ACCT GOV.+NFP ENTITIES LOOSELEAF W/CONN.
18th Edition
ISBN: 9781260949766
Author: RECK
Publisher: MCG
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Chapter 3, Problem 13C
The city manager of University City is finalizing the budget proposal that must be submitted to the city council 60 days prior to the July 1 start of the next fiscal year, FY 20X2. An economic recession has significantly reduced the city’s revenues over the past two years, particularly sales taxes and building permit fees. Despite strong political pressures on city council members to sustain current city services, the legal requirement to balance the budget has forced the council to cut certain services and staffing levels over the past two years. Federal financial assistance has prevented even deeper cuts, but will be sharply reduced at the end of FY 20X1. Even though the economy has gradually improved, reduced federal support will make achieving a balanced budget even more difficult in FY 20X2.
Constraints and planning factors: The city council has mandated that there be no increase in fees and taxes in FY 20X2. Although retail sales and housing starts are projected to increase modestly in FY 20X2, the assessed valuation of taxable property is projected to decrease an additional 5 percent in FY 20X2, reflecting the continuing decline in property values. Moreover, General Fund operating costs, particularly employee health insurance and energy, are expected to outpace revenue growth. Consequently, the city manager is recommending a third consecutive year of no salary and wage increases for city employees. The following financial information is provided as of May 1 of FY 20X1.
General Fund
Analysis and estimation of required property tax rate for FY 20X2: After analyzing the preceding information, constraints, and planning factors, respond to the following questions. (Keep in mind, however, that the city council may impose further changes to the budget as a result of the several budget hearings that will be held over the next two months.)
- a. What amount of estimated revenues is required from property taxes for FY 20X2? (Hint: Make your calculation using the format shown in Illustration 3–6.)
- b. What tax rate will be required in FY 20X2 to generate the amount of revenues from property taxes calculated in question a?
- c. Assuming the property tax rate for FY 20X1 was $0.20 per $100 of assessed valuation of taxable property, will the tax rate calculated in question b violate the city council mandate of no increase in taxes? If so, how would you justify the rate calculated in question b, since the city council will likely be sensitive to adverse public reaction to an increased tax rate?
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In 2015 and 2016 the City observed a higher than expected rate of car accidents involving City
owned or leased vehicles. The annual approved budget is $700,000 per year. The cause of the higher
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Scenario: A city ordinance provides that “no money shall be spent for any purpose without the prior approval of the city council.” In approving the budget for the year, the council had authorized spending $1,300,000 for road maintenance. Late in the year, after the city had spent virtually the entire $1,300,000, a major storm washed out portions of several roads leading to the elementary school. The school was inaccessible, and the mayor wanted to enter into an emergency contract to repair the roads. City engineers estimated that the cost of the repairs would be about $350,000. If the city entered into such a contract, the total amount spent on road maintenance for the year would be higher than the amount authorized. Recognizing the need for prompt action, the mayor immediately entered into the contract without seeking prior city council approval.
What are the legal, financial, and accounting systems implications of this scenario?
The town council of Riverside estimated revenues for 2020 to be $805,882 from property taxes and $194,118 from business licenses.
The appropriations budget from the council was as follows:
General government
Parks and recreation
Sanitation
Streets and sidewalks
$405,000
130,000
110,000
180,000
In April, heavy spring rains caused some flooding near the river. As a result, a picnic area at River's Edge Park was ruined and several
damaged shops had to shut down. The council adopted an upward revision of $70,000 for the parks and recreation budget and
reduced the estimated revenues from business licenses by $50,000.
The General Fund began the year with a balance of $59,000. During the year, tax collections totaled $808,500 and revenues from
business licenses were $136,000. Expenditures were $375,000 for general government, $201,500 for parks and recreation, $112,600
for sanitation, and $167,333 for streets and sidewalks. There are no outstanding encumbrances at year-end.
Required:
Prepare…
Chapter 3 Solutions
ACCT GOV.+NFP ENTITIES LOOSELEAF W/CONN.
Ch. 3 - Prob. 1QCh. 3 - Discuss the different ways in which depreciation...Ch. 3 - Prob. 3QCh. 3 - Prob. 4QCh. 3 - Explain the essential differences between revenues...Ch. 3 - Prob. 6QCh. 3 - How do Budgetary Fund Balance and Fund Balances...Ch. 3 - Prob. 8QCh. 3 - Prob. 9QCh. 3 - Prob. 10Q
Ch. 3 - The city manager of University City is finalizing...Ch. 3 - Prob. 16.1EPCh. 3 - Prob. 16.2EPCh. 3 - Which of the following accounts neither increases...Ch. 3 - Prob. 16.4EPCh. 3 - Which of the following statements is true for...Ch. 3 - An internal allocation of funds on a periodic...Ch. 3 - Prob. 16.7EPCh. 3 - Prob. 16.8EPCh. 3 - Before placing a purchase order, a department...Ch. 3 - Prob. 16.10EPCh. 3 - Which of the following is correct concerning the...Ch. 3 - Prob. 16.12EPCh. 3 - Prob. 16.13EPCh. 3 - Prob. 16.14EPCh. 3 - Supplies ordered by the Public Works function of...Ch. 3 - Prob. 17EPCh. 3 - Prob. 18EPCh. 3 - Prob. 19EPCh. 3 - The following information is provided about the...Ch. 3 - On February 15, the Town of Evergreen police...Ch. 3 - The Town of Willingdon adopted the following...Ch. 3 - During July, the first month of the fiscal year,...Ch. 3 - The Town of Bedford Falls approved a General Fund...Ch. 3 - The printout of the Revenues and Appropriations...Ch. 3 - Review the computer-generated budgetary comparison...Ch. 3 - Prob. 27EPCh. 3 - Greenville has provided the following information...
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