Acknowledgement of sources

International Budget Partnership

www.internationalbudget.org

Idasa www.idasa.org.za
Know when to intervene

The four Stages of the budget

process

3
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.

4
 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)

5
 The general stages of the budget cycle
Agencies and Executive drafts
depts report on budget
Minister of Finance
expenditure to
presents budget to
Auditor General
parliament, debates
and approves budget
budget
formulation
budget
auditing & Medium Term Expenditure budget
assessment Framework (MTEF) enactment
– 3 year rolling budget

budget
execution
Govt agencies & depts
implement programmes and
spend the funds
6
 The general stages of the budget cycle
Agencies and Executive drafts
depts report on budget
Minister of Finance
expenditure to
presents budget to
Auditor General
parliament, debates
and approves budget
budget
formulation
budget
auditing & Medium Term Expenditure budget
assessment Framework (MTEF) enactment
– 3 year rolling budget

budget
execution
Govt agencies & depts
implement programmes and
spend the funds
8
 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?9
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 Head of Department, Programme

money within each programme? Head
10
 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?

11
 The general stages of the budget cycle
Agencies and Executive drafts
depts report on budget
Minister of Finance
expenditure to
presents budget to
Auditor General
parliament, debates
and approves budget
budget
formulation
budget
auditing & Medium Term Expenditure budget
assessment Framework (MTEF) enactment
– 3 year rolling budget

budget
execution
Govt agencies & depts
implement programmes and
spend the funds
13
 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? 14
 The general stages of the budget cycle
Agencies and Executive drafts
depts report on budget
Minister of Finance
expenditure to
presents budget to
Auditor General
parliament, debates
and approves budget
budget
formulation
budget
auditing & Medium Term Expenditure budget
assessment Framework (MTEF)
enactment
– 3 year rolling budget

budget
execution
Govt agencies & depts
implement programmes and
spend the funds
16
 Steps in the Execution Stage
In your small groups, brainstorm onto a flipchart what you think happens
during this phase and identify responsible actors for each activity.
• 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
Where and how would civil society best impact on the Execution
Stage? 17
 The general stages of the budget cycle
Agencies and Executive drafts
depts report on budget
Minister of Finance
expenditure to
presents budget to
Auditor General
parliament, debates
and approves budget
budget
formulation
budget
auditing & Medium Term Expenditure budget
assessment Framework (MTEF)
enactment
– 3 year rolling budget

budget
execution
Govt agencies & depts
implement programmes and
spend the funds
19
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
 Steps in the Audit Stage
In your small groups, brainstorm what you think happens during
this phase and identify responsible actors for each activity.
• 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)
Where and how would civil society best impact on the Auditing
stage? 21
Plenary exercise
Now 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

22
The intrigues and politics of the
budget process

The Actors:

Donors, politicians, bureaucrats,

civil society

Source: IBP
www.internationalbudget.org

THE POWER-CARD GAME 23

Powerbrokers in the budget process

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

24
 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

25
 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

26
 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

27
 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

28
 The Private Sector

• Where do they have power?

→Taxation, Formulation, Procurement

• The Limits of their power

→Rule-based system

29
Your Country Budget
Who are the key power holders in the formulation
and execution of the budget in your country?