Budgets&Finan_Admin_2013x

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Nov 10, 2013 (3 years and 9 months ago)

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Budgetary Process
and Financial
Management

Douglas Brown

Pols 341

March 2013

Budgetary Process and Financial
Management


Political Significance of the Budget


Key Objectives of the Budget in Modern States


The Revenue Budget


The Expenditure Budget


The Budget Cycle and Budget “Games”


Financial Management inside Government


Scrutiny by Parliament and its agents

Political Significance



The Budget is a key policy instrument


The Budget is a reliable indicator of
government’s priorities


Political “spin” dominates budget
discourse, both government and
opposition


Budget documents hide as much as they
reveal



Objectives of the Budget in Modern
States

1 Macroeconomic management


2 Policy tool for


micro
-
managing” the
economy

3 Raising revenue

to match government
expenditures


1 Macroeconomic management




Attempts at economic stabilization,
promoting growth



“Keynesian” policy of countering
economic booms and busts (had
been less emphasized until 2008)


Generally attempting to influence
economic growth, inflation,
employment

2 Policy tool for


micro
-
managing” the economy



Use of “tax expenditures” to promote
spending or savings by individuals and
firms (e.g. retirement savings (RRSP),
research tax credits)


Use of taxes to discourage certain activity
(e.g. smoking, energy consumption)


Use of spending to encourage investment,
provide infrastructure, subsidize industry,
farming, etc.


3 Raising revenue

to match government
expenditures





Determining the mix of taxes, tax rates
and base


Estimating likely tax yields in the year
ahead


Fine
-
tuning taxes, including cutting them


Projecting an overall budgetary position:
balanced, deficit or surplus.


The “Revenue Budget”


Overall statement about the national (provincial)
economy


Selected messages about spending priorities,
new programs, new tax measures (including
cuts)


Formal Tabling in Parliament of the Estimates
(for expenditures) and Motions of Ways and
Means (for taxes and other revenue measures)

Expenditure Budget


Takes form in the “Main estimates”


Detailed department
-
by
-
department listings,
tabled in Parliament


Different rules for different categories of
expenditures:


Operating


Capital


Grants


Contributions, transfers


Non
-
budgetary loans, investments and
advances



Forms of expenditure decision
-
making

1.
Line
-
item budgeting


micro control of
spending

2.
Program budgeting


top
-
down strategic
control, but letting the managers manage

3.
Performance budgeting


flexibility in the
face of changing needs


Budget Players

(David Good)

1.
Spenders

2.
Guardians

3.
Priority Setters

4.
Financial Watchdogs

3 Key Decisions

(David Good)

1.
How much to spend

2.
Where to spend it

3.
How to manage it

The Budget Cycle


Involves both long term strategic planning and
short
-
term management of finances


Annual cycles geared to fiscal year, and a late
winter or spring Budget speech


Bottom
-
up input from departments


Top
-
down setting of priorities and trade
-
offs by
the Cabinet


Significant intermediary role by bureaucrats in
Finance and Treasury Board

Post
-
Budget Financial
Administration in the Canadian
Federal Government




Key Institutions involved


Key principles applied


Continuing issues

Institutions of Financial
Administration 1


Financial Administration Act


legal basis for all
expenditures


Parliament

votes supply, approves
appropriations, committees review expenditures


Treasury Board


establishes spending rules,
approves new programs and projects and
supervises departments


Public Works and Government Services


centralized cheque
-
issuing, accounting


Line Departments


pre
-
audit procedures,
internal post
-
audit




Institutions of Financial
Administration 2


Comptroller
-
General


supervises departmental
financial officers


Auditor
-
General


formal audit, reports directly to
Parliament


Public Accounts Committee


parliamentary
committee that reviews the work of the Auditor
-
General


Parliamentary Budget Officer

Key Principles of Financial
Administration


Parliamentary oversight


Ministerial accountability


Checks and balances in the overall system


Value for money auditing


Continuing Issues


Balancing act among three values:


Economy, Efficiency, Effectiveness


Is the Auditor
-
General too political?


Is accountability too excessive for effective
management?