Ordinance on the Act on the Financial Management of Municipalities (FHGV) (FHGV)

1. This Regulation applies to the financial budget of municipal communities.

2. The Regulation shall apply mutatis mutandis to institutions, municipal and inter-municipal associations, insofar as the legislation or statutes do not contain their own regulations.

3. If a municipality provides for consolidation pursuant to § 55 of the Municipal Finance Act (FHG) of June 20, 2016 (hereinafter: the Act), the provisions on financial reporting in this Regulation shall apply to the consolidated entities as far as necessary for the preparation of the consolidated financial statements.

4. The Regulation shall apply mutatis mutandis to the church communities of the recognized national churches, insofar as their national church law does not contain their own regulations.

1. For assessing the financial situation, comparing time series, and making comparisons with other municipalities, the task and financial plan as well as the annual report particularly include the following financial ratios

a. Net debt ratio,

b. Self-financing ratio,

c. Interest burden share,

d. Net debt in Swiss francs per resident,

e. Net debt excluding special financing in Swiss francs per resident,

f. Self-financing share,

g. Capital service share,

h. Gross debt share.

1. The following ranges apply to financial ratios

a. The net debt ratio shall not exceed 150 percent.

b. * The self-financing ratio in the financial statement should reach at least 80 percent on average over five years (reporting year and four previous years) if net debt per capita exceeds 1500 francs. In the task and financial plan, the self-financing ratio should reach at least 80 percent on average over the budget year and the three planning years if the net debt per capita exceeds 1500 francs.

c. The interest burden ratio shall not exceed 4 percent.

d. * The net debt per capita shall not exceed 2500 francs.

e. * The net debt without special financing per capita shall not exceed 3000 francs.

f. * The self-financing share shall be at least 10 percent if net debt per capita exceeds 1500 francs.

g. The capital service ratio shall not exceed 15 percent.

h. The gross debt ratio shall not exceed 200 percent.

1. In the tasks and financial plan, the municipal council must demonstrate the healthy development of the financial budget, particularly with the financial indicators according to § 2.

2. If the ranges of the financial indicators according to § 3 are not adhered to, the municipal council must justify the deviations and, if necessary, implement or outline corrective measures.

1. In the duty and financial plan, the following must be specified for each area of responsibility

a. the political mandate,

b. the relation to the legislative program,

c. the measures and projects with financial implications,

d. the metrics,

e. the financial development.

1. All expenses must be included in the global budget of a functional area, particularly those related to internal allocations, apportionments, depreciation, and imputed interest.

1. The orientation event pursuant to § 10 paragraph 3 of the Act shall be organized in such a way that a substantive discussion of the budget proposal is possible. The course of the discussion and its outcome should be appropriately documented.

2. The budget and the tax rate shall be voted on together in one resolution.

1. Essential Expenditures According to Section 13, Paragraph 5 of the Act are Specifically

a. Personnel expenditures for existing appointments and for the refilling of vacant positions,

b. Expenditures for which a credit overrun could be approved under Section 15, Paragraph 1 of the Act,

c. Other expenditures if not incurred would result in economic disadvantages for the municipality or would violate the principle of good faith.

1. The supplementary credit increases the budget credit.

2. If a special or additional credit is necessary for a project for which a supplementary credit is requested, it is proposed to the eligible voters or the municipal parliament at the latest with the supplementary credit.

3. The municipal council decides on expenditures that fall within its responsibility at the latest at the time of the supplementary credit application.

1. The approved credit overrun does not increase the budget credit.

2. Approval for a credit overrun must be obtained from the municipal council before making the corresponding expenditure.

3. A decision on the expenditure approval must be made together with the credit overrun.

1. A credit transfer increases the budget credit of the following year to the same extent as it reduces the budget credit of the current year. It is only possible to the extent of the unutilized budget credit.

2. The municipal council is responsible for the transfer of unclaimed funds to the new account. It can delegate this task to a subordinate organizational unit.

1. The municipal council shall present the annual report for approval no later than June.

2. The annual financial statement compares the accounting values per area of responsibility with the budget credits, supplemented by supplementary credits and credit transfers.

1. If the annual report is not approved by the eligible voters or the municipal parliament, the municipal council shall present a revised annual report that has been re-examined by the auditing body.

2. If approval is again refused, the municipal council shall submit the annual report to the government council for approval.

1. In determining the operational controlling system, the municipal council must particularly regulate the procedure, scope, periodicity, recipient group, and documentation.

1. Quality Management as a Leadership Tool encompasses all coordinated activities for managing and directing the municipality, specifically

a. the planning, control, and monitoring of municipal activities as well as the decision-making and implementation of improvement measures,

b. appropriate communication with stakeholders,

c. the management of processes in an appropriate form.

1. Risks are defined as events and developments that have a certain probability of occurring and can have significant negative impacts on the achievement of the objectives or the fulfillment of duties by the municipality.

2. Municipalities identify and periodically review their risks, assess them in terms of their probability of occurrence and the extent of potential damage, and take appropriate measures to manage them.

1. Municipalities are required to adequately document their internal control system (ICS).

1. The Participation Report contains, for each organization, at a minimum

a. Name and legal form of the organization,

b. the total capital of the organization and the share of the public entity,

c. the book value of the participation,

d. statements on the services provided by the organization,

e. statements on the specific risks,

f. the reporting on the owner strategy.

2. The extent of the details is determined by the significance of the participations.

1. The following are also considered expenditures within the meaning of § 32 of the Act

a. the conversion of financial assets into administrative assets,

b. compensations within the framework of performance agreements,

c. guarantees and guarantee obligations,

d. waivers of income.

2. Investments are not considered expenditures. Investments are financial transactions that correspond to a freely realizable value and merely result in a reallocation within the financial assets.

1. If a project affects both the profit and loss account as well as the investment account, a single expenditure authorization must be obtained.

1. Included in the Expenditure are

a. * All expenses incurred after the decision-making process for the planned project, such as land acquisition, construction costs including costs for temporary structures, demolition of rental properties, the necessary equipment for proper use, as well as taxes, duties, and reserves for contingencies.

b. * ...

2. Internal expenses for a project are not included in the expenditure, except for the capitalizable labor costs of municipal employees.

1. An expenditure is considered mandatory when it is prescribed by a legal rule both in principle and its scope, or when it is absolutely necessary to fulfill legally organized administrative tasks.

2. An expenditure is also considered mandatory if it is assumed that the voters or the municipal parliament would have approved the resulting expenses from a prior fundamental decree, provided that a corresponding need was foreseeable or that it is irrelevant which resources are chosen to fulfill the expenses undertaken with the fundamental decree. However, if there is a relatively large degree of discretion concerning the scope of the expenditure, the timing of its execution, or other modalities, then, even in the presence of such a fundamental decree, the expenditure is considered to be freely determinable.

1. The granting of expenditure authorizations by the municipal council and its subordinate organizational units shall be conducted in written form.

2. Municipalities may stipulate additional form requirements. In particular, they may provide that for minor expenditures and for specific cases of general administrative expenses, the signature on the invoice is sufficient.

1. The municipality may provide for specific competencies that deviate from the authority to incur expenses for conducting legal proceedings, settling disputes, and waiving statutes of limitations.

1. The municipality may stipulate special competences that deviate from the spending authorities for the conclusion of contracts implementing granted expenditure approvals.

1. The application to the eligible voters or to the municipal parliament for a special credit must include at least the precise description of the subject, the credit amount, the legal basis, as well as explanations regarding the duration of use and the consequential expenses and revenues.

2. For special credits related to construction projects, the price basis for the credit amount must also be established.

1. For the period between the time of calculating the credit amount (price basis for expenditure approval) and the conclusion of the contract, inflation is calculated based on the national consumer price index, and for construction projects, based on the Swiss Construction Price Index (Greater Region of Central Switzerland) of the Federal Statistical Office.

2. For the period between the conclusion of the contract and settlement, those inflation-related additional expenses are decisive, for which the municipality has contractually agreed to assume responsibility.

1. Inventory shall be valued at manufacturing costs or acquisition costs. If the market value is lower, it shall be used.

2. Work in progress shall be valued at manufacturing costs.

1. Adjustments to the fair value of assets in financial investments must be recorded in the income statement.

2. Tangible fixed assets in financial investments are to be revalued at least every four years. Similar types of real estate must be revalued simultaneously.

1. The activation threshold for tangible assets and intangible assets in both financial and administrative assets, as well as for investment contributions to third parties, is

a. 10,000 Swiss Francs in municipalities with up to 1,000 residents,

b. 20,000 Swiss Francs in municipalities with 1,001 to 5,000 residents,

c. 40,000 Swiss Francs in municipalities with 5,001 to 10,000 residents,

d. 50,000 Swiss Francs in municipalities with more than 10,000 residents.

2. A deviation from the activation threshold is only permissible if required by superior law.

3. The activation threshold pertains to an asset in the form of a functional unit. The gross amount is decisive.

1. Components of installations shall be capitalized separately, if feasible, when they have different useful lives.

2. Valuable internal performances may be capitalized. The municipality defines the conditions for this.

1. The following activations require the approval of the municipal council or an office of the municipal administration, provided that such an office has been declared competent in a legislative decree

a. Activation of intangible assets,

b. Activation of own work.

1. If public duties are fulfilled with active loans and the recipient thereby achieves interest savings, the interest shortfall is recorded as a transfer expense.

1. Investment Contributions to Third Parties are Capitalized When

a. the conditions for recognition according to § 56 paragraph 1 of the Act are met and

b. a claim for repayment is legally enforceable.

2. If Misappropriation of the Investment Asset is Excluded, the Contribution is Capitalized When the Conditions of § 56 Paragraph 1 of the Act are Met.

3. Capitalized Investment Contributions are Amortized Over the Useful Life of the Financed Investment Asset.

4. Investment Contributions from Third Parties are Deducted from the Corresponding Assets.

1. The transfer of assets into administrative property generally takes place at book value. If there have been obvious significant changes in value since the last balance sheet date, a revaluation must be conducted. The decision on the revaluation lies with the municipal council or an authority within the municipal administration, provided this authority has been declared responsible in a legislative decree.

1. The transfer of an asset from administrative assets to financial assets takes place at book value.

2. If the asset is not sold by the next balance sheet date, it shall be revalued at market value on the next balance sheet date.

3. Book profits and valuation differences in special financings are to be credited or charged to the cost unit of the asset.

1. A detailed asset accounting shall be maintained for the individual components of administrative and financial assets.

2. The asset categories are determined according to Appendix 1 of this regulation.

1. The useful life for administrative assets is generally determined in accordance with the asset categories as per Annex 1 of this regulation.

2. A different useful life is permissible if required by overriding law or if the actual lifespan of an asset is shorter than provided in Annex 1. Such deviations must be commented on in the annex to the annual financial statement.

3. Depreciation must be undertaken for the first time in the year following the commissioning of an asset.

1. A provision is a significant obligation arising from a past event, the settlement of which is uncertain regarding its timing or exact amount, and in which

a. an outflow of resources is probable, and

b. the amount of the obligation can be reliably estimated.

2. Provisions are formed for each event individually.

3. Provisions may only be used for the intention for which they were created.

4. Provisions must be reversed when they no longer meet the recognition criteria according to § 56 paragraph 2 of the Act.

1. The determination for the accounting of pension obligations is based on the probability and the reliable estimation of an economic obligation or an economic benefit.

2. In the case of an underfunding, there exists an economic obligation if the conditions for creating a provision are met.

3. In the case of an overfunding, there exists an economic benefit if it is permissible and intended to use this to reduce employer contributions or to use it outside of regulatory benefits for another economic benefit of the employer.

1. Obligations for special financings and funds, as well as advances to these, are generally subject to interest.

1. The revenue from municipal taxes is considered to include the revenues from the taxes of the current year contained in the budget of the fiscal year, the special taxes on capital distributions, the supplementary taxes from previous years, the withholding taxes, as well as the back taxes and tax penalties.

2. Tax revenues, with the exception of those from withholding tax, must be recorded on an accrual basis. For the withholding tax, the revenues received in the fiscal year must be recorded.

1. Extraordinary Expenses and Extraordinary Income are considered significant if they exceed 0.5 percent of the sum derived from the budgeted income from municipal taxes and the annual resource equalization for the current year, in accordance with the Financial Equalization Act of March 5, 2002.

1. The cash flow from operating activities is determined using the indirect method.

2. In cash flow from investing activities, investment revenues are compared to investment expenditures in both financial and administrative assets.

3. The cash flow from financing activities illustrates the creation and repayment of short- and long-term financial liabilities without considering the capitalized investment contributions.

1. The cost accounting aims to represent the costs and revenues of public service provision (gross and net costs) as completely and systematically ordered as possible. It serves the determination of costs and revenues of the operational areas and reflects the functional structure. Furthermore, it acts as an internal management tool.

2. Cost accounting includes primary costs and primary revenues as well as allocations and internal charging based on the causation principle.

3. It consists of the following sub-accounts

a. Cost type accounting,

b. Cost center accounting,

c. Cost unit accounting.

4. The services must be represented in cost units and show the full costs. The final result of cost accounting corresponds to that of financial accounting.

1. The cost type accounting is used for recording and classifying all costs and revenues incurred during the respective accounting period.

2. It corresponds to the categories of the income statement.

1. In cost center accounting, overhead costs and revenues are allocated, which represent indirect costs and revenues for cost unit accounting. The indirect costs and revenues must be fully transferred to the cost units.

2. In cost unit accounting, the costs and revenues caused by the services are attributed to them.

1. The financial supervision in accordance with § 99 of the Municipal Act of May 4, 2004, defines the cost centers and cost units for all municipalities according to the functional classification, whereby municipalities may make further subdivisions.

2. Municipalities may establish a cost center and cost unit structure that deviates from this. In this case, they must ensure that their structural elements can be assigned to the prescribed cost centers and cost units for statistical survey purposes.

1. The municipalities provide Lustat Statistics Lucerne with the necessary data in accordance with the requirements of the Municipal Finance Statistics Ordinance of March 3, 2009.

1. The dissolution of the revaluation reserves and the settlement of the additional payment obligation to the Lucerne Pension Fund, as well as of activated liabilities to other pension funds, shall proceed as follows

a. The scope of the annual additional depreciation according to § 68 paragraph 6 of the law is determined by the difference between the approved financial statement of 2018 and the newly presented annual financial statement of 2018 pursuant to § 68 paragraph 3 of the law. Municipalities are authorized, starting from the year 2019, to reduce the revaluation reserves by a fixed annual amount, either linearly or progressively. The amount of the annual reductions shall be specified in the balance adjustment report according to § 68 paragraph 8 of the law and shall be binding for subsequent years. The amount shall be charged against the revaluation reserves and credited to extraordinary income.

abis. * In deviation from the annual reductions of the revaluation reserves set forth in the balance adjustment report according to § 68 paragraph 8 of the law, the municipality may subsequently provide for the one-time complete dissolution and transfer of the revaluation reserves to equity. This decision must be submitted to the eligible voters or the municipal parliament for approval.

b. A negative revaluation reserve shall be transferred neutrally in terms of results to the balance surplus or balance deficit in accordance with § 68 paragraph 4 of the law.

c. The negative portion of the revaluation reserve resulting from the removal of the additional payment obligation to the Lucerne Pension Fund or activated liabilities to other pension funds can be shown separately. The annual scope of the reclassification corresponds to the annuity of the obligation. The budgeted amount shall be credited to the negative revaluation reserve and charged to extraordinary expense.

2. The remaining values of the assets adopted from the cost accounting shall be depreciated according to the useful lives specified in Appendix 1. The useful life for the remaining value is derived from the years of use according to the new useful life, minus the already expired years of use.

1. Within the context of the preliminary implementation pursuant to § 71 of the Act, the Executive Council shall also determine which provisions of this regulation are applicable early.