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| having historical budgets reflects the needs in the upcoming budget cycle |
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| relatively uncontrollable |
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| federal government cannot increase or decrease spending without changing existing substantive law |
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| audit the effectiveness or misconduct of the agency |
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| raising revenues and dedicating certain money for specific projects |
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| immune from question or criticism |
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| fields considered unauditable |
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| bringing in and budgetging for (dedicating where they will go) for revenues unplanned. money getting put in places without reason. |
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| politics of the bureaucracy |
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| plenty of interst being tugged selfishly to encourage budget allocations matching their desires |
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| acknowledging the negatives that would happen if a certain task isnt funded, or completed where there is pressure applied |
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| certain depertments having more klout and pull than others |
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| pressures of public opinion |
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| too many irons in the fire trying to implement strategy |
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| flexing budget to reflect work being done to ensure revenue that might not come |
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| tools for changing the budget |
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Definition
supplemental appropriations, deferral, reprogramming, contingency funds, interfaced transfers (Know Wyatt vs.
Stickey southern special needs courtcase) |
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| managers determination of budget |
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| when cycles have begun their harder to end a certain act performed |
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| Oversight in administrative services |
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| not done in most states prior to 1960’s.,most important are audit and fiscal analysis, most rely on GAO model |
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| has specific end point , 36 states adopted it, realized it is more work. AR faded out sunset leg. With sunset leg. |
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| Local legislative budgeting- |
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Definition
| wide variety, some cities have greater budgets than others. Dependent on intergovernmental grants. Very few have budget analysts |
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| expanded the role it plays (manages the money, fiscal responsibility, formulating and implementing the budget) trending towards “the Walmart Effect” aka doing it all |
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| Budget office vs the agency tension |
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Definition
| Agency wants money, argues that budget people are “budget pushers” and don’t know what the agency needs. CBO argue that agency budgeting is not satisfactory and want maximum flexibility. Agencies want to make themselves bigger, too much turnover, no accountability, not objective. CBO can work with executive and agency – focus on the whole picture |
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| Are budget offices politically neutral debate |
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Definition
| noted for neutrality (lack of politics, hire merit based, civil service bureaucrat) Eisenhower/Johnson added political appointees as directors … neutrality is an illusion – can’t separate executive and budget |
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| Final budgeting decisions and complex ploys that may be |
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Definition
| what can they do to cut the budget |
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| reduce funds given to agencies |
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| dismantiling the workforce |
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| fire people, freeze salaries |
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| preventative maintenance, curb travel |
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| not knowing how to do your job |
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| other ways to make the budget |
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Definition
| selling the family jewels, raiding pension funds, early retirement, transfer services to public authorities, privitizing operations |
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| Wyatt v. Stickney – (1971) |
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Definition
| A cut in Alabama's cigarette tax resulted in a budget shortfall, over a hundred employees at Bryce Hospital (Psychiatric Hospital) in Tuscaloosa, Alabama lost their jobs, twenty of them professional psychologists, etc. Federal District Judge Frank M. Johnson ruled that the due process clause of the Constitution was violated by not allowing patients the full care they needed. The case created standards of care, including patient to staff ratios and ordered the state of Alabama to pay for better conditions for patients. As a result, and because the state had no money, almost two thirds of the state’s psychiatric institute patients were released and most of the facilities were abandoned. |
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| Court ruled that Arkansas' prison system, which had no written standards, was in violation of United States constitutional law prohibiting against cruel and unusual punishment. Judge J. Smith Henley found the prison system in violation of the 8th Amendment and ruled that insufficient funding is no exception for cruel conditions for inmates. Henley ordered the state to increase expenditures on prisoners. |
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| Serrano v. Priest - (1976) |
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Definition
| Supreme Court of California ruled that the state’s finance system for education violated California’s equal protection clause in the state constitution because it created disparities in per-pupil spending. The court ruled that differences in wealth should not affect education funding. |
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| Issue: States don’t have any money. |
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Definition
Welfare applicants were denied assistance because they resided in the District of Columbia for less than one year prior to filing their application for assistance. Decision: The one-year residency requirement is unconstitutional because it discriminates against “need . . . families” who have not met the residency requirement even though the status of these families is no different than families meeting the residency requirement.
Other Notes – Rosado v. Wyman: Ceilings on welfare costs: reduced cost on bigger families
Congress also looked at question of food stamps for college students (or hippies) and made them ineligible. Supreme court said no. (Don’t know the case). |
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| National League of Cities v. Usery |
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Definition
| In 1974, Congress passed amendments to the Fair Labor Standards Act of 1938. The purpose of the amendments was to regulate minimum wage and overtime pay for state and local government employees (previously only applied to private enterprise). The National League of Cities, as well as several states and cities, challenged the constitutionality of the amendments since it increased payroll costs. The Supreme Court ruled in favor of the states and said Congress had no authority over states to make them pay overtime or other wages. |
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| Garcia v. San Antonio Metro Transit Authority – (1984) |
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Definition
| Garcia, and employee of SAMTA argued that he did not receive overtime he was due. SAMTA argued that since they are providing a government function they are not required to pay overtime. Court overturned National League of Cities v. Usery and ruled in favor of Garcia. This applied Fair Labor Standards Act to all government employees. |
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Definition
| Refusing to spend appropriated funds. Presidents actually had the authority to impound funds until Nixon. |
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| An initiative may take the form of either the direct initiative or indirect initiative. Under the direct initiative, a measure is put directly to a vote after being submitted by a petition. Under the indirect initiative, a measure is first referred to the legislature, and then put to a popular vote only if not enacted by the legislature. A popular vote on a specific measure is referred to as a referendum only when originating with the legislature. Such a vote is known, when originating in the initiative process, as an "initiative," "ballot measure", "initiative measure" or "proposition." |
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| Supreme Court ruled that a nondiscriminatory federal tax on the interest earned on state bonds does not violate the intergovernmental tax immunity doctrine (reciprocal immunity). |
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| Refers to the environment. When a developer or city wants to develop it must include an EIS (environmental impact statement) |
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| Grants distributed equally, usually with cross cutting provisions. |
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Term
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Definition
a. At the federal level the Budget and Accounting Act of 1921 and the Budget Accounting procedures established the framework of fiscal control that continues to this day
b. Several functions are provided:
i. Ensures budget to be implemented
ii. Keeps tracks of revenues and cost
iii. Controls measures for exceeding budget |
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Definition
| something you have to pay for |
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| inventory before check has been paid |
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Definition
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| when inventory used and taking out of inventory |
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| claim on money - set aside for an obligation |
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Term
| budgetary or appropriation accounting |
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Definition
a. Legal docuent produced in appropriation act
i. 32 states appropriate monies by fun
ii. 38 by agency
iii. 33 use a line-item
iv. 34 include program budgeting
v. Every appropriation and every subsequent apportionment from that appropriation is translated into a different account
vi. This records and accumulates all the thins given (approp. or money being spent) chargeable to the approp.
vii. Budgetary accounting- shows all the above
viii. Advantages
1. Control money
2. Control against unauthorized expenditures |
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Term
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Definition
| 1. Set of accounts set aside for a specific entity and record transaction for special activity i.e. rainy day fund, trust fund, highway fund |
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Term
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Definition
a. Income comes in and recorded when received and recorded when paid
b. Captures money moving in and out of a n organization
c. Advantages
i. Easy to understand
ii. Can see if gov’t meets its obligations
iii. Can determine if cash surplus
d. Disadvantages
i. Difficult to prepare for emergency
ii. Strict adherence to financial obligation to stay on top of things
iii. Only shows how much is in the bank |
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Term
| Encumbrnace/Obligation Accounting |
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Definition
a. Recognizing money has to be paid somewhere
b. Create multiple accounts
c. Unexpended and unencumbered balances = free balance |
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Term
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Definition
a. Includes all cost and liabilities even not yet paid
b. Expenditures even though no cash paid for awhile
c. Involves timing
d. Advantages
i. Permits accountability looking at money b4 it comes in
e. Disadvantages
i. Money comes in later
ii. Can be complex (pension benefits) distorts revenue because cash reported separately |
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Term
| Modified Accrual Accounting |
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Definition
a. Required by GASP (Government Accounting Standard Budgets) guidelines for state and local government
b. Revenue recognized when measureable
c. Liabilities accrue when payable fiscal year (sick leave)
d. Readily recognized liability |
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Term
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Definition
a. Does not provide data because it is focused on individual allotments and not on resources consumed
b. Accrual does have some emphasis on projects & programs (liability)
i. But rarely covers funded mandates
ii. It only deals with major unfunded mandates
c. Tries to deal with all cost
d. Much more expensive than accrual accounting because of keeping track of projects
e. Only used for selective projects |
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Term
| How Capital budgeting differs from traditional budgeting? |
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Definition
a. Capital budgeting is finance over several years
i. 5-7-10 years
b. Has 2 separate budgets
i. Capital (uniforms)/operating(salaries)
c. Payments are continuous even after item has been used
d. It is expensive
e. Definition
i. GAO – longer than 2 years,
ii. > $25000
iii. Provides service and benefits
iv. Non recurring expenditures
f. Government Finance Officers Association Definition
i. Last more than 1 year
ii. Land/building improvements
g. Why different definitions?
i. Budget items should come from the capital budget meaning largely purchased with borrowed money or loans and bonds |
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Term
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Definition
a. Local govt
i. Capital budgets fist started at the city level in 1920’s
ii. 56% of local governments use
iii. Bigger cities and most have capital budgets
b. State Govt
i. 100% have capital budgets
c. Federal GOvt
i. Has no capital budget, but has capital expenditures that are treated like regular expenditures
d. Other Countries
i. Most of them provide detailed information on capital investments, although they do not necessarily have a separate capital budget |
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Term
| Pros and Cons of Capital Budgeting |
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Definition
a. Pros
i. They are unique
ii. Debt manage (due to borrowed $)
iii. Operational budget comes from taxes
iv. Capital budgets come from borrowed $ and federal grants
v. Some belief it enables expenditure control
vi. Spend $ wisely
vii. Due to constitutional or statutory limits
viii. Long term payments for capital and short-term for operating
ix. Easier to balance the budget
x. Economic Development
b. Cons
i. Transparency
ii. Outside/inside
1. Everything on outside w/ capital inside with operating
2. Do we really need a capital budget
3. Can hide debt or deficit
4. Loop holes
a. Definitional (what counts as capital budget item)
b. Difference between macro and micro economics
c. Accountability for bad investments
d. Generational accounting |
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Term
| 6 Pillars of Capital Budgeting |
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Definition
a. Comprehensive Planning
i. Identify all needs
b. Functional Planning
i. what functions are performed
c. multiyear planning
i. 5 and 10 year budgets
ii. Capital Investment Program (CIP
1. How is it going to be paid
d. Facility Planning
e. Financial Planning
i. Three interrelated considerations are involved here:
1. Revenue
2. Grant
3. If borrow funds
f. Project Selection Criteria
i. Usually there are 1000s of projects so how are projects selected and prioritized?
1. Deteriorating infrastructure
2. Condition of existing capital facilities
3. Cost and benefits of Proposed Projects
a. CBA – Cost Benefit Analysis
b. Cost Effective Analysis (CEA)
c. Life-cycle costing = look @ project over executive and life of item considers initial cost, maintenance upgrades, deterioration
d. Value – engineering Analysis = get best cost w/o sacrificing quality
e. Feasibility studies |
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Term
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Definition
| disbursement of public money when it comes in and when it goes out. Some strategies include investing money as soon as it comes in, get a big return, and keep enough money on hand to get what is needed. |
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Definition
| The process of administering monies to ensure they are available over time to meet expenditure needs and that, when temporarily not needed they are invested in minimum risk and maximum yield. Cash management involves both short and long term investments |
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Term
| Elements of ACH transfers: ACH (automatic clearing house) |
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Definition
is an electronic network for financial transactions in the United States. ACH processes large volumes of credit and debit transactions in batches. ACH credit transfers include direct deposit payroll and vendor payments.
The receiver is the account holder that grants the authorization. An originator can be a person or a company. Accounts are identified by the bank's routing number and the account number within that bank. In accordance with the rules and regulations of ACH, no financial institution may issue an ACH transaction towards an account without prior authorization from the Receiver. Written authorization constitutes a signed form giving consent on the amount, date, and frequency of the transaction. |
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Term
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Definition
| A checking account in which a balance of zero is maintained by automatically transferring funds from a master account in an amount only large enough to cover checks presented. A zero balance account is used by corporations to eliminate excess balances in separate accounts and maintain greater control over disbursements. |
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Term
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Definition
| A deposit account used to aggregate funds from several locations into one centralized account. Concentration accounts are used by institutions to process and settle internal bank transactions. Concentration accounts are typically used for fund transfers, private banking transactions, trust and custody accounts, and international transactions. Concentration accounts have been under scrutiny by U.S. authorities due to the possibility of money laundering. For example, it may be difficult to trace the money trail if funds are being collected in one central source and if customer-identifying information is being separated from the transaction - this may open the door for abuse. |
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Definition
| from the notes: what are you doing with the liquid cash. |
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| The four standards of prudence: |
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Definition
I’m sorry. I do not have this in my notes. I can’t find it in the book either. But I got this off an investment website.
The prudence concept in accounting governs the recording and reporting of financial transactions, so that the assets or income are not overstated and liabilities or expenses understated. The principle of prudence also governs the handling of profit. Even though a business can expect profit, it must not be recorded before it is realized. |
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| Types of idle cash investment: |
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Definition
| T-bills, CD, Commercial paper repurchase agreement and reverse repurchase agreement |
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Term
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Definition
| are fully guaranteed federal securities. They mature in 4, 13, 26 and 52 weeks. They are sold at a discount by auction and consequently have not set percentage of return. |
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Term
| negotiable certificates of deposit: |
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Definition
| include those that are issued by banks which are guaranteed by the federal government. |
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Definition
| is available through banks. It is considered a corporate promissory note. |
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Definition
| is a pool of US government securities held by a financial institution and sold temporarily to state and local government and other purchasers. The institution agrees to repurchase the securities at a later date. |
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Definition
| state and local governments finance a major portion of the capital investment spending through long term debt instruments like municipal bonds general obligation bonds. Most state and local governments try to maintain of the pay-as-you-go system which works best for the smaller jurisdictions. Pg. 495-497 |
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Term
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Definition
| A popular technique is for jurisdictions to combine their investments into a state authorized investment pool. By pooling their resources, smaller jurisdiction can take advantage of higher-yield investments that require larger investments than passbook savings or CDs. |
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Term
| Money market mutual funds: |
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Definition
| Treasury bills, commercial paper, banker’s acceptances, repurchase agreements and certificates of deposit (CDs) make up the bulk of money market mutual funds. Money market mutual funds offer a convenient parking place for cash reserves when an investor is not quite ready to make an investment or is anticipating a near-term cash outlay for a non-investment purpose. Money market mutual funds offer ultimate safety and liquidity. This means that investors will have an expected sum of cash at the very moment that they need it. Important categorization for money market mutual funds relates to their taxable or tax-exempt status. Taxable funds invest in securities such as Treasury bills and commercial paper, whose interest income is subject to federal taxation. Tax-exempt funds invest exclusively in securities that are issued by state and local governments and are exempt from federal taxation. Tax-exempt funds generally appeal to investors in higher federal tax brackets who are seeking tax savings on the overall interest income generated. |
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Term
| The philosophical implications of debt |
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Definition
| Lerner's Assumption, the Overlapping Generations Model, the Neoclassical model, the crowding out hypothesis, and the Ricardian Model. |
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Term
| Non-traditional capital financing |
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Definition
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