Current Practices and Issues in Capital Budgeting and Reporting

Budgeting and accounting professionals, as well as other interested parties, are currently examining ways to improve governmental capital budgeting and reporting. Although progress has been made, major policy issues are still being analyzed and debated. This article provides an overview of current practices and the major policy issues that are being addressed. The discussion incorporates related ideas and observations made by Jesse Burkhead four decades ago. The author concludes that many of Burkhead's insights in the area of capital budgeting and reporting are still relevant and useful today.     

Municipal Capital Budgeting: An Examination

The state of capital budgeting theory is going through its growing pains. While traditional literature on capital budgeting is grounded in rational decision-making, Nunn (1990) has suggested that such an approach is too limited to be of significant value. New theories, he argues, need to reflect differences in capital demand and differences in approaches to local policy, thereby reflecting both the economically-rational and other components of capital budgeting. In this study, we examine the rigor of the traditional rational approach and the typology put forth by Nunn. Based on a broad cross-sectional analysis of municipal finance directors, we find that capital budgeting is more complex than usually presented. Yet contrary to the argument by Nunn, we also find that the process is restricted more to internal participants, with limited and targeted participation by the public and other external actors.     

Program Budgeting and Accountability in Local Government

Much has been written about program budgeting and its relevance to improved efficiency and effectiveness. However, there is little discussion about the relationship between the use of program budgeting and accountability. While, organisations using program budgeting focus on the issues of performance, the accountability of management to an elected body, such as a local council has been given little attention. In this article three questions are posed: (1) Is the performance information available to enable councillors to form a judgment about management's performance?; (2) Is management involved in determining issues of policy, such as objectives, programs and performance measurement?; and (3) Are councillors confronted by a greater volume of budgetary documentation but with no increase in time to consider it? The results show that program budgeting does not always enhance accountability in local government.     

The Line-Item Veto in Government Budgeting

Beginning in January 1997, the president will have the power to veto line-items in appropriations bills This article examines four paragraphs about the line-item veto from Jesse Burkhead's Government Budgeting . Eight themes from Burkhead's writing are identified and compared to practice by the states.     

Biennial Budgeting in the Federal Government

This article examines the possible outcomes of changing from the current annual budget review to biennial budgeting. It looks at the experience of various states and its application to the federal level. It explores all of the supposed benefits , including less time spent on budgeting issues, more accurate budget projections, reduction of congressional workload and increased congressional oversight and, for the president's point of view, increased power of the executive branch. Concluding on a cautious note, the article offers some plausible applications of biennial budgeting to the national budget.     

Budgeting for Contracting in Local Government

While the amount of contracting out seems to be leveling off, the number of larger, long‐term contracts seems to be increasing. Such contracts are generally not well described in local budgets. Recent efforts in some cities to shift to more outcome‐oriented performance budgeting should push toward more clarity in reporting on major contracts in the budget. This article examines how a handful of major cities handle contracts in their budgets—in some cities contracts are omitted from the budget or all merged into one budget line—and makes some suggestions for improvements.     

Financial Control in Australian Government Budgeting

With the arrival of accrual accounting and "accrual output budgeting," there have been huge changes in the mechanism of central financial control in the budget-dependent Australian public sector. This article outlines and evaluates these changes. The new parliamentary appropriations arrangements are discussed, as is the increased role played by nonappropriated departmental "own-source" funding. The shift of emphasis from legislative to administrative financial controls is noted and analyzed. Consideration is given to the implications of this shift of emphasis, and of the increased complexity of the financial control framework, for fiscal transparency and democratic accountability.     

Public Capital Investment and Economic Growth in Forth Worth: The Implications for Public Budgeting and Infrastructure Management

There is a common assumption that local government investment in infrastructure stimulates private development. This article examines relationships in one southwestern city between public capital spending and city infrastructure assets and private economic activity as measured by building permit activity, permit values, and assessed property valuations. Two research questions are examined: (1) Is public investment in new capital associated with private capital formation? and (2) Is public investment associated with improvements in the property tax base? The findings hold implications for infrastructure planning, budgeting, and management. First, public and private capital spending patterns varied in tandem across several cycles, and tracking such cycles may help public managers predict short- and mid-term infrastructure needs. Second, utility capital spending is critically related to private capital formation, and may offer higher fiscal returns than other public infrastructure. Third, infrastructure capital had a strong significant effect on the assessed value of urban property, and will therefore influence the property tax base.     

How Capital Budgeting Helped a Sick City: Thirty Years of Capital Improvement Planning in Cleveland

During the 1970s, Cleveland's capital improvement plan (CIP) was scorned as a bad joke, and the city's roads, bridges, and public buildings fell into disrepair. The city's default on its fiscal obligation in 1978 seemed to cap the city's infrastructure problem; there was no comprehensive strategy for capital spending and in a bankrupt city, no money to spend in any event. Yet, during the 1980s, with support from the administration, the business community, and the innovations of a small group of dedicated urban planners, the CIP was restructured and hundreds of millions were systematically invested in public infrastructure. By the 1990s, most of the innovative changes of the 1980s seemed to be institutionalized, but there were ominous clouds on the horizon.     

Participatory Budgeting in Australian Local Government: An Initial Assessment and Critical Issues

Participatory budgeting (PB), a process whereby governments seek direct input from citizens into financial decisions, is gaining a foothold in the community engagement practices of Australian local governments. Following questions of definition, we survey the theoretical terrain, locating PB within several components of local democracy. We then provide details of six PB processes in New South Wales, Victoria, and Western Australia. We identify several questions for the future of PB in Australian local governments, including the role of deliberative practices as part of the broader work of councils, the issue of the adaptability of councils and leaders, the impacts upon state and local governments, and the role of third parties. The article concludes by reflecting on how PB sits with democratic practices at the local level if it continues to be implemented.     

An Analysis of Introducing Program Budgeting in Local Government

Program budgeting has been in use for 30 years. It has had a checkered history, being considered alternately a great advancement or an unworkable system. Little has been written about the consequences for the organization that has adopted it. This study was undertaken concerning local government across the State of Victoria, Australia. A questionnaire was sent to all municipalities. There was a 60 percent response rate. Results show that information generated by planning programming budgeting (PPB) is used for decision making but in a limited way. The proposition that PPB will have an impact on the operations of councils is only partially supported.     

Participatory Budgeting and Community-Based Research: Principles,Practices, and Implications for Impact Validity

Research and evaluation is an integral part of the Participatory Budgeting (PB) process. Since PB in New York City (PBNYC) is designed to be a democratic and community-based initiative that is grounded in the values of equity and inclusion, it is important that the research and evaluation methods used to study the process and its participants adhere to the same principles. For the past five years, a team of community-based researchers, academics, and PB participants have designed research questions and instruments, implemented data collection, analyzed and shared data with PB participants and practitioners, and issued reports to the wider public. Like PB, the research design is rooted in the communities where PB is operating. The research is not intended to sit on a shelf but is actively used by participants and practitioners to help reflect on the process, improve deliberation in decision-making, and strengthen the process and outcomes of PB. This article will discuss Participatory Action Research principles used by the Community Development Project of the Urban Justice Center, explore the applicability of these principles to the Participatory Budgeting research context, and explain how these practices have helped to deepen and improve the process and outcomes of PBNYC.     

Multi-Year Budgeting: A Review of International Practices and Lessons for Developing and Transitional Economies

In recent years, many developed countries have moved to develop their annual budget process in a strategic multi-year framework. While a common feature of multi-year budgeting approaches is the inclusion of revenue forecasts and expenditures estimates for two or three years beyond the current year, multi-year budget practices vary substantially between countries. This article reviews multi-year budgeting practices in six developed countries (Australia, Austria, Germany, New Zealand, Great Britain, and the United States) and attempts to draw lessons from these experiences for the potential application of multi-year budget techniques by developing and transitional countries. We draw five lessons from the multi-year budget practices of developed countries that are relevant for developing and transitional economies: (1) a multi-year dimension could be a valuable fiscal policy and management tool for developing and transitional countries; (2) the approach chosen in each developing or transitional economy should reflect the country's policy objectives, unique budget institutions and traditions, and administrative capabilities; (3) the introduction of a multi-year budget dimension is a gradual process; (4) the multi-year budget should be used to encourage the constructive involvement of line ministries in the budget process; and (5) the usefulness of the multi-year budget approach will crucially depend on the reliability and accuracy of the medium-term budget estimates.     

Graduate Curricula in Budgeting and Financial Management: Recommendations for Reform

This is an abridged version of the final report of the American Society for Public Administration's (ASPA) Section on Budgeting and Financial Management's Task Force on Curriculum Reform. The report was produced by the Section on Budgeting and Financial Management's Executive Committee. The complete final report is available from Robert Berne, Graduate School of Public Administration, New York University, 4 Washington Square North, New York, NY 1003, or James Alexander, Department of Political Science, University of Pittsburgh at Johnstown, Johnstown, PA 15904.