BUDGET METHODS AND PRACTICE

1. Preparation of Agency Budget Requests Review of Budgets Balancing the Overall Spending Plan Managing Budget Execution Audit & Evaluation BUDGET METHODS AND PRACTICE

2. PREPARATION OF REQUESTS I • Budget Instructions or Guidance • Main Goals of the Executive • Forecasts of Critical Operating Conditions and Prescribed BASELINE • A Prescribed FORMAT • A Time Schedule • MAXIMUM Increase

3. PREPARATION OF REQUESTS II • Agency Proposals • Narrative -- Current Commitments and Expected Results from New Initiatives • Detail Schedules establishing Baselines • Cumulative Schedules Showing Effects of New Initiatives (up or down) on Details and Revised Totals Description dominates numbers. Budgeting is logic, justification, and politics -- not accounting.

4. Spenders’ Budget Tactics: Ubiquitous I • Cultivation of an active and influential (well-organized) clientele • Media • Demonstrate competence • Deliver • Explain -- show understanding and mastery of cost estimates • Honesty

5. Spenders’ Budget Tactics: Ubiquitous II • Price Changes • Workload Changes • Methods Improvement • New Services • Full Financing

6. Avoiding Cuts: Propose a study Cut Popular programs Dire consequences All or nothing You pick We are the experts Seeking Bucks for the Base Round up Sprinkling Physical units Workload and backlog Spenders’ Budget Tactics: Contingent I

7. Seeking New Bucks: Old stuff Initial commitment It pays for itself Spend to save Crisis Mislabeling What they did makes us do it Mandates Matching the competition It’s so small Spenders’ Budget Tactics: Contingent II

8. Budget Justification -- Or, Why the Numbers in Next Year’s Budget are Different from this Year’s • Major Programmatic Changes/New Services -- Major Cutbacks of Service levels • Price/Wage Changes • Workload Changes • Methods Improvements • Full Financing of Activities Initiated in the Current Year • Deferred maintenance and/or replacement of equipment

9. Estimates: Grouped by Organization; Task, Purpose, Function, or Activity, AND OE or Account Code • Wages and Salaries • Non-Wage Personnel Costs • Non-personnel Costs (Cost Drivers) • Volume or activity level x Unit Price • Ratios to another OE • Adjustment to Prior Year Cost • Breakeven Analysis

10. BREAKEVEN ANALYSIS I

11. BREAKEVEN ANALYSIS II

12. BREAKEVEN ANALYSIS III

13. EXECUTIVE REVIEW I • Policy Rationale/Conformity with Executive Priorities • Conformity with Budget Guidance/Including all Required Supplemental Documents • Arithmetic

14. EXECUTIVE REVIEW II • Linkages • Program Changes • Omissions • Ratios, Shares, Trends • Clear Tradeoffs

15. BALANCING THE CONSOLIDATED BUDGET • Budget Message • Summary Schedules • Detail Schedules • Performance Targets • Supplemental Data • Many on the Assumptions Presented in the Budget Guidance and Trends

16. BUDGET EXECUTION I • Preventive Controls • Procurement • Personnel • Pre-audit • Allotments • Feed-forward Controls -- Diagnostic Tools, e.g. variance measures • Feedback Controls -- affect Next Year’s Budget, Fig. 3.1

17. BUDGET EXECUTION II • Internal Controls • Personal Responsibility • Personnel Qualifications & Rotation • Segregate Responsibilities • Separate Operations and Accounting • Maintain Controlled Proofs and Security • Record Transactions -- complete journal and general ledger

18. Thought Questions • Some programs have an explicit revenue component and policy makers make decisions about revenues and program characteristics with the long term sustainability of the program in mind. For instance, unemployment insurance or Social Security and there are actuarial studies that give us an idea of where we need to be in 5, 10, 20, etc years both from a revenue and an expense perspective if the program is to be in balance. • Why don’t we look at all program commitments this way?

19. Thought Questions 2. Someone once told me the problem with government is that it is easy to spend someone else’s money. Do you think that is true?