Final Project

Budgeting

Tolby Markham

Kaplan University

PP698: Master’s Capstone in Public Administration

April 7, 2015

INTRODUCTION

The following paper is the brief analysis and evaluation of the budgeting technique and the role of leadership from the public administration agency perspective. The selected agency for this purpose is the Administration of Aging, which is the principal agency for the Health and Human Service department of United States and performing duties under the provision of Older American Act of 1965. As the purpose is to explain and evaluate the process of formulating budget for public agency, therefore, the paper is divided into different parts, for instance, in first part theoretical approach to budgeting is highlighted, than budget creation process is discussed with the role of leadership in particular scenario (AOA, 2014). And at last, critical analysis of financial crisis that gripped nation a few years back would have impact on public administration agency, if such crisis arises in future.

THEORETICAL APPROACH TO BUDGETING

Kilfoyle and Richardson (2011, pp. 183-99) identified that Budgeting for public agencies in the United States underwent a few dramatic changes because of the recent financial crisis. As the cost of different health care and social programs expanded and deficit grew, thus, a proper theoretical approach to budgeting is required for better understanding. As the selected organization is public agency, in this regard, theoretical approach based on public sector perspective. The theoretical approach to budgeting is all about satisfying the internal and external needs. From Administration of Aging agency viewpoint, budget preparation is influenced by number of different factors, which are;

· The suggested expenses and takings of the organization services;

· The utilization of agency reserves and balances;

· Savings and growth of agency funds (Wickramasinghe & Alawattage, 2007).

It is understood that public agencies normally do not operate in isolation; therefore, they have their significant impact on the national economy because the funding to agencies like Administration on Aging is funded through taxes. Similarly, they leave a vital impact on the Public Sector Borrowing Requirement (PSBR), which is used for borrowing from public organizations to manage funds (Baiocchi & Lerner, 2007, pp. 8-13).

The objective of theoretical approach to budgeting in public agencies is that the agency has greater focus on policy development and monitoring the performance. Therefore, the fundamental objectives of public agency budgeting are;

· Control over the policy implementation;

· Supporting in planning expenses to meet up policy requirements

· Monitoring and measuring the performance;

· To undermine cumulative expenses of agency in accordance with total funding (Shah & Shen, 2007, pp. 27-35).

AGENCY’S BUDGET CREATION PROCESS

Over the last few years, public sector organizations come across numerous challenges because of the transformational changes in the organizational structure with the way of delivering services. These changes arise not just because of the finance and budgetary function but the agency also need to accommodate itself with radical changes in working through different ways and delivering the desired services in an effective manner (Robinson, 2007).

The budget creation process is the way through which public agencies build their budget. An excellent budget creating process engages all the stakeholders who considered to be responsible for adhering to the budget and also has their role in implementation of objectives. In formulation of public agency budget, following aspects need to be carefully administered;

· Write it down;

· Describing the stakeholders who would be involved;

· Formulation of annual timeline for budget

· Listing the specific task that will perform in the respective year

· Ensuring the accounting line is in accordance with budget line items

· Adaption of the policies for adhering the variances and the approval authority (Muller, et. Al., 2010, pp. 48-60).

ROLE OF LEADER & STAKEHOLDERS IN CREATING BUDGET

Role of leadership and stakeholders in public agency is very crucial and specifically if public agency is like of taking social and health care of old people, than role of leader in such agency is more critical. As the leadership provides the key ways in outlining the budget policy, which assist in adding value to the budget formulation activity (Steyn, 2007, pp. 137-40). In this part of the paper, leader and stakeholders impact on budget creation has been highlighted;

· Managing the budget cycle; the budgeting cycle is the most important mean of distinguishing the organizational strategy into qualified plan, and this is where the leader who allocates the funding across the different entities.

· Expenditure Control; to control the expenditure in an effective manner is the responsibility of leader. Translating the dimensions for whole agency and prioritizing the key pillars of the organization on which more attention will be given in accordance with the budget (Morse, 2010, pp. 231-45).

· Support to decision marking; decision making at the right time for the leader in public agency is as important as approval for the budget. For instance, assessing the financial condition of the agency and making the appropriate decision that is beneficial for the agency is the responsibility of the leader.

· Managing Cost; although this is from the finance perspective, but a good leader is that who take care and holds knowledge of all the department of public agency. As the nature of work of a public agency is different from private, and also the agency runs of public funds, therefore, it is essential for the leader to act honestly and spend the funds appropriately.

· Support to Performance management; budget formulation and development is pure financial aspect, however, role of leader and stakeholders is to develop the performance management system in accordance with budgeting cycle. As the budget creation is associated with the amount of spending and revenues, therefore, it is the role of leadership to assess the performance of the respective departments that are associated with budget creation (Bryson, 2011).

IMPACT OF FINANCIAL CRISIS ON AGENCY OF AGING

As per WHO (2015), the impact of financial or economic crisis possibly acute for older people and to the agencies whose operations are dedicated to support older people health. Similarly, in financial crisis, older people are more sensitive and on the greater risk side of losing their jobs and become solely depend upon the public agencies. From the agency budgetary perspective, it is essential for the funding parties that investment in health and social care sectors should be maintained with balance and government should also understand and include mechanism in state departments to engage old people in their workforce according to their capacity.

However, from the Administration on Aging agency perspective, the leadership and management role in the period of financial crisis is the real test because the financial crisis came up with a unique set opportunities to put in their efforts to place innovative apparatus for old age people so that they can contribute to as a productive asset during the financial crisis period (Campello, et. al., 2010, pp. 470-87). Similarly, agency leadership need to work on changing the mind set of society that people who enter into the later stages of their life become economic and financial burden on the society. Therefore, older people need to engage in such a constructive manner that their positive input must be visible in the society.

CONCLUSION

To conclude the paper, budget formulation for a public agency is critical and entirely different from private organization because of the number of stakeholders that involved in the agency. Likewise, the role of leader in monitoring the budget creation process and then evaluating the process is important. Thus, leadership role is more important as he or she is face of the agency and leader task is to run the agency while spending the budget as per the set rules and regulations.

REFERENCES

Administration on Aging. (2014). About Us. Retrieved from http://www.aoa.gov/ on March 29, 2015.

Baiocchi, G., & Lerner, J. (2007). Could Participatory Budgeting Work in the United States?. The Good Society, 16(1), 8-13.

Bryson, J. M. (2011). Strategic planning for public and nonprofit organizations: A guide to strengthening and sustaining organizational achievement (Vol. 1). John Wiley & Sons.

Campello, M., Graham, J. R., & Harvey, C. R. (2010). The real effects of financial constraints: Evidence from a financial crisis. Journal of Financial Economics, 97(3), 470-487.

Kilfoyle, E., & Richardson, A. J. (2011). Agency and structure in budgeting: thesis, antithesis and synthesis. Critical Perspectives on Accounting, 22(2), 183-199.

Morse, R. S. (2010). Integrative public leadership: Catalyzing collaboration to create public value. The Leadership Quarterly, 21(2), 231-245.

Muller, E. B., Nisbet, R. M., & Berkley, H. A. (2010). Sublethal toxicant effects with dynamic energy budget theory: model formulation. Ecotoxicology, 19(1), 48-60.

Robinson, M. (2007). Performance Budgeting: Linking Funding and Results (EPub). International Monetary Fund.

Shah, A., & Shen, C. (2007). A primer on performance budgeting. Budgeting and budgetary institutions, 27-35.

Steyn, B. (2007). Contribution of public relations to organizational strategy formulation. The future of excellence in public relations and communication management: Challenges for the next generation, 137-40.

WHO. (2015). Global financial crisis and the health of older people. Retrieved from http://www.who.int/ageing/economic_issues/en/ on March 29, 2015.

Wickramasinghe, D., & Alawattage, C. (2007). Management accounting change: approaches and perspectives. Routledge.