Budgeting

I interrupt my series on restructuring the economy to talk about an issue influenced by two recent happenings.  The first is the termination of the contract of the Bank of Jamaica governor Mr. Beaudiere.  Two questions obviously arise; first does it make sense to terminate a contract which requires payment in full until the end of the contract while at the same time having to pay someone else to do the job.

Secondly, was there no way to renegotiate the contract, I must state that it is my view that this type of contract is not suitable for persons who live in Jamaica.  It is more usual that this type of contract be offered to someone who has to leave their country of residence to come to another country and offers protection against early termination and recognizes the significant cost associated with relocating another country.

The other matter is the revelation that the cost of care for children’s home is five to seven times more than that in private care.  This is particularly bad given the state of conditions that exist in most of the homes.

I mention these two issues in order to raise a specific point about budgeting.

How is it that these two issues came as a surprise to the government?  The budget was recast recently with a view to cost cutting and these matters should have been discovered.  It maybe that in preparing the budget; that the process involved taking the costs from the previous year and adjusting the numbers for inflation.  This method is often used by organisations but is not in accordance with good practice.  A better method is to look at each item in the budget and to determine what would be a reasonable amount.  The aim is to start at zero and that each expenditure item has to be justified before it can be included in the budget.

I believe that if this process was applied to the national budget then the cost anomalies would have been discovered much earlier.