DCCA INTRODUCES NEW FINANCIAL MANAGEMENT SERIES By JAN M. GRAYSON, Director Illinois Department of Commerce and Community Affairs Credits to: Steve Gutnayer

The Illinois Department of Commerce and Community Affairs has prepared a new series of publications on Municipal Financial Management. Known as the "Municipal Finance Series," this series is designed to provide municipal officials with the fundamental tools needed to develop a comprehensive financial management system.

The documents contain both general information on how to develop an overall financial management program, and a recommended standard format for presenting pertinent financial data in a methodical manner. Each format has been developed in conformance with generally accepted accounting principles and relevant statutory requirements.

The series begins with a description of the 21 sources of municipal revenue, including such little understood revenues as the road and bridge tax and the foreign fire insurance tax. Formulas used by the State in distributing such intergovernmental revenues as the State income tax, personal property replacement tax, and motor fuel tax, are also included.

The series also addresses the departmental budget request document in which various municipal programs and services are translated into a preliminary financial plan. During the preparation of the budget request, a specific spending proposal must be developed to meet the needs of each municipal department and operation.

One document in the series discusses the operating budget and describes the importance of preparing an optional operating or "administrative" budget, in addition to the appropriation ordinance.

Another document in the series discusses the appropriation ordinance, which provides the legal authority for municipal officials to allocate funds for specific spending activities. The ordinance also establishes the municipality's legal spending limit for the fiscal year and serves as the basis for the property tax levy filed each December.

The same document also addresses such important matters as the creation of a "contingency" plan to meet unanticipated expenditures, the provision for mid-year transfers of spending authority between line items, and the very limited process for increasing appropriations after the ordinance has been adopted. A recommended format for the appropriation ordinance and required certifications is included to help ensure that statutory requirements will be satisfied.

The series also addresses the tax levy ordinance, which represents the legal request for revenues from taxes imposed upon properties lying within the municipality's corporate boundaries. Information is provided concerning the rather complex property tax cycle in Illinois (including assessment, equalization, levy, billing of property owners, and distribution of tax receipts by counties to municipalities). The document also presents a number of hypothetical property tax computations to help illustrate the relationship between property tax levy, property tax rate, assessed valuation, and property tax extension.

The series next discusses the Truth in Taxation Act, which sets forth public notice and public hearing requirements for municipalities adopting a levy in excess of 105% of the taxes extended for the previous year. Recommended public notice formats for the necessary public hearing, the adopted tax levy ordinance, and the required certification of the adopted ordinance are also included.

Another document discusses the monthly treasurer's report as required by State statute. The recommended format includes, for each fund, a statement of the beginning and ending balance, the revenues received by each fund, the disbursements made for the month, and a statement of all cash deposits from each fund, segregated by deposit account type.

The series next discusses the monthly budget report, which is designed to allow the chief executive, department heads and governing body to review the financial standing of each department and operating fund on a monthly basis.

While the preparation of the monthly budget report is a statutory requirement only for municipalities operating under the Budget Act, DCCA advises that the report should generally be prepared by municipalities which prepare an operating budget in addition to the usual appropriation ordinance.

The series also provides pertinent information relative to the annual treasurer's report required of all municipalities. The recommended format includes a listing of the following information: revenues received by source and amount; vendors receiving more than $1, 000

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by name and amount; aggregate of payments to vendors receiving less than $1, 000 each; compensation received by each employee by name and amount; and a summary statement of operations for all funds and account groups as excerpted from the Comptroller's "Annual Financial Report."

The final document in the series describes the importance of the chart of accounts, which represents the framework within which all financial information is extracted, summarized, and reported. By using a standardized chart of accounts, the municipality can methodically record and evaluate large amounts of financial data throughout the fiscal cycle for purposes of budgeting, accounting, monitoring, and reporting. The recommended chart of accounts has been specially developed for Illinois municipalities in conformance with the latest generally accepted accounting principles.

If you would like additional information concerning this series discussing municipal financial management, please contact the DCCA Office of Local Government Management Services in Springfield at 1-800-562-4688, or in Chicago at (312) 814-2318. •

June 1991 / Illinois Municipal Review / Page 31