What is the Local Government Annual Budget Process?

A local government’s annual (or in some cases biennial) budget indicates a community’s civic priorities, projected revenue and costs, and plan for the future—what revenue will pay for which departmental services and for whom those services exist. Development of the annual budget in the public sector is more than just number crunching; the budget reflects a strategic plan and its conception should consider the needs and priorities of all stakeholders, from government administrators and employees to citizens and business leaders. The development, approval, and implementation of a public agency’s budget are all critical steps of the budget process.

Steps for the Local Government Annual Budget Process

In the US, local governments include counties, municipalities (including cities, villages, and boroughs), townships, special districts (e.g., water and sewage authorities, parks and recreation), and school districts. Most local governments have multiple funds, or budgets, that keep designations for public money organized and transparent. Each major department of the local government has a line-item budget that tracks every dollar spent for personnel, operating, and equipment costs (broken down further into more detail by program). The budget process is highly complex and, while the specific departments, services, and budget calendars may differ from state to state, the annual budget process generally includes the following stages.

Budget Development

The first step of the budget preparation process is identifying budget objectives and operating budget requests. The chief executive or local government CEO (e.g., city manager, town manager, county manager) drafts a recommended budget through their budget office. Department directors solicit input from program managers within their department. These budget requests are submitted to the budget office for review. The chief executive reviews the budget requests (typically submitted by mid-March if the fiscal year begins July 1) with the finance director. Meetings are held with the department directors and budget staff to go over requests. Once the chief executive drafts a proposed budget, it goes to the legislative body (e.g. city council, county council, or county board) for approval. This process can take up to six months.

Budget Approval, Adoption & Implementation

When the proposed budget goes to the legislative body for review, depending on the size of the group, there may be committees that oversee various portions of the budget. Each member of the legislative body reviews the budget in detail (during what are known as work sessions) and hosts a public budget hearing and information session for public input. After community input and review, the local legislative will adopt the budget. Typically, this takes place one or two months before the fiscal year begins.

After the budget is implemented, the budget office’s duties include monitoring expenditures and ensuring that funds are spent as intended. At the end of the fiscal year, the legislative body will approve a final budget reconciliation, among other year-end accounting modifications to the budget. An independent auditor will review the Comprehensive Annual Financial Report (CAFR) reviewed by an independent auditor and determine compliance.

Citizen Engagement is Key

It is important that community members provide input throughout the budget planning process. Soliciting their input in the local government’s choices further strengthens trust and buy-in. Ways to engage residents in the process include:

  • Open houses
  • Citizen academies
  • Focused discussion sessions
  • Needs surveys

The annual budget directly affects where citizens live and work, and should be influenced by their needs and concerns.

Communicating the Budget

After administrative preparation, legislative approval, and financial implementation, the annual budget is ready to be communicated to the public. Local leaders should ensure all stakeholders have access to the same information, in multiple formats (both print and electronic). Examples of communications methods include:

  • Formal budget books
  • Press releases
  • Public presentations
  • Summary sheets
  • Social media

Communicating your budget meaningfully with stakeholders is key for transparency. Make the proposed budget viewable to the public to show relevant policy decisions and trade-offs made during the budget process.

What is the Timeline?

The annual budget process for local government typically begins six months into the fiscal year. It usually takes local public sector organizations between six and nine months from initial planning to final approval.

Software to Improve the Budgeting Process

User-friendly technology can drastically reduce the time spent on the budgeting process by automating calculations, highlighting trends and exceptions, centralizing communications into collaborative environments, and increasing access to budget data on demand. In short, all stakeholders in the budgeting process can benefit from budgeting software.

Building the budget in a spreadsheet can lead to many back-and-forth emails and confusion over who made what changes and why. Reconciling Excel spreadsheets takes time spent away from strategic priorities. If department-level modifications repeatedly change overall budget requests, you can avoid tedious manual updates by adopting cloud-based software, such as OpenGov, that keeps everything up-to-date.

OpenGov streamlines the budgeting process for local and state government by tying dollars to initiatives. All stakeholders have the access they need to stay updated on spending, performance, and progress with an interactive interface that shows the relationship between budgeting and planning.

For more information on how budgeting software can make public sector budgets even more effective, download these resources: The CFO’s Guide to Modern ERP Software and The Excel Lover’s Guide to Enhancing Budget.

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