Transcript ADB Grant 0133-CAM: Public Financial Management in Rural

ADB Grant 0133-CAM: Public Financial
Management in Rural Development
Ministries (Component 1)
Analysing Budgets
March 22 - 25, 2010, Day 4- Answer
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Answer Q1
1. Main tools of budget presentation to MEF are:
• Brief historical of previous budget performance
• Main priority programs, sub-programs response to
Ministry policy/strategy within the year
• Summarized budget of the ministry by Program,
Sub-sector and by non-program, and showing
sources of funds (may have table and pie chart)
• Summarized budget of the ministry by economic
classification with previous year of budget
performance and next three years forecasting
(may use graph; column and line graphs)
• Full budget annexes including measurable
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indicators.
Answer Q2
2. Summary of entity’s budget for showing to
your top management:
• Priority and normal sub-programs, activities
and target locations
• Showing previous performance of the
priority/normal sub-programs, activities at any
target locations.
• Showing previous results and budgets for
multi year (3 years) by economic classification
using graphs (pie, column, line graphs to
explain).
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Answer Q3
3. Economic classification shows the nature of types of
revenue, expenditure, assets and liabilities.
Economic Classification in Cambodia is as follows:
• Economic class:
 Class 1: Capital
 Class 2: Asset
 Class 4: Third party account
 Class 5: Finance account
 Class 6: Current expenditure
 Class 7: Revenue
• Chapter and chart of accounts (see Prakas 2008).
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Answer Q4
4. Explain the capital and recurrent cost in the
preparation of budget.
• Capital cost: The cost of investment or
developing any areas of the sector/sub-sector.
• (Capital investments are assets which are held
for the medium or long term, with the
purpose of achieving the entity’s objectives
• Recurrent cost: The cost of operational or for
running sector/sub-sector and daily activities.
• Those two are important for development
program/project.
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Answer Q5
5. Cost structure – is an analysis of how the value
of goods, works and services varies with the
level of activity in an organisation. Cost
structure can be used for predicting the next
multiple year cost of those goods, works and
services. Cost structure consist of fixed cost
and variable cost. Variable cost can be further
analyzed by examining which cost drivers
cause the variability.
continued......
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Answer 5 - continued
• Cost structure is important for budget
preparation, it helps budgeters in analysing
the historical cost and then they may
predict future costing for goods, works and
services for a proper cost at future market
price.
Answer Q6
6. Analysis of past results against GDP allows
the budgeter to see how economic growth
has affected revenues and costs.
• GDP forecasts contribute to budgeting by
helping the budgeter to build up multiple
year budgets allowing for the predicted
economic growth rate.
• Government uses GDP estimates when
making decisions affecting the economy
and measuring the effects of strategic
decisions on the economy.
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