Wk. 10. BS321 Budget Presentation

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BS321 Contemporary Issues in Public AdministrationBS321 Contemporary Issues in Public Administration

Tuesday, 9, September, 2008Tuesday, 9, September, 2008


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By Tabian Ambang

Health Management Dept.

September, 09, 2008

T. Ambang @ DWU HM 204 Public AdministrationT. Ambang @ DWU HM 204 Public Administration

Budget presentation formalities in theBudget presentation formalities in the

government sector in PNGgovernment sector in PNG


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33Chapter 1Chapter 1

T. Ambang @ DWU BS321 Public AdministrationT. Ambang @ DWU BS321 Public Administration

Learning ObjectivesLearning Objectives

By end of this lecture you should be

able to explain the administrative

formalities of budget presentation in the

government sector in PNG.


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Typically, budgets serve three major

purposes in the government sector:

1. Planning (plan & programs)2. Coordinating (programs)

3. Controlling (resources)

Purpose of BudgetPurpose of Budget


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Public Sector Financial ManagementPublic Sector Financial Management

Although Government inputs are expressed

in monetary terms, outputs cannot be similarly

expressed in monetary terms as they involve

services delivery rather than profit.

The main objective of the government financial

management is to control public spending and

controlling Government spending against budget is

the legitimate and fundamental role pf public

sector managers.


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What should government financial management

achieve?

The ultimate goal of financial management is to raise

revenue and services are delivered to the community in the

most efficient and effective manner. This goals can be

achieve by translating Government policies into financial

plans (budget) with achievable targets. An effective

financial management system is absolutely

essential in assessing revenue and expenditure

performance and in monitoring actual results against plans

and targets contained in the financial budget.


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Chapter 1Chapter 1 88

Figure 3. Government Financial Management

PLANNING

Policy Objectives

Resources available

Long term/medium-

term plans

Implementation

Service delivery

Clients of Government

Stakeholders

ANNUAL BUDGETS

Revenue raisingDevelopment (infrastructure,

projects)

Recurrent (programs, faculties)

ACCOUNTING

Statutory requirements

Expenditure control

Monitoring and

management

Feed back

Reporting Accounting and

financial information


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Development planning often focuses solely

on development projects as they are morelikely to receive aid financing and are usually

seen as the major source of economic

growth.


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Outcome

Improve service -

delivery

Quality output

Sustainability

Outcome

Profit

Business growth

Market expansion

--Quality,Quality,

Price,Price,Focus market,Focus market,

Logistic,Logistic,

Market expansion,Market expansion,

Innovation,Innovation,

--Differentiation,Differentiation,

--OthersOthers

1. Quality1. Quality

2. Infrastructure2. Infrastructure --

improvementimprovement

3. Cost efficiency3. Cost efficiency

4. Technical efficiency4. Technical efficiency

5. Allocation efficiency5. Allocation efficiency

6. Others6. Others

Business SectorBusiness Sector

Key StrategiesKey Strategies

Improve living standard and

reduce poverty through

social and economic

development

Public SectorPublic Sector

Key StrategiesKey Strategies


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The layers of the government SystemsThe layers of the government Systems

in PNGin PNG

National GovernmentNational Government

Provincial AdministrationProvincial Administration

LLG/District AdministrationLLG/District Administration


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Different levels of budgets in the government sector

1.National budget National Government__________________________________________________________________________________________________2. Provincial budget Provincial Administration

3. Department budget National Department (e.g.Health Dept, Defense, Dept.)

Provincial Departments (19

provinces + NCD),

- Govt. Institutions/Statutory__________________________________________________________________________________________________

4. District budget - District level_______________________________________________________________________________________________________________________

5. Program budget - Operational /Unit level


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Budgets in Public Sector Environment

The following represents budget most likely to be

used in the public sector.

Expenditure Budget: Eighty percent of budget in

the public sector is focused on expenditure cost

of delivering goods and services (program budget).

Revenue budget: It is a budget that projects future

sales. E.g. LLG revenue through licensing fees.

Profit projections by Govt owned enterprises.


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Capital Budgets: Infrastructure developments,

e.g. roads, bridges, schools, hospitals,buildings and major equipment are called

capital expenditures.


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The Budget processThe Budget process

Bottom Up or Top-down budgeting

There are two basic approaches to government

budgeting:bottom up or top down.

Under the bottom up approach, implementingagencies estimate their expenditure requirements

and these are aggregated and compare to

expected resources.


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The Budget processThe Budget process

Under the top down approach, the estimate resourcesavailable are allocated between departments according to

priorities. Department then prepare their budgets within

their resource allocation. Bottom up

approach budgets makes it easier for managers to make

resource allocation decisions while top down approachsets a maximum budget limit to guide managers in making

their resources allocation decision.


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Cont..Budget approachCont..Budget approach

Top down approach

National Government decides funding ceiling for

each government department, provincial

administration, LLG, and statutory institutions.

Bottom up approach:

Each government department, provincial

administration, LLG, and statutory institutions identify

key development priorities and document and

present their budget.


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Funding allocation approachFunding allocation approach

Top down approach

Advantage:

- Avoid high expenditure request,

- Control of limited resources,

Disadvantage:

- Govt. organisations getting less funds

- Organisations strategy plans will be

sustained in the long g run.


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Bottom up approachBottom up approach

Advantages:- Government organisation will present a realistic

budget forecast with a clear picture of their budgetand operational requirements, and strategic

operational activities.

Disadvantage

- Government organisation will present unclear andrealistic budget forecast.

- Time consuming, need to justify budgetrequirements.


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Delivery of Goods and Services:

Government organisations use

program budget


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Budget Formalities in theBudget Formalities in the

Government SectorGovernment SectorBudget Focus: Delivery of goods and services

(expenditure budget). Funding allocation is

based on program budget.

Allocation of budget to specific programs at the

province and district level.


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Program Budget

Disease

ControlEnv.

Health

Family

Services

Health

Admi.

District Health Manager

T. BT. B

MalariaMalaria

HIV/ADSHIV/ADS

Water SupplyWater Supply

Waste DisposalWaste Disposal

Family PlanningFamily Planning

ImmunizationImmunization

Admin CostAdmin Cost

OperationsOperations


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Budget at the Program Level

Disease

Control

Env.

HealthHealth

Admi.

District Health Budget

Family

Health Serv.Unit Level

Program Level


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Budget at the District Level

Dist. HealthServices

DistrictAgriculture

D

istrictCommerce

District Administrator

DistrictEducation

Program Level

Program Budget

District

Budget

D

istrictSocial Services

District Budget Planning Committee

District Level


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E.g. of a budget at the Provincial level

DistrictsProvincial

Divisions

Provincial Administrator

Provincial Division BudgetsDistrict Budgets

Provincial Budget Planning Committee

District 1

District 3

District 4

District 2

Prov. Health Office

Prov. Education Office

Prov. Planning Office

Prov. Agri. Office

Provincial Budget

Districtlevel

Provincial

level


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Budget at the Provincial Level

District

Administrator

Provincial Divisions

(Principle Advisors)

Provincial Divisions BudgetDistricts Budgets

Provincial Budget Planning Committee

Prov. Governor

Dept. of Finance To ensure budget documents

meets financial standards

To provide political leadership

- To prioritize key

Developments areas

-Ensure budget meets -

provinces development

Policies.

To provide administrative leadershipProvincial Administrator

(Provincial Budget


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PNG Govts National Budget

20 Provincial

Admin in PNG

Dept. of Finance

Dept. of Planning

Dept. of Education

Dept. of Health

Dept. of Police

East New Britain

Morobe

Eastern Highlands

Central

National Departments

Statutory Bodies


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Budget at the National Level

20 Provincial

Administrations

in PNG

National Parliament

NationalDepartments

Dept. of Finance


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Budget Allocation

How funds are allocated to the

Provincial Administrations and theNational Departments once the budget

is passed.


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Budget allocation

NationalDepartments

Government Institutions

Department Treasury

Provincial

Administrations

Provincial Treasury Office

District Treasury Office

Departments

Division of Finance

National Parliament

Budget passed by the

National parliament

Budget deliver to Govt.

Departments & institutions


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Budget Allocation

Department of Treasury

Budget passed by theNational Parliament

Provincial

Treasury

Offices

District

Treasury

Offices

Department

Treasury

Offices

ProgramsPrograms

at theat the

ProvincialProvincial

LevelLevel

ProgramsPrograms

at theat the

DistrictDistrict

LevelLevel

ProgramsPrograms

at theat the

NationalNational

LevelLevel


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Government operational schedule is divided into

four quarters in a year.

January

to

March

April

to

June

July

to

September

October

to

December

First

quarter

allocation

Second

quarter

allocation

Third

quarter

allocation

Fourth

quarter

allocation


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Supplementary BudgetSupplementary Budget

Supplementary budget is released to cater for theperiod in suspension while waiting for the national

budget to be passed (January March).

National budget is passed during parliament sessionin the beginning of the year (Jan- March).


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ContBudget AllocationContBudget Allocation

Budget allocation to the hospitals andEducational Institutions based on

formula approach allocation.


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ContBudget AllocationContBudget Allocation

The funding agencies employ one of theThe funding agencies employ one of thefollowing six types of budget approach whenfollowing six types of budget approach when

allocation budget resources to the organisations:allocation budget resources to the organisations:

1. Line1. Line--item,item,2. Program,2. Program,

3. Lump sum,3. Lump sum,

4. Formula,4. Formula,

5. Performance or function,5. Performance or function,6. Zero6. Zero--based.based.


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1. Line1. Line--ItemItem

In a line-item budget, each category of activity is

afforded its separate appearance. Line-item budgetsfacilitate low levels of detail for both planning and

cost control purposes.

Among the advantages of line-item budgets are easeof preparation, use as detailed planning vehicle and

utility as a means of comparing performance from

one fiscal period to another fiscal period.


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Warner (2004) provides a model to illustrate the simplicity and utilityWarner (2004) provides a model to illustrate the simplicity and utility

of the lineof the line--item budget:item budget:

LineL

ine--ite

m Budgetit

em Budg

etProgram: E.g. Dist. Health ServicesProgram: E.g. Dist. Health Services

Activities Last Year This Year Next Year

Materials K K K

Stationeries K K K

Transport K K K

Utilities K K K

Salaries K K K

Total K K K


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By its nature, a program budget focuses on the services the

organisation provides to its clients. Therefore, the programbudget more readily relates to overall organizational goals and

objectives. Its attractiveness is further enhanced by its

usefulness when establishing priority for specific division

programs relative to the department.

The program budget development is typically an extension of

the line-item budget development method. Robinson and

Robinson (2004) explain that each program in the program

budget appears separately and is broken out in categories

similar to the line-item budget.

2. Program Budget2. Program Budget


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Warner (2004) provides a model to illustrate the simplicity andWarner (2004) provides a model to illustrate the simplicity and

utility of a program budget approach:utility of a program budget approach:

Program Budget ApproachProgram Budget Approach

Activities MCH Health Prom Env. Health

Materials K K K

tationeries K K KTransport K K K

Utilities K K K

alaries K K K

Total K K K


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Warner (2004) provides this model for the Function Budget:Warner (2004) provides this model for the Function Budget:

Performance ApproachPerformance Approach

Activities District N0. 1 District. 2 District. 3 Total

Staff

employment

K K K K

Training K K K K

Research K K K K

Administration K K K K

Clinical K K K K

Total K K K K


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4. Zero-Based Budget

Zero-based budgeting shifts the emphasis from

comparing present performance and/or programs tothe past or to the current activity.

Zero-based budgeting requires that a clean slate

be the starting point for budget development

(Zach, 2002)


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5. Formula Budget Approach

When an organisation is funded through the formula

budget, the budget allocation is typically tied to anumeric value such as full-time-equivalencies

(FTEs), i.e., number of FTEs registered students

multiplied by a fixed dollar amount yields the budget,

For example, funds are allocated according to the

number of students at an educational institution.

Formula: number of students, kina per head.


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Once the lump-sum is allocated, the organisation

proceeds with lower-level allocations among plannedactivities.

For example, funding for capital, projects and

investment health centre new buildingconstruction

contLump SumcontLump Sum


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Em tasolEm tasol

na see you in next lecturena see you in next lecture


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Wk. 10. BS321 Budget Presentation