The budget cycle refers to the process by which enterprises, most typically governments, allocate their resources over a specified period, typically one year. Governments from the federal government to municipal governments follow the same general budget cycle process which consists of four primary phases: preparation and requests; legislative approval; implementation and execution; and audit and review.
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Preparation and Requests
The first phase of the budget cycle involves preparing and requesting a proposed budget. Typically a committee of individuals submits the proposal. This committee could be appointed by the executive branch or it could be a subset of the legislative branch. Once the committee had evaluated past budgets, considered expected expenses and ascertained available resources, they draft a proposed budget and submit it to the legislature for approval.
Typically, the legislature has the power to approve or reject a budget. Once a proposed budget is received by the legislative branch, they review it and vote. If the budget is approved, it moves into the implementation phase. If it is rejected, it is sent back to the budgeting committee to be revised and resubmitted.
Implementation and Execution
Once a budget has been approved, it is the duty of the executive branch to implement and execute the budget. This primarily involves distributing the budgeted resources to their designated recipients within the government.
Audit and Review
Finally, a budget is typically audited and reviewed following implementation. The effectiveness of the budget, as well as its efficiency, is evaluated and used to guide future budgeting decisions.
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