Budget Methods - Librarians Portal

Begetting

Every library, no matter how small, has to operate with a budget. In most libraries, the librarian and his senior staff prepare the budget, according to budgetary norms issued by the authorities. The budget is scrutinized, vetted, if necessary, and approved by the Library Executive Committee before it is sent to the higher authorities for final approval and sanction. The general practice is to follow the methods and procedures of the parent organization. If they are special service of a comparatively limited scope, some small special libraries may be exempted from the preparation of a detailed budget. There are some methods of budgeting for preparing library budgets.

i) Line Item Budgeting or Incremental Budgeting or Historical Budgeting  

Probably the most common type of budget is the one that divides items of expenditure, line-by-line, into broad categories such as books and journals, salaries and allowances, equipment, supplies, capital expenditure, contingencies, etc. with further subdivisions for each of these broad categories. This is the usual traditional method which, by taking into account past expenditure on each item, prepares the current budget, hence called historical budgeting. The budget is prepared with a small increase of say 5 or 10 percent for each major item of expenditure of the previous year’s allocation, assuming that all current programmes are as good and necessary.

 ii) Lump sum Budget

In lump sum budget, a certain amount of money is allocated to the library. The

library is given the necessary freedom to decide as to how the amount is going to

be allocated to different categories.

iii) Formula Budgeting

In formula budget, predetermined standards are applied for allocation of money. Such a budget is technical and easy to prepare. It does not require special skills to prepare the same. Based on financial norms and standards this method tries to relate some inputs like users served, academic programmes supported and ratio of book stock to total funds of parent body. The formulae are used for financial estimation as well as budget justification. This appears to be a broad and quick method and hence saves a lot of time.

iv) Programme Budgeting

This method propounded originally in the Hoover Commission Report (1949) has three steps. They are: (i) statement of agency objectives, (ii) full consideration of alternative ways and (iii) logical selection of the best based on effectiveness and efficiency. Extended from the line-item method, this method tries to answer the questions for “what purpose the money is being spent?” and “how have the resources to be deployed for each programme?” and more suitable for a contracting economy. The focus in this method of budgeting is on the library’s activities and the funds are to be earmarked for programmes or services that the library plans to provide. For instance, if a library decides to provide a Current Awareness Service, the cost of that service is calculated and the expenditure estimated. The budget is thus prepared on the basis of the cost of programmes and whether a programme has to continue, get modified or deleted.

v) Performance Budgeting

This budgeting method is similar to programme budgeting but the emphasis shifts from programmes to performance. The expenditure is based on the performance of activities and the stress is laid upon operational efficiency. This method requires careful accumulation of quantitative data on all the activities over a period of time. Management techniques such as cost-benefit analysis are used to measure the performance and establish norms. For example, data on the number of books acquired, classified and catalogued, actual man-hours for doing the entire processing work, etc. are collected to determine the manpower and materials needed to perform the tasks.

vi) Planning Programming Budgeting System (PPBS)

 This method of budgeting was first proposed by USDOD (1961). Two key elements of PPBS are budgeting and systems analysis. As an extension of programme budgeting, PPBS involves systems analysis, and/or other cost-effectiveness processes to provide a more systematic and comprehensive comparison of costs and benefits of alternative approaches to a policy goal or programme objective. This method combines the best of both programme budgeting and performance budgeting. The focus in this method is on planning. It begins with the establishment of goals and objectives and ends with the formulation of programmes or services.

The important steps in PPBS are:

i) identifying the objectives of the library;

ii) presenting alternative ways to achieve those objectives with cost benefit

ratios presented for each;

iii) identifying the activities that are necessary to each programme; and

iv) evaluating the result so that corrective actions can be taken.

vii) Zero-Base Budgeting (ZBB)

This method, developed by Peter Phyrr during early the 1970s, requires a thorough knowledge of the organisation and a lot of time, effort and training. Having much. in common with PPBS and opposite of historical budgeting, it emphasises current activities and the necessity to justify each part of the programme every year. It assumes a budget of `zero' for each programme until one convinces the appropriating authority that the programme is worthwhile and deserving of support at a specified level. It does not allow for incremental growth in budget. ZBB is an operating, planning and budgeting process which requires each manager to justify his entire budget request in detail from scratch and shifts the burden of proof to each manager to justify why he should spend at all.