THOMAS RICHARDSACC 548

MAY 13, 2013SHAWN KYLE FACIANE

Comprehensive Annual Financial Budget Analysis

Governmental and For-Profit Budgeting

The chief difference in the use of budgets for governmental and for-profit enterprises is how it pertains to their respective missions. The goal of for-profit is just that, profit. Budgeting is the beginning of that process but it takes a back seat to the Annual reports. Governmental entities however, begin with the budget. Their mission is to provide services to the constituents of that government. The budget details how the government will go about providing those services and to whom.Governments use the budget in four main ways: Policy Document, Financial Plan, Operations Guide, and a Communications Device.

Governmental and For-Profit Budgeting

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 entity’s short-term initiatives that guide the development of the

budget.

The Budget as a Financial Plan• Describes all funds that are subject to appropriation.• Presents a summary of major revenues and expenditures and other

financing sources/uses.• Summarizes revenues/other financing sources and expenditures/other

financing uses for the prior, current, and proposed budget year.• Describes major revenue sources, underlying assumptions, and

significant trends.

Governmental and For-Profit Budgeting

The Budget as an Operations Guide• Describes activities, services, or functions carried out by organizational units.• Provides objective measures of progress toward accomplishing goals and

objectives.

The Budget as a Communications Device• Provides summary information on significant budgetary issues, trends, and

resource 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 relationship

between functional units, major funds, and nonmajor funds in the aggregate.

Impact of Nondiscretionary Fiscal Policy

Non-discretionary fiscal policies are changes to government taxation and expenditures that occur automatically once certain conditions are triggered. Such fiscal policies are encoded into the system to act as the first line of measures designed to protect the economic well-being of their nation. For example, if the economy enters a recession and the newly unemployed begin receiving unemployment benefits, those benefits count as non-discretionary fiscal policy because they automatically happen. In contrast, if the government legislative bodies then decided to spend money to encourage businesses to hire workers, that is a discretionary fiscal policy since it required those bodies to choose to implement this course of action.

Impact of Nondiscretionary Fiscal Policy

Impact of Non-Discretionary Fiscal Policies on RevenuesGovernments can change their revenues through changing tax rates. In general, an increase in tax rates increases government revenues and serves to dampen rising demand in the economy, while a decrease in tax rates decreases government revenues but serves to bolster flagging demand. The theory behind this is that individuals and businesses will have more money to spend if taxes are lower and will spend more if the cost to them of doing so is less. Exceptions to this general rule do exist, but tend to be rare.

Impact of Nondiscretionary Fiscal Policy

Impact of Non-Discretionary Fiscal Policies on ExpendituresGovernments can implement fiscal policies that cause them to either spend more or less of their money. In general, an increase in government expenditure serves to bolster flagging demand, while a decrease dampens rising demand. Expenditures have a multiplier effect on the economy because money circulates. For example, if the government pays $100 in unemployment benefits to a worker who then spends all of it on groceries, most of that $100 will be used by the store to pay its suppliers and workers, who will in turn spend it on other goods and services.

Key Performance Measures

Category I: The External Report on Performance Information

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

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

3. Involvement in establishing goals and objectives: To help users identify who established the goals and objectives and whether that includes those responsible for achieving results.

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

5. Analysis of results and challenges: To present performance results with a discussion 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 the organization’s performance.

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

Key Performance Measures

Category II: What Performance Information to Report

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

9. Resources used and efficiency: To facilitate an assessment of resources used and the efficiency, 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 of outputs and outcomes.

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

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

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

14. Consistency: To allow users to compare an organization’s performance from period to period and to better understand changes in measures and reasons why measures changed.

Key Performance Measures

Category III: Communication of Performance Information

15. Easy to find, access, and understand: To ensure that a broad group of potential users can access, understand, and use various forms of performance reports to reach conclusions.

16. Regular and timely reporting: To ensure that organizations report performance information on a regular and timely basis to be useful in decision making.