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8/2/2019 Introduction to Understanding Public Budget Process
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Introduction to Budget Process andunderstanding public budgeting
David Adama InakuGovernance Coordinator
ActionAid Nigeria
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Objectives of the session
At the end of this session, artici ants should be able
to :Understand what public budget isIdentify the key elements and components of the
budgetUnderstand the principles of budget
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Linking the macro & micro..at our own level
What is Public Budget?
budget?
Public Budget & Governance. Any relationship?
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Introduction
good of the citizens
ow can e governmen mee e ever compe ngneeds and expectations of citizens?
The budget is a tool which provides financialimpetus to government plans and policies.
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Defining the Budget A budget is a statement
French word bou ette
expenditure of ahousehold/government/o
which means little bag
rganization within aspecific period of time.
estimated revenue and
proposed expenditure
Public budgetinginvolves the selection of
A financial plan showingproposed expenditures
en an t e se ect on om eans to reach thoseends. (Robert Lee &
an propose means ofinancing
Ronald Johnson)
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..... An action plan A key instrument for macroeconomic
management
A B U D G E T I S M U C H M O R E T H A N
A C O L L E C T I O N O F N U M B E R S .A B U D G E T I S A R E F L E C T I O N O F
A N AT I O N S P R I O R I T I E S , I T S N E E D S ,
A N D I T S P R O M I S E N D I T S P R O M I S E .A L E X A N D E R H A M I L T O N
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Plenary
Recall our rou work on famil bud et.
From that experience, why do you think it isimportant to prepare a budget?
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Importance of the BudgetIt helps us decide how, when and on what we spend ourmoney on
It helps individuals, households, communities andgovernment decide how and from where to get their money from
It helps individuals, households, communities and
government to plan on how to satisfy their needs t ena es us see ow erent groups ene t or are
disadvantaged from the way resources are distributed orallocated
It gives people information on how government plans tospend money on goods and services.It shows how overnment uses u lic mone to influenceand control the world (private sector) of business and thelives of people.
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F n i n f h B
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Traditional Functions
Plannin Tool:
It helps us lay out what activities and programmes weintend to undertake within a specific time.
Political Instrument:
Spells out policies, interventions and priorities of . It involves conflicting interests, attempting to use
public money (Budget) for their own interest and
purpose
Administrative Management Tool: It funds the activities of government and its agencies
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Traditional Functions contd.
Social Tool:
It serves as a tool to satisfy the need/welfare of thepeople such as health, education, transportation, e.t.c.
conom c oo : It uses the budget to promote or discourage growth of
certain sections of the economy The budget guides or serves as a guide in production,
distribution and delivery of goods and services.
resources
Le al Tool: It allows government to raise and spend money.
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re t ere mens ons to t eB
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Economic DimensionThe budget is the annual estimates of expenditures andrevenue projections of the government
It is the fiscal representation of government developmentalplans and goals
Th e e co n o m ic d i m e n s io n o f t h e b u d g e t is t h a t i t is a
t o o l t h r o u gh w h ich t h e go ve r n m e n t s ee k s t o
The budget is the most important economic document and
Every other economic policy or goal is dependent on the
The budget authorises government spending.
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o t ca mens on
The budget is seen here as a key instrument in
s a so seen as an ns rumen o a m n s ra vecontrol as it allocates money to the various
through which the various arms and agencies of overnment are ener ised so as to meet u with
their political obligations to the people.
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MAJOR COMPONENTS OF BUDGET
Incom e (Revenue): This refers to the funds comin
into the coffers of government from varioussources.
Expenditure: this is the amount of money spent ongoo s an serv ces a me at meet ng ent eneeds and goals of the budget.
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What are the different sources of income orrevenue of the Federal Govt. , state governmentand local government?
What are the different kinds of expenditure of theFederal, State and Local Govt. ?
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Revenue :
xp ora on an sa es o na ura m nera s:- suc as cru e o
Direct taxes:- these are income taxes such as; personal income(salaries) and company profit taxes
n rec axes:- ese nc u e , mpor an expor u esGrants
Loans
Expenditure:Recurrent: This is an ongoing expenditure, example- personal and
overhead cost (Salaries)Capital Expenditure: This is an expenditure of fixed assets that arenot easily consumed (infrastructure)
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Budget OutputsSurplus budget:
Here budget expenditure is less than the. , c ange
which can be deployed into savings and some other ventures.
Deficit budget:
Here the expenditure exceeds the income. In this case, .might have been due to poor revenue generation , wasteful spending or some unforeseen situations.
Balanced budget:Here, the income equals the expenditure. This shows
.depends on a lot of variables.
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Budget Stages
Identify priority areas for development and sources of FORMULATION OR PREPARATION
revenue; money a oca e o pr or y areas.
APPROVAL OR ENACTMENET
from sources identified and to spend money on identified
priority areas.
Mone is enerated and s ent as a roved.
IMPLEMENTATION OR EXECUTION
MONITORING OR AUDIT/EVALUATION
money was generated and spent.
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B u d ge t Ap p r o va l
u ge t r ep a r a t o n
The Budget Cyclehe Budget Cycle
B u d g e t M o n it o r in ga n d E va l u a t i o n
Bu d ge t I m p le m e n t a t i on
Hilary Ogbonna (2007)
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State Level Budget Process
Step 1Development of
Step 2Issuance of Budget Callcircular to MDAs
Step 3Set up of Sector Planning Team,Development of Medium Term
,Fiscal Strategy Paper,
Set Resource Envelop
ec or ra egy
Step 4Submission of draft MDA
estimates to Budget Office,Consolidation of draft
Step 9Budget monitoring
and evaluation
estimates, Executive Scrutiny of Draft Budget
Step 9Budget
Step 6
Step 5Presentation Budget by theGovernor to State House of
Assembly (Parliament)
mp ementat on
Budget defense hearingin Parliament
Budget Approval by parliament
Governors Assent
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Basic Objectiveso u c xpen ure anagemen
Level 1: Allocative Efficiency (Expenditure according to government priorities and
Level 2: Operational Efficiency es va ue or money on e spen ng nc u e n eBudget)
Leve 3:Aggregate F sca D sc p ne(Budget totals as the result of explicit, enforceddecisions)
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C o m p r e h e n s i v e n e s s
and provides for all the interest groups? Are estimates gross or does netting take place?
Tr a n s a r e n cIs the state budget classified?How useful is the budget classification?Is it eas to connect olicies and ex enditures throu ha program structure?How are spending priorities determined and agreedunder the budget process?
o are t ose nvo ve n t e u get process Are budget documents available to the public? Are people aware of the budget timelines?
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Rea l i t y
framework? Are estimates based on reasonable revenueprojections? How are these made, and by whom? Are the financing provisions realistic?Is there a realistic costing of policies and programsand hence expenditures (e.g., assumptions about, , .How are future cost implications taken into account?Is there a clear departure from previous and new
What is the effect?How far ahead are spending priorities determinedand a reed under the bud et rocess?
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Characteristics of Sound Public
Co m m it m e n t , ca p a cit y & w i llin gn e s s t o :
priorities and (b) that can realistically beimplemented within the revenue available
Execute budget as passed by the legislature
Account for results achievedEvaluate impact of policies and programs and takeresults into account in budget preparation.
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Weak links between policy, resource limits, and budgets
nnua ocus ea s o su op ma c o cesSeparation between capital and recurrent budgetsNon-comprehensive budgetFailure to think strategically about tools andobjectivesNot learnin from ex erienceNot harnessing energies of all actors in system;mismatch of roles and responsibilities
- all effectThe common pool problem deficit bias
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Myths and Illusions about Budget
Public budgeting is the exclusive preserve of the Executive
Budgets must be formulated in secret or they can upsetfinancial markets
Non-govt intervention can destroy the integrity of the budget
envelop
Legislators and CSO have a greater interest in advancing theinterests of their constituents as o osed to the interests of the country as a whole
ov s man a e s o pro uce e u ge n erna y n aclosed process and have it rubber-stamped by the legislature
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WHAT IS THE WAY FORWARD?
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THE WAY FORWARD
2. Promote Participatory Budgeting
3. Engage the process of budgeting
4. Strengthening of Institutions: the Executive,Implementing agencies, Legislature and Civil
Society
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