Acknowledgement of sources International Budget Partnership Idasa .

Acknowledgement of sources

International Budget Partnership www.internationalbudget.org

Idasa www.idasa.org.za

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Know when to intervene

The four Stages of the budget process

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Key points:

- Different decisions are made at each stage of the budget process

- You should intervene before the decisions you want to change are being made, not after.

Budget Cycle

• Budget formulation– Executive drafts budget

• Budget enactment– Minister of Finance presents budget to

parliament, debates and approves• Budget Execution

– Government agencies & departments implement programmes and spend the money

• Budgeting auditing and assessment– Agencies and departments report on expenditure– Auditor General (Supreme Audit Institutions –

SAIs)

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The general stages of the budget cycle

budget formulatio

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enactment

budget execution

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Medium Term Expenditure Framework (MTEF)

– 3 year rolling budget

Executive drafts budget

Minister of Finance presents budget to parliament, debates and approves budget

Govt agencies & depts implement programmes and spend the funds

Agencies and depts report on expenditure to Auditor General

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Executive Executive drafts budgetdrafts budget




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Steps in the Formulation Stage

• Economic modeling – Treasury, World Bank, Central/ Reserve Bank• Revenue estimations – Treasury, Central / Reserve Bank• Department/Agency expenditure ceilings determined• Executive determines medium-term spending priorities (April-Sept)• National and subnational depts prepare medium term expenditure

framework (MTEF) budget submissions (April-Aug) • Department/Agency expenditure budgets formulated

• Medium Term Expenditure Committee (MTEC) hearings held between Natl Treasury and separate departments • MTEF and Division of Revenue (DOR) debated between July and

August. • Budget Council makes final recommendation on DOR between

subnational regions/provinces. • Approval by Cabinet (Sept-Oct)

• Medium Term Budget Policy Statement; Adjustments Estimate; Division of Revenue Bill - introduced into Parliament (Nov)

• Tabling of budget in Parliament

• Formulation overlaps with other stages, i.e. auditing of last year’s records & execution of current year’s budget

When and how would civil society best impact on the Formulation Stage?

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Budget formulation decisions follow a sequence:

Decision Who decides?

How much extra money will we collect in tax & donor funds for the next financial year? Treasury, Central Bank, Donors

How much extra money do we want to spend? Treasury, Donors, Cabinet

How much money should we borrow? Treasury, Central Bank, Donors

How should we divide additional money up between expenditure departments? Treasury, Donors, Cabinet

How should we divide additional money up within expenditure departments (which programs)? Department Head, Minister

On what should we spend additional money within each programme?

Head of Department, Programme Head

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Answer the following question

Plenary work:• Not all people with mental health problems

have access to community-based services .• Make a list of all the possible budget

formulation decisions that could cause this problem.

• Who makes each of the decisions that you listed above?



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Steps in the Enactment/

Approval Stage

• Minister of Finance tables budget in Parliament • Media briefing on the budget (closed room

affair)• Committees consider budget, hold public

hearings, and report to Chamber• Amendments (not likely!)• Budget voted into law (Appropriation Act)

becoming known as Enacted Budgets • Ministers also present their Votes to Parliament When and how would civil society best impact on the Enactment

stage?



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Steps in the Execution Stage

• Money transferred to spending agencies (from enacted budgets)• Agencies initiate spending

o Through payrolls, procurement of goods and services, etc• Payments for goods and services procured• Transactions recorded in accounting systems• In-year accounting and budget performance reports produced (Monthly,

quarterly & mid-year reports)• Supplementary budgets/ adjustment estimates • Year-end accounting and budget performance reports produced (Annual

reports)• Many budget process activities occur concurrently during execution

stage, e.g formulation also overlaps with last year’s auditing

In your small groups, brainstorm onto a flipchart what you think happens during this phase and identify responsible actors for each activity.

Where and how would civil society best impact on the Execution Stage?



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Types of audit• Financial audits/ attestation audit – Auditor attests to, or

verifies, accuracy and fairness of the presentation of financial statements

• Compliance audits – Auditor checks if some conditions have been satisfied: expenditure authorised by competent authority? Expenditure authorised by the appropriation law and spent according to the law? Does expenditure conform to procedures of public finance and related laws?

• Performance audits – assessing technical & managerial aspects of spending to measure levels of “value-for-money” in public spending (moving beyond accounting & finance), through three factors:– Economy: can program be run at less expense?– Efficiency: can r/ships between inputs and outputs be improved?– Effectiveness: Is the spending authority delivering its intended results,

comparing performance indicators against actual results

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Steps in the Audit Stage

• Executive submit year-end reports to Supreme Audit Institution (SAI, or AG)

• Audit conducted • SAI report referred to Legislature• Legislature refers report to the Public Account Committee (PAC)• Public hearings key mechanism by PAC to examine audit reports - room

for CSOs & Media to be involved• PAC have constitutional power to summon officials & ministers to provide

evidence • Recommendations of PAC referred back to full parliament for debate• Government should implement recommendations, but this rarely happens

(indicating weak parliamentary power to hold executive accountable)

In your small groups, brainstorm what you think happens during

this phase and identify responsible actors for each activity.

Where and how would civil society best impact on the Auditing stage?

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Plenary exerciseNow that we have covered all the budget cycle

phases, which stage of the budget process would you try to intervene in if you were advocating about the following & why?- Poor quality medicines are procured with no efficacy on medical

conditions for which they are dispensed - Auditor General’s report on poor financial management of the

department of health- Money allocated to district hospitals wasn’t spent during the

financial year- There is fraud in every procurement process of the department of

health- Underspending in the palliative care budget

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The intrigues and politics of the budget process

The Actors:

Donors, politicians, bureaucrats, civil society

Source: IBP www.internationalbudget.org

THE POWER-CARD GAME

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Powerbrokers in the budget process

• Treasury• Politicians• Donors & IFIs• Legislatures• Private sector

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Treasury

• Where do they have power?→ Fiscal policy, Expenditure envelopes,

Arbitration, Virement, Rollovers, Financial management

• The Limits of their power→ Relationship with the Presidency/Prime

Minister→ Technical capacity

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Politicians

• Where do they have power?→ Executive decisions, Formulation of

budget, Implementation of Budget• The Limits of their power

→ Policy goals public?→ Financial management legislation→ Relative power of Legislature and

Treasury

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Donors & IFIs

• Where do they have power?→ Fiscal policy, Expenditure envelopes,

Financial Management Legislation• The Limits of their power→ Donor Diversity→ Clearly formulated Public policy goals

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Legislatures

• Where do they have power?→ Approval of budget, Implementation,

Audit• The Limits of their power

→ Political system & party rules → Amendment powers → Role of committees in the budget process

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The Private Sector

• Where do they have power?→ Taxation, Formulation, Procurement

• The Limits of their power→ Rule-based system

Your Country BudgetWho are the key power holders in the

formulation and execution of the budget in your country?

Acknowledgement of sources International Budget Partnership Idasa .

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Transcript of Acknowledgement of sources International Budget Partnership Idasa .