To develop the regions, local governments are empowered to manage or organize their own local finances. Local expenditure component are as follows:
a. Expenditures of the state apparatus, including general administrative expenditure, operational expenditure and maintenance, and capital expenditures.
b. Spending of public services, including general administrative expenditure, operational expenditure and maintenance, and capital expenditures.
c. Shopping for results and financial assistance.
d. Unexpected expenditure.
Shopping is spending loads of cash into local area in certain periods of the fiscal year. Items of expenditures can be explained as follows:
a. General administration expenditures, are indirect spending and not add to fixed assets. For example shopping salaries, electricity, water, telephone, and vehicle maintenance.
b. Operational and maintenance expenditure, is spending a large or small is influenced by the activity but does not add to the asset. Eg policing operations vendors.
c. Capital spending, is spending a large or small it is influenced by the activities directly and acquire assets. For example the construction of buildings, purchase of motor vehicles, and road construction.
d. Shopping for results and financial assistance. These expenditures are directly without any performance indicators. Eg for the allocation of provincial spending for the results. The allocation can be a motor vehicle taxes and motor vehicle ownership charges to the county or city, assistance to community organizations, sports, and professions.
e. Unexpected expenditures, allocated to fund the urgent needs of the region to be implemented but there is no budget.
Government’s budget policy is needed to encourage the growth of economic activities so that national income increases. The types of budgetary policy are as follows:
a. Balanced budget policy, occurs when government revenues equal government spending. It can be applied if the condition is stable economy.
b. Not a balanced budget policy, may consist of:
1. Budget deficit. Policy budget deficit occurs when government spending will be larger than the existing reception. These policies can be done when a low level of economic growth, inflation, and people’s purchasing power fell.
2. Budget surplus. Policy budget surplus occurs when government spending is smaller than the existing reception. This policy can be done to tackle inflation. Because not all revenue is spent, the government can accumulate savings.