On what basis shall we allocate resources to Program A instead of Program B,” is the perennial statement in public sector budgeting. Identify and discuss at least five attempts, found in the budgeting literature, used to answer V.O. Key’s famous budgeting question. In your professional judgment, which type of budgeting system is most appropriate for public administration? Why do you feel this way?
Any financial plan that is designed and implemented by an organization can be described as one of the most important and powerful tools for management control in the organization. Notably, budgets are the key drivers and evaluators of the performance of the management team of an organization. Budgets often give an organization the opportunity and platform for the organization to create a financial plan for a given period by developing a plan for the sales volume and revenue, the quantity of the resources, costs, expenses, assets, liabilities and cash flows of an organization (NUSSLE, 2012). Public budgeting is part and parcel of a public administration and believes that any budget is dependent on the approaches, functions, formation and the type of the budget developed. This assignment will attempt to show how an organization can allocate resources by V.O. Key’s famous budgeting questions.
V.O. Key a renown American political scientist attempted to create an equal and just society by sparking the normative question on how best to allocate the scarce resources available to the nation to the unlimited demands of human beings. In an attempt to provide answers to this question, economists came up with five forms of the budget that can help to allocate limited resources to the unlimited demands. These budgets include:
Line item budget – this form of budgeting can be described as the simplest or easiest budgeting approach that has ever been developed considering that it links the resources of the system to the system itself. Additionally, these forms of budgets largely exist in the form of accounting documents that offer minimal information and data regarding the importance of the system (Menifield, 2011).
Program budgets – this form of budget takes a prescriptive approach to budgeting considering that much of the decision-making regarding the allocation of the available resources is determined by the availability of capital or funds to finance a project or a program. This approach is substantially connected to the planning, programming and budgeting system financial approach that integrates various techniques and methods in planning and budgeting processes.
Priority-based budgeting – this form of budgeting process seeks to cut the amount of money and resources allocated to certain programs within the budget. Unlike incremental budgeting, priority-based budgeting fixes the amount of funds and resources to be used and then distributes these resources across the various programs. Notably, programs and projects often receive their resources based on their urgency, need, and priority. This budget can be used as a response to poor economic conditions in a country (Doern, Maslove, & Prince, 2013).
Flexible freeze – this type of budgeting was introduced by former united states president President George H. W. Bush as a technique to minimize government expenditure. Under this form of budgeting, important factors such as the population and inflation would significantly affect some of the programs and projects.
PPBS budgeting – this form of budgeting is widely known as a program panning budgeting system that is used to create complex budgets by integrating both line-item budgeting and program budgets. Therefore, through this budgeting approach, individuals and organizations have an opportunity for identifying, costing and assigning sophisticated resources for determining priorities and strategies in projects. This budgeting process also links the project under consideration to the means of facilitating its implementation and execution (Doern, Maslove, & Prince, 2013).
Owing to the presence of limited economic resources in the world today and the increasing human demand, priority-based budgeting would suit economic conditions. Through this approach, important programs and projects such as security and healthcare are prioritized over less important programs, thus maximally, effectively and efficiently utilize the resources.
Doern, G. B., Maslove, A. M., & Prince, M. J. (2013). Canadian public budgeting in the age of crises: Shifting budgetary domains and temporal budgeting. Montreal: McGill-Queen’s University Press.
Menifield, C. (2011). Comparative public budgeting: A global perspective. Sudbury, MA: Jones and Bartlett Publishers.
NUSSLE, J. (2012). Perspectives on Budget Process Reform. Public Budgeting & Finance, 32(3), 57-60. doi:10.1111/j.1540-5850.2012.01014.x