Government

4 GFOA Best Practices for Your Budget: Financial Plan 

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The new criteria recently released by the Government Finance Officers Association (GFOA) to improve accuracy and build public trust include: 

  • Financial Plan 

GFOA formulated these criteria to provide governments with the ability to implement strategic financial management and planning. This also helps them bring about transparency and accuracy when putting together budgets that align with federal guidelines and requirements.

 

 

We will break these criteria down in detail, focusing on the mandatory components of each. For this blog, we’ll focus on compiling your Financial Plans. Its key elements include:

 

 

Consolidated Financial Schedule - One Year

 

What’s it all about? 

For your consolidated financial schedule, you need a summary of the revenues and other financing sources and expenditures as well as other financing uses of all appropriate funds in one place in the budget document. While other funds may be included in this schedule you MUST include appropriated funds.

 

How to put it into practice? 

  1. Present a summary of major revenues and expenditures, as well as other financing sources and uses to provide an overview of the total resources budgeted by your agency. 
  2. Both revenues and other financing sources and expenditures as well as other financing uses must be presented either: A) Together in a single schedule; or B) In separate but adjacent/sequential schedules; or C) In a matrix. 
  3. Revenues should be presented by type (i.e. property tax, sales tax, fees and charges, intergovernmental, etc.) for all appropriated funds in total. 
  4. Expenditures should be presented either by function, program or spending component. 

Pro Tip – With Questica Budget, you can capture in-depth revenue and expenditure data as well as other financing sources all in one place so you can present that in your financial schedule. 

 

 

Fund Balance

 

What’s it all about? 

It is required that the beginning and ending fund balances, as defined by your agency, be shown for the budget year as well as revenues, expenditures, and other financial sources and/or uses. 


How to put it into practice?
 

  1. Highlight projected changes in your fund balance/ net position for appropriated funds included in the budget presentation. 
  2. The information may be included on the schedule(s) with the three-year data or may be presented on separate schedules. 
  3. Both the beginning and ending fund balances must be clearly labeled. 
  4. If your agency budgets on a cash basis, the schedule may show the beginning and ending cash rather than the fund balance. 

Pro Tip – Questica Budget integrates with any financial system so that you can run your budget vs actual reports in real time to accurately monitor fund balances. 

 

 

Revenues

 

What’s it all about? 

Major revenues of the appropriated funds in the aggregate must be identified and described. If an outside source (such as another government or consulting firm) provides an estimate of the revenue for the budget year, you must clearly state this.

 

How to put it into practice? 

  1. Describe major revenue sources, explain the underlying assumptions for the revenue estimates and discuss any significant trends.
  2.  Don’t just focus on General Fund revenues. For example, include revenue from grants, indirect costs, etc. 
  3. If using trend analysis to project revenue, you must include a discussion of the revenue in addition to any schedules or graphs depicting the revenue trend. 
  4. If the projections are based on trend analysis, the discussion must identify factors that affect the trend, such as changes in the local economy, a new housing development or fee increases. 

Pro Tip – Using Questica Budget, you can contextualize revenue sources using narratives that can be added to each line item in the budget. 

 

 

Capital Program

 

What’s it all about?  

This criterion doesn’t necessarily mandate a particular definition of “capital expenditures” but instead the definition enclosed by your agency. 

 

How to put it into practice? 

  1. After defining capital expenditures, indicate the total dollar amount of sources and uses for the budget year(s) and/or multiyear capital plan. 
     
  2. Include budgeted capital expenditures, whether authorized in the operating budget or in a separate capital budget. 
     
  3. Make sure to include some discussion on the process of how capital projects are identified. 

 

Debts

 

What’s it all about?  

Agencies should describe and calculate their legal debt limits as well as coverage requirements. The legal debt limits may be expressed in terms of total dollars, millage rates, or percentages of assessed value.

 

How to put it into practice? 

  1. Discuss coverage requirements and actual coverage for revenue backed debt.
     
  2.  Include debt to maturity schedules.
     
  3. Include financial data on current debt obligations, describe the relationships between current debt levels and legal debt limits, and explain the effects of existing debt levels on current operations.

Pro Tip – Did you know that debt service to maturity schedules can easily be built within Questica Budget? 

  

Want to learn more? Download our free playbook “4 Ways the Pandemic Has Force Governments to Rethink Budgeting.”  

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