Budgetary Classification

March 02, 2011

Designing and Implementing an Administrative Classification

Posted by Jason Harris

A neglected area of PFM reform is the administrative (or organizational) classification, also known as the administrative segment of the budget classification. There appears to be no publicly-available documentation of comprehensive reform of an administrative classification. This despite the apparently unanimous view of PFM experts that a sound administrative classification is fundamental to a sound budget classification and a sound budget classification is fundamental to a sound PFM system.[1] The article on the reform of Tajikistan’s administrative classification posted earlier this week on this PFM Blog by John Zohrab, Robert Brudzynski, and George Gridilian gives a good illustration of why having a sound administrative classification is important and of the challenges met in introducing one.

A possible reason for the lack of publicly-available documentation of comprehensive reform of an administrative classification is that most countries have relatively sound administrative classifications.[2] According to this view, the work involved in reforming an administrative classification is so obvious and straightforward that it should be part of the day-to-day responsibilities of ministries of finance and should not warrant separate reform status.

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February 28, 2011

Budget Classification Design and Implementation: Tajikistan’s Administrative Segment

Tajikistan has embarked on a major reform of its budget classification. The main element of this reform is the inclusion of an adminsitrative segment in the budget classification. The attached article (Download TAJIKISTAN ADMINISTRATIVE CLASSIFICATION ) by John Zohrab, Robert Brudzynski, and George Gridilian provides a detailed description of the reason for this reform and of its key characteritics. 

The conclusions of the article are as follows:

"Although there is further work to be done to complete the implementation of the new administrative segment of Tajikistan’s budget classification, some preliminary conclusions can be drawn.

Conformity with Fiscal Transparency Code and Manual

The new administrative segment is internationally accepted in the sense that:

  • It conforms almost completely  with the principles set out in the relevant IMF technical manual and in specific technical assistance reports; and
  • Other donors and international experts funded by them working on PFM issues have explicitly or implicitly accepted it.

It is standardized in the sense that, subject to some clarification, its structure conforms consistently to its design principles. It has a uniform coding structure.

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November 08, 2010

A Common Language for a Sound Budget Classification System

Posted by Jean-Luc Helis

From its presentation to the parliament to its reporting on television or in newspapers to its execution by government institutions, the language of the budget should be consistently understood. When citizens become interested in the fiscal affairs of their country, they want to see financial information that is transparent and that they can understand. Moreover, there are occasions for exchanging information and reporting fiscal status to agencies outside the country. Consequently the financial language used within the country must be such as to directly communicate or, at least, be able to be easily “translated” into the language used for international fiscal communication.

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Un Langage commun pour un système cohérent de classification budgétaire

Posté par Jean-Luc Helis

De sa présentation au Parlement à sa communication à la télévision ou dans les journaux en passant par son exécution par les organismes publics, le budget devrait être formulé dans un langage qui soit compris par tous. Lorsque les citoyens s'intéressent aux affaires budgétaires de leur pays, ils souhaitent en effet avoir une information financière qui soit transparente et qu'ils puissent comprendre. Par ailleurs, il arrive que l'on échange des informations budgétaires avec des organismes et des institutions en dehors du pays. Ces informations devraient pouvoir être communiqués directement ou, du moins, être «traduits» facilement pour être comprises au niveau international.

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April 23, 2010

Gender Budgeting and Equity Issues in Fiscal Federalism Arrangements: Some Lessons from India

Posted by Davina F. Jacobs 

Despite the growing recognition of gender factors in budget planning and execution, there have been relatively few attempts to translate them to the intergovernmental sphere. An interesting working paper by Lekha Chakraborty (attached below), drawing on her own analysis and that of an earlier study of the Indian National Institute of Public Finance and Policy (NIPFP), discusses this up to now often neglected area. The question discussed is basically can gender issues be incorporated into financial devolution approaches. She discusses these issues in the context of the policy agenda of the Thirteenth (and latest constituted) Finance Commission of India.

India has and continues to be a pioneer in institutionalizing gender budgeting within its Ministry of Finance. The process of gender budgeting in India gathered momentum with a NIPFP study in 2003. To provide the analytical framework for gender budgeting, this study constructed an econometric model to link spending on public education and health to the Gender Development Index (GDI), showing the positive effect of such spending on this indicator of gender inequality—see the development of the GDI as set out in Box 1, page 8, of Chakraborty’s paper. This approach did not refute the widely explored link between economic growth and (gender-sensitive) human development; rather it confirms this link through higher public expenditure, particularly through healthcare and education.

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February 10, 2010

Compiling Government Finance Statistics (GFS) -- an IMF Fact Sheet

Posted by Sagé de Clerck, IMF Statistics Department

GFS Fact Sheet1 The IMF has prepared a Fact Sheet describing what is involved in compiling government finance statistics (GFS), and how these data relate to the fiscal cycle, source data, and accounting systems. GFS are key to economic analysis and also a major input for national accounts statistics. GFS facilitate consistency with other macroeconomic datasets and enhance international comparability.

Data users are often faced with a myriad of fiscal data: from the budget process, from various specialized budget reports, or from audit reports, and users can easily get lost in the data labyrinth. The Fact Sheet will help users of fiscal data better understand these differences. Compilers of GFS will also find it helpful to understand differences among these various datasets and how they relate to each other. Where necessary, GFS compilers should publish reconciliations of the data to instill confidence in the reliability of the data.

Frequently asked questions from users suggest a need to clarify the different types of data and their applications. For example, “central government budget data” are used in policy decisions at a national level while “budget execution reports” are useful to monitor progress with implementing these decisions. In contrast, to capture governments' involvement in the production and growth of the economy, as measured in the national accounts, a more comprehensive measure covering the "general government" is required.

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January 06, 2010

Almost All You Ever Need (or Want) to Know About Budget Classification

Posted by Davina Jacobs

Budget Classification_Page_01
Why should budget and treasury officials see the “budget classification” as one of their most important tools? What exactly is the budget classification? A new IMF Technical Note and Manual on Budget Classification (TNM/09/06) (attached below) prepared by Davina Jacobs, Jean-Luc Hélis and Dominique Bouley of the Fiscal Affairs Department addresses the following main issues:

• Why is a budget classification system important?
• What are the main features of a sound budget classification system?
• How should a budget classification system be structured?
• What is the relationship between budget classification and the chart of accounts (COA)?
• What are the pre-conditions for successful implementation of a new budget classification system?
• What are likely to be the critical steps and milestones in the reform of a budget classification?

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November 21, 2007

From Line-item to Program Budgeting - Opening the 'black-box' of spending

Posted by Bill Dorotinsky

Lineitem2_3 A perennial question of annual public budgeting for Ministries of Finance and legislatures, and the general public, is "What are we getting for the money?" It is the proverbial "black box" of annual spending, where funds are allocated by traditional line-item budgets to agencies, but there is no sense of what the money actually achieves. While under line-item budgeting, budget offices know what inputs are being purchased, there is no clear indication of what activities, purposes, or objectives -- or ultimately outputs or outcomes -- are being purchased, or how government policies translate into spending. A common first step for many countries towards opening the black box of spending is to adopt a program classification of spending, and introduce program budgeting. A program classification is often thought of as a first step in introducing a performance orientation into the budget process.

While sounding like a very dry, technical exercise, the reality of successful introduction of program budgeting is more complex, involving elements of change management across government. Various governments across the globe have been introducing program budgets over many decades, including within the past decade in Russia, Brazil, and more recently, the Republic of Korea (RoK). A recent book by the Korean Institute of Public Finance and the World Bank, From Line-item to Program Budgeting (John Kim, Editor; Seoul, 2007), summarizes some key lessons from the global experience, and offers practical advice to countries embarking on this journey.

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November 16, 2007

New Danish Accrual Budgeting System

Posted by Marc Robinsonp>

Denmark Denmark has this year introduced an accrual budgeting system, and in doing so has joined the ranks of a very small group of countries with such systems (including the UK, Australia, and New Zealand). The core feature of the new Danish system is that government agencies receive a budget appropriation for the expenses – i.e. operating costs as measured using accrual accounting – they will incur in the financial year. No longer do they receive a budget limiting the expenditure (payments) that they may make.

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October 25, 2007

Transitioning to accrual -- IFAC resource

Posted by Bill Dorotinsky

As a follow-up to our October 15 blog "Transition to Accrual Accounting," a reader suggested we also highlight the International Federation of Accountants(IFAC) International Public Sector Accounting Standards (IPSAS) research paper Study 14 "Transition to the Accrual Basis of Accounting: Guidance for Governments and Government Entities (second edition)" (December 2003). This authoritative, 268-page guide covers issues of managing the process of change, skills assessment and training, financial reporting issues, as well as coverage of specific topics such as treatment of cash and intangible assets. This guide is available for free electronic download at the IFAC web bookstore link above.

October 17, 2007

Program and Performance Budgeting Enthusiasm in India -- IMF Training Course

Pune_2_4  An IMF training course in Pune for senior civil servants from India and around the region went into the varied experiences with this “second generation” budget reform. Making program and performance budgeting (PPB) work in the context of capacity constraints and politicians familiar only with traditional line item budgeting led to lively discussions with the 29 participants from India’s central and state governments, and invited representatives of other countries' ministries of finance.

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