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- 3 Marks
Question
According to Section 20 of the Public Financial Management Act, 2016 (Act 921), the Minister of Finance shall, subject to the approval of the cabinet, issue guidelines for the preparation of the budget for each financial year and circulate copies of the guidelines to each Covered Entity not later than 30 June each year. Budget Guidelines play an important role in budget development.
Required:
State and explain THREE (3) importance of Budget Guidelines in Public Sector Accounting and Finance.
(3 marks)
Answer
The importance of Budget Guidelines in Public Sector Accounting and Finance includes the following:
- Control of Aggregate Expenditure:
- Budget guidelines help ensure that total government expenditure remains within affordable limits, consistent with macroeconomic constraints. This control is essential to prevent budget deficits and maintain fiscal discipline.
- Resource Allocation to Reflect Priorities:
- Budget guidelines are crucial for ensuring that resources are allocated in a manner that aligns with the government’s policy priorities. They provide a framework for prioritizing spending in areas that will achieve the most significant impact on economic and social outcomes.
- Efficient Delivery of Public Services:
- By providing clear instructions on budget preparation, budget guidelines help promote productive efficiency in the delivery of public services. This ensures that resources are used effectively to achieve the desired outcomes within the constraints of the available budget.
- minimization of the financial costs of budgetary management (i.e., efficient budget
execution and cash and debt management practices).
- Tags: Budget Development, Budget Guidelines, Public Financial Management
- Level: Level 2
- Topic: Public sector fiscal planning and budgeting
- Series: MAY 2019
- Uploader: Joseph