Methods of Budgeting
Research and Library Services
Northern Ireland Assembly
Research Paper 06/10
January 2010
METHODS OF BUDGETING
A paper that presents different approaches to budgeting in the public sector along with case studies of their application by various organisations internationally.
Library Research Papers are compiled for the benefit of Members of The Assembly and their personal staff. Authors are available to discuss the contents of these papers with Members and their staff but cannot advise members of the general public.
Northern Ireland Assembly, Research and Library Service
SUMMARY OF KEY POINTS
• As a budget is a forward plan expressed in money terms, it is unlikely that any refinements to the budgeting process will ever enable budgets to be perfect. By nature they contain a level of assumption about uncertain conditions. Budgeting in the public sector can be viewed as more problematic than in the private sector. There is no profit or loss bottom line by which the performance of organisations can be measured. Further, measurement of the outcomes of public-spending programmes can be problematic. This makes the alignment of the budget process with intended outcomes a complex task. Public sector organisations such as government departments are large and complex. They design interventions across a wide range of policy areas and have to balance competing pressures. The current process of incremental budgeting for departments in Northern Ireland has a number of drawbacks. Some of these problems could probably be lessened by moving to alternative approaches to budgeting. But any alternative approach will also have its own drawbacks. And some of the approaches outlined in this paper can be very resource-intensive. It is often difficult from the budget documents presented to see how departmental spending is aligned with the priorities of the Programme for Government. For example, the tables presented following the quarterly monitoring rounds indicate
Northern Ireland Assembly
Research Paper 06/10
January 2010
METHODS OF BUDGETING
A paper that presents different approaches to budgeting in the public sector along with case studies of their application by various organisations internationally.
Library Research Papers are compiled for the benefit of Members of The Assembly and their personal staff. Authors are available to discuss the contents of these papers with Members and their staff but cannot advise members of the general public.
Northern Ireland Assembly, Research and Library Service
SUMMARY OF KEY POINTS
• As a budget is a forward plan expressed in money terms, it is unlikely that any refinements to the budgeting process will ever enable budgets to be perfect. By nature they contain a level of assumption about uncertain conditions. Budgeting in the public sector can be viewed as more problematic than in the private sector. There is no profit or loss bottom line by which the performance of organisations can be measured. Further, measurement of the outcomes of public-spending programmes can be problematic. This makes the alignment of the budget process with intended outcomes a complex task. Public sector organisations such as government departments are large and complex. They design interventions across a wide range of policy areas and have to balance competing pressures. The current process of incremental budgeting for departments in Northern Ireland has a number of drawbacks. Some of these problems could probably be lessened by moving to alternative approaches to budgeting. But any alternative approach will also have its own drawbacks. And some of the approaches outlined in this paper can be very resource-intensive. It is often difficult from the budget documents presented to see how departmental spending is aligned with the priorities of the Programme for Government. For example, the tables presented following the quarterly monitoring rounds indicate