2009 ggfoa annual conference john g hulsey cgfm jackson county ga
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2009 GGFOA Annual Conference John G. Hulsey, CGFM Jackson County, GA. Budgeting in Today’s Economy. Learning Objectives. Identify Symptoms & Causes of Fiscal Stress Diagnosis of your Government’s Fiscal/Budget Situation Effective Communication Budget Strategies Budget Tactics

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Budgeting in Today’s Economy

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2009 ggfoa annual conference john g hulsey cgfm jackson county ga

2009 GGFOA Annual Conference

John G. Hulsey, CGFM

Jackson County, GA

Budgeting in Today’s Economy


Learning objectives

Learning Objectives

  • Identify Symptoms & Causes of Fiscal Stress

  • Diagnosis of your Government’s Fiscal/Budget Situation

  • Effective Communication

  • Budget Strategies

  • Budget Tactics

  • Enhanced Interim Financial Reporting


Identifying the symptoms

Identifying the Symptoms . . .

  • Inadequate Cash Flow Needs

  • Declining Fund Balance

  • Using Reserves to Balance the Budget


Knowing the causes

Knowing the Causes . . .

  • Inadequate Reporting/Lack of Good Information

    • Cash Basis Vs. Modified Accrual

  • Deficit Financing

  • Slow Debt Retirement

  • Unfunded Accrued Pension Liability


Knowing the causes1

Knowing the Causes . . .

  • Debt Restructuring

    • Deferring more than 35% of Current Debt Service

  • Over-reliance on nonrecurring revenue

  • Lack of Capital Improvement Plan

  • Excess Inter-fund Borrowing with no Capacity to Repay in the Near Future


Cyclical vs structural deficits

Cyclical Vs. Structural Deficits

  • Knowing the Difference

  • Cyclical Deficits

    • Short-term in nature

    • Caused by temporary economic downturns

    • Easier to address and weather


Cyclical vs structural deficits1

Cyclical Vs. Structural Deficits

  • Structural Deficits

    • Long-term in nature

    • Caused by long-term gaps between projected revenue growth and the estimated cost of government-funded services

    • Much more difficult to address


Selecting the appropriate strategy

Selecting the Appropriate Strategy

  • Cyclical Deficits –

    • Use of Reserves – “rainy day funds”

    • Freeze on hiring

    • Defer capital or maintenance spending


Selecting the appropriate strategy1

Selecting the Appropriate Strategy

  • Structural Deficits –

    • Use of Reserves post-pones the problem and becomes a recipe for fiscal disaster

    • Hiring freeze places greater pressure on staff – leading to turnover

    • Deferring infrastructure spending harms the economic vitality of the community and the tax base that supports the government


Effective communication

Effective Communication

  • It is imperative that decision makers visualize the problem

    • Interactive presentations of future financial positions using different growth scenarios

    • Find anecdotal ways to relate the scope and nature of the problem

  • Benchmark Data

    • Use to show areas of over-expenditure

      • Employees per capita

      • Overtime spending ratios

      • Trends in benefit costs


Effective communication1

Effective Communication

  • Understand what tough times mean for citizens

    • Try to anticipate the unintended consequences of applying budget strategies

    • Trust with citizens is crucial for ongoing financial stability and short-term political support


Effective communication2

Effective Communication

  • Understand what tough times mean for employees

    • The most effective and efficient organizations recognize the value of employees in achieving the primary purpose of government, “to serve the citizens”.


Is the budget balanced

Is the Budget Balanced?

“Accuracy above Balance” is the fundamental rule of budgeting.

If the budget is balanced but not accurate, it is not balanced!


Know the budget environment

Know the Budget Environment

  • It is imperative that you are aware of State Legislation that will impact the budget process.

    • HB 233 – Moratorium on Digest Value

    • Removal of HTRG


Budget strategies

Budget Strategies . . .

  • Prioritize Services

    • Entails carefully considering the price($) of government and results desired

    • Essential to eliminating structural deficits and preventing cyclical deficits from becoming structural deficits


Budget strategies1

Budget Strategies . . .

  • Work with a Citizen Blue Ribbon Committee

    • Leading citizens can provide an outside perspective on efforts to restore financial balance

    • Build public support for hard choices and involve in the development of the strategies


Budget strategies2

Budget Strategies . . .

  • Seize the Opportunity to Innovate

    • A crisis can be the impetus to innovate and make changes that would be near impossible in better times.

    • Involving and re-focusing employees can be of great aid in reaching financial stability.


Budget tactics management practices

Budget Tactics – Management Practices

  • Make Managers Manage

    • Layers of control may have built up over time that are costly to maintain and of limited effectiveness.

  • Pursue inter-organizational cooperation

    • Cooperate with other organizations to gain economies of scale

    • Joint health insurance purchasing or using pooled insurance


Budget tactics management practices1

Budget Tactics – Management Practices

  • Enhance Purchasing Practices

    • Identify bulk purchases and explore multi-year contracts to lower cost and explore long-term contracts to help manage energy costs

    • Standardize and limit the selection available for office supplies & basic technology

    • Utilize Just-in-Time purchasing to reduce inventory carrying costs and shrinkage


Budget tactics management practices2

Budget Tactics – Management Practices

  • Re-evaluate vendors frequently to verify value and accuracy.

    • Lack of competition can cause complacency and lead to higher prices.


Budget tactics financial planning analysis

Budget Tactics – Financial Planning & Analysis

  • Divestiture of loss-generating enterprises

  • Identify sources of liquidity


Budget tactics financial planning analysis1

Budget Tactics – Financial Planning & Analysis

  • Audit certain routine expenditures

    • Pensions and benefits

    • Cell phones, pagers, and landline usage

    • Office and janitorial supplies

    • Publications, travel, and memberships

  • Review property & liability insurance schedules for accuracy

  • Review insurance claims history


Budget tactics human resources and benefits

Budget Tactics – Human Resources and Benefits

  • Investigate risk management

    • Inadequate practices and fraud can contribute to higher costs

    • Use benchmarking to compare your experiences against those of others

  • Evaluate overtime usage

    • Examine ratio of overtime to regular wages

    • Consider alternative scheduling options


Budget tactics human resources and benefits1

Budget Tactics – Human Resources and Benefits

  • Re-examine labor structures

    • Review all positions for duplication of duties

    • Review the use of consultants and temporary staff

    • Use workload indicators to budget staff and identify targeted reductions

  • Assess organization structure


Budget tactics human resources and benefits2

Budget Tactics – Human Resources and Benefits

  • Integrate Human Resources and Financial Systems

    • Integrated HR and financial data is vital to decision making

  • Address health-care costs

    • Examine the major drivers of the cost

    • Re-evaluate co-payments

    • Focus on the greatest needs of the population and ensure that the plan does not pay for unused benefits


Budget tactics capital and debt

Budget Tactics – Capital and Debt

  • Restructure Debt

    • Take advantage of lower interest rates

    • Beware of intergenerational inequity issues

    • Consider operating impacts on future budgets (i.e., back-loading a debt issue with higher principal payments)

  • Begin comprehensive capital project planning

    • Ensure you understand operating and maintenance cost of new assets


Budget tactics revenue

Budget Tactics – Revenue

  • Audit revenue sources

    • Audit surcharges, franchise fees, etc., to uncover instances of underpayment

  • Improve billing and collection procedures

  • Explore fees for services

    • Re-visit to ensure existing fee structure is meeting cost recovery goals


Budget tactics to use with caution

Budget Tactics to Use with Caution

  • Offer early retirement program

  • Institute hiring/wage freezes

  • Furlough Days

  • Suspend retirement plan contributions

  • Use of fund balance

  • Sell assets

  • Defer and/or cancel capital projects


Budget tactics to use with extreme caution

Budget Tactics to Use with Extreme Caution

  • Make across the board wage cuts

  • Make across the board budget cuts

  • Levy a broad tax increase


Enhanced interim financial reporting

Enhanced Interim Financial Reporting

  • Cash Basis Vs. Modified Accrual

  • Timely and accurate information


Conclusion

Conclusion

  • Fiscal stress creates opportunities and is an opportunity to focus on outcomes that the citizens really desire

  • Know the difference between cyclical and structural deficits and employ the budget strategy/tactic to improve your financial condition


Questions

Questions

  • John G. Hulsey, CGFM

  • Jackson County Government

  • 706-367-1840

  • [email protected]


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