BUDGETING PROCESS Dr. BALAMURUGAN MUTHURAMAN Chapter

BUDGETING - Introduction The budgeting concept is seen to be the central point of government financial administration; government accounting is driven by the budgeting system of government. In this process, any government can develop its own process, depending on the system of government and the stage of development or sophistication of the government

DEFINITION OF BUDGET A budget is an authorised financial plan of the anticipated revenues and expenditures of the government. Before the document is approved and hence authorised for implementation, it is referred to as estimates. It is a document that is developed for the financial operations of the Nation

OBJECTIVES OF BUDGETING  It is to assist policy makers of a Nation to develop policies  The process is aimed at estimating the total income of the government to support its expenditure plans and developments.  It is to give authority to future spending  It is to provide a mechanism to control the Nation ‟ s revenue and expenditure  It serves to bring together the separate subsystems of the Nation to enable them work together towards the achievement of the objectives of the Nation

THE BUDGETARY/GOVERNMENT ACCOUNTING CONCEPT Governmental accounting has been known as well as budgetary accounting in the sense that the budgeting concept is the main financing concept that drives the accounting process in government organisations. The budgetary accounting concept is the process through which government organisations account for the receipt of budgetary resources from the central government and how these resources were used

IMPLEMENTING A GOOD BUDGETARY CONTROL SYSTEM  There is the need for an agreement generally in the organisation to implement such a budgetary control measure.  The objectives, outputs and targets for the organisation  A detailed plan is formulated into a comprehensive budget.  A Continuous process is adopted of comparing achievements or outputs with the budgets

BUDGETARY CONTROL AREAS Budgetary control in government can cover the following areas: (a) Revenue Control (b) Fund Control (c) Expenditure Control (d) Cost control (e) Cash Control (f) Payment/Disbursement Control (g) Salary/Payroll Control

TYPES OF BUDGET SYSTEMS THE TRADITIONAL BUDGET This is the initial system of budgeting that was developed and the main objective was to plan how to utilise the financial resources of the Nation, to control these resource and also to ensure accountability from the stewards, who are the officials who lead in the use of these resources

PERFORMANCE BUDGETING This budget stresses on the functions, and projects which are undertaken in the budget as against the traditional budget which stresses on inputs, or expenditure items like materials, wages and stationery

THE ZERO-BASE BUDGETING (ZBB) The budgeting technique stresses that every item of expenditure to be budgeted for should be scrutinized and justified why such item should be funded in the budget. The budget by implication tries to discourage wasteful expenditure, and is aimed at ensuring that useless projects are not undertaking in the government budget

PLANNING PROGRAMMING BUDGETING SYSTEM (PPBS) The main features of this budgeting technique are identified in the three main words in the concept: (a) Planning This involves the development of long range objectives and goals of the public sector institutions. Such goals and objectives are at times prioritized for the purposes of their achievement

(b) Programming Programmes are developed to achieve the objectives or goals as identified under the planning. Alternative programmes are identified here and compared. (c) Budgeting This involves placing money values on the programmes, putting together the costing of the programmes and the relevant benefits that would be derived from the programme

PPBS – Advantages 1.It stresses more on the future, since planning involves looking into the future. 2. It enables budget authorities to evaluate programmes to determine their efficiency and effectiveness. 3. It encourages constant review of programmes. 4. The whole system development prevents programmes that often overlap through departments; similar programmes in different organisations are well coordinated

PPBS - Disadvantages 1. The long range planning process is often difficult since going deep into the future is very subjective. 2. Planning cannot be done well since most of the goals or objectives in the public sector system cannot be physically identified and measured easily. 3. The process requires a lot of time, money and personnel who can do good analyses financially and technically. 4. There is also the problem that most public sector outputs cannot be quantified and measured, hence performance cannot be measured easily through such budgeting system