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Traditional/Incremental Budgetting (Method of preparation of the budget in…
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Weaknesses
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The potential for a department to manipulate data in order to reach a target, which could lead to a need to spend funds on an independent party to verify results
A potential for disagreement on where spending priorities should lie, in the case of a government with multiple agencies
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Weaknesses
The incremental approach causes a large amount of expenditure to never be thoroughly investigated for its effectiveness
Heavily oriented on budget input than output. Thus, it can't be used as a tool for making policy and resource choices, or monitoring performances
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Strengths
As the budgeting item is based on the previous year, it brings stability because financial activities are done with coordination and everyone know what need to be done
Decentralizaton, any branch situated away from its HQ can prepare budget on its own & can make changes within the allowed limits
The Traditional budget method gives the opportunity to consolidate various projects together into a single larger one. This helps in improving the performance of those projects which were underperforming before they were clubbed with a good performing working project.
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Strengths
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Is a systematic way to shift the status quo and encourage organisations to always test alternative activities and patterns of cost behaviour and expenditure levels
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Planning, programming, and budgeting system (PPBS)
Budgeting techniques that are based on systems theory that are oriented towards outputs and objectives with the main emphasis being on resource allocation based on economic analysis
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Requires sophisticated information systems, data availability, and measurement systems, and staff who have high capability, thus its more costly
Strengths
PPBS uses marginal utility theory, thereby encouraging optimal allocation of resources.
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Cross-departmental so that it can improve communication, coordination, and cooperation between departments
Weaknesses
PPBS is a statistically oriented budget technique. The use of statistics is sometimes not sharp enough to measure program effectiveness. Statistics are only appropriate for measuring a few programs
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Weaknesses
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Ranking a decision package requires staff who have expertise that the organisation may not have. In addition, subjective considerations / political pressures may appear so that they are no longer objective.
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