performance budgeting and accrual budgeting - oecd.pptVIP

Performance Budgeting and Accrual Budgeting: Decision Rules or Analytic Tools? Allen Schick Analytic Tools Versus Budget Rules An analytic tool assists budget makers in deciding the purposes and amounts to be allocated A decision rule is information that dictates either how decisions are made or the types of decisions Medium-term projections that inform budget makers of the future fiscal outlook are analytic tools Medium-term frameworks that limit future spending or other budget elements are decision rules Analytic Tools Versus Budget Rules…cont… Reformers often seek to convert analytic tools into decision rules because of concern that the information will not be used in deciding the budget Over the years, both analytic tools and decision rules have proliferated in budgeting Not every tool of analysis is appropriate for making budget decisions: tools expand budget choice, rules constrain them Performance Budgeting Shifts budgeting from decisions on inputs to decisions on outputs or outcomes No standard definition of performance budgeting Some governments define performance budgets as budgets that contain information on actual or estimated results Performance Budgeting…cont… Others define performance budgeting as budgets in which increments in resources are linked to increments in results In the broad definition, performance budgeting is only an analytic tool In the strict definition, performance budgeting serves as a decision rule Accrual Budgeting Shifts budgeting from cash flows (money received and payments made) to revenues earned and liabilities incurred The accrual basis would align budgeting and financial reporting: both would be on the same accounting basis It is feasible to report in terms of accruals and to budget on a cash basis Accrual Budgeting…cont… If budgeting were continued on the cash basis, financial reports would be analytic tools If budgeting were shifted to the accruals, accounting principles would become decision rules in budgeting Expendit