Local and StateTaxes

Getting rid of of local and state sales taxes and substituting them with uniform sales taxes such that it would become the prerogative of the federal government do the collection and subsequently give back to state governments in piecemeal would gradually set a wrong precedent and usher in centralization which is alien to democratic governance. The constitution of the United States has been crafted in such a way that states enjoy independence and freedom that allow them to run their affairs without federal government involvement and meddling.

According to Bowen, Haynes, and Rosentraub (2006), states spend tax dollars with the view of developing their economies in the fields of education, social and safety programs, and healthcare. Giving the federal government what would have been the prerogative of state governments would undermine infrastructural development and lower the living standards of citizens in all states. When states collect local and sales taxes, there is that sense of ease and competition and the tendency to prosper to a desired level.

Devolution of power, a significant model of governance that spreads power such that states enjoy the right to administer state public policies, is a vital tool for increasing state and local government responsibilities especially the formulation of local laws, and the delivery of goods and services without federal government involvement (Bae, 2008). State and local governments are more capable than the federal government in the delivery of goods and services to the local population. The closeness of state and local government to the people in need of goods and services and the efficiency of service delivery is one factor that cannot be ignored. States have a better role to play in local and state matters than the federal government.

Retail taxes are usually generated from individual purchases from sales transactions. A sales tax is a tax levied on a buyer when a product is purchased for its usefulness (Hyman, 2011). Retail taxes emerge during transactions. In essence, in the cause of transaction, the buyer acts as a government intermediary.

It would be futile to carry out representative and encompassing service stipulation to society from sales tax managed by a federal government. The impact from transferring such a tax to a central administration would be catastrophic for the national economy as their would be a lot of mismanagement, inconsistencies, and incongruities resulting from the transfer of sales tax management to a generally powerful jurisdiction such as the federal government in Washington, DC. The notion of democracy is based on the devolution of power and also separation of powers. This system allows local jurisdictions to craft streamlined systems that make their operations attainable in a manner that brings in satisfaction in the effective delivery of goods and services to the population inhabiting in that jurisdiction.

Transferring local and sales taxes to a central authority would undermine state development and lower human progress especially the social and economic sectors that will be severely impacted by mismanagement ultimately spearheading drastic decline in the effective delivery of goods and services. The notion of freedom that is enshrined in the constitution will also be undermined and the general national administration will be akin to authoritarianism as the state and local governments will be deprived of the rights and privileges enjoyed previously. There will be mismanagement of taxes as some states would receive better preferential treatment than others.

The men and women on the helm in the central headquarters will be driven by favoritisms and affection for states inclined to their political ideals and philosophical thoughts. There is no question that humans have inherent sense of irrationality and preferences for people of like mind and ideas. Any preferential treatment of a state over another state would result in massive migration of people seeking better opportunities and avoiding burdening taxation in their original areas of settlement. Taxation is a government monetary imposition that cause reduction to citizen finances and that is why many abhor it altogether. However, despite citizenry abhorrence of taxation, what is worth comprehending is the significance taxation has on human progress especially when jurisdictions resourcefully and effectively deliver goods and services as demanded without any lapse whatsoever. There are nations on this planet that are free of taxation. However, people pay more for services such as plethora of commodities, groceries, insurance premiums, diesel and gas, electrical and heating utilities, water and garbage collection, school tuition, and other amenities to supplement the missing taxation. 

It would be improper to tax people and redistribute from a government-managed central jurisdiction. This would place a strain on the progress of local and state jurisdictions. In a nutshell, local and state jurisdictions would be unable to make recommendations to the central authority and as well be unable to design a formality that would usher in progress and prosperity to their areas of jurisdictions. On the other hand, the central government would have a hard time making universally encompassing deliberations on tax dispositions in such an expansive nation like the United States.

Centralization of taxation has failed in many authoritarian and dictatorial regimes where hunger and starvation, abject poverty and underdevelopment are the norm. The decline of national infrastructure in undemocratic countries results from poor management of national revenues and other sources of finances. Gross injustices and political decline visible in undemocratic countries emanate from mishandling of the overall governing structures that is based on individual philosophical thoughts as opposed to uniform social deliberations and freedom of choice. Thus, centralization of taxation is inconsistent with modern governance.

Taxation handled by a single governing entity would accelerate a decline in people’s purchasing power. However, since not all jurisdictions share equal resources, the federal government would be tempted to impose hefty taxation on states and local jurisdictions that it finds having significant resources. Likewise, the federal government would put more emphasis on the development of the region having potential for resource production such as in the fields of petroleum, forestry, fisheries, industries, education, medicine and pharmaceutical products, and mineral extraction.

In 2009, the total revenue raised by state governments from sales tax was 30% (Hyman, 2011). Some states depend more on revenues generated from retail sales than others such as Washington which accounted for 63% of total tax collections in the year 2009. Sales and retail taxes are regressive in nature and they are higher for low-income tax-payers. E-commerce, a modern way of conducting business over the internet is gaining ground as consumers become more adept at using this innovative technology. In e-commerce, transactions are usually done between businesses to business where taxation is nonexistent. One problem with the state sales tax is that government and nonprofit organizations are exempted from taxation during transactions. The aging of society may also impact sales tax revenue in the near future.

According to Hyman (2011), retail sales taxes are the prerogative of local and state government and never administered by the federal government. This is already an answer to the question that drives this essay. It was first enacted in New York in the 1930s because there was desire for stable revenue source. In most local and state governments, the administrative costs of running a government are made possible by retail sales taxes. It would be extremely difficult for any local and state government to administer a jurisdiction without collecting state and local taxes. Thus, transferring these taxes to a central government for redistribution would undermine the effective administration of local and state governments.

 

References

 

Bae, S. (2008). Revenue, growth, structure and burden across state and local revenue sources: The impact of state budgetary rules.  Conference Papers-Midwestern Political Science Association. Department of Public Administration: San Francisco State University. 

Bowen, W.M., Haynes, M.E., & Rosentraub, M.S. (2006). Cities, tax revenues, and a state’s fiscal future: The value of major urban centers. Public Budgeting and Finance, 26 (1), 47-65. DOI: 10.1111/j.1540-5850.2006.00838.x.

Hyman, D. N. (2011). Public finance: A contemporary application of theory to policy (10^th ed.). 

Mason, OH: South-Western, Cengage Learning.

 

The Consequences of Debt

The U.S. is moving deeper and deeper into debt and there is little sign that it is getting out of this problem. According to Hyman (2011, debt can have impact on future generations who have to shoulder the responsibility of repaying that debt. The burden of debt causes reduction of income on future generations because they will have to live with compulsory tax for a long time to come. While foreign borrowing can stimulate the economy for a certain period of time, what is hard to tackle or avoid are the long term implications debt may have on the economy and on society as a whole. A case in point is when, in 1982, the nation of Mexico declared that it was no longer in a position to service its foreign debts (Were, 2001). Despite being an oil producer, Mexico was left to live with the long term implications of foreign debt.

Debt inundates the market with surplus goods and services, competition becomes cutthroat, and consumers will have less to spend. Environmental protection becomes less of a priority with explosive debt, jobs diminish, and there will be an increased movement of corporations to poor overseas countries. Debt forces producers to borrow more money consequently accelerating price hikes and interest rates. Debt held by foreign interests can have long term implications for the U.S. Because Americans don’t save much, the government will be compelled to keep on borrowing from foreign entities such as China. Americans have more concern for U.S. borrowing from China than the political situation and confrontation with Iran (Zhang, 2012).

With increase of debt we will see flooding of cheaper goods lacking value, merger of corporations leading to bigger and bigger conglomerations, and retailers embarking on the importation of goods produced in countries where wages are extremely low. Foreign debt leads to furious competition in international trade. Instead of exporting goods and services, debt forces nations to import which is a sign of weakening economy. Consequently, nations with bigger deficits run to the International Monetary Fund (IMF) for bail out an example being Third World countries notably in Africa Asia who are dependent on the IMF when there economies get worse.

References

Hyman, D.N. (2011). Public finance: A contemporary application of theory to policy (10th). South-Western, Cengage Learning.

Were, M. (2001). Kenya Institute for Public Policy Research and Analysis. Retrieved from http://www.debtweek.org/content/the-impact-of-external-debt-on-economic-growth-and-private-investment-in-kenya/index.html

Zhang, M. (2012). Are foreign holdings of U.S. national debt a threat to our economy? Retrieved from http://www.ibtimes.com/are-foreign-holdings-us-national-debt-threat-our-economy-721691

Centralization versus Decentralization

The opposite of a centralized government, a decentralized government is a government whose power is spread out and is not restricted to a central place. Decentralization is synonymous with devolution, transference, delegation, and transfer. Decentralization is prominent in curtailing the powers of government and enhancing the powers of individual representatives. A decentralized government is closer to the people than a centralized government that is far from people’s reach. A decentralized government can be held accountable for its misdeeds; its successes and failures can be documented and if possible challenged by the citizens it serves. One very important aspect of a decentralized government is that it gives the ordinary citizen the right to vote on the right kind of public service that is open for consumption by the public. In a centralized government such freedom is not available to the citizen.

Decentralization of power allows the locals to question when something is wrong with the government. Lower levels of government become easily manageable with decentralization. Decentralization gives the local government the power and will to provide public goods and services that serve the common good. With a federal system, there are checks and balances, and chain of command. Because citizens have no access to the upper levels of government, through decentralized power, arrangements can be made for the lower government to have consultations with the upper echelons of the state. In a decentralized government, the lower level of government is allowed to make arrangements for training new officials. Voting is a vital and significant tool in a federal system.

Problems emanating from maladministration by a decentralized government can be averted when states object to the use of wrong policy implementations. When one state fails to implement a policy, other states may opt not to use that same policy for fear of also failing. Decentralization and federalism go hand in hand in rigid democracies. A strong and vibrant local government is possible when there is a real democracy. In federalism and decentralism, power sharing is vertical with multi-layered governments enjoying autonomous rule that is free from the central government in some aspects.

According to Hyman (2011), politicians seeking office are usually driven by the urge for power, personal financial returns after vacating office, the desire to serve the public, and prestige coming as a result of holding a high office. The redistribution of income becomes the prerogative of the various sectors that make up the decentralized government. The federal, state, and local governments each have their roles to play in a decentralized system. When the federal government oversees the national security, the role of the state is to provide good roads and reliable bridges, while the local government provides fire and police protection. Leaving the provision of goods and services to the federal government would make life unbearable for the ordinary citizen as many goods and services would be distributed inequitably and inefficiently.

References

Hyman, DN. (2011). Public finance: A contemporary application of theory to policy (10^th ed.). Mason, OH: South-Western, Cengage Learning.

Global Social and Technological Advancement

Changes in technology and advancement in social services have tremendously impacted the delivery of public and private goods, negatively or positively, depending on geographic location. Some part of society may be attracted to technological innovation more than others. Technology has been friendlier to the youth and to the educated elite because of their lifestyles and love of modern tools and technology. Advances in technology have allowed humanity to enjoy the luxuries that come with public and private goods.

Technology is better placed in advanced democracies than in sluggish autocratic or authoritarian regimes where economic strangulation, economic retardation, political obscurantism, underdevelopment, human rights violations, and control of general societal development prevail. Nations that have advanced in the use of technological tools include those in North America, Western Europe, and in Australasia. Economic factors and freedom contribute to technological distribution and use.

Benefits from public goods can be shared unlike private goods that are consumed by individuals who purchase the private good based on their ability to purchase. A public good is like the national defense where its consumption is shared by all as every citizen has to be defended by the arsenals of weapons in use in case of aggression. Streetlights are another example of public goods. Others include clean air and light houses that equally benefit the general public without one person enjoying the significance of that public good more than the other person.

To avoid working in hazardous conditions and overcome the risk of purchasing products of concern, citizens look to their governments for information. It is a government prerogative to oversee economic stabilization and engage in monetary and fiscal policy implementations to deter unemployment and economic downfall.

Efficiency leads to confidence and an increase in purchasing power. Efficient distribution of products and resources elevates consumer confidence. A change in welfare distribution is trade-off that leads to improvement in efficiency. Efficiency is best attained in a perfectly competitive market system as everyone’s monetary income depends on the amount of production in resources owned and returns obtained. However, income distribution is dependent on individual willingness and ability to pay (Hyman, 2011).

Public goods may be categorized as non-rival or rival. Public goods are non-rival in consumption because they can be consumed by many in a given locality. An example of non-rival good is television and radio transmissions. Because of the non-exclusion characteristic, pure public goods are non-rival. Private goods are considered rival in consumption because of the competition among consumers.

The value and worth of public and private goods delivery and transfer of business transactions is best determined when there is efficiency and social equity. Life becomes up to standard and comfortable in nature when there is a streamlined delivery of public and private goods and equitable distribution of social services. Humans tend to decline services that are not worth and out-of-date. Citizens prefer to pay for public goods in accordance with the benefits they get from that public service (Mikesell, 2011). The same applies to private services or public goods.

Changes in income alter human consumption of goods. The introduction of the welfare system such as the food stamps program allows many to become free riders. Free rider is at times seen as having the same characteristics as the Tragedy of Commons. The fact that free riders do not contribute to the food stamps and other supplemental nutrition programs, advocates opposed to spending feel it causes financial strain on the laboring, tax paying citizen. 

According to Hyman (2011), there is no unanimously agreed upon and appropriate manner when it comes to distributing goods and services to consumers. Pure private goods cannot be supplied by the government and financing cannot be made through taxation.

Technology has tremendously altered the way humans consume goods and services. In recent times, technology has played a vital role in the delivery of healthcare and healthcare services. People are getting advanced medical attention and better treatment options. States, counties, and smaller jurisdictions have seen the proliferation of hospitals regardless of whether they are public or private. Technology has simplified how hospitals operate and patients’ waiting periods have been slashed to almost a half. Nowadays, patients can be operated on by specially trained doctors and nurses using advanced equipments and modern tools.

Many from the outside world, including Kings, queens, presidents and prime ministers, CEOs, and ordinary wealthy individuals come to the US to seek medical attention in hospitals such as John Hopkins Hospital, Mayo Clinic, and other reputedly advanced medical institutions treating such diseases as cancer and brain injuries and other serious diseases that cannot be treated anywhere else except the US. Majority of these hospitals, because of advancement in technology and resource distribution, are either publicly or privately owned.

In modern times, businesses have prospered significantly as a result of internet communication. Business transactions have become more widespread with the proliferation of internet technology. The United States leads the world when it comes to conducting business on the internet. Business is more robust and diversified especially during the holidays. Millions of Americans buy gifts over the internet and then send to friends and relatives without even seeing the product being shipped. Shipping companies and the post office have been experiencing increased traffic due to demand and supply.

Thus, this novel business transaction has emerged as the most valuable tool in the dissemination of products and information. Business over the internet is being conducted efficiently and equitably. Transfer of products and services have been increasing over time. Big ground transportation companies have taken the lead transferring tons of materials, gadgets, and other equipments ordered over the internet. The airline industry also plays a major role shipping public and private goods far and wide. The marine industry, though slower than road transportation and air travel, has also increased its business acumen. The tonnage of materials being shipped overseas has been increasing yearly as result of the production of advanced freighters that travel great distances.

Big corporations have transformed the way they do business. At times, it is not necessary to ship heavy or light equipments, books, toys, or other necessities abroad. Since many corporations have now branches in many parts of the world, delivery can be done by an overseas company that has the ordered product in its stores. Someone living in New York can order a laptop for a friend or a relative living in a slum in a developing country. Delivery of the item will be performed by a branch store located in the country of destination.

Income plays a great role in modern economics. Many destitute people get public goods provided by their governments while the affluent and wealthy rely heavily on private goods according to their financial capabilities. Welfare economics has undergone tremendous changes and these changes have been made possible by human advancement in the science of economics. The world has become a global village and no wonder the consumption or production of goods has been advancing with each passing day. As the world continues to change and goods and service increase, the manner of conducting transactions will also change for the better unless otherwise unnecessary restrictions emerge.

References

Hyman, D.N. (2011). Public finance: A contemporary application of theory to policy (10^th ed.). Mason, OH: South-Western, Cengage Learning.

Mikesell, J.L. (2011). Fiscal administration: Analysis and applications for the public sector (8^th ed.). Boston, MA: Wadswoth, Cengage Learning.

Social Deliberation and Political Equilibrium

When society deliberates on issues pertaining to their needs, they follow established rules and political guidelines that make their actions legally acceptable. For the sake of bringing in changes that benefit everyone involved, citizens make public choices to advance their political agendas. People make their voices heard by contacting their representatives through the use of postal mail, social media, e-mail, and voting in select locations among other things. Bringing changes to the living conditions of constituents is one of the most burning issues that face elected representatives. In turn, elected representatives find means to ensuring their constituents remain satisfied by deliberating on significant issues that need to be addressed in political forums. This system of interaction is only possible in democratic systems.

Societies living under authoritarian or dictatorial regimes often suffer exclusion, marginalization, stratification, censorship, oppression, and coercion. In non-democratic systems, it is the government that makes decisions concerning the production of goods and services without consulting the mass. This system of administration contravenes human needs and expectations and society’s inalienable rights to freedom and opportunities. Import of goods and services becomes the prerogative of select individuals who have been shoved into office without public scrutiny and open electoral selection. The public benefits little from the export of goods and services in draconian governing institutions.

According to Hyman (2011), political processes are rules contained in a nation’s constitution. It is up to the citizen to cast vote or take part in an election and vote for the representative who will carry the issue of political contention forward for approval. The theory of public choice evolved as a means to ensuring people’s choices influences the democratic political process. In essence, it is a theory that has been formulated in such a manner that it studies how goods and services are supplied by governments through the observance of efficiency and equity. In a modern democracy, each individual citizen is allowed one vote to influence election processes.

Political equilibrium

Equilibrium is a situational change especially in markets when demand and supply are in par or are equal while equilibrium price is when there is a balance between quantity supplied and quantity demanded. Politics defines how a nation’s economy functions and it is the working relationships between the voter and the representative that help shape the effective delivery of a nation’s goods and services. Taxation is the major tool that advances the operation of the police and national defense. These two institutions are significant in the preservation of law and order and without them it is difficult to keep the law. While the police are responsible for internal security and fighting crime including corruption and other public malpractices, the national defense defends the nation from outside aggression. Nations that have weak police force and disorderly armies tend to collapse as a result of security lapse.

Interest groups have been gaining ground in modern times with the world seeing the proliferation of these groups in all aspects of society. Interest groups usually lobby for causes that serve their interests. When a government experiences the rise of an interest group, such that an administrative takeover evolves, society has to shoulder the maximum cost as distribution will be in favor of the most powerful. The negative administrators imposed by bureaucrats at times bring in deadweight loss and losses in political transaction costs.

 Taxes are compulsory deductions paid by citizens of a nation. Part of these taxes is what makes the existence of a police force and national defense possible. While ordinary citizens may abhor government action on their income, the benefits they get in return for protection is worth taking.

References

Hyman, D.D. (2011). Public finance: A contemporary application of theory to policy (10^th ed.).

Mason, OH: South-Western, Cengage Learning.

A Study of the African Union Finances and Budgeting Practices

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Abstract

The survival of any organization, regardless of whether it is large or small, national or international, depends on the flexibility and effective administration of its fiscal matters. The advancement of information technology and the proliferation of academic research in the last few decades ushered in the much-needed know-how and expertise in terms of monetary investments. The African Union (AU), founded in 2002, evolved out of the former Organization of African Unity (OAU) that was founded in 1963 in Addis Ababa, Ethiopia by a group of African leaders under the auspices of former Emperor Haile Selassie (Udombana, 2002). The AU evolved out of two groups of African nations: the Casablanca Group and the Monrovia Group (Genge, Kornegay, and Rule, 2000). Organizations that have strong economic foundations tend to survive longer than those managed with scarce resources. Surprisingly, the AU, that is almost foreign aid dependent, has been able to survive for a long period. In the last few decades, despite existence of various political, social, and economic upheavals, the AU has remained an exemplary force due to its ability to stay on course and remain part of the international community. The purpose of this paper is to uncover the fiscal administrative strictures that make the AU effective and is divided into various sections, each delving into an issue of particular interest to fiscal public sector.

Mission and goals of the organization

In its initial conception, the Union was founded on the principles of uniting the nations that constitute the massive African continent and was modeled from the EU (Steinberg, 2001). It was established on the notion of partaking in the elimination of apartheid and colonialism in the continent. The mission and goals of the AU include valuing diversity and respect for joint effort, putting the interests of Africa above everything, observing transparency and accountability, uprightness and fairness, efficiency and expertise, and propagation of information and knowledge. The AU is on the forefront of reducing conflicts in afflicted parts of the continent through the creation of contingents of multidisciplinary rapid deployment forces. It is strengthening to overcome humanitarian disasters and as well struggling to integrate into the international community of nations.

Ethical Considerations in Finance and Budgeting

There exist ethical considerations in the finance and budgeting systems of the AU. The AU spends large sums of money for the protection of civilians in war prone regions of the continent yet little is done to deter belligerent parties from causing harm to innocent unarmed civilians and their properties. Despite receiving considerable financial resources for its peacekeeping operations in southern Sudan, the AU has been unable to keep at bay antagonistic forces taking the lives of poor southern Sudanese citizens and the repressive Janjaweed militia that wrecked havoc in Darfur. The AU des not have the might and financial capabilities that can allow it to transcend borders and pursue enemies at long distances (Williams. 2006). Despite article 4(h) of the AU charter stipulating the use of force when incidents like genocide and crimes against humanity occur, in essence, the Union has been unable to meet its commitments in reclaiming peace in various parts of the continent such as in Somalia and Rwanda (Williams, 2006). The Union is beset by unprofessionalism and abuse of office by management and employees hailing from distinct backgrounds. Lack of qualified personnel, poor communication and linguistic barriers are some of the elements of concern that place a barrier in the creation of a strong, effective workforce (Ping, 2009).

Technological considerations

Modern technological innovations improve efficiency within organizations and if effectively used in the finance and budgeting sector, can bring significant improvements and garner support from shareholders and stakeholders as well. The AU has a lot to achieve from technological use. In the last few years, the AU has seen significant improvements especially with the establishment of an African parliament, a banking institution, and regional economies. There have been drastic improvements in the fields of technology within the AU since the start of the Arab Spring in 2011 (ACSS, 2011). Demand for dignity and political inclusion among the youth imitating the political changes visible in North Africa has never been so captivating. As elucidated by Franklin and Raadschelders (2004), favoring one determinant over another, may result in dilemmas for decision-makers. The use of technology has been skyrocketing for the AU primarily as a result of the effects of globalization, human interconnectedness, and global integration. Globalization evolved out of the modernization of the 1950s and 1960s and there is much talk about market and capital proliferation among nations that share common interests and cultural elements that make communication possible (Cooper, 2001).

Applicable laws, regulations, and policies

The Union is mainly guided by seventeen institutions that are responsible for its effective operations and financial stability. The African Heads of State and Government (AHSG) is drawn from the fifty-three leaders of the Union; others are the Executive Council (EC), the Permanent Representative Committee (PRC) that act like ambassadors of their respective nations, a legislative assembly known as the Pan-African Parliament, a judicial court, and three banking institutions (Tieku, 2004). Fear of state draconian laws continues to drive thousands if not millions of educated African intellectuals and professionals out of the continent that ultimately lead to brain drain and thereafter placing a strain on important social services. Authoritarian rule still captures the continent’s political spectrum with almost 40% of African nations still reeling under dictatorial repression consequently triggering unemployment, underdevelopment, and social decline (ACSS, 2011).

The stability of the African business enterprise is held aback by government bureaucracy and denied competition by a penumbra of stiff governmental legislations, that include lack of empowerment and limitations on foreign investments. Among the applicable laws and legal policies that bind the AU to other nations in the fields of trade and industry is the ACP-EU Cotonou agreement that opened the doors for better bilateral agreements (Udombana, 2004). Despite its explosive population growth that exceeds 700 million, the African continent accounts for only 1% of the world’s GDP and a mere 2% of international trade. What holds African products back and not fare well in the international markets, are the stringent measures that include imposition of hefty tariffs by industrialized nations in the European rim and North America. These nations feel African products to be of inferior qualities and having health hazards. However, according to Corkin & Burke (2006), the People’s Republic of China is filling the vacuum where Western powers have failed. China is playing a great role in assisting African nations in infrastructural developments. China is helping African nations so as to extract for itself the vast natural resources that remain untapped in the African continent. Communist China is engaged in Angola for oil; it is heavily engaged in Tanzania, Malawi, Sierra Leone, and Zambia.

Evaluation of budget process and revenue sources

One simple budget process that can be of vital importance to the AU’s financial operating procedures would be the use of the operating budget plan. This is a system that allows organizations to be able to summarize annually allotted monetary resources and succinctly be able to accelerate smooth operations of their existing valuable resources without losing tack. Udombana (2004) perceives that there exist challenging business relations between the AU and nations in the Caribbean rim, the EU, and North America. European Aid to the AU for the fiscal year 2008 was estimated at $28,656,819 (EuropeAid, 2008). The AU’S use of the Government Finance Officers Association (GFOA) budgeting system which is a specific budgetary system applicable to public finance could be of valuable use as it is a three-fold comprehensive budgeting operating procedure that can be easily applied when financial officers have the vital tools and expertise necessary for maintaining a mammoth organization like the AU.

Impact of internal factors

The Union has multiple internal factors that could impede its strategic planning and these include economic disparities, gender imbalances, pandemics, internal strife in states within the Union, drought, locust invasions, and a plethora of problems that evolve without warnings. Unlike the EU, the AU evolved as a result of colonialism and that nations that constitute it are regarded as multi-states and not nation-states as in the case of the EU (Steinberg, 2001). Money mismanagement at times evolve as fractions of a budget have to be sent to other regions that need immediate attention to overcome major challenges like unanticipated catastrophes and other natural disasters having destabilizing effects. Besides existence of antagonism that exists within the Union leadership, foreign hands at times meddle with the effective administration of the Union’s fiscal matters. Political instability and internal strife have had adverse effects on the economies of many states ruled by dictators. Besides the Arab Spring uprising that gripped the northern part of the continent, violent demonstrations have been seen in Djibouti, Cote d’Ivoire, Swaziland, Guinea Bissau, Mauritania, Gabon, Cameroon, Benin, Malawi, Senegal, Uganda, and Kenya respectively (ACSS, 2011). Only seven African countries fall under the category known as ‘consolidating democracies’; twenty are perceived as ‘democratizers’; eleven are ‘semi-authoritarians’; while another eleven are absolute ‘autocracies’ (ACSS, 2011). Political instability, poverty, repressive regulations, disease, human rights violations, and impermanence of nationhood are some indicators that lead to economic stagnation of the AU. The breakup of the former OAU came as a result of the improper handling of the African Economic Community (AEC), which, according to Tieku (2011), had all the hallmarks of functional and structural flaws. Despite changes in governance, the AU remains in economic limbo.

Use of cost-benefit analysis

The AU is a massive organization that has a working structure alike that of the EU and the UN. According to Mikesell (2011), separation of budgets is necessary if efficiency and financial elegance is to be experienced in business transactions. The presence of corruption has had adverse effects on the AU’s application of cost-benefit analysis. Corruption is an endemic factor that is visible in almost every country and that it is an immoral act that benefits the office-bearer or politician Nye (1967). Corruption in African states is so widespread that it is synonymous with weed decimating a healthy plant. Problems do exist in the management of the environment in many African countries whose tourism industries remain in infancy. The spread of various diseases that kill humans and animals alike continue to be of concern for many African countries whose medical and veterinary facilities are no match for the yearly spread of contagious diseases that cripple vast populations. However, working in concert with various international organizations, many African states have been able to emerge successful in combating diseases having catastrophic consequences though a lot needs to be done by these nations to achieve self-sufficiency in the medical field.

Cash management and investment strategies

The biggest investment institution for the AU is the African Development Bank (ADB) whose current temporary head office is in the city of Tunis, in Tunisia. It was relocated from its former base of Abidjan due to insecurity in the West African nation of Cote d’Ivoire. An African multilateral banking system that exists to be of service to the entire nations that constitutes the broader AU, ADB was established to eradicate poverty and improve the livelihoods of Africans in general (AfDevInfo, 2011). Founded in 1964, ADB has fifty-three shareholders that are primarily member states of the AU and twenty-four foreign entities coming from countries in Asia, Europe, and America.

Assessment of overall financial condition

Assessment and auditing of the AU finances is the prerogative of qualified AU auditors and financial experts who work in concert with foreign-based donor employees tasked with keeping an eye on effective use of foreign aid. The AU relies on foreign economic powers to finance its operations. The EU, some Middle Eastern countries, China, and the U.S. are by far the largest donors of the AU in terms of military infrastructure earmarked for peacekeeping operations, fight against pandemics, containment of HIV/AIDS, deforestation, control of malaria; infrastructures such as hydro-electric power generation, construction of medical facilities, educational institutions, and student scholarships. The AU budget for the fiscal year 2011 was estimated at $256,754,447 mostly from donors and a few generous entities residing in the continent (EuropeAid, 2008). The AU’s expenditure is mainly spent on its own operation and that it is a non-profit organization that lacks investment of its own with the exception of the African Development Bank (ADB) that serves as the only financial institution shared among member states. Without assistance from foreign donors, the AU may not be able to survive on its own. Nations within the Union have a funds collection system where every nation has to pay a certain amount of money for the upkeep of the Union official operations. However, some states tend to be delinquent in their remunerations.

References

AfDevInfo (2011). African Development Bank Group. Retrieved from http://www.afdevinfo.com/htmlreports/org/org_26876.html

ACSS Special Report No. 1 (November 2011). Africa and the Arab Spring: A New era of democratic expectations. Retrieved from http://africacenter.org/wp-content/uploads/2011/11/ACSS-Special-Report-1.pdf

Cooper, F. (2001). What is the concept of globalization good for? An African historian’s perspective. African Affairs (2001), 100, 189–213

Corkin, L. & Burke, C. (2006). China’s Interest and Activity in Africa’s Construction and
Infrastructure Sectors. Centre for Chinese Studies, University of Stellenbosch. Retrieved from
http://www.ccs.org.za/downloads/DFID%20Exec%20Summary.pdf

EuropeAid (2008). Financial contributions of EuropeAid to African Union 2000-2008. Retrieved from http://ec.europa.eu/europeaid/who/partners/international-organisations/documents/au_2008_fr.pdf

Franklin, A. L., & Raadschelders, J. C. (2004). Ethics in local government budgeting: Is there a gap between theory and practice? Public Administration Quarterly, 27(4), 456–490.

Genge, M., Kornegay, F., and Rule, S. (2000). African Union and Pan-African Parliament: Working Papers. Retrieved from http://unpan1.un.org/intradoc/groups/public/documents/idep/unpan003885.pdf

Mikesell, J. L. (2011). Fiscal administration: Analysis and applications for the public sector (8th ed.). Boston, MA: Wadsworth.

Nye, J. (1967). Corruption and political development: A cost-benefit analysis. American Political Science Review. Vol. 61, No. 2.

Ping, J. (2009). Strategic Plan 2009-2012. Directorate for strategic planning policy, monitoring, evaluation, and resource mobilization. Retrieved from http://au.int/en/sites/default/files/Strategic_Plan2009-2012.pdf

Steinberg, N. (2001). Background paper on African Union. World Federalist Movement. Retrieved from http://www.wfm-igp.org/site/files/AU_background_doc.pdf

Tieku, T. (2004). Explaining the clash and accommodation of interests of major actors in the creation of the African Union. African Affairs (2004), 103, 249–267, DOI: 10.1093/afraf/adh041

Udombana, N. (2002). Can the leopard change its spots? The African Union treaty and human rights. American University International Law Review, Vol. 17 Issue 6.

Udombana, N. (2004). Back to Basics: The ACP-EU Cotonou Trade Agreement and Challenges for the African Union. Texas International Law Journal 40. 1 (Fall 2004): 59-111.

Williams, S. (2006). Military responses to mass killing: The African Union mission in Sudan. International Peacekeeping (13533312).

Capital Investments: Pay-offs and Risks

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Every organization, big or small, national or international, is prone to failures and may at times run bankrupt and shut down completely, or stagger for a while and make a complete come back to shine in the limelight again. Making organizations effective and flourishing depends on the type of leadership and approaches, and the manner of direction, guidance, and interaction among leadership, employees, stakeholders, and shareholders. According to Bryson (2004), Institutionalization of strategies can lead to people’s attention drifting else where. This is possible as humans have the tendency to change perspectives and visions regarding the present and the future. People see things differently and it is thus necessary to have focus on every aspect of project implementations. Just because a strategy has been put in place does not mean that things can’t turn around and cause a quagmire. Constant supervision of strategies in place and creating changes where applicable should be the best solution to staying on the right direction.

The African Union, the biggest decision maker of the African continent has various issues that need constant attention. For example, the subject of human rights, gender equality, and women empowerment need to be strengthened through communication, education, and inflexible mandates. Since Strategy Change is never conclusive once all plans are in place, creating an ongoing strategic management process helps alleviate unavoidable incidents. Constant evaluation and monitoring of existing networks could be helpful in unearthing and streamlining loopholes that emerge in the long run.

Having sufficient resources to cover policy implementations could be an added advantage in the case of human rights, gender imbalances, and women empowerment. Since the African Union is mainly dependent on economic powers for its upkeep, effective use of donated funds should be a priority by creating a healthy structure of accountability.
Misappropriation of funds by officials and petty theft can be dangerous if not contained at all cost.

The continent has been prone to civil and political conflicts for generations and there are no parameters in place to ensure nations live in peace and harmony. There must be expectations in every endeavor and desired outcomes must be cherished and protected at all times. Excessive red tape and bureaucracy that is holding back progress of vital sectors will have to be tackled and rules and regulations initiated so as to place a lid over embarrassing altercations among the top echelons and other office-bearers found to be absconding justice.

References

Bryson, J.M. (2004). Strategic Planning for Public and Nonprofit Organizations, 3rd Ed. San Francisco, CA: Jossey-Bass.

Managing Money

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Nations, regardless of system of governance or financial capability, have to be prepared for disasters whose catastrophic impacts are hard to prognosticate. Almost every year, the world experiences disasters of various magnitudes that include devastating tsunamis, earthquakes of different dimensions, hurricanes that inundate vast stretches of lands, contagious diseases that spread beyond borders, civil wars that kill and displace undisclosed number of people, and volcano eruptions that spread beyond control with geothermal implications.

The Federal Emergency Management Agency (FEMA) is a U.S. Government public organization that provides emergency assistance to state, local, and non-profit organizations. Former president Jimmy Carter created FEMA by executive order on March 30, 1979 (Woolley, 2005). FEMA is part of the Department of Homeland Security headed by Janet Napolitano. It was founded for the sake of averting disasters or triumphing over natural or human-made disasters (Adamski, Kline, & Tyrell, 2006). In its fiscal year 2011 budget, the Department of Homeland Security allocated 15% of its budget of $56,335,737,000 (a 2% increase over 2010 FY) for use by FEMA boosted by a further 7% grants (DHS, 2011). However, due to increased natural disasters, FEMA at times finds itself suffering austere measures that lead to budget deficits. Usually, it is Congress that passes appropriation bills thereafter to be signed by the president so that it becomes a law. Conversely, the president has the power to veto a bill or sign it in its entirety (Mikesell, 2011). Before appropriations are made for a FY, federal agencies may continue functioning through continuing resolution.

In order to succeed in its commitment to the public it serves, FEMA has to have the necessary tools and financial resources required to accomplish its goals and expectations. Since FEMA is a public not-for-profit organization that solely relies on the U.S. Government for its budgetary and other financial needs to combat disasters, it is prudent that accountability be considered with utmost importance to safeguard dwindling resources in case of economic meltdowns. Because the money provided by the government to FEMA is generated from businesses and the public through taxation, it is equally important for FEMA to ensure public services is distributed in the most applicable manner without hindrances of any sorts. According to Mikesell (2011), a budget is a valuable document that is fundamental in the way an organization is managed. Budgets apply differently to public and private organizations. Besides government, FEMA generates its budgetary needs from well-wishers and donors especially when catastrophes strike.

References

Adamski, T., Kline, B., & Tyrell, T. (2006). FEMA Reorganization and the Response to Hurricane Disaster Relief. Perspectives in Public Affairs. Vol. 3, Spring 2006.

DHS (2011). FY 2011 budget-in-brief. Retrieved from http://www.dhs.gov/xlibrary/assets/budget_bib_fy2011.pdf

Mikesell, J. (2011). Fiscal administration: Analysis and applications for the public sector (8th Ed.). Boston, MA: Wadsworth Cengage Learning.

Woolley, L. (2005). FEMA-Disaster of an emergency. Retrieved from http://archive.newsmax.com/archives/articles/2005/9/12/102827.shtml

Leadership, Ethics, and Money Matters

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Every year, many organizations suffer misappropriation of funds and white collar crimes of various dimensions that are either prosecuted in courts of law or neglected altogether due to laxity of organizational rules and regulations. Such improper behaviors resulting from poor book keeping and distorted accounting procedures ultimately result in the loss of millions of dollars. According to Franklin and Raadschelders (2004), bureaucracy can cause hardships on a state's economy. Political and self-interests are some factors that can impede budgetary operations of a state like in Oklahoma where disproportional distribution of services, kickbacks, unethical behaviors, and corruption have been the norm for some time. Budgetary wranglings is not limited to the state of Oklahoma only. In essence, it is a widespread practice that can be found in both private and governmental organizations. Bureaucrats or office-bearers driven by the desire to get-rich-quick have caused bankruptcies to many financially stable organizations. Failure to uphold constitutional values, conflicting ideologies, disregard for budgetary control and mismanagement are some of the causes that lead to budgetary breakdowns. According to DeThomas, Oliver, and Seereiter (1987), organizational success can be achieved by laying down an impressive financial planning that will serve as a guiding force.

Corporate financial scandal has become a global problem and that it is not limited to the U.S. alone. The latest financial scandal that shook Australasia happened in Victoria, a region of Australia. Located in the city of Melbourne, Sonray Capital Markets Pty Ltd. is a marketing company that deals in investments, derivatives, futures, and international and domestic equities. Former CEO of Sonray, Scott Murray, started a two-year jail-term without the prospect of parole for deliberately shuffling client money from one account to another leading to the subsequent collapse of Sonray in June of 2010. In total, Sonray lost a staggering $46.7 million (Wood, 2011). According to court documents, Murray, working surreptitiously in cahoot with his boss Russell Johnson, dragged money belonging to clients to Sonray's operating budget. This was done to rectify the financial afflictions faced by Sonray and also to fulfill the directives of his immediate boss who, in a separate court proceeding, was also charged with twenty-four counts including conspiracy to commit theft and making false accounting.

In order to resolve past financial follies, Sonray Capital Markets Pty Ltd. has hired a new external administrator who is tasked with overseeing its day to day activities until such a time when it can be determined if it can continue with its normal operations or go into liquidation. The new administrator has set up a line of communication that include telephone numbers, a postal address number, and a web site with e-mail addresses exclusively for people intending to lodge grievances. This is a commendable action as it will help Sonray deal with shareholders, creditors, and employees in an amicable manner without resorting to grueling court proceedings that could result in challenging financial settlements.

References

DeThomas, A., Oliver, J., & Seereiter, D. (1987). Designing the strategic financial planning system. American Business Review, 5(2), 23–31.

Franklin, A. L., & Raadschelders, J. C. (2004). Ethics in local government budgeting: Is there a gap between theory and practice? Public Administration Quarterly, 27(4), 456–490.

Woods, L (2010). CEO jailed for Sonray theft. Retrieved from http://www.theage.com.au/business/ceo-jailed-for-sonray-theft-20111014-1lp77.html

Comparing and Contrasting Levels of Government

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Budgets for the three levels of government often perform the same regardless of the scope of government though there could be variations in the size of earmarked budgetary allocations according to demand and population. According to Mikesell (2011), it all depends on how the entity pays particular attention to the demands and foundations of the institution to be funded. Budget allocation is the prerogative of select government appropriation officials who often debate on subjects related to what to spend, where to spend, when to spend, and how to spend. At the federal level, it is Congress that debates on government budgetary needs before sending their final bill to the president for approval. In the end, the president may approve it by signing it into law or veto it out-rightly. In the U.S., there are financing committees known as the Senate Finance and House and Ways Means committees that have leverage over federal tax and revenue measures (Mikesell, 2011). In essence, as a measure of easing work, the appropriation committee gets help from subcommittees that assist in making the necessary budget for federal operations. In the U.S., the two largest federal budget entitlements are Social Security and Medicare that are primarily for the elderly. Medicaid, a program that has been established to serve the needy receives 12.5 percent mandatory spending and is the third largest entitlement. Most government spending comes from tax cuts (Mikesell, 2011).

At the state and local governments, expenditures are geared towards general public needs and that is the delivery of health and sanitary needs, educational enrichment, and welfare and public safety measures. Unlike the national government that has a broader reach in international affairs related to dispute resolution, state governments put greater consideration to the attainment of fiscal stability by tending to the needs of local governments. The largest recipient of local government expenditure goes to primary and secondary education (Mikesell, 2011). Public welfare programs receive the largest share of state budgets. Governments-federal, state, and local-generate their expenditures from taxes levied from income taxes, payroll taxes, capital gains taxes, wealth taxes, property taxes, corporate taxes, and estate and excise taxes (Taxes and Government Spending, 2011). A state may use innovative ideas of dispensing its money without causing harm to the rest of the national economy.

At the local level, departmental heads prepare Christmas lists that are devoid of executive guidance and at times unreliable in context. Some important features that make local governments perform well in their fiscal policies when executed efficiently include choices and responsiveness, citizen participation in decision-making, accountability, improved revenue mobilization, and easier monitoring of results (Shah, 2007).

References

Mikesell, J. (2011). Fiscal administration: Analysis and applications for the public sector (8th Ed.). Boston, MA: Wadsworth Cengage Learning.

Taxes and government spending (2011). Retrieved from http://www.libraryindex.com/pages/1309/Taxes-Government-Spending-OVERVIEW.html

Shah, A. (Ed., 2007). Public sector governance and accountability series: Local budgeting. The International Bank for Reconstruction and Development. World Bank. Washington, DC