Budget as a Tool of Administration

Budget as a Tool of Administration:

While justifying fully the need to use a budget and budgeting as a tool of administration, P. M. Harold Smith observes that this objective can be achieved only when sound budgeting is undertaken, and sound budgeting is one which is based upon the principles of budgeting. He discusses eight principles that can ensure the role of the budget as a tool of administration.

(1) Budgeting under the control and supervision of the Chief Executive- A Budget being the programme of the chief executive goes hand in hand with programmes and consequently must be under the direct supervision of the chief executive.

(2) A Budget based on Correct Estimates- The Budgetary processes like the preparation of estimates, legislative action, and budget execution must be based on full financial and operating reports coming from all levels of the administration. “Budgeting without such reporting is blind and arbitrary.”

(3) Executive responsibility towards the implementation of the Budget should be ensured- Appropriation is not just a mandate to spend. The chief executive, therefore, must see that the departmental programmes fulfill the intent of the legislature and economy is observed in the execution of the programme.

(4) Budgeting with the help of financial experts- The Budgetary responsibilities of the chief executive require him to be endowed with certain administrative tools. For instance, he must have an adequately equipped budget office attached to him. He must have the authority to earmark monthly or quarterly allotments or appropriations.

(5) Multiple Procedures- Though all governmental operations are reflected in the budget, the method of budgeting may vary according to the nature of operations. Therefore, the budgeting of quasi-commercial activities may be different from that of purely administrative activities.

(6) Scope for Some Executive Discretion- Appropriation should be made for broadly defined functions of the department. The chief executive should be allowed thereby sufficient discretion to choose the means of operation to realize the main purpose.

(7) Scope for some flexibility- A Budget should have some provision to accommodate necessary changes in the light of the changing economic situation.

(8) Budgeting as a two-way process- It is of paramount importance to remember that efficient budgeting depends upon the active cooperation of all departments and their sub-divisions. There must be in each agency a budget office that functions in that agency in the same way as the government-wise budget offices. The budgeting and programming work of the agency must be interrelated under the direct responsibility of the head. The established budget officer assists his superior in administrative control of the sub-divisions of the particular agency; he also transmits the agency’s views and proposals to the central budget bureau. Budgeting is not only a certain function but a process that should permeate the entire administrative traffic between the central office and the agency office responsible for budgeting, and programming should move on a two-way rather than a one-way street.

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