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SP 029 473

Kelsey, Craig; Gray, HowardThe Budget Process in Parks and Recreation. A CaseStudy Manual.American Alliance for Health, Physical Education,Recreation and Dance, Reston, VA. AmericanAssociation for Leisure and Recreation.ISBN-0-88314-339-98686p.American Alliance for Health, Physical Education,Recreation, and Dance, 1900 Association Drive,Reston, VA 22091 ($9.95).Guides - Non-Classroom Use (055)

MF01 Plus Postage. PC Not Available from EDRS.*Case Studies; Higher Education; *Parks; *ProgramBudgeting; Program Implementation; *Recreation

ABSTRACTThis case study manual, designed for undergraduate or

graduate students studying the area of parks and recreation fiscalmanagement, considers the practical, critical skills of budgetingtechniques. The manual deals with the most common budgeting styles ina step-by-step approach with case study exercises. Each chapterincludes an introduction to a particular budget style, a descriptionof the budget, purposes of the budget, a step-by-step budget process,and advantages and disadvantages of the ..4thod considered. Budgetstyles covered are: object classification, line item, fee, program,performance, planning programming budgeting system, zero-based,activity, function, unit, fuhd, character, increment-decrement,running, benefit cost, and capital. A final chapter discusses thefinancial statement, the final aspect of the budget process. (CB)

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The Budget Processin Parks and Recreation

A Case Study Manual

Craig Kelsey, Ph.D.Utah State University

Logan, UtahHoward Gray, Ph.D.

Brigham Young UniversityProvo, Utah

American Association for Leisure and Recreationan association of the

American Alliance for Health, PhysicalEducation, Recreation, and Dance

3

Copyright © 1986

The American Alliance for Health,Physical Education, Recreation,

and Dance1900 Association DriveReston, Virginia 22091

ISBN 0-88314-339-9

4

I

PREFACE

This case study (homework) manual has been prepared for theundergraduate or graduate student studying the area of parksand recreation fiscal management. The purpose of thismanual is to provide the student with the critical,practical skills of budgeting techniques and it is not meantto represent a presentation of fiscal and economic theory.The manual deals with the most common budgeting styles in astep by step approach buttressed by a case study exercisefor each budget style. Eacli chapter has an introduction tothe budget style, a description of the budget, the purposesof the budget, the step by step budget process followed bythe advantages and disadvantages of that budget method. Itis the intent of this manual that the student and instructoruse the case study experiences to foster an understanding,discussion and practial experience aspect for each budgetstyle. These budget styles are presented in a generalfashion, therefore, slight to moderate variations mightoccur in some budget styles at various parks and recreationagencies.

Table of Contents

Section Page

1

2

3

45

IntroductionObject Classification BudgetLine item BudgetFee BudgetProgram Budget

1

5

162026

6 Performance Budget 307 Planning Programming Budgeting System . 358 Zero Based Budget 399 Activity Budget 44

10 Function Budget 4711 Unit Budget 5112 Fund Budget 5513 Character Budget 5814 Increment - Decrement Budget 6115 Running Budget 6416 Benefit Cost Budget 6817 Capital Budget 7318 Financial Statement 76

5

Introduction

Of paramount concern to parks and recreation students is thestudy of budgetary systems that interface with the programsthat the emerging professional will be responsible for. Thebudget process is of such fundamental importance that almostall parks and recreation administration courses andtextbooks deal with this concept to some degree. However,the budget process in these courses or texts are usuallyisolated to only one type of budget and leaves the emergingprofessional with limited options, except for that onebudget tjpe.

There are several budgetary systems which at one time oranother may be more effectively utilized than confiningoneself to one particular budget style. Describedthroughout this manual are several budgetary systems movingfrom very traditional budgets to the most recent budgetinnovations.

What is a Budget?

The term "budget" in community parks and recreation is usedto donate a plan prepared by an executive for financing thework of a program, department or enterprise for a givenperiod of time. Until the budget receives approval of theappropriating body (city council, county commission, statelegislature or an administrative entity within theorganization) the budget is merely a proposal. After budgetapproval, the budget becomes a controlling financial planfor carrying out the program of operations and services.Three key aspects of the budget definition are highlightedfor more clarity:

1. Plan: The budget is foremost a plan, that is, a designas to where monies will be spent and where the monies willcome from.

2. Proposal: Until the budget is approved, the budgetrepresents a proposal, that is, changes may and probablywill be made in the plan and the budget is not yet binding.

3. Control: Once the budget is approved. the documentbecomes a binding and usually legal document that provides acontrol to the allocation of expenditures. Usually thebudget cannot deviate from its approved condition.

Purposes of a Budget

A budget is more than a legally binding financial plan.Indesd, it is a multipurpose document, which reflects and

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seeks to serve the information needs of the various usersand planners of the budget. The budget generally has threemajor purposes:

1. Control: The budget controls the allocation of moniesthrough enforced accounting and reporting procedures. Theseprocedures generally control the transfer of monies from oneaccount to another, controls the number of personnel hiredor terminated and controls the acquisition of supplies andequipment.

2. Management: The budget serves a management function asthe executive responsible for the budget conforms to thebudget and therefore allocates monies as the budgetdictates. The executive manages the money by following thebudget precisely.

3. Planning: The budget provides planning information froma short to long range perspective. The future of large itempurchases as well as personnel needs can be planned for byutilizing the budget.

Budget Calendaring

The budget process can be a very complex operation andtherefore built-in controls are necessary. One method thatcommunity agencies utilize to help provide an orderly andtimely budget process is a budget calendar. A budgetcalendar is established by each community agency (city,county, organization, etc.) so that the various phases ofthe budget process may flow without interruption orhinderance. The budget calendar is an orderly chronologicaltimetable which identifies certain dates by which differentand necessary actions required for the preparation andexecution of the budget must occur. The responsibilities ofvarious officials is usually highlighted corresponding tothe dates those actions are necessary. The following is anexample of a budget calendar that might be used by acommunity agency:

Responsible Party Action Necessary Time Frame

Program Coordinaters will submit theirprogram budgets tothe department head

by Dec. 10

Department Heads will submit 6 copiesof the departmentbudget to the financeofficer

by Jan. 15

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Finance Officer

City Council

Mayor

Department Head

will submit 10 copiesof the agency's bud-get to the mayor andcity council

will submit 2 copiesof the approved budgetto the mayor

will finalize budgetwith each departmenthead

will activate budget

by March 1

by April 15

by May 30

on July 1

Regardless of the time sequence of the budget calendar, theparks and recreation professional is responsible for thedevelopment and execution of the budget. Generally, theauthorization for the budget requests is the soleresponsibility of the appropriating body (city council,etc.) that governs the agency. It is critical that theadministrator be well versed in the time sequence so thatadjustments and adoptions in the budgetary process can bemade without losing control of the budget.

Important Questions to Ask about the Budget

For the emerging parks and recreation professional, threequestions seem most important regarding the budget process.These three questions should be asked early, (employmentinterview or first week of employment) and they are:

1. What are my budget responsibilities? Am I responsiblefor the budget of one program (swimming pool, recreationcenter, teen club), or am I responsible for budgets thatencompass larger entities (parks and recreation department,the cemetary and the maintenance workshop).

2. What budget style or format does the agency use? Thereare sixteen different ways or methods of preparing andpresenting the budget and each style requires differentpreparation skills.

3. What is my time frame? What does this specific agency'sbudget calendar look like so it is known how much time theadministration has to prepare the budget.

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CASE STUDY NO. 1TOPIC: BUDGET CALENDAR

1. Contact a governmental agency of your choice (city,county, state, federal) and obtain a copy of their budgetcalendar.

2. Determine from the budget officer the answers to thefollowing questions:

A. Does the budget calendar for your agency provideyou with the proper preparation time? Comment.

B. Are there aspects to your agency's budget calendarprocess that are cumbersome or perhaps "unnecessary."Comment.

C. Have the budget officer explain the type of budgetthat is used by that agency and highlight the keyfactors of that budget. Explanation.

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Section 2

Object Classification Budget

Considered by many parks and recreation administrators to bethe most traditional budgetary method, the ObjectClassification System was one of the earliest methodsdeveloped and simplest to understand. Most parks andrecreation professionals will have need to utilize thisparticular budget style at one time or another in theirprofessional career.

Description

The Object Classification budget uses two terms that must bedefined at the outset:

1. Object: This represents the item that the administratorhas a financial cost for, such as telephone bills orsalaries for the staff members.

2. Classifications: This represents a uniform method ofclassifying or grouping the objects into certain categories,such as services, contractual, or repairs.

In the Object Classification method several main classes ofexpenditure exist with those areas broken down further intosub-classes, that provide detail for the mainclassifications. Identified below is a typical ObjetClassification System that might be used by a communityparks and recreation agency:

Expenditure Classification by Objects

1000 Services - Personal1100 Salaries, regular1200 Salaries, temporary1300 Wages, regular1400 Wages, temporary1500 Other compensations

2000 Services - Contractual2100 Communication and transportation

2110 Postage2120 Telephone and telegraph213n Freight and express2140 Traveling expenses2150 Hired horses and vehicles

2200 Subsistence, care and support2210 Subsistence and support of persons2220 Subsistence and care of animals2230 Storage and care of vehicles

_ r _

10

2300 Printing, binding, and advertising2310 Printing2320 Typewriting and mimeographing2330 Binding2340 Photographing and blueprinting2350 Advertising and publication of notices

2400 Heat light, power, and water2410 Heating service2420 Interior lighting service2430 Street lighting service2440 Power service2450 Water service

2500 Repairs2510 Repairs to equipment2520 Repairs to buildings and other structures

2600 Janitorial, cleaning, waste removal, and otherservices

3000 Commodities3100 Supplies

3110 Stationery3120 Food products3130 Forage3140 Fuels3150 Gasoline, oils, and lubricants3160 Clothing and dry goods3170 Cleaning supplies3180 Chemicals, drugs, and medicines3190 Other supplies (e.g. repair parts)

3200 Materials3210 Lumber and timber3220 Masonry and road materials3230 Structural metals3240 Paints, oils, and class3250 Fiber products (woven fabrics, paper, etc.)3260 Hides, pelts, and leather3270 Other materials

4000 Current Charges4100 Rents

4110 Of buildings and offices4120 Of equipment

4200 Insurance4210 On buildings and structures4220 On stores4230 On equipment4240 Official bonds4250 Employers' liability

4300 Refunds, awards, and indemnities

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11

4400 Registrations and subscriptions

5000 Current Obligations5100 Interest5200 Pensions and retirements5300 Grants and subsidies5400 Taxes

6000 Properties6100 Equipment

6110 Furniture, furnishings, and fixtures6120 Hand tools6130 Machinery and implements6140 Vehicles and harness6150 Motor vehicles6160 Live stock (not for slaughter)6170 Instruments and apparatus6180 Other equipment

6200 Buildings and improvements6210 Buildings and fixed equipment6220 Walks and pavements6230 Sewers and drains6240 Roads6250 Bridges and viaducts6260 Piers and wharves6270 Trees and shrubs6280 Nonstructural improvements

6300 Land

7000 Debt Payments7100 Serial Bonds7200 Sinking fund installments

These classifications must be standarized if they are to beeffective when used by a large organization, such as a cityor county agency. Therefore, a typical definition of eachclassification or category might be:

1000 Services - Personal(Personal services involve salaries and wages paid topersons employed by the government body.)

2000 Services - Contractual(Contractual services involve work performed for thegovernment through agreement or contract by other thanemployees, as well as the provision of equipment andfurnishing of commodities under agreement.)

2100 Communication and Transportation(These expenses include the cost of postage, telephone,telegraph, freight, express, and drayage. Alsoincluded here are traveling expenses for transportingpersons.)

712

2200 Subsistence, Care, and Support(These expenses involve the subsistence and care ofpersons or animals and the storage and care ofvehicles.)

2300 Printing, Binding, and Advertising(These expenses include all charges for printingding advertising and publication of notices, andexpenditures for mime(graphing, photography,blueprinting, and binding

2400 Heat, Light, Power, and Water(These expenses include all charges for heat, light,power, and water furnished by the public-utilityenterprises.)

2500 Repairs(These charges include all repair expenses of acontractual nature for buildings, structures, andequipment.)

2600 Janitorial and Other Cleaning Services(These charges include janitor, towels, bottled water,and waste removal services on a contractual nature.)

3000 Commodities(This group of expenses includes both supplies andmaterials.)

3100 Supplies(A supply is a commodity that is consumed, impaired, orworn out in a reasonably short period of time. Forexample, stationery, food, fuel, ice, clothing, andmotor items are supplies.)

3200 Materials(Materials are items of a more permanent nature thatmay be combined or converted to other uses. Here wouldbe included lumber, paints, iron, or other buildingmaterials, masonry and road materials, fiber products,leather, and repair parts.)

4000 Current Charges(Current charges cover those items of expenditure forrent, insurance, licenses, subscriptions, indemnities,and the like, which may be provided through contract atthe option of government authorities.)

5000 Current Obligations(Current obligations include those fixed expenses andbinding contracts resulting from previous obligationsof the governing authority. Included here would berepayment of temporary loans, interest on the city'sdebt, grants and subsidies, and other obligatorypayments.)

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6000 Properties(Properties include charges foi the land, equipment,buildings, structures, and fixed improvements.Equipment as used here includes movable items that,when used, show little impairment or change and have adefinite period of usefulness. Furniture, machinery,motor vehicles, tools, and the like readily fall underthis classification.)

7000 Debt Payments(This item includes the amount of annual payments forthe reduction of the principal of the government'sdebt.)

Purposes

The Object Classification budget has several specificpurposes which generate its usage. Some of these purposesare:

1. Provides a uniform and standardized method of budgetingparticularly within large organizations.

2. Requires that all budget officers set up and presenttheir budgets in a similar manner.

3. Assures that all budget categories are considered whenallocating dollars.

4. Provides an accountability and control system.

5. Provides a complete budget picture for the total agencyor program.

Steps

The parks and recreation professional who is using theObject Classification System should follow the detailedsteps listed below:

Step 1: Obtain your agency's object classificationdefinition sheet which should be similar to theexample presented earlier. This will allow thebudgeter to define which category the neededexpenditures fall in.

Step 2: Obtain from your agency the standard budget sheetwhich has the code numbers for each of the budgetcategories. This will allow the budgeter to placein the proper code system the monies that are to beallocated for that category. The example presentedearlier should look very similar to the codedbudget sheet.

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14

Step 3: Determine how much money will be needed for eachcategory. For example: you determine that youwill need to develop six thousand brochures foryour summer softball leagues. You have contactedthe local printer and they have told you that thebrochures will cost $800.00. Therefore, you findcategory 2000 which represents contractual services(the commercial printer). Then you find category2300 which identifies printing, binding andadvertising (the development of the brochures).You then find category 2310 which representsprinting (that is what you are paying for). Thenyou add the fourth digit for the particular program2311 (softball program). On the budget sheet itmight look like this:

2311 Softball League Brochure(s) $800.002312 Basketball Tournament Brochure(s) $785.00

(etc.)

Step 4: If you are having difficulty determining how mucheach category will cost, follow the suggestionsbelow:

a. Use last year's budget if one exists so that abudget data base is available for comparison.

b. Contact other executives within your agency whomight be able to assist (personnel manager shouldbe able to help you determine accurate personnelcosts).

c. Contact outside groups that might be able toprovide you with specific cost estimates (i.e.telephone company, power and light company, etc.).

d. Contact as many specific groups as possiblethat your agency will be doing business with to getestimates for costs (i.e. printer for brochures,etc.)

CAUTION: The Object Classification System may vary from oneagency to another. However, the principleguidelines will remain constant. Compare thefollowing example of an object classificationbudget with the earlier examples:

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PreviousFiscalYear

CurrentFiscalYear

FutureFiscalYear

Direct obligations:Personnel compensation:11.1 Permanent positions 188,453 203,377 204,98211.3 Positions other than

permanent12,188 12,990 13,227

11.5 Other personnel com-pensation

11,405 12,156 12,426

Total personnel compensation 212,046 228,523 230,635

12.1 Personnel benefits: 22,959 25,325 26,800Civilian

13.0 Benefits for formerpersonnel

1,989 2,403 2,668

21.0 Travel and transporta-tion of persons

7,438 8,103 9,723

22.0 Transportation of things 2,721 3,165 3,25723.0 Rent, communications and

utilities36,923 41,678 42,794

24.0 Printing and reproduction 1,841 1,787 2,51725.0 Other services 81,798 104,970 127,53526.0 Supplies and materials 21,673 24,301 27,35131.0 Equipment 29,356 42,579 36,80932.0 Lands and structures 429 438 61541.0 Grants, subsidies and

contributions30,257 32,161 31,891

42.0 Insurance claims andindemnities

16 16 16

Subtotal 449,446 515,449 542,611

95.0 Quarters and subsis-tance

-703 -703 -703

Total direct obligations 448,743 514,746 541,908

Values

The object classification budget system has both positivesand potential negatives. The chart below depicts some ofthose considerations.

Advantages Disadvantages

1. Uniform and standarizedsystem.

1. May not have the flexi-bility your programneeds.

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2. Categories are providedfor budgeter.

2. May not be able to findthe category you needfor a peculiar item orobject.

3. Generally easy to set up. 3. Requires a lot of de-tailed cost estimates.

17-12-

04.4C9-

CASE STUDY NO. 2TOPIC: OBJECT CLASSIFICATION

1. Prepare an Object Classification Budget using the formand information provided below:

a. total budget - $1,223,196.00b. number of full time personnel - 30c, number of temporary staff - 30d. benefit percent for full time personnel is 12.2%

no benefit percentage for part time or temporarystaff

e. facilities provided to community - 20,000 sq. ft.center

f. listing of community programs - softball, baseball,basketball, volleyball, tennis, archery, swimming,arts, crafts, dance, music, drama club, open fac-ility, etc.

1000 Services - Personal1100 Salaries, regular1200 Salaries, temporary1300 Wages, regular1400 Wages, temporary1500 Other compensations

2000 Services - Contractual2100 Communication and transportation

2110 Postage2120 Telephone and telegraph2130 Freight and express2140 Traveling expenses2150 Hired horses and vehicles

2200 Subsistence, care and support2210 Subsistence and support of persons222C Subsistence and care of animals2230 Storage and care of vehicles

2300 Printing, binding, and advertising2310 Printing2320 Typewriting and mimeographing2330 Binding2340 Photographing and blueprinting2350 Advertising and publication of notices

2400 Heat, light, power, and water2410 Heating service2420 Interior lighting service2430 Street lighting service2440 Power service2450 Water service

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2500 Repairs2510 Repairs to equipment2520 Repairs to buildings and other structures

2600 Janitorial, cleaning, waste removal, and otherservices

3000 Commodities3100 Supplies

3110 Stationery3120 Food products3130 Forage3140 Fuels3150 Gasoline, oils, and lubricants3160 Clothing and dry goods3170 Cleaning supplies3180 Chemicals, drugs, and medicines3190 Other supplies (e.g. repair parts)

3200 Materials3210 Lumber and timber3220 Masonry and road materials3230 Structural metals3240 Paints, oils, and glass3250 Fiber products (woven fabrics, paper, etc.)3260 Hides, pelts, and leather3270 Other materials

4000 Current Charges4100 Rents

4110 Of buildings and offices4120 Of equipment

4200 Insurance4210 On buildings and structures4220 On stores4230 On equipment4240 Official bonds4250 Employers' liability

4300 Refunds, awards, and indemnities4400 Registrations and subscriptions

5000 Current Obligations5100 Interest5200 Pensions and retirements5300 Grants and subsidies5400 Taxes

6000 Properties6100 Equipment

6110 Furniture, furnishings, and fixtures6120 Hand tools6130 Machinery and implements6140 Vehicles and harness

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6150 Motor vehicles6160 Live stock (not for slaughter)6170 Instruments and apparatus6180 Other equipment

6200 Buildings and improvements6210 Buildings and fixed equipment6220 Walks and pavements6230 Sewers and drains6240 Roads6250 Bridges and viaducts6260 Piers and wharves6270 Trees and shrubs6280 Nonstructural improvements

6300 Land

7000 Debt Payments7100 Serial Bonds7200 Sinking fund installments

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Section 3

Line Item Budget

The Line Item Budget is extremely close to the ObjectClassification Budget in nature and this budget system isconsidered by many parks and recreation professionals to bethe twin-sister of the Object Classification. Theirsimilarities will be come apparent.

Description

The Line Item Budget uses two terms which, like the ObjectClassification Budget need to be defined:

1. Item: This represents the specific item or object forre.licn monies will need to be allocated, such as postage or.tquipment purchases.

2. Line: This :epresents the process of placing the itemsor objects in a line so that all items appear on the budgetsheet.

The major difference between the Line Item Budget and theObject Classification System is two-fold:

1. The Line Item Budget eliminates any numerical codingsystem, and

2. The Line Item Budget does not have specific and setcategories that all items or objects are classified into.

Purposes

The Line Item Budget serves the following purposes:

1. Provides a method of budgeting that is flexible and canbe adjusted tl that particular agency.

2. Does not rely on a standardized coding system and henceprovides for ease of administration.

3. Provides the budget picture for aspects of the agency orprogram.

Steps

The Line Item Budget is very easy to prepare and establish.The following steps are helpful.

Step 1: Determine what items that the agency will need to

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have financial allocations made for (personnelsalaries, equipment, etc.)

Step 2: Determine how much each of those items will costand place that figure across from the correspondingcategory.

Public Safety Fund Expenditures

Account Title

LastYear

Actual

ThisYear

Actual

NextYear

Police Department

Salaries $387361 $417407 $451460Heat and Light 11741 11215 11800Telephone and Telegraph 4397 4523 4500Postage 18 38 40Travel and Training 339 462 950Freight 40 75 100Ambulance Service 9600 11370 14880Doctor and Hospital 2221 819 2500Legal Notices 33 30 100Printing 498 471 500Investigations 4 100Court Costs and Fees 42 100Office Equipment Repairs 593 347 600Bldg. and Bldg. Equipment Repairs 6497 5738 6503Towels and Laundry 149 67 150Dues 15 21 25Disinfectants 332 300 350Office Supplies 2187 2094 2550Gasoline and Oil 10117 10072 10500Motor Vehicle Supplies and Repair 6497 5738 6500Jail Food 2972 2797 3000Janitor Supplies 108 109 250Medical Supplies 4 6 25Wearing Apparel 4560 4602 6400Photo Supplies 845 688 1100Radio Repair and Supplies ... ... 1500Other Supplies 1315 1680 1300Motor Vehicle Insurance 1568 1732 1780Building and Content Insurance 149 149 200Office Equipment 528 155 1100Motor Vehicle Equipment 2853 16818 12400Other Equipment 1300 2 944 1800

Total $453953 $498257 $540560

Step 3: You may decide to show last year's budget and theproposed budget for the next year so that increases

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and decreases are apparent. Likewise, this processwill identify new items that were not in lastyear's budget or that can be dropped in next year'sbudget.

Values

The Line Item Budget has both positive and problem areas:


1. Allows for flexibility inpreparing and administer-ing the budget.

1. May forget to place anitem on the budget andhence no dollars willbe allocated for that

2. Does not require the bud-geter to conform to a

item.

single syEtem. 2. May cause confusion ifcomparing budgets to

3. Allows adding or deletingitems without difficulty.

other departments.

3. Slight loss of account-ability and reportingaccuracy.

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CASE STUDY NO. 3TOPIC: LINE ITEM BUDGET

1. You are the director of a summer camp and you mustprepare the budget. The camp has been provided to yourcommunity for a number of years, therefore a number of campequipment items are already available. Prepare a Line ItemBudget using the form and information provided below:

Budget Information Available:

a. length of camp - 14 days/13 nightsb. number of campers - 250, age range 10-18 yearsc. number of camp counselors - 25d. number of administrative staff - 3e. number of support staff (maintenance, cook)- 3f. equipment currently available:

- all kitchen, cooking and eating equipment- all tennis, archery, rifle range equipment- all housing units (three sided cabins)- all waterfront equipment (canoes, etc.)

g. equipment not currently available:- any other recreational equipment- any first aid equipment

LINE ITEM BUDGET

Item

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

TOTAL

Cost

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Section 4

The Fee Budge!

The Fee Budget is considered to be the most effective methodof determining and identifying the actual expenditurerequirements of a program. In order for this budget to beeffective, the parks and recreation administrator mustascertain a variety of information that is detailed below.

Description

The Fee Budget consists of determining the allocation orcost of four items:

1. Direct Labor: The direct labor is the time that therecreation leader or program director actually spendsinvolved in leading the activity. This also includespreparation for the activity and appropriate evaluation,record keeping and follow up of the activity.

2. Overhead: The overhead consists of the costs for suchthings as janitorial, household and secretarial services;telephone and utilities, and such things as programinsurance. Basically, the overhead cost is everythingrequired for the program excluding the leader's salary, theprogram supplies and equipment.

3. Equipment Costs: These costs represent the cost ofequipment for the program, estimates of repairs and normalmaintenance of the equipment. The equipment are those itemsthat are non-expendable, that is they continue to existafter use (gymnastic apparatus as opposed to paper that isexpendable).

4. Materials Costs: These costs are those items used inthe program that are expendable, that is they can not beused again. For example, glue in an arts and crafts programor tape in a gymnastics program.

Fi- .-_12.

The Fee Budget has several purposes, some of which areidentified below:

1. The Fee Budget attempts to identify the exact cost of aparticular program rather than the entire parks andrecreation budget.

2. The Fee Budget is flexible to the program and can bealtered if necessary.

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Steps

The Fee Budget is rather simple to establish, however theprocess can become more complex as will be apparent.

Step 1: Determine the direct labor cost of the program.This should be the cost of the salary paid to therecreation leader or leaders that prepare, conductand follow up on the program. For example, if therecreation leader is paid $8.00 per hour and itrequires six hours to prepare the program, fourteenhours to conduct the program and another four hoursto perform necessary record keeping, evaluatory andfollow up work, then the direct labor for thatprogram is 24 hours X $8.00 per hour = $192.00.

Step 2: Determine the overhead costs of the program. Thisshould be the cost of using the recreationfacility. If the activity occurs at a park andoverhead is not a feature of the program then nooverhead costs are charged. However, if theprogram is conducted within a facility the overheadcost should be determined using the cost per hourcharge that your facility utilizes. For example,if your agency charges $2.00 per hour for theracquetball courts and your program will be usingthe 8 racquetball courts for 14 hours then theoverhead cost is: $2.00 X 8 courts = $16.00 X 14hours = $224.00.

Step 3: Determine Equipment Costs: These costs are forthose equipment items that are necessary for theprogram that the agency supplies. For example, 2basketballs will be purchased specifically for theprogram at a cost of $24.00 per ball. Theequipment costs would be 2 X 24 = $48.00.

Step 4: Determine Materials Cost: These items areexpendable in nature such as paper, tape, glue,etc. For example, your program has purchased$36.00 worth of arts and crafts supplies for theprogram. The material costs would be the $36.00

Step 5: Add the direct labor, equipment cost, overhead andmaterials cost together to determine the total costof the program. The parks and recreationadministrator now has a clear picture of the costof that particular program.

Step 6: (Optional) Some administrators choose to dividethe number of participants of the program into theprogram cost so that a cost per participant figuremay emerge. Additionally, some administrators havefound it helpful to establish a fee per participantcurve so that the administrator can determine how

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many participants are necessary. Below the programreaches the break even stage.

Cost per participant is highdue to low number enrolled

Cost per participant islow due to high number

enrolledII

number of participants

For some agencies the Fee Budget is prepared using a morecomplicated formula. This formula is very exact and allowsan agency to be very specific in Cetailed program costs.

Step 1: Determine the Direct Labor Costs: The direct laboris computed by multiplying the average productivehourly rate by the time the recreation leader isinvolved in the activity. The average productivehourly rate equals the average total monthly salarydivided by the monthly productive hours. Themonthly productive hours equal 75% of the totalpaid hours of the recreation leader. For example,if the recreation worker's salary is $800 a monthand the total productive hours are 132 (75% of 176hours), the average productive hourly rate is$6.06. This rate accounts for vacation time, sicktime and coffee breaks, etc.

Step 2: Determine the Overhead Costs: The overheadconsists of all other costs such as janitorial,household supplies, unassigned administrativesalaries, telephone, secretarial salaries,assistants' salaries, insurance costs and all otherexpenses of operating the recreation facility withthe exception of equipment and supplies. Theoverhead for any particular activity or program isdetermined by computing all of the overhead costsof the entire department. Then, multiplying thatfigure by the percentage that the program oractivity occupies in floor space of the totaldepartment. When this is done, that figure isdivided by the number of weeks that the program

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27

runs and that figure is further divided by thenumber of hours that the program operates per week.Then divide that figure by the number ofparticipants per hour and the administrator has thehourly overhead cost per participant. To determinethe true overhead, the hourly overhead cost perparticipant is multiplied by the time that theparticipant spends in the program. For example,the total overhead costs of the recreationdepartment is $100,000 and the particular programwe are concerned with occupies 25% of the floorspace of that program so the overhead cost of thatprogram will be $25,000. If the program runs for50 weeks a year the weekly overhead cost will be$500. Also, if the program operates 50 hours perweek the hourly overhead cost will be $10.00 Todetermine the hourly overhead cost per particpantthe administrator divides the $100 by the number ofparticipants per hour in this case, 10, so the rateis $1.00 per participant per hour. The last stepis to multiply the amount of time that theparticipant spends in the program to determine thatparticipant's actual cost.

Step 3: Determine the Equipment Costs: Equipment costsinclude all the costs of purchase repair andmaintenance of equipment. To determine theequipment cost, the administrator adds together thetotal equipment costs of the program and thendivides that figure by the number of times that theequipment is in use. If the equipment costs$3000.00 and is used 3000 times during the courseof the program, then the equipment cost is $1.00per usage period.

Step 4: Determine the Material Costs: The materials usedin the program are computed in the same manner. Ifthe total cost of the materials used equals$2000.00 and is used 2000 times, then the cost is$1.00 per usage.

Step 5: The administrator then adds those four componentstogether. Also, the administrator may choose todevelop a fee per participant or a fee curve asindicated earlier.

Values

The Fee Budget provides for the administrator a number ofadvantages and concerns.

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1. Allows the determinationof the very exact cost ofa participant program.

1. Is artificial budgetbecause not all itemsmay be included inbudget (equipment pur-

2. Program costs can be re-duced if the program coststoo much (increase numberof participants or reduce

chased years earlierthat is used in theprogram).

materials provided). 2. Requires the adminis-trator to be aware of

3. Provides a cost per parti-cipant for each programwhich allows for moreaccurate budgeting.

all needs of the pro-gram before the programstarts.

3. Is usable for only cer-tain types of programs(clinics, tournaments,etc.) .

29-24-

CASE STUDY NO. 4TOPIC: FEE BUDGET

1. You want to comnare the cost and associated fee for twoprograms that your community parks and recreation agency iscontemplating offering. Using the form and informationbelow prepare two fee budgets.

A. Program One: Beginning Gymnastics Clinic

- primary instructor $8.00 per hour- assistant instructors $4.00 per hour

(one assistant instructor needed for every siparticipants)

- advertising cost $.17 per participant- gymnastic equipment - no cost, already available- utility cost per hour for program $2.17- disposable materials (tape, etc.) total cost

$100.00- length of program - 8 weeks, 2 nights per week,

2 hours each night- maximum participants that program can maintain

85

B. Program 2: Open Basketball Playing Area

- supervisor $3.50 per hour(only one supervisor necessary)

- no advertising cost - attendance by drop in basis- no equipment cost - participants bring own balls- utility cost per hour $2.10- length of program - 7-10 p.m. from November 17 toMarch 6 (6 nights per week minus 7 days closurefor holidays during time period)

- maximum program attendance - 150

FEE FACTORS PROGRAM ONE PROGRAM TWO

Direct Labor

Overhead Costs

Equipment Costs

Materials Costs

TOTAL

Fee Schedule for each Program

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Section 5

Program Budget

The Object Classification Budget and the Line Item Budgetare strong from a standardization and organizationalviewpoint. The major drawback of these two budget formatsis that they really don't show or explain what the financedprogram looks like, its value, purpose, and meaningfulnessto the participants. It is very difficult to look at a longlist of categories consisting of numbers and be able todetermine the intent of the program. For this reason, theProgram Budget format was developed.

Description

The Program Budget identifies large units of work to beperformed, isolates that work and presents and describesthat work in a clear narrative fashion so that the budgetingauthority who makes allocation decisions will have a fullerunderstanding of the dimensions of the program. The ProgramBudget is distinct from many other budgets by the followingcharacteristics:

1. The Program Budget describes the agency's goals andobjectives in very specific terms.

2. The Program Budget identifies what programs will reachthe agency's goals and also provides a description ofalternatives to the program.

3. The Program Budget identifes unique characteristicsabout the programs that will meet the agency's objectivesand goals.

4. The Program Budget details pcssible outcomes or valuesthat flow from the suggested program.

5. The Program Budget develops the costs for providing thesuggested program.

Purposes

In parks and recreation the Program Budget is of particularinterest and usefulness because of the program orientationof our agencies. The Program Budget serves the followingpurposes:

1. It provide method of describing the values of theprogram and not ,t the costs.

2. It provides an opportunity to highlight very unique

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features of the program that might otherwise be hidden in astrictly cost-oriented budget.

3. It provides flexibility and creativity to the budgetingprocess.

Steps

To perform the Program Budget the following steps aresuggested:

1. Identify the goals of your parks and recreation agencyand describe them in effective and meaningful narrative.

2. Identify the program(s) that your agency is offeringthat meet the goals of your agency.

3. Provide a detailed narrative of those features of theprogram that are deemed to be important or critical.

4. Provide a cost for the program so that the budgetingauthority may be able to understand the cost per valueaspects.

To help understand this process an abbreviated example isprovided.

Program Budget for Youth Baseball

Goals of Agency

The parks and recreation agency is established to meet thefollowing community goals:

1. Provide leisure opportunities for all communitycitizens.

2. Provide youth an opportuntiy at sports training andcompetition.

3. etc.

Goals of Program

The Youth Baseball Program sponsored by the Parks andRecreation Agency is established to meet the followinggoals:

1. Provide a systematic method of training ye,ith inthe fundamentals of baz.7.0nall.

2. Provide youth a fair and enjoyable competitive

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baseball sports opportunity.

3. etc.

Unique Features of Program

1. A paragraph describing each of the following items:

a. past development and historyb. number of participantsc. nature of staffingd. number of games playede. extent of community supportf. recognition system

2. A paragraph detailing the cost of providing thisprogram*

* In order to determine the cost of the program the programdirector would need to use one of the budgets describedearlier in this manual (Object Classification, Line Item orFee Budget).

Values

The Program Budget is distinguished by the followingfactors:


1. A narrative budgetdescription rather thancost only description.

1. Potential of "over-selling" the program.

2. Does not always provide2. Highlights values and

uniqueness of program.enough budget-costdetail information.

3. Provides creativityand flexibility.

3. Requires the use ofanother budget systemto determine costs.

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CASE STUDY NO. 5TOPIC: PROGRAM BUDGET

Prepare a Program Budget FDr the Community Little LeagueBaseball Program. Use the form provided below and addressthe following isbues (be creative and imaginative): historyof program, number of participants, nature of staffing,cc,mmunity support, recognition system, number of events(games), cost per participant ratio, summary.

Program Title:

Starting Date:

Total Proaram Cost:

Ending Date

Budget 19 $

19

Program Narrative

'34

Section 6

Performance Budget

The same kin relationship that exists between the ObjectClassification Budget and the Line Item Budget also existsbetween the Program Budget and the Performance Budget. Thedistinction between the two, if one exists, is very subtleand slight. The goal of the Program Budget is to identifythe dimensions of the program, its purpose and objectivesas well as cost. The goal of the Performance Budget is alsoto reach beyond the dollars alone and to the end result ofthe operation -- the servIces to be performed. ThePerformance Budget permits the administration to explain tothe public and sanctioning authorities what services are tobe rendered during the budget year rather than just how muchis to be spent.

Description

The Performance Budget has four primary characteristicswhich are described below:

1. The Performance Budget breaks the agency or departmentdown into measurable categories known as functions, sub-functions and activities. For example:

1. Parks, Parkways and Cemeteries (Function)

a. Parkway, Tree Maintenance (Sub-Function)

1. Planting (activity)2. Trimming and Removal (activity)3. Inspection and Spraying (activity)

2. Parks and Playgrounds (Function)

a. Paths and Driver Maintenance (Sub-Function)

1. Scarifing, Grading, Shaping (activity)2. Rolling (activity)3. Patching (activity)

2. The Performance Budget develops appropriate work unitsby which the work within those activities may be measured.For example:

Activity Work Unit

1. Planting each2. Trimming and Removal each3. Inspection and Spraying each

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1. Scarifing, Grading, Shaping sq. yd.2. Rolling sq. yd.3. Patching each

3. The Performance Budget then determines how much timeeach work unit requires under normal circumstances basedupon the number of staff members, equipment, distanTe towork sites, etc.

4. The Performance Budget then is able to apply the amountof time to the number of work units to determine the cost ofproviding that function of work or the "performance."

Purposes

The Perforance Budget provides the budgeter a number ofexcellent benefits.

1. the budget is based on very specific time and motionequations that allow the budgeter to develop a very accuratebudget.

2. This budget allows for maximum contra) of dollars andhence control over the work performed.

3. This budget allows those who analyze the budget to seewhat "performance" is actually being received for the moneyspent.

Steps

To develop a Performance Budget the administrator shouldfollow the steps listed below. It should be noted that thedevelopment of a Performance Budget initially is very timeconsuming and difficult. However, once the budget is inplace the budgeting process is very easy.

1. Break the parks and recreation agency into its variousfnctions, sub-functions and activities. Each agency willdiffer, but generally the functions may include:

1. Administration and Business Management2. Construction, Planning and Development3. Maintenance4. Operation of Recreation Centers5. Operation of Playgrounds and Parks6. Operation of Pools and Beaches7. Operation of Golf Courses, etc.

The various sub-functions and activities likewise would bespecific to the agency, however an example would be helpful:

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36

Maintenance (Function)

a. Storm Sewer Lines (Sub-Function)

1. Excavating (activity)2. Filling3. Removing Pipe4. Laying Pipe5. Sheeting and Bracing6. Cleaning

b. Sanitary Sewer Lines

1. Excavating2. Filling3. Removing Pipe4. Laying Pipe5. Sheeting and Bracing6. Cleaning

cu. yd.cu. yd.1 ft.1 ft.sq. ft.1 ft.

cu. yd.cu. yd.1 ft.1 ft.sq. ft.1 ft.

The various activities must have a work unit measurementdeveloped that is accurate in the work unit's ability tomeasure the performance of that activity (sq. ft., linearft., etc.)

2. The budget officer then determines a cost per work unitmeasurement which is accurate to that specific agency.Again, the cost of a work unit will depend on a number offactors such as skill of workers, quality of equipment, typeof equipment, available tools, distance to be traveled, etc.For example, a parks department might determine that foreach linear foot of sewer line work performed in its parksthe average cost is $14.85. This figure is based again on anumber of peculiar factors that are specific to the agency.

3. The budget officer then determines how many work unitsof the different functions must occur during the budget yearin order for the agency to fulfill its communityobligations. Once the number of work units is determinedthe cost per work unit is multiplied to the number of workunits and those figures are totaled. The final figure isthe budget needed for the performance of that agency.

Cubic YardLinlar. FootSquare Foot

$13.15$14.85$ 6.06

Cubic yird work needed = 1,000 X $13.15 = $13,150.00Linear foot work needed = 3,000 X $14.85 = $44,550.00Square foot work needed = 5,000 X $ 6.06 = $30.300.00

Performance Budget Total $88.000.00

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Values

The Performance Budget is very unique and is based on workstandards. The following details some of this budget'svalues and problems.


1. Very standardized 1. No creativity

2. Allows for control 2. No flexibility

3. Very accurate 3. Does not provide foradjustments if necessary

4. Very easy to follow4. Very difficult to set

5. Effective when comptAer-ized and easy to update

up initially

changes (inflation, etc.) 5. Not feasible for non-work unit type work(creativity, thinking.etc.)

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CASE STUDY NO. 6TOPIC: PERFORMANCE BUDGET

1. Contact a local governmental agency of your choice(transportation, maintenance, engineering, etc.) and obtaina copy of that agency's performance cost schedule (cost perwork unit scale).

2. Determine from the budget officer the answers to thefollowing questions:

A. How accurate and reliable are your cost per workunit scales? Comment.

B. How often must the cost per work unit scales bechanged to reflect inflation or other cost variables?Comment.

C. What problems emerge that alter the accuracy of thecost per work unit scales? (weather, distance, etc.)Comment.

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39

Section 7

Planning Programming Budgeting System (PPBS)

The PPBS is a concept of budgeting which has generated muchexcitement since its development by the Rand Corporation andits subsequent use by the Department of Defense. Thissystem identifies the relationship that exists between thecost of a program and the end result of the program. Thefocus is upon the end product of the program rather thancost of the program.

Description

The Planning Programming Budgeting System utilizes threeelements which gives this budget system structure. Thesethree elements are:

1. Planning: The process of establishing agency andprogram objectives.

2. Programming: The process of combining activities andevents to produce results and reach the agency or programobjectives.

3. Budaeting: The process of allccating the resourcesnecessary to initiate the programming elements.

Purposes

The purposes of the PPBS are:

1. Providing a rational basis for the efficient allocationof scarce resources among competing programs.

2. Providing a focus on the outputs of the program (goalsreached) rather than on the inputs :equired (monies).

3. Providing a clear narrative picture of the directionthat allocated monies will go rather than a simpleaccounting system of numbers only budget.

Steps

To develop the PPBS the following steps are necessary:

Step 1: Determine the goals of the parks and recreationsystem or agency. The various goals are determinedmany times by the recreation agency itself.Regardless of who establishes the goals of therecreation agency, they must be articulated so that

-35- 4 0

the purpose of the financial requests will begeared toward a specific outcome.

Step 2: Determine the goals and objectives of parks andrecreation in general. Such factors as physicalfitness, instructional opportunities, communitysocial interaction and others are highlighted.These factors must be directly related to theagency's goals and objectives.

Step 3: Determine and describe the parks and recreationprograms that will be offered that are establishedin an effort to reach the goals identified. Eachprogram such as erts and crafts, aquatics, summerathletics, winter sports, etc. are describedrelative to such factors as range of activities,time units, comprehensiveness, and otherhighlighting elements.

Step 4: Describe the constraints of those elen.ents whichwill inhibit the successful operation of theprogram. Such factors as limited facilities,equipment, supplies, time, staff and others mightbe indicative of constraints.

Step 5: At this point the administrator describes bothsubjective and objective ways in which the agencywill measure the attainment of the program reachingthe goals and objectives. These may be timemeasures, physical fitness tests, participationrates and percentages, attitudenial evaluations,community advisory council measures, or some otherstyle which would more specifically measure theprogram's success.

Step 6: The alternatives available in the community whichcould meet the specific objectives that have beenestablished are identified and analyzed. If otherprograms exist which might fulfill the community'sneeds, these should be described including theircosts, time availability, equipment and otherpertinent factors. The purpose of this category isto further the planning needs of the agency. Ifyour city recreation prog,.am does not have aswimming pool but the Y.M.C.A. does, and the costto community residents is low, then perhaps adecision would be made for the city not to developa swimming program.

Step 7: Future projections, trends and costs which can beprojected over a multi-year basis are presented.Those elements of the program that may requirefuture planning should described in detail.

-36- 41

Step 8: A cost is then placed upon the provision of eachprogram suggested. The theory is that if allprograms meet community needs and the contracts andalterations are not overwhelming, then the programscan justify the allocation of monies.

Values

The PPBS has several values and hinderances which aredescribed below:


1. Bases mcney recre3ts ongoals of program.

1. If programs do not meetcommunity needs theprogram is eliminated.

2. All programs must existto meet community needs. 2. If program is not of

value to the community3. Rational and logical

comparison of programsavailable.

as determined by goalsit is eliminated.

3. Some programs are not4. Presents budget beyond

dollars but on endresults.

comparison oriented(police department).

4. Narrative may confusesome budget authorities.

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CASE STUDY NO. 7TOPIC: PPBS

1. Select a parks and recreation program at a local agencyand prepare a Program Planning Budgeting System for thatprogram. Choose a program which is smaller in nature (forexample, the tennis program rather than the adult tournamentdivision).

2. Remember that a number of key facts must be obtained inorder to complete this budget. Use the form below to assistyou.

PROGRAM COST _____

1. GOALS:

2. OBJECTIVES:

3. DESCRIPTION:

4. CONSTRAINTS:

5. EVALUATION:

6. ALTERNATIVES:

7. LONG RANGE PLANS:

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Section 8

Zero-Based Budgeting

The Zero-Based Budgeting method is a relatively new approachto planning a budget. It varies from the traditionalmethods in one major and fundamental way. The traditionalmethods of budgeting provide little opportunity tosystematically analyze the priorities and results of thefunded program. The Zero-Based Budget method aims toovercome this by subjecting all proposed activities andexpenditures to an intensive scrutiny which is usuallyrequired of new programs. In essence, as the new fical yeararrives, the agency or department has no money and theadministrator must justify all expenditures for the newyear. The purpose of this budget style is to bring rapidlyincreasing budgets under control. The administrator who isrequired to utilize this budget method will need to reviewthe agency's programs relative to their desirability andneed for the service, the beneficiaries of the service, thereasonableness of the proposed costs, potential futureimplications and the availability of funds.

Description

The Zero-Based Budgeting System is a sophisticatedmanagement tool which provides a systematic method ofreviewing and evaluating all operations cf the organization,current or proposed; allows for budget reductions andexpansions in a planned, rational manner, and encourages thereallocation of. -esources from low to high priority. Thissystem consist' following four steps which are describedin detail in t action.

1. Est.a.olishing Budget Units2. Dividing Budget Units into Service Levels3. Analyzing Service Levels4. Priority Ranking of all Service Levels

Purposes

The Zero-Based Budgeting System has several purposes whichare identified below:

1. Requires all programs to justify their existence beforemonies are allocated.

2. Prevents a continuous increase in dollars to programseven if the program has fulfilled its purpose.

3. Provides for a systematic method of reducing budgets

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without immediately eliminating a program.

4. Brings rapidly increasing budgets under control throughcontinuous program review.

Steps

To develop the Zero-Based Budgeting System the followingsteps should be followed:

Step 1: Establishing Budget Units: A budget unit consistsof a grouping of existing or proposed activitieswhich go together to establish a program.Generally, the budget unit corresponds with theestablished divisions within the department. A setof budget units in the recreation agency wouldconsist of such areas as the arts and crafts unit,the aquatics unit, the outdoor sports unit, theindoor sports unit and the like. These unitstogether equal the recreation program ordepartment.

Step 2: Dividing Budget Units into Service Levels:Dividing the budget into service levels theadministrator no longer assumes that the individualbudget unit will be funded but that one or more ofseveral alternative levels of service will befunded. The ZBB method suggests that the firstlevel of service be equal to 40-60% of the currentexpenditures level. Generally one level of servicebelow the current, the current level ofexpenditure and one level of service on an improvedand expanded level of expenditure. To illustratethe service levels, assume that the followingrecreation department maintains sixteen budgetunits (aquatics, arts and crafts, etc.) and thateach unit provides services for 72 hours per week.

For each unit the following service level chartwould be created:

Level 1 - All programs operate 36 hours per week(50% of current)

Level 2 - All programs operate 72 hours per week(current level)

Level 3 - All programs operate 84 hours per week(expanded level)

The administrator then applies a cost to eachservice level. Emerging is the idea that if therecreation budget was cut, a particular programwould not need to be eliminated but just reduced to

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45

a lower level of service.

Step 3: Analyzing the Service Levels: To analyze theservice levels the administrator evaluates incareful detail the need to provide a given level ofa particular service. For example, it might berather unreasonable to provide an arts and craftsprogram for 72 hours per week based on the pastparticipation roles. However, it might beparticularly advantageous to provide the aquaticsprogram for that duration. The administrator needsto analyze the manpower and other costs for eachservice level and make appropriate adjustments.

Step 4: Priority ranking of all service levels is the laststep and most difficult. The administrator mustlist in rank order of priority all of the budgetunits and within those budget units the servicelevels. This requires the administrator to decideof the sixteen budget units or programs, whichwould be the most essential to provide, down towhich program would be the least essential toprovide.

If the administrator is handed a fiscal allocationwhich falls short of funding for all sixteenprograms at their current expenditure, the decisionis made if the lower prioritized programs will gototally unfunded or if they will be funded but atthe lower service level. Additionally, if theentire governmental agency is on a Zero-BasedBudget method and the recreation department is thelast of the rank order of priority of all thecity's programs, the decision can be made as towhat level of service any of the programs willoperate at.

Values

The Zero-Based Budgeting System has several advantages anddisadvantages, some of which are identified below:


1. Excellent method ofprogram justification.

1. Generates increasedinformation, work andpaperflow.

2. All programs start eachyear on equal financialfooting.

2. The initial conversionto the ZBB requirestime, money, effort

3. A control method of keep- and personnel.ing the cost of services 3. Internal department

-41-46

4.

down.

Provides a number ofoptions rather than com-plete elimination of aprogram.

4.

"fighting" mily resultdue to the increasedcompetition.

Because evaluation ofprogram is still crude,discrepencies may exist

5. When reduction is nec-essary, the ZBB is an

where they should not.

excellent method toaccomplish this task.

5. Morale and tension inpersonnel may resultdue to the ZBE System.

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04.,Cr-

CASE STUDY NO. 8TOPIC: ZERO-BASED BUDGET

Prepare a Zero-Based Budget for the following adult mensprogram of the parks and recreation program. Use the formbelow and, if helpful, contact an agency that provides sucha program to obtain specific detailed information. (Becreative and imaginative.)

DEPARTMENT DIVISION BUDGET UNIT YEAR

Parks/Recreation Recreation Adult Mens Program 1984

SERVICE LEVEL

SERVICES PROVIDED AT LEVEL JUSTIFICATION OF NEED FORSERVICE

SERVICE LEVEL


SERVICE LEVEL


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48

Section 9

Activity Budget

The Activity Budget is an alternative budgeting system whichpresents information fo the managers and fundingauthorities on a detailed Lasis of performed activities.Many of the budgeting formats describe what various programswill cost while the Activity Budget details what eachspecific activity of that program will cost. Most fundingauthorities prefer to know, for example, how much the agencyspends on trash collection at each park area, or how muchmoney is spent on travel than they care to know about avague term which is used to describe a grouping of areas.The Activity Budget is very similar to the PerformanceBudget in that they both are concerned with how much it willcost to perform a specific activity. The differencehowever, is that the Activity Budget does not attempt to tiethe expenditure for activities to work load measures.

Description

The administrator's task is to identify all of the specificactivites which are performed at the recreation agency andlist them in some order of relati'nship. Then a fiscalallocation is placed to the side of that activity whichrepresents the required cost of performing that activity.This allows both the administrator as well as the fundingauthority to have a detailed description of cost relative toactivities performed. Perhaps the cost of a specificactivity will be considered too great when compared to thecost of another activity when described in this fashion.

Activity

PreviousFiscalYear

CurrentFiscalYear

FutureFiscalYear

1. Trash Collection2. Lawn Mowing3. Tree G,00ming4. etc.

32,38632,7275,929

35,08239,9229,561

35,94942,5967,295

Purpose

The purpose of the Activity Budget is:

1. To describe the activity which costs money rather than avague accounting term.

2. To compare costs of various activities so that arealistic assessment can be made of the department.

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49

3. Provides a more clear picture of what the agency ordepartment does rather than listing costs for thedepartment.

Steps

To develop an Activity Budget, the following steps aresuggested:

1. Determine all activities that occur within the parks andrecreation department. For example: supervision,instruction, programming, maintenance, etc.

2. Group the activites into some sort cf logical grouping.For example: administrative, grounds, leader based,facility based, etc.

3. Determine the cost for providing those activities. Thecost must be complete ior the total of the Activity Budgetwill represent the cost of running the agency. For example,when providing the cost for supervision, the administratorneeds to include salaries, fringe benefits and training ofstaff. When showing the activity of lighting facilities,the cost v.ould represent all factors that go into the costof lighting the facility (utility cost, replacement parts,etc.).

4. List all activities in their appropriate grouping withtheir associated costs.

Values

The Activity Budget provides the following:


1. Makes clear what activ-ities are provided.

1. Is cumbersome and attimes difficult to setup.

2. Shows viewers of thebudget where the moneyis allocated.

2. Not all activites makesense being listed asactivites (retirement

3. Compares the cost ofone activity to another.

pay).

3. Does not provide thebudget officer theflexibility that issometimes needed withbudgets.

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50

CASE STUDY NO. 9TOPIC: ACTIVITY BUDGET

Visit a local parks and recreation agency and determine thespecific activities which are performed in that agency andlist them in some order of relationship. For example,Instruction: basketball, racquetball, volleyball, etc.Supervision: open swimming, teen night, basketball area,etc.

PARKS AND RECREATION AGENCY

Activities Performed Cost Per Activity(Optional)

5.

6.

7.

8.

8.

10.

11.

12.

13.

14.

15.

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51

Section 10

Function Budget

The Function Budget is a method of describing the cost of aparks and recreation department by determining the cost ofthe various functions that that department performs. Thefunding authority is able to see how much it costs tooperate the swimming pool, the golf course, the athleticprogram, or the community center.

Description

The function within the parks and recreation departmentgenerally falls into three categories:

1. Administration2. Facilities/Grounds3. Programs/Services

Each aspect of the parks and recreation department would besub-functions of the three functions identified. Forexample:

2. Facilities/Groundsa. golf courseb. parksc. swimming poold. recreation centere. etc.

3. Programs/Servicesa. clinics

1. softball2. racquetball3. basketball

b. tournaments1. volleyball2. etc.

c. etc.

Purposes

The purposes of the Function Budget are:

1. To compare the costs of the different functions of theparks and recreation department (percent of monies spent onadministration versus clinics, etc.).

2. To isolate budget growth patterns within the differentfunctions performed by the department.

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3. To describe the types of functions fulfilled by thedepartment.

Steps

To develop the Function Budget the following steps aresuggested:

Step 1: Determine the major categories or functions thatthe parks and recreation agency fulfills. Again,the general categories are Administration,Facilities/Grounds and Programs and Services,however, your agency may require additional or adifferent breakdown.

Step 2: Determine the sub-functions of your majorfunctions. For example, the department may providethe following services: arts and crafts, drama,and music programs or the agency might be moreprogram oriented with clinics, tournaments, specialevents, open recreation or a combination of both.

Step 3: Prepare or outline an Object Classification Budgetincluding the normal features of Services-Personnel, Services-Contractual, etc.

Step 4: Run the Object Classification Budget down the leftside of the budget sheet and the major and sub-functions across the top of the budget sheet.

Step 5: Fill in the object classification costs for each ofthe various sub-functions and total at the side andat the bottom of each category. In the bottomright corner will appear the total departmentbudget.

A ServicesPersonal

I Salaries

Admirostram

RecreationCenters

Feedlots

Play-pounds

Special Services

TotalSwunmingPools

GolfCourses

Arts andCrafts Drama Athletics

2. Overtime

3 Temporarysalaries

B. ServicesContractual

I.

2

3

C. CommoditiesI

2

3.

D. Current charges

E. Currentobligations

Total

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53

1

1

Valdes

The Function Budget provides certain advantages anddisadvantages which are identified below:


1. Provides for comparisonof function costs.

1. Not all departments canbe placed into functioncategories.

2. Provides for comparisonof each object costwithin each department.

2. Comparison figures arenot always representa-tive (cost of maintain-

3. Helps budgeters under-stand where the moniesare allocated.

ing a golf course isnot equal to the costof maintaining a swim-ming pool).

3. The object classifica-tion concept does notprovide for budgetingfreedom.

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CASE STUDY NO. 10TOPIC: FUNCTION BUDGET

Contact a local parks and recreation agency and determineth, personnel services costs for each of the differentprogram fune:tions of that agency. Use the form below toassist you,

PERSONNEL SERVICES FUNCTION

Salaries, regular

Salaries, temporary

Wages, regular

Wages, temporary

Total

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Section 11

Unit Budget

The Unit Budget or Budget by Classification ofOrganizational Unit is a method of budget design which hasparticular usefulness in extremely large organizationalsettings. The Unit Budget classLfies the expendituresaccording to the organizatioral unit. (Facilities Division orProgram Division, etc.) of the department. In this way thecost of the differing units can 'pe compared rather thanidentifying the individual and peculiar costs that make upthat organizational unit.

Description

The organizational units must be part of 'argeorganization or the breakdown units will not yield thedistinctions necessary. The Unit Budget does not have astandard classification of categories, but usually suchunits are called bureau, division, section, department, oragency. Each unit usually would have a directing head whoseresponsibilities are geared to the overall function of thatunit. An organizational unit breakdown may look like thefollowing:

Recreation Department

Administrative DivisionProgram Division

PlaygroundsCommunity CentersAthleticsMusic CenterSpecial Events

Facilities Division

AuditoriumMunicipal CampStadiumMuseumBeachesPoolsGolf Courses

Maintenance Division

EngineeringConstructionLandscapingGreenhouse

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Purposes

The purposes of the Unit Budget are:

1. To describe the fiscal allocations by units rather thanby per item costs.

2. To provide comparison data from one unit to the next(which unit costs the most to run or the least, etc.).

3. To facilitate the budgeting process by having thedivision or unit head prepare the budget for their unit andthe parks and recreation director groups all budgetstogether for the total department budget.

4. To display budget information to community residents ina clear and understandable fashion.

Steps

To prepare the Unit Budget follow the steps identifiedbelow:

Step 1: Break the department into logical units asindicated by the earlier example (AdministrativeDivision, Program Division, etc.).

Step 2: Ask the department head to prepare the budget forthat department or division by using whateverbudget method seems appropriate (ObjectClassification, Line Item, etc.). Uniformity mustbe present in all division budgets or else too muchvariety in costs will occur.

Step 3: Combine all budgets together to determine the totalbudget.

Recreation Department $1,642,119.00

Administrative Division 196,295.00Program Division 64,754.00

Playgrounds 16,495.00Community Centers 19,992.00Athletics 12,124.00Music Center 9,477.00Special Events 7,666.00

Facilities Division 1,157,516.00

Auditorium 57,111.00Municipal Camp 33,117.00Stadium 114,146.00Museum 92,191.00

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Beaches 492,169.00Pools 72,772.00Golf Courses 296,000.00

Maintenance Division 223,554.00

Engineering 34,444.00Construction 112,641.00Maintenance 41,100.00Landscaping 27,173.00Greenhouse 8,196.00

Valuer4

The Unit Budget provides certain positive and negativefeatures:


1. Provides for a cleardescription to the publicof the costs of the pro-gram.

1. Requires departmenthead to prepare thebudget using some otherbudget system.

2. Is a simple budget topresent and understand.

2. Requires uniformity indepartment head budget-ing or control is lost.

3. Allows others to partic-ipate in the budgetprocess.

3. Does not show the peritem cost of runningeach unit or division.

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CASE STUDY NO. 11TOPIC: UNIT BUDGET

Obtain a copy of a typical parks and recreation budget andprepare that budget into a display unit budget using theform below.

Department

UNIT BUDGET

Division

Program

Division

Program

Division

Program

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Section 12

Fund Budget

The Fund Budget is utilized by a limited number of agenciesand only those agencies which receive their fiscalallocations from several different funds. Very smallrecreation departments usually receive the requested moniesfrom the mayor after submitting whatever budget style isrequired. However, many times these smaller communities andcertainly larger communities provide money for therecreation agency from several different sources or funds.When the department does receive funding from severalsources a Fund Budget is usually required.

Description

The Fund Budget consists of identifying where the variousmonies that fund the parks and recreation agency originateand then to list those funds with their respective dollaramounts. The majority of parks and recreation departmentsreceive their monies from the following funds:

1. The General Fund of the City or County2. Federal Matching Grants3. Capital Expenditure Bonds4. Special Millage5. Fee and Charges6. Gifts7. Concessions

Purposes

The Fund Budget provides several purposes which areidentified below:

1. Identifies where the agency or department monies comefrom.

2. Identifies what percentage each fund makes up of thetotal budget.

3. Provides clear description to citizens as to where fundsare generated.

4. Allows for future projection of monies by analyzing thetrend of the fund categories.

Steps

To develop the Fund Budget, the following steps should be

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followed:

1. Identify all funds in which money is utilized by theparks and recreation department.

2. Identify the amount of money that each fund provides.

3. Determine the percent that each fund represents of thetotal budget.

FUND AMOUNT PERCENT

1. General Fund Appropriations $247,163 20.242. Special Millage Tax Levies 92,468 7.573. Special Tax 1,629 .134. Fees and Charges 12,477 1.025. Grants-in-Aid 100,102 8.196. Gifts 10,100 .827. Concessions 96,000 7.868. Money Raising Events 696 .059. Bonds 542,000 44.3910. Special Assessments 1,969 .1611. Rental Agreements 116,229 9.52

TOTAL $1,220,833 100%

Values

The Fund Budget provides for many helps to the budget aswell as problems.


1. Excellent budget todescribe where fundscome from.

1. Is not a working budgetbut really a descrip-tion budget.

2. Provides clear descrip-tions to community resi-dents.

2. Another budget must bedeveloped in order todetermine expenditures.

3. Provides for projectiondata.

3. Does not provide forcreativity or flex-ibility.

4. Determines percent repre-sentation of each fund. 4. Funds may dramatically

alter from one year to5. Allows for keeping percent

of fees and charges (orany other category) con-sistent percentages asother fund categorieschange.

the next - hence may beinconsistent.

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:

CASE STUDY NO. 12TOPIC: FUND BUDGET

Contact a community agency (parks and recreation, welfareservices, transportation, health care, etc.) and obtain fromthat agency what funds provide monies for that agency andthe percent that each fund represents of the total budget.Use the form below for assistance.

FUND BUDGET: AGENCY

FUNDS

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

TOTAL

AMOUNT PERCENT

100%

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Section 13

Character Budget

The Character Budget, though used to a lesser degree thansome of the other traditional budget systems, is stillprevalent in municipal recreation. This system attempts toorganize and present the budget on a time element basis.That is, it classifies expenditures relative to the past,pre ent and future concerns of the agency.

Description

The Character Budget breaks the costs of the parks andrecreation department into four categories, eachrepresenting a different obligation time element.

1. Current Expenses This year's obligation

2. Fixed Charges Payments due for past years'obligations that will gen-erally stay consistent overtime

3. Acquisition of Property One time current expenses

4. Redemption of Debt Payments due for past obli-gations that will eventuallybe paid off

----

Purposes

The purposes of the Character Budget are:

1. To plan for the future fiscal allocations taking intoaccount current and past obligations.

2. To recognize one time debt redemption or acquisition ofproperty costs which temporarily inflate the budget.

3. To provide the budget developer a picture of the budgetsituation over time (seven year pay back on a bond, etc.).

Steps

To develop the Character Budget the following steps aresuggested:

1. Along the top of the budget sheet place five categoriesrepresenting current expenses, fixed charges, acquisition of

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property, redemption of debt and total.

2. Along the left side of the budget sheet identify thedifferent components of the parks and recreation departmentsuch as administration, athletics, playgrounds, etc.

3. Fill in the appropriate space the fiscal allocationwhich represents the corresponding categories.

PROGRAMCURRENTEXPENSES

FIXEDCHARGES

ACQUIS-OF

PROPERTY

REDEMP-TIONOFDEBT TOTAL

Administration 12,100 600 0 0 12,700

Athletics 8,600 1,200 0 0 9,800

Aquatics 14,200 6,000 0 0 20,200

Playgrounds 4,000 0 15,000 0 19,000

Indoor Center 18,900 11,000 0 16,200 46,100

Maintenance 22,100 10,000 0 0 32,100

TOTAL 79,900 28,800 15,000 16,200 139,900

Values

The advantages and disadvantages of the budget style are:


1. Provides budget pictureover time.

1. Is not a very goodworking budget.

2. Isolate debt chargesand one time largeexpenditure charges.

2. Generally requires amore detailed budgetto explain thosedollars.

3. Provides for futurebudget planning. 3. Is confusing to the

general public.

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CASE STUDY NO. i3TOPIC: CHARACTER BUDGET

Obtain a copy of a community agency budget and answer thefollowing questions regarding that budget.

1. What is the amount of the agency's current expenses?

$

2. What are the items that make up that budgets fixedcharges?

......,........111.-211.

...M...1....M....

3. What amount of money was spent on the acquisition ofproperty?

$

4. What debt payments does that agency have?

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Section 14

Increment - Decrement Budget

An extension of the Object Classification and Line ItemBudgets is the Increment (increase) or the Decrement(decrease) Budget. This budget £tyle has been the mainstayfor many organizations and has been crucial to theirexistence. Basically, the Increment Budget consists ofadding a certain percentage increase or decrease to thecurrent year's budget. Therefore, next year's budgetemerges similar to this year's budget only adjusting for abudget increase or budget decrease.

Description

Many governmental parks and recreation departments areallocated a standard percent increase in certain parts ofthe budget in order to remain even with various inflationindex increases. For example, the utility cost of yourdepartment increases by 9.2%. Therefore, the budgetauthorities indicate that in next year's budget the utilitysection may be increased by that percentage. The personnelmay have received a 7.5% increase in base salary and 1.5%increase in fringe benefits, therefore, those sections ofthe budget receive that percentage increment. Particularlydifficult for a budgeter is when the budget receives adecrement or decrease percentage. The budget preparer isinformed that the budget must be reduced by 2.4% across theboard. Therefore, the budgeter is required to delete 2.4%from the budget.

Purposes

The Increment-Decrement Budget serves the followingpurposes:

1. Provides for a predictable rate of growth or rate ofdecrease over a period of time.

2. Allows for future planning, particularly long range if aspecific rate of increase will' be provided over that periodof years.

3. Provides for some freedom on how to handle decreases inthe budget. Reduce all categories equally or eliminate onecategory and not adjust another.

Steps

To develop the Increment-Decrement Budget the following

1316

steps are suggested:

Step 1: Prepare or obtain the agency's budget and placebudget into the object classification style.

the

Step 2: Determine the percent increase or decrease which isallowed by the agency's funding authority.

Step 3: Adjust each category by the percentage increase ordecrease. For example, the department receives a15% increase for next year's budget. Theadministr ACT identifies this year's cost, adds the15% and posts next year's budget.

This Year

2000 Services-Contractual2100 Communication-

Transportation

Next Year

2000'Services-Contractual2100 Communi ation-

Transportation

2110 Postage 100.00 2110 Postage 115.002120 Telephone 200.00 2120 Telephone 230.002140 Travel 560.00 2140 Travel 644.00

Caution: Many times the percent increases or decreases willbe specifically earmarked for salary only or foroperation and maintenance categories. Therefore,only those categories are allowed the increase ordecrease. When decreases are mandated, usually thebudget preparer has freedom to decide whatcategories the c,Lcrease can come from.

Values

The Increment-Decrement Budget provides the budget officercertain advantages atal disadvantages.


1. Provides f-or orderly andpredictable growth.

1. Perpetuates an attitudeof consistent budgetincreases.

2. The budget process issimplified and easy tocontrol.

2. Major decrements canusually only occur inthe personnel section

3. Provides for future plan-ning if rates of increase

of the budget.

or decrease are known. "I . This budget still doesnot allow for budgetjustification or explan-ation of need or inpact.

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CASE STUDY NO. 14TOPIC: INCREMENT BUDGET

Obtain a copy of a community parks and recreation budget andperform the following:

1. Provide an 8.1% increment in personnel and a 2.4%increment in operation and maintenance.

2. How much does the personnel costs of the agencyrepresent of the total budget?

3. Perform a decrement of 2.4% in personnel and a 2.7% inoperation and maintenance.

4. What decisions must be made if a continuous decrement isrequired in the personnel section? In the operation andmaintenance sections?

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Section 15

Running Budget

Many ,imes during the course of the fiscal year, theadministrator needs to know exactly how much money has beenspent in a certain category or more likely how much moneythe administrator has remaining in certain categories. Asthe year draws to a close, the fiscal picture intensifiesand the administrator attempts to remain within the budgetwithout reducing the programs before their plannedconclusion. To help the administrator with this commc,problem is the Running Budget. This budget style provides aday to day running account of the fiscal resources enablingthe administrator to make adjustments before rather thanafter critical circumstances.

Description

This format is somewhat unique to the parks and recreationadministrator and operates very similar to a personalchecking account. The administrator is aware of how muchmoney is available in the account for certain items for theyear, for example, personnel overtime. As each day passes acertain amount of the money for personnel overtime is usedand is deducted from that account, leaving the remainingamount. As the end of the budget year emerges the budgetofficer knows how much money is in that account so that anoverage does not occur.

Purposes

The Running Budget provides for a number of purposes:

1. Provides detailed day to day accounting of the budget.

2. Provides for projection of monies to be spent oractivities which must be reduced in order to ascertain abalanced budget.

3. Provides for accurate and wise use of expenditures overthe period of the budget year.

Steps

The Running Budget is developed by following the stepsindicated:

1. Prepare a Line Item Budget with each budget categorygoing down the left side of the budget sheet with the fiscalallocation to the immediate right side of the budget

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category.

2. Along the top of the budget sheet place a box whichrepresents each day of the budget year (June 1, June 2,etc.). Beneath the date divide the space into two equalboxes.

Item Allocation June 1 June 2 etc.

3. The first column or box under the date represents themoney spent that day out of the budget category. The secondcolumn or box represents the money remaining in that budgetcategory. The fiscal allocations which have been spent arewritten in red ink while the allocations remaining areprinted in black ink.

ItemAlio-cation June 1 June 2

I

etc.

Equipment $5,200 $816 $4,384 $32.50 $4,351.50

Advertising $1,000 0 $1,000 0 $1,000

Overtime $6,000 $100 $5,900 0 $5,900

4. The dates continue to run along tho top of the budgetpage, hence requiring a lengthy horizontal budget sheet.The length of the budget down the budget sheet is only aslong as the budget items.

Values

The Running Budget provides the budget preparer thefollowing:


1. A day to day costaccounting system.

2. A time line fiscalplanning chart.

1. Requires another budgetstyle to determine theamount needed for eachbudget category.

2. Requires day to day

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3. A method of maintaininga balanced budget at theend of the year.

budget action in orderto stay current.

3. Usually requires time4. An easy way to know each

day how much money hasto set up intitially.

been spent and can bespent.

. Slight loss of controlif more than one personis allowed to spend thedepartment's budget.

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I

I

I

I

I

I

I

I

1

I

CASE STUDY NO. 15TOPIC: RUNJING BUDGET

Prepare a running budget on your personal expenses for a twoweek period using the form provided below.

ITEM(S) ALLOCATION

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Section 16

Benefit Cost Budget

The Benefit Cost Budget has experienced much usefulness inprivate enterprise particularly in cost analysis settings,however, it has been used less extensively in the parks andrecreation domain. The basic concept of the benefit costanalysis is t. determine the cost of a particular program,compare the cost to the benefits desired and then determineif the ratio is worth continuation relative to other optionsor alternatives. Probably the primary reason for non-use ingovernmental agencies has been the inability to quantifybenefits. It is not difficult to determine cost, but how doyou measure quantitatively such programs as education,police protection, slum clearance and housing. The benefitsare difficult to estimate in dollars and cents.

Description

This budget style uses three words which require furtherdefinition and Ac'c^rip"r"

1. Benefit: This term is used liberally by manygovernmental authorities and the term may have a diversityof meaning, however, before utilizing this budget system,the benefit term must have a solid and an agreeabledefinition. Generally benefit means the value of aparticular program such as delinquency reduction, improvedhealth, community involvement, etc. However, many of thebenefits or values of a parks and recreation program are notmeasurable as benefits even though they are the prinarypurpose of the program: happiness, joy, feeling good,worthwhileness, etc. Therefore, many community authoritieschoose to understand benefit only in numerical terms such asprogram attendance rates. Before the Benefit Cost Budget isutilized, the parks and recreation administrator must definethe term benefit and understand that measurement of thatterm may be required.

2. Cost: The term cost is defined as the complete cost ofthe program which is being conducted. Such items are staff,equipment, materials and overhead. Only those costsattributable to the program should be included.

3. Ratio: The mathematical relationship between thebenefit and the cost as measured by numbers.

Purposes

The purposes of the Benefit Cost Budget are:

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1. To provide a method by which several programs can becompared to determine which program generates the greaterbenefit relative to cost.

2. A method of comparing the cost of the program to someconcept of benefit which is derived from the program.

3. A method of demonstrating that program provision isattempting to satisfy community needs yet still remainfiscally realistic.

Steps

To utilize the Benefit Cost Budget the following steps aresuggested:

1. Define the Term Benefit: Understanding that the hestmeasure is probably subjective, strive for a definitionwhich is measurable (i.e. increased skill, fitness,knowledge, reduced injury, crime, errors, etc.). Again, thesingle most widely used definition is: program participantnumber (P.A.O.T. = participations at one time).

2. Determine the Cost of the Program: To determine costs.such items as research and development costs, investmentcosts, operation and maintenance costs, and replacementcosts are usually calculated. As an example, a highwaythrough a city would require investment costs of planningand design, purchase of right of way, demolition of existingbuildings on the right of way, relocation of occupants, andactual construction costs of the road, operation,maintenance, and replacement costs which would includecosts of policing, snowplowing and repairing the road.

3. Calculate Ratio: To calculate ratio, the administratordivides the benefit measure of the program into the costmeasure of the program and a cost per benefit (P.A.O.T.) isgenerated.

It is necessary for the Benefit Cost Budget to be able tomeasure benefits on the same basis as cost is measured. Inrecreation the cost side of the budget is comparativelysimple. A Line Item Budget or Object Classification formatidentifies the cost of the recreation program. The benefitside of the budget is more difficult. The administrator isin a difficult position when attempting to measuresatisfaction, enjoyment, physical fitness, socialinteraction, skill development or other benefits of therecreation experience. These benefits are increasingly moredifficult when the calculation must be done on an individualbasis.

However, in the recreation domain, some administrators whoutilize the Benefit Cost Budget have chosen to measure

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benefits by participation rates. That is, the more peoplethat participate in the recreation program the higher thenumerical measure of benefit. If an increase in percentageof participation or in actual numbers of participationoccurs in the recreation program then the benefit measure iscalculated on that percentage or numerical basis. As anexample, the recreation administrator must determine whichof two programs should be funded. The administrator usesthe 8enef t Cost Budget to make that decision and identifiesthe fallowing:

GYMNASIUM PROGRAM POOL PROGRAM

Costs: $7,200.00 Costs: $6,400.00Benefit: 120,000 Benefit: 4,000Ratio: 1:.06 Ratio: 1:1.60

The gymnasium program would cost $7,200.00 which wouldconsist of the itemized costs of the program such assalaries, equipment, supplies, facilities and the like. Thepool program would cost $6,400.00 and consist ofapproximately the same type of itemized costs. The benefitof the gymnasium program would be 120,000 participationoccurances and the pool program could provide 4,000participation occurances. Again the administrator haschosen to measure benefit by participation rate andparticipation rate equals the total number of people thatcould appropriately utilize that program for the length ofthe program. The benefit cost ratio of providing thegymnasium program is one participation occurance for $.06while the pool program would have a ratio of oneparticipation occurance for $1.60.

Values

The Benefit Cost Budget provides the following helps andhinders:


1. A method of comparingprograms to determinerelative costs.

1. Very difficult to definethe term benefit in a"univerally" acceptableway.

2. A method of evaluatingthe needs of the com-munity, satisfaction,enjoyment, etc.).

2. Comparing costs tobenefits is oftensuperficial.

3. A method of determiningrelative participationof a variety of programs.

3. May force an administra-for to become numberconscious and not bene-fit conscious.

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4. A method of justifyingone program over another.

. Does not consider theunderlying need inmany instances forprogram subsidization.

76

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CASE STUDY NO. 16TOPIC: BENEFIT COST BUDGET

Contact a local parks and recreation agency and determinethe costs of a small recreation program (arts and crafts,tennis clinic, racquetball tournament, etc.) and then obtainthe number of participants and prepare a Benefit CostBudget.

COSTS

PROGRAM

RATIO

P.A.O.T._.

What benefits occurred that are not reflected in theparticipation at one time calculation?

- -

How can true benefits be reflected into the benefit costratio?

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Section 17

Capital Budget

The budget formats described to this point are allclassified as operating budgets, that is, they are used tohelp the administrator operate the parks and recreationprograms. A different type of budget is the Capital Budgetwhich is utilized for long range and long term budget items.These items go beyond the current year's expendituresrequired to operate the program and include such things asland acquisition, construction of major public works such asbuildings, streets, bridges, sewer systems, off-streetparking, and utilities.

Description

The three main distinguishing elements that exist between aCapital Budget and an Operating Budget are:

1. Long Range Basis: The Capital Budget is not concernedwith purchases tat are needed just for the currentsituation but over a long period of time.

2. Non-Annual Analyzation: The Capital Budget is usuallyapproved once and will last a range of six to ten years withpayments occurring during that period.

3. Adoption: The Capital Budget is usually adopted andexecuted separately and differently than an OperatingBudget.

Purposes

The purposes of a Capital Budget are:

1. To purchase large items that may require several yearsto purchase.

2. To prevent artificial inflation of an operational budgetby including a one time large payment for a capital item.

3. To allow long range decisions to be made separate fromthe day to day decisions.

4. To protect the fiscal authority from loosing track oflarge sums of money in a day to day operating budget style.

Steps

To perform or execute a Capital Budget the following steps

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should be followed:

1. Determine from the parks and recreation agency what isconsidered a capital budget item. Each agency will define acapital budget item based on cost. Some agencies considerany one time purchase of o'er $500.00 a capital item withall purchases under that figure to be non-capital whileother agencies define capital budget items as high as$10,000.00.

2. Prepare a cost estimate of the capital budget item byreceiving at least three estimates for the cost of the item(equipment, land, etc.).

3. Prepare a narrative justification for the need for thecapital item explaining purpose, need, long range savings,alternatives and cost estimates. Remember, capitalexpenditure items will be required of mist parks andrecreation programs. The need for these items may occurwith no warning as when the filtration system in theswimming pool becomes non-functional, or it may be plannedfor as in the acquisition and development of a new parkarea. Generally, capital items are purchases which areexpensive, usually one time purchase items, are purchasedfor future intent and are not required for the day-to-dayoperation of the program.

Values

The advantages and disadvantages of the Capital Budget are:


1. Provides a method ofdealing with one timepurchases.

1. Requires separatebudget format andprocess to adoptand execute.

2. Protects the day-to-daybudget and does notartificially inflate theoperating budget.

2. Requires specialnarrative justifica-tion and usuallydebate.

3. Represents a solutionto emergency budgetpurchases.

3. Requires cost esti-mates and specialaccounting (in-creased work butprovides increasedprotection.)

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CASE STUDY NO. 17TOPIC: CAPTIAL BUDGET

Contact three different agencies and ascertain the answersto the following questions:

1. At what cost point is an item considered a capitalexpenditure item?

2. Why has that cost point been selected by that agency?

3. What capital expenditure items were purchased by thatagency?

4. What problems does the budget officer experience withthat agency's capital expenditure process?

7 58

Section 18

Financial Statement

Parks and recreation administrators are called upon toprepare, justify and execute a financial plan or budget fortheir agency and many times, individual programs within thatagency. Several budget methods have been presented, eachwith its own strengths and weaknesses, however, thesebudgets are used in a variety of settings. The parks andrecreation administrator will either be told which budgetformat to utilize or the administrator will select thebudget style that is most appropriate for that program oragency. When the administrator is required to follow aparticular budget format the decision has been made and theadministrator must utilize that style regardless of personalpreference. When the administration is in a position tochoose which budget format they wish to use, that decisionwill depend upon how the administrator conceptualizes thestrengths and weaknesses of the budget format compared tothe task at hand. Many times siveral different formats mustbe used either in sequence or in combination in order tojustify and execute the financial plan.

Description

As a final aspect of the budget process, some mention shouldbe made of the financial statement. This statement consistsof a summary of all income and expenditures that enter intothe parks and recreation agency. When an agency receives norevenue then the financial statement would be a listing ofexpenditures only. however, this circumstance would be veryrare. Generally, the parks and recreation agency receivesrevenues from a number of different sources such as thegeneral tax fund, fees and charges or concessions, etc.

Purpose

The purpose of the financial statement is:

1. To provide a clear accounting of all revenues andexpenditures and determine any overage or underage.

2. To identify where monies are generated from and areexpended to.

3. To isolate the percentage that each revenue andexpenditure represents of the total parks and recreationbudget.

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Steps

To set up a financial statement the following steps shouldbe followed:

Step 1: Determine sources of revenue to the parks andrecreation department and list the amount of thatrevenue. It is also helpful to identify thepercent that each revenue represents of the total.

REPORT OF INCOME

Source Receipts

Boat Slips 135Boat Stalls 2 340Concessions 1 700Craft Materials 13 286Day Camp Reservations 21 839Golf Courses 262,459Learn To Swim Program 7 340Pavilion Permits 4 493Rifle Range Permits 232Swimming Pools 73 186Tennis Permits . 39,473Miscellaneous Revenue 96

Total Park & Recreation Receipts $426,579

Auditorium 274,063Stadium 38 241

Total Auditorium & Stadium $302,304

GRAND TOTAL ALL RECEIPTS $728,883

Step 2: Determine all sources of expenditures that arerequired of the parks and recreation department,list the amount and percent of each expenditure.The sources of expenditures should be grouped intosome form of general categories.

REPORT OF EXPENDITURES

Personal Non-Personal TotalDivision Services Services Expenditures

Parks $ 770,031 $ 207,385 $ 977,416Recreation 355,505 76,157 431,662Forestry 142,787 50,130 192,917Building Services 159,760 130,530 290,290Meter Maintenance 46,578 6,954 53,532

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Meter Checkers 45,533 4,980 50,513Auditorium 152,182 83.793 235,975Stadium 16,047 39,042 55,089Administrative 32,872 1,747 34,619

TOTALS $1,721,295 $600,718 $2,322,013

Step 3: Present both revenues and expenditures as onestatement. It should be obvious that the revenueside of the financial statement is the Fund Budgetand the expenditure side of the financial statementis the Unit Budget.

REPORT OF INCOME

Source

Boat SlipsBoat StallsConcessions

Receipts

1352 3401 700

Craft Maraiials 13,286Day Camp Reservations 21 839Golf Courses 262,459earn To Swim Program 7 340Pavilion Permits 4,493Rifle Range Permits 232Swimming Pools 73,186Tennis Permits 39,473Miscellaneous Revenue 96

Total Park & Recreation Receipts $426,579

Auditorium 274,063Stadium 38 241

Total Auditorium & Stadium $302,304

GRAND TOTAL ALL RECEIPTS $728,883

REPOnT OF EXPENDITURES

Personal Non-Personal TotalDivision Services Services Expenditures

Pants $ 770,031 $ 207,385 $ 977,416Recreation 355,505 76,157 431,662Fotestry 142,787 50,130 192,917Buildirg Services 159,760 130,530 290.290Mete.: Maintenance 46,578 6,954 53,532Meter Checkers 45,533 4,980 50.513Auditorium 152,182 83,793 235,975

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Stadium 16,047 39,042 55,089Administrative 32,872 1,747 34,619

TOTALS $1,721,295 $600,718 $2,322,013

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CASE STUDY NO. 18TOPIC: FINANCIAL STATEMENT

Prepare a financial statement for a local parks andrecreation agency using the form below.

F AGENCY

Source

REPORT OF INCOME

Receipts Percent

REPORT OF EXPENDITURES

Source Receipts Percent

-80-85

The Americ n Alliance for Health,Physical Education, Recreation,

and Dance1900 Association DriveReston, Virginia 22091

ISBN 0-88314-339-9

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document resume - eric · document resume. sp 029 473. kelsey, craig; gray, howard the budget...

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