Budget & Control NKK

8/22/2019 Budget & Control NKK

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Budgeting & Budgetary

Control

Nand Dhameja24/10/12


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Budget : Meaning

A statement ofprobable revenue andexpenditure for the ensuing year withfinancial proposals founded thereonannually submitted by the Exchequer for

the approval of the House of Commons--Oxford English Dictionary A document that spells out annual business

plans in financial terms, serves as a co-coordinating centre for the actions of the

different sections of the business, andassists managers in controlling theactivities for which they are responsible


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Budgeting Process

Organisation

Structure

-Proposals

-Benefit-cost analysisRanking &-Finalisaion

Programmes:

Budget

Review &

ControlObjectives


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MANAGEMENT PROCESS

THREE KEY ELEMENTS:

PLANNING

EXECUTION

CONTROL


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5

PLANNING

DESIGNING FUTURE COURSE OFACTION

BRIDGES GAP BETWEEN WHERE WEARE & WHERE WE WANT TO GO

ESSENTIAL FOR EVERY ENTERPRISE &A PASSPORT TO ITS SUCCESS


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ACCOUNTS - BUDGETS: PURPOSES

FROM WHERE MONEY IS COMING?

WHERE FUNDS ARE GOING?

WHAT ARE WE ACHIEVING FROM THE

MONEY SPENT? ACCOMPLISHMENT ARE ALLOCATIONS OF FUNDS

OPTIMAL? VALUE FOR MONEY OF THE MONEY SPENT IN PLANS or

POJECTS, WHAT HAVE WE ACHIEVED? CONTROL AND RESPONSIBILITY

ORIENTED


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BUDGETING : PURPOSES

AUTHORISATION

ALLOCATION

ACCOUNTABILITY/ CONTROL

OBJECTIVES LINKAGES COMMUNICATION

CO-ORDINATION

CO-OPERATION


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Budget:Origin

Word budget is derived from the French word

bougette, which means small leather bagor

pouch containing all inflows or outflows of cash

Budget, in general, operationalises the plan,

every entity- commercial or non-commercial-

looks at budget in term of tax proposals or

concessions affecting their revenues orinvestment proposals relating to expansion or

diversification.

Dhameja 8


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Budget Procedure : HistoricalPerspective

First budget in India was presented byJames Wilson in 1860 on the lines of theBritish budgetary system

Railways have separate budget since 1925 First budget for Independent India was

presented by first Finance Minister Sir R. KShanmugham Chetty on November 26,1947 and since then budget is presentedevery year normally on the last day ofFebruary. Approved for Financial year Aprilto March next


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Starting with October- November, the FM officialsbegin consultations with various stakeholders-Industry associations, chambers of commerce,consumer lobby groups, farmers associations,economists and employees unions- in the NorthBlock

In January, meetings are held with thestakeholders, chaired by the Finance Minister tohave their views

seven days before the Budget is presented, top

officials of F M, experts, printing presstechnicians and stenographers are led into theNorth Block & are totally cut off from the outsideworld. Budget papers are printed there.


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Budget expenditure as

Charged

Voted

Plan & Non- Plan

Receipts & payments classified asrevenue & Capital


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GOI: Five Tier Classification

Sectors of Economy : General Services:Social & Community Services

: Economic Services

Major Head : Function

Minor Head : Programmes Sub Head : Activities

Detailed Head : Inputs

: Item-wise/Object-

wise expenses: Salary

Materials

Rent


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BUDGET

A POLICY INSTRUMENT

OPERATIONLISES PLAN

MEANS OF APPROVAL FROM LEGISLATURE

MEANS OF PRIORITISATION OF VARIOUS

PROGRAMMES PROCESS OF ALLOCATION OFFUNDS TO

VARIOUS PROGRAMMES

Lays down targets/expected result

Measurement of actual results

BUDGET REVIEW: Comparison of actualwith the targets Variance Responsibility identified & Control action


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Budget Preparation: Steps

Have an overview of economic scenario Ascertain the Plan for future Establish budget centers also called,

responsibility centre/departments/divisions Form a budget Committee

Ascertain the limiting factor which affect thefunctioning of the organization

Prepare the sales/revenue budget- unit of sales Prepare production budget- each product Prepare material budgets Prepare manpower budget Prepare Administrative expenses budget Prepare cash budget Prepare Master budgets


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Budgeting : Advantages

Define objectives of the organization,translate into plans and programmes

A means to facilitate communication andco-ordination of plans into various

executives Provides yardsticks to measure the

efficiency for various functions/divisions

Shows the extent to which actual results

have deviated from the defined objectives Provides guide for corrective actions

Facilitate control and delegation ofresponsibility


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Budget

Fixed Budget

Flexible budget


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Public Budgeting : Formats

Appropriation Budgeting

Performance Budgeting

ZBB

Outcome Budgeting


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APPROPRIATION BUDGETING

Also Called `LINE ITEM OR `OBJECT CLASSIFICATION BUDGETING

EXPENDITURE EXPRESSED IN CONSIDERABLE DETAILS but

ACTIVITIES UNDERTAKEN ARE GIVEN LITTLE ATTENTION

ORIENTED TOWARDS FINANCIAL OR MONEY ASPECTS

EMPHASIS ONINPUTSLIKE SALARIES, RENT, STATIONARY, AND

NOT ON THE PURPOSEOF EXPENSES

OVERRIDING CONSIDERATION IS FINANCIAL ACCOUNTABILITY

FOCUS ON EXHAUSTIONOF FUNDS PROVIDED, RATHER THAN ON

PERFORMANCE or END RESULTOF MONEY SPENT

RELIES HEAVILY ON CASH BASIS OF PAYMENT, RATHER THAN ON

VALIDATION OF INPUTS AND THE RESULTS OF THOSE INPUTS


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Appropriation Budget-

IllustrationMillions of Rs.

Items of Expenses:

YearsX0 X1

Materials 1770

Salaries/WagesStores

Travel

Publicity

Machines

Land & Equipment

215220

5

2

100

20

Total 2332

INFLOWS:

-,


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PERFORMANCE BUDGET-Meaning

PRESENTS THE PURPOSES AND

OBJECTIVESFOR WHICH FUNDS ARE

REQUESTEDCOSTS OF PROGRAMMESPROPOSED FOR

ACHIEVING OBJECTIVES

QUANTITATIVE DATA MEASURING THE

ACCOMPLISHMENTS & WORK

PERFORMANCE UNDER EACH PROGRAMME


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PERFORMANCE BUDGETING:PROCESS

ORGANISATION OBJECTIVES

ORGANISATION STRUCTURE:DIVISIONS/CENTRES

PROGRAMMES PROPOSED:

FUNCTION: PROGRAMME: ACTIVITY CLASSIFICATION

PHYSICAL AND FINANCIAL LINKAGES

LINKAGES WITH OBJECTIVES

COST DATA

FINANCE & ACCOUNTING SYSTEM

RESPONSIBILITY CENTRE ACCOUNTING ACCRUAL ACCOUNTING

WORK PERFORMANCE DATA MEASURING COST & ACCOMPLISHMENT FOR EACH

PROGRDAMME-ACTIVITY

INDICES, NORMS, RATIOS


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PERFORMANCE BUDGET: PURPOSES

HIGHLIGHT ACCOUNTABILITY TO LEGISLATURE

REFLECTS WHAT GOVT IS DOING & HOW MUCH&AT WHAT COST?

USED BY MANAGEMENT FOR PERFORMANCE

EVALUATION - DECISION MAKING, PLANNINGAND CONTROL

LINKING UP PHYSICAL TARGET & FINANCIALINVOLVEMENT

FOCUS ON ACCOMPLISHMENTRATHER THAN on

EXHAUSTIONOF FUNDSPresents : FUNCTION - PROGRAMME - ACTIVITIES

EDUCATION

PWD

AGRICULTURE


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PERFORMANCE BUDGET: PURPOSES

HIGHLIGHT ACCOUNTABILITY TO LEGISLATURE

REFLECTS WHAT GOVT IS DOING & HOW MUCH&AT WHAT COST?

USED BY MANAGEMENT FOR PERFORMANCE

EVALUATION - DECISION MAKING, PLANNINGAND CONTROL

LINKING UP PHYSICAL TARGET & FINANCIALINVOLVEMENT

FOCUS ON ACCOMPLISHMENTRATHER THAN on

EXHAUSTIONOF FUNDSPresents : FUNCTION - PROGRAMME - ACTIVITIES

EDUCATION

PWD

AGRICULTURE


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Performance Budgeting: IllustrationPublic Works Department:

CONSTRUCTION OF ROADS

CONSTRUCTION OF BRIDGES

COSNTRUCTION OF BUILDINGSRoads:

New Roads National

Highways State Highways

Maintenance of Roads

ACTIVITIES:

Land Acquisition

Leveling of Land

Bridges & Culverts

First Coat

Inner Coat

Final Coat

INPUTS REQUIRED

Quantity Rupees


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Performance Budgeting: Function-Programme-Activity Classification Illustration

Funct ions Programmes Act iv i t ies

Public Works Construction of:

Buildings

Roads

Bridges

Construction of Roads:

Land acquisition

Earth work

Bridges & culverts

Sole coteInner cote

Top cote

Education Secondary

Primary

Technical

Training of teachers

No. of classes

Books

Agriculture High Yielding variety

Warehouse

Development office

Public Health Control of

Communicable Diseases

Eradication of Malaria

DDT Spray


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ZBB

Inputs or Expenditure should notJustify the Programme

Output should justify the

programme or Output On-Going programmes & New

Programmes

Both be Reviewed

Budget not based on Last year

No Principle of Incremental


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ZBB : Questions

Are Current activities efficient &effective?

Should current activities be eliminated

or Reduced to Fund Higher PrioritiesNew Programmes or Reduce thecurrent budget?

ZBB :

Evaluation of all programmes Evaluation may occasionally lead to

completely rethinking or redirect a

programme, in which we do throw

everything out and start over again


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ZBB

The essence of ZBB is simplythat an agency provides

defence for its budgetrequest that makes noreference to the level ofprevious appropriations


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ZBB Implementation: Prerequisites

Support from Top Management Top management believes in it

Committed to it

Involves lower level people

Effective Design of Budgetary System as

per needs: Committee/Task Force for its

implementation

Training of people

Manual/Procedures

Forms Design


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ZBB ApplicationMore suited :

Service or support type activities wheremanager has Discretion to choosebetween different levels of activity;

Where Input- output relationship cannotbe established

For example: R &d, Production Planning;Quality control, Marketing, Finance

Not warranted: Where input-output relationship exits; Where manager cannot influence

benefits by increasing expendituresFor example: Production Department


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GOOD DAY

Thank You

Documents

Budget & Control NKK