Budgeting and Financial Management for Human Services Kara A. Millonzi, Professor of Public Law and Government UNC-CH School of Government Winter 2018

Budget Adoption/(Oversight) Structure Governing Board Budget Adoption/(Oversight) Fiscal Mgmt County Health Department County Board of Health County Commissioners County Finance Officer County Social Services Department Social Services Board County Commissioners (recommended by SS board) Consolidated Human Services Agency Consolidated Human Services Board County Commissioners (recommended by CHS board) District Health Department District Board District Finance Officer Public Health Authority Authority Board Authority Finance Officer Multi-county Area Authority for MH/DD/SA Public Hospital Authority

Local Government Budget & Fiscal Control Act Budgeting Cash Management & Investments Obligating & Disbursing Public Funds Accounting & Financial Reporting Auditing

Annual Budget Ordinance Single Fiscal Year Operating and Capital Expenses Appropriations by Department, Function, or Project Revenues by Major Source Grant Ordinance Life of the Grant/Project Projects Funded at Least in Part with Grant $ Only Project Ordinance Life of the Project Capital Projects Only Capital Expenses

Vending Machine Rule “[A]ll moneys received and expended by a local government or public authority should be included in the budget ordinance [or project ordinance]. . . No local government or public authority may expend any moneys, regardless of their source, except in accordance with a budget ordinance or project ordinance….” Exceptions: Moneys accounted for intragovernmental service fund Moneys accounted for in a trust or agency fund

General Fund Budget by Department Budget by Function Social Services dept. $1m Health dept. $1.2m Parks & Rec dept. $2m Inspections dept. $.5m Fire dept. $3m Library dept. $4m Social Services Salaries/benefits $650,000 Supplies $ 25,000 Equipment $200,000 Utilities $ 5,000 Special projects $120,000 $1,000,000 Budget by Project New Social Services Software System Personnel $150,000 Contractor $80,000 Supplies $25,000 Equipment $72,000 Lease Agreement $44,000 Contingency $25,000 Total $396,000

Area Authority for MH/DD/SA receives an unexpected $500 grant to support its work with those in the community suffering with substance abuse issues. The authority’s director deposits the money in the area authority’s bank account and directs the finance officer to expend the funds for a program targeted to teens with substance abuse issues. Lawful?

A grateful senior citizen makes a $150 cash contribution to the health department. The citizen requests that the funds be used to purchase a new coffee machine for the department. The request is well documented. The department’s accountant orders the coffee machine. The expenditure is well documented, with appropriate receipts. It is reported to the governing board at their next meeting. Lawful?

The FY 2017-18 budget ordinance includes an appropriation authorizing the health department to spend $100,000 on supplies. As of June 2018, the department has $12,000 remaining in this appropriation. It orders goods in late June to spend most of the remaining money. The goods do not arrive until July and payment is due in August 2018. May the department pay the bill based on the budgetary authorization in the FY 2017-18 budget ordinance?

Local Government Budget & Fiscal Control Act Budgeting Cash Management & Investments Obligating & Disbursing Public Funds Accounting & Financial Reporting Auditing Receiving cash/property Ordering goods Entering into services contracts Payroll

County/ Municipal/ Public Authority Governing Board Finance Officer Deputy Finance Officer (Appointed by Governing Board) County / Municipal Manager Sets fiscal policy Adopts / amends budget Selects banks Sets investment guidelines Receives all donations Oversees all financial management Manages bank accounts Supervises deposits (audits decentralized $ collection) Performs preaudit process Performs disbursement process Manages investments Sets policies related to collecting, obligating, and disbursing $ and payroll processing May perform preaudit process May perform disbursement process Executes budget May amend budget within a fund, with explicit board approval Supervises finance officer

Years ago, a public health director opened a bank account at a local bank for the department. From time to time, department staff deposits funds—from donations, fundraisers, and small grants— into the account. The director keeps detailed records of the account and approves expenditures from the account to cover department expenses. Checks on the account are always co-signed by another department employee for internal control purposes. Lawful?

Don’t Be Sheriff James Sheriff received $2,665 check made out to “Washington County Detention” Sheriff deposited $2,000 in Sheriff’s Office bank account and used rest for Sheriff’s Office petty cash Money used for Sheriff Office purposes Jury found Sheriff guilty of EMBEZZLEMENT

Used by department personnel? The social services department receives a donation of 25 bank-issued gift cards, each for $100. What do you do? Used by department personnel? Given away? Treated as revenue Treated as personal property Governing board must amend budget to recognize revenue and authorize its expenditure Governing board must accept donation (or designate someone else to accept) Follow internal control procedures; keep cards in safe, under direction of finance officer Follow internal control procedures; keep cards in safe

G.S. 159-28 Budget Ordinance / Project Ordinance Determine costs of goods or services Preaudit process Order goods / execute contracts Goods arrive / services performed Disbursement process Pay for goods / services

Ensure expenditures follow budget Budget Ordinance / Project Ordinance Determine costs of goods or services Preaudit process Order goods / execute contracts Goods arrive / services performed Disbursement process Pay for goods / services Ensure expenditures follow budget Alert vendors/contractors that there is budgetary authority for expenditure

Order goods / execute contracts Budget Ordinance/ Project Ordinance Determine costs of goods or services Preaudit process Order goods / execute contracts Goods arrive / services performed Disbursement process Pay for goods / services

Preaudit Process? Before an obligation is incurred, finance officer (or deputy finance officer) must: Check to see if there is an appropriation in budget ordinance or project ordinance for amount due this fiscal year Check to see if sufficient funds remain in the appropriation to cover amount that will come due this fiscal year Affix signed preaudit certificate to any “writing” that evidences contract/agreement/order*

Process triggered when: A local unit enters into contract or agreement (or places an order) for goods or services that are accounted for in the budget resolution; AND the local unit is obligated to pay money by the terms of the contract/agreement/order; AND the local unit anticipates paying at least some of the money in the current fiscal year (fiscal year in which the contract/agreement/order entered into).

Preaudit Required? Public health director order $500 in supplies in September (which is below the unit’s PO threshold). Social services director issues PO to order program supplies in January. Order received and payment due in February. Public health director hire staff member in August. Clerk to area authority board uses area authority credit card to pay for snacks for board meeting in February. Social services director enters into multi-year service contract in May. First payment due in July.

*Exemptions from Step 3 (Certificate Requirement) “Payroll expenditures, including all benefits for employees of the [local unit].” Electronic transactions (charge card, credit card, debit card, gas card, procurement card)

Step 1: Step 2: Step 3: Step 4: Step 5: No Yes Encumber obligation “This instrument has been preaudited in the manner required by the School Budget and Fiscal Control Act.” /s/ Finance Officer Step 5:

If No Preaudit….. Contract/agreement/order is VOID and cannot be enforced Any individual or officer who enters into contract/agreement /order or causes funds to be disbursed without following statutory processes may be held personally liable for amounts committed or disbursed

Disbursement process Budget Resolution Determine costs of goods or services Preaudit process Order goods / execute contracts Goods arrive / services performed Disbursement process Pay for goods / services

Before Disbursed, Finance Officer (or Deputy) must: Check to make sure amount is payable Check to see if there is (still) an appropriation in budget ordinance or project ordinance for amount due Check to see if sufficient funds remain in the appropriation to cover amount due Affix signed disbursement certificate to check, draft or electronic payment*

Disbursement Certificate Local Unit 1000 BlueSky Drive Anywhere, NC 27000 “This disbursement has been approved as required by the Local Government Budget and Fiscal Control Act.”