1. Module #3 Budgeting

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

3. What is Budgeting? (cont’d) Budgeting is a valuable tool in both the planning and the evaluation processes. Budgeting is a valuable tool in both the planning and the evaluation processes. Budgeting is the vehicle for translating educational goals and programs into financial resource plans. Budgeting is the vehicle for translating educational goals and programs into financial resource plans.

4. Objectives of Budgeting Financial reporting should provide information to determine whether current-year revenues were sufficient to pay for current-year services Financial reporting should provide information to determine whether current-year revenues were sufficient to pay for current-year services

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

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

7. Meeting the budgeting objectives requires that budgets should: Be balanced so that current revenues are sufficient to pay for current services. Be balanced so that current revenues are sufficient to pay for current services.

8. Meeting the budgeting objectives requires that budgets should: Be prepared in accordance with all applicable federal, state, and local legal mandates and requirements. Be prepared in accordance with all applicable federal, state, and local legal mandates and requirements.

9. Meeting the budgeting objectives requires that budgets should: Provide a basis for the evaluation of a government’s service efforts, costs and accomplishments. Provide a basis for the evaluation of a government’s service efforts, costs and accomplishments.

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

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

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

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

14. Budget Evaluation Evaluation typically involves an examination of: How funds were expended How funds were expended Outcomes resulted from the expenditure of funds Outcomes resulted from the expenditure of funds And to what degree these outcomes achieved the objectives stated during the planning phase And to what degree these outcomes achieved the objectives stated during the planning phase

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

16. Budgetary Approaches Line-item or “traditional" budgeting Line-item or “traditional" budgeting Performance budgeting Performance budgeting Program and Planning budgeting Program and Planning budgeting Zero-base budgeting Zero-base budgeting Site-based budgeting Site-based budgeting Outcome-Focused Budgeting Outcome-Focused Budgeting

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

18. Line-Item Budgeting An example would be: An example would be: The budget request for a school library may be based upon its prior year’s budget appropriation plus/minus 5 percent for increased/decreased costs.

19. Line-Item Budgeting The development phase of line-item budgeting consists of three stages: Individual schools and departments submit budget requests to the CEO in terms of the type of expenditures to be made. These expenditures are classified into categories such as salaries and wages, supplies, utilities, and equipment. Individual schools and departments submit budget requests to the CEO in terms of the type of expenditures to be made. These expenditures are classified into categories such as salaries and wages, supplies, utilities, and equipment.

20. Line-Item Budget Continued 3 stages: Next, the CEO compiles all the requests and submits a summary request to the school board in line-item format Next, the CEO compiles all the requests and submits a summary request to the school board in line-item format Finally, the board reviews the request, makes revisions, and appropriates funds for line-item expenditures. Finally, the board reviews the request, makes revisions, and appropriates funds for line-item expenditures.

21. Line-Item Budgeting could be “A Double-Edged Sword” Advantages: it offers school boards and district administration a high degree of control over the use of district resources. Disadvantages: Funds cannot be redistributed without budget amendments.

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

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

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

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

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

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

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

29. Statement of Texas Law The superintendent is the budget officer for the district and prepares or cause the budget to be prepared. The superintendent is the budget officer for the district and prepares or cause the budget to be prepared. The district budget must be prepared by a date set by the state board of education, currently August 20, (June 19 if the district uses a July 1 st fiscal year start date. The district budget must be prepared by a date set by the state board of education, currently August 20, (June 19 if the district uses a July 1 st fiscal year start date.

30. Statement of Texas Law (cont’d) The president of the board must call a public meeting, giving ten days public notice in a newspaper, for the adoption of the district budget. The president of the board must call a public meeting, giving ten days public notice in a newspaper, for the adoption of the district budget. No funds may be expended in any manner other than as provided for in the adopted budget. No funds may be expended in any manner other than as provided for in the adopted budget.

31. Statement of Texas Law (cont’d) The budget must be prepared in accordance with GAAP (generally accepted accounting principles) and state guidelines. The budget must be prepared in accordance with GAAP (generally accepted accounting principles) and state guidelines. The budget must be legally adopted before the adoption of the tax rate. The budget must be legally adopted before the adoption of the tax rate.

32. TEA Legal Requirements The budget must be adopted by the board no later than August 31 st (June 30 if the district uses a July 1 st fiscal year start date) The budget must be adopted by the board no later than August 31 st (June 30 if the district uses a July 1 st fiscal year start date) Minutes from the board meetings will be used by TEA to record adoption of and amendments to the budget. Minutes from the board meetings will be used by TEA to record adoption of and amendments to the budget.

33. TEA Legal Requirements (cont’d) The officially adopted district budget must be filed with TEA through PEIMS (Public Education Information Management System) by the date prescribed in the annual system guidelines. The officially adopted district budget must be filed with TEA through PEIMS (Public Education Information Management System) by the date prescribed in the annual system guidelines. A school district must amend the official budget before exceeding a functional expenditure category, i.e.., instruction, administration,etc, in the total district budget. A school district must amend the official budget before exceeding a functional expenditure category, i.e.., instruction, administration,etc, in the total district budget.

34. Local District Requirements School districts may establish their own requirements for annual budget preparation. These policies may include: Fund balance levels Fund balance levels Debt service fund balance Debt service fund balance Investment requirements Investment requirements Property tax exemptions parameters Property tax exemptions parameters Staffing Levels Staffing Levels Financial performance comparison measures. Financial performance comparison measures.

35. Public Hearings and Adoption of the District Budget Public hearings are the final step in the budget development process. These hearings are legally mandated by the Texas Education Code.