MODULE 6: Government Budgeting Functions and Methods

GAA Structure

1. Programs, Projects, and Activities (PPAs)

2. Current Operating Expenditures

3. Capital Outlays

General Administration Support

Consists of activities and expenditure dealing with the provision of overall administrative management and operational support to the entire agency operations

General Administration Support example

(1) general management and supervision

(2) human resources development

Support to Operations

Consists of programs and corresponding expenditures which provide staff, technical and/or substantial support to operations

Operations

Consists of programs and corresponding expenditures which

relate to the main purpose for which an agency has been created.

Operations example

direct production of goods or delivery of services or direct engagement in regulations.

Personal Services

Provisions for the payment of salaries, wages and other compensation of permanent, temporary, contractual, and casual employees of the government

Maintenance and Other Operating Expenses (MOOE)

Refer to expenditures to support the operations of government agencies such as expenses for supplies and materials; transportation and travel; utilities (water, power, etc.) and the repairs, etc.

Capital Expenditures or Capital Outlays.

Refer to appropriations for the purchase of goods and services, the benefits of which extend beyond the fiscal year and which add to the assets of the Government.

Major Final Outputs (MFOs)

Goods and services that a department or agency are mandated to deliver to external clients through the implementation of programs, activities and projects.

Performance Target

A predetermined level of quantity, quality, timeliness and cost of outputs

Government Budget

Financial plan of a government for a given period, usually for a fiscal year, containing resources and how they will be generated or used over the fiscal period.

Government Budget

A quantitative economic plan in respect of a period of time

Functions of a Budget

a. mapping

b. controlling

c. coordinating

d. communicating

e. instructing

f. authorizing

g. motivating

h. performance measurement

i. decision-making

Functions of a Budget: Mapping

Details the steps to be taken and therefore can act as a check on the overall viability of the organization's objective

Functions of a Budget: Controlling

planning control framework over the steps to be taken

Functions of a Budget: Coordinating

Spells out the linkages between parts of the organization's plan

Functions of a Budget: Communicating

Means for management to explicitly inform the staff and the wider public

Functions of a Budget: Instructing

lays out the requirements of the organization

Functions of a Budget: Authorizing

Delegating function within the specified limits

Functions of a Budget: Motivating

Encourages managers to perform within targeted limits

Functions of a Budget: Performance Measurement

Provides a benchmark against which actual performance can be measured

Functions of a Budget: Decision-Making

May serve as a useful tool in evaluating the consequences of proposed changes in actions.

Limitations of Government Budgeting:

Budget is _______ expressed in _________

a forward plan expressed in monetary terms

Limitations of Government Budgeting:

In the public sector, there is no _____ by which the performance of the agency can be measured

bottom line

7 Methods of Budgeting

Incremental Budgeting

Zero-Based Budgeting

Priority-Based Budgeting

Planning Programming Budgeting System

Performance Based Budgeting

Participatory Budgeting

Resource-Restricted Budgeting

Incremental Budgeting

(1) The previous year's budget for a department or a division is carried forward to the next annual budget

(2) Reasons for adjustment

(3) a process of negotiation and compromise

Advantages of Incremental Budgeting

(1) stable

(2) Allows policy-makers to concentrate on the key areas of change

Disadvantages of Incremental Budgeting

(1) backward looking

(2) tends to be reactive than proactive

Zero-Based Budgeting

(1) Starts from the basis that no budget lines should be carried forward from one period to the next simply because they occurred previously

(2) considered, justified, and activities are ranked in order of priority

Advantages of Zero-Based Budgeting

(1) Focuses the budget closely on objectives and outcomes

(2) Actively involves operational managers rather than handing them down a budget from above

Disadvantages of Zero-Based Budgeting

(1) time consuming

(2) need for specialized skills/training

Priority-Based Budgeting

(1) modification of zero-based approach (variant: mission-driven results oriented budgeting)

(2) focus: corporate/agency priorities and its core functions

Planning, Programming and Budgeting System (PPBS) or Output Budgeting

Relates cost estimates to programs using a cross-cutting method...

Performance-Based Budgeting

Main aim is to connect performance information with the allocation and management of resources.

Performance-Informed Budgeting

The type of budgeting the Philippine Government employs is _______.

Participatory Budgeting

Give local groups ownership of the budgetary process

Ways of Participatory Budgeting

community-led debate, neighborhood votes and

public meetings

Resource-Restricted Budgeting

Limits are applied to particular resources (i.e. staff or equipment) and works rather like the incremental approach but in reverse