Introduction to Performance Budgeting
The objective of doing this project is to fulfill the credit of the course credit hour of Public Sector Accounting. The topic we choose is about "Does Performance budgeting work?"
What is performance budgeting? Performance budgeting in Public is needed because it is to show where the public money had been used and also to make sure that the value of money is used properly by the government. It is a pressure to the government to make sure that the information provided is in true and fair value to the citizen.
Performance budgeting is different from the traditional line item budgeting in the links predicted expenditure to specific tasks and goals. The performance budgeting does not focus on provided for money, but they focuses on what the municipality spends.
The performance budgeting has linked to boarder efforts to improve the expenditure controlled as well as public sector efficiency, effectively and performance. It also can be combined with the increased flexibility for the government in return for stronger accountability for the results this is to enable them to decide how to delivered best to the public citizens.
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In the mean time the performance information encourage on greater emphasis on planning's and a good indication of what works and what do not works. The tool improves transparency in providing more and better information to legislatures and the public.
In this assignment we will discovered what the performance in the country and other countries do. We will discovered whether the performance budgeting in the public sector works efficiently and effectively or not in the performance and also to make sure did they delivered a true and fair value of accounts in the public sector accounting to the public citizen.
Objective of the studies
To introduce performance budgeting
Introduction to what is performance budgeting and how it can helps to improve in Public Sector Accounting. To identify the flexibility and accountability of the government in using the public money to developed the country.
How is the implementation of performance budgeting in public sector Accounting
To understand how performance budgeting is implement in the Public Sector Accounting and the purpose of implementing it to know how efficient and effectiveness that can be brought out thru the Performance budgeting In helping the Public Sector.
The improvement of performance budgeting in public sector of Malaysia
To know about the improvement made thru Performance budgeting and how effective is it. It can also compare between the old and new current system to see the advantages and weaknesses of the system.
Comparison between the performance budgeting between countries
Comparing between countries to understand how other countries implement the performance budgeting or what are the other performance measurement that they used in measuring the public sector accounting in their countries.
How to improve the efficiency of Performance Budgeting in Public Sector Accounting.
To identify what are the weaknesses of the Performance Budgeting in Public Sector Accounting. To identify where the weaknesses come from and how can the government plan and also how the citizen or shareholder can do to help improve the efficiency of the Performance budgeting with the Current Measurement.
Implementation Of Performance Budgeting In Public Sector Accounting
Malaysia has adopted performance budgeting as a system to improve our country's budget planning and financial management. The implementation of performance budgeting is expected to make the government more transparent and accountable to its citizens. Public budgeting is about choices among ends and means. Although public budgeting shares many features with private sector budgeting, it does require the application of different criteria from those used in the private sector organisations. The implementation of performance budgeting also requires that the government becomes more transparent and accountable to its citizens on how allocated resources were used to achieve planned policy objectives. Promoting efficiency and effectiveness in the utilisation of public resources is the primary goal of performance budgeting.
Both developed and developing countries have experimented with the implementation of performance budgeting, but they have met with little success or complete failure. Many factors have contributed to little success or failure in implementing performance budgeting which are stiff resistance to reform, lack of specialised expertise, lack of performance information systems to capture performance information, administrative complexities, lack of investments in managerial accounting and information systems, the absence of institutional incentives to promote gains in economic efficiency, pervasive corruption and hastily conceived reform with unrealistic expectations.
Performance Budgeting in Industrial Countries
Always on Time
Marked to Standard
New Zealand : Outputs Budgeting
New Zealand's budgeting reforms have attracted considerable international attention over the past two decades. In 1989, Public Finance Act (PFA) redefined the appropriation process, shifting the budget emphasis from inputs to outputs. Under the PFA, appropriations to departments were for the purchase of classes of outputs. Appropriations on a full accrual basis for all agencies were achieved with the 1994 amendments to the PFA. The Fiscal Responsibility Act 1994 (FRA) required governments to state their fiscal objectives and report progress towards achieving those outputs. These output appropriations encourage the Government and its Parliament to pay attention on the goods and services to be delivered by a unit in respect of the appropriations. Thus, the attention is the value obtained from the government expenditure as much as how that disbursement was made.
Output appropriations also provide the departments with autonomy in determining the appropriate input mix and to alter that input mix during the period when necessary. Resources are linked to results at three dimensions. The first one is resources are linked to and appropriated against expected outputs in the budget while the second dimension is resources are linked and reported against actual output performance and the third actual outputs are tracked and reported against targeted performance. It is widely conceived that budgeting reforms has considerably contributed to New Zealand's improved fiscal position.
Performance Budgeting Experiences in Developing Countries
Malaysia : Output Budgeting System
Along with New Zealand, Malaysia pioneered the output oriented approach to performance budgeting system with the introduction of the Modified Budgeting System (MBS) in 1989. It also introduced complementary reforms to strengthen performance-based accountability such as the Client's Charter in 1993, and initiation of accrual accounting. The Client's Charter requires all agencies to identify their customers and establish the customer needs. Agencies are required to notify clients about standards of services available and public agencies are expected to report both on service improvements and compliance failures annually. The MBS is essentially an output based budgeting system as the managers receive lump sum appropriations and have the flexibility to use them in return for agreed upon results or outputs. Performance indicators for government agencies and other public service providers are maintained and acted upon.
Critical Conditions for Successful Implementation of Performance Budgeting
Motivation To Make A Change
Consensus among participants on the need for reform is critical to successful implementation. Public officials need to identify their motives for using performance measurement and performance budgeting. Their motives may come from external demands for service quality and accountability and internal demands for efficiency and effectiveness. It is also essential to identify the producers and consumers of information and to provide an appropriate incentive strategy for the use of performance based on information.
Furthermore, decision makers must understand that performance-based information may be most helpful for management improvement, rather than for budgetary matters. Political will is critical to the implementation of results-based accountability. Even a less sophisticated system can achieve a great deal in the presence of political will, and a more sophisticated system will achieve very little if the political will to use not present.
Importance of Legislative Support
Strong and consistent political support from the legislature is critical for performance budgeting initiatives. To pursue internal rationality and efficiency criteria without regard to the political environment jeopardizes the prospects of the endeavour. Legislative understanding and involvement are critical but were often neglected in previous initiatives such as PPBS, MBO, and ZBB, partly because those reforms were seen mainly as administrations' internal management initiatives. Lack of legislative support is an important reason for the failure of those reforms.
Budgeting reform affects all branches of government; it cannot operate with technical refinement or analytical sophistication independently of the political environment. The role of legislators in budgeting often focuses on balancing budgets and controlling public spending. Hence, they show interest in control-oriented budget formats such as line-item budgeting, in which they can manipulate and monitor budget revenues and expenses item by item. Legislators may resist performance measurement, fearing a shift of power to the executive branch. The political effect of performance budgeting reform demonstrates that implementation of this initiative needs the support of political stakeholders.
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A government needs to involve legislators in establishing performance goals, developing performance indicators, monitoring the performance process, and evaluating performance results to promote acceptance from the legislature. The reform is unlikely to succeed if the executive and legislative branches have conflicting objectives and conflicting understandings of why the reform is necessary. Clearly, development of such an open system is costly; however, performance budgeting reform risks losing momentum and being abandoned if without it.
Support and Engagement From Citizen
Performance reforms should provide direct benefits to government stakeholders in exchange for their support. Without at least some degree of the public involvement, performance budgeting risks becoming an internal bureaucratic exercise separated from what the citizen views as important. Citizens' involvement also ensures credibility and improves the meaningfulness of the data that are collected, assessed, and reported.
Minimum Administrative Capacity and Bottom-Up Approach
Mandating the implementation of performance measurement and budgeting across the board when politically popular may not be administratively feasible. It is important that the political leaders and policy entrepreneurs who advocate implementation of the reform allow time for agencies to learn and build their capacities. Besides imposing a system for all programs to follow, the reform should respect institutional differences among agencies and help them to develop approaches which suitable for their own situations and contexts, and also approaches that can provide them with useful information for reviewing the effect of what they are doing and identifying how this information can help them in their planning and budgeting. Institutional capacities building in personnel, information systems, accounting standards, and funding potential are highly associated with the use of performance measurement in budgeting.
If the civil servants lack of the capacity to implement performance budgeting, the political enforcement and managerial commitment alone will not make any change. Most of the work of developing and maintaining a performance budgeting system is done by the budget staffs in the executive and legislative branches. In the absence of adequate training, managers and staff members are unlikely to be able to understand the potential value of a results-oriented approach or be able to provide for effective implementation.
When a performance budgeting system is attempted, a series of important questions will face by them. It is not feasible to plan an evaluation of a program's effect without sufficient resources and appropriately trained personnel. Personnel training can make a difference not only by changing attitudes but also by preparing competent staff members. Transforming an organizational culture by building performance consciousness into daily functions is a difficult works. The experience of many different countries likes Denmark, Norway, and the United States is that training, guidance, and availability of technical assistance are required over a period of time.
Government agencies frequently do not have data systems that can readily generate the performance information needed. Many state agencies have collected program data in mainframe systems that cannot easily respond to the information needs. Coupled with data quality needs, certain electronic systems must be in place for maintaining and tracking performance.
The absence of an appropriate accounting system may destroy performance budgeting reforms. The foundation for performance measurement is activity-based costing of all direct and indirect costs for a program to provide a more accurate expense of achieving a specific objective. Accurate cost data are critical to analysis that seeks to determine the return on investment in government programs.
Financial Costs of The Reform
Sufficient financial resources for data collection, initial training, and ongoing system maintenance are critical for the implementation of performance budgeting. Performance budgeting information systems which entail data collection and validation, analysis, and reporting, may be costly to develop and maintain but we need to do it and try to minimize the costs.
Budgeting System in Government Malaysia
There are several types of budgeting system and techniques being implemented by Malaysian Government since 1960s. Budgeting system is referred to the methods or the techniques of how a budget was prepared and presented. Different budgeting system will apply different approaches for planning, controlling and evaluation roles of budgeting. The budgeting systems that being performed are Line Budgeting System, Program and Performance Budgeting System (PPBS), Modified Budgeting System (MBS), and Outcome Based Budgeting (OBB).
Budgetary reform focused on greater accountability and financial discipline among the various government agencies entrusted to carry out the socioeconomic development plans for the country. In addition to greater public sector accountability and improved budgetary system performance, the government undertook a number of additional reforms including improved financial compliance, quality management, productivity, efficiency in governmental operations, and management of national development efforts.
Budget reform had been on the Malaysian government agenda for over two decades. Malaysia's budget reform efforts have been closely linked with the efforts at nation building and global competitiveness associated with Vision 2020 which is a program aimed at making Malaysia a fully developed country by the year 2020.
Reformation Budgeting System in Malaysia
Malaysia budgeting system reforms were initiated in the 1960s as part of an effort by the government to strategically develop the country. The past two decades have witnessed a growing interest in performance management and budgeting reforms, in response to louder public demands for government accountability in industrial countries. These reforms are intended to transform public budgeting systems from control of inputs to a focus on outputs or outcomes, in the interest of improving operational efficiency and promoting results-oriented accountability. These experiences have significant relevance for public sector reforms in developing countries.
Line item Budgeting System
Government Malaysia was started to use Line Item Budgeting System after independent. Malaysia adopted Line Item Budgeting System start from year 1960 until 1968. Line Item Budgeting System is a simply list that itemizes every item in a budget. Line Item Budgeting System is primarily a tool for controlling expenditures. The purpose of Line Item Budgeting System is to make the budget a tool for financial compliance. This method is relatively easy to use and understand.
Line Item Budgeting System is a traditional method that prepares a budget by using the previous year's budget as base. Line Item Budgeting System emphasizes inputs and provides information on how much is spent and how it is spent rather than what for it is spent. It does not link inputs with outputs, and hence say nothing about how efficiently resources are used. The major criticism of Line Item Budgeting System is it does not deal with key issues of government objectives, their links to the budget, the services to be delivered by the government. This budgeting system does not provide the information related to the functions and activities of a program and department.
Because this system is not capable enough to justify the current financial situation and to achieve budget objectives, Line Item Budgeting System has been replaced since 1969 with a new budgeting system, Program and Performance Budgeting System (PPBS).
Program and Performance Budgeting System (PPBS)
Program and Performance Budgeting System (PPBS) was first introduced and adopted in Malaysia in 1969. The evolution of Program and Performance Budgeting System in Malaysia from its beginning in 1969, through the in-depth implementation phase which began in 1972, to the present day. It outlines the system in the Ministry of Health, where PPBS has been extensively developed and comments on the systems established in other in-depth ministries, in several of which little appears to have been achieved. In 1981 all other agencies were asked to adopt PPB in their budget submissions.
Malaysia implemented the PPBS in 1969 through to 1990. The focus of the budgetary process was on line items although information on the performance of program was available. Budget process was used more as a tool for funds disbursement rather than a strategic management tool.
In 1990, a new budget system was introduced in order to overcome the weakness of PPBS. The system has been adopted after PPBS is Modified Budget System (MBS).
Modified Budget System (MBS)
The Malaysian government introduced a Modified Budget System (MBS) for the 1990 annual operating budget preparation with the issuance of Treasury Circular No.11 of 1988. The Modified Budgeting System also known as the Malaysia Budgeting System. The Modified Budgeting System is a system of management designed to establish logical linkages on the relationship between inputs, outputs and impacts. MBS was implemented with the explicit objectives of trying to improve resources allocation by bringing about more efficient management of government programs by way of improved accountability.
MBS was first introduced in three (3) pilot Ministries, these being the Ministry of Health, Ministry of Work and Ministry of Social Welfare (Malaysia Treasury 1988). The MBS was implemented in other government organizations in 1992. The MBS was developed to counteract weaknesses as in the Program and Performance Budgeting System (PPBS), which has been in place 1969 and also to introduce several reform mechanisms to enhance results based accountability. The main principals and objectives of the MBS for improving the financial management of government organizations are to improve and modernize the process of resource allocation on the basis of performance, to delegate greater authority over the management to a lower level of management as practicable, and to introduce a result oriented and cost effective management.
Government Malaysian was implemented MBS from year 1990 till now. But MBS still have some problem that can be improve to be better. The problems of MBS are:
Over-emphasis on the technical aspects and neglect of human variables.
Little attention to develop understanding, receptivity and capability in using data.
Inadequate support from top level administrators.
Lack of trained staff.
Inadequate support from the Treasury itself.
Trained staff being promoted to unrelated jobs.
To solve the problem of MBS, Government Malaysian was planning to implement a new budgeting system. Government Malaysian hope that the new budgeting system, Outcome Based Budgeting (OOB) can adopted within the next three years in public sector.
Outcome Based Budgeting (OOB)
The Second Finance Minister, Datuk Seri Ahmad Husni Hanadzlah said that there have five (5) selected ministries will be use Outcome Based Budgeting (OBB) as test-bedded in 2012 and OOB will be rolled out across all the ministries start from 2013 onward. The first five selected ministries is finance, human resources and public works, while the other two ministries will be identified later.
Some of the countries have been successfully implemented OOB, like New Zealand and Canada. Malaysian Prime Minister, Datuk Seri Najib Tun Razak was still debatable the idea to implement OOB in the 2010 budget. The purpose is to ensure the concept of value for money, which is efficient, effective and economic, for the budget expenditure management can be achieve.
OBB is an integrated system that uses goals, mission and objectives to explain why the money is being spent to achieve a specific outcome and it enables policymakers to determine which activities are cost-effective to achieve national priorities. The purpose of implementation of OBB is use to overcome the weaknesses and problem that have been faced when implement MBS.
Comparison between the performance budgeting between countries
Performance based budgeting (PBB) advanced rapidly in other countries as a way to make government more competitive and cost-efficient and as a response to cynical taxpayer who demand more accountable government spending. Below have some discussion related to the PBB for United Stated, Taiwan and China. Different country implements different PBB because they based their administrative and public demand.
On 1993, Government Performance and Result Act (GPRA) become law in United States. This implementation occurred because want to establishing a strategic and performance budgeting framework for federal government. At the time, under Bill Clinton administration National Performance Review (NPR) Committee is established in order to implement management reform with the objective of budget deficit reduction. Refer to White House statement says that NPR's implementation is a cost cutting and save budget. Enhance performance accountability by eliminating wasteful spending and achieving better programs results through an extensive performance review is the NPR's goal. For federal programs success, GPRA set specific objective, standard, and goals. But for federal budget, the related task is submission and publication of federal agencies' performance report and integration of performance goals for major's expenditure into the federal budget. Executive leadership support plays an important role in PBB implementation. GPRA and PBB got strong supported from Clinton administration and also Congress. U.S Office Management and Budget was very sure content of GPRA. After Clinton administration, next is George W.Bush administration which is still continued performance based budgeting (PBB) by implementing Program Assessment Rating Tool (PART). Even though PART believed to have had limited but steady impact on management communication and decision making. In order to improve government performance and accountability through PBB have to go various levels of government in the United States.
In Taiwan implementation of PBB are subordinates to all agencies to the Executive Yuan and local government. Measurement of performance be done end of fiscal year by compares actual performance with the objective. To reform this, there have two distinct aspects. First is executive leadership and second is project management process. For the first one, Major PBB project are classified and controlled at the Executive Yuan level. Their annual performance evaluations are submitted to the Research Development and Evaluation Commission (RDEC) of the Executive Yuan. The RDEC assembles committees consisting of members from the Council for Economic Planning and Development, National Science Council, Directorate General of Budget Accounting, as well as experts outside the government to review and evaluate these projects and their affiliated agencies. The final evaluation results are published on an RDEC website for public review and are used in making funding decisions. The RDEC also monitors the progress of each program and verifies such progress with on-sites inspections. A monitors report is published regularly. Project management process is the second distinctive features is carefully designed in which each is subject to intensive administrative scrutiny during planning, implementation and evaluation. Executive Yuan, ministry and agency will reviewed first medium-term plan(four years) for various governmental projects which incorporated into an annual plan after a preliminary agency self-evaluation. The performance assessment is conducted in this stages. The Department of Regional Affairs of the RDEC reviews local government projects subsidized by the central government. Commissioned by the Executive Yuan, the RDEC is mainly responsible for project management, although the council for Economic Planning and Development, Public Construction Control, and National Science Council are also involved in the management of projects in the their specialties. Beside that, project management process involved a carefully designed assessment phase in which each agency uses performance results achieved in the previous three years to set a performance goal. The performance goal for the next four years is establish often at ten percent higher than the previous goal. The results of this assessment are taken into consideration in making funding decisions for the budget next year. Moreover, the agency's performance results are linked with employees' financial benefits.
Next we were discuss PBB in China( Guangdong). In 2003, China becomes the first province in the People's Republic of China to launch PBB reform. The province, located in southern China was the first implement market-oriented reform in the late 1970's, and it is known for its progressive economic and political initiatives. In 2003, Guandong's per capita GDP was among the highest in China. In 2003, Guangdong government revenues amounted to roughly 13.4 percent of the total provincial government revenues, and its expenditures made up about 9.8 percent, both the largest in China. The finance department of Guangdong Province and coordinated the PBB initiative. After securing support from key government party officials, members of the local congress, and other interest group, the department started publishing an annual guidebook of regulations and policies to promote its PBB initiaves among department officials. The book also includes expert opinions from central Ministry of Finance, the local congress, and the Guangdong finance, audit, and supervision departments to demonstrate the broad behind the reform initiative. Furthermore the department created a new agency, the Performance Evaluation Division (PED), to compile and analyze financial statistics, and to organize and conduct the performance evaluation of programs. The evaluations consist of an agency self-evaluation as well as a formal assessment. The formal assessment often focuses on several selected programs and is done by public's officials from the finance department as well as experts such as scholars or university professors. An evaluation report is prepared by the Performance Evaluation Division and delivered to agencies and individual officials. Despite its admirable goal, the PBB effort in Guangdong was considered experimental. It is administration-driven effort, and no PBB legislation was passed. The scope of the reform has been limited. Only programs in six large agencies were selected. These agencies were selected because they had sufficient resources to implement the initiative and because agency leaders demonstrated support for the reform. The programs selected are in areas of transportations, educations, tourism, research and development. Guangdong is limited but its lack of expertise in performance data analysis and evaluation. The Performance Evaluation Division has not successfully developed skills and capacities needed to extend the PBB to other programs, and the progresses in developing expert inventory have remained unsatisfactory. Despite its goal to link performance with budgetary decision making, Guangdong reforms set a modest objective at the early stage of the reform to enhance understanding of performance evaluation. With no drastic changes in the management system, the focus of PBB was on learning, education, and experimentation and information dissemination to help officials understand the need for PBB. No significant effort was made to link performance to funding decisions. And, no change was made to alter expenditure classifications and accounting codes to reflect the program cost needed for making performance funding decisions.
Malaysia also implements PBB since 1969. Outsider researcher also makes some discussion in order to evaluate successful of implementation and explores the use made to reveals little use by public sector. The purpose doing this is to compare Malaysia PBB with other country. Normally we cannot used the same based to compared from other country with other because the implementation is government done followed their per capita and country adoption. By implementing this Malaysia more focus on between the input, output and impact. PBB in Malaysia different in above country because its comprise two component which is program budgeting and performance budgeting. Program budgeting means how much the program will be accomplish during the fiscal year. But, the program achieved must include function, objective, activities and responsibilities centre. Next for performance budget is method or techniques use for measuring performance and cost occurred. All this based on previous approved program plan. Malaysia implement PBB based on four major elements which consist of identify the objective, program or activity, performance measurement, and program evaluation. For Malaysia government to make PBB success so they come out this four element. The program be done must identify and formulate in a clear, precise and concise manner. At the same time the related program must have set of activities which have common activities. To make program efficient to public there must have indicator for a purpose of evaluation of financial and physical performance. Last but not least, in order to measure how efficient the program the responsible person must gone through comparing between input and output. In other words, compared between actual results and targeted. All this are Malaysia PBB implement compare to other country. Malaysia can be said as develop country compare to United Stated. For sure the implementation of PBB quite different.
The Efficacy of Government-Wide Performance Budgeting
Performance Budget that the Government formulated the first business plan and engineering plans, according to government functions and re-plan the implementation of the policy planning programs, and on the basis of cost-benefit analysis to determine the cost of implementation of the program to a method of preparation of the budget. 90 years since the 20th century, around the world will focus on budget reform can improve the performance of the administrative performance of the budget up. From developed countries to implement the practice of performance budget reform, performance budgeting to improve the efficiency in the use of public funds, improve government performance and achieved significant results.
Performance of the budget through the establishment of political and human environment, improve the effective use of finances. The main purpose of the traditional budget management is to make the budget consistent with the financial management requirements, also known as the compliance budget. The Government only on the use of public resources is not responsible for the use of resources for the results. The traditional method of budget and budget performance differs in that it put some of the basic concept of the market economy into the public administration into. Thus, effectively reducing the cost of public goods had provided by the Government to improve the efficiency of fiscal expenditure. Performance output indicators for the preparation of the budget to the budget based on budget allocations for each spending department costs to specific outputs based on legislative approval of the department's funding allocation within the limits free financial resources. Public bodies should not only their responsible use of public resources, but also the results of use of these resources should take responsibility for departments and units of output is a measure of the effectiveness of the main indicators of budgetary funds, while the control input on the budget has been greatly relaxed, budget departments and units in the use of budgetary funds have a stronger autonomy and flexibility. Performance of departments and units as the budget applied for and obtained a reasonable budget legitimate reason, in the general scarcity of public resources, revenue and expenditure under the reality of the larger conflict can greatly improve the efficiency of the allocation of public resources and improve efficiency in the use of budgetary funds. In this section the empirical evidence on the efficacy of government-wide performance budgeting system is considered under three heading: budgetary allocation, aggregate expenditure, and productive efficiency and program effectiveness.
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BUDGETARY ALLOCATION IMPACTS
Different countries has different budget allocation, some countries may focus on automobile industry while some may focus on others industries. There are several industries on every country, such as automobile, banking and finance, textile, agriculture, telecom, oil and gas, and so on. It is important for the country to focus on their major industry so that they can earn money from it. Therefore, the government of the country must well know how to use the budget wisely, so that they will not query from the people of the country.
However, it is hard to calculate the total cost of expenditure on the industry and hard to make sure the benefit in the future. Thus, the government must have a body to focus on calculate the future benefit of the industry and intelligently allocate the budget to different industry so that the country can earn money in the future and will not waste for the resources. If the government wrongly allocates the budget to the particular industry, it will make the country's resources wasted and other industries may be affected due to lack of budget. Moreover, it will make the country develop slower or have outstanding obligation with other country due to resources wasted.
(i) Factors impacting on the allocative efficacy of performance budgeting
Some country's government is, arguably, the way in which politic influences budgets. In any type of democratic system, of course, budgeting is necessarily and essentially political. Cabinets in parliamentary systems, being composed of politicians worried to keep majority control of the parliament, are obviously greatly influenced by electoral considerations when making public expenditure decisions. Nevertheless, substantial legislative budgetary power tends arguably to place significant budgetary power in the hands of individual legislators who can be particularly liable to the influence of special interest groups. It may become significantly more difficult in such systems, for example, to eliminate or scale back programs which are ineffective or inefficient, but which have significant local interest group support.
In respect to allocation efficiency, performance budgeting reformers have been driven by a belief that expenditure allocation in the public sector tends to be insufficiently responsive to changing social needs and priorities. The perception is that money can keep flowing year after year to ineffective programs because of a lack of accountability for results linked to the budget process. This becomes an obvious problem particularly when government priorities change significantly, or when significant new public policy challenges emerge. Increasing the responsiveness of the budgetary allocation of resources to government priorities has, therefore, been an express objective of some performance budgeting systems.
AGGREGATE EXPENDITURE IMPACTS
As usual, different countries have their different own aggregate expenditure objective which it will affect their own country in different ways. The objective of the aggregate expenditure is important to determine the growth and development in a country for a year. The expenditures that spend out by the government are to prepare or ready the facilities to their public.
For example, the strategy of budget in Malaysia during 2002 is to maintain the momentum of economic growth, increase the competitive between private sector, various different sources of plantation and to make sure the allocate of fortunes are more balancing. Therefore, they reduced the individual tax rate, eliminated taxes limit on the bonus given and reduced or eliminated duty import on certain chosen goods that had helped in increasing the utilization and also the aggregate demand.
Whether the increase in expenditures is conducive to economic growth, international academic debate has been a hot topic kitchen. Especially in developing countries, public spending and GDP, an average of 26% / Division in the past 15 years increased by about 8 percentage points. But at the same time, the various levels of economic growth in developing countries and the growth rate is very different. This makes the financial expenditure and economic growth around the relationship between the debates even more intense. One view is that public spending is often low productivity, government spending for the facility and the formation of high taxes and spending and the private sector will cause great negative impact on investment, therefore, must reduce government spending in order to ensure economic growth. Another point of view, public spending growth in the economy play an important role in economic development because it offers a number of public goods with external effects and other public benefits or services to encourage and facilitate private investment. Then we state whether government spending can promote economic growth, expenditure on economic growth will ultimately what impact.
IMPACTS ON PRODUCTIVE EFFICIENCY AND PROGRAM EFFECTIVENESS
The Government took a number of measures to get better existing procedures and systems, introduced office automation and information technology to reinforce information and service delivery, and superior the ability of area administration. Those measurements are for the purpose to improve the quality of service offered by public sector agencies to clients at the "service" counter. The Government realizes that the values and ethics are critical for the provision of "quality" service so the Government launched a number of programs to instill pleasing values, such as honesty, discipline, integrity, dedication, accountability, trustworthiness and efficiency among the public servants.
(i) Improved productivity and delivery of services
In the early years, the government decides to expand the range of goods and services. The government offer to the people through institution building, resulting in the expansion of the civil service to take on the responsibility for development. The main purpose to expand the goods and services are in order to promote organizational efficiency and effectiveness towards achieving national developmental goals. Thus, it will directly increase the reputation of the government and the popular feelings.
(ii) Office automation and information systems technology
Government to the Internet, enterprises to be effective, agencies and office automation has become an inevitable trend of modern management of enterprises. In the current government agencies and enterprises to vigorously reform the external environment, office automation, government agencies or enterprises to improve the work efficiency of various departments to improve scientific decision-making, accuracy and improve the comprehensive competitiveness of both management and has a very important significance. Build a corporate intranet, office automation, and information for many leading department in charge of the main work
Office automation and computerization of the public sector has been expanding at an increasing rate over the years. The use of equipment for expediting work processes, enhancing the quality of output and the upgrading of the comfort and safety of personnel are actively promoted. Text processing machines, reprographic equipment, communication equipment and audio-visual equipment are examples of the kinds of automation introduced in the public sector to enhance administrative efficiency and effectiveness.
(iii) Measuring efficiency and effectiveness
The Government set up performance measurement at the organizational and individual levels to make sure that the curriculum and activities are implementing efficiently and effectively with set purposes. A manual entitled "Guidelines for establishing performance indicators in government agencies" was issued in 1993. This manual objective is to help agencies in implementing performance measurement. The performance indicators were incorporated into the agency's annual budget estimates, annual reports and other feedback to the Government. With the measurement, how well the organization is doing and what it needs to increase to become effectiveness and efficiency.
As we can see that most of the country now applies the implementation performance budgeting system in their country now. Most of them comes from develop and developing countries. Although they have choose to used performance budgeting which requires them to emphasis more on management and to give more results in using the public services money, they are still facing the problem of lack of professionals in handling such cases. They still face failure in implementing this features but it has shown that it have give more improvement in compare to the old system that they used to used in managing the public services back to the citizen. Citizen nowadays can put on more hopes on the government as they are more accountable for their responsibilities now.
Different countries use different Performance Budgeting. A Summary from the point above is in the United States they uses cost cutting and save budget. Enhance performance accountability by eliminating wasteful spending and achieving better programs results through an extensive performance review is the NPR's goal.
In Taiwan they implement two distinct aspects. First is executive leadership and second is project management process. They will give each ministries they responsibilities and then they will evaluate them by the end of the year. They will see that if every ministry follows the objective given to them.
In china they are very much the same like in Taiwan, they implement an evaluation report is prepared by the Performance Evaluation Division and delivered to agencies and individual officials. The book also includes expert opinions from central Ministry of Finance, the local congress, and the Guangdong finance, audit, and supervision departments to demonstrate the broad behind the reform initiative. They both implement the same style of performance budgeting.
In Malaysia, we implement PBB based on four major elements which consist of identify the objective, program or activity, performance measurement, and program evaluation. In the end of the time we also do comparison with the actual and expected expenditure. This means the input and output of the source of information.
As we can see that our government put quite a lot of effort in making the measurement better b getting better existing procedures and system, introducing office automation and information technology to reinforce information and service delivery and etc. Our government of Malaysia now is improving a lot compare to last time, last time we use the traditional budgeting system to programs and performance budgetary system and now have improve to modified budgetary system. This have shown that our government is giving much more accountability to citizen and the performance budgetary system is one of the most effective and efficient way to bring out a better country performance.
In conclusion, we can conclude that budgeting system has been place for quite a while ago but we still face problems of making it favourable to all parties. The problems are for example: officials that are responsible might resist relinquishing control over line-item expenditures. Performance data are more likely to be ignored where it is used as an "overlay" rather than replacement for line-item data. The choices of choosing the right data is also a challenge for manage to use the information to make decision. The data that come out might not be reliable and contains wrong information.
Responsible parties must give more attention to the data being manipulated. So that in future managers can used the data without any constraint and the decision make can help improve the countries development. This does not mean that the country is in bad condition now, as we can see that we are a developing country and there are still room to improvement in our countries. Compare to last time, Malaysia have already been a more advance country and hope that all agencies in the country can start accepting the performance system to help improve the performance of the country.