ACC 4291
INTEGRATED CASE STUDY

TERM PAPER
CASE: CITY OF YORBA LINDA, CALIFORNIA

PREPARED BY Wafa’ Bt Zaharudin (1025250 )

PREPARED FOR
Lecturer : Assoc. Professor Dr. Nik Nazli Binti Nik Ahmad

NO. | CONTENT | PAGE NUMBER | 1. | EXECUTIVE SUMMARY | 3 | 2. | PROBLEM STATEMENT | 5 | 3. | FORMULATE THE ALTERNATIVES | 5 | 4. | ANALYTICAL TOOLS | 6 | 5. | EVALUATION OF ALTERNATIVES | 12 | 6. | FINAL DECISION & RECOMMENDATION | 13 | 7. | QUESTIONS & ANSWERS | 15 | 8. | REFERENCE | 17 |
TABLE OF CONTENT

EXECUTIVE SUMMARY
The city of Yorba Linda which is located in northern Orange County, California was incorporated in 1967 as a general law city. This city had been growing at a rate of about 3,000 people per year, as in 1991, it had 53,000 residents living there. Yorba Linda city used a city manager form of government. Mr. Simonian has been appointed by the City Council to be the city manager, where he will be managing all the city departments except for the Legal Services. The city’s budget included 68 full-time employee for general city operations and 17 for library operations. The city council comprised of five city residents which was elected on an at large basis for a four-year, part-time term. Their responsible is to set the city policies.
Yorba Linda city is a contract city where this city contracted with public and privates agencies to provide services in the city. As in Yorba Linda the agencies are the City of Brea, County of Orange and a private agency. The purpose of this approach is to cut back or delay noncritical services or projects when revenues were not available. The city revenue is primarily derived from the state and local resources. City of Yorba Linda implements fund accounting as their financial control as it is required by the California state law.
The California state law also required all cities to prepare annual budget. The main purpose for this budget is to provide city managers with the authority to make expenditures and to control over the expenditures by providing comparison between the actual and budgeted. Besides, they also required cities to main reserves to ensure a balanced budget even when faced with nonrecurring expenses. As for Mr. Simonian, he had three goals for the city’s budgeting process, which are to ensure that the budget is easy for members of the City Council to understand, to ensure that the budget is understandable by the members of the community, and to encourage the city department directors to analyze current and projected activities.
In 1986, Mr Simonian implemented a multiyear budgeting approach to replace the line item budget that had been used for many years. This budget was designed to facilitate the setting of policies and priorities. During the year, several changes were made to the budgeting process and budget content for the 1991-1993 cycle. The changes were, first, all department managers responsible to come out with their expenditure projections. Second, a budget manual was distributed to assist department personnel to prepare the budget. Third, the prepared budget must be in details including the purposes, accomplishments, objectives, and criteria of their proposed activities. Fourth, the budget calendar was expanded to allow managers more time to define their budget.
There are two types of processes in preparing the budget for City of Yorba Linda which are revenue projections and expenditures projections. The revenue projections were made by their finance director, Gordon Vessey. He highlighted that the revenue were expected to decline from fiscal year 1991. However, the city manager’s office was pursuing four major initiatives to increase general fund revenues. In the other hand, the expenditure projections were prepared by the department’s directors. Mr. Simonian stated that the initial expenditure budget submission was too high. Then, the potential reductions were discussed in a series of management meetings. The proposed budget contained several significant changes in the operating expenses of the City Council, city manager, city clerk, police and Parks and Recreation department. As a whole, the city expenditures proposed was decrease between cycles respectively.
Then, the proposed budget will be presented by Mr. Simonian to the City Council members to get their approvals. During the meeting, John Gullixson one of the members voice out his disagreement regarding the increment of cost on the police services. But then Mr. Simonian justified that he believed the proposed budget was an acceptable figures. But there was no action taken regarding the disagreement from John Gullixson. Even after the second meeting, the objection was still neglected by them. They just precede the budget by having four favourable votes and with Mr. Gullixson abstaining.

PROBLEM STATEMENT
In this case, Mr. Simonian is the decision maker. He has the authority to manage and supervise all city departments except legal services. He is responsible to make sure that the city operation is running smoothly to provide the best services to the community. Throughout his years in managing the city departments there are many changes that had been made by him to improve the operation of Yorba Linda city. However, there are symptoms or problems that can be define from this case such as, there is no bonus system, city council that with lack of knowledge in public administration and policy, and there is no department performance evaluation between actual and budgeted programs. Mr. Simonian wants to provide the best and good services to the community by preparing annual budgeting report for city of yorba linda. So, the real problem here is how Mr. Simonian should improve the budgeting process and system to sustain and smooth the city of Yorba Linda operation in the near future.

FORMULATE THE ALTERNATIVES
There are two alternatives that Mr. Simonian should take into consideration: 1. Change the goals and purposes of the budgeting process or; 2. Provide policies and procedures for the budgeting process or; 3. Do nothing (maintain the current system).

ANALYTICAL TOOLS
SWOT Analysis
Strength
There are several strengths that can be defined in the budgeting system of Yorba Linda city. One of the strength is that in preparing the budget, the Finance department had provided all departments a manual to come out with their expenditures projection. This manual included guidelines, samples, forms, standard costs, and the charts of accounts. By providing this manual, it will help the departments to prepare the budget efficiently and accurately.
The preparation of budget for the City of Yorba Linda, it involve from all departments to come out with each of the departments expenditure departments. This is strength for this city as the involvement of all departments shows that there is segregation of works in the City of Yorba Linda governance. Besides, it gives all departments the opportunity to proposed and voiced out their opinions in the budgeting process. By having the involvement of all departments, the budgeting process will be more efficient and effective as everyone is working together to come out with a good budget for the City of Yorba Linda.
Yorba Linda City used the multiyear budget approach in preparing the budget of the city. This is another strength of Yorba Linda city budgeting system, where it will save time and cost. By having a multiyear budget approach, it gives a clear view with document chains that cover a fiscal year change. Besides that, a multiyear budgeting approach gives the ability to identify long term trends of financial and strategies goals. With this ability, City of Yorba Linda can foresee their performance in the near future. It will also help Mr. Simonian in making decision to ensure that the budget will benefit to the community.
The goal of maintaining a general fund reserve is strength of this city. This is because; the general fund reserve will assure the city’s capability of continuing its operations even there is an event of major catastrophe. This general fund reserve will ensure a balanced budget even when faced with nonrecurring expenses as by California state law required to have a balanced budget to all cities.

Weaknesses
There are some weaknesses of Yorba Linda city that can be outline, one of it is poor decision making by the top management. As, there is no action taken when there is objection or disagreement in the decision making process during the last phase of budgeting process which is the approval of the city council on the prepared budget. This can be seen when Mr. Simonian did not take any action to justify or look into the issue raised by John Gullixson. In this matter, Mr. Simonian should look into it to ensure that they have a good budget prepared. Instead, he just pressed for approval of the budget over Mr. Gullixson’s objection and proceeds the budget with four favourable votes and with Mr. Gullixson abstaining. This shows that the top management is making a poor decision making without considering other opinions and disagreements.
Another weakness of this city is that they have weak budgeting process goals. The goals set by Mr. Simonian years ago consider as weak because it only focus on the understanding of the budgeting process rather than focus on the improvement of the outcome. Besides, it was stated that the budget hearing in this city usually, it was attended by two or three citizens, this shows that there is lack of involvement from community in the budgeting process. This matter consider as a weakness to Yorba Linda city because it does not meet the goals set by Mr. Simonian. Mr. Simonian considers that the citizens were the ultimate customers of the city services; however the lack of involvement from the community would raise dissatisfaction from the budget. The dissatisfaction may lead to a riots or chaos in the future. That is why it is very important to have involvement from the community in the budgeting process.
The fund accounting used by City of Yorba Linda consider as a weakness because, fund accounting does not reflect the true, intrinsic value of the fund. It cannot truly analyse the revenues and expenses of a specific funding source. Moreover, fund accounting cannot fulfil simultaneously the demands of different group such as investors, investment manager, tax authorities, auditors and potential partners. By having this issues as implement the fund accounting give difficulties to the city manager to analyse its components.
Opportunities
There lots of opportunities that can be consider by Mr. Simonian to take into action one of it is that Yorba Linda city should establish and provide their own services. As for now, this city has outsourced their services from the public and private agencies. This outsource of services has been costs incurred by the city operation. However, if they have their own services provided to the city, it would cut cost for a long term plan. In addition, it would open up many job opportunities to the citizens of Yorba Linda such as, police officer, fireman, detectives and many more. This also would boost up the city economically.
Another opportunity that can be considers for this city is that Mr. Simonian should appoint assistant city manager to help him manage the city effectively and efficiently. By having an assistant, the segregation of duties would be more efficient as it would also less burden Mr. Simonian in performing his duties and responsibilities. This opportunity should be consider by Mr. Simonian for him to provide the best services to the citizens.
Providing a training for the members of city council would be an opportunity for Mr. Simonian should consider to ensure that the top management in making a good decision making for the Yorba Linda city. The training should relate to public administration and policy making as these are what lack from the members of the city council. By having this training, the members of city council can have a better understanding about the budget; as so, they can make a good decision making in the future. This opportunity should be consider so they can sustain smooth their city operation in the near future.
Threat
One of the major threats in this city is the community. This is because; the lack of involvement from the community in the budgeting process would trigger a disagreements and objections from the community about the budget prepared. This agreements and objections might lead to a riots or unrest among the citizens. So, the top management need to do something to attract the community to involve in the budgeting process so that it will benefit all.
The recession occurs in early 1990s have affected the City of Yorba Linda; in term of job losses, where there were 7% of the orange county residents had lost their job during recession. It even admitted by the residents that they are in a “serious recession” situation. The recession has been a concerned of the citizens when there was a serious fleeing high-priced lifestyle of Southern California. The residents also said that during the recession is the worst economy situation they have been through. The recession has a great threat towards the city of yorba Linda and also the citizens to sustain in the near future.
Another aspect that can be consider as a threat is the outsourcing agencies that providing the services for the city of Yorba Linda. This is because, the outsource agencies might have take advantage on this city by imposing a high rate of their services. As mentioned by one of the city council members, Mr. Gullixson that the city of Brea might have taken advantage by increase the salary of the policeman that providing services to the city of Yorba Linda. The outsourcing agencies can be a threat towards City of Yorba Linda if they do not perform a proper research on the cost of services provided by them.
PESTEL Analysis
Political
The political factor in the City of Yorba Linda is that this city used a city manager form of government. This means that the city manager is the administrative head of government of the city and the successor agency to the redevelopment agency, under the direction of the City Council Board. As currently, the city manager is Mr. Simonian. He is responsible for the efficient administration of full affairs of the city, which are under his control. This kind form of government required the city manager to perform a variety of functions, including oversight of economic and business development programs and also to coordinate the city risk’s management and various insurance programs for the city.
As the city manager, Mr. Simonian also responsible to supervise and direct all head departments and subordinate employees of the city. Included also, he is responsible to excise control over methods and procedures of operations in city departments. In addition, his duties also include making recommendations to the City Council and advising them as to the needs of the city included also in term of financially. So, city of Yorba Linda is a city manager form of government which is Mr. Simonian is the city manager.
Economic
The economic aspect of this city can be seen in part of revenue projection of the budgeting process of Yorba Linda. The city revenues primarily derived from state and local sources. As for the state fund, it included the state subventions and grants. While, the local sources were primarily from property taxes, sale taxes, franchise fee, and building permit fee. This show that this city have an economic stability as there are many stream of revenue the city received.
This city has offers many business opportunities to an active and expanding market in a business-friendly environment. In fact, the city’s economic development service has coordinated with the Yorba Linda’s Chamber of Commerce to provide support and incentives for starting and maintaining a business in Yorba Linda since January 1913. The Yorba Linda’s Chamber of Commerce role is to foster an alliance between business owners, residents, and local government. Through mutual exchange of services and information, the chamber of commerce strives to promote Yorba Linda as a desirable community. This shows that the city of Yorba Linda has a strong economic development to ensure their sustainability in the near future.
Social
In terms of social aspects of Yorba Linda city, in 1991 the city had 53,000 residents living in approximately 18.5 square miles. It can be seen in the case that the community of this city is less concern about the budget prepared by the city administrative. As, it usually two or three citizens attended the budget hearing. This shows that the budget is not interesting enough to attract them to come to the hearing also to alert them about the budget.
Besides, it can be seen in the financial report and also the goals of the budgeting process. The budget prepared by the city manager shows that the social welfare is really a concern when they preparing the budget. This is because; it was said by Mr. Simonian that the citizens were the ultimate customers of the city services. In other word, providing good services to the citizens are the ultimate priority of the city in preparing the budget.
Technology
The analysis on technological aspect of this city is not applicable.
Environment
The environment aspect that needs to be concern in this city is that in the financial statement state that there will be a construction on a community service for the city of Yorba Linda. The construction is a concern because; it might affect environmentally during the construction such as air, noise and water pollution where the construction will provide all kind of waste during the construction period. So, the city manager needs to take an earl precautious action so that the pollution can be avoided in the future and also to preserve the city of Yorba Linda.
Other than that, in terms of environmentally, this city is preserve by the administrative by providing the services including on trash collection. This shows that the city is well managed by the city manager so that this city will be sustained and preserved in the near future.
Legal
In terms of the legal aspect of the Yorba Linda city is that this city is a general law city which following the California state law. One of the California state laws that required on this city is that the city must used Fund Accounting in financial control system. As so, Yorba Linda follows the requirement by implementing Fund Accounting in their financial control system included also in the budgeting process.
Another requirement by the California state law is that all cities in the Orange County included City of Yorba Linda to have an annual budget. It was required by the law in the purpose of to provide the city manager with the authority to make expenditures for the city and to provide the city manager a control over the expenditures. Besides, the state law also required the annual budget to be balanced. By ensuring that they complied the requirement, Yorba Linda has maintained reserves. The city even set a goal of maintaining a general fund reserve level equal to 50% of the operating budget to really sure that they will have a balanced budget.
Other than that, the laws and policies which guide Yorba Linda’s development and which ensure a safe and comfortable environment for all residents are set by the members of City Council. Besides, the designed budget by Mr Simonian is to facilitate the city council to setting of policies and priorities for the City of Yorba Linda.

EVALUATION OF ALTERNATIVES
In evaluating the alternatives, the analysis of qualitative and quantitative should be assessed comprehensively in order to justify the best solution that would be selected later. Each alternative may have different implication and it would affect the result in future.
Alternative one is Mr. Simonian should take into consideration which is to change the goals and purposes of the budgeting process. This action should be taken because the current goals and purposes do not successfully meet. By having a new and right goals and purposes of the budgeting purpose would definitely change the perspective of the employees and community on the budgeting process to a new and fresh start to be provide a better budget. This also would attract the community to acknowledge about the budget prepared by the city administrative. Besides, it would also encourage and motivates the employees to perform better and contribute more to the city.
Alternative two is that the city manager should provide policies and procedures for the budgeting process. In the case shows that there are no specific policies and procedures in the budgeting process such as there is no action taken when there is disagreement or objections regarding a certain matters in the budgeting process. As an organization policies and procedures is important as it will bringing structure to the organization. As in case of Yorba Linda city, it will also ensure that the operation of the budgeting process is a success process. Policies and procedures are for the purpose of succession planning to prepare an agency for risks throughout its process and operation. The city manager can also ensure that there are in compliance with the regulatory rules and guidelines as for City of Yorba Linda, the California state law. This will definitely outline the Yorba Linda’s budgeting process in terms of organizational and operational structure.
Alternative three is Mr. Simonian should do nothing but to maintain the current system. This alternative does not require the city manager to take any major changes and action, where he just only needs to maintain the current system to sustain and smooth the city operations in the near future.

FINAL DECISION & RECOMMENDATIONS
From the outlined alternatives, the changes of goals and purposes of budgeting process would improve the budgeting process of Yorba Linda. In order to change the goals and purposes, proton need to evaluate in many aspects such as in terms of social, economy, environment, and political. However, to take this action into consideration would be time consuming and also require expertise in all aspects so that they can establish proper and right goals for the budgeting purposes. As in Yorba Linda, they are lack of these expertises to implement it, even the city council also have a little knowledge about administrative and policy. Hence, this alternative would not be suitable for the city manager to implement in his action.
On the other hand, city manager is struggling in providing good services to the ultimate customers which are the citizens when they are lack of involvement from the community. Besides, the budgeting process is still lacking such as there is no evaluation phase of the budget after it was prepared, instead it was straight away sent to the city manager to get the approval from the city council. The decision making made by the top management to proceed with the budget when there is objection and disagreement related to the budget is considered as a poor decision making. City manager should not precede the budget instead he should evaluate the budget and improve it. This shows that by keep maintaining the current budgeting process would only bring problems to the City of Yorba Linda budgeting process, thus, the city manager should not take this action into consideration.
From the evaluation of alternatives above, the final recommendation shall be made on the basis of effectiveness and productiveness business in short term and long term. We have come out the final recommendation for proton where we are in opinion that the second alternative which is Mr. Simonian should provide policies and procedures of the budgeting process are the best way for Yorba Linda to sustain and smooth the city of yorba linda operation in the near future.
To take this alternative as a solution for Yorba Linda, the city manager first need to set up the policies and procedures for preparing the budget. As currently, the budget process procedures are revenue projections, expenditure projections, and budget approval. To improve the budgeting process to an ideal one, Mr. Simonian could include also an evaluation process for the prepared budget so that the budget will be evaluate first before it will be sent to the city council to get the approval. This will ensure that the prepared budget were prepared according to the complaints and also to ensure the budget is suitable and reasonable to be proposed, then it will be sent for an approval.
The city manager should set up a budgeting process procedure as it will definitely improve and boost the performance of preparing the budget effectively and efficiently. Besides, by having a well written policies and procedures, it will create a good and firm structure to the budgeting process of Yorba Linda city. This also can help the administrative to measure success or failure of the budgeting process operationally. Other than that, this will help the city manager to ensure an operational success during a succession process. The policies and procedures also will help the city manager to manage the risk associated with the budgeting process. In addition, by having a firm policies and procedures also will ensure that the budgeting process is in compliance with the California state law regulatory rules and guidelines.
Along with the alternatives, I would like to recommend the city manager of Yorba Linda to provide a formal training for the city council’s members so that they will be educated about the administrative and policy. By providing this training to the city council at least it will help them in making decision later. Besides, this will also help them to understand the prepared budget easily. So, this will improve their decision making by considering every aspect as they have the understanding about the budget prepared.
Other than that, I also would like to recommend the city manager to improve their goals and purposes of the budgeting process in future so that it includes other aspects also not only about the understanding of the people on the budget. One of the goals that should be included is that to improve and upgrade the standard of living as they just gone through a rough period of recession. This will attract the community to acknowledge the budget process of the city administrative going to prepare as it relate to them directly. Also, they would definitely interested to know how the city administrative to help them to improve their standard of living.
Besides, I am in opinion that the goals and objective should not stay the same through the years, instead it should be change in every new budget there are preparing. This is because; first, it will attract the community to involve in the budgeting process. Second, it will give them a different focus so that they will improve the city operation from time to time. Last but not least, it will definitely boost their performance in preparing the budget for the City of Yorba Linda.
In conclusion, by taking the second alternative which is to provide policies and procedures for the budgeting process, where city manager, Mr. Simonian can improve the decision making, improve the structure of the budgeting process, and also improve the risk management is the best decision that he should take into action as it can boost performance and help to sustain and smooth the budgeting process in the near future.

QUESTIONS & ANSWERS
Question 1: a) Does the city of Yorba Linda’s current budgeting process meet the goals set of (for?) it?
Answered in page 7 (paragraph 2) b) Are those goals the right ones? Please justify your answer.
Answered in page 7 (paragraph 2), page 11 (paragraph 5), page 14 (paragraph 2) c) Does the city council’s failure to approve the budget unanimously reflect badly on the city manager and his staff and/or the budgeting process? Why or why not?
Answered in page 7 (paragraph 1)
Question 2: a) What is fund accounting?
- Fund Accounting is an accounting system that commonly used in non-business entities, such as nonprofits organizations, government agencies, and hospitals. Fund accounting different from traditional business accounting, where it focuses more on identifying how successful an entity has been at generating profits. While, nonprofits organization and government agencies are not designed to generate profits, fund accounting method provide them a more fitting approach to tracking and reporting their finances. b) What are its strengths and weaknesses as compared to standards accrual accounting for use in a municipality such as Yorba Linda? (In your response, consider the following question: Did the City of Yorba Linda expect to have a good year in fiscal year 1991 – 92? How do you judge?
- The strengths of fund accounting are it assist in budgeting control by providing information that enable managers to keep expenditures within allocation and demonstrate compliance with fund resources. Fund accounting is an accounting system that emphasising the accountability rather than profitability that widely used by non-profit organizations and governments. It also a self-balancing set of accounts, segregated for specific purposes in accordance with laws and regulations.
Answered in page 7 (paragraph 3)
- As Yorba Linda, implementing fund accounting is an essential for preparing the budgeting process as it is one of the financial control for a municipality such as Yorba Linda.
Question 3: a) Evaluate the overall financial control system used by the City of Yorba Linda.
Answered in Swot Analysis page 6 b) What suggestions, if any, would you make to Mr. Simonian to improve the financial control system?
Answered in page 13 & 14

REFERENCES
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Leigh Anthony, Why Is Goal Setting Important in Organizations? Retrieved 27 November 2014, from http://smallbusiness.chron.com/goal-setting-important-organizations-2509.html
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M. Gomez and Lee, (April 12, 1992), TIMES ORANGE COUNTY POLL: More Are Finding Less Hope Amid Recession: Economy: Ranks of the pessimists have nearly tripled. A majority don't expect improvement until next year. Retrieved 26 November 2014, from http://articles.latimes.com/1992-04-12/news/mn-425_1_orange-county-business
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