1

UNIT 2.1.4 PLANNING AND BUDGETING

1. PLANNING

DEFINITION

A plan is a statement by an institution or an organization of where they would like to

be at the end of the planning period and the actions they will need to take in order

to get there. In other words, a plan is a specific, documented intention consisting of

an objective and an action statement. It is a process of coping with uncertainty by

formulating future course of action to achieve specified results by identifying what

activities need to be undertaken, when, by whom and at what cost.

Planning enables humans to achieve great things by envisioning a pathway from

concept to reality. The greater the mission, the longer and more challenging the

pathway. Planning is a never ending process because constant change, uncertainty,

new competition, unexpected problems, and emerging opportunities.

NECESSARY THINGS TO CONSIDER IN PLANNING

i. A clear vision of the desired end state

ii. Clear understand of the present undesired state

iii. Clear understanding of the means available for, and constraints

relating to achieving the desired end result.

IMPORTANCE OF PLANNING

a. Planning helps the councils to evaluate their current (undesired) status and

visualize their planned(desirable) status at the end of the planning period

b. Planning helps councils to priotise their objectives and articulate different

strategies for going from the current status to the desired status.

c. Planning also helps to evaluate the strategies and choose their preferred

strategies, develop action plans and cost them.

ESSENTIALS OF PLANNING

Despite the wide variety of formal planning systems, some essentials(common

denominators) of sound planning are organizational mission, types of planning,

objectives, priorities, and planning/control cycle

The Organizational Mission

The mission is the reason for existing. A clear, formally written and published

statement of an organization’s mission is the corner stone of any type of planning

system that will effectively guide the organization through uncertain times.

2

A well written mission statement does the following things :

i. Defines your organization for key stakeholders.

ii. Creates an inspiring vision of what the organization can be and can do

iii. Outlines how the vision is to be accomplished

iv. Establishes key priorities

v. Creates a philosophical anchor for all organizational activities

vi. Empowers present and future organization members to believe that

every individual is key to success.

2. Forms of Plans

After the mission statement is in place, successive rounds of strategic,

intermediate and operational planning can occur.

Strategic planning is the process of determining how to pursue the

organization’s long-term goals with the resources expected to be available.

This is done by top management, councilors e.t.c

Intermediate planning is the process of determining the contributions

subunits can make with allocated resources. This is done by middle

management, departmental heads e.t.c. It takes 6 months to 2 years.

Operational planning is the process of determining how specific tasks can

best be accomplished on time with available resources. This is carried out by

lower level staff. The planning horizon is 1 week to 1 year.

3. Objectives

Objectives are targets to aim at. They may be defined as a specific

commitment to archive a measurable result within a given time frame.

Carefully prepared objectives serve as targets, foster commitment and

enhance motivation.

4. Priorities

Priorities are defined as ranking of goals, objectives or activities in order of

importance. This helps in allocating limited resources proportionately. There

are basically three priotizing methods:

i. Must do, these are critical to successful performance

ii. Should do, these are necessary for improved performance but they

can be postponed if necessary

iii. Nice to do, these are desirable for improved performance but not

critical to the survival or improved performance. They can be

eliminated or postponed to achieve objectives of higher priority.

3

5. Planning Control Cycle

These are corrective actions that are undertaken when either preliminary or

final results deviate from plans. For planned activities still in progress, the

corrective action can get things back on track before it is too late. Deviations

between final results and plans, on the other hand are instructive feedback

for improvement of future plans.

PLANNING ROUND ABOUT

Planning is therefore a key component of management as it gives the manager the

means to check if they are headed in the right direction (monitoring) and to take

action if they are not (control). The figure below1 gives some key features of the

planning process.

TYPES OF PLANS

District Development Plan

The District Development Plan should set out the general developmental objectives

of the district. Some of the key issues this plan should be based on are projected

population growth, vehicular traffic patterns and anticipated economic activity

4 Lets Go Implementation

1 Where do we want to be? Mission, objectives, Key

Performance Indicators

2 Where are we likely to be? If we continue as we are

3 How can we get where want to be? Strategies

5 How are we doing? Evaluation and Control

4

growth. This helps to assess what services will be required, such as housing,

commercial centres, roads, schools, hospitals and play parks; and where these will be

located, zoning. It should also outline when these services should be available

relative to the growth projections. The financial implications of such plans are

normally based on broad-brush assumptions and are not very detailed.

In essence these plans form the basic foundation of all council activities. Their

demise in the recent past may have created some of the issues being faced currently

such as unplanned settlements for the urban areas and inappropriately sited

services.

Strategic Plan

A more detailed plan than the District Development Plan is a strategic plan. All

councils should have strategic plans. Currently only a few of the major councils have

strategic plans that give in some reasonable detail what direction they ought to be

headed. The strategic plan normally has the following components:

1 Mission statement

2 A SWOT Analysis

3 Sometimes a goal statement

4 Objectives

5 Strategies

6 Indicators

7 Specific activities and action plans to support the strategies and

8 Output indicators

The strategic planning process should be consultative and participative to ensure

that the priorities set in the strategic plans coincide with the stakeholders’

aspirations

Vision and Mission

A vision or mission statement describes the ideal desired conditions that council will

strive to achieve by the end of the planning period. This should be arrived at after

due consultations with the key stakeholders who help in identifying the vision of

their town

5

Strengths Weaknesses Opportunities and Threats (SWOT) Analysis

A SWOT analysis is an analysis of the Strengths, Weaknesses (internal) of the councils

and Opportunities and Threats (external) available to council. The figure below

outlines the components of a SWOT analysis.

Mission

To provide adequate social services for the enhancement of social

economic growth of the district

Objective 1

Broaden the revenue base and

increase collection efficiency in order

to improve service delivery.

Objective 3

Promote private sector participation in

service delivery to enhance

effectiveness

Objective 3

Improve the security situation to

encourage investment

Strategies 1

1.1 Identify new sources. 1.2 Enforce collection

protocols 1.3 Update customers

databases 1.4 Establish more revenue

collection points

Strategies 2

2.1 Establish permanent stakeholder forum

2.2 Identify institutions to network and link with

2.3 Establish Private Public Partnerships

Strategies 3

3.1 Provide street lights 3.2 Create plots for

community police stations

3.3 Establish a local investment centre

6

Figure : SWOT Framework

Goal Statement

In order to create goals for the council to aim at during the plan period clearly stated

goals to be achieved must be articulated. For example the following goal statement

was articulated

‘To provide adequate and accessible social services to improve the community’s

standard of living’

Adequacy, access, standard of living are all issues that can be measured in some

manner. So this makes a good goal statement. To complete it two other instruments

are required to be developed to create the appropriate framework for evaluation:

a) a baseline study should be undertaken to determine the prevailing, undesirable, situation at the start of the plan period relating to articulated goals are deemed to be important and

b) a statement of the desired end of planning period situation relating to the articulated goals which would indicate the achievement of the desired vision or mission.

Residents

Forces for change: Social Economic Political Technological

Council

Service

Delivery

Mission

Vision

Objectives

Stakeholders

Strategies

Structures

Skills

Systems

Staff

Shared Values

Service

External Analysis

Internal Analysis

Opportunities and Threats

Strengths and Weaknesses

7

Objectives, Strategies and Indicators

Since council functions relate to a whole range of services, several objectives need to

be set and achieved in order to achieve the stated vision. For example

1. To establish and maintain a consultative and collaborative system in order

improve service delivery

3. To broaden the revenue base and increase collection levels of KMC in order to

improve service delivery

5. To promote the participation of women in decision making process in council

affairs in order to improve service delivery.

Related to the objectives should be strategies, how the objective is going to be

achieved, and indicators, how the achievement is going to be measured.

Objective 3. To broaden the revenue base and increase collection levels of KMC in

order to improve service delivery

Strategies

Identify non traditional sources of revenue Enforce by-laws Develop measures to ensure consumers pay bills Establish more revenue collection points

Output Indicators

Increase in revenue annually Number of non traditional sources of revenue identified Enabling legislation in place by June 2001 Reduction of unsettled monthly bills Improve council liquidity

Action Plans

For the desired results to be achieved, actions plans are necessary. These will

indicate for each strategy, who will do what and when.

8

For example

Strategy Action By Whom When

Identify non

traditional sources

of revenue

List current sources Compare with other

councils Survey activities being

undertaken in the district Propose new Sources

Revenue Accountant

Treasurer Council Secretary

Council Secretary

March

00

March

00

April 00

June 00

Capital Improvement Plans

In order to implement strategic plans, there is almost always a need for improved

capital formation, whether it is the acquisition of refuse trucks, computers or the

building of new public conveniences. These capital improvements are usually a key

element in the successful implementation of strategic plans.

It is now standard management practice to extract these items and create a

procurement plan for the capital items as capital improvement plans.

A proposed format is shown in the figure overleaf which gives:

a) The Department acquiring the capital item

b) The item to be acquired

c) The linkage to the action plan in the strategic plan, AWPB.

d) The cost

e) The proposed timing for the purchase

f) The total for each month and each department

g) The gross totals

9

Capital Improvement Plan Format

Departmental Strategic Plan

Each department should have a strategic plan that feeds into the council’s strategic plan. The

format of these strategic plans should be exactly the same as the council’s own strategic plan.

ANNUAL WORKPLANS AND BUDGETS

Councils are obliged by law2 to prepare their annual estimates of revenue and expenditure at

least 60 days before the commencement of the year to which they relate. The budgets of

councils must therefore always be accompanied with annual work plans to describe what

physical work done or what services will be provided and by whom and at what cost. This is the

essence of activity based budgeting that each activity must be costed based on what it will

deliver to the total work output of the council as a whole for the benefit of the residents.

The Annual Work Plans and Budgets AWPBs must consist of:

An introduction covering a review of the previous year’s activities and the current status of the council relative to the baseline position on the key issues.

Vision of the desired status of the council at the end of the annual work plan period.

10

Activities to be undertaken, which should link into the overall strategic plan, to enable the achievement of the stated vision by the end of the work plan period. These should be broken down by section and department.

A programme, probably represented by bar charts illustrating the timing and duration of the activities, to create a visual road map of what should be done and when.

The budget will then be a product of the foregoing.

A Cash flow Projection, for internal management purposes to show the expected cash flow position during the year as the budget itself is done on an accrual basis.

The figures in the budget form only a small part of the departmental AWPBs shown. For

purposes of administration the departments will have detailed breakdown of the proposed

budgeted income and expenditure.

Strategic Plans and AWPBs

Strategic Plans link into the Annual Work Plans and Budgets through the incorporation of the

action plans that relate to the year being planned for.

EXAMPLE OF ANNUAL WORK PLAN

To ensure receipts and disbursements of councils moneys are properly accounted for.

2. To collect punctually all revenue and broaden tax base

3. Strengthen financial management

4. Effective planning and allocation of resources

For the first objective it then has the following details:

Table 1: Annual Work Plan – Finance Dept.

Activities Input Means of Verification Output Assumptions

Prepare cash books

Prepare financial statements

Stationery Office

equipment Accountable

documents Printer

toner Diskettes

Cash books Reports Receipt books Payment vouchers Expenditure

returns Revenue returns Register of

accountable documents

16 update cash books

Management and councilors updated

Financial position of council established

Funds will be available