PRACTICES NATURE OF THE PROBLEM NATURE OF THE PROBLEM
Tragedy of the commons
Choosing among different claimants of funds Difficulty of efficient trade-offs Strong political incentives High transaction costs Information asymmetry Satisficing [Wildavsky and Caiden (1997: 48)] INCREMENTAL LINE-ITEM BUDGETING INCREMENTAL LINE-ITEM BUDGETING Advantages Disadvantages oSimplicity oIncremental in nature oFosters overspending oFunding stability oBudget review oOperational oVariance from actual stability oPerpetuates resource allocations oLess risk taking BUDGETING PRACTICES IN INCREMENTAL SYSTEMS OF DEVELOPING COUNTRIES INCREMENTAL BUDGETING PRACTICES IN DEVELOPING COUNTRIES Always asking for more Ritualistic cycles of padding and cutting Under-budget for high-priority expenditure oLower project estimates for first year Industrial countries vs Developing countries oLess information asymmetry oPrioritising for wrong intentions CHANGING NATURE OF BUDGETING IN DEVELOPING COUNTRIES New perceived purpose of budget Change in relationship between government institutions An idealized, rational policy-making process A series of innovative approaches to budgeting BEYOND INCREMENTALISM: RATIONALITY AND INCENTIVES IN BUDGET METHODS PROGRAM BUDGETING SYSTEMS Programming, or the subdivision of the government budget Identifying the operational aims Budgeting and accounting of each program Measuring the outputs and performance of activities Using the relevant data to establish standards and norms PLANNING-PROGRAMMING-BUDGETING SYSTEM Program memoranda o describes the agencys strategy and comparing the cost and effectiveness of major alternative programs Special analytic studies o looks at selected current and long-term issues Program and financial plans o summarizes program choices in terms of their outputs and costs over a five-year period. ADVANTAGE AND DISADVANTAGES OF PPB Advantages o Recognising public Disadvantages institutions as o Requires training interdependent o Difficult to implement o Clarity about government o Lot of paperwork goals o Disregard of available o Seeking cost effectiveness information ZERO-BASED BUDGETING Advantages Disadvantages o assume a zero base at the o Masses of paperwork beginning of each budget o Disregard for the realities of cycle institutional and public o Unguaranteed Continuation politics o Effective allocation of funds o Disregard for the consequences of discontinuation o Difficulty to determine policy impact NEW PUBLIC MANAGEMENT (NPM) Shifts the emphasis from traditional public administration to public management Decentralization of responsibilities Brings the responsibility to budget closer to better information Alignment of incentives to improve the quality of spending decisions Reorganizing the budget into an output- or product-based format MEDIUM-TERM EXPENDITURE FRAMEWORK (MTEF) Resource-constrained expenditure framework Shifts the burden of calculation to where there is better information Opportunity to compare the medium-term costs of competing policies Facilitates a more comprehensive approach to budgeting BUDGETING METHODS TO EXPOSE CHOICES ON THE GROUND PROCESS-BASED MECHANISMS Pressure for efficiency and effectiveness vs underfunding and increasing demand Funding decision based on agency reputation Shame-and-blame tactic Appraisal of all spending programs over time More focus on input rather than output INFORMATION-BASED MECHANISMS Public Expenditure Review (PER) Examines ministerial programs and activities Activity Based Costing Encourages honesty in the budget Identifies objectives and respective outputs process Identifies what activities will deliver each output
Builds consensus on expenditure
issues Links budgets and operational performance INFORMATION-BASED MECHANISMS (cont.) Spending Baselines, New Policy Proposals & Savings Budgeting Submission of spending baselines Submission of detail proposal of new spending initiatives Proposing spending reductions achieved by introducing efficiency savings Permits the government to reprioritize spending over time CONCLUSION CONCLUSION New budgeting methods are not always meaningful Very difficult to implement new methods Credibility of budgeting depends on a lot of factors Always linked with politics Continual trade-offs between costs of incremental and comprehensive- rationale-based budgeting