City Of Yorba Linda Essay
City Of Yorba Linda
Yorba Linda is a small city in Orange County, California. Nearest megacity, Los Angeles is located approximately 36.3 miles equivalent to 58 kilometers from Yorba Linda. The interesting history of Yorba Linda started in 1880s but then in 1910-1920, early residents came with the intent of operating small farms. Yorba Linda began as a community of hard-working and earnest citizens. During 1920s, Yorba Linda started to grow and prosper while agriculture remained the mainstay of the local economy. Post World War Two, Yorba Linda retained its small town character until in early 1960s, Yorba Linda began experiencing tremendous population growth due to immigrants started to believe in California’s ability to generate prosperous future for them. in the middle of 1960s, Yorba Linda began transformation of small agricultural community into a modern community. Finally, Yorba Linda was incorporated into city in 1967.
The case study is about Yorba Linda in 1991-1993 where approximately 53,000 residents living in the city. The case study focuses on the budget preparation processes for year 91/92 and 92/93. There are several decisions maker in this case study from various levels. They are the City Council members, Department Directors and Arthur Simonian who were the city manager of Yorba Linda.
The main decision maker in Yorba Linda budgeting processes is Mr. Simonian. He was appointed by previous City Council’s board to be the city manager since the past 22 years from 1967 until the case took place. Even though he served Yorba Linda for a very long period, it does not mean that he did not have any undisclosed agenda. After the case study, in 1999, Mr. Simonian was voted to be dismissed by the City Council for committing financial fraud. Although the budget report needs to be approved by City Council’s members, Mr., Simonian is the one who control the system and process for preparing the budget. Thus Mr. Simonian overrides the power of City Council.
Other decision makers in this case study are department directors who were given responsibilities to participate in the budgeting process. They set the expenditure budget for their respective department. But they are not main decision makers in this process simply because Mr. Simonian has the authority to ask them to review and do potential reductions in their prepared budget. 2. The Problem
Unfortunately, the main problem is the budget report prepared by Mr. Simonian was unable to be unanimously approved with the vote of four in favor and one abstention. This event was highlighted as that was the second time the budget report had failed to be unanimously approved. The council member in abstention raised issues relating to the fluctuation of unnecessary and avoidable expenditure prepared by Mr. Simonian.
The main problem appeared to be as a result from several minor problems occurred in the preparation of the budget. First, the impact of transition period of budgeting system used at that moment as the city previously used line-items budgeting system and for 1991-1993 since 1989, they changed to programs and plans budgeting system. As a result, the council members who have limited knowledge in finance were unable to completely understand the budget report.
The change in the system used for budgeting also resulted in fluctuation of expenditure figures as the department managers were attempted to preserve services and programs that previously preferred by Yorba Linda’s residents. Although Mr. Simonian asked all department directors to identify potential reductions, many of the targeted reductions were focused on items that directors believed could be deferred to future years.
Second, fluctuation of expenditure due to massive increment in capital improvements needs for fund and also appropriation of expenditure for election, affecting in other departments to forced-cut their expenditure budget. These two non-recurring expenditure currently absorbed funds for other revenues. Despite of these problems, Mr. Simonian tried to keep revisions of budget at minimum. This phenomenon can be seen in increase in police service costs. This was due to additional patrol hours and increase in proposed salary.
Third, department directors were resistance to change. As shown in the case, Yorba Linda used line-item basis before Mr. Simonian decided to use programs and plans budgeting system. Directors were too comfortable using previous system, plus by using programs and plans budgeting system, they have to alter their department’s expenditure pattern. This situation lowered the capability of new budgeting system used. [1c] [1c] answer for question 1c
3. Data analysis
1. Yorba Linda is a contract city where most of the public services are outsourced to other sectors. There is advantage and disadvantage of outsourcing public services. The advantage of outsourcing public service is the city can save money and time, private company can help city by doing jobs faster and much more efficient. Philadelphia for example saved USD 275 million by privatizing 49 of their state services. The disadvantage of outsourcing is the city has to take the risk of the unknown and dumping them to the suppliers of the services.
2. The city council consists of five members that are elected by residents to four-year terms, with a three-term limit. A city manager is hired by the council to run day-to-day operations of the city. The council elects its own mayor at the end of every year from within its ranks, whose duty is to “preside over the meetings and represent the city at various functions. The combination of these two things means that the city employs a council-manager form of government. Economic
1. In 1991-1993 Yorba Linda were affected with global economic crisis. Resulted in tight financial of the city. 2. Yorba Linda main industries during 90s are agriculture, construction, manufacturing and transportation. These main industries will create jobs opportunity that can boost several tax revenues for Yorba Linda. 3. Over 1,000 businesses operated at Yorba Linda, not including 1,500 operating out of residential houses. The numbers of new businesses keep increasing during earlier 90s causing a huge market mix. Thus sales made by small businesses will increase and resulting in higher sales tax revenue.
4. California’s population is growing and it will continue to grow twice as fast as the rest of the U.S.A. number of residents in Yorba Linda also were expected to increase as a lot of new housing projects took place in late 80s until early 90s. 5. U.S.A. government invested USD10.5 billion for California to boost the development of highway and mass transit constructions. This highway will cross Yorba Linda creating a better link to other cities around.
1. Unfortunate for the residents in 90s, there was no high school in Yorba Linda other than one Catholic school in the city. Most students went to high school in Orange County, Anaheim or Santa Ana which are the nearest neighbor with high school. 2. In 1991, there were 53,000 residents with growing rate of 3,000 per year. 3. There were a golf, tennis and social membership available for subscriptions. 4. Los Angeles Times quoted that Yorba Linda had the lowest crime rate in 1991 among the other cities in Orange County. Residents in Yorba Linda were described as friendly, less snobbery and neighborliness.
1. The city was undergoing the transition period from using conventional budgeting system to programs and plans budgeting system which act as a management tool to public sector departments. 2. Launch of World Wide Web took place in 1991 enabling the city to gained wider and cheaper knowledge to find resources for the city. 3. California’s state law require cities to use fund accounting or cash basis accounting that emphasize more on accountability rather than profitability. It is more important for the cities to keep record of how their money was spent rather than how it was earned.[2a] strengths of fund accounting are; 1) Fund accounting gives nonprofits better visibility into their finances and allows users to know the status of their funds in real-time.
This enables organizations to make the proper decisions regarding the funding and development of new programs, as well as helps them plan better for the future. 2) Fund accounting performs accounting procedures in the most efficient way possible. Data entry tasks can be done in half the time. Weaknesses of fund accounting are; 1) Fund accounting is full of issues in which the accounting does not reflect the true, intrinsic value of the fund. As in other types of accounting, at best it is a crude approximation as to what is important in the fund. 2)Its accounting cannot fulfill simultaneously the demands of different groups, among them investors, investment manager, tax authorities, auditors, and potential partners. There are some tradeoffs that have to be made usually in a conservative manner.[2b] [2a] answer for question 2a
[2b] answer for question 2b
1. At the beginning of the decade, sustainable development and environmental protection became serious issues for governments and the international community. In 1992, first Earth Summit was held and several countries including U.S.A. committed to protect the environment. 2. Global warming as an aspect of climate change also became a major concern and the creation of the United Nation framework convention on Climate Change after the Earth Summit helped coordinate efforts to reduce Carbon Emissions in the atmosphere.
1. Government code section 13337.5 requires that projected expenditures shall not exceed projected revenues for the ensuing fiscal year. 2. In the Budget Act stated that departments have the primary responsibility to operate within budgeted levels and to comply with restrictions or limitations enacted by city manager with the approval by city council. 3. The city manager has the power to adjust expenditures. Although these powers do not permit for adjustment for appropriations, the expenditure plans may be asked to be reduced.
1. The city has an experienced city manager whom had served for 22 years.
2. Budget appropriation processes were systematic.
3. Running a contract city saved some money and time for the city management.
4. Have a significant fund reserves which was maintained and not utilized.
5. Using cash basis instead of accrual basis accounting for preparing the budgeting report.
6. Experienced financial manager who served for 18 years that act to help the city manager to manage the city’s revenues.
7. Using programs and plans budgeting system gives clear separation of duties.
1. Tight financial situations due to global economy crisis and also the non-recurring expenditure. 2. Comparisons between actual program performance and budget were not considered as performance indicator in department level. Personnel do not have motivation to actually serve their best for planned programs. 3. Growing city such as Yorba Linda needs a lot of expenditure allotted to development of the city which will affect other funds allocated for other expenditure. 4. Big portions of budget expenditure were spent on capital improvement project.
1. Could create city-owned police department to reduce police services charged to the city. 2. Use modified budgeting system instead of using programs and plans budgeting system. 3. Use Government Code Section 13337.5 that advice city managers from allocating expenditures that exceeded total revenues to avoid deficit. 4. The city can generate revenue from franchise fee that was expected to increase. 5. Maintaining special revenue grant monies so that it would not offset petrol tax revenue increment. 6. Build school instead of library for future investment.
1. Putting decision making responsibility to Mr. Simonia who was also act as a master for budget preparation gives him chance to commit fraud. 2. Bias city manager and department directors. By using programs and plans budgeting gives them opportunity to include their personal expenses in the budget. 3. Have to follow Carbon Emission framework set by United Nation which could affect in slowing down city average productivity level in many levels causing revenues for the city to drop. 4. Outsourcing police services to City of Brea may open up a loophole for them to generate revenue from the contract. 5. Current expenditure failed to gives revenue. Could happen when expected to flourish Yorba Linda Auto Plaza and other commercial center fails to do so. 6. Near to megacity, California may attract residents to immigrate for a better urban life.
4. Decision criteria
The decision criteria set for selecting the best alternative that gives most benefits should be based on:
a. Within city’s current resources capabilities.
b. Ease and speed of implementation.
c. Within acceptable risk parameters.
d. Outcomes generated.
5. Alternatives and evaluation of alternatives
First alternative is to use Modified Budgeting System rather than Program and Planning Budgeting System. This is because; modified budgeting system is an improved version of programs and plan budgeting system. It focuses on relationship between input, output and impact of the program. Modified budgeting system target to improves the allocation of resources to departments and efficiency of department’s programs and strengthen mechanisms for accountability of controlling officer. But to implement a new budgeting system, it could cost a lot to the city.
Second alternative is to open the tender for police services to other nearest police departments that can reduce expenditures for police services and keep using temporary building for library to avoid increase in library services. This is to reduce the capital improvement and operating expenses as the main problem raised because of fluctuation of certain operating expenditures and increase in capital improvement funds.