Management Accountability Budgeting - Term Paper Example

Management Accountability Budgeting Abstract This paper addresses the key issues in budget. The procedure to implement in utilization of the allocated funds is zero based budgeting procedure, since it requires each department in a particular firm to makes justification of allocations of each period. In management accountability the paper addresses management and use of government funds. In cost benefit analysis the paper address issues concerning improvement of country infrastructures like country highway and funding bus services. Other issues addressed in the paper include tax, debt and borrowing, investment, money printing process, fee and penalties, donors and finally conclusion highlighting the best techniques to arrive to best projects. Management Accountability Budgeting A budget is a forecast or an estimation of the expected income or revenue and a projection of the intended expenses and how these expenses will be funded. Budgeting is a process that not only lies with the financial department but with the whole management since it requires making decisions regarding the projects to be funded, the expenses to be cut down to reduce the cost and other decisions regarding capital investments, marketing and so forth. This purpose of this paper is to categorically prove why the decision to revert the budget from improvement of a local county highway to expand an interstate freeway, was a viable decision in line with management accountability and cost benefit application. Procedure The best procedure I will implement in an effort to analyze the utilization of those funds is the zero-based budgeting procedure. This system of budgeting requires that all departments in a firm to justify all allocations and expenses for each new period and not relying on past expenditure trend (Bhattacharrya, 2011). This system assumes that there is neither carrying forward of balances nor existence of current obligations. The requirement is that all activities in the period will be implemented on the basis of cost-benefit analysis, which advocates for a systematic resource allocation criteria. It is with no doubts that this system will suit this project. This is because this process comes as an alternate to the others and is fully funded. This means there would be no need at all to revisit the past expenditure plan. The system helps to identify areas that result to wasting resources and elimination. This is the common goal of every organization as a means of benefiting from cutting costs of unessential areas (Bhattacharrya, 2011). Management Accountability In a survey carried in 2009 of government Budget Transparency, found out that the misuse of public resources is a result of releasing minimal information to the citizens. Many governments were found to hide the wasteful and corrupt spending in an effort to prevent evaluation (Ramkumar and Renzio, 2009). Citizens were found to hold the government accountable for managing the money, but this was based on the government’s action of providing full adequate information. Management accountability involves a thorough analysis on whether the funds are spent as appropriated to help hold known individuals accountable incase something contrary to that happens. It also involves the ability the concerned entities to view the statements of the various government entities. This is mostly done to help curb mismanagement of money as individuals who portray greed tend to do. The major ways of ensuring accountability is achieved is by promoting transparency. This can be done through mobilizing demands from public, media, legislatures, civil society entities and audit entities in support of transparency (Lazare, 2008) Management accountability when fully implemented prepares the decision makers for any consequence of the decisions made which will be in full spectacle of the general public. It also enables those in charge of making informed judgments on public benefits that are due to come from the projects being undertaken and the progress being made to ensure those projects are completed on the stipulated time without pauses arising from scandals or lack of funds (Ramkumar and Renzio, 2009). Cost Benefit Analysis This is basically an analysis done as a criterion of assessing or determining how efficient an impact of proposed action plan (John, 2013). It acts as a benchmark for making choice on how to allocate resources which may be scarce among the competing needs. In this project for instance this analysis will be used to rank the projects according to the one that provide the highest expected benefits or gains with respect to the social welfare taking into consideration the limited government spending. The major projects in question here are the improvement of the local county highway, funding for the rapid bus service and expansion of an interstate freeway. Some of the benefits that will arise from the expansion include: reduced accident costs, benefits from time savings and reduced vehicle operation costs. This also includes the growth in the employment and earnings as a result of opening up of economies or markets between the states. Compared to the cost of expanding and maintaining that free way, the extra benefit the freeway achieves proves that the decision to direct the funds to expand the interstate freeway form the local county highway was the best (Riley, 2012). Cost benefit analysis takes place in various stages: calculation of both tangible and intangible benefits and costs, a sensitivity analysis is then carried on all occurring events, the value of the future benefits is discounted to determine today benefits, the costs and the benefits are then compared after which the net rate of return from different projects is compared (Riley, 2012). Sources of Government Revenue Tax The government earns a high percentage of its revenue from the tax charged on people’s income, or corporate incomes or on goods and services. A certain specified percentage of tax is charged on every individual earning a salary as well as all firms and business. Part of this money is used to cater for the development of infrastructure and other amenities (Gauray, 2010). Debt/Borrowing According to Gauray (2010) the government borrows for instance when funding a project that’s worth more than the tax payer’s money. Government only borrows on instances where there is a specified action plan to be implemented. It borrows either in terms of bonds and treasury bills or from other developed countries. Investments The government raises money from its own investment structures, for instance when a government owns a five star hotel. All the revenue generated goes to the government account. Other investments could include transport services, sports clubs (Gauray, 2010). Printing Money This is termed as a destructive form of raising the government revenue because it inflates the economy. The government, when in need of money to finance its various projects, gets the central bank to print (Gauray, 2010). Fees and Penalties This includes fees that are charger for services rendered by the government to the citizens. The fees include those charged for issuing passports, certificates or driving licenses. Penalties come about as a result of breaking the law or failing to observe certain regulations to act as punishment. Fines are also charged on individuals who fail to fulfill certain conditions. The main purpose is to caution people against breaching the law (Gauray, 2010). Donors These come in play when the country is in a crisis of war or emergency situations. These are grants donated either as military aid or food aid incase of drought .governments also do borrow when they are funding very costly projects (Ramkumar and Renzio, 2009). Some of sources of government spending include payment of public or government employees funding of projects like hospitals and schools, dams, infrastructure, relief aid to the less developed countries (Hindle 2003). All these have to be included in the budget and implemented using the cost-benefit analysis technique. Increasing revenue by raising taxes involves increasing the percentage of income taxable of the individuals while cutting other services and programs include privatization of projects. Conclusion The best technique to use when arriving at the best project to fund is the cost benefit analysis. This is because it weighs both sides of the coasts ad benefits and comparison is made. This helps prevent wasting or misusing of public resources. References Bhattacharrya D (2011). Management Accounting. India: Pearson Education. Gauray Akrani (2010). Tax and Non-tax sources of public revenue to government. Retrieved from http://kalyan-city.blogspot.com/2010/12/tax-and-non-tax-sources- of-public.html Geoff Riley (2012). Cost benefits analysis. Retrieved from http://www.tutor2u.net/economics/revision-notes/a2-micro-cost-benefit-analysis.html John Reh F (2013). Cost Benefit Analysis. Retrieved from http://management.about.com/cs/money/a/CostBenefit.htm Michael Lazare (2008). The Importance of Transparency and Accountability in Public Management. Retrieved from http://blog-pfm.imf.org/pfmblog/2008/05/the- importance.html Tim Hindle (2003).The Economist Guide to Management Ideas and Gurus. New York: Profile Books. Vivek Ramkumar and Paolo De Renzio (2009). Budget Transparency and Accountability Improvement. Retrieved from http://internationalbudget.org/budget-briefs/brief7/ Read More