Take-Home Exam 1

V372: Government Finance and Budgets

Sections 6248 & 6249; Trexler
Due: Friday, October 23, 2015
Below you will find your first exam. Its worth 15% of your total grade. You are welcome
to work individually or in groups. Each student or group will hand in a printed report by
October 23. If youve chosen to work in a group, please only turn in one report per
group. Feel free to hand in your report early in class or my mailbox in the adjunct offices
in SPEA 412 (there is an after-hours drop box in the hallway).
The exam is split into two sections. Part one contains instructions for completing a month
cash budget. Use the data provided to estimate the 2016 budget amounts and create a
table for each fund. Part two contains a series of questions related to your estimates.
Your final report should be a printed document containing the four budget tables and the
answers to the questions in Part 2. Please type your answers in Word or a similar program.
Only include your answers in the report. Do not waste additional paper by printing this
document. Be sure to follow the instructions carefully and address all parts of each
question. Remember that I expect you to take time to make your final product look
professional. Use the formatting tools in Excel and Word, or whatever software you
choose to use, to make your answers easy to find and tables easy to read.
The exam will be graded out of 100 points. Ill award points for each question based on
whether or not your final answers are correct, the methods you used to solve each
problem, and the amount of effort put into the overall presentation of your answers. Note
that it is possible to get an answer wrong and receive partial credit, assuming your report
demonstrates that you put effort into solving the problem and clearly communicating your
answers.
As a reminder, we should have time for exam questions on most presentation days. Look
for an announcement on Canvas for additional help sessions outside of class. Im also
happy to answer questions by email or over the phone, but please try to utilize the class
time Im offering.
Note, this exam will be time consuming. Do not wait till the last minute to start
work on it. Also, be sure to print your final report early to avoid any unforeseen printing
problems. Good Luck!

Part One The Budget Tables (60 Points)

As the new controller for the city of Cashton, you are concerned about next years
budget (2016). Specifically, youre concerned that you may not have enough cash to
cover all of your expenses each month (cash flow problems). As a result, youve decided
to create a monthly cash budget for each of the four major funds of the city. Use the
following data to create a monthly cash budget for each fund.

V372 Exam 1
Fund Balance for January 1:
General Fund
$680,350
Parks General
$74,892
Motor Vehicle
$156,547
Cumulative Capital $964,601
Revenue Estimates: All estimates are taken from the budget approved by the City
Council last year.
Property Tax: Collections are received by the city on May 1 and November 1. Cashton
gives a discount for early payment to encouraged citizens to pay their bill early. As a
result, five-eighths of the total levy is received in the first payment. Cashton has
experienced a 2% delinquency rate in the past. The total property tax levy for each fund
is:
General Fund
Parks General
Cumulate Capital

$2,894,000
$685,000
$228,000

Parking Meters (general fund): Revenues run about $9,000 per month. In warmer months
(May, June, July and August) collections are typically 20% lower due to less people driving.
Collections are generally 15% higher in December due to holiday shopping downtown.
Permits (general fund): The county engineering department collects permit fees for
Cashton throughout the year and remits them to you at the end of each quarter. The total
collections are estimated at $360,000 with 20% coming in Q1 and Q4, 25% in Q2, and 35%
in Q3.
Traffic Fines (half to general fund, half to motor vehicle): Estimated at $8,500 per month.
Swimming Pool Admissions (parks general): Estimates are based on prior years.
May
June
July
August
September

$950
$1,110
$1,350
$3,200
$600

Parks Concessions (parks general): estimates are based on prior years.

May
June
July
August
September

$600
$1,000
$2,400
$4,200
$500

Gasoline Taxes (motor vehicle): The state collects gasoline and excise taxes on vehicles
operated within the state and shares those revenues with local governments to help
maintain their vehicles and equipment. Payments are remitted to local governments at
the end of each quarter. Last year Cashton received a total of $440,000. The state
estimates 2015 collections to be roughly 3% higher.
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V372 Exam 1
Expenditure Estimates: All estimates are based on currently approved appropriations
by the City Council.
Payroll: Paydays are every other Friday. The first payday is January 1 st.
General Fund
Parks General
Motor Vehicle

$93,000 biweekly
$17,500 biweekly
$2,500 biweekly

Seasonal Employees: Cashton hires additional temporary help in summer months (May
thru September). These paychecks are issued on the same day as the regular payroll.
Parks General
Motor Vehicle

$6,000 biweekly
$1,700 biweekly

Regular Expenditures: Payments to suppliers are issued every other Wednesday starting
January 6th. The following amounts represent the average amount per disbursement
based on the previous years expenditure patterns.
General Fund
Parks General
Motor Vehicle

$29,000 /disbursement
$4,500 /disbursement
$1,450 /disbursement

Seasonal Expenditures: Cashton generally experience higher costs in the summer months
(May thru September). These disbursements occur on the same days as the other regular
expenditures.
Parks General
Motor Vehicle

$2,300 /disbursement
$5,800 /disbursement

Debt Service: Cashton issued a bond four years ago for general infrastructure
improvements. Payments are due semiannually on January 30 th ($162,000) and August
30th ($128,000). Debt service is paid from the cumulative capital fund.
Capital Expenditures: Cashton has planned the following capital expenditures for 2015.
Payment is due on the date listed.
General Fund Three new police cars valued at $18,000 each (April 15 th)
Motor Vehicle One dump truck valued at $67,500 (September 30 th)
Motor Vehicle One snowplow valued at $34,000 (September 30 th)

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V372 Exam 1

Part Two The Questions (40 Points)

1) Is the budget in balance as it is proposed? How large is the annual deficit or
surplus for each fund? Note, Im asking for four numbers here.
2) Will Cashton experience cash flow problems throughout the year? If so, which
funds will have problems? When will the problems occur?
3) What could Cashton do to avoid the cash flow problems that you found in the
previous question? There are many valid answers. Dont simply say cut
expenses or raise revenue. Be specific. Please list at least three actions
they could take.
4) What is the total ending balance for all four funds as of December 31 st? We refer
to this amount as a cash reserve. Why do agencies hold cash reserves? Is it
appropriate for Cashton to hold that much cash in reserve? Explain your answer.

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