04 - Government Budgeting: Functions and Methods

General Administration and Support

This budget term in the GAA structure consists of activities and expenditure dealing with the provision of overall administrative management and operational support to the entire agency operations (agency overhead), e.g., general management and supervision, human resources development, etc.

Support to Operations

This budget term in the GAA structure consists of programs and corresponding expenditures which provide staff, technical and/or substantial support to operations, but do not produce goods or deliver services or directly engage in regulation, policy formulation and planning, monitoring and evaluation, information management, etc.

Operations

This budget term in the GAA structure consists of programs and corresponding expenditures which relate to the main purpose for which an agency has been created. Involves direct production of goods or delivery of services or direct engagement in regulations.

Personal Services

This budget term in the GAA structure provisions for the payment of salaries, wages and other compensation (e.g., merit, salary increase, cost-of-living-allowances, etc.) of permanent, temporary, contractual, and casual employees of the government

Maintenance and Other Operating Expenses (MOOE)

This budget term in the GAA structure 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

This budget term in the GAA structure 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, including investments in the capital stock of GOCCs and their subsidiaries.

Major Final Outputs (MFOs)

It is a part of the GAA structure that refers to 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

It is a budget term that refers to a predetermined level of quantity, quality, timeliness and cost of outputs.

Government Budget

It is the financial plan of a government for a given period, usually for a fiscal year, which shows what its resources are, and how they will be generated and used over the fiscal period; A quantitative economic plan in respect of a period of time.

Mapping

It is a function of a budget that details the road to be travelled in fulfillment of an organizational objective. It details the steps to be taken and therefore can act as a check on the overall viability of the organization’s objective

Controlling

It is a function of a budget that ensures the achievement of objectives by placing a planning control framework over the steps to be taken

Coordinating

It is a function of a budget that spells out the linkages between parts of the organization’s plan

Communicating

It is a function of a budget that means for management to explicitly inform the staff and the wider public what the organization will be doing

Instructing

It is a function of a budget that lays out the requirements of the organization

Authorizing

It is a function of a budget that takes action within the specified limits. It delegates function.

Motivating

It is a function of a budget that encourages to perform within targeted limits

Performance Measurements

It is a function of a budget that provides a benchmark against which actual performance can be measured

Decision-Making

It is a function of a budget that may serve as useful tool in evaluating the consequences of proposed changes in actions, since it should be possible to track the effect of any change throughout the organization

Perfection

Budget is a forward plan expressed in monetary terms. It is a limitation of government budgeting concerning the unlikeliness of any refinements in the budgeting process.

Problematic

There is no bottom line by which the performance of the agency can be measured. It is a limitation of government budgeting that describes to the measurement of outcomes of public spending.

Incremental Budgeting

It is a method/ approach of budgeting wherein the previous year’s budget for a department or a division is carried forward to the next annual budget. This is due to new legislative requirements, additional resources, service developments, anticipated price and wage inflation, population growth, etc.

Advantages of Incremental Budgeting

• Stable

• Easily understood

• Administratively straightforward

• Particularly useful where outputs are difficult to define/quantify (and value judgment is appropriate)

• Allows policy-makers to concentrate on the key areas of change (political decisions)

Disadvantages of Incremental Budgeting

• Backward looking

• Tends to be reactive rather than proactive

• Does not allow for overall performance overview

• Often underpinned by data or service provision which is no longer relevant or is inconsistent with new priorities

• Encourages systemic inertia and ‘empire building’

Zero-Based Budgeting

It is a method/ approach of budgeting that starts from the basis that no budget lines should be carried forward from one period to the next simply because they occurred previously. Everything that is included in the budget must be considered and justified. Minimum, current and incremental levels of service provision are determined

Advantages of Zero-Based Budgeting

• Allows questioning of inherited position and challenges the status quo

• Focuses the budget closely on objectives and outcomes

• Actively involves operational managers rather than handing them down a budget from above

• Can be adaptive to changes in circumstances and

• priorities

• Can lead to better resource allocation

Disadvantages of Zero-Based Budgetign

• More time consuming

• Need for specialized skills/training

• Difficulties can arise in the identification of suitable performance measures and decision/prioritization criteria (threat to legislative power, Buridan’s ass)

• Questioning of the inherited position can be seen as threatening to organizations and their people

Priority-Based Budgeting

It is a method/ approach of budgeting that is a modification of the zero-based approach (variant: Mission-Driven, Results Oriented Budgeting). It focuses on corporate/agency priorities and allocates growth and savings in budgets accordingly (core functions)

Planning, Programming, and Budgeting System (PPBS)

It is a method/ approach of budgeting that relates cost estimates to programs using a cross-cutting method rather than attributing costs on a traditional departmental basis. It is also called Output Budgeting.

Performance-Based Budgeting

It is a method/ approach of budgeting wherein its main aim is to connect performance information with the allocation and management of resources. It needs to containing: Inputs, Outputs, Efficiency/productivity data, and Effectiveness of information.

Participatory Budgeting

It is a method/ approach of budgeting which attempts to give local groups ownership of the budgetary process. Local communities have a say in prioritizing services or projects through activity such as community-led debate, neighborhood votes and public meetings.

Resource-Restricted Budgeting

It is a method/ approach of budgeting where limits are applied to particular resources (i.e. staff or equipment) and works rather like the incremental approach but in reverse. Offers control over resources in question and provides clear unambiguous direction but tends to ignore the practicalities of service delivery (eg DepEd in the 1990s, other offices at present). It may make service unmanageable because of the restrictions imposed