Government Budget

Government budget is a financial plan embodying an estimate of proposed expenditure for a given period usually a year and proposed means of financing them. Budget is a statement on how government plans to obtain income and the manner to spend such income in a particular financial year. In essence, it is through the budget that the government forecast and plans its revenue and expenditure for the coming year.

For proper financial management, it is necessary that the budget is comprehensively prepared and ready for execution before the commencement of the financial year. Budget is usually prepared on the basis of sector, subsector, heads and subheads. There are two aspects of budget frame work, the recurrent aspect and the capital aspect.

The recurrent aspect: this includes recurrent revenue and recurrent expenditure. This aspect consists of items for the smooth running of government and of consumption. The items in these aspects are, salaries, buying of stationery, and maintenance of infrastructures.

The capital aspect: this aspect shows capital revenue and capital expenditure.

Budget is the most important decision making process in public institution and serves as a method of control by limiting the resources to be used by a government  department, and by establishing standards against which actual performance are measured and compared. Specifically budget provides the legal authority for incurring expenditure and revenue and establishes the financial position for the federal state and local government.

Categories of Budget

Budgets are categorized into three types, the balanced budget, surplus budget and deficit budget. A balance budget is where the projected revenue and expected expenditure are presumed equal. A balanced budget portrays thrift and astuteness in public financial management. Surplus budget is where there is presumed excess revenue projection over estimated expenditure. Deficit budget is termed deficit if the expenditure outweighs the revenue projection.

Characteristics of Budget

  • It is stated in numerical terms.
  • It covers specific time period usually a years.
  • It shows managerial commitments as managers agree to utilize resources as allocated.
  • It is approved in advance by higher authorities.
  • It can be altered only under previously agreed circumstances.
  • It usually a political instrument that allocates scarce resources among social and economic needs of the nation.
  • It is an administrative or managerial instrument that specifies the ways and means of providing programmes and services.
  • Budget establishes the cost of programmers and criteria by which these programmes are evaluated for efficiency and effectiveness.
  • Budget allows for review or evaluation
  • It is an accounting system that holds government official responsible for the expenditure of funds with which they have been entrusted.

Objectives of Government Budget

  • To provide financial plan of action for the government.
  • To give legal authority for incurring expenditure and generating revenue.
  • To provide reference point for decision and policy making process.
  • To minimize misappropriation by exerting control over revenue and expenditure.
  • To enable compliance with constitutional provision on budgeting and financial control.

Problems of Government Budgeting in Nigeria

  • Over estimation of figures:  most government department and ministries over estimate their budget particularly on area of expenditure. This is usually done for corrupt and selfish reasons. Sometimes, expected incomes are over stated. This is usually in an attempt to create an impression of good performance in the area of revenue generation for the government.
  • Problems of getting adequate and reliable data:  a budget is a financial plan which relies heavily on data. In Nigeria, getting adequate and reliable data for budget preparation is problematic. This is as a result of historical base, financial resources and the technical equipment used for data collection and processing.
  • Conscious errors arising from corrupt tendencies: there are cases where the actual or original figures in the published project documents differ from those approved by the legislature and accepted by the president or the governor. Some figures are increased while others are reduced contrary to what is appropriated for the particular items. This is done to satisfy secret clients who lobbied for higher appropriation; such errors are not usually noticed before the execution of the budget.

Suggested Posts: