1. Budget Execution:Overview Bill Dorotinsky, PRMPS Budget Execution Course January 16-17, 2003

2. Outline • What is budget execution? • Expenditure Management Cycle • What are the objectives? • Why is budget execution important? • Key concepts • Commitment Stages • Budget classification • Organization of the course

3. What is budget execution? • Processes and institutions to implement the budget • Incentives – principle-agent problem • Reflects that budget is NOT only an accounting document • also a political document • Planning/steering device

4. Expenditure Management Cycle Financial management system boundaries Project Resource Annual budgets Medium term appraisal allocation Development, Planning plans, e.g. three recurrent and system year rolling plans revenue Expenditure Liquidity review management Public expenditure Information technology review A core tool of integration Fund release procedure, e.g... warranting Accountability Expenditure control Project monitoring Audit system Post event Accounting for Monitoring review revenue and & controlling expenditure Reports and financial statements Source: Integrated Financial Management.Michael Parry, International Management Consultants Limited.Training Workshop on Government Budgeting in Developing Countries. THE UNITED NATIONS. December 1997.

5. Objectives of budget execution • Manage Spending and Revenues to budget • support choices of elected officials • allow budget to be planning and steering tool • promote macrofiscal discipline • Reduce opportunities for corruption • Enable program implementation • Assure resources flow to programs • allow budget to be aid to operational efficiency through spending unit advance planning, efficient administration • enable program managers to achieve objective

6. Credibility of the Honduran Budget – In-year Deviations by Agency (percent of the executed over the approved budget) Why is budget execution important?

7. Why else important? • Every country spends money; • done well or poorly, it is an existing set of institutions in countries upon which to build reform • Important role in anti-corruption • Critical for direct budget support

8. Five PEM Principles • Comprehensiveness – include all revenue and expenditure, and all government agencies • Accuracy – record actual transactions and flows • Annuality – cover a defined period of time (e.g. one year) • Authoritativeness – only spend as authorized by law • Transparency – information on spending should be publicly available, on a timely basis, in an understandable or common format

9. Organization of the course • Topic versus chronology • Structures and terms • Incentives and dynamics • Time for questions and discussion • Evaluation • Case study