Description Of The Line Item Budgeting

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Line-item Budgeting Line item budgeting categorizes various expenses and places them in list format on a document for budgetary purposes. This type of budgeting is considered the heartbeat of budgeting due to the systematic method by which it controls revenue and expenses, this is made evident when Tyer and Willand (1992), pointed out “Statutory or administrative controls could be imposed on the transfer of funds from one-line item to another, or between broad categories of expenditure.” According to Schick (1971), “line item budgets were attractive to legislative officials because they did not focus explicit attention on substantive policy issues or choices.” Advantages/Disadvantages An advantage of line-item budgeting is that expenditures are often based on established provisions, therefore, fund allocation for those necessities are easily justifiable. Line-item budgeting is also uncomplicated and exact, allowing for expenditures to be recorded in specific or broad classifications and or for reduction of expenditures to be effortlessly processed. A disadvantage of line-item budgeting would be rigid regulations which prevent flexibility in spending when necessary. Other disadvantages include quick calculations and lack analytical examination which can lead to mindless budgeting errors or inefficient allocation of funds. Out of frustration with the shortcomings found within the line item budgeting method, the following various types of budgeting methods have been formulated to address those limitations and improve overall budget outcomes. Performance Budgeting Performance budgeting encompasses the causal relationship among program funding and the probable results of that program and uses this information as a means to de... ... middle of paper ... ... an entirely clean slate, as all revenue must be completely depleted and it not carried over into the new fiscal year. This type of budgeting incorporates three steps: all programs must be completely described in decision packages; programs are thoroughly analyzed and classified with consideration given to program purpose, performance measures, and cost vs benefits analogy; and finally fund allocation is distributed based on importance of classification. Advantages/Disadvantages An advantage of this type of budgeting style is allows for program overseers to pay close attention to daily and routine operations; it also permits efficient review of line item disbursements. A disadvantage of this type of budgeting is the cumbersome attention given to detail, as it prohibits practical application of this budgetary style from being implemented in ordinary circumstances.
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