Government Finance Officers Association

Understanding the Budget and Local Government Revenue Sources

December 6, 2019

© 2019 Government Finance Officers Association

gfoa.org@GFOA

2

• John FishbeinSenior ProgramManagerTechnical Services CenterGovernment Finance Officers Association (GFOA)Phone: 312 578 2268Email: jfishbein@gfoa.org

2

1

3

http://www.gfoa.org/best practices

Links

4

• Budget Awards home page• http://www.gfoa.org/budgetaward

4

Links

2

5

6Town of Windsor, Colorado.

6

3

7Wake County, North Carolina

7

8City of Loveland, Ohio.

8

4

9

Financial Forecastingin the Budget Preparation Process

• Define assumptions – time horizon, objective, political/legal issues, major revenue and expenditure categories.

• Gather information.• Preliminary/exploratory analysis

Business cyclesDemographic trendsAnomaliesVariables 9

10

• Select methods – extrapolation, regression, knowledge-based.

• Implement methods, make the forecast, and forecast ranges.

• Use the forecast.Credibility of the forecasterPresentation approachLinking forecast to decision-making.

Financial Forecastingin the Budget Preparation Process

10

5

11City of Golden, Colorado

11

12St. Louis County, Missouri

12

6

13Santa Clara Valley Water District, California

13

14City of Mesa, Arizona

14

7

15St. Louis County, Missouri

15

16City of Manhattan, Kansas

16

8

17City of Merriam, Kansas

17

18

Establishing Government Charges and Fees

• Adopt formal policy (public)Factors to be taken into account in pricingIntent to recover full cost?Circumstances where more or less than 100% recovery permittedRationale for not recovering full cost

• Full cost should be calculated to provide a basis for setting fees or charges

• Review and update regularly

18

9

19

• As a part of the budget process, the Board set water rates thatwill go into effect on January 1, 2016.

• The planned water rate adjustment is 2.5% based on a cost ofservice analysis. This represents an impact of $1/month for thetypical residential customer. The main cost drivers that make anincrease in 2016 necessary are investments in infrastructurereplacement, labor expenses, security enhancements, and agradual decline in indoor water use.

• The 2016 rate is consistent with WaterOne’s approach to avoidrate volatility by creating incremental rate adjustments. Stable,predictable rates are preferred by customers and promote thegrowth of the local economy.

WaterOne, Kansas

19

20

Albemarle County Service Authority, Virginia

20

10

21Pinellas County, Florida

22

What fees should be listed in the budget document?

A. Those with a high dollar impactB. Those subject to a high level of citizen concernC. Those affected by significant changesD. A, B, and CE. A list of all fees should be presented

22

11

23

5. Establishing an Effective Grants Policy

• Provides staff guidance to staff in order to maximizethe benefits and minimize the risks of receivinggrants.

• Identifies formal steps to take prior to applying foror accepting a grant.

• Policy should include, at a minimum, the following:Grants identification and applicationStrategic alignmentFunding analysisEvaluation prior to renewal or grantcontinuationAdministrative and operational support

23

24Coconino County, AZ.

24

12

25Achieving a Structurally Balanced Budget• Clarify distinction between satisfying a statutorydefinition and a true structurally balanced budget.

• Define parameters for achieving and maintainingstructural balance whereby recurring revenues equalrecurring expenditures in the adopted budget.

• Identify key items, including:Recurring and non recurring revenuesRecurring and non recurring expendituresReserves

• Adopt a formal, written policy calling for structuralbalance of the budget.

• Require the budget presentation to clearly identifyhow recurring revenues are aligned with or not alignedwith recurring expenditures.

25

26Maricopa County, Arizona

26

13

27Maricopa County, Arizona

27

28

When analyzing key features of astructurally balanced budget, some items toconsider may include?

A. Adoption of a formal policy

B. Identify recurring and non recurringrevenue and expenditures

C. All of the above 28

14

29

Budget Monitoring

• Revenues. Governments need to carefully analyze sourcesof funds with particular attention to:• Seasonality, and whether comparable to priorobservations

• Any potential volatility and the resulting impacts• Trends and comparison to projections• Timing of receipts• Relationship to economic indicators and potentialimpacts

• Changes in policy/practice of overarchinggovernments involved in disbursement of revenues

• Review of patterns at other similar/relatedgovernments

29

30

Budget Monitoring

• How the elements should be analyzed• Root cause. Governments should move beyond justidentifying deviations from budget versus actuals andwork towards analyzing and articulating why deviationsoccurred in order to move towards resolution.

• Time frame. Is it anticipated for any identified varianceto continue or is there an underlying reason for thevariance? How does the current spending patternimpact the subsequent year’s budget?• Requirements. Structure budget monitoring to meetany interim reporting requirements that thegovernment may have, if possible.

30

15

31

Budget Monitoring• Communications

• Frequency. The frequency of how often budgetmonitoring reports and information is generated shouldbe agreed upon at all levels of the organization.

• Delivery. How the information is communicated and towhich stakeholders, both internally and externally,needs to be clearly structured.

• Format. The format for how information related tobudget monitoring needs to be clearly established aswell.

• Transparency. How can the information be shared on awide spread basis to the community and include theproper context to best inform the public and minimizeadditional request for more information.

31

32City of Independence, Missouri

32

16