Introduction to
Budgeting Basics
Presented by:
The Department of Municipal Affairs
1
Introduction to Budgeting
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The budgeting process is the first phase of a
municipality’s financial management cycle
It will produce a valuable planning tool to use as a
guide to the management and operation of the
municipality
The budget is a written plan, expressed in dollars
It is only as accurate as the information collected
and the thoroughness of the process
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The Importance of Budgeting
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Sets standards for controlling costs
Allows regular comparisons between
estimated and actual costs
Allows timely adjustments to programs
and services
Must be done to establish tax rates
Ensures realistic planning and estimates
Communicates council’s plans to others
Provides an opportunity for evaluation of
programs and services
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Budget Categories
Categories:
1.Current/Operating – expenditures for
goods and services which will be used
within one year.
2.Capital – expenditures on equipment and
infrastructure expected to last for a
number of years.
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Developing a Realistic Budget
Preparation of a realistic budget emphasizes:
 Council giving clear direction to the staff
regarding financial priorities, goals and
objectives
 The need for accurate, up-to-date
information
 Completing expenditures estimates
BEFORE revenues
Scaling expenditures to “FIT” the available
revenues is NOT a very good practice.
5
Who Does the Budget?
The clerk or manager is responsible for the actual
preparation of the budget, but it is the Council
which must adopt the budget.
 Council may appoint a Finance Committee to
guide and coordinate the budget process
 A typical Finance Committee would include:
 The mayor
 One or two councillors
 The clerk or manager
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Deadlines and Time Frames
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Municipal Fiscal Year - January 1 to December
31
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The Budget Cycle - October 1 through one full
year
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Budget Time Frames:
 September 1 - start gathering information
 By December 1 - prepare and adopt
budget…
 By December 31 - submit budget to
Minister…
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Deadlines and Time Frames
EXCEPTION
 Time frames may be
different in the case of an
election year or revised
budget.
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Six Steps to Successful Budgeting
1. Establish a Budget Calendar
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Actions to be completed
Who is responsible
Dates when these actions are to be
completed
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Six Steps to Successful Budgeting
....Sample Budget Calendar
What
(Actions)
Who?
When?
(Person/Group) (Date)
Collect all necessary information for
budget preparation
Clerk/Manager
Sept. 1
Send out notices to request input from Clerk/Manager
committee, group that is supported by
Council funds or accountable to
Council
Sept. 1
Submit input to Council; include
requests for next year’s programs and
activities and an evaluation of last
year’s programs
All departments,
Oct. 1
committees, groups
requesting
budgeted funds for
the next fiscal year
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Six Steps to Successful Budgeting
....Sample Budget Calendar
What
(Actions)
Who?
When?
(Person/Group) (Date)
Review all material and prepare draft
budget for presentation to Council
Clerk/Manager
Make adjustments and prepare final
budget
Finance Committee Nov. 1
Present final budget to Council for
approval
Finance Committee Dec. 1
Submit budget to the Minister of
Municipal Affairs for review
Finance Committee Dec. 31
Nov. 1
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Six Steps to Successful Budgeting
2. Collect all necessary information
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Assessment Roll
Loan payment schedules
Past budgets
Goals & objectives of Council
Tax collection statistics
Audited financial statements, internal financial
reports and bookkeeping records
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Six Steps to Successful Budgeting
2. Collect all necessary information
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Financial policies and procedures
The current year’s “year-to-date” operating
costs as well as forecasted amounts for the
balance of the year
Annual evaluations of Council programs,
services, and activities
Program statistics
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Six Steps to Successful Budgeting
3. Request information from others
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Review financial statements of
funded groups
Request budget estimates from
groups seeking funding
Review reports and program
evaluations on previous year’s
activities
Meet with groups seeking funds
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Six Steps to Successful Budgeting
4. Review information and prepare draft
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What to Review:
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Goals and objectives of council
Differences between past budgets and actual
expenditures (Financial Statements)
Effectiveness, cost implications and benefits of
all council activities – on-going or proposed
Financial policies and procedures . . . Are they
still relevant?
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Six Steps to Successful Budgeting
4. Review information and prepare draft, cont’d
 Preparing the draft
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Complete the Debt Charges Summary
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Reminder: ensure that the totals for Council Annual
Payment & Provincial Annual Payment are recorded in
the proper place under Expenditures (7.1 – Debt Charges
From all Sources)
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Reminder: ensure that the total for Provincial Annual
Payment is recorded in the proper place under Revenues
(4.1.2 – Provincial Portion of Debt Charges)
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Six Steps to Successful Budgeting
4. Review information and prepare draft,
cont’d
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Preparing the draft, cont’d
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Estimate and record expenditures
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Estimate and record expected revenues
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Prepare draft for presentation to Council
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Six Steps to Successful Budgeting
5. Review the draft and make adjustments
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If there is a Finance Committee - draft is reviewed
and adjustments made to balance the budget
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If there is no committee, council thoroughly
reviews draft and approves any adjustments
Several meetings may be needed to finalize the
budget
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Remember…
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The draft budget review process is an
excellent opportunity to:
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Help Councillors to better understand the
budget process and the overall financial
picture of the municipality
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Take the time to ask questions about the
relevance and viability of municipal
programs, services and activities
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Remember…
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Approved budgets MUST
be balanced.
Revenues = Expenditures
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Six Steps to Successful Budgeting
6. Adoption & submission of budget
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Adoption by December 1 at a regular council
meeting
 Budget notes/highlights to be made available
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Adopted budget is transcribed onto official form
and sent to Municipal Affairs for ministerial review
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Municipal Affairs staff will review and Council will
be advised if revisions are required
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Did You Know That…?
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All tax rates for the coming year should be set and
approved by resolution of council …Section 101(1)
Even though no changes are made. . . Tax rates
should be re-adopted each year for the record
This practice is essential when taking court action
against taxpayers in arrears
You have an official record of the tax rates in
effect for previous years
March 31 is an important date . . . Why?
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Tax rates cannot be changed after March 31…Section
101(4)
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Did You Know That…?
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A council shall publish annually a copy of
its tax structure in a newspaper circulated
in a municipality and by public notice in a
municipality…Section 109(1)
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The Municipal Budget Submission
Form
There are five main sections:
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Front Page
Debt Charges Summary
Expenditures
Revenues – Includes tax rates
information
Summary of the Municipal Budget
Submission Form
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The Front Page
Here is where you identify:
 Your municipality
 The budget period
 The date of approval
 The individuals, by their signature (mayor,
clerk/manager) who verify the adoption of the
budget
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Debt Charges Summary
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If council owes money for loans received, the
Debt Charges Summary must be completed
The lending sources are typically the Banks,
the Newfoundland and Labrador Municipal
Financing Corporation (NMFC), and the
Canada Mortgage and Housing Corporation
(CMHC)
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Debt Charges Summary
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Using the loan information obtained from the
lender(s), complete the table in the summary
Your previous audited statement should
contain a summary of all loans for the
previous year
ALL loans must be reported
You should complete the Debt Charges
Summary BEFORE you prepare your draft
budget
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Debt Charges Summary
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Loan Number
Name of Creditor
Purpose (Water/Sewer; Roads; etc.)
Original Principal
Maturity Date
Council Annual Payment
Provincial Annual Payment
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Debt Charges Summary
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TOTAL Council Annual Payment
TOTAL Provincial Annual
Payment
TOTAL Provincial Annual
Payment
7.1 – Debt Charges
from all Sources
(Under Expenditures,
Fiscal services, p. 4)
4.1.2 – Provincial
Portion of Debt
Charges (Under
Revenues, Government
Transfers, Provincial
Government Grants and
Subsidies, p. 9)
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Expenditures/Revenues and Summary
Expenditures:
 Estimated expenditures are entered here
Revenues:
 Estimated revenues are entered here
 The budget form requires that the various tax rates
set by a municipality be recorded in the appropriate
boxes in this section
Summary of the Municipal Budget Submission Form:
 This is an “at-a-glance” summary of the reported
expenditures and revenues
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The Municipal Budget Submission
Form - Expenditures
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1.0
2.0
3.0
4.0
5.0
6.0
7.0
General Government
Protective Services
Transportation Services
Environmental Health
Planning and Development
Recreation and Cultural Services
Fiscal Services
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The Municipal Budget Submission
Form - Expenditures
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1.0 GENERAL GOVERNMENT
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1.1 Council
 1.1.1 Remuneration for Councillors
 1.1.2 Travel
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The Municipal Budget Submission
Form - Expenditures
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1.0 GENERAL GOVERNMENT
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1.2 General Administration
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1.2.1
1.2.2
1.2.3
1.2.4
1.2.5
1.2.6
1.2.7
1.2.8
Salaries
Employee Benefits
Payroll Burden
Travel
Supplies
Purchased Services (other than Insurance)
Professional Services
Insurance
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The Municipal Budget Submission
Form - Expenditures
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1.0 GENERAL GOVERNMENT
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1.3 Municipal Elections & By-Elections
1.4 Property Assessment Services
1.5 Common Services
 1.5.1 Engineering Services
 1.5.2 General Maintenance
 1.5.3 Professional Development and Training
 1.5.4 Public Relations
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The Municipal Budget Submission
Form - Expenditures
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2.0 PROTECTIVE SERVICES
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2.1
2.2
2.3
2.4
2.5
Fire Protection
Emergency Preparedness and Response
Animal and Pest Control
Municipal Enforcement
Other Protective Services and Inspections
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The Municipal Budget Submission
Form - Expenditures
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3.0 TRANSPORTATION SERVICES
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3.1 Vehicle and Fleet Maintenance
3.2 Road Transport
 3.2.1 Streets, Roads, Sidewalks, etc.
 3.2.2 Snow Removal
 3.2.3 Street Lighting
 3.2.4 Traffic Services
3.3 Public Transport
3.4 Other Transportation Services
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The Municipal Budget Submission
Form - Expenditures
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4.0 ENVIRONMENTAL HEALTH
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4.1
4.2
4.3
4.4
Water Supply
Sewage Collection and Disposal
Garbage and Waste Collection and Disposal
Other Environmental Health Services
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The Municipal Budget Submission
Form - Expenditures
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5.0 PLANNING AND DEVELOPMENT
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5.1
5.2
5.3
5.4
5.5
Planning and Zoning
Community Improvement and Development
Regional Development
Tourism and Marketing
Other Planning and Development
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The Municipal Budget Submission
Form - Expenditures
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6.0 RECREATION AND CULTURAL
SERVICES
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6.1 Recreation Administration
6.2 Recreation Facilities
 6.2.1 Recreation and Community Centres
 6.2.2 Parks, Playgrounds, etc.
 6.2.3 Stadium
 6.2.4 Swimming Pool
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The Municipal Budget Submission
Form - Expenditures
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6.0 RECREATION AND CULTURAL
SERVICES, cont’d
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6.3 Cultural Facilities
6.4 Recreation and Cultural Programs, Activities,
etc.
6.5 Other Recreation and Cultural Services
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The Municipal Budget Submission
Form - Expenditures
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7.0 FISCAL SERVICES
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7.1 Debt Charges From All Sources
 7.1.1 Council Annual Payment
 7.1.2 Provincial Annual Payment
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The Municipal Budget Submission
Form - Expenditures
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7.0 FISCAL SERVICES
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7.2 Transfers to Authorized Reserves and
other Funds
 7.2.1 Provision for Uncollectible Taxes, Fees, & Charges
 7.2.2 Operating Deficit of Prior Year
 7.2.3 Accumulated Deficit Reduction Plan
 7.2.4 Discounts, Losses, Allowances
 7.2.5 Capital Expenditures Out of Revenue
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7.2.5.1 Gas Tax
7.2.5.2 All other (please provide list)
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The Municipal Budget Submission
Form - Expenditures
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7.0 FISCAL SERVICES
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7.2 Transfers to Authorized Reserves and
other Funds
 7.2.6 Authorized Transfers to Reserves & Other Funds
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7.2.6.1 Gas Tax
7.2.6.2 All Other (please provide list)
7.3 Bank Charges & Other Fiscal Services
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Dealing with HST
REMINDER:
 HST paid out or rebated is not
recorded in the budget
 The EFFECT of HST is reflected
in the budget for expenditures
that are taxable
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Dealing with HST
Budget Item: Office supplies for council office
Value: $200
Clerk will budget for $216 . . . Here is the calculation:
Cost of Supplies ……$200
Plus HST . . . . . . . ….+$26 (5% GST is $10 ; 8% PST is $16)
Total………....$226
Less GST rebate …. - $10 (100% of GST, which is $10)
($200 + $26) - $10 = $216
Budget for supplies: $216
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Dealing with HST
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Budgeting without including the applicable
taxes will result in an under estimation of
costs
Including the full 13% HST and not
factoring in the rebate will result in an over
estimation of costs
In some cases, the dollar amounts
involved can be significant !!
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The Municipal Budget Submission
Form - Revenues
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1.0
2.0
3.0
4.0
5.0
Taxes and Related Revenues
Sales of Goods and Services
Other Revenue From Own Sources
Government Transfers
Other Transfers
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The Municipal Budget Submission
Form - Revenues
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1.0 TAXES AND RELATED REVENUES
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1.1 Property Tax Information
 1.1.1 Residential Property Info.
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1.1.1.1
1.1.1.2
1.1.1.3
1.1.1.4
Mil Rate Method
Minimum Tax Method
Residential Grants in Lieu
Residential Exempt Properties
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The Municipal Budget Submission
Form - Revenues
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1.0 TAXES AND RELATED REVENUES
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1.1 Property Tax Information
 1.1.2 Commercial / Non-Residential
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1.1.2.1
1.1.2.2
1.1.2.3
1.1.2.4
1.1.2.5
Mil Rate Method
Minimum Tax Method
Non-Residential Grants in Lieu
Tax Agreements
Non-Residential Exempt Property
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The Municipal Budget Submission
Form - Revenues
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1.0 TAXES AND RELATED REVENUES
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1.2 Water and Sewage Tax Information
 1.2.1 Residential Water and Sewage
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1.2.1.1
1.2.1.2
1.2.1.3
1.2.1.4
1.2.1.5
Number of households NOT connected
Water and Sewage Tax
Water Tax Only (if separate tax)
Sewage Tax Only (if separate tax)
Other Residential Water and Sewage Tax
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The Municipal Budget Submission
Form - Revenues
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1.0 TAXES AND RELATED REVENUES
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1.2 Water and Sewage Tax Information
 1.2.2 Commercial / Non-Residential Water and Sewage
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1.2.2.1 Number of Commercial / Non-Residential Units
NOT connected
1.2.2.2 Water and Sewage Tax
1.2.2.3 Water Tax Only (if separate tax)
1.2.2.4 Sewage Tax Only (if separate tax)
1.2.2.5 Other Commercial / Non-Residential Water
and Sewage Tax
1.2.2.6 Industrial & Institutional Water and Sewage
(e.g. fish plants, hospitals)
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The Municipal Budget Submission
Form - Revenues
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1.0 TAXES AND RELATED REVENUES
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1.3 Other Taxes
 1.3.1 Poll Tax
 1.3.2 Business Tax
 1.3.3 Utility Tax
 1.3.4 Municipal Utility (Sales) Tax
 1.3.5 Direct Seller Tax
 1.3.6 Other Authorized Taxes
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The Municipal Budget Submission
Form - Revenues
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2.0 SALES OF GOODS AND SERVICES
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2.1 Sales of Goods and Services
 2.1.1 Garbage Collection Fees
 2.2.2 Recreation and Cultural Services
 2.2.3 Transportation Services
 2.2.4 Fire Protection Service Fees
 2.2.5 Animal and Pest Control Fees
 2.2.6 Tipping Fees
 2.2.7 Water Supply
 2.2.8 Other Sales of Goods and Services
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The Municipal Budget Submission
Form - Revenues
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3.0 OTHER REVENUE FROM OWN SOURCES
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3.1 Other Revenue from Own Sources
 3.1.1 Assessments, Levies, Fees and Charges
 3.1.2 Rental Income
 3.1.3. Interest From Investments
 3.1.4 Interest Collected on Overdue Accounts
 3.1.5 Other Revenue From Own Sources
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The Municipal Budget Submission
Form - Revenues
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4.0 GOVERNMENT TRANSFERS
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4.1 Provincial Government Grants and Subsidies
 4.1.1 Municipal Operating Grant
 4.1.2 Provincial Portion of Debt Charges
 4.1.3. Provincial Capital Grant
 4.1.4 Other Provincial Grants and Subsidies
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The Municipal Budget Submission
Form - Revenues
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4.0 GOVERNMENT TRANSFERS
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4.2 Federal Government Grants and Subsidies
 4.2.1 Gas Tax
 4.2.2 Other Federal Grants and Subsidies
5.0 OTHER TRANSFERS
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5.1 Operating Surplus of Prior Year
5.2 Transfers from Authorized Reserves
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The Municipal Budget Submission
Form – Debt Servicing Ratio (DSR)
Municipal Annual Debt Payment
Local Revenue + MOG
= DSR (%)
Follow the instructions on Page 10 of the
Budget Submission Form to calculate your
municipality’s DSR
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Summary of the Municipal Budget
Submission Form
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From the Municipal Budget Submission
Form, transcribe the following onto the
Summary Form :
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Totals of the seven expenditure functions
Total expenditures
Totals of the five main revenue sources
Total revenues
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Monitoring the Budget
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Insure that your budget is monitored on a
monthly basis:
 To insure that your goals and objectives
will be met
 To allow council to take corrective action
on a timely basis if operational
circumstance cause you to stray from your
financial plan
Use a Budget Variance Report
 Compares actual expenditures to-date
with budgeted figures
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