07-10-07 FPAC Agenda - Laserfiche WebLink

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O Government Finance Officers Association Recommended Practice Capital Project Budget(2007) (CEDCP and BUDGET) Background. Once a government entity has adopted a multi-year capital plan(see GFOA Recommended Practice,Multi-Year Capital Planning),the next step in the capital process is to develop and implement a capital improvement projects budget(capital budget). A properly prepared and adopted capital budget is essential to ensure proper planning,funding and implementation of major projects. Most capital budgets are formally adopted as part of the annual or bi-annual budget process, officially incorporating the appropriate year(s) of the multi-year capital plan into the budget. Capital projects are different from programs adopted in the operating budget, often representing very large financial obligations that may span two or more fiscal years. Therefore,it is important that they be properly planned,budgeted, and tracked. Because of the unique nature of capital projects,the processes for preparing,prioritizing and presenting them to the governing body may be different from the operating budget. Capital project budgets may also require additional information such as geographic location,multi-year funding sources,and impact on the operating budget. After the capital budget is 411 adopted, it is important that an adequate system is in place to initiate and manage each authorized project through completion. Recommendation.The Government Finance Officers Association(GFOA)recommends that governments prepare and adopt a formal capital budget as part of their annual or bi-annual budget process. The capital budget should be directly linked to, and flow from,the multi-year capital improvement plan. In many jurisdictions,the first year(or first two years in a bi-annual budget) of the multi-year capital plan would be adopted by the governing body. It may be necessary to modify projects approved in the capital plan before adopting them in a capital budget. Modifications may be necessary based on changes in project scope, funding requirements,or other issues. If these modifications are material,jurisdictions should consider the impacts these may have on their multi-year capital and financial plans. Organizations should establish specific criteria early in the process to help prioritize capital submittals. The capital budget should be adopted by formal action of the legislative body, either as a component of the operating budget or as a separate capital budget. It should comply with all state and local legal requirements: Preparing and Adopting the Capital Budget. The capital budget should include the following information: • A definition of capital expenditure for that entity. • Summary information of capital projects by fund, category, etc. •