AGENDA #5

Wednesday, February 26, 2003

Finance Department

Initial Budget Presentation to the Mayor and Council

Fiscal Year 2003-2004

MISSION STATEMENT

The primary mission of the Finance Department is to provide financial oversight and direction to help the Town make the best possible use of its assets.

BRIEF SERVICES DESCRIPTION

• Provide support for the budget process, including an accurate and informative budget document and estimation of Town revenues.

• Oversee Town centralized purchasing and contracts.

• Monitor the Town’s fiscal position and provide for appropriate investments and borrowings.

• Provide payroll and accounts payable services.

• Efficiently provide and maintain accurate and informative financial records in a manner that supports the Town’s operations and enables Town to receive clean opinions by independent auditors.

• Provide centralized revenue collection services for all Departments and collection of taxes for Town and County citizens.

• Provide annual assistance and coordination of debt management and planning.

The Finance Department has no revenues that offset operating costs.

Departmental Base Budget Cost Estimates

CATEGORY	2002-2003 Original Budget	2002-2003 Revised Budget	2002-2003 Estimated	2003-2004 Requested	% Increase (Decrease) from Original Budget
Personnel	648,069	648,069	655,547	660,696	1.9%
Operations	211,292	240,303	255,617	243,592	15.3%
Capital Equipment	0	0	0	0	N/A
TOTAL	859,361	888,372	911,164	904,288	5.2%

KEY BASE COST ISSUES

An increase in estimated personnel cost of about 1.9% due primarily to the unfunded portion

of merit salary and benefit increases budgeted for only 7 months in the current year, and minor adjustments in medical insurance costs based on changes in medical insurance coverages.

Estimated operating costs include increases of about 15% in three categories as follows:

• An increase of about $19,000 over the current budget of $79,000 for the property tax collection contracts with Orange and Durham counties (costs determined by formula which includes the proportional tax levies and number of tax bills for each jurisdiction and the overall costs of collections by each county).
• An increase of about $10,600 in banking services and fees which are normally offset by interest earnings on available bank balances (account balance interest earnings have decreased to practically zero in the current economic environment, and are no longer available to help offset standard monthly account charges and fees)
• An increase of about $3,900 in the annual maintenance support charge for the financial system computer software.

For most all other operating costs, the requested line item amounts are the same as in the current base budget.

KEY SERVICES THAT ARE GOING WELL

• Budget preparation and meeting all financial reporting requirements in timely manner.
• Purchasing and contract oversight, including development of procurement card system.
• Borrowing and debt management (lease-purchase agreements and issuance of bonds).

KEY SERVICES THAT CAN BE IMPROVED

• Final phase implementation of purchasing card program to all departments, and use of purchasing cards to facilitate business meetings and training arrangements.

POTENTIAL ADDITION

Need for an additional accounting position to address an increasing workload and new financial reporting requirements effective this year.

The increasing accounting workload includes:

• billing and collection of revenues for the expanded privilege program begun last year (from about 1200 to 2000 businesses)
• additional work related to billing and collecting for commercial garbage fees and the rental licensing programs initiated in the current year (from 85 in 2002 to 1688 in 2003)
• coordination, monitoring, and reporting required for an increasing number of installment purchase contracts (from 10 in 1999 to 20 currently)
• reporting and monitoring for an increasing number of grants (from 24 in 1999 to 38 currently)
• the need to initiate a program for acceptance of credit cards for various Town revenue transactions.
• new financial reporting requirements of the Governmental Accounting Standards Board (GASB 34) will be effective this audit year.  The new requirements  will include an expanded comprehensive annual financial report (audit report) presenting results of the Town’s overall financial transactions and operations in both the old and a new expanded format designed to provided better managerial information about the Town’s operations.  The expanded format and requirements will continue in future years.

The impending retirement of the current Purchasing and Contracts Manager provides an opportunity for possible changes in the position and a potential for restructuring and reallocating resources that could help cover the cost of an additional accounting position.

POTENTIAL REDUCTION LIST OF 5% OF TOTAL BUDGET ($42,968)

A reduction of 5% of the total Finance Department budget would require a reduction in existing positions that could include the following:

• Reducing the Purchasing and Contracts Manager position to half-time ($33,100)
• Eliminating a part-time Office Assistant Position ($18,000)