BUDGETING IN
ROMANIA
Den Haag, the Netherlands
11 November 2004
Michael Ruffner
Administrator
Budgeting and Management Division
Background
• In 1998, OECD started “reviewing” country
budget systems
• System reviews using functions of budget
and stages of budget as base
• Learning device – principally descriptive
• Romania first non-OECD non-observer
country to be reviewed
General Comments
• System in movement
– Structures and Processes
• Impressive reforms over a short period of
time
– Reforms similar to other countries
• Strongly legalistic tradition with ex-ante
control
Fiscal Rules
• Government Programme
– Broad political consensus about EU accession
and high level macro-economic goals
– Generally successful – lower inflation, general
3% of GDP deficit limit on expenditures, 29%
of GDP Debt
• Not passed in law
The Budget
First things, first …
• More comprehensive – fewer off budget
funds, quick privatisation
• Budget Year + 3 year MTEF
– Looks realistic
• Economic Assumptions
– Good performance, recently
– Some steps to ensure independence
Budget Reporting
• Monthly, quarterly, annual
• No Mid-year Report
– Update of economic situation (already provided
by National Forecast Commission
• Timeliness of annual report
Specific Disclosures
• Room for Improvement
– Contingent Liabilities
– Tax expenditures
– Asset registry (How far, linked to accruals)
• Privatisation lowers risks -- Where are the
ties to budgets? Loan guarantees?
Role of Parliament
• Lengthened but still relatively short time
frame for action
• Rights to amend budget, can’t increase
deficit
• Does have access to specialised staff
– Two chambers work together
• Two tiered Committee Structure
– Sectoral review followed by budget committee
Budget Execution
• Treasury system with 3 levels of credit
holders (Ministry, Program, Street level)
• Ex-ante Control – “Own” control and
“Delegated” control
• Tight rules on virement (transfers)
• New Internal Audit – just starting
• Still ability to overspend
External Audit
•Audit Court produces report by December
•Previously longer delays, but timing is still not
optimal
•Court has improved its interaction with media
•Court reports to parliament, but there is no audit
committee
•Capacity for performance audit is being developed
•Main audit report discussed in a joint sitting of
both houses
•Formal vote on budget execution
•Parliamentary process largely formalistic
Civil Society
• Institutionalised consultations through
Economic Social Council (CES)
– Very high standard (consensus/near consensus)
– Other tri-partite discussions
• Some academic review – especially in
macroeconomic assumptions
Budget Transparency According to OECD Guidelines
Romania
Item
1. Budget Reports
The Budget
Pre Budget Report
Monthly Reports
Mid-Year Report
Year End Report
Pre-Election Report
Long Term Report
2. Specific Disclosures
Economic
Assumptions
Tax Expenditures
Assessment
●↑
The Budget is more comprehensive than in past, but there still are extra-budgetary funds
●
●↑
●
●↑
Financial Liabilities
●↑
and Assets
Non-Financial Assets
Employee Pension
●↑
Obligations
Contingent Liabilities
3. Integrity, Control and Accountability
Accounting Policies
●↑
Internal Audit and
●↑
Control
Audit
●↑
Parliamentary Scrutiny
Civil Society Scrutiny
Comments
●↑
●↑
While there are monthly and quarterly execution reports, there is no comprehensive mid-year report –
although some important sectors like pension and health do produce mid-year reports
Year end report is released but not time ly
Quality of assumptions assured by outside factors, need to think of how forecasts are constructed in
the future
There is some analysis on tax expenditures, but it is not comprehensive or part of the budget
documents
Foreseen with the implementation of accruals
Foreseen with the implementation of accruals
Internal control is effective but not efficient, internal audit is new and has not reached critical mass
Could be more timely with audit of year end report, better follow up needed, increase in performance
audits
Little civil society involvement in budget process, CES lends institutionalised civil society
involvement
● = Item substantially met, ● ↑ = Item met, situation needs improvement
Conclusion
• Solid Base of Transparency
– Improvements happening rapidly
– Time needed to implement and judge success of
reforms
• Internal audit, program budgeting, accruals
• New disclosures
– Contingent liabilities, Mid year update to
parliament, reconciliation line in MTEF