Evaluating Budget Documents

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Armstrong Atlantic State University

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Assignment: Application: Evaluating Budget Documents

An organization’s operational budget is no more than next year's action plan in financial terms. It should list major goals and objectives for the upcoming year, as outlined in an organization’s strategic plan. The budget must identify which programs or services best achieve those goals and estimate all expenses necessary to deliver them. Budget documents should also include expectations for revenue. Despite the necessary elements involved in all operational budgets, these documents can vary in quality from organization to organization. Each year, the Government Finance Officers Association (GFOA) awards government organizations for the quality of their budget documents, using criteria established in its Distinguished Budget Presentation Award Program.

In this Assignment, you will evaluate a budget document using the above criteria. Review the criteria for the GFOA’s Distinguished Budget Presentation Award Program. Then, select a public organization and a specific budget document from the organization.

Submit a 6-page double-spaced paper (not including the cover and reference pages) in which you do the following:

  • Briefly describe the organization and the budget document you selected.
  • Identify the specific type of budget document you selected.
  • Evaluate the budget document using GFOA criteria.
  • Explain whether or not the budget document serves the constituents and other stakeholders of the organization.
  • Use from the library at least two scholarly sources that were published within the past five years to support your paper. Be sure to follow APA guidelines when citing your sources.

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GFOA Detailed Criteria Location Guide Distinguished Budget Presentation Awards Program Name of Entity: ____________________________ State/Province: ____________________________ First Submission? Yes  No  Cite specific page references on the lines in response to each question. Introduction and Overview * Table of Contents Strategic Goals and Strategies #C1. Mandatory: The document shall include a table of contents that makes it easier to locate information in the document. 1. Is a comprehensive table of contents provided? ________________________________________________ 2. Are all pages in the document numbered or otherwise identified? _________________________________ 3. Do the page number references in the budget or electronic table of contents agree with the related page numbers in the budget or electronic submission? _______________________________________________ #P1: The document should include a coherent statement of organization-wide, strategic goals and strategies that address long-term concerns and issues. 1. Are non-financial policies/goals included? ___________________________________________________ ______________________________________________________________________________________ 2. Are these policies/goals included together in the Budget Message or in another section that is separate from the departmental sections? ________________________________________________________________ 3. Are other planning processes discussed? _____________________________________________________ ______________________________________________________________________________________ #P2: The document should describe the entity’s short-term factors that influence the decisions made in the development of the budget for the upcoming year. 1. Are short-term factors addressed? __________________________________________________________ Short-term ______________________________________________________________________________________ organization 2. Does the document discuss how the short-term factors guided the development of the annual budget? factors ______________________________________________________________________________________ 3. Is a summary of service level changes presented? ______________________________________________ ______________________________________________________________________________________ #P3. Mandatory: The document shall include a budget message that articulates priorities and issues for the upcoming year. The message should describe significant changes in priorities from the current year and explain the factors that led to those changes. The message may take one of several forms (e.g., transmittal letter, budget summary section). 1. Does the message highlight the principal issues facing the governing body in developing the budget (e.g., policy issues, economic factors, regulatory, and legislative challenges)? ___________________________ * Priorities and ______________________________________________________________________________________ Issues 2. Does the message describe the action to be taken to address these issues? ___________________________ ______________________________________________________________________________________ 3. Does the message explain how the priorities for the budget year differ from the priorities of the current year? _________________________________________________________________________________ 4. Is the message comprehensive enough to address the entire entity? ________________________________ ______________________________________________________________________________________ * Budget Overview #C2. Mandatory: The document should provide an overview of significant budgetary items and trends. An overview should be presented within the budget document either in a separate section (e.g., executive summary) or integrated within the transmittal letter or as a separate budget-in-brief document. 1. Is an overview contained in the budget message/transmittal letter, executive summary, or in a separate budget-in-brief document? ________________________________________________________________ 2. Is summary information on significant budgetary items conveyed in an easy to read format? ______________________________________________________________________________________ 3. Is summary information on budgetary trends provided? _________________________________________ ______________________________________________________________________________________ 1 Financial Structure, Policy, and Process #O1. Mandatory: The document shall include an organization chart(s) for the entire entity. 1. Is an organization chart provided which shows the entire entity? __________________________________ *Organization ______________________________________________________________________________________ Chart #F1: The document should include and describe all funds that are subject to appropriation. 1. Is a narrative or graphic overview of the entity’s budgetary fund structure included in the document? ______________________________________________________________________________________ Fund 2. Does the document indicate which funds are appropriated? (Other funds for which financial plans are Descriptions prepared also may be included in the document.) ______________________________________________ and Fund ______________________________________________________________________________________ Structure 3. Does the document include a description of each individual major fund included within the document? ______________________________________________________________________________________ 4. If additional or fewer funds are included in the audited financial statements, does the document indicate this fact? _________________________________________________________________________________ Department/ Fund Relationship Basis of Budgeting * Financial Policies * Budget Process #O2: The document should provide narrative, tables, schedules, or matrices to show the relationship between functional units, major funds, and nonmajor funds in the aggregate. 1. Is the relationship between the entity’s functional units, major funds, and nonmajor funds in the aggregate explained or illustrated? __________________________________________________________________ ______________________________________________________________________________________ #F2: The document shall explain the basis of budgeting for all funds, whether cash, modified accrual, or some other statutory basis. 1. Is the basis of budgeting defined (eg., modified accrual, cash, or accrual) for all funds included in the document? _____________________________________________________________________________ 2. If the basis of budgeting is the same as the basis of accounting used in the entity’s audited financial statements, is that fact clearly stated? ________________________________________________________ ______________________________________________________________________________________ 3. If the basis of budgeting is not the same as the basis of accounting used in the entity’s audited financial statements, are the differences described? ____________________________________________________ ______________________________________________________________________________________ #P4. Mandatory: The document should include a coherent statement of entity-wide long-term financial policies. 1. Is there a summary of financial policies and goals? _____________________________________________ ______________________________________________________________________________________ 2. Do the financial policies include the entity’s definition of a balanced budget? ________________________ ______________________________________________________________________________________ 3. Are all financial policies presented in one place? ______________________________________________ ______________________________________________________________________________________ #P5. Mandatory: The document shall describe the process for preparing, reviewing, and adopting the budget for the coming fiscal year. It also should describe the procedures for amending the budget after adoption. 1. Is a description of the process used to develop, review, and adopt the budget included in the document? ______________________________________________________________________________________ 2. Is a budget calendar provided to supplement (not replace) the narrative information on the budget process? ______________________________________________________________________________________ 3. Is a discussion of how the budget is amended provided in the budget document available to the public (including the budgetary level of control)? ___________________________________________________ ______________________________________________________________________________________ 2 Financial Summaries #F3. Mandatory: The document shall present a summary of major revenues and expenditures, as well as other financing sources and uses, to provide an overview of the total resources budgeted by the organization. 1. Does the document include an overview of revenues and other financing sources and expenditures and other financing uses of all appropriated funds? ________________________________________________ * Consolidated ______________________________________________________________________________________ Financial 2. Are revenues and other financing sources and expenditures and other financing uses presented either (1) Schedule together in a single schedule OR (2) in separate but adjacent/sequential schedules OR (3) in a matrix? ______________________________________________________________________________________ 3. Are revenues presented by major type in this schedule (e.g., property taxes, intergovernmental, sales taxes, fees and charges)? ______________________________________________________________________ ______________________________________________________________________________________ 4. Are expenditures presented by function, organizational unit, or object in this schedule? (For funds other than the main operating fund of the entity, a presentation by fund normally would satisfy this requirement.) ______________________________________________________________________________________ #F4. Mandatory: The document must include summaries of revenues and other financing sources, and of expenditures and other financing uses for the prior year actual, the current year budget and/or estimated current * Three/(Four) year actual, and the proposed budget year. Year 1. For annual budgets, are revenues and other financing sources and expenditures and other financing uses for Consolidated the prior year, the current year, and the budget year presented together on the same schedule(s) or on and Fund schedules presented on adjacent/sequential pages? _____________________________________________ Financial ______________________________________________________________________________________ Schedules 2. Is this information presented for the appropriated funds in total (or for the entity as a whole if no appropriated funds are included)? __________________________________________________________ ______________________________________________________________________________________ 3. Is this information also presented at a minimum for each major fund and for other (i.e. nonmajor) funds in the aggregate (or for each significant fund and other funds in the aggregate if no appropriated funds are included)? _____________________________________________________________________________ ______________________________________________________________________________________ 4. For biennial budgets, are revenues and other financing sources and expenditures and other financing uses for the prior year, the current year, and both budget years presented together on the same schedule(s) or on separate schedules presented on adjacent/sequential pages? ______________________________________ ______________________________________________________________________________________ * Fund Balance #F5. Mandatory: The document shall include projected changes in fund balances, as defined by the entity in the document, for appropriated governmental funds included in the budget presentation (fund equity if no governmental funds are included in the document). 1. Does the document include the entity’s definition of “fund balance” (or of “fund equity” if no governmental funds are included in the entity - frequently the noncapital portion of net assets)? ______________________________________________________________________________________ 2. Is the fund balance (equity) information presented for the budget year? _____________________________ ______________________________________________________________________________________ 3. Is there a schedule showing (1) beginning fund balances, (2) increases and decreases in total fund balances (reported separately), and (3) ending fund balances for appropriated governmental funds? ______________________________________________________________________________________ 4. Is this information presented at a minimum for each major fund and for nonmajor governmental funds in the aggregate? _________________________________________________________________________ 5. If fund balances of any major fund or the nonmajor funds in the aggregate are anticipated to increase or decline by more than 10%, does the document include a discussion of the causes and/or consequences of these changes in fund balance? ____________________________________________________________ 6. If an entity has no governmental funds, is the change in the fund equity presented for (1) the entity as a whole, (2) the main operating fund, and (3) each significant fund? ________________________________ ______________________________________________________________________________________ 7. If an entity has no governmental funds and the fund equity of any significant fund or other funds in the aggregate is anticipated to change by more than 10%, does the document include a discussion of the causes 3 8. and/or consequences of any change in fund equity that is greater than 10% in either a significant fund or other funds in the aggregate? ______________________________________________________________ For biennial budgets is the change in fund equity presented separately for both years of the biennium? ____ ______________________________________________________________________________________ #F6. Mandatory: The document shall describe major revenue sources, explain the underlying assumptions for the revenue estimates, and discuss significant revenue trends. 1. Are individual revenue sources described? ___________________________________________________ ______________________________________________________________________________________ * Revenues 2. Do the revenue sources that are described represent at least 75 percent of the total revenues of all appropriated funds? _____________________________________________________________________ 3. Are the methods used to estimate revenues for the budget year described (e.g., trend analysis, estimates from another government or consulting firm)? ________________________________________________ ______________________________________________________________________________________ 4. If revenues are projected based on trend information, are both those trends and the underlying assumptions adequately described? ____________________________________________________________________ ______________________________________________________________________________________ Long-range Financial Plans #F7: The document should explain long-range financial plans and its affect upon the budget and the budget process. 1. Are long-range financial plans identified? ____________________________________________________ ______________________________________________________________________________________ 2. Do your long-range financial plans extend out at least two years beyond the budget year? ________________________________________________________________________ 3. Is there a concise explanation or illustration of the linkage between the entity’s long-range financial plans and strategic goals? __________________________________________________________ Capital and Debt #F8. Mandatory: The document should include budgeted capital expenditures, whether authorized in the operating budget or in a separate capital budget. 1. Does the document define “capital expenditures”? _____________________________________________ ______________________________________________________________________________________ * Capital 2. Does the document indicate the total dollar amount of capital expenditures for the budget year (both budget Expenditures years for biennial budgets)? _______________________________________________________________ ______________________________________________________________________________________ 3. Are significant nonrecurring capital expenditures described along with dollar amounts? (Information in a separate CIP document does not satisfy this criterion.) __________________________________________ ______________________________________________________________________________________ 4. If the entity has no significant nonrecurring capital expenditures, is that fact clearly stated in the document? ______________________________________________________________________________________ #F9: The document should describe if and to what extent significant nonrecurring capital investments will affect the entity’s current and future operating budget and the services that the entity provides. 1. Are anticipated operating costs associated with significant nonrecurring capital investments described and quantified (e.g., additional personnel costs, additional maintenance costs, or additional utility costs)? Impact of (Information in a separate CIP document does not satisfy this criterion.) Capital ______________________________________________________________________________________ Investments on 2. Are anticipated savings or revenues expected to result from significant nonrecurring capital investments Operating described and quantified (e.g., reduced utility costs, lower maintenance costs)? ______________________ Budget ______________________________________________________________________________________ 4 * Debt #F10. Mandatory: The document shall include financial data on current debt obligations, describe the relationship between current debt levels and legal debt limits, and explain the effects of existing debt levels on current operations. 1. If the entity has legal debt limits:  Are debt limits described? _________________________________________________  Are the amounts of debt limits expressed in terms of total dollars, millage rates or percentages of assessed value? ______________________________________________  Are the amounts of debt subject to debt limits identified in the same terms used to describe the debt limits themselves? __________________________________________ 2. If the entity has no legal debt limits, is that fact clearly stated within the budget document? ____________ ______________________________________________________________________________________ 3. If the entity does not have and does not intend to issue debt, is that fact clearly stated? ________________ ______________________________________________________________________________________ 4. Is the amount of principal and interest payments for the budget year (two years for biennial budgets) shown for each major fund (for appropriated funds), for each significant unappropriated fund and for other funds in the aggregate? ________________________________________________________________________ ______________________________________________________________________________________ Departmental Information * Position Summary Schedule #O3. Mandatory: A schedule or summary table of personnel or position counts for prior, current and budgeted years shall be provided. 1. Is a summary table of position counts provided for the entire entity? _______________________________ ______________________________________________________________________________________ 2. Does the table include the prior year, the current year, and budget year position counts? ______________________________________________________________________________________ 3. Are changes in staffing levels for the budget year explained? _____________________________________ ______________________________________________________________________________________ 4. If there are no changes in staffing levels, is that item noted? ______________________________________ ______________________________________________________________________________________ #O4. Mandatory: The document shall describe activities, services or functions carried out by organizational units. * Department 1. Does the document clearly present the organizational units (e.g., divisions, departments, offices, agencies, or programs)? __________________________________________________________________________ Descriptions 2. Does the document provide descriptions of each organizational unit? ______________________________ ______________________________________________________________________________________ #O5: The document should include clearly stated goals and objectives of organizational units (e.g., departments, divisions, offices or programs). 1. Are unit goals and objectives identified? ____________________________________________ Unit Goals and ________________________________________________________________________ Objectives 2. Are unit goals clearly linked to the overall goals of the entity? ______________________________ ________________________________________________________________________ 3. Are objectives quantifiable? ____________________________________________________ ________________________________________________________________________ 4. Are timeframes on objectives noted? _______________________________________________ ________________________________________________________________________ #O6: The document should provide objective measures of progress toward accomplishing the government’s mission as well as goals and objectives for specific units and programs. 1. Are performance data for individual departments included in the document? _________________________ Performance ______________________________________________________________________________________ Measures 2. Are performance data directly related to the stated goals and objectives of the unit? ___________________ ______________________________________________________________________________________ 3. Do performance measures focus on results and accomplishments (e.g., output measures, efficiency and effectiveness measures) rather than inputs (e.g., dollars spent)? ___________________________________ ______________________________________________________________________________________ 5 Document-wide Criteria #C3: The document should include statistical and supplemental data that describe the organization, its community, and population. It should also furnish other pertinent background information related to the services provided. 1. Is statistical information that defines the community included in the document (e.g., population, composition of population, land area, and average household income)? ____________________________ Statistical/ ______________________________________________________________________________________ Supplemental 2. Is supplemental information on the local economy included in the document (e.g., major industries, top Section taxpayers, employment levels, and comparisons to other local communities)? ________________________ ______________________________________________________________________________________ 3. Is other pertinent information on the community (e.g., local history, location, public safety, education, culture, recreation, transportation, healthcare, utilities, and governmental structure) included in the document? _____________________________________________________________________________ #C4: A glossary should be included for any terminology (including abbreviations and acronyms) that is not readily understandable to a reasonably informed lay reader. 1. Is a glossary that defines technical terms related to finance and accounting, as well as non-financial terms Glossary related to the entity, included in the document? _______________________________________________ 2. Are acronyms or abbreviations used in the document defined in the glossary? ________________________ 3. Is the glossary written in non-technical language? ______________________________________________ #C5: Charts and graphs should be used, where appropriate, to highlight financial and statistical information. Narrative interpretation should be provided when the messages conveyed by the graphs are not self-evident. 1. Are charts and graphs used in the document to convey essential information (e.g., key policies, trends, Charts and choices and impacts)? ____________________________________________________________________ Graphs 2. Do the graphics supplement the information contained in the narratives? ____________________________ ______________________________________________________________________________________ #C6: The document should be produced and formatted in such a way as to enhance its understanding by the average reader. It should be attractive, consistent, and oriented to the reader's needs. 1. Is page formatting consistent? _____________________________________________________________ 2. Are the main sections of the document easily identifiable? _______________________________________ Understand3. Is the level of detail appropriate? ___________________________________________________________ ability and 4. Are text, tables, and graphs legible? _________________________________________________________ Usability 5. Are budget numbers in the document accurate and consistent throughout the document? _______________ 6
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Running head: EVALUATING BUDGET DOCUMENT

Evaluating Budget Document: Millennium Challenge Corporation
Name
Institution

1

EVALUATING BUDGET DOCUMENT

2

Evaluating Budget Document: Millennium Challenge Corporation
Description of the Organization
The Millennium Challenge Corporation (MCC) was founded in 2004 with the aim of
availing solutions to the multiple frustrations that the Federal government had faced with its
foreign aid initiatives. As such, Parks and Davis (2019) explain that the MCC played a
significant role in the endeavors of availing the federal government with an alternative way of
delivering the desired economic assistances to the vulnerable populaces across the globe. MCC
operates on the principle that economic development is well attained if it is well connected to the
economic and democratic ideologies of a free market and where the associated government is
effectively committed to advance the reform measures needed to foster the attainment of such
goals.
Azam and Thelen (2018) explain that MCC as a concept of the federal government
greatly differs from the past and current aid regimes and agencies put in place by the United
States’ government. For instance, the researchers explain that unlike other agencies, the
Millennium Challenge Corporation adopts a competitive procedure aimed at rewarding countries
across the globe based on their past operations and the present performance indicators. Similarly,
the scholars reveal that the MCC incorporates a pledge of insulating the financial resources
drawn from the objectives of the United States strategic foreign policies to impose a strong
influence in the areas where the aid is spent. On the other hand, Parks and Davis (2019) explain
that the MCC embraces the mission of eradicating poverty by fostering economic advancement
and ensuring that that recipient economies are held responsible for all forms of MCC-funded
initiatives. To meet this objective, MCC puts a lot of emphasis on the importance of
institutionalizing higher levels of transparency in all aspects of its operations.

EVALUATING BUDGET DOCUMENT

3

(ref3) explain that the MCC was incorporated after the Congressional approval of the
Millennium Challenge Act of 2003. The researchers explain that the MCC was established as a
government agency whose operations are separated from those of the Departments of States, the
USAID, and the National Treasury. Unlike the funding for other aid organizations such as the
USAID where the Congress plays a pivotal role in the processes of fostering allocation decisions,
its involvement in MCC is only meant to ensure that the corporation’s unique decision-making
approach is followed in a structural manner.
Description of the Budget Document Selected
The present day study seeks to evaluate Millennium Challenge Corporation’s budget
document for the financial year 2019. The organization’s total appropriation is estimated at $800
million. MCC’s budget for 2019 is based on the costs incurred in the agency’s expenditures in
the financial years 2017 and 2018. For instance, the organization’s budget for 2017 and 2018
were estimated at $905 and $898.9 respectively. A critical analysis of the budget document
reveals that the organization puts into consideration factors such as the costs needed to meet the
associated administrative expenses, compact development, due diligence, threshold programs
and compact assistances. As such, MCC indicates that the $800 million sought will be applied in
the processes of supporting compacts ...


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