YOU WILL DISCOVER: The basics of budgeting How to use forecasting to set your future budget The importance of budget monitoring

1. Forecasting, Budgeting & Setting the
Precept for Local Councils
Hannah Driver

2. What is Budgeting?
● A budget is a financial plan for a specific period of time, often a
year
● Parish Councils, regardless of their size, have a statutory duty
to prepare an Annual Budget
● The budget must be prepared and approved before setting
the precept and before the start of the financial year
● All members of the council should understand the budget

3. Why is Budgeting important?
● Allows councils to set an appropriate Precept amount
● Allows councils to plan for future projects
● Flags up potential under or overspend against the budget
allowing for corrective action

4. Budgeting
Timetable

5. Budgeting Timetable
● October: Departments / Committees work on draft budgets
● November: Full draft budget
● December: Present budget at full council meeting
(reviews of the budget may happen prior or at this meeting)
● January: Precept agreed and submitted to billing authority

6. Budgeting Approaches
Budgeting
Approaches

7. Incremental Budgeting
● Traditional method of budgeting
● Based on current year and/or historic data
● Adds on percentage or incremental amount
● Doesn’t encourage in depth analysis of current budget

8. Zero-based Budgeting
● Starts from scratch, does not consider current/prior years
● Allows for full analysis of all budget elements
● Useful for one-off / special projects

9. Forecasting

10. Forecasting
● Predicting future income and expenditure to create a final year
position to assist in budgeting
● Use in conjunction with other data, especially if the current
year is non-typical
● Used for budgeting but can also be used to manage
spending

11. How do I Forecast?
● The half year point (April - Sept) is a good place to start but can
be done from any month end
● Predict the remaining months’ income & expenditure per
budget line
● Some budget lines will be easier to forecast than others
● Once complete analyse against budget

12. How do I Forecast?
●

13. How do I Forecast?
●

14. Budget Process

15. Budget Process
● Use the current year forecast and other relevant data
● Consider
○ Expenditure
○ Income
○ Contingencies & Reserves
● Be mindful of
○ Level of detail
○ Materiality

16. Expenditure
Fixed Costs
● Also known as indirect costs or overheads - costs that are
unlikely to change e.g. staff costs, phone
● Fairly easy to budget for
● Some costs will be known e.g. insurance renewal,
subscriptions etc
● Others can have percentage uplift applied

17. Expenditure
Reactive Costs/Variable Costs
● Costs that are harder to predict e.g. maintenance costs
● May be related to level of activity if other sources of income
e.g. hall hire
● Generally a smaller proportion of the overall budget for a
council

18. Income
● Calculate guaranteed income e.g. rent, grants etc
● Review other income sources
○ Are they likely to continue?
○ Are rates/fees to be increased?
● Estimate income from uncertain sources e.g. cemetery,
venue hire

19. Contingencies & Reserves
● Amounts held for unexpected expenditure or cashflow issues
● General Reserve:
○ Equal to between 3-12 months expenditure
○ Should be maintained at an appropriate level
● Do not build contingencies in to each budget line
● Beware one-off costs when reviewing actual spend

20. Earmarked Reserves / Projects
● Zero-based budgeting may be relevant here
● Income - how will the project be funded?
○ consider what will be received e.g grants
● Expenditure - for all elements
○ Direct costs
○ Other associated costs, e.g. ongoing maintenance

21. Calculating the
Precept

22. Calculating the Precept
● Precept requirement will be based on expenditure budget less
other income expected or prior year surplus
● E.g. Expenditure budget £100k, Income budget £20k = Precept
required £80k
● Check calculation based on Band D equivalent properties

23. What if the Precept amount is
vastly different to last year?
Does the budget need revisiting?
○ Cost savings
○ Deferral of projects/planned spend
Can the precept required be reduced?
○ Offset by budget surplus or reserves
Is the change justifiable and needed?
○ Change to services provided

24. Counteracting the Cost of Living Crisis
● Reduce consumption of energy
● Reduce office waste e.g. less printing/photocopying
● Defer projects/planned spending
● Review contracts/suppliers
● Fixed price deals
● Invest in technology

25. Monitoring the
Budget

26. Monitoring the Budget
● Important to monitor budget vs actuals - can help predict
under or overspend
● A good cashbook is key - based on the budget codes
● Keeping notes on the budget and actual spend in the
current year can be helpful in setting future budgets

27. Monitoring the Budget

28. Find Out More!
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hello@scribeaccounts.com
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package in action you can call us on 01603 856505
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Thanks for watching!