1. Budget Execution Sanjay Vani PREM Learning Week – Public Finance Analysis and Management Course April 24, 2007

2. What is budget execution? Processes and institutions that implement the budget 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.)

3. Why is budget execution important? It affects 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.

4. Objectives of Budget Execution Manage Spending and Revenues per budget 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 Enable program implementation –ensure resources flow to programs –enable program managers to achieve objectives Ensure accountability Ensure accountability –timeliness in reporting –authenticity of reporting

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

6. - internal control - program management - spending (commitments) - recording & reporting - payment orders - verification of receipt of goods/services - program/cash plans Roles of various players in Budget Execution

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

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

9. Reforms in Budget Execution Treasury Modernization – cash management Treasury Modernization – cash management FMIS FMIS Accounting Reforms – Accrual accounting - IPSAS Accounting Reforms – Accrual accounting - IPSAS Procurement Reforms Procurement Reforms PIFC reforms – Managerial Accountability PIFC reforms – Managerial Accountability Internal Audit Reforms Internal Audit Reforms External Audit Reforms External Audit Reforms Legislature Reforms - PAC Legislature Reforms - PAC

10. PEFA: The PFM High-Level Performance Indicator Set C(ii) Predictability and Control in Budget Execution 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 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 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