Posted: March 6th, 2023
Budgeting is an essential part of the public sector, as it establishes a blueprint for where and how funds are allocated within government entities. It also helps inform stakeholders (e.g., citizens) about overall financial strategies and performance, in terms of both current operations and future planning (McRae & Chadwick-Blossey, 2020). Budgeting in the public sector encompasses multiple components: sources of revenue, purpose of government expenditures, budget cycles, budget preparation and debt administration.
Sources of Revenues
The primary source of revenue for governments comes from taxes; however there are other sources such as user fees or charges for services rendered by the governmental agency (McRae & Chadwick-Blossey, 2020). Taxes can be income taxes that taxpayers pay on their income or sales tax that consumers pay on goods they purchase. User fees or charges may involve fees charged to those who use public facilities such as parks or libraries (Iwasaki et al., 2021). Governments may also receive revenues through grants from federal agencies or other organizations. These grants could provide funds to aid with specific projects such as disaster relief efforts. Finally, investments made by a government can generate additional revenues which can be used to support existing programs or finance new initiatives (McRae & Chadwick-Blossey 2020).
Purpose of Government Expenditures
When considering governmental expenditures there are two main categories: discretionary spending and mandatory spending (Iwasaki et al., 2021). Discretionary spending refers to items selected either year after year for certain purposes like defense contracting or infrastructure building; whereas mandatory spending is required by law and typically involves entitlement programs like Social Security payments which increase each year due to inflation adjustments etc.. In addition to these major categories most governments have set aside money for emergency situations such as natural disasters like hurricanes etc.. This category is typically known as emergency spending although not all governments have this designation specifically labeled within their budgets (Kane & Longenecker 2016).
The budget cycle refers to the timeframe in which a government needs to create its annual plan outlining projected revenue and expenditures over that period; it typically follows a calendar year but some jurisdictions use different timeframes depending on local regulations/laws(Kane & Longenecker 2016 ). The budget cycle begins at least six months prior when departments begin gathering data related to expected costs and revenues over the upcoming fiscal year; this information is then compiled into an initial draft document called “the base” which serves as starting point before revisions are made based on any changes/updates needed until final approval is given by appropriate authorities at end of process (McRae & Chadwick-Blossey ,2020 ). Once approved this document serves basis from which actual allocations will be derived throughout following twelve months .
Once data has been gathered necessary steps taken outlined within budgetary cycle above focus turns towards further preparing proposed budget beginning with drafting individual departmental plans followed by compilation into single overarching document representing entire organization’s finances during given period ,this includes breakdowns segmented according inputs discussed earlier under section defining scope sequence including projections regarding both projected revenue streams anticipated expenditure alongside any potential areas need further review due factors outside direct control impacting numbers long term analysis expected impact decisions made during process . Detailed audit reports should accompany proposals submitted ensure accuracy verification .
In order manage debt obligations incurred various departments respective municipalities must develop systems track accounts receivable payments well any liabilities owed external parties though bonds issued organization itself direct loans received outside entities . Systems implemented vary jurisdiction however common methods include creation pre – payment schedules based estimated timeline repayment amounts along designating employees responsible handling incoming accounting disbursements associated particular item general ledger ongoing monitoring compliance records outlined agreements case discrepancies identified timely manner corrected quickly possible prevent disruption cash flow operations .
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