3.2 Budget Preparation

A latter section covers the Federal budget preparation and cycle and here, we are going to focus on a generic government budget preparation. The public budget cycle usually involves four steps, which form a recurring and overlapping process between legislative and executive branches:

  1. Executive preparation
  2. Legislative review and approval
  3. Budget implementation
  4. Audit and evaluation

Executive Preparation: The executive preparation starts with forecasting the economic climate and projecting revenue and expenditure. It guides decisions and outlines responses to those decisions. For example, the Department of Transportation uses snowfall forecasts and sets priorities which roads to clear first. This process includes a budget call to agencies and departments which outlines executive priorities, limits on the expenditure growth based on revenue forecasts, and detailed instructions for budget preparation. Agencies prepare and submit their budgets in response to public service demands, and the executive budget ultimately serves as a message of policy direction.

Legislative Review and Approval: The legislative review and approval process involves aligning legislative priorities and constituency interests within appropriation limits. This includes making recommendations, conducting hearings, and reconciling any differences through modifications before adopting the final appropriation bills. Following this, the executive may veto the budget, to which the legislature can respond with further actions to address the veto.

Budget Implementation and Audit and Evaluation: Budget implementation involves the execution of public programs by agencies using appropriated funds, ensuring legal spending in accordance with the budget while avoiding deficit spending. This phase focuses on the practical delivery of services. After the fiscal year ends, audits and evaluations are conducted, including financial audits to verify legal spending, management audits to assess agency performance, and program audits to evaluate the effectiveness of the programs. An external review of budget execution is conducted, with findings reported to both the legislature and the public.

3.2.1 Budget Document

Budget documents include the following components:

  • Budget year: Budget plan for current year
  • Out years: Budget plan beyond the current year
  • Progress report year: Tracking and comparison of actual expenditures and revenue to budget
  • Final report year: Previous year’s budget and outcome

The budget message at the beginning of the budget document outlines the goals, objectives, key challenges, and constraints. Given the mention of constraints, it should also contain strategies to address those challenges. The budget message also highlights initiatives to promote goals and objectives. The budget document also includes information about the economic climate, policy priorities, circumstances, constraints, and key changes compared to previous years. Summary tables should include revenue and expenditure trends (by function and object) and workforce trends as well as explain major budget drivers.

3.2.2 Detailed Departmental Budgets

Break-down of budget by unit

  • Organization chart
  • Mission, objectives, achievements
  • Budget summary
  • Detailed line item budget
  • Personnel detail
  • Program/sub-unit specific budgets

3.2.3 Budget Examples

Example of biennial budget

Example of an annual budget