Chapter Five
Questions and Exercises
1. The analysis should begin with a test of ratios, shares, and trend, probably within a
spreadsheet. The investigation could examine 1) how the categories have increased over
time, 2) how the share of the particular categories have changed, e. g., the faculty salary
or student fellowship share of the total; and 3) the relationship (ratio) between
components, e. g., clerical to faculty or travel to faculty.
2. Some questions about the memorandum: 1) The collection increase is about 50 percent,
not 59 percent. 2) What are the separate contributions to numbers of calls from the
automated phone system and from additional employees? Adding 10 employees is a 53
percent in staff, but calls increase by 100 percent. Can we assume that the remaining
productivity increase is from the equipment? What would happen if either the new
equipment or the new employees were added, but not both? 3) Doubling the number of
calls represents a 100 percent increase in calls. Why is the yield increase so much less?
Might most of the productive calls have already been made with the existing
system/staff?
3. Grade Number Salary Total Salary
Chief 1 $105,000 $105,000
Shift Commander 3 70,000 210,000
Firefighter 1 12 39,000 468,000
Firefighter 2 26 30,000 780,000
Clerical (part-time) 3 15,000 45,000
TOTAL 1,608,000
COST
a. Salaries: 1,608,000
b. Social Security:
Retirement: 0.062 x [1,608,000 – (105,000-90,000)] = 98,766
Medicare: 0.0145 x 1,608,000 = 23,316
c. Health Insurance: 180 x 12 x 42 = 90,720
d. Pension System: (1,608,000/2) x 0.20 = 160,800
e. Uniform Allowance: 750 x 42 = 31,500
Total: 2,013,102
4.
a. Price Change: Postage
$5,500 requested to cover a postal rate increase of $0.02 per ounce for 275,000
items per year.
b. Other Continuing: Travel $15,000 to cover travel expenditures that were
accommodated by funds transfers in the last fiscal year.
c. Workload Change: Personnel
$56,625 in first year for new examiner (salary plus fringes) and $56,625 in second
year for second new examiner (salary plus fringes) to accommodate assistance file
growth.
d. Full Financing:
$6,000 to external traffic fine collection program through entire fiscal year ($18,000
had been appropriated for three quarters of prior fiscal year).
e. Methods Improvement: Equipment
$3,000 to acquire PC-compatible computer, better quality printer, work processing
software, and associated cables. (Insert whatever cost estimate seems proper.)
Examination Questions
1. Which of the following can contribute toward a phantom balance in an operating
budget?
2. Internal control standards do not include which of the following?
3. When justifying a budget request (in narrative form), which of the following is NOT
recommended to be discussed:
4. An allotment schedule is
5. The appropriation to the State Library System (fiscal year starts July 1) for fiscal 2012
was $15,000,000. On December 31, 2011, its budget reports showed expenditures of
$7,500,000 and encumbrances outstanding of $500,000. Quarterly allotments were as
follows: Q1—$3,750,000; Q2—$4,500,000; Q3—$3,750,000; and Q4—$3,000,000.
What was the status of system operations at that point?
6. Which of the following is not a “rule of thumb” used by budget analysts in review of
agency budgets?
7. A requirement that the Governor’s operating budget be balanced usually means that:
8. Various strategies exist to reduce the budget deficits without actually changing spending
intentions. The strategy of accelerating revenues and deferring spending is called:
9. The audit process which occurs after the end of the budget year is designed to accomplish
all of the following EXCEPT:
10. Break-even analysis attempts to determine:
