Module 1.2 Introduction to the Budget Cycle INTRODUCTION TO PUBLIC FINANCE MANAGEMENT.
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Transcript of Module 1.2 Introduction to the Budget Cycle INTRODUCTION TO PUBLIC FINANCE MANAGEMENT.
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Module 1.2 Introduction to the Budget Cycle
INTRODUCTION TO PUBLIC FINANCE MANAGEMENT
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Module map
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Module outline
The six phases of the budget Cycle
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Six Phases of the Budget Cycle
Review Policy Budget Execution
Accounting and reporting
Strategic Planning External Audit
Budget Preparation
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Translation of the medium-term economic and social policies into a medium-term programme of actions, taking into account available resources
Phase 1. Strategic Planning
Macro-economic forecasting
Development of sector strategies
Setting priorities within fiscal constraint
Costing / fiscal impact assessments
Set macro-fiscal policy
Determining expenditure ceilings
National Development Plan
fiscal side policy side
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Phase 2. Budget Preparation
• Budget preparation deals with the annual translation of strategic plans into the budget
• Responsibilities in budget preparation process are set out in a legal framework: constitution, organic budget law, financial decrees and regulations
• Approved budget is a law: deviations (virements, supplementary budgets) need to be approved
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Phase 2: budget preparation
I. Determine budgetary ceiling
Min
istry o
f F
in
an
ce
L
in
e m
in
istri
es
V. Submit to Parliament for authorisation
II. Send budget circular
III. Submit bid
IV. Negotiations
Parliament
Cabinet
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Phase 3. Budget execution
Revenue collection
• Taxes (direct/indirect)
• Excises
• Duties
• Non-tax revenues
• Donor funding
Expenditures
•Control
•Payroll
• Procurement of goods/services
• Transfers / subsidies
Liquidity management
• Short term (cash management)
• Medium / long term (debt management)
Aim: achieve policy goals
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Phase 3: budget execution Control
Authorisation by MoF or Fin. Dept. of LM
Commitment to future payment
Verification of delivery by spending dept: liability
Payment Authorisation by MoF or Fin. Dept.
Cash Payment by Treasury or LM
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Phase 4. Accounting and Reporting
Accounting: maintaining basic records of government transactions and, thus, outturn expenditures
Aim: monitor and control legal compliance with budget authorisations
Chart of Accounts (CoA): coding framework for financial transactions
Data: commitments and/or payments
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Phase 4: Accounting and Reporting
Financial reporting• In-year reporting – related to budget execution
• End of year report: Annual Financial Statement• Revenues and expenditures• Balance sheet (assets and liabilities)
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l
Phase 5. External Audit
Supreme Audit Institution (SAI) • National institution responsible for
external auditing of government’s annual financial report
Key feature• Independence from executive and
legislative authorities by Constitution
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6. Policy Review• Assessment of actual versus desired government
policy outcomes
• Ex-post analysis of impact of government policy programs
• Adaptations of strategic policy mix based on outcomes of government policy effectiveness and efficiency in service delivery
Should be an integrated phase of budget cycle
• No common practice in developing countries• Carried out on an ad hoc basis• Frequently initiated by donor community (PER, PETS)
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t t+1 t+2
Fiscal
Year:
t-2 t-1
Budget
T-1
Reporting & Audit
Policy Review
Budget Execution
Account. & Mon.
Strat. Planning
& Budget Prep.
Budget
T+1
Reporting & Audit
Policy Review
Budget Execution
Account. & Mon.
Strat. Planning
& Budget Prep.
Budget
T
Reporting & Audit
Policy Review
Budget Execution
Account. & Mon.
Strat. Planning
& Budget Prep.
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Budget Cycle Exercise
• Groups should each clear a complete Table top,
ready for working
• Take all cards
• Lay out in three columns:
• Do stages first, then tasks, then stakeholders
• Be sure to put tasks in correct order
• Time: 30 min
Stages Tasks Stakeholders