What is the Budget Structure?
Understanding Municipal Budgets: Core Questions and BARS Structure in Montan
A municipal government’s finances revolve around four basic questions:
1. How much money do we have to start the budget year? (beginning cash available)
2. How much money do we expect to receive during the budget year? (revenue estimates)
3. How much money do we expect to spend during the budget year? (appropriations)
4. How much money do we expect will be left at the end of the budget year? (anticipated ending cash available)
These four questions should enable a newly elected municipal official to grasp the “big picture” of governmental budgeting. However, the actual budgeting process and the structure of the Montana BARS budget are made somewhat more complicated by law, presumably for the purpose of standardized preparation and reporting, thereby enabling review and oversight by state government. Moreover, few municipal clerks (the individuals who are most frequently responsible for assembling the budget) are certified public accountants and, therefore, they
need some standardized guidance in budget assembly and documentation. To these ends, state law specifies the structure and elements of the Department of Administration’s BARS standardized budget format, briefly described here.
4. Municipal Budgeting 132
The annual operating budget for each governmental fund is comprised of the same basic elements, which commonly include:
1. Detailed listings of proposed expenditures by department and further categorized in terms of personnel costs, operations costs and capital costs. (See ATTACHMENT 4.1 at the end of this chapter for a model of the BARS tabulation of expenditures);
2. A comparison of proposed expenditures with present year actual expenditures;
3. A listing of anticipated revenues by source;
4. A comparison of anticipated revenues with present year actual revenues; and
5. The Tax Levy Requirements Schedule summarizing the proposed spending, the required financial resources and the consequent property tax impacts, if any, for each governmental fund. (See Attachment 4.2 at the end of this chapter for a model of the BARS Tax Levy Requirements Schedule, which is a particularly useful document in summarizing the entire budget.) Each of these five components of a local government budget is required by law and serves a specific accounting or management purpose and each reveals a different aspect of the municipal government’s financial future. For example, the mayor of a small town may be most interested in the detailed listing and comparison of his departmental staffing and expenditures, while a prudent municipal council member may be focused on any changes in the proposed property tax mill levy, or the finance officer of a large city may be eager to track any downward trend in the government’s year‐end “fund balances”. Learning what questions to ask of a local government’s budget and where to find the answers in the budget is
the first and perhaps most important step in understanding the financial health of that government. Familiarity with this basic structure of a municipal government’s budget is the key to understanding the capacity of a particular government to deal with the financial challenges it will face in its immediate future.
1. How much money do we have to start the budget year? (beginning cash available)
2. How much money do we expect to receive during the budget year? (revenue estimates)
3. How much money do we expect to spend during the budget year? (appropriations)
4. How much money do we expect will be left at the end of the budget year? (anticipated ending cash available)
These four questions should enable a newly elected municipal official to grasp the “big picture” of governmental budgeting. However, the actual budgeting process and the structure of the Montana BARS budget are made somewhat more complicated by law, presumably for the purpose of standardized preparation and reporting, thereby enabling review and oversight by state government. Moreover, few municipal clerks (the individuals who are most frequently responsible for assembling the budget) are certified public accountants and, therefore, they
need some standardized guidance in budget assembly and documentation. To these ends, state law specifies the structure and elements of the Department of Administration’s BARS standardized budget format, briefly described here.
4. Municipal Budgeting 132
The annual operating budget for each governmental fund is comprised of the same basic elements, which commonly include:
1. Detailed listings of proposed expenditures by department and further categorized in terms of personnel costs, operations costs and capital costs. (See ATTACHMENT 4.1 at the end of this chapter for a model of the BARS tabulation of expenditures);
2. A comparison of proposed expenditures with present year actual expenditures;
3. A listing of anticipated revenues by source;
4. A comparison of anticipated revenues with present year actual revenues; and
5. The Tax Levy Requirements Schedule summarizing the proposed spending, the required financial resources and the consequent property tax impacts, if any, for each governmental fund. (See Attachment 4.2 at the end of this chapter for a model of the BARS Tax Levy Requirements Schedule, which is a particularly useful document in summarizing the entire budget.) Each of these five components of a local government budget is required by law and serves a specific accounting or management purpose and each reveals a different aspect of the municipal government’s financial future. For example, the mayor of a small town may be most interested in the detailed listing and comparison of his departmental staffing and expenditures, while a prudent municipal council member may be focused on any changes in the proposed property tax mill levy, or the finance officer of a large city may be eager to track any downward trend in the government’s year‐end “fund balances”. Learning what questions to ask of a local government’s budget and where to find the answers in the budget is
the first and perhaps most important step in understanding the financial health of that government. Familiarity with this basic structure of a municipal government’s budget is the key to understanding the capacity of a particular government to deal with the financial challenges it will face in its immediate future.