Decision Step 6: Classify Program Budgets
Why is decision step six important?
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Selected tools to implement step 6
- Participatory budgeting
- Program budget templates
- Project budget templates
- Economic impact analysis
- Impact accounting
Key Decision Points
- Ensure program budgets are clearly connected to the program targets and their related actions. Note that often the actions related to a program target are implemented using actions at the project level.
- Ensure the program targets align with capital investment categories, such as human, physical, social and environmental capital. For example, if a construction project is expected to create a significant number of jobs, then a separate target should be established for job creation. This target should be linked to human capital.
- Ensure that budget estimates are created using appropriate budgetary procedures, e.g., reasonable price schedules.
- Ensure that there are adequate procedures for evaluating the impact of investment spending, e.g., impact accounting.
Summary of Main Considerations
Focus area programs and program-based budgeting
- Under the Strategic Development Planning Pathway, expenditure for development will not be determined based on project expenditure schedules. Development expenditure will be determined based on macro-level expenditure forecasting in line with projected GDP growth targets (see DAP A).
- Divisions of the THA and their agencies will use the projected budget forecast related to their areas of responsibility to prepare focus area program budgets.
- This Program-Based budgeting approach at the level of the divisions of the THA will first subsume and then replace the Project-Based Budgeting currently used by the THA’s divisions.
- In the interim, divisions will continue to use a project-based budgeting approach. However, project expenditures will be aggregated to align with Focus Area Program expenditures.
Program-Based Budgeting has four main benefits, including:
- Transparency: Program-based budgets will offer a clearer understanding of the costs and potential benefits of a program.
- Accountability: Program-based budgets are connected to measurable targets and indicators of progress and success, which help assess the value of expenditures on specific programs. Consequently, increases or decreases in funding for a program will be based objectively on performance measures.
- Data-Driven Decision-making: Program-based budgeting will ensure that budgetary planning and executive decision-making are closely aligned to focus area programs and informed by pertinent, verifiable targets.
- Effective alignment and management of investment: Program-based budgeting will allow for the organization of funding for focus area programs into various categories and levels of capital investment associated with GDP growth in key economies.
Levels of capital investment
- The levels of investment will include tier 1, tier 2, tier 3, and tier 4. This investment hierarchy will be based on the value of the investment.
Category of capital investment
- The categories of investment will include physical, human/institutional, environmental, cultural, social, and technological or innovation capital, among others.
- The organization of focus area program funding into categories and levels of investment will guide executive decision-making related to capital investment based on the achievement of economic growth targets, particularly GDP growth.
