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Budget Principles
Strong budget policies help the Town determine not only what we want, but equally important, what we can afford. As conditions change, the Town must continue to be proactive in adjusting the budget or risk compromising our long-term fiscal health. Over the past several years, the Town administration has developed several budgetary and financial principles to guide the Administration, the Finance Committee, the Town Department’s and the citizens in crafting and adopting a budget that continues to preserve the financial strength of the Town. The policies currently adopted by the Town Administration can be found in Appendix A and include:
- Policy on Reserve Fund Transfers: The purpose of this policy is to identify the criteria the Finance Committee will use to rule on requests for transfers from the Reserve Fund.
- Policy on Intra-Departmental Line Item Budget Transfers: The purpose of this policy statement is to identify the criteria the Finance Committee will use to rule on requests for intra-departmental transfers between account types.
- Policy on Spending in Excess of Appropriation: The purpose of this policy is to provide a summary and interpretation of the statutory prohibition against spending in excess of appropriation.
- Policy on New Growth Taxation Revenue: This policy is established as a means to project and develop reasonable operational and capital outlay plans during both normal and unusual periods of real estate development and taxation growth.
- Policy on Fraud Prevention and Detection: The purpose of this policy is to facilitate the development of controls, which aid in the prevention and detection of fraud against the Town.
- Policy on Identity Theft Prevention: The purpose of this policy is to comply with regulations issued by the Federal Trade Commission as part of the implementation of the Fair & Accurate Credit Transaction Act of 2003.
- Policy on Investments: This policy is established to ensure the security, safety, liquidity, and yields of invested Town funds and to reduce risk in managing the Town’s short and long term investment needs.
This past year, the Town adopted additional financial policies. They are:
- Policy on Cash Management: This policy establishes sound financial controls and practices to assure all cash receipts are deposited on a timely basis, are recorded on a timely basis, that disbursements are made only after proper authorizations and safeguards; and to assure that cash is reconciled on a timely basis.
- Reserve Policy: This policy gives direction to the Town’s budget-makers and financial professionals on how the Town’s funds are to be reviewed and how much reserves should be set aside each year.
While these policies are a good start, each year we look at ways to improve upon these policies. I have directed the Finance Director and spoken with the Finance Committee to think critically about the policies we currently have and where we could adopt others. However, in general, I believe that wherever possible, a municipal budget should be created with the following short-term principles:
- Current revenues must be sufficient to support current expenditures
- Debt is not used to fund current operating expenditures
- Strong General Fund reserves are to be maintained
- Adequate contingency funds are budgeted
- Sufficient maintenance and replacement dollars are included to ensure capital facilities and equipment are properly maintained
- The budget strives to maintain the quality of services currently provided, while at the same time attempts to address any new or increased service demands
Taken as a whole, the Town’s financial management policies represent the general philosophy upon which financial decisions are made and include provisions for long-term financial planning, as well as guidelines for the use of Free Cash and Stabilization Fund reserves.
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