Question

Governmental budgets may be organized in line-item, program, and performance formats. What are the differences among these three approaches? Make an argument that builds a case for hybrid presentations that includes all three elements. Please be detailed in the answers.

Answer 1

Line-Item Budgeting -

A line-item budget lists, in vertical columns, each of the city’s revenue sources and each of the types—or classes—of items the city will purchase during the fiscal year. Following is an example of how line-item budgeting would be used in a small town public works department. The line-item budget, which is the most widely used of all budgeting systems, offers many advantages. It is comparatively easy to prepare and doesn’t require sophisticated financial skills. Also, the line-item budget is straightforward, simple to administer, and readily understood by the city council, city employees, and citizens. Moreover, the simplicity of the system makes it easier for the city council and administrator to monitor revenues and expenditures, which is important in this era of shrinking resources.

Program Budgeting -

Unlike the line-item budget, which lists total departmental appropriations by items for which the city will spend funds, a program budget displays a series of “mini-budgets,” which show the cost of each of the activities that city departments perform. In the case of the water department, for example, a separate mini-budget would be established for water production and distribution, water system repair and maintenance, and meter reading.

Performance Budgeting -

Performance budgeting is the same as program budgeting, except that one additional component—performance—is included to tie expenditures for each program to specific goals established for that program. For example, the amount budgeted for street sweeping would be 6 tied to an expected level of performance, such as sweeping “X” number miles of streets during the fiscal year. If the city council chooses to increase the level of street sweeping to sweeping residential streets once every two weeks rather than once each month, the council can easily relate the cost of sweeping per mile and then multiply this figure by the additional miles that are to be added to the street sweeping program to determine the new budget figure. Performance budgeting provides spending data that the city council and administrator can examine at the end of the fiscal year to identify the amount of service that each city department has actually produced. Additionally, by knowing the exact cost of each service, the council can determine its relative usefulness compared to the other spending priorities. The negative aspect of performance budgeting is that it is difficult to develop measurable performance goals for simple programs, such as street sweeping. It is hard to set measurable goals for emergency medical services and other less-quantitative programs. Also, data collection can be difficult