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CHAPTER 5: VARIOUS BUDGETARY MODELS - Coggle Diagram
CHAPTER 5: VARIOUS BUDGETARY MODELS
GOOD BUDGETING CHARACTERISTICS
Rational allocation of resources
Continuous improvement
Clear definition of long-term goals
Supported by accounting information system
Managers' involvement
BUDGETARY REFORMS IN MALAYSIA
Programs & Performance Based Bugeting System (PPBS)
1969-1990
-Programs & Performance
FUNDAMENTALS
-Identifying objectives
-Programs planning & structuring
-Developing performance indicator
-Performance evaluation
CHARACTERISTICS
-focuses on overall agency objectives
-emphasizes programs/activities to meet objectives
-emphasizes objectives of spending
-evaluate performance and ensure various agency/departments attain the objectives
Modified Budgeting System (MBS)
1990-2013
-Accountability, flexibility & delegation
OBJECTIVES
-improve programs performance in the utilization of funds (improve policy)
-improve on the distribution and allotment of funds according to priorities set
-upgrade on accountability especially amongst lower officers
-improve public sector accountability through Program Agreements and Exemption Reports
CHARACTERISTICS
-expenditure target (existing policy, new policy, one-off)
-programs agreement & exceptions reports
-cycle of program evaluations
-more generalized approach to expenditure control
Traditional Budgeting System (TBS)
1957-1969
-Detailed Controls & Discipline)
CHARACTERISTICS
-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 cost
-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
Outcome Based Budgeting (OBB)
-Integrated Approach
OBJECTIVES
-structural mechanism to translate (national transformation policy into effective outcomes of a programme
-more authority to managers
-increase accountability through enhancement
-spending based on “value for money”
-emphasized on programmes and projects with high multiplier effects.
STRATEGIC PROCESS
Outcome base planning - Budget Preparation - Monitoring & evaluation - Reporting of results
Provides the right climate for good decisions, excellence and controls all activities, and is intelligent and timely for organisations (Finney 1993).
ADVANTAGES
TBS
simple and easy to use
PPBS
determine government's objectives
-provides better information
-Systematic and continuous performance
MBS
-Central Budget Level
-Departmental Headquarters Level
-Line-management Level
OBB
-Sets clear priorities at national, ministry, programme and activity levels
-better focus on results especially on the outcomes
-Provide availability for audit trail
DISADVANTAGES
TBS
-for
short-term
planning only
-does not state clearly the purpose of the current and future utilization of resources
-the long run goals of the organization may be jeopardized.
-not give sufficient information to legislators and the public on why the government bought those particular items.
PPBS
-Goals & objectives of individual agencies are not clear
-Difficult to develop performance indicator
-Difficult to determine appropriate programs
-Required too much information and difficult to get
MBS
-unclear or unsuitable
-only a ‘package of modification to the budget process’
-has all the elements of PPBS, cannot be considered as Separated or new Budget Systems
OBB
-level of acceptance and understanding on OB is still low
-qualities of information need to be improved in providing better information and to increase
-structure of OBB requires more work and more commitment from the officer