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The Role of Government
Government public programs require significant costs to implement and operate without a direct monetary return on investment. They are fully funded from the budget of various levels of government. The purpose of budget preparation ensures that there is funding for government policies and operational capacity. Since governments often function on severely limited and overdrawn budgets, it is critical to ensure complete efficiency and maintain aggregate expenditure control within the confines of macroeconomic reality. The best method to evaluate any policy or public program is to examine its marginal utility.
The equi-marginal principle ensures that the value added by each input is equal to all the previous ones. Thus, when applied to budgeting, resources are allocated most productively, eliminating possibilities of wasted funding.
However, on a government budgeting level, it is difficult to evaluate utility practically. Political agenda overshadows rational economic decisions with the assumption that programs are created or eliminated without proper consideration of marginal utility. It is critical to evaluate a public program’s benefit in comparison to the costs. Usually, the more widespread a program in terms of geography and targeted demographics, the more utility it has.
Furthermore, programs that demonstrate efficient operation while positively impacting the macro-economic climate (i.e., job creation) justify their funding from the government budget (Rubin, 2016). Policymakers should carefully balance fiscal responsibilities with marginal utility in public programs. Certain projects must be funded regardless of economic utility due to societal needs. Meanwhile, other programs maintain positive growth to a certain point but do not justify expansion since their utility would drop considerably.
Guided by Financial Control Concerns
An analyst guided by financial control concerns would seek to analyze the budget for its fiscal and economic integrity. First, the budget will be compared to the incoming revenue of a government body to ensure that there are existing sources of income and any deficits do not endanger the government’s ability to operate or fulfill critical fiscal responsibilities. Any budget should be based on the current macroeconomic climate that makes realistic predictions and financing provisions.
Furthermore, the analyst might inquire about the distribution of resources within a budget. This includes necessary evaluation of spending priorities and proper consideration of non-planned costs and future economic implications. Overall, financial control seeks to ensure a budget is balanced regarding funding in comparison to costs within reasonable boundaries.
Meanwhile, management dominated decisions may focus on the allocation and utilization of budget funds. Transparency is necessary to confirm budget classification and connect any policies with expenditures within the fiscal structure. They may focus on the distribution of resources amongst government branches and departments, including the power that each branch must allocate budget funds as well as the constraints or appropriations faced by leadership (International Monetary Fund, n.d.).
Focusing on budget control directly affects planning activities. It is important to realize that budgets are forecasts that any economic entity relies on for its most efficient function. When it comes to large organizations, budgets are inherently complex and require forecast on large scales far into the future. Unlike small-scale budgets, they cannot be easily modified and play a big part in financial security. By diverting from the planning aspect, the organizations risk creation chaos around the budget initiation and implementation. Furthermore, budgets, which are based on carefully considered timing, require significant planning resources to perfect operational capacity that can be influenced by a variety of calendar-related factors (Bufan, 2013).
In a government body, where politics may often guide the budgeting process, therefore create various management-related concerns, the focus may shift away from competent fiscal policy and strategic planning. In the attempt to limit the power of individual branches of government or implementation of policies, costs and benefits may not be accurately considered. Furthermore, the initial vision of government function to provide and improve the community of its constituents can be compromised if there are more concerns about budget distribution and implementation rather than the actual intended objectives of legislative policy.
Bufan, I. (2013). The role of budgeting in the management process: Planning and Control. SEA – Practical Applications of Science, 1(1), 16-37. Web.
International Monetary Fund. (n.d.). Budget preparation. Web.
Rubin, I. (2016). The politics of public budgeting: Getting and spending, borrowing and balancing. Washington, District of Columbia: CQ Press.