This presentation was delivered to M.Phil scholars by myself in 2012 at the Department of Social Work, University of Peshawar.

1. BUDGETING
in
Social Administration
and Management of
Social Services.
Course Title:
Social Management and Administration of Social Services.
Course No. 719
Credit Hours: 3
Date: March 11, 2011

2. Outline
A. What is a Budget?
B. Why do I need a Budget?
C. Different kinds of Budget
D. Methods of Budget
E. Budget Techniques
F. Budget Stages
G. Budget Limitations
H. Q/A and Discussion

3. A. What is Budget?
DEFINITION
• The word budget is derived from the Old French bougette
(“little bag”) [Britannica 2009].
as a Noun:
• leather pouch, wallet, or pack ; also: its contents
(Marriam Dictionary).
• Money for particular purpose: Total amount of money
allocated or needed for a particular purpose or period of
time (Encarta 2009).
As a verb
• Budget is planned spending: to plan the allocation
expenditure, or use of resources, especially money or
time (Ibid).

4. • A Budget is a plan that outlines an organization's
financial and operational goals.
To describe a little more deeply,
• Budget is the forecast by a government of its
expenditures and revenues for a specific period
of time.
• In other terms, a budget is an organizational plan
stated in monetary terms.

5. B. Why do I need a Budget ?
• In the midst of starting and running your
organization, you may wonder why you need to
stop and put together a budget.
• A properly prepared and updated organizational
budget serves several purposes:
Source: Jean Murray (n.d.). Why Do I Need to Prepare a Business Budget? What is the Purpose of a Budget? In
about.com Guide. Retrieved 08 March, 2011 from
http://biztaxlaw.about.com/od/budgetingandfinance/f/whybudget.htm

6. 1. Plan Start-up Needs for Your Organizational
Plan
 The first purpose of a budget is to help you gather
information for your organizational plan, including
all the items and expenses necessary for start-up.
 You need to know what it will cost you to open
your doors the first day of your organization.
 This includes inventory (stock in hand), furniture
and fixtures (objects in fixed position), computers
and software, and, of course, the costs of finding
and securing a location for your organization.

7. 2. Work with a Lender
 You will probably need to borrow money from a
lender, donor, or from family and friends for start-
up.
 A budget shows your lender how much you
need for start-up and what your cash flow
situation will look like in the first three years of
your organization.
 A reasonable budget can increase your
credibility with your lender.

8. 3. Plan Your Spending
 Your budget can give you information about how
much you can spend each month and how much
you can take out of your organization as a salary
or draw to live on.
 As you start out, you may not be able to take
much, but you can see what the future looks like
and you can plan for your living expenses as you
get started.

9. 4. Know Your Required Profit
 If you set up your budget on a "required profit"
basis, you can see how much money you need
to make to meet all your expenses, including
personal expenses.
 A required profit budget starts with all the
expenses you need to pay each month, leaving
the required profit as the income number needed
to make the budget balance.

10. C. DIFFERENT KINDS OF BUDGETS
• In addition to your main working budget –
what you realistically expect to generate or
raise, and how this will be spent – you can also
have some “what if” budget options. “What if”
budgets allow you to prepare for the
unexpected – whether it is good or bad. Your
“what if” budgets could include:
1. Survival budget
2. Guaranteed budget
3. Optimal budget

11. • A survival budget. This is the minimum required
in order for the organisation or project to survive
and do useful work.
• A guaranteed budget. This is based on the
income guaranteed at the time the budget is
planned. Usually the “guarantees” are in the form
of promises from donors. However, unexpected
situations, such as a donor grant coming through
very late, may make it necessary to switch to
your survival budget.
• An optimal budget. This covers what you
would like to do if you can raise additional
money. Once extra money comes in or is
promised, it becomes part of your working
budget.

12. D. Methods of Budget
• There can be at least three methods by which
budgets can be prepared by organizations:
1. By objectives
2. By activities
3. By assistance provided.

13. Method 1: Budget by Objectives
• This first method shows the full plan of the project –
the objectives, outputs and activities.
• It is designed to give an overall picture of the
project. It contains:
 a narrative summary of the goal, objectives and
outputs that follow the agreed framework (Hierarchy)
numbering system
 a list of activities for each output (one line /row for
each activity)
 a budget estimate for each activity.
• This system requires a three level system for
budget codes and therefore a more complex
accounting system.

14. 1. BUDGET BY OBJECTIVES
Number Narrative Detail Budget (Rs)
GOAL
To enable women victims of injustice and violence to obtain fair and just treatment
within the legal system; and to create a just and democratic legal system through
advocacy for law reform and improved treatment of women by legal authorities.
LEGAL AID
Objective 1
To provide legal assistance and counseling for 100 women victims of injustice and
violence in KPK by the end of January 2012
Output 1
By the end of Jan 201, 15% of women who have sought legal assistance from NGO
obtain a court decision in their favour.
Activity No Activity
1.1.1
Provide direct and indirect consultation and counselling on legal rights for approximately 100
women victims of injustice or domestic or other forms of violence. 10,000,000
1.1.2 Provide litigation services to 40 women (take 40 cases of court) who request legal assistance. 31,000,000
1.1.3 Advocacy of legal bodies regarding specific criminal cases being handled by NGO. 12,580,000
1.1.4
Set up and maintain a database to monitor the progress of all cases handled by NGO and
evaluate outcomes every six months. 500,000
Output 2
By the end of Jan 2012, 100 Women victims of injustice and domestic violence know
their legal rights and legal procedures and are able to help other similar victims to seek
assistance.
Activity No Activity
1.2.1
Conduct monthly empowerment meetings with NGO Partners (clients and ex clients) to share
experiences, continue education on gender and the law and women's legal rights, and
encourage Partners o share this informaion with their communities. 13,400,000
TOTAL FOR OBJECTIVE ONE 67,480,000

15. Method 2: Budget by Activities
• This method is a simplified version of method
one but contains only objectives and activities
• The Outputs is removed and all activities under
one objective are listed under that objective.
• This system requires a simplified numbering
system (only two levels) and therefore a
simplified accounting system.

16. 2. BUDGET BY ACTIVITIES
Number Narrative Detail Budget (Rs)
GOAL
To enable women victims of injustice and violence to obtain fair and just
treament within the legal system; and to creae a jus and democraice legal sysem
through adocacy for law reform and improved treatment of women by legal
authorities.
LEGAL AID
Objective 1
To provide legal assistance and counselling for 100 women victims of injustice and
violence in KPK by the end of January 2012
Activity No Activity
1.1
Provide direct and indirect consultation and counselling on legal rights for
approximately 100 women victims of injustice or domestic or other forms of
violence. 10,000,000
1.2
Provide litigation services to 40 women (take 40 cases o court) who request legal
assistance. 31,000,000
1.3 Advocacy o legal bodies regarding specific criminal cases being handled by NGO. 12,580,000
1.4
Set up and maintain a deabase to monitor the progress of all cases handled by NGO
and evaluate outcomes every six months. 500,000
1.5
Conduct monthly empowerment meetings with NGO Partners (clients and ex
clients) to share experiences, continue education on gender and the law and
women's legal rights, and encourage Partners o share this information with their
communities. 13,400,000
TOTAL FOR OBJECTIVE ONE 67,480,000

17. Method 3: Budget by Assistance
• This method lists projected spending as
individual line items that relate specifically to
the type of assistance provided e.g, staffing,
technical support, goods, equipment, training,
etc.
• It is also called Recurrent Cost Budget, bcz, this
cost repeat every year.

18. 3. BUDGET BY ACTIVITIES
Number Narrative Detail Budget Total
Coding No Adminisration - general
1.1 Accounting and audit fees 2600
1.2 Bank fee & charges 250
1.3 Equipment - rapairs and maintenance 2500
1.4 General office exps - stationery, postage, printing 2800
1.5 Registration fees and subscriptions 50
1.6 Rent and utilities (electricity and water0 15480
1.7 Sundries (petty cash, misc) 1000
1.8 Travel expenses - general 2000 26680
Staffing
2.1 Salarries and wages 61000
2.2 National Provident Fund 3000
2.3 Accident Compensation Board 600
2.4 Training 3000
2.5 Volunteer Resource Allowance 3800
2.6 General amenities 500 71900
Communications
3.1 Communications-electronics eg. Phone, fax, internet. 7000
3.2 Newsletter 1920
3.3 Advertising-radio, TV, Newspaper 3800
3.4 Development of Website PSC 3000
3.5 PSC Contract -public awareness materials 3700 19420
Fundraising
4.1 Human Rights Day Breakfast Fundraiser expenses 1500
4.2 International Day for Familis Fundraiser expenses 1500
4.3 Others 1500 4500

19. Education and awareness workshops
5.1 Workshop Peshawar, KPK 5125
5.2 Workshop, Islamabad 5125
5.3 Workshop, Peshawar, Rural, KPK 5125
5.4 Workshop, Lahore 5125
5.5 Workshop, Karachi 6929 27429
Vehicle
6.1 Fuel 3400
6.2 Repairs & maintenance, insurance, and reg 2500 5900
Capital Purchases
7.1 Vehicle 18000
7.2 Table and chair for meeting room 1500
7.3 CD-Writer from Computer and UPS 1450 20950
TOTALS: 176779 176779

20. Comparing Methods
Method Advantages Disadvantages
Method One:
By Objectives
• Link the design
framework for the
project.
• Good tool for
monitoring and
evaluation purposes.
• Good tool for
reporting.
• More difficult to prepare.
• Can become very complex if
recurrent costs have to be
split across too many
objectives/activities.
• Administration and
equipment expenses can be
difficult to assign to
individual objectives.

21. Method Advantages Disadvantages
Method Two:
By Activities
• Link to the design
framework for the
project.
• Good tool for
monitoring and
evaluation purposes.
• Good tool for reporting.
• Don’t see the full design
framework – only objectives and
activities.
• Can become very complex if
recurrent costs have to be split
across too many
objectives/activities.
• Administration and equipment
expenses can be difficult to
assign to individual objectives.
Method Three:
By Assistance
• Simple to prepare.
• Easy to report against.
• No link to the design framework.
• No transparent means of
showing inputs required to
achieve objectives.
• Can not cost individual
objectives for comparative
purposes.
• Often provide too little
information.
• Often no narrative detail.

22. E. Budget Techniques
• The two main techniques are:
1. Incremental budgeting;
2. Zero sum budgeting.

23. • Incremental budgets are budgets in
which the figures are based on those of the actual
expenditure for the previous year, with a
percentage added for an inflationary increase for
the new year.
• This is an easy method that saves time but it is
the “lazy” way and is often inaccurate.
• This budgeting technique is only suitable for
organisations where each year is very similar to
the previous one in terms of activities. Very few
dynamic organisations or projects are so stable
that this budgeting technique really works for
them.

24. • In Zero based budgets, past figures
are not used as the starting point.
• The budgeting process starts from “scratch” with
the proposed activities for the year.
• The result is a more detailed and accurate
budget, but it takes more time and energy to
prepare a budget in this way.
• This technique is essential for new organisations
and projects, but it is also probably the best
route to go in a dynamic organisation that is
proactive in taking on new challenges..

25. F. Budget Stages
The budget cycle usually has four stages:
• Budget formulation, when the budget plan is put
together by the executives branch of the
organization/government;
• Enactment, when the budget plan may be debated,
altered, and approved by the board of directors etc;
• Execution, when the policies of the budget are
carried out by the organization; and
• Auditing and assessment, when the actual
expenditures of the budget are accounted for and
assessed for effectiveness.

26. G. Limitations
1. Consuming too much time and cost;
 even the most efficient organizations take 79 days to plan their budget
(Bartrum 2006).
 Ford company calculated that they spent $1.2 billion annually for budgeting
(2006).
2. Providing little reliable and valuable information;
 Budgets are based on assumptions that often turn out to be inaccurate.
 21% of finance staff time was spent on analysing the budgeting numbers,
while 79% of their time was spent on valueless activities (1999 global best
practice study).
3. Adding little value and wasting resources;
 Specially long term budgets, for three or more years.
4. Encourage parochial and non-ethical behaviour;
 focusing on Meeting the targets
5. Demotivating employees.
 Reinforce dependency culture. ‘do what you have been told to do,
meet the budget.”
 encourage avoid taking risks.