1. Preparing & Implementing the BUDGET
Micki Rundell, CFO
City of Georgetown
TML – June 5, 2015

2. “IT’S CLEARLY A BUDGET. IT’S GOT A LOT OF NUMBERS IN IT.”
George W. Bush

3. What Budgeting Should Be:
Texas Municipal Clerks Program
What Budgeting Should Be:
Opportunity to establish community goals.
Ability to incorporate those goals into the budget.
Allocates resources to accomplish goals.
This presentation will utilize the budgeting function as the vehicle for explaining a typical government’s financial structure and how the system can be used to realize the best in government or abused to bring out the worst in a community.
June 2005

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. Capital Budget
Capital projects are different from programs adopted in the operating budget:
Often represent very large project
Can have involve major financial obligations
May span two or more fiscal years
FUNDS the CAPITAL IMPROVEMENT PLAN

11. 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”

12. 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

13. 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?

14. Key Financial & budgetary policies
Good budgeting begins with a good policy….
Key Financial & budgetary policies

15. 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

16. 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

17. 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

18. Expenditure Policies Current Funding Basis Defined CIP Process
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

19. 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

20. Debt Management Policy
Use of Debt Financing
Future use against future payment
Long-life capital assets
Affordability Targets
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
Debt to Market Av < 2.5-3%
Debt/capita <1000 = low > 2500 = high
OVERLAPPING DEBT

21. 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

22. 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

23. 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

24. 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

25. 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”

26. Implementing the BUDGET
On-going Responsibilities

27. Understand the Budget Cycle
Forecasting & analysis
Preparation
Presentation/ Formal Filing
Workshops & Public Hearing
Formal Adoption
Implementation
Monitor & Adjust if Necessary
PREPARE FOR YEAR-END AUDIT

28. 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

29. 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

30. 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

31. 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

32. 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

33. 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

34. 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

35. Technical Resources GFOA – www.gfoa.org TML Series – www.tml.org
Best Practices
Elected Officials Guide Series
TML Series –
GFOAT -
Finance Forum 35

36. Questions?
Contact info:
Micki Rundell, Chief Financial Officer
City of Georgetown
Micki.