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BUDGET METHODS AND PRACTICEPreparation 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 IAvoiding 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 IISeeking 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

$ totalQACTIVITY/WORKLOAD LEVELRTC

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BREAKEVEN ANALYSIS II

$ totalQACTIVITY/WORKLOAD LEVELRTCTCRP

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BREAKEVEN ANALYSIS III

$ totalQACTIVITY/WORKLOAD LEVELRTC

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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?