Public Budgeting Definition and Challenges
According to Shim and Siegel (2008), public budgeting is acquisitions and proper utilization of resources by different public organizations. Acquisitions of resources are finding money from the private sector and obtaining the resources from the taxes, fees, and gifts. It is true the only way to know what one is planning to accomplish in your budget is by the measurement of success because, in the private sector, the price mechanism determines resources utilization and measurement in the budget process. In the public sector, budget makers mostly decide the kinds and levels of revenues and expenditures employment in the budget process. Policymakers express those decisions in the budget documents that consists of Governmental fees for things like road and the fee charged when entering national parts entrances. However, even where these fees for services operations exist in the public budget, the fees often reflect only a portion of the actual expenditures for services.
In order to measure public budget success it is good to access the public budgeting processes that are divided into four general stages, that occur sequentially; preparation, submission and approval, implementation and reviews and reports. The four stages consist of a cycle from a beginning to an end with the stages following each other during distinct periods, although, some activities from each of the stages may overlap into these stages. Each cycle represents the time of its implementation that is usually one year in length, and always overlaps at least two other budgets that are at different stages of implementation. For instance, the implementation stage of one-budget cycles overlaps the reviews and reports stages of the previous budget cycle and the preparation stages of the succeeding budget cycle. Some budget managers, in order to realize successful budget planning decide to work with three or four different budget cycles at the same time.
The preparation period starts when some managers of the budget start working to create a budget for an upcoming fiscal year. To measure the success of the budget planning, the central office creates and communicates a calendar of budgeting events, instructions and revenues, and the expenditures estimates for the next fiscal period to other private sectors. For a successful budget, the instructions produce estimates of expenditure in detail and the source of the revenue needed to relate to the budget planning. The budget proposal is usually in the words and numbers indicating the costs of the providing services and goods, to measure the success of the budget the administrators should review the budget proposals and decide whether they approve each proposal. For example, the comprehensive budget proposals contain revenues and expenditures together with general policy records (Mikesell, 2011).
For a budget to be successful, planning of time and effort requires approval of the budget because it varies widely on how to prepare and present proposed budgets. During the endorsement process, budget makers work on forms of the budget proposal and verify the budget decisions in one or more accepted budget credentials. In addition, the implementation of each private-sector relies on at least one budget document derived from approved budget documents that indicate how resources are spent. For the success of the budget process managers of the reviews and reports stage should produce financial reports, auditors produce audit reports, and managers responsible for reviews should be responsible. The public sectors use separate capital budget documents for projects and resources similar to other budget documents because capital is particularly significant in the success of budget planning. Therefore, when the public sector deals with the capital items on the budget processes, they should use specialized capital item documents for proposing, submitting and approving, implementing, and review and reporting.
The public sectors implement different types of the budget for the success of the planning process, some of the budgets includes operating budget, financial budget, and expenditure budgets (Mikesell, 2011). The operating budget is a report that characterize financial plan for responsibility during the budget period, and it consists expenditures, revenues, and profits of the budget in the fiscal period. On the other hand, the financial budget shows how a public sector is going to obtain resources and how to implement them for a successful budget planning. The balance sheet, cash budget and the capital expenditure budget are examples of the financial budgets. Nonprofit budgeting situations and practices relate to foci and need to obtain non-tax revenues, they consist small size, sensitive to the economic situation, different compositions of revenues, expenditures, and comparatively easy budgeting planning. The nonprofit sectors spend input factors to provide services, such as education that generate fees used to make the planning process successful.
The nonprofit sector budgeting is simpler than governmental budgeting because of the fewer constraint and honesty in dealing with changing situations (Mikesell, 2011). The challenge of the successful planning of the nonprofit sectors is that it does not follow the many budget related laws that constrain governments, difficult to change annual budgets and adjust their budgets as conditions changes. The example of the successful budget is the federal government budget that is unique because of its size, frequent large deficits, composition of revenues and expenditure are flexible. The federal expenditures are programs and policies designed to shape behavior by transferring money, while several programs and policies are based on purchasing effects, with defense being the major example. The examples of transfer programs include social security, foreign assistance and the local government payments.
In many cases, the public budgeting is a political process because the top leaders always try to manipulate the budgeting process. The utilization of power in the budget process affects the distribution of the public resources, from the social angle the power as formal and informal integration of main norms and values into operating procedures and practices of the budget. In any given process, of budget formulation and planning uneven power associations may due to inclusion of different social class to the decision making practice. Power has a crucial role in acquisition of information and determination of decision-making of the budget process. The most public budget does not account for the poor people and equal distribution of resources among gender consideration in the budget process.
It is expected that when budgets move in public direction it will review hidden resistance of fair implementation of the planning process. The transparency of the budgeting process is highly significant its forms a system of budget information that allows officials and public to analyze what happens to the resources utilized in the budgeting process. In conclusion, the challenge of decision making of the budget process is about resource allocations that are mismanaged and implementation take a long time than expected. Finally, for any public budget process to be successful the leaders should work together to utilize given resources to manage the expenditures of the budget. The implementation of the budget process should be done within specified time to avoid overlapping of the budget process stages.
Mikesell, L. (2011). Administration, Analysis and Applications for the Public Sector (8th ed.) United Kingdom, UK: Cengage Learning press.
Mikesell, L. (2011). Understanding government budgets: a practical guide. New York, NY: Routledge press.
Shim, K. & Siegel, G. (2008). Budgeting Basics and Beyond. New York: John Wiley and Sons Inc.