Budgeting and Performance

Question 1

Accruals Accounting and Output and Outcome Budgeting (1)

Answer 1

One of the problems that many governments have expressed about the public expenditure budgeting process is that it is concerned only with the allocation of money and the control of its spending. It was not traditionally concerned with either what was bought for the money, or how well the departments and agencies to which the money was allocated were spending it.

The have been two major changes. The first was a move from cash accounting to accruals accounting to reveal more accurately the costs of goods and services that were purchased with the money. Second there have been attempts to include unit costs of outputs in budget documents. The budget was recast in the language of ‘buying’ and ‘selling’ rather than simply ‘allocation’ or ‘appropriation’.

Question 2

Accruals Accounting and Output and Outcome Budgeting (2)

Answer 2

Accrual Output Budgeting or AOB

• Many governments have included statements of expected outcomes in documents that accompany budgets, but have maintained outputs as the basis for unit costing.
• Accruals accounting has normally been accompanied by attempts to measure both outputs and outcomes, but is conceptually a narrower practice of accounting for resource use rather than cash expenditure.

Question 3

Defining outputs and outcomes

Answer 3

N.B. the difficulty of defining outpus and outcomes

Question 4

Will Performance Management and Budgeting ever be Fully Implemented?

Answer 4

There are five technical and behavioural difficulties in integrating performance management with budgeting.

• The trying to do too much at one time’problem: capacity may be lacking to produce and interpret all the information required for full integration.
• The comfort of ambiguity issue: politicians may be unwilling to have their promises fully quantified
• The defending your patch issue: civil servants in charge of programmes may have reasons of self-interest not to disclose too much performanceinformation for fear of having programmes reduced in scale.
• The constraint or empowerment problem: approaches that enable managers more freedom to act in the way they think will produce the best results, are incompatible with heavily quantitative and performance-oriented management approaches.
• The attribution of outcomes issue: the difficulty of claiming that the changes in results or outcomes can genuinely be attributed to the government programme and not some other independent variables.