Public Budgeting

Public Budgeting

Question 1

Public budgeting allocates public resources. This allocation function means that budgeting lies at the very heart of politics. Federal budget is a legal document which defines the expenses and revenues of the government at federal level. It encompasses all the states of the nation. On the other hand, State budgets are designed on the basis of individual state's population, income level, availability of resources and expenditure requirements. Federal budget address the whole nation whereas the state government budgets are for a defined legal jurisdiction within the state. The source of revenue and mode of financing also varies in different type of budgets. In case of federal budget, the main source of financing is through taxation, domestic and foreign loans. The state and local governments are also funded through taxes, but these include property tax, sales tax, subventions etc. The local authorities usually do not borrow from the international markets.

If accountability is the hallmark of democratic governance, public auditing is a means to achieve it. Auditing is a form of oversight, or examination from some point external to the system or individual in question. Technically, auditing is a form of verification by an independent body, which compares actual transactions with standard practices. Because it evaluates the relationship of what is against what ought to be, auditing is a normative operation. Public auditing is the traditional instrument to hold actors entrusted with managing public funds accountable by providing information to supervising agents, elected officials, and (sometimes) constituents about compliance with or deviations from accepted standards. Although accountability as a general aim of auditing is undisputed, unavoidable tensions with other principles of good governance arise, such as the exercise of informed discretion by elected decision makers or individual privacy rights when the corset of control is taken to an extreme (Wildavsky, 1986).

I will manage my expenditures through the internal control of auditing. Internal control of auditing refers to procedures that protect the resources of an organization by documenting and then reporting on financial matters (e.g., financial statements, 990 income tax return, and audit). This approach reduces the probability of a recording error, fraud, or embezzlement. Internal control involves following generally accepted accounting principles (GAAP) promulgated by the Financial Accounting Standards Board (FASB) and American Institute of Certified Public Accountants (AICPA). One dimension of internal control is documentation. Whenever a financial transaction occurs, it is documented; for example, a record of a check, payroll record, or receipt associated with a purchase. Financial transactions are recorded in a journal, which is simply a chronological list of transactions. Journal entries are posted to a ledger. The ledger summarizes financial transactions that increase or decrease asset, liability, and net asset (fund balance) accounts. Nonprofit organizations use fund accounting. A fund is a balanced set of accounts where assets equal liabilities plus net assets. This is what a trial balance shows. The trial balance is the basis of financial statements (statement of financial position or balance sheet, activity statement or revenue and expense statement, and ...