Bogus Budgeting

As the Government of Grenada enters the dying stage of its 2015 budgetary allocations and begins preparation for the presentation of the Estimates of Revenue and Expenditure for the year 2016 it is a good time to reflect on the annual routine, to form a view as to how much latitude Ministries and Departments really have in production of this document for submission to the Parliament.

The Planning, Budgeting and Forecasting process is guided by the objective setting process where government sets out its broad objectives for the period under review and the line ministries follow by breaking down the specific objectives and goals into activities.

It is easy to see the budget preparation cycle as an annual ritual to be endured and to be over and done with. In particular where the broad objectives are not developed from the ground up but is an imposition of management. This scenario gets even worse when such decisions are beyond management’s control and represent an imposition by an external force.

For example, in the current situation in Grenada under its austerity program, the budget targets are set by the International Monetary Fund (IMF). Thus the objectives are fixed by contract and may bear no relation to the operating reality on the ground. There is no possibility to align the strategic needs of the wider organisation with that of the external organisation since they may be diametrically opposed.

For example, the need to invest funds in agricultural production in the short term so as to gain benefits, including health benefits, in the medium to long term would be opposed by the immediate objective to produce a surplus of Revenue over Expenditure of 5% in 2015.

In the October issue of Accounting and Business Magazine, Peter Williams examines Planning, Budgeting and Forecasting in an article called “Steering a Safe Passage”. Williams looks at the process in the context of Culture, Strategy data and Technology. He examines the importance of involving and understanding the culture of the wider organisation and in particular its reaction to external factors.

Williams stresses the need for an understanding of the relationship between short term targeting and the long term relationship between Income and Expenditure. He emphasises the need to have robust, accurate, timely and visible data. He argues the importance of investing in technological planning tools and in the relevant financial experts to use those tools. This, he believes will provide the organisation with relevant information and the ability to change forecasts and plans as new facts come to hand.

The Ministry of Finance in Grenada has no financial planning expert among its top echelon. It is also true that they did not invest in the sophisticated planning tools needed to produce forecasting in the circumstances.

Under these circumstances and having placed the nation’s Constitutional responsibility in the hands of an external organisation it is highly likely that the process would result in the production of a bogus, illusory document without due regard for the aims and aspirations of the population.

Garvey Louison

Tagged , . Bookmark the permalink.

Comments are closed.