Public budgeting processes and financial management

¶ … public budgeting comparisons of the federal, state and local budget distributions. This thesis will be focused on whether or not the increased budget allocations for transportation in the federal, state and local government will enhance travel security, efficiency, performance measures and R&D development in the domain. The thesis will start off with a proposal for an agency that works across and is allocated budget in all the federal, state and local legislatures. The agency chosen for the thesis is the United States Department of Transportation. The proposal will include a detailed overview of the chosen agency inclusive of some financial data in recent years for the agency and a comparative analysis of the performance measures accomplished with those measures that were not completed. This will be followed by the details and comparative analysis of the budgetary performances of the federal, state and local budget departments in the United States which is the primary focus of the thesis. This will include relevant theory of budget distribution and will be complemented by some relevant financial statistics. The last part of the thesis will present a proposed strategy for efficient budget distribution for future transportations projects. This will be a PowerPoint presentation and will present strategies-based conclusions and analysis made in the prior two sections. The paper will aim to prove or refute the following hypotheses: 1) increased budget allocation in transportation across all legislatures (federal, state and local) may lead to increased security; 2) increased budget allocation in transportation across all legislatures (federal, state and local) may lead to increased efficiency; 3) increased budget allocation in transportation across all legislatures (federal, state and local) may lead to increased accomplishment of performance measures; and, 4) increased budget allocation in transportation across all legislatures (federal, state and local) may lead to increased R&D efficiency and accuracy.

Agency Name

United States Department of Transportation (DOT or Department) is the agency that has been selected for this paper. An overview of the financial performance of the United States Department of Transportation (DOT or Department) has been explained in the Agency's Financial Report (AFR). This report provides the financial information for the fiscal year (FY) 2011 and coming years (U.S. DOT, 2011).

DOT Mission

It is the mission of the Department to enhance the lives of the people of United States by providing them with a better, efficient, safe and accessible transportation system. The Department aims at not only enhancing and improving the present of the people of United States but also their future by ensuring that the transportation system meets their requirements and needs (U.S. DOT, 2011).

DOT Values

Professionalism: DOT considers itself a responsible public servant. It is very important to DOT to demonstrate respect, highest standards of integrity and excellence in their working environment (U.S. DOT, 2011).

Teamwork: DOT as an organization is united. It respects and considers the ideas and differences of other people and it is very important to them that they work in a united fashion.

Customer Focus: It is important to DOT to provide its customers with the services that they want. For this reason DOT believes in bringing innovations and being creative to accommodate their customers in the best possible manner (U.S. DOT, 2011).

History

DOT was developed in 1967. It works in collaboration with the United States private and local sector partners and it has made the Federal transportation policy with the help and agreement of all these sectors. DOT's main goal is to ensure that the transportation whether its railways, airways, roads or seaways is secure, efficient, safe and fast. It is also the goal of DOT to ensure interconnected National transportation all over the U.S. DOT uses all these goals as the guidelines towards ensuring the establishment and maintenance of the ideal transportation system for the people of U.S. (U.S. DOT, 2011)

There are approximately 60,000 people all around the country who have been employed by DOT. These employees are located in the Office of the Secretary of Transportation (OST) as well as the bureaus and the twelve Operating Administrations (OAs). The OST, OAs and the bureaus all have their own organizational structure and management (U.S. DOT, 2011).

The Office of the Secretary of Transportation works as the leader. All the major management guidelines, programs for consumer protection, economic guidelines and administrative support are provided by the Office of the Secretary of Transportation. Although the Surface Transportation Board (STB) and the Office of Inspector General (OIG) are a part of the DOT structure, but according to the law they are independent (U.S. DOT, 2011).

Proposal Name

In order to get to understand and get to know about the Department's performance with regards to the budgetary resources, the financial reporting and the performance AFR is being done. It has become a requirement under the Office of Management and Budget's Program to have the AFR delivered among many other reports. The purpose behind this is to get to know about the Alternative Approaches regarding Accountability Reporting and the Performance. This is a voluntary program in which the Department is participating and it's the second year that this has been done. The Department is aiming at providing a more transparent and accountable system that can provide detailed information about the resources and the performance of the system to its readers. The strengths, highest priorities of the Department as well as the challenges being faced by it are also mentioned in the report (U.S. DOT, 2011).

Financial Details (All financial data was retrieved from U.S. DOT, 2011)

Fiscal Year 2007-2011

In the table below, the data has been presented on the overall research and development that was completed by DOT for the fiscal year 2007 to 2011.

In the table below, we see a comparative analysis of DOT's budget with the Federal U.S. Budget allotted to transportation.

Fiscal Performance -- Past, Present and Future

In the graph below, we see the FAA allocation of capital fund for DOT for the year 2008 to 2016 showing steady growth in the trust in the abilities of DOT to deliver on the safe transportation facilities for the masses in the United States (U.S. DOT, 2011).

Measure of Success

The Strategic Plan of the Department for the Fiscal Years 2006-2011 is "New Ideas for a Nation on the Move." This is the last year that the Department will report on this strategic plan. The strategies and measures that have been mentioned in the upcoming pages have been followed by the Department to improve the performance and efficiency of the system. However, some of those measures might have been dropped by the Department while it adopts new ones since its main goal is to bring more and more improvement to the system (U.S. DOT, 2011).

The preliminary results for this year show that approximately 80% of the performance targets that had been set by the Department were met. However, there still exist some areas that need some improvement (U.S. DOT, 2011). Given below is a concise explanation of the results regarding the strategic objectives:

Safety Performance

The main purpose of Safety Dot is to keep a track of safety of the American people who are travelling through airways, roads or railways. It was observed from the preliminary results that about 9 out of 10 safety goals were achieved. The decline of the general aviation (GA) fatalities didn't take place as quickly as it was being imagined. It was observed that most of these fatalities took place in the experimental aircrafts. The fatal accidents in the GA accounted for approximately 26% of the fatalities. A lot of different approaches are being taken by the FAA in order to address this issue (U.S. DOT, 2011). Please refer to the details below for performance measures on safety performance (U.S. DOT, 2011).

Reduced Congestion

It is one of the strategic objectives of DOT to make sure that the congestion in the modes of transportation is reduced. DOT is trying to make this happen with the help of various factors such as ensuring that it gets proper funding to maintain the highways in good state, by efficiently managing the air traffic and by trying to persuade the people to use mass transit. However, it is being observed by the DOT that the trend of mass transit being used by the people has been declining for two continuous years now. There are many reasons that are responsible for this decrease such as the unemployment, inflations, economic decline and the decline in the local and state tax revenues that were used to ensure that the mass transits were in good states (U.S. DOT, 2011). Please refer to the details below for performance measures on reduced congestion (U.S. DOT, 2011).

Global Connectivity

Global connectivity not only helps the American economy but also enables the American market to stay in touch with the markets all around the world. This is done by the transportation of vehicles, products and goods by trying to keep the delay to the minimum. The St. Lawrence Seaway is a major seaway with the help of which the upper West stays connected to the global markets. In the FY 2011 it was mentioned that the St. Lawrence Seaway remained open for 99% of the time during the shipping season. Continuous efforts are also being made to ensure that the flow of traffic on the roadways is improved as well. Although decrease in delay was noticed in many areas but these results were not very clear due to the delays that took place on the borders. It was noticed that in NY, WA, Buffalo and Blaine, the delays increased. However, five crossings were observed and it was noted than from among those, in three, the delay decreased (U.S. DOT, 2011). Please refer to the details below for performance measures on global connectivity (U.S. DOT, 2011).

Environmental Stewardship

When it comes to the environmental factors and the transportation, the transportation can prove to be a very serious issue. However, DOT tries to ensure that no environmental issues take place with regards to the quality of the transportation. It has been noticed that for four years in a row now that no standards regarding the air pollution have been violated by the Department (U.S. DOT, 2011). Please refer to the details below for performance measures on environmental stewardship (U.S. DOT, 2011).

Security, Preparedness and Response

Although when it comes to the security of the public transportation, the Department of Homeland Security is the one that is responsible. However, DOT has and still does ensure that it has the ability and capability to keep functioning with in a crisis situation. It is through the Maritime Administration that during the military mobilization the role of being a supporter of the Department of Defence was played by DOT. DOT has been exceeding their requirements for the commercial ports and shipping capacity for four years in a row now (U.S. DOT, 2011). Please refer to the details below for performance measures on security, preparedness and response (U.S. DOT, 2011).

Organizational Excellence

As DOT's administration pays a lot of attention to how DOT is making use of the tax payers' money, they keep a record of the costs that are associated with the major infrastructure projects and major system purchases. DOT doesn't make the cost estimate for the huge infrastructure projects as whole but it is being observed that a lot of individual projects are improving and performing well. The cost estimates, finance plans and project management plans will continue to be reviewed by the DOT administration.

Required Changes

It is essential for the smooth and efficient running of DOT that it tries to find out and study the factors or risks that can make it difficult for DOT to reach their objectives. In order to manage the identified risks, DOT needs to improve the internal controls of the system. In order to manage the risks in a proper manner DOT needs to manage its performance through the risk indicators. Some of the risk indicators are: observing exactly how we are identifying the risks that are involved in the internal control and how we are addressing these challenges, what are the rates and amounts of improper payments etc. Activities such as audits that are conducted by the Department's Office of Inspector General could be used to bring these above mentioned challenges to the attention of the management. The inputs from the current businesses should be used to formulate and improve risk management strategies. In order to modernize their Financial Systems the feasibility of different paths should be monitored continuously. In order to ensure consistency and standardize the financial management processes it is important that the DOT makes use of the information from the prior reports and work conducted.

In future, the DOT administration should plan on improving the Department with the help of the accomplishments in the financial management department. Along with this ensuring the availability of secure and efficient transportation will remain the Department's most important concern. With the help of their financial system DOT plans on promoting economic growth with the help of the availability of jobs.

Scholarly Activity 2

Introduction

The recession is finally ending after giving the American Nation a very difficult time for two years. These two years have been the toughest that the American people had to face in generations. There is no more danger of the U.S. financial system collapsing or of a second Great Depression starting. The swift and aggressive actions that were taken to cope with the recession have proved to be fruitful as the economy of the Nation is now recovering. The main reason for the jump-start of the economic structure is the boosting of the macroeconomic demand that was done by the American Recovery and Reinvestment Act (the Recovery Act). The dangerous recessionary cycle to the Administration's Financial Stability Plan was broken with the help of this step. Hence, the confidence of other organizations was restored in the U.S. markets and the financial institutions. This step greatly helped the government in saving the automobile industry. There were some extraordinary choices and decisions made by the President, some of which weren't very popular among the people either. However, time has proved that those policies and decisions played a very important role in making the economy start its journey back to recovery (Budget.gov, 2012).

Although the economy is now in its recovering stages but that doesn't mean that all the problems have been solved. There are still so many people in America who remain unemployed, a lot of businesses that still need some time to recover from the losses that they had to face due to the recession. There are still towns and cities in America that have been affected by the recession to such an extent that they are still having difficulties in providing their residents with jobs (Budget.gov, 2012).

Careful measures have to be taken in order to ensure that the recovery process doesn't have to face any more setbacks. It has been observed through various studies that the longer the recession stays the longer and more dangerous its side effects become. According to some studies the unemployment of parents affects the educational and the professional achievements of their children. Similarly, some studies also show that the people who start their jobs in the recession period get underpaid not only in times of recession but many years after that too. There are still some studies that have shown that recession not only affects the societies but the individuals too and in a negative fashion. Therefore, in order to make sure that the U.S. economy and Nation face long-term economic growth it is important for them as a Nation to invest in the infrastructure and capabilities of their workforce (Budget.gov, 2012a).

Right now we as individuals as well as a society need to make choices that will benefit their Nation as a whole. In order to make sure that the U.S. economy becomes one of the strongest ones in the world the government needs to make sure that it invests in the education, transportation, infrastructure and innovation of the American Nation. By doing this they will be able to make the Nation able enough to compete in the global market. However, to achieve all this some serious and tough decisions have to be made. Hence, in the federal, state and local budget some of these decision such as making necessary investments and cuts have to be discussed. All these steps are essential for the American economy as these will enable the availability of jobs and better investment and business scenarios in the upcoming months (Budget.gov, 2012).

In the next few pages we will discuss the federal, state and local budget distribution to the department of transportation in the rebuilding process for the past two to five years, i.e. during and after the recessionary period.

Federal, State and Local Budget

The budget forecasting for States is very difficult at the moment due to the severe recession that it recently came across as wells as the frail economic recovery that it has recently started. The State Budget for the State Fiscal Year (SFY) 2010-11 was four months late as it was enacted on August 3, 2010. It was also overly optimistic as it relied heavily on the projections from tax revenues for the budget balance. The initial projections of the All Funds tax revenue got lowered by about $343 million in the Mid-Year Financial Plan that was released in November 2010 by the Division of the Budget (DOB). In February 2011 these projections got further reduced to $690 million. Therefore, in just over a period of six months there was a $1.0 billion reduction in the expected tax revenue. It has been noted that there has been a shortfall in the All Funds tax revenue collections by approximately $8.3 billion than what had been projected at the time of the budget enactment (Budget.gov, 2012a).

The spending plan of the State is made by keeping the revenue projections that are mentioned in the Financial Plan in view. When there are shortfalls in the collections, they lead to unanticipated deficits and in scenarios like these corrective actions have to be taken. In order to compensate for the $8.3 billion shortfall, U.S. had to reduce the spending, temporary resources, nonrecurring actions as well as federal stimulus. For example, 500 million in Personal Income Tax refunds and $2.1 billion in school aid payments were delayed in the SFY 2009-10 because there weren't enough funds available (Budget.gov, 2012a). See table below for more differences between the Executive Budget and the Enacted Budget (DiNapoli, 2011):

With regards to the transportation funding no major changes have been made to the Executive Budget by the SFY 2011-12 Enacted Budget. The appropriations that have been proposed by the Executives for State Operations, Capital Projects and Aid to Localities are accepted by the Legislature. Some of these are detailed below:

State Transportation Capital Spending

According to the Enacted Budget it is evident that the two-year 7.0 billion capital program is in continuation. This program began in SFY 2010-11. The fact is that the $25.8 billion five-year program which was proposed in October 2009 by the Department of Transportation (DOT) would have averaged at $5.1 billion per year. This is approximately $1.6 billion more each year than the current annual funding of $3.5 billion (Budget.gov, 2012a).

It was Governor Paterson who rejected the original DOT plan according to which the roads and bridges of the State would be kept in good condition. The reason given by the Governor for rejecting this plan was that it was too expensive since the State was facing fiscal challenges. However, he asked for the transportation capital funding to continue at the same level. Due to this the planned distributions of the capital from the State's transportation capital plan were about $1.5 billion lower than it was approximated by the DOT in October 2009 in order to keep the roads and bridges of New York in a good state (Budget.gov, 2012a).

Support for Local Highways and Bridges

For the Consolidated Highway Improvement Program (CHIPS) the bonding authorization is maintained at $363 million and $39.7 million for the Marchiselli program according to the Enacted Budget. This is the same as it was for SFY 2010-11. The Marchiselli and CHIPS spending is not included in the Financial Plan of the State as, the funds for them are raised by the New York State Thruway Authority's bonds that are issued. Therefore, the spending for CHIPS and Marchiselli is completely off budget (Budget.gov, 2012a).

Dedicated Highway and Bridge Trust Fund

The Dedicated Highway and Bridge Trust Fund (DHBTF) is the major fund for the highway construction in States. The approximate distribution of the capital from the Dedicated Highway and Bridge Trust Fund (DHBTF) has increased by 29.9% which is $192.4 million by the Enacted Budget. However, it is being expected that the funds which are distributed for the support of the operations of the departments might decline from $67.3 million to $1.3 billion. This reduction is less than the 10% which was predicted in the Executive Budget that was proposed. It is being projected that the distributions of the debt service would reach approximately $1.4 billion which will be about 2.2% higher than the previous year. However, the important thing to keep in mind here is that this increase was mainly a result of the increase of dent services which took place in SFY 2010-11 and was totalled at $336.2 million or 32.6%. It was in 2005 that a decision to restructure DHBTF's debt was taken which resulted in this increase. It was decided to restructure the debt in such a way that payments of the principle of debt services were delayed for five years (Budget.gov, 2012a).

The State doesn't have a five-year transportation plan as yet. However, it is still required off the Executives to provide the budget documents with an estimate of the important capital programs along with the DHBTF's receipt and distribution summary. There are many changes that have been made in the DHBTF's five-year plan which is included in the Executive's Enacted Budget. These changes are not present in the proposed Executive Budget's plan.

Any shortfalls that take place in the DHBTF are adjusted with the General Funds. According to this there was an increase in the DHBTF's General Funds subsidy at the end of the year. This increase was of approximately $29.7 million. A total of $3.01 billion is the estimated transfer for five-year from SFY 2011-12 and SFY 2015-16 from the General funds to the DHBTF (Budget.gov, 2012).

The burden of the transfers that General Fund had to make to the DHBTF has been reduced to some extent by the Enacted Budget. Since DHBTF's main sources were going to debt services, it was until the start of this year that General Funds' transfer were the main sources of capital for the DHBTF. However, now more capital will be available for the DHBTF for spending since the State's Operation amounts have been reduced (Budget.gov, 2012).

There are many constraints that have risen as a result of the crisis being faced by the local governments. Although these constraints look unrelated or not important but their collective effect can prove to be disturbing. There are four levels upon which the effects of the crisis can be felt upon:

1. Revenue: The revenues that might have to face sharp declines whether they have been derived from the transfer done by the State or generated by the local government.

2. Expenditures: Expenditures that are resulting from the increase in the unemployment and the needs for social welfare which are arising due to the lack of or slowness of the economy activities.

3. Financing capacities: There is a lack in the financing capacities which is taking place due to the difficulties that the people have to face when it comes to getting loans (Budget.gov, 2012a).

4. Foreign investment: Foreign investments have decreased to a large extent. Many projects have been put on hold, delayed or cancelled altogether (Paulais, 2009).

Banks, no matter specialized or not, and bonds are two of the major financing systems that have been affected by the crisis a lot. According to the institutional as well as the political scenarios of the regions various strategies have been adopted by the governments to overcome the damages. Whether these policies are to provide stimulus packages, rescue financial institutions or work out recovery plans, one thing common in all these policies is that they are focused on central or concentrated governments rather the local government. No matter what might happen due to these short-term policies there is a strict need for reforms that would help in improving the situations that are being faced by the local governments. Everywhere we see it is evident that the financial system's infrastructure has been greatly affected by the crisis. The housing sector has also been affected by it (Paulais, 2009).

Public-Private Partnerships have been greatly affected by the crisis. Everywhere we see the direct capital investment in the creation and development of the infrastructure and real estate is declining very quickly. However, there are some sectors which haven't been affected as badly as others. These sectors are mainly the ones in which the demand was very strong such as energy sectors like electricity and telecommunications. It has been noticed that the sectors which have great importance to the local governments such as, water, transportation and sanitation were the ones that very affected very badly. A decrease of about 40-50% was observed in these sectors. Many of the ongoing projects have been put on hold, delayed or cancelled altogether (Leigland & Russell, 2009).

It has been noticed that the countries which were developing proportionally got affected by the decline a lot more than the others. In the export-oriented countries like Democratic Republic of Congo or Nigeria some special operations like telecommunications were able to escape recession mainly because of the high returns being expected by the investors. Generally speaking the investors are now hesitant in investing in the projects where the risks of return are high. The main reason for this attitude is the high cost of money and the shortage of revenues (Paulais, 2009).

A historic investment is being proposed by the President in this Budget. The main purpose of this investment is to ensure the modernization, repairing and rebuilding of the transportation system. According to the Budget an immediate investment of $50 billion will be done. The purpose of this investment will be to create new jobs which will ultimately help the Nation in its long-term economic growth. According to the future plans of the Budget, it will be providing funds for the development of the National Infrastructure Bank and high-speed railways to improve the quality of transportation. The purpose of the National Infrastructure Bank will be to support the projects that are going to be essential to the Nation's growth (Paulais, 2009).

Supports Sustainable Communities and Innovative Infrastructure Planning

One of the main goals of the Budget is to ensure the development of Sustainable Communities. There is an amount of $150 million included on the Budget which is going to be spent on the communities to help them in creating better transportations to avoid and reduce the greenhouse gas emission, make sustainable development possible and increase the transit- accessible housing. Recently, 100 grants were awarded to the communities all over the country by the Environmental Protection Agency (EPA), HUD and the Department of Transportation (DOT). Added to those 100 grants this $150 million will be able to help many communities all over the country (Budget.gov, 2012a).

Major sources of revenue

Funding Highlights:

In 2012, $13.4 billion are to be provided in discretionary resources. This is a $1.3 billion decrease from the levels of 2010. (In this figure the $109 billion are not included which were for the surface transportation plan's obligation limitations. The total budgetary resources of the Department of Transportation comes up to be $53 billion over 2010, this includes the obligation limits of the surface transportation).

There is a reauthorization plan of six-years whose goals are to enable the economy of the State to grow by providing more jobs as well as modernizing the transportation infrastructure of the country. This plan has a budget of approximately $556 billion. The President is going to be working with the Congress in order to ensure that the deficits are not increased by this plan.

With the help of $50 billion funding in 2012 the investments and job-growths will get a jump-start.

In order to achieve the goal of the President to provide about 80% of the Americans with an efficient railway system $8 billion will be provided in 2012 and $53 billion over a period of next six years.

In order to build a National Infrastructure Bank which will be investing in projects that will have national and regional importance to the economy, there will be $30 billion funded over a period of next six years.