CHAPTER ONE

GENERAL INTRODUCTION

1.1 Background of study

Law no 2007/006 of 26 December 2007 aligned Cameroon to a new approach of public management through programme budgeting.

This law, which relates to the fiscal regime of the state, lays down the conditions for the preparation, presentation, implementation and control of the implementation of the finance laws based on Programmes.

The Fiscal year 2013 marks the full effectiveness of Law no 2007/006 of 26 December 2007 to institute the financial regime of the state.

Accordingly, recommended for the first time in 1964 by the Hoover Commission in the United States, the programme budget system was introduced in August 1965. It was viewed from the point that people do a task better when given an understanding of the background and the roots of the process in which they are engaged .

In the American milieu, Programme budgeting has passed through several different evolutional periods. First was the developmental period which was borne out of the need for a national budget practice.

The Budget and Accounting Act of 1921 was such that it was practically impossible for any appropriating body or the public to know where its money was going.

The most significant change in budgeting, which paved the way for programme budgeting during this period occurred in 1967 under the leadership of Frederick A. Cleveland, when New York City’s Bureau of Municipal Research adopted this method .

The second period was a period of control. This period began with the Budget and Accounting Act 1921 creating the Bureau of the Budget.

The purpose of this budget was to provide a means of translating ‘working programmes’ into fiscal terms so that each activity could be balance with other activities and revenues in long range economic policies, programme for advance approvals. Programme Budgeting was advanced in 1930 by William A. Jump, budget officer for the US department of Agriculture and was expanded upon by the War Production Board in 1941 through the efforts of Frederick Eberstatt .

In the late 1940, the Federal Government developed programme budgeting in the Bureau of Reclamation, the Coast Guard and other agencies .

The third period was the contemporary period. In 1961, the Secretary of Defense Robert S. McNamara and his comtroller, Charles J. Hitch introduced programme budgeting to the Department of Defense . This was the first time programme budgeting has been attempted for an entire agency.

Until 2012, Cameroon has had experience with resource-based budgeting whereby the state gave public administrations resources according to their needs. Fifty years of experience with resource-based budgeting have exposed its numerous weaknesses. These include the practice of services voted, wastage in the recurrent budget and the under-consumption of investment votes .

The introduction of programme budget in Cameroon consists in preparing, presenting and implementing Finance laws based on programmes. By this method, Ministries set medium term goals and defined the results to be achieved.

The Finance law each year provides and authorizes all state revenue and expenditure, by determining their nature, amount and allocation and ensuring fiscal balance, under the conditions and limitation of the present law.

In implementing the Finance law based on programmes, it shall present all the programmes aimed at attaining the country’s economic, social and cultural development objectives .

1.2 Definition of Key Concepts

1.2.1 Budget

The term budget has been has been defined in two ways. This includes the Legal and the Economic definition of Budget.

Legal Definition

A budget outlines state revenue and expenditure authorized under the finance law, in terms of revenue and expenditure within the context of a financial year . The financial year shall cover a calendar year . Aggregate revenue shall correspond to aggregate expenditure .

The integral amount of proceeds shall be included in the state budget, without making a distinction between revenue and expenditure . All revenue and expenditure shall be recorded in a single document titled the budget .

A budget is a statement of an organization’s estimated revenues and expenses for a specific period, usually a year. It is a sum of money allocated to a particular purpose or project .

Economic Definition of Budget

A budget is an estimate of cost, revenues, and resources over a specified period, reflecting a reading of future financial conditions and goals .

A budget is an estimate of the revenue and expenses over a specified future period of time. A budget can be made for a person, family, group of people, business, government, country, multinational organization or just about anything else that makes and spends money .

A Budget is “A plan quantified in monetary terms, prepared and approved prior to a defined period of time, usually showing planned income to be generated and/or expenditure to be incurred during that and the capital to be employed to attain a given objective” . A budget is therefore an agreed plan which evaluates in financial terms the various targets set by a company’s management.

It includes a forecast statement of comprehensive income (profit and loss account), statement of financial position (balance sheet), accounting ratios and statements of cash flows which are often analysed by individual months to facilitate control .

1.2.2 Programme Budget

Programme

Program includes all actions to be implemented within a public service in order to achieve a specific objective within the context of a function .

Programme Budget

Programme Budget involves the preparation, presentation, implementation and control of the implementation of the finance law.

Programme Budget involves an attempt to classify expenditures in terms of the outputs to which they are devoted. For example, a traditional school programme budget attempts to assign expenditures to specified outputs, categorizing them according to numbers of children completing various programs.

Programme Budgeting system, contrary to conventional budgeting, describes and gives the detailed costs of every activity or programme that is to be carried out in the budget . Objectives, outputs and expected results are described fully as are their necessary resource costs. For example, raw materials, equipment and staff.

The name ‘Programme Budget’ is derived from some simple fact that the planning process is organized by programme rather than by department of fiscal inputs or output . Programme Budgeting is generally described as a planning-oriented procedure.

Its chief goal, according to Sohick, is to rationalize policy-making by providing data on the cost and benefits of alternative ways of attaining proposed public objectives and output measurement to facilitate the effective attainment of chosen objectives .

1.2.3 Public Finance

Economic Definition of Public Finance

Public Finance is the study of the role of the Government in the economy . It is the branch of economics which assesses the government revenue and expenditure of the public authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones.

The purview of Public Finance is considered to be three-fold: governmental effect on, (1) efficient allocation of resources, (2) distribution of income, and (3) macroeconomic stabilization .

Legal Definition of Public Finance

According to Professor Maurice DUVERGER, Public Finance is the study of financial problems for the State, other public authorities, mechanisms relating there to and the legal rules applied to them .

Public Finance is however related to other traditional disciplines such as Administrative and Constitutional Law.

The presentation of these relationships highlights, on the one hand, the undeniable use of Constitutional Law in public finance. Indeed, it is the constitution that determines the holder of financial power and shall specify the powers of the later .

On the other hand, the presentation of these relationships highlights the possible use of Administrative Law in public finance.

As an example, one can cite the case of embezzlement of public funds for which the embezzler would be applied discipline, whose study belongs to the public service law, other wise said Administrative Law .

In addition public finance also determines decisively administrative law because public finance is the bases of administrative action and any administrative activity cannot be exercised without public finance.

1.2.4 Research Questions

1. What are the grounds for the introduction of programme budget in Cameroon?
2. How is programme budget prepared?
3. How is the assessment of the implementation of programe budget carried out?
4. What are the possible recommendations of the problems faced in implementing programme budget in Cameroon?

1.3 Problem Statement

Many countries over the world, for example the USA have succeeded in implementing programme budget. The main problem that saw the introduction of programe budget in the world was that people do a task better when given an understanding of the background and roots of the process in which they are engaged.

It is commonly known that when a budget is planned for a particular activity, one can easily find out what precisely would be carried out and also at what costs can it be done and what result is expected.

In this regard, many countries today have introduced programme budget because they have seen its success in other countries.

In Cameroon, Law no 2007/006 of 26 December 2007 aligned Cameroon to a new approach of public management through programme budgeting and the Fiscal year 2013 marks the full effectiveness of Law no 2007/006 of 26 December 2007 to institute the financial regime of the state.

This therefore leads to the legal issue of this research topic which seeks to find out the reason why programe budget was introduced in Cameroon’s Public finance.

It also seeks to identify the weaknesses of resource-based budget and highlight the improvement and modernization of public finances management.