IN my last instalment, I looked at Result-Based Management (RBM) as a system of integrated sub-systems. One of the sub-systems is the Results-Based Budgeting (RBB).
This is a budget process in which:
- Budget formulation revolves around a set of predefined objectives and expected results;
- Expected results justify the resource requirements which are derived from and linked to outputs required to achieve such results and;
- Actual performance in achieving results is measured by objective performance indicators.Over the years, there have been serious malpractices in the manner in which most budgets in private and public sectors have been formulated and presented.Such practices have in a way provided serious loopholes for manipulation, leading to corruption and wanton misuse of money.This has called for significant change in the way in which budgets of state or non-state institutions should be presented and managed. In particular, the decentralisation of financial management should lay down clear lines of responsibility for appropriations and should also provide for increased identification of full costs of activities.This approach has been inspired by the increased reports of rampant misuse, misallocation and misappropriation of funds disbursed to institutions or departments of government.Need for review of presentation
The RBB calls for serious revision in current
approach to budget formulation and presentation. The revision of a budget structure should take place across organisations and the presentation of the programme of activities should be overhauled to match this new management instrument known as the Project Management Methodology.
The way forward
Greater discretion should be given to the secretariat in the management of programmes and in budgetary management, coupled with increased accountability to the budget committee for results achieved.
There is a need to introduce a revised budget structure and reporting system based on the definition of objectives and the measurement of actual performance against predefined criteria (results-based budgeting).
Activity area objectives
For clarity of budget formulation and presentation, administrative units must identify activity area objectives and must present for each of these activity areas:
- Expected results;
- Performance indicators;
- Sources of verification and;
- With relevant costs relating to achieving those objectives split at the following budget line levels: remuneration of permanent staff, remuneration and accessory charges for temporary staff, operational expenditure etc.
- A separate document explaining significant increases/decreases in individual budget lines should also be provided as an annexe to the budget. In the case of government ministries, external resources, such as those from voluntary contributions managed through special accounts, must also be identified with activity areas.This change in presentation marks a fundamental shift in the philosophy of budget preparation in that it places objectives and results at the forefront of the budget presentation rather than individual lines of expenditure as was the case previously.However, it should be recognised that the introduction of results-based budgeting will be a process which will take a number of years.
As with the programme of activities, an evaluation document should be produced (at specified time frame), which compares actual results with the performance indicators detailed in the draft budget document.
Practical application of RBB
In practise the following guidelines should be followed;
- Drawing a clear distinction between the objectives and the activities which are necessary to achieve them and;
- Considering major external factors and conditions, which could significantly affect the success of the implementation of the budget.
- Identifying Activity Areas
- Identifying tasks to which appropriate resources can be clearly attributed.
- Measurable effects
- Defining realistic performance indicators which measure the effects produced by one’s activities.Mandeya is a senior executive training consultant and communication in management advisor, a personal coach in leadership and professional development with the Institute of Leadership Research and Development. Contact him on: email@example.com