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

The Budget and Its Coverage 59
The basic principle of national budgeting is that each level of the government
should have its own budget to cover its own sphere of activity and
responsibility. Most countries, including those in Africa, generally have and
enforce clear revenue and expenditure assignments. However, in a few
African countries (and in several transition economies of the former Soviet
Union), the division of revenue and expenditure responsibilities is either
unclear or not observed in practice: parallel systems of revenue collection
or of informal expenditure are superimposed on the formal systems. In
these cases, the distribution of responsibilities among the different levels of
the government must be clarified and stable and transparent arrangements
are needed to ensure that it is respected in practice.
Sound analysis of a country’s fiscal stance and prospects calls for looking
at general government rather than only central government. Indeed, attention
to central government generates the temptation to download fiscal
difficulties onto subnational levels of government by decentralizing expenditure
responsibilities without decentralizing the revenue to go with them.
This downloading masks real problems for some time, until they surface
in a more virulent form owing to the lack of policy attention. The risk is
especially acute in African countries, where fiscal data from levels of government
below the central government may not be available in a timely
and reliable fashion.
The public sector
In addition to general government, the public sector includes entities that
are majority owned by the government, such as state-owned enterprises or
state financial institutions. In market economies, state enterprises should
be commercially oriented and thus have a separate legal persona and full
operational autonomy. As such, their expenditures and revenues cannot be
submitted to the same scrutiny and approval mechanisms as the government
budget. The budget should include the financial transactions
between the state enterprises and the government but not their transactions
with the rest of the economy, for which the government is not
directly responsible. 1 However, a financial approach should be developed
for the public sector as a whole. Thus, the budget can show the consolidated
account of the public sector (sometimes called the consolidated
budget, although it does not have the legal status of the government
budget) in an analytical table, presented for information only. In any event,
for accountability and transparency, the government should report regularly
on the performance and the financial situation of both financial and nonfinancial
state enterprises.