Budgeting Coursework - Essay Example

Budgeting Coursework 1. Differences between the political and technical section of the budget Budget preparation and implementation involves several universal stages. Although there may be a number of differences between processes used in difference countries, there are some generic stages which are universally accepted. There are very distinctive differences between the first three stages of budget process and the final steps of the budget process. Budgeting can be divided in fives phases and two sections. The first three stages are more political while the last two stages are technical. The initial three stages of the budget are pre-planning, planning/ proposal, approval/acceptance. The last two stages which are more technical are expenditure which is also known as implementation stage and audit. In general there are two sections in the budgeting process; the political section and the technical section. Some of the main differences between the two stages include; the participants in the first three stages are politicians. In this stage, the main players are the legislature. During this level, the legislature tries to articulate their political power to the executive. The legislature participation in this process is therefore on political bases. Politician tries to express their de facto power in the budgeting process1. The legislature utilizes their political supremacy in their space to control the entire budget process. This is relatively different from the last two phases of the budget process. Players in the implementation and auditing process are technical professional as opposed to the players in the first stages who are politicians. Their role in these stages is theoretical but not de facto as it is the case in the first three stages. The reason why there exist the differences between the players in the two sections is that, in the political section the player present the general public, therefore they must makes sure there issues are fully addressed. In the second section, the players are technical people and professionals who must abide by their professional ethics. The second difference is that, the first three stages entail the writing of the budgeting while the last three stages have to do with implementation and evaluation of the budget. Being the writing stages, the first three steps encounter concrete discussion and contradiction among the involved stakeholders. There is a lot of debate in this stage due to its impact on the entire process. This is different from the last three stages which do not require a lot of debate. Professionals in the implementation stage are expected to meet the prerequisite of the budget with limited need for debate. They are not supposed to make any amendment to the budget unless advised2. There ideas that professionals are only expected to meet the expectation of the budget makes the second stage more technical than the first stage. This is contrary to the first section where the players have to ensure the desires of the public are met. The third difference is that, the first three stages and most specifically the second and third stages involve budget policy making process. The fourth stage has to do with the implementation of the agreed policies. Policy making process requires politician who represent a definite section of the population. Implementation of the policy requires competent experts who are knowledgeable enough to put into practice the formulated policies. In the political section, the public are involved either through their representative in the legislature or through the media. The interest of the public are addressed during the first three stages. Implementation stages involve the experts only. Public members are passive participant in this level. On the other hand, public involvement is not pertinent. Technicians have the biggest role in the last two stages. Why the differences exist All the stages are very imperative in the budget process. One stage cannot be realistic without the presence of the other. The involved ministry or organization prepares the budget draft in the first stage for endorsement by the legislature. The significance of this stage is to propose the executive requirement. The important of the second stage is to make sure the budget is in accordance to the available resources and the needs of the public. The legislature amends the budget where necessary and then approves it for implementation. The legislature provides the executive with legal authority to raise the required revenue and expense them. The first three stages are very vital in the budget process as they involve the writing of the budget as well as giving the executive the power to execute the proposed budget. Public interests are considered at this stage3. After the first three stages, the executive acquires the power to put into practice the proposed budget. The central budget unit takes the responsibility of monitoring the implementation of the budget. The central budget unit is also supposed to write a final report on how the budget has been implemented and the experienced shortcoming. In some cases, the executive has the consent of altering the proposed budget in case of an emergency although with the approval of the legislature. This technical stage is therefore very appropriate in ensuring the budget meets its anticipated objective. It is also predicts any future predicament and proposes the relevant rectification. The finals stage which entails the evaluation of the credibility and accountability of implementation of the budget is very significant in deciding the next budget. Auditors provide a report which is used by the legislature in examining the executive performance. Auditing stage must be implemented by an independent body to ensure it effectiveness and transparency How the differences affects the activities of public administration The differences between the first three stages and the last two stages have a significant impact on the efficiency, effectiveness, equity, and responsiveness of the public administrators. In their operations, public administrators are expected to meet the political and technical aspects of the budget. In the first section the public administration tries to meet political needs while in the second section the players work to meet the technical need. This complication has an impact on the performance of the public administration. Technical players find it very complicated to abide by their professional ethic and at the same time meeting the political desire of the legislatures. The differences between the technical and political facets of the budget influence the performance and the output of the involved public administrators. In some cases, the political expectation and the technical needs improve the public administrators’ performance. They also affect the competency of the public administrations. This mostly occurs when the public administrator attempts to meet the political expectation and at the same time trying to abide by his/her professional ethics. 2. The expenditure/implementation phase of the budget The expenditure or implementation stage is one of the most significant stages in the budget process. It determines the outcome of the budget. However, the players in this stage are always very cautious and alert on the implementation of the proposed budget. The manner in which the resources are utilized at this stage determines the outcome of the auditing stage. Players in this stage are regulated by the auditing process in their activities. This stage can therefore be referred to as the preparation for an audit stage. The following reasons explain why the implementation stage can also be referred to as preparation for audit. To start with; professionals who implement the proposed budget ensure they have a sound record of their expenditure. Records are kept for auditing purposes. Secondly, technicians in this stage also prepare an account for the availed resources during the auditing phase. Thirdly, they also prepare report on an adjustment in the proposed budget which is very imperative for auditing. In general therefore, all the activities in the implementation stage are to a great extent controlled and influenced by the expectation of the final stage of the budget. Reasons for auditing An audit is always the eventual stage in the budget process. An audit entails evaluating and analyzing the expenditure of the government or an organization and producing the final report to the relevant body. In most case, the audit phase of the budget is conducted by an independent body. It is during this phase that a recommendation is made concerning the whole process. Auditing can also be referred to the process of assessing the results or outcome of an annual budget in terms of its effectiveness, economy, and efficiency. This is one of the exceptionally significant stages in the budget process. It ensures accountability and transparency in the utilization of the public resources. It also helps in deciding the nature of the future budget. In broad-spectrum, an auditing is useful in ensuring accountability and transparency of the public resources. The report produced by an independent audit body should be reflects in the next budget4.  How do you manage your expenditures so that you are ready for an audit? To guarantee effective delivery in the auditing stage, the implementation team requires sufficient preparation for the phase. There are some extremely pertinent actions which can warranty adequate management of the expenditure in preparation for auditing. The body responsible in implementing must know how to manage their expenditure for the preparation of auditing stage. The budget committee or any other involved body has the liability of ensuring the resources are distributed to the relevant department as provided for in the budget. They should also follow up to ensure the resources are utilized effectively. To ensure sufficient preparedness, the implementation team must make sure resources are used for the intended purpose. An adjustment to the budget has to reflect the supplemental or adjustment appropriations which must be presented to the legislature for approval. The adjustment in the budget should be done in a transparent manner. The process should be subject to scrutiny if need be. The implementing team is also expected to keep satisfactory records required in the auditing stage. The record must tally with the physical implementation of the budget. Accountability is also very imperative in the auditing level. Accountability reflect proper utilization of the resources assigned to the implementing team To ensure the budget is accountable and powerful, it must have the capability to deal with any form of uncertainty. The contingency funds should be utilized effectively and should be reflected in the implementation report. The decision about their use should be approved by the legislature and should be transparent to everyone satisfaction. 5. Actions of the public administrators and their effect to the bad long-term effects on budget. Budget has both long term and short term effect to the community and most specifically the vulnerable section of the society. The public administration and most particularly those involved in the implementation of the budget, has the responsibility of curtailing the effect of budget to the community. Public administration must ensure resources are utilized for their intended purpose. Frequent adjustments have tremendous effect to the community members. Frequent adjustment displays an ill disciplined budget system which has a significant discouraging effect to the community. The public has the accountability of informing the public on the possibility of any alteration to the allocated resources. This is to ensure adequate preparedness among the public members. Proper utilization of the budgeted resources has a role in reducing the long term effect of budget to the public. The community member can only feel the significant of a budget if the set aside resources are properly utilized to meet their expectation. Transparent is another act which can reduce the impact of the budget to the involved community members. Tax payers feel comfortable in paying their tax when they are sure it will be utilized appropriately. Public administration should also ensure the public members are fully involved in the entire budget process. This will give the public a chance to air their grievances as well as raising the concern over any discontent5 Public administration initiative of ensuring the public are not affected negatively by the budget is very health. It ensures people interests are well incorporated in the budget. Their involvement is also relevant in motivating the public to pay more tax. It also reduces conflict and critics brought about by budget shortcomings. Reduced adjustment is also relevant in ensuring the budget meet its intended purpose. Transparent and accountability helps in enhancing economic development 5.1. Possible reasons for budget an imbalance The institution might be having a debt which has an interest. The interest charged on the debt may be the cause of the imbalance between the revenues and the expenditure. On the other hand, delay in payment of the debt incurs more interest which might not be accounted for in the budget. The misappropriation of resources can be another cause of the imbalance. Use of the available resources for unintended purpose can be a reason for budget imbalance. Using resources for ill purposes have the possibility of overuse of the resources available thus leading to the imbalance of the budget. The direct payment could be another reason for imbalance of the budget. This most occurs when payments are paid directly without following the right payment procedure. Direct payments in most cases are not accounted for thus leading to budget imbalance. The institution may have paid more in benefit that it has received in the entire payroll revenues. This increases the expenditure thus reducing the available resources hence causing the imbalance. Other possible causes of budget imbalance include; incorrect accounting of the resources spent, embezzlement of the resources, mathematical error, incorrect record keeping, wrong entry of data and wrong balancing of the revenues and expenses6. 5.2. How you would go about finding the actual problem of budget imbalance In search for the actual problem, the budget officer has to verify all financial records to ensure the information in the balance sheet is the same to the information in the record. This will help in detecting any wrong entry in the balance sheet. The budget officer can identify the cause of the shortage by visiting manually all the proposed projects to indentify the accuracy of the information in the records. The chief budget officer should as well demand for the departmental budget to identify which department has miscalculated the resources distributed. All the record concerning all the payments and money received should be visited and verified to access their accuracy. Internal auditor should also be consulted to access the possible cause of the shortage7 5.3. Possible solutions to budget imbalance Time to time internal auditing is very relevant in addressing the problem of budget imbalance. Internal auditing is very relevant in rectifying the emerging problem. Transparency and accountability in payment and other expenses can reduce similar future problem. Clear and accurate record keeping of all transitions in the institution is very paramount in ensuring balanced budget. This will reduce avoidance or elimination of any relevant information. Timely payment of the institutions debt and other payment can reduce unnecessary deduction in interests. Following the recommended procedure in direct and indirect payment can reduce the possibility of any imbalance in the budget8. Bibliography Boex, L. F. J. et al ‘Multi-Year Budgeting: A Review of International Practices and Lessons for Developing and Transitional Economies.’ Public Budgeting and Finance, 2000, 20(2): 91-112. Crippen, D. Countering Uncertainty in Budget Forecasts, paper presented at the 24th Annual Meeting of OECD Senior Budget Officials, Rome, Italy, 3-4 June 2003. Chisholm, M. ‘Financial Implications of Major Legislation.’ Public Money and Management, 2000, 20(3): 21-26 Krafchik, W. & J. Wehner ‘The Role of Parliament in the Budgetary Process’, South African Journal of Economics, 2008, Vol. 66 No. 4:512-541 Lee, R. and Johnson, et al. Public Budgeting Systems. Boston, Jones and Bartlett Publishers 2004. Organization for Economic Co-operation and Development OECD Best Practices For Budget Transparency. Paris, OECD, 2001.http://www.oecd.org/dataoecd/33/13/1905258.pdf Schick, A. and LoStracco, M. The Federal Budget: Politics, Policy, Process, Washington DC: Brookings Institution Press, 2000 Wildavsky, A and Caiden, N. The New Politics of the Budgetary Process. New York, Pearson/Longman, 2004. Read More