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PFM Good Practice: Budget Formulation


February 4, 2013

Doug Hadden, VP Products

We released a set of Public Financial Management (PFM) documents last week following on our mandate of sharing good practices for the community.

The second released document, embedded below, describes good practices in budget formulation. Governments are budget driven and use commitment accounting. Profit is the key concept in private sector accounting. Budget is the key concept in government.

That’s why budget formulation is so critical in government.

Budget is linked with policy and government objectives. It’s the formal and legal expression of government policy. That’s why many countries call a budget “the vote” or the “organic budget law”.

I’ve seen governments fall in Canada by losing the budget debate.

There are many budget formulation applications designed for the private sector. These software programs focus on fulfillment planning: logistics, manufacturing, assembly. Sure, financial planning is part of that. But the result of the planning is rarely multiple aggregate controls across different periods into the financial system. And, rarely handles supplemental budgets, virements, transfers, continuing resolutions and adjustments to tolerances.

And, let’s face it: budgets in the private sector are guidelines.

In government, the budget is the law.

Public Financial Management Good Practice Budget Formulation by FreeBalanceGRP

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Doug Hadden

Doug Hadden

Executive Vice President, Innovation at FreeBalance
Doug is responsible for identifying new global markets, new technologies and trends, and new and enhanced internal processes. Doug leads a cross-functional international team that is responsible for developing product prototypes and innovative go-to-market strategies.

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