CHAPTER 2:

THE LOGIC OF THE

BUDGET PROCESS
continuation..
 Functions of the Budget Process
Public financial managers expect budget
procedures to:
1. To provide a framework for fiscal discipline and
control.
2. Facilitate allocation of government resources
toward uses of highest strategic priority.
3. Encourage efficient and effective use of resources
by public agencies as they implement public
programs.
 The Four Major Stages of the Budget
Cycle
1. Executive Preparation-At the start of the preparation
phase, the chief executive instructs all departments
and units of government to prepare their agency
requests, includes (a) a timetable for budget
submissions, (b) instructions for developing requests,
(c) indication of what funds are likely to be available,
and (d) overall priority directions from the executive.
2. Legislative Consideration-In a government with
distinct legislative and executive branches, the
budget documents is transmitted to the legislature
for debate and considerations.
3. Executions-Appropriations are spent, and
services are delivered.
4. Audit and Evaluation-An audit is an examination
of records, facilitates, systems, and other evidence to
discover or verify desired information.
Government Accounting and Financial
Reporting
The full accounting system combines several
elements:
1. Source documents
2. Journals
3. Ledgers
4. Procedures and controls
 Funds
1. Government Funds- examples: general fund,
special revenue funds, debt service funds,
capital projects funds, and permanent funds.
2. Proprietary Funds- examples: enterprise
fund, internal service funds
3. Fiduciary Funds-examples: pension funds,
trust funds
 Accounting Basis: Cash or Accrual
The method of matching revenues and expenditures
over time-may be cash (revenue posted when cash is
received, expenditure posted when cash payment is
completed), full accrual (revenue posted when earned,
expenses posted when good or service is used), or
modified accrual (revenue posted in period in which
they are measurable and available, expenditure posted
when liability is incurred.