Budgeting is an important subfield of public administration (Tyer & Willand, 1997). A budget system balances expenditures and revenues (Smith & Lynch, 2004). In public budgeting, revenues are funded by sources. These such sources are fees and special assessment, lotteries, and public, and other miscellaneous revenue. Another important factor of budgeting is the ability to make informed decisions. The ability to recognize and understand financial terms is an important quality to have when making financial decisions.
There are seven financial analysis tools that can be used in this decision-making process and also other financial analysis tools can be used. Importance of Informed Financial Decisions Decisions are made every day, weighing the benefits, and the risks of possible outcomes. Financial decisions can be nerve racking, and obtaining as much information before making a decision is important in regard to finances. Informed financial decisions can be made following simple steps. The first, and one of the most important steps, is to set aside emotion.
Financial decision making should not be made based on emotions, because they can be powerful motivators, which may not be based on facts. Hard, cold logic of mathematics are the foundations of financial decisions. When making the decision, it is important to have an understanding of all the facts and possible outcomes of each situation. Taking in account each factor that can benefits or cause a failure of the return of an investment. Creating a worst and best case scenario can help as well in decision making by reflecting how much can be lost if the wrong decisions is made and also keeping realistic possibilities in mind.
Predicting the outcome of a decision can be difficult, so having a professional look into the financial decision options can help increase the possibility that the decision will be beneficial. Revenue Sources in Public Budgeting Expenditures and budgets are the means by which public policies are translated into targeted and tangible developmental actions. The decisions made on how to spend and allocate financial resources impact the well-being of citizens (Oreshnikova, 2009).
Civil society involvement and citizen participation in financial management and public budgeting is essential because it promotes accountability and transparency in regard to safeguards against corruption, public finances, and the allocation of public money. In public budgeting, revenue sources can come from many sources. Three of these sources include fees and special assessment, lotteries, and other miscellaneous revenue. Fees are amounts paid to the government for a service such as court charges, marriage license fees, and mortgages (Oreshnikova, 2009).
Special assessments are additional taxes levied for public improvements on private property to enhance the property’s value. Lotteries are a source of revenue that generate revenue back into the community for player prizes, retailer compensation, and public education. Lotteries can stimulate the economy by generating more revenue for local businesses and help public schools retain and attract quality teachers (California Lottery, 2013). Other miscellaneous revenue sources include gifts (donations), conscience money, fines, and escheats. Financial Analysis Tools
Determining the suitability for an investment is done by evaluating budgets (PG Exchange, n. d. ). The use of a financial analysis is beneficial because it helps analyze if an investment is stable and profitable enough to be invested in. A common way to analyze financial data is to calculate ratios from that data and compare it to other companies or against the companies past performance. Looking back at past performance can help create an estimate of the company’s future performance. Seven tools can be used to help exert influence and monitor public spending and budgeting. The first tool is public revenue monitoring and reporting.
These reports inform investors about amounts and sources of government revenues along with how they are managed. A second financial analysis tool is budget transparency. This is the full disclosure of all information relevant to fiscal public information in a systematic and timely manner. This process can help prevent corruption, contribute to the use of the funds, and allow public accountability. The third tool is independent budget analysis. This occurs when civil society organizations analyze government budgets and share the finding with the public and the government to advocate changes.
The fourth tool is public expenditure tracking. This occurs when the flow of public resources for public provision of public services or goods is traced, from beginning origin to the destination. The tool can help prevent and detect inefficiencies and corruption, bottlenecks, and wastage. Community-led procurement is the fifth financial analysis tool. This tool enables communities to control and implement the procurement process through its own organizations. This creates accountability and openness, a higher value of money, and less corruption. The sixth tool is participatory budgeting.
This occurs when citizens participate directly in the allocations of the government’s budget. An alternative tool is the alternative budget. The alternative budget is an initiative that advocates strategies to highlight limitations of budgets in regard to key issues in society. To accomplish this, there should be an emphasis on how groups can be effected by the failure of a budget, such as children, women, the poor, and people with disabilities (PG Exchange, n. d. ). If the outcome can be a possible failure, an alternative budgets that takes in consideration the needs of these groups can be created.
Conclusion Financial decision-making can be simple if steps are taken to ensure that the outcomes and needs for financial investment are based on fact and that the decision is informed. Public financial budgeting is an important part of budgeting for a community. Revenue sources of public budgeting can help by stimulating the economy and financing cities and towns to meet the needs of the citizens. The involvement of the community can be beneficial, and there are tools to help meet the needs of the community and the public budget.
References
California Lottery. (2013). Lottery Funds at Work. Retrieved from http://www.calottery.com/giving-back/lottery-funds-at-work Oreshnikova, J. (2009). Sources of Public Revenues. Retrieved from http://www.slideshare.net/visabi/sources-of-public-revenues PG Exchange. (n.d.). Public Budgets and Expenditures. Retrieved from http://pgexchange.org/index.php?option=com_content&view=category&id=58&Itemid=133 Smith, R. & Lynch, T. (2004). Public Budgeting in America (5th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall. Tyer, C., & Willand, J. (1997, Summer). Public Budgeting in America, a Twentieth Century Retrospective. Journal of Public Budgeting, Accounting, and Financial Management, 9(2).
