Evaluate Appropriation Activities
Project description
Consider the following issues:
The Board of Alderman of the Hayville approved the Appropriations budget for its General Fund for the year ending December 31st as shown below.

General Government: $500,000

Public Safety 2: $800,000

Public Works: $1,200,000

Health and Welfare: $1,300,000

Culture and Recreation: $700,000

Contributions to Retirement Fund: $600,000

Total General Fund Appropriations: $7,100,000

In a paper, provide responses to the following:
Explain the legal significance of an appropriation and why auditors engaged for a financial and compliance audit need to know the meaning of the term.
It is illegal for a governmental unit to spend money for any purpose unless a valid appropriation for that purpose exists? Does this legal rule assure good financial management for each governmental unit? Why or why not?
Provide the entry in General Journal form to record the budget in all necessary General Ledger and Subsidiary Ledger accounts.
Illustrate a form of Appropriations, Expenditures, and Encumbrances subsidiary ledger account that would provide the information needed by a government finance director to ensure compliance with legal requirements concerning appropriations.

Explain how the term expenditure can be employed and defined differently in the following given situations:
Expense
Disbursement
Encumbrance
Other financing use
The fund equity section of the interim balance sheet of the Freeman Town’s General Fund, as of June 30, 2005, was:

Fund Equity:

Appropriations: $2,551,600

Less: Expenditures $1,349,000

Encumbrances: #1 €“ $112,000 and #2 €“ $1,461,000

Available Appropriations: $1,090,600

Reserve for Encumbrances: $112,000

Fund Balance: $122,600

Total Fund Equity: $1,325,200

The fund equity section of the balance sheet for the same fund as of December 31, 2005, the end of the fiscal year, was:

Fund Equity:

Reserve for Encumbrances: $32,000

Reserve for Inventory of Supplies: $60,000

Total Reserved Fund Equity: $92,000

Fund Balance: $81,600

Total Fund Equity: $173,600

A local newspaper ran a feature article and an editorial on the incompetence of city administrators in running the General Fund at a loss of over $1,150,000 in the last six months of 2005, since the Total Fund Equity decreased from $1,325,200 to $173,600.

Is the newspaper correct? Why or why not? If you need additional information to be sure of your answer, explain what additional information you need.

Johnstown is considering a capital project. For each of the following legally feasible alternatives, compare and contrast the desirability of each from the viewpoint of (1) the official in charge of administering capital projects funds, and (2) taxpayers residing in the governmental unit.
$5,000,000 face value of 10-year special assessment bonds can be sold at 98 with a semiannual interest at the normal annual rate of 6%. The discount would be borne by a debt service fund.
Same as Item (a), except the discount would be borne by the capital projects fund.
Same bond issue can be sold at 103 with semiannual interest at the nominal rate of 9%; the premium would be transferred to the debt service fund.
Same as Item (c), except the premium would be retained by the capital projects fund.

One of the common objections to computing depreciation of general capital assets has been that the assets are used for activities that are not expected to generate revenues sufficient to replace the assets; therefore, depreciation expense is not relevant to decisions about the acquisition or use of general capital assets. Evaluate this argument as a conclusion to your paper.

Support your paper with a minimum of five (5) scholarly resources. In addition to these specified resources, other appropriate scholarly resources, including older articles, may be included.

Length: 4 pages not including title and reference pages