Financial Management in the Public Sector: Tools, Applications and Cases / Edition 3

by Xiaohu (Shawn) Wang

Overview

The new edition of this popular book provides a step-by-step guide on how to use financial management and budgeting tools in the public sector. The book features a practical, case-study approach, and includes plentiful exercises and examples. It is designed as a textbook for courses on public financial management or public budgeting that focus on the application of budgeting and financial management tools. Public service professionals will also benefit from this handy primer.

Product Details

ISBN-13:	9780765636898
Publisher:	Taylor & Francis
Publication date:	05/30/2014
Edition description:	New Edition
Pages:	274
Product dimensions:	3.70(w) x 3.20(h) x 0.50(d)

About the Author

XiaoHu Wang is a professor at City University of Hong Kong, China. Previously, he was professor of public administration at the University of Central Florida. He has degrees in public administration and economics. A trained specialist in US local government finance, he has worked as a financial analyst for a number of governmental institutions in the United States. His teaching and research focus on financial management, performance management, and sustainability management. His research has been published in the most prestigious academic journals in public administration and public finance. He is the winner of multiple teaching and research awards.

Table of Contents

List of Illustrations xi

Preface and Acknowledgments xv

Part I Tools for Financial Planning 1

1 Revenue Forecasting 3

Learning Objectives 3

Concepts and the Tool 4

Simple Moving Average (SMA) 4

Exponential Smoothing (EXS) 6

Transformation Moving Average (TMA) 8

Regression Against Time (Regression) 8

A Quasi-Causal Forecasting Model 10

Determining Forecast Accuracy 11

A Case Study 13

Step 1 Cleaning the Data 13

Step 2 Choosing the Forecasting Technique 14

Step 3 Forecasting 15

Step 4 Monitoring Forecasting Performance 15

Exercises 16

2 Resource Development Analysis 22

Learning Objectives 22

Concepts and the Tool 22

Defining the Issue: The Revenue Shortage 23

Estimating the Revenue Shortage 24

Developing Revenue Options 27

Assessing Revenue Options 30

Making Decisions 31

A Case Study 32

Step 1 Denning the Issue 33

Step 2 Estimating the Revenue Shortage 33

Step 3 Developing Revenue Options 36

Step 4 Assessing Revenue Options 37

Step 5 Making Decisions 37

Exercises 38

3 Cost Estimation 41

Learning Objectives 41

Concepts and the Tool 42

Cost Classification 42

Total Cost Estimation 44

Average Cost Estimation 46

A Case Study 46

Step 1 Determining Personnel Costs 47

Step 2 Determining Operating Costs 47

Step 3 Determining Capital Costs 48

Step 4 Determining Total Program Costs 49

Step 5 Determining Average Costs 49

Exercises 50

4 Cost Comparison 54

Learning Objectives 54

Concepts and the Tool 54

A Case Study 58

Step 1 Estimating Project Costs 58

Step 2 Determining the Present Value of Cost 59

Step 3 Making Decisions 59

Exercises 60

5 Incremental Cost Analysis 63

Learning Objectives 63

Concepts and the Tool 64

A Case Study 65

Step 1 Examining Each Cost Item 66

Step 2 Determining the Incremental Cost (or the Marginal Cost, If Necessary) 67

Step 3 Making Decisions 67

Exercises 67

6 Cost-Benefit Analysis 70

Learning Objectives 70

Concepts and the Tool 70

Introduction to Cost-Benefit Analysis 70

Issues in Cost-Benefit Analysis 72

A Case Study 74

Step 1 Formulating the Question in Cost-Benefit Analysis 76

Step 2 Determining the Benefit 76

Step 3 Determining the Cost 77

Step 4 Determining the Discount Rate 78

Step 5 Calculating the Net Present Value 78

Step 6 Making Decisions 78

Exercises 78

Part II Tools for Financial Implementation 83

7 Financial Performance Monitoring 85

Learning Objectives 85

Concepts and the Tool 86

Determining Monitoring Indicators 86

Detecting Unacceptable Performance 90

Understanding the Causes and Taking Action 91

A Case Study 93

Step 1 Determining and Assessing Individual Financial Indicators 93

Step 2 Detecting Unacceptable Performance 93

Step 3 Understanding Causes of Underperformance 94

Step 4 Developing a Monitoring Report 94

Exercises 95

8 Cash Management: Determining the Optimal Cash Balance 99

Learning Objectives 99

Concepts and the Tool 100

Creating a Cash Budget 100

Determining the Optimal Cash Balance 102

A Case Study 106

Step 1 Data Collection and a Review of the Data 106

Step 2 Use of the Miller-Orr Model 107

Step 3 Conducting the Analysis 107

Step 4 Making Decisions 108

Exercises 108

Part III Tools for Financial Reporting and Analysis 113

9 Financial Reporting and Analysis: The Statement of Net Assets and the Statement of Net Position 115

Learning Objectives 115

Concepts and the Tool 116

What Information Is in the Statement of Net Assets? 116

What Information Is in the Statement of Net Position? 117

The Accounting Process 118

Principles That Govern Accounting Practices 122

A Case Study 122

Step 1 Reviewing and Analyzing This Year's Statement of Net Assets 125

Step 2 Comparing with Last Year's Statement 125

Step 3 Searching for Solutions and Taking Actions 125

Exercises 126

10 Financial Reporting and Analysis: Statement of Activities 128

Learning Objectives 128

Concepts and the Tool 128

What Information Is in the Statement of Activities? 129

Accounting Bases 132

A Case Study 133

Step 1 Examining the Statement of Activities 134

Step 2 Comparing with Last Year's Statement 135

Step 3 Searching for Solutions and Taking Action 135

Exercises 135

11 Financial Reporting and Analysis: Fund-Level Statements 137

Learning Objectives 137

Concepts and the Tool 138

Governmental Funds 138

Proprietary Funds 140

Fiduciary Funds 141

A Case Study 141

Step 1 Reviewing the Fund Statements 142

Step 2 Comparing with Last Year's Statements 143

Step 3 Analyzing the Issues 144

Step 4 Searching for Solutions 144

Exercises 145

12 Financial Condition Analysis 148

Learning Objectives 148

Concepts and the Tool 148

What Is Financial Condition Analysis? 148

Determining Measures in FCA 149

Identifying Any Warning Trend of a Deteriorating Financial Condition 153

Specifying the Relationship 154

Explaining the Relationship 156

FCA Report Writing 157

A Case Study 157

Step 1 Defining the Scope of the Analysis 158

Step 2 Determining Measures and Collecting Data 158

Step 3 Identifying Warning Trends 160

Step 4 Specifying the Relationships 161

Step 5 Explaining the Relationships 163

Step 6 Taking Action to Improve Financial Condition 165

Exercises 166

13 Debt Capacity Analysis 169

Learning Objectives 169

Concepts and the Tool 170

Types of Debt 170

Debt Capacity Analysis: A Simple Example 171

Assessing the Current Debt Level 172

Determining the Debt Capacity 173

Determining the Additional Debt Capacity 174

Determining the Future Debt Capacity 175

A Case Study 175

Step 1 Calculating the Current Debt Level 175

Step 2 Determining the Debt Capacity 176

Step 3 Determining the Additional Debt Capacity 177

Step 4 Determining the Future Debt Capacity 178

Step 5 Preparing a Debt Capacity Report 180

Exercises 180

14 Financial Risk Assessment: Analyzing the Risk of Revenue Loss 183

Learning Objectives 183

Concepts and the Tool 183

What Is Financial Risk? 183

How to Measure the Risk of Revenue Loss 184

How to Reduce the Risk of Revenue Loss 188

A Case Study 190

Step 1 Developing the Purpose of the Analysis 192

Step 2 Identifying Major Revenue Sources and Estimating Revenue Risks 192

Step 3 Analyzing the Risks 193

Step 4 Making Recommendations to Reduce the Risk 195

Exercises 196

Appendix A Introduction to Microsoft Office Excel 199

Appendix B Exercise Answers 201

Glossary 223

Index 239

About the Author 255