Public Budgeting - Budget Planning and Preparation - Case Study Example

?CASE STUDY REPORT ON PUBLIC BUDGETING INTRODUCTION AND PURPOSE: Budget planning and preparation is an integral part of any organization. It is a quantitative concept which is framed for a certain period of time. It is a representation of strategic planning by an organization or business unit. Budget can be called as the predefined and forecasted expenditure for the future course of time. It serves as a tool which helps to coordinate different activities of the organization. It is a document or a collection of documents which refers to the future course of action of the organization. It serves as a policy guide, management tool, legal document (after the approval of the board) and a financial control instrument towards the organization. So budgeting is basically a mechanism for setting goals and objectives and allocating resources to achieve those objectives. IN other words it can be described as “thoughtful strategic planning process” (Lee, Johnson & Joyce, 2008, pp. 1-8). The report is a snapshot regarding the public budgeting details of a nonprofit organization of United States named as the Human Society of the United States. The report tells about the Budgeting cycle, budgeting policy, and budgeting documents. In the report the budget for the Finance Department has been taken into account. It gives a synopsis of the purpose and goal, revenue and expenditure, planning and activities of the finance department of the Human Society during 2012-2011 and the major changes in policy and accomplishments. MAJOR APPROPIATION AND CHANGES FROM PREVIOUS YEAR: The Human Society of Us is the nation’s largest organization for animal protection fighting for the rescue care and protection of animals. The organization distributes its entire budget of expenditure mainly for within two heads, firstly operational budget and secondly the supportive budget which supports the operational activities. For the fiscal of 2012 the operational budget included budget for animal protection program, Budget for fund raising and budget for management and general. During the fiscal 80% of the budget was allocated for animal protection program which actually accounted for $142118050. Fund raising accounted for the rest 20% of the operation 17% for fundraising and rest 3% for management and general. Fund raising had a budget of $29479645 while management and general had a budget of $5225819. Animal protection program which had the major budget had a segregation of 47% for advocacy, outreach and policy; 22% for direct care and service; 18% for cruelty prevention and 13% of the expense for research and education. For the support and revenue budget of 2012 the organization estimated 84% of the total revenue from contribution and grant which they accounted for $151069252. For rest of the revenues they estimated 13% would be coming from bequests, 2% from investment income and 1% from other income. On the contrary, for the fiscal of 2011 the organization deployed 80% of their total operational and supporting expenses budget for animal protection program. The same followed a segregation of 18% in cruelty prevention, 24% for direct service and care, 43% advocacy and cruelty, 15% for research and education. The support and revenue budget for 2011 accounted 79% of revenue coming from contribution and grants, 17% from bequests, 3% from investment income and 1% from other income (Human Society Organization, 2013, Annual Report 2012 & 2011) MAJOR REVENUE SOURCES AND CHANGES FROM PREVIOUS YEAR: The revenue of the firm came mostly from the support division and from other income. The total revenue from support and other income accounted for $5970558 during 2012 that of $5955358 during 2011 which indicated a hike of 0.25%. The revenue hike is almost negligible and the organization doesn’t aim for it since it is a nonprofit making firm with a “no profit” making view. The revenue for 2012 mainly came from contribution, trusts, grants, donation, merchandise sale, donated securities, sale of donated items, gains for disposals of property and equipments. The total revenue that came from support division accounted for $4227458. While revenue from other income was derived from animal service, investment income, net assets released from satisfaction of donor restriction. The total accounted for $1743100. The total revenue for 2012 was $5970558 which came 71% from support division and 29% from other income which it also budgeted. For 2011, revenues came from the same sources. The total revenue was $5955358 which accounted for revenue from support division of $3484731 and that of $2470627 from other income head. The support division accounted for 58% of the total and other income accounted for 42% which is much lesser than budgeted (Human Society Organization, 2012 & 2011). FIXED ASSET, THEIR POSITION AND CHANGES FROM PREVIOUS YEAR: Fixed Assets Position Particulars 2012 2011 In $ In $ Total Fixed Assets NA NA Less: Accumulated Depreciation NA NA Net Fixed Assets 21653538 20970197 The net fixed assets accounted for $21653538 and $20970197 for the year 2012 and 2011 respectively. It was 9.04% of the total asset during 2011 which followed a deceleration and accounted for 8.67% of the total assets during 2012 (Human Society Organization, 2012 & 2011, pp. – 34 & 28). MAJOR POLICY ISSUES: Humane Society of United States is a nonprofit creating organization. So profit making is not its policy. It mainly focuses on the welfare of the animals. Their main principle is to protect the natural inhabitant and the entire community of life. In order to sustain the principle they develop partnership with a broad array of society institution. Apart from this during 2011 they had a separate budget of Operating and Support expenses and support and revenue than that of 2012. During 2011 they deployed 80% the total budget operating and supporting expenses for animal protection programs, 16% into fund raising and 4% into management and general. Whereas for support and revenue they had a budget of 79% of revenue coming from grants, 17% from bequests, 4% from investment and other income. But during 2012 their budget followed a little change. The operating and supporting expenses accounted 80% for animal protection program, 17% for fundraising and 3% for management and general. 80% expenses for animal protection program underwent certain changes. 47% was deployed for advocacy, outreach and policy; 22% for direct care service; 18% for cruelty prevention and 13% for research and education. The support and revenue division for 2012 also underwent few changes in their budget than 2011. 84% of the total revenue budget was estimated to be coming from contribution and grants; 13% from bequests; 2% from investment income and 1% from other income (Humane Society Organization of USA, 2012 & 2011). HEALTHY OR LEAN BUDGET AND REASON: When the financial statement is according to the budget then such a budget is termed as a healthy budget. But when the budget gets a bit drifted than what is framed then such budget is termed as a lean budget. 2011 followed a healthy budget since the revenue and expenses were as budgeted. In the support and revenue contribution and grant was budgeted as 79% which actually was of 78%. Revenue from bequest, Investment income and other income was same as budgeted. Operating and supporting expense budget was also a healthy one since it was as budgeted. Animal protection expenses accounted for 80%; fundraising budget accounted for 16% and management and general expenses accounted for 4% (Humane Society Organization of USA, 2011, pp. 28 ). 2012 budget was also a healthy budget. Entire animal protection program which was a sum of advocacy, outreach and policy; direct care and service; cruelty prevention; research and education accounted 80% of the total support and expense as budgeted. Fundraising accounted for 17% and management and general accounted for 3% of the total actual expense. The support and revenue also was exactly as per the budget (Humane Society Organization of USA, 2012, pp.34-35). IMPROVEMENT ON BUDGET DOCUMENT: Establishment of broad goals should be made by assessing community needs, identifying challenges and priorities and by developing and discriminating broad goals. Emphasis should be given to develop the budget by developing a process for preparing and adopting a budget, by evaluating financial options. Performance should be evaluated by systematic monitoring, measuring and evaluation of performances and by making necessary adjustments as needed. If the improvements are related to the policies and programmes of the document then a broad action is required. Budget improvement can also be made by funding resources through a written approval (Dropkin, Halpin & Touche, 2007, p.130) BUDGET DOCUMENT ASSESEMENT: The budget document has been assessed using appendix H as cited by Len Wood (2006). The budget document has been evaluated under each pointer. Each pointer carried certain points and by summarizing all the points of each pointer the final evaluation is done. The Humane Society Organization is a nonprofit organization and has an average budget document scoring 29 as per Appendix H. The budget document encountered few drawbacks. The departmental objective was not revealed by the document. It failed to show the goal department wise. An index as well as a table of content was missing. All these resulted into an average a Budget Document (Wood, 2006, pp. 343-345). BUDGET CHART: Financial Position 2012 Assets $ Liabilities 33878096 Cash and Cash Equivalent 27706707 Net Assets   Receivables 19221925 Unrestricted 138702993 Prepaid Expenses, Deferred Charges, and Deposits 1955953 Temporary Restricted 38447039 Redeemed Securities Nil Permanently Restricted 38173451 Investment, at Market Risk 178663636 Total Net Assets 215323483 Fixed Assets after depreciation 21656358 Total Liabilities and Net Assets 249201579 Total Assets 249201579     (Humane Society Organization of USA, 2012, pp.34-35) PREPERATION OF BUDGET DOCUMENT AND HOW THE BUDGET IS USED: The Board of Directors approves the budget document. The budget is used as per as the goals set within the budget document. For the nonprofit organization like Humane Society of United States does operate within a limited version of budget used basically for fundraising. For that the organization should follow a certain financial policy as decided by the board. The Board should weightage in improving the detailing of the document. . References Annual Report (2012) The Humane Society of United States, The Humane Society of United States Home, retrieved on 30 June 2012 from: http://www.humanesociety.org/about/overview/financials/annual-report-2012.html Annual Report (2011) The Humane Society of United States, The Humane Society of United States Home, retrieved on 30 June 2012 from: http://www.humanesociety.org/assets/pdfs/publications/2011_annual_report/2011_annual_report_pub.pdf Dropkin M, Halpin J, Touche B, (2007) The Budget Building Book For Nonprofits A Step-By-Step Guide For Managers and Boards, New York, Wiley Publishers Lee R, Johnson R, and Joyce P, (2008), Public Budgeting Systems, United States Of America, Jones and Bartlett Publishers Wood L, 2006, Local Government Dollar & Sense, California, The Training Shoppe. Read More