Institutional Federal Compliance Report 2021

136 • 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 disbursements for the ensuing fiscal year, as well as all monies and revenues estimated to be available. Bills containing all recommended appropriations or reappropriations and any proposed legislation necessary to provide monies and revenues sufficient to meet such proposed expenditures and disbursements accompany 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 spending authority for unanticipated revenues or unforeseen emergencies in accordance with statutory requirements. The Execu- tive Budget also includes a cash basis financial 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 Execu- tive Budget it has approved or modified. The Legisla- ture 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 sup- plemental budgets were enacted and for which the costs would exceed available spending authorizations. The Legislature might add to a previously authorized appropriation anticipated to be inadequate, or provide a new appropriation to finance an existing or antici- pated liability 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 Legislature has completed action on the appropriation and revenue bills and they are approved by the Governor, the cash basis and the GAAP basis financial plans must be revised by the Governor to reflect the impact resulting from changes in appro- priations 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 deviations and any significant changes to the financial plans. Projected disbursements are based on agency staffing levels, program caseloads, levels of service needs, formulas contained in State and federal law, inflation and other factors. All pro- jections account for the timing of payments, since not all the amounts appropriated 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.