Canadian Public Sector Financial Management 2nd Edition by Andrew Graham ISBN 1553394267 978-1553394266

Chapter 1 Financial Management in the Public Sector

Scope and Nature of the Public Sector

Size of Canada’s Public Sector

Employment: The Government Side of the Public Sector

The Real Extent of Public-Sector Employment

Implications of Contracting in the Public Sector

Expenditures and Revenues: Government Sector

A Closer Look at Government Expenditures

What Makes Financial Management Different and Important in the Public Sector?

Governments Serve Multiple Objectives and Not Only the Profit Motive

Governments Bear a Wide Range of Risk

With Great Power Comes Higher Levels of Accountability

Government Financial Management Operations Are Governed by Legislation

The Importance of the Budget

Lack of Equity Ownership/Reality of Collective Ownership

Most Governments’ Tangible Capital Assets Are Different in Nature than Those Held by a Business

Government Capital Spending Will Focus on a Range of Policy Benefits Rather than Only the Efficiency of the Operation or Lowest Cost

The Principal Source of Revenue for Governments Is Taxation, but This Is a Non-Exchange Transaction

Governments Hold Assets Acquired in the Right of the Crown

Governments Operate in a Non-Competitive Environment

Governments Have Debt Capacities Unparalleled by Most Other Organizations

Other Factors that Affect Public-Sector Financial Management

Summing Up

Chapter 2 Public-Sector Accounting Principles

You are Not an Accountant

Defining Accounting

Users of Accounting Information: Who Cares? Who Needs to Care?

Internal Users

External Users

Access

Frequency

Detail

Expertise and Understanding

Response

What Management and Financial Accounting Do

GAAP: The Accounting Framework

Who Sets These Standards?

Generally Accepted Accounting Principles

1. The Entity Principle

2. The Cost Principle: Money as a Measure

3. The Going Concern Principle

4. The Conservatism and Cost Principle

5. The Matching Principle

6. The Consistency Principle

7. The Materiality Principle

8. The Accrual Principle

The Quality of Accounting Information

Summing Up

Chapter 3 Financial Statements

The Accounting Cycle

Accounting Technologies

Double-Entry Bookkeeping and the Fundamental Accounting Equation

Debits and Credits: The Tools to Balance the Equation

Relating the Concept of Debits and Credits to the Fundamental Equation

Journal and Ledger Functions: Building Towards Financial Statements

Building Blocks of Financial Statements

Assets

Current Assets

Fixed and Long-Term Assets

Depreciation

Liabilities

Current Liabilities

Long-Term Liabilities

Contingent Liabilities

Net Worth

Financial Statements – A General Overview

Balance Sheet

Management Discussion and Analysis

The Statement of Operations

Statement of Changes in Net Assets or Net Debt

Cash Flows Statement

Financial Condition Analysis and the Application of Financial Ratios in Determining the Solvency and Sustainability of an Organization

Why FCA is of Importance to Government Financial Managers

Key Tools of FCA

The Use and Abuse of Financial Ratios

Summing Up

Chapter 4 Accrual Accounting and Budgeting

Accrual Accounting and Public-Sector Reform: It’s an Accrual World in Government Now

So What Does Accrual Mean for the Line Manager?

Moving from Cash to Accrual in the Public Sector

Recognition

Just What is Cash-Basis Accounting: An Overview

Example of Cash Accounting

Accrual Basis Accounting: An Overview

Expense or Expenditure in Accounting

Key Differences Between Cash and Accrual Accounting

Treatment of Non-Cash Transactions

Implications of the Accrual Basis for Public-Sector Financial Reporting

Risks of Accrual

Accrual Budgeting

Summing Up

Chapter 5 Budgets: What They Are and What They Do

What is a Budget?

Cultural Dynamics of Budget Formulation

A Budget is a Budget&Well, That Depends: Many Uses of the Term Budget

Distinguishing Public- and Private-Sector Budgets

Cyclical Nature of the Managerial Budgets Past, Present, and Future

Types of Budgets

Relationship of Revenue Budgets to Expenditure or Operating Budgets

Budget Architecture

Operating Budgets

Cash Budgets

Capital Budgets

What You Can’t Budget For

Structure of Operating Budgets

Line-Item Budgets

Program or Responsibility Centre Budgets

Functional Budgets

Flexible or Rolling Budgets

Fixed and Variable Costs in Determining Budget Fluctuations

Funds in Budget Structure

Types of Funds

Off-Budget Funds and Expenditures

More Complex Forms of Budgets: Linking Money to Results

Zero-Based Budgeting

Performance or Results-Based Budgets

Some Concluding Thoughts and What This Means to Managers

Chapter 6 Planning and Budgeting

Introduction

Budgets and Planning Cycles

The Budget Cycle: The Basics

Strategic Planning Phase

The Architecture of a Strategic Plan

Moving to Action and Into the Budget

Budget Preparation Phase

Role of Revenue and Workload Forecasts in Budget Calculation

Revenue Assumptions

Cost Analysis and Forecasting

Controllable and Uncontrollable Costs

Basic Costing Tools and Definitions

Direct and Indirect Costs

Activity-Based Costing and the Distribution of Indirect Costs

Fixed and Variable Costs

Break-Even Analysis

Appropriation Process: Getting Approval to Spend

Inherent Tensions in the Budgetary Process

Balancing Revenues and Expenditures: Financial Discipline

The Wants Versus the Won’ ts: Central Agency Versus Program Advocates

The New Versus the Old

Robbing Peter to Pay Paul: Moving the Money Around

Complexity Versus Clarity

Summing Up: Trends to Watch

Chapter 7 Capital Planning and Budgeting

Characteristics of Capital Assets

What does it Cost? What is it Worth?

Capital Planning and Budgeting

Capital Improvement Plans

Alternative Financing of Capital Projects

Risk Assessment: ‘What Can Go Wrong?”

The Financial Outcome: The Capital Budget

Challenges in Capital Budgeting and Accounting in the Public Sector

Social and Public Policy Value Versus Monetized Market Value

Depreciation

Distinguishing Capital and Operating Costs

Asset Measurement

Third Party Investment Strategies

Tools for Analyzing Capital Costs

Business Cases

Time Value of Money

Present and Future Value Calculations

Using Present Value Calculations to Compare Options

Using Net Present Value to Evaluate Investment Decisions

Cost Benefit Analysis

Summing Up

Chapter 8 Taking It Back: Reallocation and Budget Cutting

Context: Budget Level and Program Level

Decremental Budgeting

Continuous Reallocation: In-Year Cash Management

General Approaches to Reduce Spending

Accross-the-Board Cuts

Strategic Reviews

Efficiency Gains

Outsourcing and Privatization

General Approaches to Reallocation

Strategies and Tools for Reduction and Reallocation

Service Level Changes

Change the Employment Arrangements to Reduce Salaries

Reduce Staffing Permanent and Temporary

Defer or Cancel Investments

Reduce or Eliminate Discretionary Spending

Amalgamate and Reorganize

Increase Fees and User Costs

Internal Transfers Temporary and Permanent

Sell Off Assets

Cutback Management

Framing the Cutback: Risks and Consequences

Knowing Where to Look: Control Brings Insight

Implementing Cutbacks

In Summation

Chapter 9 Managerial Control

Introduction: Control is About Delivering

Who Has an Interest in Control?

The Control Process: It Never Ends

Risk and Risk Management: Heart of the Control Process

What is Risk and Risk Management?

Not All Risks are Created Equal

General Approaches to Managing Risks

Control: Who, What and How

Whom to Control, When to Control and Who has Control

Who is the Controller?

The Array of Control Tools

The Control Environment: Trust and Ethics and Setting the Tone

Trust

An Ethical Culture

Facilitative or Strategic Control

Protective Controls

Testing the Controls

Finding the Balance Between Control, Discretion and Cost

The Concept of Controllership in Government

Chapter 10 Cash Management: In-Year Budget Control and Monitoring

Defining Cash Management

In-Year Cash Management Versus Budget Planning

A Budget in Hand: Good First Step

Establishing a Cash-Management System

Preparing a Cash-Management Plan

Spending Plan: Estimating Budget Performance for the Reporting Period

Arriving at an Adjusted Budget

Tools of Forecasting

Use of Historical Data

Use of Formulae, Average Costs, and Revenues at Shady Gulch

Monitoring Financial Performance and Variance Analysis

Governance

Setting Up a Monitoring Timetable

Performance Reports

Variance Reports

Forecasted Versus Actual Report

Analysis of Key Variances Report

Historical Information

Reallocation and Readjustment

Authority to Reallocate

Freeing Up the Funds

The Danger of Rewarding Bad Management

Building Incentives and Protecting Budget Integrity

The Crucial Relationship Between Line Manager and Financial Advisor

Summing Up

Establishing and Using Effective Governance

Giving Assurance to Good Management

Rigorous Review of Commitments

Chapter 11 Confirming Control: Budget Accountability and Reporting

Accountability: Big Idea with a Broad Reach

The Public Sector Accountability Landscape: Accountable for What?

Qualitative and Quantitative

What Accountability Means

A Continuum of Accountabilities

The Relationship of Accountability and Financial Reporting

The Users of Financial and Performance Reports

The Objectives of Financial and Performance Reporting

Integrating Financial and Non-Financial Information

Reports and More Reports: A Sampler

Annual Reporting

Audit and Financial Management

Categories of Audits

Internal Audit Functions

Risk and Materiality in Determining What to Audit

Need for Independence

Audit Committees

External Audit: The Legislative Auditor

Independence

Legislated Mandate

Accountability and Oversight of Arm’s-Length Agencies and Contracted Services

Summing Up

Appendix 1 The Budget Games People Play

Appendix 2 A Brief History of Budgeting and Financial Management Reform in North America

Appendix 3 Federal Government’s Comptrollership Capacity Checklist

Appendix 4 Internal Control Checklist

Appendix 5 The Financial Management Capability Model: Auditor General of Canada

Appendix 6 The Cash Management Games People Play