US government mngement budget plnning nd control - Essay Example

Running hed: US GOVERNMENT MNGEMENT BUDGET PLNNING ND CONTROL Nme of the Nme of the school: 2006 Budgeting describes wht governments do by listing how governments spend money. budget links tsks to be performed with the mount of resources necessry to ccomplish those tsks, ensuring tht money will be vilble to wge wr, provide housing, or mintin streets. Budgets limit expenditures to the revenue vilble, to ensure blnce nd prevent overspending. Most of the work in drwing up budget is technicl, estimting how much it will cost to feed thousnd shut-ins with Mels-on-Wheels progrm or how much revenue will be produced from 1 percent tx on retil sles. But public budgets re not merely technicl mngeril documents; they re lso intrinsiclly nd irreducibly politicl. The efficiency of budgeting is determined by the wys it is plnned nd control. The following pper described the wys tht US budget is crried out, how scrce resources re llocted nd the choice between potentil objects of expenditure is chosen. ll budgeting, whether public or privte, individul or orgniztionl, involves choices between possible expenditures. Since no one hs unlimited resources, people budget ll the time. child mkes budget ( pln for spending, blncing revenues nd expenditures) when she decides to spend money on mrshmllow rbbit rther thn chocolte one, ssuming she hs money enough for only one rbbit. The ir force my choose between two different irplnes to replce current bombers. These exmples illustrte the simplest form of budgeting becuse they involve only one ctor, one resource, one time, nd two strightforwrd nd comprble choices. (Blnd, Rubin, 1997) Normlly, budgeting does not compre only two resonbly similr items. There my be nerly unlimited number of choices. Budgeting usully limits the options to consider by grouping together similr things tht cn be resonbly compred. When I go to the supermrket, I do not compre ll the possible things I could buy, not only becuse I cnnot bsorb tht number of comprisons, but becuse the comprisons would be meningless nd wste of time. I do not go to the supermrket nd decide to get either turkey or bottle of sod pop. I compre min dishes with min dishes, beverges with beverges, desserts with desserts. Then I hve common denomintor for comprison. For exmple, I my look t the min course nd sk bout the mount of protein for the dollr. I my compre the desserts in terms of the mount of cholesterol or the clories. Budgeting often lloctes money, but it cn llocte ny scrce resource, for exmple, time. student my choose between studying for n exm nd plying softbll nd drinking beer fterwrd. In this exmple, it is time tht is t premium, not money. Or it could be medicl skills tht re in short supply, or expensive equipment, or prtment spce, or wter. Government progrms often involve choice of resources nd sometimes involve combintions of resources, ech of which hs different chrcteristics. For exmple, some federl frm progrms involve direct csh pyments plus lons t below-mrket interest rtes, nd welfre progrms often involve dollr pyments plus food stmps, which llow recipients to py less for food. Federl budgets often ssign gencies money, personnel, nd sometimes borrowing uthority, three different kinds of resources. (Blnd, Rubin, 1997) Budgets hve to blnce. pln for expenditures tht pys no ttention to ensuring tht revenues cover expenditures is not budget. Tht my sound odd in view of historiclly huge federl deficits, but budget my techniclly be blnced by borrowing. Blnce mens only tht outgo is mtched or exceeded by income. The borrowing hs to be pid off. Borrowing mens spending more now nd pying more in the future in order to mintin blnce. It is blnce over time. Budgeting cnnot proceed without some kind of decision process. The process determines who will hve sy nd t wht point in the decision mking, nd frmes the decisions tht hve to be mde. Budget process typiclly involves estimtes of revenues nd limits on expenditures, structures the comprisons mong lterntives, nd regultes the flow of decisions to see tht they re mde in proper order nd in timely wy. Governmentl budgeting is lso concerned with procedures for mnging trdeoffs between lrge ctegories of spending. Budgeters my determine the reltive importnce of ech ctegory first, ttching dollr level in proportion to the ssigned importnce, or they my llow purchsing in ech re to go on independently, lter reworking the choices until the blnce between the prts is cceptble.The order of decisions is importnt in nother sense. Governmentl Budgeting Public budgeting shres mny of the chrcteristics of budgeting in generl but differs from personl nd business budgeting in some key wys. 1. Public budgeting is chrcterized by vriety of budgetry ctors who hve different priorities nd different levels of power over budgetry outcomes. In fmily nd business budgeting there my be only one key ctor or few, nd they my hve similr views of wht they wnt the budget to chieve. 2. In governmentl budgeting, elected officils spend citizens' money, not their own. Generlly speking, individuls nd smll-business owners spend their own, not someone else's money. Public officils cn force citizens to spend their money on expenditures they do not wnt, but citizens cn vote the politicins out of office. Consequently, public officils try not to stry too fr from wht they think the public wnts. Becuse of the vriety of budgetry ctors nd demnds, however, there is no single set of demnds to follow. To crete enough coherence to guide decisions, budget processes in the public sector involve the negotition of consent mong representtives of competing groups nd interests. 3. Becuse elected officils mke spending decisions for citizens, ccountbility is n importnt prt of public budgeting. The budget document helps explin to the public how its money ws spent. Tht document is necessrily public, unlike business budgets, nd my be the focus of public controversy if citizens do not like wht they see or do not fully understnd it. 4. Public budgets re plnned well in dvnce of the beginning of the fiscl yer nd re intended to lst whole yer or even two yers. Mny chnges cn occur over tht period of time, in the economy, in public opinion, in politicl colitions, in the wether. Public budgets need to be ble to respond to such pressures during the yer without mjor policy chnges. If the dels tht were necessry to prepre the budget come undone during budget implementtion, budget ctors will lose their trust in the process. Privte-sector budgets re more flexible: they cn be remde from week to week or month to month, nd policy chnges cn be dopted t ny time. Privte-sector budgets re not designed to lst unchnged for eighteen months or more. Moreover, privte-sector budgets re less open to pressures from the outside, from public opinion or frequent chnges in elected officils. Public budgets re incredibly constrined compred to the privte sector. There re often rules bout the purposes for which revenue cn be spent nd the time frme in which it cn be spent, s well s requirements for blnce nd limits on borrowing. Cpitl projects my require public referend for pprovl, nd txtion growth my be limited to infltion unless citizens pprove higher rtes in referendum. Other levels of government my impose spending requirements or limit the permitted forms of txtion. Pst greements my control spending levels or result in tx shring with other jurisdictions. Courts my ply role in budgeting, telling jurisdictions wht they my tx or how their budget process my or my not chnge. Rther thn one bottom line, which is the business model, government gencies my hve multiple bottom lines, ech of which must blnce. Mny elements of public budgeting re beyond the control of those who drw up the budget. (Blnd, Rubin, 1997) ny given budget is likely to ttrct opponents s well s supporters, becuse no mtter how mny interests re served by budget, some climnts will feel they did not get ll hey wnted or hd in previous budget. Detrctors often mke public chrges ginst the budget, nd budgeters, eqully publicly, defend it. The budget is generlly implemented lmost exctly s pssed. Most of the chnges tht occur re mde for widely ccepted resons, nd very little rebudgeting tkes plce out of public view or outside regulr budget processes. Nevertheless, the discretion grnted to the executive to crry out the budget is sometimes used for politicl nd policy purposes during the yer. Not ll of this policy-relted ctivity is uncceptble or thretening to democrtic vlues. But sometimes chnges in the budget during the yer hve the effect of rendering the publicly circulted budget document obsolete. Sometimes the discretion to dpt the budget to chnging circumstnces is bused or is perceived s perversion of legisltive intent. If there is some indiction of overspending or underspending, or of corruption, frud, or purposeful thwrting of the policies nd priorities in the budget, the elected officils re likely to increse the level of their control over budget execution. (Svge, 1990) budget is pssed t the end of long period of nlysis, debte, disgreement, nd compromise. s result, it often seems to be the outcome nd end point of the budgetry process. But budgeting does not stop completely once the budget becomes lw. Becuse of chnging economy, poor predictions of revenues nd expenditures, continuing politicl bttles, chnged ledership, nd the ltered slience of public problems, the budget my chnge fter it is pssed. ccommodting to chnges due to unvoidble circumstnces while ssuring tht the policy greements underlying the budget re observed is the tsk of budget implementtion. The implementtion stge often involves formuls for disbursements nd rules bout how much money cn be shifted from one item or progrm to nother fter the budget hs been pssed. The emphsis in budget execution is on crrying out the budget exctly s it ws encted, which mkes budget execution seem highly technicl, the proper sphere of dministrtors nd ccountnts, devoid of politicl content. In relity, budget execution is lso politicl becuse it regultes the degree of public ccountbility in the budget, becuse it involves bttles for policy control between the executive nd the legislture, nd becuse even the most technicl of issues, such s the elimintion of wste, frud, nd buse, my become prt of politicl cmpigns. The people who drw up budget hve to mke predictions bout revenues nd expenditures, predictions bsed on guesses bout the future performnce of the economy, the rte of infltion, nd even the wether. When the economy improves, revenues increse, nd outlys for progrms such s unemployment compenstion nd welfre go down. When the economy slows down, revenues drop off, nd expenditures for unemployment compenstion nd welfre go up. Infltion ffects the price of goods nd services purchsed during the yer, s well s the pyout for pensions tht rise with the cost of living. Wether conditions ffect the cost of heting bills, street repirs, nd clenups fter hurricnes, torndoes, or floods. If the guesses underlying the budget re wrong, the budget my be djusted in midyer to reflect the rel revenues nd expenditures. If the budget is required to blnce before the end of the fiscl yer, environmentl chnges my force budget chnges. budget my chnge during the yer becuse the budget process ws not complete before the beginning of the fiscl yer. The budget yer my begin under one set of figures but continue under different set fter the decision mking is completed. Budget ctors my tenttively resolve n issue, expressing the result in the budget, but lter bck off from the greement, bringing bout new set of negotitions. Sometimes ctors distort informtion in order to get n greement tht will pss, but end up with n unworkble budget nd hve to modify it lter. budget my represent the best thinking nd compromises of ctors involved during budget preprtion, in rection to situtions tht were pressing t the time, but the slience of problems nd the composition of the ctors my chnge by the time the budget is executed, requiring chnges in the budget itself. When ledership chnges, which often occurs during budget yer, the new insiders my be eger to implement their policies nd hence my mke chnges in the existing budget. For ll these resons-- chnging economy, continuing politicl bttles, chnged ledership, nd the ltered slience of public problems--the budget implemented my not be the sme s the budget pssed. certin mount of flexibility nd chnge during the budget yer my be both necessry nd desirble. But chnging the budget during the fiscl yer rises potentil problems. Grnting the executive brnch wide discretion to implement the budget nd mke such chnges s my be necessry my give gency heds or chief executives disproportionte mount of decision-mking power not llowed during the regulr budget process. If gency heds or the chief executive use tht discretionry power to reverse the intent of the legislture, the result my be mjor bttle between the executive nd legisltive brnches. nd chnges in the budget during the yer, if they re extensive or clerly policy relted, my crete shdowy second budget process, outside public scrutiny, thretening the bility of the budget s originlly pssed to represent government decisions to the public. The need for flexibility in the budget, to dpt to chnging conditions, con flicts with the need to implement the budget s it ws pssed. Public ccountbility requires tht the budget pssed in full public view, with public nd interest-group prticiption, be the budget implemented. (Svge, 1990) Despite the cre with which budgets re normlly implemented, devitions from the budget tht re not routine nd minor sometimes occur. These devitions my be of two kinds. The first is violtion of fiscl control, resulting in overspending or wste, frud, or buse. The second is violtion of policy control, in which some budget ctor mkes policy chnges in the budget without going through the whole forml, public business of lwmking. If the consequences re serious enough, or irritting enough, or embrrssing enough, the chief executive or the legislture my increse control over budget implementtion. The legislture my increse its control over the executive, the chief executive my increse his or her control over the gencies. The result my be n increse in the number nd severity of constrints over budget implementtion. The dynmics of control tends to follow pttern over time: (1) n initil grnt of brod discretion to the gencies; (2) perception of buse; (3) incresed budgetry control, in the form of incresed supervision nd oversight, incresed reporting responsibilities, nd dditionl constrints written into committee reports nd sttutes; nd (4) gency rection to reduced flexibility. If reduced flexibility sufficiently hmpers mngement, or if politicins become overburdened with politiclly irrelevnt decisions bout budget execution, there my be (5) grdul reduction in the level of implementtion of budgetry controls. (Ingrhm, Brrilleux, 1983) t the federl level, for the most prt, Congress's control of gencies' budget execution is informl. There is n initil brod grnt of discretion to the gencies nd to the executive brnch over budget execution. There re converstions between legisltors nd gency heds during budget herings or suggestions for restrictions on spending in committee reports, neither of which hs the sttus of lw. Congressionl committees request nd gencies prepre detiled budget justifictions, but these justifictions re not prt of the ppropritions; they re just prt of the informl understnding between gency officils nd members of Congress. But if the gency does not dhere to informl dvice, congressionl committees my increse their controls nd put restrictions or dvice into the ppropritions ct, giving them the force of lw. "Usully when restrictive provisions re written into ppropritions cts, it is becuse the gency hs filed to comply with these less forml types of guidnce or the Congress is not stisfied with how prticulr gency is progressing towrd some congressionlly desired gol." (Drper, Pitsvd, 1981) Periodiclly the flexibility in the budget is bused, nd legisltive will is thwrted. Legisltors my become ngry nd increse controls over n gency or progrm. Such controls my ccumulte over time nd remin in plce long fter they re needed. morss of controls invites efforts to evde them, nd even the legislture my grdully lose interest in enforcing outdted overcontrols. Legisltive bodies tend to get excited when they think their will hs been thwrted. They do not tend to get s excited bout poor finncil mngement, but the Generl ccounting Office nd the Inspectors Generl t the ntionl level nd Inspectors Generl nd uditors t the stte level get upset bout poor finncil mngement, especilly when it leds to mjor losses of money. Unlike the legisltures, uditors do not hve line uthority to mke improvements. t the ntionl level, the Inspectors Generl hve to persude the mngement of their gencies to mke improvements. They hve to develop working reltionship with the mngers whom they re observing, while mintining their independence nd reporting to Congress. In the end, improving budgeting and control is not neutrl nd technicl topic even when it is hndled quietly, but when mismngement involves millions or billions of dollrs nd mkes government look bd, those who report it become unwelcome presences. Efforts to control the uditors or put prticulr spin on their findings hve sometimes mrred the independence of the Inspectors Generl. Bibliography: 1. Frank Draper and Bernard Pitsvada, "Limitations in Federal Budget Execution," Government Accountants Journal 30, no. 3, (Fall 1981): 23. 2. Irene S. Rubin. The Politics of Public Budgeting. Chathan House Publishers, Fifth Edition. 3. J. D. Savage, Balanced Budgets and American Politics (1988); D. S. Ippolito, Uncertain Legacies: Federal Budget Policies from Roosevelt through Reagan (1990). 4. OMB. Budget of the United States Government, Fiscal Year 1999. February 1998. 5. Patricia Ingraham and Charles Barrilleaux, "Motivating Government Managers for Retrenchment: Some Possible Lessons from the Senior Executive Service," Public Administration Review 43, no. 3 ( 1983): 393-402. 6. Robert L. Bland and Irene S. Rubin. Budgeting: A Guide for Local Government. International City/Government Managers Association, 1997 Read More