Budget Tools: Financial Methods in the Public Sector

Half Title
CQ Press
Title
Copyright
Contents
Tables, Figures, Boxes, and Worksheets
Preface
How to Use This Book
Acknowledgments
Module 1: The Craft of Budgeting
	References
Module 2: Organizing Budget Data
	Understanding the Chart of Accounts
	Understanding Accounting Codes
		Fund Sources
		Programs
		Object Codes
	Summary
	Assignments
	Additional Readings
	Appendix A: Uniform Chart of Accounts for Local Governments of Utah October 29, 2013
Module 3: Fixed and Variable Costs
	Definitions of Fixed, Variable, and Step Costs
	In-Class Exercise: The MLK Settlement House
	Summary
	Discussion Questions
	Assignments
	Additional Readings
Module 4: Breakeven Analysis
	Definition of Breakeven Analysis
	A Simple Equation
		Midtown Soup Kitchen and Breakeven Analysis
	Summary
	Discussion Questions
	Assignments
	Additional Readings
Module 5: Cost Allocation
	Selected Cost-Accounting Concepts
		Cost Accounting and Cost Objectives
		Program and Service Centers
		Direct Versus Indirect Costs
		Pool and Base
	Cost Allocation Methods
		Direct Allocation Method
		Step-Down Method
	Summary
	Assignments
	Additional Readings
Module 6: Time Value of Money
	Some Basic Concepts of the Time Value of Money
		Formulas to Compute Time Value of Money and Simple Examples
		Formulas to Compute Present Value of Money and Simple Examples
	Net Present Value: Decision Criteria
	Summary
	Discussion Questions
	Assignments
	Additional Reading
Module 7: Inflation
	Nominal Versus Constant or Real Dollars
	Base Year
	Calculation of Constant Dollars
	Deflators and Indexes
	Summary
	Assignments
	Additional Readings
Module 8: Sensitivity Analysis
	Scenario Analysis
		Example of Scenario Analysis
	Understanding Sensitivity Analysis
	Statistical Methods
	Summary
	Assignments
	Additional Readings
Module 9: Integrating Budgeting With Performance
	Budget Proposal
	Budget Implementation
	Framework for Performance Budgeting
	Linking Performance Measures With the Budget
	Targets
		Benchmarks
		Standards
		Comparison With Prior Successes
	Actuals
	Variances
	Reporting Performance Data
		Integrating Performance Indicators With Expenditures
	Outcomes
		Outcome Measures
		Outcomes and Causality
	Outputs
		Outputs and Outcomes
		Early-Stage Outcomes
	Process Measures
		Measures of Satisfaction
		Process Efficiency
		Process Effectiveness
		Financial Efficiency
	Equity
	Difficulties in Performance Budgeting
	Summary
	Assignments
	References
	Additional Readings
Module 10: The Budget Process: An Overview
	The Budget Call
	The Base Budget
	The Budget Manual
		Descriptive Text
		Performance Information
		Personnel Information
		Financial Information
	Decision Packages
	Additional Topics
	Time Frame
	Agency Role in the Budget Process
	The Executive Budget Submission
	The Legislative Budget Process
	Executive Approval
	Implementation and Follow-On
	Summary
	Assignment
	Additional Readings
	Appendix A: Budget Guidance
	Appendix B: Priorities
	Appendix C: Example of Virginia’s Decision Package
Module 11: The Budget Document
	Organization of the Budget Document
		Transmittal Letter
		Budget Message or Executive Summary
		Revenue Estimates
		Detailed Schedules
		Capital Budgets
	Budget Information
	Budget Levels
	Budget Formats
		Line-Item Budgets
		Performance Budgets
		Program Budgets
	Other Information in the Budget
	Proposed Appropriation
	Summary
	Assignments
	References
	Additional Readings
	Appendix A: Chicago Budget Message
	Appendix B: Richmond, Virginia, Budget Message
Module 12: Determining the Baseline Budget
	Defining the Baseline Budget
	Nonpersonnel Services
		Technical Adjustments
		Annualizing the Base
		Contract Values
		Small, Infrequent Expenditures
		Ratio of Expenditures to Number of Employees
		Distribution to Line Items
	Inflation
		Calculation of Inflation
		Garden City Day Care Center’s Baseline Budget
	Personnel Services
		Changes in Personnel Levels
	Revenues
	Summary
	Assignments
	Additional Readings
Module 13: Decision Packages: Cost Estimates
	Budgetary Cost Estimate for a Decision Package
		Steps for Making the Estimate and Work Paper
	Cost Estimate Example: Garden City Day Care Center
	Summary
	Assignments
	FluQ Case
	Additional Readings
	Appendix A: Format for Cost Estimate
Module 14: Decision Packages: Budget Justifications
	Budget Justifications
		General Guidelines for Budget Justifications
		Section Breakdown
		Budget Justification Example
	Summary
	Assignments
	References
	Additional Readings
Module 15: Budget Cutbacks
	Decrementalism
	Retrenchment
	Examples of Fiscal Crises
		An Exaggerated Fiscal Crisis
		A Serious Fiscal Crisis
	Summary
	Assignment
	References
Module 16: Legislative Budget Tools
	Introduction to Budget Presentations
	Delivering the Budget and Testifying
	Two Scenarios
		First Testimony
		Second Testimony
	Legislative Hearings
		Message
		Focus
		Clarity
		Preparedness
		Loyalty
	Legislative Analyst’s Tools
		Quantitative Information
		Transactional Changes
		Capital Budget
		Qualitative Information
		Status
		Policy Choices
		Committee Report
	Summary
	Assignments
	Additional Readings
	Appendix A: New York City Fire Department’s Fiscal 2014 Budget
Module 17: Cost-Benefit Analysis
	Concept of Cost-Benefit Analysis
	History of CBA: A 200-Year-Old Tool
	Conducting Cost-Benefit Analysis
		Determining Standing and Perspectives
		Determining Alternatives or Basis for Comparison
		Listing Impacts
		Monetizing Impacts, Including Both Costs and Benefits
		Inferential Methods
		Discounting Future Impacts
		Calculating Program Net Present Value
		Example of Net Present Value
		Benefit-Cost Ratio
		Example of Net Present Value and Benefit-Cost Ratio
	Performing Sensitivity Analysis
		Partial Sensitivity Analysis
		Total Valuation Analysis
		Monte Carlo Analysis
		Example: Cost-Benefit Analysis of Brooklyn’s Atlantic Yards
		Selecting the Alternative With the Largest Net Social Benefits
		Limitations of Cost-Benefit Analysis
	Summary
	Assignments
	Additional Readings
Module 18: Life Cycle Costing
	Basic Concept of Life Cycle Costing
	Brief History of Life Cycle Costing
	Calculating Life Cycle Cost
		Example of Life Cycle Cost
	Limitations and Qualifications of Life Cycle Costing
	Example of Life Cycle Costing in Public Projects With Unequal Economic Lives
	Current Status in Application
	The Future of Life Cycle Costing
	Summary
	Assignments
	Additional Readings
Module 19: Capitalization and Depreciation
	Government Accounting Standards Board (GASB)
	Asset Capitalization
		Categories of Capital Assets
		Valuation of Capital Assets
	Depreciation
		Standards of Depreciation
		Methods of Depreciation
	Summary
	Discussion Questions
	Assignments
	Additional Readings
Module 20: Long-Term Financing
	Financing Capital Projects
	Municipal Bonds
		Types of Municipal Bonds
		Bond Structure: Term and Serial Bonds
		Debt Repayment Schedules
	Summary
	Assignments
	Additional Reading
Module 21: Investment Strategies
	Governing Authority and Investment Policy
		Investment Policy
		Investment Policy Statement
	Short-Term Investment Strategy
		Issues in Short-Term Investments
		Investment Objectives: Safety, Liquidity, and Yield
		Default Risk and Market Risk
		Key Short-Term Investment Vehicles
	Long-Term Investment Strategy
		Key Concepts and Issues in Pension Fund Investment
		Long-Term Investment Practices and Considerations
		Key Investment Vehicles
	Summary
	Discussion Questions
	Assignments
	Reference
	Appendix A: Sample Investment Policy
Module 22: Operating Plan and Variance Analysis
	Allocation
	Allotment
	Variance Analysis
		What Causes Variances?
	Budget Modifications
	Summary
	Assignments
	Additional Readings
Module 23: Cash Management and Internal Controls
	Cash Management Policy
	Types of Cash
		Cash Receipts
		Cash Payments
		Checking Accounts
		Petty Cash Funds
		Credit and Debit Cards
		Electronic Transactions
	Controlling Personnel and Nonpersonnel Services
		Requiring Vacations
		Controlling Travel and Cell Phone Use
		Monitoring Vendors
		Preventing Bribery
	Examples of Fraud
	Summary
	Discussion Questions
	Assignments
	References
	Additional Readings
Module 24: Forecasting and Managing Cash Flow
	Liquidity
	Cash and Cash Flow Management
	Cash Flow Budgets
	Preparation of a Cash Flow Budget
	Cash Flow Management Strategies
	What Options Are Available If a Cash Shortfall Occurs?
	What Options Are Available in the Case of Too Much Short-Term Cash?
		Investing Short-Term Cash
		Margin of Safety
	Implementing and Updating the Cash Budget
	Summary
	Discussion Questions
	Assignments
	Additional Reading
Module 25: Government and Nonprofit Accounting
	Fund Accounting
	The Accounting Equation
	The Balance Sheet or the Statement of Financial Position
	Income Statement or Statement of Activities: The Statement of Revenues, Expenditures, and Changes in Net Position
	Statement of Cash Flows
	Journal Entries
		Debits and Credits
	Example of Debits and Credits
	Summary
	Assignments
	Additional Readings
Module 26: Financial Statement Analysis
	Fund Accounting
	Oversight
	Financial Statements
		Government Balance Sheet: Statement of Net Assets or Statement of Financial Position
		The Income Statement: The Statement of Activities or the Statement of Revenues, Expenditures, and Changes in Fund Balance
	Ratio Analysis
		Liquidity
		Solvency
		Profitability
		Sustainability
	Example of Ratio Analysis
	Summary
	Assignments
	Additional Readings
Located Online
Appendix A: New York State Chart of Accounts
Appendix B: Spreadsheet Basics
Appendix C: Graphing Data Using Excel
Glossary
Index
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