Budget Process (continued)

Budgetary Adoption (continued)

The Capital Budget incorporates short-term improvements mandated by the State-issued Collection System Permitwithlong-termneedsidentifiedandprioritizedbythe20-yearWastewaterSystemMasterPlantohandle wet-weather flow conditions, to improve the performance at the wastewater treatment plant, and to prepare the system to handle expected future wastewater flows. Engineering staff prepare annual estimates of expendituresoverthelifeofprojectsinaproposedtimetableforconstructionina10-yearCapitalImprovement Plan (CIP).

Meanwhile, Administrative staff prepares an update of the District’s ten-year financial forecast based on estimated revenues, expenditures, and debt issuance, which is integrated with the 10-year CIP, along with projections for fleetandwastewater plantreplacementfunds.

The effect of current expenditures on cash flows and debt coverage ratios are verified for adequacy, and any indicated adjustments to expenditures are made to sustain services within the desired user rate levels, which are setannually in connection with budgetadoption.

Budget Administration

The Budget Resolution is adopted at the fund level and allows for the carry forward of encumbered contracts and purchase orders from the previous fiscal year. This budget book illustrates the initial allocations among departments and between line items for authorized expenditures not including carryover amounts. Authority for modifying theseallocations varies.

The General Manager has the authority to transfer amounts between departments within a fund without limitation. Division Directors may transfer amounts between line items and sections within their departments withoutlimitation.

Theentireallocationisavailableatthebeginningoftheyear,andtheunexpendedbalancewillremainavailable during the year, unless otherwise limited by the General Manager and Director of Finance due to cash flow considerations.

Budget Process (continued)

Budget Administration (continued)

Several strategies are used to monitor expenditures throughout the year. The General Manager and Division Directors receive monthly expenditure reports, which compare actual to budgeted amounts forthe period and for theyear to date.

In addition,theprocurementsoftwareis designed to requireapprovalfrom theGeneral Manager orDirectorof Finance if the line item has insufficient funds to cover the requisition or if the expenditure is over a certain amount. Purchasing staff make periodic reviews of outstanding inventory levels, requisitions, and purchase orders to updateavailableline-itembalances.

Budget Amendment

BudgetAmendmentsrequireapprovalbytheBoardofDirectorsandassucharesubmittedthroughtheagenda process forconsideration ataregularly scheduled Board meeting.