CHANGES TO APPROPRIATIONS, ESTIMATED REVENUES, AND
RESERVES
NUMBER:
A.2.
DEPARTMENTS & DISTRICTS AFFECTED:
ALL AGENCIES, DEPARTMENTS, AND DISTRICTS GOVERNED
BY THE BOARD OF SUPERVISORS
EFFECTIVE: 12/01
_________________________________
David E. Sundstrom, Auditor-Controller
1.
POLICY
The following states the County’s policy
pursuant to State law:
Any increases to appropriations and estimated
revenues in the County budget must be submitted
to the Board of Supervisors ("Board")
and approved by a four-fifths vote of the Board.
Budget increases in one County fund/agency
resulting from receipt of unbudgeted transfers
of monies from another County fund/agency must
also be approved by a four-fifths vote of the
Board, and must be accompanied by a cash transfer
from the transferring fund/agency to the receiving
fund/agency.
Transfers of appropriations between fund/agencies
in the County General Fund must be submitted
to the Board and approved by a majority vote
of the Board. Refer to County Accounting Procedure
(CAP) No. A.1., Budget Transfers Within
a Fund/Agency.
Transfers of appropriations within a fund/agency
budget must be submitted to the Auditor-Controller
for approval, with the exception of transfers
from the salary and benefit account codes, which
must also be approved by the County Executive
Office (CEO). Refer to CAP
No. A.1., Budget Transfers Within a Fund/Agency.
Any transfers from Contingency appropriations
or from Fund Balance Reserve (Reserve) account
codes (excluding the General Reserve, balance
sheet reserves, and Reserve for Encumbrances
– see Sections 2.7.3
and 2.7.4 below) must be
submitted to the Board and approved by a four-fifths
vote of the Board.
This policy and procedure applies only to those
County funds governed by the County Budget Act,
Government Code Sections 29000 through 29144.
Funds governed by the County Budget Act include
all those Board-governed County funds listed as
being covered by appropriations control in the
annual "Appropriations Control" letter
sent out by the Auditor-Controller in April of
each year.
1.1
Purpose
To ensure that changes to the County’s
budget are made in accordance with applicable
State law and County policy.
1.2
Authority
1.2.1
State of California Government Code
Section
25252
Section 25252 allows the Board to
establish and abolish funds as necessary
for the transaction of the business
of the County, and to transfer money
from one fund to another, as the
public interest requires. This section
also allows the Board, by resolution,
to authorize the County Auditor-Controller
to perform these functions (also
reference Section 1.2.2,
Resolution No. 91-1143).
Section
29009
Section 29009 requires that in the
Proposed and Final County Budgets,
the budgetary requirements shall
equal the available financing. In
other words, the budget for each
fund must be balanced.
Section
29084
Section 29084 allows the Board to
establish in the budget an appropriation
or appropriations for contingencies,
by either one or a combination of
the following methods:
Setting aside an amount within
a fund not to exceed 15 percent
of the total appropriations
from the respective fund, exclusive
of the amount of the contingency
appropriation.
Setting aside an amount in
a separate contingency fund,
or in the County General Fund,
not to exceed 15 percent of
the total appropriations contained
in the budget, exclusive of
all appropriations for bonded
debt service and all appropriations
for contingencies. The total
appropriations on which the
15 percent limitation is based
must exclude the total appropriations
for each fund having a contingency
appropriation established under
(a).
Section
29086
Section 29086 requires that the
General Reserve, which is Balance
Sheet Account Code 9850 in the County’s
General Ledger, for any particular
fund can only be established, cancelled,
increased, or decreased at the time
of adopting the Final County Budget.
Section
29125
Section 29125 provides that the
Board may make transfers and revisions
with respect to the appropriations
specified in the resolution of adoption
of the budget, except with respect
to transfers from the appropriation
for contingencies (which are covered
by Section 29130), by a majority
action formally adopted by the Board.
Section 29125 also allows the Board
to designate a County official to
approve transfers and revisions
of appropriations within a budget
unit, defined as a fund/agency in
the County Budget (see Section 1.2.2,
Resolution No. 97-415).
Section
29130
Section 29130 requires that any
increases in appropriations resulting
from transfers from appropriations
for contingencies, amounts made
available from Reserve account codes,
and any unanticipated increases
in available financing (such as
revenues received in excess of budgeted
amounts), must be approved by a
four-fifths vote of the Board
1.2.2
Board of Supervisors’ Resolutions
Resolution
No. 97-415
Adopted pursuant to Government Code
Section 29125, Board Resolution
No. 97-415, dated September 16,
1997, delegates to the Auditor-Controller
the power and authority to make
transfers and revisions of appropriations
within a budget unit, with the exception
of transfers of appropriations from
salary and benefit account codes,
which must receive CEO approval.
A budget unit is a discrete fund/agency
code in the County Budget.
Resolution
No. 91-1143
Adopted pursuant to Government Code
Section 25252, Board Resolution
No. 91-1143, dated October 1, 1991,
authorizes the Auditor-Controller
to establish and abolish funds/agencies,
and to transfer money between funds/agencies
in circumstances where both of the
following conditions exist:
The Board has authority over
the funds; and
The Board has provided for
such transfers in the budget
that is
applicable to the period in
which the transfers are to be
made.
Resolution
No. 91-260A
Also adopted pursuant to Government
Code Section 25252, Board Resolution
No. 91-260A, dated March 19, 1991,
authorizes the Auditor-Controller
to transfer monies between various
funds, as required in the Resolution
of Issuance for each of the Mello-Roos
Districts, the Trust Indentures
for the Orange County Development
Agency, and the Trust Indenture
for each of the Certificate of Participation
bond financing issues.
1.2.3
Accounting Standards and Procedures
Manual
The State Controller’s Manual,
Accounting Standards and Procedures
for Counties, provides definitions and
specific accounting treatment for budgetary
changes.
1.3
Definitions
1.3.1
Agency
A separate budget unit within a fund
that classifies a grouping of expenditure
requirements into accounting or organizational
units that are deemed necessary or desirable
for financial and administrative control
purposes. For example, the separate
County departments within the County
General Fund, Fund No. 100, are each
budgeted in a separate agency code:
Agency 003 for the Auditor-Controller,
Agency 042 for the Health Care Agency,
Agency 060 for the Sheriff-Coroner,
etc.
1.3.2
Appropriation for Contingencies
A budgetary provision representing
a set-aside by the Board pursuant to
Government Code Section 29084 to meet
unforeseen expenditure requirements.
An Appropriation for Contingencies is
recorded in Expenditure Object Code
(Object Code) 5200.
1.3.3
Appropriations
A legal authorization granted by the
Board to make expenditures and to incur
obligations for specific purposes, as
provided for in the Board’s annual
adoption of the County Budget, and as
changed thereafter by budget transfers
and by changes to the Budget made by
the Board. An appropriation is limited
in amount and in the time it may be
expended. Appropriations in the County
Budget are controlled at the major object
of expenditure, also called "category"
of expenditure, which are:
Salaries and Employee Benefits
(Object Codes 0100-0490).
Services and Supplies (Object
Codes 0500-2890).
Other Charges (Object Codes 3000-3900).
Equipment (Object Code 4000).
Land, by Project (Object Code
4100, controlled by Organization
Code)
Buildings and Improvements, by
Project (Object Code 4200, controlled
by Organization Code)
In addition, Operating Transfers
Out (Object Codes 4800-4809) and Residual
Equity Transfers Out (Object Codes
5000-5009) are unique as they are
controlled by each Object Code rather
than the object category.
1.3.4
Available Financing
The sum of all sources of funding
that can be utilized to meet the budget
requirements for a fund for the fiscal
year. Available financing consists of:
Fund balance available (FBA),
plus
Estimated revenues, plus
Reserve cancellations or decreases,
plus
Mid-year cancellations of prior
year encumbrances.
The total budgeted available financing
must equal the total budgeted financing
requirements, which consist of appropriations
plus increases to reserves.
1.3.5
Budget Transfers
Transfers of appropriations or
estimated revenues between different
object codes or revenue source codes
within a fund/agency. Refer to CAP
No. A.1., Budget Transfers Within
a Fund/Agency.
1.3.6
Encumbrances
Reserves against appropriations
representing commitments made by the
County to unperformed (executory)
contracts (see Definition 1.3.11 below),
purchase orders, and other obligations
for receipt of goods and services.
Encumbrances represent the estimated
amount of expenditures ultimately
to result if unperformed contracts
and purchase orders in process are
completed. Encumbrances are recorded
when contracts and purchase orders
are entered into, in order to ensure
that sufficient appropriations will
be available to pay vendors and contractors
when the goods and services are actually
received. Refer to CAP No. A.3., Encumbrances,
for a detailed description of the
encumbering process.
1.3.7
Estimated Revenues
The budgeted financing sources,
exclusive of FBA and reserve cancellations,
expected to be received or accrued
during the fiscal year to finance
the budgeted appropriations.
1.3.8
Fund
A separate fiscal and accounting
entity with a self-balancing set of
accounts in which cash and other financial
resources, all related liabilities
and equities or fund balances, and
changes to those accounts, are recorded
and segregated to carry on specific
activities. Separate funds are normally
established only when required by
the State Constitution, State statute,
Federal law, court order, other applicable
laws, Federal or State regulations,
or Board policy. For example, the
County General Fund, Fund 100, is
a fund comprised of a number of subsidiary
agencies, or departments. Other examples
of separate County funds are the Road
Fund No. 115, the Orange County Library
Fund No. 120, and the Orange County
Flood Control District Fund No. 400.
1.3.9
Fund Balance Available (FBA)
The unreserved, undesignated, unencumbered
year-end carryover amount remaining
in a fund that can be utilized as
a financing source for the following
year’s budgeted appropriations.
The fiscal year-end FBA carried over
into the next budget year is generally
equal to:
FBA from the beginning
of the year
Plus:
Revenues received and accrued
during the year
Reserve cancellations
Encumbrance cancellations (current
and prior year)
Less:
Expenditures paid and accrued
during the year
Encumbrances entered into during
the year
Reserves increased or added during
the year.
1.3.10
Reserve
An amount set aside in a fund for
a specific purpose. A reserve is not
available for financing budget requirements,
and can only be made available for
appropriation by a specific action
of the Board by four-fifths vote,
pursuant to Government Code Section
29130.
1.3.11
Reserve
An amount set aside in a fund for
a specific purpose. A reserve is not
available for financing budget requirements,
and can only be made available for
appropriation by a specific action
of the Board by four-fifths vote,
pursuant to Government Code Section
29130.
1.3.12
Unperformed (Executory) Contracts
A contract that has not yet been
fully completed or performed, or a
contract, the obligation (performance)
of which relates to the future.
2.
PROCEDURE
2.1
Budget Transfers
Budget transfers of appropriations within
a fund/agency (i.e., within a distinct budget
unit or department/agency) must be submitted
to the Auditor-Controller on an Expense Budget
Transfer Form (refer to Exhibit
I). If a transfer is being made from any
of the Salaries and Employee Benefits objects
to any other expenditure category, the Expense
Budget Transfer Form must be submitted to
the CEO first for approval. Budget transfers
of estimated revenues within a fund/agency
must be submitted to the Auditor-Controller
on a Revenue Budget Transfer Form (refer to
Exhibit
II).
Transfers of appropriations between agencies
or from the Appropriation for Contingencies
cannot be processed on an Expense Budget Transfer
Form, and transfers of estimated revenues
between agencies cannot be processed on the
Revenue Budget Transfer Form.
Refer to CAP No. A.1.,
Budget Transfers Within a Fund/Agency, for
more detail on completing and submitting the
Expense Budget Transfer Form (Exhibit
I) and the Revenue Budget Transfer Form
(Exhibit
II).
2.2
Appropriation of Unanticipated Financing
2.2.1
Appropriation of Unanticipated Revenue
If during the fiscal year a particular
program or department/agency receives
revenues in excess of its budgeted revenues,
and if the department/agency desires
to expend the excess revenues, and has
no other appropriations available, then,
with CEO approval the department/agency
must either submit an Agenda Item Transmittal
(AIT) Form (refer to Exhibit
III) to the Clerk of the Board,
requesting that the Board appropriate
the unanticipated revenues, or submit
the request to the CEO for inclusion
in a Quarterly Budget Report. Unless
there is an urgent need for the additional
appropriations, these types of budget
changes should generally be included
in a CEO Quarterly Budget Report to
the Board. At a minimum, the AIT, or
request to the CEO, should contain the
following information (in addition to
the standard information required for
an AIT):
A complete description of the
unanticipated revenue source and
the particular program or project
which it is funding.
An explanation as to why the revenues
are being received in excess of
the budgeted estimate, and that
no other appropriations are available
to fund the new budgetary requirement.
Recommended Actions directing
the Auditor-Controller to increase
the estimated revenue in the appropriate
revenue source codes and to increase
the appropriations in the appropriate
object codes, in accordance with
Government Code Section 29130 with
the following conditions:
The revenue source codes and
object codes must be identified,
including: Fund-Agency-Revenue
Source and Sub-Revenue Code,
Object Code, Activity and, if
required, Organization Code.
Increases to appropriations
in the Land Account (Object
Code 4100) and the Buildings
and Improvements Account (Object
Code 4200) must also specify
the Organization Code for the
particular capital project.
The total of the recommended
estimated revenue increases
must always equal the total
of the recommended appropriations
increases.
The Recommended Actions must
include language stating that
Government Code Section 29130
requires a four-fifths vote
of the Board.
Whenever possible, actions to
appropriate unanticipated revenue
should be included in one of the
CEO’s regular Quarterly
Budget Reports to the Board.
2.2.2
Budget Changes Due to Actual Fund
Balance Available in Excess of or Less
Than Budget
The County’s Final Budget is
adopted each year at the end of June
utilizing estimated FBAs for each County
fund, because the actual FBAs will not
be known until all year-end accruals
are made and the books close in early
August. In November each year, the CEO
files the First Quarter Budget Report
with the Board, which, among other budgetary
actions, contains all budgetary changes
necessary to balance all County funds
to their FBAs. Before the First Quarter
Budget Report is filed, the CEO contacts
all departments which control funds
outside the County General Fund (excluding
Enterprise Funds and Internal Service
Funds) to determine which expenditure,
estimated revenue, or reserve account
codes will be used to balance the financing
requirements for each fund to actual
FBA and final estimated revenues.
The Recommended Actions in the First
Quarter Budget Report directing the
Auditor-Controller to increase or decrease
appropriations, estimated revenue, and/or
reserve account codes to balance to
final FBA must include the following
information:
The Object Codes, Revenue Source
and Sub-Revenue source codes, as
well as required Organization and
Activity codes, and/or Reserve account
codes with appropriate Reporting
Category code, must be identified.
Increases or decreases to appropriations
in the Land Account (Object Code
4100) and the Buildings and Improvements
Account (Object Code 4200) must
also specify the Organization Code
for the particular capital project.
The total of the recommended appropriations/estimated
revenue/reserve increases or decreases
for each fund must equal the total
increase or decrease in FBA.
A statement that the appropriation
increases and reserve increases
must be approved by a four-fifths
vote of the Board as required by
Government Code Section 29130.
2.3
Budgeted and Unbudgeted Interfund Transfers
2.3.1
Budgeted Interfund Transfers
Budgeted interfund transfers may be
processed at any time during the fiscal
year, either by journal voucher or by
a memo authorizing the Auditor-Controller
to process a journal voucher to make
the transfer. Appropriations for transfers
between funds that are included in the
County’s Final Budget are shown
in the Operating Transfers Out accounts
(Object Codes 4800-4809) and the Residual
Equity Transfers Out accounts (Object
Codes 5000-5009) in each appropriate
fund. Each fund receiving a transfer
contains an equal amount of estimated
revenue in the Operating Transfers In
accounts (Revenue Source Codes 7810-7819)
and Residual Equity Transfers In accounts
(Revenue Source Codes 7900-7909).
2.3.2
Unbudgeted Interfund Transfers
The Board must approve interfund transfers
not contained in the Budget, and any
increases to budgeted interfund transfers
in excess of the amounts contained in
the Budget. The department responsible
for the fund/agency that will be making
the unbudgeted interfund transfer must
submit an AIT to the Board, or a request
to the CEO for inclusion in a Quarterly
Budget Report, containing, in addition
to the standard AIT requirements, the
following information:
An explanation of the necessity
for the unbudgeted interfund transfer,
or transfer in excess of the budgeted
amount, including the purpose for
which the transferred funds will
be expended.
Recommended Actions to direct
the Auditor-Controller to make the
following budgetary and transfer
entries:
Decrease appropriations by
the required amount in another
specific object code of the
transferring fund, and increase
appropriations by the same amount
in the appropriate Interfund
Transfers Out or Residual Equity
Transfers Out account code in
the transferring fund. (This
action provides the necessary
appropriations to make the interfund
transfer from the transferring
fund.)
Make an Operating Transfer
or Residual Equity Transfer,
as appropriate, of cash from
the transferring fund to the
receiving fund, specifying the
Transfer Out account code to
be used in the transferring
fund and the Transfer In account
code to be used in the receiving
fund. (This action actually
move the funds, in cash, from
the transferring fund to the
receiving fund and records the
corresponding expenditure in
the transferring fund and revenue
in the receiving fund.)
Increase estimated revenues
in the appropriate Operating
Transfer In or Residual Equity
Transfer In account code in
the receiving fund, and increase
appropriations in an equal amount
in whatever object codes are
required to be increased in
the receiving fund. (This action
appropriates the unbudgeted
Transfer In revenue in the receiving
fund so that it can be expended.)
All of the account codes in
the Recommended Actions Section
of the AIT must be specified
as to Fund, Agency, Object and
Revenue Source and Sub-Revenue
Codes, plus required Organization
and Activity codes.
The appropriate 2-digit Sub-Object
and Sub-Revenue Source Codes
must be specified for the Transfer
In and Transfer Out account
codes (refer to the County of
Orange Chart of Accounts Manual
for details on coding Operating
Transfers and Residual Equity
Transfers).
The budgetary entries in the
transferring and receiving funds
must balance and the Transfers
Out must equal the Transfers
In.
A statement that the appropriations
and estimated revenue increases
must be approved by a four-fifths
vote of the Board as required by
Government Code Section 29130.
Whenever possible, unbudgeted interfund
transfer actions should be included
in one of the CEO’s regular
Quarterly Budget Reports to the Board.
2.3.3
Restrictions on Appropriation Transfers
Between Funds
Government Code Sections 29130, 29125,
and 29009 require that the transfer
of appropriations from one County fund
to another must be approved by the Board
as described in Section 2.3.2 above.
Appropriations may not be transferred
between funds without Board approval
for the following reasons:
A simple transfer of appropriations
from one fund to another fund without
the required interfund transfer
does not provide a source of revenue
or other financing to support the
additional appropriations in the
receiving fund.
A transfer of appropriations without
the required interfund cash transfer
leaves the receiving fund with no
cash to make the necessary expenditures
and results in a cash deficit in
the receiving fund.
2.4
Appropriation of Reserve Cancellations/Decreases
2.4.1
Budgeted Reserve Cancellations/Decreases
Generally, cancellations or decreases
of amounts in fund balance reserve account
codes should only be requested as part
of the budget process. The budgeted
cancellation or decrease of an amount
in a reserve account code provides additional
financing for the appropriation requirements
of the fund in which the reserve is
cancelled or decreased. The Auditor-Controller
records budgeted reserve cancellations
and decreases in the budget/accounting
system after the Board adopts the Final
Budget.
2.4.2
Unbudgeted Reserve Cancellations/Decreases
Except for the General Reserve, Balance
Sheet Account Code 9850, (see Section
2.4.3 below), in order to cancel
or decrease a fund balance reserve mid-year,
an AIT must be filed with the Board
containing the following information
(in addition to the standard AIT requirements):
A description of the reserve account
code being cancelled or decreased,
and the purpose for which the reserve
was originally established.
An explanation of the necessity
for making the reserve available
for appropriation mid-year.
A description of the purpose for
which the cancelled or decreased
reserves will be used.
Recommended Actions to direct
the Auditor-Controller to decrease
or cancel the reserve account code
by a specific amount, to increase
FBA by the same amount, and to appropriate
the increased financing in specific
object codes, in accordance with
Government Code Section 29130, with
the following conditions:
The reserve account codes
to be cancelled or decreased
must be identified by Fund-Agency-Balance
Sheet Account-Reporting Category,
and the increased appropriations
must be identified by Fund-Agency-Object
Code, plus required Organization
and Activity Codes.
The total of the increased
appropriations in the object
codes must equal the total of
the reserve cancellations and
decreases.
A statement that the appropriation
increases must be approved by a
four-fifths vote of the Board as
required by Government Code Section
29130.
Whenever possible, unbudgeted reserve
cancellation/decrease actions should
be included in one of the CEO’s
regular Quarterly Budget Reports to
the Board.
2.4.3
General Reserve Cancellations/Decreases
As provided in Government Code Section
29086, the General Reserve of each County
fund, Balance Sheet Account Code 9850,
can only be cancelled or decreased at
the time of the adoption of the Final
County Budget (except in the case of
a legally declared emergency). Therefore,
no mid-year changes are allowed to the
General Reserve Account code of any
County fund.
2.5
Transfers of Appropriations Between General
Fund Agencies
2.5.1
Prior Approval by CEO
Requests for transfers of appropriations
between agencies in the General Fund
must be approved by the CEO before submission
to the Board for approval. Transfers
of appropriations between General Fund
agencies will be approved by the CEO
only if there are no unanticipated revenues
or other sources of financing or other
available appropriations in the requesting
department’s/agency’s budget
to fund the required appropriations.
2.5.2
Approval by Board
Once approval is obtained from the
CEO, the department/agency must prepare
an AIT for submittal to the Board, containing,
in addition to the standard AIT requirements,
the following:
A detailed description of the
reason for the budget overrun being
addressed by the transfer of appropriations
from another agency.
An explanation that there are
no unanticipated sources of financing
to fund the required appropriation,
and that there are no other available
appropriations in the applicable
agency to fund the budget overrun.
An explanation of why appropriations
are available in the transferring
agency, why the appropriations can
be made available to the receiving
agency, and why the transfer will
not adversely impact the transferring
agency’s budget.
Recommended Actions directing
the Auditor-Controller to decrease
appropriations in the agency which
is transferring appropriations,
and to increase appropriations in
the agency which is receiving the
appropriations with the following
conditions:
The object codes must be identified
by Fund-Agency-Object Code,
plus required Organization and
Activity codes.
The total of the amounts of
the increased appropriations
must equal the total of the
amounts of the decreased appropriations.
Whenever possible, transfers
of appropriations between General
Fund agencies should be included
in one of the CEO’s regular
Quarterly Budget Reports to the
Board.
Appropriations cannot be transferred
from an agency within the General
Fund to another County fund, unless
approved by the Board as an unbudgeted
interfund transfer as described
in Section 2.3.2
above.
2.5.3
Transfers of Estimated Revenues Between
General Fund Agencies
If for some reason there is a need
to transfer budgeted estimated revenue
amounts between agencies within the
General Fund, for example, because responsibility
for a particular revenue source is moved
from one County agency to another due
to a change in State law or regulation,
the same procedures as specified in
Sections 2.5.1
and 2.5.2 above
should be followed. The specific Revenue
Source and Sub-Revenue Source codings
and amounts must be detailed, and the
decreases in the transferring agency’s
estimated revenues must equal the increases
in the transferee agency’s estimated
revenues. An explanation as to the reason
for the estimated revenue transfer must
be included on the AIT. Any associated
appropriation transfers must also be
included with the information specified
in Section 2.5.2.
Whenever possible, transfers of estimated
revenues between General Fund agencies
should be included in one of the CEO’s
regular Quarterly Budget Reports to
the Board.
Estimated revenues cannot be transferred
from an agency within the General Fund
to another County fund, unless approved
by the Board as part of an unbudgeted
interfund transfer as described in Section
2.3.2 above.
