1. Chapter 14 Budgeting

2. Fire Officer I Objectives
Describe the budget cycle.
Identify revenue sources.
Discuss the impact of lower revenue on resources.
Describe the purchasing process.

3. Fire Officer II Objectives
Identify revenue sources.
Describe the purchasing process.
Identify expenditures.
Discuss bond referendums and capital projects.
Describe the budgetary process.

4. Introduction
A budget is an itemized summary of estimated revenues and expenditures.
Revenues: income from all sources
Expenditures: money spent for goods or services
Every fire department has a budget.

5. Introduction The budget process is a cycle:
Identification of needs and resources
Preparation of a budget request
Local government and public review
Adoption of an approved budget
Administration of the approved budget, with periodic review and revision
Close-out of the budget year

6. Introduction Budget preparation is technical and political.
Technical: calculation of funds required to achieve different objectives
Political: elected officials making decisions about which programs should be funded

7. Budget Cycle
The budget describes where the revenue comes from and where it goes.
Annual budgets usually apply to a fiscal year.

8. Base Budget and Supplemental Budgets
Base budget: level of funding required to maintain all services at current levels
Supplemental budget: increases beyond the base level

9. Base Budget and Supplemental Budgets
Increases in the budget require early notification and the support of elected officials.
Elected officials are both advocates and gatekeepers in developing the budget.

10. Revenue Sources
Each type of organization has a different process for obtaining revenue and authorizing expenditures.

11. Local Government Revenue Sources
Some funds are restricted and can be used only for certain purposes.
Funding sources that are not restricted may be taken from one part of the budget to cover another part of the budget.

12. Local Government Revenue Sources
Revenue sources include:
General sales and gross receipts taxes
Property taxes
Individual income taxes
Direct fire department fees for service

13. Volunteer Fire Department Revenue Sources
Volunteer departments can be funded in many different ways.
Bingo and other gaming activities
Real estate and portfolio management

14. Lower Revenue Means Fewer Resources
Planned expenditures have to be balanced against anticipated revenues a year or more in advance.
Changes in the economy can reduce the amount of revenue collected by the local government.

15. Lower Revenue Options Defer scheduled expenditures.
Prioritize or contract out some services.
Regionalize or consolidate services.
Reduce the workforce.
Reduce the size of the fire department.

16. Purchasing Process
Most agencies have a standardized purchasing method.
The fire officer must understand the policies and procedures of the organization.
Purchasing violations may be found during the auditing process.

17. Petty Cash Typically used to purchase items that cost less than $100
Allows a member of the department to be the custodian of cash
The petty cash account is not an endless fund.

18. Purchase Orders
Ensure that there are sufficient funds to cover a purchase
Fire officer’s role: acquire the item at the most reasonable cost
Typically requires a signature by an official

19. Requisitions
Used instead of purchase orders for large purchases that exceed a predetermined amount, such as $2000
An exact price is not known at the time of requisition.
Requires a bidding process

20. The Bidding Process
For smaller items, the fire department may develop specifications for bids.
The fire department writes up exactly what it wants in the product.
Every requirement must be met.

21. The Bidding Process
For larger or complex purchases, a request for proposal (RFP) is developed.
The fire department gives general information about what is desired.
The vendor determines how it will meet the need.

22. The Bidding Process All bids or proposals are opened in public view.
With a bid, the contract is awarded to the lowest bidder.
With an RFP, each proposal is evaluated and the RFP is awarded to the vendor with the highest score.

23. Grants Fire departments can apply for grants. Four-step method:
Conduct a needs assessment.
Compare the needs to the priorities of the grant program.
Decide which grant to apply for.
Complete the application.

24. Grants There is strong competition for grants.
A sound justification is needed for why the organization should receive the funding.
Show that efforts have been made to obtain the funds from other sources.
Show that this solution provides a benefit at the lowest possible amount of funding.

25. Nontraditional Revenue Sources
Donations from targeted business or industry for a specific purpose
Cost recovery
Hazardous materials clean-up
Special services supplied by fire departments

26. Expenditures
The budget format should comply with the recommendations of the Governmental Accounting Standards Board (GASB).
Expenditures fall into three categories:
Personnel expenditures
Operating expenditures
Capital expenditures

27. Personnel Expenditures
Represent more than 90 percent of a career fire department’s budget
Include salaries and fringe benefits

28. Operating Expenditures
Include uniforms, protective clothing, telephone charges, and fire apparatus maintenance costs
Also includes mandated training
© Jones & Bartlett Learning. Photographed by Glen E. Ellman.

29. Capital Expenditures Purchase of durable items:
Cost more than a predetermined amount
Will last longer than one budget year
© Jones & Bartlett Learning. Photographed by Glen E. Ellman.
© Jones & Bartlett Learning. Photographed by Glen E. Ellman.

30. Bond Referendums and Capital Projects
Bond: certificate of debt issued by a government or corporation
Guarantees repayment of the original investment plus interest by a specified future date
Used to fund new stations or renovations
Must be approved by voters
Repaid over 10 to 30 years

31. Bond Referendums and Capital Projects
When used to build a new fire station, the authorized amount often includes:
The land and site improvements
Building construction
Permits and fees
Items that will go into the building
Equipment assigned to the new station

32. Navigating the Budgetary Process
Develop a budget proposal’
Describe what the new unit will do.
Describe the impact if it is not funded.
Give an overview of the program.
Give an overview in narrative form.

33. Navigating the Budgetary Process
Consider annual personnel and operating expenditures.
Include personnel expenses to be incurred.
Include operating expenses to be incurred.

34. Navigating the Budgetary Process
Create a capital budget.
The budget summary shows the first-year capital expenditures to start the program.
Ask for everything you need.
Determine cost recovery and reduction.
How will this request pay for itself?

35. Summary Every fire department has a budget.
The budget describes where revenue comes from and where it goes.
Most municipal governments use a base budget in the planning process.
The revenue stream depends on the type of organization.

36. Summary
Expenditures must be balanced against anticipated revenues a year in advance.
Departments have to make choices when faced with declining revenues.
The petty cash system allows for a custodian of cash provided by the organization.

37. Summary
A purchase order typically requires an authorizing signature by an official.
A requisition is required for purchases exceeding a predetermined amount.
In an RFP, the fire department gives general information and allows vendors to determine how to meet the need.

38. Summary Fire departments can obtain funds by applying for grants.
Fire departments sometimes solicit donations.
In most cases, more than 90 percent of the career fire department budget is allocated to salaries and benefits.

39. Summary The operating budget covers basic expenditures.
Capital expenditures comprise purchases of durable items.
Large capital improvement projects may be funded through bond programs.

40. Summary The budgetary process: Developing a budget proposal
Considering expenditures
Creating a capital budget
Asking for everything you need
Determining cost recovery and reduction