Custom «Enhanced Budgeting and Traditional Budgeting» Essay Paper Sample

Enhanced Budgeting and Traditional Budgeting

Under this section it introduces some of the topics that the research paper will be handling as it tries to analyze a report on "linking performance and budgeting: opportunities in federal budget process" Philip, G., Joyce (2003). These topics include difference between performance-enhanced budgeting and "traditional" budgeting, importance of performance-enhanced budgeting and utilization in the stages of budgeting,

The Difference between Performance-Enhanced Budgeting and a "Traditional" Budget Process

For almost a century the government has been trying to include performance information in budget making process. Some of these efforts include performance budgeting in the 1950s, zero-based budgeting in the 1970s and Government performance and results act (GPRA) in 1993. Philip, G., Joyce (2003) said 'the supply of performance information, at all levels of government, has increased over the past 20 years'. By 1990s the federal government focused more on including performance information to budgeting process. The performance informed budgeting is more different from traditional budgeting process as it retracts from the old process where the budget making process was only a prerogative of the office of management and budget (OMB), the president and the congress. According to Melkers, J., & Willoughby, K. (1998) the traditional budgeting has been more focused on incremental levels of funding than on results. While performance informed budgeting focuses on relationships between inputs and results its true from the report that traditional budgeting doesn't. From this report it also states that as traditional budgeting focuses on changes in inputs at the margin i.e. how much more funding than last year, performance informed budgeting focuses on how much more results for how much more funding. There is no link or real association between traditional budgeting process and planning and management process in the agencies; unlike in performance informed budgeting where the process is integrated with planning and management process in the agencies.

Importance of Performance Information

  1. It helps the federal government make informed budget decision through consideration of performance
  2. Performance information helps the federal government to oversight its programs
  3. It also helps the agencies in contract management process, where the agency monitors the contractor for compliance.
  4. It helps the Administration for Children and Families monitoring existing grants and deciding on future grants funding.
  5. Used in adult education and literacy program to determine which state will receive monetary incentives.
  6. Performance information is used by rehabilitation service administration to allocate technical assistance money and to refund grants from non performers.

Utilization of Performance-Enhanced Budgeting in the Stages of Budgeting

For performance information to be used in budgeting process, reform analysis at each stage of budgeting should be done. There is a great opportunity to use performance information in all stages of budgeting by the federal government. Although the government has not wholly involved performance information in budgeting, there are success stories where this performance information have been integrated e.g. in budget preparation and execution stages unlike in approval stage where it lag behind in the use of performance information for budgeting, this is according to Philip, G., Joyce (2003). The following tries to highlight how performance information can be used in each stage of budgeting.

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Budget Preparation

According to Philip, G., Joyce (2003) budget preparation stages of budget process is divided into two phases: the development of the request from the agency to office of management and budget (OMB) and the analysis of the request by OMB. From this point of view performance information can be seen to be applicable to both these two phases of budget preparation in which during the internal development of the budget by the agency the information can be used to maximize funding and justify the budget estimates right from office of management and budget (OMB), the president, to the congress level. During budget making in the agency in which exist many subunits it is always a very complex process where a lot of give and take always takes place and always time consuming. Under this situation the availability of performance and costs information to be used will greatly enhance the speed efficiency of budget making in the agency level. Using this performance and costs information some of the decentralized agencies prepares their internal budget estimates in advance before they receive OMB circular A-11 which they later review the requirements to make sure the information required office of management and budget (OMB) is included this usually saves a lot of time. As stated by Philip, G., Joyce (2003) 'traditional' budget request to the OMB by many agencies did not focus on effects of funding on performance. Rather it had been dominated unpublished information justifying additional expenditure by the agency, coupled with "current services" and "new initiatives" request from the agency. Information on agency strategic planning and performance planning can be used to build budget justification, while the costs information and out come measures can be used to make tradeoffs between agency and subunits to allocate funds strategically and determine productivity of components of an agency. Output measures can be used to determine overlapping services within an agency. From this analysis can be noted that for budget to be performance focused it requires the budget office to develop some framework for budget request that clearly shows the relationship between cost and performance. Examples of these requests are;

  1. Strategic and performance plan
  2. Performance information
  3. Costs information

This budget request should include the baseline level of performance and funding then specify the changes expected in performance due to the change funding. Then the agency forwards the budget request to the office of management and budget (OMB) for analysis where information on strategic planning, cost information and performance will very necessary as it was in the agency level. At this stage the OMB office evaluates it and compares it with the nationwide strategic plan and objectives. OMB can employ performance-informed budgeting in analyzing the agencies budget requests. They can use government wide strategic plan and performance plan to make tradeoffs with the agencies. It can also use the agency strategic plan and performance plan to justify the budget submission to the congress.

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Budget approval takes place at the congress level where legislations affecting budget implementation like taxes are discussed and approved. Even though the congress makes no addition to budget with regard to performance information, there is opportunity where performance information can be used in this stage where information n performance measures, accurate cost estimates, and strategic/performance plan can help the congress to create performance resolution and establish specific performance expectations as part of authorization process. If the information concerning structuring of accounts by program rather than by source of inputs then the congress will be able to compare costs to marginal effects on performance during legislative funding process and be able to make performance expectations as part of budget allocation. In the context of authorization of legislation, it will assist agencies in developing priorities since authorizing legislation involves reaching consensus between the congress and the president, as stated by Philip, G., Joyce (2003). Robert, L., (2005) said that the president's power to issue statements is based in article II, section 1 of the U.S. constitution which states that the "shall take care that the laws be carefully executed..." therefore any bill cannot become a law without the president's signature. Therefore president requires information prior to completion of the budget approval. The reason why the president should understand the performance implication is that he has powers to sign or veto the bill.

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Budget Execution

During the implementation of the budget performance information will help the president, congress and the agency mangers. This is because the authorization and appropriation bills do not provide all directions to the agencies in implantation as the law do not anticipate any changes that may arise. Therefore the agency managers need to help the president and the congress with the much needed expertise. This is where performance information will be required. According to Philip, G., Joyce (2003) Performance information can be bear allocation of resources for execution of the budget as follows; agency head can use agency and government wide strategic plan to understand legislative and their effects on achievement of agency performance goals and this will help him in allocating funds to agency subunits. On the other hand costs, performance and output measures can be used to monitor costs and performance during budget execution. If the relationship between resources and results are clearly shown, implies that cost can be tracked to individual program. It is important also to monitor budget performance during budget implantation phase. It is very important for agency personnel to facilitate communication about the relationship between performance and resource during execution phase.

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Budget Audit and Evaluation

During the process of evaluating and auditing the federal budget, performance information are useful as federal programs are reviewed to determine compliance with the law and management practices. Agency strategic goals, costs information, and performance reports helps both internal and external auditors to determine success or failure of a program. The importance of auditing and evaluation process to performance informed budgeting is; appropriate estimates of costs, reporting on performance, and highlighting data limitations and problems.

There has been increased use and provision of strategic planning and supply of performance and cost information. It is also established that the federal government has never been in a better position to make performance informed decision in budget making process. And lastly from the findings it is established that the congress can contribute to the ability of the federal government to engage in performance informed budgeting.

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