Chapter 12 – Budgeting and Performance Measurement
12-1
CHAPTER 12: BUDGETING AND PERFORMANCE MEASUREMENT
OUTLINE
Number
Topic
Type/Task
Status
(re: 16/e)
Questions:
12-1
Budgeting reporting
Explain
New
12-2
Line-item budgeting approaches
Compare
12-3
12-3
Performance and program budgeting
Describe
12-4
12-4
Stakeholders in budgeting process
Identify
New
12-5
Annual budget process
Identify
12-5 revised
12-6
Balanced scorecards
Describe
Same
12-7
SEA reporting and GASB
Describe
Same
12-8
Service efforts and accomplishments
Define
Same
12-9
Activity based costing
Explain
New
12-10
Federal grant accounting and allowable costs
Describe
12-10 revised
Cases:
12-11
GFOA Distinguished Budget Award
Internet
12-1
12-12
Budgeting for outcomes
Evaluate
New
12-13
Federal grant accounting and allowable costs
Evaluate, report
12-3 Revised
Exercises/Problems:
12-14
Examine the budget
Examine
12-1
12-15
Various budgeting issues
Multiple choice
Items 2, 7,
and 10 are
new; 1 and 5
are revised
12-16
Police department budget
Evaluate
12-4 revised
12-17
Illustrations within a budget document
Examine, evaluate
12-5 revised
12-18
SEA reporting
Analyze
12-6
12-19
Activity-based costing
Evaluate
12-7 revised
12-20
SEA reporting
Examine, analyze
New
12-21
Allowable Costs under Federal Grants
Examine, evaluate
New
Chapter 12 – Budgeting and Performance Measurement
12-2
CHAPTER 12: BUDGETING AND PERFORMANCE MEASUREMENT
Answers to Questions
12-1. The GASB budgeting, budgetary control, and budgetary reporting principle provides that
all governmental units should prepare an annual budget. Governments should also
General Problem Information: Budgeting Reporting
Learning Objective: 12-1
Topic: Section from Chapter
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Easy
12-2. Incremental budgeting is an approach that focuses on line-item accounts or objects-of-
expenditure (for example, salaries, travel, supplies, and rent). This approach starts with
actual amounts in line-item accounts from the current or prior year and expected
increases are added and expected decreases are subtracted for each account in arriving at
Chapter 12 – Budgeting and Performance Measurement
12-3
Ch. 12, Answers, 12-2 (Cont’d)
General Problem Information: Line-item budgeting approaches
Learning Objective: 12-2
Topic: Budgeting Approaches
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Medium
12-3. An advantage of performance budgeting and program budgeting over incremental
budgeting is that the former two methods relate resource inputs to units of work
accomplished (outputs) and thereby permit evaluation of an organizational unit’s
General Problem Information: Performance and program budgeting
Learning Objective: 12-2
Topic: Budgeting Approaches
Bloom’s Taxonomy: Understand
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Medium
12-4. Illustration 12-3 includes the following sets of potential conflict – advocates vs.
General Problem Information: Stakeholders in budgeting process
Learning Objective: 12-3
Topic: Budgeting Process in State or Local Government
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Easy
Chapter 12 – Budgeting and Performance Measurement
12-4
Ch. 12, Answers (Cont’d)
12-5. Each budget period, a government should follow a well-defined budget process that
includes a budget calendar of activities with associated target dates for completion;
General Problem Information: Annual Budget Process
Learning Objective: 12-3
Topic: Budgeting Process in State or Local Government
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Easy
12-6. Balanced scorecards typically report on performance measures that fall into four
categories: financial, customer, internal business processes, and learning and growth (of
the employees or the organization). This management tool was designed for the business
General Problem Information: Balanced scorecards
Learning Objective: 12-5
Topic: Managerial Tools to Improve Performance
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Hard
Chapter 12 – Budgeting and Performance Measurement
12-5
Ch. 12, Answers (Cont’d)
12-7. While the GASB has not issued standards for service efforts and accomplishments (SEA)
reporting, it has sponsored and conducted extensive research on SEA measures and
provides guidance for governments that voluntarily choose to produce such reports.
General Problem Information: SEA reporting and GASB
Learning Objective: 12-4
Topic: Service Efforts and Accomplishments
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Easy
12-8. Service efforts and accomplishments (SEA) measures include:
(1) input measures⎯measures of service efforts,
General Problem Information: Service efforts and accomplishments
Learning Objective: 12-4
Topic: Service Efforts and Accomplishments
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Easy
12-9. Governments, no less than businesses, must compete for increasingly scarce resources
while satisfying higher and more diverse customer expectations. In such an environment,
Chapter 12 – Budgeting and Performance Measurement
12-6
Ch. 12, Answers, 12-9 (Cont’d)
General Problem Information: Activity based costing
Learning Objective: 12-5
Topic: Managerial Tools to Improve Performance
Bloom’s Taxonomy: Understand
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Hard
12-10. The Office of Management and Budget (OMB) issues guidance on cost principles for
federal grants in Uniform Administrative Requirements, Cost Principles, and Audit
General Problem Information: Federal grant accounting and allowable costs
Learning Objective: 12-6
Topic: Budget and Cost Issues in Grant Accounting
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Easy
Solutions to Cases
12-11. a. There is a list of all state and local governments that are Distinguished Budget
Presentation Award winners for the most recent year in the GFOA’s annual
report, posted on its Web site at www.gfoa.org under the “Award Programs” tab
Chapter 12 – Budgeting and Performance Measurement
12-7
Ch. 12, Solutions, Case 12–11 (Cont’d)
General Problem Information: GFOA Distinguished Budget Award
Learning Objective: 12-1
Learning Objective: 12-3
Topic: Objectives of Budgeting in the Public Sector
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Medium
12-12. The City of Fort Collins budget Web site is available at
http://www.fcgov.com/citymanager/budget.php . The following answers were obtained
for the 2015-2016 biennial budget.
a. The Web site includes the following responses to “Why are we doing it (i.e.,
budgeting for outcomes)?
• The Fort Collins economy is changing – the times of rapid, double-digit
b. City council, using citizen input, determines the desired community outcomes.
c. For the 2015-16 budget cycle, the City of Fort Collins has the following outcomes:
• Community and Neighborhood Livability – Fort Collins provides a high quality
built environment and supports quality, diverse neighborhoods.
Chapter 12 – Budgeting and Performance Measurement
12-8
Ch. 12, Solutions, Case 12–12 (Cont’d)
e. Student answers will differ for both the outcomes adopted by different governments
12-13.
a. The appropriate document to research the allowability of costs charged to federal
grants for a local government is the Uniform Administrative Requirements, Cost
Principles, and Audit Requirements for Federal Awards available at
https://federalregister.gov/a/2013-30465. Upon implementation, this guidance will
also be available on the OMB Web site.
General Problem Information: Federal grant accounting and allowable costs
Learning Objective: 12-6
Topic: Budget and Cost Issues in Grant Accounting
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: Critical Thinking
Level of Difficulty: Medium
Chapter 12 – Budgeting and Performance Measurement
12-9
Ch. 12, Solutions
Solutions to Exercises and Problems
12-14. Each student should have a different budget, so answers will vary. For those students
who chose a municipality that received the GFOA’s Distinguished Budget Presentation
General Problem Information: Examine the budget
Learning Objective: 12-1
Learning Objective: 12-2
Learning Objective: 12-3
Topic: Various
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Medium
12-15. 1. d. 6. b.
General Problem Information: Various budgeting issues
Learning Objective: 12-1
Learning Objective: 12-2
Learning Objective: 12-3
Learning Objective: 12-4
Learning Objective: 12-5
Learning Objective: 12-6
Topic: Various chapter topics
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Medium
Chapter 12 – Budgeting and Performance Measurement
12-10
Ch. 12, Solutions (Cont’d)
12–16
a. This is a classic example of incremental budgeting. From the perspective of
the new town manager, who apparently is interested in applying zero-based
budgeting concepts, the police chief’s argument that last year’s budget should
be the base, without further justification, is weak and not likely to be accepted.