Do you consider this behavior to be ethical? If not, what steps might you, as budget director, take to cut down on this “padding”?
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During lunch, the director of the Streets and Parkways Department of the city Torrance made the following comment: “For the past 10 years, I have deliberately overstated my labor and equipment needs by 20 percent when preparing my budget request. I figure that the city council will cut it by 10 percent, and I can use the other 10 percent as slack. If there is money left over, I can always find a way to spend it.”
Do you consider this behavior to be ethical?
If not, what steps might you, as budget director, take to cut down on this “padding”?
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- The county of Edgerton is facing a General Fund deficit in 2018 because actual tax collections are lagging behind estimates. At a staff meeting, the village manager tells the chief of public works that the chief will need to terminate one employee in April to help keep the budget in balance. The chief of public works says: “I have a better idea. You know that state grant the finance commissioner put into a Special Revenue Fund because it could be used only for planting trees along the highways? Why don’t I just tell one of my boys to fill out his timesheets so that the time he spends changing street light bulbs is charged against the Special Revenue Fund? Neither our finance commissioner nor the state will ever know the difference.” How should the village manager respond?Pam Kelly says she has no faith in budgets. Her company, Kelly Manufacturing Corporation, spent thousands of dollars to install a sophisticated budget system. One year later the company's expenses are still out of control. She believes budgets simply do not work. How would you respond to Ms. Kelly's beliefs?Your city is expanding. There have been several problems with street flooding,which is affecting your business. You decide to attend a city councilmeeting, during which there is a discussion on building storm and sewerlines in advance of home construction. At the meeting, Tom Frank, thecity manager, states that the city is prohibited by law from financing theseprojects through a sales or property tax. He says that after the new homesare built, the city will be able to charge a monthly sewer fee to each homeownerand business. He asks for suggestions on financing the new sewersystem.a. What would you propose the city do to raise this money?b. Why is this investment vehicle attractive to investors?
- Ray is a finance director in a public sector organization that has experienced difficulty attracting and retaining skilled staff. To assist in overcoming this problem, the board has engaged a consultant to recommend an improved benefits structure, to apply to all staff. The consultant has produced his report, and Ray has been asked to consider the proposed staff benefits structure, and make appropriate recommendations to the board. He study the report, conduct appropriate research, and assess the costs involved. He concludes that it will be necessary to increase staff costs, but believes these will be offset by the efficiencies brought about by recruiting and retaining high-quality staff. The report contains the following recommendations: Benefits should be related to the length of service of members of staff. After one year of continuous employment, a member of staff will qualify for private health insurance. Private health insurance should cover the member of staff and his or her…Ray is a finance director in a public sector organization that has experienced difficulty attracting and retaining skilled staff. To assist in overcoming this problem, the board has engaged a consultant to recommend an improved benefits structure, to apply to all staff. The consultant has produced his report, and Ray has been asked to consider the proposed staff benefits structure, and make appropriate recommendations to the board. He study the report, conduct appropriate research, and assess the costs involved. He concludes that it will be necessary to increase staff costs, but believes these will be offset by the efficiencies brought about by recruiting and retaining high-quality staff. The report contains the following recommendations: Benefits should be related to the length of service of members of staff. After one year of continuous employment, a member of staff will qualify for private health insurance. Private health insurance should cover the member of staff and his or her…Ray is a finance director in a public sector organization that has experienced difficulty attracting and retaining skilled staff. To assist in overcoming this problem, the board has engaged a consultant to recommend an improved benefits structure, to apply to all staff. The consultant has produced his report, and Ray has been asked to consider the proposed staff benefits structure, and make appropriate recommendations to the board. He study the report, conduct appropriate research, and assess the costs involved. He concludes that it will be necessary to increase staff costs, but believes these will be offset by the efficiencies brought about by recruiting and retaining high-quality staff. The report contains the following recommendations: Benefits should be related to the length of service of members of staff. After one year of continuous employment, a member of staff will qualify for private health insurance. Private health insurance should cover the member of staff and his or her…
- Discuss this comment by a small-town bank president:“Budgeting is a waste of time. I’ve been running this business for 40 years. I don’t need to plan.”This comment is given by a small company president : “budgeting is a waste of time.i’ve been running this business for 40 years. I don’t need to plan”discuss.Question: The city of San Fernando operates on a calendar year basis. John Perez, the governor, is particularly proud of his reputation for making sure the state lives within its means. He knows that revenues in 2018 are coming in at a slower pace than anticipated, and he fears that expenditures may exceed revenues for the first time in his tenure as governor. He seeks advice from his budget director, who says: “No problem. I’ll just tell the agencies not to send invoices for utilities, travel expenses, and professional services to the comptroller during November and December for payment. Because the state uses the modified accrual basis of accounting, the comptroller won’t charge the bills to 2018.” The elected state comptroller is responsible not only for paying the bills but also for preparing financial statements in accordance with GAAP. What should the comptroller do when he learns about the budget director’s idea?
- Jane and Alex both work at Spartans Inc. Jane, the manger of a production department, buys lunch for Alex, who works in Accounting. Alex is preparing the monthly projections for the various production departments. At lunch, Jane asks Alex "to be conservative in his estimates" of variable costs in crafting the budget. Which, if any, ethical standards did Jane violate? O Credibility - failure to provide all relevant information that could influence a decision. O Competence - failure to maintain an appropriate level of expertise. O Integrity - failure to abstain from activities that might discredit the profession. Confidentiality - failure to refrain from using information for an unethical advantage. O Integrity - failure to mitigate conflicts of interest. O Confidentiality - disclosure of confidential information without authorization or legal requirement.The CEO of XYZ company has $1 million to spend to improve the company's operations. Although the money could be used to create another division, a new budget system is needed to track expenses and create responsibility budget reports. Even when the company earns profit, there are no reports to explain the reasons. Make a recommendation for the way the funds should be used. Defend your position.The executives at Stark Inc., a plumbing supply manufacturer, recently reviewed production capacity for the upcoming year and set production budgets. Based on the number of units that they expected to produce, they budgeted sales and set sales targets for each of their retail locations. They did not ask for the input of the individual store managers as they believed that they had sufficient information and they wanted to ensure that the store targets were not easily attainable. When the actual sales numbers started to come in, they were much lower than the budget. In investigating the variance, the company found that one location had a new competitor that had just opened down the street, and another had significant road construction that impeded the traffic flow and cut down on customers. There were also some new products on the market that were cutting into the company’s market share. Because of the missed sales budget, the company had overproduced, resulting in excess inventory.…
