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hi…
i wanted to know how does beyond budgeting apply to the public sector?
please correct me on this one!
i don’t know if im understanding well the concept… but i read somewhere on the internet that beyond budgeting is an approach whereby you switch from the traditional method of budgeting. it is felt that with the traditional method it attracts gaming and it is costly and time consuming to prepare budgets
now how does that apply to the beyond budgeting in the private sector?
i listened to your lecture and it stated that beyond budgeting is a way in which companies can compare the performance of managers with other managers in other divisions or other companies instead of relying on figures that can be wrong in the budget….
i assume that the traditional way of budgeting was that they compared performance of managers with the budget.
what about the public sector?
can you please help me out!
thanks! 🙂
Well, take a public sector hospital. Conventional budgeting would give so much cash for each speciality and would probably try to impose particular treatments and set targets for the number of patients treated.
Beyond budgeting frequently relies on comparison/competition with other similar entities. The amount of cash given would probably be determined by government, but then it would be up to hospital administrators and doctors to decide how best to use that to treat the maximum number of people successfully. Hospitals would try different approaches and compete with each other for the best outcome rather than having approaches and expected outcomes imposed.
Dear Tutor,
Most of the ACCA questions are about evaluating whether beyond budgeting would be appropriate in a given scenario, and these would be private sector companies. The also ask what the impact of the switch to beyond budgeting would be on performance management.
The study guide actually mentions applicability of beyond budgeting in the public sector. However, I have not seen a public sector question on beyond budgeting. Can you kindly assist, I wish to attempt a public sector question on beyond budgeting.
The ACCA article on beyond budgeting seems to imply that beyond budgeting might not be applicable in the public sector. Is my understanding correct?
Thanks
I think a distinction has to be made between whether in theory a beyond budgeting approach could be applicable to the public sector and whether under current legislation and management it can be.
Part of the problem is the way in which many public sector organisations are managed: very centrally and inflexibly. The UK Government is beginning to try to loosen things up a bit so that large cities have more control, both legally and practically, over the use of money they raise. Similarly, schools are becoming more self-governing and less managed by local councils.
I see no reason in principle why the claimed advantages in the private sector of beyond budgeting could not provide some advantages in the public sector. Of course, control of cash will remain important, but that is important even in the private sector: every organisation needs to live within their cash limits.
I have always been a little sceptical of beyond budgeting even in the private sector: they all have some budgets (renamed “targets”), but achieving those is more devolved.
Hi,
Thanks for your reply.
Imagine what would happen in countries where there is a lot of corruption if beyond budgeting were to be introduced in those countries; and no line-by-line control of budget. Government officials would have a field day.
Secondly, can you please recommend an exam type of question on beyond budgeting in the public sector. I really would like to practice such a question, in case I get it in the exam. Please.
I agree with your first comment. I think we would even worry a bit in the UK where government corruption is relatively small – as far as we know! The bigger problem is perhaps not corruption but spending government money recklessly.
I’m afraid I don’t know of any question relating to beyond budgeting in the public sector.
Hi,
I found an interesting article on this subject.
Other than three-year rolling budgets, pooling of discretionary spending, devolving of responsibilities; I don’t see anything else. These issues are as applicable to the private sector as they are to the public sector and not peculiar in any way.
https://leadingedgechange.com.au/white_papers/Article_Going_BB-in_public_sector.pdf
I doubt if an exam question on this matter can be more than five marks, what do you think?
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