Budget

A budget is the plan for the financial administration of the municipality or joint municipal board. The budget for the budgetary year is approved before the end of the previous year by the council of the municipality or joint municipal board.

According to the Local Government Act the budget includes the appropriations required by the operational targets and revenue estimates and indicates how the financing needs will be met. According to the budget recommendation of the Association of Finnish Local and Regional Authorities, the budget is divided into the operational economy, investments, the profit and loss account, and financing. The structures of the profit and loss account and financing parts correspond to the formats for the profit and loss account and the funds statement of the municipality and joint municipal board.

The Local Government Act stipulates that the budget must be observed in municipal activities and financial administration. The council decides on revisions to the budget. The accounting of the municipality or joint municipal board monitors the realisation of the budget and the financial statement includes a comparative report on the realisation of the budget.

If the municipality or joint municipal board has enterprises following the municipal enterprise model, the profit and loss statement part of the budget includes the settlements between the municipality or joint municipal board and their municipal enterprises (internal interests paid and return on the municipal enterprise's basic capital) but not the municipal enterprise's "own" profit and loss estimates. The profit and loss statement part of the budget is therefore not comparable with the profit and loss statement of the financial statement, as municipal enterprises are entered into the latter line by line, eliminating internal items.

If a municipality has municipal enterprises, it must, according to the budget recommendation of the Association of Finnish Local and Regional Authorities, publish also a profit and loss statement part in its budget which contains the municipal enterprise's profit and loss statement estimates and from which interest paid on internal loans and returns on basic capital have been eliminated.

Only a part of municipal enterprises follow the municipal enterprise model.