Please enable JavaScript.
Coggle requires JavaScript to display documents.
Chapter 5 - Various Budgetary Models - Coggle Diagram
Chapter 5 - Various Budgetary Models
GOOD BUDGETING
CHARACTERISTICS
Managers involvement
Continuous improvement
Clear definition of long term goals
Rational allocation of resources
Supported by accounting
information systems
DEVELOPMENT OF
BUDGET SYSTEM IN MALAYSIA
The Traditional Budgeting System (TBS) or the Line Item Budgeting System (LIBS) was the first budgeting system used in Malaysia
Programme and Performance Budgeting System (PPBS) was introduced in 1969
In 1990, a modification to the system known as the Modified Budgeting System (MBS) was introduced and used till today.
Summary of
SUMMARY OF TBS, PPBS, MBS, ZBB
TRADITIONAL BUDGETING
SYSTEM (TBS)
Focused on items/objects of expenditure
Concerned with financial input than the output of its activities
Not concerned with the attainments of policy objectives and their relationship to costs
The presentation of the budget is on organizational basis (ministry or department) rather than looking at expenditures of a particular program.
Less concerned with the performance
ADVANTAGES OF TBS
simple budgeting system and can be
easily understood by the users
DRAWBACKS OF TBS
did not give the managers freedom/power/authority to adjust allocation according to the needs or situation.
PROGRAMS & PERFORMANCE
BASED BUDGETING SYSTEM (PPBS)
used by majority of the developing nations.
introduced in 1969 under Treasury Circular5/1968.
CHARACTERISTICS
OF PBBS IN MALAYSIA
It focuses on overall agency objectives.
Emphasizes programs/activities to meet the
Emphasizes objectives of spending.
ADVANTAGES OF PPBS
Provides better information on management effectiveness
Systematic & continuous performance evaluation furnish information for future planning & decision making
Programs planning & structuring facilitate prioritization
DRAWBACKS OF PPBS
Goals & objectives of individual agencies are not clear
Difficult to develop performance indicator
MODIFIED BUDGETING SYSTEM (MBS)
Also known as Malaysian Budgeting System introduced in 1990s.
⦿ Based on fundamental management principles of Letting managers manage
⦿ Aim to improve resources allocation by bringing more efficient management of government programs through improved accountability
OBJECTIVES OF MBS
To improve programs performance in the utilization of funds (improve policy)
ii. To improve on the distribution and allotment of funds according to priorities set
iii. To upgrade on accountability especially amongst lower officers.
CHARACTERISTICS OF MBS
Expenditure Target
Programs Agreement & Exceptions Reports
Cycle of Program Evaluations
More generalized approach to expenditure control
EXPENDITURE TARGETS (E.T)
Existing Policy
One Off
New Policy
ZERO-BASED BUDGETING SYSTEM
ZBBS was developed by Peter Phyer
from Texas Instruments Company.
Its first application in US government was in the state of Georgia where it was adopted in 1971 by the new Governor Jimmy Carter.
spread to many states and local jurisdictions and was adopted by the Federal Government when Carter become the President in 1977.
ADVANTAGES OF ZBBS
Helps managers identify redundancies and duplications among different departments
Specific priorities of departments and divisions are identified more easily
Allows management an opportunity to review operations in depth and make recommendations for changes
DRAWBACKS OF ZBBS
Takes a considerable amount of time to go through the process of reviewing operations in enough detail to justify costs each budget cycle without relying on past expenditures.
THE FORMATS OF ZBBS
Development of decision packages for each agency. Each package will contain a summary analysis of each program within
the agency. These packages are ranked by the agency head in accordance with his/her perception of overall agency priorities.