Public Sector Governance and Accountability Series: Budgeting and ...

Therefore, only the most fundamental principles should find their way
into the country’s constitution. Subject to and consistent with those fundamental
principles, a framework law—often called an organic budget
law—contains the basic rules for managing public finances, allocating powers
and accountabilities, providing financial oversight, and the like. Subsidiary
legislation will then regulate implementation of the organic budget law and
define the operational parameters.Administrative budget instructions follow
in the legal hierarchy, primarily instructions to formulate the macroeconomic
and fiscal framework and the budget circular that starts the budget preparation
process (see chapter 8). Finally, provisions and resource allocations
for the coming fiscal year are incorporated in the annual budget law that is
presented to the legislature and in supplemental allocations or other
amendments during the course of the year.
Organic Budget Law
Generally, an organic budget law defines four things:
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1. The objectives of public financial management—fiscal control, strategic
resource allocation, operational effectiveness, service orientation
2. The principles—accountability, integrity, transparency, compliance with
rules, participation
3. The process—budget preparation, execution, reporting, audit
4. The responsibilities—of whom, for what, how, and when at various stages
in the process, including the division of powers between the executive and
the legislature.
Specifically, an organic budget law should contain the following elements:
An introduction stating the objectives and principles
Definitions, including a definition of fiscal deficit
General provisions, such as the basis of accounting and financial reporting
Rules of budget coverage and presentation, including treatment of extrabudgetary
funds and fiscal risks
Stages and rules for budget preparation
Procedures for budget debate, approval, and legislative amendment
Stages and rules for budget execution, including commitment and payment
regulations, internal control, monitoring, and evaluation
Principles and rules of external audit
Accountability provisions
Relations with local government.