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Fiscal Government Term Paper Essay

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KIMEP University
Public Administration Department

Fiscal Governance Course

Term Paper

Prof.: Francis Amagoh

Prepared by:
Orazalyeva Asel ID: 20102446
Sattay Tolegen ID: 20090436
Sheriyazdan Ruslan ID: 20081215
Turarova Aizhan ID: 20091727
Zhanatkanova Meruyert ID: 20090805

Spring 2012
Problem #1.
The article by IMF is devoted to the financial crisis in Italy and the fiscal decline. There are statistical data, graphs and other information which describes the consequences and outcomes of the crisis to the country. Concerning the Conditions that contribute to a locality’s fiscal decline we identified the following issues: 1. Economic Vitality is declining.

a. Appraised value of real estate per capita is declining.
i. distribution of country concentrations of commercial real estate and institutional-grade commercial real estate is heavily concentrated in a small number of countries. ii. Also, as the key factor for investors who buy real estate s difference between GDP growth in local currency and US dollar, we can say that the difference is too little, which means that the number of investors also decreased sharply. b. Number and Value of building permits are declining.

i. Italy’s construction industry remains depressed. The Italian construction industry association (ANCE) reported that estimates indicate a 4% decrease in 2011 and 3.2 % in 2012.
ii. the factors include the reduced credit supply to companies and delays in payment by public bodies. c. Total population is declining - it is a well-known fact that the population of Italy is in list of top countries with aged population in Europe. d. Income per capita is declining - Italy is on 43-th place according to World Bank. 2. Financial Independence and Flexibility is being lost. a. Growing Debt Burden. So, Italy’s public debt reached a new high in the first month of 2012. Overall debt reached an unparalleled 1.94 trillion euro in January. Also, statistics revealed that Italy’s debt load is equivalent o 120.1% of the country’s annual gross domestic product. 3. Municipal Productivity Declining

a. Municipal expenditures per capita increasing. Concerning the productivity of government we see that government spends about 16% of budget o interest payments. b. Also the government of Berlusconi moved away, and the new government still has some uncertainty on what to do with the crisis.

4. The Large amounts of current costs are being deferred to the future. The government is undertaking the programs by which they cut the social programs, and especially defer the pension liabilities. Also, he shadow economy in Italy is increased significantly and according to the article is 27%

Problem #2.
Assume the following personnel information about the Almaty Fire Department for Fiscal Year1:

Employee Grade Number in Grade Salary Chief 1 $80,000 Shift Commander 3 $50,000 Each Firefighter 1 15 $35,000 Each Firefighter 2 30 $27,000 Each Clerical 3 $15,000 Each

For Fiscal Year 1, the City and the employees each pay social tax of 8 percent of all salary up to $70,000 per employee. The City pays a part of the cost of health insurance for each employee of about $90 a month. The pension system is financed by a city payment of 20% of employee’s salary and employee payment of 5% of employee salary. Employees also receive an annual allowance of $700 for uniforms. Estimate the city’s full cost of fire department labor during fiscal year 1 by separating the cost into salary and fringe benefit components. (5 points)

Solution:
|Employee Grade |Calculation |Cost of City on Salary | |Chief |Multiply Chief by number in grade |= 80,000 * 1= 80,000 | |Shift Commander |Multiply Shift Commander by number in grade |= 50,000 * 3= 150,000 | |Firefighter 1 |Multiply Firefighter 1 by number in grade |= 35,000 * 15= 525,000 | |Firefighter 2 |Multiply Firefighter 2 by number in grade |= 27,000 * 30 = 810,000 | |Clerical |Multiply Clerical by number in grade |= 15,000 * 3 = 45,000 | |Total Cost |Sum up all cost in each category |= 80,000 + 150,000 + 525,000 + 810,000 + 45,000| | | |= | | | |$1,610, 000 |

|Employee Grade |Calculation (Social tax = 0,08) |Cost of City on Social Tax | |Chief |Social tax multiply to 70,000 (because Chief’s |= 70,000 * 0,08 = 5,600 | | |salary is higher than 70,000) | | |Shift Commander |Social tax multiply to Shift Commander |= 50,000 * 0,08 = 4,000 | |Firefighter 1 |Social tax multiply to Firefighter 1 |= 35,000 * 0,08 = 2,800 | |Firefighter 2 |Social tax multiply to Firefighter 2 |= 27,000 * 0,08 = 2,160 | |Clerical |Social tax multiply to Clerical |= 15,000 * 0,08 = 1,200 | |Total Cost |Sum up all cost in each category |= 5,600 + 4,000 + 2,800 + 2,160 + 1,200 = | | | |$15,760 |

The City pays a part of the cost of health insurance for each employee of about $90 a month. In order to find the full cost for the year we need to multiply $90 to 52 and then multiply to 12. The explanation is that 52 is the number of the all employees of the fire department and 12 is the number of months in one year. Cost of Health insurance = 90 * 52 * 12 = $56,160. The City pays annual allowance of $700 for the employees’ uniforms. In order to find the full cost of City we need to multiply $700 to 52 numbers of employees of the fire department. Cost of annual allowance for uniforms = 700 * 52 = $36,400. The pension system is financed by a city payment of 20% of employee’s salary which could be found by multiplying 20% for each category of employee grade and sum up to find the total cost on pension system. |Employee Grade |Number in grade |City’s cost on Pension system | |Chief |1 |= (80,000 * 1) * 0,2 = 16,000 | |Shift Commander |3 |= (50,000 * 3) * 0,2 = 30,000 | |Firefighter 1 |15 |= (35,000 * 15) * 0,2 = 105,000 | |Firefighter 2 |30 |= (27,000 * 30) * 0,2 = 162,000 | |Clerical |3 |= (15,000 * 3) * 0,2 = 9,000 | |Total Cost | |= 16,000 + 30,000 + 105,000 + 162,000 + 9,000 = $322,000 |

Total cost of the City:
|Salary |Social Tax |Health Insurance |Allowance for uniforms |Pension System | |$1,610, 000 |$15,760 |$56,160 |$36,400 |322,000 |

Total cost of City = 1,610,000 + 15,760 + 56,160 + 36,400 + 322,000 = $2,040,320 The City’s full cost of fire department labor during fiscal year 1 is $2,040,320.

Problem #3.
GWPS.
Program: Improve intergovernmental cooperation for more effective, cost-effective service delivery. Strategic Goal: Establish effective government by incorporating improved information systems and management practices.

Sub-program 1: Build public support for administration priorities through two-way communication. Elements: 1. Work to improve the economic health of the city in an equitable manner for the citizens. 2. Make timely investments in roads, utilities, sewers, parts, and alternative transportation systems to encourage responsible growth and sustain a health economy.

Sub program 2: Protect the community's natural assets and enhance environmental quality. Elements: 1. Maintain and improve the city as a place where people can live and work without fear.

Sub program 3: Support and facilitate access to basic social services for all citizens. Elements: 1. Establish a customer-driven workplace in the region. 2. Maintain and improve park services and facilities.

Problem #5.
Understanding of social equity concept in the budget process is important for government because first of all if government enhances social equity in country it will lead to the satisfaction of minorities and inefficient groups of people. The feeling that you help other people will inspire those who negatively affected by enhancing social equity in the country (e.g. increasing taxes for those who earn more). It can lead to satisfaction of the public. This satisfaction will affect people’s behavior and their behavior will be more active in terms of politics and social life. All together will incrementally result in economic growth of the country.

Problem #6.
Select any of the regions (oblasts) in Kazakhstan, identify six types of information in the region’s budget and discuss how the information is related to functions of budgeting discussed in class. (4 points) Answer:

Budgeting is a process of preparing and carrying out a government’s financial plan which is done through collecting revenue sources and distributing collected resources according to the needs of the public. There are five functions of budgeting:

1) Allocating resources to programs to meet government objectives. This means that the government makes decision to allocate the resources to such programs which use these resources wisely, more effectively and in more efficient way in order to improve such areas that the needs of the people are considered. 2) Raising funds through taxes, fees, and loans to fund the budget. The government has such instruments as taxes, fees and loans that could increase the amount of the cash in the budget in order to finance some social programs which need implementation. 3) Holding agencies accountable for the efficient and effective use of resources provided in the budget. The resources that were used for certain purposes should produce the results that are suitable for the government objectives. This means that usage of resources should not produce any under-allocation or over-allocation of the resources and the results should be controlled by governmental agencies which will be accounted at such situation when the expected results were not fulfilled. 4) Transferring...

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