BUDGETING AND

FINANCING
 BUDGET VS BUDGETING
🠶 BUDGET is a financial plan whether for an agency or a program.
🠶 According to Malvin Gross, “a BUDGET is a plan of action. It
represents the organization’s blueprint for the coming months or years
expressed in monetary terms. Characterized as a series of goals with price
tags attached.”
🠶 BUDGETING is one of the areas of financial administration which
include:
1. Securing of funds or income.
2. Using the funds in accordance with the objectives of the organization
or budgeting;
3. Maintaining appropriate records of financial transactions or accounting
and also auditing.
 TERMS RELATED TO
BUDGETING
🠶 ACCOUNTING - the art of recording, classifying, and
summarizing in a significant manner and in terms of
money transactions or events which are in part of a
financial character and analyzing and interpreting the
results.
🠶 RECORDING – making entries; classifying includes
sorting mass of transactions in an orderly and systematic
manner; summarizing means bringing together of
accounting data in a form that further enhances this
information.
 TERMS RELATED TO
🠶 AUDITING – stateBUDGETING
of making an audit or an examination of some or of
the following: documents, records, system of mutual control, accounting
procedures, and other evidences.
Purposes:
🠶 1. To determine the propriety, legality and mathematical accuracy of
proposed or consummated transaction;
🠶 2. To ascertain whether all transactions have been recorded; and
🠶 3. To determine whether transactions are accurately reflected in the
accounts and in the statements drawn, therefore in accordance with
accepted accounting procedures.
 TYPES OF BUDGET (Skidmore)
🠶 LINE-ITEM BUDGETING – most used format
- based on line-item accounting and incremental increases in projecting ahead for a year or
more.
- indicates how the money is to be spent, but it does not depict what the agency does.
- does not present agency goals, targets, or results.
- main feature: reliance on explicit categories of expenditures to insure justification.
🠶 PROGRAM BUDGETING - useful management tool in monitoring the effect of key
allocation decisions (Program, Planning and Budgeting System).
- goals and objectives are a significant part
- cover several years
- includes cost estimates and specifics
 WHAT IS PPBS?
- A management tool to help focus on the main goals of the agency.
- Consist of 4 elements; such concept is embodied in the systems theory
- According to Arthur Smithies, this system involves classifying expenditures based on an analysis of
objectives and resources and its interrelation among them.
- According to Greenberg, a tool which can help the administrator starts with the assumption that an
organization rarely finds its resources adequate to finance all of the valid programs. He cited the
elements of its operation:
a. Keeping an eye on the “end product”
b. Taking a long-range view
c. Identifying alternative course of action
d. Analyzing in terms of both its combination towards achieving the end product and its cost
e. Keeping tab on what is happening in the system
f. Being flexible
 TYPES OF BUDGET (Skidmore)
🠶 FUNCTIONAL BUDGETING
- it encompasses program services but emphasizes the supporting
administrative services that are needed for operating an agency.
- revenues and expenditures as they relate to management and general
functions, fund-raising functions, and identifiable programs offered by
the agency.
🠶 ZERO-BASED BUDGETING
- Done particularly in the government agencies
- Agency starts with no money each year and describes and justifies all
expenditures for the coming year, whether or not they have existed
before.
 BUDGET-MAKING PROCESS (Skidmore)
1. Setting the specific needs and goals of the agency.
2. Collecting and studying basic information regarding the current
and past operations of the agency (to include the what has and has
not been accomplished).
3. Looking at alternatives and different ways of using the money that
may be available during the year.
4. Deciding on priorities for the agency.
5. Finalizing decisions regarding the budget.
6. Providing adequate interpretation and public relations.
 CHART OF ACCOUNT
1. Estimating the cost of each objective or goal listed before.
2. Estimating the expected income of the agency.
Public agencies – government appropriation
Private agencies – general public’s contribution
3. Comparing the total expected income with the expense of achieving
the goals or objectives.
*Big item budget: personnel’s salaries, pensions and retirement plans,
social security and other personnel benefits
*For SWA, biggest item are social services
Remember: After preparation of budget, submit for hearing to the
appropriation body for signature and authorization.
 FACTORS OF AN IDEAL BUDGET
1. It is comprehensive- it includes all planned
expenditures and all estimated income.
2. It is clear and easily understood.
3. It is flexible.
4. It is workable.
5. It is accurate and realistic.
 FINANCING
- The allocation of an organization/ agency’s liquid assets to assure their most productive use.
- Funds required by government agencies come from the taxes of people.
- Those required by non-government or voluntary agencies to administer and deliver their services
come mainly from the following sources:
1. fees for services
2. membership dues
3. investment earnings
4. use of capital resources
5. sale of goods and publications; other grassroots funding raising efforts.
6. bequests (inheritance, gifts, donations, endowments ) ; private foundations
7. tax funds or government grants
8. grants or contract of services
9. donor contributions.
 FINANCIAL RECORD AND FINANCIAL
🠶 FINANCIAL RECORD CONTROL
- This is an on-going record of what the agency has spent on what and
how well it is staying within the budget.
- The agency’s bookkeeper or accountant enters into this ongoing record or
ledger book all receipts, cancelled checks and other necessary documents
or paper showing what has been spent.
FINANCIAL CONTROL
- In most agencies a set of procedures for purchases is followed in addition
to keeping a ledger book on expenses.
- E.g. in preparing Purchase Request. We prepare 4 copies, one for
requesting party, 1 for the supply unit, 1 for accounting and one for Bids
and Awards Committee (BAC) Sec.