Existing budget format
For many years, the Hong Kong housing department had been using the incremental format of budgeting. The department also used the balanced system of budgeting. The incremental format involved using the budget of the current year as the base and then adding incremental amounts in order to arrive at the budget of the forthcoming year. Under the incremental budgeting, the department heads often ensured that they spend all the year’s budget so that there is no surplus at the end of the year. The acts of the department heads helped them to apply additional funds to the current budget. This led to inefficiencies and wastage in the housing department (Wang, 2019) .
New budgeting format
The Hong Kong housing department has adopted a new budgeting format known as surplus budgeting system. The department adopted the surplus budgeting in the year 2003. Surplus budgeting involves the department determining if the revenues are more than the expenditure and then use the surplus to calculate the budget of the forthcoming year (Wang, 2019). The department has also considered the zero-based budget, which involves beginning each year’s budget with a zero and then adding the budget items after justification.
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What to change
In order to change to the surplus budgeting system, the department needs to abandon the housing development projects. By abandoning the development projects, the department will experience some savings resulting from the reduced expenditure. In this case, the revenues collected will be more than the expenditures. In case the department abandons the development projects, then their major aim of improving service delivery will be negatively affected (Wang, 2019).
Capacity to change
The Hong Kong housing department has the capacity to change its budgeting format to surplus budgeting. Over the years, the department has been experiencing a continuous increase in revenues. As a result, the revenues become more than the expenditures. For example, the company expects to record a surplus of HK$13 billion this year. This is because the department has received more revenues from selling affordable houses to the members of the public, which are more than its expenditures. The housing department is determined to achieve the Special Administrative Region’s (SAR) strategic plan by building high quality residential and business houses (Hong Kong Housing Department, 2019) .
SAR’s strategic direction
SAR’s 2030 strategic plan is to make Hong Kong a liveable, sustainable, and competitive city in Asia. This strategy will guide the city's infrastructure, planning, and land development as well as improving the natural and built environment. As a result, the people of Hong Kong will have a more pleasant living environment, more opportunities for recreation, better essential facilities, and a better quality of life. The Hong Kong housing department fits into the strategic direction because the department is focused on providing the public with subsidized housing, especially people who cannot afford to pay rent. The department has many plans and projects concerned with the provision of affordable housing for low-income individuals. The plans will ensure that the people of Hong Kong are provided with a better living environment, thus improving the quality of life (Hong Kong Housing Department, 2019) .
Control of appropriations
Efficiency in appropriations is experienced in all levels of the housing department. Resources are always allocated to the unit managers in various strategic areas to develop policies and also decide financial needs for their sectors. Therefore, the allocation of the resources among projects, activities, and programs within the strategic areas demands appropriate arrangements within various areas of the department for adequate technical capacities and policy formulation within the spending agencies who select the cost-effective projects, activities, and programs. The appropriation ensures that all the unit managers are made accountable for all their units in the achievement of the department’s goal (Hong Kong Housing Department, 2019) .
Spending information last year
The housing department often develops its budget after considering the expenditures of the previous year. The spending information is commonly used to estimate the forthcoming year's expenditure. This is workable because the operations of the department are recurring. The projects of the department include construction, computer equipment, and improvement works, which are repeated over the years. Hong Kong SAR uses spending information to develop a budget forecast. The forecast helps the department determine if its financial situation will remain sound in the future (Hong Kong Housing Department, 2019) .
Forecast for the future
The department’s budget request includes a forecast for the next five years. Under the budgeting process, financial and budget forecasts for various business units of the department are prepared, reviewed, and finally endorsed by the relevant unit committees. For example, the beginning of 2019 saw the Finance Committee discuss and endorsed the 2018/19 budget and then proposed a 2019/20 budget. The committee also noted financial forecasts of 2020/21 to 2022/23. The budget forecast information is important for the department for developing future plans. The department also uses the information to determine how to reduce its expenditure in the future, thus increasing its surplus.
Significance of the budget document
The budget document is an important communication tool because it contains information about the plans for buildings to be constructed during the year. The document also includes information on taxes, salaries, and project plans important for allocating funds. The document contains all the information about various projects and their respective costs until completion. It shows different adjustments that should be achieved in the next year’s budget. It also provides the steps the department has taken to provide the public with affordable housing. Finally, the document provides the responsibilities of each unit manager in meeting the goal of the department as a whole (Yip, 2019) .
Performance Information
The budget currently includes performance information in order to prove that they are achieving value for money. The department uses the information to evaluate their performance and inform the public about its progress. The performance information in budgeting is related to both activities and results as it is concerned with improving activities in order to improve performance. The performance information includes flexibility for the unit managers associated with greater accountability for better results, to improve their decisions regarding how to improve service delivery (Hong Kong Housing Department, 2019) .
Trend Analysis
Hong Kong housing department has focused all its attention on providing housing facilities to the citizens. A most recent report has shown that from 2017 to 2019, the department has continuously improved its efficiency. Also, the department has improved its response to emergencies and approval of projects. From the budget, it is evidenced that there is a constant increase in homeownership. The increasing number of homeownership is because of the better deals provided by the department in terms of mortgages for employees. Finally, the department responds to the needs of customers quickly, thus enabling proper housing for citizens (Hong Kong Housing Department, 2019).
Evaluation of programs
The department effectively evaluates its programs because, from the budget statement, activities of the department have been adequately assessed. In addition, the support services and increasing efficiency proves that the department identifies problems or faults in their previous programs and then addresses them in the consequent budget years. The evaluation has enabled the department to ensure that the estimated budget values of the next year are accurate. This proves that the evaluation is accurate and reliable. The evaluation helps the department to identify the projects that need support and include them in the budget (Hong Kong Housing Department, 2019).
References
Yip, N. M. (2019). Pol5502 urban finance and budgeting; housing in china and Hong Kong [PDF].
Hong Kong Housing Department. (2019). Head 62 — HOUSING DEPARTMENT. Retrieved from:
https:// www.budget.gov.hk/2019/eng/pdf/head062.pdf
Wang, X. (2019). Major revenue sources Hong Kong [PPT].
Wang, X. (2019). Public Budgeting and the Management of Financial Resources Professor [PPT].
