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BUDGETING IN PUBLIC ADMINISTRATION, Budgeting-and-Public-Administration -…
BUDGETING IN PUBLIC ADMINISTRATION
DEFINITION
Budget is an estimation of revenue and expenses over a specified future period of time
It is compiled and re-evaluated on a periodic basis
Budgets can be made for a person, a family, a group of people, a business, a government, a country, a multinational organization or just about anything else that makes and spends money
At companies and organizations, a budget is an internal tool used by management and is often not required for reporting by external parties
CHARACTERISTICS
The budget must follow the organizational's goals
Have the support of management through out it's period of it's planning and implementation
Flexible
The budget must be coordinate
A sense of ownership must be expressed by the budget
PURPOSE AND OBJECTIVE
Objective
Allocation
Distribution
Stabilization
Growth
Purpose
Estimation of capital or funds requirements
Determination of capital composition
Choice and sources of funds
Management of expenditures
Financial controls
ADVANTAGES/ DISADVANTAGES
Advantages
Coordinates activities across departments
Budgets translate
strategic plans
into action
Budgets provide an excellent record of organizational
activities
.
Budgets improve
communication
with employees.
Budget improve
resources allocation
, because all requests are clarified and justified.
Budget provide a tool for corrective action through
reallocations
Disadvantages
The major problem occurs when budgets are applied mechanically and rigidly.
Budgets can demotivate employees because of
lack of participation
. if the budgets are arbitrarily imposed top down, employees will not understand the reason for budgeted expenditures and will not be committed to them.
Budgets can cause perceptions of
unfairness
Budgets can create
competition for resources and politics
.
A rigid budget structure
reduces initiative
and innovation at lower levels, making it impossible to obtain money for new ideas,
IDENTIFY PROBLEMS
Rigid decision making
Time needed to setup a budget
Inaccuracy
Attitude shown by the public sector
False information or inaccurate value of money
TYPE OF BUDGETING
Operating budget
Capital budget
