Into the Weeds: Revenues, Transfers, and Allocations

We’ve stepped Into the Weeds over the course of several posts now, and we’re just about ready to start looking at the larger picture and delving into some of the issues that have been in the news over the past months. We need to take a look at one more piece of the puzzle, though, and that is how money is received and moved around in and between Funds. The primary mechanisms are Revenues, Transfers, and Allocations.

Revenues are simply monies coming into the City from outside sources. They include taxes (e.g., General Fund, Gas Tax Fund), fees for service (e.g., Private Development Fund, Sewer Fund), time and materials billing (e.g., Subdivision Fund), development impact fees (e.g., Street Facility Improvement Fund, Community Parks Fund, assessments (e.g., Maintenance District Administration Fund), and grants (e.g., Capital Grants Fund, Community Development Block Grant Fund). Revenues are listed by specific types in the top section of each Fund Summary.

Here are some examples of how the Revenue section of a Fund Summary looks: General Fund, Community Development Block Grant Fund, Capital Grants Fund, and Private Development Fund. In the City budget, each Fund has its own separate page. I combined them into one document for our purpose, which was to look at how different types of Revenues are called out.

Transfers shift dollars from one Fund to another to pay for expenses. They are used, for example, when an Operating Expense is paid out of one Fund, but all or a portion of the Revenues designated to cover the expense has been paid into a different Fund. A simple example of this type of transfer is from the Parking Revenue Fund (853) to the Transportation Fund (212).

It is important to note that there are no “hidden” transfers in the budget. Both the dollar amount and the purpose of any transfers are clearly identified in the Fund Summary for both the donor and recipient Funds.

Transfers out of a Fund are labeled 9FFF, where FFF represents the recipient Fund number. Likewise, transfers into a Fund are labeled 3FFF, where FFF represents the donor Fund number.

This is how the Parking Revenue Fund (853) Summary describes the transfer: “Transportation transfer (9212) reflects the estimated cost of the Downtown Employee Free Fare Program which allows employees to ride the Transit system for free as an incentive to increase the availability of parking downtown.”

You will find a similar description in the Transportation Fund (212) Summary: “Parking Revenue Transfer (3853) reflects the estimated cost of the Downtown Employee Free Fare Program which allows employees to ride the Transit system for free as an incentive to increase the availability of parking downtown.”” 

So, the $36,000 is moved from Fund 853 to Fund 212, and then the cost of the Downtown Employee Free Fare Program is included in Transit Services payments due to Butte Regional Transit (B-Line), out of the Transit Services Department (212-653).

Allocations distribute expenses from one Fund to one or more other Funds. The largest and most complex Allocation is the Citywide Indirect Cost Allocation Plan (CAP), which will be coming forward to Council in the near future. That Allocation deserves and will receive its own separate post, once the basics of all the moving parts have been explained.

Simpler to understand are Internal Service Fund Allocations, which distribute costs for providing certain services to City Departments. Some of the Funds that receive their Revenues via Allocations are Central Garage (Fund 929), Municipal Buildings Maintenance (Fund 930), and Information Systems (Fund 935).

The basis of the Allocation depends on what services are provided. For example, the Information Systems Allocation (from Fund 935) is based on the number of computers per Fund-Department. It is allocated at the Department level, but accounted for at the Fund level. [Stay with me — I’ll explain!]

In a previous post, we discussed Planning operations, so I will use it as an example here as well. Planning’s Department code is 510, and it has operations in the General Fund (001), the Private Development Fund (862), and the Subdivision Fund (863).  In order to see Planning’s Allocation detail, you would need to look at all three of its Operating Budgets: 001-510, 862-510, and 863-510. As you can see, the Information Systems Allocation for Planning is spread across all three Funds. Please note that those are last year’s figures, since I no longer have access to internal budget pages without submitting a PRR and causing an uproar in the City Clerk’s office.  🙂

This level of detail is not available in the published budget. Instead, it contains an Operating Summary Report for Planning, which shows its total Allocations and only separates them by General Fund and Other Funds.

The important thing to remember is that Transfers and Allocations are related, in that they both effect inter-Fund cost sharing; however, the mechanisms are different. Transfers distribute dollars, and Allocations distribute expenses.

Clear as mud, I know.

Next in line for the budget posts will likely be the Private Development Fund. I had planned to move from this post directly to the Cost Allocation Plan, since it went to Finance Committee earlier this month; however, insider information has it that there was a problem with figuring out the Fund 400 piece [audible gasp!], and the study is now back at the staff level for further review rather than moving forward to the full Council. We’ll see which topic inspires me more the next time I feel compelled to wield my machete and continue blazing a trail through the weeds for you. Yee haw…

Thank you for your continued readership. We welcome your comments and questions, and ask that you please continue to share our posts with your family, friends, and neighbors.

Remember: Truth Matters, Chico!

financial-puzzle

Photo credit: lifewayadvisors.com
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Posted on December 23, 2013, in Budget and tagged , , , , . Bookmark the permalink. 1 Comment.

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