Public Budgeting, Accounting, Auditing, and Accountability

M.Dluhy, April 2000

1. Financial Reports:

2. Principles of fund accounting (Grizzle)

All financial transactions are quantified in dollars and recorded to journals.
Assets always equal liabilities plus fund balance.
Financial transactions are posted from journals to the accounts. Account fund types are general, special revenue, enterprise, internal service, debt service, special assessment, capital projects, trust or agency.
Four financial statements are essential—the balance sheet (may be included in budget), the statement analyzing changes in fund(s) balance(s) (may be included in budget), the statement comparing actual revenues with estimated revenues (may be included in budget), and the statement comparing expenditures and encumbrances with authorizations.
Use of modified accrual or full accrual, opposed to cash system.
Clarify revenue accounts by fund and source
Expenditure accounts should be classified by fund, function, unit, activity, etc.
Financial statements must not be misleading to the reader.

3. Financial Audits vs. Evaluations or Performance Audits, Political vs. Financial

4. Other good principles of accountability/oversight

Financial audit (accounting and auditing principles are followed and legal expenditures are verified)
Performance audit (economy, efficiency, productivity, effectiveness)
Internal vs. External auditors (independence is critical for both)
Communication of information regularly to elected decision makers or board of directors and the public
Limited privileged or confidential financial information, should consult with legal counsel.

Remaining Topics for Public Budgeting

Reports from four groups
Exercise on Capital Improvements
Bond Ratings and Criteria for Anticipating Fiscal Stress (failing non-profit); Louis, Jennifer, Greg, Leigh Ann
Retrenchment
Financial Reports
Fund accounting principles
Accountability/Oversight