The action plan with resources. Economically, the budget

The four phases of a budget cycleinclude:  preparation, legislativeapproval, executive implementation and accounting and financial reporting.

   The culmination of thepreparation phase is the executive budget, which represents the chiefexecutive’s proposed spending plan for the forthcoming year.  After reviewing and revising theexecutive’s proposal, the legislature adopts the budget into law by passing anappropriation, a legally binding act of the legislature that sets the spendinglimits for each department and agency in government, including those in thelegislative and judicial branches for the forthcoming fiscal year.  Administrators responsible forbudget implementation,  then enter intocontracts and issue purchase orders that create encumbrances to eachdepartment’s appropriation.   The accounting department isresponsible for recording encumbrances and approving the subsequentdisbursement of funds once the contracted service is completed.

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  On completion of the fiscal year, the chiefaccountant prepares a comprehensive annual financial report that compares theappropriation as amended for each department with the actual amount ofexpenditures.  An independent auditorreviews the financial report and reports to the council on its accuracy and onthe local government’s compliance with federal, state and local laws. For most local governments, thebudget consists of two documents:  theoperating budget which reports the spending plan for a government’s ongoingservice.  It typically organizesinformation by departments and provides details on such line items aspersonnel, supplies, utilities and others. Money from the operating budget comes from current revenues.

 The capital budget represents aspending plan for the acquisition of fixed assets.  This budget is usually part of a morecomprehensive capital improvement plan that projects major construction andacquisition needs for a five to eight year period.  Funding for the capital budget usually comesfrom the sale of bonds or other long-term obligations.

  Information contained in the capital budgetis usually organized by projects. Discovering budget linkages Budgeting involves convertingdata and information on community needs and wishes into action plan withresources.  Economically, the budgetprocess converts the factors of production into goods and services.  The process of preparing  the budget is about discovering the linkagesbetween budget inputs and outcomes.  Forexample, will a mosquito spraying program enhance the health of ourcitizens?   The “probable linkages” in a particularcity, town or village is   determined by the community’s unique mix ofeconomic, social, political, cultural and historical events.

  Through the budget process, community leaderslearn what works effectively in their community and what does not.  Not only is the budget process about  understanding the linkage between inputs andoutcomes, it is also about reducing unintended effects. The true cause and effect links between spending andoutcomes are never known with certainty. Good leaders continuously search formore data and information.  For thisreason, budget innovations that are successful in one place are quicklyreplicated by other governments.

  

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