Local authorities specify that there shall be a collection of user fees upon submission and collection of certain products and supplements. The state also provide an allowance that the revenue authority collect from each of the given categories and, the rate of expenditure should be adjusted in each fiscal year due to increase in workload. Moreover, user fee consist by far the most important and the largest source of revenue to the local government. In most local authorities, it consists of more than half of the total revenue collected. The central government has mandated the local government opt privatize some of their services to individual firms in order to make a profit from them. These essential services include firefighting, gas supply, municipal transport as well as water and sanitation. Private enterprises take charge of payment collection and undertaking the expenditure to maintain the local infrastructure.
The benefits that an individual gets from the use of public goods are not measurable and, therefore, user fees may not be feasible to some situations. Such services like security, development of infrastructure and law enforcement can only be financed directly from tax. The local authority has to employ discretion while trying to outsource additional revenue from user fees. It is only the private goods that auger well with such fees.
The highest user fees established by South Africa local authority are some of the following: late fees and disconnection of services are some of the collection devices that the public enterprises apply to ensure that bad debts written off are minimal.
In Africa, user fees for health services are not a new thing. A number of countries from the Anglophone Africa such as Namibia and South Africa have had this type of national user fees for quite a number of years. However, in many other countries such charges have been applied to both the governmental and non-governmental organizations.
The other component of user fees is the service cost of indirect costs. These are the costs that are not specifically assignable to a particular cost center. User fees on transport is the other source of revenue that assists in financing the local government activities. User fees arise from the usage of city busses and commuter railways that service major destinations in town. The local authorities set their collection centers at the point of entry and exit such as railway and bus terminus with stringent measures on collection and records keeping.
Ohio state budget of the financial year 2012/2013 recommends a GRF of approximate $26.9 billion. This represents an increase over the previous year by 1.1%. The governor recommends that all funds totaling to $59.4 billion as a decrease of 5.3% from the 2011 spending. This share that excludes the federal reimbursement displays the GRF budget by major functional areas.
Analysts have developed a number of methods that can be used to estimate state budget in future. Some of the methods include the following:
(i) Net present value (NPV) - this is the most widely acceptable and applied the method to evaluate a given capital budgeting situation. It is most effective when the cash flow of the established projects can be ascertained for the period of evaluation. However, the NPV process does not take into consideration the net present values of the initial investment as it may lead to analysts to a wrong decision.
(ii) Internal rate of return- this method is also used in place of NPV because it solves problems associated with the previous method. However, if the process involves complex cash flows, the IRR process may provide two IRR methods that may become ambiguous and decision making tough. Therefore, for effective use of the IRR process, the analyst must ensure that the ambiguity of cash flows is eliminated.
(iii) The profitability index is an alternative method to NPV which helps solve the drawbacks involved in the initial budgeting. It evaluates the capital budgeting process using the NPV methods to arrive to a concrete decision.
Therefore, forecasting capital budgeting may not be thought appropriate by relying on only one method, a number of methods have to be put in place.