1. Budget Execution: Overview
Bill Dorotinsky, PRMPS
Budget Execution Course
January 16-17, 2003

2. Outline What is budget execution? Expenditure Management Cycle
What are the objectives?
Why is budget execution important?
Key concepts
Commitment Stages
Budget classification
Organization of the course

3. What is budget execution?
Processes and institutions to implement the budget
Incentives – principle-agent problem
Reflects that budget is NOT only an accounting document
also a political document
Planning/steering device

4. Expenditure Management Cycle
Planning
system
Medium term
plans, e.g. three
year rolling plans
Annual budgets
Development,
recurrent and
revenue
Fund release
procedure, e.g...
warranting
Accounting for
revenue and
expenditure
Public expenditure
review
Information technology
A core tool of integration
Reports and
financial statements
Audit system
Project monitoring
Project
appraisal
Resource
allocation
Liquidity
management
Expenditure
control
Monitoring
& controlling
Post event
Accountability
Financial management system boundaries
Formulation covers ‘expenditure review’ insofar as this is a step in preparation of future plans, and goes through to “annual budgets..”
-- need for good budget
-- Brazil roads, congress, MoF
-- linking budget to cash management
-- dc grants management
Execution covers from ‘liquidity management’ through to PER’s, insofar as PER’s are part of the ex poste accountability system.
Half of cycle
(2) Hardware and software do not solve problems in human systems. Must know source of problem, and seriously assess whether computerization will solve the core problem. (DC Example)
Underlying all of this is good recording of transactions and reporting!
Source: Integrated Financial Management. Michael Parry, International Management Consultants Limited. Training Workshop on Government Budgeting in Developing Countries. THE UNITED NATIONS. December 1997.

5. Objectives of budget execution
Manage Spending and Revenues to budget
support choices of elected officials
allow budget to be planning and steering tool
promote macrofiscal discipline
Reduce opportunities for corruption
Enable program implementation
Assure resources flow to programs
allow budget to be aid to operational efficiency through spending unit advance planning, efficient administration
enable program managers to achieve objective
governance

6. Why is budget execution important?
Credibility of the Honduran Budget – In-year Deviations by Agency
(percent of the executed over the approved budget)
Matching Plan to Implementation
Good Macrofiscal
But, look at sectoral allocations. Who gets harmed?
3-level framework
Cash, accrual, commitment

7. Why else important? Every country spends money;
done well or poorly, it is an existing set of institutions in countries upon which to build reform
Important role in anti-corruption
Critical for direct budget support

8. Five PEM Principles
Comprehensiveness – include all revenue and expenditure, and all government agencies
Accuracy – record actual transactions and flows
Annuality – cover a defined period of time (e.g. one year)
Authoritativeness – only spend as authorized by law
Transparency – information on spending should be publicly available, on a timely basis, in an understandable or common format

9. Organization of the course
Topic versus chronology
Structures and terms
Incentives and dynamics
Time for questions and discussion
Evaluation
Case study