Conservation District Conservation District Supervisor Supervisor

AccreditationAccreditation

Module 8:Module 8:

Financial PlanningFinancial Planning

Discussion questions:Discussion questions:

Why should conservation districts be Why should conservation districts be concerned with financial planning?concerned with financial planning?

What are some of the key elements of a What are some of the key elements of a sound financial plan?sound financial plan?

Name three different approaches to Name three different approaches to budgeting?budgeting?

What should a conservation district do to What should a conservation district do to justify its budget?justify its budget?

IntroductionIntroduction This module covers three approaches to This module covers three approaches to

budgeting. All three approaches have budgeting. All three approaches have advantages and disadvantages. Some advantages and disadvantages. Some organizations combine aspects of different organizations combine aspects of different approaches to achieve their goals. approaches to achieve their goals. Regardless of which approach is used, it is Regardless of which approach is used, it is critical that planning be done.critical that planning be done.

Once a district has developed its budget, it Once a district has developed its budget, it must have the ability to defend that budget must have the ability to defend that budget and the priorities expressed in it. and the priorities expressed in it.

Financial PlanningFinancial Planning In order to be successful, a conservation In order to be successful, a conservation

district must have a process for determining district must have a process for determining financial priorities and allocating resources financial priorities and allocating resources to meet those priorities. to meet those priorities.

The best plans, unless adequately funded, The best plans, unless adequately funded, will never come to pass. Money, unless will never come to pass. Money, unless properly allocated and budgeted, will sit idle properly allocated and budgeted, will sit idle or be spent without regard to the results or or be spent without regard to the results or to the goals of the district. to the goals of the district.

Financial PlanningFinancial Planning The financial planning process allows the The financial planning process allows the

district staff and supervisors to attach district staff and supervisors to attach dollar amounts to the goals in their long dollar amounts to the goals in their long range plan and the hydrologic unit plans range plan and the hydrologic unit plans for their district. The board can then for their district. The board can then approach fulfilling the goals of the plans approach fulfilling the goals of the plans based on the resources based on the resources available to the district. available to the district.

Financial PlanningFinancial Planning

Establishing a sound budget will help Establishing a sound budget will help ensure that the goals of the conservation ensure that the goals of the conservation district are met and will demonstrate the district are met and will demonstrate the commitment of the board to the effective commitment of the board to the effective running of the conservation district. running of the conservation district.

Elements of a Sound Financial PlanElements of a Sound Financial Plan

Identify all revenue sources for the Identify all revenue sources for the planning period (government planning period (government appropriations, fees, grants, interest, etc.)appropriations, fees, grants, interest, etc.)

Identify all expense categories for the Identify all expense categories for the planning period (regular expenses, planning period (regular expenses, incidental or occasional expenses, incidental or occasional expenses, emergencies, etc.)emergencies, etc.)

Establish a budget including all identified Establish a budget including all identified income and expense. income and expense.

Elements of a Sound Financial PlanElements of a Sound Financial Plan

Establish a statement of cash flows for the Establish a statement of cash flows for the budget period which:budget period which: Details each income and expense itemDetails each income and expense item Shows exactly what the amounts will be Shows exactly what the amounts will be

during each budget periodduring each budget period Allows for forecasting of unusual expenses Allows for forecasting of unusual expenses

and erratic incomeand erratic income A budget won’t show you A budget won’t show you whenwhen the money the money

is needed; a cash flow statement will. is needed; a cash flow statement will.

Budgeting ApproachesBudgeting Approaches

WAG (Wild Assumed Guess) – “Budget by gut WAG (Wild Assumed Guess) – “Budget by gut instinct”. Assign budget amounts for all items instinct”. Assign budget amounts for all items without analysis of needs, impact on services, or without analysis of needs, impact on services, or outcomes. outcomes.

AdvantagesAdvantages:: DisadvantagesDisadvantages::Quick and dirty Quick and dirty No basis for decision if budgetNo basis for decision if budgetOccasionally brilliantOccasionally brilliant is wrong is wrongAppealing to those notAppealing to those not No standard for calculating errorNo standard for calculating error comfortable with comfortable with Difficult or impossible to Difficult or impossible to

defenddefend sophisticated systemssophisticated systems Easy to cutEasy to cut

Budgeting ApproachesBudgeting Approaches

Incremental Budgeting – planning process Incremental Budgeting – planning process using last year’s budget as a basis for using last year’s budget as a basis for additional funding. The Consumer Price additional funding. The Consumer Price Index (CPI) or Wholesale Price Index Index (CPI) or Wholesale Price Index (WPI) often act as the basis for the (WPI) often act as the basis for the percentage of increase. percentage of increase.

Incremental BudgetingIncremental Budgeting

AdvantagesAdvantages:: DisadvantagesDisadvantages::

Saves timeSaves time Budgeting is year to yearBudgeting is year to year

Treats all programs the sameTreats all programs the same Not all items need sameNot all items need same

Simple to administer Simple to administer increase or decrease increase or decrease

CPI or WPI gives immediate,CPI or WPI gives immediate, Easy to cutEasy to cut

powerful rationale for budget powerful rationale for budget Assumes that history Assumes that history

changechange repeats itself; no budget repeats itself; no budget

Easy to understandEasy to understand items need to be added items need to be added

or deleted. or deleted.

Budgeting ApproachesBudgeting Approaches

Zero-based Budgeting – “start from scratch” Zero-based Budgeting – “start from scratch” budget process. Each activity is considered budget process. Each activity is considered on basis of funds available and value (“bang on basis of funds available and value (“bang for the buck”). for the buck”).

AdvantagesAdvantages:: DisadvantagesDisadvantages:: No budget item off limitsNo budget item off limits Easier to cut necessaryEasier to cut necessary Can eliminate prior Can eliminate prior but unpopular but unpopular

programsprograms activitiesactivities Takes effort to defendTakes effort to defend

Can add new activitiesCan add new activities priorities prioritiesBudgeting is year-to-yearBudgeting is year-to-year

Defending the BudgetDefending the Budget

All districts have to defend their budgets to All districts have to defend their budgets to their county commission, residents, and their county commission, residents, and others. It will be easier to explain and defend others. It will be easier to explain and defend if your strategy is soundif your strategy is sound

Foundations of Sound Budgeting:Foundations of Sound Budgeting: - Sound Planning- Sound Planning - Salesmanship - Salesmanship

- Careful forecasting- Careful forecasting - Politics - Politics

- Workable strategy- Workable strategy - An ability to deliver results - An ability to deliver results

““Do a good job, do a good job, and tell people about itDo a good job, do a good job, and tell people about it

Defending the BudgetDefending the Budget If your budget and programs are sound If your budget and programs are sound

and still come under attack, keep your and still come under attack, keep your perspective and put first things first. perspective and put first things first.

Defend the base; keep budget at current Defend the base; keep budget at current levels levels then look atthen look at

Increasing the base; get more money to Increasing the base; get more money to do what you’re already doing. do what you’re already doing. Only then Only then look atlook at

Expanding the base; secure funding for Expanding the base; secure funding for new programs and activities. new programs and activities.

Financial PlanningFinancial Planning SDCL 38‑7‑23 states the Division of Resource SDCL 38‑7‑23 states the Division of Resource

Conservation and Forestry (RC&F) "shall have Conservation and Forestry (RC&F) "shall have the duty and power to require proper the duty and power to require proper accounting and financial reporting procedures accounting and financial reporting procedures by conservation districts and to assist in the by conservation districts and to assist in the implementation of these procedures." implementation of these procedures."

RC&F will provide assistance as needed, and RC&F will provide assistance as needed, and the districts can help each other to implement the districts can help each other to implement the system. the system.

Accounting ManualAccounting Manual A financial committee was organized to develop A financial committee was organized to develop

and recommend changes to the original and recommend changes to the original accounting manual. Members of the committee accounting manual. Members of the committee were from :were from : Department of Legislative AuditDepartment of Legislative Audit State Conservation CommissionState Conservation Commission SDACDESDACDE An individual with extensive bookkeeping experienceAn individual with extensive bookkeeping experience SD Association of Conservation DistrictsSD Association of Conservation Districts Conservation District SupervisorConservation District Supervisor Resource Conservation & Forestry DivisionResource Conservation & Forestry Division

Please contact Division of Resource Please contact Division of Resource Conservation and Forestry for a copy of the Conservation and Forestry for a copy of the current manual.current manual.

Accounting ManualAccounting Manual The objective of this manual is to provide clear The objective of this manual is to provide clear

accounting procedures to be followed by all accounting procedures to be followed by all conservation districts. When consistently conservation districts. When consistently applied, these procedures will assure that the applied, these procedures will assure that the various financial statements issued by the various financial statements issued by the districts are comparable and standardized. districts are comparable and standardized.

This manual is designed for use with either a This manual is designed for use with either a manual ledger or a computerized system. It is manual ledger or a computerized system. It is also designed to meet Generally Accepted also designed to meet Generally Accepted Accounting Principles Accounting Principles

Accounting ManualAccounting Manual Examples of transactions shown in the manual Examples of transactions shown in the manual

include: include: Formal Review Checklist of Financial RecordsFormal Review Checklist of Financial Records Balance Sheet -- General FundBalance Sheet -- General Fund Profit/Loss Statement (Ordinary)Profit/Loss Statement (Ordinary) Profit/Loss Statement (Extraordinary)Profit/Loss Statement (Extraordinary) Sample Cash Flow Budget WorksheetSample Cash Flow Budget Worksheet Statement of Cash FlowsStatement of Cash Flows Information Directory Information Directory Record of AssetsRecord of Assets Reconciliation FormReconciliation Form VoucherVoucher Suggested References Suggested References

AccountabilityAccountability Supervisors are accountable for the use of Supervisors are accountable for the use of

public funds. Supervisors, therefore, are public funds. Supervisors, therefore, are obligated to ensure that district employees follow obligated to ensure that district employees follow this manual.this manual.

Internal control systems, all transactions, and Internal control systems, all transactions, and other significant events are to be clearly other significant events are to be clearly documented. This includes a written policy or documented. This includes a written policy or procedure for all transactions and methods of procedure for all transactions and methods of record keeping. record keeping.

Key duties such as authorizing, approving, and Key duties such as authorizing, approving, and recording transactions; issuing and receiving recording transactions; issuing and receiving assets; making payments; and reviewing or assets; making payments; and reviewing or auditing transactions should be separated auditing transactions should be separated among individuals. among individuals.

Financial PlanningFinancial Planning

Conservation districts shall submit annual Conservation districts shall submit annual financial and progress reports by March 1 financial and progress reports by March 1 covering the previous fiscal year. The reports covering the previous fiscal year. The reports shall be on the forms published in Appendix A at shall be on the forms published in Appendix A at the end of Administrative Rules of South Dakota the end of Administrative Rules of South Dakota Chapter 12:03:01 or on forms substantially the Chapter 12:03:01 or on forms substantially the same. The fiscal year for each district is January same. The fiscal year for each district is January 1 through December 31. 1 through December 31.

Financial PlanningFinancial Planning A district shall at least three weeks before the A district shall at least three weeks before the

dates specified by law for the setting up of official dates specified by law for the setting up of official budgets, estimate the total cost of operating and budgets, estimate the total cost of operating and maintaining the district for the ensuing fiscal year maintaining the district for the ensuing fiscal year and the funds available from all sources. and the funds available from all sources.

These budget estimates shall be submitted to the These budget estimates shall be submitted to the county commissioners who shall then provide the county commissioners who shall then provide the additional funds needed for the ensuing fiscal year additional funds needed for the ensuing fiscal year from general funds. The county may disallow or from general funds. The county may disallow or modify any item which it determines is not justified. modify any item which it determines is not justified.

Financial PlanningFinancial Planning

Any conservation district before receiving such Any conservation district before receiving such funds shall file with the county commissioners a funds shall file with the county commissioners a financial statement for the last three years financial statement for the last three years itemizing the amount of funds received and how itemizing the amount of funds received and how they were disbursed. they were disbursed.

Any conservation district receiving county funds Any conservation district receiving county funds shall file with the county commissioners an shall file with the county commissioners an itemized annual financial report within sixty days itemized annual financial report within sixty days following the end of the district's fiscal year. following the end of the district's fiscal year. Within thirty days of receiving the financial Within thirty days of receiving the financial report, the county commissioners shall publish report, the county commissioners shall publish the report in the official county newspaper. the report in the official county newspaper.

Conservation District Special Revenue FundConservation District Special Revenue Fund (Revolving Loan Fund)(Revolving Loan Fund)

Established by the SD Legislature in 1949 Established by the SD Legislature in 1949 (SDCL 38-8-53). Loans (with 3% interest) to (SDCL 38-8-53). Loans (with 3% interest) to conservation districts are for securing necessary conservation districts are for securing necessary equipment, trees and other plant materials, and equipment, trees and other plant materials, and supplies needed to further their programs.supplies needed to further their programs.

Requests are submitted to the Division of Requests are submitted to the Division of Resource Conservation and Forestry. Resource Conservation and Forestry.

The division will make the loan investigation and The division will make the loan investigation and present the application to the Conservation present the application to the Conservation Commission for their approval or disapproval Commission for their approval or disapproval within 120 days of receipt.within 120 days of receipt.

Revolving LoanRevolving Loan Repayment of Loan:Repayment of Loan:

Equal annual installments of not less than $250.00.Equal annual installments of not less than $250.00. Loan may be paid in full at any time. Loan may be paid in full at any time. The repayment schedule will not exceed five years, The repayment schedule will not exceed five years,

unless extension is approvedunless extension is approved Each district receiving a loan from the revolving Each district receiving a loan from the revolving

fund shall submit a statement of usage describing fund shall submit a statement of usage describing the current status of the loan and, if the loan was the current status of the loan and, if the loan was used to purchase equipment, the use and used to purchase equipment, the use and operation of that equipment during the year. A operation of that equipment during the year. A conservation district shall submit its statement of conservation district shall submit its statement of usage to the Conservation Commission at the time usage to the Conservation Commission at the time of the annual financial statement. of the annual financial statement.

Conservation TillageConservation Tillage Loan FundLoan Fund

Low interest (set by the Secretary of Agriculture) Low interest (set by the Secretary of Agriculture) loan available to conservation districts loan available to conservation districts

Limited to the purchase of conservation Limited to the purchase of conservation equipment for use on a rental basis or to provide equipment for use on a rental basis or to provide a service to district cooperators. a service to district cooperators.

Submitted to the Conservation CommissionSubmitted to the Conservation Commission Recommendation forwarded to the Secretary of Recommendation forwarded to the Secretary of

Agriculture for final approval. Agriculture for final approval.

Coordinated Natural Resources Coordinated Natural Resources Conservation Program GrantsConservation Program Grants

(Commission grants)(Commission grants) May be used only for grants to conservation May be used only for grants to conservation

districts on a competitive basis districts on a competitive basis A copy of the motion of official action by the A copy of the motion of official action by the

board of the sponsoring district to approve the board of the sponsoring district to approve the project and the grant project and the grant application must also application must also be submitted by the be submitted by the deadline (usually April 1 deadline (usually April 1 or October 1).or October 1).

Coordinated Natural Resources Coordinated Natural Resources Conservation Program GrantsConservation Program Grants

(Commission grants)(Commission grants)

The commission may not allocate grant The commission may not allocate grant funds for the primary purpose of funds for the primary purpose of purchasing equipment, land, buildings, or purchasing equipment, land, buildings, or replacing available federal cost-sharing. replacing available federal cost-sharing.

Coordination between agencies and Coordination between agencies and organizations is encouraged.organizations is encouraged.

SummarySummary A district must have a process to determine A district must have a process to determine

financial priorities and to allocate resources financial priorities and to allocate resources to meet them.to meet them.

A sound financial plan will include a A sound financial plan will include a complete budget and statement of cash complete budget and statement of cash flows. These will show how much income flows. These will show how much income and expense the district will have, and will and expense the district will have, and will show when the money is expected and show when the money is expected and needed. needed.

SummarySummary Budget approaches that can be used:Budget approaches that can be used:

WAG (wild assumed guess)WAG (wild assumed guess) Incremental (add the same % to previous budget)Incremental (add the same % to previous budget) Zero-based (start from scratch each year)Zero-based (start from scratch each year)

Districts have to be prepared to defend their Districts have to be prepared to defend their budget priorities. Sound budgeting makes budget priorities. Sound budgeting makes defending the budget easier: sound planning, defending the budget easier: sound planning, careful forecasting, workable strategy, careful forecasting, workable strategy, salesmanship, politics, and an ability to salesmanship, politics, and an ability to deliver results. deliver results.

Review QuestionsReview Questions Why should conservation districts be Why should conservation districts be

concerned with financial planning?concerned with financial planning? What are some of the key elements of a What are some of the key elements of a

sound financial plan?sound financial plan? Name three different approaches to Name three different approaches to

budgeting?budgeting? What should a conservation district do to What should a conservation district do to

justify its budget?justify its budget?