USA USA Division of Govenment Entity Accounting Practices

[mikeincousa]

I am not a trained accountant but I have significant exposure to accounting methods and bookkeeping procedures in commercial venues. (Manufacturing and financial analysis.)

I am researching budgeting practices of a local political subdivision of a state government.

Maybe somebody here could help me with some thorny-for-me questions? If not maybe someone could recommend another forum?

To the point.

The entity starts every budget year from zero even though there is a very significant surpluss from the previous year. This strikes me as the same as retaining earnings in for-profit structures.

First question.
Is this common practice in Local Government accounting? I would think that because such entities do not operate from a profit motive they should be cyclically adjusting their budgets targeting zero gain or loss on a year over year basis?

If this is acceptable standardized accounting practice do the mechanisms for retention or non-retention of surplus have a name? A source method designation in formal accounting standards like GAAP.

If they must be carried over on a year over year basis how are they tagged as a line item from the start in creating a new budget?


Thanks for any thoughts or referrals.

 

[bklynboy]

Yes - common and called zero based budgeting. Has nothing to do with accounting but each department has to justify their budgets each year from the bottom up to secure funding.

 

[mikeincousa]

Thanks. That helps.
The organization typically runs about 5% or better under budget each year.
So what typically happens to overage from year to year in such situation?