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    Capital Budgeting-Accounting for Governmental Funds

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    Can you assit me with a graduate level conclusion for this assignment? I am having trouble and I need a conclusion. I have attached the finished portion.

    The assignment was:

    Write a 2,400 word paper that includes the following:

    I. Introduction

    II. Discuss how the debt capacity of a governmental entity is determined.

    III. Analyze various funding alternatives that can be used to support debt obligation.- Catherine

    IV. Describe how rating agencies evaluate governmental risk.

    V. Conclusion

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    Solution Preview


    Governments, in some ways, have to be operated like private entities. Public administrators and managers alike make resource allocation decisions. This commonality result from the fact that the resources of both entities are limited though governmental entities' funds are sourced from public debt, taxes, and inter-governmental transfers in addition to the government's various businesses.

    Though, the government's ability to raise debt seems unlimited this however is not the case. The amount of debt the government has affects it ability to set fiscal and monetary policies which in turn affect how the economy performs. Hence, public administrators not only have to manage resources efficiently, but also have to determine the government's optimal debt structure. Fortunately, governments have other alternative sources of funds including taxes, grants and revenues from government owned entity ties.

    Moreover, the level of the government's debt has to be managed as this level affects the risks that the government might have a hard time meeting its obligations without jeopardizing the financial and economic stability of the country. Rating agencies grade governments on their ability to honor their obligations. This is much like grading the financial health and the giving investment grades of debt securities issued by private corporations.


    Capital Budgeting Paper
    As governmental entities struggle to achieve excellence, public administrators have to work towards ensuring capital funds are allocated properly in accordance to its capital budget. The capital budget funds are allocated towards physical assets for constructed, renovated, acquired and rehabilitated assets. The capital budgeting process is expensive and time consuming; however, public administrators must assess the infrastructure needs in order to prioritize capital plans.
    The governmental entities must generate funds for the capital budget through public debt, taxes, and inter-governmental transfers in addition to the government's various businesses. Governmental entities assess its practices related to its debt capacity and its ability to repay its debt obligations without revenue deficit. The capital budget management helps public administrators ensures accountability of policies and procedures for appropriate allocation of funding and to reduce governmental risk.
    How Debt Capacity of a Governmental Entity is Determined
    Debt depicts the aggregate sum of budget deficits. "That is, the debt is the cumulative excess of past spending over past receipts" (Rosen, 2005, p. 456). Therefore, the greatest interest to the creditors and investors concerns the government's dept and its ability to repay principal and interest because "Just like a private borrower, the government must pay interest to its lenders" (Rosen, 2005, p. 456).
    Debt capacity refers to the capacity by which an individual or entity can repay debt. Governments borrow money to fund long-range expenditures against the projected revenue (capability to repay) within the terms of the obligation. The Dunn and Bradstreet web publication, All Business, ran an article entitled Debt capacity analysis for local governments (2004) in which the topic explores the pitfalls in determining debt capacity.
    Although the government accounting system differs from that of the private sector, the government credit rating has the same effect as an individual's credit rating. Much like private solvency, rating agencies examine the government's ability to repay debt, and this government credit rating ...

    Solution Summary

    Capital budgeting for accounting of governmental funds are examined.