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

Overview 3
Chapter 2 by Salvatore Schiavo-Campo is concerned with the budget
document and its coverage. The fundamental requirement of fiscal management
is that the executive branch of government can take no moneys
from the public, nor make any expenditure, except with explicit approval of
the legislature as the representative organ of the citizens. Consequently, the
budget should be the financial mirror of society’s economic and social
choices, and should reflect all components of good governance—accountability,
transparency, participation, and predictability.
The unity of the budget is therefore a basic principle. It is impossible for
the budget to reflect the choices of society if it does not include the bulk of
revenues and expenditures. Otherwise programs cannot be compared and
there is no assurance that scarce resources will be allocated to the priorities.
Also, expenditure not included in the budget is uncertain and opaque, making
macroeconomic programming difficult and increasing the risk of corruption
and waste.
Extrabudgetary funds (EBFs) are government operations set up outside
the annual budget process and thus not subject to the same legislative
approval procedure as the budget. The reasons for setting up EBFs include:
Bypassing budgetary procedures when they are too rigid
Protecting and insulating high-priority expenditure programs
Purchasing goods for future delivery, payment of which occurs after the
fiscal year
Financing autonomous entities such as universities or research institutes
Avoiding scrutiny and accountability for the use of public funds.
In industrial countries, the largest EBFs are for social security and
public health. In Africa, the major types of funds are as follows:
Aid-financed expenditures, per requirements of different donors
Road funds, the design and management of which have improved in
recent years
“Black boxes” and parallel budgets, fueled from revenue from natural
resources or commodity boards.
Although there may be a rationale for setting up an EBF, there is never a good
reason for secrecy on revenues and rarely a good reason for secrecy on
expenditures.
Whatever the reason for setting up an EBF, the fundamental requirement
of fiscal management must be met, by legislative approval of its