Rethinking the Budget Process in Uncertain Times
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good foundation for making a budget on the last year’s numbers. Take the time to examine if your reporting and budgeting tools are appropriate (Excel is not always the answer!), or if the data is disaggregated enough to give useful information. Unusual revenues, expenditures or other transactions from one-time or discontinued programs may be mixed in with normal operating accounts. Ensure the trial balance is classified efficiently so that these unique items can be identified. This is particularly important for smaller local governments where unusual events can have a significant financial effect. Due to COVID-19, many local governments saw decreases in recreation and parking revenues, and large increases in cleaning and information technology costs. These changes may not be a good indication of next year’s operations without fully understanding which items were one-time occurrences and which are recurring.
egislation requires a local government to adopt an annual financial plan. This process can be taxing and time consuming at the best of times. COVID-19 has made budgeting especially challenging for smaller local governments who may have limited administrative resources to invest in deep data analysis and forecasting. For these entities, relatively small items could have a material impact. Your local government may have already adopted its current year financial plan; however, the plan can be amended by bylaw at any time. Here are some things to keep in mind:
INPUT FROM OUTSIDE THE FINANCE TEAM The financial plan will impact the operations of the entire organization. You must understand each department’s plans and projects for the upcoming year. COVID19 may have created revised expectations for service levels, which will affect each department differently. It is the responsibility of the finance department to work with department managers to translate their needs into a financial budget. Frequent communication and feedback with department managers is important to ensure the budget is accurate and realistic.
GOOD DECISIONS COME FROM GOOD DATA The usual starting point in making a budget is the prior year’s actual results. When reports and analysis of historical results are robust, then you have a
RESERVE FORECASTS Future costs may depend on circumstances or decisions outside of your local government’s control. It is important to understand the financial risk of likely outcomes
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