BUDGET
METHODS AND
PRACTICE
Preparation of Agency Budget Requests
Review of Budgets
Balancing the Overall Spending Plan
Managing Budget Execution
Audit & Evaluation
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PREPARATION OF
REQUESTS I
• Budget Instructions or
Guidance
• Main Goals of the Executive
• Forecasts of Critical Operating
Conditions and Prescribed
BASELINE
• A Prescribed FORMAT
• A Time Schedule
• MAXIMUM Increase
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PREPARATION OF
REQUESTS II
• Agency Proposals
• Narrative -- Current Commitments
and Expected Results from New
Initiatives
• Detail Schedules establishing Baselines
• Cumulative Schedules Showing
Effects of New Initiatives (up or down)
on Details and Revised Totals
Description dominates numbers.
Budgeting is logic, justification, and
politics -- not accounting.
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Spenders’ Budget
Tactics: Ubiquitous I
• Cultivation of an active and
influential (well-organized)
clientele
• Media
• Demonstrate competence
• Deliver
• Explain -- show understanding
and mastery of cost estimates
• Honesty
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Spenders’ Budget
Tactics: Ubiquitous II
• Price Changes
• Workload Changes
• Methods
Improvement
• New Services
• Full Financing
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Spenders’ Budget
Tactics: Contingent I
Avoiding Cuts:
• Propose a study
• Cut Popular
programs
• Dire
consequences
• All or nothing
• You pick
• We are the
experts
Seeking Bucks for
the Base
• Round up
• Sprinkling
• Physical units
• Workload and
backlog
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Spenders’ Budget
Tactics: Contingent II
Seeking New
Bucks:
• Old stuff
• Initial
commitment
• It pays for itself
• Spend to save
• Crisis
• Mislabeling
• What they did
makes us do it
• Mandates
• Matching the
competition
• It’s so small
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Budget Justification -- Or, Why the
Numbers in Next Year’s Budget are
Different from this Year’s
• Major Programmatic Changes/New
Services -- Major Cutbacks of Service
levels
• Price/Wage Changes
• Workload Changes
• Methods Improvements
• Full Financing of Activities Initiated in
the Current Year
• Deferred maintenance and/or
replacement of equipment
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Estimates: Grouped by
Organization; Task, Purpose,
Function, or Activity, AND OE or
Account Code
• Wages and Salaries
• Non-Wage Personnel Costs
• Non-personnel Costs (Cost Drivers)
• Volume or activity level x Unit Price
• Ratios to another OE
• Adjustment to Prior Year Cost
• Breakeven Analysis
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BREAKEVEN
ANALYSIS I
$ total
R
TC
Q
ACTIVITY/WORKLOAD LEVEL
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BREAKEVEN
ANALYSIS II
$ total
R
TC P
TC R
Q
ACTIVITY/WORKLOAD LEVEL
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BREAKEVEN
ANALYSIS III
$ total
TC R
Q
ACTIVITY/WORKLOAD LEVEL
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EXECUTIVE
REVIEW I
• Policy Rationale/Conformity
with Executive Priorities
• Conformity with Budget
Guidance/Including all
Required Supplemental
Documents
• Arithmetic
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EXECUTIVE
REVIEW II
•
•
•
•
•
Linkages
Program Changes
Omissions
Ratios, Shares, Trends
Clear Tradeoffs
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BALANCING THE
CONSOLIDATED
BUDGET
• Budget Message
• Summary Schedules
• Detail Schedules
• Performance Targets
• Supplemental Data
• Many on the Assumptions
Presented in the Budget
Guidance and Trends
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BUDGET
EXECUTION I
• Preventive Controls
•
•
•
•
Procurement
Personnel
Pre-audit
Allotments
• Feed-forward Controls -Diagnostic Tools, e.g. variance
measures
• Feedback Controls -- affect Next
Year’s Budget, Fig. 3.1
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BUDGET
EXECUTION II
• Internal Controls
•
•
•
•
•
Personal Responsibility
Personnel Qualifications & Rotation
Segregate Responsibilities
Separate Operations and Accounting
Maintain Controlled Proofs and
Security
• Record Transactions -- complete
journal and general ledger
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Thought Questions
•
Some programs have an explicit revenue
component and policy makers make
decisions about revenues and program
characteristics with the long term
sustainability of the program in mind. For
instance, unemployment insurance or
Social Security and there are actuarial
studies that give us an idea of where we
need to be in 5, 10, 20, etc years both from
a revenue and an expense perspective if
the program is to be in balance.
1. Why don’t we look at all program
commitments this way?
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Thought Questions
2. Someone once told me the
problem with government is
that it is easy to spend
someone else’s money. Do
you think that is true?
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