a l i t i e s , since ths volume of transactions would be s m a l l , and personal knowledge of expenditures, encumbrances and unencumbered balances would therefore be greater, i t would probably be necessary to make up copies of Form X only, say, once a quarter f o r th© f i r s t three quarters of each year, and monthly for the l a s t quarter. 1 F o r a d i s c u s s i o n of such systems, see, for examples I r v i n g Tenner, Municipal and Governmental Accounting, Jrd e d . , Hew York C i t y , P r e n t i c e - B a l l I n c . , 1955. ^ r x , Municipal Finance A d m i n i s t r a t i o n , ?th e d . , Chicago, The International C i t y Managers* A s s o c i a t i o n , 1955. FORMH Alfoftment of Appropriations The Corporation of ALLOT! ME NT OF APPROPRIATIONS i for the year end/no. December 31, 1957 \ Code No. £. I £. ui E. Ill E. Ill I Account £xc entire and Leqis iat i ft - Salaries -Other jAdnvn i ttritiee-Stlinti Total /500oo$ 3 7S.ee _ 1,6 75.06 / a, soo. 00 Jan IA a rt 125 00 /40.00 1 550. 00 Febr u a ry /2 5 00 /5 00 /4OO0 1550 OO De c ember] U /2SO0 Z5 00_ \p / OO OO /54-0. 00 45 Allotments A f u r t h e r refinement of budgetary controls l a the breaking down, or a p p o r t i o n i n g , of expenditure appropriations i n t o monthly or quarterly " a l l o t m e n t s " . T h i s procedure allows a c l o s e r c o n t r o l over expenditure s i n c e j (a) i t helps to prevent over-spending of an eppropriat ion early i n th© year and the r e s u l t i n g curtailments of s e r v i c e s , or r e v i s i o n of a p p r o p r i a t i o n s a t the end of the year, and (fe) I t allows a c l o s e r c o n t r o l over disbursements by holding back expenditures that can /be c o n t r o l l e d u n t i l r e c e i p t s from th© tax levy make such disbursements possible without a bank l o a n . I f an allotment system i s used, probably the simplest method o f p u t t i n g I t i n t o e f f e c t would be to f i l l out Form XI for each a p p r o p r i a -t i o n to which allotments were to be a p p l i e d . In f i l l i n g out column J of e i t h e r Form IX or Form X, the amount of the "appropriation" would only be the t o t a l a l l o t t e d up to the date of the statement. (Forms IS, X, and XI have been f i l l e d i n using f igures f o r February as en i l l u s t r a t i o n , ) The allotments laust, of course, take l a t a consideration the need of each department throughout the y e a r . I f such a system i s followed, the allotments should be requested by the department heads when t h e i r departmental appropriations are passed. The budget o f f i c e r should be a b l e to r e v i s e the requested allotments e i t h e r e t the time of the request or a t any time throughout the year that f i n a n c i a l conditions w i t h i n the m u n i c i p a l i t y isske such revis ions necessary. Revisions of the Budget As was pointed out above, revis ions of allotments can properly and best be l e f t to the budget o f f i c e r , since i t i s merely an administrative c o n t r o l technique and u s u a l l y does not a f f e c t the appropriations that r e f l e c t the p o l i c y of the c o u n c i l . However, from time to time conditions a r i s e which necessitate modif icat ion and r e v i s i o n of the budget. To ensure t h a t requested changes are l e g i t i m a t e , and that pract ices are not resorted to that weaken a d m i n i s t r a t i o n of the budget, s t r i c t c o n t r o l should be exercised over changes i n a p p r o p r i a t i o n s . In large m u n i c i p a l i t i e s , t r a n s f e r s of appropriations between accounts i n the same department should be authorized only by the finance committee of the c o u n c i l on the recommendation of the c o u n c i l committee under whose j u r i s d i c t i o n the department concerned f a l l s . Transfers between departments must be approved by the c o u n c i l . In smaller m u n i c i p a l i t i e s , a l l transfers of appropriations should be approved by the c o u n c i l . I t i s wise budgeting to provide f o r a "contingency 8 account i n th© estimates. This account should be used to make transfers to accounts the a p p r o p r i a t i o n of which has been made inadequate by some very unusual circumstance, and the need f o r which i s e s s e n t i a l , "Contingency" accounts are j u s t i f i e d only i f properly used to jseet unexpected emergen-c i e s . I f they are used f o r any other purpose they are to be condemned. Transfers from the "contingency* account are made only on the authority of the c o u n c i l . Revenues The o v e r a l l r e s p o n s i b i l i t y f o r the execution and c o n t r o l of the budget l i e s with the budget o f f i c e r . Thus, i t i s u s u a l l y his respon-s i b i l i t y to maintain a close watch on the actual revenues as compared 45 with the budgeted revenues to ensure that they are a t l e a s t as large as estimated. I f revenues are less than a n t i c i p a t e d , as soon as t h i s becomes e v i d e n t , the budget o f f i c e r should report the s i t u a t i o n to the c o u n c i l . Three possible courses of a c t i o n must then be considered by the councils (1) Cut back on the l e a s t e s s e n t i a l expenditure appropriations to the extent that revenues seem l i k e l y to f a l l short of the estimates. ( i i ) Cut s l i g h t l y back on some of the less e s s e n t i a l expenditure appropriations i n the hopes that the revenue estimates may y e t be a t t a i n e d , but admitting the p o s s i b i l i t y of expendi-tures exceeding the revenues, ( i i i ) Carry out the original budget programme with the realization that next y e a r ' s budget must provide for the deficit thus i n c u r r e d , provided that the municipal law permits the c o u n c i l to aske expenditures i n excess of current revenues. The policy decisions i n thie s i t u a t i o n belong to the c o u n c i l , but the budget o f f i c e r should be prepared to offer advice as to which course of a c t i o n seems appropriate to him. I f the c o u n c i l decides on either course (i) or ( i i ) above, the budget officer should be prepared to advise which expenditure appropriations could be cut down with a minimum amount of disruption and loss of service. CHAPTER VII THE CASH BUDGET Purpose of the Cash Budget The purpose of the cash budget i s to provide a month to month f o r e c a s t of the flow of money to and from the municipal treasury, and thus f u r n i s h the basis f o r planning the means of short-term financing for the m u n i c i p a l i t y through the year. I f forecasts i n d i c a t e the l i k e l i h o o d of the m u n i c i p a l i t y ' s disbursements exceeding i t s revenues f o r the f i r s t / f o u r months of the year, plans should be made to borrow the necessary money. I f there Is to be s period of three or four months during which the M u n i c i p a l i t y w i l l have, from a l l sources, an excess of receipts over disbursements, plans can be made to help finance other municipal projects out of the excess, or to buy short-term investments, F u l l u t i l i z a t i o n of a m u n i c i p a l i t y ' s money i s to be d e s i r e d , and means that no more money than i s needed should be borrowed, and that excess funds should be invested u n t i l they are needed. Estimating, Methods The methods of estimating receipts and disbursements are much the same ae those discussed i n Chapters III and IV f o r estimating revenues and expenditures. Once the annual revenue estimates have been prepared, estimates of receipts of those revenues by months based on past experience subject to any changes i n circumstances i n the coming year, should be drawn up. S i m i l a r l y , the estimates of expenditures are the basis for the estimates of how money i s to be disbursed month by month f o r those 47 expenditures. The department heads are i n the best p o s i t i o n to know t h e i r probable cash requirements and t h e i r estimates should be reviewed and approved by the budget o f f i c e r . Accounting Records In the presentation of monthly statements comparing a c t u a l and estimated receipts and disbursements, the actual f igures w i l l come from an a n a l y s i s of the cash books. The a n a l y s i s f o r statement purposes can most e a s i l y be done on the basis of sources of receipts and departments making the disbursements. Statement I give® an i l l u s t r a t i o n of these c l a s s i f i c a t i o n s set out i n a manner which i s e a s i l y prepared and quickly i n t e r p r e t e d i Ho amounts have been f i l l e d i n because the use of the v a r i o u s columns i s s e l f - e v i d e n t . Two f a c t s about the f igures that would appear on Statement I should be noted howeveri (1) The t o t a l receipts and disbursements f o r the year probably w i l l not agree with the r e l a t e d revenues and expenditures. This i s so because the revenues and expenditures take i n t o account amounts incurred but not p a i d , paid but not i n c u r r e d , earned but not received, and received but not earned. Receipts and disbursements do not include these a c c r u a l s , ( i i ) The a c t u a l f igures on Statement I are i n memorandum form only but must agree with the t o t a l s from the cash records of the m u n i c i p a l i t y . STATEMENT 1 of. The Corporation G E N E R A L FUND Statement of Receipts, for t h t month Q u r r t n t DiS bur se m en is and P>a nf 19 Month ' _ T of a i a nc es-to Date Opening Balance Peic,eif>i' S . R. I Taxation R. i' Lice n 4 / j and Pi rrr> > ts R. 3 Rents, Con cessions, etc. R 4 fines • R. 5 Interest; Penalties, c'c. R.S Service charges P.7 Recreation fi.8 Grants,, Sub's idles, etc, R,$ Debt cha-rges Recover able ft'JO Mis ci I tort eo us Total''9<ctipts 5 b urs c me nt s •. igE. I General Government E,ZProtect/'on io Persons etc E.3 Public Work* B.4 Sanitation and l/Vaste Re mo v a ! £, 5. Health E.6 Social Welfare £ 7 Edu c'-a iron £.8 Recreation E. 9 Debt Charge s EIP Utilities and Enterprises E.ll Reserves E.I2 Capital Ittms E. 13 •Joint or Special /terns E. 14 Mi $ c 111 an to as Total Disbursements • Closing Balance Total Estimated Estimated 19 f * * *• ' ' * t-Es 11 nn a I l d Actual over (*) or Esl/rnateal under (~) Actual f_ * f i . £s t i m « i e a 3a Ianee. of Actual over (*) or Estimate fo under (-) Actu»i be Realised i * # . 1\ f t t 4 CHAPTER VIII THE CAPITAL BUDGET The Meed f o r a C a p i t a l Budget The main d i s c u s s i o n of t h i s manual has been i n teras of the current revenue budget, i . e . , the budget f o r the normal items of expen-diture to be paid for out of revenues r a i s e d i n the coming y e a r . C l e a r l y , It i s important that a m u n i c i p a l i t y should be thinking of i t s development for periods farther ahead i n terms of th© need f o r c a p i t a l improvements and not just current operations. The purpose of a capital budget i s to focus a t t e n t i o n on the municipality's needs f o r periods of a t least f i v e years ahead, and e s p e c i a l l y of the c a p i t a l assets that w i l l be required to satisfy these needs. R e s p o n s i b i l i t y f o r the C a p i t a l Budget The responsibility f o r the c a p i t a l budget should be given to the gaae budget o f f i c e r who i s responsible f o r the current budget, since i t would be unwise to separate c a p i t a l and current budgeting. However, i n c a p i t a l planning, he should have the assistance and advice of people i n t e r e s t e d i n the long-term developaent of the community. The ehainaan of the Municipal Community Planning Board, i f there i s such a board i n existence, would l i k e l y be the person who would be q u a l i f i e d to think i n terms of the community's long-range programme. I f a Community Planning Board has not been establ ished, i t might be that the s e l e c t i o n of someone to take the r e s p o n s i b i l i t y for the m u n i c i p a l i t y ' s c a p i t a l budget would be the f i r s t step i n the c r e a t i o n of such,a body. C e r t a i n l y c a p i t a l 50 budgeting i s financial community planning. The budget o f f i c e r i n charge of the current budget should be the chairman of the c a p i t a l budget committee since he i s i n the best p o s i t i o n to offer advice on the cost of proposed projects — both the c a p i t a l costs and Maintenance costs — and what t h e i r ef fect on the current budget w i l l fee. He should point out the a d d i t i o n a l "uncontrollable* costs the municipality w i l l have to undertake with th© a c q u i s i t i o n of a d d i t i o n a l c a p i t a l assets (maintenance costs as w e l l as debt retirement and i n t e r e s t charges where the c a p i t a l assets are acquired from the proceeds of debenture i s s u e s ) , ' Estimating Methods The methods of estimating revenues and expenditures described i n previous chapters for the current budget w i l l apply to estimating c a p i t a l revenues and expenditures. The same problems of a l ternate proposals f o r expenditures and the choice of which projects w i l l be c a r r i e d on and which deferred are s t i l l to be faced. The revenues to meet the proposed expen-ditures, whether from current revenues or from the sale of debentures, can s t i l l b© r a i s e d only w i t h i n the range of the municipality's a b i l i t y to pay. The forecasts that must be made, since they cover longer periods than those of the current budget, may be subject to more r e v i s i o n than those of the current budget. I t i s desirable that the c a p i t a l budget should continuously be point ing th® course of the m u n i c i p a l i t y ' s develop-ment f o r the next f i v e or more years. This means that as each year passes, another y e a r ' s c a p i t a l budget should be planned for the future, and the c a p i t a l budget f o r the immediately preceding years be revised In the l i g h t o f the current y e a r ' s events. Thus a t the beginning of 1957» the 51 municipal c a p i t a l budget should be prepared f o r the years 1958 to I962. At the end of 1957, the c a p i t a l plans for the years I958 to I962 should have been revised i f such r e v i s i o n s appeared necessary i n the l i g h t of happenings i n 1957, and the c a p i t a l budget should now be extended to include I963. fhe annual current budget can be considered as a u t h o r i z i n g the maintenance and extension of a one year segment of the c a p i t a l budget. . . . here i s one of our r e a l modern problems i n a d m i n i s t r a t i o n , to marry the knowledge and s k i l l of the administrator In c a r r y i n g out M s budget processes to the a u t h o r i t y , i n t e r e s t and ult imate r e s p o n s i b i l i t y of the elected representative and of the public who elected him. H.B. Bryee C l e r k of the Privy C o u n c i l and Secretary to the Cabinet SELECTED BIBLIOGRAPHY 52 A. BOOKS Brittain, Horace L., Local Government in Canada, Toronto, Ryerson Press, 1951. Crawford, K. Grant, Canadian Municipal Government, Toronto, University of Toronto Press, 195^ . (Dawson, R. MacG., ed., Canadian Government Series, vol. 6,) International City Managers' Association, Municipal Finance Administration, Chicago, I.CM.A., I955. Municipal Finance Officers Association of the United States and Canada, Municipal Budget Procedure and Budgetary Accounting, Chicago, M.F.O.A., I9A2. (Accounting; Publication No. 9.) , Simplified Municipal Accounting, Chicago, M.F.O.A., I950. Tenner, Irving, Municipal and Governmental Accounting, Sew York, Prentice-Hall Inc., 19551 (Finney, H.A., ed.. Prentice-Ha11 Accounting Series.) Wrens h a l l , C.M., Municipal Administration and Accounting, Toronto, Sir Isaac Pitman & Sons (Canada), Ltd., 19^7. B, PERIODICAL ARTICLE Municipal Finance Officers Association of the United States and Canada, The Value of Manuals. Chicago, M.F.O.A., I953. (Special Bulletin 1955 J.) , An Administrative Case Study of Performance Budgeting in the City of Los Angeles, California, Chlcago7''K"F,''o",AT7" 195^ . (Account-ing Publication Series No. 11-1.) , Administrative Uses of Performance Budgets, Chicago, M.F.O.A,, 1954. (Accounting Publication Series No. 11-5.) C. GOVERNMENT PUBLICATIONS Dominion Bureau of S t a t i s t i c s , Manual of I n s t r u c t i o n s , Ottawa, D . B . S . , 1950. 55 APPEHPII A. A Suggested Code of Revenue and Expenditure Accounts Using the C l a s s i f i c a t i o n s Given i n the Manual of Instructions Revenues R . l Taxation R.11111 R, 11112 R.1112 R.1H5 R . 1 1 1 4 a.1115 R.1116 R.1117 R.1116 R.1119 R.1121 R.1122 R.121 R.122 R.125 R.124 General Taxation R. 2 R.21 R.2111 R.2112 R.2115 B .2121 R.2122 1.2125 R.2124 R .2125 R.2126 R.22 R.2211 R.2212 R.2215 R.2215 S p e c i a l Assessments School Purposes - Real Property - Land - improvements Personal Property - Business - Income - P o l l - ... Amusement ( M u n i c i p a l i t y 1 s share) - Sales - Household and Tenant - Other - Local Improvements (owners' share) - Other - Elementary - Secondary - Technical or Vocational - Other Licences and Permits Professional and Business Trade - Genera1 - Taxi - Vending Machines Building Permits Sale of B u i l d i n g By-laws Plumbing Permits Gas Permits E l e c t r i c a l Permits Other Other Licences and Permits Licences - Bicycle - Dog - Pound Fees - Vehicle - Parking Meter Fees 1.5 Rents. Concessions and Franchises E * H Rents - Market n'it? - Properties Acquired f o r Taxes Z'iTt - Municipally-owned buildings (specify) Revenues 5* B.5 R.514 R.515 R.521 R.551 R . 4 R . 4 1 R.5 P.511 R .512 R .51^ R .515 R.51^  R .521 R.522 R.525 R.6 R.611 R.621 R.651 R.7 R.711 R .8 Concessions Franchig - Municipally-owned land (specify) - Other - (specify) - (specify) Fines R . 8 1 H R.8112 1 . 8 1 2 1 R.8122 R .8125 R.8124 R.8125 R.815 R.821 R.822 R . 8 2 J B.824 R . 8 J 1 R .852 P o l i c e Court Fines and Pees Other I n t e r e s t , Tax Penalt ies, Interest Tax Penalties -e t c . Bank Deposits Investments Redemption of Tax Sale P r o p e r t i e s , i n c l u d i n g Penalties Advances' Foreign Exchange Other General Taxes Local Improvement Taxes Other Service Charges Commissions on C o l l e c t i o n s - (specify) Search fees Work Done f o r Others - (specify) Recreation and Costaunity Service Parka - Specify (Cautiont Revenue fron Municipal enterprises such as g o l f courses, arenas, e t c . that are expected to be s e l f - s u p p o r t i n g should not be included here. As sauniclpal enterprises they should be accounted for,- on a commercial basis , i n separate funds.) C o n t r i b u t i o n s , Grants and Subsidies GoverTasents - Dominion Governments -G o v ' t . Enterprises -Other P r o v i n c i a l P r o v i n c i a l Health Federal - Municipal Health S o c i a l Assistance A r t e r i a l Roads Per Capita Other Other Municipal Dominion P r o v i n c i a l Own Municipal Other Municipal Sinking Fund Excess Earnings Other 55 Revenues R.9 Debenture Debt Charges Recoverable R.91 Specify each elass separately R.10 Miscellaneous R . l O l Specify each c l a s s separately R,12 Excess of Previous Year's Revenues over Expenditures Expenditures E . l General Government E . l l l Executive and L e g i s l a t i v e - S a l a r i e s E.112 - Other Charges E.121I Administrat ive - Treasurer 's Dept. - S a l a r i e s 1 .1212 - O f f i c e Supplies / and Expense E.1215 - Other E.1221 - Assessor -C o l l e c t o r ' s Dept. - S a l a r i e s E.1222 - Office Supplies and Expense £.1225 - Transportation E.1224 - Other E.125 - External Audit E.1241 - C i t y S o l i c i t o r ' s Dep't . - S a l a r i e s E.12A2 - Office Supplies and Expense E.124} - Other I . I 2 5 I - C i t y C l e r k ' s Dept. - S a l a r i e s E.1252 - Office Supplies and Expense E.1255 - Other E.1261 - Purchasing Dept. - S a l a r i e s E.1262 - Office Supplies and Expense E.126"5 - Other E.1271 - Stores Dept. - Salaries E.1272 - Office Supplies and Expense E.1275 - Other E.1281 - Personnel Dept. - Salaries E.1282 - Office Supplies and Expense E.1285 - Other E . l j l Other - Elect ions E.1521 - Municipal H a l l - Salaries E.1222 - Supplies E.1525 - Other 56 Expenditures E . l E.1551 5.1552 E.1555 E.154 E.155 E.156 E.1571 E.1572 E.1575 S . l 4 l E. 142 E.145 E.144 E.145 E.146 E.147 Miscellaneous Town Planning and Zoning - S a l a r i e s - Supplies - Other Public Receptions Baraage Claims Maintenance of Property Acquired for Taxes Courts of R e v i s i o n - S a l a r i e s Office Supplies and Expense Other - Telephone and Telegrams - Postage - Insurance - Conventions and Delegations - A r b i t r a t i o n and Legal Costs - A d v e r t i s i n g - Membership fees and Subscriptions E.2 E.2111 E.2112 E.2115 E.2121 E.2122 E.2125 E.2124 E.2151 E.2152 E.2155 1.2141 E.2142 E.2151 1.2152 £.2211 E.2212 P r o t e c t i o n to Persons and Property F i r e P r o t e c t i o n - Administration P o l i c e P r o t e c t i o n - F i r e F i g h t i n g Forces - P i r e Alarm System -- F i r e Stations - l a t e r & Hydrants -- Administration Salaries Office Supplie and Expense Other S a l a r i e s Equipment operation Clothing and Supplies Other S a l a r i e s Equipment operation Other Maintenance s a l a r i e s Maintenance supplies Supplies Other Salaries Office Supplie and Expense 57 Expenditures 1 . 2 E . 2 2 1 5 1.221* E.2215 E.2221 E . 2 2 2 2 E.2225 E . 2 2 2 A E.2251 E.2252 E.2255 £.2241 E . 2 2 4 2 E . 2 2 4 5 1,2251 E.2252 E.2255 E . 2 2 6 1 E . 2 2 6 2 S . 2 2 6 2 E . 2 2 7 1 - Protect ive Services E.2511 Law Enforcement E.2^12 2,2515 £.2411 Correct ions E.2412 1,2415 E.2511 Protective Inspections E . 2 5 1 2 E . 2 5 1 5 E . 2 5 1 4 E.2611 Street L i g h t i n g E . 2 6 1 2 1.2615 E.2621 - Crime Invest igat ion - Signal System - Buildings - Detention and Custody of Prisoners - A u x i l i a r y Services - Police Court Juvenile Detention Home B u i l d i n g , Plumbing, E l e c t r i c a l , e t c , -- Administration - Power Supply Telephones and Telegrams Insurance Other S a l a r i e s Clothing and Supplies Vehicle maintenance Other S a l a r i e s Supplies Other Telephones Radio Other Maintenance s a l a r i e s Maintenance supplies Other Meals Transportation Supplies Inquests, Medical Exams, e t c , S a l a r i e s Office Supplies and Expense Other Salaries Maintenance Other S a l a r i e s Office Supplies and Expense Car Allowances Other S a l a r i e s Office Supplies and Expense Other Salaries Expenditures E.2 1.5 E.2622 _ E.2625 -E.2651 - E l e c t r i c a l Supplies E.2641 - B u i l d i n g and Plant Maintenance E.2651 - Transportation E.2661 - Tree Trimming E.2711 Destruction of Pests E.2811 Other (specify) P u b l i c Works £.511 A d m i n i s t r a t i o n - S a l a r i e s E.512 - Office Supplies and Expense E.515 - Transportation E.514 - Other E.521 S t r e e t s , Bridges, Sidewalks, e t c -- Permanent Streets E.522 - Onpaved Streets E.525 - Bridges E.524 - Seawalls (or dykes) E.525 - Railway Grossing® F..J26 - Street Signs and Signals E.527 - Other E.551 Waterways E.5^1 Snow & Ice Removal Drainage E.561 M u n i c i p a l i t y ' s Share of Local Improvements E.571 Parking Meters - Mainternnee ii.572 - operation and C o l l e c t i o n E.J81 Other E.4 £.411 £.412 E.415 E.421 E.4-22 E.425 E.451 E.452 E.455 S a n i t a t i o n and Waste Removal Administrat ion Sewer System Sewage Treatment and Disposal Salaries Office Supplies and Expense Other S a l a r i e s Supplies Other S a l a r i e s Supplies - Other 59 Expenditures E.4 E.441 Street Cleaning - Salaries E . 4 4 2 - Supplies E.445 - Other E.451 Garbage & Waste C o l l e c t i o n - S a l a r i e s E.452 - Equipment Maintenance E.455 - Other £.461 Garbage & Waste Disposal - S a l a r i e s E.462 - Supplies E . 4 6 J - Other E.5 E.511 E.512 E.515 E.514 E.5211 E.5212 E.5215 E.5221 E.5222 E.5225 E.5224 E.5241 E.5242 E.5245 E.5244 E.5251 E.5252 E.5255 E.5261 E.551 E.541 Health A d m i n i s t r a t i o n P u b l i c Health M e d i c a l , Dental and A l l i e d Services H o s p i t a l Care S a l a r i e s Off ice Supplies and Expense Transportation Other Administrat ion Regulation and Inspection Maternal & C h i l d Health C l i n i c s and l a b o r a t o r i e s - Other Salaries Office Supplies and Expense Other S a l a r i e s Office Supplies and Expense Transportation Other Salaries Office Supplies and Expense Transportation Other S a l a r i e s Supplies Other E.6 S o c i a l Welfare E.611 Aid to Aged Persons E.621 A i d to B l i n d Persons E .65I A i d to Unemployed Employables E.64-1 A i d to Unemployables I.65I Mother's Allowances 6o Expenditures E.6 E.661 C h i l d Welfare E.671 Other (Cautions Do not include expenditures recoverable on account of welfare r e c i p i e n t s who are the r e s p o n s i b i l i t y of another a u t h o r i t y , ) E.7 Education E.71 Elementary E.72 Secondary E.7} Technical & Vocational E.74 Other E . 8 Recreation and Community Services E.81 Recreation Services ( d e t a i l s ) E.82 Community Services (Caution! Expenses of municipal enterprises such as g o l f courses, arenas, e t c , that are expected to be s e l f - s u p p o r t i n g should not be included here. As municipal enterprises they should be accounted f o r , on a commercial b a s i s , i n separate funds.) 1.9 Debt Charges E.91 Debenture Debt Charges 1.92 Interest on Long-term Debts E.95 Temporary Debt Charges £.95 Other E . 10 U t i l i t i e s and Other Municipal Enterprises E . l O l Short-term Advances ( d e t a i l s ) E.102 Long-tens Advances ( d e t a i l s ) E,11 P r o v i s i o n f o r Reserves E . l l-1 ( d e t a i l s ) E,12 C a p i t a l Expenditures out of Revenues E.12-1 ( d e t a i l s ) — E.15 J o i n t or S p e c i a l Expenditures E.I5-I ( d e t a i l s ) 1,14 Mis ce1laneous E.14-1 ( d e t a i l s ) HOTEs S w i l l m u n i c i p a l i t i e s w i l l probably need accounts only f o r aajor c l a s s i f i c a t i o n s ? i n any case the accounts that each m u n i c i p a l i t y needs can be f i t t e d into the above code of accounts without d i s t u r b i n g - e i t h e r the numerical order or 61 the c l a s s i f i c a t i o n s set out In the Manual of I n s t r u c t i o n s . The c l a s s i f i c a t i o n "Other" a t the end of each s e c t i o n of coded accounts does not imply that a l l other revenues or expenditures are to be Included under such a general heading. The accounts l i s t e d i n the above code are those t h a t should probably be required by a majority of munic-i p a l i t i e s . However, a m u n i c i p a l i t y may require a d d i t i o n a l accounts f o r i t s own purposes and these a d d i t i o n a l accounts can be included i n the code o f accounts by adding them, numerical ly i n order, to the l a s t account before "Other". Any small items not s p e c i f i c a l l y covered by accounts f o r which a code number has not been supplied by the m u n i c i p a l i t y , c o u l d be included under a "Miscellaneous" account. A P P E N D I X B His Worship the l-lsyor and Members of the C o u n c i l , City of V i c t o r i a , B r i t i s h Columbia. Considerat ion of a P r o v i s i o n a l Budget f o r the year 1955 was com-menced without the same degree of optimism which had prevai led i n the l a s t few years. The cause was the knowledge that only the e x e r c i s i n g of very rigid budgetary c o n t r o l during the l a t t e r months of 1954 had averted a d e f i c i t . The 1955 surplus carry over into the 1954 budget was 1298,185.55, a sum comparable to those of 1950, 1951 and 1952. The surplus f o r I954 i s only 166,229.94. The e f f e c t on the 19%S budget i s a revenue loss of soae $252,000.00r equivalent to more than j%"of our anticipated-I955 r e v -enues f r o a other than property t a x a t i o n or a greater than 5 m i l l increase. With t h i s i n ©ind every e f f o r t was d i r e c t e d to th© preparation of expenditure estimates which would continue to provide and maintain the v a r i o u s municipal services as economically as p o s s i b l e . Toward t h i s end considerable assistance was received through the medium o f ot-hool c o s t s . The combined effect of the new school financing formula end the Assessment E q u a l i z a t i o n Act provisions was a reduction i n V i c t o r i a ' . " net school costs of 178,500.00 f r o a that a c t u a l l y paid i n 19^ 4 despite ap.: o v e r a l l school budget increase of |4l&,850.00. After careful and lengthy consideration of a l l departmental e s t i -mates by your committees the provisional mill rate was s t i l l some 1110,000.00 or 1| m i l l s over a comparable rate for 1954. It must be borne i n mind that B comparison of m i l l rates between I954 and 1955 Is not e a s i l y obtainable. Whereas i n 1954 a m i l l was worth I5^»097.51f t h i s year f o r general and debt purposes i t i s worth 174,724.05 and for school purposes 180,990.65. In 1954 the rate of 55 m i l l s r a i s e d $5»G85,5^ 5«C5« If the Assessment E q u a l i z a t i o n Act had not been brought into effect a s i m i l a r rate t h i s year would have raised a larger sura as a r e s u l t of new construction and the sale during 1954 of previously exempt city-owned lands. As can ret.dily be seen, the above f a c t o r s complicate the comparison of mill rates between t h i s and l a s t year but as the main objective Is the maintenance of a, stable incidence of taxation i t has been determined that an o v e r a l l rate of 42.411 raills w i l l produce a sura which, to the r e s i d e n t i a l taxpayer, w i l l not be a greater sum than that paid i n 1954. T h i s , of course, cannot be taken as meaning that every r e s i d e n t i a l taxpayer would have a tax b i l l with the same d o l l a r cost as l a s t year because In equalizing assessments throughout the City adjustments were not s i m i l a r on a l l types and age groups of r e s -idences. Consequently some properties would be taxed less and. others would be taxed more. This i s the d i r e c t effect of equaliz ing assessments and no adjustment of the m i l l rate can a l t e r i t , but what i s of importance i s t h a t with a rat© of 42.411 m i l l s no-more money would be raised c o l l e c -t i v e l y t h i s year from those properties which were taxed l a s t year unless some major improvement or a l t e r a t i o n of a structural nature were undertaken. 6 5 With a goal of 42.411 m i l l s as an objective, every departmental budget was again c a r e f u l l y reviewed with the department head concerned with a view to effect ing savings without harmfully c u r t a i l i n g t h e i r a c t i v i t i e s . To t h i s end further expenditure reductions have been made and incorporated i n t h i s p r o v i s i o n a l budget i n the amount of 155,454.00 and as d e t a i l e d i n Schedule "A" attached. Having achieved the above, i t was f e l t that any further reductions would not be i n the best i n t e r e s t s of the C i t y as a whole or were; matters of p o l i c y which could only be decided by C i t y C o u n c i l . Nevertheless i t was evident tbat further adjustments wore necessary and therefore a n t i c -ipated revenues were subjected to further scrutiny. At t h i s time the matter of the needs of the Department of national Defence regarding the Gordon Head " A i r Park 8 property were mad© known to the C i t y and i t was agreed by C o u n c i l to accept the Federal Government*s offer to reimburse the C i t y f o r the amount o r i g i n a l l y paid to gain p a r t i a l t i t l e to the property together with i n t e r e s t a t 5*$ during the intervening years, These together would amount to s l i g h t l y aore than $25,400.00. A decision to include such an item i n the revenues for 1955 i s * I f e e l , j u s t i f i e d i n view of the f a c t that the o r i g i n a l payment of $20,000.00 was provided f o r i n the current budget of 1947 and I have Incorporated the re-purch: ae p r i c e i n t h i s y e a r ' s miscellaneous revenue s e c t i o n . During the years p r i o r to the i n s t i t u t i o n of the present system of budgetary c o n t r o l , there was permitted to accumulate an undistributed revenue s u r p l u s . During the l a s t four years t h i s , with Council approval, has been used to offset s p e c i a l expenditures such as f i n a l i z i n g the Streets Loan By-law programme. There remains a balance of 528,024.15. I t i s considered appropriate to use t h i s remaining balance at t h i s time to o f f -set to some extent the revenue loss caused by the s u b s t a n t i a l l y reduced surplus carry over from 1954 as compared with previous years. The ult imate effect of the above referred to budget adjustisients i s a p r o v i s i o n a l rate of 42.5 a l l l e made up of an uncontrol lable levy for school purposes of 15.4 m i l l s and a levy f o r general and debt purposes of 29.1 m i l l s . Such a rate Is only .089 of a m i l l over the comparable rate for I954. As can r e a d i l y be r e a l i z e d , such a sioall f r a c t i o n of a » i l l spread over approximately 18,500 i n d i v i d u a l properties having a t o t a l taxable value of $74,724,055*00 w i l l not have a jaes.curable ef fect . I t i s f u l l y r e a l i z e d that although every member of the Council w i l l be anxious to study the d e t a i l contained i n this budget, too much stress cannot be l a i d on the need f o r maintaining a stable m i l l r a t e . I f f u r t h e r reductions than those already effected are made, there i s every l i k e l i h o o d that important maintenance programmes or new projects w i l l only be delayed to accumulate f o r future years. In a healthy vigorous community such as V i c t o r i a i s at the present time, the additions. 1 tax 6k revenue from new c o n s t r u c t i o n and consequent increased revenue from other sources should, under normal c o n d i t i o n s , be s u f f i c i e n t to meet the needs f o r increased s e r v i c e s , but i f our roads, sewers, parks, e t c . , are not adequately maintained any immediate savings achieved are magnified into greater expenses f o r the f u t u r e . In a d d i t i o n to Schedule "A" r e f e r r e d to above there are two further informative schedules as l i s t e d below covering various aspects of the budget. Schedule *B* - Public Works - S p e c i a l Expenditures Schedule W G* - S a n i t a t i o n and Waste Removal ~ Special Expenditures Respectfully submitted, / C OMPTR OLLER-fREASDRER Dated this 27th day of A p r i l , 192?. APPENDIX C SO. 4 2 J 7 A B Y - L A W Respecting the Expenditure and Management of the Revenue and Money belonging to the Corpora-t i o n of the C i t y of V i c t o r i a , B.C. fhe Municipal Counci l of The Corporation of the C i t y of V i c t o r i a enacts as f o l l o w s ! / 1. The Schedule hereto annexed, being Votes *A* to "K" I n c l u s i v e , summarized i n the said Schedule, i s hereby approved and authorized, and s h a l l stand as the Estimates of Expenditure for the year ending the J l s t day of December, A . D . 1955. 2. The Treasurer i s hereby authorized to pay out i n accordance with the by-laws of the Corporation the suras of money set out i n the several votes of the s a i d Schedule f o r the purposes set out i n the said votes. 5. The Finance Committee of the C i t y Counci l may authorize the t r a n s -f e r of sums of money included i n the said Schedule from one object to another w i t h i n the same department, but no transfers from one department to another department s h a l l be wade without the approval of the Municipal C o u n c i l . 4. A l l cheques drawn on the bank f o r payment of funds belonging to the Corporation are to be signed by the Treasurer, and counter-signed by the Mayor of the C i t y before being i s s u e d . 5. A l l payments already Bade from Municipal Revenue f o r the current year are hereby r a t i f i e d and confirmed. 6. T h i s By-law may be c i t e d as the "Expenditure By-law, 1955*. Passed by the Municipal C o u n c i l the 9th day of May, A . D . 1955. Reconsidered, adopted and f i n a l l y passed by the Municipal Council the 15th day of May, A . D . 1955. ( L . S . ) "H.F. HUNTER* CITY. CLERK " C . L . HARRISOH" MAYOR 66 SCHEDULE SUMMARY OF ESTIMATED EXPENDITURES - 1955. Vote A . General Government Executive and. L e g i s l a t i v e | 18,250.00 A d m i n i s t r a t i v e Departments 255,495.00 Other expenditures 262.8o4.oo 516,527.00 B. P r o t e c t i o n of Persona and Property F i r e P r o t e c t i o n 456,442.00 P o l i c e P r o t e c t i o n 468,572.00 Law Enforcement 18,265.00 Corrections 6,850.00 P r o t e c t i v e Inspections 49,590.00 S t r e e t L i g h t i n g l4o ,945 .00 C i t y Pound 4.990.00 1,125,454.00 C. P u b l i c Works General Administrat ion 81,825.00 S t r e e t s , Bridges, Sidewalks, e t c . 522,405.00 Workshops, Yards, e t c . 25,782.00 Parking Meters 16,099.00 446,109.00 D. S a n i t a t i o n a n d Waste Removal Sewer System. 97,787.00 Street Cleaning 59,725.00 garbage C o l l e c t i o n and Disposal 194,218.00 551,750.00 E . Public Health and Hospital Care P u b l i c Health 112,445.00 H o s p i t a l Care 80.500.00 192,945.00 F . S o c i a l Welfare General Administrat ion 59,045.00 Assistance to Unemployed 5,000.00 S o c i a l Assistance '250,500.00 C h i l d Welfare 4o,225.00 Mountain View Home 58,516.00 Other Services 2,900.00 Health Services ., 25,850.00 I n s t i t u t i o n a l Care 240,200.00 640,256.00 67 Vote G. Recreation and Community Services Parks and Boulevards f 286,251.00 Playgrounds, Beaches etc. 9,075.00 Public Library 181,615.00 Other Community Services 27,060.00 504,081.00 H. Education 1,085,755.00 I. Debt Charges 981,000.00 J . Water Distribution System Distribution Expenditures 526,050.00 Consumer Accounting 58.200.00 554,250.00 K. Miscellaneous Grants - Charitable & Special 25,000.00 Trade & Industry 54,555.00 Civil Defence 52,775.00 Interest on Prepaid Taxes 57,500.00 Transfer to replacement reserve for automotive 50,500.00 equipment Capital Region Planning Board 4,900.00 Provision f o r contingencies 28.844.55 194,054.55 a^m» E q u a t e d Expenditures |6,6o2,121.55 *» 68 SUMMARY OF 1955 ESTIMATES REVENUES Taxation General, Local Improvement and Frontage Levies 15,597,569.27 Other Taxes 115.796.00 5,513,167.27 Other Revenues Licenses and Permits 454,000.00 Rents and Franchises 77,500.00 F i n e s 82 ,000.00 Interest and Penalt ies 24,685.00 Service Charges 1J-',;"C-0.00 Recreation and Goraaunity Services 2,250.00 Government Grants / 914,700.00 P u b l i c U t i l i t i e s 659,500.00 Debenture Debt Charges Recoverable 587,7^.5.00 Miscellaneous 257.800.00 2,994,700.00 Gross Revenue $6,507*867.27 Surplus f r o a Previous Tears 94.254.08 Grose T o t a l Revenue |6 ,602,121.55 Tax Levy Other Revenues -13,259,744.27 §6,602,121.55 Taxable Assessment for General and Debt Purposes Land Improvements ?stiroated Expenditures $8,602,121.35 Estiaated Revenues froa other than property 5,542,577.08 taxation „ #5,269,744.27 .Taxable Agsesaaent .for School Purposes Laqd Improvements Set Taxable assessment $£0,245,694.00 $76,284,097.00 l e t Taxable $20,£45,694.00 #80,995,245.00 iisss: Empress Hotel 509.570.00 2,.255,?a2.0>C Assessment : §19,958,524,00 175,050,505.0c Taxes levied on Land Improvements* 75$ of ' *#75,050,506.00 #19,9§6,824.00 54,787,729.00 174,724,055.00 $20,245,694.00 #80,995,245.00 Taxes levied on Land Improvements* 75% of #80,393,245.00 #20,£45,894.00 6Q,744fS?4.00 $30,930,628.00 Debt Rate General Rate 816,259.75 8.2471 Mills School Rate 1,553,210.10 20.8529 Mills Debt General 125,519.55 1.5473 Mills 959.954.87 11.8527 Mills | 2,174,469.85 29.1000 Mills $ 1,085,274.42 13.4000 Mills 

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