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MindMap Chapter 5 Government Budget, , , , , 5.2.3 Modified Budgeting…

- - - - Citizens from all walks of life with various needs, demands, interests & expectations from the government
    - - Controlling Officer, Auditor General, Accountant General, Central Agencies etc – government machinery
    - - Parliament (House of Reps & Senates, PAC) – legislative authority to pass various laws involving public finance
    - - The Cabinet (PM,DPM, Treasury) – primary policy makers
    - - NGO, OKU, Pensioners, Trade Union, Religious Groups, Activists etc.
  - - - Influenced by the PM's vision or his preferences
        For example, in Vision 2020, Tun Dr. Mahathir budgeted RM69 billion in RMK5, of which 89% is for socioeconomic expenditure to assure development and attain the status of Developed
    - - Malaysia Plans, Industrial Malaysia Plans, National Action Plans, and so on are examples of key policies. Tunku Abdul Razak has implemented a New Economic Policy to alleviate poverty and correct racial economic imbalances. MARA and FELDA were established.
    - - Globalisation, the emergence of modern information and communication technologies, new technologies, new pandemics, natural calamities, and so on.
        For example, the government intends to invest more than RM2 billion on repairing and refurbishing roads, bridges, slopes, and buildings damaged or destroyed by the recent flood (Malaysian Reserve, April 8, 2015).
    - - The implement BR1M’s policy, government have to allocate RM4.6 billion which expected to benefit 7.9million recipient as promised in PRU13’s manifesto
    - - Inflation, unemployment, the exchange rate, and so on.
        For example, in Budget 2013, the Prime Minister provided RM440 million to give loans for trainees to complete skills training in order to improve the necessary skills and knowledge that are in line with the job market in order to tackle unemployment problems.
- - - - Forecasting error.
        
        This error is related to the prediction of impacts over time. To avoid this error, it is important to use reliable data and assumptions, and to consider the uncertainty and variability of the data
      - Valuation error
        
        This error occurs when there is an inaccurate estimation of the prices used in the CBA. To avoid this error, it is important to use reliable data and assumptions, and to consider the uncertainty and variability of the data
      - Data entry error.
        
        This error occurs when there are mistakes in entering data into the accounting system. To prevent this error, it is important to be careful with financial information, put practices in place to detect and correct errors, and work with experts who can ensure that items are properly classified and entered correctly on the books
- - - - Policy Tool
      - Management tool
      - Control tool
      - Political tool
      - Statement of government expenditures
      - Performance measurement tools
- - - - 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
  - - - Information presented from this budgeting system can easily be incorporated into the accounting system. This is because, transactions are categorized based on object of expenditure that is similar to the government accounting system.
        
        Budgeted and actual revenues and expenditure ensures detailed comparisons to be made
        
        This is a simple budgeting system and can be easily understood by the users. Hence, facilitate the users in preparation of the budget.
  - - - Data provided is useful primarily for short-term planning only.
      - Information presented in the budget expenditure does not state clearly the purpose of the current and future utilization of resources.
      - As a result, the long run goals of the organization may be jeopardized.
      - It is oriented more towards providing a framework of financial information that complies with legal requirements rather than providing useful management-type information.
      - Emphasized “what the government bought and not on what the government did”.
      - It did not give sufficient information to legislators and the public on why the government bought those particular items.
      - It did not give the managers freedom/power/authority to adjust allocation according to the needs or situation.
      - Input orientation which leads to ineffective budget allocation.
      - Budget document are too bulky and long because they comprise all detail information of what they have bought for all categories.
      - The performance of the budget is measured only from the financial aspect that is on actual expenditure incurred. Thus, the information on the effects, outcomes and benefits of the programs and activities undertaken are not emphasized
- - - - Programs Agreement & Exceptions Reports
      - Cycle of Program Evaluations
      - More generalized approach to expenditure control
  - - - Existing Policy - Refers to programs that have already been approved by Law, the Cabinet, the Ministry, the Treasury or any other authority and are still being implemented in the current year and would continue to be implemented in the following year.
      - New Policy – refers to programmes planned to be implemented in the next budget period. They are also extension or enlargement of existing policy. (Add up to existing policy, introduction of new courses, establishment of new departments or units)
      - One-Off – refers to the unavoidable expenditure, non-annual or non-recurrent expenditure. It is considered as one-time purchase
  - - - Improve identification of priority expenditure in budget submission
      - Reduce paperwork in the preparation of budget submissions and in the conduct of budget examination
        
        Allow more time to discuss new policy proposal and its modification
        
        To provide the Budget Management Division with better information on programs performance
    - - Increase the department’s opportunity to use strategic planning as the basis for budget preparation
      - Enable more top-down approach to budgeting
      - Improve communications of top management priorities to lower level managers and staff
    - - To improve motivation among line managers through increasing awareness and understanding of top management priorities through programs agreement
      - Greater flexibility in the deployment of resources within aggregate constraints
      - To enable the financial plans regarding input, output and impact to be used as a management tool
- - - - 5 years planning need to be prepared based on outcome to be achieved
      - Planning begins with development of result framework by setting the agreed output and expected outcome
      - The combination of expected performance, programme and activity levels will form ministry result framework (MRF)
      - Ministries have to determine outcomes and identify programmes and activities that contribute to the national outcome under NRF
      - The focus on outcome is to enable programmes to be planned while maximising the utilisation of resources
      - The top management has to be actively involved in planning and consultancy
      - Planning process requires expected results to be coordinated so that it is aligned with the NRF
    - - Sets clear priorities at national, ministry, programme and activity levels
      - Integration of DE and OE will provide a holistic view of national priorities
      - Provides a framework for eliminating overlapping programmes
      - It give better focus on results especially on the outcomes
      - Allow for the online budget preparation and submission
    - - The level of acceptance and understanding on OB is still low
      - The development of OBB requires commitment from top management of ministries and agencies
      - The qualities of information need to be improved in providing better information and to increase opportunity to use strategic planning as basis for budget preparation
      - The government need to review the existing structure of programmes to adapt to the OBB
      - The structure of OBB requires more work and more commitment from the officer