Author: Financial Management Resource Bureau
Developing a municipal budget requires a highly organized process with clear responsibilities, stages, and milestones. Throughout the year, it’s vital that local officials monitor revenue and expenditure reports monthly. This ensures that the revenue levels claimed on the Tax Rate Recapitulation sheet are being realized, help officials spot collection trends, and provide a clear picture of cash flow.
Officials should take a strategic approach to understanding long-term revenue trends and the relative strength of each source. This insight should inform budget planning, while internal controls ensure that day-to-day collections are efficient and accurately reported.
Monitoring focuses on identifying trends in the community's primary revenue sources and flagging issues affecting long-term financial health. While the property tax levy is generally the largest revenue for most cities and towns, three core remaining revenue sources include state aid, local receipts, and other available funds.
By establishing a financial forecast, local officials can review how these revenue sources trend over time. To determine how much new revenue growth is available for additional services, expenditure projections must factor in fixed cost increases, salary adjustments and personnel contracts, and
For an example of this analysis, please see the revenue sections of our Financial Indicators Analysis and learn more about Financial Indicators here.
Analyzing Revenue Drivers
Budget preparers must examine the specific elements contributing to each revenue source. For example, tax levy growth is driven by the annual 2.5% allowable increase, "new growth," and any overrides or exclusions. Reviewing these trends within a broader economic context helps explain "peaks and valleys" in the data, leading to more accurate forecasting.
A community with predictably growing property values that relies on property taxes can generally expect revenue stability. Conversely, a community dependent on intergovernmental aid or local receipts is more exposed to economic downturns and should plan more conservatively.
Technical Reporting and Best Practices
All revenue claimed on the Tax Rate Recapitulation sheet must be tied exactly to line items in the financial software. Each source should have a unique identification code (such as organization and object codes), and departments should post receipts immediately or at frequent, regular intervals.
While tools like a treasurer’s receivable control sheet track property taxes, officials must ensure all departmental fees—such as trash stickers, building permits, water/sewer fees, parking permits, and liquor licenses—are also tracked in the system.
If department personnel are posting receipts in a timely fashion and all revenue sources are properly tracked in the financial software, the accountant can produce an accurate snapshot in the form of a revenue report. A typical monthly revenue report should show the current amount collected and its progress against what was budgeted for the fiscal year.
A standard monthly revenue report should include:
- Total Estimated Revenue: The budgeted amount for the year.
- Year-to-Date (YTD) Collected: The actual amount received.
- Percentage Collected: Progress against the total.
Generally, collections track quarterly (25% in Q1, 50% in Q2, etc.). Any deviations from this pattern should be discussed by the finance team to determine if they are seasonal or indicative of a shortfall. Since not all revenues necessarily follow a steady quarterly influx there will be deviations from this pattern, and this should be noted in discussions amongst the finance team.
Controls and Cash Management
A comprehensive report relies on accurate data. A system of internal controls and separation of duties guards against fraud and ensures efficiency. Proper practices surrounding revenue collection and cash management include:
- Monthly Reconciliations: Regular checks between the accounting office, collections, and receipting departments.
- Revenue Turnover Process: Creating verifiable records for the auditor, treasurer, and line departments.
- Frequent Deposits: Ensuring liquid cash is available for invoices.
With accurate data, the treasurer can create a cashflow forecast based on major influxes, such as tax due dates. This allows officials to align spending with high-revenue periods or arrange for short-term borrowing to cover temporary gaps.
For more information, please see the following resources:
Budgeting and Long-Range Financial Planning
Financial Indicators Videos (scroll to heading “Using Financial Indicators to Analyze Fiscal Health”)
Helpful Resources
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Editor: Dan Bertrand
Editorial Board: Tracy Callahan, Sean Cronin, Janie Dretler, Jessica Ferry, Christopher Ketchen, Paula King, Jen McAllister, Brianna Ortiz, and Tony Rassias
| Date published: | January 22, 2026 |
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