Florida Government Finance Officers Association Budgeting through the eyes of a Constitutional Officer February 18, 2016 Sherry Mehl, BS, MS, MBA Director of Administration & Budget Putnam County Clerk of Courts Agenda Budget Basics Principles Deliverables Types of budgets Elements of a good budget Budget Cycle Key Issues Timeline Assumptions 2 Agenda (cont) Article V budget implications Variance Analysis Forecasting Long Range Planning Conclusions 3 Budget Principles the master plan of a business brings together estimates of future revenues and planned expenditures tied to core operations, projects and programs approved by the leadership to build value and the options for funding them 4 Budget Deliverables Short and long range goals and objectives for the business A detailed business plan to meet them specific policies, plans, programs and management strategies to guide how the business will achieve its goals process for measuring success or failure identification of potential risks and opportunities to support quick decision making when they inevitably occur 5 Budget Deliverables A financial plan quantifying the assumptions and decisions made A method for evaluating performance and making necessary adjustments A communication tool Maximum return on investment 6 7 Programs and financial performance should be continually evaluated, and adjustments made, to ensure efficient use of resources and project progress Incorporate public participation throughout the process, from establishing goals, projects and programs plans, to performance management Increases accountability and responsiveness Can improve public image if done correctly 8 Wherever /Whenever Possible Budgeting Methods Traditional incremental budgeting Justifies variances versus prior year spending Assumes the baseline is automatically approved Zero based budgeting (bottoms up) Every line item of the budget must be approved, rather than changes only During the review process, no reference is made to the prior level of expenditure 9 Budgeting Methods Activity Based Budgeting Activities that incur costs in multiple functional areas of an organization are recorded and their relationships defined and analyzed. Activities are then tied to strategic goals, after which the costs of the activities needed are used to create the budget. Identify activities and their cost drivers Forecast the number of units of cost drivers for the required activity level Calculate the cost driver rate (cost per unit of activity) 10 11 Activity Based Budgeting (continued) Advantages Recognizes that activities drive variable costs budget Draws attention to the costs of 'overhead activities' which can be a large portion of total operating costs Disadvantages Time and effort to establish the key activities and their cost drivers Difficult identifying clear individual responsibilities for activities Many overhead costs are not controllable in the short term and do not vary directly with changes in the volume of activity for the cost driver Budgeting Methods Project Budgeting Describes and gives the detailed costs of every activity or program that is to be carried out in a budget Objectives, outputs and expected results are described fully as are their necessary resource costs, i.e., raw materials, equipment and staff The sum of all activities, across all cost centers, constitutes the program budget 12 Budgeting Methods Priority Based Budgeting a comprehensive view of the entire organization identifies every program offered identifies the costs of every program offered identifies the time to completion evaluates the relevance of every program offered on the basis of the communitys priorities brings government managers, finance officers, civic leaders and community residents together to make decisions that better align the communitys resources with what its leaders and residents value the most. guides elected and appointed officials to the policy questions they can answer with the information gained from the Priority Based Budgeting process, such as: 13 Priority Based Budgeting Questions to be answered What is the local government uniquely qualified to provide, offering the maximum benefit to citizens for the tax dollars they pay? What is the community truly mandated to provide? What does it cost to fulfill those mandates? Are there programs which could legally and appropriately be funded by establishing or increasing user fees? 14 Priority Based Budgeting Are there programs appropriate for establishing partnerships with other community service providers? Could the local government consider getting out of the business of providing a certain program? Are there obvious overlaps and redundancies in a community because several entities are providing similar services? Where is the local government potentially competing against private businesses within its own community? 15 The Budget Office Each government agency establishes and organizes their budget office to meet their specific needs They vary in size and composition Centralized budget office Central core budget office with departmental analysts Budget function integrated within the finance department 16 Putnam County Clerk of Courts Budget Office Putnam County is the poorest county in the State (according to several outside sources) The Clerks Office has 70 employees Our Budget Office isme! 17 Elements of a good budget Buy-in from key stakeholders Clearly established and communicated mission, goals and project/program priorities Clear and complete business plans for each program/project including goals, timelines with human resource requirements, milestone payments and/or large purchases for raw materials, capital equipment, etc. Multi-year timeframe Accurate revenue forecasts and timing 18 Elements of a good budget (cont) Accuracy Objectivity Identification of recurring and non- recurring revenues and expenditures Identification of fixed and variable revenues and expenditures Identification of controllable and non- controllable revenues and expenditures 19 Elements of a good budget (cont) Identification of potential risks and opportunities Periodic reviews of timelines, resource utilization and projected revenues Ability of management to redirect resources when opportunities arise A comprehensive Post Mortem! 20 Planning for the Next Budget Cycle Major events/leading indicators that will affect the upcoming budget Property taxes Legislation Cost of Living and Inflation Health Insurance FRS rates Fuel prices Collective bargaining agreements/compensation Guidance from leadership and the public 21 COLA assumption = 2% same for inflation 22 Assume 6.5% increase? 23 24 How long before your best people leave? 25 Projected FRS increase = ? 26 Elected Official Spec Risk - Admin Special Risk - Reg Senior Mgt DROP Regular Unfunded Liability ??? Diesel for Public Works, EMS, etc. = $2.75 ? Asphalt = $500 27 Regular Gasoline = $2.60 ?? 28 Budget Cycle assuming 9/30 year end October/November Review prior years revenue and expenditure budgets Research large variances Discuss underlying issues with cost center managers Develop knowledge of key drivers of revenues and expenses 29 Budget Cycle December/January project and cost center managers Update goals for projects Update status of active projects Update resource plan human and dollars, including timing of utilization Update revenue sources service charges, grants, etc. 30 Budget Cycle Jan/Feb BOCC/Senior Managers Update global mission, goals and priorities Review updated project plans Review and propose budget assumptions for big dollar items 31 Budget Cycle Feb/March BOCC/Senior Managers Complete review of project plans Set project/program priorities and projected revenues/costs Finance presents high level plan with revenue and expense projections, debt service, etc. Review plan and make revisions Update financial plan Define cost center and project targets Define budget assumptions 32 A method for evaluating the Project Portfolio using cost, time to completion, perceived value and perceived risk 33 Budget Assumptions for all managers 2% COLA Employer paid Health Care for FT employees up 6.5% ($9,585) No increase for FRS Diesel at $2.75/gallon Asphalt at $500 Regular gasoline at $2.60 No additional increases until presented and approved by budget committee 34 Budget Cycle April Cost center managers develop budget using assumptions provided May Departmental and Senior Management reviews/revisions June 1 Budget Proposal(s) submitted June September reviews, revisions, publication September Final review and approval October Close the books and start again! 35 The Clerk of Courts Budget process is driven by Revision 14 to Article V of the Florida Constitution Approved by voters in 1998 Implemented July 2004 Relevant ballot language follows: 36 Article V ballot language Article V. Section 14. SECTION 14. Funding (b) All funding for the offices of the clerks of the circuit and county courts performing court-related functions, except as otherwise provided in this subsection and subsection (c), shall be provided by adequate and appropriate filing fees for judicial proceedings and service charges and costs for performing court-related functions as required by general law. Selected salaries, costs, and expenses of the state courts system may be funded from appropriate filing fees for judicial proceedings and service charges and costs for performing court-related functions, as provided by general law. Where the requirements of either the United States Constitution or the Constitution of the State of Florida preclude the imposition of filing fees for judicial proceedings and service charges and costs for performing court- related functions sufficient to fund the court-related functions of the offices of the clerks of the circuit and county courts, the state shall provide, as determined by the legislature, adequate and appropriate supplemental funding from state revenues appropriated by general law. 37 County Obligations Original Ballot Language 38 (c) No county or municipality, except as provided in this subsection, shall be required to provide any funding for the state courts system, state attorneys' offices, public defenders' offices, court-appointed counsel or the offices of the clerks of the circuit and county courts performing court-related functions. Counties shall be required to fund the cost of communications services, existing radio systems, existing multi-agency criminal justice information systems, and the cost of construction or lease, maintenance, utilities, and security of facilities for the trial courts, public defenders' offices, state attorneys' offices, and the offices of the clerks of the circuit and county courts performing court-related functions. Counties shall also pay reasonable and necessary salaries, costs, and expenses of the state courts system to meet local requirements as determined by general law. F.S (1)(a) one paragraph out of 5 pages 39 F.S (1)(f)(2) 40 Unusual aspects of the Clerk budget Two Budget Submissions BOCC funded Balanced budget Revenues from service charges in Recording, Tax Deeds, etc., primarily identified by trend analysis and automation updates Appropriation from BOCC to cover portions of Finance, Recording, Clerk to Board, Records Management and Clerk Overhead required to support BOCC activities Also to cover departmental costs which must be funded by the BOCC per F.S Unusual aspects of the Clerk budget Two Budgets State Funded Budget authorization for deficit county Relies on collections from all 67 counties Allocation to an individual Clerks Office is based on caseload and cost per case Personnel costs and allocation methodology for splitting any costs between BOCC and State must be justified Certification required by Clerk on submission 42 Foreclosure Case Filings per year case forecasting is uncontrollable 43 Personnel Budget Org Chart Allocations Costs 44 Org Chart & Allocations 45 Personnel Cost Variables 46 Personnel Worksheet Current Year 47 Personnel Worksheet Proposed Costs 48 Personnel Worksheet Proposed Allocations 49 Sample Allocation Basis Analysis Recording Split State vs BOCC 50 Total Documents Recorded per year (top) versus the % of Court Documents Recorded 51 Operating Expense Allocations 52 Clerk Budget Certification 53 Tim Smith State Funded Budget Submission Collections by Division and Type Total Headcount and State Funded Headcount (to derive OH rate) Allocation of State funded headcount, labor costs and operating costs to Court Division Forecast for new cases and reopens by Court Division Yields cost per case Compared to peers Significant variances justified or proposed appropriation reduced 54 Next Cycle Planning to break cost per case down further Adding case processing, case management, financial processing and reporting breakdown by Court Division Heading towards ABC and ABB 55 Unfunded Mandates 56 Scan and index official records and court documents history per statute (during boom) Scan and index as you go (part of workflow) Redact all files Make searches and Official Records available online for public Online docket access for attorneys and public E-filing attorneys then public (filed documents available, redacted for public) E-recording View on Request for files prior to scanning scan/index/redact/make available online Pro se support MANY New reports and tracking requirements Expanded Compliance and other Audit requirements (DFS, etc.) Budgeting, Variance Analysis and Forecasting VERY closely linked Must understand cost center budgets projects, drivers, large expense items Rolling 12 month trend analysis Understand outliers Headcount plan Research Develop close working relationship with cost center managers 57 Forecasting The process of projecting revenues and expenditures Define time period current fiscal? A good forecast for the current fiscal will allow management to reallocate resources to meet unexpected challenges or opportunities 58 Long Range Planning Combines financial forecasting with strategy Highly collaborative Considers future scenarios Helps navigate challenges 59 Financial Forecasting Process of projecting revenues and expenditures over a longer term period Economic considerations/assumptions Changing demographics Future programs and projects Aligning financial capacity with long term service objectives 60 Requirements Time Horizon - >= 5 years Scope all funds, focused on top concerns Frequency as needed to support budget process and project planning Content Analysis of financial environment Revenue and expenditure forecasts Debt position and affordability analysis Strategies for achieving and maintaining financial balance Monitoring mechanisms 61 Conclusions Budgeting and Long Range Planning MUST have high level management support to be executed properly and maximize value There are many methods to use for creating a budget some can be very intense, but also yield the highest return on investment Budgeting, Variance Analysis, Forecasting and Long Range Planning can feel like a closed loop Be FLEXIBLE!me with additional questions:For a completely different take on the budget process, check out62