Public Budgeting

Public Budgeting

Read only_Problem Set 1 Spring 2020

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PADM 5387 Problem Set 1 Due March 4, 2020

There is a total of 17 questions, which consist of 9 questions worth 1 point and 8 questions worth 2 points, total 25 percent points counted toward your final grade. Answer all the questions and show all your problem-solving process in your answer sheet (Word). A simple answer without appropriate reasoning will result in partial or no credit to be earned for the question. Include question numbers and your answers. Identify student name(s) and the course number and section in the title page. Questions worth 2 points must be solved first through your estimation report (Excel) and then the problem-solving is copied and moved to the answer sheet, followed by concluding remarks. In Excel, use a separate sheet for each answer and name it the question number. Note: Do not copy any of the questions. Type the question numbers and your answers only. Copying questions in any way is strictly prohibited. When printing out, make sure not to circulate that hard copy to anyone. Q1. (1) What is financial management? Q2. (1) Expenses are recognized when_____________ for accrual-based budgets and when_____________ for cash-based budgets. Q3. (1) Operating budgets are suggested to be done on a(n) ___________basis of accounting. Why? Q4. (1) Briefly distinguish among line-item, responsibility center, and program budgets. Limit your answer within 2 paragraphs (4-6 sentences in each paragraph). Q5. (1) What do functional financial statements do for the federal government?

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Q6. (2) Roche City has two major sources of revenues, property tax and sales tax, which are billed according to the following schedule. 2020 July August Sept. Oct. Nov. Dec. Property Tax ($)

45,000,000

Sales Tax ($) 50,000 55,000 62,000 50,000 68,000 112,000

Traditionally, property tax revenues have been received in cash according to the following schedule:

• 40 percent in the following first month after the billing date • 20 percent in the second month • 10 percent in the third month • 10 percent in the fourth month • 8 percent in the fifth month • 5 percent in the sixth month • 7 percent are not collected

The state collects the sales tax revenues and will transfer cash to the city on March 1, 2021, for the sales tax revenues earned in the last quarter of 2020. Monthly cash disbursements for general operations are $3.7 million. Beginning cash balance for January 1, 2021 is $500,000. Roche city will borrow to ensure that the ending cash balance each moth is at least $100,000. Prepare a monthly cash budget for January, February, and March of 2012. How much will the city have to borrow in March, 2021? Refer to the following template budget table. January February March Beginning Balance Cash Receipts

Property Tax Sales Tax

Total Cash Available Less Cash Disbursements Net Cash Available Borrow/(Repay) Ending Cash Balance Note: Ending cash balances from one period are the beginning cash balances for the next period.

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Q7. (2) The County has an initiative for students in underperforming schools. To get funding, schools need to provide each student with eight 2-hour group tutoring sessions each month. Also, parents must agree to pay $10 per month for each child they register for the program. The County will pay each school $200 per enrolled child, per month. Schools must provide one tutor for every five students enrolled in the program, at a cost of $50 per hour at a teacher’s home school or $60 per hour if the teacher has to commute from another school in the system. Schools that participate also need to acquire a site license for a self-study computer program, at a cost of $2,400 per year regardless of the number of students, paid at the beginning of the program. Schools also incur a cost of $1.50 per child, per tutoring session, for workbooks that are tied to the self-study program. Generally, the County takes 1 month to pay bills submitted by schools. Parents pay all tuition bills at the beginning of each month. Participating teachers are paid for all afterschool programs at the end of each month. The full cost of the software must be paid by the end of the first month of the program. Workbooks are paid for in the month they are used. You are the budget manager for Typical County School (TCS). Five teachers in your school have agreed to be tutors. Since you expect to need 15 tutors by the end of the year, you will also use 10 teachers from other schools, as needed. Your calculations indicate an expected 25 students in the program during the first month it is offered, 41 in the second month, and 52 in the third month. Prepare operating budgets for each of the first 3 months of the program. And then, summarize the monthly budgets in to a quarterly operating budget. Refer to the below template table. Inputs

Month 1

Month 2

Month 3

Students

Student to teacher ratio

Number of teachers

Whole number of teachers

Number of inside teachers

Number of outside teachers

Tutoring sessions per month

Hours per session

Teacher Hours

Inside

Outside

Unit Revenues

Monthly parent tuition

Monthly County tuition

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Unit Costs

Inside teachers per hour

Outside teachers per hour

Software per year

Supplies per student per session

Operating Budget

Revenue Month 1

Month 2

Month 3

Full Qtr.

Tuition—Parents

Tuition—County

Total Revenue

Expenses Inside teachers Outside teachers Supplies Software Total Expenses

Surplus/(Deficit)

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Q8. (2) Continuing from Q7, prepare a cash budget for the first three months and the first quarter assuming that the beginning balance of the first month is 0. Considering the cash flows, how much will you need to borrow during the first quarter to operate the program? You can only borrow cash once during the first quarter. Note. Distinguish between revenues and costs per month and cash inflows and outflows. Cash Budget Month 1 Month 2 Month 3 Full

Qtr. Beginning Balance

Receipts

Parent Tuition

County Contract

Total Receipts

Available Cash

Disbursements Salaries Software Supplies Total Disbursements

Cash Surplus/(Shortfall)

Q9. (1) Describe three changes that resulted from the Congressional Budget and Impoundment Act of 1974 and are still present in the federal budget process. Q10. (1) The PAYGO budget requirement means that: Q11. (1) Concisely summarize a federal budget year’s cycle with specific timelines. Your summary must be rephrased and summarized within one paragraph (4-6 sentences) for each stage.

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Q12. (2) Youth for America had annual total costs of $800,000 at a volume of 2,000 volunteers. The fixed costs for the year were $400,000. What would the total costs be if the volume increased by 15 percent? Q13. (2) The Millbridge Fine Arts Museum (MFAM) is thinking about bringing a Van Gogh exhibit to Millbridge for 30 days. MFAM expects 2,000 people per day to visit the exhibit, each paying the $10 entrance fee. Daily costs for security, extra power, and added custodial services will be $1,000. What is the maximum amount that MFAM can afford to spend on fixed costs and still break even? Q14. (2) James Town Clinic (JTC) had the following fixed and variable costs. Variable costs per Patient

Fixed Costs per Year

Personnel $150 Rent $100,000

Supplies 20 Administration 120,000

Laundry 30 Other 80,000

Other 50

Total VC/Patient

$250 Total Fixed $300,000

An outside organization offers to send JTC 500 patients per year but offers to pay only $300 for each one. It currently has 2,500 patients per year and can easily handle 3,000. Should JTC agree to this arrangement? Refer to the template table below and conduct a marginal cost analysis to decide. Volume Fixed Variable Tota