Budget classification and fiscal reporting International experience

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Budget classification and fiscal reporting
International experience

• Eivind Tandberg
• Regional Advisor
• International Monetary Fund

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Overview

• Basic definitions
• Reference model (idealized)
• Budget classification common problems
• Fiscal reporting common problems
• Approaches to reform
• Specific issues for Serbia

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Definitions by purpose

• Budget classification
• Planning and prioritization
• Budget appropriations
• Budget accounting
• Budget execution results
• Compliance with laws and regulations
• Fiscal reports
• Reporting to parliament
• International comparisons
• Reporting to IMF and EU

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Reference model
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Budget classification I

• Organizational classification incomplete
• Extra-budgetary funds and entities
• Public enterprises do government activities
• Other quasi-fiscal operations
• Economic classification inconsistent
• Some transactions not included
• Foreign grants and loans
• Own revenues (indirect budget users)
• Above and below the line items
• Borrowing recorded as revenue
• Subsidies recorded as lending

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Budget classification II

• Functional classification inadequate
• Mixture of function, organization, program
• Yugoslavia Functional areas
• Different classifications for different parts of
  government
• Central local EBFs enterprises
• Different recognition principles
• Difficult to consolidate

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Budget classification III

• No program classification
• Unable to cost specific policies and programs
• Difficult to strengthen performance orientation
• No funds classification
• Unable to track funds from different sources
• Unable to document use of EU funds

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Accounts, reports I

• No comprehensive accounting system
• Reports based on ad-hoc compilation from
  different sources
• Integrity and consistency problems
• Inadequate reconciliation
• Below and above the line
• Accounts and bank statements
• Different accounting systems

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Accounts, reports II

• Inadequate control and audit
• Ineffective internal control
• Fiscal reports not audited
• Cash-based reports
• Arrears
• Off-setting operations
• Timing of payments

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Reforms - Sequencing

• Budget classification
• Chart of accounts
• Reporting formats for core budget and
  consolidated budget
• Specification of accounting and information
  systems
• Procurement or development
• Accounting regulations

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Serbia - Challenges

• Most common problems apply to budget
  classification and fiscal reports
• Major discrepancies in organizational and
  economic coverage
• Ad-hoc, incomplete and inconsistent fiscal
  reports
• No systematic assurance of fiscal data quality

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Serbia Possible solutions

• Reference model is achievable
• Ongoing accounting system reforms
• Update budget classifications and chart of
  accounts
• Comprehensive coverage
• Consistency across government
• Documentation and quality assurance for fiscal
  reporting process

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Serbia Fiscal reports

• Redefine core central budget
• Add indirect budget users own revenues, foreign
  grants/loans, offsets, subsidies?
• Define consolidated central budget
• Add EBFs, health institutions, some public
  enterprises, QFAs, tax expenditures?
• Report on consolidated, general government budget