Presentation Transcript

1. BUDGETING BASICS

   Gary Perdew St. Lucie County Fire District
2. Overview What is Budgeting? Importance Public vs Private Policies Budget Cycle Language Revenues Fund Balance Expenditures Reports & Monitoring Tips
3. What is Budgeting ? The process of allocating resources to fund operations and projects. Resources Ad Valorem Tax revenue Other Taxes (Communications Services, Gas…) Revenue Sharing Proceeds Charges for Service Impact Fees Grant Revenue Debt Proceeds Interest revenue
4. What is Budgeting? Operations and Projects Personnel Rent, Lease, Mortgage Utilities Expendables Equipment Improvements
5. How important is Budgeting? The budget controls every monetary aspect of the organization. In order to spend or obligate resources: The item must be a budgeted expenditure. Various levels of review before being placed into the budget. Internal transfers and, if necessary, Budget Amendments should be in place. The item must be an approved expenditure. Various levels of control There must be enough cash-on-hand to cover the expenditure. Stringent controls are necessary because we are dealing with Public Funds….Accountability.
6. Public versus Private Sector Private sector: Free to act in their own interest even if they clash with the interests of the community. Not concerned with the economic health of the community or other businesses. Market-based. If it is profitable they will strive to remain an on-going concern otherwise they are free to close the doors. Accountable only to shareholders. Not compelled to budget in the sunshine.
7. Public versus Private Sector Public sector: Receives mandate from the citizens. Must consider their interests and promote business activity. Depends on finding agreement among decision-makers on what is important. Law requires that budgeting decisions be open to the public and media. Incorporates extensive financial and budgetary controls to prevent mismanagement and fraud. Accountable to citizens for efficiency and effectiveness.
8. What is a Budget? A Policy Document. Long-term financial policies. Non-financial policies and goals. Short-term initiatives that guide budget development. A comprehensive budget message.
9. Policies“Guidelines that keep you out of Trouble” Financial Policies Revenue Reserve Investment Debt Financial Reporting….etc.. Grants Capital Assets Internal Controls
10. Policies“Guidelines that keep you out of Trouble” Budget Policies Inflationary Factors Requests (Equipment, Personnel, Extraordinary Items) Internal Transfers and Amendments Millage Rate “All Funds” Staffing Health Insurance Contingencies…etc.
11. What is a Budget? A Financial Plan Includes all funds. Basis of budgeting. Summary of all major revenues, expenditures as well as other sources of financing. Describe major sources of revenue, assumptions for estimates and trends. Summary of prior year actual, current year budget and actual (or estimate), and proposed budget. Projected changes in fund balances. Description and disclosure of capital expenditures.
12. What is a Budget? An Operations Guide Activities, services and functions carried out by the organization. Objective measures of progress toward accomplishing the organizational mission. Organizational chart. Summary of prior, current and budgeted personnel.
13. What is a Budget? A Communications Device Explanation of the effect other planning processes have upon the budget and budget process. Description of the process for preparing, reviewing, adopting and amending the budget. Charts and graphs where appropriate and a narrative interpretation if the message is not self-evident. Statistical data. Formatted so that the average reader can navigate the document and understand the content.
14. Budget Cycle
15. Four Phases of Budgeting Preparation. Budget instructions, calendar and letter from chief administrator. Departments & Divisions develop requested budget. Justify certain expenditures and explain significant variances. Keep funds separate. Established budget review process. OMB/Finance estimates revenue and fund balances. Revenue, fund balance and expenditures put together. Balancing act continues throughout the process. Which comes first, Millage Rate or the Budget?
16. Four Phases of Budgeting Preparation (Calendar) When do you start? How long does it take to Balance? Schedule the Revenue work also. When does the Certified Value arrive? Council Workshops Public Hearings Are there Citizen Committees?
17. Four Phases of Budgeting Preparation (Budget Workshop) Know what the rules are to prepare the budget. Review existing policies. Set Goals. Financial Programs Rates, Fees If you present challenges – offer solutions. Use Long Range Financial Models. You want to conclude the workshop with consensus and direction.
18. Four Phases of Budgeting Approval. Typically the governing authority is presented with a recommended budget for review. Board gives staff direction. Staff prepares the tentative budget for Board approval. Taxing authority provides TRIM information to the Property Appraiser based on the tentative budget. After two public hearings the final budget is approved by resolution or ordinance
19. Four Phases of Budgeting Implementation. Major source of revenue does not begin flowing in until November. Might have to delay major purchases or projects. Must have an approved policy detailing the process of adjusting the budget. Budget Amendment. Line-to-line transfer. Monitoring. Revenues. Expenditures – negative balances and internal transfers.
20. Four Phases of Budgeting Accountability 24/7 Everything we do is in the “Sunshine” and subject to public scrutiny. Independent Auditors look at the books. We report their findings at a public meeting and post them on the website. In public budgeting and finance, “Transparency” is more than just a buzzword.
21. The Four Phases Overlap
22. The Language of Budgeting Capital Budget Major capital purchases. $750 to $Millions. Separate CIP funds may be designated for this. Impact Fees, Gas Tax Revenue, Debt Proceeds. Capital Outlay: Purchase of fixed assets such as vehicles or capital improvements that extend the life of an asset. Must have a useful life of at least one year. Must cost at least $750 although some entities elect more. Contingency: An amount set aside just in case. It is not expected to be spent.
23. The Language of Budgeting Fiscal Year: The Budget Year, normally October 1st thru September 30th (Except for the State) Full Time Equivalent (FTE) 40 / 80 / 2080 Hours/2496 for Firefighters A part-time employee working 24 hours per week = 24/40 = .60 FTE Funds: Cash on hand A separate reporting unit (General, Special,…)
24. The Language of Budgeting Operating Expenses: A group of accounts covering everything from Professional Services through Depreciation. Personnel Services: A group of accounts that include Salary, FICA, Social Security and other Benefits. OPEB was just added. Transfer: (Internal) Shifting of funds within a department budget. Usually done to cover deficits Has no effect on the budget Avoid transferring between classes of expenses
25. The Language of Budgeting Transfer (Continued) An Interfund Transfer is a budgeted transfer from one fund into another. Used for actions such as: To place funds into a Debt Service Fund Transferring matching funds for a grant To collect Indirect Costs Artificially inflates the budget
26. The Language of Budgeting Truth In Millage (TRIM): This document explains how your entity can remain in compliance with TRIM requirements. How you receive the taxable property valuations from the Property Appraiser. Tentative and Final Budget. Proposed/Tentative/Final Millage Rates. The forms you must complete and return. Required advertising and verbiage. Public Hearings. Resolutions or Ordinances. Time lines for accomplishing all required tasks.
27. The Language of Budgeting Uniform Accounting System Manual: Published by State of Florida, Department of Financial Services, Bureau of Local Government. Everything you need to know about Fund Class, Balance Sheet, Revenue and Expenditure Accounts. www.myfloridacfo.com/aadir/localgov/ At bottom of page select correct UAS Manual
28. Budgeting Revenues OMB normally budgets revenues using the Local Government Financial Information Handbook produced by the state Office of Economic and Demographic Research http://edr.state.fl.us/content/local-government/reports& input from some departments Look at historical trends.
29. Budgeting Revenues Know your community. Monitor Building Permits. Follow the real estate activity in your area. Be aware of any new sources of revenue. New surtaxes. New programs that generate revenue. Change in Charges For Service schedule. Are you within the guidelines of your legislative body?
30. Budgeting Revenues Budget conservatively. Simple Weighted Average over the past five years should keep you out of trouble. Using values of: 15, 20, 25, 30, 35 Average is 25 (Too Low) Average % increase is 23.7% 1.237 X 35 = 43.3 (Might be too high) Using weights of .02, .03, .05, .10, & .80 Weighted Average is 33.1 (Conservative but a number you can live with.
31. Budgeting RevenuesAd Valorem Tax Revenue
32. Fund Balance Carried Forward Begin looking at this early in the process. Run a Trial Balance Report and calculate current Cash On Hand for each Fund. Estimate revenues you expect to receive for the remainder of the budget year. Are there any unusual or seasonal receipts that you should account for? Tax deed sales Excess fees from Constitutional Officers Cyclical revenue (Tourism or part time residents)
33. Fund Balance Carried Forward Estimate monthly expenditures and project out to the end of the fiscal year. Are there any unusual or seasonal expenditures you should consider? Debt Service payments Balloon Payments Look at your encumbrances and estimate the ones that will be cleared before the end of the fiscal year. The Purchasing Department should help you with this. Do this on a monthly basis and adjust your tentative budget as necessary.
34. Fund Balance Carried Forward CAUTION CAUTIONCAUTION There is never a guarantee that you will have excess fund balance to carry forward or what the amount will be. If you use this in your budget do not use it to fund on-going operational or personnel expenses. Appropriate uses include: Contingency reserves One-time purchases (Vehicles or Equipment) Renovations or remodeling
35. Tips From Experience Set a date after which requisitions will not be accepted unless approved at the highest level. If your system allows it, do not adjust the budget when you roll the encumbrances. It will throw your budget out of balance. Budget a “Reserved For Encumbrances” line item. Line items will indicate encumbered funds. Transfer amounts from “Reserved For Encumbrances” into the appropriate encumbered line item. The budget will remain balanced.
36. Budgeting Expenditures Current level of service versus an expanding or contracting level? Personnel Services require close scrutiny and coordination with the HR Department. Fewest lines in the budget but greatest impact. OMB usually calculates and inputs into the budget. Requests for new positions usually require additional justification, costing out of the salary, benefits, uniforms, equipment and vehicle cost.
37. Budgeting Expenditures Is there a change to the Pay Scale? COLA Step Increase Merit Increase Longevity Is there a change in the employer paid portion of the Health Insurance premiums. Is there a change in the Worker’s Compensation rate? If you have a retirement plan is there a change in the actuarially determined contribution rate? If OMB inputs the information each department should check their personnel budget to verify the accuracy. Authorized versus Assigned
38. Tips From Experience Calculate the total cost of the new position and place it into a line item titled “New Position”. It will be reflected in the tentative budget but if not approved you delete the one line item versus having to adjust the line items for Salary, Fica, Medicare/ Medicaid, Retirement or Health Insurance.
39. Budgeting Expenditures Operating Expenditures Departments and Divisions either submit their request or input the information directly. Use trends to estimate your needs. Do your Budget Preparation Instructions include a policy for anticipated inflation? Some entities require a justification for certain operating expenditures. Furniture and Fixtures Travel Dues and Memberships Training and Education
40. Budgeting Expenditures Capital Outlay Items costing $750 or greater. Some entities increased the threshold to $1,000 before the item is placed on the Fixed Asset Inventory. Usually requires additional justification or an additional form to accompany the budget. Request submitted by the Departments and Divisions.
41. Budgeting Expenditures Administrative Fee/Indirect Cost A fee charged to certain departments - normally enterprise funds – for support services. Executive Administration Accounting and Auditing Legal Services Purchasing Facilities and Maintenance Building space Revenue is generally recognized in the General Fund with the offsetting expense in the other funds.
42. Budgeting Expenditures The charges should be reasonable and quantifiable. Fees should be based on a formula such as: Number of personnel assigned versus total personnel Square footage occupied versus total square footage Fund budget versus total budget Number of requisitions versus total requisitions Number of vehicles versus total like vehicles
43. Budget Monitoring Reports Budget Detail Report Shows every budgeted line item. Budgeted, Actual, Encumbered and amount remaining. Request entire budget, a specific fund or a department. FTE Report Tracks actual compared to budgeted FTE’s Guard against over staffing and look for savings Summarized Financial Statements Allows tracking of the overall performance of a fund. Enterprise Program Reports Tracks the performance of programs that generate their own revenue.
44. Over Budget? Contact person responsible for that budget. You have to get them involved otherwise you are enabling. Options: Transfer (Line-to-Line) Was it due to an unanticipated expense? Move funds from contingency reserves. May require Board approval. Ignoring the deficit is not an option.
45. CIP Budgets Capital Improvement Plan 5-Year schedule Capital Improvement Budget Year 1 of the Capital Improvement Plan Typically large and costly projects and often requiring financing. Consider and budget the impact to the Operating Budget (add’l cost or savings).
46. Other Topics Left over budgeted funds Postponing a budgeted project Making use of ‘found’ money Un-budgeted Emergency item
47. Questions or Comments