- Operating Budget Practices: Each department and division prepares its own budget for review by the City Manager. The budget is approved in the form of an appropriations ordinance after the Mayor and Council has conducted advertised public hearings. The Operating Budget is adopted at the Fund level. During the year, it is the responsibility of the City Manager to administer the budget. The legal control, which the budget ordinance establishes over spending, is set up under Generally Accepted Accounting Principles. The City Manager has the authority to transfer budgeted amounts between departments within any Fund, but changes in the total appropriations level for any given Fund can only be enacted by the Mayor and Council through an amendment to the current appropriations ordinance. The City will strive to adopt an annual General Fund budget in which expenditures, net of pay-as-you-go capital project contributions, do not exceed projected revenues. As a management policy, budgetary control is maintained in the General, Enterprise, and the Special Revenue Funds at the program level by the encumbrance of estimated purchase amounts prior to the release of purchase orders to vendors. Purchase orders which result in overruns of balances are not processed until sufficient appropriations are made available through approved intrafund transfers. A six-year projection of revenues and expenditures for the General, Enterprise, and Special Revenue Funds is prepared each fiscal year to provide strategic perspective to each annual budget process.
- Basis of Budgeting: Budgets for General, Special Revenue, Debt Service, and Enterprise Funds are adopted on a basis consistent with Generally Accepted Accounting Principles. Accordingly, all Governmental Fund budgets are presented on the modified accrual basis; the Enterprise Fund budgets are presented on the full accrual basis. The Governmental Funds are the General Fund, the Special Revenue Funds, the Capital Projects Fund, and the Debt Service Fund. The Enterprise Funds are the Water Fund, the Sewer Fund, the Refuse Fund, the Parking Fund, the Storm Water Management Fund, and the RedGate Golf Course Fund. See the Fund Summaries section for detailed information on the Fund descriptions.
- Capital Improvements Program Practices: Along with the operating budget, the City Manager submits a Capital Improvements Program (CIP) to the Mayor and Council. This document provides for improvements to the City's public facilities for the ensuing fiscal year and five years thereafter. The first year of the plan establishes a capital budget for the new fiscal year. The remaining five years serve as a guide for use in determining probable future debt issuance needs and operating cost impacts. The Capital Budget is adopted at the Fund level. CIP expenditures are accounted for in the Capital Projects Fund or the appropriate Enterprise Funds and are funded by a variety of sources. The City strives to maintain a high reliance on "pay-as-you-go" financing for its capital improvements in order to maintain debt within prudent limits. The City's most recent bond ratings received with general obligations issued in 1998 are "Aa1" issued by Moody's Investors Service and a Standard and Poor's rating of "AA+"; both are considered enviable ratings.
- All cash is combined into one pooled operating account to facilitate effective management of the City's resources.
- The City is authorized to invest in any and all types of investments except where specifically prohibited by Maryland statutes. Permissible investments are federal obligations, including repurchase agreements supported by federal obligations.
- The basis of accounting within Governmental Fund types used by the City of Rockville is modified accrual as well as the "current resource measurement focus." Under this method of accounting, revenue is recorded when susceptible to accrual, such as when measurable and available for the funding of current appropriations. All Enterprise Funds follow the accrual basis of accounting, as well as the "capital maintenance measurement focus." Under this method of accounting, revenues are recognized when earned, as billed and unbilled, and expenditures are recorded when incurred.
- The City places continued emphasis on maintenance of an accounting system which provides strong internal budgetary and accounting controls designed to provide reasonable, but not absolute, assurances regarding both the safe-guarding of assets against loss from unauthorized use or disposition and the reliability of financial records for preparing financial statements and reports, such as the budget and the Comprehensive Annual Financial Report, as well as the maintenance of accountability of assets.
- An independent audit of the City of Rockville is performed annually.
- The City of Rockville issues a Comprehensive Annual Financial Report in accordance with Generally Accepted Accounting Principles outlined by the Governmental Accounting Standards Board.
In June 1989, the Mayor and Council adopted a set of fiscal policies regarding the projection of revenues and expenditures, and capital financing and debt management. As part of the FY 1999 budget process, the Mayor and Council reviewed these policies. The revised policies, listed below, were adopted by the Mayor and Council in June 1998. Revenue and Expenditure Policies - The City will strive to adopt an annual General Fund budget in which expenditures, net of pay-as-you-go capital project contributions, do not exceed projected revenues.
- A five-year projection of revenues and expend-itures for the General, Enterprise, and Debt Service Funds is prepared each fiscal year to provide strategic perspective to each annual budget process.
- On an annual basis the City will set fees and rates for the Enterprise Funds at levels which fully cover total direct and indirect operating costs, and all capital outlay and debt service, except where the City is not the sole provider of the service and competitive rates must be taken into consideration. In these instances, fees and rates must at least cover all direct and indirect operating expenses.
Capital Financing and Debt Management Policies - Long-term borrowing will not be used to finance current operations or normal maintenance.
- All debt issued, including by lease-purchase methods, will be repaid within a period not to exceed the expected useful lives of the improvements financed by the debt.
- The City will not issue tax or revenue anticipation notes.
- The City will strive to maintain a high reliance on pay-as-you-go financing for its capital improvements.
- The City will maintain its net tax-supported debt at a level not to exceed 2% of the assessed valuation of taxable property within the City.
- The City will strive to ensure that its net tax-supported debt per capita does not exceed $700. The City will strive to ensure that the combined total of its direct net bonded debt and its attributed share of overlapping debt issued by Montgomery County does not exceed $2,000 per capita.
- The City will strive to ensure that its net tax-supported debt per capita as a percentage of federal adjusted gross income does not exceed two and one-half percent.
- The City will maintain its annual net tax-supported debt service costs at a level less than 15% of the combined expenditure budgets (net of interfund transfers) for the General, Special Revenue, and Debt Service Funds.
- The City will maintain unreserved undesignated General Fund fund balance at a level not less than 15% of annual General Fund revenue. The reduction of the fund balance from its current required level of 25% will take place in annual increments of five percent, as provided for in the City's Strategic Plan. The reduction of fund balance dollars will be used for pay-as-you-go financing for capital improvements or for other one-time capital items. The purpose of this unreserved balance is to alleviate significant unanticipated budget shortfalls and to ensure the orderly provisions of services to residents. Use of these funds below the required level must be approved by specific action of the Mayor and Council.
- To the extent that unreserved General Fund fund balance exceeds the target, the City will draw upon the fund balance to provide pay-as-you-go financing for capital projects or for other one-time capital items.
- Annually, a six-year CIP plan will be developed analyzing all anticipated capital expenditures by year and identifying associated funding sources. The plan will also contain projections of how the City will perform over the six-year period in relation to the fiscal policies that refer to debt ratios.
- The first year of the six-year Capital Improvements Program (CIP) and any unspent funds from prior years will be appropriated as part of the annual budget process. The CIP will be appropriated by fund. At least semi-annually, the City Manager will notify the Council of any transfers between projects within a fund.
- The City will maintain a Capital Projects Monitoring Committee composed of City staff which will meet not less than once every six months to review the progress on all outstanding projects as well as to revise spending projections.
- If new project appropriation needs are identified at an interim period during the fiscal year, at the Fund level, the appropriations ordinance will be utilized to provide formal budgetary authority for the increase. Any significant impact resulting from the change on the overall CIP and on the debt ratios will be indicated at that time.
- Each year a closing resolution will be submitted to the Mayor and Council to obtain formal authorization to close completed capital projects; the unexpended appropriations for these projects will be returned to the Fund from which the appropriations were made.
|
