1. The World Bank Budget Formulation: U.S. Federal Executive Experience Bill Dorotinsky Seoul, Republic of Korea October 16, 2003

2. The World Bank 2 Outline I.The Office of Management and Budget a.Organization Chart b.Brief History c.Staffing II.Aspects of the Budget Process a.Budget Calendar b.Features of the Process c.Other actors I.Key Interactions III.Budget Documentation a.Sample IV.Reference Slides

3. The World Bank 3 What is OMB? OMB is the staff office to the President responsible for helping the President carry out his Constitutional duties. Key OMB responsibilities include: –preparing the annual President’s Budget funds and staffing limitations –providing policy analysis and advice to the President –government-wide management, including financial management and procurement –budget execution: monitoring and control of all Federal Government spending after its Appropriation by Congress –review and approval of all Federal Government regulations and data collections –reviewing and coordinating all Executive Branch legislative proposals, testimony (policy enforcement role) –providing other staff support to the President, as necessary

4. The World Bank 4 OMB Organization Chart

5. The World Bank 5 Brief History of OMB OMB was created in 1921 as the Bureau of the Budget (BOB) within the U.S. Department of Treasury. In 1939, BOB was moved from Treasury to the Executive Office of the President. While BOB always played a role in agency and government-wide management issues, this role was formalized in 1970 when BOB was renamed the Office of Management and Budget. The most recent change: OMB 2000. OMB was reorganized to combine the management and budget offices into Resource Management Offices.

6. The World Bank 6 Neutral Competence A critical point: OMB staff are career staff to the Office of the President, providing neutral competence. Although referring strictly to OMB’s ‘management function,’ the following quote nicely summarizes the over-all nature of OMB: –“The Budget Bureau must be humble. If it ever becomes obsessed with the idea that it has any work except to save money and improve efficiency in routine business, it will cease to be useful. Again I say, we have nothing to do with policy. Much as we love the President, if Congress, in its omnipotence over appropriations, and in accordance with its authority over policy, passed a law that garbage should be put on the White House steps, it would be our regrettable duty, as a bureau, in an impartial, nonpolitical, and nonpartisan way, to advise the Executive and Congress on how the largest amount of garbage could be spread in the most inexpensive and economical manner.” General Dawes, 1st Director of Bureau of the Budget, 1921

7. The World Bank 7 OMB Staffing OMB employs roughly 535 staff –approximately 35 of these staff are political appointees and staff, or 6.5 % of all staff –the remaining staff are career civil servants of these, over 50% are ‘program examiners,’ who have responsibility for individual programs or agencies budgets. the remainder are staff in OMB-wide support offices or statutory offices. Most OMB professional staff have at least a Masters degree.

8. The World Bank 8 Aspects of the Executive Budget Process Preparation of the President's Budget typically begins in the spring (or earlier) each year, –at least eleven months before the budget is submitted to Congress, –about 17 months before the start of the fiscal year to which it pertains, and –about 29 months before the close of that fiscal year. The early stages of budget preparation occur in federal agencies. When they begin work on the budget for a fiscal year, agencies already are implementing the budget for the fiscal year in progress and awaiting final appropriations actions and other legislative decisions for the fiscal year after that. The long lead times and the fact that appropriations have not yet been made for the next year mean that the budget is prepared with a great deal of uncertainty about economic conditions, presidential policies, and congressional actions.

9. The World Bank 9 Budget Calendar Months Before Fiscal Year Activity -22Prepare macroeconomic estimates -21Revenue estimates Agency request preparation begins -20Broad expenditure estimates -19Fiscal Policy set -18Ceilings set, call circular to agencies -17Additional guidance to agencies -16Budget requests submitted -16 to –14Requests analyzed, advice provided, decisions taken Macroforecast updated -14Passback of decisions, appeals -13 to –12Preparation of Budget documents -11Budget transmittal to Congress -6Budget update to Congress reflecting macroeconomic changes

10. The World Bank 10 U.S. Federal Budget Features Multi-year projections –Since 1974, OMB has been required to produce five-year estimates (budget year plus four years) Transparency of Policy Changes –Beginning in 1974, OMB was required to submit two sets of budget estimates for every account: Current Services: estimate of budget authority necessary if current law and programs were continued with no policy changes. President’s Policy: actual budget proposed by the President for enactment Modified Cash Basis of Accounting –Since 1956, OMB has been required to produce accrual-based budgets –In practice, there are some significant exceptions –Nonetheless, for each account OMB includes estimates of total obligations (incurred financial commitment), budget authority (new authority to commit resources), and outlays (cash).

11. The World Bank 11 Other Actors CONSTITUTION Legislative BranchExecutive Branch CONGRESS General Accounting Office  Accounting policies  Accounting and information systems development  Claims and risk management  Performance evaluation  Internal controls Congressional Budget Office  Economic forecasting and projections  Financial and budgetary analysis PRESIDENT Office of Management and Budget  Accounting and information systems development  Operating budget  Financial and budgetary analysis  Internal controls  Economic forecasting and projections  Advice and consultation  Financial (strategic) planning and control General Services Administration  Inventory management  Real property management  Data processing and communication systems Treasury  Credit management  Banking  Banking relations  Debt/equity management  Investor relations  Cash management  Investment portfolio management  Foreign currency management  Accounting policies  Collections and disbursements  Maintenance of accounting records  Financial reporting  Economic forecasting and projections Office of Personnel Management  Compensation and employee benefits Council of Economic Advisors  Economic forecasting and projections  Economic Advice

12. The World Bank 12 Key Interactions OMB Line Ministries PresidentCongress CBO

13. The World Bank 13 Budget Documentation Budget of the United States Government. A summary of the President’s budget proposals. Budget of the United States Government--Supplement. The budget message of the President and information on the President’s proposals. Analytical Perspectives. Analyses designed to highlight specific subject areas, and to put the budget data in various perspectives. Includes detailed economic and accounting analyses; information on Federal receipts and collections; analyses of Federal spending by department, function, and program; detailed information on Federal borrowing and debt; the Budget Enforcement Act preview report; current services estimates; and other technical presentations. Historical Tables. Budget data of the Federal government from 1940 to present. Budget of the United States Government, Appendix. Contains detailed budget plans for the coming fiscal year. Performance and Management Assessments. Contains evaluations and analyses of programs and management at federal departments and agencies. Economic Report of the President. Detailed information and discussion o f the economic situation, forecasts, etc. Agency Budget Justifications. Detailed budget information for each agency.

14. The World Bank 14 Sample

15. The World Bank 15 Sample2

16. The World Bank 16 Reference

17. The World Bank 17 Sources of Fund 2003

18. The World Bank 18 Uses of Funds 2003

19. The World Bank 19 Executive Branch Management Scorecard 2003