basics of budgeting: how to read your municipal budget august 20, 2014 3:15 pm session pat walker...

Basics of Budgeting: How to

Read Your Municipal Budget

August 20, 20143:15 PM Session

Pat WalkerPat Walker Consulting LLC

Katie GregoryCity of Peoria

Deputy Director of Finance & Budget

AgendaAgenda

Introductions/OverviewThe Budget ProcessArizona BudgetHow to read a budgetDistinguished Budget

Presentation AwardQuestions?

Purpose of Purpose of BudgetingBudgeting

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 BudgetingPurpose 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 BudgetingPurpose 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 BudgetingRoles in Budgeting

Roles in BudgetingRoles in Budgeting

Citizens Elected Officials Public Employees

Roles in BudgetingRoles 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 BudgetingRoles in Budgeting

Public Employees:Department Staff - Develop Program Objectives, Identify Service Levels, Prepare Budget RequestsExecutive Management - Prepare a Recommended, Balanced Budget, Incorporate Elected Priorities, Assess Service Levels

Types of Budget Types of Budget ProcessesProcesses

Budget ProcessesBudget Processes

Performance BasedProgramZero Based Modified Zero-Based (Target) IncrementalExpenditure Control Based (ECB)Line Item

Budget ProcessesBudget 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 ProcessesBudget 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 ProcessesBudget 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 ProcessesBudget 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 ProcessesBudget Processes

Incremental Most widely used process Starts with last year’s base Focuses on adds, not existing Can be combined with other

processes

Budget ProcessesBudget 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 ProcessesBudget Processes

Line Item Budget by commodity or resource Other processes begin from here Expenditure control and

accountability

Budget cycleBudget cycle

Preparation of requests Review of requests Preparation of budget

Implementation Evaluation/Audit

Preparation of RequestsPreparation of Requests

Council’s vision and goals Fiscal picture for next year (Revenue

Projections/Expenditure estimates) Instructions/rules to follow in

preparationBudget justificationCost Estimations

Preparation of BudgetPreparation of Budget

Revenue ForecastingProducing 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 RequestsReview of Requests

Central Budget office "rules of thumb”

Policy RationaleProgram changesTrend analysisDoes it follow executive policy

Capital BudgetsCapital Budgets

Capital Capital Budgets (CIPBudgets (CIP))

Multi-year and of considerable value

Operating Impact of CIP

Finance by pay as you go, grants, or borrowing

Capital BudgetsCapital 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 3rd 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

TOWN OF KEARY

Adopted Estimated ProposedFUND 2013-14 2013-14 2014-15 % increase

Budget Expenditures Budget (-decrease)GENERAL 1,644,386$ 1,457,872$ 1,804,391$ 9.73%

HIGHWAY USERS 74,271$ 58,011$ 75,983$ 2.31%

LOCAL TRANSPORTATION 13,367$ 6,956$ 10,920$ -18.31%ASSISTANCE

TRANSPORTATION 243,306$ 23,474$ 248,109$ 1.97%SALES TAX

MISCELLANEOUS GRANTS 1,741,800$ 41,479$ 1,461,800$ -16.08%

CAPITAL PROJECTS 150,000$ -$ 150,000$ 0.00%

UTILITIES 804,910$ 718,691$ 746,155$ -7.30%

SANITATION 250,076$ 185,091$ 253,309$ 1.29%

AMBULANCE SERVICE 314,079$ 390,648$ 317,220$ 1.00%

FIREFIGHTER'S PENSION 3,200$ 2,784$ 3,200$ 0.00%

TOTAL ALL FUNDS 5,239,395$ 2,885,004$ 5,071,087$ -3.21%

Summary Schedule of Estimated Revenues and Expenditures/Expenses

2014 2014 July 1, 2014** 2015 2015 SOURCES <USES> IN <OUT> 2015 2015Primary:

120,762$ Secondary:

3. Debt Service Funds Available

4. Less: Amounts for Future Debt Retirement

5. Total Debt Service Funds

6. Capital Projects Funds

7. Permanent Funds3,200 2,784 82,417 3,200 85,617 3,200

8. Enterprise Funds Available1,369,065 1,246,528 295,776 1,355,209 157,000 1,493,985 1,316,684

9. Less: Amounts for Future Debt Retirement

10. Total Enterprise Funds1,369,065 1,246,528 295,776 1,355,209 157,000 1,493,985 1,316,684

11. Internal Service Funds

12. TOTAL ALL FUNDS5,239,395$ 2,834,231$ 2,416,631$ 120,762$ 4,400,995$ $ $ 216,357$ 216,357$ 6,938,388$ 5,071,087$

EXPENDITURE LIMITATION COMPARISON 2014 2015

1. Budgeted expenditures/expenses 5,239,395$ 5,071,087$

2. Add/subtract: estimated net reconciling items

3. Budgeted expenditures/expenses adjusted for reconciling items 5,239,395 5,071,087 4. Less: estimated exclusions 5. Amount subject to the expenditure limitation 5,239,395$ 5,071,087$

6. EEC or voter-approved alternative expenditure limitation $ $

***

***

Fiscal Year 2015

CITY/TOWN OF KEARNY

1,946,812

3,110,529$ 1,804,391$

59,357 2,248,257 127,046 497,605 1,810,009 Special Revenue Funds

1.

2.2,222,744

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).

The city/town does not levy property taxes and does not have special assessment districts for which property taxes are levied. Therefore, Schedule B has been omitted.

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.

216,357$ $ $ 1,540,833$ 1,232,577$ $

FUND BALANCE/

NET POSITION***

PROPERTY TAX

REVENUES

ESTIMATED REVENUES

OTHER THAN PROPERTY

TAXES FUND

General Fund1,644,386$ 1,457,873$

ACTUAL EXPENDITURES/

EXPENSES**

ADOPTED BUDGETED

EXPENDITURES/EXPENSES* 2015 2015

TOTAL FINANCIAL

RESOURCES AVAILABLE

BUDGETED EXPENDITURES/

EXPENSES

INTERFUND TRANSFERSOTHER FINANCING

ADOPTED BUDGETED

EXPENDITURES/EXPENSES

EXPENDITURE/EXPENSE

ADJUSTMENTS APPROVED

ACTUAL EXPENDITURES/

EXPENSES*

BUDGETED EXPENDITURES/

EXPENSES

2014 2014 2014 2015

Mayor and Council: General Fund $ 30,275 $ $ 14,392 $ 30,435

Department Total $ 30,275 $ 0 $ 14,392 $ 30,435

List Department:Administration General Fund $ 287,977 $ $ 299,336 295,717

Department Total $ 287,977 $ 0 $ 299,336 $ 295,717

List Department:Police/Dispatch General Fund $ 654,560 $ $ 697,927 776,995

Department Total $ 654,560 $ 0 $ 697,927 $ 776,995

List Department:Fire $ $ $ General Fund 54,750 51,491 55,150 Firefighter's Pension Fund 3,200 2,784 3,200

Department Total $ 57,950 $ 0 $ 54,275 $ 58,350

List Department:Public Works/Parks General Fund $ 75,200 $ $ 80,885 $ 78,792

Department Total $ 75,200 $ 0 $ 80,885 $ 78,792

List Department:Attorney General Fund $ 30,000 $ $ 35,793 $ 30,600

Department Total $ 30,000 $ 0 $ 35,793 $ 30,600

List Department:Magistrate General Fund $ 44,203 $ $ 40,870 $ 44,658

Department Total $ 44,203 $ 0 $ 40,870 $ 44,658

List Department:Recreation General Fund $ 20,094 $ $ 17,639 $ 20,148

Department Total $ 20,094 $ 0 $ 17,639 $ 20,148

List Department:Library General Fund $ 43,009 $ $ 62,609 $ 61,041

Department Total $ 43,009 $ 0 $ 62,609 $ 61,041

*

Expenditures/Expenses by DepartmentFiscal Year 2015

CITY/TOWN OF KEARNY

DEPARTMENT/FUND

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.

Policy Document

Financial Plan

Operations Guide

Communication Device

Distinguished Budget Presentation Award Mandatory Award Criteria

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

AZ Auditor General Office

AZ League of Cities & Towns-Budget and Finance Manual -http://www.azleague.org/

Pat Walker Consulting pwalkerconsulting@aol.com

Katie Gregory Katie.Gregory@peoriaaz.gov

http:www.auditorgen.state.az.us

http://www.gfoa.org/budgetaward

Questions?Questions?