Budget Guide
FY 2023-24 Proposed Budget
Budget Guide
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FY 2023-24 Proposed Budget
Budget Guide
50 Our Mission
The mission of the City of Cupertino is to provide exceptional service, encourage all members of the community to take responsibility for one another, and support the values of education, innovation, and collaboration.
FY 2023-24 Proposed Budget
Budget Guide
51 Elements of the Budget Document
The budget is the City’s fundamental policy document. It describes the City’s goals and details how resources are allocated to achieve these goals. The budget serves as the annual financial plan, an operations guide, and a communications tool.
The budget guide provides an overview of the elements of the budget document. It includes a glossary of budget terminology. The budget document includes the following key elements:
Budget Message:
This section includes the City Manager’s transmiHal leHer submiHing the budget to the City Council. The Budget Message also summarizes the City’s current and long-term financial position, highlights new programs and organizational changes addressed in the budget, and outlines both short and long-term goals of our city government.
Budget Guide:
This section includes the City’s Mission and other tools to assist the reader in identifying key terminology in the budget document.
Community Profile:
This section describes Cupertino’s history, the economic and city profiles, community statistics, recreation and community services, education, and additional areas of interest in the city.
Financial Policies
: This section provides financial policies.
Financial Schedules:
This section provides financial information on projected revenues, expenditures, fund balances, and reserves. It includes the Financial Overview by Fund as well as detailed fund descriptions and information on all revenues and expenditures.
This section also includes a forecast of revenues, expenditures, and fund balance for the next ten years.
Additionally, this section includes an analysis of all City revenues by category. Revenue projections are based on trends, current economic indicators, and input from other agencies or consultants. Sales tax projections are based on input from our sales tax consultants, industry trends, and major company forecasts. Property tax revenues are projected by the county and adjusted by staff based on known trends.
Departmental Operating Budgets:
This section details historical and proposed expenditures by operating department. The City is organized into eight key operating functions, including Council and Commissions, Administration, Law Enforcement, Innovation and Technology, Administrative Services, Parks and Recreation, Community Development, and Public Works. Each department budget includes a summary narrative, financial information for the department and each of its major divisions, and staffing information.
Expenditures for employee compensation and benefits are based on negotiated contracts. The materials categories of expenditures are based on a zero-base budget, with increases each year by the Consumer Price Index (CPI).
Contract services are also based on a zero-based budget, with increases each year based on negotiated increases or CPI. Capital outlays are justified each year by the departments. Special Projects include one-time operational projects.
Departmental expenditures are divided into the following categories:
Employee Compensation
represents permanent full-time and part-time salary costs and overtime.
Employee Benefits
represents CalPERS retirement, health insurance costs, and other benefits.
Materials and Supplies
represent items purchased for repair and maintenance, operational activities such as books, uniforms and recreation supplies, office supplies, and conference and training costs.
Contract Services
represents legal, consulting, and other professional services, contract repair and maintenance, utility charges, training and memberships, equipment rentals, insurance, and employment services.
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Budget Guide
52 Cost Allocation
represents Cost Allocation and Internal Service charges to user departments.
Contingencies, 1
.5% of budgeted materials and contract costs, are designed for unexpected expenditures and/or emergencies.
Capital Outlay
represents expenditures for tangible fixed assets including land, buildings, furniture, equipment, and City vehicles.
Special Projects
represent any one-time projects or costs.
Debt Service
represents principal and interest payments on outstanding debt.
Other Financing Uses represent depreciation expenses.
Transfers Out represent transfers to other City funds.
Non-Departmental Operating Budgets:
This section details historical and proposed expenditures for inter-fund transfers and debt service payments.
Capital Improvement Program (CIP):
The Capital Improvement Program is in a separate document, called Capital Improvement Program, that details the proposed capital projects for the next five fiscal years. The five- year plan denotes funding sources and a description of each project. The City Council approves funding for capital projects yearly. The project may expend the funds over multiple years.
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Budget Guide
53 Glossary of Budget Terminology
The City's budget contains specialized and technical terminology that is unique to public finance and budgeting.
To help the reader understand the terms, a glossary of budgetary terminology is found below.
Accrual –
A basis of accounting in which revenues are recognized in the accounting period in which they are earned and expenses are recognized in the period in which they are incurred.
Adopted Budget
– Revenues and appropriations approved by the City Council in June for the following fiscal year.
Allocated Costs
– An expense charged by one department/division to another for services performed or expenditures of a general nature that are charged to one main account and allocated to other departments/divisions by a specified formula.
Amended Budget
– The status of appropriations between July 1 and June 30 includes the adopted budget, budget amendments, prior year encumbrances, approved carryovers, and transfers between objects, divisions and departments.
Appropriation
– An authorization made by the City Council that permits the City to incur obligations and to make expenditures of resources.
Balanced Budget –
A balanced budget requires that budgeted expenditures be equal to or less than projected revenues for the budget year.
Budget
– A financial plan for a specific period of time (fiscal year) that matches all planned revenues and expenditures with various municipal services.
Budget Amendment
– A legal procedure to revise a budget appropriation. Adjustments to expenditures within or between departmental budgets may be accomplished administratively. City Council approval is required for additional appropriations from fund balances or from new revenue sources.
California Department of Tax and Fee Administration
- A state agency responsible for administering various taxes, fees, and surcharges in California. This includes the collection and administration of sales and use taxes, which is a major revenue source for the state and local governments.
Capital Improvement Program
– A plan for capital expenditures to provide for the acquisition, expansion, or rehabilitation of an element of the City's physical plant to be incurred over a fixed period of several future years.
Capital Outlay
– Expenditures relating to the purchase of equipment, land, and other fixed assets.
Cost Allocation Plan
– A plan that details how indirect costs are calculated and allocated to user departments.
Cost Recovery
– The establishment of user fees that is equal to the full cost of providing services.
Deficit
- Occurs when expenditures exceed revenues.
Department
– A major administrative segment of the City that indicates overall management responsibility for an operation or a group of related operations within a functional area.
Division
– A unit of organization that reports to a department.
Enterprise Fund
– A fund established to account for activities that are financed and operated in a manner similar to private business enterprises, in which costs of providing services are primarily recovered through user fees.
Expenditure
– Utilization of fund resources. Expenditures include operating expenses, debt service, and capital outlays.
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54 Expenditure Category
– A basis for distinguishing types of expenditures. The major expenditure categories used by the City are employee compensation, employee benefits, materials, contract services, appropriations for contingency, special projects, capital outlay and debt service.
Fiscal Year
– A twelve-month time period signifying the beginning and ending period for recording financial transactions. The City has specified July 1 through June 30 for its fiscal year.
Full-Time Equivalent (FTE) –
The ratio of a position in comparison to the amount of time a regular, full-time employee normally works in a year. A full-time employee (1.00 FTE) is paid for 2,080 hours a year. Positions budgeted to work less than full-time are expressed as a percent of full-time.
Fund
– A fiscal and accounting entity for which the recording of financial transactions is made for the purpose of carrying on specific activities in accordance with the requirements placed upon the use of financial resources.
Fund Balance
– The net effect of assets less liabilities at any given point in time.
General Fund
– The fund used to account for the major operating revenues and expenditures of the City, except for those financial resources that are required to be accounted for in another fund category. General Fund revenues are derived primarily from property and other taxes.
Goal
– Broad mission statements that define the purpose of a department.
Governmental Fund –
Account for activities that are primarily tax-supported operations or other mandatory payments. Reported using the current financial resources measurement focus and the modified accrual basis of accounting.
Infrastructure
– Long-lived capital assets that normally are stationary in nature and can be preserved for a significantly greater number of years than most capital assets. Examples include roadways, bridges, and drainage systems.
Internal Service Fund
– A fund used to account for the services provided by one department to other departments on a cost-reimbursement basis.
Modified Accrual –
Under the modified accrual basis of accounting, revenues are recognized in the period in which they become available and measurable, and expenditures are recognized at the time a liability is incurred pursuant to appropriation authority.
Operating Budget
– A financial plan for the provision of direct service and support functions that provide basic governmental services. The operating budget contains appropriations for such expenditures as employee compensation, materials, contract services, capital outlay, and debt service. It does not include Capital Improvement Project expenditures.
Program
– A unit or organization that reports to a division.
Reserve
– An account used to designate a portion of the fund balance for specific future use and is, therefore, not available for general appropriation.
Revenue
– Increases in fund resources. Revenues include income from user fees, taxes, permits, and other sources.
Self-Supporting Activity
– An enterprise activity where all service costs (including principal and interest debt payments) are primarily covered solely from the earnings of the enterprise.
Structural Deficit
–The amount by which a government's expense is higher than its revenue received, regardless of the economic climate.
Subsidy
– Supplemental resources provided to ensure adequate funding when anticipated expenditures exceed FY 2023-24 Proposed Budget
Budget Guide
55 revenues.
Transfer Out –
Amounts transferred from one fund to another to assist in financing the services for the recipient fund.
User Fees
– Fees charged to users of a particular service provided by the City.
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Budget Guide
56 Commonly Used Acronyms
ABAG
Association of Bay Area Governments
ACFR
Annual Comprehensive Financial Report
ARPA
American Rescue Plan Act
B/PAC
Bicycle/Pedestrian Advisory Committee
BAAQMD
Bay Area Air Quality Management District
BMR
Below Market Rate
CAP
Cost Allocation Plan
CARES
Coronavirus Aid, Relief, and Economic Security Act
CDTFA
California Department of Tax and Fee Administration
CMTA
California Municipal Treasurers Association
CPI
Consumer Price Index
CPUC
California Public Utilities Commission
CSMFO
California Society of Municipal Finance Officers
CWP
City Work Program
EAP
Employee Assistance Program
EIR
Environmental Impact Statement
EOC
Emergency Operations Center
ERAF
Education Revenue Augmentation Fund
FEMA
Federal Emergency Management Agency
FLSA
Fair Labor Standards Act
FPPC
Fair Political Practices Commission
FSA
Flexible Spending Account
FY
Fiscal Year
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57 GASB
Governmental Accounting Standards Board
GFOA
Governmental Finance Officers Association
HVAC
Heating Ventilation and Air Conditioning
IPM
Integrated Pest Management
JPA
Joint Powers Authority
LAIF
Local Agency Investment Fund
LTD
Long Term Disability
MOU
Memorandum of Understanding
MTC
Metropolitan Transportation Commission
OES
Office of Emergency Services
OPEB
Other-Post Employment Benefits
PC
Planning Commission
PEMHCA
Public Employees’ Medical and Hospital Care Act
PERS
(aka CalPERS) Public Employees’ Retirement System
PTA
Parent Teacher Association
RDA
Redevelopment Agency
RFP
Request for Proposals
RFQ
Requests for Qualifications
RHNA
Regional Housing Needs Allocation
RMS
Records Management System
RWQCB
Regional Water Quality Control Board
UAL
Unfunded Actuarial Liability
UBC
Uniform Building Code
VSP
Vision Service Plan
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58 Revenues, Expenditures, and Fund Balance Table
Taxes
– Money received from tax revenue
Licenses and Permits
– Money received from license and permit fees
Use of Money and Property
– Interest earnings, facility. and concession rents
Intergovernmental Revenue
– Funds received from federal, state, or local governments such as grants Charges for Services
– Fees collected for services provided by the department Fines and Forfeitures
– Money received from fines and penalties
Miscellaneous Revenue
– Money received from various sources such as donations, salvage, and legal settlements Interdepartmental Revenue
– Interdepartmental service charges and transfers
Other Financing Sources
– Money received from bond proceeds, fixed asset proceeds, and refundable deposits FY 2023-24 Proposed Budget
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59 Total Revenues
– Total of all revenue categories
Employee Compensation –
Full-time and part-time salaries
Employee Benefits –
Employee benefits including health insurance and retirement Materials –
All material, conference, and training costs
Contract Services –
All contracted goods and services
Cost Allocation –
Cost of services from other City departments
Capital Outlay –
Land, buildings, vehicles, infrastructure, and assets used in operation beyond one year Special Projects –
One-time projects or costs
Other Financing Uses
–
Depreciation and refundable deposit expenses
Debt Service
–
Principal and interest payments for outstanding debt
Transfers Out
–
Transfers out to other City funds
Contingencies –
Funds for unexpected expenses and emergencies
Total Expenditures
– Total of all expenditure categories
Change in Fund Balance
– Total Revenues minus Total Expenditures plus General Fund Contribution. Fund balance is the difference between assets and liabilities.
General Fund Contribution
– Use of General Fund fund balance, for programs in the General Fund, or use of transfers from the General Fund, for programs not in the General Fund.
The inclusion of current and historical "actual" and "budget" information is a necessary component of the Government Finance Officer's Association (GFOA) reporting requirements. Due to the extensive amount of financial data, it is important to understand the meaning of these tables. "Actual" data represents actual revenues or expenditures that have been recognized or incurred in the respective fiscal year. Although amounts were budgeted in those years, these actual amounts are irrespective of the budget which should be taken into account when comparing historical actuals with current budgeted figures. Historical budget versus actual information for the last 4 fiscal years at the account detail level is available in the Appendix on the City's budget website (
cupertino.org/budget
).
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