Financial Management

Budgeting For the Public Leisure Services Agency

Financial Management

• • • Preparing and Executing Budgets Accounting Procedures Accountability issues

Definition of the Fiscal Management

Process

• The management, custody and control of all revenues received by the agency and funds expended…......or the handling and responsibility for all money and items of value with the intent to accomplish the agency’s mission

Budgeting-Fiscal Management

• A manager who believes in the value of his/her agency’s services to its constituents should be an aggressive seeker of funds to support its mission......not just a spender/allocator of what the agency receives.

Budget director’s (agency manager) dilemma

• • •

Balance Fiscal Conservancy

don’t overburden taxpayer maintain reasonable spending

__________________________________

With

maintaining a viable, state of the art agency

Role of Leisure Service professional in fiscal management

• need basic understanding of revenue sources, controls and accounting • need to be able to utilize budget to meet agency goals

Budget

• • Think of it as a fiscal or financial management plan for a given period of time (most typically 1 year)

A well designed budget should accomplish the following:

• 1. provide a general statement of financial status (needs and resources), for all key operational (including program) elements.

• 2. Inform stakeholders of cost of achieving agency goals • 3. Simplify operational procedures with well classified expenditures • 4. Serve as a means of evaluating objectives

Budget types

•

Operating

•

Capital Improvements

• day to day operations • significant expenses such as – salaries – rents – supplies such as large equipment, facilities and land – often managed as a separate fund (ie a bond issue)

Operating

Budget styles

• • • • • • Line Item (object classification by broad categories)

AGENCY commodities services personal current charges, etc.

• Problem: uses logical categories like supplies, but where the supplies are used cannot be determined • • Program starts with a line item basis but codes accounts by program units •

AGENCY

– Adult Softball • • •

commodities services personal current charges

Program Style Budget illustrating several divisions and categories. A straight line item/object budget would not have the extra division columns

Benefits of program style

(Using the budget as a tool)

budget

• The reason for the popularity of the program budget type is the amount of useful information it can provide. • Programs can be evaluated and compared for cost effectiveness. Almost any combination of levels can be used.

• For example, the administration account might remain general while tennis is broken into specific activities.

Legal aspects of budgeting

• • • • • Enabling legislation and related state or local statutes typically outline agency fiscal policies, including but not limited to sources of revenue (taxes, fees, etc.) accounting procedures and tracking (audits) calendars/presentation deadlines public input, hearings and approval process

Budget process

• Steps include: –

1. PREPARATION

matching fiscal resources to the agency’s strategic plan – – – combo of top-down/bottom up approaches develop justifications for all level

2. APPROVAL

The policy board rules after agency presents and public input is heard –

3. IMPLEMENTATION

The manager authorizes expenditures while conforming to state law and established procedures

Budget preparation - need

Base budget on need that is justifiable

inflated arbitrary expenses reduce agency credibility however, an agency loses credibility also if the manager is unwilling to ask for sufficient resources to do the job well....

just getting by isn’t supplying a quality service

Incremental budgets

Using incremental budgeting involves the process of adding a small increment (e.g. 4%) to last year’s budget. it is easy and fits top down information on upcoming allocations (it is often used as a result) This process is faulty in that it assumes that last year’s budget continues to meet constituent needs without justification. instead, use the incremental approach for basic needs such as utilities, etc.. and let programs justify their existence.

Zero based budgeting options

zeroes out each account each year, requiring annual justification of every aspect of agency operations

is expensive and very time-consuming

As a result, many agencies use a modified zero base approach instead….where programs that are new, untested or marginal can be zeroed out and established programs not

Budget cutting

•

What to look for

– cuts in large expenditure areas result in the greatest savings – if personnel accounts for 75% of expenditures a 10% cut in this area will result in 75% of needed savings – consider cutting or privatizing entire program units rather than hurting all programs – look for poorly performing or expensive programs – cutting cost effective programs is inefficient – cutting adult sports (no subsidy) instead of youth sports (50% subsidy) results in no savings

Hints for budget preparers

– – – always

underestimate

revenues maintain a slight surplus (

carryover

) for emergencies and shortfalls develop a special account (avoid use of the term miscellaneous) MPRD calls theirs NEW Programs, so that new programs, not thought of during the planning process, can be added while maintaining agency compliance with the Cash Basis Law

Investment of Idle funds

Agency managers are expected to invest idle funds so that interest can be earned until the funds are needed the preferred investment is a certificate of deposit, as these are safe, relatively liquid and can be purchased with varying maturity dates. KS State Bank has a special savings/checking account that earns the owner 3-4% interest but requires 10 or more transactions per month. In other words, look closely at like options.

Your student recreation fees are invested but the interest is credited to the state’s general fund and not rec services

Bank selection

• In a community the selection of a bank or banks might take the following forms require a bi-annual (or less frequent) bid of services and merely take the best bid (certainly acceptable)... use several banks to keep taxpaying banks happy (one for operating, one for capital, another for grants, etc..) can be confusing and necessitates some paperwork expenses.

Use of Banks

• Banks are taxpayers and it is a nice to be able to use different banks in a community – The best policy is probably to have financial service bid on by various banks every 3 years or so (everyone has an equal chance) – Other approaches include keeping separate funds in different banks, or alternating, etc..