Institutions of Budget Execution: Rules and Roles Richard Allen Budget Execution and Financial Accountability Course November 3-5, 2003

What Are Budgetary Institutions The rules and regulations according to which budgets are drafted, approved and implemented. Budgetary outcomes thus depend on how well these rules are both designed and observed. Institutions, (i.e. rules), are distinct from the organizations established to implement them. But organizations matter greatly too, for effective implementation and enforcement.

Understanding Budget Implementation A key distinction: Formal Rules Informal Rules And: How budgets are implemented is greatly affected by how they are put together.

Legal Framework for Public Expenditure Management

Main Actors in Budget Implementation Central Management Ministry of Finance (Ministry of Planning) Ministry of Public Service Office of the President Inspection Generale des Finances Accountant General Government Control Office Central Procurement Agency Central Tender Board National Debt Office Central Bank Line Ministries,Departments and Agencies Budget/Finance Department Procurement Department Financial Controller, Ordonnateur, Treasury Accountant (MOF) Internal Audit Unit Oversight Bodies Supreme Audit Institution Legislature Civil Society

Case Study Country X – What to Do? There are detailed budget laws and regulations covering all aspects of budget execution. Controls are centralized in the MOF (Hacienda) and the independent Controleria. The budget/finance departments of line ministries are a paper-shuffling operation with a limited role in budget preparation and little influence on budget execution. The annual budget documents are voluminous (20 volumes) and impenetrable. The budget as implemented is very different from the budget as approved. Over 20,000 supplemental appropriations are approved each year. Each supplementary must be approved by the MOF. The budget includes more then 10,000 performance indicators but these are only loosely connected to the budget planning process or budget allocations. Few programs are adequately costed. The accounting system does not produce timely and accurate data on the different stages of the expenditure process (e.g. commitments are unrecorded). Internal control and audit are generally effective – conducted through the Contoleria, with staff allocated to each budget entity. Within MOF, there is lack of “connectivity” between different departments and units, lack of detailed knowledge of line ministries, and limited capacity to implement new reforms. The Minister of Finance has initiated a budget reform. This focuses on reengineering the budget processes within the MOF and introducing an integrated financial management information system. The supreme audit institution focuses on compliance and regularity audit, and produces its reports with a long (up to 2 years) delay. The Congress has limited capacity to exert effective oversight and control.

How should the Bank advise the Government to strengthen its budgetary institutions?