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2016-07-29 | Budget monitoring

Resources are needed to implement any ideas. In the context of local governance the budget is such a resource. The effectiveness of its use, in many ways, depends on the public's attention to the process of its allocation. Therefore, it’s important for an NGO to understand how budget is filled and spent and who controls budget money. This chapter of Module 3 is called to explain the basis of formation and expenditure of the budget.

WHAT IS A LOCAL BUDGET?

Local budget — the form of establishing and use of the monetary funds required for the implementation of tasks and functions of local authorities. Local budgets are owned by territorial communities.

WHAT IS A BUDGETING PROCESS?

A budgeting process refers to the activities of public authorities, local authorities and other participants of a budgeting process with regard to the following:

  • Creation and consideration of budget estimates;
  • Approval and implementation of budgets;
  • Monitoring of budget implementation according to the law and by the public;
  • Budgetary accounting.

The budgeting process on the state level includes partial funding of local budgets.

The local budgeting process refers to the activity of local authorities(LA) with regard to the following:

  • Creation and consideration of local budget estimates;
  • Approval and implementation of local budgets;
  • Monitoring of their implementation according to the law and by the public;
  • Budgetary accounting.

WHAT FOR DOES THE STATE “PAYS” TO LOCAL BUDGETS?

Implementation of powers delegated to local authorities is funded from national budgets. The term

Delegated powers of the state” refers to the specific powers of the state assigned to local authorities according to the applicable laws or agreements. As a rule, these powers apply to government services, education, medical services, culture and sport, and social protection of the public. In other words, the obligations to the citizens undertaken by the state (to provide free-of-charge education, medical services, housing facilities, etc.) are in fact performed by local authorities, since they are closer to communities and the locations where such obligations are to be performed. For this, LA receive financial compensation from the state, i.e. the partial funding of local budgets.

WHAT ARE THE PRINCIPLES OF A LOCAL BUDGETING PROCESS?

A local budgeting process is arranged according to the following principles:

  • Separation of competences and powers between the government authorities;
  • Independence of LA;
  • Separation of powers into three independent branches: legislative, executive, and judicial.

PRINCIPLES OF A BUDGETING PROCESS:

Full Information about the Revenues, Expenditures and Sources of Budgetary Gaps Funding

It is required that any information revenues, expenditures and sources of budgetary gaps funding be fully included into the appropriate budgets.

Budget Balance

The amount of budgeted expenditures shall correspond to the total amount of budget revenues and receipts from the sources of budgetary gaps funding reduced by the amount of payments from the budget related to the sources of budgetary gaps funding and the change of the budget account balances. In the course of drawing up, approval and execution of a budget, the competent authorities should proceed from the need to minimize the budget gap.

Effective and Efficient Use of Budgetary Funds

In the course of drawing up and execution of budgets, the participants of a budget process within their budgetary authorities are obliged to proceed from the need to achieve the targeted results and use the minimum amount of funds or achieve the best results using a certain amount of funds as specified in the budget.

Transparency

Mandatory publication of approved budgets and their implementation reports in the media, including the complete information on budget implementation, availability of other information on budgets with regard to the decisions made by legislative (representative) authorities and local governments.

Transparency of Draft Budgets, Consideration Procedures and Decision-making with Regard to Draft Budgets

Any budget items may not be classified as secret. All materials of draft budgets and adopted budgets shall be publicly available for all citizens.

Budget Credibility

In other words, the reliability of indicators of socio-economic development of territories is provided, as well as reliable assessment of budget revenues and expenditures.

Target and Purpose Oriented Budget Funds

Certain recipients of budget funds are informed about budget outlays and limits of budget commitments with an indication of the purpose of their use.

Subordination of Budget Expenditures

Recipients of budget funds are entitled to receive budget outlays and limits of budget commitments only from the chief administrator of such budget funds. Chief budget funds administrators are not entitled to distribute budget outlays and limits of budget commitments to administrators and recipients of budget funds not included in the list of subordinate budget funds administrators and recipients.

STAGES OF BUDGET PROCESS:

Planning. Budget Drafting. Budgets are drafted by LAs financial agencies. All budget funds administrators (who receive funding directly from the budget) file applications (budget requests). Draft budgets are drawn up and approved for the next financial year and planning period.
Consideration Draft budgets are considered by the LA.
Approval Draft budgets are approved by the LA i.e. city councils.
Implementation LA agencies, in particular their financial divisions, are responsible for the implementation of local budgets.
Implementation of budgets according to revenues includes the following:
  • crediting of revenues received from tax, fees and other incomes allocation, from the State Treasury accounts to the single budget account, according to standards applicable in the current fiscal year;
  • refunding of overpaid (charged) amounts, as well as interest amounts for late return (on such overcharged amounts);
  • offset of overpaid (charged) amounts in accordance with the applicable fiscal legislation;
  • adjustment of payments to the budgets of the budget system;
  • transfer of funds by the State Treasury required for the return (offset) of overpaid (charged) amounts of taxes, fees and other payments, as well as interest amounts for late return (on excessively charged amount), from the single accounts of appropriate budgets to the State Treasury accounts intended for the receipts accounting and their distribution among the budgets.
Implementation of budgets according to expenditures includes the following:
  • undertaking of budget commitments;
  • confirmation of budget commitments;
  • authorization of monetary obligations payments;
  • confirmation of the due performance of monetary obligation.
Budget Control Budget control is executed by the state law-enforcement agencies (including special, as required) and the public.

The participants of a budget process include the bodies engaged in the drawing-up and consideration of draft budgets, approval and implementation of budgets, budget control, budget accounting, as well as drawing up, external assessment, consideration and approval of budget reports.

Budget Process Participants on Regional and Local Levels Include:

  • Legislative authorities;
  • Bodies of LA;
  • Executive authorities;
  • Officials of municipalities and local administrations (executive and administrative bodies of municipalities);
  • Bodies of state and municipal financial control;
  • Chief administrators and recipients of local budget funds.

Municipal legal acts regulating municipal budget process organization are adopted by LA authorities in accordance with municipalities’ charters, provided that they may not contravene the Constitution, the Budget Code and other applicable laws. Participants of the budget process are entitled to the range of budget authorities arising out of their status and ensuring the implementation of assigned functions, subject to the applicable law.

Powers and Authorities of Budget Process Participants

Statutory Regulation

Legislative authorities and the head of the state are authorized to execute legislative initiative, sign and promulgate the laws.

The legislative (representative) LA provide the consideration and approval of the respective budgets, consideration and approval of budget implementation reports, and carry out the subsequent control of budgets and public extra-budgetary funds.

Executive Regulation

Local administrations are responsible for the following: budget drafting, introduction for the consideration and approval of legislatives (representative) bodies of LA, budget implementation, management, budget control, preparation and presentation of budget implementation report for the approval of the legislative (representative) bodies of LA, and are authorized to execute other powers provided for by the applicable budget legislation.

FINANCIAL AGENCIES

Financial agencies providing the budget management are among the main participants of the budget process.

Financial agencies at the national level: Financial agencies at the regional (local) level:
  • Ministry of Finance, executive authorities responsible for the preparation of budgets and arrangement of their implementation;
  • Agencies (officials) of municipal administrations responsible for the preparation of local budgets and arrangement of their implementation (financial bodies of municipalities).
  • Financial agencies of LA bodies.

FINANCIAL AGENCIES’ POWERS AND AUTHORITIES AT THE REGIONAL LEVEL

  • Prepare draft budgets (draft budgets and medium-term financial plans) and submit the same, together with all the required documents and materials, to legislative (representative) bodies;

  • Arrange the budget implementation;

  • Establish the procedure of budget reports preparation;

  • Administer the funds available on the single budget accounts;

  • Establish the procedure for budget outlays planning for the next financial year (the next financial year and planning period), the procedure for the establishment and maintenance of a consolidated budget schedule of the corresponding budget and the procedure for the establishment and maintenance budget schedules of chief administrators of budget funds, the procedure for the establishment and maintenance of a cash budget, the accounting procedure for budget commitments of recipients of the corresponding budget funds etc.

NATIONAL FINANCIAL AGENCIES’ POWERS AND AUTHORITIES WITH REGARD TO LOCAL BUDGETS

The Ministry of Finance (such name is a rule used for such agencies) is the executive authority responsible for preparation of national policies and legal and regulatory frameworks with regard to the budget, tax, insurance, currency, banking activities, national debt, audit activities, accounting and reporting, etc.

  • Prepares the draft national budget;

  • Submits it to the national government (executive authority);

  • Prepares and submits to the national government the basic guidelines for budget and tax policies;

  • Keeps the register of the national expenditure commitments;

  • Prepares the forecasts of consolidated national budget;

  • Draws up the programs of external and internal national loans;

  • Issues the government securities;

  • Arranges the implementation of the national budget;

  • Establishes the procedure for preparation and maintenance of the consolidated budget schedule of the national budget, budget schedules for chief administrators of budget funds and chief administrators of sources national budget gap funding, cash budget for the budget implementation;

  • Prepares and maintains the consolidated budget schedule of the national budget and submits it to the State Treasury;

  • Submits to the State Treasury the limits of budget commitments with regard to the chief administrators of the national budget;

  • Draws up and draft guidelines for the distribution and procedures for inter-budget transfers from the national budget to other budgets;

  • Ensures the provision of budget loans;

  • Provides the technical guidance for chief administrators of the national budget with regard to the preparation of justification documents for budget outlays;

  • Establishes the procedure of budget presorts preparation;

  • Executes other authorities, as provided by the applicable national legislation.

The State Treasury

The Treasury is the national executive body responsible for the implementation of the national budget, cash servicing of the budgets’ implementation, preliminary and current control over the operations with the national budget funds by chief administrators, administrators and recipients of national budget funds:

  • Cash servicing of all budgets of the budget system implementation, including local budgets;

  • Distributes the revenues received from taxes, fees and other receipts, taking into account the refunding (offsets, clarifications) of overpaid or overcharged amounts and interest amounts for late implementation of such refunding and interest accrued on the overcharged amounts, between the budgets of the budget system; their transfer to the unified account of the appropriate budgets;

  • Suspends the transactions on personal accounts set up by chief administrators, administrators and recipients of national budget funds in the Treasury bodies, as provided by the applicable budget legislation;

  • Manages the transactions of the single national budget account.

The Chief administrator of local budget revenues is the LA body authorized and responsible as follows:

  • Preparation and approval of the list of subordinate administrators of budget revenues;

  • Preparation and submission to the financial agency of the budget revenues forecast, the analytical materials on the budget implementation with regard to the corresponding budget revenues, the information required for the preparation of medium-term financial plan and (or) the project of the corresponding budget, the information required to prepare and maintain the cash budget;

  • Preparation and introduction of budget reports of the chief administrator of budgets revenues;

  • Execution (as required) of authorities of a budget revenues administrator;

  • Approval the procedures of assigning and execution of authorities by budget revenues administrators and due notification of the same of local agencies (divisions) and budget-funded institutions; reserve the certain budget revenues for their subordinate administrators;

  • Accrual and record-keeping of payments into the budget;

  • Control over the calculation, and full and timely performance of payments into the budget;

  • Dept payments, fines and penalties collection;

  • Decision-making as to refunding of overpaid (charged) payments into the budget, fines and penalties, and interest amounts for refunding of overcharged amounts, and submission of orders (notifications) to the treasury in order to execute such refunds;

  • Decision-making as to the offset (adjustment) of payments to budgets and proper notification of the state treasury;

  • Adjustment of payment into budgets;

  • Preparation of budget revenue reports;

  • Cooperation with treasury agencies with regard to data exchange required for the execution of powers and authorities by revenue administrators;

  • Execution of other budgetary powers and authorities;

  • Forming of a list of subordinate administrators of budget gaps funding sources;

  • Planning (forecasting) of revenues and expenditures with regard to budget gaps funding sourcesо;

  • Distribution of budget outlays between the subordinate administrators of budget gaps funding sources; drawing up and maintaining of budget scheduling of the chief administrator of budget gaps funding sources;

  • Notification of subordinate administrators of budget gaps funding sources as to the scope of budget funding and limits of budget commitments;

  • Preparation the budget reports of the chief administrator of budget gaps funding sources;

  • Execution of other budgetary powers and authorities according to the applicable laws.

Other administrators of local budget revenues: public institutions exercising control over the calculation, and full and timely payments, charging, accounting, collection and refunding (offset) of overpaid (charged) payments, fees and penalties on them constituting the national budget system revenues of the state budgetary system.

ENERGY EFFICIENCY PROGRAMS INCLUDED INTO LOCAL BUDGETS

The formation of budgets aimed at the improvement or energy efficiency is the prerequisite for the economic growth in the country, and is the precondition for the welfare of municipal communities. Therefore, LA authorities play the key role when it comes to energy efficiency improvement. As a rule, the powers of LA in this area are aimed at the organization and implementation of energy saving and energy efficiency in residential buildings, municipal infrastructure, budget-funded and municipal organizations. In addition, they are aimed at the promotion of such activities by legal entities and citizens and provision of information support of such activities.

LA approve and implement municipal programs of energy saving and energy efficiency; conduct energy audits of residential apartment buildings and municipal residential buildings, as well as implement other measures provided by applicable laws on energy saving.

Municipal programs include energy saving and energy efficiency measures in residential buildings, in municipal infrastructure systems, in the budget-funded and municipal organizations. In addition, they include energy saving and energy efficiency incentives for producers, suppliers and consumers, as well as incentives to promote the use of secondary energy resources and (or) renewable energy sources.

MAJOR PROBLEMS OF IMPLEMENTATION OF ENERGY EFFICIENCY POLICIES AT THE LOCAL LEVELS

We may specify the following regulatory and practical problems arising in a number of countries during the development of municipal energy saving programs:

  • Lack of qualified professionals in energy saving in budget institutions and lack of educational institutions in municipalities to train such professionals;
  • Lack of organizations carrying out energy audits;
  • Lack of budget funds for the sufficient implementation of such programs.

The interest of budget-funded institutions in the reduction energy consumption rests in their right to use the saved money to ensure the performance of such institutions, including the increase in the annual salary budgets. However, the aforesaid procedure is not envisaged for other recipients of budget funds, i.e. non- budget institutions, for local governments, although it is required to indicate the targeted reduction of budget expenditures in municipal programs for the provision of energy resources not only to public institutions, but also for LA.

Numerous municipalities have problems with the assessment of annual reduction of energy consumption. Therefore, budget-funded institutions are not able to efficiently plan and implement the energy saving measures. Such problems include the following:

  • Lack of sufficient funding; necessity to attract numerous investment due to the rise in prices for energy resources;
  • Numerous old and uninhabitable residential buildings;
  • High level of tear and wear of utility networks and boiler equipment;
  • Lack of substantial guidelines for energy saving and energy efficiency improvement measures implementation;
  • Difficulties at the stage of the source information collection and systematization;
  • Energy consumers and distributors are poorly prepared for the program measures implementation;
  • Lack of legal framework regulating the recording of influencing factors (weather conditions, renovation, reconstruction of buildings, other engineering constructions), and standards of heat consumption, hot and cold water, electricity for schools, hospitals and other budget-funded institutions.

Apart from financial factors, there is a significant problem with ensuring the uniformity of measurements of energy resources consumption with metering devices in apartment blocks and other municipal residential buildings.

However, the prospects for the development of municipal programs in countries under review do exist. The public and public organizations play the particularly important role in here.

Advocacy in a local budget process is the activity of citizens and public organizations in order to influence the establishment and efficient of a budget.

Lobbying in a local budget process is a tool used to the public in order to influence the policies of budget funds use.

The public has the power to exercise the decisive influence on the receipt and use of budgetary funds by way of analyzing, controlling and lobbying of certain expenditures.

Budget lobbying may become the starting point for solving of many local issues. Questions arise from time to time, but only with regard to certain budget items. In fact, the public, even the most active part of it, does not participate in the decision-making with regard to the budget policy development. In order to start the public debate, as part of advocacy, people all over the world have begun to analyze local budgets. They summarize the available official data, including educational programs (training) as regards the budget issues, which they share with other advocating activists.

How can we influence the budget issues, if we lack for the basic knowledge as regards the budget issues?

THE BASIS FOR THE BUDGET LOBBYING IS OUR AWARENESS OF THE BUDGET ISSUES!!!

Numerous countries have picked up an idea of such “education”, and therefore, the number of people has grown who are aware of the budget issues and are ready to acts.

Therefore, budget lobbying is used for the following purposes:

  • Help people to be heard.
  • Raise the problems that may be otherwise omitted, attract attention of the media and other members of civil society.
  • Resist the governments in their ambitions to exclusively influence the distribution of public funds.
  • Influence the governments and make them treat marginalized groups of society with due respect.
  • Create new public spaces to ensure public involvement.
  • Study the general principles of decision-making and learn how to be involved in the process of budget policies development on the early stages of budget formation.

In order to meet the public needs, the budget should be under the public scrutiny and growing public pressure. In many countries, national governments have delegated or are currently delegating the vast majority of powers to local governments (decentralization of powers). In this context, budget lobbying becomes the starting point for building the relationships with local officials and raise the real-life issues. These local officials put pressure on national officials in order to alter the distribution of budget funds to make them available for the purposes poverty reduction, education, and other programs that may be of help to people.

HOW TO LOBBY A LOCAL BUDGET?

The efficient advocacy is largely the part of relationships built with decision-makers, influential leaders and other key audiences. The stronger the ties of trust, mutual support and reliability between advocate and the audience, the more efficient is the advocate.

Before you start lobbying, consider the following steps:

  1. Prepare your action plan.

  2. Prepare the draft of amendments expected.

  3. Specify what needs to be amended.

  4. Enlist the support of organizations with the same position in order to ensure prospective cooperation and support.

  5. Develop your strategy in order to send you message and to be heard.

  6. Specify the key persons (members of budget committees in LA, officials, etc.).

  7. Specify the major official persons who favor your proposal and try to get their response, seek their advice on how to influence over the key persons.

  8. Use the media in order to create the friendly environment for your proposal.

  9. In case your proposal is rejected, work out you “force majeure” plan. For example, you may try to convince the person who has the precedence of the person who has rejected your proposal, paraphrase or narrow down your proposal, etc.

  10. Be consistent in case you proposal has been accepted.

  11. In order to implement the expected changes, suggest that the members of your organization (or participants of business meetings) are included into the draft budget committee.

LOBBYING TOOLS

The following important tools are used for the lobbying of local budget issues:

Tool: Purpose of use:
Research, interviewing of dwellers Receive full and accurate information concerning the actual needs of local community and the priority local budget expenditures.
Trainings, conferences, publication of educational guidelines Raising the public awareness with regard to the local budgets. As a rule, people want to know how governments spend money that belongs to local communities. Yet, they lack for sufficient knowledge in order to understand the budget expenditures and be able to control the process.
Mass Media involvement Cover the budget processes in the media in plain language understandable by the public, which excludes dry digital reports full of obscurities for average people). Publish information in order to reach out and receive feedback from the public, and observe the relevance and efficiency of lobbying.
Information campaigns Focus attention on the certain lobbying activities aimed at the attraction of supporters.
Public hearings Receive general public opinion with the regard to local budgets.
Negotiations Actively influence decision-making by LA authorities with regard to the local budget, with the ability to contact government bodies, and often reach a compromise.

 

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