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S-1233 - 04/08/2008 - BUDGET - Ordinances Supporting Documentsco \I, I' EAM 10.11, 3 ) AGENDA ITEM Regular Board of Trustees Meeting of April 8, 2008 SUBJECT: Transfers Among Budget Line Items FROM: Darrell Langlois, Finance Director BUDGET SOURCE/BUDGET IMPACT: Effects Numerous Budget Programs RECOMMENDED MOTION: I move that the Village Board approve Ordinance S -1233, "An Ordinance Authorizing Transfers Among Budget Line Items" for the year ended December 31, 2007. Background/History: During the course of a year, there are numerous situations that may arise that cause an account, program, or even a fund to exceed its budget. When this occurs, State statutes provide that the corporate authorities may make transfers from "one corporate object or purpose to another corporate object or purpose ". Additionally, statutes provide that the corporate authorities may delegate authority to heads of municipal departments to "delete, add to, change, or create sub- classes within object classes budgeted previously to the department with the approval of the budget officer or executive officer of the municipality ". The Village has defined a corporate object or purpose to be an individual program or fund. Sub - classes within object classes have been defined as accounts and categories within a budget program. Now that all of the year -end accounting adjustments have been made, several budget accounts, categories, and programs have been determined to have ended 2007 over budget. The Village Board's policy on Finance, Taxation, and Budget, prepared based on the previously mentioned statutes, outlines the following procedures for budget administration and how these variances are to be addressed: Last saved by Default J \WORD\2007YEBUDTRF doc Last printed 4/2/2008 2 28 PM 0 1. That the Budget Officer, with the approval of the Village Manager, may authorize transfers of budgeted funds between accounts or between account categories within a single budget program. 2. That any transfer of budgeted funds from one budget program to another shall be subject to approval by the Board of Trustees upon the recommendation of the Village Manager. 3. That any transfer from contingency shall be subject to approval by the Board of Trustees upon the recommendation of the Village Manager. 4. That any increase in the total appropriation within any fund shall be subject to approval by the Board of Trustees upon the recommendation of the Village Manager. In order to make as few changes to the originally adopted budget as possible, formal budgetary control has been established at the category level, i.e. personnel, materials and supplies, operation and contractual, and capital. For example, if staff turnover created a need for overtime, this may lead to the overtime account going over budget. However, this would likely be offset by an underbudget salary account. By not doing budget transfers for these types of situations we preserve the original budget as the basis for evaluating our actual performance versus expected performance. Through Budget Year 2002, staff approved an extensive listing of budget transfers administratively due to budget variances in account categories within a single budget program as provided for under Procedure #1. In practice, these transfers were only reflected in the Village's audit report-our accounting records were never adjusted for any budget transfers in order to maintain proper original budget /actual comparison data. With the new reporting requirements associated with GASB Statement #34, the Village is now required to publish original budget amounts in addition to revised budget amounts in its audit report. This new requirement reduces the value of these administrative transfers required under option# 1. After consultation with the Village's auditors, in Budget Year 2003 and thereafter only program -to- program transfers and additional fund appropriations are recorded. These transfers are required since this is the level of legal control where budget compliance is measured. In addition to the budget transfers required under the Village's Financial Policy ordinance, during 2004 the Village Board began requiring budget transfers during the year when an individual line item account exceeded budget by more than 10 %. This policy was revised in October, 2006 by eliminating the 10% threshold and instead requiring line item transfers when an account exceeds its budget by $2,500 in a material and supply, operation and contractual or capital account (6000 to 9000 account series) or $10,000 in a personnel series account (5000 account series). Many of these transfers have already been approved by the Village Board and have been posted to the accounting system; thus, these transfers are not reflected here. Please note that all transfers are only for the amounts necessary to offset the individual program budget variances, and in most cases the transfer is done only to the individual line item that has the largest variance. In most cases it is several accounts that would cause a program to exceed Last saved by Default J \WORD\2007YEBUDTRF doc Last printed 4/2/2008 2 28 PM its budget. Also, in some cases the variance in a particular line item may be greater than the amount of the transfer, with offsets found in other line items within the budget program. After these transfers are made, numerous line -items and categories will remain over budget; however, each program in total will be within budget. Program Transfers The following is a brief explanation of the causes of program transfers that exceed $20,000: Program 121 - Legal: Expenditures for line item account 121 -7631 Village Attorney were over budget due to significant litigation and transition to a new Village Attorney. It should be noted that the transfer amount of $95,000 that is requested is in addition to a transfer of $125,000 that was previously approved by the Board. The line item for account 121 -7632 Village Prosecutor is over budget primarily due to the change in prosecuting DUI offenses. Program 181- Community Events: For budget purposes $25,000 was budgeted as a "net" amount after donations for the General Fund contribution for Independence Day. On an accounting basis, we are required to record the revenues and expenses separately. Thus, the expenditure variance of $42,300 is offset by donation revenue of $43,000 in the General Fund. Program 611- Police Service Management: The largest variance is account 611 -7630 Outside Legal Services whereby $64,000 was spent on a budget amount of $10,000. The large variance is due to legal, personnel, and disciplinary issues in the Police Department, which goes well above the normal amount that was budgeted. Program 621 - Police Field Services: Full -time salaries are over budget due a manpower allocation decision for part of the year which resulted in the number of full time employees exceeding the budgeted number in this program (this is more than offset by a reduction in salaries in Program 632 - Police Investigations). Program 363 -Snow Removal: The large number of snow events in 2007 resulted in account 363- 6180 Chemicals (primarily salt and calcium chloride) exceeding its budget by approximately $25,000. Program 351 -Water Operations: The large number of water main breaks (109 in 2007 vs. 63 in 2006) resulted in account 351 -5030 Overtime exceeding budget by $33,000. Program 821 - Clubhouse F &B Operations: Account 821 -6320 Food Cost is over budget by approximately $22,000. This variance is partially due to food sales revenue being over budget (approximately $17,800 over), and the remainder is due to food cost as a percentage of sales being slight over the budget percentage. Program 823 -Golf Food & Beverage Operations: Of the $30,550 program variance, $16,400 was payroll - related due primarily to an increase in operating hours. The variance in beverage cost is partially offset by over budget revenue. The remaining variances are due to under budget performance as a percentage of sales. Last saved by Default J 1WORD\22007YEBUDTRF doc Last printed 4/2/2008 2 28 PM Fund Appropriation Amendments Due to the escalating cost of gas and oil as well as several significant vehicle repairs, the total budget for Program 341 - Garage Operations was exceeded. As this program is the only program in Fund 62- Garage, there is no other program to transfer funds from in order to address the budget variances and has caused the entire fund appropriation to be exceeded. Thus, in lieu of a budget transfer, a fund appropriation amendment is required. The ordinance increases two line item accounts by a total of $40,700 in order to comply with the Board's budget policies. Please feel free to contact me if you should have any comments or questions. Last saved by Default J \WORD\2007YEBUDTRF doc Last printed 4/2/2008 2 28 PM ORDINANCE 2008- BU -EX1 -S -1233 AN ORDINANCE AUTHORIZING TRANSFERS AMONG BUDGET LINE ITEMS WHEREAS, the Village Manager has recommended certain transfers among budget line items in the Annual Budget Ordinance passed for the fiscal year beginning January 1, 2007 and ending December 31, 2007, and certain transfers of sums of money in said Budget Ordinance from one object or purpose to another object or purpose, and WHEREAS, the Village President and Board of Trustees concur with and approve of the Village Manager's recommendations NOW, THEREFORE, BE IT ORDAINED BY THE PRESIDENT AND BOARD OF TRUSTEES OF THE VILLAGE OF OAK BROOK, DU PAGE AND COOK COUNTIES, ILLINOIS that the following transfers are hereby authorized Section 1 The recitals above are hereby incorporated into and made a part of this ordinance Section 2 In the attached schedule, attached as "Exhibit A", the amounts shown in the column titled "Transferred From" represent unexpended balances The total of said amounts are hereby transferred to the various items specified in the "Transferred To" column immediately opposite the items specified in the "Transferred From" column Section 3 The Garage Fund budget is amended by increasing the amount budgeted in account 341 -6030, "Gas and Oil ", by $15,700, and in account 341 -7160, "Maintenance Vehicles ", by $25,000, both increases shall be funded by this Fund's fund balance Section 4• This ordinance shall be in full force and effect from and after its passage and approval as required by law Section 5 All ordinances or parts thereof in conflict with the provisions of this ordinance be and the same are hereby repealed to the extent of such conflict APPROVED THIS 8th day of April, 2008 PASSED THIS 8th day of April, 2008 Ayes Nays Absent John W Craig Village President ATTEST Charlotte K Pruss Village Clerk i t X W c O E Q a� Lam_ f H O L � ,- o � U U cu Q I- L a) E Z O O O U U 0 LO M 000000000000 000000000000 a) O U') 00 00 E! 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