978-1259917059 Chapter 12 Solution Manual Part 1

Chapter 12 – Budgeting and Performance Measurement

CHAPTER 12: BUDGETING AND PERFORMANCE MEASUREMENT

Chapter 12 – Budgeting and Performance Measurement

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CHAPTER 12: BUDGETING AND PERFORMANCE MEASUREMENT

12-1. The GASB budgeting, budgetary control, and budgetary reporting principle provides that

all government units should prepare an annual budget. Governments should also prepare

budgetary comparisons for the General Fund and each major special revenue fund that

has a legally adopted budget. Budgets for other governmental funds, proprietary funds,

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

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Ch. 12, Answers, Question 12-2 (Cont’d)

12-3. Although the underlying budget concepts are similar for corporations and governments,

there are a number of nuances unique to governments. Government budgets are legally

required. They are also integrated into a government’s accounting system and play a role

12-4. Illustration 12–3 includes the following sets of potential conflict – advocates vs.

conservers; accuracy vs. political expediency; special interests vs. collective interests;

bureaucracy vs. democracy; the budget office vs. departments; and public will vs. public

welfare. As noted in the chapter, department heads and interest groups may advocate for

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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;

budgets for appropriations, revenues, capital expenditures, cash receipts and cash

disbursements and identification of responsible persons; public hearings; and

12-6. Balanced scorecards typically report on performance measures that fall into four

categories: financial, customer, internal business processes, and learning and growth (of

(3) Internal business processes—The state will register vehicles in an efficient and

convenient manner. (4) Learning and growth—The school district will support its

teachers in maintaining and advancing their academic credentials. (Student examples will

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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.

Concepts Statement No. 2, “Service Efforts and Accomplishments Reporting” (1994) was

(1) input measures⎯measures of service efforts,

(3) efficiency and effectiveness measures⎯measures that relate efforts to

accomplishments.

Examples for a police department might include: financial resources dedicated to police

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Ch. 12, Answers (Cont’d)

12-9. “Big data” refers to large, readily available digital data sets. Public executives can use big

data for such goals as improving cash management, better budgeting, and improved long–

term planning.

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

Requirements for Federal Awards. The “super circular,” termed as such since it

consolidated and replaced eight circulars previously issued by the OMB, lists allowable

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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 website at www.gfoa.org under the “Award Programs” tab

and “Distinguished Budget Presentation Award Program” link. Readers will find

at least one award-winning municipality for most states and dozens in the largest

12-12. The City of Fort Collins budget website is available at

http://www.fcgov.com/citymanager/budget.php . The following answers were obtained

for the 2017–2018 biennial budget.

a. Under the “Budget Process” tab the website includes the following responses to

“Why are we doing it (i.e., budgeting for outcomes)”?

Chapter 12 – Budgeting and Performance Measurement

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Ch. 12, Solutions, Case 12-12 (Cont’d)

c. For the 2017–18 budget cycle, the City of Fort Collins has the following target

outcomes:

play.

• Transportation – Fort Collins provides for safe and reliable multi-modal travel to,

from, and throughout the City.

• High Performing Government – Fort Collins exemplifies an efficient, innovative,

transparent, effective, and collaborative city government.

12-13. Student memo contents will vary. Some of the similarities and differences between

Manhattan’s 2016 budget calendar (for the 2017 fiscal year) and Chesapeake’s 2016–17

budget calendar (for the 2017–18 fiscal year) are noted here. The City of Manhattan has a

Chapter 12 – Budgeting and Performance Measurement

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Ch. 12, Solutions, Case 12-13 (Cont’d)

requirements and real estate assessments. In general, the objectives are similar but the

12-14.

a. The appropriate document to research the allowability of costs charged to federal

1. According to Section 200.432, costs of meetings and conferences, the primary

2. Under Section 200.474(c)(2) travel costs for dependents are unallowable, except for

3. According to Section 200.442, costs of investment counsel and staff, and similar

4. According to Section 200.450, the cost of lobbying activities undertaken to obtain

grants, contracts, cooperative agreements, or loans is generally not allowed.

6. Under Section 200.447, costs of insurance required or approved and maintained,

pursuant to the federal award, are allowable.

Chapter 12 – Budgeting and Performance Measurement

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Ch. 12, Solutions, Case 12-14 (Cont’d)

Accreditation Skills tag: AACSB: Knowledge Application, AICPA: Critical Thinking

Level of Difficulty: Medium

Solutions to Exercises and Problems

12-15. 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

Award, they will find each of the budget documents include, at a minimum, the required

criteria noted on the GFOA’s website (and indicated by as asterisk in Illustration 12-1).

12-16. 1. d. 6. b. 11. d.

3. b. 8. d. 13. d.

5. a. 10. d.

General Problem Information: Various budgeting issues

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Ch. 12, Solutions (Cont’d)

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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