AGENDA #4i

MEMORANDUM

TO:                  Mayor and Town Council

FROM:            W. Calvin Horton, Town Manager

SUBJECT:      Annual Budget Amendment to Reappropriate Funds for Prior Year Encumbrances and Other Obligations

DATE:            September 12, 2005

The attached budget amendment would appropriate funds for encumbrances and previously approved grants and capital improvement projects in various funds from the 2004-05 fiscal year.

BACKGROUND AND DISCUSSION

As in past years, after fiscal year end we ask the Council to amend the current year budget to provide funding for encumbrances from the prior fiscal year.  Encumbrances are obligations incurred by issuance of purchase orders for which payments had not been made as of June 30, 2005, because materials or services had not yet been delivered.  In accord with generally accepted accounting principles, these encumbrances are not included in cost totals for 2004-05.  Funds should now be reappropriated to the 2005-06 budget for these encumbrances that will be paid during the current fiscal year.

Funding for these expenditures will be shown in special reserves of fund balance that will be created for this purpose in each fund.  The amounts will be shown in the 2004-05 Audit Report on the balance sheets for each fund under the heading "Fund Balance-Reserved for Encumbrances."  While these expenditures will increase total expenditures in each fund for fiscal 2005-06, they do not change total fund balances at June 30, 2005.

For previously authorized grants included in annual budgets, the attached amendment would appropriate $401,552 for unspent grant funds into the new grant fund as follows:

In addition to the reappropriations for encumbrances in various funds and grants, the attached amendment would also reappropriate a net total of $389,234 allocated last year for various projects in the Capital Improvements Fund that were not completed, but not encumbered, in 2004-05 as shown below.  Most of this amount, about $220,000, is allocated for uncompleted sidewalks, cemeteries and traffic signal upgrades previously approved by the Council.  We expect that these projects will be completed in 2005-06.

RECOMMENDATION

That the Council enact the attached budget ordinance amendment reappropriating unexpended obligations from the 2004-05 fiscal year.

AN ORDINANCE TO AMEND “THE ORDINANCE CONCERNING APPROPRIATIONS AND THE RAISING OF REVENUE FOR THE FISCAL YEAR BEGINNING JULY 1, 2004” (2005-09-12/O-2)

BE IT ORDAINED by the Council of the Town of Chapel Hill that the Budget Ordinance entitled “An Ordinance Concerning Appropriations and the Raising of Revenue for the Fiscal Year Beginning July 1, 2005” as duly adopted on June 27, 2005 and the same is hereby amended as follows:

This the 12th day of September, 2005.