Budgeting in A Public Sector Power Point
Budgeting in A Public Sector Power Point
Budgeting in A Public Sector Power Point
Definition
A budget is a quantitative expression of a plan of action prepared in advance of the period to which of relates. A budget expresses what is to be undertaken next year and authorizes the financial recourses that are needed.
Authorization of expenditure
Money must be spent on what has been authorized in the annual budget.
6. Focus attention
The budget process focuses attention on the future. It there fore makes the service manages plan method and cost of service delivery.
7. Motivation of Managers
The managers are motivated by the budget but more so if they played the role in formulating it. There is therefore alll attachment that is created.
Revenue Budgets
It must be understood that most compelling reasons for revenue budget is to determine the income level and the expenditure levels. For services that are funded through taxation and charges, the central government need to fix the level of taxes and charges to be levied.
Disadvantage
Cannot identify the amount allocated to each individual service and would therefore fail to reflect the planned level of activity for each service.
Capital Budgeting
If a public sector organization is be successful in achieving its objectives it is to give consideration to planning of capital expenditure. A Useful approach to the problem of planning and controlling expenditure is to develop capital programs which express the overall plan of start , medium and long term capital schemes, and reveal the allocation of priorities between different parts of the organization.
1. Incremental /Department
This model bases next years budget on current results plus extra amount for estimated growth and inflaction.
2. Rational/ Corporate
This is less concerned with the budget base or past, but are more concerned with using recourses to meet current established objectives.
Stage 1
Separate estimate Preparation
Do the separate departments or services prepare next years budget estimates in isolation using the current expenditure aid service levels as a starting point
Sage 2
Aggregation & Comparison
The separate estimates or bids are then aggregated and then total compare with what can be raised via taxation and charges.
Sage 3
Reduction in expenditure levels
When the gap between the income and expenditure is narrow proposals are made to reduce the proposed expenditure by a given percentage.
Stage 4
Detail Estimate Reduction
When faced prospects to make substantial cuts in proposed expenditure the following guidelines are often used
1. Multi-year Nature
A medium tom plan say 2-3 commitment and forecast are considered including the annual budget is seen as the first year of the rolling budget.
2. Expenditure Guideline
A target growth percent is established for each service prior to the prevention of detailed estimates for a department
Traditional budgeting approach which is department is not very suitable for non-profit making organizations such as government ministries.
A major citizen of the traditional approach is at luck of information on the activities actually being performed by the ministries. Cast are analyzed by their nature rather than purpose.
PPBS intended to overcome such criticisms. The aim is to enable the management of non-profit organizations to make more informed decisions about the allocation of recourses to meet the overall objectives of the organization.
Sages
1. Review the objectives and activities undertaken by the organization. 2. Identification of programs which would be undertaken to achieve the objectives. 3. Identification and evaluation of various methods of the objectives of the various programs. 4. Selection of appropriate programs on the basis of costs- benefit principals.
Advantages
1.Forces management to identify activities to provided. 2.Provide information that enable management assess the effectiveness of their plans. 3more efficient allocation of resources.
Estimated out-turn
Involves forecasting the out-turn for the current year which form the budgetary based for the contraction of budget for next year.
Estimating the expenditure for the remainder of the year the following should be considered
The preparation of the year remaining The anticipated inflation for the remainder of the year Impact pay awards on stuff costs Costs of new products to be commenced in the current year.