The County Auditor’s Role in the Local Government Budgetary Process

Presented by

The Auditor of State of Ohio and the County Auditor Association of Ohio

Allen County Auditor

Ben E. Diepenbrock, CPA

Budgets Change They are not static documents

Budgets are remarkably stable from year to year. Some fiscal officers use percentage increases and then look at new items. Prior year history is normally the basis for future budgets. We make the original estimates based upon what we know at the time of

preparation. You should expect the budget to change at some time during the year however.

– Budgets change with new sources of revenue or with unanticipated spending emergencies. (And others priorities.)

These changes must go before the budget commission and the auditor who does the work for the commission.

– You do not need to submit intradepartmental transfers because they were originally approved and you are just moving appropriations around provided they are in the same fund.

My relationship with my auditor

What does the auditor know about my village?What does the auditor know about my village?

What does the auditor need from me? Or what What does the auditor need from me? Or what budgetary documents need to be filed with the budgetary documents need to be filed with the auditor?auditor?

What do I need from the auditor? Or what What do I need from the auditor? Or what documents need to be prepared by the auditor for my documents need to be prepared by the auditor for my village?village?

Who is the Budget Commission?Who is the Budget Commission?

What does the auditor know about my What does the auditor know about my village?village?

Actually, the auditor has a file on you which includes:– Prior budgetary documents and amendments– Prior budgets– Levy information– Inside millage and – Outside millage– Dates levies are due– Total tax valuation– Local government fund allocations– Memos from your predecessor– Do you have a file on your auditor?

What does the auditor need from me?

Your adopted tax budget by July 20 Your certification of amounts and rates by

October 1 Your certificate of available resources by

January 31 Your approved appropriation ordinance by

April 1 (no fooling) Your revised revenues and appropriations

What do I need from the auditor?

An official certificate of estimated resources and certification of tax rates by September 1 or close

An amended official certificate of estimated resources by the end of January (at least before appropriations are adopted)

A certificate that appropriations do not exceed estimated resources ( shortly after April 1 or before so your appropriations can become effective.

An amended official certificate and supplemental appropriations when they are made.

County Budget Commission

The budget commission is established under Section 5705.27 of the Ohio Revised Code.

Composed of the auditor, treasurer and prosecuting attorney, the county Budget Commission oversees tax rates and budgets established by other political subdivisions within the county.

The Commission drives the process by reviewing, approving and filing budget docs.

The county auditor is the secretary and the primary contact. Why? Because the auditor has the vital information on all local governments.

The auditor does the work for the commission.

Adoption of the Budget

Section 5705.28 of the Revised Code states that all subdivisions other than schools shall adopt their budget on or before July 15 each year.

– You are excluded if you do not levy a tax, including the inside mills.– The taxing authority (council) is responsible for adopting the

budget – It is often prepared by the mayor with the help of the fiscal officers,

department heads and others.

Your budget approved by July 15Due to county auditor by July 20

The Budget Timetable (18 months)

Where do I start? Sometime before July of the year preceding the budget year.

When does it end? Never! By December 31 of the budget year.

The budget is based upon our best estimates at the time we are preparing it or at the time we are revising it.

The budget is not a static document! It changes regardless of the great job you are doing.

TO WAIVE OR NOT TO WAIVEThat is the question.What is your answer?

Section 5705.281 of the Revised Code authorizes the budget commission to waive the adoption of the budget with a majority vote which must include the auditor.

But the budget commission still needs information to divide up rates, allocate local government funds, prepare the amounts for certification, send out the Official Certificate of Estimated Resources.

In the opinion of this auditor, I did not authorize the waiver of the budgets because more budget oversight is better than less in the eyes of the taxpayers who we depend on to support us. (and elect us)

We do a less specific budget which takes less time to prepare. – We prepare a budget for only those funds that get money from

levies and we do them in totals rather than by line items for revenues and expenditures.

– Still prepare all the comparative history, the authorized inside and outside millage, the estimates for the next year.

The Budget Hearings

After the budget is prepared, Section 5705.30 of the Revised Code requires you to present it to your electors:

– Two copies of the budget be filed with the fiscal officer for public inspection at least ten days before the adoption by the council.

– One public hearing must be held before the adoption of the budget and it must be advertised ten days before the hearing.

– The budget must be adopted by council by July 15.– The budget must be filed with the county auditor by July 20.

Penalty is severe if not filed with the auditor. Anyone not filing shall not receive an apportionment from the undivided local government fund.

Approval of Levies by theBudget Commission

The auditor presents the budgets to the commission with estimates of the amounts to be raised from levies and LGF.

Commission determines if levies are properly authorized and then approves them as follows:– All levies in excess of the ten mill limit.– All levies for debt charges not provided by levies

> 10 mills.

Contents of Tax Budget

Section 5705.29 requires certain things to be in the budget if one is required to be filed. Those include:

The budget requires the last two full years of actual receipts and expenditures in comparative form.

Also required is the first six months of the current year and an estimate of the last six months of the current year.

Then the new budget, say calendar year 2008, must be estimated for the twelve month period.

The amount required to pay final judgments and debt charges. An estimated of the taxes to be levied in excess of the ten mill

limitation and the inside millage. Reserve fund balances set aside. But who can do that?

Certification of Tax Levy and Revision of Budget

In early September, the budget commission finishes its work in gathering information about your village and mails it to you. This information includes that required by Section 5705.35 of the ORC:

– The Official Certificate of Estimated Resources showing all funds (at least those getting levy money).

– Summary of Amounts Required From General Property Tax and Auditors Estimated Rates.

This will show your current tax valuation. The levies within the 10 mill limit. The levies outside the 10 mill limit. We can adjust these estimates if a levy is passed in November. The village council is required to pass a resolution at their September

meeting which will authorize the necessary levies and certify them to the county auditor before October 1.

Certificate Of BalancesFrom village to auditor

Certificate of the Amounts Available for Expenditure and Balances

This form is prepared by the village at the beginning of the calendar year and submitted to the county auditor.

What information is on the form required by Section 5705.36 of the ORC?– The total amount from all sources available for expenditure from each fund

set up in the tax budget, or if waived, from each fund set up on behalf of the taxing authority.

– The form will show the cash balance of each fund and the encumbrances at the end of the year. This will produce the unencumbered balance which then goes to the Amended Official Certificate of Estimated Resources.

– The certificate will then show the estimated revenues to be derived from taxes in the real property tax column and the revenue from other sources in the other sources column.

What is included in the real property tax column?This column includes the estimates made by the auditor for real and personal property taxes only. The auditor knows these numbers.The other sources includes all other revenue from whatever source that the auditor either knows about (such as local government funds) or that only your village knows about such as your grant funds or enterprise funds. We take your word for it.

Budget DocumentSummary of Amounts Required

Amended Official Certificate of Estimated Resources

Why do this? Didn’t I already get the Official Certificate from the budget commission?– Yes you did. However, the auditor did not know

(and neither did you) what your actual cash balances were at December 31 or your encumbrances.

– Also the auditor did not know if any new levies passed in November.

– This form is prepared from the Certificate of the Amounts Available for Expenditure and Balances.

– This form limits the appropriations you can make.

Amended Official CertificateFrom Auditor to Village

Using the Amended Official Certificate of Estimated Resources

This certificate which the county auditor will prepare after you submit the Certificate of the Amounts Available…is based upon latest known information.

Limits the appropriations to the amount established here by fund. Can be amended throughout the year based upon actual revenues being

greater than the original estimates or revenue coming in from a new source. If fiscal officer determines that revenue will be greater than the original

estimates, law says you shall submit the excess to the budget commission who shall increase the Amended Certificate by fund.

If the fiscal officer estimates the amount of revenue will be less, then you should certify the deficiency to the budget commission who shall reduce the Amended Certificate.

The Amended Certificate can be used to increase the appropriation by the amount of the increase.

Appropriations (By ordinance)

Section 5705.38 of the ORC deals with appropriations. Law says the taxing authority (Village Council) must pass

appropriations on or about the first day of the year. You can not spend anything before this is done.

You can pass a temporary to cover the early part of the year and then pass the annual appropriation ordinance by April 1. (no fooling- LOL)

Appropriations shall be classified to separately set forth the amount for each office showing the amount for salaries and fringes, and other objects. Such as services, materials, equipments and debt.

– These accounts are established in your chart of accounts. Appropriations can be supplemented throughout the year based

upon future needs. Any supplemental appropriation must be certified by the county

auditor before it becomes effective.

Appropriations Limited By Estimated Revenues

Section 5705.39 of the ORC states that total appropriations from each fund shall not exceed the total of the estimated revenue available for expenditure there from as certified by the budget commission.

It also says that no appropriation shall become effective until the county auditor files with the appropriating authority a certificate that the total appropriations from each fund, do not exceed such official estimate, or amended certificate.

If the appropriation does not exceed the estimated revenue the auditor will state such in his certificate.

If appropriations exceed the estimated revenue, the auditor will state such as the appropriations will not be valid until revised in line with estimated revenues.

Appropriations shall be made from each fund only for the purpose for which fund was established.

Appropriations can be revised throughout the year based upon needs and estimated resources.

Appropriations < Est. Rev.

Do We Have to Play Games With the Amended Official Certificate?

Section 5705.36 of the ORC says you need to amend the certificate when you know it will be greater or less than the original estimate.

Many fiscal officers and auditors consider materiality when making the changes. If it will have a financial statement impact, it should be increased or decreased.

– You also will look like a great budgeter when the statements show zero variances between actuals and your estimates.

– If your actual revenue is materially less than the estimate, you should revise your estimate and then you must revise your appropriations as well.