Measurement guidance

While the Ministry of Finance (or equivalent central government entity) is usually responsible for the annual budget preparation process, effective participation by other ministries or budgetary units as well as by the leadership of the executive, such as the cabinet (or an equivalent body), affects the extent to which the budget reflects macroeconomic, fiscal, and expenditure and revenue policy priorities. Effective participation requires an integrated top-down and bottom-up budgeting process, involving engagement from every party in an orderly and timely manner, in accordance with a predetermined budget preparation calendar. The wider scope of participation of the legislature and citizens in the budgeting process is not covered here, but the legislature’s participation in the budgeting process—as representatives of the citizenry—is assessed in PI-18.

Dimension 17.1 assesses whether a fixed budget calendar exists and the extent to which it is adhered to. Budgetary units may, in practice, start work on the preparation of budget estimates much earlier than the start of the budget calendar, but it is important that they are given sufficient time to prepare their detailed budget proposals in compliance with the guidance, including budget expenditure ceilings, of the budget circular(s), if issued. Delays in the process and the passing of the budget may create uncertainty about approved expenditures and lead to delays in certain government activities, potentially including major contracts.

Dimension 17.2 assesses the clarity and comprehensiveness of top-down guidance on the preparation of budget submissions. It examines the budget circular(s), or equivalent, to determine whether clear guidance on the budget process is provided, including whether expenditure ceilings or other allocation limits are set for ministries or other budgetary units or functional areas. The budget for the entire upcoming fiscal year (and relevant subsequent years for medium-term budget systems) should be covered in the guidance provided by the circular(s).

In order to avoid last-minute changes to budget proposals, it is important that political leadership is actively involved in setting aggregate allocations on expenditure priorities from an early stage of the budget preparation process. This should be initiated through review and approval of the ceilings in the budget circular, either by approving the budget circular or by approving a preceding proposal for aggregate ceilings—for example, in a budget outlook paper or approved medium-term fiscal outlook or framework. This dimension differs from 16.2, which considers only whether medium-term expenditure ceilings are set by the government. This dimension does not require medium-term expenditure ceilings for medium-term budgets, but assesses only whether annual or medium-term expenditure ceilings have been set.

Dimension 17.3 assesses the timeliness of submission of the annual budget proposal to the legislature or similarly mandated body so that the legislature has adequate time for its budget review and the budget proposal can be approved before the start of the fiscal year.

Every part of the budgetary central government’s annual budget is covered by this indicator, whether it is integrated or uses separate processes. Ideally this is ensured through a single or unified budget process and related circular(s) covering total government revenue, recurrent expenditure, capital expenditure, transfers, specific financing, and so on. In cases where the process is split into different parts, as may happen with recurrent and capital budgets, the scoring requirements should be met for each of the separate processes.

For the purpose of this indicator, budgetary units are those that are directly charged with responsibility for implementing the budget in line with expenditure policies and that directly receive funds or authorization to spend from the legislature. Government units that report to and receive budgetary funds through a parent unit should not be considered in the assessment.