1 Budgeting Basics FGFOA Budget Workshop December 19, 2013 Todd Bond, Budget Officer Polk County Board of County Commissioners

2 Course Outline ► ► Budget background   What is a budget?   What Guides the Budget? ► ► Budget Process and Policy   Funds and Balancing   TRIM – What is it and how it impacts us ► ► Budget Types   Operating   CIP Process ► ► Budget Methods   Line Item   Program Budgets   Zero Based   Budgeting for Outcomes ► ► Budget Monitoring and Reporting

3 What is a Budget? ► The Merriam-Webster dictionary definition:  A statement of the financial position of an administration for a definite period of time based on estimates of expenditures during the period and proposals for financing them

What is a Budget? 4 REVENUE Taxes User Fees License Fees Permit Fees Fund Balance Bond Proceeds Misc. Revenue EXPENSE Position Costs Operating Costs Capital Equipment Capital Projects Reserves How much are citizens willing to pay? What level of service do citizens want?

5 What is a Budget? ► ► Government Finance Officers Association (GFOA)   Financial Plan - a plan of what is projected to be received in revenue, as well as how much will be spent over the same time   Operations Guide – used as a tool by organizations to guide operations, as well as capital expenditures   Policy Document – provides information on goals, objectives, service levels, challenges, trends, and policies   Communications Device - communicates to the Board and the public what is being done with tax revenues

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Orange County Sources of Funds 7

Pasco County Expenditures Chart 8

Polk Adopted Budgets 9

10 Putting the budget ahead of the policy is the wrong way to do it. It's too often the way it's done in Washington. Spencer Abraham

What Guides our Budget? ► Florida Statutes ► Best Practices – GFOA ► Generally Accepted Accounting Principles ► Local Policies  Ordinances, Resolutions, Charters 11

12 Florida Statutes ► There are numerous Florida Statutes  Chapter 129 County Annual Budget ► Establishes guidelines for County Annual Budget  FS “Budget system established.”  FS “Preparation and adoption of budget.”  FS Sets the “Fiscal Year”.  FS for Municipality Budgets, Fiscal Years, and Budget Amendments

13 Florida Statutes Continued ► Chapter 200 Determination of Millage  FS Method of Fixing Millage ► Sets the timeline for establishing property taxes for all local governments and other taxing authorities  FS Duty of County Commissioners and School Board in setting rate of taxation ► Establishes that the Commissioners determine the amount to be raised for all County purposes for the Board as well as other County taxing authorities

14 Florida Statutes Continued ► Budget must be balanced ► Defines budget process ► Establishes budget amendment process ► Defines budget system ► Defines fiscal year ► Establishes that it is unlawful to overspend the budget

Legal Requirements ► Budget shall conform to the State’s uniform chart of accounts  Expenses are assigned to functional categories ► General Government ► Public Safety ► Transportation ► Economic Environment ► Human Services ► Culture/Recreation ► Inter-fund Transfers 15

16 Basic Structure ► Fund Types  General Fund ► Only fund that can be used across the Board for all General County Purposes  Special Revenue Funds ► Account for proceeds of specific revenue sources requiring separate accounting because of legal or regulatory provisions or administrative action  e.g. Transportation Trust Fund, Special Revenue Grants, Fire Services Fund, etc…

17 Basic Structure (continued) ► Fund Types (continued)  Debt Service Funds ► Account for the accumulation of resources for and payment of the County’s long-term debt other than those payable from the operations of Enterprise Funds  Capital Funds ► Account for the acquisition or construction of major capital facilities and the acquisition of environmentally sensitive land  e.g. CIP Road Projects Fund, Public Safety Capital Improvement Fund

18 Basic Structure (continued) ► Fund Types (continued)  Enterprise Funds ► Used to account for operations that are financed and operated in a manner similar to private business enterprises  e.g. Solid Waste Funds, Utilities Funds, Rohr Home Fund  Internal Service Funds ► Account for the financing of goods and services provided by one department or agency to other departments or agencies, and to other governments on a cost reimbursement basis  e.g. Fleet Maintenance Fund, Fleet Replacement Fund, Employee Health Insurance Fund, Information Technology

Generally Accepted Accounting Principles (GAAP) ► Combination of standards and simply the commonly accepted ways of recording and reporting accounting information ► Governmental Accounting Standards Board (GASB)  The source of GAAP used by State and Local governments in the United States 19

Best Practices - GFOA ► GFOA has established a collection of practices that identify enhanced techniques and effective strategies for state and local government practitioners ► _content&task=view&id=118&Itemid=130 _content&task=view&id=118&Itemid=130 _content&task=view&id=118&Itemid=130 20

21 Local Policies - County Charter ► Article I: “Polk County shall be a Home Rule Charter County, and except as may be limited by this Home Rule Charter, shall have all powers of self-government granted now or hereafter by the Constitution and Laws of the State of Florida” ► Article II: “The Board of County Commissioners shall have specific powers and duties to review the budgetary requests including salaries and make the final budgetary determinations and appropriations for all County governmental operations…”

22 Budget Process Budget & CIP Calendar Training Board Retreat 5 – 10 Year Projections Budget Kickoff Forms & Instructions Work Sessions with County Manager TRIM Proposed Budget BoCC & Public Review Two Public Hearings Adoption Preparation Phase Review Phase Adoption Phase Planning Phase

23 TRIM Process ► ► Florida Statute 200 – Determination of Millage   TRIM – stands for Truth in Millage   Sets timeline for millage that drives the whole budget calendar for local government   The process that establishes property taxes   All taxes are computed based upon taxable value ► ► Taxable value/1,000 x millage rate = property tax

24 TRIM Process

Property Tax Calculation ► ► Example:   Assessed value: $150,000   Less Homestead Exemption:($50,000)   Taxable value:$100,000   100,000/1,000 = 100 x = $

Polk County Property Value 26

Polk County Millage 27

Polk County Millage 28

Sonoma County California 29

Budget Types ► Operating Budget  One year  Multiyear – recommended practice ► Capital Budget  Adopted as part of overall budget  Developed separately as a “Capital Improvement Plan” (CIP)  First year is funded 30

Operating Budgets ► Personal Services  Salaries and benefits ► Operating Expenditures  Office supplies, fuel, contracts, etc. ► Capital Expenditures  Equipment, vehicles, etc. ► Reserves 31

Multiyear Budget ► Second year plan or “Rolling Plan”  The first year is adopted and following years are a tentative spending plan  Budgets and Plans are re-done every year ► Two-Year Budget  2 nd year plan is adjusted in the “off year” and adopted  Every other year becomes a one year budget ► TRIM process is required every year 32

Benefits of Multiyear Budgeting ► Enables strategic and tactical thinking ► Identifies trends ► Demonstrates the need for reserves ► Early problem identification ► Viewed favorably by bond rating agencies 33

Capital Improvement Plan Budgets ► Five to twenty-year plan  Includes funding sources and operating costs of finished projects  May also include Unfunded Projects ► Approved through a separate process ► Adopted annually as a plan ► Included in adopted budget 34

35 Types of CIP Projects ► Roads ► Intersections ► Jails ► County Facilities and Buildings ► Parks and Athletic Fields ► Drainage ► Landfills ► Water mains, pumps, and wells

Capital Improvement Plan 36

37 Polk County CIP Process ► Departments and Divisions identify projects ► Divisions prepare “Carry forward” Update (April - May) ► County Manager Reviews (June) ► Board Workshops (August) ► Approval During Public Hearings (September) ► “True Up” of Adopted Budget (December)

Budget Methods ► Line Item Budget  Focuses on items being bought or paid for ► Travel, office supplies, fuel, etc.  Keeps track of how much was spent on items  Easy to develop, start with last year’s cost  Also known as “Traditional Budgeting” ► Typically built upon last year’s cost  Emphasis is not placed on services provided 38

Budget Methods Line Item Budget 39

40 “ We can't solve problems by using the same kind of thinking we used when we created them. ” Albert Einstein

Budget Methods ► Program Budgets  Focuses on expected services and activities ► Performance objectives are used  Revenue and expense are linked to programs that meet community goals  Identifies anticipated results and outputs 41

Budget Methods Program Budget 42

Budget Methods ► Zero Based  Asks managers to build a budget, starting from zero  All expenses must be justified for each new budget  Budgets are analyzed for its needs and costs regardless of whether the budget is higher or lower than the previous one  Time-consuming and costly 43

Budget Methods ► Performance Based  Focus on results/outcomes, not inputs  Shows relationship between program funding levels and expected results  Aids in assessing productivity, quantity, and quality  Multiple variations, such as “Budgeting for Outcomes” 44

Budget Amendments ► Florida Statute “Execution and Amendment of budget”  Local authorities can approve or delegate authority to approve amendments, if total appropriations of the fund do not change.  Use of Reserves has to be Board approved.  Funds can be increased by resolution for unanticipated revenue.  Public Hearing required for any other purposes. 45

Budget Monitoring and Reporting ► Budget vs. actual reports  % spent compared to % of year completed  Keep in mind normal/seasonal fluctuations ► Debt service may be paid early in the year ► Park costs increase during league seasons  Payroll schedules 46

Dashboards 47

Dashboards continued 48

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50 Questions? Thank You!