Solved by verified expert:Public budgeting scholars often extol the merits of the data produced by alternatives to the line-item budgeting system traditionally used in the U.S. Define, describe, compare and contrast line-item budgeting, performance budgeting, program budgeting, and zero-based budgeting in terms of ease of use, clarity, transparency, strengths, weaknesses, and any other criteria you find valuable. If the alternatives to line-item budgets provide good data, why are they not utilized more often? Discuss at length
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Governments have an essential role in managing and ensuring their countries’ security,
and prosperity, and this role is called, “civilization.” To illustrate, the modern public authority
function is providing services for all people (citizens or non-citizens) by managing, planning,
organization, budgeting, and monitoring. This role has undergone many changes throughout
time, including budgeting. Public budgeting However, the public budgeting has four main forms,
which are: line-item budgeting, program budgeting, performance budgeting, and zero-based
budgeting. Each has advantages and disadvantages and can work successfully depending on the
area that is established for.
First of all, the traditional approach, which is the line-item budgeting, mostly used in
many organizations, and it is known as the “historical” form of budgeting. The reason behind
this name is that the government depends on the historical revenues and expenses information to
prepare the budget for a fiscal year (National Center for Education Statistics, n. d., para. 3). In
the traditional approach, the budget focuses on the appropriations and requests for each agency,
and it comes in the form of items or commodities and costs in a period of time. Also, it is created
to confirm that the outlay is within the limits of the appropriations listed and the purposes
assigned to them by the financial control agencies. So, line-item budgeting is considered to be a
monitoring instrument since it regulates the disbursement procedures by ensuring that they are
carried out legally and properly (Mikesell, 2018, p. 264). An example of the traditional budget is
presented in Table 7.1:
Budget Request form, Department of Political Science, Arkansas State University
FY 2017-2018 FY 2018-2019
Total Personal Service
Electricity & water
Total Operating Expenses
*It is just an example to clarify the budget form.
The item-line budget has many features. First, it is easy to prepare, display, implement
and control. To elaborate, the fundamental role for any budget is to illustrate the expenditures,
revenues and what is required for the next fiscal year, and this demand is presented in traditional
budget. It also compares the bulk of spending between two different years or more which makes
it easy to conduct studies and comparisons between revenues and expenditures of previous years.
Hence, the authority can control the disbursement of funds. Moreover, line-item budgeting’s
clarity can be capitalized by the parties involved and the public to ensure that the public funds
are exceeded for public interests.
In contrast, many scholars criticize the traditional approach because of its many defects.
First, this method is more concerned with the supervisory aspect than with the service itself and
for which it was spent. Since focusing on the basis of the type of expense, the line-item
budgeting does not indicate whether the expenditure has achieved the objective of spending or is
just expenses paid and ended up (Mikesell, 2018, p. 264). For example, it is obviously seen from
the table above that the expenditures of the traditional budgeting are constantly increasing. The
previous year’s budget is mainly used to estimate expenditures for the coming year with a small
amount of increase to cover the rise in salaries, purchase costs and projects. Therefore, this
method does not help the authority in determining the justifications for the increase in expenses.
In addition, although it provides comparison between the spending over years, it does not expand
to state the activities and role for every department in an agency which leads to making failure in
the decision-making process (Mikesell, 2018, p. 265). For an illustration, the employees’ affairs
department has many roles and provides variety of services for employee, such as pension,
compensation, and some entertainment activities for employees. In the traditional budgeting,
there is no mention about the services, and that shortcut does not help in decision-making
The second method is the performance budgeting, which is a result to encountering the
drawbacks of the traditional budgeting system. Performance budgeting emphasizes the
measuring administration efficiency and reducing expenditure when projects are completed. It
focuses on the activities for an agency rather than its commodities. So, it states both the
program’s objectives and the required funds (Mikesell, 2018, p. 268). In this structure, the
budget is prepared by dividing the activities of the agency into specific programs, each of which
aims at achieving a specific goal. The activities must be measurable. Thus, it provides the
institution with a better decision-making base. To illustrate, an agency funds are regulated by
providing a service; otherwise, it will not be funded. In this case, the decision makers can
determine which of the activities are weak or not needed any more. See the table:
Budget Request form, Department of Political Science, Arkansas State University:
FY 2017-2018 FY 2018-2019
Electricity & water
The performance budgeting is beneficial in providing a better distribution of the fund
resources of the country and reduce the random appropriations. Also, it improves the
implementation of programs and projects for government agencies because it determines the
expected results of the implementation of the program; therefore, facilitating the control of
implementation and recognizing of any deviation and its cause. Thus, evaluating the results will
be much easier by comparing them to plans. Furthermore, it provides adequate information to
citizens about the services to be provided by the state and its objectives, costs, and performance
units that will be achieved at the implementation (Mikesell, 2018, p. 268-269).
On the other hand, the agency using performance budgeting faces challenges. First, the
difficulty of identifying performance units (outputs) comes in the first list of defects since there
are many services and activities can not be measured (National Center for Education Statistics, n.
d., para. 4). For example, the secretary office services’ efficiency can not be evaluated by units.
Moreover, it is difficult to provide detailed information about the activities of different
government agencies because of the lack of accurate information systems they have. Also, the
performance budgeting focuses in achieving the efficiency for short-term.
The third approach of budgeting system is program budgeting. It emphasizes on the
government program’s goals and its values for the society. To elaborate, while the traditional
budgeting focuses on the inputs (government purchases), and the performance budgeting relies
on the inputs and outputs (the services and costs), the program budgeting system is built on the
inputs, outputs and its importance for the community (Mikesell, 2018, p. 272). The program
budgeting usually includes general data about the subject of the program, its agency, objectives,
funding, performance units, revenues, and any other data that sheds light on the characteristics of
the program (Pearson Education, 2007, p. 235-236). For example:
The program budgeting was created in attempting to resolve the shortcomings in both the
line-item and performance budgeting. One of the advantages that program budgeting has is the
resilience that the agencies have since it demands goals not performances to be elaborated. For
an illustration, each agency can achieve its objectives without being regulated by specific
activities provided in the budget. Therefore, the department can be funded as long as the
authority approves its goals, and it has a large area to accomplish this goal. In addition, the
flexibility has another form in the program budgeting. With this structure, the authority can
easily exclude a non-effective program in a department without affecting the other services since
in the program budgeting the department is considered to be divided programs. Also, the
authority can determine the spending priorities depending on the associations of the program’s
goals with the country’s strategic plan. If the goals do not correspond to the plan, the program
will not be funded. This will facilitate decision-making process for long-term planning
(Managing Information Services and Organizations, n.d., para.4).
Although to the benefits that the program budgeting provides, the limitations which it has
make it difficult to apply. First, some goals can not be identified accurately and tangibly. For
instance, the public entertainment as an objective for Summer Activities program that the
tourism authority has proposed is not tangible; hence, it might not be easily measured.
Furthermore, it required detailed information which takes long time to generate and collect, and
the need of complicated accounting systems fails to apply this form of budget in some
departments. Also, the high cost for applying it because it requires the availability of large
numbers of experienced staff; hence, program budgeting is a burden for many agencies.
Finally, the modern method of budgeting is zero-based budgeting (ZBB). In this system,
the budget is defined as a process of planning that requires each administration to justify and
reconsider all the requested funds in the agency budget. Meaning, the agency should not assume
that it will get appropriations as it happened in the past year, and it requires independent
procedures from year to year. This makes it totally different from the traditional budgeting in
which the funds rise incrementally each year. Thus, ZBB is a new way of planning and
evaluating all the available alternatives before requesting funds. Even though it is evolved
without relying on previous year’s budgets, the zero-based budget does not mean to start from
the scratch. The agency should capitalize from its experience throughout preceding years
(Mikesell, 2018, p. 282-283). ZBB comes in this form:
The zero-based budgeting has plenty of strengths. First, this budget reduces the
transmission of errors and mistakes from previous budget estimates to the subsequent budgets
since it developed separately. Also, ZBB ensures that all government programs are qualified to
be funded for every fiscal year. To illustrate, each agency is mandated to review and evaluate its
current and new programs in a systematic way, and to review the programs’ cost, outcome and
effectiveness. Therefore, it prevents inflation that occurs in the line-item budgeting (National
Center for Education Statistics, n. d., para. 4). Moreover, one other merit of the zero-based
budgeting is the reality as it is focused on the actual needs of the organization; then, it requires
financial allocations at the current market price.
In comparison, the drawbacks of ZBB play a significant role in the lack of using it even
its advantages. The zero-based takes much time and more effort to be developed comparing with
other forms of budgeting especially the traditional budget. Furthermore, ZBB requires a lot of
analysis and study, and it needs a large amount of information to conduct this analysis, which
requires trained and qualified cadres to prepare and analyze the data.
To sum up, each budgeting has strengths and weakness, and utilizing one of them
depends on the development or backwardness of the country and the nature role of the program
or agency. However, the line-item budgeting is the most and widely used budget among the other
forms, and this is because of many reasons. First, it is the easiest system to be followed and
prepared due to the fact that it does not required much effort. Also, it is appropriate for the local
administration, which means you can not apply zero-based, performance or program budgeting
on central government agencies. Many agencies need to be educated and trained to use the other
kind of budgeting. Finally, it helps the authority to control the agencies.
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