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

2. 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

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

4. 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

5. 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

6. 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

7. 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?

8. 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?

9. The FY 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 May the department pay the bill based on the budgetary authorization in the FY budget ordinance?

11. 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

12. 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

13. 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?

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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*

20. 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).

21. 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.

22. *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)

23. 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:

24. 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

25. 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

26. 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*

27. 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.”