Transcript What You Should Know About Budgeting Florida Association

What You Should Know
About Budgeting
F G F O A Bootcamp
Budget Workshop
November 13, 2012
Jim Seuffert, Director
Angie Bibler, Budget Division Manager
Manatee County Financial Management Department
What You Should Know About Budgets
Topics
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Budget Policies & Process
Budget Basics
Legal Requirements/TRIM
Budget Calendar
Budget Review & Approval
Budget Monitoring / Revisions
The Government Budgeting Puzzle
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What product are we trying to create?
What series of activities need to take place?
What information do we need, how do we
review it, and where do we get it from?
Who is involved and what role do they play?
What timeframe and deadlines do we have?
What legal requirements must be met?
What happens after the budget is adopted?
General Requirements
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Should be based on legal requirements and
best practices:
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Florida Statutes
Best Practices – GFOA and other sources
Generally Accepted Accounting Principles
Legal Requirements
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Florida Statutes
The budget shall be balanced
 Defines budget system & fiscal year
 Defines process & general guidelines
 Sets method for setting the millage for all
taxing authorities (FS 200.065)
 Establishes budget procedures (FS129.03 for
counties & FS 166.241 for cities)
 Budget must be posted on website
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Legal Requirements
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Budget shall conform to the state’s uniform
chart of accounts
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Expenses are assigned to functional categories:
Transportation
 Culture & Recreation
 General Government
 Human Resources
 Public Safety
 Reserves
 Debt Services
 Inter-fund Transfers
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Budget Policies
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Best Practices
Fund balance reserve policy/working capital
reserves (“rainy day” fund)
 Multiyear & realistic financial forecasting
 Monthly or quarterly financial
reporting/monitoring
 Policies on nonrecurring revenue
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Budget Policies
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Best Practices
Establish policy early
 Transparency and Clarity
 Pay-as-you-go capital funding policies
 Five-year capital improvement plan
integrating operating costs of new facilities
 Communications Device
 Themes and Consistency
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Budget Policies
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Should Address:
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Budget Process & Budget Instruction Manual
Reserves
Fund Balance
Debt Issuance and Debt Management
Investments
Revenue Diversification
Capital Program
Revenues
Fees and Charges
Expenditures
Post Adoption
Budget Policies
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Policies and Procedures
Should be in writing
 Should be updated at least annually
 Should be included in the adopted budget
 Should be tailored to your local government
 Should be adopted by governing board
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Budget Policies
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GAAP – Generally Accepted Accounting
Principles
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Fund Accounting
Fund = self balancing set of accounts set up for a
specific purpose
 Fund Types
 Governmental (general, special revenue, debt
service, capital)
 Proprietary (Internal Service/Enterprise)
 Fiduciary (Trust/Agency)
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Budget Process
Mission of a Budget Process:
To help decision makers make informed
choices regarding resource allocation and the
provision of services and capital assets and to
promote stakeholder participation in the
decision process
Budget Process
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It should provide the forum to:
Review comparative financial and
performance data in a common format
 Analyze and debate program merits
 Establish priorities & long-term goals
 Involve stakeholders
 Make service level and service cost
decisions
 Focus on results & outcomes
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Budget Basics
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Why Do We Have Budgets?
What Is A Budget?
Types Of Budgets
Capital Improvement Plan
Multiyear Budgets & Forecasting
Methods Of Budgeting
Why Do We Have Budgets?
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A means to:
Meet legal requirements
 Set and control spending
 Provide information to the public and policy
makers
 Educate the public and elected officials
 Prioritize the needs of a community
 Outline the expenditures of government spending
 Justify and analyze programs and services
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What is a Budget?
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Webster’s Dictionary An itemized summary of probable expenditures
and income for a given period
 A systematic plan for meeting expenses in a given
period
 The total sum of money allocated for a particular
purpose or time period
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Florida Statutes = Budget sets a legal limit
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Revised Budget if proper procedures are followed
What Is A Budget?
Best Practices
Government Finance Officers’ Association
 Policy Document
 Financial Plan
 Operations Guide
 Communications Device
It’s A Policy Document
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Explains and follows policy
Identifies services and service levels that
will be delivered over the upcoming
twelve month fiscal period
Summarizes the challenges that were
faced and how they were addressed
Provides detailed information such as
major goals and objectives for each
department, revenue sources, trends,
operating funds, expenditure categories
It’s A Financial Plan
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Outlines how much services and
programs will cost and how they will be
funded
Overview of major revenue and
expenditure categories
Discusses the accounting structure and
budgetary policies
Summarizes the capital improvement
program and identifies appropriations
for the program
Provides information on bonded debt
It’s An Operations Guide
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Indicates how services will be delivered
to the community
Outlines number of full time positions
Identifies department level
appropriations
Includes an organizational chart showing
how government is structured to deliver
the most efficient and effective services
It’s A Communications Device
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Designed to be user friendly with summary
information in text, tables, and graphs
Includes a glossary of budget terms
Provides a table of contents
Includes a budget message or budget
transmittal letter with a condensed analysis of
the fiscal plan and challenges for the
upcoming year
Posted on internet, budget summary,
handouts, etc
Types of Budgets
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Operating Budget
One year
 Multiyear – recommended practice
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Capital Budget
Is adopted with the operating budget
 Developed from Capital Improvement Plan (CIP)
 Is funded (1st year of the CIP)
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Types of Budgets
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Operating Budget
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Personal Services
 Salaries and benefits
Operating Expenditures
 Fuel, utilities, contracts, supplies, etc.
Capital Expenditures
 Funded capital improvements
Reserves
 Operating and cash requirements
 Savings for future uses
Capital Improvement Plan
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Typically a five to twenty year plan
Develop, review, debate separately from
operating budget
Adopted annually as a plan
Included in adopted budget document
“Smooth funding” requirements
Plan for long-term debt, if needed
Capital Improvement Plan
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Identifies funding sources
Opportunities to develop alternative
funding sources
Identifies future capital needs and their
operating costs – phase in
Identifies future transportation needs
including roads and sidewalks
Supports capital improvement element
(CIE) of the comprehensive plan
What is a Multiyear Budget?
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A document that authorizes a government’s
appropriations, anticipated revenues, and
spending plans for two or more consecutive
budgetary years.
 Rolling plan
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First year is adopted budget while second and future
years are an adopted plan or tentative spending plan
Two Year Budget
Abbreviated budget cycle in off years
 2nd year plan is adjusted in the “off year” and adopted
 2nd year of the process produces a one year budget
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TRIM process required each year
Multiyear Budget/Forecasting
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Greater emphasis on:
Management & service delivery
 Program evaluation & monitoring
 Long-term perspective
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Early problem identification
 Link operating & capital planning
 Integrates strategic planning and
goal-setting into the budget process
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Multiyear Budget/Forecasting
Ability to “smooth expenditures” as
new programs, services, or
infrastructure is brought “online”
 Cost savings
 Frees staff to deliver services
 Viewed favorably by bond rating
agencies
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Budget Methods
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Line Item Budget
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Follow uniform accounting practices and chart of
accounts to meet annual financial reporting
requirements per statute (FS 218.32)
Other ways to develop, summarize and
present the budget
Program Budget
 Performance Based Budget
 Zero Based Budget
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Budget Methods
Line Item Budget
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Focus on what is to be bought
Expenditure control model
Traditional approach
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Typically built upon last year’s cost
Easiest to develop
Lacks innovation and operational accountability
Budget Methods
Line Item Budget
Personal Services
Salaries
Fringe Benefits
Temporary Wages
Overtime
Total
Operating Expenses
Fuel
Office Supplies
Travel
Total
Capital
Pick Up Truck
Grand Total
$5,000
2,000
1,000
500
$8,500
$3,000
1,000
500
$4,500
$6,000
$19,000
Budget Methods
Program Budget
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Focus is on what is to be achieved
Effectiveness model
May cuts across department lines
Identifies program cost and establishes
performance measures
Control and accountability challenges
May lacks innovation and creativity
Budget Methods
Program Budget
Development Review Program
Public Works
Fire/Rescue
Environmental Protection
Planning
Building Inspections
$2,000
1,000
500
2,500
500
Grand Total
$ 6,500
Budget Methods
Performance Based Budget
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Focus is on what is to be done
Efficiency model
Spending is better aligned with objectives and
strategies
What do you want to deliver?
How much do you want to deliver?
What delivery channels will you use?
Aligned at department level but not at organizational
level
Budget Methods
Performance Based Budget
Fire Department
Suppression
 Number of responses
 Cost per response
 Annual Cost
100
$ 60
$6,000
Prevention
 Number of Inspections
 Cost per Inspection
 Annual Cost
470
$4
$1,800
Budget Methods
Zero Based Budget
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Focus is on what is to be prioritized
Ranking model
Let’s start from scratch
What programs & services do you want to
deliver?
 How much do you want to deliver?
 Difficult, time-consuming, and costly to develop
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Legal Requirements
Florida Statutes Determination of Millage
 Provides for the process, timeframe, and advertising
requirements that must be followed by each taxing
authority
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Definitions and duties
Method of fixing millage rates
Millage limitations
“TRIM” process
County or City Charter, if applicable
Statutory Timetable
July 1
Property Appraiser certifies the taxable value
July 15
Proposed Budget presented to Commission (counties)
Aug 4
Millage certified to the Property Appraiser (all taxing
authorities )
Aug 24
Property Appraiser mails out the Notice of Proposed
Property Taxes (TRIM Notice)
Sept 3/ Hold 1st public hearing on the tentative budget and
Sept 18 proposed millage rate (Noticed on TRIM)
Advertise the 2nd public hearing to adopt a final millage rate
and budget to be held no less than 2 days or no more than 5
days after the day that the advertisement is published
Sept 18
/Oct 3
Hold 2nd public hearing and adopt a final millage
Budget Calendar
Submit
Budget
Document
to GFOA
Jan/Feb
Economic
Forecast
September
Adopted
Budget
September
Public
Hearings
Jan/Feb
Priorities
Periodic
Budget
Amendments
& Monitoring
Aug/Sept
Board Changes
& TRIM
Mar/April
Department
Requests
Apr/May/June
County Administrator
Meetings
August
BCC
Workshops
July
Proposed
Budget
The Commission/Council Role
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Areas of Responsibility
Practices to Avoid
Budget Monitoring and Reporting
The Commission/Council Role
Areas of Responsibility
 Knowledge of Florida Statutes
 Policy, priorities, and goals
 Involved in the process
 Familiar with the documents
 Prepared for discussion and debate
 Approve the budget
 Listen
 Ask questions
The Commission/Council Role
Areas of Responsibility
 Address taxation issues locally
Raise revenues
 Cut expenditures
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Targeted service level reductions
 Across the board cuts
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Cost saving measures
Managed competition
 Consolidation of services
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The Commission/Council Role
Practices to avoid
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Failure to reward good practices
Ignoring operating costs associated with
capital projects
Deferring capital maintenance
Undisciplined use of one time revenues to
balance the budget
Implementing across the board cuts
Too strict line item control
Borrowing to balance the operating budget
Budget Administration
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Monitoring the budget
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Current year projections to year end
Straight-line projections
 % of year completed vs. expenditure rate
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Seasonal fluctuations
 Sporadic payment schedules
 Payments for 12 months & only 12 months
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Budget Administration
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Amending the budget
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Budget transfers
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Moves budget between functions, no change to fund or
department total (can be delegated to staff)
Budget amendments (approved by Comm./Council)
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Moves budget from one fund or department to
another, increase to one fund and decrease to another
fund, or to appropriate unanticipated revenue
Budget Administration
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Management reports
Monthly or quarterly reports
 Financial models
 Fiscal trend monitoring
 Position Control Reports
 Other special reports
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Executive reports to Commission/Council
Web site / Dashboard reports
BUDGETING - A Practical Example
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Property Tax terminology
Examples – Taxable Values &Millage Rates
County-wide millage summary
Revenue by Source and Appropriations by
Function (State chart of accounts)
Aggregate millage rates & “roll-back”
TRIM example
Property Tax Terminology
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(Not Greek, but Latin)
Ad Valorem – taxes based on property value
Millage Rate – tax rate; $1 per $1,000 of
taxable value
Assessed Value (just value) – total property
value
Exemption – amount determined by state law
to be deducted from assessed value (for
Homestead status, disabled, widows)
Taxable Value – Assessed value less any
exemptions
TAXABLE PROPERTY VALUES
Billions
40
35
34.4
30
31.7
30.6
28.7
25
20
24.8
24.7
21.1
23.6
23.3
15
$23.3 Billion
10
(July 1, 2012
Certified Taxable
Value)
5
0
04
05
06
07
Tax Year
08
09
10
11
12
COUNTYWIDE MILLAGE RATES
MILLAGE
RATE
10
9
8
7
OPERATING MILLAGE
7.71 7.72 7.57
7.4
6
6.0
6.0
6.0
6.0
6.0
6.0
08
09
10
11
12
13
5
04
05
FISCAL YEAR
06
07
MILLAGE SUMMARY
FUND
FY11-12
ADOPTED
FY12-13
PROPOSED
CHANGE
5.4707
TRANSPORTATION
.2625
LIBRARY
.2328
VOTED DEBT SERVICE .1303
5.4707 0.0000
.2446 - 0.0179
.2507 + 0.0179
.1333 0.0030
6.0963
6.0993 0.0030
GEN. FUND
TOTAL CO-WIDE
COUNTYWIDE MILLAGE LEVIES
Millage for the unincorporated area or for a municipality
would be in addition to the millages below.
COUNTY
OPERATIONS
5.8327 MILLS
(40%)
SCHOOL
BOARD
7.5890 MILLS
(53%)
VOTED
DEBT/CHILDREN’S
SVCS TAX .4666
MILLS (3%)
OTHER TAXING
AUTHORITIES
.5608 MILLS (4%)
REVENUE BY SOURCE
PROPOSED BUDGET $464 MILLION
OTHER TAXES
$28 MILLION
6%
CHARGES FOR
SERVICES
$174 MILLION
38%
PROPERTY
TAXES
$152 MILLION
33%
INTERGOVERNMENTAL
(STATE, FED. & OTHER)
$39 MILLION 8%
LICENSES & PERMITS,
FINES, INTEREST & MISC.
$71 MILLION 15%
APPROPRIATION BY FUNCTION
PROPOSED BUDGET $464 MILLION
PUBLIC SAFETY
$132 MILLION
28%
CULTURE &
RECREATION
$17 MILLION
4%
GENERAL GOVT.
$69 MILLION 15%
OTHER
$26 MILLION 6%
CAPITAL
OUTLAY
$14 MILLION 3%
HUMAN
SERVICES
$28 MILLION 6%
TRANSPORTATION
$42 MILLION 9%
PHYSICAL
ENVIRONMENT
$136 MILLION 29%
AGGREGATE TAX RATE
Comparison to Rolled-Back (RB)
Proposed Aggregate Rate*
Aggregate Rate for RB*
Mills below RB
6.7408 Mills
(6.9042) Mills
- .1634 Mills
* The Proposed Aggregate rate is 2.37% below Rolled Back. The
aggregate rate calculation reported on the DR-420 excludes
Debt Service millage.
Rolled-Back (RB) Taxes
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Tax Revenues budgeted last year
Proposed Tax Revenues with same
millage and increasing taxable value
“Roll-back” would require lower
millage to reduce tax revenues to
receive the same amount as last year
WITH FALLING PROPERTY VALUES
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Tax Revenues budgeted last year
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Tax revenues with falling value
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Rolled-Back rate = millage could be
increased to produce the same taxes
as last year
$ 152 Million
$ 155 Million
$ ( 3 ) Million
$ 156 Million
$ 152 Million
$
4 Million
TRIM = Truth in Millage
Column 6
Taxes if
Proposed
Budget is
Adopted
Column 8
Taxes if
budget
was the same
as
last year’s
(Roll Back)
EMPLOYEES OF THE
BOARD OF COUNTY COMMISSIONERS
PER ONE THOUSAND POPULATION
Summary of
Budget Positions
FY11
1,752
Actual
FY12
1,658
Adopted
FY13
1,658
Increase/
Decrease
-0-
Population Estimates used are per University of Florida/Bureau of Economic & Business Research (BEBR)
Paradoxical Commandments of
Government
by Ken Miller
1.
2.
3.
The reward for doing good work is more
work. Do good work anyway.
All the money you save being more efficient
will get cut from your budget now and
forever. Find efficiencies anyway.
There is not time to think about improving
what we do. Make time anyway.
Thank You!