Reginald Canary, the mayor of the City of Bloomerville, is trying to locate available resources in the governmental-type funds to help “bail out” the General Fund. The General Fund expenditures currently exceed budgetary amounts by $ 10 million with 2 months remaining in the fiscal year. Canary feels some unused resources in a Capital Projects Fund or a Debt Service Fund could be transferred to the General Fund to alleviate the impending budget deficit. Each of these funds has a fund balance of at least $ 50 million. If Canary cannot locate the needed resources, he will have to borrow money using tax anticipation notes based on an emergency tax levy. This prospect is a major problem for him because the current year is an election year. Is Canary’s plan ethical? If you were the chief financial officer of Bloomerville, how would you respond to Canary? How could such a situation be prevented?
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