CRITICAL APPRAISAL REPORT

Critical Appraisal Report

Critical Appraisal Report

Week 1: Finance and budget

Introduction

This report analyses critical decision taken for the round 1 for the decision area finance and budget. In the exigencies of financial Endeavour, the types and amounts of available resources have always been an integral part of the plans, processes, and productivity of school organizations. How and under what conditions schooling is funded remains a highly complicated situation in every venue where educational programs and activities are provided. The purpose of this chapter is to explore the nature and status of financing public education in the United States and to explicate ways and means of planning and managing the financing process. Ironically, this part contains some redundancy in that budgeting is actually a form of planning, but the dramatic changes in funding elementary and secondary schools in the past decades have produced developmental responses from school organizations with unusual and different personal, social, economic, and political results (Strauch, 2008, 89).

All the taken decisions are based on various theories and concepts, which are explained in this report systematically.

Consideration of Relevant Theories and Concepts

Operating and Capital Budgets

State and local governments report operating budgets and capital budgets. In general terms, an operating budget is an enumeration of (a) expenditures on current operations and (b) the revenue inflows required to finance those operations (current operations take place each period). Typical expenditures on current operations include purchases of services and of tangible items. Services are commodities that cannot be stored, for example, state employee salaries and interest payments on government debt. Tangibles are items that are used up each period, for example, stationery and gasoline. Revenue inflows collected in 2009 include tax and fee collections that are used to pay for 2009 operating expenditures.

Capital budgets enumerate (a) planned spending on purchases and repairs of capital assets and (b) the means of financing capital assets. In contrast to current operations, capital assets are used for many periods (examples are roads, school buildings, and water treatment plants). Because capital purchased in the current period produces services in the future, capital, like houses, often is financed with borrowed funds. Governments borrow by selling bonds, which are repaid over many periods, when the services produced by capital are enjoyed. A legal obligation requiring future expenditures is a financial liability. Thus, a capital budget is an enumeration of expenditures on capital assets and newly incurred liabilities in a given period. In contrast to most state and local governments, the federal government does not report a capital budget.

A fiscal year is a 12-month period covered by an operating budget. The U.S. federal government's fiscal year begins on October 1 of each calendar year and ends on September 30 of the following calendar year. Before the beginning of a fiscal year, governments formulate planned operating budgets, which show planned expenditures and expected tax and fee revenues. However, some operating expenditures are difficult to plan for (e.g., disaster assistance), and tax and fee revenues are difficult to predict ...