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CHAPTER 3: PLANNING AND BUDGETING

3.1. OVERVIEW - Linking the Strategic Plan, Long-Term Financial Plan, and the Budget

In its strategic plan, a commission sets goals and objectives and develops strategies for achieving them. In its long-term financial plan (some commissions call this a “sustainability plan”), a commission takes a long-term view of its financial situation and makes tentative plans for allocating future resources to the objectives identified in the strategic plan. In its budget, a commission makes a commitment for how resources will be used in the short term, typically the upcoming one or two fiscal years. The budget is a short-term spending and operational plan shaped by the goals and objectives in the strategic plan and the financial direction set in the long-term financial plan. The evaluation process includes both the evaluation of financial results and program performance.

This chapter is divided into three sections: strategic plan, long-term financial plan, and budget. Financial results are addressed in the chapter on financial reporting. This handbook does not include procedures for program and strategic results evaluation.

The following diagram illustrates the linkage among the strategic plan, long-term financial plan, the budget, and evaluation of results.

3.2. STRATEGIC PLAN

3.2.1. Introduction

A commission develops the strategic plan through a collaborative process that includes input from stakeholders and an assessment of needs, trends, and the current environment. A strategic plan includes goals, objectives, and strategies for achieving those objectives. The California Children and Families Act of 1998 includes requirements for developing a strategic plan.

3.2.2. Policy Statement

As required by state law, commissions will develop and adopt an adequate and complete strategic plan for the support and improvement of early childhood development within the county, using a collaborative process.

3.2.3. Procedures

The procedures presented below are based on directives enumerated in the California Health and Safety Code (Sections 130100-130155) and State Commission guidelines for implementing the California Children and Families Act (September 1999).

The following are the required components of a strategic plan (Section 130140(a)(1)(C)(ii)):

3.2.3.1 Community Input Session(s)

The commission should hold one or more community input sessions to obtain stakeholder input on priorities for the upcoming planning and budgetary period. To avoid duplicate meetings with similar purposes, the commission may choose to hold community meetings for purposes of both program and budget planning.

3.2.3.2 Commission Planning Session

The commission should have a planning session to make tentative long-term financial plans and to set priorities for the upcoming budget period. The inputs of this session should be the proposed long-term financial plan, the summary of the commission’s most recent financial and performance information, and the summary of stakeholder input.

Staff should prepare background information for a commission planning session. This background information should include:

3.2.4. Model Documents

3.2.5. Resources

3.3. LONG-TERM FINANCIAL PLAN

3.3.1. Introduction

A commission’s long-term financial plan, which is developed for a minimum of five years, illustrates the likely financial outcomes of particular courses of action or factors affecting the environment in which it operates. Such a financial plan is not a statement of what is certain to happen but rather a projection to highlight significant financial and operational issues or problems that must be addressed if goals are to be achieved. Long-term financial planning expands a government’s awareness of options, potential problems, and opportunities. It helps decision makers to see the long-term implications of expanding or reducing existing programs, and helps decision makers to take corrective action before potential problems become more severe. Decision makers should use the plan as a resource when making budget decisions./P>

3.3.2. Policy Statement

Commissions must develop a long-term financial plan. The plan should assess the long-term financial implications of current and proposed policies, programs, and assumptions. It should provide a long-term view of how resources will be allocated to attain the objectives in the strategic plan.

3.3.3. Procedures

The following procedures provide commissions a recommended approach to long-term financial planning, including components, content, and commission-specific activity. The financial plan, though not a binding commitment like the budget, should be adopted by the commission to show its intent to allocate funds in future budget periods. The plan is to be adopted after a public hearing. (Section 130151(b)(5)).


Specific procedures:
  1. Develop a plan that includes the following components:

    •  An analysis of past financial trends.

    • An assessment of needs, trends, opportunities, and potential shortfalls the commission will face in the future and actions needed to address these issues. Many methods are available for generating these projections. Model documents are available to illustrate the various ways individual commissions complete their projections.

    • Long-term forecasts of future revenues and expenditures that use alternative economic, planning, and policy assumptions. In certain circumstances, commissions may decide to develop and adopt multiple forecasts to describe possible futures. It is important that assumptions are clear when multiple forecasts are created under varying scenarios.

    • A plan for total revenue and expenditure levels for the planning period.

    • A plan for allocating resources among the objectives in the strategic plan. Commissions may also want to allocate provisionally resources to specific programs.


  2. The financial plan should include forecasts of future revenues, expenditures, and reserves for a period of at least five years.


  3. The financial plan should include future revenue and expenditure levels in a likely scenario. In this plan, expenditures should not exceed available revenues and reserves during the planning period.

    The financial plan should include a thorough assessment of the “revenue risk” attached to the Proposition 10 tobacco tax funding stream. Such attention is warranted as state level revenue modeling and analysis projects a decline of tobacco tax revenue in future years.

  4. The financial plan should be updated every year in concert with budget preparation.


  5. Some commissions may choose to incorporate a community input process into the development of financial plans.

3.3.4. Model Documents and Examples

3.3.5. Resources

3.4. BUDGET

3.4.1. Introduction

The budget is a commitment for the allocation of available resources for the upcoming budget period. The budget is shaped by the goals and objectives contained in the strategic plan and the financial direction set in the long-term financial plan. The budgeting policies and procedures presented here cover both the written budget document and the decision-making process for developing the budget. The purpose of this section is to set forth general guidelines for the allocation of Proposition 10 funds—guidelines grounded in best practices in budgeting but reflecting the flexibility necessary to accommodate different types and sizes of commissions.

3.4.2. Policy Statement

The budget must tie directly and explicitly to the commission’s long term financial plan. All program allocations are to be consistent with the long-term financial plan.

The budget must be within the parameters of the commission’s strategic plan and must be in alignment with all strategic plan decisions.

These policies are in line with the essential features of a good budget process as identified by the National Advisory Council on State and Local Budgeting:

3.4.3. Procedures

3.4.3.1. Establish a Process for Preparing and Adopting a Budget

3.4.3.1.1. Annual and Multi-year Budgeting

The commission should consider adjusting the time period of the budget to a period (e.g., 12 months, 24 months, 36 months, etc.) that best fits its needs within the constraints imposed by its commission policies, county government, or state law. An annual budget authorizes a commission’s planned revenues and expenditures for one year. A multi-year budget authorizes a commission’s planned revenues and expenditures for two or more consecutive budgetary years.

Multi-year budgets tend to be more beneficial for organizations with predictable revenues and expenditures, such as First 5 commissions. Thus, if a commission is limited in its ability to adopt multi-year budgets by policies or laws, it might still produce detailed projections of revenue and expenditures over multiple years for planning purposes, but only adopt the first year as the formal budget. Commissions should consider the advantages and disadvantages of multi-year budgeting and select a time period that best fits their needs.

3.4.3.1.2. Budget Calendar

The commission's budget process should be guided by a written budget calendar. The budget calendar is a schedule that lists the dates of key budget events and deadlines. It specifies the key budget tasks in the budget process, when they must be completed, and who is responsible for completing each task. The budget calendar describes the procedure for preparing, reviewing, and adopting the budget. The budget calendar should be distributed to budget stakeholders early in the budget process.

3.4.3.2. Budget Process

3.4.3.2.1. Overview of Budget Process

Although small and large commissions have different processes for developing budgets, the commission’s budget process should generally follow these key steps:

  1. In a planning session, the commission sets priorities for the upcoming budget period and adopts a long-term financial plan.
  2. Staff prepares proposed budget based on priorities established in the commission’s strategic plan.
  3. Commission reviews the proposed budget. This may be done in one or two meetings, depending on the size of the commission or policies of the commission.
  4. Commission approves the budget.
  5. Adopted budget is communicated to stakeholders using a popular budget document.
  6. Staff administers and monitors the budget.
  7. Commission or its delegate amends the adopted budget as necessary.
3.4.3.2.2. Preparation of Proposed Budget

Staff should prepare a proposed budget based on the priorities set in the local commission planning session and established in the commission's strategic plan.

Commission management's responsibility generally is to present the proposed budget in a way that best facilitates effective resource allocation decisions by the commission. It should show anticipated resources and how these resources will be used to implement the objectives in the strategic plan. In other words, it should present financial information in a format that helps decision makers to ensure that their funding decisions will support the purposes they have outlined in their strategic plan.

The budget document should include the following sections:

3.4.3.2.3. Commission Review of Proposed Budget

The commission reviews the proposed budget prior to adoption. The commission should use the strategic plan and the long-term financial plan as the framework for its review.

3.4.3.2.4. Budget Adoption

The commission should adopt the proposed budget at least one month prior to the beginning of the next budget period. In the adopted budget, the operating expenditures must not exceed the operating resources (forecasted revenues and reserves). Commissions may review and adopt budgets at different levels: fund, cost center, program, or line item depending on commission policies.

3.4.3.2.5. Communicate Budget to the Public through a Popular Budget

The commission should prepare a “popular budget” document that meets the following objectives:

3.4.3.2.6. Budget Administration

Staff should administer and monitor the adopted budget. Staff should use the budget document as a guide for expenditures throughout the budget period so that actual expenditures do not exceed the total adopted budget, resources are used for the appropriate purposes, and resources are not expended too quickly.

3.4.3.2.7. Budget Amendments

Depending on individual commission policies and procedures, the commission may make amendments to the adopted budget as necessary. Any changes to the total amount of the budget must be approved in writing by the commission prior to recording the change. Unless otherwise authorized, the commission or its delegate approves budget amendments.

3.4.4. Model Documents and Examples

3.4.5. RESOURCES