Introduction
For years, the federal budget has not been balanced. Politically, it has been easier to run a federal budget that is deficit rather than a balanced one. Nonetheless, there is need for the federal government to stick to the balanced budget because of the various shortcomings that the deficit federal budget has. Generally, this is what question one highlights. Question two describes the background and functional budget of Stanford University. Besides, it also evaluates the organization’s budget using the GFOA criteria.
Reasons for a Balanced Federal Budget
First, through federal deficits, the nation’s long term economic growth is threatened. Generally, national saving should be utilized in financing investment. However, savings that could have been invested are absorbed by deficits. When the government seeks extra borrowing, there is a rise in real interest and this happens at the expense of funding projects that are private. This does not only reduce capital stocks, but also constrains the living standards.
Secondly, servicing of debt held outside the economy of the United States will lead to a decline in domestic standards. From 1997, ownership of federal debt started being external (Europa Publications, 2002, p. 785). The ownership was with nations such as China, the United Kingdom, Japan and other nations that export oil. Since payments of debt will be required to be outside the US economy, it will not only challenge the ability of future generations to maintain their standards, but also such huge external claims can result to political challenges (Mikesell, 2010, p. 137-138).
Thirdly, the deficit can be a hindrance to the implementation of important national policies. This is because in a climate dominated by deficit, the immediate reaction to any policy initiative is the impact that the deficit will have on it. Fourth, deficits have the ability to increase the inflation rate based on whether the debt is monetized by the Federal Reserve System.
Moreover, higher future interest obligations are created by continuing deficits (Baumol and Blinder, 2007, p. 699). Every incoming congress will find a larger percentage of the federal resources to have been previously committed to offer interest on funds used to provide services previously rather than to accord services to the taxpayers that year (Mikesell, 2010, p. 138-139).
Stanford University’s Background and its Functional Budget
The budget document described here is for Stanford University. Stanford is not only regarded as the best University along the west Coast, but also as one of the global universities that are good in research and teaching. It was founded more than one century ago by John and Leland Stanford. The research at the University centers on arts, environment and sustainability, health and international affairs. Stanford University offers both undergraduate and graduate programs. It was founded basically to prepare students to be successful and useful in life (Stanford University, 2010).
The kind of budget used by Stanford University during the 2010/2011 financial year is the functional budget. This is a budget type that blends the features of a program budget with those of a line item budget. The object categories are listed on the left hand side. On the other hand, program categories are across the top. Generally, the budget shows a list of all expenses and revenue by program. This enables the reader to quickly notice how much is expected from the expenditure and receipt of each category and the much to spend on every category (Mayers, 2004, p. 61).
This budget is in the executive summary of Stanford University’s budget plan’s for the year 2010/2011 (Etchemendy, 2010, p. vii).
Evaluation of the Budget based on GFOA Criteria
The Stanford University budget meets the GFOA criteria as a policy document, financial plan, Operations guide, and communication tool (GFOA, 2011, p. 1-14).
First, the Stanford University’s budget is a policy document. It reveals the long-term fiscal policies that were utilized during the budget process. These are its anticipated financial projections (Etchemendy, 2010, p. v). The budget also has long-term non-financial goals stated under the section of administrative effectiveness (Etchemendy, 2010, p. v-vi).
Secondly, the budget is a financial plan. It describes the prescription of every major fund used in the budget. It also shows the general fund (Etchemendy, 2010, p. ix). Thirdly, the budget is an operations guide revealing several activities undertaken by its units such as the human resources, IT, non-departmental entities and research administration (Etchemendy, 2010, p. vi). Finally, the budget is a communication device since its information is presented in an executive summary that is easy to understand. Moreover, the budget has a provision for other organizational stakeholders such as students and members of staff.
Conclusion
The balanced federal budget is to be preferred due to the shortcomings that the deficit budget has. Stanford University’s 20/2011 functional budget meets the GFOA criteria since it is a financial plan. Communication tool, policy document and operations guide.
Reference List
Baumol, W. and Blinder, A. (2007). Economics: Principles and Policy. Mason, US: Thomson South-Western. Web.
Etchemendy, J. (2010). Stanford University: Budget Plan 2010/2011. Web.
Europa Publications (2002). Far East and Australasia. NY: Routledge. Web.
GFOA, (2011). Distinguished Budget Presentation Awards Program: Awards Criteria. Chicago: GFOA of the US and Canada. Web.
Mayers, R.S. (2004). Financial management for non-profit human service organizations. Illinois: Charles C Thomas. Web.
Mikesell, J.L. (2010). Fiscal Administration: Analysis and Application for Public Sector. Boston: Wadsworth, Cengage Learning. Web.
Stanford University, (2010). Stanford Facts: Introduction. California: Stanford University. Web.