HomeMy WebLinkAbout2015 NEO Mayors SchoolsIACT Newly Elected Officials Training
Ann Cottongim, Deputy Director & CFO, IACTMayor Joe Stahura, City of Whiting
Todd Samuelson, Executive Partner, UmbaughJohn Murphy, Controller, City of South Bend
Municipal Finance
Fund Accounting
•Fund accounting system. Funds are a self-balancing set of accounts set aside for the purpose of accounting for monies of general functions or specific activities.
•Fund typesvary according to revenue sources and expenditures.•Commingling of funds is prohibitedunless otherwise provide by law.
•Rules for fund accounting are prescribed by the Governmental Accounting Standards Board (GASB), Indiana State Law and local ordinances.
•The Indiana State Board of Acc
ounts (SBOA) conducts audits of most local governments and ensures compliance with Indiana statutes, prescribes and approves forms and creates a uniform system of accounting and financial reporting.
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Fund Types
•General Fund –the principal fund for a local unit. All local governments should have a general fund.
•Special Revenue Fund –accounts for revenu
e that is legally restricted for a specific purpose (i.e. Motor Vehicle Highway Fund).•Capital Project Fund –accounts for revenue that is used for capital improvements (i.e. Cumulative Capital Improvement Fund).•Debt Service Fund –accounts for the pay
ment of principal and interest on outstanding bonds (i.e. Wastewater Debt Service Fund).•Internal Service Fund –accounts for goods
and services provided primarily to other departments in the local government (i.e. Health Insurance Fund).•Trust & Agency Funds –accounts for assets held on behalf of others (i.e.
Police & Fire Pension Funds).
•Enterprise Funds –accounts for operations
that are financed by user fees
and are operated like a private business
(i.e. Water & Wastewater Utility).
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Cash Reserves•Cash reserves are monies mainta
ined in a fund that are available for cash flow purposes and emergencies. Cash reserves are similar, but not identical, to the term fund balance.
•The Government Finance Officers Association (GFOA) recommends a minimum fund balance equal to two months of revenue or expenditures (17%) in the General Fund.
•Higher cash reserves may be needed if there are delays in receiving revenue (i.e. Indiana property tax distributions are received primarily in June and December).
•A written cash reserves policy is recommended for each fund.•Adequate cash reserves are one factor used by bond rating agencies in evaluating local government debt.
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Budgeting
•Indiana Department of Local Government Finance (DLGF) sets policy on budgeting for local units in Indiana and determines final property tax rates through its “1782” budget review process.
•Appropriation –authorization to spend money granted by the fiscal body of the local unit (city counc
il) and Mayor. For certain funds, approval from the DLGF is also required (i.e. property tax funds, MVH Fund, LRSA Fund, Rainy Day Fund).
•The deadline for adoption of the annual budget, property tax rates and property tax levies is November 1st
of the preceding year.•The budgets for local units must be entered into the State’s Gateway budgeting program (
https://gateway.ifionline.org
)
•Additional appropriations are permi
tted during the year if approved by the fiscal body, Mayor and DLGF (if required).
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Example Budget Calendar•July 1 –Budget Kickoff meeting with municipal officials•July 1-15 -Clerk/Treasurer prepares revenue estimates.•July 16-31 –Departments submit expenditure requests•August 1-31 –Expenditure requests
are reviewed by the Mayor and
Clerk/Treasurer
•Sept. 1 –submit budget to county for non-binding review•Sept. 1-30 –budget meetings with the City Council & citizens•Sept. 14 –submit budget Form 3 in Gateway to DLGF•October 22 –last day to hold budget public hearing (10 days before adoption)
•November 1 –last day to adopt budget
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Cash Summary by Fund Report
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Revenue Summary Report
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Expenditure Summary Report
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Other Key Reports
•Form 100R –Employee Salary & Wages –due January 31st
•Annual Financial Report –due March 1
st
•Annual Operational Report of Local Road & Streets –due June 1st•Debt Management Report –due March 1
st
Best to update this report with each new debt issuance or retirement
Consider having your financial advisor update this report
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Municipal Budgeting for Policy Makers
What Questions do
Policy Makers Consider?
Where are we currently?What information
should we review each month?How do we prioritize essential services?How do we
accomplish Initiatives?
What financial
policies will help now and in the future?
How do we
permanently
eliminate deficits (or preserve our reserves)?How do we manage the Circuit Breaker?
How do we best
communicate to the public (and each other)?What external factors affect us?
Legislation? Other Units?Where will we be in 3 years? 5
years? Beyond?
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Definition of Budget
•
Budget•
budg·et
[ bújjət ]
•plan for allocating resources: a plan
specifying how resources, especially time or money, will be allocated or spent during a particular period•money for particular purpose: the to
tal amount of money allocated or needed for a particular purpose or period of time•quantity or supply: a quantity,
stock, or supply of something
•synonyms:
cheap
·
economical
·
inexpensive
·
reasonable
· low-priced ·
modest
•For those of us in this room, it is a:•Revenue Plan•Spending Plan •Tax Levy Plan •Tax Rate Plan
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and let’s face it, it is also……A Political, Management, Planning, Communication and Financial Instrument
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Why Budget?•Required by law•Duty to taxpayers•Fiscal accountability•Operational accountability•Transparency•Planning tool to make the most efficient and effective use of government resources
•Communicate the goals and priorities of the elected leadership to the taxpayers
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Policy Context
•National Advisory Council on State and Local Budgeting suggests the following guiding principles for public budgeting
(1)
•Establish Broad Goals to Guide Government Decision Making
•Develop Approaches to Achieve Goals•Develop a Budget Consistent with Approaches to Achieve Goals
•Evaluate Performance and Make Adjustments•
Note there is no discussion of budget forms, Gateway or due dates.
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(1) “Recommended Budget Practices: A Framework
for Improved State and Local Government Budgeting”
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More Policy Context
•The broad goals of your local government should provide an overall direction and serv
e as a basis for decision
making.
•A government should have specific policies, plans, programs, and management strategies to define how it will achieve its long-term goals.
•A financial plan and annual budget should help achieve stated goals, within the constraints of available resources.•Program and financial performance should be continually evaluated, and adjusted, to encourage continual improvement and progress.
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Budget Elements
•
Establish Broad Goals to Guide Government Decision Making•1. Assess community needs, priori
ties, challenges and opportunities•2. Identify opportunities and challenges for go
vernment services, capital assets, and
management
•3. Develop and communicate broad goals•Sample Considerations:•What services are priority (public safety, culture/recreation,
highways, economic development,
etc)?
•What has to be accomplished (employment levels
and benefits, maintenance, capital, debt)?
•What is the appropriate level of property taxes to apply toward
services (trash, hydrant rental,
public safety, highways, culture and recreation)?•What services will be cost based? •What is the appropriate level of
cost sharing (with utilities, acro
ss funds, with employees, with
users)?
•What are the cash reserve targets for various fund types (Operating, Special Revenue, Debt
Service, Capital)?
•What are the strategies for va
rious fund types (Operating, Special Revenue, Capital Project,
Debt Service)?
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Budget Elements
•
Develop Approaches to Achieve Goals•4. Adopt financial policies•5. Develop programmatic, operatin
g, and capital policies and plans•6. Develop programs and services that
are consistent with policies and plans
•7. Develop management strategies•Sample Considerations:•15% operating balance in all funds that support
core operations (General, Park, MVH, LRS,
etc).
•Capital assets must have a unit cost
>=$5,000 and a useful life >= one year.
•Trash services will be cost based.•Culture and recreation will recover ___%
of its costs through direct fees.•Employees will share in ___% of insurance costs.•Staffing levels will be bas
ed upon an industry standard.•Vehicles will be replaced based
on the following conditions.•We will establish a budget management practi
ce with organized quarterly meetings.
•The Rainy Day Fund will be used as follows.•Budget surplus will be handled as follows.
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•
Develop a Budget Consistent with Approaches to Achieve Goals•8. Develop a process for Preparing and Adopting a Budget•9. Develop and Evaluate Financial Options•10. Make Choices Necessary to Adopt Budget•Sample Considerations:•Develop a budget calendar•Identify opportunities for stakeholder input•Prepare revenue projections•Prepare expenditure projections•Evaluate revenue and expenditure options•Develop a capital improvement plan•Present the budget•Adopt the budget
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Budget Elements
Budget Elements
•
Evaluate Performance and Make Adjustments•11. Monitor, measure, and evaluate performance•12. Make adjustments as needed•Sample Considerations:•Budget reports will be reviewed monthly by ____.•Additional appropriations and budget reductions will be done quarterly.
•Initiatives and “wish-list” items will be prioritized by service goals.•Benchmarks will be established and performance will be measured against these benchmarks
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How to Accomplish•Communication•Cooperation•Stakeholder involvement•Commitment
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Budget Development:
A Policymaker Perspective
Summary of ProcessUnits develop
budgets based on individual needs and policies
Budgets are funded with property taxes and misc. receipts
DLGF computes tax
rate based on taxes to be levied and assessed value
County uses
certified tax rates to compute property tax bills
County collects and distributes property taxes to taxing unitsTaxing units use
property taxes and misc. receipts to fund budgets
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2017 Suggested Budget ProcessSuggestedSteps:1. Understand the rest of 20162. Develop revenue estimates for20173. Deductcircuit breaker and collection rate estimates from 2017 revenues4. Assembleinitial spending plan5. Determinetargeted 2017 ending cash balances (reserves)6. Compute1-4 above and compare to 5, rework as necessary Communicate7. Adopt budget Communicate8. Wait for DLGF budget order9. Wait for actual Circuit Breaker Numbers10. Adjust Budget Accordingly (and Frequently?)
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Other Considerations
•Maximize property tax levy during the budget process•Use conservative AV when advertising (80% of current)•If your community does not need your entire levy, you can make reductions as part of the 1782 notice response•Advertise and adopt carefully•Gateway (DLGF) budget –inflate tax levies and rates•Working budget –include estimated circuit breaker losses and realistic estimates of levies and other receipts•Council adopts BUDGETS, RATES and LEVIES•Verify all three are correct and in line with your financial plan
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Other Considerations (Cont’d)
•The DLGF makes no determinations between a funded budget, a deficit budget, a surplus budget or a balanced budget.
•The DLGF does not include circuit breaker credits anywhere in the budget order or the prescribed budget forms.•Local governments have the responsibility to plan for these losses.
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Contact Information
Todd A. Samuelson, CPA, Executive PartnerUMBAUGHsamuelson@umbaugh.com(574) 935-5178www.umbaugh.com
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