Question

Explain how program budgeting and line budgeting differ and the steps which are necessary to develop each type of budget. Explain how program budgeting systems seek to improve efficiency within government.

Answer 1

Program Budget is a budget related to specific project or program this budget includes expenses and revenues related to one specific project no other project is mixed with this budget.

Steps for program budgeting

1) Understand your program: As name suggests before deciding the budget you need to understand the program first, that means you need to know in which project you will investing how long it will take to complete one program and accordingly you will invest in order to avoid inefficient utilisation of resources

2) The second step is cost benefit analysis, which include finding out alternative ways of achieving the said goals, together with the costs and benefits of the various alternative available.

Line Budget

A budget in which the individual financial statements items are grouped by cost centers or departments. Line budgets are useful for financial planning, cost reduction measures, and identifying potential sources of waste of resources.

Step for creating line budget

1) Create a column titled Expenditure. Group similar expenditure into categories, such as office supplies, Salaries, Training, Marketing etc.

2) Create a column titled previous year and fill in the year such as 2017.Record how much was spent on each item from each and every category, similarly create another column for current year 2018. Now refer to what company spent last year in each category, and decide if you should allocate more or less for the next year.

Since program budget are made for specific program and that budget can't be used for any other purpose this will be helpful for any government to seek efficiency within the government .

By adapting program budget government can invest in specific projects which will help in improving efficiency and maximum utilisation of resources.

They will be able to identify the area where cost reduction can be implemented and savings can be made.