College Of Finance, Management And Development

Department of Developmental Management

Course: Government Budgeting and Expenditure Management
Individual Assignment
Prepared By: Desalegn Asfaw
ID No: ECSU1700388

Submitted to: Mr. Abdela Hussen (MA)

May, 30/ 2019
Addis Ababa, Ethiopia
 1. How does budgeting influence economic development of a country?
2. What makes budgetary accounting different from conventional accounting?
3. What the difference between financial audit and performance audit, compliance audit?
4. What are advantage and disadvantage of decentralization?
5. What is fiscal federalism?
6. Distinguish between fiscal policy and monetary police
7. What are some of the principles fiscal federalism follows
8. Indicate some of the purpose of a budget call
9. Identify the control procedures used in government budgeting
10. Explain the budget relationship of federal and regional governments
11. Distinguish between alslotment and apportionment
12. Explain the important of making budgetary review
13. What are the rules used by the budget analysts in budget review
14. Distinguish between performance budgeting and program budgeting
15. Compare program budgeting with the other system of budgeting
16. What do you think is the significance of the allotment process in enhancing the
effectiveness of the a budget of government like yours
17. What factors are considered in developing a formula for regional subsidy?
18. What is the difference between performance measurements and program evaluations?

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In a country’s economic development the role of economic factors is decisive. The stock of
capital and the rate of capital accumulation in most cases settle the question whether at a given
point of time a country will grow or not. There are a few other economic factors which also have
some bearing on development but their importance is hardly comparable to that of capital
formation. The surplus of food grains output available to support urban population, foreign trade
conditions and the nature of economic system are some such factors whose role in economic
development has to be analyzed:
Capital Formation
Natural Resources
Marketable Surplus of Agriculture
Conditions in Foreign Trade
Economic System

Conventional accounting is a very powerful tool for business management used both for
reporting money profit performance to investors and used within the internal business MIS to
optimize the performance of the organization by reducing costs and increasing profits.
Conventional accounting is a method generally used by the managers within a company. It
focuses on aspects such as decision-making, the future of the company, and timeliness. This
method gives the managers a better idea of the current company situation and how it affects
finances in the future.
Budgetary accounting is a particular of accounting most often used by local, state and federal
municipalities. Private sector companies use budgets to help guide their expenditures, but it is
not the same as budgetary accounting. Government accounting uses a series of funds that
represent the capital appropriated for certain uses. Other entries posted into the funds are
allotments and encumbrances, which detail how the state or federal agency will spend
appropriated money in each fund. One fund is typically marked as general to represent
inappropriate capital.

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Government accounting is often a difficult process to understand and maintain for most
accountants. This is because of the budget process associated with the few sources of income
earned by the government agency, such as sales, property or income tax. With each income
received by the government municipality, accountants must appropriate the funds according to
the predetermined budget. Most agencies or municipalities have a budget council that determines
how they spend tax revenues. The budget process is typically a detailed process not necessarily
governed by accountants, but the elected officials of the agency or municipality.

Compliance audit is concern more with ensuring that operating units of an organization are dis
charging their respective responsibilities in accordance with rules and regulations in the
organization. Usually this this type of review is done on a high level basis especially in ensuring
compliance to regulatory guidelines.
Financial audit involves examination of the accounting reports of any entity to vouch/assure for
their accuracy and being free from any material misstatement of facts. This is to identify any
findings such as misrepresentation and misstatements of the company’s financial statements. It is
past oriented.
Compliance audit is concerned more with ensuring that operating units of an organization are
discharging their respective responsibilities in accordance with the rules and regulations in the
organization.
Performance audit, on the other hand, focuses mainly on checking that units of an enterprise are
operating in line with pre-established objectives that would lead towards achievement of goal of
an entity. It is future oriented.

 Advantages of Decentralization
Decentralization of authority has certain advantages, such as:
I. Diversification of activities
Decentralization reduces the burden of the chief executives with making routine decisions. They
can easily devote the time available for important activities such as diversification of products,
raising necessary finance, obtaining licenses and starting new lines of production and solving

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crucial problems of the business concern, while less important and routine may be left to the
middle and supervisory levels.
II. Development of the Managerial Personnel
As the business grows in size, it requires the services of a large number of managers and here
decentralization provides a training ground for the would-be managers. The managers learn by
experience within the organization concerned.
III. Effective Control and Supervision
Decentralization leads to effective control and supervision. Since concerned managers enjoy full
authority to make changes in work assignment, to take disciplinary actions, to change production
schedules or to recommend promotions, they are in a position to supervise the subordinates’
activities.
IV. Improvement of morale
Decentralization helps improvement of managerial ability which leads to an increase in their
morale and this result in a higher productivity.
V. Satisfaction of human needs
Decentralization is an important tool for satisfying human needs of power, independence, status
and prestige. This satisfaction helps in building a cadre of satisfied managers, who feel their
responsibility towards company’s work.
VI. Quick and wise decision possible
Since decision-making authority is as near as possible to the place where action takes place,
those having this authority can make reasonably accurate, wiser and timely decisions because
they are well aware of the realities of the situation. Decentralization also minimizes the delay in
communicating information.
VII. Better utilization of Management
Other economies may be achieved through the better utilization of lower and middle
management, greater incentive, more and improved training opportunities, insurance that some
products will not be pushed at the expense of others.
VIII. Employee Management
Closer and better employee management and community relations are possible in small
administrative units for business as a whole, where decentralization may mean a more

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widespread distribution of roles and purchases, which may reduce proportionately the
unfavorable impact of sales decline.
IX. Increase Social Net Product
Decentralization may result in an increase in the managerial social net product, i.e., benefits to
the community as distinct from benefits to the company. These general benefits may include
more freedom of action for individuals, more widespread opportunity for constructive individual
participation, less social stratification within the business.
X. Reduces the Burden of Top Executives
It frees the top managers from the burden of taking too many operating decisions. This enables
specialization and also permits the top managers to think for the future and make plans
accordingly.
XI. Facilitates Diversification
Diversification of products or markets is possible only by departmentalization. Without
decentralization, departmentalization is meaningless and practically impossible.
XII. Improves Motivation
Decentralization provides more chances for the executives to exercise initiative without any
undue interference from the top executive. This improves themorale of the employees and
motivate them for peak performance.
XIII. Secures Better Co-ordination
As self-sufficient departments are established with necessary service functions, all the activities
are coordinated at the departmental level.
XIV. Ensures Effective Control
It is comparatively easy to measure the performance of the operations at the department level.
This will lead to effective control.
XV. Develops the Quality of Managers
The executives will get training and also opportunities to develop their talents.
XVI. Flexibility
It permits the enterprise to move quickly and there will be more flexibility in meeting
competition because prompt and spot decisions are possible.
 Disadvantages of Decentralization

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Notwithstanding the merits of decentralization, there are certain difficulties in its application to
all cases and in all circumstances. The serious limitations of decentralization are as follows:
 Decentralization makes the utilization of the services of exceptionally talented people.
Because of weak financial resources, appointment of such persons may not be possible.
 Decentralization increases the problems of coordination among the various units.
 In some cases, decentralization may not be possible at all. External factors make this
difficult, such as companywide strikes.
 It increases the administrative expenses because highly-paid managers have to be appointed.
 High Cost of Operation: Establishing of various departments and employment of specialists
in each department will result in a higher cost of operation.
 Lack of Uniformity: There shall not be uniformity in policies and actions, since each
manager will form his own genius in designing them.
 Unsuitable for Small Firms: Departmentalization is completely unsuitable for small firms
as it involves high operating costs.
 Reliance on the Manager: Decentralized organization has to place undue reliance on the
efficiency of the divisional managers. If they do not have enough skill or competence to take
appropriate decisions, the enterprise has to incur heavy losses due to their faulty decisions.
 Self-Centered Attitude: Each department will tend to be self centered ignoring the broader
interests of other departments and that of the entire firm.

Fiscal federalism is concerned with "understanding which functions and instruments are best
placed in the sphere of decentralized levels of government” in other words, it is the study of how
competencies (expenditure side) and fiscal instruments (revenue side) are allocated across
different (vertical) layers of the administration. An important part of its subject matter is the
system of transfer payments or grants by which a central government shares its revenues with
lower levels of government.
Federal governments use this power to enforce national rules and standards. There are two
primary types of transfers, conditional and unconditional. A conditional transfer from a federal
body to a province, or other territory, involves a certain set of conditions. If the lower level of
government is to receive this type of transfer, it must agree to the spending instructions of the
federal government.

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 Fiscal federalism assumes that a federal system of government can be efficient and effective at
solving problems governments face today, such as just distribution of income, efficient and
effective allocation of resources, and economic stability. Economic stability and just distribution
of income can be done by federal government because of its flexibility in dealing with these
problems. Because states and localities are not equal in their income, federal government
intervention is needed. Allocation of resources can be done effectively by states and local
governments. Musgrave argued that the federal or central government should be responsible for
the economic stabilization and income redistribution but the allocation of resources should be the
responsibility of state and local governments.
. Distinguish between fiscal policy and monetary policy

BASIS FOR
FISCAL POLICY MONETARY POLICY
COMPARISON

Meaning The tool used by the government in which it The tool used by the central bank to regulate the
uses its tax revenue and expenditure policies money supply in the economy is known as
to affect the economy is known as Fiscal Monetary Policy.
Policy.

Administered by Ministry of Finance Central Bank

Nature The fiscal policy changes every year. The change in monetary policy depends on the
economic status of the nation.

Related to Government Revenue & Expenditure Banks & Credit Control

Focuses on Economic Growth Economic Stability

Policy instruments Tax rates and government spending Interest rates and credit ratios

Political influence Yes No

 Five principles of fiscal Federalism

 Local management of resources responds better to local preferences

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  It may be more efficient to assign expenditures to the lowest level of government
consistent with efficient performance.
 Administrative levels are accountable to local taxpayers and accountable to the
administrative levels above them.
 Fiscal equalization.
 Increases the stake in the process by local institutions and individuals.

 Budget Call: -
o In brief, the budget call informs public bodies what their ceilings are and when to prepare
their budget requests. The budget call will be issued by the MOFED to promote a
common budget calendar and better co-ordinate the preparation of the recurrent and
capital budgets.
Budget Call: - The budget call provides public bodies with the following:
◦ Their budget ceiling for recurrent and capital expenditure for the coming fiscal
year;
◦ The deadline for submitting their budget requests.;
◦ A review of the policies that affect the expenditures of public bodies;
◦ Guidelines on treating external loan and assistance;
◦ General guidelines for the preparation of the recurrent and capital budget
submission; and
◦ Detailed instruction and formats for preparing the request for the recurrent and
capital budgets.
◦ In brief, the budget call informs public bodies what their ceilings are and when to
prepare their budget requests.
◦ The budget call will be issued by the MOFED to promote a common budget
calendar and better co-ordinate the preparation of the recurrent and capital
budgets.

 Preventive controls - these are established to lock actions that would violate standards.

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 – reviewing planned purchases
– Often requiring approval by multi and independent authorities before spending
occurs.
 Feed forward controls - perform diagnostic or therapeutic actions in the spending
process.
 Variance reports may automatically place stop order on certain accounts when
differences b/n actual expenditures and budgeted expenditures exceed certain levels.
 Feedback controls - starts corrections for the future.
– The comparison between budgeted expenditures and actual expenditures within
the fiscal year is important information for those preparing, reviewing and
directing budgets for next year.
. The budget r/ship of federal and regional government
Both the federal and regional governments have the budget relationship in planning, preparation
and allocation of budget and collecting revenue
 The regional states were also given the power to raise their own revenue and to plan and
execute their own development activities in accordance with the overall policies of the
federal government.
 Furthermore, the decentralization and devolution process did not stop at the regional
level.
 The Woreda (which is the lowest level of formal government within the regions) started
to play a more prominent role and councils were given the mandate to develop and
enforce by laws governing the management of natural resources.
Government budget planning and preparation
 At both the regional and federal government level, planning and annual budget
preparation starts with an assessment of the economic situation.
 Amongst other things, this includes an estimation of future revenue.
 This is particularly important for the administration because, the administration is
responsible for the collection of numerous fees, taxes, and royalties associated with the
exploitation of state.

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  Following this initial assessment, the Federal Government and regional governments
follow their own procedures to arrive at a final budget for the administrations under their
control.
Budget planning and preparation at the federal level
At the federal level, the first stage of the budget process is to produce an estimate of total
expected government revenue.
This estimate is produced by the co-coordinating ministries (i.e. the Ministry of
Economic Development and Co-operation and the Ministry of Finance) in consultation
with the National Bank of Ethiopia.
The expenditure budgets are then allocated to the regional and federal governments and
are divided into budgets for recurrent and capital expenditure.
Budget planning and preparation at the regional level
 One component of the federal budget is a grant from the Federal Government to the
regional state of governments.
 The allocation of this grant is determined by the Federation Council, which bases their
decision on a formula that includes variables such as the population in each state and the
capacity of each state to generate their own revenue.
 The states with less capacity to generate their own revenue are entitled to get a larger
allocation of this money.
 The state governments follow similar budget planning and preparation procedures to the
Federal Government.
 Regional finance bureaus prepare ceilings for expenditure by the regional bureaus for
each sector, which include allocations for capital and recurrent expenditure.
 This is done after the grant for each state from the Federal Government is announced.
The finance bureaus at the zonal and Woreda levels also follow this process at their levels
of the administration.
 The regional finance bureaus then submit their budget proposals to the regional councils
for approval.
 Â Once the budget proposals have been approved, they are published in the regional
Negarit Gazeta.
Federal Government budget allocation to the federal administration

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  The Federal Government budget allocation to the regional sectors is also shown by
source of funds
 i.e. foreign assistance and expenditure supported by domestic revenue collection.
 However, domestic financing has not increased by the amount that foreign assistance has
fallen, so the total budget allocation to these sectors has declined overall.
Federal Government budget allocation grant to the regional administrations
 the level of the Federal Government grant from the Federal Government to the regional
state administrations.
 the overall level of grant appears to have increased over time.
 In addition, the grant for recurrent expenditure is several times larger than the grant for
capital expenditure.
 The capital budgets of the state governments are fully covered by the Federal
Government grant and the regional states may not add to this.
 However, the recurrent budgets of the state governments are only partially covered by the
Federal Government grant.
 The regional States can supplement their recurrent budgets with the revenue that they
collect (after this has been approved by their respective councils).
 Unfortunately, information about the amount of money that is collected by the states is
not readily available and the amount that is used to supplement their budgets
Government expenditure from retained states revenue
All revenue collected in the states is deposited in the Regional Treasury, unless approval
has been given to use some of this money for reinvestment in the sector.
In most states, the forest revenue that is collected is used as a general source of revenue
for the state governments and is not used for the development of the sector.
The amount of revenue retained by the administration only covers about half of the total
government expenditure in the state.
It is believed that most of the budget allocations in the other state governments are also
used mainly for this purpose.

Allotment

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  It is the act or the amount of giving out as a share or portion of budget
automatically divided in monthly and quarterly.
 Once the legislative body adopts the budget, departments are not automatically
authorized to spend against their appropriations.
 Funds may be allotted on a quarterly, semi-annual or annual basis. Funds are allotted
quarterly. This periodic release of funds serves several purposes:
 Avoids premature exhaustion of funds
 Maintains a balanced budget
 Prevents deficits; and
 Diminishes the need for supplemental budgets or amendments
Apportionment
 It is a process used in which line agencies submit plans to the central budget office to how
appropriated funds will be used. The plans often indicate proposed expenditures for each
month or quarter of the fiscal year.
 The primary purpose of appropriation is to ensure that agencies spend at a rate that will keep
them within limits imposed by their annual appropriation.

Budgeting is one of the biggest keys to managing your money. They associate it with restrictions
and a lot of hassle and headaches. They may feel like they are too poor to budget or have other
budgeting excuses. However, budgeting can save you money, and allow you to have more to
spend by helping you to make the most of your money. Your budgeting style can determine how
successful you are at budgeting.
Here are five things that will help you look at budgeting in a new light. You may also want to
review these reasons to start budgeting.
1. To Stop Overspending
Most people who do not have a budget end up overspending each month. It limits their spending
power in the future as more and more of their salaries have to be applied to debt payments. The
stress of finding a way to pay for the rising cost of gas and food can be astronomically when
most of your paycheck is already planned.
 User your budget to help you determine when to stop spending.
 An envelope system or budgeting software can make the process easier.

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 2. Helps to Reach Goals
A budget is a plan that helps you prioritize your spending. With a budget, you can move focus
your money on the things that are most important to you. It may be getting out of debt, saving up
for a home or working on starting your own business. Your budget creates a plan and lets you
track it to make sure you are reaching your goals.
 Set aside money in your budget each month for your goals.
 Your budget will help protect the money you have already saved.
3. Helps to Save Money
People who do not have a budget tend to save less money than people who do. It is because when
you budget you assign your money to do certain things. It allows you to automatically put money
into a savings or investment account each month. A budget can help you stop dipping into your
savings each month. As you do this, you will begin to build wealth. It will give you true financial
freedom in the future.
 Budget money to transfer into savings each month.
 Use your budget to help you stop dipping into your savings or emergency fund by
planning for your expenses in advance.
4. Helps to Stop Worrying
Most people do not like the restrictions that having a budget puts on them. However, you decide
how much you spend in each category. So if you want to put a large portion of your money
towards your leisure activities, as long as you are saving and meeting your other needs, you
shouldn't feel bad about that. However, once you set up limits, you need to stick to them. If you
aren't doing that, you may have a budgeting weakness that you need to address. Budgeting is not
about limiting the fun in your life, but opening up opportunities and money to have more fun.
The key is remembering to include these categories in your budget.
 You will know how much you have to spend on each category.
 You will be able to stop spending when you no longer have money available.
5. Allow to Be Flexible
Budgeting can be flexible. You can move money between categories as you need to throughout
the month. Generally, you should restrict yourself from touching the money you have set aside
for savings, but you can adjust the amount you spend on each category as you go. It is another

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way that you can keep yourself from overspending. It also allows you to recognize issues and
adjust so that you do not end up eating ramen at the end of every month.
 Budgeting lets you adjust to cover unexpected expenses as they happen.
 Learn how to transfer money between categories in your budgeting software.
6. To put Budgeting into Control
If you feel like you are not in control of your money and you are constantly wondering where it
went and what happened to it, budgeting can put you in control. It allows you to prioritize your
spending, track how you are doing and realize when you need to stop. It puts a solid plan into
place that is easy to flow and gives you the chance to plan and prepare for the future. It is
the biggest tool you have to change your financial future, and it gives you the power to make
changes starting today.
 Checking on your budget each day can help you to monitor it and keep you from
overspending.
 Making decisions at the beginning of the month makes it easier to manage your money.
7. Budgeting Can Be Simple
It enables the business owner to concentrate on cash flow, reducing costs, improving profits and
increasing returns on investment.
Budgeting is the basis for all business success. It helps with both planning and control of the
finances of the business.
8. To Keep financially stable.
My momentum is pretty good. I like the trajectory. I hope to be out of debt soon and building
more serious cash reserves. I’ll get out of debt SOONER if I recommit to this budget
9. Rein in some out of control spending.
I couldn’t spend the money if I’d already allocated it for other things. It’s time to rein it in and
get back on track. The ONLY way to do this is to STOP SPENDING and start saving. A budget
is a great way to keep that rule in mind.
10. Renew focus on some important goals.
I’m at a point where I want to invest in a few things for this site, another website, and my life in
general. I’ve got some projects that I’m working on that I can’t totally DIY my way through – or,
I could, but the time it would take me to learn certain skills would detract from core of the

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projects themselves. If I want to afford some help, and invest in my future, then I better stop
buying personal rice crust and vegan cheese pizzas at nine bucks a pop.
On the other hand, the important of making budgetary review.
- It helps with both planning & control of the finances of the business. there is no control over
spending planning is futile and if there is no planning there are no business objectives to
achieve. A budget is a plan to enable the business to meet it objectives & make confident
financial decisions.

The budget review could be done by legislative participatory through various rules of techniques.
Hence, there are two rules of budget analysis techniques that commonly used in budget review
13.1. Variation analysis
 The identification of the programs and its cost elements, representing increase and
reduction over the previous year’s budget.
 Then the annual review by the budget agency focuses mainly on variations, with greater
emphasis on the increases in the outlays.
 It is based on items continuing in the government budget and will be review only when
special situations demand it..
13.2. The item- by- item review.
It involves the annual budget requests in terms of specific objectives such as wages and
related payments and materials.
A general problem of item- by- item review tends to concentrate on trivial items and, in
the process, neglects the more important policy issues.
.The reviewer probably will reduce some items in the proposal and the reviewer will be
less informed about agency operations than are those who prepared the budget.
Experience in itself forces upon the budget analyst the use of a set of rules of thumb.
The analyst first looks at least year’s appropriations to identify any significant changes.
The analyst, by looking for enough items to cut proceeds until the budget is balanced
within the existing revenue constraints.

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Performance budgeting
It is an important instrument for improving expenditure prioritization, effectiveness and
efficiency. Its relevance is greater than ever today given the tough fiscal circumstances that face
many countries. Reaping the benefits of performance budgeting requires that performance
budgeting systems be properly designed and that they are accompanied by the right types of
budgeting.

Program Budgeting
It is a budget that is prepared specifically for a project or program. This type of budget includes
expenses and revenues related to a specific project only. No revenues or expenses of any other
project are mixed with this particular project.
The program budget allocates resources to a project that helps in monitoring the performance of
the project and brings accountability

Program budgeting
 It is the budget for a specific program or activity such as marketing, research and
development, public relations, training, engineering, etc.
 Usually program budgets are created for product lines.
 As program budgets are typically created for activities of multiple departments, such
budgets cannot be used for control purposes
 it is much less control- and evaluation-oriented compare to Line-Item Budgeting
Line-Item Budgeting
It is still the most widely used approach in many organizations, including schools,
because of its simplicity and its control orientation.
It is referred to as the "historical" approach because administrators and chief executives
often base their expenditure requests on historical expenditure and revenue data.
One important aspect of line-item budgeting is that it offers flexibility in the amount of
control established over the use of resources, depending on the level of expenditure detail
incorporated into the document.
It offers simplicity and ease of preparation.

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 It is a familiar approach to those involved in the budget development process.
It enhances organizational control and allows the accumulation of expenditure data at
each functional level.
Finally, it allows the accumulation of expenditure data by organizational unit for use in
trend or historical analysis.
Program and Planning (Programming) Budgeting (PPB)
 It refers to a variety of different budgeting systems that base expenditures primarily on
programs of work and secondarily on objects.
 It is considered a transitional form between traditional line-item and performance
approaches, and
 it may be called modified program budgeting.
 PPB systems place a great deal of emphasis on identifying the fundamental objectives of
a governmental entity and on relating all program expenditures to these activities.
 The focus on long-range planning is the major advantage of this approach, and advocates
believe that organizations are more likely to reach their stated goals and objectives if this
approach is used.
 PPB information may be used to supplement and support traditional budgets in order to
increase their informational value.
Zero-Based Budgeting
The (ZBB) is that program activities and services must be justified annually during the
budget development process.
The budget is prepared by dividing all of a government's operations into decision units at
relatively low levels of the organization.
Decision units are then ranked by their importance in reaching organizational goals and
objectives.
Therefore, when the proposed budget is presented, it contains a series of budget
decisions that are tied to the attainment of the entity's goals and objectives.
The central thrust of ZBB is the elimination of outdated efforts and expenditures and the
concentration of resources where they are most effective.
It is achieved through an annual review of all program activities and expenditures, which
results in improved information for allocation decisions.

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 However, proper development requires a great deal of staff time, planning, and
paperwork.
Additionally, a minimum level of service for certain programs may be legislated
regardless of the results of the review process.
As a result, ZBB has had only modest application in schools, although the review of
program activities makes ZBB particularly useful when overall spending must be
reduced.
Site-Based Budgeting
 It is widely considered the most practical for budgeting within the school district
environment, by providing greater control and reporting of school-level data.
 It emphasizes the decentralization of budgetary decision making.
 It places local managers and other staff at the center of the budget preparation process,
making them responsible for both the preparation and the maintenance of the budget.
 It is popular in many school setting system,
 It generally involves granting increased budgetary authority to the school.
 The main advantage of site-based budgeting is that those who best understand the needs
of a particular organization are empowered to make resource allocation decisions.
 Another advantage of site-based budgeting is the increased level of participation of the
public and staff in budget development.
 Many site-based budgeting systems create committees composed of staff and community
members to determine budgetary allocations.
Outcome-Focused Budgeting
 Consistent with the evaluation objective, government budgeting is becoming increasingly
outcome-focused.
 The objective is to allocate government's resources to those service providers or
programs that use them most effectively.
 It is closely linked to the planning process in governments
 . For a government entity to focus on outcomes, goals and objectives must be identified
and tied to budget allocations for the achievement of those objectives.
The main types of other budget systems
 Cash Flow Budget:

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 It is a means of projecting how and when cash comes in and flows out of a business
within a specified time period.
It can be useful in helping a company determine whether it's managing its cash wisely.
Cash flow budgets consider factors such as accounts payable and accounts receivable to
assess for a company that has ample cash on hand to continue operating,
 Financial Budget:
presents a company's strategy for managing its assets, liabilities, and stockholders’
equity ,cash flow, income, and expenses.
It is used to establish a picture of a company's financial health and present a
comprehensive overview of its spending relative to revenues
Operating budget
It is the budget for income statement elements such as revenues and expenses.
It is a forecast and analysis of projected income and expenses over the course of a
specified time period. To create an accurate picture,
It is the factors of sales, production, labor costs, materials costs, overhead, manufacturing
costs, and administrative expenses..

Master budget
It is the set of financial and operating budgets for a specific accounting period, usually
the next fiscal or calendar year.
Master budget is prepared quarterly or annually.
The format of the master budget varies with business nature and size.
Operating budgets are used in daily operations and are the basis for financial budgets.
Financial budgets include a budgeted income statement and balance sheet, cash budget,
and capital expenditures budget.
Budgeted income statement and budgeted balance sheet are also called pro forma
financial statements.
Static Budget:
It is a fixed budget that remains unaltered regardless of changes in factors of sales
volume or revenue.
it moves in and out due to increased or decreased sales.

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 It is the budget at the expected capacity level
it is usually used by stable companies.
It can be used by departments with operations independent from capacity levels
Flexible (expense) budget
 It is the budget at the actual capacity level.
 It is adjusted to the actual activity of the company.
 It can be easily prepared using a computerized spreadsheet
 At first, the relevant activity range is determined for the coming period.
 Next, costs that are expected be incurred over the relevant range are analyzed.
 Finally, the flexible budget for variable costs at different points throughout the relevant
range is prepared.
 Flexible budget matches expenses to specific revenue levels or activity levels.
Capital expenditure budget
It is the budget for expected investments in capital assets and long-term projects.
It is usually prepared for 3 to 10 years. Investments in capital assets include purchasing
fixed assets such as plant, land, buildings, machinery, equipment, and mineral resources.
Long-term projects might be undertaken to develop new products, expand existing
product lines, or reduce costs.
Sometimes a capital project committee is created to overlook capital budgeting processes

- Budgets medium term spending projections enable governments evaluate cost effectiveness
and to determine whether they are.
- Budgeted amounts where the financial statements and budget consequently the funds allotted
to an entity.
- Democratic processes.
Allotment process
 Determination of allotters
 Availability of the obligation authority
 Derivation of the allotment symbol

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  Initial allotment and changes to allotments
 Procedure for withdrawals of funds from allotters

17. 1. Population size,

17.2. Level of infrastructure development favoring dis advantage regions,
17.3. Revenue raising potential and
17.4. Expenditure assessment for the provision of basic services.

Performance measurement;
it is an instrument for assessing progress against stated program goals and objectives,
It consists of the following activities:
 Documenting the production process, which consists of processes and activities used
to turn inputs into outputs
 Assessing the outcomes: PM may indicate the result of a policy measure or program,
 But does not analyze why it has occurred or what changes may need to be made to
activities or program objectives.
 Performance can be measured through measures or indicators.
 Measures correspond to direct records of inputs, outputs, or outcomes.
Program Evaluation:
 It focuses on the assessment of a program’s achievement against its objectives.
 The term policy evaluation is also used since it can cover several programs.
 Some countries do not distinguish program evaluation from policy evaluation.
 The goal of evaluation is to improve decision-making and resource allocation by
providing reliable data about the effects of policies and programs.

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Reference
 GemAnalyst | Investment Research & Financial Literacy May 11, 2016 By Toluwalope
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