MASTERCLASS. PRESUPUESTOS LOCALES. Haciendas Locales |deadet #derechoadministrativo #oposiciones

Understanding Local Entity Budgets

Introduction to Local Entity Budgets

• The speaker, Encarnación Troyano, introduces the topic of local entity budgets regulated by the Law of Local Finances.

• General budgets represent a systematic expression of obligations and rights that local entities can recognize during a fiscal year.

Key Concepts Defined

• Local Entities: Defined as municipalities, provinces, and islands; also includes regions like comarcas and metropolitan areas.

• Autonomous Organizations: Public entities governed by administrative law for specific activities within local entity competencies.

• Commercial Societies: Manage public services under private law but must adhere to budgetary regulations.

Structure and Components of Budgets

• The budgetary exercise aligns with the calendar year (January 1 - December 31), including recognized rights and obligations.

• The general budget consists of expenditure states, income states, and execution bases. Expenditure states detail necessary resources (credit), while income states outline expected revenue.

Execution Bases and Additional Documents

• Execution bases set management criteria without altering existing economic legislation or administrative procedures.

• Additional documents include investment plans for four years, annual action programs from commercial societies, debt forecasts, and consolidation statements.

Budget Classification

• The Ministry of Finance establishes budget structures based on economic nature and objectives.

Economic Classification of Local Government Budgets

Overview of Budget Classifications

• The economic classification of local government budgets includes two main categories: current expenditures and capital expenditures. Current expenditures cover operational costs, interest payments, and ongoing transfers, while capital expenditures involve real investments, capital transfers, and changes in financial assets and liabilities.

Current Expenditures Explained

• Current expenditures are essential for covering the day-to-day operations of services, such as personnel salaries and financial expenses. These are necessary for maintaining service functionality.

Capital Investments

• Real investments refer to financial resources used by local entities to acquire long-term assets like buildings or machinery aimed at generating future benefits. This is crucial for sustainable development.

• Capital transfers consist of funds that municipalities allocate to other entities to support investment projects. This collaboration enhances community infrastructure through shared financial contributions.

Financial Assets and Liabilities

• Changes in financial assets include credits designated for acquiring securities, loans granted, advances made, and established deposits. Understanding these elements is vital for assessing a municipality's fiscal health.

• Financial liabilities encompass credits related to debt amortization from loans or advances as well as the return of deposits held by third parties. Proper management of these liabilities is critical for budget stability.

Budget Formation Process

• The local entity's president is responsible for forming the budget, which must be accompanied by various documents including an explanatory memorandum detailing significant modifications compared to previous budgets.

• Autonomous organizations under local entities must submit their budgets by September 15 each year. Similarly, majority-owned commercial companies need to provide forecasts on expenses and revenues along with annual action plans before this deadline.

Approval Procedures

• Once the general budget is prepared by the president, it must be submitted to the full corporation for approval by October 15. Amendments cannot be approved separately; they must be considered collectively.

• After approval, the budget will be publicly displayed for 15 days during which stakeholders can review it and file complaints if necessary. This transparency ensures accountability within local governance.

Handling Complaints

• Complaints regarding the budget can only address procedural issues related to its formulation or insufficient funding relative to obligations outlined in legal provisions. Stakeholders include residents directly affected or legally constituted entities like unions or associations.

Final Approval Timeline

• The definitive approval of the general budget must occur before December 31st of the preceding year in order for it to take effect in the upcoming fiscal period. It will then be published officially across relevant platforms.

Implications of Non-Adoption

• If a new budget has not been enacted at the start of a fiscal year, the previous year's budget automatically extends until a new one is approved. This continuity helps maintain governmental functions without interruption.

Legal Recourse Against Budget Decisions

• A direct administrative appeal can challenge final budget approvals; however, such actions do not suspend implementation unless specifically ordered by judicial authorities after reviewing potential impacts on budgeting levels.

Modifications Post-Budget Approval

• Budgets are not static documents; they may require adjustments throughout an economic cycle due to emerging circumstances necessitating changes in allocations or priorities as permitted under local finance laws.

This structured summary provides insights into how local government budgets are classified and managed while highlighting key processes involved in their formation and modification over time.

Understanding Budget Modifications

Types of Credits: Extraordinary and Supplementary

• The discussion begins with the concepts of extraordinary credits and supplementary credits, both referring to modifications in the budget for specific expenditures.

• Extraordinary credits are allocated when there is no existing budget for a necessary expense that was not anticipated during the initial budget preparation.

• In contrast, supplementary credits are used when additional funds are needed for an expense already included in the budget but deemed insufficient.

• A formal process is required to initiate these credit modifications, including prior reports and approvals from the governing body.

• The sources of funding for these modifications can include liquid cash reserves, increased revenues, or reductions from other uncommitted budget items.

Procedures and Requirements for Credit Modifications

• Initiation of credit modification requires a proposal accompanied by a justification memo detailing the necessity and specifics of the changes.

• It must be demonstrated that delaying expenditure until future budgets is not feasible due to urgency or lack of available funds in current allocations.

• The proposal should clarify how new funding will be sourced, ensuring it does not negatively impact ongoing services or commitments.

• If extraordinary credits address public calamities, they can be executed immediately while pending claims are resolved within eight days.

Expandable Credits and Transfer Mechanisms

• Expandable credits allow increases under specific legal circumstances; they must remain exceptional and limited to defined situations.

• Credit transfers involve reallocating funds within the existing budget without altering its total amount; this can only occur under certain restrictions.

• Transfers cannot affect expandable or extraordinary credits granted during the fiscal year nor reduce previously supplemented amounts unless related to personnel costs or uncommitted funds from closed budgets.

Generating New Credits

• New credit generation occurs when non-tax revenue increases lead to an expanded spending budget; this includes firm commitments from individuals or organizations supporting local government expenses.

Understanding Local Entity Financial Management

Revenue Generation for Local Entities

• Local entities can generate revenue through various means, including the collection of determined expenses and the sale of assets.

• Additional income sources include service provision, loan repayments (including interest), and refunds from erroneous payments made by third parties.

Requirements for Credit Generation

• For credit generation to occur, certain conditions must be met, such as formal recognition of firm commitments or contributions from individuals or legal entities.

• The availability of credits is contingent upon actual revenue collection; this applies to both service provisions and loan reimbursements.

Handling Budget Surpluses

• Unused budget surpluses can be carried over to the next fiscal year if they originate from extraordinary credits or authorized transfers in the last quarter.

• The law allows for incorporation of these surpluses into future budgets but restricts their application to specific expenditures that justified their initial authorization.

Credit Incorporation Procedures

• The process for incorporating credits must adhere to budget execution regulations; any incorporated surplus can only be used within the designated budgetary period.

• Credits may be canceled if they do not adversely affect services, allowing local entities flexibility in managing their financial resources.

Execution and Liquidation of Budgets

• The final segment discusses how budgets are executed and liquidated, distinguishing between income and expenditure budgets.

• Expenditure execution involves a series of administrative actions aimed at fulfilling public spending as outlined in the budget.

Phases of Expenditure Execution

• Key phases include:

• Authorization of expenditure,

• Commitment or obligation recognition,

• Payment processing.

Each phase requires approval from a competent authority.

Authorization Process Overview

• Authorization marks the agreement on a specific expenditure amount for a defined purpose, initiating the spending process without external obligations yet.

• Preliminary steps before authorization involve creating a financial proposal detailing operational needs and characteristics related to the planned expenditure.

Certification Requirements

• A certificate confirming available funds is necessary before authorizing expenditures exceeding allocated credits; this ensures responsible financial management.

Recognition of Extrajudicial Credit Procedures

Understanding Extrajudicial Credit Recognition

• The extrajudicial recognition of credit is a procedure that allows expenses incurred in previous fiscal years to be charged to the current budget, provided there is no budget allocation for special credit operations or debt concessions.

Steps in the Budgeting Process

• When a municipality decides to renovate the flooring of its council chamber, it first approves the conditions for acquiring necessary materials. This step requires prior fiscal oversight by an auditor to ensure budgetary provisions exist.

• The auditor must confirm that sufficient funds are allocated for the renovation as specified in the approved conditions. If confirmed, a certificate of available credit is issued, effectively blocking those funds for use.

Commitment and Authorization Phases

• The commitment phase involves agreeing on specific expenditures after legal procedures are followed. Initially estimated at €80,000, actual costs may vary (e.g., €60,000), but €80,000 will be blocked initially based on estimates.

• During this phase, the local entity finalizes how much will actually be spent. The auditor checks that committed expenses do not exceed authorized amounts; if set at €80,000, it cannot later exceed this amount.

Contract Awarding and Execution

• Once all checks are complete and contracts can be awarded to companies offering favorable terms (e.g., a company bidding €70,000 instead of €80,000), this marks a significant transition from internal municipal actions to external contractual obligations.

• At this stage, it's crucial to note that administrative actions now have implications for third parties—specifically the contractor awarded the renovation contract.

Recognition and Payment Processing

• The recognition phase involves declaring an enforceable credit against the entity due to previously authorized and committed expenses. Documentation must verify service completion before recognizing any obligation.

• Only after verifying that work aligns with initial agreements can payment obligations be recognized. Local entities check invoices against approved budgets before proceeding with payments.

Finalizing Payments

• The payment ordering phase entails issuing payment orders based on recognized obligations. This responsibility typically lies with the president of the local entity but can be delegated or managed through specialized units.

• Payment orders detail gross and net amounts owed along with creditor identification and relevant budget allocations. Orders lacking accompanying documentation are classified as "to justify," requiring subsequent validation within three months.

Cash Advances and Budget Execution

Overview of Cash Advances

• The total amount of cash advances cannot exceed the limit set by the entity's plenary. Uninvested funds at the end of the fiscal year held by authorized cashiers will be used in the new fiscal year for their intended purposes.

• Recipients of these funds must justify their use throughout the budgetary exercise, with a requirement to render accounts at least once in December each year.

Payment Orders and Justification

• Local entities can establish regulations for issuing payment orders based on prior intervention reports, especially concerning catastrophic events or public safety needs.

• These regulations must specify how payment orders are issued, fund management, accounting controls, applicable budget concepts, and justification processes.

Revenue Budget Execution

• The execution of revenue budgets involves three phases: commitment to income, recognition of rights, and collection/revenue.

• According to Article 45 of Royal Decree 500/1990, a firm commitment to income is when any entity agrees to finance specific expenses either fully or partially.

Recognition and Collection Phases

• Recognition occurs when a local entity can legally demand a certain amount due to an administrative act; this may happen before or simultaneously with collection.

• Collection is defined as the actual entry (material or virtual) of funds into municipal treasury.

Budget Liquidation Process

• The budget liquidation state provides insights into approved budgets and their execution over the year. It serves as documentation for local plenaries and control bodies regarding financial management.

• The expenditure liquidation state details how much was spent during the year while indicating who spent it and on what.

Finalization of Budgets

• Sufficient credit must exist in budgets for execution; definitive credits are necessary for proper functioning.

• Income liquidation states detail initial forecasts versus actual collections within that fiscal period.

Reporting Obligations

• Each year's budget will be liquidated concerning revenue collection and obligation payments by December 31st. Local treasuries manage pending incomes and payments which form part of treasury remnant calculations.

Budgetary Procedures and Deficit Management

Initial Steps for Budget Adjustment

• The corporation must initiate a reduction in expenses during its first session, aimed at addressing the deficit incurred.

• If expense reductions are not feasible, the corporation may resort to credit operations equivalent to the deficit amount.

• Failure to implement any of these measures will result in the budget for the fiscal year being approved with an initial surplus that is no less than the stated deficit.

Reporting and Compliance Requirements

• Once the budget approval is completed, it must be reported to the plenary session in their next meeting.