Advantages Of Budgeting

Budgeting is a process to plan budget which is used to describe fiscal expectation, expenditure and future planning of an individual, organization or government within a given period of time (Olawale, et al. 2012). Up until now, there are many methods of budgeting for governments such as traditional (line item) budgeting, zero-based budgeting, and performance based budgeting (PBB). Due to its simplicity, the traditional budgeting which listed groups of expenditure using last year’s data such as office supplies, salary, electricity bill and used incremental approach on them (Navin, 2003) has become the most popular one in many countries. However, many people criticize this budgeting method because many believe that this budgeting method is ineffective

The first advantage is PBB could curb the governments spending by comparing inputs and results. The performance information from the previous year is used as a base to decide budget allocation (inputs) for the current year. In current year, the government’s spending will also be compared to the results. Therefore, the amount of wasteful spending might be reduced. The countries might be benefitted by this if this practice is conducted for a long run, because it could decrease the expenditure of the country, and eventually could reduce the possibility of fiscal

There are several reasons to support this opinion. Firstly, taxpayers demand more accountable government spending (Lee and Wang, 2009). In traditional budgeting, the accountability criteria is the input that are listed in the budget statement (Navin, 2003). The public would know about how much money is spent, but they could not get any information on how efficient and effective the money is spent by the government. While in PBB, the accountability criteria is the result of the programs. The public could know how much money is spent as well as how efficient and effective is the spending. It could be done because in PBB the governments have to disclose their goals as well as performance indicators to the public and those information is used to review the progress of the programs (Navin 2003). This is the reason why PBB is considered to be more accountable than traditional budgeting method. A good example of PBB in improving accountability is Program Assessment Rating Tool (PART) which was developed in the United States. Under the PART system, each department rates their program on a scale of 4 ratings, ranging from effective to ineffective and the reasonings behind them, were all made public on the website www.ExpectMore.gov (OECD,