Hamden is a county situated in the state of Connecticut (Hamden Economic and Community Development 1). Just like any other county in the United States of America, it has in place several programs that are targeted at providing social and other services to the inhabitants.
The local authority in Hamden is in charge of the provision of a number of services. They include health services, security and other emergency services like fire response.
The author of this paper takes a critical look at the budgetary procedures in the county. In this paper, the author restricts their discussion to the Fire Department in the City of Hamden.
The Fire Department in the city of Hamden has a long history that dates way back to the 1800s (Hamden Fire Department History 1). The organization was founded by the community members in a bid to protect their homes and businesses among other properties.
The community members were interested in protecting their property in the event of a fire. So rudimentary was the formation of the fire department that the community relied on simple materials like buckets.
According to information obtained from Hamden Fire Department’s website, the structure of the entity is fairly complex. As far as organizational structure, the entity is headed by a Fire Chief (Hamden Fire Department Organization Chart 1).
The Fire Chief has one deputy in charge of four other departments. In addition, it is easy to establish, from the organizational structure chart provided, that the department has a total of five fire stations. From the chart, it is clear that organization is a multi-faceted entity.
Given this multi-faceted nature of the organization, it is clear that a detailed budget should be put in place to ensure its proper functioning. In this paper, the author looks at one such budget and makes a detailed analysis focusing on several aspects of that document.
More importantly, the budgetary review carried out in this paper looks at the shortcomings of the document and makes recommendations for future improvements.
The Budgetary Process: A Brief Overview
Every society, be it a city, state, or a federal government, has a list of items it intends to fulfill as far as provision of services is concerned.
Aronson and Schwartz (23) are of the opinion that every level of governance requires a budget to enable it estimate the spending to be incurred during a given period of time. In other words, budget is more or less a form of financial approximation for a given period of time.
According to the two authors, the budgetary process is the mandate of the office of the leader of a local authority. In this case, the entire process of formulating the budget approximations falls squarely in the office of the Mayor of the city of Hamden.
Consequently, the mayor is expected to factor in all the departments that fall under his jurisdiction in their respective local authority.
In the opinion of Kemp (49), cities should take into account the revenue they collect and the funding they expect from the national government as they prepare their budgets.
In addition, the leadership in such cities should factor in the demand of the various services they offer so as to achieve equitable allocation of resources.
In the case of the city of Hamden, the mayor is expected to take into consideration 35 different categories of departmental structures in their expenditure approximations every year.
The Heads of the various departments in a local authority are expected to hand in estimates of their revenue and expenditure to the person designated to head the finance docket (Kemp 58). Members of the public are also invited to participate in the budget making process (Kemp 58).
Their input is considered after the professional heads of departments have made their recommendations to the mayor. Thereafter, the head of finance is expected to compile the said estimates and hand them over to the mayor.
After receiving the estimates, the mayor is expected to submit them to the legislative arm of the local authority for approval. The budget is expected to run for one fiscal year (Aronson and Schwartz 55). In the case of the city of Hamden, the fiscal year runs from July to June of consecutive years.
Operating with Capital Budgets
Aronson and Schwartz (6) argue that a budget per se is a detailed account of the financial plan of an organization. In this case, the organization in reference is the city of Hamden. More specifically, the review focuses on the city’s Fire Department.
The financial plan for such an organization is expected to be subdivided into two categories. The two are the operating and the capital plans (Fulton 1).
The first category of budget is one that takes into account the daily functioning of a particular organization over a period of one year. According to Fulton (1), the person heading such an organization is tasked with the responsibility of reviewing the said plan.
The person in charge of the budgetary allocation is to ensure that those authorized to incur expenditure do not divert from the norm.
On their part, capital budgets address the issue of investment. They account for any investment that a given organization intends to make internally (Fulton 1). In the case of the budget discussed in this paper, the Hamden Fire Department may have several investments it seeks to actualize.
As such, the department is required to have an internal way of realizing its goals and objectives. As such, the department will allocate itself a given period of time over which the said investment is to be realized.
The amount of money spent over that period for the said investment is referred to as the capital budget.
Kemp (17) opines that different local authorities have specific periods over which their investments are to be achieved. Further, the author argues that capital budgets run between 5 to 10 years.
Operating with Capital Expenses
According to Kennon (1), every organization has a set of expenses which it must incur to meet its diverse objectives. As a result, analysts argue that the funds spent by an organization to enable it fulfill its nominal operations constitute the entity’s operating expenses.
In this regard, one would argue that the operating expenses for Hamden Fired Department include wage bill for the staff and the funds set aside for the maintenance of the various machines that the organization operates.
Many organizations are expected to perform efficiently by ensuring that they keep their operating expenses at an all time low. The organizations can achieve this by cutting back on unnecessary expenses.
Capital expenses are those that an organization is expected to incur over a given period of time (Gruttadaro 1). Organizations like the Hamden Fire Department incur capital expenses due to the acquisitions of such assets as machinery and buildings.
The acquisition of such assets is crucial to the operations of the organization. It is noted that there is a difference between capital and current expenditure. However, Gruttadaro (1) is of the view that, at times, ambiguity prevails as far as the differences are concerned.
For instance, when the said fire department conducts repairs over an extended period of time, the undertakings are referred to as operating expenses. In the event that such repairs are carried out all at once, the same is referred to as operating expenses.
Sources of Revenue and Budgetary Allocations
Aronson and Schwartz (23) are of the opinion that local authorities require a source of revenue so as to fund their operations. Such jurisdictions as cities and states are mandated by law to collect different forms of taxes.
The said taxes constitute the revenue upon which the particular jurisdiction relies to fund its operations. The state of Connecticut, for example, is mandated by law to collect revenue in form of taxes. In addition, the state receives a specified portion of revenue from the federal government.
The latter is meant to supplement the revenues that a state collects through taxes and other such sources.
A look at Connecticut’s State Revenue reveals some of the said sources of revenue. Personal income tax, sales and use tax, as well as corporation tax are some of the most significant sources of revenue as far as taxes are concerned.
Motor vehicle licenses and business registration licenses form the second tier of revenue sources. Transfers from the federal government form the third tier of source of revenue for the state. Such cities as Hamden have similar sources of revenue.
Shortcomings of the Budget Making Process
In this paper, the author has established that a budget is a systematic mechanism through which an organization allocates its various resources for effective delivery of services. The resources in reference here range from the financial to the human investments in the city (Kemp 31).
The said resources are organized in such a way that during a given fiscal year, the operations of an organization like Hamden Fire Department run smoothly.
The budget prepared by Hamden Fire Department has various shortcomings. One of the shortcomings is the fact that the organization puts more emphasis on recurrent expenditure as opposed to allocating funds to such investments as radio communication.
The shortcoming stems from the fact that the drafters of the budget may have lacked the ‘foresight’ of the department in mind. Capital expenditures are usually the best way through which an organization can become sustainable.
In the case of Hamden Fire Department, there is not a single capital budget set aside for the purchase of modern firefighting equipment.
It is noted that changing trends in tackling fires require such organizations as Hamden Fire Department to upgrade and provide firefighters with new and modernized machinery.
The process of developing any given budget, as already indicated, ought to be all inclusive (Kemp 100). To achieve this, members of the public should be given a longer period of time to make their contributions towards the budget making process.
The input of the community members should be taken seriously by those drafting the budget. Local authority budgets are made for the benefit of the people who reside within the said localities. For that reason, the people ought to be given more time to contribute towards the making of the budget.
The drafters need to spur public participation through various strategies, including engaging in civic education. In addition, the department needs to set money aside to educate members of the public on matters to do with fire prevention.
Several recommendations are made in this report to improve the budget making process. The benefits of these recommendations are not restricted to the Hamden Fire Department.
On the contrary, they apply to other similar organizations operating within Hamden City and beyond. The following recommendations are made:
- Members of the public should be involved actively in the budget making process. The Hamden Fire Department should hold quarterly open days to identify the demand for emergency services in the city.
- A budget requires the input of professionals. In the case of Hamden Fire Department, there is minimal input from fire and emergency experts, hence the minimal allocations towards education. The Fire Chief and the Mayor should consult with professionals in disaster management to get advise on the procurement of the necessary equipment. Such a process will reduce recurrent expenditure.
- The Hamden Fire Department should open its operations for interrogation by the public and auditors to avoid mismanagement of funds.
- To avoid wastage of funds, the Fire Chief should work with the Mayor to legislate on spending ceilings. The same will prevent the urge to increase expenditure unnecessarily.
Budgets are more beneficial to the organization if they respect public-private partnerships and if they are properly audited.
For instance, if the mayor of Hamden City wants the budget to meet the objectives of the various departments in the city, there is a need to thoroughly vet the financial approximations before new ones are passed.
Audits will highlight several items like recurrent expenditure and how funds can be redistributed to other areas that deserve higher allocations.
In addition, local authorities need to have their budgets audited to avoid instances where money is misappropriated. Ultimately, a budget should ensure that the objectives of the organization are met.
Aronson, Richard, and E. Schwartz. Management Policies in Local Government Finance. Washington DC: International City/County Management Association, 2013. Print.
Fulton, Jeff 2013, Operating vs. Capital Budgets. Web. <http://www.ehow.com/info7815957operating-vs-capital-budget.html>.
Gruttadaro, Daniel 2013, What is Capital Expense?. Web. <http://www.ehow.com/facts5815592capital-expense.html>.
Hamden Fire Department 2013, History. Web. <http://www.hamden.com/content/219/225/583/default.aspx>.
Hamden Fire Department 2013, Organization Chart. Web. <http://www.hamden.com/content/219/225/3117/default.aspx>.
Hamden Economic and Community Development 2013, Hamden at a Glance. Web. <http://hamden-ct.com/Content/HamdenataGlance.asp>.
Kemp, Roger. The Municipal Budget Crunch: A Handbook of Professionals, North Carolina: McFarland, 2012. Print.
Kennon, Joshua 2013. Operating Expense on the Income Statement. Web. <http://beginnersinvest.about.com/od/incomestatementanalysis/a/operating-expense.htm>.