February 2009 prem 4 Africa Region
Budget preparation and Execution
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Budget preparation and ExecutionSince the adoption of the 2005 Local Finances law, municipal budget preparation and execution should follow the same standardized classifications as that of the central government (economic, organic and functional classifications). However, implementation is lacking. Past municipal budget forms were outdated and lacked standardization, which made budget monitoring difficult. However, few municipalities seem to be able to complete and make available the full range of financial tables and annexes requested by the Local Finances Law. In fact, as shown above, the budget data collected in the field also show that the presentation of the budget itself does not follow, as mandated, an economic, organic, and functional classification. This consistency with the central budget should be a priority and will require capacity building. It could also be useful to select a subset of the most essential tables identified by the law and ensure that at least these are produced annually by all municipalities. Table 4.29: Budget Tables and Information Annex to be Prepared by Municipalities According to 2005 Local Finances Law
Budget preparationBudget is prepared mostly incrementally on an annual basis, with steps toward program budgeting subject to constraints. The central government is very progressively moving toward program budgeting, but this shift is likely to be even slower at the local level. First, uncertainties on the levels of revenues available to municipalities from one year to the next would be a major impediment to multi-annual projections. Second, municipality staffing would need to be substantially adjusted to ensure that the necessary skills are present for this more complex budget process. The municipal assembly approves the budget. There is no other approval process, since the Tutelle is restricted to a legality control. Furthermore, the autonomy of municipalities in using their budget is very high. They have are no compulsory expenditures (except for loan amortizations), and no other form of constraints. For instance, there are no compulsory ratios between capital and recurrent expenditures. In the five municipalities visited, aggregate expenditure outturn compared to original approved budget is low. Municipalities fare badly regarding aggregate expenditure outturn compared to original approved budget (table 4.8). The fact that this situation has not shown much or any improvement over the years (except for the exception of Sao Vicente for 2006) is a cause of concern. Obviously, municipalities need to strengthen their budget preparation process by analyzing past years’ discrepancies and drawing lessons from them. The poor execution rate can have several explanations: A poor planning process, with overambitious plans for the coming years not based on a rigorous evaluation of past years’ budgets. A poor estimation of upcoming resources, due either to the uncertainty of some central government transfers or to the difficulty of estimating future tax revenues. Most municipalities prepare their budgets by estimating either the same value or a small increase for the forthcoming central government transfers, and adjusting later according to the actual allocations. Poor implementation capacity. Table 4.30: Variation Between Approved Budget and Executed Budget
Note: *For Sao Domingos, 2004 data are from 2003. The composition of expenditure outturn is consistent in percentage to the originally approved budget. The discrepancy between the voted and executed budget is not matched by a discrepancy in the composition of executed expenditures. If they are not able to implement all planned activities, municipalities seem to follow the priorities chosen in the voted budget and the shares of the budget allocated per sector/function are the same in the voted and executed budget. Municipal budgets are not comprehensive. As indicated in section II, one weakness related to budget comprehensiveness is linked to decentralized cooperation, which is not always in cash or on budget. This is a serious issue that also is difficult to tackle, since municipalities should not be prevented from having an active policy of attracting such cooperation. However, without curbing their initiatives or their autonomy, the central government must be able to know the flows of resources coming into their budgets. In addition, their constituents must be given the means to follow the full amounts of resources available to their municipality. The new draft law on decentralized cooperation attempts to address these issues. Budget executionMunicipalities must prepare quarterly budgets showing their budget execution, as well as the “management account” (the annual executed budget). Various forms and annexes must be attached to these. The 2005 Local Finances Law specifies the timeframe for the “management accounts” presentation and approval process (table 4.9) Table 4.31: Milestones in Budget Preparation and Control
The procedures of municipal procurement are not clear. Municipalities indicated that they follow the central government’s rules, which were changed by a 2007 law. It is possible and even probable that at least some of the municipalities have not yet mastered the provisions of this new law. Regarding the transparency of procurement contracts, the field visit was rather alarming: no municipality could give any statistics on the procedures it used per type or volume of contracts. The most common procurement method used was said to be “three quotes.” This is the basic process that, depending on the amounts involved, may not provide all guarantees that the procurement led to the best outcome for the municipality. None of the municipalities visited has an internal audit unit, which would be in charge of ensuring that rules and processes are regularly complied with. Furthermore, none has an internal audit manual that could recapitulate specific rules for a professional management of financial, human, and assets resources. The daily management of transactions is done by the “Municipal Secretary,” assisted by an accountant. One aspect of municipal finances that is prone to suspicion is the use of the “safe.” Municipalities have bank accounts in commercial banks in which they deposit their internal and external revenues. However, for revenues collected day to day, and depending on their volume, municipalities are entitled to deposit them in a safe for up to 24 hours, or to keep them to cover small expenditures or until they reach a certain ceiling. Then they should be transferred to the bank account. In light of the poor level of internal and external control, it is possible that rules regulating the use of these resources are not always followed. Directory: curated curated -> Concept stage curated -> Concept stage curated -> Republic of Côte d'Ivoire Urbanization Review curated -> Report No: aus11011 Central America curated -> Report No. 94474-pk fiscal Disaster Risk Assessment Options for Consideration curated -> Environmental and Social Management Framework for the Costa Rica Telecommunications Sector Modernization Project curated -> Environment Impact Assessment For Jiangxi Shangrao Sanqingshan Airport Beijing Guohuantiandi Environmental Technology Development Center. Ltd. Oct. 2012 Content curated -> Growth through Innovation An Industrial Strategy for Shanghai By Shahid Yusuf Kaoru Nabeshima April 22nd, 2009 curated -> Report No: 70178. People's Republic of China Download 3.98 Mb. Share with your friends:
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