Modified Budgeting (MB) approach was implemented in 1990 through the issuance of Treasury Circular No. 11/1990 to overcome the weaknesses of Programme and Performance Budgeting (PPB). MB was regarded as the modification to PPB and it consisted of four important elements namely; expenditure target, programme agreement and exception report, a cycle of programme evaluation and a more generalised approach to expenditure control. The main concept behind MB is to 'let managers manage', and this concept was put into practise using a 'top-down' planning technique. However, MB has flaws in that it continued to place more emphasis on outputs than outcomes, and was driven more towards compliance than performance. Due to MB's shortcomings, Outcome-Based Budgeting (OBB) was developed and is still in use today. Among the objectives of OBB are to efficiently manage national resources and enhance public sector accountability.

Modified Budgeting (MB) approach was implemented in 1990 through the issuance of Treasury Circular No. 11/1990 to overcome the weaknesses of Programme and Performance Budgeting (PPB). MB was regarded as the modification to PPB and it consisted of four important elements namely; expenditure target, programme agreement and exception report, a cycle of programme evaluation and a more generalised approach to expenditure control. The main concept behind MB is to 'let managers manage', and this concept was put into practise using a 'top-down' planning technique. However, MB has flaws in that it continued to place more emphasis on outputs than outcomes, and was driven more towards compliance than performance. Due to MB's shortcomings, Outcome-Based Budgeting (OBB) was developed and is still in use today. Among the objectives of OBB are to efficiently manage national resources and enhance public sector accountability.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Master Budget

A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.

Sales Budget and Selling

A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.

Question

Modified Budgeting (MB) approach was implemented in 1990 through the issuance of
Treasury Circular No. 11/1990 to overcome the weaknesses of Programme and
Performance Budgeting (PPB). MB was regarded as the modification to PPB and it
consisted of four important elements namely; expenditure target, programme agreement
and exception report, a cycle of programme evaluation and a more generalised approach
to expenditure control. The main concept behind MB is to 'let managers manage', and
this concept was put into practise using a 'top-down' planning technique. However, MB
has flaws in that it continued to place more emphasis on outputs than outcomes, and was
driven more towards compliance than performance. Due to MB's shortcomings,
Outcome-Based Budgeting (OBB) was developed and is still in use today. Among the
objectives of OBB are to efficiently manage national resources and enhance public sector
accountability.

Required:
a. Describe the concept of 'let manager manage' in the implementation of Modified
Budgeting and its implication on budget preparation and management.
b. Evaluate the significance for the Malaysian government to include programme
agreement and exception report as one of the elements in the Modified Budgeting.
c. Discuss how Outcome-Based Budgeting can help to improve resources management
and public sector accountability.

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