Transcript No Slide Title
Basics of Budgeting: How to Read Your Municipal Budget
August 20, 2014 3:15 PM Session
Pat Walker Pat Walker Consulting LLC Katie Gregory City of Peoria Deputy Director of Finance & Budget
Agenda
Introductions/Overview The Budget Process Arizona Budget How to read a budget Distinguished Budget Presentation Award Questions?
Purpose of Budgeting
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 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 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 Budgeting
Roles in Budgeting
Citizens Elected Officials Public Employees
Roles 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 Budgeting
Public Employees:
Department Staff
- Develop Program Objectives, Identify Service Levels, Prepare Budget Requests
Executive Management -
Prepare a Recommended, Balanced Budget, Incorporate Elected Priorities, Assess Service Levels
Types of Budget Processes
Budget Processes
Performance Based Program Zero Based Modified Zero-Based (Target) Incremental Expenditure Control Based (ECB) Line Item
Budget 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 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 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 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 Processes
Incremental
Most widely used process Starts with last year’s base Focuses on adds, not existing Can be combined with other processes
Budget 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 Processes
Line Item
Budget by commodity or resource Other processes begin from here Expenditure control and accountability
Budget cycle
Preparation of requests
Review of requests
Preparation of budget
Implementation Evaluation/Audit
Preparation of Requests
Council’s vision and goals Fiscal picture for next year (Revenue Projections/Expenditure estimates) Instructions/rules to follow in preparation Budget justification Cost Estimations
Preparation of Budget
Revenue Forecasting Producing 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 Requests
Central Budget office "rules of thumb” Policy Rationale Program changes Trend analysis Does it follow executive policy
Capital Budgets
Capital
Budgets (CIP
)
Multi-year and of considerable value
Operating Impact of CIP
Finance by pay as you go, grants, or borrowing
Capital 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 3 rd 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
FUND
GENERAL
TOTAL ALL FUNDS
TOWN OF KEARY
Adopted 2013-14 Budget
$ 1,644,386
Estimated 2013-14 Expenditures
$ 1,457,872
Proposed 2014-15 Budget
$ 1,804,391 HIGHWAY USERS $ 74,271 $ 58,011 $ 75,983 LOCAL TRANSPORTATION ASSISTANCE $ 13,367 $ 6,956 $ 10,920 TRANSPORTATION SALES TAX $ 243,306 $ 23,474 $ 248,109 MISCELLANEOUS GRANTS $ 1,741,800 $ 41,479 $ 1,461,800 CAPITAL PROJECTS $ 150,000 $ $ 150,000 UTILITIES SANITATION $ $ 804,910 250,076 $ $ 718,691 185,091 $ $ 746,155 253,309 AMBULANCE SERVICE $ 314,079 $ 390,648 $ 317,220 FIREFIGHTER'S PENSION $ 3,200 $ 2,784 $ 3,200
$ 5,239,395 $ 2,885,004 $ 5,071,087 % increase (-decrease)
9.73% 2.31% -18.31% 1.97% -16.08% 0.00% -7.30% 1.29% 1.00% 0.00% -3.21%
CITY/TOWN OF KEARNY Summary Schedule of Estimated Revenues and Expenditures/Expenses Fiscal Year 2015 1.
2.
FUND General Fund Special Revenue Funds 3. Debt Service Funds Available ADOPTED BUDGETED EXPENDITURES/ EXPENSES* 2014 ACTUAL EXPENDITURES/ EXPENSES** 2014 $ 1,644,386 2,222,744 $ 1,457,873 127,046 FUND BALANCE/ NET POSITION*** July 1, 2014** $ 1,540,833 497,605 PROPERTY TAX REVENUES 2015 Primary: $ 120,762 Secondary: ESTIMATED REVENUES OTHER THAN PROPERTY TAXES 2015 OTHER FINANCING 2015 SOURCES
* ** 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.
*** 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).
DEPART MENT /FUND
Mayor and Council: General Fund
Department T otal
List Department: Administration General Fund
Department T otal
List Department: Police/Dispatch General Fund
Department T otal
List Department: Fire General Fund Firefighter's Pension Fund
Department T otal
List Department: Public W orks/Parks General Fund
Department T otal
List Department: Attorney General Fund
Department T otal
List Department: Magistrate General Fund
Department T otal
List Department: Recreation General Fund
Department T otal
List Department: Library General Fund
Department T otal
$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
CITY/TOW N OF KEARNY Expenditures/Expenses by Department Fiscal Year 2015 ADOPT ED BUDGET ED EXPENDIT URES/ EXPENSES 2014 EXPENDIT URE/ EXPENSE ADJUST MENT S APPROVED 2014 ACT UAL EXPENDIT URES/ EXPENSES* 2014
30,275 30,275 287,977 287,977 654,560 654,560 54,750 3,200 57,950 75,200 75,200 30,000 30,000 44,203 44,203 20,094 20,094 43,009 43,009 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 0 0 0 0 0 0 0 0 0 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 14,392 14,392 299,336 299,336 697,927 697,927 51,491 2,784 54,275 80,885 80,885 35,793 35,793 40,870 40,870 17,639 17,639 62,609 62,609 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
BUDGET ED EXPENDIT URES/ EXPENSES 2015
30,435 30,435 295,717 295,717 776,995 776,995 55,150 3,200 58,350 78,792 78,792 30,600 30,600 44,658 44,658 20,148 20,148 61,041 61,041 * 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.
Distinguished Budget Presentation Award
Mandatory Award Criteria
Policy Document Financial Plan Operations Guide Communication Device
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
http://www.gfoa.org/budgetaward
AZ Auditor General Office
http:www.auditorgen.state.az.us
AZ League of Cities & Towns-Budget and Finance Manual -
http://www.azleague.org/
Pat Walker Consulting
Katie Gregory