1.1What is Budget?
Budget is an estimate of income and expenditure for a set period of time and the National budget is the primary tool for implementing the priorities and policies of the government as a whole.
In other words, we can say that the Budget is the estimation of income and expenditure of a country or an organization for a specific period of time mostly for one year.
A budget is a governmentâ€™s plan for the use of its financial resources; a plan of financial activity, including all planned revenues and expenses for the budget period. The budget also serves as the basis for internal financial reporting as well as, reporting to the parliament, Ministry of Finance, Cabinet, and the citizens. A budget is a powerful tool for allocating limited resources among competing priorities. Officials should measure the value of the funds spent not only by the benefits gained, but also by what is given up. Approving budget means making choices and establishing priorities.
What is Budgeting?
Budgeting is the process of creating a plan to spend your money. Creating this spending plan allows you to determine in advance whether you will have enough money to do the things you need or would like to do.
Budgeting is simply balancing your expenses with your income. If you donâ€™t balance and you spend more than you make, you will have a problem. Many people donâ€™t realize that they spend more than they earn and slowly sink deeper into debt every year.
If you donâ€™t have enough money to do everything you would like to do, then you can use this planning process to prioritize your spending and focus your money on the things that are most important to you.
Afghanistan core Budget:
Afghanistan Core Budget:
a) Operating budget: Covering recurrent expenditures of the Government.
b) Development budget: Covering the countryâ€™s development needs
a. Discretionary budget: Funded through available Government resources
b. Non-discretionary budget: Funded through earmarked donor assistance.
The Core National Budget is channeled through the Government systems, and is subject to the Public Finance Management laws (PFML) and regulations. It is managed by the Directorate-General Budget (DGB) and disbursed by the Directorate-General Treasury (DGT) of the Ministry of Finance (MoF). Line Ministries/Budgetary Units (LMs) are responsible for the preparation and implementation of the Core National Budget.
The National budget is executed based on Budget Execution Guidelines (Annex 1)
External Budget: The budget which is totally funded by the donors and it is executed outside the Governmentâ€™s systems directly by the donors.
The government of the Islamic Republic of Afghanistan is preparing its budget on the basis of available resources not on a needs basis. Also budget is prepared in alignment with key policy objective and priority programs of the government, considering fair distribution of resources among provinces. By focusing on improvement in the above sectors the government aims to help transform lives of all Afghans both socially and economically.
The size of 1394 Afghan national budget is USD 7.652 Billion. It is financed through a combination of domestic resources and donor grants. The domestic resources finance 34% of the total national budget and the remaining 66% is covered by donor grants. Domestic revenue include funds from Aynak copper mine Logar.
The government will continue its efforts to create a budget that reflects needs have all socially deprived groups by all means. Government is spending billions of Afghanis over the next year to improve security, to build better infrastructure, enroll millions of Afghan children into school and deliver better health care services to the people. The effective spending of national budget will increase the fiscal infrastructure by tangible indicator, to expend provincial upgrading by population in size and strengthen competent service delivery to the public.
Ministry of Finance
The Ministry of Finance (MoF) is specifically responsible for the management and execution of the budget, collection of taxes, organization and control of public expenditure and payments to the government and finally the management of Customs. Every government has to know the status of its revenues and expenditures, the management of its financial resources and to allocate them effectively. The major portion of the Afghan budget is financed by international assistance. The Ministry of Finance as the responsible body for public finance and expenditure is increasing step by step its influence on coordination and management of international financial assistance to Afghanistan, and convincing donors to channel more funds through the government treasury.
For the past few years, the Ministry of Finance has been trying to regulate its activities according to international rules and regulations. To achieve this goal, the MoF established a Staff recruitment Section as well as a Policy Design and Execution Unit, and has continually embarked on training and capacity building of its staff.
The aim of the MoF is to manage the financial affairs of the country through scientific economic principles so that Afghanistan becomes economically sustainable, secure and self-sufficient that is to ensure that public wealth is used in an accountable and transparent manner
Vision: A stable, financially secure and financially self-sufficient Afghanistan with a fiscally disciplined government and a Ministry that is accountable and responsive to the needs of its clients.
Mission: To be an agent of change and the voice of expertise in the fiscal matters of the country and to ensure that international standards are met for procurement and financial management.
As a central player in financial reform, the Ministry of Finance is working with the Central Bank of Afghanistan to ensure that the countryâ€™s economic infrastructure is working properly. The MoF has the additional responsibility of realigning various functions to better support national development priorities.
MoF provides the following services to the governmental organizations and citizens:
Collection of revenues, both tax and non-tax
MoF provides the following services to other government agencies
1. Budget formulation (all government agencies)
2. Allotments Processing (all government agencies)
3. Payments Processing (all government agencies)
4. In year budget reports (all government agencies)
5. Worth Papers (all government agencies)
6. Submission of annual audited financial statements to National Assembly
Why is Budgeting so Important?
Since budgeting allows you to create a spending plan for your money, it ensures that you will always have enough money for the things you need and the things that are important to you. Following a budget or spending plan will also keep you out of debt or help you work your way out of debt if you are currently in debt.
Problems of the Previous Way of Budget Preparation
There were three primary reasons for replacement of traditional budgeting to program based budgeting which are listed as follow.
No link between the countryâ€™s objectives and priorities and the budget â€“ Organization and economic classification codes only highlight costs associated with salaries, materials, and assets. These are only considered â€œinputsâ€. However, the end results of those inputs â€“ outputs and outcomes (in other words the contribution of a program to the accomplishment of the ANDS objectives and priorities) are not expressed and cannot be recognized. Traditional budgeting provides an effective basis for budgetary control but does not provide any information about the achievements of the ministry/budgetary unit concerned, or the costs of achieving them. Because the emphasis is on recording and controlling aggregate expenditure, â€˜successâ€™ or â€˜failureâ€™ in budget management is related wholly to how the budget funds have been disbursed, not to what has been delivered by way of outputs from the expenditure incurred â€“ they tell us what has been expended, not how it has been expended.
Separation of operating and development budgets â€“ Ministries currently express, account for, and report on two different types of budgets â€“ the operating budget or those expenses paid for by the national government, and the core development budget or those that are funded by various donors through government treasury system. While there are similar costs within each type of budget that support similar types of activities, there is little, if any, coordination between the two structures. This approach limits the ministryâ€™s ability to determine the total need for or impact of its spending, as usually future maintenance and other recurrent cost implications of investment (development) projects are not taken into account. As a result, the full cost of a specific program that a line ministry is delivering is not taken into account when evaluating alternative approaches to achieving the governmentâ€™s goals or in planning for future resource needs.
Lack of transparency in budget allocation â€“ In traditional budgeting, ministry expenses are categorized according to the economic classification code (21 â€“ wages and salaries, 22- goods and services, and 25 â€“ acquisition of assets). While this is effective in financial control, it provides no information on the benefits achieved or their costs. This is critical information missing from a document that should illustrate how that ministry will reach ANDS objectives. Such transparency is also necessary for achieving understanding and support from the parliament and the public. In addition, the line item budget generally has a timeframe of a single budget year and therefore does not provide budget stability for effective program planning and execution nor does it allow decision makers to consider the future year implications of the budget decisions they are making.
Background of Program budgeting
Program budgeting on a government level can be seen as early as the 1940â€™s. The War Production Board started program budgeting with building materials rather than money. It was a way to ensure the government and the population was receiving all of the materials that they needed.
This program budgeting system was first introduced by the United States Secretary of Defense Robert S. McNamara in the Pentagon in the 1960s. McNamara allegedly wanted to control the many costly weapons development programs that were plagued by ever-increasing costs and delays. He called this new system the Planning, Programming and Budgeting System (PPBS). The system was taught at the John F. Kennedy School of Government of Harvard University but it evoked little interest except from critics.
This new approach introduced an unprecedented transparency into management operations together with a simultaneous fixed pinpointing of managersâ€™ responsibilities, and so was widely resisted throughout the entire public sector However, in the eighties, the UN Inspectorate General picked up the idea and recommended that the United Nations use it to improve its performance. A few institutions tried half-heartedly but only the International Atomic Energy Agency (IAEA) went about it seriously and introduced a complete program budgeting system that is still in place today.
Program budgeting was initially developed in the private sector â€“ introduced by profit-oriented companies that wanted to link their expenditures with the results they wanted to achieve through their activities and measure their effectiveness and the future profitability of their investments.
The Afghanistan budget has traditionally been prepared on the basis of allocating resources to particular economic categories (i.e. Allocating resources to line ministries based on how much is required for wages and salaries, goods and services or acquisition of assets (capital). Little if any, information has been available on what will be produced, what services delivered, or what results will be achieved with those resources, particularly for recurrent expenditures.
GIRoA decided in 2006 to introduce program budgeting in Afghanistan in order to better link its strategic objectives and policy priorities with the annual budget, prioritize the allocation of available funds to where they are most needed as well as integrate operating and development budgets. Program budgeting in Afghanistan is being introduced on a gradual basis: it is being rolled-out to several ministries each year. The pilot phase of program budget was implemented in three Ministries, Ministry of Public Health, Ministry of Rural Rehabilitation and Development and Ministry of Education. In the Ministry of Finance program budget was implemented in the second phase.
Program budgeting replaced traditional line item budgeting by focusing expenditure estimation, monitoring and control of an organizationâ€™s key outputs rather than on its consumption of resources, and ANDS Results Framework is the foundation of program budgeting and aims at conveying.
The name program budgeting is derived from the simple fact that the planning process is organized by the program rather than a department of fiscal input or output. PB is a modern tool for planning, preparation, and presentation of the Government and private sectors budget. It is currently the best international practice for making budget policy decisions and budget allocations based on the strategic expenditure and policy priorities. Also program budgeting is a tool used to present the governmentâ€™s budget in a manner that provides clear linkages between budget resources and the policy outcomes that government wants to follow. In 2006 when the government introduced program budget the Ministry of Finance had 13 programs than it was reduced to 9 and right now the number of programs that encompasses all the activities of the Ministry of Finance is further reduced to 4 programs which is very good to be implemented.
With the development and adoption of the Afghanistan National Development Strategy (ANDS), Ministry Strategies, and Sector Strategies, the Government of Islamic republic of Afghanistan (GIRoA) now requires a more transparent mechanism that allows measurement progress toward the achievement of these priorities and policies. Program Budgeting is one such mechanism.
However, the line ministries cannot accomplish this successfully alone. The Ministry of Finance has made a commitment to provide line ministries extensive assistance in each step of the program budget implementation process. A special team within the Ministry of Finance Budget Department, the Budget Integration Reform Unit (BIRU), has been assigned this task. Also, each line ministry has received technical assistance from international and national advisors to assist them with program budget development and implementation.
What is program budget?
Simple to say that program budget is a planning tool for preparation and execution of the government budget which presents the best practice approach for government public finance management. The term program budgeting can also be called as performance based budgeting; Result based budgeting and incremental budgeting.
Program budgeting displays information in a way that provides clear link between budget resources and the policy outcomes the Government wants to achieve. However, in order to maintain discipline and strict control over public spending, in program budgeting still captures information by economic category, as well. Therefore, program budget is nothing else but different way of presenting the Government budget.
To keep long things short simply stating that program budgeting is a budget process that allocates resources to a program that has clearly specified objectives and/or results expected to be achieved from those resources. A program itself is simply a grouping of similar services or activities undertaken by a Budgetary Unit with a common strategic and/or operational objective. Program budgeting therefore requires budgetary units to define what they do with the allocated resources in terms of strategic objective policy priorities and desired results.
Benefits of Program Budget
As it May be obvious to almost everyone that in very recent years the policies of Islamic republic of Afghanistan been to introduce budgeting reform processes, reforms which is aimed to strengthen planning and public expenditure management in order to control financial expenses which these reforms have two basic objectives :
â€¢ Developing expenditure priorities and the budgeting and financial plans over the next few years
â€¢ Linking financial allocations decisions which may lead very closely to the economic development and as well as the priorities of the Islamic republic of Afghanistan
As of now these developments have taken place in parallel with the creation of a strategy for the future development of Afghanistan which that strategy is the Afghanistan national development strategy. With the development of Afghanistan national development strategy the government of Afghanistan now requires a more transparent system to operationalize and measure the progress towards the achievements of these priorities and polices which of course program budgeting is one of such mechanisms. The strategy also leads toward the attainment and achievement of the United Nations millennium development goals MDGs.
For all these reasons, a strong case can be made to transition to program budgeting. There are several important advantages or benefits that program budgeting bring to the Governmentâ€™s ability to effectively and efficiently manage the resources available:
Creates clear and strong linkages between the ministryâ€™s objectives and priorities (as stated in the ANDS), the ministryâ€™s strategic plan, and its budget â€“ provides opportunity for the ministry to design new and redesign current services that will directly contribute to the expected results from ANDS and/or ministerial strategy and objectives.
Consolidates the various budgets â€“ Provides a comprehensive picture of all costs associated with a particular service delivered by the ministry, regardless whether they are being financed from operating or core development funds.
Enables effective budget allocation decision making process â€“ assists the Government more effectively allocate its resources to its most important and highest priority strategic objectives (budget planning), by providing more useful information on the benefits of the programs as well as the cost of achieving those benefits. Based on this information Government can make more informed choices on prioritization, or in other words where to allocate scarce public resources.
Improves management of resources within the ministry â€“ assists each Line ministry more effectively manage its internal performance by holding managers and staff accountable for the outputs and services they produce or deliver.
More transparent budget adoption process â€“ makes budget easier to read and understand by non-technical people; conveys information in such a way as to promote understanding. After reading a well-prepared and presented program budget, a member of the parliament or public should better understand what the governmentâ€™s programs are and what they are intended to accomplish. In this way the budget can be described as more â€œtransparent.â€ If a member of the public cannot understand the budget document because it is filled with confusing detail or technical language, it is less transparent.
Attracts funds from the External budget to Core budget â€“ provides more information to the donors on the objectives and expected results of the budget allocation, as well as the link with countryâ€™s priorities should increase donorâ€™s confidence in the IRoAâ€™s ability to successfully manage donated resources through MoF processes.
Budget Forecasting and Planning
Once you create your first budget, begin to use it and get a good feel for how it can keep your finances on track, you may want to map out your spending plan or budget for 6 months to a year down the road. By doing this you can easily forecast which months your finances may be tight and which ones youâ€™ll have extra money. You can then look for ways to even out the highs and lows in your finance so that things can be more manageable and pleasant.
Extending your budget out into the future also allows you to forecast how much money you will be able to save for important things like your vacation, a new vehicle, your first home or home renovations, an emergency savings account or your retirement. Using a realistic budget to forecast your spending for the year can really help you with your long term financial planning. You can then make realistic assumptions about your annual income and expense and plan for long term financial goals like starting your own business, buying an investment or recreation property or retiring.
The Budget Preparation Timetable, The key documents relating to the budget preparation process are listed below:-
Annual Budget Calendar, refer to (Annex 2)
Budget Circular No 1: Is the instruction to submit estimated costs for baseline programs and any new activity.
Budget Circular No 2: Is the instruction to prepare detailed costs and outputs, within budget ceilings.
MTBF (a Pre-Budget Document), including initial annual budget ceilings for baseline costs and new activities.
National Budget Document, including final budget figures, for operating and development budget, as well as for each program.
Users of the documents should ensure they familiarize themselves with each of these documents. Furthermore, government policies and objectives change over time and these changes are likely to be reflected in the guidance given to ministries and budgetary units by MoF on budget preparation. It is therefore essential to ensure that before the various stages of budget preparation are tackled, the budget circulars are read and fully understood.
The budget preparation process starts with the issuing of the budget timetable
It is essential for all line ministries and budgetary units to comply with the deadlines and information requirements specified in the various Budget Calendar documents. Assembling the budget document for presentation to Parliament is a complex process and it is made much more difficult if some ministries/budgetary units, make late or incomplete submissions.
Because program budgeting was new to Afghanistan, it was being introduced across line ministries and budgetary units of IRoA on a phased basis. At first those line ministries/budgetary units which were working with program budgeting have been designated as â€˜pilotâ€™ ministries/budgetary units. IRoA policy was that all ministries/budgetary units will eventually embrace program budgeting and currently it is embraced for use in all parts of the government administration.
It is sufficient to know at this stage that program budgeting replaces traditional line-by-line budgeting by focusing expenditure estimation, monitoring and control on the achievement of an organizationâ€™s key outputs rather than simply on its consumption of resources.
There are several important advantages or benefits that program budget bring to the Government ability to effectively and efficiently manage the resources available.
The importance of ANDS results frameworks
The diagram below shows that the ANDS is key to creating budgets, and so is also key to performance reporting.
(1) The ANDS should be the basis for your ministryâ€™s or agencies overall strategy. Ministry or agency strategies should contribute to the sector objectives of the ANDS.
(2) Results frameworks at either ministry or sector level should define how your ministry or agency will help achieve the ANDS by stating specific outcomes that your ministry or agency will achieve and specific outputs it will deliver. There should be targets for each of these, measured by clear indicators.
(3) Budget circular one submissions should include new spending priorities that will help deliver the outputs and outcomes stated in the results framework.
(4) Budget circular two submissions should clearly state the output(s) that each sub program will deliver. Each output should have a clear target measured by a clear indicator. Each sub program should also have a cost (or â€˜planned expenditureâ€™) identified against it. Budget circular two submissions also state clearly outcomes (from the result based frameworks) that will be achieved by each program.
(5) Performance reporting is the process of reporting actual outputs delivered and actual expenditure against those planned in the approved budget submission, as well as where possible, actual outcome achievements against the plans.
Selection of Outcome/Output Indicators and Targets
Select outcome and output indicators and targets when preparing budget submissions. Below are a number of suggestions to assist the selection of output indicators and targets for annual budget:
Work with directors / managers of each program to confirm the most suitable output indicators and targets for each sub program.
For the moment, it is sufficient to agree just one output indicator and target for each sub program. Where a sub program will achieve more than one output, decide which is the most important.
Select outcome indicators and targets identified in the ANDS Sector Strategy or result based framework.
For the moment, it is sufficient to agree just one outcome indicator and target for each program. Where a program will achieve more than one outcome, decide which is the most important.
Only select indicators which your ministry / agency is able to monitor. If the information cannot be collected, you will fail to complete performance reports.
Ensure the targets and indicators you select are SMART:
National Priority Programs (NPPâ€™s)
The national priority programs represents a new commitment in afghan national development strategy frame work and their aims are to empower the afghans and afghan institutions for better service delivery, generating jobs, sustainable development of economic, incomes, protect afghan citizensâ€™ right, government and NGOâ€™s and sustainable peace.
National Priority Programs refer to a set of 22 priority programs announced at the Kabul Conference of 2010. While ANDS provides an overall strategy, the NPPs represent a prioritization and further focusing of the ANDS including specific deliverables and costings. In addition, there are over 10 NPPs that existed before and continue to operate, such as the National Solidarity Program. The new NPPs are currently being finalized and will significantly advance the ability of Government to direct resources into areas that will have the greatest national impact.
The first impression of this program which introduced for the first time in Kabul conference for defining â€œKabul processâ€ was useful, and represents a milestone for the people of Afghanistan and international partners.
The Kabul Process which started with HE the President Islamic Republic of Afghanistan speech in London conference in 2010, was the starting point for transferring civilian and military responsibilities from the international partners to the afghan government and civil society organizations in the following five sections: Peace reconciliation, Security , Good governance , Economic development , Regional and global cooperation. All these five sections are also included in the Afghan National Development Strategy (ANDS).
National Priorities Programs are likely to have the following major impacts:
It will make governmentâ€™s efforts visible to people, which will further legitimize government;
It will improve incomes, public service delivery and job opportunities and also strengthen capacities in governance;
Government will take control of the development agenda and bring order in this sphere.
The prioritized and focused implementation will bring value for money leading to satisfaction of Afghan people as well as the international community.
Categorization of NPPs: There are 22NNPs, for effective implementation which are grouped together into 6 clusters as given below:
National Priority Programs
1- Security: Peace and Reintegration.
2- Human Resource Development: Skills Development and Labor, Education for All, Higher Education, Women Affairs, Capacity Building for Health.
3- Infrastructure Development: National Regional Resource Corridor, Extractive Industries, National Energy Program, Urban Development.
4- Private Sector Development: Trade Facilitation and SME, E-Afghanistan.
5- Agriculture and Rural Development: Water and Natural Resource Management, Comprehensive Agriculture, Rural Access, Strengthening Local Institutions.
6- Governance: Economic and Financial Reform, Transparency and Accountability, Efficient and Effective Government, Local Governance, Justice for ALL, Human Rights.
The Millennium Development Goals are a UN initiative.
The Millennium Development Goals (MDGs) are eight international development goals however for Afghanistan it is nine that were established following the Millennium Summit of the United Nations in 2000, following the adoption of the United Nations Millennium Declaration. All 189 United Nations member states at the time (there are 193 currently) and at least 23 international organizations committed to help achieve the Millennium Development Goals by 2015, the goals follow:
1. To eradicate extreme poverty and hunger
2. To achieve universal primary education
3. To promote gender equality and empowering women
4. To reduce child mortality rates
5. To improve maternal health
6. To combat HIV/AIDS, malaria, and other diseases
7. To ensure environmental sustainability
8. To develop a global partnership for development
9. To enhance security in Afghanistan
Each goal has specific targets and dates for achieving those targets. To accelerate progress, the G8 Finance Ministers agreed in June 2005 to provide enough funds to the World Bank, the International Monetary Fund (IMF) and the African Development Bank (AfDB) to cancel $40 to $55 billion in debt owed by members of the Heavily Indebted Poor Countries (HIPC) to allow them to redirect resources to programs for improving health and education and for alleviating poverty.
Criticisms accompanied the MDGs, focusing on lack of analysis and justification behind the chosen objectives, the difficulty or lack of measurements for some goals and uneven progress, among others. Although developed countriesâ€™ aid for achieving the MDGs rose during the challenge period, more than half went for debt relief, with much of the remained going towards natural disaster relief and military aid which do not further development.
As of 2013 progress towards the goals was uneven. Some countries achieved many goals, while others were not on track to realize any. A UN conference in September 2010 reviewed progress and concluded with the adoption of a global plan to achieve the eight goals by their target date. New commitments targeted womenâ€™s and childrenâ€™s health and new initiatives in the worldwide battle against poverty, hunger and disease.
MDGs derive from earlier development targets, where world leaders adopted the United Nations Millennium Declaration. The approval of the Millennium Declaration was the main outcome of the Millennium Summit.
The MDGs originated from the United Nations Millennium Declaration. The Declaration asserted that every individual has the right to dignity, freedom, equality, a basic standard of living that includes freedom from hunger and violence and encourages tolerance and solidarity. The MDGs set concrete targets and indicators for poverty reduction in order to achieve the rights set forth in the Declaration.
Structure of Program Budget Documents
Program Budget Documents are meant for Line ministries to present their budgets in a program format i.e. in terms of resources allocated to each program and the expected results to be achieved from those resources. It enables Ministers, Government, Parliament and the Public to measure the performance of the program in terms of benefits it produces for the country and costs of those benefits and whether a program is providing â€œvalue for moneyâ€.
Format of the Program Budget Document
The Program Budget Document consists of two major parts:
Narrative Justification of the Ministryâ€™s programs and services it delivers are represented in components and; Financial Justification of the Ministryâ€™s programs and services
There are four categories of information in the program budget structure:
Program structure: Ministry Programs Sub-Programs Activities
Objectives: Strategic Objectives Program Objectives Operational Objectives
Performance Indicators: Outcomes Outputs
Expenditures: Summary Costs Expense Summary and Line Item Expenses
In the Program Budget Documents, these elements are structured in the following way. Each succeeding classification presents a greater level of detail.
Graphic Illustration of the Program Budget Structure
â€¢ Strategic Objective
â€¢ Program Objective
â€¢ Summary Costs
ï‚§ Operational Objective
ï‚§ Expense Summary
â€¢ Line item expenses
This means that each Ministry comprises the sum of its programs, where each of these programs comprises the sum of its sub-programs, and each sub-program comprises the sum of its activities. In the same way, strategic objectives are broken down into more specific program objectives that collectively contribute to achieving strategic objectives; further, each program objective contains several operational objectives specifically designed to cumulatively help achieve the program objective.
Components of Program Budgeting
Program Budget Component Description
Narrative â€¢ Government Goals â€“ ANDS and sectorial results framework
â€¢ Ministerial strategic objectives â€“ link between work of ministry/budgetary unit and ANDS goals
â€¢ Performance indicators â€“ measures of success and achievement in pursuing goals and objectives
â€¢ Program â€“ a collection of related activities working towards a common purpose within the line ministry.
â€¢ Sub-program â€“ a group of activities under the same operating or development priority/policy objective (i.e. part of a larger program). A sub-program essentially defines what the ministry/budgetary unit does
â€¢ Activities â€“ the work that ministries do within a sub-program. They can be either
â€¢ recurrent (operating) budget based; or,
â€¢ development activities
â€¢ Medium term financial plan â€“ identifying multi-year financial implications of pursuing government goals and objective;
â€¢ Budget ceilings â€“ identifying the resources available to pursue those goals and objectives
â€¢ Annual estimates â€“ specifying the detailed spending plans of individual ministries and budgetary units
The final concept of program budgeting to be considered relates to the assessment of government performance. Government performance is of primary concern to every citizen because there is an expectation that all resources will be used efficiently and effectively in providing the highest attainable level of public services. In turn, line ministries and budgetary units have the responsibility to ensure that the programs they provide meet their stated objectives and are cost effective.
If the needs of all these parties are to be satisfied, it is essential that there should be some methodology in place which can provide a basis for a systematic and objective evaluation of government performance. Worldwide, much work in recent years has gone into developing such measures and there now exist a wide range of what are known as
Performance indicators which can be used for this purpose these indicators are normally used to measure the output, efficiency, and outcome of government activities.
The central reason for introducing program budgeting in Afghanistan is to link expenditure to the achievement of policy goals. It is therefore essential that alongside the establishment of the programs and sub-programs, ministries and budgetary units set up relevant, measurable and robust performance indicators which can be used to assess the extent to which progress is being made towards such goals. These indicators may vary widely between different types of service provided, according to the objectives being pursued, but properly developed and used they can guide government resource allocation decisions, and can communicate the goals, objectives and effectiveness of public programs in an understandable and tangible way
There are four primary types of performance indicators:
ïƒ˜ Outcome, and
The table below defines the four principal types of performance indicators and provides some examples of how they might be applied. In broad terms,
ïƒ˜ Input indicators address the amount of resources used in providing a service/ delivering an activity,
ïƒ˜ Output indicators describe what is produced by the activities carried out in providing a service,
ïƒ˜ Outcome (or effectiveness) indicators relate to service achievement resulting in concrete and tangible development changes, and
ïƒ˜ Efficiency indicators examine the relationship between the level of resource use and the outputs achieved.
Input, output and efficiency indicators are reasonably simple to define and calculate, can be compiled from data readily available to, or within, ministries and budgetary units, and can measure performance over a short period of time. They are normally related to the amount of resource consumed and the quantity of units of output produced. However, such indicators provide only limited insight into whether the program is achieving the goals for which it was designed.
To overcome these limitations, it is necessary to identify measures of outcome which relate directly to service achievement and/or consider issues such as quality and effectiveness. However, these measures are often more complex to define and may require data which will be difficult to identify and collect. Much work was done in the creation of ANDS (most specifically in the results framework) in defining a range of sectorial outcome measures, and ministries and budgetary units can assist themselves in the program budgeting process by making reference to them as a basis for their own analysis.
Type of Indicator What it Measures Example
Input Quantity of Resources Employed ïƒ¼ Equipment required
ïƒ¼ Employees required
ïƒ¼ Supplies used
Output Quantity of Service Provided ïƒ¼ Number of projects
ïƒ¼ Number of classes
ïƒ¼ Number of people served
Outcome/Effectiveness The degree to which the intended objective of the service is being met. ïƒ¼ Percentage change in employment
ïƒ¼ Percentage change in crime rate
Efficiency Cost per unit of output ïƒ¼ Cost per liter of water delivered to a household
The national budget is the primary tool for implementing the priorities and policies of the government as a whole. Since those priorities and policies are now firmly locked into ANDS, it is essential that the budget reflect its content. Furthermore, since ANDS is results-based, the government intends to adopt a results based management framework to underpin the annual budgeting process. Now the researcher tries to obtain the gap between priorities as per MoF budget policy and activities performed.
ANDS results framework aims to explain basic supporting devices such as the Medium Term Fiscal Framework and Medium Term Budget Framework. It is essential to link the ministerial budgets to the underlying strategy of the government.
Beside program budgeting implementation is useful tool to measure outputs and achievements of priorities in comparison to previous traditional budgeting. However lack of current financial resources in government of Afghanistan and the implementation of program budgeting reform is a big challenge for our country to obtain desirable goals.
The main and basic objective behind conducting this research is to know whether implementation of program budget as a modern and new reform is useful in the budgetary units of Afghanistan, particularly in ministry of Finance as a key ministry and making sure that this budgeting tool is important in getting the objectives as mentioned in the Afghanistan national Development Strategy.
To know the constraints are during implementation of program budgeting.
It is also worth mentioning that the other objective in conducting the research is to complete the partial requirements of my Masterâ€™s degree in business administration field and to learn practical experience in real time organizational functioning with a view to seek compatibility of theoretical knowledge learned during the MBA program at Kardan University
To analyze organizational operations i.e. operational analysis, financial analysis and draw finding/ conclusions and also some recommendation to the ministry of finance about program budgeting according to the observation of the researcher.
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