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Budget Formats

Budget Formats. Or, Budget Classifications and Reform. Budget Classifications and Reform. The story of the development of public budgeting in US is replete with tales of budget “reforms,” which replace “bad” old techniques with “good” new ones This is, believe me, 99 & 44/100% pure nonsense.

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Budget Formats

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  1. Budget Formats Or, Budget Classifications and Reform

  2. Budget Classifications and Reform • The story of the development of public budgeting in US is replete with tales of budget “reforms,”which replace “bad” old techniques with “good” new ones • This is, believe me, 99 & 44/100% pure nonsense

  3. Information Demands • Budget documents all contain information, some decisions must be made as to what info to include, and what to not include • Typical budget info can deal with: • Inputs, • Outputs, or • Outcomes

  4. Information Demands, cont. • A budget may focus exclusively on one sort of info, but • Most modern budgets contain elements of two or more • This is OK

  5. Information Demands, cont. • Budget formats which are associated with each sort of information have been developed • Over time, and • In response to evolving budget theory and management needs

  6. Information Demands, cont. • In other words, evolving budget orientations, lead to new budget formats, which contain information not carried by older formats

  7. Information Demands, cont. • In practice, managers may select a budget format that mixes various info types, or focuses on one • The decision can (should?) be made in response to specific, short term needs and in light of a broader orientation

  8. Budget Formats And Associated Orientations

  9. Line Item Budgets • Control orientation • Developed in late 1800's • Focuses on elaborate identification of inputs, in order to discourage corruption & facilitate its identification • Key elements: line items & objects of expenditure

  10. Elements Common To All Budget Formats • Revenue Classifications (where $ comes from) • Expenditure Classifications (where $ goes) • Narratives, justifications, etc

  11. Elements of Line Item Budgets • Line items • Specific items to be purchased • May be shown in varying levels of detail • Objects of expenditure • General categories within which line items fall

  12. A Common Control • Managers • Can transfer monies from one line to another within objects of expenditure, but • They need permission to make transfers across objects

  13. Program/Performance Budgets • Management orientation • An outgrowth of the scientific management movement, & of the New Deal • Reflected new attitudes towards government & public managers • Corruption no longer the primary focus

  14. Program/Performance Budgets, cont. • Government as proactive, its programs enhance the public interest • Public managers are to: • Manage programs efficiently (“get the most bang for the buck”) • Facilitate rational decisions by linking spending with priorities • By focusing on outputs, the public goods & services produced by government

  15. Programs • Programs, activities, functions, etc. • The costs associated with the above

  16. Performance • A program structure facilitates prioritization, etc, but it does little to show how well the individual programs are being managed • This sort of info can easily (in some cases) be added to a program structure, via the use of performance measures

  17. Performance Measures: Types • Level of effort • Level of demand • Efficiency (e.g. unit cost)

  18. Performance Measures • Are useful • Are subject to criticism • Trivialization • Gamesmanship • etc.

  19. Program/Performance Budgets • Originally, program & performance budgets were considered to be two different formats Now, it is legitimate to consider them to be two facets of Program/Performance budgeting

  20. Program/Performance Budgets, cont. • To Work Well • Good program identification • Good cost accounting system • Good sense of potential, & limits, of performance measures • etc.

  21. The Planning, Programming Budgeting System (PPBS)

  22. PPBS • Planning orientation • A response to Program/Performance budgets’ key flaw: they can show how efficient a program is, but say little about its effectiveness • Has an interesting & important history

  23. PPBS: History • DoD, interservice rivalry, JFK, & Robert McNamara • LBJ & the great expansion • Nixon & abandonment • What happened then? • Gone with the wind • Evaporation

  24. PPBS: Underlying Concepts • Development of analytic capacity within agencies (departments, whatever) • Long term (originally in DoD was 5 years) planning, evaluation, & budgeting time frame • Improved budget mechanism to link budget decisions to basic policy decisions

  25. Successful Implementation Requires • Identify goals • Link goals to specific programs • Link programs & resource demands • Relate resource demands to dollars (“cost it out”)

  26. PPBS: Key Features • Rationalistic, not incremental • Program oriented, not organizationally oriented • Planning & analysis emphasized, not management • Top down, staff oriented

  27. Why Did It “Evaporate” • Paperwork & analysis burden, • Legislative skepticism, • Lack of sufficient numbers of trained analysts, • Disregard of organizational lines • Partisan politics, • And many more reasons

  28. PPBS: Why Did It Not Totally Disappear? • Some agencies & jurisdictions find it useful, often those with • More receptive legislatures • More, & better, staff analysts • More flexible PPBS systems • Well defined missions, goals, & objectives • Many find parts of it very helpful • Longer term (esp. future projections) • Some analysis

  29. The Zero Based Budget System (ZBB) More Planning Orientation?

  30. First, A Little History • Dept. Of Agriculture, 1960 • Texas Instruments, research geeks, Peter Phyrr, & Harvard Business Review • Georgia, Jimmy Carter, & Presidential Politics • Federal reality • Another election, another change

  31. ZBB: What It Isn't • Zero Based

  32. ZBB: What It Is • Decision Units • Decision Packages • Rankings

  33. Decision Units (DUs) • Not so low in the organization as to cause excessive paperwork • Not so high in the organization as to mask important considerations &/or to prevent meaningful review of work • Normally • Are within single budget account • Reflect existing organizational & program structures • Can have measurable accomplishments • Are a level at which policy decisions may be made

  34. Decision Packages: Several Budgets For Each DU • Below base • Base • Expansion

  35. Rankings • What Can I Say?

  36. ZBB Today • Not required in federal government • Not common in federal agencies • Remains popular among those state & local governments which had adopted it in the 1970's & 1980's

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