Into the Weeds: Funds and Departments

In attempting to understand the budget structure, the first thing you will need to learn is the difference between FUNDS and DEPARTMENTS. Some budget activity occurs at the Fund level, while other activity occurs at the Department level. This is an important distinction.

(I will be using capitalization throughout this series of blogs to identify terms that have a specific meaning within the City Budget.)

You can think of Funds as separate bank accounts. For instance, you likely have a primary checking account into which your paychecks are automatically deposited, and out of which your monthly expenses are paid. In terms of the City budget, this would be the General Fund (F001).

You might set up a second checking account if you have a side business doing lawn care, for example, in order to keep your earnings and business-related expenses separate. Unlike your General Fund account, the revenue for this account comes from fees for lawn service, and you would restrict expenditures to those related to conducting your operations. Because your lawn service business might fluctuate seasonally, there may be times when the account is flush and other times when you might need to supplement the fees with dollars from your General Fund account. City Funds that operate as businesses are known as Enterprise Funds. A good example of an Enterprise Fund with fluctuating revenues would be the Private Development Fund (F862).

If you own rental properties, you might have a third checking account. Again, unlike your General Fund account, the revenue for this account comes from the monthly rents paid by tenants, and you would restrict the expenditures from this fund to items such as mortgage payments, repairs and maintenance, and improvements to the properties. A good example of an Enterprise Fund with a more predictable revenue stream would be the Sewer Fund (F850).

For unplanned emergencies, such as loss of your job or an illness that resulted in uninsured medical bills, you may have money set aside in a savings account. You might calculate the cost of 6 months’ worth of household expenses and then make deposits into your account as necessary to keep it at the desired balance. The City also has Funds like that; a good example is the Emergency Reserve Fund (F003).

You could also set aside money in a separate savings account for known future events, such as a family reunion in Ireland every 10 years. You would likely identify the cost of the trip, and then make periodic deposits to the account so there would be enough money saved up to go and have a blast. One example of a City Fund of this nature is the General Plan Reserve Fund (F315). And, just as you might decide to contribute money from both your General Fund account and profits from your lawn care business to fund your trip, the City’s General Plan Reserve Fund receives its contributions from both the General Fund and the Private Development Fund.

These are just a few examples of the many Funds in the City budget. Here is a complete list for your reference:  Fund Listing_City Funds

If Funds are bank accounts, then Departments would be categories within those accounts. For example, in your General Fund account, you might categorize expenses as household, vehicle, medical, education, and leisure. Since you know approximately how much you will spend in each of the categories, you can budget for them with reasonable accuracy. In the same way, the City’s General Fund contains Operating Budgets for various Departments. Some City Departments that operate primarily within the General Fund are Police, Fire, General Services, Administrative Services, City Manager, City Clerk, City Attorney, and City Council.

In your lawn care account, you might categorize revenues by how frequently you work at each location (weekly, monthly, or one-time cleanups) and track costs separately for each of your crews. Similarly, the City’s Private Development Fund supports Operating Budgets for three divisions of the Community Development Department (Planning, Building, and Development Engineering).

In your rental properties account, you would likely categorize both revenues and expenses by individual property. You might also decide to budget a portion of the money to buy or build additional properties. In the City budget, money set aside to buy or build the property would be considered a Capital Project, rather than an Operating Budget. The City’s Sewer Fund is similar to your rental properties account in that it supports Operating Budgets for several Departments, as well as funding for some Capital Projects.

In your emergency savings account, you might occasionally make a direct payment (for instance, if your wacky aunt drove her car through the front of a local business and you needed to bail her out of the pokey); however, for a job loss or temporary disability, you would be more likely to transfer enough money from the emergency savings into your General Fund checking and continue paying your expenses that way. In this instance, as with the City’s Emergency Reserve Fund, there may or may not be an Operating Budget.

Finally, your family reunion savings account might have no direct costs whatsoever. You would probably just cash out in traveler’s checks and be on your way to the Emerald Isle! This is similar to what happens with the City’s General Plan Reserve Fund; the dollars accumulate until it is time to update the General Plan, and then the money is used to fund that Capital Project.

I have used only a few examples of City Departments. Here is a complete list of from this year’s budget:  Department Listing_City Departments

Well, that’s enough for one day. While this is not a perfect analogy, I hope it made the relationship between Funds and Departments fairly clear. Next on the agenda will be more about Operating vs. Capital, and Revenues vs. Transfers. Nothing but fun!

We thank you for your continued readership. If you have any questions, please do not hesitate to contact us. You can comment below, or email us at truthmatterschico@gmail.com.

Remember: Truth Matters, Chico!

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Posted on October 23, 2013, in Budget and tagged , , , . Bookmark the permalink. 5 Comments.

  1. After 20+ years of working for the City, this is probably the closest I’ve come to understanding how things work. Good work.

    • Susan, I feel the same way. I never understood how Cindy could wrap her head around all those numbers all day long {shudder}. Give me words over numbers any day.

  2. EXCELLENT work! Too bad a lot of Dept. Heads or current upper management didnt take the class. A lot of simply WRONG analysis.

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