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

280 Daniel Tommasi
The Budget Execution Cycle
The expenditure budget execution cycle includes the following stages:
Authorization and apportionment of appropriations to spending units
Commitment
Acquisition and verification (at this stage, liabilities are recognized)
Issuance of a payment order
Payment.
The Authorization and Apportionment Stage
After the budget is approved by the legislative body, spending units are
authorized to spend money through various mechanisms, such as ministry
of finance warrants, decrees, and apportionment plans. This authorization
is generally granted for the entire fiscal year, but in several British Commonwealth
countries it is granted for shorter periods (for example, the
authorization to spend may be granted quarterly for goods and services). In
some countries, the authorization procedure may include two steps:
1. A warrant or a decree authorizes line ministries to use the appropriations
or a part of the appropriations.
2. Line ministries (or main spending units) apportion the authorization to
spend to their subordinate spending units.
Sometimes, the ministry of finance uses this authorization procedure to
freeze a part of the approved appropriations. Such a procedure could indicate
prudent budget management, but its implementation too often stems
from the fact that hard choices have been brought forward from budget
preparation to budget execution.
Funds should be allocated to spending units as soon as the budget is
approved. However, in some countries, the apportionment procedure can
take several weeks. In particular, in several francophone countries, funds
allocated to remote spending units can be available only during the second
quarter of the fiscal year. This practice is generally a major source of inefficiencies
that should be addressed.
The Commitment Stage
The commitment stage is when a future obligation to pay is incurred. This stage
is very important in budget management, because at this time expenditure
decisions become effective.In practice,however,what constitutes a commitment