gary perdew st. lucie county fire district. what is budgeting? importance public vs private ...
TRANSCRIPT
BUDGETING BASICS
Gary PerdewSt. Lucie County Fire District
Overview
What is Budgeting? Importance Public vs Private Policies
Budget Cycle Language Revenues Fund Balance Expenditures Reports & Monitoring Tips
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
What is Budgeting?
Operations and Projects Personnel Rent, Lease, Mortgage Utilities Expendables Equipment Improvements
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.
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.
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.
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.
Policies“Guidelines that keep you out of Trouble”
Financial Policies Revenue Reserve Investment Debt Financial Reporting….etc.. Grants Capital Assets Internal Controls
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.
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.
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.
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.
Budget Cycle
IDEA
REQUEST
PRELIMINARY BUDGET
REVIEW
TENTATIVE BUDGET
LEGISLATIVE WORKSHOP
PUBLIC HEARINGS
FINAL APPROVAL
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?
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?
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.
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
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.
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.
The Four Phases Overlap
PREPARATION
APPROVAL
IMPLEMENTATION IMPLEMENTATION
ACCOUNTABILITY
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.
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,…)
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
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
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.
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
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.
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?
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.
Budgeting RevenuesAd Valorem Tax Revenue
Taxable Value $10,150,791
Per $1,000 $ 10,150.79
Times Millage Rate 3.94
Total Revenue $ 39,994
TRIM Factor 95.%
Budgeted Revenue $ 37,994
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)
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.
Fund Balance Carried Forward
CAUTION CAUTION CAUTION 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
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.
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.
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
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.
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
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.
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.
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
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.
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.
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).
Other Topics
Left over budgeted funds Postponing a budgeted project Making use of ‘found’ money Un-budgeted Emergency item
Questions or Comments