Chapter 12: Budget Systems and Processes

Budget systems have evolved to reflect the values (control, management, planning, reduction, etc.) that the government pursues in response to environmental changes.

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1. Trends in Budget System Reform

System	Focus	Features	Weakness
Line-Item (LIBS)	Control	Limits on each expense item	Difficult to grasp results, rigid
Performance-Based (PBS)	Management	Unit cost × Workload	Difficulty in measuring workload
Program Planning (PPBS)	Planning	Linkage of long-term plans & budget	Centralization of decision-making
Zero-Based (ZBB)	Reduction	Ignore previous budgets (Start at 0)	Excessive time and effort required
New Performance (OBB)	Outcomes	Emphasis on results (outcomes)	Linked to national fiscal plans

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2. The Budget Cycle

1. Budget Formulation (Government): Departments submit requests, and the Ministry of Finance adjusts and confirms the draft.
2. Budget Deliberation (Legislature): Policy speech $\rightarrow$ Committee review $\rightarrow$ Special committee review $\rightarrow$ Floor vote.
3. Budget Execution (Government): Allocation and re-allocation of funds. Specific mechanisms (Transfers, shifts, etc.) are used to maintain flexibility.
4. Closing and Audit: Post-audit of the legality of the execution. Performed by the Board of Audit and Inspection.

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3. Flexibility Mechanisms in Execution

• Transfer (利用): Shifting funds between legislative categories (Chapters/Sections). Requires Legislative Approval.
• Shift (轉用): Shifting funds between administrative categories (Sub-sections/Items). Possible with Government Approval.
• Reserve Fund: Funds sets aside in advance to cover unpredictable expenditures.

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Key Checklist

• Which budget system re-examines the priorities of all projects without recognizing the previous year’s budget as a vested right? (Answer: Zero-Based Budgeting, ZBB)
• What system involves shifting funds between legislative categories, requiring parliamentary approval? (Answer: Transfer)
• Which budget system aims for optimal resource allocation by linking planning and budgeting at the formulation stage? (Answer: Program Planning Budgeting System, PPBS)

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