Republic of Montenegro: Public Expenditure and ... - Vlada Crne Gore

58 Chapter 4: Public Financial Management and Procurement
audit, there is a need to expand the IA functions beyond the Ministry of Finance and build
capacity for internal audit within line ministries.
4.6 This chapter is organized as follows. Section B discusses budget preparation issues, in
particular the transparency and comprehensiveness of the budget, the reliability of the budget,
program budgeting and medium term budget planning. Section C discussed budget execution and
cash management. Section D discusses public procurement. Section E focuses on internal and
external audits, and the last section offers conclusions and recommendations.
B. BUDGET FORMULATION
4.7 Montenegro’s Organic Budget Law, adopted in 2001, provides a framework for
budget formulation and execution. The Law assigns responsibilities to the Ministry of Finance
(MoF) to issue detailed subordinate regulations to guide the processes. The MoF is responsible
for managing the budget preparation process for the central government. The budgets of
municipalities and social funds are prepared by their respective bodies.
4.8 The budget preparation process begins in June with the preparation of the
macroeconomic and fiscal policy framework for the next fiscal year, which in turn defines
the overall budget resource envelope. The MoF then issues circular instructions, for each
spending agency and the formats for budget submission. The spending agencies then prepare
their budgets according to the format provided by the MoF and submit their budgets to the MoF
in September. Budget planning at the spending agencies is based mainly on historical costs and
future projected needs. The final budget allocation outcome would involve negotiations. After
negotiations, budget analysts from the MoF work with the budget officer of the respective
spending unit to fit demands within the approved level of spending. The consolidated draft
budget is then approved by the Government and forwarded to the Parliament in November for
voting. The voted budget is published in the official Gazette to inform budget users and citizens
of budget allocations.
Transparency and Comprehensiveness
4.9 Montenegro’s budget for 2005 contains tables with the consolidated budgets of the
central government and social funds, and a new harmonized chart of accounts is being
implemented that would allow for the consolidation of municipal budgets into the general
government budget as well. The budget, however, is still not fully comprehensive as it does not
include municipalities.
4.10 In general, the Montenegrin budget presents a clear and detailed description of
planned spending for the budgeted year, as well as the macroeconomic and fiscal assumptions
that underpin the spending proposal. The structure and clarity of budget documentation
submitted to Parliament is essential to assure that budget decisions are transparent to the public.
The budget is accompanied by very good narrative that explains some of the major changes from
the previous year both on the revenue and the expenditure sides. A comprehensive summary
table is included that shows the economic classification of revenues and expenditures for four
years – the budget year, the current and prior years, and one year into the future. The same table
shows the planned deficit and the levels of financing that will be required. There is detailed