Reforms and Shortcomings

Topics: Budget, Zero-based budgeting, Budgets Pages: 17 (460 words) Published: July 13, 2015
Reforms and
Team A
April 13, 2015

Performance Based Budgeting

PBB focuses results rather than the money spent
Lawmakers are encouraged to reconsider priorities
Allows flexibility for reallocation of money
Allows sanctions for poor performance

City of Kelsey Budget
Use of Performance Based Budgeting
 Budget processing time shortened
 Empowers managers for effective promotion of
resources through KPI’s
 The city will be more focused on the resources,
making it a high priority
 Performance will be improved over all divisions

Zero-Based Budget System

Expenses must be justified every budget period
Budgets are build around the expenses justified
Previous budgets are not involved.
New Budgets in the ZBB system are a clean slate.

City of Kelsey Budget
Use of Zero Based Budgeting

Very time consuming
Avoids making blanket increases or decreases
Each division must justify funding
Not all divisions will receive the same priority

 Zero-based Budgeting- understood as a budgeting method
where every expenditure must be justified every budget
 Advantages: each cost is re-evaluated each year,
eliminates extra non-beneficial costs.
 Disadvantages- produces cutbacks, or layoffs, demands a
budget increase

 Performance-based Budgeting- is recognized as a budget that reflects the input of resources and the output of services for each unit of an organization.
 Advantages- explains previous legislative funding
decisions, estimates and justifies the potential
consequences of new funding decisions
 Disadvantages- may cause improper use of incentives
and disincentives to improve agency performance

Decline of Federal Funding & the Affects:

 Zero-based Budgeting cutbacks
 layoffs
 restricted budget
 unjustifiable expenses

 Performance-based Budgeting improved services
 utilization of cost-effective methods

Local & State Level Affects of Zero-Based Budgeting:

 Local, federal, and state programs are cut
 Local taxes and state taxes are raised (tobacco, and liquor taxes)
 Revenue loss
 Layoffs (court system, criminal justice organizations)
 Decrease in salaries, and bonuses

Local & State Level Affects of
Performance Based Budgeting:
 Abuse of federal funding
 Unaccounted expenditures, and program incentives
 Decrease in state and local taxes (tobacco, liquor
 Increase in federal funding
 Increase in residual funds
 Possible increase in bonuses and salaries

Short-Term Financing
 Loans Designed to be Paid in a Year or Less
 Fast and Flexible Way of Working Capital
 Help Cover Payroll, Utility Charges, and Purchasing of

Short-Term Financing:
 Secured Loans
 Lenders Look at the Borrower’s Ability to Repay the Loan  Interest Included in the Loan

Short-Term Financing: Contrasts
 Three Main Types of Short-Term Financing:
 Trade Credit
 Arrangement to Buy Goods and Services w/an Open Account

 Commercial Bank Loans
 Secured or Unsecured Loans

 Commercial Paper

Budget Management Technique:
 Financial Forecasting and Planning
 Clarify the Purpose
 Set a Timeframe
 Ensure the Accuracy of the Data
 Be Consistent in Calculations
 Examine the Financial Data Carefully
 Use Insight and Intuition



References Cont’d

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