Budget allocation plan for municipal economic development and services

Budget Plan for $10 Million Fund Allocation

Positive economic development in any city in the United States relies on the provision of effective, efficient, and strong infrastructures that will attract investment to generate job opportunities in the city. A central goal of any city is also to improve health outcomes for the residents to improve their health outcomes. City public officials should also provide safety and securities, and improve students achievements to enhance quality of human developments . However, a city officials are required to keep proper accounts of all income and expenditures to deliver high quality financial resources.

As a newly elected public official of the city of between 50,000 and 250,000 population, our goal is to attract investment opportunities in the city through effective use of budgetary control to meet the economic and health needs of the residents in order to enjoy 100% federal funds. Our goal is to also to use our allocated funds to improve the economic activities of the city to enhance economic growth and job opportunities.

Objectives

Objective of this project is to design the budget plan for the $10 million allocated by the city manager in order to enjoy 100% matching federal funds. The paper also discusses the method of allocating the budget to meet the needs of the community. The allocation covers the method the budget will support the operating requirements, capital requirements as well as subsidizing the non-profit organizations. Moreover, the paper discusses method of using the budget for the economic incentives in order to attract private incentives into the city. The paper also provides the strategy that will be employed in implementing fund accounting and financial control in order to enjoy financial benefits from the budget.

Additionally, the paper discusses the strategy to manage and control the public expenditures. The project also discusses the method of meeting financial reporting requirements for the public expenditures, analyzing financial statements and budgets to make appropriate administrative decisions, and applying budgets as disciplinary process.

Start-up Funding

The $10 Million will be used to start fund of our budgetary plan. The table 1 below reveals the breakdown of the financial plan.

Table 1 . Start-up Funding

Start-up Expenses to Fund

$500, 000

Start-up Fund

$9,500,000

Total Funding Required

$10,000,000

Assets

Non-cash Assets to Start-up

$0

Cash Requirements to Start-up

$9,500,000

Additional Cash Raised

$0

Cash Balance on the Starting Date

$9,500,000

Total Assets

$9,500,000

Liabilities and Capital

Liabilities

Current Borrowing

$0

Long-term Liabilities

$0

Accounts Payable ( the Outstanding Bills)

$0

Current Liabilities (interest-free)

$0

Total Liabilities

$0

Capital

Planned Investment

Medicaid

$4, 000,000

Recreation and Parks

$3,000,000

Affordable Housing Development

$3,000,000

Total Planned Investment

$10,000,000

Start-up Expenses

($500,000)

Total Capital

$9,500,000

Total Capital and Liabilities

$5,000,000

Total Funding

$10,000,000

Start-up

Requirements

Start-up Expenses

Legal

$100,000

Stationery etc.

$100,000

Brochures

$100,000

Consultants

$0

Insurance

$0

Rent

$200,000

Research and Development

$0

Expensed Equipment

$0

Other

$0

Total Start-up Expenses

$500,000

Start-up Assets

Cash Required

$10,000,000

Other Current Assets

$0

Long-term Assets

$0

Total Assets

$9,500,000

Total Requirements

$10,000,000

Implementation of Budget Plan

This section discusses different sectors that we should allocate the $10 Million in order to enhance economic growth, increase job opportunities as well as qualifying for 100% federal government funds. The paper identifies Medicaid as a program that can assist our public officials to enjoy 100% federal government funds. The paper also identifies the development of recreation and parks as an effective method to promote health benefits; enhance economic growth and generate employment opportunities in the city. Finally, the project selects the development of housing units for the low income earners.

Fund Allocation to Promote Health

The city can use several strategies to allocate the $10 million budget to enjoy 100% federal government funding and improve economic activities. One of the strategies is to invest part of the budget in the non-profit organizations such as healthcare organizations. The city should invest in Medicaid to enjoy 100% federal government funds. Medicaid is jointly sponsored by the federal and state governments to provide health benefits to certain classes of people earning low income with no insurance coverage. Created under SSA (Social Security Act) 1965, Medicaid is administered through the U.S. Department of Health & Human Services. (Nkuah, Tanyeh, & Asante 2013, Lunenburg, 2010).

Following the decision of the Supreme Court in 2012, the federal government assumes the responsibility of reimbursing 93% the funds that state government or local governments use for the Medicaid. The CBO (Congressional Budget Office) indicates that the federal government will refund nearly 100% that a state uses for funding of the Medicaid. One of the goals of the Medicaid is to assist state and local governments to reduce the costs of implementing the Medicaid program. The Medicaid is under the ACA (Affordable Care Act) aimed to provide the health insurance coverage for non-elderly individuals earning income less than 133% of poverty line or family of four earning

$30, 700. ACA health reform estimates that the federal government will bear the costs that the state or local governments spend on Medicaid in the first 9 years. Since the inception of Medicaid, the state and federal governments have jointly financed the program while the federal government assuming the 57% of the costs. However, in 2012, the ACA took different approach in order to minimize the state financial burden. Typically, the federal government assumes the responsibility of paying 100% of the Medicaid costs between 2014 and 2016.

The report suggests that our city should allocate 40% of the budget for the Medicaid implementation since the Federal government will assume 100% responsibilities of all the costs allocated to the program. As being discussed earlier on, the federal government is ready to refund 100% of the Medicaid costs between 2014 and 2016. Since this $10 Million allocation is for the budget of the 2015 and 2016 fiscal year, our city will have an advantage of claiming 100% federal government funding if we allocate 40% of the budget to the Medicaid. In essence, we will have the opportunity of claiming $4 Million of the federal government fund if we spend 40% ($4 Million) of the budget on the Medicaid. ( (Glied, & Ma 2013).

Our city will derive several benefits from allocating 40% of the budget to the Medicaid program. First, the budget allocation to Medicaid will deliver a broader economic implication. The Medicaid expenditure will generate economic activities such as creating the job opportunities. Medicaid spending will also provide tax revenue for our city because the spending will increase job opportunities within the healthcare sector, which will consequently provide tax revenue for our city. Medicaid's economic impact is intensified because small amount of Medicaid spending will enhance a significant flow of federal matching dollars into the city. (Holahan, Buettgens Carroll, et al.2012).

Broaddus, & Angeles, (2012) support this argument by pointing out that Medicaid program will assist our city to reduce the costs that we spend on insured people since the federal government will bear all the costs incurred in the health reform. In essence, our city will be able to reduce a significant cost that we incur on health insurance, which assist us in allocating our funding in other economic development ventures. (Jack, et al.2008). Apart from the economic benefit that out city will derive from allocating part of the budget to the Medicaid, the program will also provide health benefits to millions of people in the city. For example, the Medicaid program will protect the residents against different preventable illness, which will consequently promote healthier workforce in the city. (Holahan, Buettgens, Carroll, et al.2012).

Our city will also be able to boost employment opportunities for our community with the expansion of Medicaid. Through the Medicaid program, our hospitals will be able to reduce the hospital uncompensated costs by 21%. Moreover, there will be a reduction in the volume of self pay and uncompensated admissions in out hospital emergency departments. Apart from 100% free fund that we will receive from the federal government, our hospitals will also be able to boost their revenues through a reduction of uncompensated costs, which will ultimately generate employment opportunities within the healthcare sectors. A report by the Department of Health & Human Services provides reveal the impact of the Medicaid over the past 10 years. The findings reveal that Medicaid has assisted in enhancing positive economic outcomes and boost job growth within states and cities that implement the program over the past 10 years. (HHS, 2015). Essentially, the Medicaid program will enhance health outcomes of our workers, which will consequently boost productivity. Malloy, & Merkowitz, (2015) point out that economic benefits of healthy workers from the Medicaid program are very clear because healthy workers will be more productive than non-healthy workers. For example, workers suffering from illness or disability are less likely to be productive. The authors further argue that improved health outcomes are the robust predictors of productivity and economic growth. It is essential to realize that quality health insurance is an effective strategy to prevent illness from being severe. Despite the benefits that our City can derive from the Medicaid program, we should ensure that the benefits of the program should be greater than the costs. Typically, the revenues that our city will derive from the Medicaid program should be greater than the costs of the implementation. In essence, our city will derive economic gains from better health. It is essential to realize that healthcare spending will serve as stimulus to job growth. Increase in health costs can lead to more borrowing, higher taxes and cut in expenditures for infrastructures and education.

Essentially, Malloy, & Merkowitz, (2015) argue that one percent increase in the costs of Medicaid will lead to a decline in the employment growth rate by 0.008% . Meanwhile, an entity that is able to reduce the Medicaid expenditures by 37% will enjoy employment annual growth rate by 0.30% points. Since our City will enjoy 100% reduction in the Medicaid expenditure, we are likely to increase the annual job growth by more than 1%. If we are able to increase the Medicaid enrollment in our City by 5% point, we are likely to record an increase of 0.4% in per capital GDP growth as well as employment growth.

Development of City Recreation and Parks to Generate Fund

Our city officials should also allocate part of budget for the renovation parks and recreational centers to improve economic, health and social outcomes of the community. The city officials should allocate 30% of the funds to implement some capital expenditures in order to generate more revenue. The city officials should use $3 Million from the fund to renovate the recreation and park to generate revenue. Several benefits the city will derive from the renovation of recreation and parks. Similar to the public water and safety utilities considered as essential public services, the parks and recreations are equally beneficial to maintain quality of life to ensure health and well beings of the city residents and visitors. Typically, the parks and recreations will provide health and environmental benefits that will enhance good quality of life. The renovation of recreation and parks will assist the city to attract businesses as well as retaining talented workforce in the city. Additionally, renovation of the recreation and park will boost tourism industry in the city, which consequently generate revenue and provide job creation. Thus, the parks will play a major role in the economic growth and development of the city.

The result of the survey carried out by the Arlington officials reveal that 90% of the residents surveyed agree that they visit the parks and recreational facilities at least once within the last 12 months. Almost all the people surveyed agree that the park and recreation center is good. More importantly, 50% of the people interviewed agree that they are willing to pay more than 10% to be located near the recreation and parks. A report by the Arlington, (2014) also shows that every $1 spent on the recreation and parks will assist the city to enjoy $3 saving from direct medical costs.

In essence, the parks and recreation center will "provide intrinsic environmental, aesthetic and recreation benefits to our cities. They are also a source of positive economic benefits. They enhance property values, increase municipal)) revenue, bring in homebuyers " and workers, and attract retirees." (Arlington, 2014 p 2).

By using $3 Million to renovate the park and recreation, the city will drive economic, social, health and environmental benefits from the investment. The recreation and parks will make our residents to be physically active. The physical activity is essential strategy to stay healthy, prevent chronic disease, and obesity. Indulging in physical activity also assists in fighting diabetes and high blood pressures . Having access to parks and recreations will assist the residents in becoming physically active.

Our city will also be able to generate economic benefits from the renovation of the parks because the parks will attract lot of tourists to the city, which will consequently enhance market opportunities for our business organizations. The recreation and park will also generate additional revenue for the city fiscal centers, which consequently lead to job creations. Moreover, the parks will assist the city to improve the property values and increase local tax base. Essentially, quality recreations and parks is one of the top reasons that enhance business relocation decisions. Thus, increase in business relocation will assist in generating job opportunities for the city residents .

Moreover, the parks will provide essential place where people can be physically fit. The study carried out by the "Centers for Disease Control and Prevention" (2014) reveals that recreation and parks will make 25% of the residents to be physically fit, which assist them to reduce the stress and lower the blood pressures. The renovation of recreation and parks will also deliver a social importance because it will provide the avenue where people of all ages will be able to meet. Access to parks will also reduce juvenile delinquency, crimes and vandalisms.

Housing Development

The remaining 30% will be used for the development of housing units for low income people . Allocating $3 million from the fund to the housing development for the low income earners will make our city to qualify for the federal government grants. One of the top sources of federal government funds is the housing development. Typically, the federal government is ready to provide funds for the entities that are ready to improve living conditions of low income people through housing development. The city officials should join partnership with non-profit organizations for the housing development for the low income residents. Several benefits we are going to enjoy from investing in housing developments.

First, the low income people will be able to enjoy quality of life from the housing development because they will have access to safe, decent and quality housing units. The housing development for low income people will provide social, economic and health benefits for our community. Essentially, safe, and affordable housing units will make families to be financially stable in the community. Moreover, affordable housing units will make businesses to retain and attract talented employees into the cities. It is essential to realize that lack of affordable housing units will make business organizations to face challenges in attracting talented workers in the city. Typically, many businesses consider availability of affordable housing units before setting up the business in a specific locality, and lack of affordable housing units can lead to shortage of workforce in the community. By investing part of the fund in the housing units, our community will be able to attract talented workers to the city, which will assist in enhancing business growth and economic development. Additionally, investment in affordable housing unit will promote employment opportunities in the city. For example, business organizations will be able to attract large pool of talented and qualified workers in the city which assist them increasing revenue, return on investment and return on equity. The next section discusses the strategy that the city officials will employ in managing the funds.

Internal Audit

The first strategy is to carry out the internal audit systems that involves reviewing records and operations. The internal audit system is an independent appraisal to enhance effectiveness of the fund management. The city official should employ a qualified internal auditor who will be responsible to carry out the periodic auditing of the all financial transactions carry out within the organization. The function of internal auditors is to ensure that all the accounting operations are in order The internal auditor should aim to ensure efficiency and transparency. The internal checks prevent accounting errors and early detection of frauds. The public officials should also enhance internal accounting control to enhance financial accuracy.

Budgetary Control

The budgetary control is another strategy to enhance effective financial control. The budget is a "a quantitative statement for a defined period of time, which may include planned revenues, expenses, assets, liabilities and cash flows." (Nkuah, Tanyeh, & Asante, 2013). p 220). A budget assists organizations to coordinate and facilitate control. The budgetary control involves using a financial officer to monitor the inflow and outflow of cash as well as sales revenues and expenses.

Financial Planning

This section provides the financial planning of our budget. The section present break even analysis, project surplus or deficit and cash flow.

Break-even Analysis

Monthly Revenue Break-even

$220,033

Assumptions:

Average Percent Variable Cost

0%

Estimated Monthly Fixed Cost

$220,033

Surplus and Deficit

Year 1

Year 2

Year 3

Funding

$2,860,000

$2,261,000

$2,285,000

Direct Cost

$0

$0

$0

Other Production Expenses

$0

$0

$0

Total Direct Cost

$0

$0

$0

Gross Surplus

$2,860,000

$2,261,000

$2,285,000

Gross Surplus %

Expenses

Payroll

$1,144,000

$1,157,000

$1,168,000

Sales and Marketing & Other Expenses

$183,000

$139,000

$139,000

Depreciation

$0

$0

$0

Leased Equipment

$0

$0

$0

Utilities

$20,000

$20,000

$20,000

Insurance

$10,800

$10,800

$10,800

Rent

$120,000

$120,000

$120,000

Payroll Taxes

$210,600

$230,550

$250,200

Other

$0

$0

$0

Total Operating Expenses

$2,264,400

$2,235,350

$2,248,000

Surplus Before Interest & Taxes

$210,600

$225,650

$370,000

EBITDA

$210,600

$225,650

$370,000

Interest Expense

$0

$0

$0

Taxes Incurred

$0

$0

$0

Net Surplus

$210,600

$225,650

$370,000

Net Surplus/Funding

7.55%

9.83%

12.98%

Projected Cash Flow

The table in the next section provides the projected cash flow.

Pro Forma Cash Flow

Year 1

Year 2

Year 3

Cash Received

Cash from Operations

Cash Funding

$2,286,000

$2,261,000

$2,285,000

Subtotal Cash from Operations

$2,286,000

$2,261,000

$2,285,000

Additional Cash Received

Sales Tax, VAT Received

$0

$0

$0

New Current Borrowing

$0

$0

$0

New Other Liabilities (interest-free)

$0

$0

$0

New Long-term Liabilities

$0

$0

$0

Sales of Other Current Assets

$0

$0

$0

Sales of Long-term Assets

$0

$0

$0

New Investment Received

$0

$0

$0

Subtotal Cash Received

$2,286,000

$2,261,000

$2,285,000

Expenditures

Year 1

Year 2

Year 3

Expenditures from Operations

Cash Spending

$1,144,000

$1,157,000

$1,168,000

Bill Payments

$1,110,701

$181,609

$179,864

Subtotal Spent on Operations

$1,254,701

$1,238,609

$1,247,864

Additional Cash Spent

Sales Tax, VAT,

$0

$0

$0

Principal Repayment of the Current Borrowing

$0

$0

$0

Other Liabilities of the Principal Repayment

$0

$0

$0

Long-term Liabilities of the Principal Repayment

$0

$0

$0

Purchase of Other Current Assets

$0

$0

$0

Purchase of Long-term Assets

$0

$0

$0

Dividends

$0

$0

$0

Subtotal Cash Spent

$1,254,701

$1,238,609

$1,247,864

Net Cash Flow

$131,299

$122,391

$137,136

Cash Balance

$1,185,499

$1,207,890

$1,245,025

Standard Ratios

The table below compares the standard ratios of the financial planning.

Ratio Analysis

Year 1

Year 2

Year 3

Industry Profile

Funding Growth

0.00%

-8.74%

9.20%

7.29%

Percent of Total Assets

Other Current Assets

0.00%

0.00%

0.00%

51.87%

Total Current Assets

75.02%

Long-term Assets

0.00%

0.00%

0.00%

24.98%

Total Assets

Current Liabilities

5.23%

3.10%

2.68%

31.06%

Long-term Liabilities

0.00%

0.00%

0.00%

17.80%

Total Liabilities

5.23%

3.10%

2.68%

48.86%

Net Worth

94.77%

96.90%

97.32%

51.14%

Percent of Funding

Funding

Gross Surplus

Selling, General & Administrative Expenses

92.45%

90.17%

87.02%

74.84%

Advertising Expenses

10.49%

11.49%

10.53%

1.60%

Surplus Before Interest & Taxes

7.55%

9.83%

12.98%

2.61%

Main Ratios

Current

19.13

32.28

37.26

1.80

Quick

19.13

32.28

37.26

1.49

Total Debt to -Total Assets

5.23%

3.10%

2.68%

58.30%

Pre-tax Return- on Net Worth

12.29%

12.73%

15.52%

6.19%

Pre-tax Return- on Assets

11.64%

12.34%

15.10%

14.83%

Additional Ratios

Year 1

Year 2

Year 3

Net -Surplus -Margin

7.55%

9.83%

12.98%

n.a

Return on Equity

12.29%

12.73%

15.52%

n.a

Activity Ratios

Accounts Payable Turnover

12.41

12.17

12.17

n.a

Payment Days

27

38

30

n.a

Total Asset Turnover

1.54

1.26

1.16

n.a

Debt Ratios

Debt to Net Worth

0.06

0.03

0.03

n.a

Current Liab. To Liab.

1.00

1.00

1.00

n.a

Liquidity Ratios

Net Working Capital

$175,800

$201,450

$238,450

n.a

Interest Coverage

0.00

0.00

0.00

n.a

Additional Ratios

Assets to Funding

0.65

0.80

0.86

n.a

Current Debt/Total Assets

5%

3%

3%

n.a

Acid Test

19.13

32.28

37.26

n.a

Funding/Net Worth

1.63

1.30

1.20

n.a

Dividend Payout

0.00

0.00

0.00

n.a

Conclusion

This project designs the budget plan for $10 million allocated by our city manager to enjoy 100% matching federal funds. The paper also discusses the strategy of allocating the budget to meet the needs of residents . The allocation also discusses the method the budget supports the operating requirements, capital requirements and assisting non-profit organizations. Moreover, the paper discusses method of using the budget to develop economic incentives to attract private businesses into the city. The paper also provides the strategy employed in implementing fund accounting and financial control to enjoy financial benefits from the budget. The project discusses method of managing and control the public expenditures. The project also discusses the method of meeting financial reporting requirements, analyzing financial statements of the budget to enhance appropriate administrative decisions. The paper selects Medicaid program, development of parks and recreation and housing development for low income earners to qualify for 100% federal funds and enhance economic growth in the city.

Reference

Arlington (2014). The Economic Impact of Parks and Recreation. Arlington. C.ity of Arlington Parks and Recreation.

Broaddus, M. & Angeles, J. (2012). Federal Government Will Pick Up Nearly All Costs of Health Reform's Medicaid Expansion. Center of Budget Policy.

Glied, S. & Ma, S.(2013). How States Stand to Gain or Lose Federal Funds by Opting In or Out of the Medicaid Expansion. The Commonwealth Fund.

HHS (2015). Economic Impact of the Medicaid Expansion. U.S. Department of Health & Human Services.

Holahan, J. Buettgens, M. Carroll, C. et al.(2012). The Cost and Coverage Implications of the ACA Medicaid Expansion: National and State-by-State Analysis. Kaiser Family Foundation. USA.

Jack, H. et al. (2008). Covering the Uninsured in 2008: Current Costs, Sources of Payment, and Incremental Costs, Health Affairs.

Lunenburg, F.C. (2010). Financial Controls: A Safeguard Against Misuse of Public Funds. National Forum of Educational Administration & Supervision Journal. 27(4).

Nkuah, J.F. Tanyeh, J.P. & Asante, J.(2013). The Relationship between Financial Control Systems and Public Sector Efficiency in Ghana. International Journal of Advanced Research in Management and Social Sciences.2(7):209-235.

Malloy, L.C & Merkowitz, S.P. (2015). The Economic Impact of Expanding Medicaid. Healthy Economy.

Popovcic-Avric, S. Mizdrakovic, V. & Djenic, M.(2014). Budget Control and Fund Accounting. International Conference: XIV International Symposium .