Title 19 Public Finance | Chapter 4 |Subchapter 6
SUBCHAPTER 6 - ANNUAL OPERATIONS PLANS OF STATE AGENCIES
19-4-601. Responsibility generally.
Except as limited by appropriations and funding by the General Assembly and other provisions of law, state agencies shall have the authority and responsibility to administer their programs as authorized by the General Assembly and shall be responsible for their proper management.
History. Acts 1973, No. 876, § 9; A.S.A. 1947, § 13-335.
A funds center (appropriation) is the legal authority provided by the Arkansas General Assembly to disburse funds for programs and services administered by business areas (individual state agencies, boards or commissions). A funds center code identifies the programs and services to be provided plus the authorization to carry out the programs and/or services. ACA 19-4-520 through 19-4-525 provides a detailed analysis of the various classifications of funds centers (appropriations) and the restrictions regarding their usage. ACA 19-4-701 defines the fiscal periods of the State and the time period of a funds center.
The funds center cycle is summarized as follows:
The business area (state agency) prepares the initial biennial budget request in the State’s Budget System. P1-19-4-601 Business Area/ Cost Center Ranges & Functional Areas Table.
The Department of Finance and Administration-Office of Budget (DFA-OB) and the Office of Personnel Management-Classification and Compensation Division (OPM-CCD) review the request and assist the business area in its preparation.
Budget requests are presented to the Governor or Governor-Elect for review and recommendations.
Budget requests with the executive recommendations are presented to the Legislative Council/Joint Budget Committee for recommendation or referral to a sub-committee.
Legislative recommendations are entered into the State’s Budget System by the DFA-OB and OPM-CCD and transmitted to the Bureau of Legislative Research to draft appropriation bills.
The appropriation bill is presented to the General Assembly and can be amended while under consideration.
The Joint Budget Committee reviews all appropriation bills as introduced and takes one of the following actions: pass, hold or refer to committee.
If the appropriation bill is passed by the General Assembly, it goes to the Governor for approval or veto. If approved, the bill becomes law. The Governor’s Office sends signed bills to the Secretary of State where Act numbers are assigned.
If either the General Assembly or the Governor rejects the appropriation bill, it may be amended and resubmitted or a new bill may be drafted if the deadline for filing appropriation bills has not passed.
In the interim (between sessions of the General Assembly), the Chief Fiscal Officer of the State has the authority to establish and/or increase certain funds center accounts as outlined in the various appropriation acts. All such establishments and increases of funds centers must meet with guidelines established by both the Legislature and the Chief Fiscal Officer of the State.
ACA§ 19-4-608 establishes fiscal controls to prevent deficit spending each fiscal year. Each business area shall prepare an annual operations plan which contains proposed expenditures and anticipated resources on a periodic basis for the ensuing year. Agencies which receive general revenue must prepare a quarterly operations plan. Other agencies may prepare an operations plan for any given period (monthly, quarterly, or annually). Prior to the beginning of each fiscal year, the Chief Fiscal Officer of the State provides an estimate of the general revenue funding available for each business area. When the "General Revenue Forecast" is revised, the Chief Fiscal Officer of the State will announce the new forecast and provide, by letter, notification to all business areas which receive General Revenue. The actual notification for the business areas will be prepared and distributed by the DFA-OB. A change in the "General Revenue Forecast" could be an increase or a decrease. The business areas will then provide by letter, worksheet or e-mail the adjustments for their annual operations plan using the Budget Quad coding structure (fund, funds center, commitment item, functional area) to the agency’s assigned Budget Analyst in the DFA-OB. Business areas also must include new or revised Certifications of Income to inform the DFA-OB of the amount of revenue that is expected to be collected by the business area. The available funds center will be adjusted to the level of expected revenue.
See the Annual Operations Plan, "R1-19-4-608," for more detailed information.
Funds Management – Budget Structure (Quad)
The Funds Management module of AASIS is used to ensure compliance with the fiscal laws of the State. There are four elements of master data in the Funds Management module:
Funds Center – represents the purpose authorized in the appropriation act and establishes budget control. Funds centers may be further divided into sub-funds centers. The appropriation acts will authorize non-spendable commitment items for some business areas. Special non-spendable commitment items are broken down to sub-funds center/sub-appropriation. A sub-funds center/sub-appropriation is established to transfer budget from the special commitment item to a spendable commitment item. The sub-funds center is used to ensure that the amounts transferred to the spendable commitment items are adequately tracked and are not commingled with the amounts originally appropriated in the spendable commitment items. The funds center is hierarchical in structure.
The funds center account code is currently a three-digit alpha/numeric, numeric or numeric/alpha code, which identifies a business area’s authority to disburse funds. An alpha/numeric code reflects a cash/bank funds center/appropriation (A01). Numeric and numeric/alpha codes reflect a funds center/appropriation in which the funds are deposited in the State Treasury (001, 1AA). A sub-funds center is the same numeric or numeric/alpha code with a fourth alpha character (001M).
Commitment Item – represents the funds center/appropriation breakdown by line-item detail. This level is where the funds center is classified in accordance with the expenditure breakdown in ACA 19-4-521 through 19-4-525. Expenditure commitment items begin with the number 5. The first three digits of the commitment item usually correlate to the first three digits of the general ledger account. The last two numbers of the commitment item reflect the existing classification such as salaries or operating expenses. The commitment item is a seven-digit numeric code. The commitment item is determined by the general ledger account. Transaction S_KI4_38000036 provides a list of all general ledger accounts along with the assigned commitment items.
PLEASE NOTE: Go to P2-19-4-601 for the "Commitment Items Table."
Fund – represents cash/bank and Treasury funds as outlined in the Funds Group located at R1-19-5-101. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations.
Functional Area – groups business areas by activity. Each business area is assigned to a functional area. These functional areas are:
ADMN Financial/Administrative/Internal Services
CCOL Community Colleges
COMM Commerce Promotion/Regulation
EDUC Public Education
HHS Health/Human Services
PROF Professional/Service Boards/Commissions
RETR Government Retirement Systems
SFTY Public Safety/Corrections
TCOL Technical Colleges
VTCH Vocational Technical Institutes
For CAFR reporting purposes, a slightly different set of functional areas are used. These functional areas are:
Health and human services
Law, justice and public safety
Recreation and resources development
Labor, commerce and regulatory
See P1-19-4-601 for a list of business areas along with functional area and cost center range.
Expenditures cannot exceed the budget at the fund/funds center/commitment item/functional area level.
Commitment Items Transfers and Increases
Amounts appropriated in each commitment item are established by the Legislature and can be transferred in the following circumstances: (1) special language in the body of the appropriation act allows a transfer, (2) federal grants are received and certain conditions exist that allow a transfer or (3) budget classification transfers (BCT). Increases are possible under the following circumstances: (1) additional cash is certified, (2) pay plan adjustments are required or (3) federal grants result in an increase of available funds.
There are times during the fiscal year when it may be necessary to request adjustments to existing funds centers or establish new funds centers for various reasons. The most common situation of this type would be a transfer of appropriation from a non-spendable commitment item to a spendable commitment item. These transfers are tracked through a sub-funds center if there is more than one commitment item to the appropriation. All commitment items, which are not classified in ACA 19-4-521 through 19-4-524, are considered special and shall be used only for the specific purposes for which such commitment items are made.
Blocked or Inactive Funds Centers
Part or all of the entire budget quad may be blocked or held inactive for one of two reasons:
Lack of funding
Business area discretion
The block will be released as funds become available or, if voluntarily blocked, when the business area requests the release.
Cost objects (WBS Elements, Internal Orders and Cost Centers) are used in the controlling module of AASIS to monitor actual transactions against planned revenues and expenditures in detail using cost elements (general ledger accounts). A cost element (general ledger account) cannot be assigned to more than one commitment item (referred to as character code in the previous accounting system). However, many general ledger accounts can be assigned to a single commitment item. With the general ledger account being assigned to the commitment item master record, a system user does not have to decide which account should be used with which commitment item during a transaction posting. See P1-19-4-601 Business Area/ Cost Center Ranges & Functional Areas Table.
The following rules apply to cost objects:
Each fund/funds center must be represented by at least one unique cost object.
Many cost objects can be assigned to one fund/funds center. For example, cost centers 123000, 124000 and 125000 can all be assigned to fund HSC1111 and funds center 1AA.
A cost object cannot be assigned to more than one fund/funds center. So as noted in the example above, cost centers 123000, 124000 and 125000 can only be assigned to fund HSC1111 and funds center 1AA.
WBS (Work Breakdown Structure) elements are used to account for revenues and expenditures for grants received by the State without the creation of additional funds or cost centers. The system also makes it possible to record expenditures on construction projects in accordance with their legislative approved budget if appropriated and to capitalize the related costs for reporting in conformity with generally accepted accounting principles. These may be either statistical or non-statistical in nature. If a WBS element is statistical (informational only, does not have a funds management assignment), budget is reduced based upon the cost center associated with the transaction. A non-statistical WBS element (has a funds management assignment) reduces budget based upon the fund and the funds center assigned to the WBS element. Generally, WBS elements used to account for grant activity are statistical, and non-statistical WBS elements are used with construction projects. See P2-19-4-524 for additional information on WBS Elements.
Internal orders are used for unique situations to an agency such as recording training costs for individual classes or for accumulating data for cost allocation purposes. All internal orders are statistical.
Cost centers record revenues and expenditures associated with the agency’s management structure. Cost centers cannot be statistical. The fund/funds center is derived automatically when a user enters a cost center. The use of an Internal Order or Statistical WBS Element will not override the cost center. In the event a non-statistical WBS element is used in conjunction with a cost center, the WBS element fund/funds center assignment will override the cost center fund/funds center assignment.
Budget Transfers and Adjustments
Changes in operating conditions may result in the need to adjust the original budget. Appropriation transfers are used to move budget between funds centers, commitment items, funds and functional area. Maintaining the budget includes executing and controlling the budget to prevent deficit spending. Generally, appropriation transfers require special language authorization usually contained in the agency’s appropriation act. This special language will either give the Chief Fiscal Officer of the State or the Arkansas Legislative Council authority to review a transfer. If the Arkansas Legislative Council is identified as the authorizing agent in the act, the Performance and Evaluation and Expenditure Review Committee (PEER) must review the transfer when a legislative session is not in progress. In the event that a legislative session is in progress, the Joint Budget Committee must review the transfer.
Certain transfers can be approved by the Chief Fiscal Officer of the State. These types of transfers consist of contingency transfers for Institutions of Higher Education and Budget Classification Transfers as specified in ACA 19-4-522 which meet the 5% or $2,500 rule (These are transfers that do not exceed 5% of the affected maintenance and operation commitment items, up to a maximum of $2,500. The $2,500 limit is cumulative by appropriation per fiscal year). For these types of transfers, budget changes are entered and parked by agency personnel using transaction FR69 (Park Budget Transfer). Agencies shall then contact the DFA-OB with the parked document numbers. The assigned Budget Analyst will review and, if approved, transmit the document number to the Department of Finance and Administration-Office of Accounting (DFA-OA) Funds/Appropriation Manager for final approval and posting at which point the budget is updated.
Transfers that do not meet the 5% or $2,500 rule require PEER review. Transfers that must be reviewed by the Performance and Evaluation and Expenditure Review Committee (PEER) are parked by the DFA-OB Budget Analyst and posted by the DFA-OA-Funds/Appropriation Manager after review by the Legislative Performance Evaluation and Expenditure Review Committee (PEER).
AASIS provides three methods to set aside appropriation for future expenses:
1. Funds Reservation – A commitment of funds can be made for parts of the budget through funds reservation without knowing the exact costs and expenses. The reservation can be generic in nature and cover multiple months within a fiscal year. An example would be estimating that one year’s utility expense would be $100,000. The original reservation is reduced by posting any of the following type of documents and referencing the funds reservation in the document: purchase requisitions, purchase orders, vendor invoices, down payment requests and down payments. Transaction FMX1 creates a "funds reservation."
2. Pre-commitment – A pre-commitment is not tied to specific documents and is not automatically released when payments are made. An example would be when a vendor is known, but the costs may be estimated until the actual bill is received. The pre-commitment either commits budget or is referenced to a reservation and reduces the reservation. Transaction FMY1 creates a "funds pre-commitment."
3. Commitment - The funds commitment is the most detailed document in the budget reservation chain. For example, a purchase order is specific as to amount, items purchased and vendor. The legal commitment (purchase order or contractual agreement) plays a role in addition to the application of funds. The commitment can either be directly assigned to the budget or reference and reduce the pre-commitment or reduce the reservation. Transaction FMZ1 creates a "funds commitment."
19-4-602. Compliance and approval required.
(a) No state agency may increase the salaries of its employees, employ additional employees, expend moneys, or incur any obligations except in accordance with law and with a properly approved annual operations plan which includes a quarterly fiscal program.
(b) Appropriations subject to the provisions of this subchapter shall not be available for expenditures or encumbrance until the state agency has complied with the provisions of this subchapter.
History. Acts 1973, No. 876, § 9; A.S.A. 1947, § 13-335
19-4-603. Exemptions generally.
Appropriations for retirement benefits, refunds, and social security requirements of the teacher and public employees’ retirement systems shall be excluded from the provisions of this subchapter.
History. Acts 1973, No. 876, § 11; A.S.A. 1947, § 13-337.
19-4-604. State-supported institutions of higher education.
(a) At least thirty (30) days prior to the commencing of each fiscal year, the Chief Fiscal Officer of the State shall make studies for the purpose of estimating the anticipated amounts of general revenues to be available for distributions under the provisions of the Revenue Stabilization Law, § 19-5-101 et seq., for the fiscal year. The Chief Fiscal Officer of the State shall compute the estimated amounts of general revenues to be available for allocation to the respective State Treasury accounts in accordance with their percentage distributions of general revenues under the provisions of the Revenue Stabilization Law, § 19-5-101 et seq.
(b) The Chief Fiscal Officer of the State shall certify to each of the respective state-supported institutions of higher learning, at least thirty (30) days prior to the commencement of each fiscal year, the estimated amounts of general revenues to be available for distribution to the State Treasury account for their respective institutions. He shall include in each certification the quarterly allocations thereof that are estimated to be available for expenditures based upon these estimates.
(c) Upon receipt of the estimated amounts to be available for expenditure and after reviewing the quarterly allocation thereof as submitted by the Chief Fiscal Officer of the State, any such institution may request revisions in the proposed quarterly allotments as certified by the Chief Fiscal Officer of the State.
(d) The Chief Fiscal Officer of the State, with the advice and consent of the Department of Higher Education, shall approve requested revisions in the proposed quarterly allotments if he shall determine that:
(1) The proposed revisions in quarterly allotments do not exceed the aggregate of the estimated funds to be available from estimates of anticipated revenues and fund balances in the institution's account in the State Treasury for the fiscal year; and
(2) The revised quarterly allotments will not impose an undue hardship upon other allotments of revenues and other financial commitments to be met from the distributions of general revenues during the fiscal year. November 1, 2011 66
(e) The Chief Fiscal Officer of the State shall periodically review the estimates of projected general revenue collections anticipated to be available during a fiscal year. He may make revisions in the amounts certified to the respective institutions of higher learning based upon these estimates and may revise the quarterly amounts certified to each agency based upon the revised estimates.
(f) Institutions of higher learning may, from time to time, request revisions in the quarterly allotments of moneys where needs of the institution require revisions thereof.
(g) Any unexpended balances remaining at the end of each fiscal year shall be transferred forward and made available for the support of the institutions of higher learning for the following fiscal year.
(h) The budget execution provisions set forth in this section shall be applicable to all State-supported institutions of higher learning, and except for the annual fiscal program requirements, the provisions of §§ 19-4-601, 19-4-602, and 19-4-605 - 19-4-609 shall not apply to these institutions; they shall be governed by the provisions of this section and by procedures established under authority of § 6-61-209.
(i) The Department of Higher Education shall coordinate with the Chief Fiscal Officer of the State for administering the provisions of this section.
History. Acts 1973, No. 876, § 11; 1977, No. 486, § 1; A.S.A. 1947, § 13-337; Acts 1995, No. 1296, § 69.
19-4-605, 19-4-606. [Repealed.]
19-4-607. Review and approval of annual operations plans.
(a) Each state agency other than the elected constitutional officers, the legislative branch and its staff offices, the judicial branch and its staff offices, the Arkansas State Highway and Transportation Department, the state-supported institutions of higher education, and the Arkansas State Game and Fish Commission shall prepare an annual operations plan for the operation of each of its assigned programs for submission to the Chief Fiscal Officer of the State.
(b) The annual operations plan shall be prepared in the form and content determined by the Chief Fiscal Officer of the State and shall be transmitted to the Department of Finance and Administration on the date prescribed by the Chief Fiscal Officer of the State.
(c) In years when the General Assembly meets in regular session, the annual operations plan shall be prepared after adjournment of the regular session and shall take fully into consideration all applicable laws, including appropriations, and shall be submitted to the Department of Finance and Administration on a date set by the Chief Fiscal Officer of the State but prior to July 1 of that year.
(d) The Chief Fiscal Officer of the State shall:
(1) Review each annual operations plan to determine that:
(A) It is consistent with the policy decisions of the General Assembly and the Governor;
(B) Appropriations and funding have been provided by the General Assembly;
(C) It reflects proper planning and efficient management methods; and
(D) Appropriations and funding have been made for the planned purpose and will not be exhausted before the end of the fiscal year; and November 1, 2011 67
(2)(A)(i) Approve the annual operations plan if he or she is satisfied that it meets all requirements.
(ii) Otherwise, he or she shall require necessary revisions of the plan in whole or in part.
(B) However, nothing in this section shall be construed to allow the Chief Fiscal Officer of the State to substitute his or her individual judgment as to the operation or necessity of any program of any state agency for the judgment of the executive head or board or commission charged with the responsibility for the operation and control of that agency.
(e) Each annual operations plan shall indicate:
(1) The appropriation and funding provided by the General Assembly;
(2) A detailed budget by quarters; and
(3) Any other supporting or related information required by the Chief Fiscal Officer of the State or requested by a legislative interim committee, including the Legislative Council.
History. Acts 1973, No. 876, § 9; A.S.A. 1947, § 13-335; Acts 1997, No. 1354, § 36; 2001, No. 221, § 3.
19-4-608. Fiscal controls.
In order to provide proper fiscal controls, the Chief Fiscal Officer of the State shall assure the implementation of the procedures set out in this section:
(1) The annual operations plan of each state agency shall contain a quarterly fiscal program indicating the proposed expenditures and anticipated resources for each quarter of the ensuing fiscal year. Anticipated resources shall be based upon forecasted resources estimated to be available by the Chief Fiscal Officer of the State. In the event a revision of forecasted resources is made during a fiscal year, those agencies affected by the revised forecast shall submit a new quarterly fiscal program based upon the revised forecast;
(2) The Chief Fiscal Officer of the State shall review and approve the quarterly fiscal program if he or she finds that the forecasted resources will be adequate for financing the proposed program during the fiscal year and for each quarter or other appropriate period within the fiscal year;
(3) In the event an agency incurs expenses at a level that would exceed the proposed expenditures in their quarterly fiscal program, the Chief Fiscal Officer of the State may require the submission of a revised quarterly fiscal program which reduces expenditures for the remainder of the fiscal year to a total which is within the level of the estimated resources available to the agency. Remaining appropriations will be unavailable to the agency until the revised program has been submitted and approved; and
(4) In case the Chief Fiscal Officer of the State determines that the estimated revenues or other sources of income for any agency will be less than was anticipated and that consequently the funds available for the remainder of the fiscal year will be less than the amount estimated, he or she shall reduce the amount of available appropriation to the level of expected revenue after notice to the agency.
History. Acts 1973, No. 876, § 9; A.S.A. 1947, § 13-335; Acts 2001, No. 1453, § 14.
R1-19-4-608 Agency Annual Operations Plan
Agencies must submit an Annual Operations Plan in May of each fiscal year to the Department of Finance and Administration-Office of Budget (DFA-OB). (ACA §19-4-607) An Annual Operations Plan contains an agency’s proposed expenditures and anticipated resources for the ensuing fiscal year. The Annual Operations Plan is prepared using the State’s budgeting system and upon review by the Department of Finance and Administration Offices of Budget and Accounting, the approved plan will be transferred into the Arkansas Administrative Statewide Information System (AASIS). Forms and instructions are available on the DFA-OB web site at http://www.dfa.arkansas.gov/offices/budget/Pages/forms.aspx.
The S_ALR_87013611 Cost Centers Actual Plan Variance report in AASIS can be used to monitor and compare actual vs planned expenditures.
If at any time during the fiscal year changes to the Annual Operations Plan result in an increase or decrease in the appropriation and/or funding allocated for expenditure, corresponding adjustments to the Annual Operations Plan must be made in the detail plan in AASIS. (ACA §19-4-608) These changes may be made by accessing transaction KP06 – Activity Input Planning. Although budget is not checked at this level, proper plan maintenance is required for accurate evaluation of agency expenditure variances.
Training courseware is available at the following web site:
PLEASE NOTE: Agencies that do not have access to AASIS should contact their Budget Analyst in the DFA-OB for assistance.
19-4-609. Productivity reporting.
(a) Each state agency, other than the elected constitutional officers, shall institute and maintain a program to increase the productivity and cost effectiveness of the employees for which they are responsible. (b)(1) Each executive, judicial, legislative, and any other agency of the state and each institution of higher education shall provide on a calendar-monthly basis information reflecting the:
(A) Number of current employees in each such agency;
(B) Number of newly hired employees;
(C) Number of employees who have transferred to other state agencies;
(D) Number of employees who retired;
(E) Number of all other separations of employees;
(F) Number of current vacant budgeted positions; and
(G) Other information as may be requested.
(2) Each executive, judicial, legislative, and any other agency of the state, and each institution of higher education shall provide on a quarterly basis a statement of the reasons for any vacant budgeted positions.
(3) The information shall be compiled on forms developed by the Bureau of Legislative Research and submitted to the Legislative Council on a calendar-quarterly basis.
History. Acts 1973, No. 876, § 10; 1985, No. 110, § 1; A.S.A. 1947, § 13-336; Acts 1989, No. 183, § 1; 2005, No. 1686, § 1.