Government Budgeting Process at VA
Governmental Budgeting Process refers to the decision-making process by which public resources are allocated to priority areas identified by the government. It refers to the mechanism by which a budget is created and approved. Budgeting is important since it enables the government to establish expenditure levels for various agency’s functions. Budgeting helps allocate scarce resources to various agencies and departments that help meet public demand and maximize the welfare of the citizens (Lee, Johnson, Joyce, 2008). The budget is supposed to reflect the values and meet the needs of majority of the citizens. Over the years, Governmental Budgeting Process has evolved tremendously. This has mainly been influenced by laws passed by the Congress to shape and smoothen the entire process. This paper will analyze the budgeting process with regard to United States Department of Veterans Affairs (VA).
The U.S. Department of Veteran Affairs is a state-run benefits system that is meant to cater for veterans. VA administers a number of programs aimed at looking into the welfare of veterans and their families, including survivors. Specifically, the agency is charged with providing health care and other benefits to Veterans including their families. VA derives its revenues from the federal government through budget allocations. VA also utilizes discretionary resources under its control. In order to obtain funding from the federal government, VA prepares budget requests which it presents to the legislature. This is based on estimated agency needs and cost of various programs to be undertaken during the next financial period. Cost estimates prepared by VA officials are documented and taken through the four Public Budget Cycle phases for evaluation and approval purposes. In the 2017 budget request, OB has made requests of a total $182.3 billion. A part of this amount, $103.6 billion, represents mandatory funding while the other part, $78.7 billion represents discretionary resources. This is a 4.9 percent increase compared with the budget for the last financial year (“Office of Budget,” 2017).
VA has several revenue classifications based on how or where it is derived. The first classification is the exchange revenue that is derived from exchange of goods or services between VA and the public or a government entity for a consideration (“Department of Veteran Affairs,” 2011). Exchange revenue may include fees and commissions charged or earned various services. As such, VA may earn exchange revenue from providing goods or services to private entities, public entities, state and local governments, foreign governments, business, federal agencies, and other VA facilities. Primary exchange revenue at VA is earned through provision of medical services to VA members. Exchange revenue may also be earned from trust fund activity or from a revolving fund. The second form of revenue classification is non-exchange revenue. This revenue is obtained when VA demands revenue from the general public in form of penalties, duties, and fines. Donations are also included as part of non-exchange revenue. Donations may be in form of cash, securities, land, or buildings.
Related post: Public Budget Cycle
Fiduciary funds are those held by the government but in actuality belong to individuals or entities. VA has established a fiduciary program that serves veterans and their families. The fiduciary program specifically targets veterans who are incapacitated due to disease or injury and are unable to continue providing to their families. This also includes veteran members who are unable to manage their finances due to any of the reasons such as age, disease, or even injury. Proof of incapacitation must be provided for one to be eligible for the program. This involves providing medical documentation or a court ruling. A fiduciary is appointed after establishing that a veteran is incapable of managing his/her financial affairs. Fiduciary funds are a veteran’s personal savings and entitlements. They represent the share or fraction of savings that is rightfully entitled to a veteran member, but is in one way or another unable to manage the share of funds. This is thus the exchange revenue derived by VA (“Department of Veteran Affairs,” 2011).
Proprietary funds are used in governmental accounting. The Veterans Affairs Department uses proprietary accounts to show the true financial position and operations of the department with regard to liabilities, actual assets, revenues, expenditures and fund balances (“Department of Veteran Affairs,” 2011). Proprietary funds in VA are associated with the loan program. The proprietary fund associated with the loan program is audited to ensure accountability in the loan program. Proprietary liability accounts and asset accounts are used to indicate the receipt of funds in Treasury and in classification of various assets such as inventory, receivables and fixed assets. Governmental funds represent all other forms of funds. Governmental funds receives revenues from grants made by the federal government. For instance, the discretionary grants that are issued under a federal government agency.
Public policy decisions significantly affect the receipt of revenues at the Veterans Affairs Department. During the appropriation phase, various bodies maintain communication. These include Office of Management and Budget (OMB), Federal agencies, and the President. Economic outlook projections are given by the Congressional Budget Office (CBO), Treasury, and the Council of Economic Advisers. All these agencies and persons affect the decisions on issuance of revenues and restrictions that might be placed. Statutory provisions establish the number of items that must be submitted together with the budget request. VA is require by OMB circular to prepare performance-based budgets in accordance to Government Performance and Results Act (GPRA). This act also requires VA to prepare performance reports and performance plans annually. OMB is in charge of apportioning funds to various agencies including VA and monitoring their use of the funds.
The Antideficiency Act (ADA) also places restrictions in the ways VA conducts itself. This act prohibits VA from spending more funds than appropriated under the budget. The act also requires VA to control its spending. In case of overspending, penalties are issued. Government Accountability Office (GAO) and Treasury also gives directions on how VA controls its budget. The two provides guidelines and specific procedures that are supposed to be followed. VA is also supposed to issue a final report to Congress detailing how appropriated funds were put to use. GAO restricts VA on the amount of payments it can make for various operations. This ensures that funds are used in an accountable manner.
The economic performance is of great significance when making revenue projections. The first form of economic conditions that affect revenue projections is the unemployment rate in the country. The unemployment rate is determined by the business cycle prevailing in a country. When production of goods and services is high, more individuals are involved in production. This increases the revenue base available for taxation. The level of GDP also affects revenue projections in a country. GDP level is used as an indicator of economic performance. A high economic performance as indicated by GDP levels improves the bottom line of the budget. A slow or negative growth in GDP translates to less amount of taxable income available. Policymakers would thus lower their revenue projections.
The Interest rate is also a significant determiner of revenue projections. Revenue projections heavily rely on interest rates in the country. Changes in interest rates have various impacts both to firms, individuals and the government in terms of borrowing (Howlett, 2011). Generally, higher interest rates lead to low aggregate demand in the economy. This have several consequences on the economy such as low economic growth, unemployment levels increase, and negative balance of payments. The government pays higher interest rates on current loans reducing the amount of money available for various projects in the country. Such conditions negatively affects revenue projections. Policymakers analyze interest rates which gives a measure of the economic conditions in the country.
The prevailing prices of some goods also determine the economic conditions in the U.S. For instance, it has been observed that lower gas prices in the U.S. markets triggers a higher consumer spending. On the other hand when prices are high, there is a lot of pessimism which leads to restrained spending. Restrained spending is harmful to the economy since the government is unable to obtain sufficient revenue in form of taxation to fund its operations. As such, high prices of some basic commodities like gas may lead to low revenue projections.
Department of Veteran Affairs. (2011). VA Financial Policies and Procedures. Retrieved from: http://www.va.gov/finance/docs/VA-FinancialPolicyVolumeIVChapter01.pdf
Howlett, C. (2011). Budget and Economic Outlook: An Update. DIANE Publishing.
Lee, R. D., Johnson, R. W., Joyce, P. G. (2008). Public budgeting systems (8th ed.). Sudbury, MA: Jones and Bartlett.
Office of Budget. (2017). FY 2017 Budget Submission. Retrieved from: http://www.va.gov/budget/products.asp