Institutional Federal Compliance Report 2021

130 • Required Supplementary Information _______________________________________________________________________

NOTES TO BUDGETARY BASIS REPORTING (unaudited)

Budgetary Basis Reporting The State Constitution requires the Governor to submit annually to the Legislature an Executive Budget, which contains plans for all expenditures and dis- bursements for the ensuing fiscal year, as well as all monies and revenues estimated to be available. Bills containing all recommended appropriations or reap- propriations and any proposed legislation necessary to provide monies and revenues sufficient to meet such proposed expenditures and disbursements accom- pany the Executive Budget. Reappropriations are commonly used for federally funded programs and capital projects, where the funding amount is intended to support activities that may span several fiscal years. Budgets are prepared for all funds. Included in the proposed appropriation bills is a provision for spend- ing authority for unanticipated revenues or unforeseen emergencies in accordance with statutory requirements. The Executive Budget also includes a cash basis finan- cial plan that must be in balance, i.e., disbursements must not exceed available receipts. The Legislature enacts appropriation bills and revenue measures containing those parts of the Exec- utive Budget it has approved or modified. The Legis- lature may also enact supplemental appropriation or special appropriation bills after it completes action on the Executive Budget. Further, when the Legislature convenes in January, it may enact deficiency appro- priations to meet actual or anticipated obligations not foreseen when the annual budget and any supplemental budgets were enacted and for which the costs would exceed available spending authorizations. The Legis- lature might add to a previously authorized appropri- ation anticipated to be inadequate, or provide a new appropriation to finance an existing or anticipated lia- bility for which no appropriation exists. A deficiency appropriation usually applies to the fiscal year during which it is made. Pursuant to State law, once the Leg- islature has completed action on the appropriation and revenue bills and they are approved by the Gov- ernor, the cash basis and the GAAP basis financial plans must be revised by the Governor to reflect the impact resulting from changes in appropriations and revenue bills. The cash basis financial plan, which serves as the basis for the administration of the State’s finances during the fiscal year, provides a summary of projected receipts, disbursements and fiscal year-end balances. Such plans are updated quarterly throughout the fiscal

year by the Governor, and include a comparison of the actual year-to-date results with the latest revised plans, providing an explanation of any major devia- tions and any significant changes to the financial plans. Projected disbursements are based on agency staffing levels, program caseloads, levels of service needs, for- mulas contained in State and federal law, inflation and other factors. All projections account for the timing of payments, since not all the amounts appro- priated in the Enacted Budget are disbursed in the same fiscal year. The Statewide Financial System includes controls over expenditures to ensure that the maximum spend- ing authority is not exceeded during the life of the appropriation. Expenditures are controlled at the major account level within each program or project of each State agency in accordance with the underlying appropriation purpose. Encumbrances are not con- sidered a disbursement in the financial plan or an expenditure and expense in the basic financial state- ments. Generally, appropriations are available for lia- bilities incurred during the fiscal year. Following the end of the fiscal year, a “lapse period” is provided to liquidate prior year liabilities. Unless reappropriated, most appropriations for State operations cease on June 30th and local assistance, debt service, capital projects and federal fund appropriations cease on September 15th following the end of the fiscal year. Disbursements made during the lapse period from prior year appropriations are included, together with disbursements from new year appropriations, in the subsequent fiscal year’s financial plan. Many appro- priations enacted are not intended to be used, although they are required by law. These types of appropriations will generally cause total appropriation authorizations to exceed cash basis financial plan disbursement amounts. Actual disbursements for certain spending categories may exceed financial plan estimates (as reported in the Budgetary Basis—Financial Plan and Actual—Combined Schedule of Cash Receipts and Disbursements) but do not exceed total enacted appro- priations authority. Most capital projects, federal funds and many State operations appropriations are reap- propriated each year by the Legislature and therefore the life of such appropriations may be many years. If the budget is not enacted by April 1st, the legislature enacts special emergency appropriations to continue government functions, as was last done in April 2010.