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Unformatted text preview: elieved that efficiencies and improvements in government operations could be achieved through a common approach for: – Establishing longrange planning objectives – Analyzing the costs and benefits of alternative programs that would meet those objectives – Translating programs into budget and legislative proposals and longterm projections. 31 Planning Programming Budgeting System (PPBS) The system focuses on funding those projects that will bring the greatest progress toward organisational goals for the least cost Basically a Program and Planning Budgeting System
32 Planning Programming Budgeting System (PPBS)stages Identification of goals and objectives/activities for each major area of activity planning Analysis of the programs proposed to obtain organizational objectives programming Estimation of the total costs for each project, including indirect costs. Time phasing of costs is detailed. 33 Planning Programming Budgeting System (PPBS) Final analysis of alternative projects in terms of costs, expected costs, expected benefits, and expected project lives. Cost/benefit analyses are performed for each program so programs can be compared with each other and a portfolio of projects can be selected for funding 34 PPBSAdvantages it relates cost estimates to programmes using a cross cutting approach rather than simply attributing costs on a traditional departmental basis; it reduces departmental barriers and encourages cross working; managers are forced to identify which activities or programmes they wish to provide and establish a basis for assessing their suitability or political acceptability; it provides information to enable managers to assess the effectiveness of their plans, e.g. are the operational outputs as effective or as well developed as they should be for the inputs used; resources should be allocated more effectively in line with objectives, needs and priorities; 35 PPBSdisadvantages it aids the corporate approach to management and provides a structural and systematic approach to long term planning; individuals can be made responsible for controlling and supervising the programme by relating their roles to functionally organised responsibility centres.
PPBS was seen to be too costly and time consuming; it proved difficult to identify and quantify objectives in the public sector; it appeared to depoliticise the political process by taking decision making powers away from elected representatives. 36 Model of Optimization While not as deeply rooted in applied microeconomics as PPBS and undertaken from a bottoms up perspective, ZBB is also rooted in the assumption of rational analysis. ZBB is not new – it first appeared in the 1960’s – and indeed it is not surprising that dissatisfaction with a purely incremental approach to budgeting has been one of the main drivers in attempting to find budgeting models that actually serve the purposes and objectives of the organization.
37 37 Zero Base Budgeting Purpose of ZeroBase Budgeting The Objective of Zero Based Budgeting is to “reset the clock” each year. The Traditional incremental budgeting assumes that there is a guaranteed budgetary basethe previous year’ level of appropriations and the only question is how much of an increment will be given. Zero Based Budgeting implies that managers need to build a budget from the ground up, building a case for their spending as if no baseline existed to start at zero. 38 Resources are not necessarily allocated in accordance with previous patterns and consequently each existing item of expenditure has to be annually rejustified. Put differently, the purpose of ZBB is to reevaluate and reexamine all programs and expenditures for each budgeting cycle by analyzing workload and efficiency measures to determine priorities or alternative levels of funding for each program or expenditure. Through this system, each program is justified in its entirety each time a new budget is 39
developed. Zero Base BudgetingPrinciples The involvement of all executive managers in the budgeting process; The justification of resources for current and proposed activities; The determination of objectives; The assessment of alternative ways of achieving these objectives; No costs or activities should be factored into plans just because they featured in current or previous ones.
40 Stages in Zero Base Budgeting The key stages are to: Define the scope of impleme...
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- Winter '12