Public Sector Governance and Accountability Series: Budgeting and ...

106 A. Premchand
TABLE 3.4
(continued)
For
Against
Capital budgets facilitate the work of
bond-rating agencies.
Bond-rating agencies study a wide range
of data before making an assessment,
and they do not insist on capital budgets.
As a technique, capital budgets These techniques, including rolling public
facilitate links between budgets, investment planning, do not require
medium-term rolling plans, public capital budgets.
investments planning, and the
estimation of recurrent costs of
maintenance.
Capital budgets provide a link with Although the application of accrual
other financial statements related to accounting is now more widely accepted
assets, balance sheets, sources and than before, there are limits on the
uses of funds, and so on. They show application of commercial accounting
depreciation allowances and, thus, the techniques to the government sector. A
use of assets throughout their life cycle. form of modified accrual may be adequate.
Capital budgets provide a sounder basis In principle, this is true, but a capital
for macroeconomic management by budget is not necessary to accomplish it.
differentiating types of outlays and
their financing.
Capital budgets facilitate the
These projects are best conceived and
participation of the corporate sector implemented outside the budget.
in projects identified and pursued
as part of public policy.
Capital budgets imply more autonomy for There is an inherent danger of the
project managers and the application of development of a dual culture and
different techniques of implementation, enclave mentalities.
including project scheduling and
monitoring (in which projects are
carried out through contractual
arrangements). Where projects are
funded through borrowing, capital
budgets facilitate the growth of a
sense of financial responsibility.
Source: Author’s compilation.
For too long, however, the issue was not the appropriateness of the capital
budget but whether using it was inescapable. Implicit in this approach is
the argument that the informational outputs from capital budgets can be
obtained from other sources. But much the same can be said about the