Financial Budget Act (FHG) - Purpose and Scope (FHG)

1. This Act regulates the management, execution, and oversight of the financial budgets of the canton and municipalities.

2. It applies to the cantonal and municipal authorities and administrations, as well as the dependent institutions and the courts. The competencies of the cantonal financial oversight authority remain reserved.

1. The income statement must be balanced in the medium term. It may not be budgeted with an excess of expenses if there is an equity deficit.

2. Equity deficits must be eliminated within a maximum of seven years. The reduction must be planned within the tasks and financial plan and reflected in the budget.

3. The self-financing rate of net investments must be at least 100 percent in the budget if the net debt ratio exceeds 200 percent.

1. Expenditure Needs Must Be Evaluated for Necessity and Affordability. Expenditures are to be made in order of their importance and urgency.

1. Financial resources shall be used effectively. Achievement of objectives and the cost-benefit ratio are to be regularly assessed.

2. For each project, the option that achieves the specified objectives most economically and efficiently, both in terms of macroeconomic and business management, should be selected.

1. Those who cause special services are generally required to bear the reasonable costs.

2. For special economic benefits derived from public facilities or orders, contributions corresponding to the benefits are generally to be demanded.

1. Expenditures are the use of financial assets to fulfill public tasks. Pure reallocations of financial assets are not considered expenditures.

2. Every expenditure requires a legal basis, a budget appropriation, and an expenditure authorization from the competent authority.

1. An expenditure is considered mandatory when the authorities have no significant discretion regarding its necessity, scope, or timing.

2. Expenditures are also specifically considered mandatory for

a) Renovations, refurbishments, and modern upgrades that serve the maintenance and upkeep of the facility without significantly altering the purpose or existing capacities;

b) Replacement acquisitions of equipment, vehicles, and installations for their previous intended use, including necessary adaptations to new technical requirements.

1. An expenditure is considered new if it is not committed under Article 7. It shall be treated as a recurring expenditure if it occurs periodically over an indefinite period.

2. The authority responsible for approving new expenditures is determined based on the net expenditures. To determine these, expenditures earmarked for a specific purpose are subtracted from the total expenditures. For recurring expenditures, the average net expenditures per year are decisive.

3. Expenditures that are related both in substance and time, or are interdependent, may not be split.

1. All proposals and applications must disclose the financing of the associated expenses. Furthermore, the impacts on the task and financial plan must be demonstrated.

1. The Executive Council and Municipal Council annually create a task and financial plan that outlines the medium-term development of services and finances. For this purpose, the activities of the community are divided into main tasks and these into task areas.

2. The task and financial plan specifically contains

a) the key data relevant to fiscal and economic policy;

b) an overview of the development of the main tasks and the strategic objectives and the development of services in the individual task areas;

c) an overview of the planned investments;

d) the budget estimates and the projected cash flow;

e) the estimated financing needs and financing possibilities;

f) the financial policy targets and the development of financial indicators.

3. The task and financial plan is presented to the parliament and the public for their information.

1. The budget outlines the public services provided and their financing for a calendar year.

2. Guiding principles for creating the budget are specification, completeness, comparability, and gross accounting.

3. The budget notably contains

a) the general explanations;

b) the proposed operating and capital accounts;

c) the appendix with a statement of the basis of the budget, explanations of new items and significant changes compared to the previous year, as well as information regarding financing and the use of ongoing commitment credits.

1. The budgetary credit authorizes the charging of the annual accounts for the designated purpose up to the specified amount.

2. Until the budget is approved, the government council, the municipal council, and the courts are authorized to incur expenditures essential for ordinary administration activities.

3. Unused budgetary credits expire at the end of the fiscal year.

1. For foreseeable expenditures, for which the legal basis or the commitment credit is still pending at the time of budget adoption, the budget appropriations shall be included with a withholding note. They remain withheld until the legal basis enters into force and the commitment credit is lawfully approved.

1. The budget estimate may be supplemented with additional items. The competent authority is the regular budget estimate body.

2. Expenditures for which no credit or insufficient credit is provided in the budget estimate may only be incurred once the additional credit has been approved. Provisions regarding credit overruns remain reserved.

1. Expenditures Not Foreseen in the Budget may be Charged to the Annual Financial Statement without Obtaining a Supplemental Credit, Provided that One of the Following Conditions is Met

a) it concerns a compulsory expenditure;

b) the matter cannot be postponed without adverse consequences for the public community;

c) corresponding subject-related revenues are offset against the expenditures within the same fiscal year;

d) the expenditure is minor and falls within the competencies of the respective authority.

2. The Executive Council and the Municipal Council shall Report Major Overruns of Credit in the Annual Financial Statement.

1. A global credit with a performance mandate may be granted to suitable organizational units. Cost and performance accounting must be maintained.

2. The budgetary authority is responsible for the approval of the global credit and the performance mandate. No amendments may be approved.

3. A surplus may be used up to half for new reserves, provided that nothing else is specified in the performance mandate. A deficit must be covered by reserves. Uncovered deficits are to be balanced through the profit and loss statement of the community.

4. Along with the annual financial statement, a financial statistical report categorized by type must be presented.

1. The commitment credit authorizes incurring financial obligations up to a certain amount for a specific purpose. It is required for new expenditures that exceed the financial competencies of the government council and municipal council.

2. The commitment credit can be granted as an object credit for a single project or as a framework credit for a program; it may extend over several years. In the decision on the framework credit, the competent body responsible for the division into individual object credits is determined.

3. Credits for preliminary projects are considered independent expenditure resolutions concerning financial competencies.

4. The commitment credit can be resolved on a net basis, provided that third-party contributions are legally assured or if it is approved subject to certain third-party contributions. Price level clauses are permissible; the commitment credit increases or decreases according to the comparison basis.

5. The commitment credit expires when the purpose is achieved or the project is abandoned.

1. If it becomes apparent before or during the execution of a project that the approved commitment credit is insufficient, an additional credit must be obtained before undertaking new commitments. This additional credit is to be treated as an independent expenditure decision with respect to financial authority.

2. If the execution of a project cannot be deferred, the government council and municipal council may immediately decide on its continuation. The parliament and the public must be informed about the expected additional expenditures.

1. A separate proposal, accompanied by an explanatory report, must be submitted to the competent body for each commitment credit, also demonstrating the consequential costs triggered by the project.

2. A control must be conducted regarding the utilization of the commitment credit, indicating which obligations have been undertaken and which obligations are still necessary for the completion of the project. The annual maturities must be entered gross in the budget.

3. The commitment credit must be settled upon the completion of the project. The competent body must be informed about the results.

1. The full or partial earmarking of revenues for the fulfillment of a specific public task requires a legal basis. Major taxes must not be earmarked.

2. In specific financing, all related expenditures and revenues are to be reported.

1. The Financial Report of the Executive Council or the Municipal Council includes

a) the financial commentary of the executive authority;

b) the annual financial statement with a comparison to the budget and the previous year;

c) if applicable, a consolidated financial statement;

d) the audit report of the auditing body;

e) additional information as needed.

1. The government council and municipal council set financial policy targets for assessing the financial situation and ensuring the healthy development of the budget.

2. For this assessment of the financial situation, the following are decisive

a) Net debt ratio;

b) Self-financing degree;

c) Interest burden ratio.

3. Additionally, the following must be disclosed

a) Net assets or liabilities in francs per inhabitant;

b) Self-financing ratio;

c) Capital service ratio;

d) Gross debt ratio;

e) Investment ratio.

1. The annual financial statement includes a financial statistical report structured functionally, which also comprises a time series comparison.

2. This statistic is aligned with the specifications of the federal financial statistics and enables comparisons between the communities.

1. The executive council and the municipal council establish the organizational prerequisites for the lawful execution of the budget. They are particularly responsible for ensuring adequate controlling.

2. The executive council and the municipal council decide on

a) obligations within the scope of their financial competencies;

b) the alteration of the purpose of administrative assets, provided that no construction measures are involved;

c) the conversion of administrative assets no longer needed into financial assets;

d) the acquisition of funds designated for financing;

e) the organization of accounting and document retention.

3. The organizational units are responsible for

a) the economical and efficient use of the credits and assets entrusted to them;

b) asserting financial claims against third parties;

c) compliance with budget and commitment credits;

d) maintaining an effective internal control system (ICS);

e) demonstrating the effectiveness of task fulfillment.

1. The Internal Control System encompasses regulatory, organizational, and technical measures with the aim of

a) protecting assets;

b) ensuring the legitimate and economical use of resources;

c) preventing or detecting errors and irregularities in accounting;

d) ensuring proper accounting and reliable reporting.

2. The Internal Control System must meet the following minimum requirements

a) it is based on a current risk analysis;

b) responsibilities and accountability regarding controls are defined;

c) control activities, results, and corrective actions for identified errors are documented.

3. The design of the Internal Control System takes into account the cost-benefit ratio.

1. Financial reporting provides a view of the asset, financial, and income situation that corresponds to the facts as closely as possible. It is guided by the Harmonized Accounting Model for the cantons and municipalities.

2. Principles of financial reporting include gross presentation, accrual basis, going concern, materiality, understandability, reliability, comparability, and consistency. The accounting period is the calendar year.

3. The budget and annual financial statements are to be presented in the same manner.

1. The Annual Financial Statement comprises

a) the Income Statement;

b) the Capital Expenditure Statement;

c) the Cash Flow Statement;

d) the Balance Sheet;

e) the Notes to the Financial Statements.

1. The income statement includes all expenses and revenues of an accounting period. At the first level, the ordinary result is determined, and at the second level, the extraordinary result is determined. The surplus of expenses or revenues alters the equity.

2. Expenses and revenues are considered extraordinary if they could not have been anticipated in any way and are beyond influence and control. Furthermore, all changes in reserves are considered extraordinary.

1. The investment calculation includes the capital expenditures for administrative assets with a multi-year useful life and compares these to the investment revenues.

2. The government council and the municipal council determine the investment amount threshold above which an entry in the balance sheet as administrative assets is required.

1. The cash flow statement provides information about the sources and uses of liquid funds, broken down into operating, investing, and financing activities. The balance reflects the change in liquid funds.

1. The balance sheet includes financial assets and administrative assets on the assets side, and liabilities and equity on the liabilities side.

2. Administrative assets consist of assets that directly serve the fulfillment of public duties. All other assets belong to financial assets.

3. Special financing is classified as either liabilities or equity according to the extent of disposal freedom.

**1. The Annex to the Annual Financial Statements:**

a) specifies the accounting principles and justifies deviations from the Harmonized Accounting Model for the cantons and municipalities;

b) summarizes the accounting principles, including the essential principles of recognition and measurement;

c) identifies the organizational units covered by the annual financial statements;

d) shows the causes of changes in equity (equity statement);

e) provides information on the inventory and changes of administrative and financial assets (asset schedule);

f) lists the organizations in which the public entity holds a significant capital stake or other substantial involvement (participation schedule);

g) informs about the status and changes in provisions (provisions schedule);

h) enumerates the circumstances from which significant future obligations of the public entity may arise (warranty schedule);

i) justifies significant credit overruns;

j) provides information about significant events after the balance sheet date;

k) records the utilized and still available commitment credits;

l) presents the financial ratios;

m) includes additional information that is important for assessing the asset, financial, and earnings position, as well as the financial risks.

1. The annual financial statement shall present a consolidated account to the competent body for acknowledgment when

a) The financial risks in significant participations in institutions, corporations, and other entities cannot be reliably derived from the annual financial statement;

b) An assessment of the financial position of the canton or municipality is not possible without a consolidated account.

2. The consolidated account shall particularly include organizations that can be significantly influenced and receive substantial contributions or compensations.

3. The consolidated account shall be prepared using the full consolidation method and according to the principles for the annual financial statement. A simplified presentation is permissible.

4. The government council or the municipal council shall determine which information the affected organizations are required to report.

1. Assets are recognized in the balance sheet when they provide future economic benefits or directly serve the fulfillment of public duties, and their value can be reliably measured.

2. Liabilities are recognized in the balance sheet when they are based on a past event and their settlement is expected to result in an outflow of resources, the amount of which can be reliably measured. If there are uncertainties regarding the maturity or amount, provisions are made.

1. Financial assets are recorded at market value and liabilities at nominal value.

2. Administrative assets are initially recorded at acquisition or production cost. Transfers from financial assets occur at market value.

3. The disposal of assets to third parties generally occurs at market value.

1. Items of administrative assets that are subject to depreciation due to usage are depreciated linearly over their expected useful life. The government council and municipal council determine the depreciation rates according to asset categories.

2. If a permanent impairment of value is foreseeable for an item, its balance sheet value will be adjusted.

1. Additional depreciations are permissible to the extent that the income statement shows a surplus in ordinary results that is not otherwise utilized. The affected administrative assets must be itemized individually.

2. Under the same conditions, reserves earmarked for approved investment projects may be established as a form of pre-financing. These reserves must be gradually released over the useful life of the investment asset.

1. Financial Control is the specialized body for financial supervision. It operates independently of the administration and is bound in its activities solely to the Constitution and the law.

2. The Cantonal Council elects the management of the cantonal Financial Control. The other members are employed by the management of the cantonal Financial Control. The employment conditions are governed accordingly by the personnel legal provisions for the cantonal administration.

3. The Cantonal Council may authorize the cantonal Financial Control to engage a recognized auditing firm for the examination of the annual financial statement.

4. Financial Control in the municipalities is carried out by the Audit Commission. It engages a recognized auditing firm for the examination of the annual financial statement.

1. The Financial Audit Office examines the legality and compliance with the principles of financial management. It independently determines its annual audit program.

2. In particular, it examines

a) the annual financial statements;

b) the separate accounts;

c) the utilization of credits;

d) the establishment of a lawful Internal Control System;

e) the risk management of organizational units.

3. It may involve experts if specific expertise is required in certain audit areas or if a task cannot be fulfilled with the regular staff complement.

4. No enforcement tasks may be assigned to the Financial Audit Office.

5. The Cantonal Council may involve the cantonal Financial Audit Office in the exercise of parliamentary oversight.

6. The cantonal Financial Audit Office may take on audit mandates from public institutions. It declines to take over such tasks if its statutory mandate would be impaired.

1. The cantonal financial control is responsible for

a) the cantonal authorities and the courts;

b) the cantonal administration;

c) the autonomous institutions of the canton;

d) other persons and organizations entrusted with the fulfillment of cantonal tasks.

2. It may also exercise financial supervision in cases where a separate audit authority exists by law. It has the right to inspect subsidized organizations regarding the use of cantonal contributions.

1. The Financial Control reports annually to the Cantonal Council, the Municipal Parliament, or the eligible voters.

2. It informs the Government Council or the Municipal Council in advance and hears them.

1. Financial Control communicates directly with the entities being audited. The entities subject to audit cooperate, present all necessary documents, and provide the required information.

2. Financial Control is authorized to review and, if necessary, copy all personal and factual data within the scope of the audit activities. Collected data may be used solely for audit purposes and must not be disclosed further. Personal data must be destroyed after the conclusion of an audit or criminal proceeding.

1. The financial control submits the audit report to the audited entity and simultaneously to the government council, the municipal council, or the supervisory body of the respective organization.

2. The audit report contains notes and recommendations regarding the identified facts as well as any objections. The financial control has no directive authority.

3. In the case of objections, a deadline is set for rectifying deficiencies. The audited entity reports the completion to the financial control through official channels, enclosing sufficient documentation.

4. Upon justified suspicion of a criminal offense, the financial control files a report with the competent law enforcement authority.

5. As long as the investigation in a criminal incident is not concluded, no payments may be made nor obligations entered into concerning the objected matter without the approval of the financial control.

1. The canton annually reviews the financial situation of the municipalities. The municipalities are obligated to cooperate and provide the necessary documentation. The result of the review is communicated to the municipal council.

2. The government council establishes an advisory commission for the execution of financial oversight. It submits an annual report to the cantonal council on the results of the reviews.

1. If a violation of the rules regarding budget balance or debt limitation is determined, the municipal council is obligated to create an action plan within six months and submit it to the government council for approval. The action plan includes binding deadlines to ensure budget balance and debt limitation.

2. If no action plan or an insufficient action plan is submitted, the government council shall implement the necessary supervisory measures. It may, in particular, require approval for

a) the budget and the task and financial plan;

b) planned investment projects;

c) the determination of tax rates, levies, and fees.

1. The canton may provide interest-bearing loans to the municipalities to ensure budgetary balance. These loans may be subject to conditions regarding the use of funds and may be contingent upon the prior fulfillment of prescribed measures.

1. Upon the enactment of this law, a revaluation of financial assets, provisions, deferred income, participations, loans, and other selected items of administrative assets will take place.

2. The difference resulting from the revaluation of financial assets shall be recorded as a revaluation reserve in equity. It is to be exclusively used for offsetting future impairments in financial assets.

3. The difference resulting from the revaluation of administrative assets shall be recorded as a revaluation reserve in equity. It must be amortized linearly through the second stage of the income statement over a maximum of ten years. The governing council and municipal council shall set the amortization period unalterably at the time of revaluation.

4. The first annual financial statement after this law comes into force shall include a report on the revaluations. The comparison with the previous year is omitted.

1. The new tasks and financial plan shall be implemented in the canton by no later than the year 2017, and in the municipalities by no later than the year 2019. Until its implementation, a financial plan according to the old law must be prepared.

2. The internal control system shall be implemented in the canton and the municipalities by no later than the year 2015.