Preparing &
Implementing the
BUDGET
Micki Rundell, CFO
City of Georgetown
TML – June 5, 2015
“IT’S CLEARLY A
BUDGET. IT’S GOT A LOT
OF NUMBERS IN IT.”
George W. Bush
What Budgeting Should Be:
• Opportunity to
establish community
goals.
• Ability to incorporate
those goals into the
budget.
• Allocates resources
to accomplish goals.
Additionally a Good Budget…
• Reflects the Goals & Objectives of the
Organization as well as the Community
• Is a Tool for Planning & Management
of community resources
– Remember… it’s “their” money
• Is Monitored Routinely
• Reflects Organizational Structure and
Control
Lots of Types/Methods for
Budgets
Operations Budget
– Zero-Based Budget
– Lump Sum Budget
– Line Item Budget
– Program Budget
– Results Oriented / Performance Budget
Capital Budget
– Multi Year Capital Planning
FIND THE ONE THAT WORKS FOR
YOUR ORGANIZATION
Budgets based on “Funds”
• Operations are organized on the basis
of Funds
– Separate, self-contained set of accounts
• Assets, liabilities, revenues & expenditures
– Smaller cities may operate only 1 fund
• Georgetown has over 30 funds
• Plano has 130
• Each fund operated as separate entity
• Each is addressed within the Budget
Annual Budget Documents
Annual Operating Budget
– Required by State Statute & City Charter
– Allocates resources
• Based on Council Priorities
– Serves as a Policy Document
Capital Budget
– Plan acquisition/construction of major capital items
– 5-year planning horizon is recommended
• Project scope identified
• Potential Funding Sources Identified
– 1st year of CIP appropriated in Annual Budget
– Other Years are for Planning Only
Operating Budget
• Structurally Balanced
– Operating revenues should fund on-going
expenses
– PY Excess or 1-time funds should be used
for 1-time expenses
• Appropriated for One Fiscal Year
– Appropriations usually lapse at YE
– Yet, outstanding encumbrances or
purchase orders can be paid in the
following year
Operating Budget
• Should Include:
– Overall Summary of Issues, Challenges &
Opportunities
– Summary & Explanation of Revenues and
Expenditures by Fund
– Defined Programs & Objectives
– Staffing Levels
– Performance Measures
Capital Budget
Capital projects are different from
programs adopted in the operating budget:
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Often represent very large project
Can have involve major financial obligations
May span two or more fiscal years
FUNDS the CAPITAL IMPROVEMENT PLAN
Capital Improvement Program
• Preparation - update 5-Year CIP schedule
can include:
– Citizen involvement
– At least 5 years forward
– Identifies plan for funding capital improvements
– Include estimated operational impacts
• “Year 1” is formally adopted as the “Capital
Budget”
Capital Budget
Capital budgets should include:
 Descriptions of scope of each project
 Estimated costs of 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 project
• Current Year Appropriation
• Future Year Funding Sources
Any impact on the operating budget
should also be identified
Creating the Annual Budget Document
• Revenues
– Identify & estimate revenues by fund including:
• Property Tax
• Sales Tax
• Charges for Services
• Expenses/ Expenditures
– Total amounts 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?
Good budgeting begins with a good
policy….
KEY FINANCIAL &
BUDGETARY POLICIES
Why have a Financial/Budget
Policy?
• Provides “fiscal discipline”
• Achieve & maintain long-range stable
and positive financial condition
– Rating agencies and bond market rely on it
• Provide guidelines for day-to day
planning & operations of City’s financial
management
Identify the Budget Process
• Operating plan – 1 to 2 years
• Capital plan – 1 to 5 years
• Link to long-term, comprehensive plan
– Budget based on performance & outcomes
• Determine time line for preparation
• Assign control & accountability of funds
– Transfers between funds/departments
– Document the Budget Amendment process
Revenue Management
• Define “conservative” revenue projection
philosophy
• User-based fees and service charges
– “Cost of service”
• Property Tax Revenues/Tax Rate
– Relation to effective rate and rollback rate
– Portion allocated to Operations vs. Debt
• Administrative Services Charges
– Transfers between Funds
Expenditure Policies
• Current Funding Basis
– On-going revenue fund on-going
expenses
– Excess revenue funds 1-time expense
• Defined CIP Process
– 5 year capital plan with funding impacts
to tax payers and rate payers
• Address Capital Maintenance
Capital Maintenance Program
• Deferred maintenance increases future
capital costs
• On-going capital maintenance is
included in operating budget
• Use Internal Service Funds - “lease”
equipment to departments
– Lease fees fund capital repairs and
replacement
Debt Management Policy
• Use of Debt Financing
– Future use against future payment
– Long-life capital assets
• Affordability Targets
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Debt per capita
Debt as a percent of taxable value
Debt service payments as percent of current revenues
Debt tax rates as percent of total tax rate
• Sale Process
– Competitive vs. Negotiated
• Full and Continuing Disclosure
Financial Reserves
Identify “rainy day” funds…. Georgetown:
• Requires 75 days citywide operating
“contingency” reserves
– Rainy day fund for unexpected emergency
– 90 day reserve in General Fund
• 30 days = “Emergency” Funds
–Offset sudden tax increase
–Replenished next budget cycle
• 60 days = Long-term reserves
Develop a
“Budget Contingency Plan”
• Establish guidelines for managing
revenue shortfalls
– Immediate actions include freezing hiring of
new positions
– Delay all “non-essential” spending
• Service level reductions addressed by
Council
– Includes workforce reductions
Annual Budget Document includes
• Transmittal Letter
– Summary of key issues & factors driving proposed
budget
• Three Year Historical Summary (Total Budget)
– PY ending ACTUAL numbers
– Current FY BUDGET & PROJECTED FYE
– PROPOSED Budget
• Proposed Budget by Fund
– Written Summary
– Revenue Schedule
– Proposed Expenditures by Department
• Appendix
– Supplemental Information & Schedules
Outline Accounting & Financial
Reporting Requirements
• Provide quarterly/monthly reports to
Council
• Outside audit annually of all City
accounts
– Accountable directly to City Council
• Prepare Comprehensive Annual
Financial Report (CAFR)
– GFOA standards
Maintaining the Financial &
Budgetary Policy
• Review annually with the Council during the
budget process
• Clarify areas that may be confusing
• Look for new ways to improve the policy
– Example: Addition of a “revenue shortfall
contingency plan”
Implementing the BUDGET
On-going Responsibilities
Understand the Budget Cycle
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Forecasting & analysis
Preparation
Presentation/ Formal Filing
Workshops & Public Hearing
Formal Adoption
Implementation
Monitor & Adjust if Necessary
PREPARE FOR YEAR-END AUDIT
Budget Amendment Process
Determined by State Law and Charter
“Emergency or Expenses that were not
known when budget was adopted”
• Adopted by ordinance and filed with City
Secretary
• Clearly identifies appropriation and
funding source
Budget Management
• Continual process
• Monthly reporting on finances
– Summarize key revenues & monitor expenditures
– Early identification of potential issues
• Important to assess budget proposal within a
long range forecast
– Decisions made this year impact every future year
– Budget needs to be sustainable
• LONG-TERM FINANCIAL PLAN
Monitoring Spending
• Budgetary control at line item level
– Detail of planned spending
– Budget transfers between line items
• “Encumbrance” thru Purchase Orders
ensures funds are available when needed
• Prompt payment of invoices
– Records expenditure on the General Ledger and
releases encumbrance thru PO
• Most departmental spending should be within
% of prior year
– Exceptions due to seasonality
Departmental Accountability
• Allow flexibility for changes during the year
– Moving funds between line items w/n
department
• Require appropriate detail in budget
submission
• Establish service level expectations
– Performance indicators
• Monitor & report on performance
• Directors & Managers held accountable for
budget and related results
Year End Estimates/Projections
Done as part of 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
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
Conclusion
• Good budgeting guides operations and
ensures long-term financial stability
– Council & community support & involvement
• Develop financial policies that are
adhered too and enhance long-range
financial planning
– Adhere to the guidelines addressed in the policy
• Focus on desired results
– The “Budget” outlines how we manage resources
– Demonstrates fiduciary responsibility to citizens
Technical Resources
• GFOA – www.gfoa.org
– Best Practices
– Elected Officials Guide Series
• TML Series – www.tml.org
• GFOAT - www.gfoat.org
– Finance Forum
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Questions?
Contact info:
Micki Rundell, Chief Financial Officer
City of Georgetown
Micki. Rundell@georgetown.org