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Workshop Cash and Budget

“Cash is King!” Helmer Vossers Ministry of Finance The Netherlands 17 February 2006

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Budget process:summing up

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Questions:

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Is the budget the instrument for implementing government policies?

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Do you report on a regular basis on the budget-outcomes during the execution?

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Can you relate your cash information to budget-lines?

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Do you analyze every year the budget outcome and the budget forecasts?

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Is this review done for every line-item?

Budget paradox

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Trend: we see reforms towards performance based budgeting and management

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But cash info still remains very important

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why?

1. fiscal aggregates (EMU-deficit) is based on cash (sub-national parts!) 2. allocation, authorisation accounting is on cash 3. input info needed for benchmarking: number of personel, it and housing-costs

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The rules of the game, part 1!

Dealing with windfalls and overspendings….

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The rules of budgetary discipline

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Status rules: part of coalition agreement, no

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law Main rule: Compensate within your own

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budget!

An unwritten law but even used in parliament Surplus windfalls are for minister of Finance, but Carry-over principle ( 2 % of total budget)

The rules of the game, part 2!

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….. But can only be maintained when budget is reliable

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Monthly report of budget-execution Monthly meeting inspectorate and spending department Under- and overspending review for 4-5 years Strong link between realization and multi-year forecast To be supported by IT-system

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The rules of the game, part 2 !

….. But can only be maintained when budget is reliable

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Multi layer financial responsibility: flexibility Bottom-up approach: estimates based on assumptions from line ministries

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Estimations in unchanged prices Assumption of unchanged policy (demographic

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development included) Check by ministry of Finance

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Bookkeepers

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budget analysts!

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How does it really work?

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Example of budget preparations and budget execution in relation to overruns and compensation

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Underspending for us! But also carry-over principle: service not delivered

Multi annual budgeting

10 year t t+1* t+2* t+3* t+4* Appr. budget 100

Exec

15 110 120 130 140 15 10 5 0

Comp

15 10 5 0 Total 115 110 120 130 140

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Conduction of central administration

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Spending department can decide on the number of banking-accounts No ex-ante checks on payments Discussion on cash forecasts by spending units All government units included! Working processes supported by IT-systems Complex process

12 Information flow; but zero balancing Government Offices Ministry of Finance c 1 a Commercial bank e d Central Bank 2 b Customer/person Information flow Real money transfer

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To wrap up….

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No money on bank accounts: zero balancing Using infrastructure of commercial banks Current account administration with MoF Many checks and balances Spending ministers are responsible themselves!

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Information exchange supported by IT-systems

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Budgetary system RIS/IBOS

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forecasts versus realization

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explanation of mutations

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insight in liabilities (intended and realized)

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on a multi annual basis

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linked with cash information through banking accounts

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Check your position on the web

16 Animatie door Daan Vossers

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To summarise

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All mentioned features and agreements of Dutch Budget policy are covered in our IT-systems

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Systems comply with division of responsibilities Conditions: Information shoud be in time, complete and correct: but also sharing of information

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Rules, rules, rules Teach the line-ministeries System works with multi annual figures Cash info essential for reliability