Question

To what extent do you think the laws and rules surrounding budget execution impair mission performance and lead to inefficiency.

Answer 1

Budget execution is the phase where resources are used to implement policies incorporated in the budget. It is possible to implement a well formulated budget; it is not possible to implement well a badly formulated budget. Good budget preparation comes first, logically as well as chronologically. However, budget execution processes do not come down simply to mechanisms for ensuring compliance with the initial programming. Even with good forecasts, unexpected changes in the macroeconomic environment will occur during the year, and need to be reflected in the budget.

budget execution processes do not come down simply to mechanisms for ensuring compliance with the initial programming. Even with good forecasts, unexpected changes in the macroeconomic environment will occur during the year, and need to be reflected in the budget. Of course, changes should be accommodated in a way that is consistent with the initial policy objectives to avoid disrupting the activities of agencies and project management. Successful budget execution depends on numerous other factors as well, such as the ability to deal with changes in the macroeconomic environment, and the implementation capacities of agencies.

A budget execution system should meet the three major objectives of a public expenditure management system

1) Aggregate expenditure control

2) Strategic resource allocation

3) Operational efficiency

Aggregate expenditure control requires defining fiscal targets, and is therefore largely concerned with budget preparation

• Overruns are sometimes caused by noncompliance of budget managers with the spending limits defined in the budget, when committing expenditures.
• Overruns are often the result of off-budget spending mechanisms
• Overruns can be caused by deficiencies in budget preparation. Elements such as continuing commitments for investment and entitlements, or the impact of the inflation rate on wages are in some countries poorly taken into account when preparing the budget
• In a number of developing countries, the budget is underspent. This does not necessarily mean that there is good fiscal discipline in these countries. In some countries with bad governance, underspending of the official budget may coexist with off-budget spending
• Concerning the development component of the budget, underspending is often related to insufficiencies in project/program preparation