Basics of Budgeting: How to
Read Your Municipal Budget
August 20, 20143:15 PM Session
Pat WalkerPat Walker Consulting LLC
Katie GregoryCity of Peoria
Deputy Director of Finance & Budget
AgendaAgenda
Introductions/OverviewThe Budget ProcessArizona BudgetHow to read a budgetDistinguished Budget
Presentation AwardQuestions?
Purpose of Purpose of BudgetingBudgeting
To meet organizations strategic goals
Process to determine what & how services will be delivered to citizens
How the services will be financed
Pursue politically chosen goals
Purpose of BudgetingPurpose of Budgeting
Control mechanism for planning and controlling operations
One of the most important activities undertaken by governments
Described by one Mayor as “The World Series of Municipal Government”
AZ Revenues = Expenditures
Purpose of BudgetingPurpose of Budgeting
Simplistic Version
“On what basis shall it be decided to allocate X dollars to activity A versus activity B?”
Not as easy as it sounds……
Roles in BudgetingRoles in Budgeting
Roles in BudgetingRoles in Budgeting
Citizens Elected Officials Public Employees
Roles in BudgetingRoles in Budgeting
Citizens: Voice heard as to priorities/service levels and cost of providing desired priorities/service levels
Elected Officials:Set Policy Guidelines, Establish Priorities, Communicate Position to Constituents, Resolve Conflicts
Roles in BudgetingRoles in Budgeting
Public Employees:Department Staff - Develop Program Objectives, Identify Service Levels, Prepare Budget RequestsExecutive Management - Prepare a Recommended, Balanced Budget, Incorporate Elected Priorities, Assess Service Levels
Types of Budget Types of Budget ProcessesProcesses
Budget ProcessesBudget Processes
Performance BasedProgramZero Based Modified Zero-Based (Target) IncrementalExpenditure Control Based (ECB)Line Item
Budget ProcessesBudget Processes
Performance Based Emphasize activity performance
objectives Budget is presented by activities Workload and performance are measured Quality of performance measurements Looks at cost, not need of activity
Budget ProcessesBudget Processes
Program Defines goals of each agency Identify organizational activities
that contribute to the goal Focuses on the subject of
expenditures instead of type
Budget ProcessesBudget Processes
Zero Based Agency defends entire budget
starting from zero Focuses on shift of resources to
other programs Defines implications of not
providing service Decision Packages are prepared
Budget ProcessesBudget Processes
Modified Zero (Target) Based Budget office develops target budget
for each agency(i.e. 80% of prior year) Decision packages are prepared Two are prepared; Within and outside
of target Packages are ranked from high to low
impact on citizens
Budget ProcessesBudget Processes
Incremental Most widely used process Starts with last year’s base Focuses on adds, not existing Can be combined with other
processes
Budget ProcessesBudget Processes
Expenditure Control Budgeting (ECB) Starts with incremental budgeting Decision packages are prioritized Departments can transfer funds
between line items without approval Any savings are carried forward
Budget ProcessesBudget Processes
Line Item Budget by commodity or resource Other processes begin from here Expenditure control and
accountability
Budget cycleBudget cycle
Preparation of requests Review of requests Preparation of budget
Implementation Evaluation/Audit
Preparation of RequestsPreparation of Requests
Council’s vision and goals Fiscal picture for next year (Revenue
Projections/Expenditure estimates) Instructions/rules to follow in
preparationBudget justificationCost Estimations
Preparation of BudgetPreparation of Budget
Revenue ForecastingProducing a “balanced budget”Phantom deficit reductions that will
catch up with you Unrealistic revenue projections One-time versus on-going Ducking the decision
Review of RequestsReview of Requests
Central Budget office "rules of thumb”
Policy RationaleProgram changesTrend analysisDoes it follow executive policy
Capital BudgetsCapital Budgets
Capital Capital Budgets (CIPBudgets (CIP))
Multi-year and of considerable value
Operating Impact of CIP
Finance by pay as you go, grants, or borrowing
Capital BudgetsCapital Budgets
Major Revenue Sources Bonds Impact Fees Grants Current Revenues
Budgeting in Arizona – Keeping it Legal
Budgeting in Arizona Must adopt a balanced budget
Tentative budget must be adopted by third Monday in July
No requirement for final budget unless City/Town has property tax
Property Tax must be adopted by 3rd Monday in August but 14 days after final budget adoption
Various restrictions on funds – HURF, Impact Fees
Budgeting in Arizona Tentative budget is required to be itemized per
Auditor General Forms
Published once a week for two consecutive weeks
Notice of hearing date for final budget
Both tentative and final must be published on City/Town website 7 business days after adoption
Must remain posted for 60 months (five years)
Budgeting in Arizona Primary Tax Rate
• Truth in Taxation – If tax levy minus amount contributable to growth, is higher than prior year a notice must be posted
• Publish at 14 days but no more than 20 days before public discussion
• 2nd notice at 7 days but no more than 10 days
• Specific guidelines and language on publication
Budgeting in Arizona
Secondary Property Tax Rate• Only for the retirement of bonded
indebtedness
• Rate is whatever it takes to pay off the bonds
AZ Auditor General Forms
TOWN OF KEARY
Adopted Estimated ProposedFUND 2013-14 2013-14 2014-15 % increase
Budget Expenditures Budget (-decrease)GENERAL 1,644,386$ 1,457,872$ 1,804,391$ 9.73%
HIGHWAY USERS 74,271$ 58,011$ 75,983$ 2.31%
LOCAL TRANSPORTATION 13,367$ 6,956$ 10,920$ -18.31%ASSISTANCE
TRANSPORTATION 243,306$ 23,474$ 248,109$ 1.97%SALES TAX
MISCELLANEOUS GRANTS 1,741,800$ 41,479$ 1,461,800$ -16.08%
CAPITAL PROJECTS 150,000$ -$ 150,000$ 0.00%
UTILITIES 804,910$ 718,691$ 746,155$ -7.30%
SANITATION 250,076$ 185,091$ 253,309$ 1.29%
AMBULANCE SERVICE 314,079$ 390,648$ 317,220$ 1.00%
FIREFIGHTER'S PENSION 3,200$ 2,784$ 3,200$ 0.00%
TOTAL ALL FUNDS 5,239,395$ 2,885,004$ 5,071,087$ -3.21%
Summary Schedule of Estimated Revenues and Expenditures/Expenses
2014 2014 July 1, 2014** 2015 2015 SOURCES <USES> IN <OUT> 2015 2015Primary:
120,762$ Secondary:
3. Debt Service Funds Available
4. Less: Amounts for Future Debt Retirement
5. Total Debt Service Funds
6. Capital Projects Funds
7. Permanent Funds3,200 2,784 82,417 3,200 85,617 3,200
8. Enterprise Funds Available1,369,065 1,246,528 295,776 1,355,209 157,000 1,493,985 1,316,684
9. Less: Amounts for Future Debt Retirement
10. Total Enterprise Funds1,369,065 1,246,528 295,776 1,355,209 157,000 1,493,985 1,316,684
11. Internal Service Funds
12. TOTAL ALL FUNDS5,239,395$ 2,834,231$ 2,416,631$ 120,762$ 4,400,995$ $ $ 216,357$ 216,357$ 6,938,388$ 5,071,087$
EXPENDITURE LIMITATION COMPARISON 2014 2015
1. Budgeted expenditures/expenses 5,239,395$ 5,071,087$
2. Add/subtract: estimated net reconciling items
3. Budgeted expenditures/expenses adjusted for reconciling items 5,239,395 5,071,087 4. Less: estimated exclusions 5. Amount subject to the expenditure limitation 5,239,395$ 5,071,087$
6. EEC or voter-approved alternative expenditure limitation $ $
***
***
Fiscal Year 2015
CITY/TOWN OF KEARNY
1,946,812
3,110,529$ 1,804,391$
59,357 2,248,257 127,046 497,605 1,810,009 Special Revenue Funds
1.
2.2,222,744
Amounts in this column represent Fund Balance/Net Position amounts except for amounts not in spendable form (e.g., prepaids and inventories) or legally or contractually required to be maintained intact (e.g., principal of a permanent fund).
The city/town does not levy property taxes and does not have special assessment districts for which property taxes are levied. Therefore, Schedule B has been omitted.
Includes Expenditure/Expense Adjustments Approved in current year from Schedule E. Includes actual amounts as of the date the proposed budget was prepared, adjusted for estimated activity for the remainder of the fiscal year.
216,357$ $ $ 1,540,833$ 1,232,577$ $
FUND BALANCE/
NET POSITION***
PROPERTY TAX
REVENUES
ESTIMATED REVENUES
OTHER THAN PROPERTY
TAXES FUND
General Fund1,644,386$ 1,457,873$
ACTUAL EXPENDITURES/
EXPENSES**
ADOPTED BUDGETED
EXPENDITURES/EXPENSES* 2015 2015
TOTAL FINANCIAL
RESOURCES AVAILABLE
BUDGETED EXPENDITURES/
EXPENSES
INTERFUND TRANSFERSOTHER FINANCING
ADOPTED BUDGETED
EXPENDITURES/EXPENSES
EXPENDITURE/EXPENSE
ADJUSTMENTS APPROVED
ACTUAL EXPENDITURES/
EXPENSES*
BUDGETED EXPENDITURES/
EXPENSES
2014 2014 2014 2015
Mayor and Council: General Fund $ 30,275 $ $ 14,392 $ 30,435
Department Total $ 30,275 $ 0 $ 14,392 $ 30,435
List Department:Administration General Fund $ 287,977 $ $ 299,336 295,717
Department Total $ 287,977 $ 0 $ 299,336 $ 295,717
List Department:Police/Dispatch General Fund $ 654,560 $ $ 697,927 776,995
Department Total $ 654,560 $ 0 $ 697,927 $ 776,995
List Department:Fire $ $ $ General Fund 54,750 51,491 55,150 Firefighter's Pension Fund 3,200 2,784 3,200
Department Total $ 57,950 $ 0 $ 54,275 $ 58,350
List Department:Public Works/Parks General Fund $ 75,200 $ $ 80,885 $ 78,792
Department Total $ 75,200 $ 0 $ 80,885 $ 78,792
List Department:Attorney General Fund $ 30,000 $ $ 35,793 $ 30,600
Department Total $ 30,000 $ 0 $ 35,793 $ 30,600
List Department:Magistrate General Fund $ 44,203 $ $ 40,870 $ 44,658
Department Total $ 44,203 $ 0 $ 40,870 $ 44,658
List Department:Recreation General Fund $ 20,094 $ $ 17,639 $ 20,148
Department Total $ 20,094 $ 0 $ 17,639 $ 20,148
List Department:Library General Fund $ 43,009 $ $ 62,609 $ 61,041
Department Total $ 43,009 $ 0 $ 62,609 $ 61,041
*
Expenditures/Expenses by DepartmentFiscal Year 2015
CITY/TOWN OF KEARNY
DEPARTMENT/FUND
Includes actual expenditures/expenses recognized on the modified accrual or accrual basis as of the date the proposed budget was prepared, plus estimated expenditures/expenses for the remainder of the fiscal year.
Distinguished Budget Presentation Award (A Best Practice Guide)
The Government Finance Officers Association (GFOA) established the Distinguished Budget Presentation Awards Program in 1984 to encourage and assist state and local governments to prepare budget documents of the very highest quality that reflect both the guidelines established by the National Advisory Council on State and Local Budgeting and the GFOA’s best practices on budgeting and then to recognize individual governments that succeed in achieving that goal.
Policy Document
Financial Plan
Operations Guide
Communication Device
Distinguished Budget Presentation Award Mandatory Award Criteria
Policy Document The document shall include
a budget message that articulates priorities and issues for the upcoming year.
The message should describe significant changes in priorities from the current year and explain the factors that led to those changes.
Policy Document The document should include a coherent statement of entity-
wide long-term financial policies.
Policy Document The document shall describe the process for preparing, reviewing,
and adopting the budget for the coming fiscal year.
It also should describe the procedures for amending the budget after adoption.
Financial Plan The document shall present
a summary of major revenues and expenditures, as well as other financing sources and uses, to provide an overview of the total resources budgeted by the organization.
Financial Plan
The document must include summaries of revenues and other financing sources, and of expenditures and other financing uses for the prior year actual, the current year budget and/or estimated current year actual, and the proposed budget year.
Financial Plan The document shall include projected changes in fund
balances, as defined by the entity in the document, for appropriated governmental funds included in the budget presentation.
Financial Plan
The document shall describe major revenue sources, explain the underlying assumptions for the revenue estimates, and discuss significant revenue trends.
Financial Plan
The document should include budgeted capital expenditures, whether authorized in the operating budget or in a separate capital budget.
Financial Plan
The document shall include financial data on current debt obligations, describe the relationship between current debt levels and legal debt limits, and explain the effects of existing debt levels on current operations.
Operations Guide The document shall include an organization chart(s)
for the entire entity.
Operations Guide A schedule or summary table of personnel or position counts
for prior, current, and budgeted years shall be provided.
Operations Guide
The document shall describe activities, services, or functions carried out by organizational units.
Communications Device
A document shall include a table of contents that makes it easier to locate information in the document.
Operations Guide The document should
provide an overview of significant budgetary items and trends. An overview should be presented within the budget document either in a separate section or integrated within the transmittal letter or as a separate budget-in-brief.
Resources Government Finance Officers Association
AZ Auditor General Office
AZ League of Cities & Towns-Budget and Finance Manual -http://www.azleague.org/
Pat Walker Consulting [email protected]
Katie Gregory [email protected]
http:www.auditorgen.state.az.us
http://www.gfoa.org/budgetaward
Questions?Questions?