Budgeting Revenues & Expenditures: Tips and Tools

May 2008May 2008

Presenters: Nikita Johnson and David BeinPresenters: Nikita Johnson and David Bein

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Topics for DiscussionTopics for Discussion

Purpose of a Budget Budget Philosophies Budget Calendar and Assumptions Budgeting Revenue Budgeting Expenditures Reminders Common Problems

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Budget PurposeBudget Purpose

Satisfies a minimum level of financial/program information for state, local and federal governments

Provides both expending and taxing authority Meet requirements imposed by Illinois law Estimate of revenues and expenditures Provides a tool to measure fiscal performance Plan to accomplish the financial goals of BOE

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Budget PhilosophiesBudget Philosophies Business as usual

Add a pre-determined percent increase to previous year Be very careful

Zero Based Start from scratch each year A lot of work

Site Based Gives authority and responsibility to those making decisions Possible inequities throughout district

Combination of the above

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Budget Calendar and Budget Calendar and AssumptionsAssumptions Start with assumptions on key budget drivers

State and federal government budget projections Tax cap, if applicable Salary increases CPI increase New, changed or dropped programs (e.g., RTI) Staffing Non-routine expenditures (e.g., textbooks, uniforms) Technology Capital projects/expenditures

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Budget Calendar and Budget Calendar and AssumptionsAssumptions Work backward from your due dates to figure out when

you need to have key tasks completed. A typical plan might be:

Final budget in September Tentative budget 30 days before in August Near final budget in July, headcount revised Department budgets due in May Department budgets distributed in March Budget plan distributed in January

And just when you think you’ve got it all set, don’t forget that if you’re doing an amended budget it is due by the end of June, with a presentation the month before!

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Budgeting Local Revenue – Budgeting Local Revenue – 1000 Accts1000 Accts Property Taxes

Usually the largest source of revenue State-wide EAV (& new const. in capped districts) must be estimated

Talk to county and township officials for estimates Talk to clerk regarding actual extensions Talk to Treasurer for tax distribution dates

CPI Determine the rate to be used for the Tax Levy Keep record of historical rates

TOOL: ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt

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Budgeting Local Revenue – Budgeting Local Revenue – 1000 Accts1000 Accts CPPRT

Distribution from Illinois Dept. of Revenue Offsets GSA for all but Flat Grant Districts

TOOL: http://www.revenue.state.il.us/LocalGovernment/replacemnt08.htm

Interest on Investments Knowledge of investment practices Estimates of anticipated cash surpluses and interest rates

TOOL: http://www.federalreserve.gov/releases/h15/current/

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Budgeting Local Revenue – Budgeting Local Revenue – 1000 Accts1000 Accts Food Service

Tie to enrollment changes Be aware of any program and/or price changes Reimbursement rates change annuallyTOOL: http://www.isbe.net/nutrition/htmls/data.htm

Textbook Rentals and Fees Need to know collection rates $1 increase usually does not mean an additional $1

Rentals Outside organizations Ed or O&M fund

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Budgeting State Revenue – Budgeting State Revenue – 3000 Accts3000 Accts

General State Aid Largest state revenue Watch ADA Foundation level Download state form Compare estimate to prior years’ for reasonableness Obtain GSA estimator from ISBE

TOOL: http://www.isbe.state.il.us/funding/excel/gsa_calc_worksht_08.xls

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Budgeting State Revenue – Budgeting State Revenue – 3000 Accts3000 Accts Special Education

Usually second largest source of state funding Be aware of:

Enrollment New mandates Reimbursement levels State budget and changes to legislation

Talk to Director of your program (in house and/or co-op)

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Budgeting State Revenue – Budgeting State Revenue – 3000 Accts3000 Accts Pupil Transportation

Regular and Special Ed Understand your district’s relationship between expenditures and

percentage of reimbursement

Other Categorical and Grant Programs

Have a knowledge of when claims and/or disbursements are made

Use FRIS Be aware of past audit findings Watch out for Appropriations & ProrationsTOOL: http://www.isbe.net/funding/pdf/sped_appro_pro.pdf

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Budgeting Federal Revenue – Budgeting Federal Revenue – 4000 Accts4000 Accts Difficult to forecast and budget

Review historical trends Know the program or population being served Federal Grants are potentially difficult to budget

because of the timing of approvals

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Budgeting Expenditures – Budgeting Expenditures – General General knowledgeknowledge

Review assumptions on key budget drivers, make additional assumptions and collect other expense related information, including: Current and projected enrollment Current and projected number of employees Status of negotiations Current fiscal year – year to date results Limitations imposed by revenue projections

TIP: Keep a reference list of your assumptions

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Budgeting Expenditures - Budgeting Expenditures - SalariesSalaries Largest portion of expenditures Forecast each employee group separately, knowing

Salary schedules Employee counts / FTE Turnover rates Retirements Early retirement incentives Lane change costs

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Budgeting Expenditures - Budgeting Expenditures - SalariesSalaries Drives other costs, such as

IMRF fund benefits Life & long term disability insurance

TIP: Avoid using a fixed percentage to save time—salaries are your largest expense and it’s worth the time to analyze in detail.

TIP: Review TRS retirees past earnings history to determine whether you may be subject to a penalty.

TOOL: http://trs.illinois.gov/subsections/employers/calculators/ExcessSalIncrCalculator.aspx

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Budgeting Expenditures - Budgeting Expenditures - BenefitsBenefits IMRF fund

Social Security – 6.2% Medicare – 1.45% Pension contribution – employer specific

TRS / THIS .58% / .63% of certified payroll 9.4% member contribution – how is this paid? .84% THIS member contribution – how is this paid?

TIP: If possible, try not to charge salaries to federal grants (tentative FY09 employer contribution is 17.08%)

TOOL: http://trs.illinois.gov/subsections/employers/employerservices.htmTOOL: http://www.imrf.org/pubs/er_pubs/booklets/employer_rates.pdf

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Budgeting Expenditures - Budgeting Expenditures - BenefitsBenefits Health / Dental

Usually fastest increasing portion of budget Difficult to contain—work with your insurance

committee to minimize increases Life & long term disability Tuition reimbursement ERO employer contributions TRS 6% cap penalties

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Budgeting Expenditures – Budgeting Expenditures – OtherOther Purchased Services, Supplies & Materials, Capital

Outlay, Other Objects, Tuition Variety of methods to project costs

Status quo Flat increase Per capita allocation/linked to enrollment Zero-based/Building/department requests

TIP: Spend grant money first

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RemindersReminders

Justification / Assumption / Rationale should be available to support budget when presented

Be ready to explain large increases / decreases in line items

The budget is an estimate and should not be expected to come out to the penny – but be ready to explain large variances in line items

Up to 10% of the budgeted amounts in each fund can be transferred to other line items in the same fund

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RemindersReminders

Expending more than the budgeted total requires the adoption of an amended budget

Use account numbers that are consistent and in line with the updated IPAM

Provision for Contingency can be very helpful as many surprises can happen during the year Do not use this account for recording expenses Transfer budget dollars to appropriate account

TOOL: http://www.isbe.net/rules/archive/pdfs/100ARK.pdf

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Common ProblemsCommon Problems

Cash flow vs. fund balances Negative cash/investment balances Implementation of budgetary controls and

monitoring throughout the fiscal year Student activity accounts

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Other Useful LinksOther Useful Links http://www.isbe.net/finance/default.htm -- ISBE School Finance Page

Budget Forms Submit Budget Mechanics of the School District Budget Annual Financial Reports FRIS Inquiry GSA Inquiry School District Financial Profile

www.iasaedu.org Illinois Association of School Administrators www.bls.gov Consumer price index and inflation calculator http://www.tax.illinois.gov/LocalGovernment/index.htm CPPRT http://www.state.il.us/agency/idol/Facts/mw.htm Department of Labor http://nces.ed.gov/ccd/data_tables.asp IES Education Statistics

Questions?Questions?