Auditing and Assessing Financial Condition

¶ … financial condition of a hypothetical town; Swobodaville. The paper analyzes the town's revenue structure, and expenditure profile among others. In addition, paper outlines how public organizations within this town use data from audits and assessments to increase their effectiveness.

Financial Condition

There are several factors that are likely to influence the town's revenue structure. These factors are economic growth, taxations among others. The town has taxation waivers which may have led the increase in revenues from the first to the fifth year. There is a likelihood that the town has been having an increasing revenue base which has led to the increase in revenues. The level of government spending has steadily risen. The increase in government spending on state-provided goods and services including public and merit goods is likely to result in increased revenues for the town's households (Kirchler, 2007). Besides, incorporating revenue neutral individual income tax change that integrates reducing marginal tax rates, eliminating the individual alternative minimum tax and maintaining all tax breaks for saving and investment would provide large tax cuts to most households. This would reduce these households' tax expenditures resulting in increased revenues.

Most households in Swobodaville have increasing expenditures each subsequent year. This can be attributed to changes in consumption levels of the population which is influenced by reduction in product prices. The reduction in prices directly increases households' consumption since their wealth's real value increases. This effect on consumption will finally transmit to the aggregate expenditure, therefore, affecting it positively as witnessed in the past five years. The other cause of the higher expenditure is low interest rates. The lower the interest rates, the higher bank borrowings; thus increase investments and consumption expenditures. This will increase the aggregate expenditure. The level of wealth for households, and in the economy as well, affects the consumption and investment components of aggregate expenditure. Increase in financial wealth increases the consumption and investment expenditure power of households.

The different types of tax in Swobodaville city represent a good mix of revenue for the city. In addition, tax diversification in various sectors of the economy reduces tax burdens on one sector thus increasing revenue for the town. On the other hand, the town should reduce personal income tax than the corporate income tax (Carroll, 2009). A reduction would ensure a large majority of people would be able to afford the basic needs as they have enough money to purchase from the corporate. Thus, the city should reduce personal income and increase corporate income a little bit more. In addition, the town should increase other taxes to cover the reduced personal taxes. If the tax structure in the city is to be completely transparent, all personal tax rate should be at or less than the corporate tax rate. To be able to conduct a more complete analysis of the tax mix situation in the city, more information need to be provided. This information include: the tax base in the suburbs, the ration between the old and the young, the number of young people who are able to pay taxes, reasons given by companies about why they are moving.