Budget Rules and Budget Flexibility
This chapter develops a simplified framework for conceptualizing budget control. It surveys the centrality of budgeting to organizational control, and focuses on the traditional model of public budgeting to better understand why its practices remain preva
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Budget Rules and Budget Flexibility
Abstract This chapter develops a simplified framework for conceptualizing budget control. It surveys the centrality of budgeting to organizational control, and focuses on the traditional model of public budgeting to better understand why its practices remain prevalent in government. The chapter develops a new taxonomy to characterize general ‘budget rules’ in the public sector and uses two of the most prominent rules (the ‘annuality’ and ‘purpose’ of spending) to explain how the rules operate through key properties of control. The chapter explores what high flexibility looks like for each of the budget rules and speculates on the implications for sustainable rule modification. To explain how the dimensions of flexibility operate in the specific context of public budgeting, we suggest that traditional approaches to budgeting can be characterized by a set of general rules of budget control and that, by way of contrast, its modernized alternative (and especially performance-based budgeting) is essentially rule modification calculated to increase both control and flexibility (Cothran 1993).1 We begin by surveying how budgeting and financial management is conventionally understood in the public sector and how it compares with approaches in the private sector.
© The Editor(s) (if applicable) and The Author(s) 2016 M. Di Francesco, J. Alford, Balancing Control and Flexibility in Public Budgeting, DOI 10.1007/978-981-10-0341-7_4
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4.1
AN ‘ORGANIZATIONAL IMPERATIVE’: APPROACHES TO ANALYZING BUDGETING
It is almost beyond dispute that in both public and private sectors budgeting is one of the primary functions that enables planning and control in organizations. As both a product and a process, ‘the budget’ is directed at reconciling spending with constrained revenues (which in the public sector equates principally to sovereign rights to tax and issue debt). While in both contexts budgeting is easily depicted as a purely technical question about the methods of financial control, it has long been recognized to be a political question that goes to the resolution of competing priorities and the manner in which conflict and bargaining influence those decisions (which, in government, are structured by the way authority is controlled and accounted for).2 As a result, theories about budgeting, especially in the public sector, tend to focus on describing and explaining budget formulation (budget decision processes and their documentation, or how allocative decisions are made) and budget execution (budget implementation systems and techniques, or how allocations are managed and controlled) (see Mitchell and Thurmaier 2012: 2). The public budgeting literature is multidisciplinary and vast, and on both counts has its deepest reservoir in the US context, but for our explanatory purposes we will abbreviate this into two general conceptual approaches.3 The first approach analyzes the routines of budgeting and the way these are shaped by, and help to shape, distin
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