Steps of Budget Formulation
Explain the steps of budget formulation.
The steps of budget formulation are as follows:
- Estimation of overall expenditure and income: In the first stage, the planning authority should decide on the primary targets of the expenditure and the possible income or revenue of the government. On the basis of the primary targets, the overall expenditure is decided. The national development council including all the representatives of the government agencies make the final decision of budget limit.
- Priority establishment: In the second stage, the planning authority gives the weightage to the different sectors and decides the priority of their development. On the basis of this priority, it gives direction to all the departments to prepare and submit their proposals remaining within the limit of the budget
- Project preparation: The concerning departments prepare their projects and submit the proposals to the planning authority.
- Selection of projects and submission: The planning authority reviews and selects the projects submitted by the concerning departments and informs them about the selection. Moreover, it reviews the financial budget off projects and tries to adjust to the budget limit. The selected projects are submitted to the budget office.
- Preparation of final budget: The budget office gives the final shape of the budget after making a thorough review on the basis of different principles and conditions. The final shape of the budget is approved by the cabinet and is presented to the legislature for discussion.
- Authorization and execution: In the final stage, the budget is discussed in the legislature. After a long discussion on each and every item of the budget, it is passed and forwarded for the approval of the head of the state. When it is approved, it is authorized and the finance ministry begins to execute. The budget is disbursed to the concerning departments on four monthly basis remaining within the limit of the budget allocation. The disbursement of the fund depends upon the nature and the performance of projects. Lastly, the auditor general controls the budget through the function of the audit. Thus, it ensures the authorities that the expenditure has been made according to the law and rules of the country.