Program Budgeting Manual For Government

Program Budgeting Manual
For Government of Georgia

Prepared By

Glendal Wright

March 2015

Table of Content
I.

INTRODUCTION............................................................................................ 4

A.

Introduction to the Program Based Budget Manual...............................................4
1.
2.

B.

Purposes of Program Based Budgets.................................................................5
International Model of Progam Based Budgeting..............................................7

Users of the Program Based Budget Manual.........................................................9
1.
2.
3.

C.

National Level Budget Users.............................................................................9
Subnational Level Budget Users.....................................................................10
Public Users of the Budget..............................................................................10

Use of the Program Based Budget Manual..........................................................10
1.
2.
3.

Reference for Program Based Budget Preparation..........................................10
Increased Capacity for Making Budget Decisions............................................10
Increased Transparency and Accountability of Budget Policies.......................11

II.

PRACTICAL APPLICATION OF PBB ON PROGRAM LEVEL................11

A.

Introduction to Developing Program Based Budget.............................................11
1.
2.
3.
4.

B.

Overview of Program Based Budget Elements................................................11
Main Terminology of Program Based Budgets.................................................13

Basic Features of Program Budgeting.............................................................14
Number and Size of Programs.........................................................................15

Steps in Developing Program Based Budget........................................................16
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.

Step: Identification of Legal Requirements and National Policies...................16
Step: Define the Mission of the Organization.................................................18
Step: Define Programs/Subprograms.............................................................20
Step: Define Goals/Objectives of the Program...............................................21
Step: Develop Activities of the Program/Subprogram....................................24
Step: Place Programs in Organizational Structures........................................27
Step: Determine the Outputs/Outcomes........................................................31
Step: Develop Performance Indicators...........................................................32
Step: Identify the Inputs to the Activities.......................................................35
Step: Cost the Inputs...................................................................................36
Step: Prepare Program Budget Submission.....................................................41
Step: Review and Adoption of the Budget......................................................46
Step: Execution of the Budget.......................................................................47
Step: Monitor and Evaluate Program Activities/Accomplishments..................47
Step: Audit the Program.................................................................................53

III.

PROCESS OF PREPARING PROGRAM BUDGET IN GEORGIA............55

A.

The Program Budget Cycle................................................................................56

B.

Legal Framework for Developing the Program Budget........................................57
1. Budgetary Code of Georgia.............................................................................57
2. Order of the Minister of Finance #385, July 8, 2008 Tbilisi, On Approving the
Program Budgeting Methodology, adopted July 11, 2011.......................................58
3. The Budget Calendar in Georgia.....................................................................58

2

C.

Developing the Program Budget Process in Georgia.............................................60
1.
2.
3.

4.

Planning and Preparation Phase......................................................................60
Budget Review and Adoption..........................................................................70
Budget Implementation/Execution..................................................................73
Budget Audit and Program Evaluation............................................................75

ANNEXES................................................................................................................ 76

3

I.

Introduction

The Republic of Georgia had undertaken to improve its budget process and to implement
a program based budget (PBB) after the Budget Code was adopted in 2009. Since that
time the implementation has proceeded with the adoption of a program budgeting
methodology and development of key documents, such as the Basic Data and Directions
(BDD), which have guided this effort. It is important to realize that this implementation

has been implemented as a part of a larger public finance management reform described
in the Public Finance Management Reform Policy Vision 2014-2017. The effort to
further develop the PBB will continue over the next several years and is enhanced this
PBB manual.
A. INTRODUCTION TO THE PROGRAM BASED BUDGET MANUAL
This budget manual is intended to achieve several different purposes for improving the
budget process within the central ministries of the Government of Georgia. One of the
weaknesses identified in implementing PBB in Georgia has been the lack of a
comprehensive manual that will provide those involved in preparing the PBB with the
necessary knowledge and information of the concepts, terminology, advantages and
disadvantages of PBB, and the practical and sequential steps in preparing the budget.
Therefore, this manual is intended to serve as a guide in the full development over the
coming years of the Georgian system of program-based budgeting (PBB). It shall assist
officers involved in budget preparation and execution to understand public sector
budgeting based on programs. The manual is intended to assist line ministry officials and
budget agencies in their understanding as to how a program-based budget is to be
developed and submitted to the Ministry of Finance. It shall guide Budget Users (budget
officers and program managers tasked with the development and implementation of
programs) throughout the whole process of preparing budgets using PBB methodology
for all levels of government. This includes organizations outside of the government

ministries, such as the Parliament and the State Audit Office. The Parliament needs an
understanding of the government programs for their budget review and oversight
functions and how the government’s policies have been translated into specific programs
and spending levels. The audit institutions need to understand program budgeting
methods to ensure that the specific programs have spent funds to accomplish the purpose
and objectives of the programs in an efficient and effective manner.
At a later stage the manual will serve as the basis for the development and delivery of
training to civil servants to be rolled out to all the ministries and spending units, as well
as subnational units.

4

Purposes of Program Based Budgets
Program based budgets have been developed to serve a number of important purposes in
the budget process. First, and foremost, it serves the purpose of providing a policy
document. The budget should not just show a set of numbers within a budget year
timeframe, but should reflect the goals, needs, and priority of choices made by
government, with citizen input. Therefore, the budget serves the purpose of a policy
document that should highlight the following:
 Goals and Objectives: The budget should represent the decisions on what the future

should be in terms of what is to be accomplished through budget expenditures and
what level of accomplishment is expected.
 Recommendations on Policy Issues: The budget should present the financial issues
facing the central government and the policy recommendations and proposed
legislation to solve these issues.
 Financial Policies: The recommendations on policy issues are then translated into
financial policies that are reflected in the setting of tax rates, expenditure priorities,
and timeframes in which these will be applied.
Secondly, the budget is, of course, a financial plan that presents financial data, such as
summaries of revenues, expenditures, and debt for the budget year and subsequent years,
as well as identifying operational/recurrent activities and capital improvements, and the
financial reports for various accounts the government may have. Since traditional
budgets primarily represent a tool for control of expenditures according to limited
categories (e.g. services, wages, goods, etc.), they may provide the answers to the
questions like “how much did we spend on services, wages, etc.?” But such limited
categories cannot answer the questions that can be answered by PBB, such as “how are
education program expenditures achieving national education quality standards” or “what
is achieved by more expenditures for maternal health.” Public expenditures represent the
inputs that are directed at achieving outputs and outcomes that are embedded in the
national social values and enumerated in policy documents.

Thirdly, the budget presents an operations guide for its execution by the government
ministries and spending units. The budget should reflect policies and strategies of the
national and subnational governments. It should identify the functions and
responsibilities linked with the implementation of the policies and strategies, establish
levels of performance to be achieved by implementation of these policies and strategies
and provide an identification of the inputs to support the program objectives.
Finally, and importantly, the budget serves as a communication tool between the
government and the citizens. It should present the information and data in a clear and
understandable manner that will allow everyone to understand what is being done. The
budget should contain a table of contents, a description of the budget process, and visual
summary representations of the revenues and expenditures. It should be useful for the
citizens and for social, economic and political groups to understand what is being planned
for the future and how it meets their needs and expectations.
5

All of these purposes are achieved in a budget document if it is:
 Comprehensive: The budget reports all revenues by sources and expenditures, by
function or purpose
 Consistent: The budget is presented in a consistent format and structure from year to
year and funds are accounted for based on accepted accounting standards.

 Comparable: The budget should present revenues and expenditures for several years
to allow for comparison and identification of trends; and performance measures are
presented for several years for comparison purposes.
 Unified: The budget should relate all spending and revenue collecting parts to
evaluation criteria.
 Exclusive: Only financial matters should be in the budget.
 Annual: The budget should be prepared every year for the next year of the
organizations operations.
 Clear: The budget should describe what is proposed in understandable fashion.
 Public: The budget should be done based on the principles of democracy. Such
important choices should be made with public input and review.
 Results-oriented: The budget defines what is to be accomplished and the measures
that indicate the results desired have been achieved.
The Budgetary Code of Georgia enacted in 2009 provides a set of principles for the
budget system comparable to the ones identified above. These are identified in Article 4
of the Budget Code in the following box.
Article 4. Main Principles of the Budgetary System of Georgia
1. Any participant in the budgetary system of Georgia at all the stages of the
budgetary process shall fulfill the following principles:
a) comprehensiveness – complete reflection of all the changes in the revenues,
expenditures and balance in the relevant budgets;
b) transparency – openness of the review procedure of the draft budgets in the
representative agencies for the population and mass media; publishing of the reports on
the approved budgets and their fulfillment; availability of the information about budgets
(except for the secret information) for any physical and legal entities;
c) accountability – responsibilities of all the participants in the budgetary process
for carried out activities and for provided budgetary information;
d) independence – independence of the state budget of Georgia, republican
budgets of the Autonomous Republics and the budgets of the local self-governing units,
which are provided for by their own revenues and balances, and also the right to
independently define own taxes in accordance with the legislation of Georgia.
e) unity – usage of common principles defining the basis for the central agencies,
Autonomous Republics and local self-government bodies of Georgia, uniform budgetary
classification, single accounting system, and state financial control;
f) universality – direction of all the budgetary revenues for joint financing of
expenditures except for the cases defined by the present Code. At the same time, no
revenue, except for the revenues financed by donors, shall be earmarked for covering of a
6

specific expenditure. Retaining of the revenues by a budgetary organization for its own
purposes shall not be allowed except for the cases when the budgetary organization is
represented by a legal entity of public law and/or non-profit (non-commercial) legal
entity;
g) consolidation – bringing the revenues at all the budgetary levels within the
uniform system of accounting of the state treasury and payment of expenditures within
the rule defined by the legislation of Georgia, management of the uniform system of
accounting of the state treasury by the State Treasury and their placement within the
National Bank of Georgia and/or other banking institutions.

2. International Model of Progam Based Budgeting
In this section, to further develop the awareness and knowledge of the methods and
techniques of PBB the main features of program budgeting will be briefly described.
A. Program Based Budgeting
The program based budget form organizes proposed expenditure according to output or
contribution to governmental objectives. Programs are constructed on the basis of
contribution of those objectives. The focus is neither on what governments buy nor on
activities in which the government is engaged, but on, as nearly as can be defined the
outputs of government. The budget places together programs, which contribute to a
similar objective so that competition for funds occurs among real alternatives. In an
ordinary budget, agencies or departments compete for funds, as do programs within
agencies or departments, so similar program may receive different treatment simply
because different agencies house them. In a program budget, similar approaches for
handling a public problem will compete with each other, not with dissimilar programs
housed in an administrative agency.
Program budgeting defines the goals of an agency and classifies organization activities
contributing to each goal. Grouping is by end product, regardless of the administrative
organization functions, to focus competition for resources among objectives and
alternative programs for achieving objectives. The program structure identifies agency
products; it does not focus on the inputs used by the agency.
Program budgeting requires careful definition of programs. That exercise is the essence
of such budgets. While a good understanding of government operations is vital for
program classification, the logical criteria for program design may be considered as the
following:
1. Design programs so that they permit comparison of alternative methods of pursuing an
imperfectly defined policy objective. If there are competing ways of reducing some
social problem, make certain they end up in the same program.

7

2. Programs must include complementary components that cannot function separately.
The health programs require doctors, nurses, physical facilities, and the like in
appropriate proportions—and those elements must all be in the program.
3. When one part of a government serves several others, separate supporting service
programs may be needed. Thus, central electronic data processing, personnel
administration, and so forth may permit operating economies not possible if each agency
handles them separately. These activities can be handled as programs, even though their
outputs are not governmental objectives.
4. Governments may have to have overlapping program structures to achieve their
objectives. Many revenue departments, for instance, have structures arranged both
functionally and geographically. That approach appears when both regional and national
objectives are important.
5. Finally, some activities involving research, development, or long-term investment may
be considered as separate subprograms because of the long time span over which the
expenditure takes effect. That is because of the uncertainties that preclude reasonably
reliable estimates of resource requirements beyond relatively short portions of their life.
Program construction is the identifying feature, but program budgets often have other
elements accompanying them. First, budget time horizons expand beyond an annual
appropriation to the lifetime of the program. While appropriation remains annual,
decision makers are presented the total cost of the program considered, not simply a
down payment. Second, steps in preparation induce agencies to consider alternate
operating methods and to propose only those that require least cost to achieve the desired
results. Because agency administrators traditionally have incentives toward larger
budgets for prestige or advancement, such steps are difficult to enforce. Finally, program
budgets often include some benefit-cost analysis of the resource use of programs
proposed. Programming brings together costs for achieving particular objective, so an
important piece of the data needed for such analysis is provided.
1. Advantages/Disadvantages of Program Based Budgeting

Program budgeting has the advantage of focusing the organization on its mission and
purpose with a budget structure that clearly identifies these and relates them to develop
service delivery Programs. For this reason program based budgeting is a major planning
tool.
In case it is not properly applied, this tool can become an administrative burden. There is
a tendency to develop a very information intensive effort to support the program based
budgets. This is often beyond the present capacities of the staff and information systems
to fully develop and apply in the program based budget process. Consequently, much
time is spend on developing the information requirements rather than focus on the critical
information needs that would support better budget decision making.
Even where used, program budgets cannot cure all budgetary problems. Three problems
merit special attention. First, many public activities contribute to more than one public
objective and the best programmatic classification for them is not always apparent.
8

Whatever choice is made will emphasize one set of policy choices at the expense of
another set.
Second, cost estimates for programs may be less meaningful for public decisions than
imagined. There is no scientifically defensible method for allocating the substantial joint
costs appearing in agencies. Because most units work with several programs, many
resources used by the agency are shared and not clearly attributable to a single program.
Furthermore, public decisions require concern for social implications—not simply money
out of pocket—while program budgets still focus on agency cost alone. Thus, the
program cost data is unlikely to be directly usable for guiding choices.
Finally, program budgets may have little impact on decisions. Legislatures, lobbyists,
and governmental departments have experience with the traditional budget format. All
are familiar with that construction and have developed general guides for analysis for that
format. New presentations require new guides and extra effort by all. Unless the major
participants in the budget process actually want the improved presentations, it will be
ignored in favour of the format to which they are accustomed.
B. Comparison of Budgeting Methods
In order to illustrate and clarify the differences of these budgeting methods the table
below provides some of the main features of each of these methods and orientation for
budgeting. The traditional line-item expenditure method is included here to demonstrate
the main differences among these methods
Budget Method

Characteristics

Line-Item
Expenditure Budget

Expenditure by
commodity or
resource purchased
Expenditure Related
to Public Goals
Cost data across
organizational lines

Program Budget

Primary
Organization
Feature
Resources
Purchased

Budget Focus

Achievements
(products or
outputs)

Planning

Control of
Resources

B. USERS OF THE PROGRAM BASED BUDGET MANUAL
National Level Budget Users
At the central government level, the main users of this program based budget manual will
be the Ministry of Finance, other central ministry and spending units (LEPL) staff that are
involved in the development of the program based budget submissions. These staff is the
hands-on users of this guide in order to prepare program budget submissions that meet
9

the requirements of the legal framework provided in the Budget Code and conform to the
policy directions identified and described in the Basic Data and Directions document.
This manual will provide the detailed sequence and activities that encompass the
implementation of program based budgeting in Georgia. The users of the manual will be
not only the main central ministries and spending units, but also the Parliament and State
Audit Office.
Subnational Level Budget Users
The subnational level budget users, the autonomous regions and the local governments,
that are implementing program based budgeting following the lead of the central
government will find this manual useful to understand the basic concepts, terminology,
and practices of program based budgeting. While their programs and expenditures may
differ substantially from the central government, the same basic concepts and practices
will apply. In addition, this manual will help them to prepare their budgets in accordance
with the central level budget process and ensure there is consistency and accountability
between the government spending levels.
Public Users of the Budget
The public, in terms of both citizens and non-governmental organizations, have a great
interest in understanding the budget and how it addresses their needs and priorities. For
this reason, the budget should also be prepared with the intention of it being a means of
providing citizens and their representative organizations with the means to utilize the
information in the budget. A clear and concise budget presentation not only serves the
public officials, but also the citizens who fund the programs through their taxes and want
to see how their money is being use.
C. USE OF THE PROGRAM BASED BUDGET MANUAL
Reference for Program Based Budget Preparation
This manual is intended to provide the staff of the Ministry of Finance, the other
ministries of the central government, and with subnational units of government in
Georgia with a reference source for implementing program based budgeting that complies
with the requirements of the relevant budget methodology. It is also intended to provide
those using the manual with the methods and techniques of program based budgeting and
how it can be implemented within their government organization.
Increased Capacity for Making Budget Decisions
The Guide is also intended to increase the skill and capacity of
government officials to improve the budget decision-making process.
The application of program based budget methods should provide for
improvements in translating citizens’ needs into public expenditures to
meet these needs. The application of program based budgeting should
10

improve this process and ensure that funds received will be expended
in a more economical and efficient manner. It will also allow for better
methods of prioritizing the competing needs of the citizens on a more
rational basis.
Increased Transparency and Accountability of Budget Policies
This manual is also intended to provide for a more transparent and accountable method
by which central ministries and spending units makes their expenditure decisions. The
inclusion of performance indicators and costs associated with these expenditure decisions
should increase the interest of citizens in how these funds are being spent and generate
more citizen interest and participation in the public budget process. Transparency and
accountability are major reasons for implementing a performance based budget system.

II.

Practical Application of PBB on Program Level
A. INTRODUCTION TO DEVELOPING PROGRAM BASED BUDGET
Overview of Program Based Budget Elements
The following diagram provides a picture of the relationships among the main elements
and features of program budgeting. Program budgeting is based on a hierarchy of
elements and not just a division of programs/subprograms to develop a program based
budget.
This hierarchy begins at the mission level, which requires the organization to focus on
what it strategic level purpose is in the overall governmental organizational scheme. This
mission is then translated into program(s), which require the identification of goals and
objectives of that program as it relates to the mission of the organization.
At the third level, the details of the program(s) are determined. It is here that
programs/subprograms are broken down to a finer detail through activities that begin with
identification of the critical elements that support the program budget; inputs and outputs
that are directed to strategic policy outcomes envisioned in the mission statement and
accomplished at the most efficient or least cost approach. At this third hierarchical level,
the development of performance measures is applied to the outputs and outcomes.

11

MISSION

GOALS

PROGRAM

OBJECTIV
ES

“Results,
“Quality”
“Budge
t”

OUTCOME

“What was
done”

OUTPUT

INPUT
EFFICIENCY

“Cost/unit,
Employee hrs
/unit”

PERFORMAN
CEEEEE
MEASURES

The clarification of the mission of the organization is utilized to define the
programs/subprograms that would fulfill the mission statement. A few key points will
made here to reiterate the requirements of ensuring that programs/subprograms are
properly defined and developed in the program budgeting process.
The development of programs/subprograms should follow a rational relationship from the
mission of the organization. If the mission of the organization, such as a ministry of
education or ministry of health, is to provide quality services that are accessible to all the
people at a economical cost, then the programs must address these areas of quality,
accessibility and cost.
12

Defining programs as they relate to these mission purposes requires some creativity and
innovation in the development of the programs/subprograms. The following provides
some examples of defining of programs/subprograms under several sectors.

Ministry
Agriculture

Education

Health

Mission/Policy
Priority
Increase
Quality
&
Access
to
Health Diets
Provide
educational
opportunities to
all citizens
Preventative
Health

Program

Sub-program

Support Dairy Milk Production
Production &
Related
Products
Primary
Increase
School
Education
Enrollment
Malaria
Prevention

Distribution
of
Malaria
Medicines/Material
s

In these examples the relationship of the organization mission and sector priorities
provides a basis for determining what programs/subprograms might be envisioned and
developed to achieve the mission and priorities. These are developed to the level of
activities that would support the programs/subprograms and lead to further definition of
the program.
Main Terminology of Program Based Budgets
The confusion over what constitutes program-based budgets is more easily resolved by
the understanding the main terminology that is applied in this budget method. The main
terminology has been provided in the diagram above. These constitute the following
terms with some generally accepted descriptions of what they mean.
Mission: The main purpose of the governmental organization and identifies its main
responsibility areas for developing programs.
Program: Generally defined as an organized set of activities directed toward a common
purpose, or goal, undertaken or proposed by an agency in order to carry out its
responsibilities.

13

Goal: An observable and measurable end result having one or more objectives to be
achieved within a more or less fixed timeframe.
Objective: A specific result that an organization aims to achieve within a time frame and
with available resources and is, in general, more specific and easier to measure than
goals.
Input: Resources used in the carrying out of activities to produce outputs (for example.
labor, equipment, buildings).
Output: A good or service provided by an agency to or for an external party.
Outcome: Changes brought about by public interventions upon individuals, social
structures, or the physical environment.
Efficiency: Production of an output at minimum cost while holding quality constant,
given prevailing input prices.
Performance Measures: Ratings or quantitative measures that provide information on the
effectiveness and efficiency of public programs.
Basic Features of Program Budgeting
The above sections have provided a description of the main features of program
budgeting and identified and defined some of the key terminology that is utilized in
developing a program-based budget. In this section, the basic features of program
budgeting are briefly summarized prior to addressing some critical aspects of developing
and implementing program budgeting.











Program budgeting is the planning, authorization and execution of expenditures in
terms of programs.
The key to developing the programs is to define a system of expenditure
classification and accounts that will be grouped under the program structure.
The classification of expenditure allows for the program to be assessed and
prioritized in terms of the allocation of resources to specific problems that the
budget is to address.
Program/subprograms will be developed to the activity level where the resource
inputs (personnel, materials, and capital expenditures) will be defined to the lineitem level that is related to the budget and accounting classification codes.
The prioritization of expenditure resources allows for selection of programs and
expenditures within sectors, such as education or health, but not across sectors.
The initial prioritization of program expenditures within sectors is decided at the
ministry level where the responsibility and accountability for these decisions and
the use of these resources will be evaluated against program goals and objectives.
The prioritization of programs and expenditures will be made at the governmentwide level and reviewed and adopted by the legislature or parliament.
14

Number and Size of Programs
One of the first decisions that will need to be made is how many and how large, in terms
of financial values, should programs be in the overall program budget structure and
organizational entities. There is no hard and fast rule, although for many ministries, three
to five programs may be a reasonable number.
A number of factors need to be considered in determining the number of programs.
These are:





Number of different sector areas aimed at different client groups
Degree or nature of the government’s policy priorities as defined in the national
plans and sector strategies
Ministry’s or agency’s internal management and technical capabilities
Immediate to medium-term impacts expected to be achieved

The number and size of programs should be developed in a coordinated approach
between the ministry program management and the ministry of finance. The ministry of
finance may wish to provide some guidelines on the development of the number of
programs and their values.
The determination of how many and how large the programs should be balanced between
one or two large programs or having many small programs. Only careful analysis of the
organization’s mission and the sectoral areas that must be addressed in the budget can
provide some indication of how to achieve this balance. For example, rather than one
large education program that covers pre-primary through university education, it would
be better to create several programs that cover the various age groups and school grades.
This will enable a more refined analysis of the programs and serve as a better basis for
budget decision-making as well as program evaluation.
On the other hand, creating too many programs will not serve the purpose of determining
the allocation of funds on a broader basis to the social or sector problems that have been
identified. It also creates difficulty in requiring more time for preparing the budget,
maintaining accountability in program areas, and overly complicates the budget and
accounting classification system.
The number of recommended programs has varied from three to five or as many as five
to eight for a particular ministry. A ministry with a more narrowly defined mission and
scope, such as a ministry of transportation or education, might find the three to five
number of programs as reasonable. However, a ministry with a broad mission and scope,
such as ministry of education, culture and sport, might have to have as many as five to
eight to adequately differentiate the programs in each of these areas.
The key to solving this problem is for a set of guidelines to be developed that provide
some parameters with regard to the number of programs and the minimum or maximum
values of these programs and then apply this across all ministries.
15

B. STEPS IN DEVELOPING PROGRAM BASED BUDGET
In the following section, a step-by-step outline for developing a program budget is
presented. This is a model for determining what steps are necessary and how these might
be accomplished. The implementation of program budgeting takes a number of budget
cycles to complete the process and be fully achieved. While the steps are placed in what
might be considered a logical order of development, this is not intended to indicate that
these must be followed in this sequence. In many cases, some of these steps might be
well fully developed and attention to the other steps will require more time and effort to
achieve. Therefore, some steps in this process might be rearranged or merged as the
particular program budget situation is assessed and implemented.

Step 1: Identification of Legal Requirements and National
Policies
Step 2: Define the Misssion of the Organization
Step 3: Define the Programs/Subprograms
Step 4: Define the Goals/Objectives of the Program
Step 5: Develop the Activities of the Program/subprogram
Step 6: Place Programs in Organizational Structures
Step 7: Determine the Outputs/Outcomes
Step 8: Develop Performance Indicators
Step 9: Identify the Inputs to the Activities
Step 10: Cost the Inputs
Step 11: Prepare the Program Budget Submission
Step 12: Adoption of The Budget
Step 13: Execution of the Budget
Step 14: Monitor/Evaluate Program
Activities/Accomplishments
Step 15: Audit the Program

Step: Identification of Legal Requirements and National Policies
The essential first step is to identify the legal requirements and the national policies that
relate to implementing program budgeting. This is really a two phase process within this
one step.
Basic Legal Framework
The first phase should be an identification of the existing legal framework, or lack of one,
for implementing program budgeting. Program budgeting should be clearly identified
and defined in the basic legal framework that relates to the public finance and
management system within the government structures.

16

Typically, the authority for implementing program budgeting is contained in the Law on
Finance or Budget as proposed by the government and enacted by the Parliament. This
legislation is often termed the Budget Code that controls the government financial
management system. This Budget Code will largely identify the requirements, scope and
responsibilities for preparing a program budget as part of the annual budgeting cycle
The budget code will be supported by the issuance of a specific instruction or regulation
issued by the Ministry of Finance that will provide more detail on the content and process
of developing the program budget. This should provide the basic methodology of the
program budget process. This often will be a rather detailed instruction that will be
referenced each year for the budget preparation.
The Budgetary Code of Georgia, adopted in 2009, in Article 3 provides the legal basis for
the budgetary system with Article 9 specifically identifying Program Budgeting as the
basis for developing the budget.
As a further supplement to the implementation of the program budget methodology, the
Ministry of Finance will issue annually before the beginning of the budget planning and
preparation process a further budget instruction or budget circular that will be specific to
the requirements of preparing the forthcoming budget. This will contain in most
instances the basic expenditure and revenue projections, the expected increases/decreases
in certain expenditure categories, such as personnel salaries, etc., and the basic
information and budget submission forms that are to be completed. These activities will
largely be determined and developed within the Ministry of Finance and the relevant
central ministries budget offices.
The Order of the Minister of Finance #385, adopted July 2011, details the specific
components and timeframe in preparing the budget on a program basis.
National Policy Review and Update
This phase of the first step should involve a broad based policy review from the central
government political leadership level to the management level of the central ministries.
National planning and development policies, sector policies and other guides for the
national policy prioritization is involved in this process. This process will be a
undertaken at the government cabinet level and ministry levels to review the current
national policies, review and prioritize new problems and evaluate prior accomplishments
based on the performance indicators. This phase should be guided through policy
working groups and even include national organizations and community based groups
that wish to bring to the government’s attention some policy problems and needs.
The Basic Data and Directions (BDD) document that is described in Article 34 through
56 of the Budget Code is the primary policy instrument that is prepared annually to
support the budget decisions of the government. The BDD is based on national plans that
define the strategic goals and objectives for the development of the various sectors in
Georgia.

17

Step: Define the Mission of the Organization
Understanding and defining the mission of the organization will provide a reference point
and framework for developing the programs/subprograms that are key to implementing
the program budget. Defining the mission of the organization or ministry may not be as
simple as is often thought. Ministries may have multiple sector functions as is often the
case and these may require the mission of the organization to be defined in very broad
terms and more define by goals and objective statements.
Mission statements identify and describe the larger purpose of the organization and the
services that it provides and establishes the basis for determining Program and SubPrograms and their goals and objectives.
Mission statements:





Provide motivation and spirit to employees in the conduct of their work
Define why a public organization or Program with its Sub-Programs exists
Define what the public organization or Program with its Sub-Programs does
Define for whom the public organisation or Program with its Sub-Programs exists

An example of a mission statement for a Ministry of Education might be the following:
The Ministry of Education is charged with the responsibility of ensuring that all
Belizeans are given an opportunity to acquire those knowledge, skills, and attitudes
required for their own personal development and for full and active participation in the
development of the nation. In carrying out its mission, the Ministry of Education shall
work in collaboration with all education stakeholders.1
This mission statement is rather simple, but expresses its responsibility (charged with the
responsibility of ensuring), its scope of beneficiaries (all citizens), content of its efforts
(knowledge, skills and attitudes), and purpose (for their own personal development and
for full and active participation in the development of the nation.)
The mission statement is often accompanied by a vision of what is to be achieved through
the accomplishment of this mission. For Belize, the following vision relating to the
mission of the Ministry of Education, Sports and Youth:
Equitable access to and efficiently delivered quality and relevant education, at all levels,
for all Belizeans, founded on the following integrated principles:
Education for Self: to create confidence, self-sufficiency, and excellence in an ever
changing environment.
Education for Strength: in preparation to enter, participate, and contribute ethically to
an economically strong, socially rich, culturally proud, and politically just society.

1 Website of the Ministry of Education, Youth and Sports, Government of Belize
18

Education for Life: Never too old to learn or too old to start. Belizeans of all ages will
enjoy educational opportunities as we create a country founded on the intelligence and
education of its greatest assets, the people.2
Often, mission statements will be accompanied by identification of strategies to achieve
the mission. The following is an example of how mission and strategies can be
formulated.
Our mission is to promote good health and reduce illness, ensure access to good and
affordable healthcare, and pursue medical excellence. We achieve this through three
strategies:
Promote good health and reduce illness
Good health is to a great extent the responsibility of the individual. But the Ministry plays
a major role in educating and providing information to the public on how they can
maintain a healthy lifestyle. The Ministry also play a key role in reducing illnesses in
Singapore through the control and prevention of diseases and ensuring that resources are
allocated appropriately to do this.
Ensure access to good and affordable healthcare
The Ministry is responsible for ensuring that healthcare in Singapore is characterized by
good clinical outcomes and professional standards, and that services delivered are
appropriate to each patient’s needs. While we emphasize the principle of co-payment, we
also ensure that healthcare remains affordable to Singaporeans.
Pursue Medical Excellence
Our healthcare system is well regarded and Singaporeans have benefited from it.
Increasing number of foreign patients seek treatment in Singapore. We will build on this
so that we become even better known for certain areas of healthcare. In the process, we
must make sure that healthcare costs continue to remain affordable to Singaporeans.3
As can be seen in the above, the mission statements should be rather simple statements
that encapsulate the main scope and responsibility of the organization or ministry.
Further detail can be provided in vision or strategies that underpin and clarify in more
detail the mission.
The mission statements for the spending units in Georgia are defined in the national
strategy plans as well as being developed in the ministry action plans and the program
budget submissions.
2 Website of the Ministry of Education, Youth and Sports, Government of Belize
3 Ministry of Health, Singapore
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Step: Define Programs/Subprograms
A. Defining Programs/Subprograms
Properly defining programs and subprograms is often a very difficult exercise in
implementing program budgeting. The critical element here is to define the mission of
the organization in some broad, but specific terms, and then identify within that mission
statement some classification of these purposes of the organization and form these into
program/subprogram areas. This classification tends to be directed toward a particular
problem or a particular target grouping. As Robinson indicates:
“programs are in some cases defined in terms of both their intended outcome and their
target client groups or region. For example, education ministries typically have separate
program for primary and secondary education. These programs have the same intended
outcome—educated and socialized young people—but they target different client groups
(i.e. young people in different age ranges). Similarly, in health treatment services, the
government may wish to make explicit decisions about the regional allocation of health
budget resources—the result of which may be a program structure in which there is a
hospital program which is comprised of regional subprograms.”4
The development of the program/subprogram structure requires a thorough review of the
organizational purposes and its organizational structure. There must be compatibility
between the beneficiary directed (students, medical patients, farmers, etc.) targets of the
program and the organizational delivery structure (centralized, decentralized, or
deconcentrated).
One of the main problems of defining programs/subprograms is to mistake the activities
as programs/subprograms. This tends to make the program budget a line-item budget
focused on what the expenditure is for, rather than for what the expenditure is intended to
achieve. Consequently, the program budget becomes more of a management tool rather
than a budget decision-making tool.
A well-developed policy development process based on sector strategies and
organizational mission statements will identify some of the key problems and resulting
program areas that the program budget should be oriented around. These will form the
broader goals and objectives that can then be related to specific outputs/outcomes. Once
the outputs/outcomes are determined then the activity levels that relate resources and
costs to these activities will clarify the budget decisions that must be made.
The following diagram presents the hierarchy of a program structure.

4 Marc Robinson, Performance Based Budgeting Manual, Center for Learning on
Evaluation and Results, p. 53.

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Sectoral Goals
Programs
(Outcomes)
Sub-programs
(outputs)
Activities or Projects








The sectoral goals represent the longer-term objectives to be achieved by the
ministry as specified in the national planning policy document and the sector
strategies.
The programs (outcomes) identify the specific medium-term benefits to be
delivered by the ministry to the community and contributing to the attainment of
the sectoral goals.
The sub-programs are a group of outputs (products and services) delivered to
external clients to achieve the government and ministry goals.
The activities or projects are tasks or a series of connected tasks undertaken to
provide goods and services to the community.

In the Georgia program budget development process, the identification of sectoral goals,
programs, and subprograms should be done during the initial development of the BDD
and the action plans that form the basis of the later budget ceilings and program
allocations within the spending units.
Step: Define Goals/Objectives of the Program
A. Developing Program/Subprogram Titles and Objectives
It might be assumed that developing program titles and objectives would be a rather
simply and straightforward problem. Unfortunately, this is not always the case. As
mentioned above, there is a tendency to make program titles more of an activity
description than a simple and clear title of what the program is concerned with.

21

B. Developing the Goals/Objectives of the Program
Once the program/subprogram structures are identified, the development of the program
objectives should be undertaken. Again, this is not always easy to accomplish. It is
important that program objectives be developed with some reference to the program
targets/beneficiaries so that the performance indicators and measures may be easily
derived. The program objectives should be oriented toward the outcomes of the program
and this will often include the target population that will benefit from the program.
There is a natural tendency to define program objectives to be very broad and output
oriented that are not easily measurable. Also, there is also the tendency to try to make too
many program objectives rather than a more modest and achievable number. While there
is no specific rule about the number of objectives it is generally considered that a
minimum of three and maximum of five would provide a clear identification