Finance and Budgeting
Budgets and funds
A budget is a financial plan, not a guarantee. Know line-item (object), program, performance, and zero-based formats, and the split between operating (recurring) and capital (assets, major renovation) budgets. Public agencies use fund accounting; enterprise funds such as golf or aquatics are expected to recover costs through fees, while general-fund programs may be subsidized by policy.
Concepts to know
Cost-recovery pyramid (some programs heavily subsidized, some at full cost recovery, a few generating surplus); revenue forecasting; variance analysis comparing budget to actual by line with explanation; purchasing thresholds, sealed bids, and RFPs; internal controls and segregation of duties; external audit findings; grant terms including indirect-cost rules; depreciation and life-cycle cost; fee setting and scholarships.
Traps
Capital versus operating confusion; treating cost recovery as profit; assuming a grant covers everything it touches; assuming money moves freely between funds or line items; swapping zero-based (built from zero each cycle) for incremental (last year plus an adjustment); and forgetting that the lowest bid must still be responsive to the specifications and a responsible bidder.
Worked example
An aquatics operation budgets $480,000 in revenue against $600,000 in expense, recovering 80%. If the agency target is 90%, the gap is $60,000; the options are fee adjustments, new revenue programs, expense reduction, or an explicit subsidy approved by the governing body.
Rule of thumb
No single person should control a transaction end to end - the approver, the purchaser, and the reconciler should not all be the same person.