Yorba Linda Essay Example
Yorba Linda Essay Example

Yorba Linda Essay Example

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Whether he has managed to achieve each of these goals set forth, will be discussed as below: Forum for discussion and understandable y members of the City Council To a certain extent, it can be deduced that the members of the city council have understood the budget as they have approved the all or most previous budgets. It is mentioned in the case that, 'for only the second time in city history, the budget was not unanimously approved' , giving us the expression that the city council members have usually understood the budget rationales and figures laid out in the budget, enough to not raise any objections on any of the programs.

Also, Budget format shown in the exhibit is also easily understandable even for accounting aground. However, one can challenge the assumptions above by inferring that the only basi

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s for approving the budget without question for many years was the limited knowledge on public administration matters by the city council's members.

It is observed that none of the members are from a public administration background and thus, it is likely that they do not fully understand the complexities and objectives of public sector budgeting.

The fact that Mr. Gulling did not vote in favor of the budget shows that he is aware of the inefficiencies in the allocation of the city's funds, unlike the other embers who approved without objection. A healthy platform for discussion could not be established as Mr. Simian has failed to present the council with a set of alternative options to decide on 'final priorities'.

If a council member such as Mr.

Gulling raises concern on the proposed expenditure

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increase for police services, the city manager should be prepared with possible options such as negotiations with City of Bread or outsourcing from other nearby states. Instead Mr. Simian 'pressed for approval of the budget over Mr. Scullion's objections'. Communicate and involve the community on he city's budget setting process This goal was not achieved as 'typically, only two or three citizens attended a budget hearing.

It was Mr. Simian's objective to be transparent to the citizens of the budget's priorities as they were after all, the 'ultimate consumers' of public services and facilities. This can be attributed to the Worry Linda taxation system, whereby the residents are not taxed on their hard earned income and instead only pay sales tax, property tax and cable franchise fees, which are of negligible amounts or not frequent. Thus, the citizens do not bother on the budgeting phenomenon as t does not directly implicate their lives.

Analyses current and projected activities by city department directors The Worry Linda budgeting process has definitely failed to achieve this particular goal above all else as it is mentioned that the actual and budgeted program performance of each city department were not evaluated in determining department performance. Since there are no monetary rewards or any positive reinforcements linked to the performance of each department, the directors are not motivated to perform to exceed expectations in terms of resource efficiency and program effectiveness.

Although program priorities are decided and being 'realistic' in the cost cutting process of the budget preparing phase, there is no inseparability for the proper delivery of these programs . A performance indicator is needed to provide essential information as

to whether the programmers have been realistically planned and properly managed. The element of accountability is rather lacking in the allocation and expenditure of Worry Land's funds for various programs because there is no analysis on the effectiveness of each program as per budgeted figures. B) Are those goals the right ones?

Justify your answer In my opinion, the goals are not altogether the right combination of objectives.

The budgeting goals are, to a certain extent functional, but not comprehensive. These goals are more focused on the qualitative objectives and do not regard the quantitative ones. An ideal budget aims to achieve a balance of both qualitative and quantitative objectives. Qualitative Aspects The budget generally strives to be a fiscal policy instrument, whereby economic, social and administrative goals are detailed in order to strengthen economic growth, reduce inflation and improve the livelihood of the immunity involved.

Even on a qualitative basis, the scope of the goals set by the city manager is narrowed down to communicating towards the various member groups of the municipality and allocation of priorities amongst department managers in the pre-approval phase of the budget. In setting the goal Of involving the citizens as an integral party to the budget setting process, the city manager needs to be more transparent in aspects of social interest.

A more explicit statement of budgetary goals serves to provide some statement of community goals to publicly inform the residents (taxpayers) hat the local government intends to accomplish for the social needs and overall welfare of the community. A more explicit statement of budgetary goals would also include objectives to strengthen the accountability of each department not

only in terms of legal compliance but also in terms of programmer delivery for upholding public interest and social justice.

Besides being prudent in analyzing current and projected activities, each department director should be liable to report on the proper management of funds. As there are no monetary incentives for the department directors, they are not titivated to be conservative on their expenditure forecasts.

Quantitative aspects The budget is adopted as a management instrument for optimal allocation of limited financial resources so that objectives are achieved as planned. There is clearly a lack of any objectives with regards to measuring the efficiency and effectiveness of the city's budgeted programmers and operations.

The main purpose of performance evaluation is to assess the relevance, results and impact of the programmers for each department so that comparisons between actual output for a given period and targeted output can be made. A measurable set of goals gives a more concrete understanding of the municipality productivity to the decision makers and common citizens, thus instilling the element of transparency. The underlying rationale for budgeting is for the optimal allocation of public funds to Worry Land's city programmers in order to fulfill city's policy goals within a financial constraint.

Thus, it is crucial that management of limited financial resources to be evaluated in terms of efficiency and effectiveness.

C) Does the city council's failure to approve the budget unanimously reflect Daly on the city manager and his staff and/or the budgeting process? Why or why not? (mm) In my humble opinion, I would not exclusively say that the unanimous approval of the budget by city council members depicted an unfavorable image

of the city manager, his staff and the budgeting process.

After all, the budget had received a majority vote from most of the council anyways. Nevertheless, Mr. Gulling has the right to question the significant rise in police costs and the preparers of the budget are answerable to his objections with good reason. Most of the parties mentioned contribute to the stile situation in one way or another: City manager's failure to provide alternatives Mr. Simian has failed to present the council with a set of alternative options to decide on 'final priorities' before approval.

If a council member such as Mr. Gulling raises concern on the proposed expenditure increase for police services, the city manager should be prepared with possible options such as further negotiations with City of Bread or outsourcing from other nearby states. Instead Mr. Simian 'pressed for approval of the budget over Mr. Scullion's objections'.

The city manager is liable since he is the sole installation of the budget from various departments before submitting to the council, thus raising concerns that he may act on personal interests.

He is the person responsible for preparing Worry Land's service contracts with City of Bread and as a result, responsible for expenditure of these contracts from the city's fund. Budgeting process has no review or audit phase The lack of a review for the budgeted allocations by an independent 3rd party or an internal audit committee gives us the impression that the information and figures presented for approval have no depiction of reliability or reducibility.

The reasons for increases in police force or other projected costs are ambiguous and not justified with proper sources

and independent reviews.

If police services are contracted on service hours basis and a portion of Bread's overhead costs, there should be supporting justifications on why Worry Linda should bear increases in police personnel salary with good reason.

As stated in the case, the actual and budgeted program performance of each city department was not compared in performance evaluation. As a result , the decision-makers are left in the dark on the execution of public orgasm and proper discharge of funds. City council's lack of public administration background To a certain extent, it can be deduced that the members of the city council have understood the budget as they have approved almost all the previous budgets.

It is mentioned in the case that, 'for only the second time in city history, the budget was not unanimously approved' , giving us the expression that the city council members have usually understood the budget rationales and figures laid out in the budget, enough to not raise any objections on any of the programs. However, one can refute the assumptions above by inferring that the only basis for approving the budget without question for many years was the limited knowledge on public administration matters by the city council's members.

It is observed that none of the members are from a public administration background and thus, it is likely that they do not fully members who approved without objection. Department directors' resistance to change Resistance to change by department directors is also observed in the budgeting process as some of them are planning for their department's expenditures using line-item budgeting technique instead of program budgeting. This will indeed lead

to inconsistencies in budgeting methods amongst departments and allow gaps for inefficient apportionment of city funds.

Although budget preparation guidelines and a chart Of accounts for program budgeting approach had been distributed to each department director, they have instead adopted line item approach which is not a realistic projection of program expenditures.

Since there are no monetary rewards or any positive reinforcements linked to the performance of each department, the directors are not motivated to perform to exceed expectations in terms of resource efficiency and program effectiveness. This type of management culture leads to complacent workers who are not willing to innovate or adapt to the changing environment. 2. A) What is Fund Accounting? Mm) One of the fundamental principles underlying government accounting, fund accounting is a financial accounting technique adopted for the purposes of segregating resources into independent, separate constituents called funds, to identify both the source of funds and the use of funds. For the purposes Of stewardship, government revenues are categorized into a series of funds, each of which accommodates towards a specific welfare activity of the overspent.

Funds are separate fiscal and accounting entities and include cash as well as non-cash resources. Each fund is segregated according to the purposes for which they are to be expended.

Each fund has its own self- balancing set of accounts with complete double entry and financial statements. This means that each fund is a self-contained accounting entity with its own assets, liabilities, revenues, expenses and fund balance (Section 1300, Governmental Accounting Standards Board, GABS). The basis of accounting for funds is typically the cash basis or the modified cash basis ender which revenue is

recorded only when cash is received, and expenditure recognized only when cash is paid, regardless of the fact that the transactions might have occurred in the previous accounting period.

Under this basis, payable and receivables are not taken into account. Fund accounting assists in budget control by providing information that enables managers to review their expenditures to ensure they are within their allocations and also serves to demonstrate compliance with funding sources. B) What are its strengths and weaknesses as compared to standards accrual accounting for use in a municipality such as Worry Linda? Did the City of Worry Linda expect to have a good year in fiscal year 1 991-92? How do you judge?

The basis of accounting for funds is typically the cash basis or the modified cash basis under which revenue is recorded only when cash is received, and expenditure recognized only when cash is paid, regardless of the fact that the transactions might have transpired in the previous accounting period. Under this basis, payable and receivables are not taken into account.

STRENGTHS of fund accounting over accrual accounting Enhances Accountability and financial control. As there is a specific source of fund for each program under fund accounting, one can analyses the results of each project individually.

Fund accounting also offers valuable information to assist decision-makers to keep expenditures within allocated financial limits. In this sense, accountability is assumed by the program manager for proper usage of it. Under accrual system, there is a lack of accountability as all expensed transactions are recorded under the profit and loss account in order to derive the most profit. Expenditures are not limited to a

certain amount, and thus, there is less incentive to save costs.

Accurate tracking of cash flow.

Fund accounting on cash basis shows an accurate representation of the cash flow of program activity. Since it only records revenue and expenses when they actually appear in the program account, it is easier to determine how much cash is available on hand in the particular moment. Meanwhile, accrual accounting encounters inaccurate representation of the cash flow. Although the accrual method represents the flow of business income and debts on a more accurate scale, it does not provide information as to what cash reserves are available, which could pose a cash flow retirement.

For example, the revenue account may display thousands of dollars in program earnings, while in reality the cash account is empty because the cash has not been received for that period.

Understandability and easy delegation of work. Fund accounting usually adopts cash basis which is understood by people with little or no financial accounting background as it involves only a single entry system. Thus, work can be delegated without the involvement of a trained bookkeeper or accountant. The complexities of accrual accounting concepts restrict the delegation of work.

Easy bookkeeping.

Tracking a program's progress under cash basis fund accounting is relatively straightforward as transactions are recorded only when cash leaves or enters the account. Thus,it saves time and is easy to operate. For accrual accounting both the transaction date of the sale and the date of received payment are recorded in separate accounts, thus requiring more complex bookkeeping mechanisms and/or software. DRAWBACKS of fund accounting over accrual accounting Indistinct efficiency parameters.

Gender fund accounting, the only

way to determine a program or activity's effectiveness is to check whether the entirety of the fund has been exhausted. This is because the fund has been budgeted and allocated based on the program's requirements and expected to be expended as per allocation, regardless Of inflation and other external factors.

On accrual basis, savings and excess cash infers that efficiency has been achieved to reduce expenditure and thus, generate more profits. Time consideration. Under fund accounting, a project or program can be stretched on for a very long time period.

This means that inherent factors such as inflation, currency rates, political and legal settings may vary over the course f that time period-As a result, the amount originally allocated for that project may not be enough to cover these external inherent costs. In accrual accounting, yearly performance is easily evaluated as the statement of income and Lack of matching concept.

Fund accounting on cash basis accounting does not accord with the matching concept. An accrual system's double entry bookkeeping offer some form of internal control unlike cash accounting with a single entry system.

This means every financial transaction results in both a debit entry in one account and an equal, offsetting credit entry in another account. In the context of fund accounting, Worry Land's expectations for fiscal year 1991-92 do not project a positive outlook. Mr. Simian had requested department managers to be conservative in their budgeted plans and cut costs wherever necessary due to the fact that initial budget expenditure submission was too high.

The total proposed expenses of $30,331 , 200 is significantly higher than total projected revenues of $23,734,300.

This high increase

can be partially attributed to the high number of capital improvements undertaken by Worry Linda in 1991 such as remodeling of the library, street maintenance and design of the immunity centre. This amount of capital expenditure is justified by the notion that some of these projects were scheduled for completion in 1 992 and 1 993 and thus, there would be a huge decrease in capital improvement costs by 42. 5% after fiscal year 1991-92.

A sharp increase in police service costs at 24. 9% also contributed to the huge amount of expenses.

For 1991-92, city officials proposed utilizing $1. 4 million in property tax funds to pay city operating costs. In earlier years, much of the property tax money has gone toward capital improvement projects and to city reserves for emergency tuitions. As with other cities, the general fund should be devoted to financing the general administration and operations of the municipality.

Worry Linda maintains its general fund reserves at 50% of the operating budget as a back-up plan in the event of a major catastrophe.

This may limit the purpose of the general fund, whereby the huge amount of general fund contingency reserves could have been utilized for the betterment of the city's operations, such as the establishment of essential public services like the city's own police force or sewage treatment service. However, the city management, in the effort to maintain this 50% fiscal base, has used property tax fund to service operations instead of the general fund. This had lead to inefficient financial control as the property tax monies are usually used to inject funds for capital improvement projects in Worry Linda

(refer to attached article in appendix).

Therefore, the fact that fund sources have not been expended for their original purpose indicates that Worry Linda has projected the fiscal year 1991-92 to not be a 'good' year. A significant amount of 5. 3% increase in department expenditure and decrease in projected revenue as compared to revises year is proof of this. 3. A) Evaluate the overall financial control system used by the City of Worry Linda. An ideal financial control system in a municipality aims to control and increase efficiency of the expenditure of public monies for the sake of public benefit.

In a sense, we can deduce that Worry Linda has a mediocre mode of financial control due to several palpable gaps in its approaches in the context of budgeting tools, service outsourcing and delegation of responsibilities, amongst others. Here, the overall financial control mechanisms are elaborated and evaluated: Budgeting Process as a financial control Achaeans The core purpose for budgeting is as a tool for planning and allocating the resources to municipal activities and an assurance of commitment to the proper usage of public monies.

Thus, the Worry Linda budget is an instrument for revenue estimation, expenditure control, establishing policies and priorities which are unique to the city. A budget manual with guidelines and charts of accounts have been introduced so that there is a clarity of purpose, process and standards which should be adhered to. This is a form of financial control to standardize and harmonize accounting techniques and documentation processes. Worry Linda employs a multilayer budgeting approach which means that it is able to address long term financial goals and strategies.

This

is because many programs and capital projects lasted for more than one year. Multilayer budgeting encourages orderly spending patterns as per year allocated and also saves time and effort in consolidating annual budgets. However, Worry Linda failed to adhere to the 2-year budgets allocations due to the Council authorizing additional expenditures for projects that occurred after the budget was prepared. This may distort budget plans and inefficient sourcing of funds to finance newer activities. Program budgeting is the format used whereby programs are funded based on their requirements which are in tune with the municipality objectives.

As there is a specific source of fund for each program, one can analyses the results of each project individually to ensure expenditures are within allocated financial limits.

This enhances accountability for the program executioner. One predicament regarding this budgeting approach is natural resistance to change, particularly among department directors, who still seem to use line- item budgeting to determine their required expenditure, thus, defeating the purpose of program budgeting. Although the city management has executed the programs, there is no evaluation of the results.

As stated, the actual and budgeted program performance of each city department was not compared in performance evaluation.

As a result, the decision-makers are left in the dark on the execution of public programs and proper discharge of funds. The lack of a review for the budgeted allocations by an independent 3rd party or even an internal audit committee gives us the impression that the information and figures presented for approval have no depiction of reliability or credibility. The rationales for increases in police force or other rejected costs are ambiguous and not justified

with proper sources and independent reviews.

Police services are contracted on service hour basis and a portion of Bread's overhead costs.

Supporting justifications on why Worry Linda should bear increases of 24. 9% in police personnel salary should have been provided for review by the city council as a form of financial control. Contract of services as a financial control mechanism The focal approach adopted by Worry Linda in the control of public expenditure is the outsourcing of services from nearby counties, municipalities and private agencies on a contract basis.

This approach has enabled the city to reduce or delay non-critical services or projects when revenues were not readily available. Additionally, it means Worry Linda is relieved from employing full time workers for some services and incurred minimal overhead costs. The neighboring city of Bread provided police protection whilst the Orange County provided sewage treatment and public transportation services.

Although this has resulted in cost savings, Worry Land's management has to bear the risk of a contractor defaulting or temporary disablement of the contract.

A public commotion and disorder may occur in these kinds of situations. For example, if the City of Bread withdraws its police services all of a sudden, chaos and crime will be rampant until management has found another contracting city to restore order in Worry Linda. Another predicament faced through outsourcing of major services is that Worry Linda management has limited power to negotiate the charges of the services provided. It is observed that contracting cities such as Bread would take advantage of its position as the sole provider of police services to increase fees and indirect overhead expenses.

Fund accounting

as a financial control mechanism Fund accounting technique is required by California state law. As there is a specific source of fund for each program under fund accounting one can analyses the results of each project individually. Fund accounting also offers valuable information to assist decision-makers to keep expenditures within allocated financial limits. Fund accounting shows an accurate representation determine how much cash is has been expended at that particular moment.

As with other cities, the general fund should be devoted to financing the general administration and operations of the municipality.

Worry Linda maintains its general fund reserves at 50% of the operating budget as a back- p plan in the event of a major catastrophe. This may limit the purpose of the general fund, whereby the huge amount of general fund contingency reserves could have been utilized for the betterment of the city's operations, such as the establishment of essential public services like the city's own police force or sewage treatment service.

However, the city management, in the effort to maintain this 50% fiscal base, has used property tax fund to service operations instead of the general fund. This had lead to inefficient financial control as the property tax monies are usually used to inject funds for capital improvement projects in Worry Linda (refer to attached article in appendix).

Delegation of responsibilities as a financial control mechanism Responsibility is passed on to each department director in the budget preparation phase to serve as a form of financial control.

This is so that each department is accountable to make a critical evaluation of existing services and programs and review priorities so that efficient allocation Of

resources can be achieved. This is observed in the budget manual prepared by Mr. Simian which requested that departments be conservative in their plans.

Alt was prudent to involve department managers in the cost-cutting process as they were more well-versed in the department's activities.

Although program priorities are decided and being 'realistic' in the cost cutting process of the budget preparing phase, there is no inseparability for the proper delivery of these programs.

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