Objective of Budget Review
The objective of the review was to provide an independent evaluation of the City of Albany’s (City’s) adopted budgets for fiscal years 2025 and 2026.
Background
The City’s fiscal year 2025 and 2026 adopted budgets total $221,709,865 and $228,408,909, respectively. Our review addressed the following question related to the City’s fiscal year adopted budgets:
- Were the significant revenues and expenditures in the City’s fiscal year 2025 and 2026 adopted budgets reasonable?
Overall, we determined that significant revenue and expenditure estimates in the City’s fiscal year 2025 and 2026 adopted budgets were not reasonable. City officials did not prepare budgets using realistic estimates based on historical trends, actual results and the most current and accurate information available. In addition, City officials relied on nonrecurring revenues to fund recurring expenditures.
Key Findings
- Our review identified significant revenue estimates that were not based on reasonable amounts the City would receive. In some cases, estimates were not supported by historical trends, actual results or the most current information available. In particular, sales tax, traffic violation fines, payments in lieu of taxes (PILOTs), federal and State aid and interfund transfers were overestimated. These practices increase the risk that actual revenues will fall short of budget estimates and contribute to operating deficits.
- Our review identified significant appropriations that were not based on reasonable estimates. In particular, appropriations for police overtime and retiree health insurance were underestimated. In addition, the City provided limited funding for contingencies and did not adequately consider the potential financial impact of unsettled collective bargaining agreements. These practices increase the risk that actual expenditures will exceed budgeted appropriations and contribute to operating deficits.
- Our review identified that City officials relied on nonrecurring funding to fund recurring personal service costs. Nonrecurring revenues, such as temporary aid and fund balance are generally more appropriate for one-time or nonrecurring expenditures. Using nonrecurring revenues to fund recurring expenditures can create future budget gaps when those revenues are no longer available and the recurring expenditures continue.
Key Recommendations
City officials and the Common Council should:
- Develop a plan to achieve and maintain structurally balanced budgets by identifying sustainable funding sources for recurring expenditures and discontinuing the practice of relying on nonrecurring revenues to fund recurring expenditures.
- Develop annual budgets using realistic estimates based on historical trends, actual results, current information and other relevant supporting documentation and consider known or reasonably anticipated costs.
- Closely monitor actual revenues and expenditures against budget estimates throughout the fiscal year and make timely budget modifications when necessary to address projected shortfalls and help maintain a balanced budget.
- Maintain documentation supporting significant revenue and appropriation estimates, including the assumptions, calculations and other information used to develop these estimates.