TML Workshop

George W. Bush

Seven Stages of Grief

A Good Budget…… Reflects the Goals & Objectives of the

Organization

Is a Tool for Planning and Management

Is Monitored Routinely

Reflects Organizational Structure and Control

GFOA Best Practices Many topics in the budgeting area

Budgeting Techniques

Budget Process

Capital Budgeting

Forecasting & Analysis

Long Term Strategy & Planning

Budget Guidelines

Budget Document

GFOA Awards Program Distinguished Budget Presentation Award

Criteria defined & explained

Reviewed by financial professionals

Feedback from reviewers on areas to improve

Criteria focused on document presentation Introduction & Overview

Financial Structure, Policy & Process

Financial Summaries

Capital & Debt

Departmental Information

Types of Budgets Operations Budget

Zero-Based Budget

Lump Sum Budget

Line Item Budget

Program Budget

Results Oriented / Performance Budget

Capital Budget

Multi Year Capital Planning

Annual Appropriation

Operating Budget Structurally Balanced

Appropriated for One Fiscal Year

Should Include: Overall Summary of Issues, Challenges & Opportunities

Summary and Explanation of Revenues and Expenditures by Fund

Defined Programs and Objectives

Staffing Levels

Performance Measures

Appropriations Typically Lapse at Fiscal Year End

Capital Budget Capital projects are different from programs adopted in the

operating budget, often representing very large financial obligations that may span two or more fiscal years

Capital budgets should include the following: Descriptions of the scope of each project Estimated costs of the project based on recent and accurate

sources of information Schedule for completion of each project

Phasing: Engineering, Design, Construction

Identified funding sources for all phases of the project Current Year Appropriation Future Year Funding Sources

Any impact on the operating budget

Budget Documents Annual Operating Budget

Required by State Statute and City Charter Allocates Resources to Achieve the City’s Vision, Mission &

Goals Based on Council Priorities Serves as a Policy Document

Capital Budget Plan for Acquisition or Construction of Major Capital Items City Charter Requires Five Year CIP Projects and Scope Identified Potential Funding Sources Identified 1st year Appropriated in Operating Budget Other Years are for Planning Only

Operating Budget Components Transmittal Letter

Summary of the key issues and factors driving the proposed budget Should be from official filing budget

Three Year Historical Summary (Total Budget) Last Year’s Actual This Year’s Budget & Projected FYE Proposed Budget

Proposed Budget by Fund Written Summary Revenue Schedule Proposed Expenditures by Department

Appendix Supplemental Information & Schedules

What should be in the Appendix Supplemental information that may be helpful for

readers or for future reference

Financial Policies

Compensation Plans

Ordinances

Glossary of Terms

Components of a Budget Revenues

Identify & estimate revenues by fund to support the operating costs by fund Property Tax Sales Tax Charges for Services

Expenses/ Expenditures Total funds to be spent during the year

By Fund By Department/ Program

Fund Balance/ Cash Reserves What are the expected ending balances? How do they compare to policy requirements?

Funds and Fund Balance City finances are organized on the basis of Funds –

based on function and purpose

Each Fund is a separate, self-contained set of accounts, assets, liabilities, revenues and expenditures

Smaller cities can operate with only one fund

New Braunfels has 43 funds – 199 million dollar budget

Each fund operates as a separate entity

Key Characteristics of the Budget Process

Incorporates a long-term perspective

Establishes linkages to broad organizational goals

Focuses budget decisions on results and outcomes

Involves and promotes effective communication with stakeholders

Provides incentives to government management and employees

Budget Cycle Forecasting

Analysis

Preparation

Presentation/ Formal Filing

Workshops

Public Hearing

Formal Adoption

Implementation

Monitor & Adjust if Necessary

Financial Policies Key to Budget Policies provide guidance to staff and council in

managing the city’s finances

Provides for consistent financial management practices

Bond rating agencies expect to see formal adopted policies when assessing a city’s financial strengths

Financial Policies- Areas Covered Accounting, Auditing & Financial Reporting

Financial Consultants

Budget & LR Financial Planning

Revenues & Other Resources

Expenditures & Services

Fund Balance/Ending Balances

Capital Expenditures & Improvements

Debt

Cash Management/ Investments

Grants

Policy: Budget Management Balanced Budget

Recurring Revenues > Recurring Expenditures

One Time Funds only used for One Time Expenditures

Tools to Manage Growth in Tax Bills Property Revaluation

Tax Rate Adjustments

Changes to the Homestead Exemption

Sales Tax Elastic Revenue Source

Self-imposed cap on operating budget dependence

Set aside 10% for pay-as-you-go CIP

Policy: Budget Management Pay As You Go CIP Funding

Targeted Funding Amount

Goal is to adequately fund ongoing rehabilitation

Conservative Revenue Estimates Sales Tax

Utility Revenues

Employee Compensation

Personnel cost is 70-75% of operating budget Council Adopted Compensation Philosophy

Third year in Market Study Implementation

Budget Management Budget Amendments

Operating Budget

Increase (or Decrease) to the overall appropriation at the department/division level

Appropriation expires at FY end

Capital Projects

Capital Projects are Budgeted at the Project Level

Appropriation does not expire at FY end

Policy: Operating Deficits Steps to take if operating deficit is anticipated by FYE Defines corrective actions to be taken Implement as early as possible Some options:

Reduce PAYG CIP Deferral of capital purchases Expenditure reductions Hiring freezes Freeze merit increases Use of fund balance Increase fees Lay-off employees

Phases of the Budget Cycle Budget Preparation

Revenue Estimates

Establish Budget Priorities

Develop Proposed Budget

File Proposed Budget Review Proposed Budget

Budget Approval

Implement & Monitor Budget Periodic Reporting

Corrective Action- If Necessary

Follow Up- Annual Audit

Budget Management Budget management is a continual process

If we aren’t preparing a budget we are monitoring and reporting on the current budget Monthly reporting on finances

Summarize key revenues and monitor expenditures

Early identification of potential issues

Important to assess budget proposal on a long range forecast Decisions made this year impact every future year

Budget needs to be sustainable

Monitoring Spending Budgetary control at the line item level

Detail of planned spending at the line item level Budget transfers between line items

Encumbrance of funds through Purchase Orders ensures that funds are available when needed

Prompt payment of invoices Records Expenditure on the General Ledger Releases Encumbrance on Purchase Order

Most departmental spending should be within a percentage of the fiscal year elapsed Exceptions due to seasonality

Parks & Recreation River Activities

Departmental Accountability Allow flexibility for changes during the year

Establish authority for Line item transfers (Manager)

Transfers between programs (Director & ACM)

Transfers between departments (City Manager)

Require appropriate detail in budget submission

Establish service level expectations

Monitor & report on performance

Directors held accountable for budget Budget management is a factor in their annual performance

evaluation

Monthly Financial Reports New Braunfels produces monthly financial reports

Monthly reports include income statements for major operating funds and investment report

Monitor key revenue streams Sales Tax Property Tax Building Permit Activity Fines & Forfeitures Utility Revenues Airport Fuel Sales

Quarterly reports include all funds are presented to Council

Review key items with City Manager Copy to Mayor & Council

Budget Amendments Know your City’s requirements

Amendment- Increase to the overall appropriation at the fund level

Council Approve individual actions as needed

Formally Adopted by Ordinance

Capital Projects

Budget approved at the Project Level

Increase to project budget requires a formal amendment

New Braunfels Fund Balance Policy Maintain an operating reserve for use in the event of unanticipated,

extraordinary expenditures and/or the loss of a major revenue source. General Fund - a minimum of twenty-five (25) percent of the General

Fund budgeted expenditures for the current fiscal year. Special Revenue Funds - ten (10) percent of the budgeted annual

expenditures. Enterprise Funds - (25) percent of the budgeted annual expenditures.

And can only be appropriated by an affirmative vote of five of the seven Council members.

Capital project funds’ reserves - established by project, not by fund and will, in general, reflect three (3) percent of the total project costs.

Debt Service Funds - not less than ten percent of the principal and interest payments on outstanding debt for each fiscal year and can only be appropriated by an affirmative vote of five of the seven Council members.

Year End Estimates/Projections Part of the budget process

Re-estimate revenues

Departments provide projections, identify savings or potential overage

Estimate ending fund balances

Gives a good starting point for next year

Allows corrective action to be taken if necessary

Formally adopted as final budget amendment of the year in September Presented in budget document

Explanation for projection vs original budget

Technical Resources GFOA – www.gfoa.org

Best Practices

Elected Officials Guide Series

TML Series – www.tml.org

GFOAT - www.gfoat.org

Finance Forum

31

QUESTIONS?