a) Budget for 2019

b) i) The Ministry used the Incremental Budgeting approach in the preparation of the 2019 Budget. This approach involves using the previous year’s budget as a base and making adjustments for expected increases or decreases in revenues and expenditures.

(2 marks)

ii) Merits of Incremental Budgeting:

• Simplicity and Time-Efficiency: This method is straightforward and quick to apply, saving time in the budgeting process.
• Stability: It provides stability as it builds on existing budgets, which are familiar to all stakeholders.
• Ease of Justification: There is less need to justify the entire budget, as only the increments or decreases are usually scrutinized.

Demerits of Incremental Budgeting:

• Inefficiencies are Carried Forward: Inefficiencies in the previous budget may be perpetuated if they are not critically examined.
• Lack of Innovation: The approach discourages a fresh evaluation of activities and can stifle innovation as it assumes past activities are still relevant.
• Resource Allocation Issues: The approach may not align resources with strategic priorities, leading to the potential misallocation of funds.

(3 marks total – 1.5 marks for three merits and 1.5 marks for three demerits)

iii) An alternative approach that could be suggested is Zero-Based Budgeting (ZBB).

Reasons for ZBB:

• Resource Optimization: ZBB ensures that every department starts from a “zero base,” justifying all expenditures, leading to better resource optimization.
• Eliminates Waste: This approach forces a review of all expenditures, helping to eliminate unnecessary spending and promoting efficiency.
• Alignment with Strategic Goals: ZBB aligns budgeting with current strategic goals, ensuring resources are allocated to the most critical areas of need.