The Role of Elected Officials in the Budget Process

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The Local Government Budgeting Toolbox

By Maryann Holloway, CPA, RMA, PSA, CMFO, Director

Key Takeaways

Elected officials play a central role in local government budgeting, requiring oversight of priorities, resource allocation and financial health through informed review and governance practices.
Effective budget oversight relies on understanding regulations, budget structure and financial reports, enabling officials to identify risks, variances and compliance issues without deep accounting expertise.
Monitoring key indicators including revenue shortfalls, cash flow declines and procurement anomalies supports transparency, accountability and stronger financial management in public sector operations.

For elected officials, few responsibilities carry more weight than approving the annual budget. It shapes priorities, directs resources and influences the financial health of the organization. Effective oversight doesn’t require deep financial expertise; it requires asking the right questions, understanding key indicators and recognizing potential risks.

This article begins a series, The Local Government Budgeting Toolbox, designed to provide practical guidance to local government officials seeking to strengthen their budgeting practices. Each installment will focus on tools to help officials make more informed financial decisions.

Oversight Starts with Leadership

Congratulations on your election to the governing body. One of the first major processes that you will encounter is the annual budget, and you play an important role in that process.

In many local governments, elected officials are assigned responsibility for one or more departments; however, this does not replace the broader responsibility of overseeing the entire budget and financial condition of the local government.

Effective oversight begins with understanding three key areas.

Understanding the Rules that Govern the Budget

Do you understand the state and local regulations and policies that apply to the budget process?

Elected officials should seek resources that help build their knowledge. These may include:

Your local government’s website
State government websites and guidance
Internal government policy manuals
Webinars designed for newly elected officials

Your PKF O’Connor Davies client service team can also be a valuable resource when questions arise.

Understanding the Budget You Will Adopt

Do you understand the budget that you are voting to adopt?

Before the governing body adopts the budget, planning meetings are typically held where the finance department presents the proposed budget. These planning meetings with the governing body occur after the finance department has met with various departments to discuss their needs. Preparation for these governing body planning meetings should include:

Reviewing the materials provided
Reading the prior year’s budget
Requesting additional reports that may help in your review of the budget.

Your role is not to reach a substantial level of financial expertise, but you should understand the structure of the budget, major assumptions and significant changes from prior years. Preparing questions from your review is part of effective oversight.

Understanding Monthly Financial Reports and the Applicable Statutory Requirements

Do you understand the financial reports presented at the monthly meetings?

The finance department will typically provide reports for your review and acceptance at each meeting. Preparation should include reviewing these reports so that you understand what you are approving, including understanding your state’s statutory requirements that govern the financial operations of your governmental organization.

Your goal is not to audit each line item; however, developing the ability to recognize patterns, inconsistencies and warning signs is an important oversight skill. Some indicators worth your consideration include:

Timeliness and Clarity of Reports

Reports provided months late, or that contain information that the finance department cannot easily explain, should prompt questions. Request explanations in clear, plain language.

Large unexplained variances
If spending or revenues vary significantly from projections, ask what caused the variance and whether it is expected to continue. Possible causes may include poor forecasting, weak oversight, operational changes or unauthorized spending.

Unusual month-to-month spikes or drops
Determine whether these changes reflect normal seasonal patterns or something unusual, such as operational changes or misclassified expenditures.

Revenue consistently below projections
If revenue regularly falls short of expectations, is the fault in the forecasting or are there delays in collections?

One-time revenue funding ongoing expenses
Grants and other temporary funding sources can help address short-term revenue gaps; however, when these funds support ongoing programs, a structural budget gap can emerge when the funding disappears. Be aware of these in your understanding of the budget.

Overreliance on vague budget categories
Appropriations labeled miscellaneous, other, general services or professional fees may require additional explanation. Asking for a breakdown helps improve transparency.

Frequent journal entries or reclassifications
Repeated adjustments may be routine, but they may hide overruns or present a false appearance of budget targets being met.

Declining cash balances
Problems in the cash flow can lead to the late payment of bills. Understanding the reasons for the decline and the finance department’s plan for improvement is important.

Procurement red flags
Review vendor lists carefully. If a vendor appears frequently, particularly multiple times in the same month, it may be worth asking whether purchases are being broken into smaller amounts to bypass procurement laws.

Payroll and staffing concerns
Watch for overtime that consistently exceeds expectations or payments for stipends, bonuses or reimbursements that were not appropriated in the budget or approved by the governing body.

The Oversight Mindset

Effective financial oversight does not require elected officials to become accountants. It involves curiosity, preparation and attention to patterns.

By focusing on the trends presented in the reports, requesting clear explanations, comparing year-to-date results against both the budget and the prior year and gaining an understanding of the laws and policies over the budget, elected officials can fulfill their responsibilities in the budget process.

Stay Tuned

Upcoming insights in the Local Government Budgeting Toolbox series will explore key areas, such as financial leadership, revenue planning, capital strategy, performance and accountability and long-term financial sustainability.

For those located in New Jersey, see our recent seminar recap on preparing for the 2026 municipal budget cycle, including key insights and access to the full replay.