Professional Documents
Culture Documents
MANAGEMENT
The Budget as a Policy Tool
• Monetary Policy
The process by which the monetary authority of a country,
like the central bank or currency board, controls the supply
of money, often targeting an inflation rate or interest rate to
ensure price stability and general trust in the currency.
• Fiscal Policy
Fiscal policy is the means by which a government
adjusts its spending levels and tax rates to monitor and
influence a nation's economy.
The Budget as a Managerial Tool;
• Accountability
• Cut on budgetary allocation
• Performance budgeting
The Organization for Economic Co-operation and Development (OECD)
Auditing & Accounting in Govt.
• The Auditor General of Pakistan, is appointed under
Article 168 of the Constitution of the country
• To develop independent and objective assessments of the
process of governance which augment the legislative
oversight of the people's representatives on governmental
operations.
• Govt. follows accounts & audit rules & regulations
whereas Commercial organizations used general
accepted accounting principles.
• Provide information about govt. receipts, transfers
deposition of public funds.
• Govt accounting system based on cash basis.
Types of Budgets
Line-Item Budget
Program Budgeting
Zero-based budgeting
Outcome Budgeting
LINE ITEM BUDGETING
Simplest form of budgeting, this approach links the inputs of the
system to the system.
Typically appear in the form of accounting documents that
express minimal information regarding purpose or an explicit
object within the system.
Most popular among local governments, given its relative
simplicity.
Illustrates where public money will be spent item by item.
The amount that will be spent is clearly defined to keep
spending under control.
Simple tool for keeping tabs on where money goes, ensuring
that funds are spent appropriately.
Personnel costs, office supplies, and the like are projected each
year and are lined up beneath one another.
Line Item Budgeting
Expressed in terms of the kinds and quantities of
goods and services to be purchased
Keep expenditure within the amounts approved for
each object
Line Item Budgeting
Strengths:
Effective in ensuring financial control
Adequate basis for allocating limited resources at a
time when Government activities were limited
Line Item Budgeting
Limitations:
Rigid, unable to cope with
rapidly changing priorities and circumstances
creation of new government services
Budget evaluation mechanism difficult without
mechanism to link “things to be bought” with “things to
be done”
Line Item Budgeting
Limitations:
New budgets based on previous budget with
increments for price increases
no evaluation of whether objectives are still met or cost-
effective
PERFORMANCE BUDGETING
Attempts to solve decision making problems
based on a programs ability to convert inputs to
outputs and/or use inputs to affect certain
outcomes.
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PERFORMANCE BUDGETING
Strengths:
Budget based on outputs
Emphasis on performance and results
Greater autonomy and flexibility
Greater accountability
Departments more aware of outputs and cost of producing
outputs
Puts decisions on deployment of resources in the hands
of people at operations
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PERFORMANCE BUDGETING
Shortcomings:
No clear link to desired outcomes
Lack of focus on processes
Does not address need for sustained superior
performance and results
With tighter fiscal position, need for greater emphasis on
inter-ministry allocations
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PROGRAM BUDGETING
Program Budgeting takes a normative approach
to budgeting in that decision making—allocating
resources—is determined by the funding of one
program instead of another based on what that
program offers.
Program Budgeting
Strengths:
Greater awareness of goals to be achieved
More flexible than Line Item Budgeting
gradually relaxed transfer of budgets between objects of
expenditures and between activities/programmes
Program Budgeting
Limitations:
With the expansion of existing programmes and the
introduction of new ones, there was no mechanism to
ensure that the overall expenditure would not outgrow
revenue collection.
ZERO-BASE BUDGETING
Starts from a "zero base" and every function within
an organization is analyzed for its needs and costs.
Budgets are then built around what is needed for
the upcoming period.
All expenses must be justified for each new period.
All departments must defend their programs and
consequently their level of funding each year.
Department head must demonstrate how different
levels of funding would impact the delivery of a
given program’s services.
ZERO-BASE BUDGETING
Zero-based budgeting is a response to an
incremental decision making process whereby the
budget of a given fiscal year (FY) is largely
decided upon by the existing budget of FY-1.
In contrast to incrementalism, the allocation of
scarce resources—funding—is determined from a
zero-sum accounting method.
In government, each function of a department's
section proposes certain objectives that relate to
some goal the section could achieve if
allocated x dollars.
OUTCOME BUDGETING
The Outcome Budget is likely to comprise
scheme- or project-wise outlays for all central
ministries, departments and organizations
during 2005-06 listed against
corresponding outcomes (measurable physical
targets) to be achieved during the year.
It measures the development outcomes of all
government programmes.
BUDGET TYPES (Line Item, Program)
Purpose?
Central Conditions for
Characterstics Central Actors Strengths Weaknesses
Question?Problem to Success
be solved?
Provides clear
Program
linkage between
accountability Focus is on program Requires the Requires
program
plans, goals and resources considerable
Program Program activities and
Is the program objectives. necessary to investment of
Budgeting managers & budget
achieving its goals and develop program resources
(PPBS) program analysis allocation
objectives? Requires budgeting to plans, goals and High potential fo
Links parts to
a plan. objectives conflicts
whole and
Program effectiveness
present to future
BUDGET TYPES (Performance , ZBB)
Purpose?
Central Conditions for
Characterstics Central Actors Strengths Weaknesses
Question?Problem to be Success
solved?
Requires
Measurements
Program efficiency/ considerable Time-consuming
are created for
effectiveness resources to develop Provides and expensive
workload First line
Is the program cost- reliable measures. objective ways High potential for
Performance activities, supervisors
effective? Is the program Require time to of documenting resistance becaus
Budgeting effeciency of and street level
effective develop confidence accomplishmen of fear of measure
resource bureaucrats
Measures of what is of those needed to ts being used to
allocation and
being accomplished create performance penalize
effectiveness
measures.
• BUDGET AT A GLANCE
Budget Surplus
Budget Surplus = Savings
A company's or individual's income exceeds its
expenditures over a particular period of time.
The amount by which government revenues exceed
government spending.
A surplus is considered a sign that government is
being run efficiently.
Used to pay off debt, save for the future, or to make a
desired purchase that has been delayed.
Budget Deficit
Budget Deficit = Shortfall
A company’s or individual's liabilities exceeds its
assets over a particular period of time.
The amount by which government spending exceeds
income in any one fiscal year.
Financed by borrowing money and paying interest on
the borrowed funds.
Program Spending
Discretionary Spending
Programs that are deem discretionary must have
funding approved each year.
i.e. Defense, Education, and Housing
Entitlement Spending
Funding for entitlement programs are mandated by law.
i.e. Social Security and Medicare
BUDGET 2016-17 {SALIAT FETURES}
Total outlay of the budget is Rs. 4894.9 billion
10% higher than the budget 2015-16
Resources available estimated 4442 billion (2016-17)
Resources available estimated 4168.3 billion (2015-16)
Net revenue receipts estimated 2779.7 billion (2016-17)
12.8% over the budget 2015-16
Provincial share in taxes 2135.9 billion (2016-17)
15.5% over the budget 2015-16
Net Capital receipts estimated 453.6 billion (2016-17)
Net Capital receipts 606.3 billion (2015-16)
BUDGET 2016-17 {SALIAT FETURES}
External receipts estimated Rs. 819.6 billion (2016-17)
Increase of 9.1% from budget 2015-2016
Overall expenditure estimated 4894.9 billion (2016-17)
Current expenditure : 3844 billion
Development Expenditure : 1050.9 billion
Share of current expenditure in budgetary outlay is 78.5%
Expenditure on general public service is estimated 2707.2
billion (70.4% of current expenditure)
Development expenditure outside PSDP 156.6 billion
THANK YOU
RULES OF PROCEDURE AND CONDUCT OF
BUSINESS IN THE NATIONAL ASSEMBLY ON
FINANCIAL MATTERS (EXCERPTS FROM THE “RULES
OF PROCEDURE AND CONDUCT OF BUSINESS IN
THE NATIONAL ASSEMBLY – 1992”) 163.
BUDGET
• PRESENTATION OF THE BUDGET
• NO DISCUSSION ON THE DAY OF PRESENTATION
• STAGES OF DISCUSSION OF THE BUDGET
• ALLOTMENT OF DAYS
• GENERAL DISCUSSION ON THE BUDGET
• CUT MOTIONS
• CONDITIONS FOR ADMISSIBILITY OF CUT-MOTION
• SPEAKER TO DECIDE ADMISSIBILITY OF CUT MOTION
• NOTICE OF CUT-MOTIONS
• AMENDMENT TO CUT-MOTION
• VOTING ON DEMANDS FOR GRANTS
• SCHEDULE OF AUTHORIZED EXPENDITURE
• PROCEDURE FOR DEALING WITH SUPPLEMENTARY AND
EXCESS DEMANDS
Financial Accountability Cycle
Funds
authorization
Line Departments
MOF/Legislature
AGP
CGA
Financial
Reporting
Budget—a Planning & Control Model
To achieve objectives set by management, two
basic management functions are to be
performed:
Planning, and
Controlling
Vs
Public Account
Consolidated Fund
Article 78/118, Consolidated Fund
is:
All revenues received by the
Federal/Provincial Government
All loans raised/received, and
All money received in repayment of
any loan
Consolidated Fund & Public
Account
Public Account is:
All
other moneys received by or on
behalf of the Federal/Provincial
government or received or deposited
with the Supreme/High Court or any
other court established under the
authority of the Federation/Province
Charged Expenditure
Remuneration payable to:
the President & other expenditure
relating to his/her office.
Judges of the Supreme Court
The Chief Election Commissioner
The Chairman & Dy. Chairman of the
Senate
The Speaker & Dy. Speaker
The Auditor General
Wafaqi Muhtasib
Officers and servants of the Supreme
Court, Auditor General, CEC, Secretariats
of the Senate & NA.
Debt Servicing Charges.
Sums required to satisfy any judgment,
decree or award against Pakistan by
any court or tribunal
Sums required for making loans to the
Provinces & and making grant-in-aid
by an Order of the President.
Any other sums declared by the
Constitution or by Act of Parliament to
be so charged.
Preparation
Policy
Formulation
Authorization
BUDGET
CYCLE
Review
Reporting
and Implementation
Monitoring
Budget—A Constitutional Requirement
Article: 80 & Article 120
The Annual Budget Statement— according to
the constitutional requirements.
To show separately ‘charged’ and ‘voted’
expenditures.
To distinguish between ‘current’ and
‘development’ expenditures.
Prescribed format; i.e. separate estimates for
development and
non-development expenditure.
The details to be provided by grant number and
according to the object and functional
classification as per Chart of Accounts.
TheSecretary of the
department/division is the “Principal
Accounting Officer (PAO)”.
Revised Estimate =
First 04 months Actual Expenditure for the
current FY +
Last 08 months Actual Expenditure for the
Previous FY.
RE-APPROPRIATION
Ministries/Divisions/Departments have
been delegated full powers for re-
appropriation except Employees Related
Expenses, Telephone, utilities and rent.
5. GST on Services
- Federal Government recognized that the Sales Tax on
Services is a Provincial subject. NFC decided that it might be
collected by Provinces if so desired
- Provinces will gain Rs. 30 billion as a result of this decision.
Salient Features of 7th NFC Award 2010
6. Gas Development Surcharge
- On account of GDS - Balochistan 28.7 percent,
- KP 3.0 percent, - Punjab 7.8 percent
- Sindh 60.4 percent.
- Loss of royalty to Balochistan is about Rs 2 billion which will be compensated
through generating additional revenue of Rs 1.8 billion under the revised formula.
(10 %)
7. Relief Measures for KP and Balochistan
- KP NFC recognized the role of KP as front line province against War on Terror
- Federal Government to bear all expenditure
- 1 % of net proceeds of Divisible Pool ear-marked for KP
- Balochistan ,As the most under-developed province of Pakistan and having
peculiar geographic and economic characteristics, Balochistan needed special
attention of NFC. In the horizontal distribution, its provincial pool has been
increased to 9.09% (approximately twice the 2009-10 Divisible Pool transfers).
Moreover, Federal Government has promised to cover any short fall due to lower
federal revenues.
Resources—Federal level
Resources
= Divisible
Pool
Divisible Pool
Provincial Shares
Share of Provinces out of Divisible Pool
Percentage share of Provinces out of divisible pool is as follows:
Province
Resources
= Provincial
Divisible Pool
PROVINCIAL OBLIGATORY EXPENDITURE
40% to Provincial
Government
60% to Districts
096 Admn.
A011-2
A01151 Basic Pay of Other Staff
Supplementary grant,
Reappropriation,
Excesses/surrenders
Supplementary Grant
If available within the grant, and if already funds were
allocated in a certain head, reappropriation can be made
where required. If not available, funds arranged by FD will be
part of the supplementary grant.
If funds are available within the grant, but no funds were
allocated in the ABS, token grant will form part of the
supplementary grant, remaining managed from within the
grant through re-appropriation.
Supplementary budget is presented to the assembly after
annual budget of the next year, for authorization like ABS
Excess/surrender budget
No timing.
When re-appropriation account is prepared, and is
discussed by the PAC, and if they feel the excesses
are justified, they order preparation of excess budget
which is again submitted to the assembly for
authorization.
Revised Budget
Used for preparation of budget for the upcoming
budget.
Used as a yardstick for preparation of next year
Estimates which are based on:
Reconciled 08 months actual expenditures of the current
year + 04 months expenditure of previous year gives the
Revised Estimates, which is then compared with the
actual allocation and saving is surrendered, or additional
grant is demanded.
THANK YOU
BACKGROUND
The institution of budget originated in the West.
In the days of absolute monarchy, treasury was controlled by the king.
The struggle for representative government in England began with the
right to control budget.
‘No budget without representation was the concern raised. The right to
control expenditure through appropriation was asserted.
The executive was required to produce for the approval of the parliament
every year a complete plan of income and expenditure.
The budget was document of future plans of government and that
expenditure was done to address public needs.
There was no better way of asserting control than to require the
government to submit a comprehensive plan for the approval of the
legislature showing how much money is needed for any one year and
how they propose to raise and spend it. This plan was called ‘budget’.
PLANNING PROGRAMMING BUDGETING (PPB)