AGENDA #2
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TO: |
Roger L. Stancil, Town Manager |
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FROM: |
Kay Johnson, Finance Director |
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SUBJECT: |
Current Year General Fund Expenditure Estimates |
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DATE: |
May 23, 2007 |
The purpose of this Budget Working Paper is to update the Council on estimates for lapsed salaries and other sources of unspent current year budgets.
The Manager’s Recommended Budget includes estimates of current year spending. These estimates are included in the Recommended Budget every year for use in forecasting and planning, but are not formally entered into the Town’s accounting system or adopted as revised budgets.
The estimates are prepared by departments for budget discussions that begin in January and are based on six months of actual data for the year. Based on January estimates, departments intended to return $1,252,000 at year end. Because of the anticipated excess of costs over revenues for 2007-08 budget, the Finance Department requested in March that departments return an additional $557,000. Based on more recent estimates, the total expected to be returned is $1,520,000. The current projection assumes that departments have correctly estimated emergency needs between the time of the estimate and the end of the current year. For a summary of estimates by department, see Attachment 1.
The largest budgeted but unspent amount comes as a result of lapsed salary savings. The estimates this year for lapsed salaries total $835,000.
Lapsed salaries arise in several situations:
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New positions – |
New personnel are not hired at the rate or at the time assumed in the budget. |
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Vacancies – |
Positions are purposely held open to meet financial goals. |
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Resignations/ Retirements – |
Unexpected retirements and resignations are the most common reason for lapsed salaries. Departments do budget for retirements when they are known in advance. |
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Overtime – |
Each year the Town budgets for overtime for special events and severe weather conditions. In 2006-07, we did not need the funds for salaries or supplies set aside for severe weather conditions. In addition, we anticipated that celebrations related to campus athletics events would be greater than they actually were. |
The largest non-personnel source of unspent revenues this year is fuel. Fuel prices dropped significantly in the winter months, and we did not need to use the fuel reserves that the Council established for the 2006-07 budget. In addition to the lowered cost of fuel in the winter months, there were significant fuel savings related to the delay in the planned move to the new Town Operations Center. We were not able to move in January, as planned in preparing the 2006-07 budget. The savings in addition to fuel include liability insurance, utilities and supplies. In order to achieve the higher level of savings requested by the Finance Department, departments delayed planned purchases and provision of services.
Other major savings were for the landfill fees that were not incurred because we had no severe weather events, debt service costs that were budgeted for the General Fund, but that will now be able to be paid by a housing capital grant, and overall good experience in vehicle repair needs this year.
Cost savings from budget are anticipated to be greater this year than in recent years because of increased staff turnover, the mild fall and winter weather, fewer special events than anticipated, high fuel estimates and the delayed move to the Town Operations Center. Additional fund balance derived from these savings could reasonably be used to help reduce the effects of increased debt service in 2009-10 and 2010-11. We do not expect similar savings in 2007-08.