N6 – Module 7 Introduction
A budget can be described as a “financial statement (or plan) which contains the estimates of revenue and expenditure over a certain period of time, i.e. normally one year” (Gildenhuys 1993:392).
What is government itself but the greatest of all reflections on human nature? If men were angels, no government would be necessary...
James Madison (1751-1836), U.S. President. Federalist Papers, no. 47 (Jan. 1788). Budget Concepts
Before showing the budget cycle, it is necessary to refer to terms which are used in an explanation of the formulation (drawing up) and the execution (the presentation and approval) of a budget. As we have clearly seen, budgets are used to • compile programmes which need to be executed; • serve as a document for approval by The Legislature (Parliament);
• serve as an instrument of control (see Module 2).
Revenue: the source of funds – income tax, business taxes (see Module 4 & 5) and property rates and taxes which is the main source for local governments.
Expenditure: the spending of funds – this is detailed so that it should be clear to see exactly who gets what funds.
Capital expenditure: this is spending on infrastructure or services which last longer than a current year – salaries last for as long as they are paid, but building a school means that capital expenditure has taken place. The maintenance of this building will fall under operational expenditure.
Operational/current expenditure: the funds needed to run a department; these include salaries, consumables, maintenance of buildings, etc.
Policy directives: at all times any budget should reflect the overall policy of the government of the day; these may be expressed in goals and objectives and in instructions to the various departments concerned.
Budget year: the fiscal year of the public service runs from 1 April until 31 March; local government authorities run from 1 July to 30 June each year.
The Annual Budget: Central Government
The Annual Budget, or Main Budget (there are others) is seen as the executive authority’s proposals for expenditure for a given financial year. It is tabled in Parliament and offered for debate, thereby satisfying the democratic principle of transparency (see p.27).
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