Understanding Budget Analysis

8/2/2019 Understanding Budget Analysis

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BUDGET ANALYSIS

av ama

Governance Programme Coordinator

ActionAid Nigeria


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OBJECTIVES OF THE SESSION

Understand budget analysis

and concepts en y an exp a n oo s or

bud et anal sisEngage in budget analysis for

monitoring and tracking


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WHAT IS BUDGET

Budget:A statement of expected income and expenditure of

(an individual/a household/organization)/government within a

specific period of time.

Analysis: examination, study, breakdown the breakdown of

any particular thing or place to see the results and come up

with suggestions, recommendations for improvement.


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WHAT IS BUDGET ANALYSIS? - CONTI

ways/systematic steps, which

understand different aspects of the

process in comparison to the norms of

lives and environment.


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BASIS OF BUDGET

Budget analysis is generally based on certain generally

acceptable standards, baselines or benchmarks. Whatare these standards?

How many of people develop a monthly family budget?

How did you develop your last family budget?


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BASIS OF BUDGET

- Questions:

Who develops the family budget? (Participation)

(Accountable)

Did the budget show all the familys expected income and

(Realistic & Accuracy)

How often was spending and income coming in checked?

(Fiscal measure)


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BASIS OF BUDGET

- Questions:

Were there ex enses included in the bud et ou considered

waste of money? (Efficiency)

vulnerable members of the family?

(Equity)

budget?

(Transparency)

as your am y u ge w n a me rame (Time bound)


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BASIS OF BUDGET

- In addition to the above features of a ood bud et an

analysis of the budget also tries to answer the followingquestions:

ow muc was rea y a oca e or spen on an ac v y an

area within the period being reviewed?

(Normal value and Real value)

Is the amount allocated to the activity enough?

(Adequacy)

How does money allocated for or spent on an activity/an area

compare to money provided for or spent on anotheractivity/area?

(Priority)


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BASIS FOR BUDGET

- Questions:

Is the budget meeting its target goals? Or did the budget meet

its target goals?

(Output)

What effect has the budget had on the lives members of the

family and the familys ability to earn income (economy)?

(Impact)

Are resources being allocated fairly? Is it targeting vulnerable

groups of the community or population?

E uit

Are there indirect spending due to the impact of the issues

identified?


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WHY BUDGET ANALYSIS?

With the discussions we have had wh do we need to

systematically examine the budget for the abovebenchmarks? (Ask for volunteers)

Budget analysis provides facts and

figures that can be used to effectivelyengage duty bearers.

People need budget analysis

knowledge and skills to be able toengage with constructive, factual and

valid facts.


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WHY BUDGET ANALYSIS? - CONTI

Monitoring is made effective when the

budget is properly examined andsecondary data generated.

SOs closeness to citizens enables them

to gather unique information on citizenpr or es, an r ng c v soc e yperspectives into the budget.

ybecome aware of community issues and.


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ARE THERE TYPES OF BUDGET ANALYSIS?

PRINCIPLE ANALYSIS: looks on values and norms

.

Participation: Were citizens actively involved in thebudget process, from formulation to evaluation?

ccounta ty: re government o c a s an po t c ans

open to scrutiny on what, when, and how they spent public

money? Transparency: Is the budget process open to the people;

documents available to the public; followed a legal, public

and acceptable procedure?

Accuracy: Can the budget revenue and expenditure meetthe demands it plans to meet?


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ARE THERE TYPES OF BUDGET ANALYSIS? PRINCIPAL ANALYSIS: - Conti

,

especially to disadvantaged and vulnerable groups? Efficiency: Does the budget planning and implementation

ensure va ue or money

Timeliness: Is the extent to which the budget was

implemented within the defined time frame?


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ARE THERE TYPES OF BUDGET ANALYSIS? CONTENT ANALYSIS: looks at the revenue and the

money on, in different areas (sectors), e.g. education,health, etc. Includes the following:

Economic analysis evaluates and scrutinizes the budget

to find out economic progress it aims to achieve

Budget accuracy determines the ability of the budgetsrevenue and expenditure to meet pre-determined objectives.

Sectoral analysis finds out allocations made on various

sectors and sub-sectors for patterns and priorities

expressed by the budget.


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ARE THERE TYPES OF BUDGET ANALYSIS? OUTPUT ANALYSIS: Determines whether the fund

services to the target beneficiaries. OUTCOME ANALYSIS: Determines whether the

objectives of the budget were met in terms of number

of people that are benefiting from the budget

im lementation man hours saved due to the roduct

(e.g. rail construction) or service (e.g. GSM phones)

provided.

: e erm nes e c anges animprovements taking place in the lives of the whole

community or society.


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TOOL 1: SHARE OF THE TOTAL BUDGET

(PRIORITY)

Determines of level of priority a government gives to

an item in the budget.

.

Always presented as a percentage.

Formula:

MOUNT LLOC TED

TOTAL BUDGET AMOUNT

MOUNT LLOC TED

TOTAL BUDGET AMOUNT

X 100X 100


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Always present as a percentage using tool 1 for someAlways present as a percentage using tool 1 for some

Compares the share allocated to specific sectors,Compares the share allocated to specific sectors,departments, programs, etc. over different budgetdepartments, programs, etc. over different budgetyearsyears

It shows whether the percentage share is increasingIt shows whether the percentage share is increasing

or decreasingor decreasing It answers the question of whether there has been aIt answers the question of whether there has been a

shift in prioritiesshift in priorities


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COMPUTING TRENDS IN BUDGET

ALLOCATIONS

2010 2011

Total Annual

Budget

Amount Percentage Amount Percentage

Ministry

Water &

Sanitation

Education

Health

Agriculture

Defence


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TOOL 3: NOMINAL GROWTHTOOL 3: NOMINAL GROWTH

DeterminesDetermines increaseincrease oror

ecreaseecrease oo ee amounamoun

fromfrom oneone yearyear totoanotheranother earear toto faceface

valuevalue

ItIt determinesdetermines progressprogress2 1

*100GRAllY AllY

N

InflationInflation isis notnot aa factorfactor

inin thethe calculationcalculation

1

PresentPresent asas timetime seriesseriesinin %%agesages


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CALCULATING NOMINAL VALUE AND

GROWTH RATE

Determines increases or decreases

of the amount from one year toanother at face value.

Nominal value is expressed in

numerals. Nominal growth is expressed in

NB: Inflation is not a factor in this.


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EXAMPLE OF CALCULATING NOMINAL

GROWTH Health Year 2 -Year 1 = N (Nominal Value)

Nominal Growth =

Nominal value x 100Year 1

qua s = nom na growt rate


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CALCULATING NOMINAL GROWTH

the Following in the 2011 and 2012u ge :

HealthGovernment House

a er esources


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TOOL 4: REALTOOL 4: REAL VALUEVALUE OFOF

ConsiderConsider inflationinflation atat thisthis stagestage

.. ..

DeflatorDeflator ==YearAdeflatorYearAdeflator((100100++InflInfl..RateRate yryr BB)=)=DeflatorDeflator YearBYearB

100100

NominalNominal valuevalue isis thethe faceface valuevalue ofof allocationallocation

RealReal valuevalue isis thethe urchasinurchasin owerower ofof thethe allocationallocation(how(how muchmuch goodsgoods andand servicesservices cancan itit buy)buy)

HenceHence budgetbudget of of aa sectorsector mightmight bebe increasingincreasingnominallnominall butbut decreasindecreasin inin realreal termsterms

DeflatorDeflator cancan bebe generatedgenerated asas timetime seriesseries

N o m V a lv

D e fla to r


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TOOL 5: REAL GROWTH RATETOOL 5: REAL GROWTH RATE

FindsFinds outout whetherwhether therethere

hashas beenbeen aa realreal increaseincrease oror

ofof thethe amountamount allocatedallocated oror

actualactual expenditureexpenditure fromfrom

2 1

1

*100v vG Rv

R Y R YR

R Y

yearyear toto yearyear

InIn calculatingcalculating realreal growthgrowth

ra era e youyou cancan seesee ee reareaamountamount overover thethe yearsyears

inin realreal termsterms


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TOOL 6: ANNUAL AVERAGE GROWTHTOOL 6: ANNUAL AVERAGE GROWTH

RATERATE

1 2 ...GR GR n GRGR

Y R Y R Y RAA

ThisThis showsshows inin thethe averageaverage overover aa

n

periodperiod ofof timetime whatwhat thethe realreal increaseincrease

oror decreasedecrease inin thethe rowthrowth hashas beenbeen..TheThe realreal growthgrowth raterate overover aa periodperiod

ItIt cancan bebe describeddescribed asas thethe averageaverage

realreal growthgrowth raterate..


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::S e c A l l

P

DeterminesDetermines howhow muchmuch isis allocatedallocated perper personperson inin

o p

department,department, unit,unit, andand program/projectprogram/project..

NominalNominal perper capitacapita isis calculatedcalculated whenwhen budgetedbudgeted

RealReal perper capitacapita isis calculatedcalculated whenwhen thethe budgetedbudgetedamountamount hashas beenbeen deflateddeflated

s owss ows equ y,equ y, a equacya equacy anan progressprogress.. ThisThis can be used to address the issues of

adequacy and to strengthen advocacy.

Formula = Budget/Total population


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TOOL 8: REAL GROWTH IN PER CAPITATOOL 8: REAL GROWTH IN PER CAPITA

BUDGETBUDGET

*100PCBR P Y

RealReal growthgrowth inin perper capitacapita budgetbudget usesuses realreal perper capitacapita

budgetbudget hencehence thethe amountamount mustmust havehave beenbeen deflateddeflated ItIt helpshelps toto identifyidentify ifif therethere hashas beenbeen aa realreal increaseincrease oror

decreasedecrease inin thethe amountamount allocatedallocated oror spentspent perper personpersonoverover thethe yearsyears

tt measuresmeasures progressprogress a tera ter a ust nga ust ng oror n at onn at on ananpopulationpopulation growthgrowth


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::

ItIt comparescompares

spendingspending patternpattern ofof Serenterent sectorssectors

ItIt helpshelps toto identifyidentify

ee ruerue pr or ypr or y

sectorsector of of aaecB

administrationadministration


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CALCULATING RATIO:

Purpose:

budgetary allocation over another This serves the purpose of drawing attention to

issues of allocative efficiency and priority sector.

The sector you wish to use in comparing is used to

e.g.= Sector B (divided by) Sector A

,

ratio of the water resources budget to the

TOOL COMPARING BUDGET TOTOOL COMPARING BUDGET TO


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TOOL 10: COMPARING BUDGET TOTOOL 10: COMPARING BUDGET TO

COSTSCOSTS

/ *RB AvCostperunit serv NumOutputs

/

R eU n d er o ve r

q B u d g et A c tB u d g et N u m O u tp u ts F u n d e d

meetmeet thethe expectedexpected outputoutput

CostCost perper unitunit isis likelike askingasking howhow muchmuch willwill itit costcost toto educateeducate aachildchild aa yearyear..

ItIt cancan alsoalso meanmean thethe unitunit costcost ofof anan itemitem fromfrom placeplace toto placeplace addedaddedoverover aa periodperiod ofof yearsyears oror aa numbernumber ofof placesplaces andand divideddivided byby thethetotaltotal numbernumber toto getget thethe averageaverage unitunit costcost perper unit/serviceunit/service

performanceperformance targets,targets, efficiencyefficiency andand effectivenesseffectiveness

TOOL 11: PHYSICAL MONITORING OFTOOL 11: PHYSICAL MONITORING OF


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TOOL 11: PHYSICAL MONITORING OFTOOL 11: PHYSICAL MONITORING OF

PROJECTSPROJECTS

ItIt improvesimproves efficiencyefficiency andand effectivenesseffectiveness ofof outputoutput asas wellwellasas outcomeoutcome andand impactimpact

BaselineBaseline SurveSurve :: BeforeBefore andand afterafter usinusin thethe samesamebaselinebaseline instrumentinstrument

LogicalLogical FrameworkFramework toto determinedetermine:: OutputOutput:: AgreedAgreed verifiableverifiable indicatorsindicators toto determinedetermine toto

whatwhat extentextent thethe projectproject metmet thethe immediateimmediate objectives,objectives,ee..gg.. numbernumber ofof waterwater borebore holesholes inin aa communitycommunity

OutcomeOutcome:: AgreedAgreed verifiableverifiable indicatorsindicators toto determinedetermine thethecontributedcontributed toto achievingachieving thethe purposepurpose ofof thethe project,project, ee..gg..increaseincrease inin thethe numbernumber ofof peoplepeople thatthat havehave accessaccess totocleanclean andand safesafe waterwater..

mpactmpact:: ncreasencrease nn t et e num ernum er oo waterwater oreore o eso esaffectedaffected hygiene,hygiene, reductionreduction inin thethe incidenceincidence of ofwaterbornewaterborne diseases,diseases, improvedimproved sanitation,sanitation, increaseincrease ininthethe numbernumber ofof femalesfemales oinoin toto schoolschool etcetc..??


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Calculate the priority sectors share of the total

, Calculate the nominal growth rate for health,

HIV/AIDS and PHC services Generate the real values of the budget allocation

over e years , an or ea ,

HIV/AIDS and PHC services Generate the real growth rate and the annual

avera e rowth rate over the ears for health Calculate the per capita budget for the priority

sector, sub-sectors above and the per capitabudget for the total budget allocation over the

ears 2010 2011 and 2012 Calculate the real growth rate per capita for the

priority sub-sector and the total budget allocation Calculate the ratio of the priority sector (health)

Calculate the ratio terms of capital againstrecurrent for health 2010, 2011 and 2012

Identif issues for advocac from our anal sis inthe priority sector


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ear n at on opu at on

2010 14.60

2011 9.50

2012 13.70


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THANK YOU

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Understanding Budget Analysis

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