Week 8 Seminar

Financial Management

Objectives

• Describe the purpose for public budgeting• the use of the budget as a tool for planning• the difference between operating, capital, or capital

improvement budgets• The use of line item budget and program budgets

and the strengths and weaknesses of each• The difference in user fees and taxes

Budget

• Required by law and used for planning purposes.

• determine how much money will be needed to fund the organization.

• State laws• stretching the rules might be illegal.• Governments credit report is called bond

rating.

Signs Of Poor Management

• Overspending

• Failing to recognize potential shortages during the fiscal year

• Failure to include foreseeable expenses are

The Purpose of a Budget

• Supply information to elected officials to determine what programs and services will be funded

• Supply information to the public, facilitating public participation in the process

• Establish a formal policy for spending public funds

• Assist managers by categorizing and tracking expenditures

Budget Preparation

• Preparing a budget for upcoming year• Detailed financial projections– Called the “recommended budget”

• The recommended budget is submitted to the elected governing body, and it is made public.

• Public hearings• The governing body may modify the recommended

budget– This is the adopted budget for the fiscal year.

Operating Budget

• Funding for the day-to-day operating expenses of running the government

• Salaries and fringe benefits, fuel, expendable supplies and equipment, rent, utilities, and interest payments

• Generally broken down into categories called line items or funds

Capital or Capital Improvement Budget

• Long-range budget plan is used to guide the financing and construction of capital projects.– Includes funding for land acquisition, the development of

parks, and the construction of roads

Budget Tactics• Some budget categories are intentionally

underfunded.– overtime pay

• funding the shortage by transferring funds from nonessential categories

• seasoned managers schedule and procure supplies and equipment in the first half of the fiscal year.

• wish list for use at the end of the year

Budget Calendar

• The federal fiscal year runs from October 1 through September 30.

• Most other levels of government use July 1 through June 30 as their fiscal year.

Budget Formats

• Five most radically different budget types– line-item budget– lump-sum budget– program budget– performance budget– zero-based budget

Cost Recovery & User Fees

• They typically require enabling legislation from the state legislature.

• User fees are not taxes.• User fees are payments for service.• They must be based on some logical system

such as the cost to perform the service.

Adoption

• With business support, the adoption of a fee schedule is almost guaranteed.

• Without business support, but with the acknowledgement that they were given opportunity for input, adoption may occur provided elected officials agree on the need.

• Accusations of secrecy guarantee failure.

Determining the Fee Structure • Cost per hour basis• Based on budget data• average cost per hour or per inspection

criteria• Types Of Fees– Permit Fees– Inspection fees– Plan review fees– Fire protection systems testing and retesting

Summary

• Laws and regulations• purpose of a budget• Government budgets• Operating budget• Capital or capital improvement budget• The establishment of user fee systems• Adoption of a fee schedule