CAFR Budget Analysis

8/13/2019 CAFR Budget Analysis

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COMPREHENSIVEANNUALFINANCIAL

BUDGETANALYSIS


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GOVERNMENTALANDFOR-PROFITBUDGETING

The Budget as a Policy Document

A coherent statement of entity-wide long-term financial policies.

A coherent statement of entity-wide, nonfinancial goals and objectives.

The entitys short-term initiatives that guide the development of thebudget.

The Budget as a Financial Plan

Describes all funds that are subject to appropriation.

Presents a summary of major revenues and expenditures and otherfinancing sources/uses.

Summarizes revenues/other financing sources and expenditures/otherfinancing uses for the prior, current, and proposed budget year.

Describes major revenue sources, underlying assumptions, and significanttrends.

(Granof & Wardlow, 2011)


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GOVERNMENTALANDFOR-PROFITBUDGETING

The Budget as an Operations Guide

Describes activities, services, or functions carried out by organizationalunits.

Provides objective measures of progress toward accomplishing goals andobjectives.

The Budget as a Communications Device

Provides summary information on significant budgetary issues, trends, andresource choices.

Explains the effect, if any, of other planning processes upon the budget.

Describes the process for preparing, reviewing, adopting, and amending

the budget. Uses charts and graphs to highlight financial and statistical information

with narratives.

Provides narrative, tables, schedules, or matrices to show the relationshipbetween functional units, major funds, and nonmajor funds in theaggregate.


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IMPACTOFNONDISCRETIONARYFISCALPOLICY

Non-discretionary fiscal policies are changes togovernment taxation and expenditures that occurautomatically once certain conditions are triggered.Such fiscal policies are encoded into the system to act

as the first line of measures designed to protect theeconomic well-being of their nation. For example, if theeconomy enters a recession and the newly unemployedbegin receiving unemployment benefits, those benefitscount as non-discretionary fiscal policy because theyautomatically happen. In contrast, if the government

legislative bodies then decided to spend money toencourage businesses to hire workers, that is adiscretionary fiscal policy since it required those bodiesto choose to implement this course of action. (Li, 2013)


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Impact of Non-Discretionary Fiscal Policies onRevenues

Governments can change their revenues throughchanging tax rates. In general, an increase in tax

rates increases government revenues and servesto dampen rising demand in the economy, while adecrease in tax rates decreases governmentrevenues but serves to bolster flagging demand.The theory behind this is that individuals and

businesses will have more money to spend if taxesare lower and will spend more if the cost to them ofdoing so is less. Exceptions to this general rule doexist, but tend to be rare. (Li, 2013)


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Impact of Non-Discretionary Fiscal Policies onExpenditures

Governments can implement fiscal policies that causethem to either spend more or less of their money. In

general, an increase in government expenditure servesto bolster flagging demand, while a decrease dampensrising demand. Expenditures have a multiplier effect onthe economy because money circulates. For example, ifthe government pays $100 in unemployment benefits to

a worker who then spends all of it on groceries, most ofthat $100 will be used by the store to pay its suppliersand workers, who will in turn spend it on other goodsand services. (Li, 2013)


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KEYPERFORMANCEMEASURES

Category I: The External Report on Performance Information

1. Purpose and scope: To inform users of the intent of the report and to identify theprograms and services that are included.

2. Statement of major goals and objectives: To provide users with the goals andobjectives and their source so users can determine how they were established.

3. Involvement in establishing goals and objectives: To help users identify whoestablished the goals and objectives and whether that includes those responsiblefor achieving results.

4. Multiple levels of reporting: To allow specific users to find the appropriate level ofdetail performance information for their needs.

5.Analysis of results and challenges: To present performance results with adiscussion of challenges facing the organization.

6. Focus on key measures: To ensure that reports provide users with enough (and

not too much) information to develop their own conclusions about theorganizations performance.

7. Reliable information: To assist users in assessing the credibility of the reportedperformance information.

(Wilson, Kattellus, & Reck, 2010)


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Category II: What Performance Information to Report

8. Relevant measures of results: To ensure that performance measures reflect thedegree to which those goals and objectives have been accomplished.

9. Resources used and efficiency: To facilitate an assessment of resources used and theefficiency, cost-effectiveness, and economy of programs and services.

10. Citizen and customer perceptions: To ensure that a more complete view of the results

of programs and services results than is captured in other objective measures ofoutputs and outcomes.

11. Comparisons for assessing performance: To provide a clear frame of reference forassessing the performance of the organization, its programs, and its services.

12. Factors affecting results: To help users understand the factors that might have aneffect on performance, including relevant conditions in the state, region, or community.

13.Aggregation and disaggregation of information: To provide performance informationthat is not misleading and is relevant to users with different interests and needs.

14. Consistency: To allow users to compare an organizations performance from period toperiod and to better understand changes in measures and reasons why measureschanged.



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Category III: Communication of PerformanceInformation

15. Easy to find, access, and understand: To

ensure that a broad group of potential users canaccess, understand, and use various forms ofperformance reports to reach conclusions.

16. Regular and timely reporting: To ensure that

organizations report performance information on aregular and timely basis to be useful in decisionmaking.



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CAFR Budget Analysis

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