Desk Item 2 with Attachment
PREPARED BY: JENNIFER ARMER, AICP
Senior Planner
110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832
www.losgatosca.gov
MEETING DATE: 04/30/2019
ITEM: 1
DESK ITEM 2
TOWN OF LOS GATOS
GENERAL PLAN UPDATE ADVISORY COMMITTEE
REPORT
REPORT
DATE: APRIL 30, 2019
TO: GENERAL PLAN UPDATE ADVISORY COMMITTEE
FROM: JOEL PAULSON, COMMUNITY DEVELOPMENT DIRECTOR
SUBJECT: CONTINUE THE DISCUSSION OF GENERAL PLAN VISION AND DISCUSS
GUIDING PRINCIPLES
REMARKS:
Attachment 7 contains a public comment that was not included in the first Desk Item Report.
ATTACHMENTS:
Attachments previously received with April 30, 2019 Staff Report:
1. Budget Process Diagram (one page)
2. Example Vision Statements (23 pages)
3. Public Comments Received before 11:00 a.m., Friday, April 26, 2019
Attachment previously received with April 30, 2019 Addendum Report:
4. Comment from Committee Member
Attachments previously received with the first April 30, 2019 Desk Item Report:
5. Comment from Committee Member
6. Public Comments Received before 11:00 a.m., Tuesday, April 30, 2019
Attachment received with this second Desk Item Report:
7. Public Comments Received before 11:00 a.m., Tuesday, April 30, 2019
From: <pkoen@intermedia.net>
Date: April 30, 2019 at 10:45:29 AM EDT
To: <lprevetti@losgatosca.gov>
Cc: <jvannada@gmail.com>
Subject: Budget Monitoring.pdf
Laurel,
Since the Staff memo states that the Town employees best budgeting practices and discusses the mid-
year performance review, please pass this to the GPAC.
I think it would be instructive for the GPAC to read what the GFOA has published regarding best
practices regarding budget monitoring. I would draw your attention to the highlighted portions of the
note. The GPAC should ask if purposely excluding $1.5m from the adopted budget and claiming that
there was a budget surplus is consistent with the attached best practice.
Thank you.
Phil Koen
Intermedia
825 E. Middlefield Rd
Mountain View, California 94043
www.intermedia.net
J.D. Power certifies Intermedia for providing an “Outstanding Customer Service
Experience” in Assisted Technical Support 3 years running.
ATTACHMENT 7
Monitoring the budget is important to ensure that the financial, operational and capital plans that
were developed and approved for implementation as part of the budget processes are being
implemented. Budget monitoring is crucial for an organization to be able to enforce accountability
related to spending. In addition, regular, comprehensive monitoring of the budget allows a
government to evaluate service level provision, ensure any new initiatives are making expected
progress towards goals/expectations, learn more about trends and other deviations that may impact
future operations, and finally demonstrate transparency by sharing findings from this regular
monitoring.
Budget monitoring must include examination of a broad set of functions in order to fully inform what
actions need to be taken if significant deviations are found. Comparison of budget to actuals is the
starting point for budget monitoring, but it should be expanded to include how the organization is
performing related to service delivery and other programs/initiatives. To ensure this, governments
should clearly articulate not only the elements and who will analyze, but also how the analysis will be
utilized. If conducted consistently, thoroughly and effectively, the budget monitoring process will
provide information that may lead to corrective action or operational improvement.
GFOA recommends that all governments establish a formal set of processes for comparing budget
to actual results to monitor financial performance. Budget monitoring should include analysis of a
diverse set of indicators to best inform the analysis and facilitate evaluation of a government’s overall
performance. Establishing and conducting regular budget monitoring provides organizations the
opportunity to promptly adjust for any significant variances to ensure continuity of program/service
delivery. Governments should establish comprehensive budget monitoring that includes the following
key items:
1. What elements should be reviewed:
1. Revenues. Governments need to carefully analyze sources of funds with particular
attention to:
1. Seasonality, and whether comparable to prior observations
2. Any potential volatility and the resulting impacts
3. Trends and comparison to projections
4. One time sources
Budget Monitoring
BACKGROUND:
RECOMMENDATION:
BEST PRACTICE
https://www.gfoa.org/print/26041 4/30/19, 10931 AM
Page 1 of 4
5. Timing of receipts
6. Relationship to economic indicators and potential impacts
7. Changes in policy/practice of overarching governments involved in
disbursement of revenues
8. Review of patterns at other similar/related governments
2. Expenditures. Governments need to carefully monitor all expenditures as well –
including one-time uses and also examining key aspects of the following:
1. Personnel. Examine additional detail beyond just regular payroll expenses,
including analysis related to hiring and vacancy information and also,
depending on magnitude, analysis of part-time, overtime, leave pay out and
special pay. In addition, conduct analysis of re-class/promotions to see if on-
track with expectations. And whether fringe benefit costs are within budgeted
expectations as well.
2. Non-personnel. Monitoring needs to include more than just current expenses.
Governments need to analyze draw down of encumbrances, outstanding
purchase orders, and its major contracts to develop a better picture of not only
what was spent, but what remains to be spent.
3. Operations. Are services being provided as anticipated? Are any services being
provided that were unanticipated? What trends are being observed that may impact
whether or not spending remains on track?
4. Capital. Governments need to monitor the budgets of capital projects as well – see
GFOA’s Best Practice on ‘Capital Project Monitoring and Reporting.’
5. Economic Trends. How is the broader context of prices for labor, services,
commodities and other items impacting expenses versus the budget?
6. Performance Measures. Governments should incorporate into their budget monitoring
process an examination of performance measures and linkages to financial outcomes.
The analysis should include any changes to goals/initiatives since budget adoption and
are there any new initiatives not initially included in the budget.
2. How the elements should be analyzed
1. Root cause. Governments should move beyond just identifying deviations from budget
versus actuals and work towards analyzing and articulating why deviations occurred in
order to move towards resolution.
2. Time frame. Is it anticipated for any identified variance to continue or is there an
underlying reason for the variance? How does the current spending pattern impact the
subsequent year’s budget?
3. Requirements. Structure budget monitoring to meet any interim reporting requirements
that the government may have, if possible.
4. Basis of comparison. Governments should also ensure that reference points for
comparison are logical and appropriate and account for any major organizational
changes that would impact any comparisons. In addition to comparison of current
results to budget, government should expand their basis of comparison for more
robust analysis to include:
1. Previous year actuals
2. Averages of several prior year actuals
3. Projections and forecasts
3. At what level of detail should the analysis be conducted. This will vary depending on
revenue/expenditure type. Organizations should discuss benefits of more versus less detail
and its impacts on the timeliness, usefulness, and degree of difficulty to compile, among other
factors. Potential levels at which to monitor the budget should mirror an organization’s chart of
https://www.gfoa.org/print/26041 4/30/19, 10931 AM
Page 2 of 4
accounts, including the following:
1. Fund. Use for high level analysis and also may be the only monitoring needed for
minor revenue/expenditure areas
2. Department. Analysis at this level can be used to establish budget accountability for
department heads
3. Sub-department/division. Appropriate to analyze in particular if budget accountability
resides at the sub-department head level.
4. Function. Use to track expenditures by major organizational responsibilities, i.e. public
safety, public works, etc.
5. Object/account. Utilize for examining key types of expenditures at an organization-
wide basis, such as overtime.
6. Project/program/grant/activity. Use to track revenue/expenditures of specific activities
associated with areas that need additional scrutiny or for reporting requirements
4. Who is responsible and outlining roles
1. Production. Who produces the analysis, reports, etc. related to budget monitoring
should be clearly articulated and disseminated.
2. Roles. Collaboration and ownership within the organization should be promoted to help
provide context related to any potential issues.
3. Ownership. Identify who is responsible for resolving variances related to both spend
and service delivery as well as any other problems identified that need attention.
5. Tools for conducting the analysis
1. Electronic system. An organization’s enterprise resource planning (ERP) system
should drive data gathering and analysis related to budget monitoring. Use of the ERP
system allows for real time information to be readily accessible for encumbrances and
other time sensitive information as opposed to reliance on static, stand-alone reports.
2. Automation. Budget monitoring data and reports should be integrated into and
generated by an organization’s ERP system to ensure efficient use of staff time and
also consistency of information.
3. Overspend Protection. Governments should also ensure that mechanisms are in place
in their ERP system to automatically prevent overspending of budget and notify the
organization’s financial leadership.
4. Consistency. Off-system analysis should be consistently applied to all aspects of
monitoring the budget and clearly articulated to both staff conducting the analysis and
end users.
6. Communications. This will vary on type of size of jurisdiction as well as the intended
audience.
1. Frequency. The frequency of how often budget monitoring reports and information is
generated should be agreed upon at all levels of the organization, but may vary for
different program areas.
2. Delivery. The government should describe the point at which the monitoring process is
achieved and how the information is communicated and to which stakeholders, both
internally and externally, needs to be clearly structured.
3. Format. The format for how information related to budget monitoring needs to be
clearly established as well, including considerations for the audience and their level of
expertise.
4. Transparency. How can the information be shared on a wide spread basis to the
community and include the proper context to best inform the public and minimize
additional request for more information.
7. Action. A government’s budget monitoring process does not end at the time of
https://www.gfoa.org/print/26041 4/30/19, 10931 AM
Page 3 of 4
203 N. LaSalle Street - Suite 2700 | Chicago, IL 60601-1210 | Phone: (312) 977-9700 - Fax: (312) 977-4806
communication. Following the steps above, governments will conduct comprehensive
monitoring and communication that will ensure timely corrective action and operational
improvement.
Notes:
The County of Mecklenburg, NC was chosen to receive a GFOA Award for Excellence for exemplary
demonstration of GFOA's Best Practice of Budget Monitoring and Reporting. To learn more about the
City's Quarterly Budget Monitoring and Reporting Process, please visit their award page.
https://www.gfoa.org/print/26041 4/30/19, 10931 AM
Page 4 of 4