Friday, January 23, 2009

Government budgeting

We can transpose the concept of family budgeting to government budgeting.
It’s not so different, if we consider the fundamentals.
Government budgeting is also like family budgeting.
The government derives income.
This income is taken from the taxes that are paid by the people.
For local governments, they have what we call Internal revenue allotment, or IRA.
Local governments hugely rely on their IRAs to survive.
There are also other sources of income other than taxes.
These are called non-tax revenues.
For example, if the local government has a huge tourism industry, and collects fees from visitors, and patrons, then the local government has a form of “non-tax” revenues.
The rent collections from use of market stalls is also a form of “non-tax” revenue.

Government Expenditures

Out of these income derived by the government, the amounts will have to be used to cover the expenses of government, just like covering the expenses of the family.

Three categories

Although it may look complicated, government expenses or expenditures can be simplified if we categorize it properly.
In the government budget the main categories of expenditures are (1) personnel services (2) maintenance and other operating expenses and (3) special purposes appropriation.

Personnel services

Personnel services is an amount set aside to pay for the personnel (employees) of the government.
The personnel are needed to run and operate the government so that basic services can be delivered to the people.
This is like the family, when a part of the income is paid to pay for the househelp.
Personnel services as a government expense is quite regularly because year-in, year-out, the government has to pay the salaries of government employees.


“MOOE” means maintenance and other operating expenses.
This is the second main category of government expense.
This kind of expense is used to operate the government.
Government has to pay electricity, other utilities, buy bond paper, buy computers, or any other thing that is used to operate the daily affairs of government.
The MOOE is also one category that is regular year-in-year out because each year the government needs money for operating expenses.

Special purpose appropriations

The third category is the most flexible, the most controversial.
This is the so-called special purpose appropriations, or special purpose funds.
The phrase speaks for itself.
It is money set aside for “special purposes”
Government needs to fund activities for special purposes like social services, health services, and all other services that the creative mind can think of.
This is also prone to abuse, due to its flexibility.
That is why, the people must guard this aspect of budgeting: special purpose funds.
It doesn’t matter whether it is the national or local government budget that people are watching or monitoring.
Special purpose appropriations are flexible because there are not hard and fast rules in determine what constitutes “special purpose” that needs to be funded.

Lump sum budgeting

This is also the most controversial category because this is where we find the so-called “lump-sum” appropriations.
It is in the special purpose funds, where appropriations are juggled from one item to another, or one department to another, or one purpose to another.
Lump-sum appropriations are amounts in millions of pesos identified for a general purpose, but does not contain an itemized list as to how exactly the millions will be present.
You want to know where the biggest corruption is happening in government?
Ask some of our quiet, but sly, witty congressmen.
(There are only a very few congressmen who know this trade).
Welcome to the exciting world of “lump-sum” budgeting.
Next week: Let’s discuss lump-sum budgeting

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