Managing Public Expenditure - CMI

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46 Managing Public Expenditure - A Reference Book for Transition Countries Appropriations may be grouped into the following broad categories: • Obligation-based appropriations give rights to make commitments and make cash payments according to these commitments, without a predetermined time limit. Such appropriations have their own life cycle and are not limited to one year. This system is no longer used for all expenditures, but may be used for special programmes (e.g. in the US). • Cash-based appropriations give authority to make cash payments over a limited period of time, generally corresponding to the fiscal year. This system is the most widespread. In principle, appropriations define cash limits that cannot be exceeded, but there are exceptions. They cover the payments due. • Accrual-based appropriations cover the full cost of the operations of a ministry or agency, and increases in liabilities or decreases in assets (such as pension superannuation liabilities, depreciation of fixed assets, etc.). “Full costs” are the goods and services actually used or consumed (as opposed to acquired) over a period. Therefore, the depreciation of physical assets, variations in inventories and variations in liabilities are added to actual payments to calculate the full costs of a programme. Moreover, for goods and services, there may be differences between the points of time at which they are acquired, paid for and used/consumed. For central government entities, accrual-based appropriations are currently used only in a very few countries (New Zealand, Australia and, from 2002, the United Kingdom). When appropriations are accrual-based, special mechanisms for controlling cash must be put in place. Budget systems can be classified schematically according to the basis of appropriations, into obligationbased, cash-based and accrual-based budgets. Most budget systems at the present time are cash-based. As discussed in Chapter 11, the basis of appropriations, which concerns the nature of authorisations of parliament, should not be confused with the basis of accounting. Accrual accounting does not require abandoning the presentation of cash-based appropriations to parliament. In many transition countries, spending agencies keep books on an “accrual” basis. Nevertheless, these countries have given priority to reinforcing the cash-budget system in their recent budgetary reforms. A cash-based budget system fits well the needs for compliance and expenditure control. Payments are controlled on the basis of the authorisations of the parliament. Macroeconomic objectives, such as the cash deficit are directly linked to the appropriations. All transition countries need to enhance their system of accountability to parliament and their macroeconomic control. Presenting cash appropriations to parliament serves both purposes. Whatever their accounting system, transition economies should present cash-based appropriations to parliament. Figure 1.1 shows three different types of appropriations. In addition, some countries and the EC have a procedure for making multi-year commitments. 2. Gross terms To formulate and assess correctly government policies and activities (including its business activities) expenditures and revenues should be shown in the budget in gross terms, even if the authorisation of the parliament and the budget execution controls concern only netted appropriations (i.e. expenditures that exceed commercial revenues).
The Budget and its Coverage 47 Obligation-based appropriation Figure 1.1. TYPES OF APPROPRIATION… For running costs Appropriation Commitment Payment Payment Payment Fiscal year 1 Fiscal year 1 Fiscal year 1 Fiscal year 2 Fiscal year 3 Cash-based appropriation Appropriation Commitment Payment (Annual only) Accrual-based appropriation Depreciation and other Appropriation Commitment Payment (Annual only) Time lag …AND COMMITMENT APPROPRIATION Authorisation Commitment Appropriation Payment Appropriation Payment to commit Fiscal year 1 Fiscal year 1 Fiscal year 2 Fiscal year 2 3. Annual nature of the budget Budgets are almost always annual (the “fiscal year” can be the calendar year or some other 12-month period). A shorter period would be disruptive for management; a longer period could make budgetary planning and implementation subject to considerable uncertainty. Because many other relevant statistics (e.g. international trade) are published on a calendar year basis, a 1 January — 31 December fiscal year is the most convenient for analytical and reporting purposes, and most countries conform to this cycle.
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The European Budget and the Impact
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114 Managing Public Expenditure - A
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CHAPTER 4 BUDGET CLASSIFICATION, PR
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Budget Classification, Presentation
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CHAPTER 5 POLICY FORMULATION AND BU
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Policy Formulation and Budget Prepa
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PART III MANAGING BUDGET EXECUTION
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CHAPTER 9 THE TREASURY FUNCTION AND
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The Treasury Function and Cash Mana
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SUMMARY — PART III A. KEY POINTS
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Summary — Part III — Managing B
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CHAPTER 11 ACCOUNTING Accounting an
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Accounting 293 paid and, more gener
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Accounting 295 Figure 11.1. CASH AN
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Accounting 297 eventually a commitm
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Accounting 299 3. Expenses a. Main
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Accounting 301 Such an assessment c
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Accounting 303 • Implementation o
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Accounting 305 information on commi
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Accounting 307 The consolidation mo
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Accounting 309 Table 11.2. PLANS TO
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Accounting 311 Box 11.2. COMPARISON
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Accounting 313 4. Capital charges T
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Accounting 315 15. A generation is
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CHAPTER 14 EXTERNAL AUDIT Auditing,
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External Audit 343 Box 14.1. RECOMM
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External Audit 345 Independence of
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External Audit 347 (but not always)
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External Audit 349 2. Ex post audit
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External Audit 351 Such audits can
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External Audit 353 Box 14.4. FRANCE
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External Audit 355 Box 14.6. UNITED
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External Audit 357 government offic
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CHAPTER 15 PERFORMANCE MEASUREMENT
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Performance Measurement and Evaluat
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SUMMARY — PART IV A. KEY POINTS 1
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Summary — Part IV — Accounting,
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Summary — Part IV — Accounting,
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ANNEX I QUESTIONNAIRE ON PUBLIC EXP
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Questionnaire on Public Expenditure
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ANNEX II ESTABLISHMENT OF A NATIONA
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Establishment of a National Fund Sy
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ANNEX IV IMF CODE OF GOOD PRACTICES
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IMF Code of Good Practices on Fisca
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IMF Code of Good Practices on Fisca
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BIBLIOGRAPHY Abed, George T. (1998)
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Bibliography 477 Canada, Ministry o
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Bibliography 479 Goode, Richard (19
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Bibliography 481 Kopits, George and
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Bibliography 483 OECD (1996c). Perf
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Bibliography 485 Rajcoomar, S., Mic
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Bibliography 487 Squire, Lyn. (1995
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Bibliography 489 United States, Gen
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SELECTED WORLDWIDE WEB SITES 1 http
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INDEX Note: For terms listed in the
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Index 495 ex post control: 124, 262
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Index 497 GAAP: 13, 384, 456 genera
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Index 499 Pre-Accession Economic Pr
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