Types of Budgets

Executive Summary

The budgetary process is a key part of any organizations financial planning. This paper examines the impact of structural and procedural changes of public budgeting reforms, specifically by identifying the advantages and disadvantages of line item budgeting, program budgeting, and performance budgeting. It also looks at how politics and economics impact the budgetary process. Finally, it examines the impact of internal and external stakeholders, domestically and internationally, on the process.

Impact of Structural and Procedural Changes of Public Budgeting Reforms

Impact of Line Item Budgeting

Line item budgeting is one method that can be used to create and track the budget. This approach has a number of advantages, including improved accuracy and transparency. Line item budgeting refers to how each individual expense is allocated its own line in the budget. This approach provides a high degree of control over spending and can be beneficial in ensuring that funds are used as intended. However, line item budgeting can also be inflexible and may not always produce the most efficient allocation of resources. For example, if a project requires more funding than was originally allocated, it may be difficult to make adjustments to the budget without affecting other areas. As a result, line item budgeting can impact the budgetary process by making it more difficult to reallocate funds (Martin, 2002).

The advantages of line item budgeting are that it creates a separate line in the budget for each individual expense, which can help to improve accuracy by ensuring that each expense is properly accounted for in the budget. In addition, line item budgeting makes it easier to track spending and identify areas where costs can be reduced. Thus, this approach can also help to improve transparency by providing a clear view of where funds are being spent.

The disadvantages of line item budgeting are that it can be time-consuming and may require more resources than other approaches. Line item budgeting can also give rise to unintended consequences, such as overspending on items that are not essential to the organization's operations. Overall, however, line item budgeting can offer a number of benefits that make it an attractive option for many organizations (Martin, 2002).

Impact of Program Budgeting

Program budgeting is a type of budgetary system that focuses on Activities, Outputs, and Goals (AOGs). It was first implemented in the United States federal government in the 1970s as a way to improve decision-making and accountability in the budgeting process. Under program budgeting, each agency is responsible for developing a budget that outlines their planned activities, outputs, and goals for the upcoming fiscal year. This information is then used to assess the effectiveness of the agency in achieving its objectives. Thus, the main advantages of program budgeting are that, first, it can help to clarify the link between organizational goals and resource allocation. By aligning resources with specific objectives, program budgeting can help ensure that resources are being used effectively to achieve desired outcomes. Second, program budgeting can improve transparency and accountability within an organization. By tracking expenditures and results at the program level, program budgeting can help reveal areas of waste and inefficient use of resources. Finally, program budgeting can help decision-makers to optimize resource allocation by identifying opportunities for cost-savings and efficiency gains (West, 2011).

However, even though program budgeting has been praised for its ability to improve decision-making and accountability, there is some evidence that it has also led to increased bureaucracy and paperwork. In addition, program budgeting can be complex and time-consuming, making it difficult to implement in large organizations (West, 2011). Thus, the decision to implement program budgeting is one that has to be determined by weighing the pros and cons of this approach.

Impact of Performance Budgeting

Performance Budgeting (PB) is a process whereby government agencies are held accountable for their expenditure by linking it to specific outcomes. The idea is that by evaluating the performance of an agency against predetermined goals, it will be possible to improve the efficiency and effectiveness of government spending. PB has been implemented in a number of countries, with varying degrees of success. In general, however, it is fair to say that PB has had a positive impact on the budgetary process. One of the key advantages of PB is that it provides greater transparency in government spending. By linking expenditure to specific outcomes, it becomes easier to track how taxpayer money is being spent and to hold government agencies accountable for their results. This increased transparency can help to build public trust in the government and improve the overall legitimacy of the budgetary process. In addition, PB can also help to improve the efficiency of government spending by making it easier to identify and address areas of waste or duplication. Overall, then, it is clear that PB has had a positive impact on...

…their decisions to elected officials and the public. In addition, the budget can be used as a tool to hold managers accountable for results. By carefully tracking spending and measuring outcomes, budgets can help ensure that public resources are being used effectively and efficiently. As a result, public budgeting is an essential part of effective management in the public sector.

Historical/Theoretical Assumptions

There are a number of historical and theoretical assumptions that play a role in how public budgeting can impact the management of public sector organizations. One assumption is that the budgeting process itself is an inherently political one, shaped by the iterests and power dynamics of those involved. This can make it difficult to create an objective, efficient budget that meets the needs of all stakeholders. Another assumption is that public sector organizations are inherently complex, often struggling to balance competing demands and priorities. This can make it challenging to effectively allocate resources through the budgeting process. Then there is the assumption that financial resources are always limited, making it necessary to carefully ration them through the budgeting process (Alibasic, 2018).

Domestic/International Impact

Historically, public budgeting has been used to manage public sector organizations in a variety of ways. For example, public budgeting has been used to track and control spending, to allocate resources based on need, and to assess the effectiveness of programs and policies. Internationally speaking, the role of public budgeting has come under increasing scrutiny in recent years, and this is due in part to the impact of globalization, which has led to increased competition for resources and a greater need for transparency and accountability in the use of public funds (Alibasic, 2018).

There are a number of theoretical assumptions that underlie the practice of public budgeting. These include the assumption that resources are scarce and need to be allocated in an efficient manner; that decision-makers act in their own self-interest; and that there is a trade-off between efficiency and equity. Each of these assumptions has important implications for how public budgeting is practiced.

Conclusion

The budgeting process is a key component of sound economic management. It provides a framework within which government spending can be planned and delivered in a way that is efficient and effective. It is also a complex and dynamic one, involving many different stakeholders with varying interests and perspectives. Understanding the various aspects of the factors that impact the budgetary process can help one to better…