Here are the definitions of each from the book. You do not have to be specific, but maybe just utilize the concepts of each to show that the topics are understood. It appears that you have almost finished the paper, so only quick points about each should be enough.
Organized budgets:
One of the most important, but also one of the simplest, ideas of budgeting and accounting is that every dollar should be recorded—meaning every dollar an organization receives, keeps, and spends or plans to receive, keep, or spend should be catalogued. But how are all of these data organized? If everyone records these transactions using idiosyncratic descriptions, chaos will ensue. Actual transactions will not be coordinated with budget plans, and records of transactions will drift substantially over time as employ- ees change and as people forget how they used to record things and record them now with newly invented definitions. Such records would be valueless for budgeting or accountability.
In this module, you will learn how to organize budget data by learning to use a chart of accounts and by learning to understand accounting codes, particularly object codes. In the last section, you’ll find exer- cises to practice your skills in organizing budget data by using spreadsheets to format data, to tabulate (sum) data, and to carry sums between “pages.”
(G. 5)
G., Chen, G., Weikart, A., Williams, W.. Budget Tools: Financial Methods in the Public Sector, 2nd Edition. VitalSource Technologies - Telegrapher API, 2015. VitalBook file.
fixed and variable costs:
Costs can be classified into three types based on whether they change in relation to production volume: (1) fixed costs, (2) variable costs, and (3) step costs.
Fixed costs are those cost elements that remain constant over a normal range of production volume or activity or over a certain length of time. A typical example of a fixed cost is the cost of facilities rental, which, within a relevant range of output and during the lease period, often remains constant.
Variable costs vary in direct proportion to production or service volume. For instance, the food cost to operate a soup kitchen is variable since the total food cost will increase proportion- ately with any increase in the number of meals served.
Step costs are those cost elements that remain constant but increase to a new level at a cer- tain point of activity or usage within the relevant range. An example is the number of teachers required in a school. When the number of students in a class is lower than the maximum class size (i.e., when there is unused capacity), adding one student will not lead to the hiring of a new teacher. However, when the classroom is operating at full capacity, the addition of one student (or more than one student) will require the formation of a new class and the hiring of a new teacher for that class. The cost related to hiring a new teacher is therefore a step cost. Adding more students will not change the cost structure until the teacher’s class is at maximum size.
(G. 23)
G., Chen, G., Weikart, A., Williams, W.. Budget Tools: Financial Methods in the Public Sector, 2nd Edition. VitalSource Technologies - Telegrapher API, 2015. VitalBook file.
inflation:
We use the term inflation to indicate the declining purchase power of money over time. The general reason for inflation is that the quantity of money seeking to purchase goods and services increases faster than the quantity of goods and services offered for purchase. Because there are many complexities, such as the speed at which money passes from one purchase to the next, inflation is best measured by tracking the actual purchase price of typical goods—called a mar- ket basket—repeatedly over time. Doing this allows for construction of an index, that is, a series of numbers associated with dates that show the change in the price from a base point. At the base point, the value is set at 1, 100%, or sometimes 100. If it is 100, the value means 100%, so if you take the actual purchase price of all the goods in the market basket and divide it by the actual purchase price on the base date (the date when the base point is set), the result is 1 or 100%.1 Values on subsequent dates tend to be higher because the purchase price of a market basket tends to go up. Sometimes earlier dates are also shown, based on either historical data or estimation, and these values typically will be smaller because the purchase price of the market basket was less. The index that most readers hear about from popular news sources is the Consumer Price Index for All Urban Consumers, usually abbreviated as CPI. As the full title indicates, it is focused on urban consumer prices, meaning the prices of goods and services that members of a household in a city or suburb might purchase.
(G. 46)
G., Chen, G., Weikart, A., Williams, W.. Budget Tools: Financial Methods in the Public Sector, 2nd Edition. VitalSource Technologies - Telegrapher API, 2015. VitalBook file.
the budget process:
Narrowly, budgeting is preparing a plan—a request for funds based on a declaration of need— which is submitted to a decision-making authority. More broadly, it involves participating in a process that may last between 18 and 24 months, perhaps even longer in some jurisdictions or for some sectors of government. The major components of the budgeting process are shown in Figure 10.1. They typically begin with the central budget authority, normally the executive, pre- paring a base or baseline budget and then issuing a budget call. In response, the agencies that are responsible to the executive prepare a budget request. The agencies then prepare agen- cy-level budgets and submit these to the central budget authority. The central authority reviews, modifies, and approves the agency-level budgets and prepares a consolidated government-wide budget. The government-wide budget is then submitted to the legislature.
The legislature has the ability to appropriate money; that is, it can authorize expenditures that are completed through the enactment of laws. Laws are usually called acts in states and the fed- eral government and ordinances in local government. The proposed appropriation act or ordinance may look a lot like the budget, and in some jurisdictions, the legislative and budgeting processes may have become so intertwined as to appear seamless. The proposed law is typically reviewed via a legislative committee process, where there are hearings and testimony. Among those who testify are the executive or a senior official, who testifies about the whole budget, and agency heads, who testify about their agency budgets. Others who testify may include legisla- tors, lobbyists, interested parties, and members of the public. The committee modifies and reports a recommendation to the legislative body, which approves or disapproves the budget. In bicameral legislatures, agreement must be reached between the two chambers. In the federal government, most or all states, and cities with strong mayors, the budget is subject to approval or veto by the executive, meaning this process may cycle back for additional review and approval. Many states give their governor line-item veto authority, which allows the governor to strike out small parts of the budget that he or she does not approve.
(G. 74-75)
G., Chen, G., Weikart, A., Williams, W.. Budget Tools: Financial Methods in the Public Sector, 2nd Edition. VitalSource Technologies - Telegrapher API, 2015. VitalBook file.
budget cutbacks:
Budget cutbacks can range from small, decremental reductions to major retrenchments. Budgets are often reduced in stages. When reductions in budgets are demanded, often the first thought is to raise revenue so that reductions do not have to take place. Then, if that strategy is insufficient, officials usually move toward cutting nonpersonnel services. If that strategy fails, officials often will look for across-the-board cuts instead of more strategic cuts. As a result of these stages in the process, cutting budgets is often difficult and time-consuming.
(G. 150)
G., Chen, G., Weikart, A., Williams, W.. Budget Tools: Financial Methods in the Public Sector, 2nd Edition. VitalSource Technologies - Telegrapher API, 2015. VitalBook file.
Legislative Budget tools:
The budget is submitted to the legislature (meaning the city council, county board of supervi- sors, or state legislature) to review, act on, and appropriate money for. When the written budget is submitted, often the executive or a senior official will deliver an oral presentation to the legis- lature. After the executive delivers the budget, the legislature schedules hearings. During these hearings, heads of budget units (agencies and departments) are asked to testify about their department’s budget. They may also be asked to provide material including written testimony to contribute to a briefing book.
(G. 156)
G., Chen, G., Weikart, A., Williams, W.. Budget Tools: Financial Methods in the Public Sector, 2nd Edition. VitalSource Technologies - Telegrapher API, 2015. VitalBook file.
long term financing:
A capital budget is a financial plan for the construction, improvement, or acquisition of capital assets such as land, buildings, and costly equipment. The planning process for the acquisition of capital assets, discussed in Chapter 19 on capitalization and depreciation, is called capital bud- geting. The capital budget is a key element in the organization’s master budget, which also includes an operating budget and a cash budget. Although the building blocks of the operating budget discussed in earlier modules are organizational units or programs, projects are the typical units of analysis in the capital budget.
Capital projects are long-lived, costly investments and are usually but not always durable brick-and-mortar initiatives. Capital projects also have a useful life and often have costs beyond the initial purchase price; these might include costs of maintenance, service contracts, or addi- tional personnel required to staff the building or equipment. Conversely, some capital projects can produce expense budget savings. For example, when New York City began to replace its three-man garbage collection trucks with two-man vehicles, the city was able to reduce the work- force of its department of sanitation. It then used some of the savings to increase salaries and reduce the department’s budget.
(G. 191)
G., Chen, G., Weikart, A., Williams, W.. Budget Tools: Financial Methods in the Public Sector, 2nd Edition. VitalSource Technologies - Telegrapher API, 2015. VitalBook file.
investment strategies:
Public organizations often have short-term idle cash that should be managed for safety, liquidity, and returns. Some institutions also have long-term financial assets that need to be invested for real total returns. The legislative branch or the board of trustees/directors has fiduciary respon- sibility for the public entities’ assets, and therefore, it is charged with overseeing such entities’ investment programs. The legislature or board governs the investment programs by developing investment policies, by delegating the management of the investments to internal and external investment professionals, and by overseeing the performance of investment programs.
Different investment objectives are chosen depending on the term of investment. For short- term investments, the first priority is safety, followed closely by liquidity. Yield should be pursued only in that context, given the fiduciary responsibility of governments. Policies for short-term investments should specify suitable and unsuitable investment instruments, and investment per- formance and compliance with investment policies should be regularly checked to achieve estab- lished investment objectives.
Long-term investments, especially the pension funds discussed in this chapter, differ from short-term investments in purpose and therefore in strategy. The focus of long-term investing is on real total returns within a predetermined level of risk tolerance. Long-term safety is no longer achieved by selecting individual securities but by using asset allocation to create a diversified portfolio, including fixed-income vehicles of longer maturity, stocks, and alternative invest- ments. The pursuit of higher total returns, using alternative investments, involves higher risks. It requires the effort of qualified and skillful investment professionals, guided and overseen by a dedicated governing board or legislature.
(G. 204)
G., Chen, G., Weikart, A., Williams, W.. Budget Tools: Financial Methods in the Public Sector, 2nd Edition. VitalSource Technologies - Telegrapher API, 2015. VitalBook file.
Forecasting and Managing Cash Flow:
Public organizations need to carefully manage their cash flow in addition to implementing accrual-based budgetary control. A useful tool for managing cash is cash flow forecasting or cash budgeting. Most public organizations prepare a cash budget on at least a monthly basis so that they can foresee cash shortages and surpluses. Management is therefore prepared if corrective actions are needed.
There are multiple ways of dealing with short-term cash shortages and surpluses. Much of the effort must be focused on sustaining uninterrupted public services and safeguarding the public funds that have been entrusted to the organization. Timely updating of the cash flow bud- get with actual data is needed to keep the forecast accurate and relevant.
(G. 245)
G., Chen, G., Weikart, A., Williams, W.. Budget Tools: Financial Methods in the Public Sector, 2nd Edition. VitalSource Technologies - Telegrapher API, 2015. VitalBook file.
Government and Nonprofit Accounting:
Fund accounting, the sorting and tracking of all the sources and uses of funding, is what govern- ments and nonprofits use to track all their transactions. This type of accounting is very different from private sector accounting, which may not separate the sources and uses of funding into different categories.
In the nonprofit world, net assets are divided among three fund categories: unrestricted, tem- porarily restricted, and permanently restricted. In the government world, net assets are divided among many fund categories, the most common being government funds, proprietary, and
fiduciary. Within these three categories are further divisions. The government funds category includes operating and capital funds, the proprietary funds category often includes utilities and golf courses, within fiduciary funds, one often finds pension and health benefit funds.
(G. 246-247)
G., Chen, G., Weikart, A., Williams, W.. Budget Tools: Financial Methods in the Public Sector, 2nd Edition. VitalSource Technologies - Telegrapher API, 2015. VitalBook file
