Final Public Administration of $10 Million for the Budgetary Allocation of City Council’s Fiscal Year Expenditure

Posted: August 27th, 2021

Final Public Administration of $10 Million for the Budgetary Allocation of City Council’s Fiscal Year Expenditure

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Introduction

With the study of public administration being considered normative in reality, its practice instead seems pragmatic in the application. Ideally, the practice of public administration is associated with the principles of efficiency and economy. Specifically, a public officer entrusted with drafting a budget needs to make proposals in line with the estimated costs. It implies that the drafting of a proposal for both the Mayor and City Council needs to meet the minimum costs. Therefore, this paper discusses the provision of a business plan in the way$10 million will be effectively and efficiently allocated to help meet the City Council’s expenditure with a population size of 250,000 people.

Examining Differences between Public and Private Sector Accounting Principles

The principle of private-sector accounting has set forth a precedent benching for public sector accounting. Notably, public sector accounting practice presently follows the guidelines of generally accepted accounting principles (GAAP) (Chan 13). Since both the private and public sector principles might seem alike, significant differences distinguish their applications. For example, public sector accounting principles entail economy, efficiency, consistency, and historical prudence. On the contrary, the principles that govern the application of private sector accounting compose of cost, matching, full disclosure, and objectivity. Whereas the principle of objectivity drives the implementation of private sector accounting, the minimum cost principle governs the working dynamics of public administration (Chan 13). Therefore, the business plan for City Council will involve efficient utilization of $10 million to cover all the expenses at minimum costs.

Integrating Fund Accounting and Financial Controls

The idea of fund accounting revolves around the money in the account gathered for an exact eventual purpose. Notably, this concept has existed throughout governmental accounting history in the US(Chan 14). The fund accounting execution occurs across the suggestion of various expendable fund entities, such as proprietary and fiduciary. Similarly, the implementation of fund accounting requires the integration of financial controls to extend the expenditure of government activities over a year. Therefore, the purposes for which such funds are spent needs to be prescribed to enhance an exclusive coverage of all the expenditure items. In this case, the allocated $10 million need to cater for all the running costs of 250,000 people in the City Council. An example of fund accounting entails implementing a capital project like a debt service fund intended to generalize both the interest and principal payments, especially on a long-term basis(Chan 14). Categorically, the debt service fund has the features of financial controls, namely, interest account. Undoubtedly, there is a proper integration of both interest account coupled with a separate principal account. Therefore, fund accounting does not have fund resources (cash-inflows), a decrease in fund resources (cash-outflows), and a shift in fund balance(Chan 14). The integration of fund accounting with financial controls reinforces public sector accounting’s need to reveal both the accrual and budgetary accounting expressly. Consequently, the incorporation of financial controls and fund accounting brings about efficient utilization and control of funds.

Assessing Approaches to Control and Management of Public Expenditures

The application of public expenditure management (PEM) for drafting and appropriating budget revolves around three approaches. The approaches are relevant for allocating and controlling the public expenditures (Chan 15). Indeed, the consideration of either one of the three approaches aims to increase the preferred outcome for the City Council. Categorically, the first mechanism involves aggregate fiscal discipline in that the spending totals and decisions regarding such budgets need to be made independently of each other. Similarly, the budget totals need to be enforced throughout the fiscal year, thus preventing spending totals from surpassing the demand limit.Imperatively,this approach to PEM will curb overspending, thus leading to small deficit budget balances (Chan 15). The second mechanism to PEM is allocative efficiency, where most of the spending decisions and responsibilities are made from the decentralized ministries and departments. With budget supplementaryand cutbacks have done at specific ministries and departments, this kind of approach averts any budgetary conflicts since the informational demand is easily managed. Therefore, the spenders do not have to jeopardize the whole process of setting priority and implementing the budget because most strategic decision-making is done centrally by the Office of the Mayor. The last measure to PEM is operational efficiency, which shifts the consideration of spending control from budget inputs to outputs. Undoubtedly, operational efficiency revolves around the decentralization of the operating resources’ management process, intending to sustain hard constraints on the costs of planning for the budget (Chan 16). Therefore, the whole approach to PEM is advantageous in enhancing the entire budget-writing process’s economy. Nonetheless, this business plan recommends using Operational Efficiency as the best approach to PEM for administeringa $10 million fund. Thus, the employment of such a technique to PEM for City Council ensures that there will be a 100% match of the federal funds and total spending.
Explaining Government Financial Reporting Requirements

Government financial reporting is a process by which a functional unit of both the local and federal authorities reports their financial positions and activities to the general public. Since these reports are generally standard, the public and oversight bodies can use such reports to measure the government’s efficiency, financial capacity, and effectiveness to administer expenditure (OECD 12). Regarding the GAAP, the public sector is expected to complete reports on cash flows, operations that promote profit-making, and the relevant sectors’ financial conditions. Therefore, most western democracies widely share the following basic requirements of financial reporting.

Credibility

Government financial reports must be trustworthy, objective, and reliable in providing information, which fits in line with the highly independent standards from relevant agencies.

Fair Presentation

To ensure effective administration of public funds, the government needs to reveal the most accuratefinancial conditions and its operating performance despite the difficulties associated with unnecessary disclosure of useful info.

Value Addition

Reporting a budget needs to happen in a manner that the relevant government will add value concerning its already disclosed fiscal information. Constrained by the government’s historical orientation and the unavoidable lag throughout the preparation plan, the substantial value of fiscal financial reports underscore the need to provide a long-term standpoint on developments.

Consistency and Uniformity

The financial reporting needs to employ similar measurement rules over time without initiating any circumstantial change that would decrease the reports’ understandability and comparability. Besides, financial, budgetary, and statistical reporting proceduresneed to be in harmony at all times.

Annual Financial Statements

At the end of every year, the government needs to issue three primary financial statements: balance sheet, statement of cash flow, and gains and losses.

Financial Disclosures

General financial statements need to be supplemented by extra-financial data to facilitate financial accountability and transparency. All these are done through the imposing of limitations by the accounting acknowledgment criteria together with measurement techniques.

Reporting Entity

A general financial statement needs to cover government in totality in terms ofthe principal government control entity to well-ordered entities for which the primary government is financially answerable. Similarly, the fiscal associations existing among these entities need clarification concerning the aggregated financial statements (OECD 15). Also, there is a need to have additional reporting on the government’s relevant ministries and departments’ preparedness to promote effective management and oversight.

Full Reporting Capacity

A government’s financial information system needs to have the capacity to generate data, which is useful for determining budget implementation and interim.

Apart from that, financial reporting seems one of the pillars that support better fiscal management. Specifically, high-quality financial reporting is vital in ensuring that the government’s fiscal decisions are genuinely accurate and updated (OECD 12). Therefore, financial reports’ usefulness extends to the point that legislators and auditors can hold the government responsible for service delivery and duties performance. Similarly, financial reports provide relevant info about markets for stakeholders to comprehend the government’s financial operations concerning economic decisions. Notably, high-quality financial reporting revolves around the need for requirements to sound complete regarding the entire government’s financial operations (OECD 13). Besides, the quality of financial reporting needs to express comprehensiveness in that all relevant info about entities are well covered. Also, the prerequisites of financial reporting need to concentrate on a heightened sense of external validation. In this regard, this business plan’s financial statements will be reported by improving the completeness of each financial report. Indeed, this will be done by putting into consideration the accrual accounting mechanisms (OECD 13). Thus, the implementation of accrual accounting is meant to create a balance sheet that would report on varying levels of assets and liabilities.

Analyzing Financial Statements and Budgets to Make Appropriate Administrative Decisions, and Apply the Budgets as a Disciplinary Process

The preparation of a government budget entails making difficult decisions at a particular cost. However, the City Council may choose to avoid such choices but would impact a far greater cost. Most importantly, the budget preparers need to undertake implicit trade-offs that are relevant in formulating the budget (Walther and Skousen 108) explicitly. Such actions would permit the seamless execution of prioritized programs while sidestepping other considerations of political programs. Therefore, it is inefficient to initiate postponement mechanisms that would delay the execution of the budget process despite hard choices. From this analysis of the budget, it is possible that the overestimation of the streams of revenue coupled with an effect of continued commitments must be implemented into the budget-making (Walther and Skousen 108). Such underestimations will sustain sharp cuts in the expenditure, thus making the budget seem easier. On the other hand, the overestimation of revenue streams, which results from technical factors like a bad appraisal, sustain an excessive number of programs on the budget, leading to downplayed difficulties throughout the control financing. The reason is that many quantities of expenditures seem similar to the financial constraints associated with preparing a budget. Furthermore, impacting the right tactics to effect changes on the unrealistic budget seems complicated, especially during the execution process. Indeed, the implementation of selective cash rationing affects the process of budget execution differently because varied substitute priorities delay the program activities (Walther and Skousen 108). Consequently, the application of budget as a disciplinary process would compel for the initiation of regulative commitment measures as a means of sidestepping hard budgetary choices. The following figures also involve the estimated budgets and financial statements associated with the City Council’s mandate to administer funds over a population of 250,000.

Table 1.  Estimated budget expenditure for a City Council with a 250,000 population size

Expenditure Items	Amount in $
Wages	$2,220,000
Benefits	$2,177,000
Mandated programs	$2,045,000
Contracted services	$1,200,000
Sales Tax – City Council	$800,000
Inter-fund Transfers – Operating	$40,000
Inter-fund Transfers – Debt Service	$48,000
Scheduled Debt Service Payment	$82,000
Inter-departmentals	$67,000
All other	$1,321,000
Total Gross Expenses	$10,000,000

Table 2. Consolidated Revenues and Appropriations by Category

Revenues	General Funds       ($)	Special Revenue Funds   ($)	Debt Service Funds ($)	Internal Service ($)	Component Units        ($)	All Funds ($)
Property Tax Levy	1,200,000	0	0	0	0	1,200,000
Deferred/Uncollectible	-137,000	0	0	0	0	-1,370,00
Prior Year Collections	91,000	0	0	0	0	91,000
Pilots/Interests & Penalties	101,000	0	0	0	0	101,000
Room Occupancy Tax	42,500	40,500	0	0	0	83,000
Abstract Charges	131,000	90,000	0	0	0	221,000
Sales Tax – City Council Portion	1,120,000	0	0	0	0	1,120,000
Sales Tax – City Council/ School Portion	907,000	0	0	0	0	907,000
State Aid	1,050,000	150,000	0	0	260,000	1,460,000
Federal Aid	1,034,000	150,000	0	0	240,000	1,424,000
Interdepartmentals	670,000	52,000	0	51,000	550,650	1,323,650
All Other	600,500	550,000	450,500	332,000	235,000	2,168,000
Subtotal Revenues	6,810,000	1,032,500	450,500	383,000	1,285,650	9,961,650
Fund Balance
Fund Balance	0	38,350	0	0	0	38,350
Subtotal Fund balance	0	38,350	0	0	0	38,350
Total Revenues	6,810,000	1,070,850	450,500	383,000	1,285,650	10,000,00

Appropriations	General Funds  ($)	Special Revenue Funds   ($)	Debt Service Funds ($)	Internal Service ($)	Component Units        ($)	All Funds ($)
Wages	1,600,000	220,000	0	0	400,000	2,220,000
Benefits	1,500,000	177,000	0	200,000	300,000	2,177,000
Mandated programs	2,045,000	0	0	0	0	2,045,000
Contracted services	500,000	155,000	0	245,000	300,000	1,200,000
Sales Tax – City Council	800,000	0	0	0	0	800,000
Inter-fund Transfers – Operating	20,000	20,000	0	0	0	40,000
Inter-fund Transfers – Debt Service	26,000	22,000	0	0	0	48,000
Scheduled Debt Service Payment	42,000	40,000	0	0	0	82,000
Inter-departmentals	41,000	8,000	0	10,000	8,000	67,000
All other	700,000	121,000	200,000	150,000	150,000	1,321,000
Total Expense	7,274,000	763,000	200,000	605,000	1,158,000	10,000,000

Conclusion

The idea around the creation and development of fund accounting entails promoting comprehensiveness and fair presentation of non-profit undertaking transactions. The whole act of combining both the fund accounting and financial controls is based on the fact that specific funds have predefined purposes. Through such measures, the government can plan effectively to ensure that total spending is predefined to meet particular long-term goals. Regardless of the non-profit capacity of government funding, the reporting of its expenditure activities need to happen economically. Although financial reporting is considered complex, the info that facilitates such reporting should center on efficiency, minimum costs, and the economy. Overall, preparation of government budget entails making challenging decisions at a particular cost despite that avoidance of some decisions might trigger a far wider cost. Thus, the budget preparers need to effect implicit trade-offs relevant for articulating the process of budget making explicitly.

Works Cited

Chan, Liam J. “Government Accounting: An Assessment of Theory, Purposes and Standards,” Public Money and Management, 2003, pp. 13–20.

OECD. “Quality of Governments’ Financial Reporting.” Government at a Glance, 2017. DOI: https://doi.org/10.1787/gov_glance-2017-44-en

Walther, Larry, and Christopher J. Skousen. “Budget and Decision Making.” 2009, www.library.ku.ac.ke/wp-content/downloads/2011/08/Bookboon/Accounting/budgeting-and-decision-making.pdf. Accessed 11 November 2020.