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- Understand the rationale behind the 2024 updates to the Uniform Guidance outlined in 2 CFR 200, and their implications for federal grant recipients.
- Identify the key changes and revisions introduced by the Office of Management and Budget (OMB) in the 2024 edition of 2 CFR 200.
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Our free classes cover fundamental concepts in robotics, coding, and engineering, providing students with a strong foundation in these critical areas. Through our interactive workshops, students can dive deeper into specific topics, working on projects that challenge them to apply what they've learned and think creatively. Our summer camps offer an immersive experience where students can collaborate on larger projects, develop their teamwork skills, and gain confidence in their abilities.
In addition to our local programs, Up the Ratios is committed to making a global impact. We take donations of new and gently used robotics parts, which we then distribute to students and educational institutions in other countries. These donations help ensure that young learners worldwide have the resources they need to explore and excel in STEM fields. By supporting education in this way, we aim to nurture a global community of future leaders and innovators.
Our live lectures feature guest speakers from various STEM disciplines, including engineers, scientists, and industry professionals who share their knowledge and experiences with our students. These lectures provide valuable insights into potential career paths and inspire students to pursue their passions in STEM.
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PNRR MADRID GREENTECH FOR BROWN NETWORKS NETWORKS MUR_MUSA_TEBALDI.pdf
Approaches and techniques in budgeting
1. APPROACHES ANDAPPROACHES AND
TECHNIQUES IN BUDGETING:TECHNIQUES IN BUDGETING:
THE PHILIPPINETHE PHILIPPINE
EXPERIENCEEXPERIENCE
Public FiscalPublic Fiscal
administrationadministration
JoHnnY a. GErardo, ll.b, mPaJoHnnY a. GErardo, ll.b, mPa
2. INTRODUCTIONINTRODUCTION
ORIENTATION IN BUDGETINGORIENTATION IN BUDGETING
a. Control Orientationa. Control Orientation
b. Management Orientationb. Management Orientation
c. Planning Orientationc. Planning Orientation
LINE-ITEM BUDGETINGLINE-ITEM BUDGETING
PERFORMANCE BUDGETINGPERFORMANCE BUDGETING
a.a. ComponentsComponents
1.1. Functional and Activity ClassificationsFunctional and Activity Classifications
2. Performance Measurements2. Performance Measurements
3. Performance Reports3. Performance Reports
3. b.b. Attitude Towards Performance BudgetAttitude Towards Performance Budget
c. Philippine Experience in Performancec. Philippine Experience in Performance
Budgeting ProblemBudgeting Problem
1. Lack or Absence of Performance Measures1. Lack or Absence of Performance Measures
2. Problems on Personnel2. Problems on Personnel
3. Organization3. Organization
4. Legislative4. Legislative
PLANNING, PROGRAMMING ANDPLANNING, PROGRAMMING AND
BUDGETING SYSTEMBUDGETING SYSTEM
a History and Developmenta History and Development
b. Specific Featuresb. Specific Features
c. PPBS: The Philippine. Experiencec. PPBS: The Philippine. Experience
d. An Assessment of PPBSd. An Assessment of PPBS
4. ZERO-BASE BUDGETINGZERO-BASE BUDGETING
a. Introduction and definitiona. Introduction and definition
b. Features and Objectivesb. Features and Objectives
c. Basic ZBB Termsc. Basic ZBB Terms
d. The ZBB Processd. The ZBB Process
e. ZBB in the Philippinese. ZBB in the Philippines
f. An Appraisal of ZBBf. An Appraisal of ZBB
CONCLUSIONCONCLUSION
5. INTRODUCTIONINTRODUCTION
American-introduced, American-American-introduced, American-
installed, and for a while Americaninstalled, and for a while American
supervisedsupervised
American influence in local fiscalAmerican influence in local fiscal
administration is most apparent in theadministration is most apparent in the
area of budgetingarea of budgeting
American themselves set-up theAmerican themselves set-up the
administrative system in the Philippinesadministrative system in the Philippines
when the latter was still a colony of thewhen the latter was still a colony of the
United States.United States.
This system was largely unchangedThis system was largely unchanged
even after the granting of theeven after the granting of the
independence and our transition fromindependence and our transition from
the various regimes to the presentthe various regimes to the present
Republic.Republic.
back
6. ORIENTATION INORIENTATION IN
BUDGETINGBUDGETING
The stages in the evolution ofThe stages in the evolution of
the United States’ federalthe United States’ federal
government budget aregovernment budget are
characterized, according tocharacterized, according to
Allen Schick, by three majorAllen Schick, by three major
orientation: control,orientation: control,
management and planning.management and planning.
back
7. CONTROLCONTROL
ORIENTATIONORIENTATION
It is the process of enforcingIt is the process of enforcing
limitations and conditions setlimitations and conditions set
in the budget and inin the budget and in
appropriations, and ofappropriations, and of
securing compliance with thesecuring compliance with the
spending restrictions imposedspending restrictions imposed
by central authorities.by central authorities.
back
8. ManagementManagement
OrientationOrientation
It involves the use ofIt involves the use of
budgetary authority at bothbudgetary authority at both
agency and central levels toagency and central levels to
ensure the efficient use ofensure the efficient use of
staff and other budgeting, thestaff and other budgeting, the
focus is on agency activitiesfocus is on agency activities
back
9. PLANNING ORIENTATIONPLANNING ORIENTATION
It is the process of determiningIt is the process of determining
public objectives and the evaluationpublic objectives and the evaluation
of alternative programs. To use theof alternative programs. To use the
budget for planning, centralbudget for planning, central
authorities must have informationauthorities must have information
concerning the purposes andconcerning the purposes and
effectiveness of programs. They musteffectiveness of programs. They must
also be informed of multi-yearalso be informed of multi-year
spending plans and of the linkagespending plans and of the linkage
between planning, spending, andbetween planning, spending, and
10. Three Important developmentsThree Important developments influencedinfluenced
the evolution from a management to athe evolution from a management to a
planning orientation (Schick)planning orientation (Schick)
Economic analysis- the emergence of macroEconomic analysis- the emergence of macro
and micro analysis has had an increasingand micro analysis has had an increasing
part in the shaping of fiscal and budgetarypart in the shaping of fiscal and budgetary
policy;policy;
The development of new information andThe development of new information and
decision technologies has enlarged thedecision technologies has enlarged the
applicability of objective analysis toapplicability of objective analysis to
policymaking; andpolicymaking; and
There has been a gradual convergence ofThere has been a gradual convergence of
planning and budgetary processes.planning and budgetary processes.
11. CharacteristicsCharacteristics ControlControl ManagementsManagements PlanningPlanning
Personnel SkillPersonnel Skill Accounting objectsAccounting objects AdministrationAdministration EconomicsEconomics
Information focusInformation focus ExecutionExecution ActivitiesActivities PurposesPurposes
Key budget stage (central)Key budget stage (central) DiscreteDiscrete Preparation Discrete/Preparation Discrete/
ActivitiesActivities
PreparationPreparation
Breath of measurementBreath of measurement FiduciaryFiduciary EfficiencyEfficiency ComprehensiveComprehensive
Role of Budget agencyRole of Budget agency Upward aggregativeUpward aggregative Upward aggregativeUpward aggregative Policy DownwardPolicy Downward
disaggregatedisaggregate
Decisional-flowDecisional-flow IncrementalIncremental IncrementalIncremental TeleticTeletic
Type of Choice ControlType of Choice Control
ResponsibilityResponsibility
CentralCentral OperatingOperating OperatingOperating
Management ResponsibilityManagement Responsibility DispersedDispersed CentralCentral SupervisorySupervisory
Planning ResponsibilityPlanning Responsibility DispersedDispersed DispersedDispersed CentralCentral
Budget-AppropriationsBudget-Appropriations
classificationsclassifications
SameSame SameSame DifferentDifferent
Appropriations-organizationalAppropriations-organizational
linklink
DirectDirect DirectDirect CrosswalkCrosswalk
12. LINE-ITEM BUDGETLINE-ITEM BUDGET
APPROACHAPPROACH
Gives emphasis on listing of objects for itemizedGives emphasis on listing of objects for itemized
expenditures-supplies, personnel, equipment-expenditures-supplies, personnel, equipment-
without much regard for the purposes ofwithout much regard for the purposes of
programs for which such items are proposed.programs for which such items are proposed.
Also called “Item of Expenditure Approach”Also called “Item of Expenditure Approach”
Manifestation of process budgetary, “incremental,Manifestation of process budgetary, “incremental,
fragmented, non-programmatic and sequential.fragmented, non-programmatic and sequential.
Little explicit consideration of objectives andLittle explicit consideration of objectives and
policies and almost no search for alternatives.policies and almost no search for alternatives.
13. According to Robert Golembiewski,According to Robert Golembiewski,
(Percolate-up characteristics)(Percolate-up characteristics)
It is the chief executive issues a call for estimatesIt is the chief executive issues a call for estimates
which are generated from belowwhich are generated from below
Line item is the product of many “factorings”Line item is the product of many “factorings”
beginning at low organization levels whose requestsbeginning at low organization levels whose requests
were aggregated and perhaps trimmed as they rosewere aggregated and perhaps trimmed as they rose
through an hierarchy.through an hierarchy.
Lessens the top executive’s control over planningLessens the top executive’s control over planning
and programmingand programming
Fait accompli, by the time it reaches the topFait accompli, by the time it reaches the top
executive.executive.
Adopted through the enactment of CommonwealthAdopted through the enactment of Commonwealth
Act No. 2546, --Budget Act of 1937.Act No. 2546, --Budget Act of 1937.
14. Advantages of Line-Item budgetAdvantages of Line-Item budget
approach (Schick)approach (Schick)
It enables central authorities to control inputs; that is, toIt enables central authorities to control inputs; that is, to
control the cost of inputs before the expenditure is made orcontrol the cost of inputs before the expenditure is made or
obligated.obligated.
It provides external control by legislators and centralIt provides external control by legislators and central
monitors who are not beholden to a particular agency.monitors who are not beholden to a particular agency.
Line-item control is especially effective for salaries andLine-item control is especially effective for salaries and
purchases, which together account for the bulk of statepurchases, which together account for the bulk of state
government spending, perhaps 90 percent or more in somegovernment spending, perhaps 90 percent or more in some
instances.instances.
Control is uniform.Control is uniform.
Control is comprehensive.Control is comprehensive.
Control is exact.Control is exact.
15. There are multiple opportunities toThere are multiple opportunities to
control.control.
Both aggregate and detailed controlBoth aggregate and detailed control
are promoted.are promoted.
Line-item controls establish the basisLine-item controls establish the basis
for budget cutting.for budget cutting.
16. Why do agencies, despite frequent
disclaimers, prefer the line-item budget even with
the introduction of the performance budgeting type
in the 1950’s?
Line item budgeting gives agencies plenty of
opportunities to manipulate the facts to their
advantage and considerable leeway in estimating
the projected benefits of proposed activities.
Agencies are able to express their subjective
interpretation of anticipated benefits without being
encumbered by analytical instruments. Nor are they
required to weigh in a systematic and uniform
manner the cost effectiveness of their proposals.
Budgeting by object obtains “the best care” for the
agency.
17. Philippine Experience of line-
item budget
During the legislation or authorization
phase of the line-item budget, the
legislature wielded so much influence
on agencies of their choice.
Through the line-item budget, the
lawmakers were able to pinpoint
“objects of future choice” especially
those referring to new positions.
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18. PERFORMANCE
BUDGETING
Known as “activity” or “functional”
budgeting, the Hoover
Commission succeeded in creating
a feeling of novelty and excitement
for the post-war generation of
public administrators.
The objects of expenditures are
deemed as significant factors in
relation to what they are used for
and not in relation to their specific
character.
19. Hoover Commission Report to US
Congress in February 1949 explained
the meaning of performance budgeting
“We recommended that the whole budgetary
concepts of the Federal Government should be
refashioned by the adoption of a budget based
upon function, activities, and projects, this we
designate as a performance budget.
“Such an approach would focus attention
upon the general character and relative
importance of the work to be done, or upon the
service to be rendered, rather than upon the
things to be acquired such as personal
services, supplies, equipment, and so on. The
latter objects, are after all, only the means to
an end. The all important thing in budgeting is
the work or service to be accomplished, and
what that work or service will cost.”
20. The salient features of a performance
budget and its basic differences from the
traditional line-item budget are depicted
in this comprehensive definition of the
concept. A performance budget is one
which states:
The short term and long term goals in
the major functional areas for which
funds are requested;
The programmes in each function and
activities or projects in each programme
proposed for the accomplishment of the
goals in the various functional areas;
21. The cost of the programs and activities
or projects proposed;
The qualitative and quantitative data for
the program and activities proposed;
The organization units responsible for
carrying out the programmes;
The sources and amount of all money
receipts and expenditures; and
The units of work measurement which
measure the results of programs,
projects and activities.
22. A performance budget is in
essence a work-plan of the
government which specifies
the concrete proposals to be
established during the
financial year.
These systems serve as a
continuous check on actual
performance in terms of
work as well as of
expenditure against the
approved budget. back
23. COMPONENTSCOMPONENTS
Performance Budget Techniques. LikePerformance Budget Techniques. Like
all other budget approaches,all other budget approaches,
performance budgeting has itsperformance budgeting has its
distinctive methods. While these havedistinctive methods. While these have
not been described comprehensively innot been described comprehensively in
the literature, the main elements can bethe literature, the main elements can be
inferred from the practices ofinferred from the practices of
governments and the proposals ofgovernments and the proposals of
reformers. The common components ofreformers. The common components of
performance budgeting systems are:performance budgeting systems are:
activity classifications, performanceactivity classifications, performanceback
24. FUNCTIONAL andFUNCTIONAL and
ACTIVITYACTIVITY
CLASSIFICATIONSCLASSIFICATIONS
• Performance budgeting places considerablePerformance budgeting places considerable
emphasis on redesigning expenditure accountsemphasis on redesigning expenditure accounts
and grouping expenses into functional and activityand grouping expenses into functional and activity
categories. In performance budgeting technology,categories. In performance budgeting technology,
a function refers to a group related activities fora function refers to a group related activities for
which a governmental unit is responsible.which a governmental unit is responsible.
Functions such as public safety, health, andFunctions such as public safety, health, and
transportation, are divisible into specific groupingstransportation, are divisible into specific groupings
of work and expenditures. Ex. the health activitiesof work and expenditures. Ex. the health activities
of government include food inspection, theof government include food inspection, the
licensing of doctors, and the operation of clinics.licensing of doctors, and the operation of clinics.
back
25. PERFORMANCEPERFORMANCE
MEASUREMENTSMEASUREMENTS
• Measurement is essential to the success ofMeasurement is essential to the success of
performance budgeting. Performance measurementsperformance budgeting. Performance measurements
generally are derivatives of cost accounting andgenerally are derivatives of cost accounting and
scientific management. Adopted from costscientific management. Adopted from cost
accounting are methods of measuring the total oraccounting are methods of measuring the total or
partial cost of each unit of production or service;partial cost of each unit of production or service;
from scientific management, techniques for relatingfrom scientific management, techniques for relating
units of input (such as labor) to quantities of output.units of input (such as labor) to quantities of output.
In its application to government, cost accounting isIn its application to government, cost accounting is
more often used for ascertaining than for controllingmore often used for ascertaining than for controlling
costs.costs.
Scientific management- measures the effortScientific management- measures the effort
Cost accounting- measures the costCost accounting- measures the cost
back
26. PERFORMANCEPERFORMANCE
REPORTSREPORTS
• Reports are a special type of performanceReports are a special type of performance
measurement, a retrospective assessment of whatmeasurement, a retrospective assessment of what
as accomplished with budgeted resources. Theas accomplished with budgeted resources. The
performance report can either be an interim-auditperformance report can either be an interim-audit
or a post-audit of work and costs. It compares theor a post-audit of work and costs. It compares the
actual cost and accomplishment with what wasactual cost and accomplishment with what was
projected in the project. A performance report mayprojected in the project. A performance report may
show deviations thereby prodding managers orshow deviations thereby prodding managers or
budgeters to take corrective actions. A report maybudgeters to take corrective actions. A report may
lead to a reappraisal of performance.lead to a reappraisal of performance.
27. Advantages of the newAdvantages of the new
budgetary system (Hooverbudgetary system (Hoover
Commission)Commission)• It gives more comprehensive and reliableIt gives more comprehensive and reliable
information to the chief executive, theinformation to the chief executive, the
legislative body and the general public onlegislative body and the general public on
the policies of government;the policies of government;
• It helps individual legislators to understand whatIt helps individual legislators to understand what
the government is doing and what the costs are;the government is doing and what the costs are;
• It improves legislative examination ofIt improves legislative examination of
budgetary requirements and enables thebudgetary requirements and enables the
legislative committees to decide more easilylegislative committees to decide more easily
the basic expenditure issues each year;the basic expenditure issues each year;
28. • It makes possible the submission andIt makes possible the submission and
consideration of the budget for a shorterconsideration of the budget for a shorter
length of time;length of time;
• It enables the administration to placeIt enables the administration to place
responsibility upon subordinate officials forresponsibility upon subordinate officials for
the clear execution of the provisions madethe clear execution of the provisions made
by the legislative;by the legislative;
• It permits effective performance in reportingIt permits effective performance in reporting
on budgeting and management.on budgeting and management.
back
29. ATTITUDEATTITUDE TOWARDSTOWARDS
PERFORMANCE BUDGETPERFORMANCE BUDGET
Throughout the performance budget era, thereThroughout the performance budget era, there
as persistent confusion over the meaning ofas persistent confusion over the meaning of
performance budgeting and program: and othersperformance budgeting and program: and others
considered the program budget to be a stepconsidered the program budget to be a step
beyond the performance budget.beyond the performance budget.
Performance budgeting meant the elevation ofPerformance budgeting meant the elevation of
management concerns to central prominence.management concerns to central prominence.
Performance budgeting also meant abandoningPerformance budgeting also meant abandoning
control traditions which the budget examinerscontrol traditions which the budget examiners
had strong interests and over which they servehad strong interests and over which they serve
as guardians.as guardians.
30. Performance budgeting was castigated as tooPerformance budgeting was castigated as too
radical and too complicated, particularly with itsradical and too complicated, particularly with its
over-refinement in details, which could obscureover-refinement in details, which could obscure
the prime purpose of an agency’s program tothe prime purpose of an agency’s program to
the point that budgeting becomes a merethe point that budgeting becomes a mere
exercise in accounting.exercise in accounting.
Expressing faith in common sense in contrast toExpressing faith in common sense in contrast to
scientific budgeting traditional budgeters,scientific budgeting traditional budgeters,
asserted that “budgeting is 90 percent commonasserted that “budgeting is 90 percent common
sense and don’t let anybody tell you anythingsense and don’t let anybody tell you anything
else.”else.”
Never before was the evolution the PhilippineNever before was the evolution the Philippine
budgetary system as colorful and memorable asbudgetary system as colorful and memorable as
with the country’s experience in performancewith the country’s experience in performance
back
31. The PhilippineThe Philippine
Experience inExperience in
Performance BudgetingPerformance Budgeting
Cognizant of the lag in the development of publicCognizant of the lag in the development of public
fiscal management in the field of budgeting in thefiscal management in the field of budgeting in the
early 1950’s.early 1950’s.
The budget, accounting and auditingThe budget, accounting and auditing
modernization project was launched in July 1954modernization project was launched in July 1954
in collaboration of US management.in collaboration of US management.
Like other reform projects implemented under theLike other reform projects implemented under the
broad US technical assistance program in thebroad US technical assistance program in the
Philippines, budgetary improvements representedPhilippines, budgetary improvements represented
an attempt to initiate requisite changes in an areaan attempt to initiate requisite changes in an area
relatively neglected in the past.relatively neglected in the past.
32. However, it differed from other program in that inHowever, it differed from other program in that in
involved a technique that was untested in otherinvolved a technique that was untested in other
jurisdictions: performance budgeting.jurisdictions: performance budgeting.
The performance budgeting introduced in theThe performance budgeting introduced in the
Philippines as part of the package of reformsPhilippines as part of the package of reforms
during the incumbency of late Presidentduring the incumbency of late President
Magsaysay by the Economic Survey MissionMagsaysay by the Economic Survey Mission
headed by Daniel Bell in 1950.headed by Daniel Bell in 1950.
The purpose of the reforms, including theThe purpose of the reforms, including the
modernization of fiscal administration, was to helpmodernization of fiscal administration, was to help
the government cope with severe social, economic,the government cope with severe social, economic,
and political problems.and political problems.
33. The passage of R.A. No. 992 or the Revised BudgetThe passage of R.A. No. 992 or the Revised Budget
Act on June 4, 1954, formally launched theAct on June 4, 1954, formally launched the
establishment of performance budgeting in theestablishment of performance budgeting in the
Philippines. This act required that the wholePhilippines. This act required that the whole
budgetary concept be based on the triad of functions,budgetary concept be based on the triad of functions,
projects, and activities defined in terms of expectedprojects, and activities defined in terms of expected
results.results.
For the part of executive agencies, they pointed outFor the part of executive agencies, they pointed out
two factors which they believed made performancetwo factors which they believed made performance
budgeting unsuccessful: indifference in the executionbudgeting unsuccessful: indifference in the execution
of programs, and lack of understanding on the part ofof programs, and lack of understanding on the part of
key operating officials.key operating officials.
back
34. LACK or ABSENCE ofLACK or ABSENCE of
PERFORMANCEPERFORMANCE
MEASUREMENTSMEASUREMENTS
Units of work measurement characterizeUnits of work measurement characterize
performance budgeting. While line-itemperformance budgeting. While line-item
budgeting merely lists the items ofbudgeting merely lists the items of
expenditures, performance budgeting isexpenditures, performance budgeting is
based on programs, projects and activities.based on programs, projects and activities.
The formulation of precise and accurateThe formulation of precise and accurate
units of work measurement is the mostunits of work measurement is the most
critical problem.critical problem.
35. The DBM has been in an endless search forThe DBM has been in an endless search for
exact work measurement units on which toexact work measurement units on which to
base the financial requirements ofbase the financial requirements of
governmental agencies. The unit of workgovernmental agencies. The unit of work
measurement is the very essence ofmeasurement is the very essence of
performance budgeting as it measures theperformance budgeting as it measures the
results of agency programs and activities.results of agency programs and activities.
The attainment of accurate workThe attainment of accurate work
measurement units depends largely on ameasurement units depends largely on a
common understanding and frameworkcommon understanding and framework
between the central budget agency and thebetween the central budget agency and the
operating agencies.operating agencies. back
36. PERSONNELPERSONNEL
Performance budgeting is hamperedPerformance budgeting is hampered
by the lack or absence of personnelby the lack or absence of personnel
processing necessary technical skillsprocessing necessary technical skills
and competencies such as managementand competencies such as management
and cost accounting. The responsibilityand cost accounting. The responsibility
for preparing the budget shifts fromfor preparing the budget shifts from
the accountants to the manager whothe accountants to the manager who
has to express his agency’s plans inhas to express his agency’s plans in
terms of programs and projects.terms of programs and projects.
back
37. ORGANIZATIONORGANIZATION
Performance budgeting demanded no less than aPerformance budgeting demanded no less than a
restructuring of the government’s organizationalrestructuring of the government’s organizational
system.system.
Out of 50 plans presented in the Congress inOut of 50 plans presented in the Congress in
1955, only one was approved and out of 53 plans1955, only one was approved and out of 53 plans
in 1956, 20 were rejected.in 1956, 20 were rejected.
For those plans which were passed into law,For those plans which were passed into law,
complicated problems led to an overweight,complicated problems led to an overweight,
overstaffed, and sufficient bureaucracy.overstaffed, and sufficient bureaucracy.
Such frustrations in streamlining theSuch frustrations in streamlining the
government’s organizational structure impededgovernment’s organizational structure impeded
the success of performance budgeting whichthe success of performance budgeting which
requires logical, rational, and efficientrequires logical, rational, and efficient
organizational structure.organizational structure. back
38. LEGISLATIVELEGISLATIVE
Lack of congressional support added to theLack of congressional support added to the
unsuccessful implementation of performanceunsuccessful implementation of performance
budgeting. Initial support leading to R.A. No.budgeting. Initial support leading to R.A. No.
992 eventually changed to downright hostility on992 eventually changed to downright hostility on
the part of the Congress.the part of the Congress.
A leading authority on Philippine budgeting,A leading authority on Philippine budgeting,
remarked that “the most depressing reason forremarked that “the most depressing reason for
the present superficial adoption of performancethe present superficial adoption of performance
budgeting in the government is the completebudgeting in the government is the complete
reversal of Congress with respect to performancereversal of Congress with respect to performance
budgeting.”budgeting.”
back
40. HISTORY andHISTORY and
DEVELOPMENTDEVELOPMENT
It was originally developed by theIt was originally developed by the
Rand Corporation in Sta. Monica,Rand Corporation in Sta. Monica,
California, for use by the US Air force.California, for use by the US Air force.
PPBS was adopted in 1961 by thePPBS was adopted in 1961 by the
Defense Secretary MacNamara for hisDefense Secretary MacNamara for his
department’s operations.department’s operations.
President Johnson issued an executivePresident Johnson issued an executive
order on August 1965 instructing allorder on August 1965 instructing all
executive departments to adopt PPBS:executive departments to adopt PPBS:
thus making this system the decision-thus making this system the decision-
41. PPBS is a result of three distinct but closelyPPBS is a result of three distinct but closely
related current thoughts in budget-making:related current thoughts in budget-making:
economic planning, efficiency ineconomic planning, efficiency in
government, and management of nationalgovernment, and management of national
economies to control cyclical fluctuationseconomies to control cyclical fluctuations ..
PPBS also offers an answer to the classicalPPBS also offers an answer to the classical
question: how does the government allocatequestion: how does the government allocate
resources appropriately and rationallyresources appropriately and rationally
without resorting to a hit-and-misswithout resorting to a hit-and-miss
procedure? PPBS respond to the question byprocedure? PPBS respond to the question by
eclectically corporating in the system threeeclectically corporating in the system three
distinct administrative processes, namely:distinct administrative processes, namely:
strategic planning, management control, andstrategic planning, management control, and
operational control.operational control.
42. PPBS aims to specify (andPPBS aims to specify (and
where possible to quantify) thewhere possible to quantify) the
objectives or “output” ofobjectives or “output” of
government's spending programsgovernment's spending programs
and then to minimize the costs.and then to minimize the costs.
To do so requires the systematicTo do so requires the systematic
use of analysis in connectionuse of analysis in connection
with budget formulation,with budget formulation,
planning, program developmentplanning, program development
and evaluation.and evaluation.
43. Smithies defines the purpose : a. toSmithies defines the purpose : a. to
improve the basis for major programimprove the basis for major program
decisions; b. to subject decision aboutdecisions; b. to subject decision about
resources allocation to systematicresources allocation to systematic
analysis, comparing alternative coursesanalysis, comparing alternative courses
of action in a framework of rationalof action in a framework of rational
objectives clearly and especially stated;objectives clearly and especially stated;
c. to use the rule of efficiency inc. to use the rule of efficiency in
choosing the alternative that optimizeschoosing the alternative that optimizes
the allocation of public resources; andthe allocation of public resources; and
d. to help responsible officials maked. to help responsible officials make
decisions while taking into accountdecisions while taking into account
that PPBS is not a mechanicalthat PPBS is not a mechanicalback
44. SPECIFIC FEATURESSPECIFIC FEATURES
Specifications of objectives to beSpecifications of objectives to be
achieved through government spendingachieved through government spending
and expenditures;and expenditures;
Existence of a multi-year planning andExistence of a multi-year planning and
programming process whichprogramming process which
incorporates and uses an informationincorporates and uses an information
system to present data in meaningfulsystem to present data in meaningful
categories essential to major executivecategories essential to major executive
decisions, thus a budget system whichdecisions, thus a budget system which
is future and planning-oriented.is future and planning-oriented.
45. Selection of a decision from variousSelection of a decision from various
alternatives to achieve programalternatives to achieve program
objectives where the choice is arrivedobjectives where the choice is arrived
at using economic method of analysisat using economic method of analysis
such as cost-benefit analysis andsuch as cost-benefit analysis and
feasibility studies which leads ofeasibility studies which leads o
minimization of costs and comparisonminimization of costs and comparison
of costs and benefits, especially whenof costs and benefits, especially when
benefits can be quantified.benefits can be quantified.
Existence of analytic capability usedExistence of analytic capability used
by the agency’s by permanentby the agency’s by permanent
specialized staffs to meet objectives.specialized staffs to meet objectives.
46. Existence of a budgeting processExistence of a budgeting process
which can take broad programwhich can take broad program
decisions, translate them intodecisions, translate them into
more refined decisions in a budgetmore refined decisions in a budget
context, and present thecontext, and present the
appropriate program and financialappropriate program and financial
data for presidential anddata for presidential and
legislative action; andlegislative action; and
Systematic use of analysisSystematic use of analysis
throughout the process, hencethroughout the process, hence
holistic and integrative inholistic and integrative inback
47. PPBS: THE PHILIPPINEPPBS: THE PHILIPPINE
EPERIENCEEPERIENCE
The introduction of PPBS brought aThe introduction of PPBS brought a
damaging gap between publicity anddamaging gap between publicity and
performance. In the US, agencies wentperformance. In the US, agencies went
through the motions of preparing PPBSthrough the motions of preparing PPBS
documents.documents.
In the Philippines, after the declaration ofIn the Philippines, after the declaration of
Martial Law in September 1972, P.D No. 1Martial Law in September 1972, P.D No. 1
called for the reorganization of the entirecalled for the reorganization of the entire
government system in accordance with thegovernment system in accordance with the
Integrated Reorganization PlanIntegrated Reorganization Plan
recommended by the Presidentialrecommended by the Presidential
Commission on Reorganization—formulateCommission on Reorganization—formulate
48. The same P.D. provided for theThe same P.D. provided for the
creation of the NEDA chaired by thecreation of the NEDA chaired by the
president himself. The Philippinepresident himself. The Philippine
Navy attempted to work out a PPBSNavy attempted to work out a PPBS
model for entire Department ofmodel for entire Department of
National Defense in 1976.National Defense in 1976.
As a result of PPBS, Filipino scholarsAs a result of PPBS, Filipino scholars
and experts read papers in seminars onand experts read papers in seminars on
the possible usefulness of PPBS in thethe possible usefulness of PPBS in the
Philippine setting.Philippine setting.
Philippine Association of GovernmentPhilippine Association of Government
Budget Administration (PAGBA)Budget Administration (PAGBA)
49. Even the Career Executive ServiceEven the Career Executive Service
Development Program undertakenDevelopment Program undertaken
by the Development Academy ofby the Development Academy of
the Philippines invariablythe Philippines invariably
included an overview of the PPBSincluded an overview of the PPBS
in its course modules.in its course modules.
Likewise, course syllabi in fiscalLikewise, course syllabi in fiscal
administration, organization andadministration, organization and
management, and managementmanagement, and management
planning and control courses inplanning and control courses in
the NCPAG included assessmentsthe NCPAG included assessments
50. Early proponents of PPBS in theEarly proponents of PPBS in the
Philippines avoided using thePhilippines avoided using the
term to minimize negativeterm to minimize negative
reactions to another “importedreactions to another “imported
technique”. They preferred to calltechnique”. They preferred to call
it the IBS or the Integratedit the IBS or the Integrated
Budget System. Despite suchBudget System. Despite such
Incognito, it was implied that IBSIncognito, it was implied that IBS
or PPBS, like the performanceor PPBS, like the performance
budget, was the same animal, onlybudget, was the same animal, only
much bigger this timemuch bigger this time
51. Local budget officials were veryLocal budget officials were very
careful about openly advocating PPBS,careful about openly advocating PPBS,
perhaps due to the earlier experiencesperhaps due to the earlier experiences
with performance budgeting. However,with performance budgeting. However,
they admitted the usefulness of thethey admitted the usefulness of the
system in this sense:system in this sense:
a. PPBS provides a clear linkagea. PPBS provides a clear linkage
between planning and budgeting; andbetween planning and budgeting; and
b. PPBS offers techniques whichb. PPBS offers techniques which
might help solve the problem ofmight help solve the problem of
resource allocation and setting ofresource allocation and setting of
positions.positions.
back
52. AN ASESSMENT OFAN ASESSMENT OF
PPBSPPBS
Compared to the critics of performanceCompared to the critics of performance
budgeting, the critics of PPBS arebudgeting, the critics of PPBS are
more outspoken and emphatic in theirmore outspoken and emphatic in their
assessment of PPBS implementation.assessment of PPBS implementation.
Topping the list is Aaron WildavskyTopping the list is Aaron Wildavsky
whose appraisal of PPBS and politicswhose appraisal of PPBS and politics
of the budget process may now beof the budget process may now be
considered a classic and from whom aconsidered a classic and from whom a
lot of scholars on governmentlot of scholars on government
budgeting owe a lot.budgeting owe a lot.
53. A positive view of PPBS isA positive view of PPBS is
noteworthy. Although presentingnoteworthy. Although presenting
no panacea, PPBS offers a logical,no panacea, PPBS offers a logical,
objective approach to planningobjective approach to planning
and budgeting. Potentiality, PPBSand budgeting. Potentiality, PPBS
allows administrators to evaluateallows administrators to evaluate
the anticipated results of proposedthe anticipated results of proposed
programs and systems alternatives,programs and systems alternatives,
and to compare results fromand to compare results from
different proposals in search of adifferent proposals in search of a
“best” or “satisfying” alternative.“best” or “satisfying” alternative.
54. With that, one shouldWith that, one should
recognize the fact that PPBSrecognize the fact that PPBS
is only a tool for budgetaryis only a tool for budgetary
forecasting, planning andforecasting, planning and
programming. The tool neverprogramming. The tool never
makes decision; decision-makes decision; decision-
makers who use the datamakers who use the data
derived from the tool make thederived from the tool make the
choice.choice. back
56. INTRODUCTION ANDINTRODUCTION AND
DEFINITION of theDEFINITION of the
CONCEPTCONCEPT
The zero-base approachThe zero-base approach
”revolutionized" the budgetary”revolutionized" the budgetary
systems in both developed andsystems in both developed and
developing countries. As usual,developing countries. As usual,
the trend-setter was the US,the trend-setter was the US,
and its gospel was echoed andand its gospel was echoed and
adopted by many developingadopted by many developing
57. According to Phyrr,According to Phyrr, zero-zero-
base budgetingbase budgeting is anis an
operating, planning andoperating, planning and
budgeting process whichbudgeting process which
requires each manager torequires each manager to
justify his entire budgetjustify his entire budget
request in detail, and shiftsrequest in detail, and shifts
the burden of proof to eachthe burden of proof to each
manager to justify why hemanager to justify why he
58. ZBBZBB is a management andis a management and
budgeting process whichbudgeting process which
necessitates each managernecessitates each manager
responsible for a majorresponsible for a major
activity, cost center oractivity, cost center or
function to justify fully hisfunction to justify fully his
budget proposal following abudget proposal following a
systematic method ofsystematic method of
identifying, analyzing,identifying, analyzing,
evaluating, and rankingevaluating, and ranking
present and new projects.present and new projects.
59. The term “The term “zero-basezero-base” refers to the” refers to the
yearly analysis, evaluation, andyearly analysis, evaluation, and
justification of each activity,justification of each activity,
program or project starting from aprogram or project starting from a
“zero” performance level.“zero” performance level.
For the uninitiated, the termFor the uninitiated, the term
“zero” in budgeting connotes a“zero” in budgeting connotes a
negative impression.negative impression.
However, “However, “zero-basezero-base” really means” really means
the analysis of the entire budgetthe analysis of the entire budget
back
60. FEATURES andFEATURES and
OBJECTIVES of ZBBOBJECTIVES of ZBB
• It is a total budget
approach.
• It is a budget based on need,
not want.
• It reallocates resources.
• It identifies alternative
ways and levels of
61. In effect, ZBB systemIn effect, ZBB system
hopes to achieve thehopes to achieve the
following objectivesfollowing objectives ::
Strengthen the presentStrengthen the present
performance budgetingperformance budgeting
systemsystem
Eliminate or reduce theEliminate or reduce the
funding of low-priorityfunding of low-priority
activitiesactivities
62. Improve the quality of
Management and Budget
information
Encourage the application
of improved or new
performance measurements
back
63. BASIC ZBB TERMS
Decision Unit is a major
activity, group of related
activities, cost center or
organizational unit which requires
significant managerial decisions on
performance and funding levels.
Decision Level is the level of
the organization responsible for
analyzing, reviewing, ranking, and
grouping activity justification
document. Each division, regional
64. Three parts of Levels of
Performance and Funding
Current Level (CL)- level of
performance and funding that is
required to carry on the year’s
service or output level without
major policy changed, also referred
to as “BUSINESS AS USUAL”
level.
65. ACVITY JUSTIFICATION and
DOCUMENT (AJD) DECISION
PACKAGE is a document that
identifies and describes a specific
operation in a manner that enables
management to evaluate and rank
it against other operations
competing for limited resources
and to decide whether to approve
or disapproved it.
66. Minimum Level (ML)- level
of performance and funding
below which an activity is not
feasible to operate because it
cannot make a constructive
contribution towards
fulfilling an objective.
67. ENHANCEMENT LEVEL (EL)-
level performance and funding
above the current level wherein
increased output and service will
warrant the service review of higher
management; the enhancement level
may be divided into EL(1) and EL(2)
is higher than EL (1) and is closer to
attaining completely the objective of
an Activity.
68. Levels of Performance
and Funding besides the
following information
Objectives
Description of activity
Alternative methods considered
Output performance measurement
69. RANKING is the process by
which higher level managers
evaluate an array activity
levels (as shown in the
decision packages) in
descending order of priority.
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70. THE ZBB PROCESS
8 steps necessary to
establish in agency
Development and issuance of agency
planning assumption and policy
guidelines;
Identification of decision units;
Identification of objectives for each
decision unit;
Identification and evaluation of
alternative methods of accomplishing
objectives;
71. Analysis of different levels of
performance and funding;
Preparation of justification documents
or decision packages;
Ranking of activities at various
performance and funding levels; and
Consolidation of activity justification
documents and accomplishment of
standard budget preparation forms.
73. Development of
decision packages
For decision units, take activities that
are not so low or detailed as to focus
too limited options for decision-
making, and not so high or broad as to
hide major activities and commitments.
Consider the time required for analysis
and amount of paper work needed.
74. Set objectives for each activity.
They must be operational,
measurable and related to the
agency’s “what” (response to
issue or problems), “how much”
(rate of response) and “when”.
back
75. RANKING
This is done at levels in the
organization. Phyrr stresses that the
ranking process has to be started by
the manager who directly supervises
the operation. Then the manager above
him reviews the ranking and
consolidates the ranking and
consolidates the ranking of all the
packages of managers below him.
76. The ranking is repeated upward until a
final ranking is produced at some
appropriate organizational level.
TWO routes are suggested for this
ranking process:
1. Based on the organizational structure
and
2. By functional groupings of activities
even if such activities cut across
present organizational boundaries
77. Fundamental
questions associated
with the ranking
processes Who will do the ranking?
How will it be done?
What will be the basis for ranking?
What ranking methods will be used?
How will the results be presented?
-Well defined and objective answers to these
questions will rationally lead to a meaningful
ranking process
78. The heart of ZBB is the ranking
process
All decisions are listed in the
order of decreasing benefit by
the managers in charge of them.
Package has a price tag
attached, there is a cumulative
cost as the list proceeds in
descending order.
back
79. ZBB in the
PHILIPPINES
Introduced in the Philippines
in 1977 during the preparation
of the Calendar year 1978
national budget.
The legal basis of adopting
ZBB is found in Section 8 of PD
1177 (Budget Reform Decree).
80. Establish “bench
marks” for outlays
category:
Personal services
Maintenance and
operating expenses,
and
Equipment
81. It is better that a
‘bench mark be
established for each
category rather
than proceed to
evaluate requests
equal to or in excess
of previous limits.
82. Justifications for adopting ZBB in
the Philippine Budget system:
reasons advanced by the Office of
Budget and Management
Lack of managerial involvement in
budgeting
Limited priority setting of projects and
activities
Lack of performance measurements
and cost benefit analysis
Unnecessary spending
83. Weak planning and
budgeting linkage
Inadequate probing
organization and methods of
operation
Ineffective allocation
resources
back
84. An Appraisal of
ZBB
Benefits claimed after the
implementation of ZBB: (Texas)
No. of budget forms were
reduced
ZBB provided a procedure for
focusing evaluation of resources
only for those activities with the
highest contribution to profit.
85. In Georgia:
The establishment of a financial
planning phase before the budget was
prepared
Greater involvement in the budgetary
process by personal in the lower
organizational levels of state
government.
86. Negative side in New
Jersey:
Problems were encountered in
different areas:
Resistance to the system
Lack of understanding of the basic
concepts of ZBB
Poor quality of information
submitted
87. Weakness or constraints in full implementation of
ZBB in the Philippine system
• Support from top management
• Translation of concepts
• Management of system
•Claudio has added certain requirements:
•Clear-cut organizational structure which defines
duties and responsibilities of each manager
•Clearly stated functions and objectives of the
department or bureau
•Competent managers
•Well defined outlines and planning assumptions
88. Defects or weaknesses in
the execution of ZBB
Insufficient training of agency personnel
on the intricacies of implementing ZBB.
Lack of guidance in implementing ZBB,
especially in the ranking system;
Lack of central staff fully trained in ZBB so
as to guarantee an effective reecho or
orientation to agency budget and planning
personnel;
89. Lack of appreciation and real support
from dept heads and officials
Emphasis on forms or too much
paperwork
Difficulty of translating the ZBB
concepts to more comprehensible,
concrete terms which are socially
digestible and palatable to end-users
back
90. Conclusion:Conclusion:
The Philippine experience in applyingThe Philippine experience in applying
various approaches to budgeting hasvarious approaches to budgeting has
been described.been described.
These were adopted from approachesThese were adopted from approaches
developed in the united states- startingdeveloped in the united states- starting
with the line item budget, then thewith the line item budget, then the
performance budget, on to the PPBS andperformance budget, on to the PPBS and
ZBBZBB
91. What budget approach are we actuallyWhat budget approach are we actually
using in the Philippine budgeting atusing in the Philippine budgeting at
present:present:
The chief of the financial managementThe chief of the financial management
office of a leading agency, whenoffice of a leading agency, when
confronted with this question, answered:confronted with this question, answered:
“at the agency level, we are actually“at the agency level, we are actually
subjected to all these approaches. Insubjected to all these approaches. In
budget preparation, we are enjoined to usebudget preparation, we are enjoined to use
ZBB; in budget authorization andZBB; in budget authorization and
accountability, it is performance budgetingaccountability, it is performance budgeting
which sets the standards.which sets the standards.
92. Few Observations onFew Observations on
budgetingbudgeting
Approaches used inApproaches used in
the Philippinesthe Philippines
These are from the United States.These are from the United States.
It cannot be claimed with great confidenceIt cannot be claimed with great confidence
that these approaches have beenthat these approaches have been
completely successful in making thecompletely successful in making the
budget an effective instrument of fiscalbudget an effective instrument of fiscal
policy.policy.
These approaches are premised onThese approaches are premised on
rationality.rationality.