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
…show more content…
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 develop an actual budget. A major focal point of performance budgeting is accountability; this type of budgeting is often utilized by administrators to obtain cost efficiency and establish useful budget forecasting.
Advantages/Disadvantages
An advantage of performance budgeting would be transparency; this type of budgeting allows stakeholders the ability to ascertain the amount of service delivered for the funded cost. Basically it measures to what extent does government agencies getting what they paid for. This type of budgeting also provides an avenue by which management and line staff can contribute feedback for the enhancement of a program’s success.
A disadvantage of this type of budgeting is that it leaves room for erroneous reporting by departmental heads to ensure their programs are not cut due to lack of performance output. Performance budgeting can become a burden for substantial budgeting endeavors as funding requirements for various agencies can vary
I attended the Saturday Lab 1 session discussing the Denison Specialty Hospital case study. In our session, we had a through discussion into the different budget terminology. I learned about the difference between accrual and cash accounting methods, which is based on the timing of when the revenue and expenses are recognized. I also learned about responsibility centers as an organizational unit under the supervision of a manager, who is responsible for its activities and results. In addition, the manager is accountable for the budget of the department that they head. Therefore, a centralized form of management in developing the budget because it makes easier to because the information for the department budget is located
The Australian Budget is an annually published document which details the Federal Government's plans to affect the level of economic activity, resource allocation, and income distribution through the use of fiscal policy. It describes the framework which the government intends to follow during the next financial year which will result in the attainment of their objectives. The budget is a publication of the government's plans regarding the use of fiscal policy, and is published to parliament and the general public on “budget night”, so as to allow open dissemination about the status of public finances and to promote transparency in Australia's fiscal policy.
For government budgeting to be effective, the process that guides it must be an evolving one. As the government gets bigger, it will most likely destabilize the existing method. Therefore, it must change to keep pace with the demands and growth of the country. The process must be capable of handling the complexity of our nation and its multifaceted needs so it will always need revisions and restructuring to face these new challenges. Its ultimate goal must be to reinforce the government and strengthen the country.
Budgeting is a familiar term to most American families. Dictionary.com defines budgeting as an estimate, often itemized, of expected income and expense for a given period in the future. In order to avoid debt, bankruptcy, or overspending it is common to create a spreadsheet of some sort tracking your spending and income. On a grander scheme, the Unites States has to budget as well.
The budget is a method in which to reign-in discretionary spending, and will likely show variances between what costs have been anticipated and what costs are actually incurred. The Budget Process Budgetary planning may differ between organizations. Single-period budgets and rolling budgets have methodologies that provide advantages and disadvantages that may make one budget time frame better than another. A single period may require less time in planning during a fiscal year, but is less accurate than a rolling budget that is continuously planned on a repetitive basis. In either case, budgets are planned in advance in order for a company to operate profitably, and less so to have "actual results equal budgeted results."
“A budget is more than just a series of numbers on a page; it is an embodiment of our values”, Barack Obama. The utterance of these words could not have been a breath more of truth. For the Federal Budget is a reflection of the founder’s aspirations stated on the preamble. To specify, in the simplest of forms the preamble is a mission statement for the nation; it vaguely identifies the steps required for the prosperity of the nation. With the creation of the preamble, along came the Federal Budget; the budget being the nation’s budget that states the overall expenditures. The preamble being utilized in the birth process of the Federal Budget, Due to the lack of alignment between the federal budget and the preamble, funding in The big Five,
A possible problem can arise if the superior uses higher budget proposals for subordinates as a standard, the benefits can then be very low when the subordinates submits lower budgets (Fisher et al., 2002). When subordinates submit significant lower budgets than their co-workers, they may even be sanctioned by their superior (Fisher et al., 2002).
In the annual budgeting stage of the legislators job they determine how much money is needed to keep government programs running. They usually work on subject like these during the Winter
In conclusion, the advantages of participative budgeting include an increase and transferral of information, an increase in subordinate morale and job satisfaction, the development of negotiation skills and goal congruence. However these advantages only come into full affect when particular conditions are present, without these conditions it may turn into a disadvantage through budgetary slack, low job satisfaction and responsibility.
Quantitative plans are called budgets. Budgets are prepared to impose cost controls on the activities of an organization (Chenhall, 1986).Budgets are then used to evaluate the performance of the management and budget itself is considered as a standard to evaluate the performance Solomon, 1956). The purpose of the budget is also to implement the strategy of the organization and communicate it to the employees of the organization Rickards (2006). The change in the external environment has led to the change in the budgeting approaches from the initial cash based budgets to the zerio based budgets (Bovaird, 2007).
Capital budgeting is one of the primary activities of a company. Most of the company uses capital budgeting for decision making process of selecting and evaluating long-term investment. The company have to make a right decision with respect to investment in fixed asset such as purchasing of new equipment and delivery vehicles, constructing additions to buildings and many more. The decision must be right because of the project involve huge amount of cash outflow and it is committed for many years.
Jules, P, & Holzer ,M. (2001). Promoting the Utilization of PerformanceMeasures in Public Organizations: An Empirical Study of Factors Affecting Adoption and Implementation. Public Administration Review, 61 (6): 693 – 708.
In conclusion, an organization needs to know how performance is measured. They need to be cognizant of the gaps in training needs and it is vital for an organization to realize cutting the training budget is going to cost them more in the long run. Proper budget allocations can and will give your organization the competitive edge it needs to maintain strong
It requires an adequate and sound organizational structure, that is, there must be a definite assignment of responsibility for each function of the enterprise. Budgeting compels all the members of management, from the top to bottom to participate in the establishment of goals and plans. Budgeting compels departmental managers to make plans in harmony with the other departments and of the entire enterprise. Budgeting helps the management to put down in figures what is necessary for a satisfactory performance. Budgeting helps the management to plan for the most economical use of labor, material and capital. Budgeting tends to remove the cloud of uncertainty that exists in many organizations, especially among lower levels of management, relative to basic policies and objectives. Budgeting promotes an understanding among members of management of their co-workers' problems. Budgeting force management to give adequate attention to the effects of general business conditions. Budgeting aids in obtaining bank credit as banks commonly require a projection of future operations and cash flows to support
Fiscal Affairs Department of IMF in 2009 declared that a statement of the main central government tax expenditures should be required as part of the budget or related fiscal documentation, indicating the public policy purpose of each provision, its duration, and the intended beneficiaries. In addition, there is an area of the budget that routinely escapes rigorous inspection. This is the large allocation of state resources through the use of tax expenditures which reduce the taxes that might otherwise be collected. The tax expenditure report supplements the annual or biennial budget document (Benker, 1986).