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• Upon completion of this topic, students should be able to:
• Explain the concept budgeting in public sector context
• Describe budget in public sector context
• Identify and explain the feature of budgeting
• Discuss the various budgeting approaches
• Discuss the budgeting processes in the public sector
• Discuss the institutional arrangements for budgeting in different
countries, including Ghana
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• Budgeting is simply balancing your expenses with your income.
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• Good budgeting is a broadly defined process that has:
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political,
managerial,
planning,
communication, and
financial dimensions.
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• In businesses—management plans
• In governments—management plans AND laws
• Control the activities authorized to carry out plans
• Prepare statement that permit comparison of actual results with
budget and evaluation of variances
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• A typical budget contains the following minimum information:
• Types and amounts of authorized expenditures
• Purposes for which expenditures are to be made
• Planned means for financing expenditures
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• General objective of government budgeting is to
• ensure financial control, goal attainment and managerial productivity.
• Specific functions include:
• Assisting in policy making and planning
• Determining income and expenditure
• Coordinating government activities
• Providing bases for controlling revenue and expenditure
• Setting standards for evaluating performance
• Motivating organization managers (ministerial and departmental), employees
and others.
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• Participation: involve as many people as possible in drawing up a
budget.
• Comprehensiveness: embrace the whole organisation.
• Standards: base it on established standards of performance.
• Flexibility: allow for changing circumstances.
• Feedback: constantly monitor performance.
• Analysis of costs and revenues: this can be done on the basis of product
lines, departments or cost centers
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• Planning. Budgets are embodiment of plans of an organisation and
helps organisation to stick to their plans in a systematic manner.
• Control. Budgets serve as a tool of control of government activities
and programmes. It provides the benchmark or standards by which
activities could be controlled.
• Coordination. Budgets help to achieve goal congruence by bringing
the plans and objectives of subunits of government together to
ensure that national goals and objectives are achieved.
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• Communication. Budgets serve as a formal communication between
government and the public concerning the intention of government.
• Performance measurement. Budgets provide key performance
indicators or standards by which performance of entities and
administrators could be assessed
• Motivation. A budget produced from a participatory process serve as
a drive to managers and employees to achieve the overall goal of the
entity.
• Accountability and transparency. Budget serve as tool of
accountability as it establishes responsibility and authority for
executing the plans of the organisation.
• It aslo ensure transparency in the allocation of resources to the
various sectors and projects of government.
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• Budgeting includes not only a time dimension, but also different
perspective
• The term perspective is concerned with rather a different picture of
the same thing and not truly different thing.
• Within the context of budgeting, there are three main perspectives:
• Functional perspective (including the product perspective)
• Budget by nature
• Institutional perspective
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Revenue Classifications
BY FUND
EXAMPLES:
General Fund
Special Rev. Fund
Capital Projects
Debt Service
BY SOURCE
EXAMPLES:
Taxes
Licenses
Intergov.
transfers
BY SUBCATEGORY
EXAMPLES:
Property Taxes
Sales Taxes
Expenditure Classifications
BY FUND
EXAMPLES:
General Fund
Special Rev. Fund
Capital Projects
Debt Service
BY
FUNCTION/
PROGRAM
BY ORG. UNIT
EXAMPLES:
Public Safety EXAMPLES: BY ACTIVITY
Parks and
Police
BY OBJECT
Rec.
Fire
EXAMPLES:
Health
Investigation EXAMPLES:
Patrol
Personnel
Vehicles
• Different approaches to budgeting exist, many of which are not
exclusive to the public sector.
• Common approaches include:
• Traditional Line item budgeting
• Zero Base Budgeting
• Performance Budgeting
• Planning Programming and Budgeting System (PPBS)
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• It is the first of all the budgeting approaches.
• Its persistent existence has been attributed to the following:
• it enables expenditures to be limited to the amounts and items voted in the
appropriations;
• provides flexibility in considering across-the-board cuts for macroeconomic
purposes
• avoids any conflicts about objectives and the methods of achieving them.
• It has two features:
• line item and
• incremental features.
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• Emphasis is on the nature of the income and expenditure e.g. taxes,
loans, salaries material etc.
• The budget is expressed in terms of the kinds and quantity of objects to
be purchased and the estimated revenue to finance the expenditure.
• Budget division are listed by organization and types of expenditure are
listed by category.
• It is also referred to as input budget or object of expenditure budget.
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• It is where only the Increase or decrease in budget figures are
considered.
• It is argued that because incrementalism process is annually
repeated, it causes the authorities to make regular review of
activities and policies.
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• ZBB concept rejects the notion of a budgetary base.
• Argues that every item to be budgeted for should be scrutinised, nothing
being taken for granted.
• It requires that every expenditure must be justified from a zero point
every year as if a new programme or expenditure has just been
established hence requiring a full rationalization of its need and
purported accomplishments.
• The concept discourages agency heads from taking program
perpetuation for granted and to encourage them to reallocate funds as
they think appropriate.
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• The technique basically forces each manager to analyse and justify his
operation which inevitably leads him to a cost-benefit analysis for each
component of activity within his own area of responsibility.
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• This was proposed by The Hoover Commission in 1949 to the United States
government.
• It aims at:
• fulfilling the managerial productivity function of government.
• Improving the efficiency and effectiveness of public expenditure by
linking the funding of public sector organizations to the results they
deliver, making systematic use of performance information
• It requires reforms in the whole budgetary concept, particularly, the
functions, activities and projects
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• It proposes a move from emphasizing inputs, usually measured as money
expenditures for specified objects, to outputs measured in physical terms
where feasible.
• Expresses in financial terms the major activities or functions of a unit with
programme descriptions based on the activities being performed rather than
on the expenditure required.
• Focuses attention upon the general character and relative importance of the
work to be done, or upon the service to be rendered, rather than upon the
things to be acquired such as personal services, supplies, equipment and so
on.
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• it gives attention to productivity, though bias towards the output portion of
the input/output ratio of the productivity index.
• So, also known as Output Budget since the main emphasis being on output
rather than input.
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• It supports the legislature in meeting accountability requirements because
this budgeting system includes a narrative description of each project
• Inputs and outputs are measured, the results of each activity and associated
cost being formally monitored
• Emphasis is also placed on carrying out the activities of the organisation, as
well as on controlling costs.
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• The technique was used with little success even in the United States itself where it
originated.
• It is difficult to classify government programmes with accuracy and precision
and this led to implementation difficulties.
• The process of allocation of cost estimates over the activity or programme
elements is difficult due to lack of the requisite personnel.
• Most public sector activities are not easily measurable in output terms.
• The technique fails to stress on long-run objectives of government, just as the
traditional budget.
• Performance budgeting is retrospective, based on the past and on the record
of prior accomplishment, or evaluative, measuring what was done.
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• Defined as:
• a systematic method of linking long-range planning with yearly budgeting
and evaluation.
• It involves definition of public needs; preparation of programs with
objectives to respond to those needs; and program implementation by the
most efficient means possible.
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• It is a centralised budgeting system where goals and objectives are
clarified from the top to give clear guidance during the budget
preparation phase.
• It is prospective or forward looking, concerned with objectives ahead
and the purpose of work.
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A. Formulate overall objectives and goals of the entity.
B. The possible alternative programmes which may be used to fulfil the desired objectives
are compared based on the effectiveness of each in achieving the organisational
objectives.
C. The total cost of each programme is related to the total benefits that would be derived
from the programme to determine the efficiency of the programme.
D. The most effective and efficient programmes are selected, integrated into a
comprehensive programme, and implemented.
E. The results of this programme, once initiated, are reviewed and judged on the basis of
performance. The purposes of this review are for the control in the implementation of
the programme and procurement of information for future decisions and forecasts.
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• It exposes programmes that are overlapping or contradictory in terms of achieving
objectives,
• Provides information on the impact that existing and alternative programmes will
have on objectives, and the associated cost.
• It emphasizes long-range planning on a routine basis and to review and update
programmes and objectives frequently.
• It enables management to evaluate issues like the efficiency and economy of
programmes, alternative programmes or alternative ways of implementing the
same programme, and giving priority to various programmes to determine their
overall effectiveness.
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• Measurability problems of public sector organisational goals or objectives.
• It is not easy to determine objectives or formulate a set of goals in governmental
organisations.
• It requires a great deal of time and money, as well as analytical ability on the part of both
preparers and users.
• It requires many long-run estimates of costs and benefits which makes the objective
measurement of performance very difficult.
• Others:
• It is more of a cosmetic than substantive change in budgets (United Nations, 1978)
• It is thought of as just one more example of a technique that is conceptually sound, and
yet because of practical limitation, incapable of satisfactory implementation (Jones and
Pendlebury, 2013)
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• MTEF concept is an revolutionary expenditure budgeting system in
public sector finance and accounting.
• a “practical tool/decision-making mechanism to integrate policy
priorities into annual budget, in a multi-year perspective (3-5 years), for
fiscal soundness and effective resource allocation and for operational
effectiveness and performance management” (Dong Yeon Kim)
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• “a new approach to Government planning and budgeting, based on:
• Corporate or strategic planning, which ensures answers to the questions:
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why do organisations exist,
how they do business and for whom,
What are their priorities,
How do they organise their functions so as to only implement those
that are affordable within limited resources and for which the greatest
impact will be realised.
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• The aim is to ensure that the micro and macro economic objectives of a
government are achieved within the resource constraint of the
government.
• The concept aims at:
• Maintaining aggregate fiscal discipline
• Facilitating strategic prioritisation of expenditure between and within
sectors
• Improving allocation or technical efficiency in the use of resources
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The mission, goal, objectives and outputs of MDAs are defined.
Activities to achieve the objectives are defined
Costing is done for these various activities
Costing is done for both the recurrent and capital inputs needed
Classification and presentation of the budget/estimate is improved to ensure smooth
implementation of the activities by the MDAs.
• Outputs as measures of performance are clearly identified and monitored.
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• The budgeting process is a continuous activity which involves many stages
which in interrelated in a back and forth manner.
• There is no agreement in the literature as to the number of stages in a typical
annual budgeting
• A good budget process is far more than the preparation of a legal document
that appropriates funds.
• A good budget process:
• Incorporates a medium‐term perspective
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Establishes linkages to broad organizational goals
Focuses budget decisions on results and outcomes
Involves and promotes effective communication with stakeholders
Provide incentives to government management and employees
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• It is not simply an exercise in balancing revenues and expenditures one
year at a time, but is
• strategic in nature,
• encompassing a multi‐ year financial and operating plan that allocates
resources on the basis of identified goals.
• In practice, the budgeting processes are made up of several activities.
• Though the activities may vary from countries, there are some
similarities
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• Though the processes involves several activities, the process can be
grouped into:
• Planning and Preparation—critical first step given complexity of modern
governments providing critical goods and services provided by
government that are not evaluated through market process
• Approval and Control—gives Legislature control of the Executive (CE), who
uses budget to control subordinates
• Implementation and Evaluation—standard for determining legal and
administrative compliance
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 Budget control can be introduced through the budget processes,
introduced through budget control Act, and both.
 While the budget control Act generally focuses on deficit reduction and
reduction of discretionary expenses, other control elements are
evidenced in the budget cycle.
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 Budget formulation and approval:
 The budget cycle starts with the budgeting process, in which
the government, with legislative oversight, plans for the use
of the coming year’s resources in accordance with policy
priorities.
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 Budget execution
 Once the budget has been approved and the new fiscal year begins,
spending agencies and the responsible Ministry embark on its
implementation.
 The responsible Ministry manages the flow of funds and monitors
and makes in-year adjustments to ensure compliance with the
budget and PFM rules.
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 Accounting and reporting
 Throughout the fiscal year, each spending agency records its expenditures
(accounting).
 These accounts are consolidated centrally
 At the end of the fiscal year, a report that demonstrates how the budget was
implemented is issues.
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 External oversight
 This report is then subjected to external scrutiny.
 An independent government body, reviews the government’s revenue collection
and spending and issues its own statement on the execution of the budget and
the strength of the PFM systems.
 In many countries, this audit report is presented to the legislature for further
scrutiny and follow-up.
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 Budgeting in the Ghanaian Public Sector predates Ghana’s independence from the British
in 1957.
 The fundamental basis for budgeting are enshrined in the various constitutional
dispensations since independence:
 1957/1960 constitution: Part VIII and Article 58
 1969 constitution: Chapter eleven (129-132)
 1979 constitution: chapter thirteen (139-143)
 1992 constitution: chapter thirteen (175-180)
 Other legislations (FAR, 2004; PFMA, 2016)
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• Since the early 1980s, budgeting in the Ghanaian public sector has gone
through three (3) main changes:
1. Pre-Public Investment Project (PIP) budget Era:
 where the budget was concerned with only two line items:
• Recurrent expenditure, and
• Capital expenditure/development budget
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2. PIP budget/ Incremental Budget
 Concerned with nine (9) line items:1-6:recurrent and 7-9: capital
 Capital budget has a two year projection
 Broad –based
 Shows sources of funding, etc.
3. MTEF budgeting: the Era of reforms
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Weaknesses in the Old Budgeting System
 Incremental budgeting without review, whether the activities that were
funded should have been continued or not.
 The investment budget was made up of a large number of projects, making it
more difficult to link the activities funded through the development budget to
the Government’s own priorities.
 The budget preparation process did not link the achievement of objectives
and meeting of targets with the financial resources required.
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 There was a general emphasis on the control of inputs and less on
improving performance of the sector through meeting its objectives
and targets
 The budget was not broad-based since it looked only at domestic
resource envelope.
 It lacked ownership on the part of MDAs;
 There was lack of timely reporting.
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 The weaknesses in Ghana’s budgeting systems were formally
identified initially in 1993 during the Public Expenditure Review
(PER) prepared by the Government of Ghana (another PER in 1994).
 As part of the reform, the Medium Term Expenditure Framework
(MTEF) was introduced, inspired by the Public Financial
Management Reform Programme (PUFMARP) and the Budget and
Public Expenditure Management System (BPEMS) launched by the
Ministry of Finance in July 1995.
 MTEF was initiated in 1996, it was implemented from fiscal year
1999.
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• The introduction of the project was supported by the Department
for International Development (DFID) of the British Government who
financially supported consultants to develop the MTEF concept.
• It begun on pilot basis in 3 MDAs in September, 1997, namely
Ministries of Education, Health, and Road and Transport
• MTEF is one component of the Public Financial Management Reform
Programme (PUFMARP), a programme that was introduced by the
government, through the Ministry of Finance in July 1995 as a
reform process of its financial management and accounting system
throughout the MDAs.
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• To ensure strong budget formulation
• To ensure that budgets are owned my the MDAs/MMDAs
• To ensure effective and efficient budget monitoring and control
• To provide quality and timely receipt of data on govt. resources
• To ensure proper accounting and monitoring systems
• To ensure full compliance with financial policies and procedures
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• It is integrated:
• Links recurrent spending to development expenditures to enable an assessment
of the implications of recurrent spending.
• It is broad based:
• Includes IGF, GOG, and donor resources
• It requires prioritizing
• It is performance based:
• Activities are expected to be planned and cost with a view to producing outputs
that in turn should achieve objectives
• It addresses MDAs Mission:
• Why they exist, core values, stakeholders, core business, etc.
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• It incorporates an aggregate spending ceiling based on a consistent and
comprehensive macroeconomic framework;
• It presents MDAs’ expenditure estimates on a rolling three-year basis;
• It classifies the annual spending envelopes under four heads (Line items):
• Item 1: Personnel emoluments (salaries and pensions);
• Item 2: Administrative expenses;
• Item 3: Service expenditure; and
• Item 4: investment expenditure;
• NB: Presently three line items ( 2 & 3 Combined)
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• Therefore under MTEF they are identified as follows:
• Item 1
Compensation payment (salaries, wages, etc)
• Item 2
Goods and Services (Cost of running organizations)
and (cost of rendering services)
• Item 3
Investment Activity Expenses (Cost of dev. Projects)
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• In public sector, expenditures are generally grouped into two:
recurrent expenditure and capital/development expenditure
• In the context of MTEF, expenditures are divided into two:
• Statutory Payments
• Discretionary Payments
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• These include debt payment and statutory transfers.
• Example
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Debt service
External Interest
External amortization
Domestic interest
Statutory transfers include
• DACF, GETF, Road Fund, Social Security contributions, Pensions,
Gratuities, National Health Insurance Fund
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• The line items (Item 1 to 3)
• There are also five activity sectors under discretionary
payments
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General Administration
Economic Services
Infrastructure
Social Services
Public Safety
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1.
Questioning the Reason for the Existence and activities of each
MDA
This is a means of government funding only the MDAs whose activities
contribute to the meeting of the government’s policies and needs.
2.
Allocating scarce resources to priority areas
Priority areas are agreed by government institutions and the activities of these
areas are costed.
3.
Considering all Resources in Aggregate
All revenues available in the form of tax revenues, internally generated funds,
donor supports and other non-tax revenues are brought together towards the
achievement of the agreed purposes of MDAs.
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4.
Considering All Costs in Aggregate
Both recurrent and development expenditures are brought together in an
integrated budget to ensure that all forms of expenditure are met, especially
recurrent costs that arise from investments through new investments from the
development expenditure.
5.
Transparency in the costing of policies and the relevant
activities
This ensures that better information is generated from the financial
management system for better decision making by the government.
6.
Stressing on Defining and Measuring Performance
define and develop performance variables so as to measure the outputs
and outcomes of the MDAs.
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7.
Matching of Resources to Needs
Total needs as per the priorities of governments are well identified and
resources of government are similarly identified and the two matched to
ensure that there will be no mismatch; having needs that cannot be matched.
8.
Scaling Down Needs by Prioritisation
To be able to match needs to resources, needs are expected to be scaled down
where available resources are not enough to meet the needs identified –
“Cutting one’s coat according to the available Cloth”.
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• There are seven identifiable steps in the process, and which is a
combination of the top down and bottom up processes of budget
estimations.
• The top down approach has to do with actions from the Ministry of
Finance, Cabinet and the Legislature, which involves steps 1, 2, 5 and 7.
The bottom up approach involves steps 3, 4 and 6
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• Step1. formulation of a three year macroeconomic framework,
projecting economic growth rate, domestic revenue generation and
donor funds availability.
• Step 2. Ceilings are identified for each sector considering the sector
priorities of government for the three years.
• Step 3. The three year expenditure requirements for the sectors based
on government priorities are projected for MDAs.
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• Step 4: The activities of the MDAs are costed and prioritised for the three
years.
• Step 5: Policy hearings are organised and sector ceilings are revisited at a
higher, possibly cabinet level where medium term sectoral ceilings are
reviewed if necessary.
• Step 6: Detailed three years estimates are prepared based on the projected
costing made of activities and programmes
• Step 7: Final budget hearings are organised for review and final approval of
the three years estimates by the Ministry of Finance and Cabinet.
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• It overcomes incrementalism.
• It helps to solve the problem between what can be afforded by the government,
which is given from the top ( top down approach) and the needs of the organisation
which are presented from the bottom (bottom up approach).
• It gives more and better information, which enhances transparency and
accountability;
• It is a decision-making framework for the consideration of different
organisational (ministerial and departmental) policies and their
agreements among them.
• It enables authorities to predict with some certainty possible funding
support from international organisations.
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• MTEF falls short of its potential as it tends toward being a form-filling exercise and
it is yet to be established as a tool for rational allocation of resources, review of
priorities, and decision making.
• The information included in the annual spending estimates is overly detailed.
• The preparation process is work intensive and time consuming, and the
voluminous nature of the documentation (up to forty volumes for the combined
MDAs).
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 The Constitution provides the general activities and time lines for the Ghanaian
budget cycle–the President shall cause to be prepared and laid before
Parliament at least one month before the end of the financial year, estimates of
the revenues and expenditure of the Government of Ghana for the following
financial year. –Chapter 13, 179(1).
 Appropriations Bill/Act –Passes every fiscal year.
 Other Laws provide additional information:
 PFM Act, 2016
 Financial Administration Regulations (FAR)
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 There are four main phases of the budgetary cycle in Ghana:
 Planning and Preparation (Budget Formulation)
 Analysis and approval (Authorisation and Approval)
 Implementation and
 Monitoring, evaluation and auditing
 At any point in time, more than one of these processes take
place simultaneously.
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 This consists initially of the determination of the macro-economic framework for
the country
 To prepare and circulate budget circular on the guidelines for the preparation of
sectoral budgets
 MDAs are made to submit their draft estimates at budget hearings, after which
the conclusions are sent to Cabinet.
 Budget formulation targets a macroeconomic framework, so as to achieve
growth in national income.
 It incorporates policy measures and initiatives that will lead to the attainment of
the growth target
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 In Ghana, the distributional concern is the prime responsibility of MDAs, while
the responsibility of allocation lies in the purview of the Ministry of Finance.
 Also, the Ministry of Finance and Economic Planning provides a vigilant
supervision of all the MDAs and MMDAs with respect to budgeting
 MOF monitors the above through the provision of quarterly and monthly
expenditure ceilings and the institutions of sanctions to departments that
exceed their ceilings.
 Expenditure returns from the various MDAs are submitted to the Expenditure
Monitoring Unit of the Ministry of Finance, which then advises on what actions
to take.
 Chief Directors or whoever is the “vote controller” of the various MDAs, use
the budget (or are expected to use the budget) for effective and timely
management of their programmes.
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This involves the following:
Development of macro-economic framework (3 year) by the Budget
and Research division of MOF (May-June).
Policy reviews
Cross- sectoral meetings (July or August)
Policy hearings
Budget circulars/instructions
Submission of draft estimates (see regulation 156)
Budget hearings (September)
Re-prioritization
Final submission to cabinet for conclusions
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• After Cabinet have discussed the draft estimates, it is presented at parliament
and forwarded to the relevant parliamentary select committee for
examination
• There are various select committees of Parliament which handle affairs of
different MDAs.
• They discuss the allocations of the various government units and later lay
their report on the floor of parliament.
• Sector Ministers of the government unit are called upon to table motions
before parliament for acceptance of their allocations.
• After approval for sector allocations, the entire budget is collated and
consolidated into an Appropriation law for consideration and passed by
parliament.
• The presentation is usually done in November
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After passing the appropriation bill into law, MOF then puts the budget
together into volumes for distribution to all MDAs (focusing on the
expenditure items).
The Minister then issues General warrants with respect to items 1 and 2
to the CAGD
The CAGD in turn issues the General Circular which contains instructions
to MDAs and Treasury Officers about the implementation of the General
Warrant
Also, the CAGD prepares and issues expenditure warrants (EW)and bank
transfer advises (BTA) to all cost centres.
Under GIFMIS, funds are released upon request by the MDAs using
GIFMIS to implement their programmed activities in accordance with the
approved budget.
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• Items 3 (investing activities) are traditionally considered as specific warrants and are
issues on application with supporting documents from MDAs.
• The specific warrant must be obtained before making a commitment by an MDA.
• The application must include:
• The amount
• Purpose
• Work plan
• Completed activity and expenditure limitation form
• For such item expenditure, the MDA concerned must have completed the
procurement process.
• Note that the CAGD is again involved as they also have to issues EW &BTA
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This stage involves the regular monitoring of MDAs activities in accordance
with the programmes, projects and policies stated in the budget to ensure
that these are achieved.
It also involves examining the financial reports and activities of the MDAs
to ensure that they spent within the budget and that all monies were used
for the purposes for which they are given.
Budgetary monitoring is a continuous check, review and reporting of the
budget implementation process to assess progress toward the
achievement of the set objectives, planned outputs, planned activities and
inputs in order to identify areas of variances, isolate the causes and to
cause remedial action to be taken.
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• Financial responsibilities of the head of department are outlined
• Vote controller of each and every item of expenditure are to be indicated.
• Feedback mechanisms to be established including institutional
development such as strengthening budget committees, budget units
within MDAs and in MOF responsible for selective monitoring.
• No financial business can be transacted irrespective of availability of
authority until the CAG has assigned an account number for the
transaction.
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• At the macro level, the Minister of Finance has to authorise releases.
There are limits to which releases can be effected by
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The Minister
Deputy Minister
The Chief Director
Director of Budget
• At the Micro/MDA level, the Vote Controller is responsible for releases
(who is the vote controller?).
• As part of a control measure, there are Treasury officers from CAGD
posted to various MDAs/MMDAs who are under the purview of the
CAGD in charge of treasuries,
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• The audit may be internal and external.
• The Internal Audit is a management function and is currently the
responsibility of the IAA but previously under the purview of the
Controller and Accountant-General’s Department
• MDAs have their internal auditors who certify the appropriateness of
expenditures before they are incurred
• External auditing is carried out by the Auditor-General who is
independent of the CAGD.
• All copies of warrants, cash release instructions, appropriations are
copied to the Auditor-General.
• Read Regulations, 191 &196 of the FAR and….).
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• Since 1998, Activity Based Budgeting (ABB) approach has been used
for the preparation of the National Budget.
• ABB was introduced under the Public Financial Management Reform
Programme (PUFMARP) as part of wider PFM reforms
• It was intended to bring a stronger performance focus to MDA budgets
by linking strategic objectives to outputs and activities.
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• Background:
•
•
•
•
2010 – Pilot with two Ministries
2011 - Further rollout of pilot (Oct –Dec ) - 7 MDA’s
2012 – Further rollout to 14 other MDA’s (Feb – May)
2014 – Full rollout –presentation of PBB to Parliament
• The structure consists of:
• programs,
• subprograms and
• Activities
• It requires that in order to measure results, there should be:
• Outcomes (measurable and specific)
• Outputs and performance indicators
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• Aggregate fiscal discipline
• effective control of resources
• Allocative efficiency
• allocating resources according to strategic priorities.
• Operational efficiency
• using resources in such a way that outputs are maximised.
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• Program budgets present more useful information on service
delivery & allow for transparency and accountability in service
delivery
• It also more useful for:
•
•
•
•
determining whether allocations reflect priorities
planning the delivery of services
monitoring the use of resources within each program
identifying areas where savings can be made or where more funds are
needed
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• The Ghana Integrated Financial Management Information System
(GIFMIS) was launched in May 2009 as a follow up to the Budget and
Public Expenditure Management System (BPEMS) Project with funds
(US$ 120.51) from:
•
•
•
•
The WB (US$28.44m),
DFID (US$ 15.05m),
EU ($12.27m) and
DANIDA ($4.50m).
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• Major financial modules:
• Purchasing - for Purchase Requisition, PO, SRA
• Accounts Payable - for logging Invoices/ PVs, creating accounting
and tracking liabilities, including multi-year commitments.
• Cash Management- Managing Bank Account, Bank Transfer, Bank
Reconciliation, Cash Pooling and cash forecasting, etc.
• General Ledger- Repository of all accounts
• Accounts Receivable- for tracking revenue
• Fixed Assets register-for tracking assets
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• Institutional Scope
• GIFMIS deployed to all Ministries, Departments and Agencies(MDAs)
and Metropolitan, Municipal and District Assemblies(MMDAs)
• Funds covered by GIFMIS
• Consolidated Fund
• Donor Funds
• Statutory Funds
• IGFs
• Any other public funds
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• Systems Integrate/Interface with:
• Programme Based Budgeting (PBB)
• Payroll & HuRMIS (PSC)
• CS-DMRS (DMD-MOF)
• E-Monitor (Non-Tax Revenue- MoF)
• PIMS (PID- MoF)
• TRIPS & GCMS (GRA)
• T-24& SWIFT (BoG)
• E-Procurement (Public Procurement Authority)
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• Improved budgetary, financial management (record Keeping) and reporting
processes
• Provide accurate, timely and reliable financial information to Central
Government and Decentralized Institutions and Organizations
• Uniformity in accounting and reporting with the introduction of a common
Chart of Account and Database for all MDAs and MMDAs.
• Improvement in accountability, control, monitoring and auditing of
Governmental finances.
• Ensure that Ministries, Department and Agencies (MDAs/MMDAs)
spend within their budgetary allocation due to budgetary control
• Reduce manual processes, duplication of effort and errors
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• Match disbursements with availability of revenues thus Improve
efficiency in cash management and treasury Management System
• Improve interaction between and among other financial management
players such as Bank of Ghana (BOG) , Public Procurement Authority
(PPA), Ghana Revenue Authority (GRA), among others
• Enhance enforcement of financial legislation
• Complete and timely exchange of data and information
among/between MDAs/MMDAs and central government for producing
complete, timely and accurate reports (Improve Record Keeping) etc
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• Enhance and re-enforce the internal control systems in public financial
management for accountability.
• Provide documentation of business processes, workflows and approval
levels to ensure consistent and timely compliance across all MDAs and all
MMDAs.
• An effective and efficient budget preparation, execution, monitoring and
evaluation mechanism
• Provide for the ability to budget for, track and monitor projects and
grants through the chart of accounts, by using the Project
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•
•
•
•
•
•
•
•
•
First Republic-1948, 15th August.
Capital-Seoul
Official language- Korean
Government- unitary presidential constitutional republic
The state is referred to as the 6th republic of South Korea.
Population-50.6 million (as at 2015).
Market economy ranked 13th in the world.
Made up of legislature (National Assembly), Executive and Judiciary.
Currency- South Korean won (W).
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• Ministry of Strategy and Finance(MoSF) is in charge of works related
to the drafting, execution and performance management of the
budget and the funds.
• The Budget Office at MoSF is given the budgeting responsibilities.
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• RESPONSIBILITIES OF THE BUDGET CORDINATION BUREAU:
• determines the goals based on national priorities regarding the budget and
funds, plan
• coordinates national policies that attends to the budget, allocation of resources,
manage reserve funds, operate advisory council on fiscal policy, etc.
• RESPONISIBILITIES OF THE SOCIAL AFFAIRS BUDGET BUREAU:
• determines medium to long term goals on welfare, employment, environment,
education and culture, etc.
• discusses, revises and manages the performance of the fund management plan
and revise job creating opportunities that needs financial support from the
budget.
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• RESPONSIBILITIES OF THE ECONOMIC AFFAIRS BUDGET BUREAU:
• proposes and executes the national budget for the economic sector regarding
goals for industry, land, transportation, agriculture, fisheries, etc.
• manages and coordinates total project cost, etc.
• RESPONSIBILITIES OF THE ADMINISTRATIVE BUDGET BUREAU:
• determines medium to long term goals administrative affairs, national defense,
judicial affairs, etc.
• coordinates resource allocation between national and local governments;
• manages special account for metropolitan and regional development; etc.
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• The 1948 Constitution: Chapter 54 and 57
• The Nation Finance Act: aimed at efficient, performance oriented and
transparent management of the public finance.
• The Local Finance Act: to guarantee the autonomy, transparency and
soundness in local finances.
• The National Assembly Act: administers the standing committee, special
committee on budget and accounts and other related groups related to the
budget and settlement processes.
• Other budgetary legislations include Act on Management of Subsidies, Tax
Act, Framework act on management of charges, Act on public-private
partnership on infrastructure, etc.
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• Budget Formation by the administration: starts from December
before the fiscal year by setting guidelines for fiscal management plan
(for 5 fiscal years) through to October 2nd of the fiscal year where the
budget proposal is submitted to the National Assembly.
• Deliberation by the National Assembly: speech on administrative
policy, public hearing, comprehensive review by special committee on
adjustment of figures and funds, and review and vote at plenary
session which ends on December 2nd (at least 90days).
• National Finance Act, as amended in April 2013, requires the budget proposal
to be submitted 90 days before the fiscal year in 2013, 100 days in 2014, 110
days in 2015, and 120 days from 2016.
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• Execution: budget allocation and re-allocation, fund allocation,
maintenance of flexibility in the execution of the budget and the
funds.
• Settlement and Evaluation: Submission of Statement of Accounts to
Ministry of Strategy and Finance (MoSF), review of board of audit and
inspection, national statement of accounts submission to the National
Assembly, self assessment of fiscal projects and performance goal
management.
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• It’s an institution attached to the chairman of the National Assembly.
• Made up of independent technicians but not politicians and they
allow the National Assembly to exert control over the government’s
fiscal activities by implementing non-partisan research and analysis
from an independent point of view.
• Its main responsibilities include regular reports on the budget and
settlement, cost estimates for bills, analyses on medium-long term
fiscal demands, analyses of specific policy and program issues at the
request of a committee or an individual member of the National
Assembly.
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• Digital Budget and Accounting System: (d-Brain system)
• Initiated in January 2007 after 3 years of preparatory period.
• It supports the online processing of the entire fiscal activities of central
government such as budgeting, budget execution, settlement of accounts
and performance management.
• The system has contributed to the efficiency of work and ease of
information management due to a single system processing of work related
to public finance.
• It has also given the public the chance to have greater opportunities of
monitoring and participating in public finance and also providing
convenience in the payment of taxes or receiving of fees.
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• The system makes real-time fiscal management possible.
• For example, as for transactions accompanied by the execution of fiscal funds,
journal entries are automatically created according to the accrual basis and
double-entry bookkeeping and costs for each program are calculated
• The national finance is clearly displayed and comprehensively
managed by the d-Brain system.
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Activity
Korea
Ghana
Provisional budgets
Done
Done
Powers of amendmentIncrease/Decrease
Done- with the consent of the
executive
Done
Approval of resources
By the National Assembly
By Parliament
Carryover of appropriations and
borrowing of future appropriations
To some extent
To some extent-under the same
expenditure Head
Approval Period
3 months to year end
1 month to year end
National Budget Office
In Korea : NATIONAL ASSEMBLY BUDGET OFFICE
(NABO)
Not in Ghana
Executive Agency system and the
civil service
26 executive agencies with special
rules
No executive agencies
Supplementary budgets
Done
Done
 Denmark functions as a constitutional monarchy. The Monarch, Queen
Margarethe II is officially the head of state
 The Queen appoints the Prime Minister and the Cabinet
 The Prime Minister is the head of cabinet and is accountable to the
“Folketing” meaning parliament in Denmark
 January, 2015 population estimate of 5,633,782 people
 Historically, Denmark has a very large public sector than all the other Nordic
countries except Sweden
117
 The public sector is built on solid and stable financial foundations with
budget surpluses ranging from 0.4% to 3.1% of GDP
 The government is committed to maintaining surpluses into the future
in preparation for the fiscal implications of its ageing population
 Existence of multi-party coalition government ( i.e. Any political party
given the mandate to form government after elections may include
members of other political parties)
118
 Emphasis on the need to always build consensus due to the
fact that, no political party has had majority in parliament
since 1909
 The “Denmark 2010 Programme” is the anchor of its budget
policy
 This medium-term framework enjoys broad political support
and is followed by successive governments
119
 Existence of constitution adopted in 1953 with 89 articles
 However no formal specific statutes governing its budget processes
 The Ministry of Finance issues budget regulations and guidelines
 Arbitrariness in the choice of formal and less formal budgeting process in
order to build consensus
 However, roles of key players like parliament and parliamentary committees in
the budgeting process are specified in the Danish Constitution
120
 Parliament and Parliamentary Committees
 have oversight responsibility over the executive with the existence of
parliamentary committees, parliamentary auditors and external auditors
appointed by parliament
 Political Executive consists of the Monarch, prime minister and the
cabinet
 Ministries and Executive Agencies are usually small in size and
confined to policy making
 Civil Service and Sub-National Governments include counties and
municipalities executing about two-thirds of the state budget)
121
The annual budgeting process has been categorised as follows:
 Planning and Preparation (January to June)
 Approval and Control (August to December)
 Execution and Post-implementation (A year-long activity with periodic
reports, accountability and audits)
122
• Budget regulations and guidelines are specified in the ‘Budget
Guidelines Handbook’, which is issued by the Ministry of Finance and
approved by the Finance Committee of Parliament
• The MoF drafts a Budget Priorities Memorandum to the Cabinet
Economic Committee
• The memorandum describes total levels of expenditures consistent with
the medium-term “Denmark 2010 Programme” framework
123
• It may or may not specify expenditure ceilings
• Highlights key issues arising from negotiations between national, regional
and local governments
• Review and approval by Cabinet
• Formal communication to all key players such as spending ministries
124
• Afterwards, spending ministries present their budget submissions to the
Ministry of Finance by the end of April or early May; subject to their
respective expenditure ceiling
• Justification for over-spending
• Further negotiations and approval by Cabinet in June
• Final checks in August before presentation to Parliament
125
• Negotiations with other political parties prior to presentation of budget
proposal to Parliament in order to achieve consensus
• As a result, some tactical decisions are taken about what should be in the
original budget proposal and what should be included later as subjects
for negotiation with other political parties
• Parliament approves budget proposal after all necessary amendments
and changes have been made
126
• Spending ministries are required to oversee the execution of the budget
• Provision of periodic reports
• Control activities by parliamentary auditors and external auditors
• The need to conform to set standards
• Individual ministries responsible for their actions
127
• January The Ministry of Finance examines budget preconditions and
proposes overall budget targets.
• Early February Breakdown of overall budget targets to ceilings for
consumption and income transfers for each ministry.
• Early May Line ministries give their draft budget proposals to the Ministry of
Finance.
• May-June The Ministry of Finance performs technical scrutiny of the budget
proposal helped by various budget analyses and holds discussions with line
ministries on the financing of new initiatives, etc.
• August Last-minute estimates of the economic situation and its influence on
the budget proposal.
128
• End of August Presentation of the budget proposal.
• Early September- First parliamentary discussion of the budget
proposal.
• Early November- End of political negotiations regarding the budget
proposal
• Mid November- The Minister of Finance proposes the government’s
amendments and changes to the budget proposal (including the result
of the political negotiations).
• End of November- The Minister of Finance presents amendments
based on a final estimate of the economic situation and its influence on
the budget proposal.
• Mid December- Third and final parliamentary reading of the budget
proposal
129
• Broad stakeholder involvement helps to build consensus amongst political
parties
• Press freedom provides effective tool for monitoring and controlling the
budget
• Appointment of external auditors by parliament not the executive
• Existence of parliamentary auditors to augment the activities of external
auditors
• Existence of budget ceilings
• Greater autonomy to regional and local governments
130
Some fundamental basis for budgeting are enshrined in laws of both
countries
There exist budget ceilings for the expenditures of various sectors
Annual budgets are integrated with medium term goals
They both undertake periodic budget reforms
The legislature have oversight responsibility over the executive for the
purposes of control and monitoring of annual budgets
131
Greater autonomy of local governments and agencies
Consensus building among political parties
No legal requirement to report tax revenues to parliament as part of the
annual budget
External auditors appointed by parliament
Existence of parliamentary auditors
Focus on budget surplus
132
The need for consensus building among political parties
Broad stakeholder involvement in order to avoid the “closed-doorintra-governmental” approach to budgeting in Ghana
The need to follow medium-term policies by successive governments
Press freedom and easy accessibility to information
Accountability and assurance issues and adoption of a “sanctions
regime”
133