The League and others have submitted questions to DOR staff in recent weeks seeking clarification regarding the department's new approach to the ERP budget worksheet. I've pasted below several FAQs that DOR emailed to us late yesterday.
Question 1. With regard specifically to the debt service fund, is it DOR's interpretation that the LEVY is to be included on line 1 and then subtracted on line 2? Or are the total actual principle and interest to be included on line 1, but then what happens on line 2? Is the total P & I then subtracted regardless of what is levied? Our debt service fund currently has fund balance due to TID debt advances which were repaid. Our P & I expenses exceed our levy as we are applying this balance. I'm trying to figure out how this interpretation would affect us.
Answer: On line 1, all general fund expenditures would be reported, including transfers out to other funds (i.e., debt service fund). On line 2, all long-term principal and interest payments from the general fund and any transfers to the debt service fund would also be reported. If the municipality has a debt service fund which is composed of unused project costs, interest earned, and other revenues (ex., donations), and the property tax levy makes up the difference to fund debt service payments, only the levy amount used to fund the debt service payments would be included on line 2.
Question 2. I have questions about whether unspent funds budgeted in one fiscal period that are carried over to the next fiscal period by resolution have to be included in the ERP calculation.
Answer: No. ERP compares budgeted expenses to budgeted expenses. So, having a year where the amount of actual expenses is less than the original budgeted amounts does not make the next year's allowable increase any higher.
Another scenario would be if the City experienced a bad winter and the snow removal expenditures significantly exceeded the budget, would the use of general fund reserves (fund balance) have to be included in the ERP calculation.
Answer: No. ERP compares budgeted expenses to budgeted expenses. Likely, they used a contingency fund to finance the actual cost of snow removal or ended up with a lower fund balance at the end of the year than they wanted to.
Question 4. Periodically the City will receive miscellaneous gifts and grants from foundations, individuals, etc. for a specified purpose (i.e. donation for the sponsorship of a Library concert series) and the accounting practice has been, in order to avoid an expenditure budget deficit, to appropriate the revenue over to the appropriate expenditure line item. Do these expenditures have to be included in the ERP calculation?
Answer: Technically, a municipality cannot spend more than the amount budgeted for any specific item. In result, some municipalities amend budgets during the year to be able to "legally" spend the money. Municipal budgets should be amended using the steps outlined in statutes. If the budget amendment impacts the general fund expenditures, it should be reported on the ERP worksheet.
Just to be clear, the only part that I need to include would be the amount that is levied for, correct? For example, total expenses for paramedics are $1.2 million of which $500,000 is levied for (ambulance bill revenue, etc. offset $700,000) so I would include the $500,000 not the total $1.2 million.
Answer: All general fund expenditures should be included. So, if there are $1.2 million of paramedic expenditures in the general fund, the total amount would be included on line 1.
However, if there is a special fund for paramedics (created in compliance with GAAP), which is funded by $700,000 of ambulance bill revenue and $500,000 of property tax levy, the expenditures funded by the $500,000 of property tax levy would be reported on line 1.
If you have questions about ERP and DOR's new interpretation, contact: