How does the municipal governing body manage surplus funds from the previous budget?

Managing surplus funds from the previous budget is an integral part of municipal financial planning. Surplus funds refer to the excess revenues over expenditures, and one common practice is for the municipal governing body to lapse these surplus funds into the fund balance. This mechanism helps in stabilizing the budget for future periods.

When surplus funds are lapsed into the fund balance, they become part of the municipality's reserves. This allows for greater flexibility in future budgeting and can provide a financial cushion for unexpected expenses or revenue shortfalls. It enhances the overall financial health of the municipality by maintaining a higher fund balance, which can be an important factor in credit ratings and borrowing capacity.

Using surplus funds in this manner is viewed as a prudent fiscal practice because it prepares the municipality for future financial challenges, ensuring sustainability in service delivery and infrastructure maintenance. It also signals to taxpayers and other stakeholders that the municipality is managing its finances responsibly.