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

Overview 13
For efficient implementation of programs, managers should have a certain
degree of flexibility in determining which inputs are needed to produce the
services. Nevertheless, to keep expenditure under control, rules for limiting
transfers between personnel and nonpersonnel items must often be established.
Transfers between programs should not alter the priorities stated in
the budget.
A comprehensive midterm review of the implementation of the budget,
which may include a budget revision, is needed to ensure that programs are
being implemented effectively and to consider changes in the economic
environment and other unforeseen developments that have budgetary
implications. Amended budgets should be submitted to the legislature, and
their number should be limited to no more than one or two per year.
Fiscal control of personnel expenditures is one of the most crucial issues
in budget management. The ministry of finance must be involved in the
budgetary control of personnel expenditures, which includes (a) decisions
on changes in staffing levels in line ministries; (b) short- and longer-term
financial implications of staff reduction and retrenchment policies, including
pension liabilities; and (c) financial components of the pay structure for the
civil service as a whole. Special attention should be paid to ensuring a proper
link between the personnel and payroll databases.
A properly functioning public procurement system that promotes fair
and transparent competition for contracts awarded by public and private
bodies is essential both to encouraging market development and to promoting
good governance.
Control of cash is a key element in budget and macroeconomic management.
Cash management should be aimed at implementing the budget
efficiently, reducing the cost of government borrowing, and maximizing
return on excess operating balances. To this end, a centralization of cash
balances through a treasury single account (TSA) is required. A TSA is an
account or a set of linked accounts through which all government payment
transactions are made. In any case, whatever the organization of the payment
system, the ministry of finance should be responsible for supervising all central
government bank accounts.
Efficient cash management is having the right amount of money in the
right place and time to meet the government’s obligations in the most costeffective
way. Therefore, for smooth implementation of the budget, in-year
financial planning is essential. If delays in payment and arrears generation
are to be avoided, commitments must be planned and monitored. An annual
budget implementation plan, which will be rolled over quarterly, as well as
monthly cash and borrowing plans, should be prepared. Cash planning must
be done in advance and communicated to spending agencies so that they can