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Financial Management for Elected Officials January 2013 <br /> <br />Institute for Local Government www.ca-ilg.org 7 <br /> <br /> <br /> <br />Budget Creation and Monitoring <br /> <br />Budgets are an agency’s tool for linking near-term goals with the resources available to achieve <br />them, while keeping in mind long-term goals and resources and how the agency’s annual budget <br />fits into its capital plan. Budgeting typically involves: <br /> <br />1. Establishing goals and priorities for the agency; <br />2. Allocating resources according to those goals and priorities; and <br />3. Comparing actual expenses and revenues to those estimated in the current budgeted <br />expenses, making adjustments during the course of the budget year as necessary. <br /> <br />As important of a function as budgeting is, decision-makers may find that their options are <br />limited in determining how the agency’s monies are actually spent. The limitations may result <br />from legal restrictions on how funds may be used, matching funds issues (that will result in loss <br />of revenues if the agency does not spend a certain amount), and state mandates. <br /> <br />Budgets play the following roles: <br /> <br />• Financial Plan. The budget document shows where agency revenues come from and how <br />they are used. It demonstrates an agency's ability to meet recurring expenses with recurring <br />revenues. As the fiscal year proceeds, there may need to be adjustments in the agency’s <br />financial plan—the role of elected officials is to understand why such adjustments were <br />necessary and what steps were taken to avoid having to make these adjustments. <br /> <br />• Communications Tool. The document also is an opportunity to explain to decision-makers, <br />the news media, staff and the public: <br /> <br /> What the agency does and why; <br /> <br /> How the agency is organized to deliver programs and services; <br /> <br /> The kinds of programs, services and activities planned for the budget period and <br />what kinds of costs are involved; <br /> <br /> Key fiscal issues facing the agency; and <br /> <br /> How the agency assesses the efficiency and effectiveness of agency efforts (see <br />also note on performance measurement on page 11). <br /> <br />• Yardstick. Once adopted, local officials and others can use budget numbers as a reference <br />against which to compare expenditures and revenues throughout the year. As such, the <br />budget provides an ongoing financial management tool to make sure the agency spends <br />within its means and balances expenses against revenues. <br /> <br />Page 57 of 109