The scope of the public budget cycle
A budget is a vital policy document for all federal agencies. It is a tool through which state and federal governments establish economic and social needs and sets the direction of the economy. The key reason for budgeting is to establish a mechanism for financial management and allocation of scarce resources among competing public interests, to achieve a set of goals and objectives. A public budget reflects the essential values underlying government economic policies and the welfare of its citizens in terms of employment, investment, and national income (Bowsher, 1985). Congress is a crucial place for examining the government budget proposals and ensuring the country’s needs and aspirations are met. Congress must therefore take a proactive role in the public budget process. To ensure efficiency and accountability the public budget is implemented in the cycle, which ensures that the existing integrated financial management information systems gather and respond to new information.
Preparation and submission of the public budget
The pubic budget involves four major processes namely: (a) preparation and submission, (b) approval, (c) execution, and (d) audit and evaluation. The initial phase of budget preparation and submission has been subject to many reforms, however, the procedures and implementation remain the same. Budget preparation is the principal mechanism for federal agencies to ascertain how objectives will be achieved and means of improving government performance. Congressional budget preparation adopts an executive budgeting approach where the chief executive has the sole responsibilities of preparing a proposed budget and submitting it to the Senate for debate and revisions. The chief executive in this case the president is usually engaged in other duties and usually delegates most of his responsibilities to the legislature.
According to Lee, Johnson & Joyce (2008) budget preparation is primarily a role of the budget office, which was established by the Budget and Accounting Act of 1921. The budget office (BOB) is a unit of the treasury department. A budget can be prepared from a top-down approach, bottom-up, or through negotiations. A top-down approach involves defining aggregate resources available for public spending over a planned period and thereafter preparing a sound macroeconomic framework, which will ensure that the annual sector spending limits fit government and line ministries’ priorities. A bottom-up approach involves formulating and costing for the planned period within the sector spending limits. Integrated iteration and reconciliation mechanisms are required to ensure cohesion between the two approaches. A bottom-up approach is mostly adopted where budgets are developed from the lowest level to the highest level of management. Its main advantage is that it enables managers to participate in the budget-making process and this increases the chances of organizational acceptance. Initial preparation could adopt the use of past data although carefully since budgets are there to prepare for the future and dependence on the past should only act as guidance (Lee et al., 2008).
Managers should therefore focus on the future and changes in future conditions in budget preparations. Budget preparations involve the following processes: (a) preparation of the macroeconomic framework (b) preparation of a budget circular that gives guidelines for departmental budgets preparation and announcing expenditure ceilings (c) preparation of departments budgets in line with these guidelines (d) budgetary negotiation between the line departments and Treasury, and (e) completion of the draft budget. It is vital that budgets are agreed and any changes made should be after consultations. This will reduce the lack of trust and commitment to the budgeting process. It is also important for executives not to be under budget to set lower targets. At the same time, superiors should not set tough targets that are not achievable by subordinates. In the short run, desired results will be achieved but only at a cost of loss of morale and increased labor turnover in the future. The Negotiation process is very important as it enhances trust and confidence with subordinates, thus resulting in a fruitful budget process.
Public budget execution
The congressional budget process involves the president’s budget submission, budget resolution, reconciliation, sequestration, authorizations, and appropriations. Rules, and laws, and in particular two statutes that regulate the congressional budget process. The Budget and Accounting Act of 1921 established the statutory requirements for the budget process that include submission of the president’s proposed budget to Congress for consideration. Other regulatory frameworks include the Office of Management and Budget (OMB), which assists the president to carry out his duties, and the General Accounting Office (GAO) that aids Congress in its capacity as the auditing agency of state government. The second law is the Congressional Budget and Impoundment Control Act of 1974 that established the legal framework for a congressional budget process and provided for the yearly adoption of immediate resolutions on the budget as an instrument for facilitating congressional budgetary decision-making.
Other regulatory bodies such as Senate Budgetary Committees and Congressional Budget Office (CBO) provide budgetary information to Congress independent of the executive. Every year the president submits his budget priorities and policy objectives. These requests are formulated according to competing demands of the economy and another federal request. The OMB (office of management and budget) controls this process between the president’s administration and other federal agencies and departments. After the president’s submissions to Congress on the first Monday of February, the CBO (congressional budget office) then submit its review of the budget proposal to Congress. This president submission usually provides a critical examination of government expenditure and revenues including initiatives by the executive and other state departments. However, the budget cycle usually begins in mid-April the previous year when the OMB (office of management and budget) compiles materials and information from federal agencies, which culminates in presidential submission to Congress. The OMB is an oversight body that supervises budget development and issues strategies to subordinate departments that are consistent with executive policy decisions. After the president’s submission, the proposals are forwarded to budget committees to facilitate the preparation of Congressional budget resolution.
The audit and evaluation process in a public budget
This resolution contains Congress’s views on the appropriate amount of revenue and expenditure. The budget committees conduct public hearings to evaluate the impact of the budget and the fiscal climate. These hearings are vital as they allow public participation thus reducing the level of resistance. When Congress passes the budget resolution, Congress has until the beginning of the fiscal year, October 1, to lay down funding levels for all government programs through the appropriation process and legislation. The Senate Appropriation Committee and House Committee on Appropriation divide the budget allocations among the smaller committee, which have a mandate over sectors such as defense, energy, and health. The funds are later apportioned to these departments for spending. The final step of the approval stage is the signing of the appropriations bills into law by the president, which signifies the start of budget execution. The apportionment of funds by OMB ensures that the agencies do not spend funds above the level provided by the law. This phase monitors the internal control systems, which ensure accountability of the funds allocated. The evaluation and auditing function of state government is located in the Government Accountability Office (GAO). This office is headed by the comptroller general who is appointed by the president after vetting and consent by parliament.GAO institutes auditing procedures of federal agencies as well as evaluation of internal control systems. The audit reports are tabled in the house for review and approval (Golembiewski & Rabin, 1997).
- Bowsher, C.A. (1985).Governmental financial management at the crossroads: Public budgeting & finance, Vol. 5, No. 2, pp. 9-22
- Golembiewski, T.R. & Rabin, J. (1997).Public budgeting and finance. Washington, DC: Markel Dekker
- Lee, R.D., Johnson, P.G., & Joyce, P.G. (2008).Public budgeting systems. New York, NY: Jones and Bartlett