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BUDGETING 101
OMFOA Northwest Finance Institute Tuesday, October 18, 2011
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PRESENTERS
Christina DayBudget ManagerPortland Community
Tom LinharesExecutive DirectorMultnomah County Tax Supervising and Conservation [email protected]
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“You don’t get points for predicting rain. You get points for building the ark.”
- unknown
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OVERVIEW
Purpose of Budgeting
Budget Preparation
Budget Adoption Process
Life After Adoption
Common Mistakes
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PURPOSE OF BUDGETING
Foundation of every financial plan
Just like in your personal life, you budget
because you need to understand:
How much money you have;
Where it goes; and
Plan how to best allocate those funds, whether
scarce or plentiful.
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PURPOSE OF BUDGETING
Policy document Formalizes:
Policies on spending Reserve thresholds Strategies to react to resource reductions
Defines program goals & objectives Sets priorities Discusses factors affecting jurisdiction’s
financial condition
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PURPOSE OF BUDGETING
Communications Device Communicates your plans & priorities to
the public Capital improvement plans Operating priorities and/or changes Grant applications and/or funded programs
Communicates challenges your organization may face to the public, and plans to handle them
Changes in funding sources GASB changes
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Operations Guide Discloses how your jurisdiction functions –
nuts & bolts, i.e., organizational units & programs that can include:
Organization chart Position information and salaries Performance measures
PURPOSE OF BUDGETING
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Benefits of having a budget: Establishes agreement with the public and
your governing body on priorities for the year Provides protection – like a contract with the
public if employees are spending according to the
budget, it’s been pre-authorized by public and governing body
Provides ways to revise if needed Most Importantly – without it, your entity
can’t spend a dime after 7/1 or levy any property taxes!
PURPOSE OF BUDGETING
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LEGAL BUDGET ENTITIES
ORS 294.311 (26) is the statute that designates entities that need to apply local budget law.
Counties
Cities
Schools (K-12 and ESDS)
Community Colleges
Special districts
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LEGAL BUDGET ENTITIES
Check your requirements carefully, as local budget law may not apply to the following Special Districts in accordance with ORS 294.316 Diking & drainage Health Irrigation Road Soil conservation (no tax levies) Water control Public Utility District (no tax levies)
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LEGAL BUDGET ENTITIES
You also want to be familiar with other legal requirements:
Charter Purchasing – ORS Chapter 279 System Development Charges (SDC’s) –
ORS Chapter 223 Urban Renewal Agencies – ORS Chapter
457 Local Government Borrowing – ORS
Chapter 287A
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BUDGET OFFICER
ORS 294.331 requires local government to have a Budget Officer Appointed; or Designated by charter
Under the supervision of: Executive officer, or Governing body
Responsible for: Preparing or supervising the preparation of the
proposed budget Public notices of Budget Committee meetings
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BUDGET PROCESS
Develop a budget calendar – Starting with the adoption of the budget (last
governing body meeting in June), back into a calendar to help frame up the budget season
Plan for: Budget Committee meetings Governing Body meetings Advertisements Filing deadlines Holidays/closures Property tax measure elections
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BUDGET PROCESSApril 2011
S M T W T F S Apr. 01, 2011 Proposed Budget document is sent to Print Center for duplication and printing.
1 2 Apr. 07, 2011 BPAC Meeting
3 4 5 6 7 8 9 Apr. 07, 2011 Publish 2nd Notice of Budget Committee Meeting.
10 11 12 13 14 15 16 Apr. 11, 2011 Deliver the District President's Budget Message and a copy of the Proposed 2011-13
17 18 19 20 21 22 23 Biennium Budget to the Board.
24 25 26 27 28 29 30 Apr. 21, 2011 Board Meets as the Budget Committee: (Cascade) The Budget Committee to hold a meeting
on the Proposed 2011-13 Biennium Budget and to approve the budget. The
Budget Committee also approves the proposed property tax levies (2 years) for the biennium.
Apr. 26, 2011 Submit the approved Biennial Budget to TSCC
May 2011
S M T W T F S May 5, 2011 BPAC Meeting
1 2 3 4 5 6 7 May 10, 2011 Publish the approved 2011-13 Biennium Budget and the notice of the scheduled public
8 9 10 11 12 13 14 hearing with TSCC. (ED forms)
15 16 17 18 19 20 21 May 17, 2011 Staff to present the approved budget to TSCC. TSCC conducts a public hearing on the
22 23 24 25 26 27 28 budget, approves and certifies the budget (1:30 pm @ TSCC Office)
29 30 31 May 19, 2011 Board Meeting (Sylvania)
June 2011
S M T W T F S Jun. 01, 2011 President's all managers meeting:
1 2 3 4 Jun. 02, 2011 BPAC Meeting
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12 13 14 15 16 17 18 Jun. 16, 2011 Board Meeting: (Southeast) Board approval of Resolution to adopt the 2011-13 Biennium
19 20 21 22 23 24 25 Budget and make appropriations. Board also approves a resolution to levy and categorize
26 27 28 29 30 property taxes for the 1st year and 2nd year of the biennium.
July 2011
S M T W T F S
1 2 Jul. 1, 2011 Adopted Budget document to print
3 4 5 6 7 8 9 Jul. 15, 2011 Deadline to file all Property Tax Levy Forms, Adopted Budget Resolution and Adopted
10 11 12 13 14 15 16 Budget Document with TSCC, County Assessors and the Oregon Dept. of Revenue.
17 18 19 20 21 22 23 Jul. 21, 2011 Board Meeting (Sylvania)
24 25 26 27 28 29 30
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BUDGET PHASES
Requested Departments prepare their requested budget
Proposed Budget Officer presents the proposed budget to the
Budget Committee Approved
Budget Committee approves the proposed budget after considering whether to make any changes
Adopted Governing body adopts the approved budget, with
limited changes, no later than June 30
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BUDGET PROCESS
Requested Phase: Departments begin developing budgets
Methods Used: Zero-based– Start with zero in each line
item and justify every $ Trend-based – use historical actual data
and increase estimated expenditures by a %
Outcome-based – Set goals first, then budget to meet goals or desired outcomes
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BUDGET PROCESS
Proposed Phase: Entity’s budget compiled into 1 document
Management discussion
Once finalized, presented to Budget Committee for consideration.
Number of meetings may vary by entity Make available to public
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BUDGET COMMITTEE Membership
Governing Body PLUS equal number of appointed members (ORS 294.336)
Or whatever number of appointed members willing to serve, if any
Quorum Need a quorum in order to conduct a meeting or
take action; one more than half the number of membership
If vacancy in appointed members: Total membership is reduced when counting
If vacancy in elected members: Total membership is NOT reduced when counting
To take action: Takes a majority of membership, not just majority of those present
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BUDGET COMMITTEE
Role of the Budget Committee: Review, consider changes, and approve
proposed budget Provides for public input through open
meetings, advertisements, and citizen membership
May review mid-year budget changes at discretion of governing body
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BUDGET COMMITTEE One Budget Committee meeting
Budget Officer presents budget message and Proposed Budget Committee review & discussion of Proposed budget Public comment accepted Committee approves Proposed budget and property tax levies
Two (or more) Budget Committee meetings Budget Officer presents budget message and Proposed Budget Other tasks may take place at first meeting or subsequent
meetings Public Notice must state which meeting for public comment Committee approves Proposed budget and property tax levies
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BUDGET COMMITTEE Local Budget Law allows for other
meetings during the year to: Review the state of the organization Receive financial updates
Example – PCC holds an early meeting to review the Governor’s budget
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BUDGET PROCESS
Approved Phase Already approved by Budget Committee Limited authority to change budget at this
point Prior to adoption, expenditures in each fund
can be amended by no more than $5,000 or 10%, whichever is greater (annual budget) – ORS 294.435
Total ad valorem property taxes cannot change (except under ORS 294.437)
Will need to republish and hold new hearing if greater changes needed.
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BUDGET PROCESS
Extra Step: If within Multnomah County, TSCC acts for
citizens – ORS 294.411 Reviews Approved Budget for adherence to local
budget law Holds hearing for public input for 200,000 +
population districts TSCC Board asks questions on public’s behalf as well All entities must consider and take appropriate action
on TSCC recommendations, orders, objections Washington County – send report for publication
on website
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LOCAL BUDGET FORMS
Publish your budget prior to Public hearing for Adoption: Local governments (LB) and education districts
(ED), and now community college (CC) Get details of changes in Budget 201 session
Within Multnomah County – only need to publish summary if TSCC conducts public hearing
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LOCAL BUDGET FORMS
Use your own format, or use: Special Fund LB-10 Reserve Fund LB-11 Resources LB-20 Expenditures Summary LB-30 Bonded Debt LB-35 Debt Service Supplement LB-36 Personal Services Summary LB-40
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BUDGET PROCESS
Adoption Hold Public Hearing prior to Adoption for
final public input Governing Body considers and adopts
resolution to appropriate funds and levy taxes.
Must be adopted PRIOR to July 1, so plan accordingly!
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BUDGET PROCESS
After Adoption: ORS 294.555
If taxes to be levied - must file with County assessors office by 7/15
If not levying taxes – must file with ODR by 7/15
GFOA Distinguished Budget Award Program File final document within 90 days of adoption
Distribute final documents to interested parties (underwriters, banks, libraries, etc)
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LIFE AFTER ADOPTION
What if you need to make changes after adoption?
Local Budget Law provides a way to revise appropriations
294.450 – Resolution Transfers
294.480 – Supplemental Budget
No provision to change ad valorem taxes
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LIFE AFTER ADOPTION
ORS 294.450 Transfers of appropriation authority Causes no increase in total appropriations Interfund transfers between appropriation
categories (from M&S to Personnel Services) or organizational units or programs (from police to fire)
Transfers from Contingency of less than 15% of fund appropriations
Between funds Depends upon level of appropriation authority
Pass-through revenues
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LIFE AFTER ADOPTION
ORS 294.480 Supplemental budgets For situations “not anticipated” during the
preparation of the budget Create new appropriations to spend
increased resources Transfer resources & appropriations from
fund to fund Establish a new appropriation category
within a fund Establish a new fund
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LIFE AFTER ADOPTION
Supplemental budget increasing expenditures by 10% or less: Governing body may adopt at a regular meeting
after publishing a notice of the meeting (ORS 294.311(34))
Supplemental budget increasing expenditures by more than 10%: Governing body may only adopt after conducting
a public hearing; ORS 294.480(4) Public Notice must include summary of changes
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LIFE AFTER ADOPTION
ORS 294.326 Exceptions to local budget law Specific purpose grants Proceeds of most bond issues
ORS 294.440 Education districts emergencies Funds from federal sources or ESD
emergency funds
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RESOURCES
Internal If you are new to the organization or to budgeting – look at the existing processes in place
You may want to follow existing “roadmap” to get an understanding of the players and corporate culture
Meet with key personnel and ask for comments or suggestions for the current processes
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RESOURCES
External Fellow OMFOA and GFOA members Other contacts met through networking County Assessor (for property tax estimates, etc)
Department of Revenue Annual training at various locations throughout the
State On-line manual State statutes www.leg.state.or.us http://egov.oreggon.gov/dor/ptd/localb.shtml
Multnomah County TSCC Annual training Property tax estimates
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LOCAL BUDGET LAW MISTAKES
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MOST COMMON MISTAKE
Expenditures during the fiscal year or budget period exceed authorized appropriations.
In 2009-10, six districts (out of 27) under TSCC’s jurisdiction over-expended authorized appropriations.
Tips to avoid mistake: Copy appropriation resolution and keep it prominently
displayed in your work space. Run monthly reports to track actual revenues and expenses
compared to budget estimates. React before expenditures exceed appropriation authority!
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FIRST MOST SERIOUS MISTAKE
General Obligation Bonds Debt Service Fund includes fees (including refunding fees) and/or non-GO
Bonds debt service payments (such as PERS bonds).
ORS 287A.140 allows only GO Bonds principal and interest to be paid out of the GO Debt Service Fund. No Exceptions!
Tip to avoid mistake: All other debt service should be paid out of General
Fund or a completely separate Debt Service Fund.
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SECOND MOST SERIOUS MISTAKE
Budget Committee Not Properly Setting Property Tax Levies
Levies are not explicit in motion or clearly indicated in minutes. Not clear how determined. Based on amount to receive as resource in budget rather than levy
needed to raise that amount (either rate or dollar amount).
Tips to avoid mistake: Double, then triple check calculations before presenting to the
Budget Committee. Insist that the committee approve all rates just as they will appear
on LB/ED – 50. Refer to DOR’s Local Budgeting Manual.
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PUBLICATION REQUIREMENTS
Budget Committee meeting notice not published twice, 5 to 30 days prior to first meeting.
Notice of Budget Hearing / Financial Summary not published 5 to 30 days prior to public hearing.
Tips to avoid mistake: In Budget Calendar, don’t schedule notice for last
newspaper prior to deadline; schedule at least two editions prior to meeting/public hearing.
Don’t schedule just one edition between 2 Budget Committee meeting; schedule two.
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SUMMARY CHARTS
Summaries by Object and/or by Function do not match total of fund by fund detail across all
four years.
Some large, multi-fund budgets include summary charts. If the numbers in the summary do not match the fund detail it could cause confusion as to what the correct numbers are.
Tip to avoid the mistake: Double check that the source for fund detail and the
summary charts is the same, especially for “Current Year” where one could be using adopted and another amended data.
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FORM LB / ED 50
Breakdown of General Obligation Bonds Debt Service Levy by bonds approved before October 6, 2001 and those bonds approved after October 6, 2001.
The assessor needs this breakdown for certain urban renewal calculations.
As more GO bonds are approved after that date, more districts will have different amounts on lines 4a and 4b.
Tips to avoid mistake: Remember, the distinction is when voters approved the bonds,
not when bonds were issued so many refunding bonds issued after 10/6/2001 are still counted on line 4a.
Always use worksheet on back of LB / ED 50.
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NEXT? BUDGET LAW UPDATE & BUDGETING 301
QUESTIONS?
