The City of Big Boot approved its budget for calendar year 2019. In that budget, the annual appropriation for salaries in the General Fund is $6,000,000. At the end of June 2019, the General Fund reported salary expenditures well over $3,000,000. Assuming that the City incurs salaries ratably throughout the year and does not hire extra personnel, for example, for summer services, what actions could the City take in light of actual salaries expenditures at June 30?

Question

Quizplus · Accepted Answer

Comparing budgeted amounts to actual for salaries tells us that the City has spent $250,000 more than budgeted at mid-year for General Fund salaries. The City can correct the problem by placing a freeze on open positions with annual salaries of $500,000. Seeking out new revenue sources likely would not be effective for correcting the excess spending by year end. City managers cannot assume they will be permitted to use unassigned fund balance at December 31, 2018. This would require the City's legislature to pass a budget revision.

The City of Big Boot Approved Its Budget for Calendar