BUDGET ANALYSIS EXERCISE
The following exercise is intended to assess your ability to read, understand, analyze, and evaluate a government budget. The governmental unit that you will use is the City of Santa Clarita, California. Their budget can be accessed at: http://www.santa-clarita.com/index.aspx?page=220. Use the “Budget FY 2012-2013” link. The exercise involves two parts; 1) describing and analyzing the budget, and 2) evaluating the budget document.
Part 1 – Describing the Budget
In order to evaluate a budget you must first be able to read, understand, thoroughly describe and analyze it. Each of the following sections should be present in all “good” public budget documents. Lookfor these sections and answer the questions provided below for each section.
Budget Message
1. What are the major points that the Chief Executive Officer (CEO) provides?
2. What demographic, economic, and intergovernmental, and political factors are impacting the budget?
3. Under what law is the CEO required to submit the budget and what is the time frame for the budget?
4. How much revenue is anticipated and how has this changed?
5. Are cuts being made to the budget; and if so, what are they and how much are they?
6. Are new programs being created or expanded; if so, what are they and how much?
Budget Summary
1. For all funds, what are the major objects of expenditure, what are the amounts and the percentage of total planned spending? (Present your findings in tabular form.)
2. For all funds, what are the major sources of revenue, what are the amounts and percentage of total estimated revenues? (Present your findings in tabular form.)
3. Prepare a spreadsheet showing the major divisions within “All Funds – Operating Appropriations.” Indicate the totals for each major division, the percentage of total for all funds, and the percentage change between the actual, estimate, and budget years.
4. Conduct a preliminary assessment of the budgetary solvency of the jurisdiction. Budgetary solvency means the government’s ability to generate adequate revenues over the budgetary period to meet expenditures, and to control spending, to avoid deficits.Hint: you should primarily focus your attention on the General Fund but do not ignore the other funds that may have an impact on the General Fund or more broadly on the budgetary solvency of the jurisdiction. Also support your assessment with numerical data.
Expenditures (Summary)
1. In a spreadsheet recreate the table showing “General Fund – Operating Appropriations.” In addition show the percentage change between the Actual, Estimate, and Budget columns, and provide a percentage of total General Fund amount for each column.
2. Do the above percentage changes and percentages of total seem reasonable to you? Provide support for your answers.
Revenues
1. In a spreadsheet recreate the table titled “Budget Revenue, Three Year History” for all the Taxes and for just the totals of the major categories of revenues for the General Fund. The major categories of revenues for the General Fund are: Taxes, Licenses & Permits, Fines, Forfeitures, & Penalties, Use of Money & Property, Revenues from Other Agencies, Charges for Current Services, and Other Revenue. In addition show the percentage change between the Actual, Estimate, and Budget columns, and provide a percentage of total General Fund amount for each column.
2. Do the above percentage changes and percentages of total seem reasonable to you? Provide support for your answers.
3. Arethere other major sources (= 5% of total revenues) of revenue in other funds, what are they and what are they used for?
Department/Agency Budget Information
1. How are departmental budgets organized?
2. What information is presented in the departmental budget?
3. What type(s) of budget format is used?
4. Do you think there are any weaknesses and/or omissions in the department budgets? What are they?
Supplemental Budget Information
1. Is there any other information provided in the budget that is not included under the Departments; if so, describe the contents.
2. How does the City handle capital improvements?
3. Is there any other information that should be included? What is it?
Part 2 – Evaluating the Budget
The first section asks you to describe and analyze the budget. Here you will use the information you gathered in the first part of this exercise, the knowledge you acquired in PPA 555, and your critical thinking skills to assess whether this is a “good” budget document or not. In addition to materials from your text(s) and lectures, two other sources may prove useful. They are the Government Finance Officers Association’s (GFOA) Distinguished Budgeting Awards Program accessible at http://www.gfoa.organd the California Society of Municipal Finance Officers Association’s (CSMFO) Budget Award Program accessible at http://www.csmfo.org. Both organizations provide criteria to evaluate a budget document. Fundamentally, and following the GFOA guidelines, you should think about the budget document as: 1) a policy statement, 2) a financial plan, 3) an operations guide, and 4) a communications device. In your opinion, is this a “good” budget? Or stated differently does this budget document effectively serve the GFOA’s general purposes guidelines as noted above? State your answer and provide a thorough justification for your answer.Please limit your response to no more than two, typed, double-spaced pages.
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