Term
| Identify the purpose and elements of an effective financial performance monitoring system. |
|
Definition
| The purpose of financial performance monitoring is to provide an ongoing check on the budget in order to uncover inefficient processes and help avoid further financial deterioration. The elements of financial performance monitoring are having indicators that assess financial performance, techniques to detect unacceptable financial performance, and techniques to diagnose the causes of under performance. |
|
|
Term
| Briefly outline the 4 steps in the capital budgeting process |
|
Definition
1. conduct a capital asset inventory
2. document a capital improvement plan
3. document and perform financing plan
4. implement capital plan. |
|
|
Term
| Briefly outline the 4 steps cost-benefit analysis |
|
Definition
1. project benefits estimation and valuation
2. estimate project costs
3. select a discount rate
4. establish decision criteria. |
|
|
Term
| What is the basic accounting equation? |
|
Definition
| Assets = Capital + Liabilities |
|
|
Term
| Within the statement of activities of the government-wide financial statements, what is the changes in net assets? |
|
Definition
| Return on Assets is Change in Net Assets/Total Assets |
|
|
Term
| In which fund is the business-type activities of government reported? |
|
Definition
| The business-type activities of government are reported in the proprietary fund |
|
|
Term
| Identify the 7 guidelines for revenue forecasting and the steps for monitoring forecasting performance |
|
Definition
1.Decide the forecast subject, What am I going to forecast?
2. Establish the forecast horizon, how many years will I forecast?
3. Be familiar with forecasting techniques
4. Understand the administration of the tax being forecast, including the procedures that generate collection data
5. Ensure openness in forecasting to avoid manipulation [must be transparent]
6. Selection of forecasting techniques based off of forecast purpose
7. Make sure individual revenue sources are forecast separately |
|
|
Term
| Discuss the importance and advantages of cost estimation. |
|
Definition
1. Public entities such as utility companies, need to break even
2. Knowledge of cost aids in management decision making
3. Cost provides a measure of efficiency
4. Cost information is required under performance-based budget
5. Provides accountability to citizens and other stakeholders
6. Cost is a useful standard in privatization and outsourcing decisions |
|
|
Term
| What are the steps in financial condition analysis? |
|
Definition
1. Define the scope of the analysis
2. Determine the availability of measures and data
3. Identify Warning Trends
4. Specification of relationships
5. Explaining the Relationships
6. Present your findings
7. Taking Action to Improve Financial Condition |
|
|
Term
| Why is financial condition analysis important? |
|
Definition
| Financial Condition analysis is important because it not only gives you an understanding of the current financial condition of your organization, but you can also use it to improve the financial condition as well. The ultimate purpose of FCA is to identify the factors that impact the financial condition and to provide recommendations to improve the financial condition. |
|
|
Term
| Distinguish between financial condition and financial performance monitoring. |
|
Definition
| Financial performance monitoring is conducted more frequently than FCA. Monitoring can be done daily or monthly on a very limited number of financial indicators while FCA is a more thorough assessment that requires more time and resources for data collection and analysis; so it cannot be conducted as often as performance monitoring. |
|
|
Term
| Name the 4 standards for tax policy. |
|
Definition
1. equity
2. adequacy of revenue production
3. collectability
4. economic impact |
|
|
Term
| What are the conditions necessary for user charges to function? |
|
Definition
| In order for user charges to function, the benefits of the charge must be identifiable by individuals or firms and it must be chargeable in order to prevent public subsidization and exclude non-users from benefiting. |
|
|
Term
| What are the steps in resource development analysis [RDA] ? |
|
Definition
1. Defining the issue. Once a revenue shortage is found, it must be inquired as to why it happened. It could be changes in policy, socioeconomic environment, or large/unexpected events.
2. Estimating the Revenue Shortage.This is critical as the organization needs to know how much the organization is hurting due to the shortage.
3. Developing Revenue Options. Once the revenue shortage is defined and calculated, one can develop options for reversing the shortage. Options include increasing taxes and user charges, borrowing money, intergovernmental assistance, dipping into savings, or making policy changes.
4. Assessing the Revenue Options. One must evaluate the options through the lenses of financial, political, legal, and administrative feasibility.
5. Making a Decision. Each possible option should be pitted together and rated on their merits. A decision making matrix is helpful to show the possibilities and rankings of each option. |
|
|
Term
| What is the relevance of resource development analysis [RDA] ? |
|
Definition
| When an organization suffers from a significant loss in revenue, a significant increase in expenditures, or both, an organization needs to do a resource development analysis. |
|
|
Term
| Distinguish between full-faith-credit and non-guaranteed debt. |
|
Definition
| Full-faith and credit debt is debt backed by the taxing power of the government to finance the debt. Full-faith and credit debt is often issued to fund projects of governmental activities, which cannot generate revenues to repay the debt; this type of debt also features low interest rates. Non-guaranteed debt in not based on the governments taxing authority and features higher interest rates than full-faith and credit debt. This type of debt is incurred by the government when projects have their own ability to generate revenue to repay the debt. |
|
|
Term
| Name four ratios in debt capacity analysis. |
|
Definition
(1) Debt outstanding as a percentage of taxable property values [= Debt outstanding / taxable property values].
(2) Debt outstanding as a percentage of total personal income [= debt outstanding / personal income]
(3) Debt outstanding per capita [Debt outstanding / population and
(4) Debt Service Ratio is the Debt service as a percentage of revenue [= Debt service / revenue] |
|
|
Term
| Which of the four debt capacity ratios is most popular? |
|
Definition
| Debt Service Revenue is the most popular debt capacity ratio |
|
|
Term
| What are the 3 objectives of cash management? |
|
Definition
1) controlling the cash collection and disbursement process
2) managing the available cash balances
3) investing those balances in short-term instruments. |
|
|
Term
| What are the 4 elements of cash management? |
|
Definition
1. cash safety
2. cash liquidity
3. maintain optimal cash balance
4. investment returns |
|
|
Term
| State 4 internal controls over cash receipt. |
|
Definition
1. Receipts through the mail should be logged in the mail-room immediately, and receipts should be recorded within the day.
2. Large receipts ($1,000) should be deposited daily. All receipts should be deposited at least weekly.
3. Copies of cash receipts should be checked against the record of cash received by someone other than the person receiving the cash.
4. Receipt records should be maintained in a location separate from cash and checks. |
|
|
Term
| State 4 internal controls over cash disbursement. |
|
Definition
1. Wire transfer or electronic transfer whenever possible as they are more easily managed
2. Advances should be controlled, being only used when necessary. Excess travel advances should be collected promptly.
3. The process should prevent duplicate payments on invoices.
4. Before vouchers are certified for payment, they should be reviewed for corrections of payee and payment account, to verify correct delivery and payment is appropriate. |
|
|
Term
| Name and explain the 4 components of the Miller-Orr Model of cash management. |
|
Definition
1. Lower Limit is the minimum cash balance. If cash goes below this threshold, cash should be replenished by selling investments.
2. Return Point is the Lower Limit plus ⅓ of the spread. The cash balance point at which decisions are made to if the cash should be replenished or invested.
3. Upper limit is the point where the cash balance is more than sufficient and part of the cash should be invested.
4. Spread is the distance between the lower limit and the upper limit. This is a financially safe range of cash balances. If too high, cash should be used to invest, and if lower, should be replenished by selling investments. |
|
|
Term
| Identify the 3 decision rules of the Miller-Orr Model. |
|
Definition
1. No transaction is needed if the cash balance falls between the lower and upper limits
2. If the balance rises to the upper limit, cash should be invested by the amount of Upper Limit - Return Point.
3. If the cash balance falls to lower limit, sell investments by the amount of Return Point - Lower Limit to replenish the cash flow. |
|
|
Term
| Why is prudent financial management important in the public sector? |
|
Definition
| Prudent financial management is important in the public sector because as public administrators we have a duty and responsibility to be use public funds judiciously. By managing and monitoring how and why funds are being utilized, it allows for transparency in governance and an increase in public trust. It can also increase the effectiveness of resource allocation in government operations so that the public's tax dollars are being effectively utilized. By analyzing the performance of a governments resources, you can find areas which need improvement, and take corrective actions. Finally, through prudent financial management, you can foster an atmosphere of accountability and increase the level of services to the public which makes everyone happy. |
|
|
