Budget Execution

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Budget Execution

• Sanjay Vani
• PREM Learning Week Public Finance Analysis and
  Management Course April 24, 2007

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What is budget execution?

• Processes and institutions that implement the
  budget
• Laws, rules, regulations, practices
• Line ministries, MoF, treasury
• Control framework
• (Note Budget is not a comprehensive statement
  of financial flows it is limited to those
  transactions included in the budget. Budgets do
  not include off-budget or extra-budgetary funds,
  nor do they accurately reflect assets,
  liabilities and risks.)

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Why is budget execution important?

• It affects
• the cost and quality of services
• the volume of government expenditure, and
• the relations between citizens and government.
  Citizens know their government through the
  services they receive from it.

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Objectives of Budget Execution

• Manage Spending and Revenues per budget
• support choices of elected officials
• allow budget to be planning and steering tool
• promote macrofiscal discipline
• reduce opportunities for corruption
• Enable program implementation
• ensure resources flow to programs
• enable program managers to achieve objectives
• Ensure accountability
• timeliness in reporting
• authenticity of reporting

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Phases in Budget Execution

• Phase 1 Allocation
• Phase 2 Ministry Spending Plans
• link actions with finances cash flow needs
• Phase 3 Commitments (award contracts)
• Phase 4 Actual receipt of goods/services
• Phase 5 Payment
• Phase 6 Accounting
• Phase 7 Reporting
• Phase 8 Audit
• Phase 9 Parliamentary Scrutiny
• (Note These phases are not necessarily
  sequential)

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Roles of various players in Budget Execution
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Issues in Budget Execution

• Predictability in the availability of funds
  cash rationing
• In year transfers credibility of the budget
• Weak procurement planning bunching of
  expenditures towards the year end
• Weak procurement management - use of less
  competitive methods
• Lack of a commitment control system - arrears
• Delay or a lack of reconciliation and clearance
  of suspense accounts and advances violation of
  budget discipline

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Issues in Budget Execution

• Weak internal controls waste and abuse of
  resources
• Lack of internal audit weakens internal control
  framework
• Delays in accounting and reporting managers
  having no access to full information before
  making decisions
• Weak external audit - delay in audits - little
  evidence of response or follow up on audit
  reports
• Legislatures review is non-existent or extremely
  limited weak accountability

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Reforms in Budget Execution

• Treasury Modernization cash management
• FMIS
• Accounting Reforms Accrual accounting - IPSAS
• Procurement Reforms
• PIFC reforms Managerial Accountability
• Internal Audit Reforms
• External Audit Reforms
• Legislature Reforms - PAC

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PEFA The PFM High-Level Performance Indicator
Set

• C(ii) Predictability and Control in Budget
  Execution
• PI-13 Transparency of taxpayer obligations and
  liabilities
• PI-14 Effectiveness of measures for taxpayer
  registration and tax assessment
• PI-15 Effectiveness in collection of tax payments
  
• PI-16 Predictability in the availability of funds
  for commitment of expenditures
• PI-17 Recording and management of cash balances,
  debt and guarantees
• PI-18 Effectiveness of payroll controls
• PI-19 Competition, value for money and controls
  in procurement
• PI-20 Effectiveness of internal controls for
  non-salary expenditure
• PI-21 Effectiveness of internal audit
• C(iii) Accounting, Recording and Reporting
• PI-22 Timeliness and regularity of accounts
  reconciliation
• PI-23 Availability of information on resources
  received by service delivery units
• PI-24 Quality and timeliness of in-year budget
  reports
• PI-25 Quality and timeliness of annual financial
  statements
• C(iv) External Scrutiny and Audit
• PI-26 Scope, nature and follow-up of external
  audit
• PI-27 Legislative scrutiny of the annual budget
  law
• PI-28 Legislative scrutiny of external audit
  reports