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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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