Financial and Budgetary Terms

 

Here are some brief definitions for financial and budgetary terms you may encounter in your job as a municipal policy leader:

 

Accrual basis accounting:

Iowa communities may keep their records on an accrual basis. This means that a record is made when liabilities are incurred or accounts become receivable. Cities over 2,000 population are encouraged to keep their books on a modified accrual basis, which includes “encumbering” purchase orders and contracts to record the reduction of the appropriation balance even before cash is paid out.

Actual value:

The assessed, or 100% valuation of taxable property, before the application of any rollback percentage. The value against which a city calculates its Constitutional debt limit.

Appropriation:

This is an authorization to spend. Your budget certificate contains the appropriation resolution that allocates appropriations to programs when you adopt the budget. If you want to appropriate money for programs or purposes not included in the originally adopted budget, or to increase appropriation amounts to any of them, you will need to go through the budget-amending process.

Appropriation balance:

At any date during the fiscal year, this is the amount you have appropriated for a program, service, function, or activity account, less the amount that has been spent as of that date. This figure has nothing to do with the cash balance. You may thus also want to check to see that your income is meeting expectations. If it is not, you may have to cut your appropriations and expenditures accordingly. You should have information made available to you regularly, preferable monthly, on expenditures to date and the appropriation balances, and on actual money taken in and the amounts yet to be collected.

Beginning fund balance:

You are required to include this figure in the state-prescribed budget summary form. It is an estimate of the cash on hand, less outstanding warrants/checks that you anticipate on the day your next year’s budget starts, together with all investments.

Bonds or Notes:

These instruments of long term debt are issued by cities in order to obtain funds to pay for projects whose costs exceed amounts available in the current budget. Examples of bonds and notes include:  general obligation bonds, revenue bonds and special assessment bonds.  When a city issues bonds, it must keep the bond proceeds in a separate project fund. The project fund should be identified by its purpose. The money in a bond project fund can be appropriated and used only for the purpose stated in the bond issue.

Budget:

This is the plan for receiving and spending money for the fiscal year. The budget is more than the summary and certificate. It is a detailed document, which includes appropriation allocations to activities or purposes within city programs.

Budget appeal:

This is a request by taxpayers to make a change in the budget after it has been adopted by the council but before it goes into effect.

Budget Certificate Summary form:

This summarizes the detailed budget and is adopted by the council as the formal certificate of city income, expenditure estimates, and tax askings. Iowa law requires a city to file two copies of the Adoption of Budget and Certificate of taxes, one paper copy of the detailed budget (from Excel  budget file provided by the state) and one original proof of publication or Affidavit of Posting to the county auditor. One copy of the Excel budget file is required to be sent to the county auditor by either diskette or uploaded to the Iowa department of Management. The complete budget that you prepare for your own city’s use must be available for public inspection and must be more detailed. It should show the different types of income you plan to take in and the different kinds of expenditures you plan to make.

Budget hearing:

The public meeting where taxpayers may express their views for or against the items in the proposed budget to the council.

Budget process:

The various activities and actions required to prepare a plan for spending and receiving money to sustain municipal operations during a fiscal year together with related explanation.

Cash balance:

This is the amount of money the city has in the bank, including investments. Each month the city should receive a report of the cash balance by funds from the treasurer or designated finance officer.

Cash basis accounting:

Most Iowa communities keep their records on a cash basis; that is, no record is made until cash is either actually received or cash is actually paid out to pay a bill, salaries, wages, etc. This method is the alternative to accrual basis accounting.

City Finance Committee:

This body is the state board assigned the task of overseeing the financial requirements of city government as outlined in Section 384.13 of the Iowa Code.

Fiscal year:

Cities operate on a fiscal year for their financial operation from July 1 to June 30. The primary reason for having a fiscal year is so that your city government will have the same starting and stopping point year after year for budgeting, accounting, reporting, and auditing purposes.

General Fund:

This fund is used to account for all revenues and the activities financed by the city (such asa Police, Fire, Parks, Library, Council and Clerk) but not accounted for in some special fund (such as Road Use or Enterprise Funds..

General Obligation Bonds:

      General obligation bonds are debt instruments (either essential corporate purpose or general corporate purpose) that are backed by the “full faith and credit” of the city and usually paid back with funds collected through the property tax levy.

Income other than property taxes:

This term is an estimate of revenues from licenses, fees, state and federal aids, county and township contributions, charges (such as for water and sewer services), rents fines, and miscellaneous revenues.

Property tax asking:

This term concerns the dollar amount required to balance your budget after all other revenues have been deducted from your budgeted needs.

Revenue Bonds:

      Revenue bonds are debt instruments backed by a revenue source through the receipt of that particular revenue such as water or sewer revenue.

Rollback:

A state-imposed reduction in actual valuation, stated in terms of a percentage, which is used in determining taxable value.

Special Assessment Bonds:

Special assessment bonds are debt instruments backed by the properties benefited by the improvements and repaid from special tax charges levied against these properties.

State Appeal Board:

This group of state officials hear and decide requests from city officials to raise property tax revenues in excess of the state mandated levels and also hear and decide appeals from local citizens who challenge the city’s proposed property tax asking.

State shared revenues:

These funds are collected by the state and are shared with city governments (for example Road Use Tax Funds).

Tax levy:

This is the actual total dollars raised in property taxes in your community.

Tax rate:

This is the amount in dollars and cents that is assessed on every $1,000 of taxable property in your city: tax levy divided by taxable value (in terms of $1,000 of property).  This is sometimes referred to as the “mil rate.”

Taxable value:

This is the amount of value of property in the city against which taxes may be assessed.

Transfer:

  Certain revenues must be deposited into revenue funds.  The expenses may be reflected in a different fund.  The Council approves a transfer resolution to move the money from one fund to another.

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