money, money, money! municipal finance 101 · 2018-04-02 · municipal finance 101 • strategic...

Money, Money, Money!Municipal Finance 101Ross Hyatt, Finance Director City of Jerome

Michelle Frostenson, Asst Finance Director City of Jerome

Lorie Race, CFO City of Twin Falls

ICCTFOA 2016

Municipal Finance 101

• Strategic Planning• Budgeting• Financial Review and Reporting• Audit/CAFR (Comprehensive Annual Financial Report)• Internal Controls• Help!

Municipal Finance 101

• Where to begin?? Strategic Plan!• Roadmap

• Continuity

• Goals?

Mission

VisionHealthy

Community

Learning Community

Secure Community

Accessible Community

Environmental Community

Prosperous Community

Responsible Community

Internal Organization

Guiding Principles

Municipal Finance 101-Long Term Planning

• Strategic Plan

• Long Term Planning Committee• Tasked with preparing 5-year plan

• LTP role in budget process

Municipal Finance 101- Budgeting

• Idaho code 50-1002: City Council is responsible for preparing budget.• Who participates in your city?

• Does the budget reflect City Council’s priorities in investments in the community? (IE: Strategic Plan!)

Sample: Accessible Community (FA #4)Budget Connections

Personnel

• Upgrade a Planner to a Senior Planner ($4,888)

Capital

• Specific improvements for ADA compliance ($55,000)

• Sidewalk replacement program ($50,000)

• Eastland Drive South reconstruction from Wright to Osterloh ($500,000)

• Eastland Drive reconstruction from Julie to Falls ($427,000)

• Street lights along Cheney Dr. from North College to Washington ($300,000)

• ARFF vehicle for airport ($800,000)

• Taxiway reconstruction at airport ($2,750,000)

Sample: City of Jerome Strategic Plan Focus Areas

1. Commercial Environment2. Public Facilities3. Community Pride4. Cost of Services5. Civic Engagement6. Managed Growth

7. Youth Focus8. Public Service Attitude/ Effectiveness9. Changing Demographics10. Economic Prosperity11. Community Health and Safety12. Environmental Quality13. Jerome City Staff

Sample: City of Jerome Strategic Plan Focus Area/2017 Budget Driver

• Focus Area 1: Commercial Environment • 2015 Condition: “Due to both national trends in the retail environment and regional issues, the traditional vitality

of commercial activity in Jerome…”• Preferred Future Vision: “A more self-reliant body of commercial activity exists in Jerome where a broad array

of shopping choices is available for residents conveniently located within their community…”• Goal CE 1: Revitalize Downtown Jerome

• Initiatives: CE1.1 City Council Policy Resolution expressing priority for Downtown Revitalization

• 5-year Success Factors – Goal CE 1 • Council Policy Adopted

• Plans, studies and strategies completed and adopted by City Council

• Etc…

• Budget Driver - Continue staffing and fund activities for commercial environment improvement

Municipal Finance 101- Budgeting (continued)

Budget Basics

• Easy to understand?

• What’s it for?

• What drives the budget?

• Budget year: October 1st to September 30th.


Budget Structure/Funds• Governmental Funds

• General Fund, Special Revenue, Debt Service, and Capital Projects

• Proprietary Funds

• Enterprise Funds (Business-type)

• Internal Service Funds

• Fiduciary Funds (Trustee)


Budget Structure:• Revenue Sources

• Taxes, Charges for Services, Intergovernmental, Interest, Donations, Contributions, etc.

• Organization Units• Admin, Police, Fire, Parks, Economic Development, Finance, etc.• Further breakdown within the units.

Municipal Finance 101-Sample15-16 16-17 17-18 18-19

Category Budget % Change Budget % Change Budget % Change Budget % Change

Property taxes 17,898,113$ 3.10% 19,277,321$ 1,074,244$ 7.71% 20,417,059$ 5.91% 21,615,872$ 5.87%Prior Year Collections 17,662,301$ 2.13% 18,203,078$ 3.06% 19,277,321$ 5.90% 20,417,059$ 5.91%

Option 1--3% Statutory increase 264,935$ -48.94% 546,092$ 106.12% 578,320$ 5.90% 612,512$ 5.91%Option 2--New construction 277,455$ 13.43% 528,151$ 90.36% 561,418$ 6.30% 586,302$ 4.43%Option 2--Annexations -$ -$ -$ Option 3--Foregone Balance Used -$ -$ -$ -$

Ag replacement/HOE 10,276$ 36.69% 1,073$ -89.56% 1,073$ 0.00% 1,073$ 0.00%Personal property tax 294,689$ 0.00% 294,689$ 0.00% 294,689$ 0.00% 294,689$ 0.00%

304,965$ 0.91% 295,762$ -3.02% 295,762$ 0.00% 295,762$ 0.00%

Building Permits 850,000$ 21.43% 810,000$ (40,000)$ -4.71% 826,200$ 2.00% 842,724$ 2.00%Electrical Permits 125,000$ 38.89% 130,000$ 5,000$ 4.00% 132,600$ 2.00% 135,252$ 2.00%Plumbing Permits 75,000$ 7.14% 78,000$ 3,000$ 4.00% 79,560$ 2.00% 81,151$ 2.00%Mechanical Inspection Fees 110,000$ 4.76% 85,000$ (25,000)$ -22.73% 86,700$ 2.00% 88,434$ 2.00%

1,160,000$ 20.21% 1,103,000$ (57,000)$ -4.91% 1,125,060$ 2.00% 1,147,561$ 2.00%

Gas 340,000$ 0.00% 325,000$ (15,000)$ -4.41% 328,250$ 1.00% 331,533$ 1.00%Electric 1,375,000$ 0.36% 1,377,000$ 2,000$ 0.145% 1,404,540$ 2.00% 1,446,676$ 3.00%Cable 190,000$ -8.65% 175,000$ (15,000)$ -7.89% 175,000$ 0.00% 174,125$ -0.50%

1,905,000$ -0.68% 1,877,000$ (28,000)$ -1.47% 1,907,790$ 1.64% 1,952,333$ 2.33%

State Liquor Apportionment 575,000$ 8.08% 615,000$ 40,000$ 6.96% 633,450$ 3.00% 652,454$ 3.00%

County Distribution 1,676,000$ 5.87% 1,734,000$ 58,000$ 3.46% 1,794,690$ 3.50% 1,857,504$ 3.50%State Distribution 1,980,000$ 12.57% 2,079,000$ 99,000$ 5.00% 2,162,160$ 4.00% 2,248,646$ 4.00%

Municipal Finance 101-SampleFund Personnel M&O Capital Debt Transfer Total

General & Capital Improvement FundsCity CouncilFY 2017 119,824$ 38,874$ -$ -$ -$ 158,698$ FY 2016 119,824$ 37,071$ -$ -$ -$ 156,895$ Increase (Decrease) -$ 1,803$ -$ -$ -$ 1,803$ % Increase (Decrease) 0.00% 4.86% 0.00% #DIV/0! #DIV/0! 1.15%

City ManagerFY 2017 744,104$ 210,647$ 600,000$ -$ -$ 1,554,751$ FY 2016 705,031$ 178,986$ 28,400$ -$ -$ 912,417$ Increase (Decrease) 39,073$ 31,661$ 571,600$ -$ -$ 642,334$ % Increase (Decrease) 5.54% 17.69% 2012.68% 0.00% #DIV/0! 70.40%

FinanceFY 2017 595,777$ 173,615$ -$ -$ -$ 769,392$ FY 2016 562,708$ 194,781$ -$ -$ -$ 757,489$ Increase (Decrease) 33,069$ (21,166)$ -$ -$ -$ 11,903$ % Increase (Decrease) 5.88% -10.87% #DIV/0! #DIV/0! #DIV/0! 1.57%

LegalFY 2017 96,638$ 298,944$ -$ -$ -$ 395,582$ FY 2016 91,225$ 298,294$ -$ -$ -$ 389,519$ Increase (Decrease) 5,413$ 650$ -$ -$ -$ 6,063$ % Increase (Decrease) 5.93% 0.22% #DIV/0! #DIV/0! #DIV/0! 1.56%


Budget Calendar/Checklist

• Communicate!• Date material distributed.

• Date task must be completed.

• Department Heads, Mayor, and Council understand time-line.• Helps to meet legal time-lines.

MarchMonday, March 21 Discussion with City Council on FY 2017 Budget Strategies

AprilThursday, April 7 Budget Packets Distributed to DepartmentsMonday, April 25 Long Term Planning Presentation to City CouncilThursday, April 28 Budget Packets CompletedFriday, April 29 Notify Twin Falls County of Public Hearing Date for the FY 2017 Budget

MayMonday, May 23 Round Table Budget Meetings & Internal Budget Hearings/BalancingTuesday, May 24 Round Table Budget Meetings & Internal Budget Hearings/Balancing

JuneThursday, June 2 All Departments Budget Meeting - (Big Budget Balancing Meeting) - if necessary

JulyWednesday, July 6 Preliminary budget to Council for reviewMonday, July 11 Preliminary budget overview to Council by City Manager/StaffMonday, July 18 Discussion on Strategic Plan Focus Areas 7 & 8Monday, July 25 Discussion on Strategic Plan Focus Areas 1, 2 & 3

AugustMonday, August 1 Discussion on Strategic Plan Focus Areas 4 & 5Thursday, August 4 & 11 Publish Notice of Public Hearing on Rate AdjustmentsMonday, August 8 Discussion on Strategic Plan Focus Area 6Monday, August 15 Public Hearing on Proposed Rate AdjustmentsMonday, August 15 Council Adoption of FY 2017 Budget, set Public Hearing dateThursday, August 18 & 25 Publish Notice of Public Hearing on FY 2017 BudgetMonday, August 29 Public Hearing - FY 2017 Proposed BudgetMonday, August 29, 2016 Publish Appropriations Ordinance & Send Copy to Secretary of StateWeek of August 22 Certify Tax Levy to CountyMonday, August 29, 2016 Budget Finalized

September Wednesday, September 7, 2016 Last Day for Budget Hearing and Adoption of FY 2017 BudgetThursday, September 8, 2016 Last Day to Certify Tax Levy to CountyFriday, September 30, 2016 Final Date to Publish Appropriations Ordinance

FY 2017 Budget Calendar


Budget Kickoff• Budget Calendar/Checklist.

• Year-to-Date reports.

• Prior 2 years of financial data.

• Property Tax Scenarios: 0-3% increases

• Budget Forms: Operating, Personnel, & Capital


Budget KickoffTo Do List (April)

• Notify County of Public Hearing date• Review Calendar – Dept., Mayor & Council• Set Priorities for Budget.

• Review current trends, data, and conditions.• Set COLA and other employee costs. (PERSI, medical, etc.)• Review capital improvement plans (5 years).


Budget Forecasting

• Review long-term debt obligations.

• Review new construction and annexation with County.

• Review trends on expenditure line-items.

• Refer to AIC Revenue Forecasts• Sales Tax, Gas Tax, Liquor Tax


Budget Checklist• Departmental Meetings by Appointment

• Mayor & Councilmembers

• Financial Officer / Treasurer

• Department Heads & Supervisors

• Long Term Planning Committee

• Round Table Discussions


Budget Checklist• Meet with General Fund Department Heads to balance the General Fund

Budget.• List all budget requests and revenues expected.

• Calculate General Fund surplus/deficit.

• List all requests for: Capital, new programs, & new personnel.

• Negotiate cuts to balance General Fund budget.


Budget Checklist• Preliminary review by Mayor & Council

• Review General Fund cuts to balance.

• Review all Capital and New Employee requests.

• Review all fee increases.

• Maintain Fund integrity.

• Funds must balance.


Budget Checklist• Council Meetings before August.

• Review tentative budget.

• Set tentative budget through Resolution.

• Set Hearings for fee increases.


Budget Checklist• Public Hearing Notice

• Publish twice 7 days apart in official newspaper.• Include proposed revenues/expenditures along with 2 prior fiscal years.

• Next fiscal year proposed budget.• Current fiscal year budget.• Prior fiscal year actual.

• Public hearing for all fee increases greater than 5%.


Budget FinalizingCouncil meeting before 2nd Monday in September.

Public Hearing – Fee increases.Public Hearing – Budget.Approve Final Budget – not greater than published amounts.Certify Tax levy by 2nd Monday in September (L-2).Publish Ordinance once by September 30th.File Ordinance with Secretary of State.Produce final budget documents and publish on web-site.


Budget Monitoring

• Make Department Heads responsible for budget.

• Use information for trending to form next year’s budget.

• Use to help discover errors in accounting.

• Make sure departments code to actual expense account and not where they have budget money.

Municipal Finance 101- Budgeting (continued)Budget Reporting

• Complete Annual Street Report by December 31st.

• Publish annual Street Report by January 15th.

• Publish Quarterly Treasurer’s Reports.

• Report to Council:• Weekly payables

• Monthly updates

• Formalized quarterly presentations


Budget Amendments• More than original appropriation?

• Do a Notice of Public Hearing.• Publish twice 7 days apart

• Have Public Hearing.• Adopt an Appropriations Ordinance Amendment.

• Publish once before the end of the fiscal year.


Budget Considerations Use the budget priorities to develop an unmet needs list. List comes out of requests presented at budget time that were left

unfunded. Each departments is allowed a limited number of unmet needs on the

list. List is used during the year if any additional revenue becomes available. Gives a starting point for future budgets.

Municipal Finance 101 - Fund Accounting

• Cities use Fund accounting to record their financial transactions and for budgeting.• Fund accounting could be compared to

“check book” accounting with a check book for each fund.

• Choose software that supports this type of accounting.

Municipal Finance 101 - Fund Definition

• A fiscal and accounting entity with a: • Self balancing set of accounts

• Records cash and other resources, together with all related liabilities and residual equities or balances, and changes therein,

• That are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with specific regulations, restrictions or limitations.

Sample Fund DashboardsMarch 31, 2016

** Enterprise Fund Current Restricted Detailed Breakdown:63,878.32$ 225,010.38$

1,159,997.07$ 5,312,588.78$ 2,433,585.17$ 929,057.93$ 1,021,054.50$ 597,832.19$

11,743,004.34

A Look at Jerome's Reserves as of:

Customer DepositsCapital Reserves

The four graphs below show the unrestricted and restricted reserves in each fund for the period:

Debt ReservesOperating Reserves

Reserve Capacity2014 Bond Funds

2014 Bond Reserve2006 Bond Reserve

1.00 100.00

10,000.00 1,000,000.00

100,000,000.00

GENERAL STREET LIBRARY PARK

$1.6M $1.57M $169k $68k$1.31M $1.34M $147k $77k$1.1M $1.32M $118k $74k

Governmental Fund Unrestricted Reserves

Current Unrestricted Prior Year Unrestricted Prior 3 Year Average Unrestricted

1.00

100.00

10,000.00

1,000,000.00


$21k $1k $0k $3k$24k $1k $0k $3k$19k $1k $0k $2kGovernmental Fund Restricted Reserves

Current Restricted** Prior Year Restricted Prior 3 Year Average Restricted

1

100

10,000

1,000,000

100,000,000

IRRIGATION SANITATION WATER SEWER

$0k $8k$1.87M $9.86M

$0k $6k$2.34M

$14.44M

$0k $6k $2.36M$9.97M

Enterprise Fund Restricted Reserves

Current Restricted** Prior Year Restricted Prior 3 Year Average Restricted

1.00

10,000.00

100,000,000.00


$155k $154k $198k$6.83M$346k $157k $1582k

-$10.16M$220k

$155k $672k

-$2.46M

Enterprise Fund Unrestricted Reserves

Current Unrestricted Prior Year Unrestricted Prior 3 Year Average Unrestricted

March 31, 2016A Look at Jerome's Cash as of:

The graph below shows the breakdown of what the City's Cash and Cash Equivalents consist of for the period:

The three graphs below show how the above Cash and Cash Equivalents are allocated across the funds:

-

5,000,000.00

10,000,000.00

15,000,000.00

20,000,000.00

25,000,000.00

BANK DEPOSITS STATE OF IDAHO LGIP U.S. GOVERNMENT BONDS

TOTAL

$1.17M

$14.8M

$1.45M

$17.42M

$.42M

$18.51M

$1.12M

$20.05M

$.24M

$14.53M

$.83M

$15.6M

Cash and Cash Equivalents

Current Cash and Cash Equivalents Prior Year Cash and Cash Equivalents

-

1,000,000.00

2,000,000.00


$1.76M$1.31M

$170k $68k

$1.53M $1.25M$147k $77k

$1.29M$1.17M

$118k $74k

Allocated to Governmental Funds

Current Cash and Cash Equivalents Prior Year Cash and Cash Equivalents Prior 3 Year Average Cash and Cash Equivalents

1.00

10,000.00

100,000,000.00


-$14k

$144k$1.8M $11.03M$175k $156k

$2.27M $14.59M$65k $152k

$2.27M $10.49MAllocated to Enterprise Funds


0.01

100.00

1,000,000.00

ENGINEERING HUMAN RESOURCES INFORMATION TECHNOLOGY

TOTAL

$0k $0k $0k

$16.29M

$0k

$0k

$0k

$20.21M$0k $0k $1k $15.65MAllocated to Internal Service Funds & Fund Totals


Municipal Finance 101 - The G’s

• GASB – Governmental Accounting Standards BoardFormed in 1984 and determines GAAP for state and local governments.

• GAAP – Generally Accepted Accounting Principles

Refers to the conventions, rules and procedures that serve as the norm for the fair presentation of financial statements.

Municipal Finance 101- Audit

• Cities > $250,000 Budget – Annual Audit Required by State Law

• Cities > $100,000 and < $250,000 May do Biennial or Annual

• Cities > $50,000 an < $100,000 – Reviewed Biennial

• Cities < $50,000 – No Audit or Review Required

Municipal Finance 101- Audit Terms

• Reasonable AssuranceLevel of assurance that should be obtained from financial audits that the financial statements are fairly presented.

• Material WeaknessesReportable conditions identified during the audit process that are of such magnitude that they could potentially result in a material misstatement of the financial statements. Materiality – Is it significant or important enough to affect the results in a meaningful way – material to the end result.

Municipal Finance 101- Audit Terms

• Unqualified or “clean” audit opinion• Qualified opinion• Disclaim an opinion• Adverse opinion• Audit Findings• Single Audit

• Based on Federal award amount over $750,000.

Municipal Finance 101- Financial Section

• Who will write City’s Financial Report?• Keep in mind the separation of duties.

• Accountant separate from auditors.

• Will it be a CAFR?

• Does your City have a “Discretely Presented Component Unit? Example: Urban Renewal

Municipal Finance 101- Financial Section

• Management Discussion and Analysis• Government Wide Financial Statements• Government Fund Financial Statements• Proprietary Fund Financial Statements• Fiduciary Fund Financial Statements• Notes to the Financial Statements• Required Supplementary Information (RSI)• Other Information (Not required by GAAP)

Municipal Finance 101- Internal Control Purpose

• Reasonable assurance the following objectives are met:• Reliability in financial reporting.

• Effectiveness and efficiency in operations.

• Compliance with applicable laws and regulations.

• Safeguarding of City assets.

• Safeguarding of the employee.

Municipal Finance 101- Components of Internal Controls

• Control Environment• Assignment of authority, policies, and practices.

• Risk Assessment• Staff turnover, information technology

• Control Activities• Preventative, detective, corrective.

• Information and Communications• Treatment of transactions that occur.

• Monitoring.

Municipal Finance 101- Implementing Internal Controls

• Policy and Procedure Manuals• Credit Card Policy• Fixed Assets Policy.• Purchasing Policy.• Debt Policy.• Investment Policy.• Cash Handling Policy.

• All Policies should include appropriate forms and flow charts.

Municipal Finance 101- Internal Control Examples

• Separate billing and receipting duties.• Check approval and signing duties should be separate

from check creation. • Department code invoices, A/P prepare, and Council

approve.• All statements should be mailed to the A/P office.• Bond employees who handle cash.


• Cash, check, credit card payments should balance to daily deposits.

• All employees should sign a credit card agreement form prior to receiving a credit cards.

• Deposits – safe process in place to transfer deposits from City to the bank (armored car or police).

• Adequate physical control over check stock, cash receipts, cash, etc.


• Do not cash checks out of receipt drawers.

• Pre-numbered check stock.

• Positive pay or reverse positive pay.

• Bank reconciliations prepared by one employee and reviewed by a responsible official (not the preparer).

• Complaints investigated by someone other than the individual who performed the work.

Municipal Finance 101- HELP!!• Join Relevant Associations

• ICCTFOA – Idaho City Clerks, Treasurers, and Finance Officers Association. (Accounting Manual) www.idahocities.org

• AIC – Association of Idaho Cities (Municipal Guide Book) www.idahocities.org

• APT US & C – Association of Public Treasurers of United States and Canada www.aptusc.org

• GFOA – Government Finance Officers Association www.gfoa.org

http://www.idahocities.org/

http://www.idahocities.org/

http://www.aptusc.org/

http://www.gfoa.org/

Municipal Finance 101- Contact Information

Ross Hyatt, Finance Director Lorie Race, CFOCity of Jerome City of Twin Falls(208) 324-8189 (208) [email protected] [email protected]

Michelle Frostenson, Assistant Finance DirectorCity of Jerome(208) [email protected]

mailto:[email protected]



money, money, money! municipal finance 101 · 2018-04-02 · municipal finance 101 • strategic...

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