Workshop%20Cash%20and%20Budget%20%20

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Workshop Cash and Budget Cash is King!

• Helmer Vossers
• Ministry of Finance The Netherlands
• 17 February 2006

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Budget processsumming up
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Questions

• Is the budget the instrument for implementing
  government policies?
• Do you report on a regular basis on the
  budget-outcomes during the execution?
• Can you relate your cash information to
  budget-lines?
• Do you analyze every year the budget outcome and
  the budget forecasts?
• Is this review done for every line-item?

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Budget paradox

• Trend we see reforms towards performance based
  budgeting and management
• But cash info still remains very important ? why?
• 1. fiscal aggregates (EMU-deficit) is based on
  cash (sub-national parts!)
• 2. allocation, authorisation accounting is on
  cash
• 3. input info needed for benchmarking number
  of personel, it and housing-costs

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The rules of the game, part 1!

• Dealing with windfalls and overspendings.
• The rules of budgetary discipline
• Status rules part of coalition agreement, no law
  
• Main rule Compensate within your own budget!
• An unwritten law but even used in parliament
• Surplus windfalls are for minister of Finance,
  but
• Carry-over principle ( 2 of total budget)

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The rules of the game, part 2!

• .. But can only be maintained when budget is
  reliable
• Monthly report of budget-execution
• Monthly meeting inspectorate and spending
  department
• Under- and overspending review for 4-5 years
• Strong link between realization and multi-year
  forecast
• To be supported by IT-system

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The rules of the game, part 2 !

• .. But can only be maintained when budget is
  reliable
• Multi layer financial responsibility flexibility
• Bottom-up approach estimates based on
  assumptions from line ministries
• Estimations in unchanged prices
• Assumption of unchanged policy (demographic
  development included)
• Check by ministry of Finance

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Bookkeepers ? budget analysts!

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How does it really work?

• Example of budget preparations and budget
  execution in relation to overruns and
  compensation
• Underspending for us! But also carry-over
  principle service not delivered

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Multi annual budgeting
year t
t1 t2
t3 t4

Appr. budget
100
110 120 130
140
15
15 10 5
0
Exec
Comp
15 10 5
0
115
Total
110 120 130
140
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Conduction of central administration

• Spending department can decide on the number of
  banking-accounts
• No ex-ante checks on payments
• Discussion on cash forecasts by spending units
• All government units included!
• Working processes supported by IT-systems
• Complex process

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Information flow but zero balancing
Ministry of Finance
Government Offices
c
a
1
d
Commercial bank
e
Central Bank
b
2
Information flow
Customer/person
Real money transfer
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To wrap up.

• No money on bank accounts zero balancing
• Using infrastructure of commercial banks
• Current account administration with MoF
• Many checks and balances
• Spending ministers are responsible themselves!

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Information exchange supported by IT-systems

• Budgetary system RIS/IBOS
• ? forecasts versus realization
• ? explanation of mutations
• ? insight in liabilities (intended and realized)
• ? on a multi annual basis
• ? linked with cash information through
  banking accounts

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Check your position on the web
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Animatie door Daan Vossers
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To summarise

• All mentioned features and agreements of Dutch
  Budget policy are covered in our IT-systems
• Systems comply with division of responsibilities
• Conditions Information shoud be in time,
  complete and correct but also sharing of
  information
• Rules, rules, rules
• Teach the line-ministeries
• System works with multi annual figures
• Cash info essential for reliability