The Budget Cycle
What are the four steps of the budget cycle?
(1) Executive Preparation
(2) Legislative Consideration
(3) Execution
(4) Audit and Evaluation
What are the four budget systems?
(1) Line-item
(2) Performance
(3) Planned Program
(4) Zero-based
What is the governmental fund?
Associated with governmental operations; could be general, special revenues, debt service, capital projects, permanent
What is NCGS 159?
Local Government Budget and Fiscal Control Act
What does accounting basis mean? What are the two types of accounting basis?
The method of matching revenues and expenditures over time
Cash or Accrual
What occurs during the executive preparation step of the budget cycle?
Establish what public purpose money should be spent on; incorporates agency/department requests
Description, advantages, and disadvantages of line-item budgeting
- A list of expenditures and credits
- Provides expenditure control and accountability and helps you collect historical data on what money has been spent on
- Not flexible; doesn’t tell you a story about outcomes
What is the proprietary fund?
Business type units within the organization of government; ex. enterprise funds for supporting utilities like gas, water, sewer; ex. internal service funds for financing of goods or services provided by one department to other departments like IT or vehicle maintenance
What are the key components of NCGS 159?
- must prepare an annual balanced budget
- must have a budget officer
- must hold a public hearing before adoption
- must be adopted by June 30
- must have an annual audit
Define accrual accounting basis
revenue posted when earned, expenses posted when good or service is used
modified accrual: revenues posted in period in which they are available, expenditure posted when liability is incurred
What occurs during the legislative consideration step of the budget cycle?
Legislative body considers what was asked for and decides
Description, advantages, and disadvantages of performance budgeting
- Presents costs of performing measurable tasks; provides funds and establishes performance objectives
- Improved management of cost of services provided; better communicate importance of services
- Does not ask if outputs produced provide a service the public actually wants (not responsive); expensive to develop
What is the fiduciary/trustee fund?
Account for assets held by a government as a trustee for others like pension funds
What is the ACFR?
Annual Comprehensive Financial Report - a public record prepared annually and includes all funds and accounts controlled by the government entity
Define cash accounting basis
revenue posted when cash is received, expenditure posted when cash payment is completed
What occurs during the execution step of the budget cycle?
Agencies/departments use the money that has been given/appropriated; approved budget becomes a monitoring tool
Description, advantages, and disadvantages of planned program budgeting
- Establishes long-term goals; identifies alternative programs to achieve goals; allocates resources based on effectiveness
- Focuses on serving the public by asking legislators to spend on outcomes rather than inputs or outputs
- Requires a lot of knowledge about how individual units operate; not as flexible; can cause conflict between budgeters and departments
What budget system is most commonly used in public budgeting?
Line-item
What does GAAP stand for and why is it important?
Generally Accepted Accounting Principles
Accountability, comparability, informed decision-making, public trust, oversight
When does a fiscal year begin and end in NC?
July 1-June 30
What occurs during the audit and evalution step of the budget cycle?
Financial and program audits
Description, advantages, and disadvantages of zero-based budgeting
- Starts from scratch when building an annual budget having to justify what they do and the funds they need
- Theoretically eliminates low-return programs; judges need by focusing on current numbers instead of past budgets
- Costly and time-consuming; hurts long-term planning
Name the functions of the public budget.
(1) A tool for tracking expenditures and revenues
(2) An instrument of legislative control over the executive branch
(3) An opportunity to make taxing and spending decisions aimed at regulating economic demands providing strategic planning and control
(4) A technique for allocating resources among competing programs
(5) A record of past performance and a plan for future action
What is the GASB and what do they do?
Government Accounting Standards Board
Set forth standards for state and local budgets
What is the biggest difference between local budgeting and state or federal budgeting?
LOCAL government units must adopt a BALANCED budget while state and federal do not