Professional Documents
Culture Documents
BUDGETING SYSTEM
(A STUDY ON MBS AND OBB)
LECTURER: Tan Sri Sulaiman Mahbob
BY: Suganthy Siva Kumar (Zga160011) &
Hanisah Bt Abdul Rahman Sevanathan (Zga160002)
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MALAYSIAS BUDGETARY REFORM INITIATIVES
2013 - Now
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History of Modified Budgeting System
Dean (1986) concluded that financial management including budgeting in the government really
weak and it urgently needed to do a reformation (United Nation Inter-Regional Adviser).
They was officially introduced for the 1990 annual operating budget preparation with the issuance
of Treasury Circular No.11, 1988.
The implementation of MBS had stated in three pilot ministries; the Ministry of Health, Ministry of
Work and Ministry of Social welfare (Malaysia Treasury, 1988).
In 1997, the system was implemented in relevant Statutory Bodies that received allocation for
operating expenditure from the Treasury (Malaysian Treasury, 1996).
The MBS was developed to counteract the weaknesses of the PPBS through optimization of
resource allocation, improved program performance while increasing the level of
accountability.
What is MBS?
3. The implementation of
2. Based on two fundamental 4. Agencies in early years
1. MBS was based on development program &
management principles: i. had positive impact,
Program-Activities activities was undertaken
Authority must match however, in one time, it
approach with long term by ministries & agencies in
accountability & ii. Lets reverted to budgetary
macroplanning strategies accordance with the
manager manage compliance
planned strategies
6. Implementation &
5. Its an attempt to link
performance were
input efficiency with
measured by the number 7. Objectives based
output and outcome
of outputs generated, input evaluation
performance were met with
used & physical progress of
challenges
the development projects
Main Objective
i. This rationality of MBS
is to achieve fiscal
limits upon agencies and
forging a link between
To promote a rational inputs and outputs.
allocation of resources
to government program. ii. It also seeks to
promote better program
management through
the adoption of better
management practices.
1) Expenditure target (ET) which Period: Two years in year one
represents a budget ceiling for on-going
program
PPBS MBS
PROGRAM/ACTIVITY 2. PROGRAM
STRUCTURE AGREEMENTS AND
EXCEPTION REPORTS
PERFORMANCE
3. PROGRAM EVALUATION
MEASUREMENT
4. A MORE GENERALISED
PROGRAM APPROACH TO
EVALUATION EXPENDITURE
CONTROL
THE BUDGET PROCESS UNDER MBS
PREPARING
EXAMINATION OF
OF EXISTING
PROGRAM
POLICY
AGREEMENTS
SUBMISSION
PREPARING OF
NEW POLICIES,
EXAMINATION OF NEW POLICIES,
ONE-OFFS AND
ONE-OFFS AND SAVINGS
SAVINGS
PROPOSALS FOR BUDGET YEAR
PROPOSALS
1&2
Aggregate expenditure control
1.Expenditure target:
- refer to budget ceiling for on-going program,
- treasury estimates the resource allocation
through previous years allocation
- Then, make estimation of the allocation: on-offs,
salary increments, inflation
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Cont.
2. New policies/additional 3. One offs
allocation - Is a non recurrent expenditure
- Ministry can apply for - To finance a particular activity
additional allocations: in that budget year alone
* Implementing new policies Eg: purchase of equipment,
which would translate into upgrading of equipment, buildings
new programmes or activities and other facilities, hosting a
* Implementing new policies conference
through existing program
* One-offs
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Cont.
4. Threshold
- Is a set of limit, if exceeded can request
additional funding
What purposes?
- Encourage agencies to find funds with the
existing budget to fund minor policies
- Encourage agencies to study new policy
thoroughly so that really important ones get to
submit to the treasury
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Cont.
5. Saving proposal
- Is an expenditure target motivate agencies to
identify saving in base budget
- Need to keep saving identified by them after
informing the treasury
- Agencies will be forfeited the amount of
identifies saving if founded by treasury
allocation, it will be deduct
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Program Agreement (PA)
- Ministry will sub-allocate their spending expenditure ceiling to
programme, then the expenditure will based on priority
- Budget structures are for the last years performance, current
year and coming 2 years
- Identify for each activity on:
* Measurable objectives
* Authority of the programme
* Alternatives strategies and chosen solution
* Target outputs and services that are meeting public
needs
Cont.
Components Benefits
A program agreement is an agreement Mission and result driven budget
which determines the level of performance Links performance to budget
that can be achieved for a given budget
year with the allocation approved. Treasury focuses on outputs and
impact
-The 14 elements comprised: general
object, agency, program, activity, activity Develops a culture of performance
code, vetted power, client, policy/need Sets challenging performance
analysis, function, objective, source, output targets
specification, impact indicators, evaluation
program Ensuring accountability for results
Exception Report
Comes together after programme agreement
Specify the following:
-Where performance is inconsistent with the target
-Reason for inconsistent
-Remedial actions
Official review /
approve /
General warrants
coordinate
to state
ministry /
accountants
MBS
department
estimates
Process
Finance minister Submit a proposal
budgeted in to the central
parliament agency
Treasury
The central
weighing /
agency reviews
approving
budget proposals
budgets
Budget inspection
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Impact from MBS
Every division prepares details of input and output
performance targets for the performance agreement
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The use of expenditure as one of the performance measures
resulted in attempts by agencies to commit wasteful expenditure
at year end to justify greater performance. In addition, the lack
of structured monitoring framework, the lack of performance
information and insufficient internet capacity hindered
managers from undertaking evaluation as mandated under the
MBS. Data for evaluation was only sought after when
evaluations were done and not planned from the beginning.
Program managers had difficulty drawing constructive
conclusions as to make decisions based on the evaluation.
(Deputy Sec Gen Dato Mat Noor b Nawi- Ministry of Finance, Sept 10,
2012)
Source:
21 Outcome Based Budgeting and Evaluation: An Integrated and Holistic Approach for Improving Public Sector Performance, 2012)
Outcome Based
Budgeting (OBB)
2013 - Now
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OUTCOME BASED BUDGETING (OBB)
OBB introduced in the 10TH Malaysia Plan (2011-2015).
Focus on detailed planning with requisite horizontal & vertical linkages
(contribute to share or common outcomes).
Whole of Government approach used as a covering processes of complete
cycle from planning to result (at both national & ministry level).
OBB measures result achieved at almost every stage of the project from input
application activity completion, outputs delivery and impact achievement.
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Why Change was required??
Focus on outcomes
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OBB Strategic Cycle
3 supporting
components
of OBB
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Challenges on the implementing OBB
The need for stakeholders & top managements support
& commitment in planning, monitoring & evaluation
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MyResults: Performance Management System
Ministry/Agency
Planning
Budgeting
Monitoring
Evaluation
Reporting
Demand Analysis
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The push for the results
Performance information will be reported to various levels of decision
makers on a timely basis.
OBB is relevant to give decisions makers a more accurate and relevant
information
OBB can support the budgetary process by helping either the program or
components of programs : can potentially modified, expanded or cut.
OBB can assist the budgetary process identify savings by improving the
efficiency of specific service.
The early warning system or dashboard for management has been
developed to generate information on shortfalls happened
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References
Amy Tam (2013), Enhancing Monitoring and
Evaluation for Better Results.
Performance Management in Public Sector OBB ,
Ministry of Finance
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thank you