Module #3 Budgeting. What is Budgeting? Budgeting is the process of allocating resources to the...

Module #3Module #3

BudgetingBudgeting

What is Budgeting?What is Budgeting?

Budgeting is the process Budgeting is the process of allocating resources to of allocating resources to the prioritized needs of a the prioritized needs of a school district.school district.

What is Budgeting? What is Budgeting? (cont’d)(cont’d) Budgeting is a valuable Budgeting is a valuable

tool in both the planning tool in both the planning and the evaluation and the evaluation processes.processes.

Budgeting is the vehicle Budgeting is the vehicle for translating educational for translating educational goals and programs into goals and programs into financial resource plans.financial resource plans.

Objectives of BudgetingObjectives of Budgeting

Financial reporting should Financial reporting should provide information to determine provide information to determine whether current-year revenues whether current-year revenues were sufficient to pay for were sufficient to pay for current-year servicescurrent-year services


Financial reporting should Financial reporting should demonstrate whether resources demonstrate whether resources were obtained and used in were obtained and used in accordance with the entity’s accordance with the entity’s legally adopted budget.legally adopted budget.


Financial reporting should Financial reporting should provide information to assist provide information to assist users in assessing the service users in assessing the service efforts, costs and efforts, costs and accomplishments of the accomplishments of the governmental entity.governmental entity.

Meeting the budgeting objectives Meeting the budgeting objectives requires that budgets should:requires that budgets should:

Be balanced so that current Be balanced so that current revenues are sufficient to pay revenues are sufficient to pay for current services.for current services.


Be prepared in accordance with Be prepared in accordance with all applicable federal, state, and all applicable federal, state, and local legal mandates and local legal mandates and requirements.requirements.


Provide a basis for the Provide a basis for the evaluation of a government’s evaluation of a government’s service efforts, costs and service efforts, costs and accomplishments.accomplishments.

Budget Process OverviewBudget Process Overview

The budgeting process is The budgeting process is comprised of three major comprised of three major phases: planning, preparation phases: planning, preparation and evaluation.and evaluation.

Budget PlanningBudget Planning

Planning defines the goals and Planning defines the goals and objectives of campuses and the objectives of campuses and the school district and develops school district and develops programs to attain those goals programs to attain those goals and objectives.and objectives.

Budget PlanningBudget Planning

Once these programs and plans Once these programs and plans have been established, have been established, budgetary resource allocations budgetary resource allocations are made to support them.are made to support them.

Budget PreparationBudget Preparation

Budgetary resource allocations Budgetary resource allocations are the preparation phase of are the preparation phase of budgeting. The allocations budgeting. The allocations cannot be made, however, until cannot be made, however, until plans and programs have been plans and programs have been established.established.

Budget EvaluationBudget Evaluation

Evaluation typically involves an Evaluation typically involves an examination of:examination of:

How funds were expendedHow funds were expended Outcomes resulted from the Outcomes resulted from the

expenditure of fundsexpenditure of funds And to what degree these And to what degree these

outcomes achieved the outcomes achieved the objectives stated during the objectives stated during the planning phaseplanning phase

Budget preparation is not a Budget preparation is not a one-time exercise, rather one-time exercise, rather it is part of a continuous it is part of a continuous cycle of planning and cycle of planning and evaluation to achieve evaluation to achieve district goals.district goals.

Budgetary ApproachesBudgetary Approaches

Line-item or “traditional" Line-item or “traditional" budgetingbudgeting

Performance budgetingPerformance budgeting Program and Planning Program and Planning

budgetingbudgeting Zero-base budgetingZero-base budgeting Site-based budgetingSite-based budgeting Outcome-Focused BudgetingOutcome-Focused Budgeting

Line-Item BudgetingLine-Item Budgeting

The line-item format is the most The line-item format is the most widely utilized approach to widely utilized approach to budgeting because of its budgeting because of its simplicity and control simplicity and control orientation.orientation.


An example would be:An example would be:

The budget request for a school The budget request for a school library may be based upon its library may be based upon its prior year’s budget appropriation prior year’s budget appropriation plus/minus 5 percent for plus/minus 5 percent for increased/decreased costs.increased/decreased costs.


The development phase of line-item The development phase of line-item budgeting consists of three stages:budgeting consists of three stages:

Individual schools and departments Individual schools and departments submit budget requests to the CEO submit budget requests to the CEO in terms of the type of expenditures in terms of the type of expenditures to be made. These expenditures are to be made. These expenditures are classified into categories such as classified into categories such as salaries and wages, supplies, salaries and wages, supplies, utilities, and equipment.utilities, and equipment.

Line-Item BudgetLine-Item Budget

Continued 3 stages:Continued 3 stages: Next, the CEO compiles all the Next, the CEO compiles all the

requests and submits a requests and submits a summary request to the school summary request to the school board in line-item formatboard in line-item format

Finally, the board reviews the Finally, the board reviews the request, makes revisions, and request, makes revisions, and appropriates funds for appropriates funds for line-itemline-item expenditures.expenditures.

Line-Item Budgeting could be Line-Item Budgeting could be “A Double-Edged Sword”“A Double-Edged Sword”

Advantages: it offers school Advantages: it offers school boards and district boards and district administration a high degree of administration a high degree of control over the use of district control over the use of district resources.resources.

Disadvantages: Funds cannot be Disadvantages: Funds cannot be redistributed without budget redistributed without budget amendments.amendments.

Performance BudgetingPerformance Budgeting

The focus of this approach is on The focus of this approach is on efficiency (based on the efficiency (based on the measurement of the costs and measurement of the costs and standard process inputs), and standard process inputs), and the budget is considered a the budget is considered a “performance contract” between “performance contract” between the superintendent and the the superintendent and the school board.school board.

Performance BudgetingPerformance Budgeting

Example: The budget for a Example: The budget for a school cafeteria might be school cafeteria might be developed based on the number developed based on the number of meals that are to be produced of meals that are to be produced multiplied by the average cost of multiplied by the average cost of producing a meal.producing a meal.

Program and Planning-Program and Planning-Programming BudgetingProgramming Budgeting

Program budgeting is used to Program budgeting is used to refer to a variety of different refer to a variety of different budgeting systems which base budgeting systems which base expenditures primarily on expenditures primarily on programs of work and programs of work and secondarily on objects. It is secondarily on objects. It is considered a transitional form considered a transitional form between traditional line-item and between traditional line-item and performance approaches.performance approaches.

Zero-Based BudgetingZero-Based Budgeting

The basic tenet of ZBB is that The basic tenet of ZBB is that program activities and services program activities and services must be justified annually during must be justified annually during the budget development the budget development process.process.

Site-Based BudgetingSite-Based Budgeting

Site-based budgeting places the Site-based budgeting places the principal and other campus staff principal and other campus staff at the center of the budget at the center of the budget preparation process. Principals preparation process. Principals act as budget managers for their act as budget managers for their schools, responsible for both the schools, responsible for both the preparation and maintenance of preparation and maintenance of the campus budget.the campus budget.

Outcome-Focused BudgetingOutcome-Focused Budgeting

Outcome-Focused Budgeting is Outcome-Focused Budgeting is the practice of linking the the practice of linking the allocation of resources to the allocation of resources to the production of outcomes. For an production of outcomes. For an entity to focus on outcomes, it entity to focus on outcomes, it must first have identified what must first have identified what goals and objectives it needs to goals and objectives it needs to attain and then tie budget attain and then tie budget allocations to the achievement allocations to the achievement of those objectives.of those objectives.

Legal Requirements for Legal Requirements for BudgetsBudgets

Legal requirements for school Legal requirements for school district budgets are formulated district budgets are formulated by the state, TEA, and the local by the state, TEA, and the local district.district.

Statement of Texas LawStatement of Texas Law

The superintendent is the budget The superintendent is the budget officer for the district and prepares or officer for the district and prepares or cause the budget to be prepared.cause the budget to be prepared.

The district budget must be prepared The district budget must be prepared by a date set by the state board of by a date set by the state board of education, currently August 20, education, currently August 20, (June 19 if the district uses a July 1(June 19 if the district uses a July 1stst fiscal year start date.fiscal year start date.

Statement of Texas Law Statement of Texas Law (cont’d)(cont’d) The president of the board must The president of the board must

call a public meeting, giving ten call a public meeting, giving ten days public notice in a days public notice in a newspaper, for the adoption of newspaper, for the adoption of the district budget. the district budget.

No funds may be expended in No funds may be expended in any manner other than as any manner other than as provided for in the adopted provided for in the adopted budget.budget.

Statement of Texas LawStatement of Texas Law(cont’d)(cont’d)

The budget must be prepared in The budget must be prepared in accordance with GAAP accordance with GAAP (generally accepted accounting (generally accepted accounting principles) and state guidelines.principles) and state guidelines.

The budget must be legally The budget must be legally adopted before the adoption of adopted before the adoption of the tax rate.the tax rate.

TEA Legal RequirementsTEA Legal Requirements

The budget must be adopted by The budget must be adopted by the board no later than August the board no later than August 3131stst (June 30 if the district uses (June 30 if the district uses a July 1a July 1stst fiscal year start date) fiscal year start date)

Minutes from the board Minutes from the board meetings will be used by TEA to meetings will be used by TEA to record adoption of and record adoption of and amendments to the budget.amendments to the budget.

TEA Legal RequirementsTEA Legal Requirements(cont’d)(cont’d) The officially adopted district budget The officially adopted district budget

must be filed with TEA through must be filed with TEA through PEIMS (Public Education Information PEIMS (Public Education Information Management System) by the date Management System) by the date prescribed in the annual system prescribed in the annual system guidelines.guidelines.

A school district must amend the A school district must amend the official budget before exceeding a official budget before exceeding a functional expenditure category, i.e.., functional expenditure category, i.e.., instruction, administration,etc, in the instruction, administration,etc, in the total district budget.total district budget.

Local District RequirementsLocal District Requirements

School districts may establish their own School districts may establish their own requirements for annual budget requirements for annual budget preparation. These policies may preparation. These policies may include:include:

Fund balance levelsFund balance levels Debt service fund balance Debt service fund balance Investment requirementsInvestment requirements Property tax exemptions parametersProperty tax exemptions parameters Staffing LevelsStaffing Levels Financial performance comparison Financial performance comparison

measures.measures.

Public Hearings and Adoption Public Hearings and Adoption of the District Budgetof the District Budget

Public hearings are the final step Public hearings are the final step in the budget development in the budget development process. These hearings are process. These hearings are legally mandated by the Texas legally mandated by the Texas Education Code.Education Code.

Module #3 Budgeting. What is Budgeting? Budgeting is the process of allocating resources to the...

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