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CHAPTER 3 BUDGETING IN PUBLIC SECTOR (BUDGETING APPROACHES) - Coggle…
CHAPTER 3
BUDGETING IN PUBLIC SECTOR
(BUDGETING APPROACHES)
BUDGETING
TECHNIQUES
TBS
<1969
PPBS
1969-1989
MBS
1990-2012
OBB
2013-present
Traditional budgeting
1950s-1969
known as the line-item budget or standard-object budget
presentation of the traditional budget is
based on line-item, or on the nature of income & exp
Eg; income from fees, sales, and grants;
expenditure on employment, consumables, travelling
:star:
RATIONALE
Simple and easily incorporated in the accounting system.
Does not require extensive analysis on the activities carried out.
Reduces arguments during budget presentationand approval.
Reflects rational economic policy.
:warning:
SHORTCOMINGS
No consideration of whether a particular activity is still compulsory in meeting the objectives.
Focuses on inputs (spending) instead of outputs (achievement of objectives).
There is no link between the allocation and the objectives of the public sector.
Less information cost-effectiveness.
Limited to short-term planning.
Financial control is focused solely on minimising expenditures and controlling inputs (costs).
:check: Main aim ensuring the limited funds were allocated effectively; to minimise
excessive & unauthorised expenditures.
Total Allocation =
Last years spending level + Current year budget+
Increase in cost of material & labour due to inflation +
Costs for new project or programme
Programme & Performance budgeting
1969-1990
:check: The aim was to transform public budgeting
system from the control of inputs to a focus on outputs or outcome in the interest of improving operational efficiency and promoting result-oriented accountability.
The main concept is to link between resource allocation with programmes that are able to facilitate the public sector in achieving its objectives.
segregated in 4 stages:
Identifying overall objectives
Planning and structuring of programmes
Analysing and selecting programmes
Evaluating performance
:star:
IMPLICATIONS
Improvement of record keeping, classification & coding scheme for revenue and expenditure, intro of vote book.
Budget dialogues became more meaningful.
Encouraged good management practices among managers.
Provides for proper performance evaluation that
links btwn utilisation of resources & achievement of objectives.
:warning:
SHORTCOMINGS
Lack of info needed to enable successful implementation.
The complexity of public sector was ignored in the development of the programme structures.
Conflicting objectives of the public sector.
Modified Budgeting
1990-2013
:check: The main concept is ‘let managers manage’ & ‘accountability to match authority’
greater authority and autonomy in financial mgt given to controlling officers
Controlling offices were to set their own targets and prioritise their programmes.
Focused the ‘value for money’ in the spending of public money:
Economy:
INPUT
(supply, assets, grants, expenditures)
Effectiveness:
OUTPUT
(products/ services produced)
Effectiveness:
IMPACT
(effectiveness of input & output as measured in terms of quantity, quality, timeliness and costs).
:star:
IMPLICATIONS
Provides flexibility for managers to make decisions within their authority and focus on strategic planning.
Encourages accountability via clear delegation of authority and feedback.
Better programme rationalization and analysis.
:warning:
SHORTCOMINGS
Lack of structured monitoring framework.
Sole focus on the output in terms of quantity rather than quality.
Budgeting become mere compliance.
Programme evaluation was carried out on an ad-hoc basis