Presenter: M. Shohelur Rahman Chowdhury
Procurement Specialist
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Budget execution is the phase
when resources are used to
implement policies
incorporated in the budget.
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Requirements for budget execution
 Compliance - Ensuring that the budget will be
implemented in conformity with the legislature’s
authorization
 Adaptation - Adapting the execution of the budget to
changes in the economic environment
 Sound Management - Resolving problems met in
program implementation and preventing any risk of
abuse and corruption
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Budget execution cycle
Authorization
and
apportionment
Payment
Issuance of
payment order
Commitment
Acquisition and
verification
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Authorization and Apportionment Stage
 A warrant or a decree authorizes line ministries to use the
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appropriations or a part of the appropriations
Line ministries (main spending units) apportion the
authorization to spend to their subordinate spending units
Authorization is generally granted for the entire fiscal year
In British Commonwealth countries it is granted for shorter
period
Ministry of finance may freeze a part of the approved
appropriations for prudent budget management
Funds should be allocated to spending units as soon as the
budget is approved
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Commitment stage
 Commitment stage is when a future obligation to pay
is incurred
 For goods and services commitment means legal
commitment
 Commitment entails an obligation to pay
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Verification stage
 The verification stage immediately follows the
deliveries
 Verification is the conformity of the delivered goods,
or rendered services
 For debt service, personnel expenditures and a few
other expenditure items the verification stage and the
commitment stage are combined
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Payment Order Stage
 After verification of goods and services the authorizing
officer issues a payment order
 Expenditure is recognized and recorded in books of
the public accountant and in the books of the
authorizing officer
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Payment stage
 Bill is paid by cash or cheque or electronic fund
transfer
 At this stage comparison with bank statements should
be systematically carried out
 Issue of cheques at the end of the year may lead to
high fiduciary risks
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Compliance control in budget execution
 Why compliance control?
 To prevent blatant cases of misuse of appropriation
 Overspending
 Irregularities
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Compliance control in budget execution
 At commitment stage verify that
 The proposal to spend has been approved by an
authorized person
 Money has been appropriated for the purpose stated in
the budget
 Sufficient funds remain available in the appropriate
category of expenditure
 The expenditure is classified in the correct way
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Compliance control in budget execution
 At verification stage the documentary evidence that
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the goods have been received and services were carried
out must be verified
The expenditure has been properly committed
The invoice and other documents requesting payment
are complete
The creditor is correctly identified
After final payment examine and scrutinize the
expenditure concerned and report any irregularity
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Compliance control in budget execution
 At verification stage the documentary evidence that the
goods have been received and services were carried out
must be verified
 The expenditure has been properly committed
 The invoice and other documents requesting payment are
complete
 The creditor is correctly identified
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Compliance control in budget execution
 Commitment may be made through different channels
which may be upstream from the annual budget cycle
 Expenditure in utilities such as electricity and
telecommunication expenditure
 Staff recruitment
 Contingent liabilities
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Implementation and Budgetary Expenditure
Source: Allen and Tommasi 2001
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Issues in managing and monitoring
budget execution
 Distribution of responsibilities
 Ministry of finance
 Line ministries
 Spending units
 Treasury
 Period covered: Annual Rule
 Transfer within the appropriations
 Sequestrations
 In-year budget revision
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Treasury function
 Cash management
 Management of government bank accounts
 Accounting and reporting
 Financial planning and forecasting of cash flows
 Management of government debt and guarantees
 Administration of foreign aids
 Financial asset management
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Objectives of cash management
 Controlling spending in the aggregate
 Implementing the budget efficiently
 Minimizing the cost of government borrowing
 Maximizing return o excess operating cash balances
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What’s the money for?
 Performance is not a simple concept
("Achievement”,"realization","fulfillment')
 “Performance” can be subjective (for effort) or objective
(for results).
 Choose results-orientation, but don’t forget the effort
dimension.
 Also, the "results" must be appropriately defined, and an
exclusive focus on results without respecting process will
weaken process and eventually produce bad results
“Performance” is the achievement of agreed results within resources
and time provided, without diluting quality and respecting the
prevailing norms of due process.
(Source: Schiavo-Campo)
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THE FOUR "P'S" OF
BUDGETING PERFORMANCE
 Traditional paradigm: Probity and
Propriety
 New paradigm: Policy and Performance
 Beware of dichotomies – All Four P’s are
essential to execute well the budget, and
foster both integrity and operational
efficiency.
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The CREAM of performance
 A performance indicator must be:
 Clear
 Relevant
 Economic
 Adequate
 Monitorable
 Never use either one single indicator or too many
indicators
(Source: Schiavo-Campo)
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THE BOTTOM LINE
 It is possible to execute badly a good and realistic
budget; it is not possible to execute well a bad and
unrealistic budget.
 International experience demonstrates that
strengthening efficiency and effectiveness in budget
execution cannot be accomplished by excessive
controls, but by introducing into the budget
management system: A systematic, robust, and
transparent dialogue on results.
(Source: Schiavo-Campo)
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THANK YOU
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