Planning Programming Budgeting System (PPB)

As we had learned in our class of Administration of Financial Resources (PAD 343.02) budget can be understood as a collection of documents that describes what had been accomplished as a result of expenditure, it also describes the current situation of a government with respect to revenues and previews expenditure, and it is used for submission from the Executive branch to the Legislative branch for appropriation or approval. In other words, a budget is a “systematic plan which indicates where the money will come from, how much will be spent, and what it will be spent for. A budget is a fiscal plan for a given period of time.” and I have to add to this that there is a variety of budget formats. Even though this is a very complex explanation

of what is budget, professor Alaoui had taught us that budget is very complicated, it is not easy. In this research paper, I will be using chapter seven of our book, other sources, and all the knowledge I had got in this class to analyze different budget formats and their advantages and disadvantages.
Budget formats are the different types of budgets, which influence how a budget works, this includes the different types of budget decisions and budget outcomes. In class, when we got to chapter seven of our book we learned about the different budget formats which include Line- item budgeting, Baseline budgeting, Fixed-Ceiling budgeting, Open-Ended budgeting, Performance budgeting, Planning-Programing budgeting and Zero-Base budgeting. Professor Alaoui taught us that when they get implement each one of them has advantages and disadvantages. I felt curiosity for four of these budge format and I decided to analyze in details more information on them and the advantages and disadvantages of Line-item budgeting, Program budgeting, Performance budgeting and Zero-base budgeting.
In the United States, the first budgetary format used was called Lump Sum budgeting. This was “a technique which allocates money directly to an agency without compelling that agency to construct an itemized presentation of how the money is to be spent” As you can see this was a format of budgeting that was basically providing money to agencies, without knowing how these agencies were going to use that money. By using this format of budgeting the public funds were susceptible to misuse because the government didn’t really know how this money was being spent. After authorities, realizing this issue, they decided to improve this format of budgeting by implementing Line-item budgeting.
In Line-item budgeting “expenditures are itemized on a line-by-line basis. (Line items are detailed enumerations of everything for which money is spent, examples of this are employee salaries, paper, typewriters, paper clips). As you can see Line-item budgeting is very different than Lump Sum budgeting because it allows the government to see in detail all the expenditure of the agencies. Besides listing all the expenditure, “utilizes standardized classifications which allow officials to categorize these expenditures, according to some general personal or physical characteristics, examples of this are personnel services, contractual services, and commodities and supplies.” In other words, this format of budgeting provides a narrow in details the money that has been expended in objects and the used of these objects in each agency of the government.
The Line-item budgeting advantages are very clear. This budget format is very useful to keep a record of the expenditures and the criteria against which audits could measure compliance. Also, it increases government’s control over the budget, because it provides a clear understanding of how the money is being used. This is very specific on where the money comes from and where it will go. Furthermore, there are also disadvantages in this format of budgeting. The one we learned in class is that Line-item budgeting doesn't give information on how well the money had been spent. Also, this budget format puts down the discretion of the administration of the agencies because the budgeting and accounting tasks are being complicated. The administration of the agencies only can allocate funds in the assigned category, meaning that they are prevented to transfer funds to other categories and this is a disadvantage because it prevents them to allocate the funds in an effectively and efficiently way. It also prevents long-term of planning, due to the concentration of current agencies operations. As you can see this wide-used format of budgeting Line-item budgeting has great advantages, but there are some disadvantages as well.
Planning Programming Budgeting System (PPB or PPBS) was introduced by Robert McNamara, the Secretary of Defense in the Kennedy’s Administration.

This is the budget format “that allows authorities to engage in long-term planning and to determine program effectiveness and efficiency.” As you can see this format of budgeting provides what the Line-item format is missing. The way it works is by “relying on developing functional categories, for example, programs, in order to determinate the total cost of a program. In class, we learned that this format of budget allocates programs, which means that it rationalize programs by planning goals and objectives, developing programs to achieve these goals and budgeting for projects within each program. In other words, the government has to “analyze agency activities and functions according to stated objectives, then they go up all related activities and functions under a single structure and finally, they develop cost and output information for each program so that the expected impacts of various programs can be ascertained.” This format of budgeting has advantages and disadvantages as

well.
The advantages of Planning Programming Budgeting System (PPB or PPBS) is that “the utilization of functional categories prevents program costs from being buried in a maze of line items which are grouped not according to function, but according to standardized nonfunctional classifications. Instead of containing line-item cost, a program budget cuts across agency and item lines to determinate the entire cost of a program.” In other words, this is a way to provide agencies with efficiency and effectiveness because the amount of money provided will be for the total cost of a program and it will be used for what is needed. There is a disadvantage in Planning Programming Budgeting System (PPB or PPBS) as well, which is that “it reduces the authorities’ discretion over itemized expenditures.” In class we learned that this format of budgeting was allowed to die quietly, I think it is because the government still don’t trust in agencies without a list of a report of each part of their expenditure.
Performance budgeting is “an attempt to determine precisely the extent to which a program is achieving its objectives.” This is considered very similar to program budgeting because both formats of budgeting examine the total cost of a program. The difference between those two is that performance budgeting “ uses precise measures to ascertain whether, and to what extent, each program objective is being achieved.” In class, we learned that when the government uses this budget format, they should be able to tell the public how much public service was delivered for x amount of money. Also, professor Alaoui, mention that an example of this is trash collection, which focuses more on efficiency analysis.
There are many advantages in Performance budgeting format.

It allows the authorities to “see exactly how their tax money is being spent, what priorities are being set, and whether and to what extent programs are delivering services.” This allows authorities to make a better judgment about quality and quantitative of the services provided. Furthermore, there are disadvantages as we learned in class this format of budgeting has not been widely adopted. “Implementing it is expensive and requires authorities to make difficult decisions among alternatives program” When I mentioned "expensive", it includes a great amount of time as well, and as we all know there is no time to lose in budgeting, time is considered gold. Another disadvantage of this format of budgeting is that “it decreases an authority’s control over the budget because it makes agency heads, not the governing authorities, accountable for the success (or failure) of a program” As I mentioned before this is a proof that anything that the government can’t control in the fulness, won't be

adopted.
The last budget format I will be analyzing and discussing its advantages and disadvantages is Zero-based budgeting. “It allows authorities to determine not only if a program is achieving its objectives, but also whether it is achieving enough of its objectives to justify continued fiscal support.” The way it works is by preparing and ranking decisions packages. Decisions packages describe all the various ways a specific function can be operated. There are three steps these decision packages have to follow which are: “First, all agencies objectives specified in measurable terms, second, programs designed to meet such objectives, and third, computed costs of implementing and or operating those programs are assembled and assigned a priority, usually by comparing performance costs.” In other words, first all currently proposed programs have to be described and reviewed in these documents call decision packages, then, these programs are ranked trough they cost and benefits and finally, resources are allocated for this programs by ranking.
There are advantages and disadvantages in Zero-based budgeting format as well than the others. In class, we learned that one advantage of this program is that this “is useful to flag programs that need close attention for resource allocation.” Also, the idea behind it which is that “budgetary cost estimates should be based on the amount of money needed to deliver a service rather than on incremental increases in past program costs.” This is an advantage in a situation where there is debt and you are trying no to increased costs of any program. Furthermore, the disadvantages include “budgets are never developed independently of pass programs” this is bad because by looking to pass programs is the main way you can improve what had done incorrectly. Also, “ Objectives usually are set so they can be met easily thus justifying the continued need for a program” This implies a lot of work, that basically had been done in previous years. Finally, “an inordinate amount of time and energy is consumed in preparing a zero-based budget.” Any budget that required a long amount of time to be ready is in disadvantages, as I mentioned before.
As you can see each one of these four formats of budgeting is unique in their own way. Also, each one of them has many advantages and disadvantages, therefore they should be implemented depending on the situation.