Training Resources: PPW Budgeting Overview

FINANCIAL MANAGEMENT Presentation to Planning and Public Works Department April 8, 2022

Welcome  Wolfgang Opitz, Finance Deputy Director  Wolfgang.Opitz@piercecountywa.gov  Phone: 253-798-7580

 Gary Robinson, Finance Director  Gary.Robinson@piercecountywa.gov  Phone: 253-798-7450

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Agenda  Financial Management Standards  Budget Development  General Fund Budget  Total County Budget  Accounting Transactions  Budget Monitoring

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FINANCIAL MANAGEMENT STANDARDS

Brandon Kirkwood, Chief Accountant Brandon.Kirkwood@piercecountywa.gov Phone: 253-798-7231

Governmental Accounting Standards Board (GASB)  GASB Website

Government Finance Officers Association (GFOA)  GFOA Website

Washington State Auditor’s Office (SAO)  Budget, Accounting, and Reporting System (BARS)  Generally Accepted Accounting Principles (GAAP)  Manual Website

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Basis of Accounting and Budgeting Pierce County 2022-23 Budget  The “basis of accounting” and “basis of budgeting” determine when revenues and expenditures are recognized for the purposes of financial reporting and budget control.

Accounting on a “cash basis” means that revenues and expenditures are recorded when cash is actually received or paid out.  This method is used by many small businesses, but it has limitations which make it unsuitable for larger, more complex organizations. Most large businesses employ “full accrual accounting,” in which revenues are recorded when earned (rather than when received), and expenditures are recognized when an obligation to pay is incurred (rather than when the payment is made).  Capital expenses (the costs of acquiring tangible assets) are recognized over the life of the asset, not when the asset is purchased.

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Basis of Accounting and Budgeting  Governments typically employ a hybrid basis of accounting termed “modified accrual.”

Under this system, revenues are recognized when the obligation to pay is incurred.

However, capital expenditures are recognized at the time of the purchase.  This means that governments may experience significant increases and decreases in total expenditures from year to year, because capital expenses tend to be large and unevenly timed. To help explain year to year expenditure trends, governments frequently report capital expenditures separately from operating costs in their budget documents.  Pierce County uses modified accrual accounting and budgeting for its governmental fund types, including the General Fund, special revenue funds, debt service funds, and capital project funds. For proprietary fund types, including enterprise funds and internal service funds, the County uses full accrual accounting and budgeting.

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Accounting Structure  Fund Accounting – Like most governmental entities, Pierce County organizes its finances on the basis of “funds.” A fund is a self-contained, independent financial entity with its own assets and liabilities. Each fund has its own balance sheet and, in effect, is treated as a separate “business” for accounting purposes. The 2022-23 biennial budget includes expenditures for 80 funds, ranging from the General Fund ($861 million) to a small special revenue fund ($235,550).

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Fund Types  Funds can be classified according to the accounting conventions which apply to them.

“Governmental” funds are governed by accounting standards developed specifically for government. “Proprietary” funds are controlled by the same accounting standards which apply to private business.

Governmental  The General Fund is the primary County operating fund and accounts for all general government financial resources, except those required to be accounted for in another fund type.

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Governmental  The General Fund is the primary County operating fund and accounts for all general government financial resources, except those required to be accounted for in another fund type.  Planning and Development Center  Special Revenue Funds are used to account for and report the proceeds of specific revenue sources that are generally legally restricted to expenditure for specific purposes other than debt service or capital projects.  Blighted Property Maintenance Fund (178)  County Road Fund (150)  In-Lieu Fee Wetlands Mitigation Program Fund (177)  Planning and Land Services Building and Development Fund (176)  Second Real Estate Excise Tax Roads Fund (148)  Surface Water Management Fund (153)  Traffic Impact Fee Fund (151) Financial Management | 10

Governmental  Debt Service Funds are used to account for the accumulation of resources for payment of principal and interest on County general obligation bonds.  Capital Project Funds account for acquisition, construction, and remodeling of major capital facilities and for major capital equipment purchases.  Public Works Construction Fund (320)  Surface Water Management Construction Fund (323)  Transportation Facilities Fund (321)  Fiduciary Funds are used to account for assets held in a trustee capacity or as an agent on behalf of others.

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Proprietary  Internal Service Funds account for centralized services provided to other County departments or agencies on a cost reimbursement basis. Centralized intra-governmental services include the following: heavy equipment and vehicle acquisition and maintenance; computer systems and data processing; operation of County facilities and communications systems; risk management; and general administrative services.  Equipment Rental and Revolving Fund  Enterprise Funds account for various business-type activities for which a fee is charged to external users for services.      

Airport (480) Ferry Services Fund (460) Sewer Revenue Bonds Fund (430) Sewer Utility Fund (402) Sewer Utility Construction/Reserve/Preservation Fund (425) Solid Waste Management Fund (470) Financial Management | 12

Objects of Expenditure Pierce County follows the BARS Object Code methodology established by the Washington State Auditor.

Object Codes: 10 – Salaries & Wages 20 – Personnel Benefits 30 – Supplies for Consumption and Resale 40 – Services & Pass-Through Payments 60 – Capital Outlays (Capital Expenditures) 70 – Debt Service – Principal 80 – Debt Service – Interest and Issuance Costs Financial Management | 13

Objects of Expenditure Expenditures – Approximately 34% of the County’s total budget is allocated to personnel costs. All other operating costs consume roughly 54%. The remaining 12% is for capital purchases, construction, and debt service.

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BUDGET DEVELOPMENT

Julie Demuth, Assistant Director of Budget and Performance Julie.Demuth@piercecountywa.gov Phone: 253-798-8534

Budget Development  The County adopted the first two-year budget for the 2020-21 Biennium, which included funding for calendar years 2020 and 2021.  The current 2022-23 budget includes funding for calendar years 2022 and 2023.  Pierce County 2022-23 Budget  The budget ordinance appropriates resources by fund for the two years combined.

Budgets were developed for each fiscal year of the biennium so that expenditures and revenues can be tracked each year.  Enhanced financial planning.  More accurate revenue and expenditure projection and monitoring.  Facilitation of processes that occur on an annual basis (e.g., fee ordinances, grant reporting, levy certifications, etc.).

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Budget Development

Base Budget Development (Feb – Apr)

Monitoring and Forecasting (Ongoing)

Department Budget Submittals (May – Jun)

Analysis and Reporting (Jun – Aug)

Budget Execution (Dec – Jan)

Executive Proposed Budget (Aug – Sep)

Council Adopts Budget (Nov – Dec) Council Budget Hearings (Oct – Nov)

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Budget Development  Department biennial budgets are prepared in the spring and summer of odd numbered years.  The Executive’s budget proposal is presented to the County Council in September.  Council adopts the biennial budget before the end of December.  In the spring, the Finance Department prepares a base budget for the next biennium for each department by removing one-time costs from the previous biennium.  The Finance Department also prepares budget “pre-calculated costs” for the upcoming biennium that include salary and benefits for every position and central services such as facilities and information technology.

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Budget Development  The budget establishes staffing levels for each fund. Expenditure and staffing levels cannot be exceeded unless authorized by a supplemental budget, or when approved in advance by the Finance Department and the Council for grants.  Per Section 15 of Ord. No. 2021-100s2, Planning and Public Works may increase staffing levels for the purpose of meeting permitting and inspection processing goals, planned employee retirement and associated succession training, or coverage for extended employee absence. Budget capacity must be available and staffing level increases must be approved in advance by the Finance and Human Resources Departments.  Some capital funds can be reallocated among projects that are included in an adopted biennial budget when approved in advance by the Finance Department and the Council.  Supplemental budgets, which are amendments to the adopted biennial budgets, may be submitted by the Executive and adopted by Council during the biennium.

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Budget Development  Essential components of budget development include: 1. Strategic Plan 2. Performance Measures 3. Data 

Pierce County’s Strategic Plan is used to align resource allocation with priorities.

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Decision Package Requests must align with the County’s priorities and strategic objectives.



Requests for new or expanded services/programs must identify a performance measure and target to track the outcomes of the funding.

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Budget Development  Performance measures are mandatory per the Government Finance Officers Association (GFOA). 

GFOA Criteria: 1. Are performance data for individual departments or programs included?

2. Are performance data directly related to the stated goals and objectives?

3. Do performance measures focus on results and accomplishments (output, efficiency, and effectiveness measures) rather than inputs?

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Budget Development  The County policy is to maintain a fund balance for the General Fund of fifteen percent (15%) or higher. Other fund balance targets have been established for Planning and Public Works Department Funds.  The Finance Department provides all Departments with instructions and training on the preparation of the biennial budget.  Budget Preparations Guide  Budgets are prepared by general ledger accounts and object codes prescribed by the State Auditor.  Charts of Accounts

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GENERAL FUND BUDGET

Julie Demuth, Assistant Director of Budget and Performance Julie.Demuth@piercecountywa.gov Phone: 253-798-8534

General Fund Budget

1000

$903.7

900

$861.3

800 700 $ in Millions

600

$563.2

$600.7

$664.2

500 400 300 200 100 0

2014-15

2016-17

2018-19

Percent Change

40%

2020-21

2022-23

36.1%

35% 30% 25% % Change

20% 15%

10.6% 6.7%

10% 5%

2.5%

0% -5%

-4.7%

-10%

2014-15

2016-17

2018-19

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2020-21

2022-23

Miscellaneous Revenue $95,541,350 11%

General Fund Revenue

Interest Revenue $8,514,510 1%

Taxes comprise 66% of the revenue in General Fund.

Fines And Forfeitures $6,713,220 1%

Charges For Services $117,016,340 14%

Taxes $568,628,890 66%

Intergovernmental Revenues $53,709,300 6%

Licenses/Permits $11,178,560 1%

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2020-21 Budget Property Taxes

5.3%

197,666,380

255,102,520

29.1

1,939,000

2,099,600

8.3

Licenses and Permits

11,318,840

11,178,560

-1.2

Intergovernmental Revenue

81,400,290

53,709,300

-34.0

111,406,380

117,016,340

5.0

7,670,230

6,713,220

-12.5

20,796,930

8,514,510

-59.1

Other Miscellaneous Revenue

153,475,930

25,799,990

-83.2

Use/(Source) of Fund Balance

22,345,070

69,741,360

212.1

Other Taxes

295,719,140

$

Percent Change

311,426,770

Sales Taxes

$

2022-23 Budget

PRESENTATION TILE

Charges for Services

Fines and Forfeitures Interest Revenue

Total Revenues

$ 903,738,190 Financial Management | 26

$861,302,170

-4.7%

Salaries and Benefits make up 66% of the General Fund budget.

Salaries & Benefits $568.4 66.0%

Transfers Out $52.1 6.0%

Other Operating Costs $240.8 28.0%

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Public Safety and Legal & Judicial functions make up approximately 74% of the General Fund budget.

Utilities 2,973,150 0.4%

Cultural & Recreation 26,329,000 3.0%

Natural & Economic 26,490,570 3.0%

General Government 143,960,370 16.7% Public Safety 395,024,800 45.9%

Legal & Judicial 239,992,710 27.9% Social Services 26,531,570 3.1%

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TOTAL COUNTY BUDGET

Julie Demuth, Assistant Director of Budget and Performance Julie.Demuth@piercecountywa.gov Phone: 253-798-8534

Total County Budget

3,500 3,000

$2,971

$3,014

2020-21

2022-23

2,000

$1,742

$1,684

2014-15

2016-17

$1,845

1,500 1,000 500 0

2018-19

Percent Change

60%

61.0%

50% 40% % Change

$ in Millions

2,500

30% 20% 10%

9.6%

6.2%

1.4%

0%

-3.3%

-10%

2014-15

2016-17

2018-19

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2020-21

2022-23

Total County Revenue Taxes make up 30% of total County revenues.

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Total County Expenditures by Functional Grouping Transportation/Utilities make up 29% of the total County budget.

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Total County Expenditures by Fund Type Special Revenue funds comprise 35% of the total County budget.

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ACCOUNTING TRANSACTIONS

Brandon Kirkwood, Chief Accountant Brandon.Kirkwood@piercecountywa.gov Phone: 253-798-7231

Financial / HCM System - Why Workday Workday is an on-demand (cloud-based) software vendor that specializes in Enterprise Resource Planning, Financial Management and Human Capital Management applications.

Financial Transactions Accounting Journal Ad Hoc Bank Transaction Ad Hoc Payment Budget Cash Sale Customer Contract Customer Invoice Expense Report Procurement Card Verification Purchase Order Requisition Supplier Contract Supplier Invoice

Human Capital Management (HCM) Absence Management Benefits Compensation Learning Payroll Time Entry Worker Lifecycle (Hire/Performance/Promote/Terminate)

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Worktags  Worktags are dimensions that identify financial transactions and categorize them for reporting.  Think of Worktags as keywords that you can assign to transactions and supporting data to make their business purposes clear and establish common relationships through classification.  Worktags enable transactions to indicate and clarify their specific business purpose and common relationships. They also allow for transactions to be organized, searchable, and reported accordingly.

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Worktags  A Worktag is a dimension to facilitate management and financial reports such as:  Training Expenses by Cost Center  Salary Expense for Project  Travel Expense by Company  Total Expenses by Location  Revenue by Fund  Some Worktags are Organizations (Company, Cost Center, etc.) used to:  Provide security for accessing data and approvals  Provide for roll-ups into Hierarchies

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Required on all transactions

FUND • 150-00 • 153-00 • 320-00

COST CENTER • PW Ferry • PW Business and Financial Operations

Ability to report on any (or multiple) worktags

Required for tracking on some transactions

BUSINESS UNIT • 53400P0 Water Utilities • 53700P0 Solid Waste Utilities

SPEND CATEGORY

REVENUE CATEGORY

• General Supplies

• Sewer Charges

• Asphalt

• Repair Services

Minimize ledger accounts by utilizing worktags to provide detail Financial Management | 38

• Ferry Tolls

LOCATION • 112th Street • Annex PPW Rm • Thun Field -PW

Creates flexibility by utilizing combination of worktags

Worktag Structure: 1. Company = Department A. Cost Center = Line of business within a department B. Fund = An independent fiscal and accounting entity C. Business Unit = State prescribed code for functional activity D. Ledger Account = Account code for reportable activity i.

Spend Category = Specified expenditure worktag entered on operational transaction that applies accounting to expenditure ledger account by posting rule.

Follow the Object Code methodology established by the State Auditor.

ii.

Revenue Category = Specified revenue worktag entered on operational transaction that applies accounting to revenue ledger account by posting rule

E. Department level worktags include: Program, Grant, Project, Location Financial Management | 39

Accounting Structure Overview - COMPANY 

Company is considered the primary level at which a legal entity holds a balanced set of books.  Each department in Pierce County is represented as a Company in Workday to meet primary reporting and security considerations.  All District external agencies where we act as Treasurer are represented as a Company in Workday.  Each legal entity (Tax ID) is represented as a Company.



Grouped into Company Hierarchies.

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Accounting Structure Overview – COST CENTER  Cost Center represents a line of business within a department  Independent of funds and programs  Grouped into Cost Center Hierarchies  Restricted to Specific Companies or Hierarchy  Optional Related Worktags  Cost Center Manager approves all spend

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Accounting Structure Overview – FUND 

A Fund is an independent fiscal and accounting entity with a self-balancing set of accounts.



A Fund can only be created via County Ordinance.



An ordinance specifies the specific Fund purpose and use of fund revenues and identifies the classification of the fund balance.

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Accounting Structure Overview – BUSINESS UNIT  The Business Unit represents the State BARS prescribed functional activity.  A Business Unit replaces Basub.  Grouped into Business Unit Hierarchies.

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Accounting Structure Overview – LEDGER ACCOUNT  Equivalent of General Ledger (GL) Accounts  Includes:  Assets (1xxxxx)  Liabilities (2xxxxx)  Revenue (3xxxxx)  Expenditure Accounts (5xxxxx)  Does not include Control Accounts  Budgets will be managed at this level  Grouped into Ledger Account Summaries for reporting

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Transactions and Account Posting Transactions move through a Business Process (BP) and once completed (for some settlement occurs), it posts to the appropriate Accounting based on Account Posting Rules.

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Role Expectations Cost Center Manager 

Fiscally responsible for transactions posting against their Cost Center (line of business within a department) indicating the item is appropriate, accurately supported, and within budget of the Cost Center.



Follow procurement policies and procedures:  Ensure expenditures are valid, necessary, and reasonable.  Verify appropriate worktags (i.e., Fund, Cost Center, Project) are being used for transaction.  Verify appropriate documentation is attached to transaction.



Approval authority for financial transactions:  Procurement (Supplier Contracts, Requestions, Purchase Orders, PCards)  Spend Transactions (Supplier Invoice, Expense Reports, Ad Hoc Payments)



Monitors financial reporting and metrics for Cost Center spend.

PC Department Accounting Manager  Fiscally responsible for ensuring the accounting and worktags are correct.

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Business Process (BP) / Workflow A Business Process (BP) is the definition of business tasks that need to be performed in order for an event to occur, the sequence in which they must be done, and who must do them.  Task - Business Process (BP) that you must complete  Approval – no change allowed  To Do - reminders to do something inside or outside the Workday system

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Workday Reports Worklets are available and enable you to quickly access your common reports. Once added, it will appear on your Homepage.  Worklets may be added by clicking on the wheel icon under your picture and then clicking the ‘+’ sign to add another row enabling you to select a Worklet to add  The following Worklets include Reports by Topic:      

Financial Reports Custom Reports Revenue Reports Expenditure Reports District Reports Favorites

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Workday Reports The Favorites Worklet displays a list of your favorite Tasks and Reports. Use the Manage Favorites task to configure your Favorites list.  Once you’ve added items to your Favorites worklet you can view them in the following groups:  Actions – Click on the items in this list to go directly to that function  Views – Click on items in this list to be brought to the report screen

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Workday Basic Reports - Accounting  Trial Balance  Account Summary showing financials  Shows period beginning balance, total debits/credits, and ending balance  Report with many display options to focus on specific Worktags  Trial Balance by Fund  Account Summary showing Fund in addition to Account  Shows period beginning balance, total debits/credits and ending balance  Financial Detail Activity by Company FIN0353  List of Journal Line details for the selected period and company  Includes both Expenditure and/or Revenue Ledger Accounts

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Workday Basic Reports - Accounting  Event Accounting Summary  Summary showing the number and total amount of each kind of transaction meeting the criteria given.  Customer Activity Summary  View a summary of transactions for all or selected customers in the time range.  Summary information includes ending balance, beginning balance, totals for invoices and adjustments.  Supplier Activity Summary  View supplier activity totals for each supplier. Supplier activities include transactions such as invoices, payments and adjustments.

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BUDGET MONITORING

Julie Demuth, Assistant Director of Budget and Performance Julie.Demuth@piercecountywa.gov Phone: 253-798-8534 Anthea Aasen, Budget and Performance Analyst Anthea.Aasen@piercecountywa.gov Phone: 253-798-7265

Workday Basic Reports – Budget Monitoring  Expenditure Summary Biennium to Date by Company FIN0435 - Biennial  Expenditures for current month (period actuals) relative to the biennial budget, biennium to date actuals, and biennial estimates  Revenue Summary Biennium to Date by Company FIN0598 - Biennial  Revenue for current month (period actuals), biennial budget, biennium to date actuals, and biennial estimates  Revenue to Expenditure Budget Comparison FIN0393  Summary of Cost Center and Fund showing total revenue and total expenditure budgets  Can be used to balance budgets

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Expenditure Summary Biennium to Date by Company FIN0435 Biennial  Expenditures for current month (period actuals) relative to the biennial budget, biennium to date actuals, and biennial estimates.  All expenditure worktags are included.  Export report and create a pivot table for further analysis.

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Revenue Summary Biennium to Date by Company FIN0598 Biennial  Revenue for current month (period actuals), biennial budget, biennium to date actuals, and biennial estimates.  All revenue worktags are included.  Export report and create a pivot table for further analysis.

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Ad Hoc Budget Monitoring  FIN0435 for Expenditures  Track precalculated costs.  Do not exceed overall biennial appropriation (the bottom line).

 FIN0598 for Revenue  Confirm budgeted transfers.  Track revenue streams.

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Power BI – Financial Dashboard for PPW Year over Year (YoY) Financials

 FIN0353 for monthly actuals.  Shows revenue and expenditures for all PPW funds, cost centers, and ledger categories.

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Power BI – Financial Dashboard for PPW Cash on Hand  Cash file updated by Business and Financial Operations (BFO) Team.  Available weekly by Fund.  Year over Year (YoY) comparison.

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Power BI – Financial Dashboard for PPW Cost Center Breakdown

 Revenue and Expenditures by Fund and Cost Center.  YTD and BTD, Budget Estimates, and Percent used.

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Budget Estimates 

Use Maintain Budget to update Budget Estimates.

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Update Quarterly or after a budget amendment is approved.

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Make sure the Plan Name and Organizing Dimension are the same Fund.

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Budget Estimates 

Update individual budget lines with debit and credit totals.

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Does not need to balance.

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Budget Estimates cannot exceed Biennial Budget appropriation levels.

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RESOURCES

Training Resources:  Workday 101 - Financials  Online Learning Workday Courses  Browse Workday Financial

 Workday Financial Resources  Quick Start Guides and Training Manuals

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PPW Financial Resources: Tina Pablo – Long, Business and Financial Operations Manager  Tina.Pablo-Long@piercecountywa.gov  Phone: 253-798-4106

Brandon Anderson, Business and Financial Operations Assistant Manager  Brandon.Anderson@piercecountywa.gov  Phone: 253-798-3722

Katie Maguire, Accountant 2  Katie.Maguire@piercecountywa.gov  Phone: 253-798-2576

Christine Tudor, Accountant 2  Christine.Tudor@piercecountywa.gov  Phone: 253-798-3191

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PRESENTER NAME Finance – Information Technology First.Last@piercecountywa.gov

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| 253.798.XXXX