PUBLIC BUDGETING &

FINANCE
Budgetary Process in Pakistan
Approaches to Public Budgeting

Financial Administration

Public budgeting & financial management are

concerned with the allocation of limited resources to
the problems government and other pubic
organizations face.

The budget is an extremely important tool for

planning and control

Finance constitutes a vital part of all govt. activities

It is to meet ever increasing demands of the

citizenry with limited resources, particularly financial
resources.
2

Financial administration refers to

Fiscal Policy Formulation
Fiscal Management
Accountability

Budgeting

Derived from French term Bougette

Budget is a financial plan of govt. for a

definite period (Taylor)

A budget is a financial statement

prepared in advance of opening of a fiscal
year based on estimated revenues and
proposed expenditures of govt.
departments & public entities for the
ensuing fiscal year (H R Bruce)
4

A plan of proposed revenues and

spending outlays for the coming fiscal
year or longer. It sets forth the financial
plan for allocating resources and
indicates the policy priorities of the govt.
Rosenbloom

A govt budget is a statement of social priorities

which indicates how much money govt intends to
spend in areas of priority.

It provides a societys dimension of socio-economic

change and development.

Equally important is its role in reforming public

sector.

Budget also has a revenue dimension.

Budget also reflects political exigencies of the govt.

The budget is a fiscal blue-print of

projected government activities put side
by side with the record of past years and
joined to an estimate of public revenues.

Annual Budget Statement (Article 80 of th

e Constitution)

Budget as an instrument of fiscal policy

Fiscal policy is concerned with the impact of

govt. taxation and spending on the economy
generally
Before Great Depression govt. bothered least
about market mechanisms (Free Economy)
Keynesian Economics
The ways federal govt. can influence the
economy
By varying its own spendings
By raising or lowering taxes
8

Budget as an instrument of
public policy

Favorite govt. programmes are funded

Budgetary priorities are set mostly under
political influences

Two concepts

Where the money comes from

Where the money goes

Where the money comes from

A- Govt. own sources
B- Transfers from other governments
C- Loans and aids
A

Individual income tax

Corporate income tax
Payroll taxes
Sales tax
Excise taxes
Property taxes
Wealth tax
Withholding tax
Other revenue sources
10

Where the money comes from

cont..

B- transfers from other governments

Intergovernmental transfers
National Finance Commission Award

C- Loans, Grants & Aids

11

Where the money goes

Govt. priorities
New conditions arise
New programs are proposed
Old programs are expanded
Debt repayments
Defense and law & order

12

Budget Cycle

The budget making process- the

budget cycle

The budget as Managerial tool

Authorization of public programs by
members of parliament
Appropriations
Accounting and auditing of budget

14

The Budget Cycle

A six step process;

Setting budget policy and initiatives (Budget
Call Circular)
Preparation of estimates
Authorization
Implementation
Reporting & Monitoring
Review & Audit

The budgetary cycle

PAD,
Ministries &
PAC

6Review

5-Reporting
&
Monitoring

PAD, Spending
Ministries

1-Policy
Setting
The Cabinet

MoF, Spending
Ministries
2Preparation

Cabinet,
National
Assembly
President
3Authorization

4Implementa
tion
MoF, Spending
Ministries

Approaches to Public Budgeting

Allen Schick suggests that budget has at

least three different purposes;
Planning
Management
Control

Incremental Budget
The Line-Item Budget
The Performance Budget
Planning-Programming-Budgeting System
Zero-Based Budgeting
19

Line Item Budgeting

Abudgetin which theindividual financial

statementitemsare grouped by cost
centersordepartments.

It shows the comparison between

thefinancialdatafor the
pastbudgetingperiodsandestimatedfigure
s of thecurrentor a future period.
the budget of a given fiscal year (FY) is
largely decided upon by the existing budget.

Zero-based budgeting

It isa response to an incremental budgeting

In contrast toincrementalism, the

allocation/funding is determined from a
zero-sum accounting method.
In government, each function of a
department's section proposes certain
objectives that relate to some goal the
section could achieve if
allocatedxamounts.

Performance Based
Budgeting

Performance may be judged by a program's

ability to meet certain objectives that
contribute to a goal as calculated by that
program's ability to use resources (or
inputs)
efficientlyby linking inputs to outputsand/or
effectivelyby linking inputs to outcomes.

Allocation of scarce resources/funding

depends on determining which project
maximizes efficiency and efficacy.

Performance budgets use statements of missions, goals

and objectives to explain why the money is being spent. It
is a way to allocate resources to achieve specific objectives
based on program goals and measured results. Carter

According to Segal and Summers,performance budgeting

comprises three elements:
the result (final outcome)
the strategy (different ways to achieve the final outcome)
activity/outputs (what is actually done to achieve the final
outcome)

Harrisonelaborates:
PBB sets a goal, or a set of goals,
monies are connected (i.e. allocated) to these goals,
specific objectives are derived,
funds are then subdivided among them.

itrequires to list down Key Performance

Indicators(KPIs) at the outset
linking these performance indicators to
resources
This is where strategy and planning
meet execution and measurement

PPBSProgram Planning
Budgeting System

A leader in the promotion of PPBS was Robert

McNamara's use in the United States
Government's Department of Defense in the
1960s.

It is the link between the line-item and program

budgets and the more complex performance
budget.

as a long-term planning tool, it links the program

under consideration to the ways and means of
facilitating the program.

PPBS

conti

This is meant to serve so that decision makers are

made aware of the future implications of their
actions.

These are typically most useful in capital projects.

The planning portion of the approach seeks to link

goals to objects or expected outcomes, which are
then sorted into programs that convert inputs to
outputs;
finally, the budgeting of PPBS helps determine
how to fund the program.

Planning, Programming, and Budgeting System

(PPBS) is in effect an integration of a number of
techniques in a planning andbudgetingprocess

It typically divides the process into plans,

programs and budgets.

Used for identifying, costing and assigning

resources for establishing priorities and
strategies in a major program

for forecasting expenditure and achievements

within one financial year or over a longer period.

CSS-Questions

Css-2015
Q. No. 8. Describe the system of auditing in Pakistan and
examine its role in combating corruption and financial
miss-management in government departments.
Css-14
Q. No. 8. Write short NOTES on any TWO of the following:
(10 each) (a) Woodrow Wilsons contribution to Public
Administration (b) Planning Process in Pakistan (c) Zerobased Budgeting
Css-2013
Q.8. Write notes on any TWO of the following:(a) Role of public administration in modern welfare
state
(b) Ecology of Bureaucracy
(c) Problems of
coordination in public administration in Pakistan
(d)
Performance budgeting

CSS-2011
Q.7. The flow and management of funds is the lifeblood of
our system of public administration. Explain the
governments budgetary system. Is it an inherently
political process?
Css-2012
Q. 5. What is performance budgeting? Bring out its merits,
limitations and difficulties. (20)

Q&A