Funding and budgeting Flashcards
Operating budget
Includes everyday expenditures of an organization such as supplies, personnel, and maintenance of office supplies
Capital budget
Includes long-term purchases, such as a new building, rec center, water main, or other equipment. A one-year budget
CIP - is longer range (5-7 years)
Capital Improvements Programming (CIP)
Scheduling of selected physical plans and facilities for a community over a certain period of time. Long range forecast which can guide specific content of each year’s officially adopted budget
Line-item Budgeting
The emphasis is on projecting the budget for the next year while adding in inflationary costs. Advantage is that it does not require any evaluation of existing services and it is easy to prepare and justify. Disadvantages include lack of flexibility and a lack of relationship between budget request and the objectives of an organization. Has a short-term focus - only looks one-year into the future and is not linked with strategic or comprehensive plans. Lacks focus on programs.
Planning, Programming, Budgeting Systems (PPBS)
Focuses on planning through accomplishing goals set by a department. Advantage is that it helps departments place their programs in perspective and evaluate efforts and accomplishments. Disadvantage is that it is time-consuming to prepare and requires that goals and objectives be stated in measurable terms.
EX: a department may evaluate the number of permits that are issued per month rather than the satisfaction of applicants.
Has limited success because of its heavy information requirement and the incompatibility of program format with control mission.
Zero-Based Budgeting (ZBB)
Emphasizes planning and fosters understanding within all units of an organization. Advantage is that it requires a department to consider every aspect of its operation. Disadvantage is that it is time-consuming
Start at 0 every year. Prepare decision packages
Has limited success because of its intensive information requirements and limited benefits to managers.
Performance-based budget
Focused on linking funding to performance measures. Advantage is it helps departments develop standards. Disadvantage is that it is time consuming.
Ex: funding could be tied to the amount of time it takes to process plat applications or building permits.
Pay-As-You-Go
Uses current funds to pay for capital improvement projects
Reserve Funds
Ones that have been saved for the purchase of future capital improvements
General Obligation Bonds
Voter-approved bonds for capital improvements. GO bonds use the tax revenue of the government to pay back the debt
Revenue Bonds
Fixed source of revenue to pay back the debt.
EX: revenue bonds can be issued to pay for a new water main. The debt cwould be paid back through the water use fees.
Typically used finance utility improvements and special facilities such as baseball stadiums
Tax Increment Financing (TIF)
Allows a designated area to have tax revenue increases used for capital improvements in that area. All but one state use TIF. A TIF district is supposed to be an area with substantial disinvestment (blight). The area receives target investment which should enable redevelopment and reinvestment. The increase in the value of property results in increased tax revenue, which is used to pay back the investment made in the area.
Special Assessments
Allows a particular group of people to assess the cost of a public improvement
Lease-purchase
Allows a government to “rent-to-own”. The benefit is that the government does not have to borrow money to finance the acquisition of a major capital improvement.
Grants
Allows for all or a portion of the cost of a public facility to be paid for by someone other than the local government. Typically require a match from the local government.
