• Annual Financial Estimates known as ‘Budget’, present under different heads the estimated receipts and expenditure of the University in respect of a financial year, before the commencement of that year

• The Budget specifies the objects for and the limits up to which expenditure may be incurred during the financial year

BUDGET

Parts of the Budget• The budget estimates shall be prepared in

accordance with the provisions of the Act, Statutes and other instructions

• The Budget is broadly divided into four parts

Non-Plan

Plan

Earmarked

Debt, Deposits, Advances

•Non-Plan : The receipts and expenditure connected with normal operational and maintenance part. It is mostly recurring in nature

•Plan : The receipts and expenditure on development activities

•Earmarked : The receipts and expenditure for specific purposes

•Debt, Deposits, Advances : The receipts, and expenditure relating to Debt, Deposits

& Advances

Budgeting in Govt

•Budgeting system among governments over the year has undergone changes and new approaches

to Budgeting have been evolved

•Budgeting is a constitutional requirement under Article 112. Annual Financial statement showing estimated receipts and expenditure of Govt of

Indian for the coming year has to be placed before the Parliament

•Demands for Grants, one for each Ministry under Article 113 is to be presented to the Lok Sabha

•In IGNOU, under statute 11(6), the financial estimates of the University shall be laid

before the Finance Committee for consideration and comments, and thereafter submitted to the Board of Management

BUDGETARY REFORMS

•With heavy investment on developmental activities and greater emphasis on planning, Budgeting is a tool of planning and control. Must lay down targets to be acheived over a period

•The public must know the end use of the money spent

•Executive head of an organisation has to supervise and ensure carrying out of the activities as planned

•Necessitated application of management concept to budgeting and planning of activities to see budgets are drawn not only in terms of money but also lay down the Programme and activities

•Planning in terms of programmes and activities and linking these to the financial requirements is known as Performance Budgeting

•This was first recommended by the Hoover Commission in the USA in1949 and later by Administrative Reforms Commission in India

•As a step to control the growth of public expenditure the FM announced that Z B B would be used for the fiscal year 87-88

•Z B B does away with incrementalism and adoption of previous year as basis of

budget. It analyses issues –

Are the current activities efficient and effective?

Should the current activities be eliminated or reduced to fund higher

priority new programmes?

WHY BUDGET

Budget is both a planning and control device and is a continuous process. It is involves -

•Control Mechanism

Setting targets for achieving objecting and laid out plans

Recording the actual transactions i.e., accounting & record keeping

Comparison of targets and actuals and arriving at variances

Taking corrective actions for the variances and laying down responsibility to avoid such deviation in future

•Budgets is a device for allocation of scare resource to various activities and is an

instrument of authorisation

•A planning tool – as an instrument that operationalises the plan and lays down the path to be followed for achievement of objectives

PURPOSE OF BUDGETS

Several purpose which are related to each other

•It incorporates an organisation’s plans

•It provides motivation by means of targets built into them

•It contains means for self evaluation for those responsible for budget centres

Phases of Budgeting

Three Phases

•Formulation – of Budget at various Divisions/Schools/RCs/Centres

•Finalisation - Discussion and approval by the Authorities

•Review & Control – Periodical comparison of budget with actuals to see how far the targets envisaged have been achieved or what are the short falls so as to take corrective action

Budgeting Process

Budgeting as a process of planning resource allocation and control has to be linked with organisational objectives and organisational structure. It entails

•Define organisational objectives

•Identify organisational structure i.e. responsibility centres or decission unit

•Develop and finalise programmes or activities for each responsibility centre

•Lay down targets in Physical and financial terms i.e., the outcome

•Evolve a system of execution and record keeping

•Review and control - have periodic review by comparing actuals with the budgeted

targets both in physical and financial terms and see variances

Budget Process

OrganizationalStructure

DevelopProgrammes

Develop Physical Targets & Resou-rces involvement

Execution & Record Keeping

Review & Control

Objectives

TYPES OF BUDGET

•Traditional Budget – It is also known as Conventional Budget or line item Budget or Object-wise Budget

This year’s Budget = Last year’s Budget+New Activity+Inflation

Accomplishment – Nil

•Performance Budget – It emphasises on the classification of the functions, programmes and the activities

Measurement of performance is done by laying down standards

•Zero Base Budget (ZBB) - the objective of ZBB exercise is to optimise the cost of governance by making the public expenditure more effective and need based

•Outcome Budget – Outcome budget requires ‘outcome’ defined in measurable and monitor able terms and ensure flow of right amount of money at right time to the right level. It is having effective monitoring and evaluation system. It also changes the mindset to more result oriented

Z B B Process

•The formulation of a zero-base budget consists of the following steps :

It requires identification and sharpening of objectives

Examination of various alternatives through cost benefit and cost

effective analysis

Prioritisation of objectives and programmes

Switching of resources from programmes with lower priority to those with higher priority

Identification and examination of programmes which have outlined their utility

Outcome Budget

•Outcome Budget is an exercise to convert ‘Outlays’ into ‘outcome’ or how effectively each rupee is spent

•The outcome Budget measures the development outcomes of programmes

•Develops linkage between money spent and the result which follows

•It converts financial outlays into physical outcomes – measurable and monitorable targets

•Cost effective•Focus not on money spent but on result of the money spent•Outcome Budget is used as an important

tool for effective management of programmes and towards accountability

•In India outcome Budget was adopted during 2005-06 for Plan schemes and was presented on August 25, 2005