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Budgeting in Simi Valley. February 2014. Agenda. Budget 101 Budget Structure Budget Process Overview Budget 102 The City’s Fiscal Environment City Fiscal Policies and Practices Department Budget Prep In Conclusion… Your Role Questions and Answers. What is the Annual Budget?.

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agenda
Agenda
  • Budget 101
    • Budget Structure
    • Budget Process Overview
  • Budget 102
    • The City’s Fiscal Environment
    • City Fiscal Policies and Practices
    • Department Budget Prep
    • In Conclusion… Your Role
  • Questions and Answers
what is the annual budget
What is the Annual Budget?
  • Like at home, it is a spending PLAN for the next year
    • Circumstances change over the year
    • The budget changes frequently as items are added or deleted (Supplemental Budget Requests)
  • City fiscal year is July 1 to June 30
  • Ideally, the budget should be a prioritization of resources
    • This is the idea of Priority Based Budgeting
    • “What is most important gets funded”
vocab fund accounting
VOCAB: Fund Accounting
  • Fund accounting is an accounting system used by government and non-profits which emphasizes accountability rather than profitability
  • A fund is a self-balancing set of accounts, segregated for specific purposes in accordance with laws and regulations.
vocab fund types
VOCAB: Fund Types
  • General Fund = general government
  • Internal Service Fund = provides service to internal customers
  • Enterprise Fund = internal “businesses” that should be self-supporting; revenues usually paid by customers/ratepayers
  • Special Revenue Fund = specific, segregated revenue stream
  • Capital Fund = for capital purchases and projects
what s in our budget
What’s In Our Budget?

PARKS =

RSRPD

TRANSIT

GENERAL FUND

Police

Public Works

Environmental Svcs.

Community Svcs.

Admin. Svcs.

City Attorney

City Administration

WATER

SCHOOLS =

SVUSD

SANITATION

FIRE =

VENTURA COUNTY

pop quiz how big is our budget
Pop Quiz:How Big is our Budget?
  • For Fiscal Year 2013-14
    • Total Budget is over $175 Million
    • This includes $10 Million for capital projects
    • General Fund is $66 Million
    • Over 130 individual funds
    • Governed by federal and state law, GFOA and GASB accounting standards
what does it pay for
What Does it Pay For?

Salaries & Benefits = 80.7%

Supplies & Materials = 9.5%

Services = 9.0%

other documents
Other Documents
  • Comprehensive Annual Financial Report (CAFR)
    • Like financial statements for private company showing year-end situation
    • CAVEAT: different fund groupings than budget (per requirements); tough to compare
    • Extremely useful notes; READ IT for the detail
  • Supporting Document
    • Provides justification/explanation for any increases in budget line items
    • Includes requests for additions and proposed reductions to the budget for that year
capital improvement program cip
Capital Improvement Program (CIP)
  • We prepare a five-year “Capital Improvement Program” (CIP) book with the spending plan for capital items
    • Since they are most costly, it makes sense to plan ahead
  • Capital Projects = large projects, often constructed and budgeted over multiple years
    • $5,000 for vehicles, machinery & equipment
    • $25,000 for infrastructure & building improvements
    • $50,000 for buildings
    • $100,000 for intangibles (such as computer software and licenses)
  • The current year of the CIP is included in the annual budget
vocab fund balance
VOCAB: “Fund Balance”
  • Fund Balance = a measure of resources available in the fund, the difference between assets and liabilities
vocab reserves
VOCAB: Reserves
  • If the budget is for your checking account, reserves are like your savings account
  • Reserves are funds accumulated for use in emergency
    • The City’s “rainy day fund”
  • Reserves are restricted (held for specific uses) and unrestricted (available for use)
  • City Council policy is to maintain at least 17% operating expenditures as unrestricted reserves (two months’ expenditures)
    • 17% is recommended by GAAP
how is the budget prepared
How is the Budget Prepared?
  • Departments submit information to Budget Officer
  • Budget Officer compiles
  • City Manager reviews, adds, and subtracts
  • City Manager submits preliminary base budget to City Council
  • Council deliberates and makes decisions
  • Council adopts balanced budget
  • Fiscal year starts on July 1st of each year
budget is a living document
Budget is a Living Document
  • It is adopted in balanced form in July
  • As soon as Council approves a supplemental, we are in imbalance again
  • The numbers change with every item going to Council
  • Key for departments to plan ahead as much as possible and include things in the budget
moving toward priority based budgeting
Moving toward Priority Based Budgeting
  • Tie budget/goals to City priorities
    • Strategic Plan
    • Council goals
  • Keep base budget for existing operations
    • Add for new items
    • Subtract for reduction
  • Begin evaluating City programs for value
    • Cost recovery
    • Mandate
    • Demand
cost allocation plan cap
Cost Allocation Plan (CAP)
  • Prepared annually
  • Determines amount charged to departments for indirect costs
  • For example:
    • the cost of the Human Resources Division is charged to other departments based upon number of authorized regular positions
    • The cost of the City Attorney’s Office is charged to other departments based upon number of Council agenda items prepared
vehicle replacement plan
Vehicle Replacement Plan
  • Keep rolling inventory of vehicle stock
  • Have set replacement schedule; departments charged each year for portion of replacement cost
    • Example: Department with $40,000 vehicle with 10 year replacement life is charged $4,000 each year it is in service so $40,000 is available upon replacement
  • If vehicle deferred for replacement past its life, there is no charge to the department
  • Each year Budget Officer recommends which to replace and which to defer; City Manager makes final decision
overview
Overview
  • The City’s overall financial position is very strong with excellent reserves
    • Regular reserves + former Lighting Maintenance District on top + receivables (money due us)
  • Water, Wastewater, and Transit Utilities need attention
    • No fee increases in several years while costs have risen
    • Infrastructure projects are being deferred
    • General Fund subsidy to Transit
overview continued
Overview (continued)
  • General Fund (operating) deficit last year
    • Expenditures greater than revenues
    • Why? Primarily revenue drops in past few years
      • City has limited ability to raise revenues (Prop 13, Prop 218)
      • 81% of General Fund is salaries and benefits…
    • Some overspending by depts.
overview continued1
Overview (continued)
  • Does not mean City is going bankrupt
    • But… THIS IS NOTSUSTAINABLE!
    • We have plan to address but some solutions take time
  • How are we addressing this?
    • Cuts to budgets and staffing in past
    • Held on raises until this year
    • Been carefully tapping reserves to balance the budget; planned, with full disclosure to Council
    • Operational changes and reducing subsidies
five year gf forecast
Five Year GF Forecast
  • Try to project revenues and expenditures
  • Adjust over time with known changes
    • Update to include costs/savings of recent negotiations with labor groups, development changes, etc.
  • Use as a long-range budget plan
the view for fy14 15
The View for FY14-15
  • Ended FY 2012-13 with ~$400,000 deficit in General Fund
  • Revenues up slightly in FY 2013-14, primarily thanks to one-time bumps
  • Expenditures up and impact of raises will begin to be felt
  • Council will direct 10% reduction target again
  • In summary: We are still at the edge and need to remain conservative.
priority based budgeting
Priority Based Budgeting
  • We will be making an incremental move to PBB over the next few years
  • Current concept is baseline budget plus any approved enhancements less any approved reductions
  • Future, based on evaluation of City programs; that which is important gets funded
    • What’s the “priority” for funding? Must have, need to have, nice to have…
city account numbers
City Account Numbers
  • City account number structure example:

100 – 1505 – 44010

Fund = General Fund

Cost Center = AS Admin

G/L (line item)= Professional Services

  • Capital Projects also have Internal Order (I/O) Number, e.g. 950380 (Minor Streets FY 13-14
    • Keeps track of that project separately
    • They will need both the City account number AND the Internal Order
chart of accounts
Chart of Accounts
  • The BIBLE of finance and budgeting!
  • List of funds, cost centers (divisions), and line items to be used for various purposes
  • Found at W:Citywide Forms/Chart of Accounts
supplemental budget request sbr
Supplemental Budget Request (SBR)
  • Form used to request changes to the Budget
  • Found on W:/Citywide Forms (Word and Excel versions available)
  • Need BOTH sides – revenues and expenditures
  • If with agenda item to Council, goes with staff report
  • If administrative, goes directly to Budget Officer
budget control
Budget Control
  • PLEASE READ POLICY A-29 (provided)
  • Budget control is at the fund level except for General Fund
  • For General Fund, at the Department level
  • Interfund moves and all changes to Revenues/Expenditures must go to Council
  • City Manager can make administrative amendments that don’t impact fund balance
  • Line item transfers can occur administratively (Budget Officer)
budget processing
Budget Processing
  • Always charge items to the correct codes (not just where there is money)
    • This helps you know how to budget next year
    • This provides transparent, useful info on spending
  • No work can occur until budget is authorized
  • Donations of $500 or more should be handled through Supplemental Budget Request (add to revenue and budget side)
department duties
Department Duties:
  • Review salaries and benefits info provided by Budget Officer and verify/adjust
    • Most important since biggest part of budget!
  • Enter estimated actual for current year and requested new budget amounts
  • Prepare narratives/descriptions
  • Review authorized staffing numbers/titles
  • Prepare charts and materials for City Manager Meetings
  • Appear at public meeting and Council to answer questions and justify requests
where to get info
Where to Get Info?
  • SAP Financial System
    • 100% *best* source for accurate information
      • Use RHOSKEN variants for department/fund budgets
  • City budget and financial documents (online or hard copy)
  • OpenGov.com isn’t as accurate; only updated twice per year
    • Useful for trends over time
how to project the future
How to Project the Future?
  • Analyze the Past
    • Chart past budget vs. actual experience
    • Track percentage changes
    • Look at timing of revenues/expenditures
    • Identify known changes for next year and adjust accordingly
  • Read about trends
    • For statewide, www.californiacityfinance.org is excellent!
    • Commercial News Outlets
    • Economic updates (Cal Lutheran, etc.)
  • Include staff
    • Ask them for input for next year’s budget and items that might impact it
  • Make your best guess!
your role
Your Role
  • You are a steward of the public’s money; take that role seriously
    • Would you do the same thing with your own money?
    • Would you like this to be on the front page of the newspaper?
  • Read and follow the City’s fiscal and budget policies
  • It is your responsibility to monitor your own budget
  • Stay within your budget
  • Any increase in expenditures requires Council approval
    • Even the City Manager can’t increase budget without approval
questions
Questions?

RebekkaHosken

Budget Officer

rhosken@simivalley.org

x6328