10. Case study
Cash budgeting, strengths, weaknesses and prospects
10.1 Overview of the budgetary system
The Constitution provides the legal basis for expenditure management. It requires
expenditure to be authorized by an appropriation act (budget law) or supplementary
estimate approved by Parliament and issued by the President. However, the President is
allowed to issue a warrant without an appropriation act or prior supplementary estimate if
he considers the expenditure “urgent.” Such expenditures must be approved by
Parliament in the form of an ex-post supplementary estimate, a procedure that is used
quite regularly to confirm expenditures already made. Supplementary estimates are often
prepared on an ad hoc basis late in the year rather than as part of a formal midterm budget
review. In principle, they should be met from savings on other items within the same
category, but such funding arrangements are rare. The frequent use of urgent warrants is
an important feature of the budget system, and ex post supplementary estimates are not
always applied. Years with actual expenditures exceeding the budget (original budget
plus supplementary budget) are not unusual. The Auditor-General’s reports on the 1996
and 1997 fiscal years mention numerous instances of unconstitutional excess
expenditures.
MoF is responsible for managing the preparation and implementation of the budget.
Within line ministries and other budget heads the controlling officer, usually the
permanent secretary, is the key person responsible for financial management.
Controlling officers have to assure that all payments are within the limits imposed by the
financial rules and regulations. They are personally responsible for any payments made
without proper authority, but in practice controlling officers are rarely fired or forced to
reimburse the government for improper payments, and no criminal cases have been
brought to court since 1993. The government often legitimizes payments after the fact by
authorizing supplementary spending.
The budget is divided into 51 expenditure budget heads. These cover 38 ministries,
departments, offices and commissions, 9 provinces, and 4 general purpose heads (mostly
concerned with standing charges such as debt service and contributions to International
Organizations such as the UN). A number of important government entities
(universities, major hospitals, the Revenue Authority, etc.) are treated as independent
institutions. As such, they have their own budgets even though they are financed largely
or exclusively by government grants. Hence the budget category “grants and other
payments”, accounted for over 19 percent of total domestic government expenditures in
1998. It covers public expenditures, such as salaries of tax collectors and medical doctors
which are often included in line ministry budgets in other countries.
For each budget head (except the above-mentioned four general purpose heads)
expenditures are grouped into four categories: (i) personal emoluments (salaries, wages,
and other emoluments); (ii) recurrent departmental charges (RDC). This includes
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allowances, purchase of goods, purchase of services, and training expenses and
corresponds to “operation and maintenance(O+M)” in other countries; (iii) grants and
other payments as mentioned above; and (iv) capital expenditures (movable assets,
projects). Thus the budget contains no functional or program classification.
According to financial regulations, funds may be transferred within the four expenditure
categories with the approval of the permanent secretary of MoF. In practice, such
reallocations can be made by a controlling officer. Furthermore, reallocations between
RDC and grants are tolerated. The transfer of funds intended for personal emoluments or
capital expenditures requires parliamentary approval by means of a supplementary
estimate that can be granted ex post. One way of increasing pay without parliamentary
approval is to increase daily allowances (part of RDC).
The budget includes some foreign aid, such as technical assistance, capital grants, and
external borrowing for specific projects as well as non-project loans, on the revenue as
well as on the expenditure side. However, the majority of foreign aid is actually disbursed
and spent outside the regular budget process and is not recorded in the published budget
accounts. .
There are few experienced and well-trained accounting personnel in the government, and
Information technology support is limited. Many agencies use manual accounting
systems and computerized systems where they exist are often incompatible. Proposals
for reform include an Integrated Financial Management Information System (IFMIS)
and a Medium-Term Expenditure Framework (MTEF).
10.2 The economic crisis
During the late 1980s and early 1990s the country experienced large fiscal deficits
averaging well over 10% of GDP. Their financing by domestic money creation and
foreign borrowing led to runaway inflation and unsustainable levels of foreign debt.
Consumer prices doubled annually between 1988 and 1991 and almost tripled between
1991 and 1993. Foreign debt doubled during the eighties and had to be rescheduled
massively in 1994. Eventually Government made the fundamental decision no longer to
finance its operations by borrowing from the central bank and not to run a budget deficit
on its domestic operations.
The new Government which came to power in 1991 implemented a wide range of
economic and fiscal reforms, with curbing inflation as a top priority. In an attempt to reimpose financial discipline it introduced a number of adjustment measures supported by
the international community. These measures included introduction of a cash budget
system, agreement with the IMF on a SAF/ESAf program1, and introduction of a public
sector reform program (PSRP) aimed at civil service retrenchment.
10.3 Introduction of the cash budget system
1
SAF is a structural adjustment facility and ESAF is an enhanced structural adjustment facility.
2
The cash budget system was introduced in 1993, based on the principle that no cash is
released to line ministries and for other budget heads unless sufficient funds are available
in the Treasury’s main bank accounts to cover payments. The cash budget was
introduced administratively without enactment of new statutes or amendments to existing
ones. . Its legal basis was provided by the Finance Control and Management Act which
empowers the Permanent Secretary of MoF to “impose a restriction on expenditure under
any sub-head or item appearing in the estimates ”.
The power of the permanent secretary was interpreted broadly to mean that the
executive arm of Government (MoF) can decide on which activities are to be funded
among those initially approved by Parliament in the budget .
Implementation of the cash budget began with the Permanent Secretary of MoF issuing
an instruction to the central bank to the effect that funding requests should not be
honored, unless the Treasury had sufficient cash in the Bank to cover the expenses.. The
Treasury was prevented from borrowing from the central bank or running a net overdraft
for the year at the Bank, except in a few special circumstances. The rules, however, still
permitted cash to be raised in advance by selling treasury bills, as this would not entail an
increase in money circulation and have no inflationary effect.
Despite extreme pressures caused by the adoption of the cash budget, in the beginning
few major breaches were observedand there was strong support provided by the Cabinet,
Parliament, and the public at large. The policy was endorsed by Cabinet, announced
publicly in the 1993 Budget Address, and approved by Parliament as part of the budget
program. The new Government wanted to demonstrate credibility, which was essential
for reviving the economy and sustaining donor support. Pre-announcing the cash budget
as a foundation of its stabilization policy created a situation in which the Government
could not violate the rules without incurring a heavy cost, both economically and
politically. Furthermore, the cash budget provided the Budget Office with a welcome tool
to refuse the constant barrage of spending requests. Finally, there was a widespread
public consensus that Government needed to stop “printing money” based on the bitter
lessons from the previous decade of stabilization failures and the fact that in 1993 the
economy was on the verge of hyperinflation.
10.4 Mechanisms of the cash budget
To implement the cash budget system a Joint Data Monitoring Committee (JDMC) was
created, comprising officials and advisors from MoF (Budget Office and External
Resource Mobilization Department) and the central bank. It was responsible for the daily
monitoring of cash budget execution; proper management of reserve money, and the
overall adherence of macroeconomic policy to program targets. The Committee met daily
to scrutinize fiscal and monetary data, analyze near term prospects, identify substantive
problems, discuss alternative solutions and recommend appropriate remedies. It
submitted weekly reports to the Minister of Finance, the Governor, an inter-ministerial
technical group on economic policy, and other top officials. Thus, the critical issues were
promptly reported to the top economic policy makers.
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.
The process of executing the cash budget changed in response to changing needs. It
became clear that interest charges on treasury bills magnified government expenses when
the bills matured and that special-issue bills worsened net claims on Government, a key
benchmark in the IMF program. As a result treasury bills could no longer be used as a
means to by-pass cash budget constraints. The most important change was effected in
1997 when the daily monitoring by JDMC and the financing of line ministries by MoF
was changed to monthly funding. The annual budget estimates were divided into 12 equal
installments and if funds permitted, were financed on a monthly basis. The main
purpose of JDMC was to ensure that nodeficit was recorded at the end of the month.
The actual decision of how much each ministry and other budget head could spend
each month in each expenditure category was taken by a small committee within
MoF, comprising the Permanent Secretary (Budget and Economic Affairs), the
Director of Budget, Chief and Principal Budget Analysts, Chief Revenue Analyst and the
Accountant-General (or representative). This committee decided upon and issued
monthly cash releasesand this, rather than the formal budget, determined actual
allocations. The cash budget process goes through ten steps from the moment the budget
is approved by Parliament and signed by the President and payments are actually made:
1. After the budget has been signed it is divided into four quarters and the latter broken
down into months on a straight-line basis. This represents the formal monthly
program budget;
2. Early in every month, the Revenue Authority provides a revenue projection;
3. The monthly surplus necessary to meet the quarterly ESAF benchmark, is
determined;
4. Total resources available for expenditures during the month are calculated by
deducting the monthly surplus from the revenue profile;
5. The MoF Committee then allocates total available resources to the 51 budget heads
broken down into the four expenditure categories. However, these allocations are not
decided all at once at a specific date early in the month. Decisions are taken on an adhoc basis during the course of the month. First priority is given to domestic debt
service, contingency for unexpected revenue shortfalls, and personal emoluments
(based on the payroll for the previous month). Second priority is given to social
sector expenditure. Funding of recurrent departmental charges (RDCs), grants and
other current expenditures, and capital expenditure (CAPEX) are decided last, as a
residual, with the small amount of domestically financed CAPEX usually receiving
lowest priority. In consequence, RDCs and CAPEX for low-priority budget heads
often receive no funding during a given month if revenue is particularly low or if
new, higher priority funding requests are met even though they may not have been
included in the budget;
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6. As the Committee progresses in deciding cash releases for the month, cash is
gradually released and ministries and other budget heads are finally informed of their
monthly resource envelopes;
7. Domestic debt service is strictly paid at the dates due, and cash releases are structured
accordingly. Personnel emoluments are supposed to be paid by the middle of the
month. If at that time, insufficient cash is available, the Budget Office can draw on its
interest-free overdraft with the central bank but this has to be repaid at the end of the
month. The Budget Office can also decide to delay salary payments towards the end
of the month, when revenue collection is usually at its monthly peak. In a few
instances, accumulated surpluses have been used to finance shortfalls; however, this
risks violating the budget surplus benchmark agreed with the Fund;
8. Cash releases for other expenditure categories are usually decided and executed late
in the month to which they refer, when revenues are at their peak and the risk of an
unexpected revenue shortfall is at a minimum. This means that, de facto, cash releases
for purposes other than debt service and personnel emoluments are not based on the
monthly revenue profile but mostly on revenue already collected and ‘in the bank”
before the releases take place. It also means that the funds released in a given month
are mostly spent in the following month. For example, the cash release for RDCs to
the Ministry of Education for the month of May is received by the Ministry during the
last few days of May and is used largely to cover expenditures during June.
9. As soon as the MoF Committee has decided on a monthly cash release to a particular
budget head and expenditure category, the Budget Office authorizes the central bank
to transfer money from the government general revenue account to the respective
control account. As mentioned above, this may happen at any time during the month.
Most budget heads have three main control accounts covering personnel emoluments,
RDCs and grants, and capital expenditures. A budget head cannot transfer money
from one account to another but can do so within the same account .
10. Since the central bank is not involved in retail banking, for each of its control
accounts there is a mirror account at a commercial bank. Budget heads use these
mirror accounts to effect their payments. For this purpose, controlling officers first
have to submit to the central bank a list of checks they intend to draw on a given
control account, such as the Ministry of Health’s RDC control account; this may
happen as often as once a day. If the balance in the control account concerned is
sufficient to cover the list (i.e., the list total is within the cash released previously to
this control account) the exact corresponding amount is transferred from the control
account to the mirror account. At the same time, the central bank forwards a copy of
the list of checks to the accountant-general’s office. The accounting officers of the
budget head concerned can then write the checks included in the list. If the list total
exceeds the balance in the control account, the list is returned to the budget head, no
funds are transferred to the mirror account, and the accounting officers for that budget
head can not write any checks.
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Those responsible for budget heads submit monthly expenditure statements to the
Accountant-General’s Office (floppy disks and hard copies) and daily statements to BoZ
in the form of the list of checks mentioned above. This administrative arrangement,
necessitated by the cash budget, has impacted procedures for the preparation of financial
statements. . The Financial Regulationsrequire controlling officers to prepare and submit
financial statements to the Auditor-General for each head of expenditure, which the
Auditor General is to query and certify and then send to the Accountant-General’s Office
at MoF for preparation of the Government consolidatedfinancial report. Controlling
officers are required to answer to the Public Accounts Committee in this regard.
However, current practice is for the Accountant-General’s Office, rather than the
controlling officers, to
prepare these financial statements based on the floppy disks submitted
monthly by each budget head, and then to forward them (along with necessary supporting
documentation) to controlling officers for verification. Controlling officers are normally
given very little time (a few days) to verify bulky documentation. Accountants at line
ministries are, often, also requested to prepare journal vouchers so that their figures agree
with those of the Accountant General. In some cases, such journal vouchers are not
approved by controlling officers. The Auditor General’s Office is then given very little
time to review the financial statements.
.
10.5 Macroeconomic impacts
There can be no doubt that the central government’s fiscal performance has improved
markedly since 1991. Both, government expenditure as well as the budget deficit have
been reduced substantially and are now at levels which are sustainable in the long term.
The balance of recurrent budget operations 5 improved from a deficit of 10.6 percent of
GDP in 1991 to a small surplus of 1.4 percent in 1998 (and an expected marginal deficit
of 0.3 percent in 1999), and inflation declined from over 93 per cent in 1991 to under 29
percent in 1998. This had a positive effect on inflation, albeit somewhat diluted by
continuous, high deficits of other public administrations and entities. The reform
package as a whole has largely achieved its objective of reestablishing overall financial
equilibrium. Between 1991 and 1998 the Government managed to cut discretionary
recurrent expenditures in real terms by well over half (i.e. excluding servicing of the
domestic and foreign debt), a remarkable achievement by any standard. Part of this
reduction was achieved before the cash budget was introduced at the beginning of 1993
and much of it resulted automatically from the massive inflation during these years that
sharply reduced civil servants’ salaries in real terms. However, the discipline imposed by
the cash budget and ESAF helped to maintain recurrent expenditures at the low level
reached in 1993 and to prevent a major reversal during later years. It was also
instrumental in making Government phase out subsidies, which had accounted for 29
percent of discretionary current expenditures in 1991.
. However, as discussed below, the cash budget system had major negative side effects on
social and economic development that became increasingly apparent over time.
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Impact of the adjustment program on the overall budget situation
1992 1992 1993 1994 1995 1996
1997
1998
K billion at 1998 prices:
Personnel emoluments
RDC
Subsidies etc.
Other non-debt(grants and
capital)
Total (non-debt)
644
354
528
292
605
283
47
504
363
255
66
287
351
193
404
272
343
213
404
183
327
161
567
421
293
283
354
1,818
1,439
971
1,110
1,097
849
870
842
% of GDP
total domestic revenues
Total recurrent expenditure
Balance
18.7
29.3
-10.6
18.4
27.2
-8.8
15.9
26.3
-10.4
20.1
27.9
-7.8
19.9
24.2
-4.3
20.6
18.5
+2.1
19.8
17.5
+2.3
18.1
16.7
+1.4
100.0
165.1
183.7
54.6
34.9
43.1
24.5
24.4
Inflation per cent (period
average)
Capital expenditures increased considerably from 3 to 5 percent of GDP before
1996 and to 8-11 percent since. However, as the bulk of these expenditures are financed
by
foreign aid largely outside the budget they have little impact on the Government’s overall
financial situation and reflect little on the Government’s financial performance.
While Government was very successful in bringing its budget deficit under control and
limiting its recourse to central bank financing, inflation did not decline as rapidly and as
strongly as expected. Three years after inception of the cash budget, inflation still
exceeded 43 percent and by 1998 was still above 24 percent. While this is a substantial
improvement over the 100 percent experienced in 1991 and the 200 percent in mid-1993,
inflation remains a significant threat to the country’s financial and monetary stability.
As indicated below, the central government deficit accounts only for a part of the total
fiscal deficit – 17 percent in 1997. Furthermore, most of its other, quasi-fiscal
components have improved much less rapidly than the central government deficit and
some have actually worsened requiring continuous, substantial central bank support, with
corresponding inflationary impact.
in % of GDP
Quasi-fiscal activities and the budget deficit
1995
1996
Central government budget
Pension funds
Public enterprises
Local governments and others
Central Bank (implicit deficit)
TOTAL
4.6
1.0
0.3
3.4
9.1
18.4
1997
2.5
0.9
6.2
2.0
6.2
17.8
2.3
0.9
4.9
2.1
3.4
13.6
10.6 Analysing the figures of budget execution
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There is a wide-spread notion that this system of cash budgeting, established a close and
rigid link between monthly revenues and monthly expenditures, i.e. expenditures in a
given month, are equal to or very close to revenues collected in the same month. While
this appears logical, given the characteristics of the system, it is not supported by the
facts. For instance revenues in June 1997 reached K 99 bill, but expenditures (including
payments of domestic arrears) were only K 56 bill. More generally, in less than 40
percent of the 48 months between January 1995 and December 1998, did actual revenues
and expenditures come within 10 percent of each other while in over 33 percent they
were more than 20 percent apart. One logical explanation is that for many categories of
expenditures cash releases are based, de facto, on previous month revenue collection.
Taking this time lag into account, the share of closely linked months increases slightly to
43 percent; still not a sign of a strong link.
There is an even stronger assumption that under the cash budget system no deficits can
occur and that during any given month expenditures are lower – or at most equal – to
revenues. This also is not supported by MoF statistics. Over the four years 1995-98, 18
months, or well over one third, ended with a deficit on domestic operations, including
cash payment of arrears. Most deficit-prone months were February (all 4) and November
(3 out of 4). For both months, low revenue collections are the main explanation.
Given the close link between monthly revenues and expenditures established by
the cash budget system one would expect fluctuations in expenditures to be caused
largely by those in revenues. As shown below, this is not the case. Total revenues are
much morestable than total domestic expenditures. Revenue fluctuations are calculated
to explain only about 44 percent of expenditure fluctuations.
Several factors besides fluctuations in revenues may be responsible for fluctuations in
expenditures. First, is the need to fulfill the quarterly ESAF targets. This leads to clearly
recognizable intra-quarterly variations in cash releases characterized by relatively high
expenditures during the first two months followed by sharp cuts in the last month of the
quarter, when ESAF targets have to be met. Second, some expenditures that were not
included in the budget are approved at the monthly cash release meetings . During the
first two months of the quarter, when controls were somewhat relaxed, these additional
requests could be added to other cash releases, producing an overshooting of total
expenditures. During the last month, sharp cuts in the budgeted expenditures became
unavoidable. This inevitably creates large ups and downs in monthly cash releases. The
third factor is the attachment of different priorities to different budget heads and
expenditure categories which intensifies fluctuations in cash releases for low priority
expenditures. For “receivers of last resort” even minor fluctuations in revenues will
have serious impacts on expenditures. Such is the case, for instance, for RDC in the
Ministry of Agriculture and for capital expenditures (road rehabilitation and
maintenance) in the Ministry of Works and Supply, which are considered third priority
despite their long term development impact. At the same time, personal emoluments are
well protected and fluctuate little. As a result, ministries may be well-supplied with civil
servants but devoid of the necessary means of employing them fruitfully (e.g. visiting and
advising farmers in the field or controlling budget accounts in the provinces).
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Selected monthly cash releases in K billion, 1998
Ministry of Health
Personal
emol.
RDC
Grants
Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
3.1
2.4
3.8
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
1.3
1.2
2.2
2.0
1.1
0
1.2
0.9
0.4
4.6
0.7
2.4
4.4
4.9
3.9
5.2
4.2
2.0
9.3
4.0
3.1
5.0
5.1
7.1
Budget2
2.0
1.5
4.8
Ministry of Education
Agric
Works
Personal
emol.
RDC
Capex
7.3
7.3
7.3
7.3
7.3
7.3
7.5
7.8
8.8
10.8
7.8
7.8
RDC
Grants
2.1
2.0
1.6
4.1
2.4
0.3
2.2
1.5
2.6
3.0
4.8
1.9
2.0
2.0
2.0
2.1
1.5
0.7
1.8
2.1
1.1
1.8
2.1
3.8
1.6
1.2
0.6
0.8
2.1
0
0
0.8
0.5
2.8
2.0
0.3
0
3.1
0.2
5.2
0.2
3.7
5.8
5.1
6.1
9.9
4.4
7.2
2.4
1.9
1.0
4.2
Monthly cash releases have fluctuated widely not only for the four ministries presented in
the table above and not only for RDC. Monthly RDC releases for the Government as a
whole have also fluctuated widely and not only in 1998 but equally in 1996 and 1997
recording jumps up or down of over 50% during nearly half of these 36 months.
Similarly, total monthly cash releases of the Ministry of Education have fluctuated
widely during 1996, 1997, and 1998, almost as strongly as cash releases for RDC alone.
Government revenues
fluctuated less than cash releases and the fluctuations were less unpredictable, following
a recognizable seasonal trend: low during the first quarter, average during the second
quarter, followed by a gradual increase toward a peak in December. The statistics further
indicate that Government has been quite successful in projecting annual revenues at the
time the budget is prepared: during the first three of these years actual revenues slightly
exceeded budget projections and in the fourth year the actual shortfall was less than 0.5
percent. Even though the outcome for 1999 may not be as accurate, this is an impressive
track record.
10.7 Program impacts
The replacement of the budget by the monthly cash release as the main determinant of
government budget expenditures had a major impact on government resource allocation.
Government priorities as established in the budget were replaced by the monthly
decisions of a small committee in MoF. .
While some random reallocations of budgetary appropriations are common in
most countries as the year progresses and situations change, the changes recorded were
not
2
Based on 1/12 of the year's allocation for each month
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only unusually large but also not at all random. A detailed comparison of original budget
estimates with actual, audited expenditures for the year 1997 reveals massive and
systematic changes in expenditure priorities during the course of the year away from
ministries and other budget heads directly concerned with economic and social matters
towards general public services (such as defense,police, Home Affairs) and from RDCs
and grants to personal emoluments. This change in focus was reinforced by the sharp cuts
in capital expenditures financed by domestic resources. As a result, actual public
expenditures turned out to be substantially less development oriented than the budget as
enacted at the beginning of the year.
Taking 1997 as an example, there were two major changes in resource reallocation in
1997: reallocations between groups of ministries and reallocations between expenditure
categories within groups of ministries. The ministries which gained most were those
classified as general public services (such as State House, Defense,Police, Judiciary).
Those that lost most were economic services (Energy/Water, Agriculture, Works and
Supply,etc.). Thanks to exceptionally large increases in personal emoluments, social
services (Education, Health, etc.) were modest gainers. The same general tendency can
be observed for expenditure categories. While personal emoluments exceeded budget
estimates in all three groups, there was a clear shift in resources away from economic and
social service ministries to general service ministries in RDC, grants, and domestically
financed capital expenditures. The group of general service ministries overspent their
RDC estimates massively. These are major changes in expenditure priorities that
significantly affect the country’s long-term development, economically and socially.
As development issues, by their very nature, are always long-term and rarely of
immediate urgency, they mostly lose-out in the daily battle for funds once budget
priorities are no longer respected as is this case. It is indeed difficult to argue
convincingly that rehabilitation of a certain rural access road can not possibly be
postponed for another month so that the funds can be used to cover the costs of an
important diplomatic delegation abroad. In the kind of ad hoc based budget
implementation system, there is a definite danger that the rural road in question will
never be rehabilitated because of urgent needs not included in the original budget
estimates. Immediate funding needs satisfied; the country’s long-term development
jeopardized.
A well known procedure used by some powerful line ministries consists in budgeting for
lower priority expenditures in the original budget but later in the year requesting
supplementary estimates for high-priority spending that the cash release committee would
find difficult to turn down. Thus, regularly allocated cash is used for lower-priority
purposes, while high-priority expenditures are financed through ad hoc special requests.
Inevitably, this leads to a lower cash release on some other budget head. From the point
of view of economic and social development, it would be of little concern, if the shifting
of resources were limited to reallocations within each group. In this case an urgent
funding request by a general public service ministry such as the Ministry of Home Affairs
would be accommodated by cutting the cash release of another general service ministry
such as the Ministry of Legal Affairs. Or the cash release to the Ministry of Tourism
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would be increased at the expense of the Ministry of Commerce and Industry. The
serious issue is the observed systematic discrimination of economically and socially
important ministries in favor of general public services and therefore the need for a
realignment of expenditure priorities.
The twin problems of over-commitment of expenditure and the creation of payment
arrears are found during periods of budget austerity. Over-commitment may be an
understandable response for spending agencies deprived of funds. But they may also be
an additional means of changing budget priorities. Where the cash budget has replaced
the enacted budget, it is difficult to identify budget priorities. In addition, in cases where
money is spent in violation of the cash budget release but in compliance with the original
budget estimate, the rights and wrongs of the situation are unclear.. The main culprit
could be the cash budget system for creating such serious disruptions rather than the
government officials trying to maintain services to the public.
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Case study assignment
The aim of the case study assignment will be for each group to prepare a plan of urgent
actions to reform the cash budget.
1. The first part will involve a plenary session to discuss how the cash budget system has
performed and what at the key causes of this performance . The discussion will cover
questions such as :
What were the key features of cash budget system and what has been the effect of the
cash budget system, initially and subsequently, in terms of :
 Macroeconomic/aggregate fiscal discipline
 Resource allocation
 Efficiency in service delivery
 Accountability, transparency and control
 The effectiveness of the annual budget as a resource management tool
What was the impact of the cash budget on the relative roles and accountabilities of key
players (such as Parliament, Cabinet, MoF, Controlling Officers, Accountant General,
Auditor General ) in the budget process?
Why do you think expenditures were less predictable than revenues?
What were the key causes of the problems that arose? Was it the inevitable result of
limiting releases to revenues or could it have been done differently?
2. The second part will involve breaking out into working groups to develop a proposal
for the Government of urgent, priority actions to address the key problems with the cash
budget and to provide the basis for long term development of the budget management
system.
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