Budgeting Concepts Paper
FIN / 390
November 14, 2011
Government budgets focus on summarizing the intended revenues and expenditures to provide a financial plan that identifies the operating costs considered essential to the successful operations of the agency for a given period. In preparing a budget there are different methodologies to consider in creating an effective budget. The types of government budgeting to consider are activity-based costing, zero based, line-item, management by objectives and performance-based. This paper will look at the similarities and differences of line-item budgeting to zero based budgeting and line-item budgeting to performance-based budgeting.
Line-item budgeting should consist of income and expenses associated with planned services or programs. This methodology is a traditional approach for preparing a budget that details out the level of spending allowed for specific purposes. Line-item budgeting requires an explanation for any increase that is requested for the resulting period. For instance, take the human resources department budget as an example; the budget spells out the exact amount it will expense on every item it uses. Within the human resources appropriations, there might be a class for training expenditures and within the training expense category is a subunit heading for such items as trainer expenses, materials, snacks and travel expenses. As the period progresses, human resources spending must be within the allotted amounts unless a request for a budget amendment is approved. Line-item budgeting promotes a line of reasoning so that every expenditure has a purpose. Under spending does not mean that one category can transfer funds into another to enhance another category with additional funds.
Budget analysts for municipalities like the simplistic aspect of preparing a line-item budget and the details it takes to operate at various levels and time periods. Even though...