The Budget Cycle , business and finance homework help

Business Finance

Question 1

The Budget Cycle can be described as consisting of four phases.

Please list all four phases, one word for each phase.

Question 2

You are the Director of the Budget Department in your Government Agency and you propose

introducing the concept of “Beyond Budgeting” as a pilot (i.e. as a trial) in your agency. You explain

to the Head of the Agency that you will ensure that the overall annual spending authority of this

agency would be obeyed during the pilot phase (to preempt her most likely first reaction) but that

individual Departments within the agency could operate within the concept.

The head of the Agency reviews the concept and asks three questions:

i) “The budgets have served in the past as ‘fixed performance contracts’. Now you propose

we should instead have ‘relative improvement contracts’. Why?”

ii) “If you and I no longer set specific budgets (i.e. expenditure limits) for individual

Departments, what other means of control would we have?”

iii) “Yes, we could devolve spending decisions to a lower level but I believe we can do this

equally well. Then why should we entrust the lower level with such authority?”

Please provide in your reply:

Three reasons for i), three examples for ii) and one applicable principle for iii).

Question 3

List the three key objectives of public financial management and explain in detail what each of the

three means.

Question 4

You are the Permanent Secretary in your country’s Ministry of Finance. A new Minister has been

appointed; she hasn’t served in the Finance Ministry since 1980. As a result, she knows very little

about the public financial management revolution. You have to brief her before a joint meeting with

European Union donor countries who are linking their release of the next round of funding to how your

country is assessed in terms of the quality of its public financial management. Please write a briefing

note for the Minister that covers:

1. How and why public financial management (PFM) has changed in the past 25 years or so,

including flaws and weaknesses of the traditional budget-focused approach.

2. What donors in particular hope to achieve or avoid by requiring a strong public financial

management framework.

3. Any three of these four PFM initiatives:

a) Medium Term Expenditure Framework

b) Performance Budgeting

c) Numerical Rules

d) Fiscal Risk Management

Question 5

Explain clearly, giving at least two reasons to support each answer, how a government’s budget can do

any two of the following:

i) Translate the government’s stated social priorities into practice

ii) Increase transparency about the government’s priorities

iii) Promote sustained and non-inflationary economic growth

iv) Hurt the country’s ability to borrow overseas

Question 6 see the attached file

Look at the table and answer the following three True or False questions about Malawi’s Budget and

argue your case on (iv):

i) Based on the years shown, Malawi’s government total nominal expenditure as a

percentage of GDP has been growing steadily since 1990 (T/F)

ii) Nominal Military expenditure in 1990 accounted for less than 10 percent of GDP (T/F)

iii) Real government expenditure was higher in 2005 relative to 1995 (T/F)

iv) The government says the steady increase each year in expenditure on education

demonstrates its prioritization of education. Use the table to support or argue against

this supposition.

Please refer also to the Excel file “ Tables for Question 6 ”,

Sheet “ Table for Question 6 ”.

Question 7

Richard Allen refers in “Challenges of Reforming Budgetary Institutions in Developing Countries” to

three stages of historical development often observed in countries with regard to the evolution of

budgetary institutions, including in developing countries. One of the three stages is called

“open-access society”.

How could the concept of “Beyond Budgeting” create an “open-access-agency” with regard to

participation of staff and other stakeholders?