S-1191 - 04/10/2007 - BUDGET - Ordinances Supporting Documents�O �7:G
f�ml
00 U N -TvA
�o
v�
IT EM 40.11.1)
AGENDA ITEM
Regular Board of Trustees Meeting
of
April 10, 2007
SUBJECT: Transfers Among Budget Line Items
FROM: Darrell Langlois, Finance Director oy
BUDGET SOURCE/BUDGET IMPACT: Effects Numerous Budget Programs
RECOMMENDED MOTION: I move that the Village Board approve Ordinance S -1191,
"An Ordinance Authorizing Transfers Among Budget Line Items" for the year ended
December 31, 2006.
Back $tround /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 2006 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\2006YEBUDTRF doc
Last printed 4/3/2007 3 30 PM 9�v_l
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). Most 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\2006YEBUDTRF doc
Last printed 4/3/2007 3 30 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 611- Police Service Management: This program exceeded the total annual budget by
$53,985. Account number 611 -5230, Training, exceeded its budget by $17,385 due to costs
associated with Police Department employees utilizing the Village's tuition reimbursement
program exceeding the amount included in the budget. Account 611 -7700, Other Services, is
$36,600 over budget due to primarily to legal costs related to ongoing personnel matters in the
Police Department.
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 offset by a reduction in Program 632 -
Police Investigations). Account number 621 -9010, New Equipment, is over budget by $27,890
due to an unbudgeted expenditure for a card access security system in the Police Department for
which a grant of $25,000 was received from ILEAS. Thus, a revenue amount offsets most of this
budget variance but this transfer is still required so that the program total does not exceed its
budget.
Program 700 -Fire and EMS General Salaries: On December 12, 2006, $36,190 was transferred
from Account 700 -5001 Full Time Salaries to partially fund variances totaling $103,305 caused
by overtime and fire pension variances in the Fire Department. The Fire Department
overestimated the amount available in the Full -Time line item when this transfer was made and
$23,850 is now required to be "put back" in order to comply with the budget policy. Thus, the
primary cased of the variance in the program is the over transfer done on 12/12/2006.
Fund Appropriation Amendments
For the first time in many years no fund appropriation amendments are required as total
expenditures in each Fund of the Village were under the total budget appropriation.
Please feel free to contact me if you should have any comments or questions.
Last saved by Default J \WORD\2006YEBUDTRF doc
Last printed 4/3/2007 3 30 PM