Analysis:
The impacts of governmental budgets are so unescapable that they have a profound effect on private and public activities. Therefore, the accuracy of a budget forecast is very important. Although these forecasts are typically incorrect; and often they are wrong by huge amounts. The average error involved in budget forecasting is a task that all public administrators must learn to be intelligently good at. The preceding sentiments become clearly evident within the case of “Forecasting in Timber City” by author’s Jon S. Ebeling, Frederica Shockley and William A. Murphy. A case which emphasizes the important role that city managers have in administering a proper budget forecast and presenting it to government stakeholders.
Observation: …show more content…
Since budgeting is about the future, budget decisions regarding the allocation of resources must be based on forecasts. But “budget forecasts are always wrong, and often they are wrong by a lot” (Penner, 2001). Indeed, changes in budget projections caused by alterations in economic forecasts and technical assumptions generally far exceed adjustments caused by changes in fiscal policies. The change in the allocation formula for the distribution of property tax revenue, which forecast a drop of more than $50,000 could actually be $100,000 and will be unknown until the end of the budget year after when true revenue has been calculated. This degree to which city council may be annoyed by such major adjustments must be spearheaded, since, in fact that the actual revenue reductions and new required expenditures is “actually expected to lead to a total of $160,000 shortfall in the general fund for the coming fiscal year”. In respect to the aforementioned the city manager is correct in overestimating the importance of retaining a general fund reserve and advising the city council of the budget