Financial  Management   Chapter 13
Objectives <ul><li>Upon completion of this chapter, you will be able to: </li></ul><ul><li>Describe the purpose of public ...
Objectives (cont’d.) <ul><li>Discuss the use of line-item budgets and program budgets and the strengths and weaknesses  of...
Financial Management of Fire Prevention Programs <ul><li>Most of us tend to relegate public service financial management <...
The Budget Process <ul><li>Effective budget preparation and disciplined fiscal management: </li></ul><ul><ul><li>Deliver a...
FIGURE 13-1 Funding for this firefighter’s protective clothing, equipment, and salary all came from his department’s budge...
Financial and Accounting Standards <ul><li>Governments are audited </li></ul><ul><ul><li>Protect against waste/fraud </li>...
Budget Basics <ul><li>Purpose of budgets </li></ul><ul><ul><li>Supply information to: </li></ul></ul><ul><ul><ul><li>Elect...
Budget Basics (cont’d.) <ul><li>Recommended budget: submitted to the legislative body </li></ul><ul><ul><li>Adopted budget...
The Budget Tool <ul><li>Should be in constant use </li></ul><ul><li>Quarterly reviews that track spending should  be  care...
Budget Calendar <ul><li>Federal fiscal year: Oct 1 - Sep 30 </li></ul><ul><li>Budget preparation: typically late summer </...
The Budget as an Evaluation Tool <ul><li>Evaluation </li></ul><ul><ul><li>Services that people really need, how much to sp...
Budget Formats <ul><li>Line-i tem  budget </li></ul><ul><ul><li>Each line item is a fund or sub-fund </li></ul></ul><ul><l...
Budget Formats (cont’d.) <ul><li>Performance budget </li></ul><ul><ul><li>Standards developed for each functional area </l...
Fire Prevention Bureau Budgets <ul><li>Bureaus responsibilities and duties </li></ul><ul><ul><li>Quite different from rest...
Replacement Schedules <ul><li>Developing replacement schedules for tools and equipment is good policy </li></ul><ul><li>Go...
Cost Recovery and Fee Structures <ul><li>User fee </li></ul><ul><ul><li>Payment for service </li></ul></ul><ul><ul><li>Not...
The Fee Adoption Process <ul><li>Establishment of fee system without input of the business community </li></ul><ul><ul><li...
Determining the Fee Structure <ul><li>Fee might be based on average time to perform an inspection </li></ul><ul><ul><li>Co...
Types of Fees <ul><li>User fees can apply to most functions performed by fire prevention bureaus </li></ul><ul><li>Permit ...
Types of Fees (cont’d.) <ul><li>Plan review fees </li></ul><ul><ul><li>Based on plan type, square footage, number of fire ...
Implementation <ul><li>Time for establishing tracking/accounting system: not after adoption of program </li></ul><ul><li>A...
Summary <ul><li>Public employees </li></ul><ul><ul><li>Moral and legal obligation </li></ul></ul><ul><li>Government budget...
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Chapter 13

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Chapter 13

  1. 1. Financial Management Chapter 13
  2. 2. Objectives <ul><li>Upon completion of this chapter, you will be able to: </li></ul><ul><li>Describe the purpose of public budgeting </li></ul><ul><li>Describe the use of a budget as a tool for planning </li></ul><ul><li>Define and describe the terms operating budget and capital budget or capital improvement budget </li></ul>
  3. 3. Objectives (cont’d.) <ul><li>Discuss the use of line-item budgets and program budgets and the strengths and weaknesses of each </li></ul><ul><li>Discuss the difference between user fees and taxes </li></ul>
  4. 4. Financial Management of Fire Prevention Programs <ul><li>Most of us tend to relegate public service financial management </li></ul><ul><ul><li>Special category of knowledge and skills </li></ul></ul><ul><li>Money: part of all management decisions </li></ul><ul><li>Public employees: moral/legal obligation to give citizens their money’s worth </li></ul>
  5. 5. The Budget Process <ul><li>Effective budget preparation and disciplined fiscal management: </li></ul><ul><ul><li>Deliver adequate services </li></ul></ul><ul><li>State laws require local governments to balance their budgets </li></ul><ul><li>Governments’ credit reports: bond rating </li></ul>
  6. 6. FIGURE 13-1 Funding for this firefighter’s protective clothing, equipment, and salary all came from his department’s budget (Courtesy of Duane Perry)
  7. 7. Financial and Accounting Standards <ul><li>Governments are audited </li></ul><ul><ul><li>Protect against waste/fraud </li></ul></ul><ul><ul><li>Measure effectiveness of management </li></ul></ul><ul><li>Governmental Accounting Standards Board (GASB), 1984 </li></ul><ul><ul><li>For state/local governments </li></ul></ul><ul><ul><ul><li>Corruption more difficult to conceal </li></ul></ul></ul>
  8. 8. Budget Basics <ul><li>Purpose of budgets </li></ul><ul><ul><li>Supply information to: </li></ul></ul><ul><ul><ul><li>Elected officials </li></ul></ul></ul><ul><ul><ul><li>The public on government programs </li></ul></ul></ul><ul><ul><li>Establish policy for spending public funds </li></ul></ul><ul><ul><li>Assist managers by categorizing/tracking expenditures </li></ul></ul>
  9. 9. Budget Basics (cont’d.) <ul><li>Recommended budget: submitted to the legislative body </li></ul><ul><ul><li>Adopted budget for the fiscal year </li></ul></ul><ul><ul><ul><li>Operating budget </li></ul></ul></ul><ul><ul><ul><ul><li>Day-to-day operating expenses: salaries, utilities, rent, fuel, and transfer payments </li></ul></ul></ul></ul><ul><ul><ul><li>Capital improvement budget </li></ul></ul></ul><ul><ul><ul><ul><li>Long-range government financial plans: construction projects, and land acquisition </li></ul></ul></ul></ul>
  10. 10. The Budget Tool <ul><li>Should be in constant use </li></ul><ul><li>Quarterly reviews that track spending should be carefully studied </li></ul><ul><ul><li>Ample time to request/justify extra funding </li></ul></ul><ul><li>By end of 3 rd quarter of fiscal year </li></ul><ul><ul><li>Shortfalls identified/notified to budget director </li></ul></ul><ul><ul><ul><li>Best to schedule training activities and procure supplies/equipment in 1 st half of fiscal year </li></ul></ul></ul>
  11. 11. Budget Calendar <ul><li>Federal fiscal year: Oct 1 - Sep 30 </li></ul><ul><li>Budget preparation: typically late summer </li></ul><ul><li>New programs and changes in service levels (additional staffing) </li></ul><ul><ul><li>To be justified in earliest stages of budget cycle </li></ul></ul>
  12. 12. The Budget as an Evaluation Tool <ul><li>Evaluation </li></ul><ul><ul><li>Services that people really need, how much to spend, and the quality of them </li></ul></ul><ul><li>Government Performance and Results Act </li></ul><ul><ul><li>Federal agencies develop methods of measuring performance in delivery of services </li></ul></ul><ul><ul><li>Quality now included in many government systems that measure performance </li></ul></ul>
  13. 13. Budget Formats <ul><li>Line-i tem budget </li></ul><ul><ul><li>Each line item is a fund or sub-fund </li></ul></ul><ul><li>Lump -sum budget </li></ul><ul><ul><li>Fire chief spent money as he/she saw fit </li></ul></ul><ul><li>Program budget </li></ul><ul><ul><li>Funds allocation by major program area/service </li></ul></ul>
  14. 14. Budget Formats (cont’d.) <ul><li>Performance budget </li></ul><ul><ul><li>Standards developed for each functional area </li></ul></ul><ul><ul><ul><li>Performance compared with that of previous years </li></ul></ul></ul><ul><li>Zero-based b udget </li></ul><ul><ul><li>All government programs rated in order of priority </li></ul></ul><ul><ul><ul><li>Funding based on value of the service provided </li></ul></ul></ul>
  15. 15. Fire Prevention Bureau Budgets <ul><li>Bureaus responsibilities and duties </li></ul><ul><ul><li>Quite different from rest of fire department </li></ul></ul><ul><li>Needs for unfamiliar categories often questioned by: </li></ul><ul><ul><li>Fire department budget analysts </li></ul></ul><ul><ul><li>Some senior fire department officials </li></ul></ul>
  16. 16. Replacement Schedules <ul><li>Developing replacement schedules for tools and equipment is good policy </li></ul><ul><li>Good working relationships on the street </li></ul><ul><ul><li>Cooperative relationships during budget process </li></ul></ul>
  17. 17. Cost Recovery and Fee Structures <ul><li>User fee </li></ul><ul><ul><li>Payment for service </li></ul></ul><ul><ul><li>Not a tax </li></ul></ul><ul><ul><li>Widespread acceptance </li></ul></ul><ul><ul><li>To be based on logical system </li></ul></ul><ul><ul><ul><li>Cost to perform the service </li></ul></ul></ul>
  18. 18. The Fee Adoption Process <ul><li>Establishment of fee system without input of the business community </li></ul><ul><ul><li>Unsatisfactory results </li></ul></ul><ul><li>With business support, the adoption of a fee schedule is almost guaranteed </li></ul>
  19. 19. Determining the Fee Structure <ul><li>Fee might be based on average time to perform an inspection </li></ul><ul><ul><li>Cost per hour based on budget data </li></ul></ul><ul><ul><ul><li>Salary </li></ul></ul></ul><ul><ul><ul><li>Fringe benefits </li></ul></ul></ul><ul><ul><ul><li>Transportation </li></ul></ul></ul><ul><ul><ul><li>Operating expenses </li></ul></ul></ul><ul><li>Important to consider: service provided </li></ul><ul><ul><li>Poor quality: opens door to privatization </li></ul></ul>
  20. 20. Types of Fees <ul><li>User fees can apply to most functions performed by fire prevention bureaus </li></ul><ul><li>Permit fees </li></ul><ul><ul><li>Based on average time required for inspection </li></ul></ul><ul><li>Inspection fees </li></ul><ul><ul><li>Based on time required for inspection and preparation of the inspection report </li></ul></ul>
  21. 21. Types of Fees (cont’d.) <ul><li>Plan review fees </li></ul><ul><ul><li>Based on plan type, square footage, number of fire protection devices, or reviewer’s time </li></ul></ul><ul><li>Acceptance testing and retesting fees </li></ul><ul><ul><li>Generally per hour or per device </li></ul></ul><ul><ul><li>To be established with same care as plan review fees </li></ul></ul>
  22. 22. Implementation <ul><li>Time for establishing tracking/accounting system: not after adoption of program </li></ul><ul><li>Assistance from finance officials should be sought early on in the process </li></ul><ul><li>Good security and formal procedures help keep honest people honest </li></ul>
  23. 23. Summary <ul><li>Public employees </li></ul><ul><ul><li>Moral and legal obligation </li></ul></ul><ul><li>Government budgets </li></ul><ul><ul><li>Operating budget: day-to-day operations </li></ul></ul><ul><ul><li>Capital budget: land for road, park, or facility construction </li></ul></ul><ul><li>Fee systems </li></ul><ul><ul><li>Only charge those who receive the service </li></ul></ul>

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