What is Direct budget Financing

Direct budget financing is provided from a dedicated budget line of the appropriate level.Budget funds, as history says, are the basis of financing information and consulting services (especially during the periods of their formation, formation and initial development). The following works are performed at the expense of state funds: 1) a material and technical base of the service is created; 2) a methodological, research and information base of the service is being formed; 3) large-scale initial training of consultants and service specialists is carried out; 4) an information network and a system of interconnections with all participating organizations (research institutes, information processing centers, laboratories, trade organizations and wholesale markets, private consulting firms, etc.) is created.

The budgets of different levels in relation to the ICS perform various functions.

  • At the expense of the national(federal) budget are carried out:
    • AIC programs of national importance (food security of the country, environmental protection, AIC competitiveness) in which the service participates, including targeted integrated development programs of the ICS itself;
    • the creation and development of the material and technical base of federal service management bodies, central service institutes;
    • creation of information computer systems, as well as equipping regional services with the necessary backbone equipment;
    • development and updating of national databases;
    • training and retraining of personnel for ICS at the federal and regional levels.
  • At the expense of regionalbudgets carried out:
    • programs for the development of the agro-industrial complex of the regions in which regional services participate, including programs for creating and developing the regional services themselves (identifying problems and needs of the agro-industrial complex and commodity producers themselves, developing and analyzing ways to solve them, etc.);
    • creation and development of the material, technical and information base of regional (and partially district) ICCs;
    • development and updating of regional databases, adaptation and distribution of application software products;
    • training and retraining of staff at the ICS of the district (and partially regional) level;
    • current expenses of regional (partially district) service institutes.
  • At the expense of localbudgets carried out:
    • creation and development of the material and technical and information base of the district service (together with the regional budget);
    • financing (with the support of the regional budget) of the local district operating costs

The structure of budget funds depends on the level of the budget. The higher the hierarchy level (the federal budget), the higher the share of capital investments in the structure of budget funds. Conversely, the lower the level of hierarchy (district level), the greater the proportion of current costs. With the formation and subsequent development of the service structure of budgetary funds may change. If at the beginning of the process, when capital expenditures prevail (Fig. 6.1), the main financial burden falls on the federal (partially regional) budget, then later, when the share of current expenditures increases, they are financed from the district and regional budgets.

Other sources of financing

Among other external sources, a special place is occupied by grants and sponsorship. These two sources have significant differences, despite the fact that both are provided free of charge and free of charge.

Grantsusually provided at the beginning of the development of the service in order to give the first impetus, to start the process with the expectation of its further independent development. Funds for grants are mainly provided by special funds, governments, international financial institutions, and public organizations. As a rule, with the help of grants, pilot projects are financed with limited action in time and in terms of their impact on the entire system. And this is done in order to test the acceptability and effectiveness of a particular service model, to show with a concrete example the need to create an information and consulting service and its advantages over other institutions, to interest the government and society in supporting the development of this direction, to give it an initial impetus. When implementing pilot projects, special attention is paid to the purity of the experiment. This is necessary in order to obtain reliable results guaranteeing the planned efficiency outside the experiment.

Grants, unlike sponsorship, are awarded on a competitive basis. In the case of a tender, the contestants must submit an appropriately executed application by the date set by the tender conditions. The application usually includes a description of the project’s goals and objectives, key results to be obtained during the project implementation, activities and activities that will ensure the achievement of the planned results, possible risks, as well as financial, material and labor resources necessary to fulfill all scheduled events.

Preparation of a high-quality application is a creative and time-consuming process, requiring special knowledge and extensive experience. The application usually involves professionals who are able to provide a competitive level of the document.

Grants are not a gift that you can use on your own. They assume exclusively targeted use of allocated funds according to predetermined rules. Requirements for the application for the project and rules for spending funds are formulated by the customer and published in a competitive announcement.

Examples of grants include many programs and projects: ARIS International Bank for Reconstruction and Development (IBRD), TACIS (CIS Technical Assistance) and TEMPUS of the European Union, REAP of the British Department for International Development (DFID), etc.

Sponsors (private individuals, commercial firms) help, as a rule, the development of already existing areas, firms, organizations and services that have proved their effectiveness and targeted use of previously allocated funds. Sponsors who sponsor information and consulting services may be guided by the following motivations:

  • implementation of personal inner need in assisting rural producers, manifestation of active patriotism, etc .;
  • the desire to create a favorable image of your company;
  • the desire to reduce their own taxable income base.

Sometimes, direct or indirect financial interest may be hidden behind sponsorship. For example, if rural producers (customers of the service) are at the same time real or potential suppliers of products for the sponsor, financial assistance to the service will increase production, improve product quality or reduce costs and prices, and this, in turn, will lead to an increase in income of the sponsor .

Every service, in whatever country it works, tries to make the most of all these sources of funding. And the structure of the revenue portion of the budget depends on the specific economic and political conditions. In some countries (USA, some German lands, etc.), the largest share is taken from the state budget, in others (England, Scotland, Holland, etc.) commercial income from the sale of services prevail.

All of the above sources directly finance the activities of really existing and officially registered ICSs, however, information and consulting activities are carried out not only by these services. Often, consultations and information services are provided by other state and non-state organizations (research institutes, educational institutions, statistical offices, computer centers, analytical laboratories, etc.), commercial companies and associations of commodity producers.

State organizations for this purpose use budget funds (including tax revenues from legal entities and individuals, excise taxes, duties, etc.). Non-governmental organizations finance their information and consulting activities from self-financing revenues from the provision of paid services, grants that they receive from the state or from outside the country, from funds paid by the state (either own or foreign “donor state”) for fulfilling orders under contracts as well as from received grants, sponsorship funds of commercial companies wishing to create a favorable image for themselves. Commercial companies that sell means of production to commodity producers and (or) buy their products also apply the dissemination of agricultural knowledge in the interests of their own business.

Associations of producers pay for consulting services from their membership fees or from state support funds.

Various combinations of the above options are possible. For example, the salaries of public service consultants are paid from the budget, and other running costs are borne by the farm association; A commercially oriented cooperative or supplier company can send a specialized magazine to its members or customers “for free”, since its publication has already been paid for in another form.

by Abdullah Sam
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