Budget Policies & Procedures
Description of Reporting Entity
The City of Georgetown, South Carolina, operates under the Mayor-Council form of government in accordance with Home Rule Act Number 283 and offers services as provided for in the Act. Those services by functional category include general government, public safety, public works, and community development. The City also owns and operates its own electric, water, wastewater, and stormwater drainage service utilities, as well as the Kaminski House Museum.
Basis of Presentation, Measurement Focus, and Basis of Accounting
The City uses "fund accounting" to account for its operations and activities. A fund is an independent fiscal and accounting entity with a self-balancing set of accounts. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance related legal and contractual provisions.
Annual budgets are adopted for all funds on a basis consistent with generally accepted accounting principles. A description of the fund types utilized by the City and the applicable measurement focus and basis of accounting of each follows.
Governmental Funds - Governmental funds are those used to account for the City's general government activities. Governmental fund types use the flow of current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they are "measureable and available"). "Measureable" means the amount of the transaction can be determined and "available" means collectible within the the current period or soon enough thereafter to pay liabilities of the current period. The City considers all revenues available if they are collected within 60 days after year end. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on general long-term debt, which is recognized when due, and certain compensated absences and claims and judgments which are recognized when the obligations are expected to be liquidated with expendable available financial resources.
The primary sources of governmental revenue considered susceptible to accrual include property taxes, regularly billed charges for services, reimbursement type grants, interest, and other miscellaneous sources when their receipt occurs within 60 days after the City's year end.
Governmental funds of the City include the following fund types:
General Fund - The general fund is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund.
Special Revenue Funds - Special revenue funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditure for specific purposes. The City uses the following special revenue funds:
- State Accommodations Tax Fund
- Local Accommodations & Hospitality Tax Fund
- Community Development Fund
- Seized & Forfeited Property Fund
Proprietary Funds - Proprietary funds are accounted for on the flow of economic resources measurement focus and use the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred.
Proprietary funds of the City include the following fund types:
Enterprise Funds - Enterprise funds are used to account for operations (a) that are financed and operated in a manner similar to private business enterprises - where the intent of the governing body is that costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes.
The City uses the following enterprise funds:
- Electric Utility Fund
- Water Utility Fund
- Wastewater Utility Fund
- Stormwater Utility Fund
- Waste Management Fund
- Kaminski House Museum Fund
Internal Service Funds - Internal service funds are used to account for the financing of goods or services provided by one department to other departments of the City, on a cost reimbursement basis.
The City uses the following internal service funds:
- Fleet Services Fund
- Engineering Services Fund
- Information Technology Services Fund
Budget Policies
The City employs formal budgetary integration in its accounting system as a management control device. Expenditures may not exceed the budgeted appropriations at the fund level. The City Administrator is authorized to transfer budgeted amounts between departments within any fund and department heads may make budget transfers within their departments with the approval of the City Administrator. However, transfers of appropriations between funds and all supplemental appropriations must be approved by City Council. The legal level of control is therefore at the fund level.
Encumbrance accounting is utilized in all governmental funds. Under encumbrance accounting, purchase orders, contracts, and other commitments for the expenditure of money are recorded in order to reserve that portion of the applicable appropriation. Encumbrances outstanding at year end are reported as reservations of fund balances since they do not constitute expenditures or liabilities.
All appropriations lapse at year-end; however, outstanding encumbrances are re-appropriated and honored during the subsequent year.
The City recognizes the benefits of utilizing public funds in a prudent manner. In order to provide adequate working capital in the event of emergencies or other unexpected economic events and to reduce the need for short-term borrowing. City Council has adopted a fund balance policy which endeavors to maintain an unreserved fund balance in the General Fund in an amount equal to at least two month's normal General Fund operating expenditures, excluding capital outlay. The City designates this target amount, which approximates $1,100,000, as available for emergencies and contingencies.
Generally only unreserved fund balance accumulations in excess of the target amount will be considered as available for appropriation by City Council. In the event of emergency or other unusual circumstances, Council may approve the use of these contingency funds, provided that the fund balance is replenished as soon as possible after such an event.
Budgetary and management control is also achieved through sound, reasonable purchasing practices. Following are the major provisions of the City's purchasing policy:
Purchases up to $1,500 - Department managers have sole responsibility and discretion for purchases.
Purchases from $1,501 to $10,000 - A minimum of three written quotations must be solicited except when the item is purchased through state contract or other approved cooperative purchasing program. Purchases must be approved by the Purchasing Agent.
Purchases from $10,001 to $25,000 - A minimum of three written quotations must be solicited except when the item is purchased through state contract or other approved cooperative purchasing program. Purchases must be approved by the City Administrator.
Purchases over $25,000 - A requisition along with specifications must be submitted to the Purchasing Agent who shall upon formal advertising use competitive sealed bids or proposals as the method of procurement. Approval must be obtained from the City Administrator and the City Council before a purchase order can be issued.
Budget Process
The City utilizes the following procedures in enacting its annual budgets:
Department Heads and Administrative staff of the City initiate budget preparation with a series of work sessions in which current trends, needs and accomplishments of the City are reviewed. The City Administrator and Finance Director establish a timetable to be followed and forms to be used throughout the budget process. The Finance Department distributes statistical analyses, historical budgetary comparisons and necessary forms to all departments to aid in their development of line-item budget requests.
The next step in the budget process is a retreat with the Mayor, Council, and administrative staff in attendance to discuss ideas of what the City should be doing over the next several years. The retreat culminates with the development of short-term goals and priorities, particularly those that are to be addressed in the upcoming budget year.
Upon return from the planning retreat, the administrative staff meets with all department heads to discuss the priorities determined at the retreat. Department heads are then asked to prepare their individual requests and justifications for personnel, programs, projects, capital needs and initiatives they would like to have considered in the upcoming budget. Administrative preferences are clearly expressed and ongoing consultation is encouraged.
When completed, the departmental requests are compiled as budget worksheets and made available to the Mayor and Council in a series of public workshops at which time formal departmental presentations are made.
Within the framework of established budget policies, sound financial management and priorities developed by Council, the City Administrator considers all input received from Council members, the public, and staff and converts departmental requests into a workable budget recommendation.
Prior to June 1st, the City Administrator submits to Council a proposed annual budget for the fiscal year commencing July 1st.
Formal public hearings are then held to obtain citizen input on the proposed budget.
Prior to July 1st, budgets are legally enacted upon two readings and passage of a budget ordinance by City Council.