Question

1. The Board of Aldermen of Fitchburg approved the appropriations budget for its General Fund for the year ending December 31, as shown below:

General Government                          $600,000

Public Safety                                    3,100,000

Public Works                                    1,400,000

Health & Welfare                                 800,000

Cultural & Recreation                           400,000

Contribution & Retirement Fund             700,000

Total General Fund Appropriation        $7,000,000

1) Explain the legal significance of an appropriation and why auditors engaged for a financial

    and compliance audit need to know the meaning of the term. (cite source)

2) It is illegal for a government to spend money for any purpose unless a valid appropriation

    for that purpose exists. Does this legal rule assure good financial management for each

    government? Why or why not? (cite source)

Answer 1

1-While the budget appropriation is enacted into law, it will become a legal authorization to the government for incurring liabilities for the purpose mentioned for appropriations. So the expended amount may not exceed over the appropriated amount. In this way, a government budget will have the effect of law by limiting the amount to approved levels.

As mentioned above in the case of a government, a financial and compliance auditor must know all terms related to these appropriations to ensure that no amount has been expended by the company above the appropriations for each purpose. In total, while a government cannot spend the amount over the appropriations, a company also cannot spend any purpose more than its budgeted amount. it is the duty of compliance and financial auditor that, his or her client company does not spend any amount more than of budgeted amount in the beginning.

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2- Yes it is illegal that a government cannot spend money more than of it's budgeted amount. if the government spends more than of it, then the expenditure will become out of control. So it is limited to the law through the budget. But this legal rule will not ensure good financial management for each government. Because, if the government is getting a lot of budget for the purposes, then it will spend the appropriated amount in any way not to lapse the amount if it is not spent. If they don't have enough appropriations, then they cannot operate effectively. so it is not the budget which is merely a factor of efficient financial management of a government, but expertise, commitment, and efficiency of government officials who are liable to implement the budgeted amount in proper way will decide good financial management of each government.

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