TOPIC FOUR

BUDGETARY PLANNING AND CONTROL OF GOVERNMENT FINANCES

Topic objectives
 Basic features of government budgets and the extent they attain budgetary control
 The basic process of budgetary planning
 The role of Government
 The role of Parliament
 The basic features of budgetary control
 Control at parliamentary level
 The role of the Controller and auditor General
 Treasury administration and control of public funds
 Duties of Accounting officers and warrant holders
Introduction
General definition of budget
A budget is an estimation of revenue and expenses over a specified future period of time; it is
compiled and re-evaluated on a periodic basis. Budgets can be made for a person, a family, a group
of people, a business, a government, a country, a multinational organization or just about anything
else that makes and spends money. At companies and organizations, a budget is an internal tool
used by management and is often not required for reporting by external parties.

Government budget, is a forecast by a government of its expenditures and revenues for a specific
period of time. In government finance, the period covered by a budget is usually a year, known as
a financial or fiscal year, which may or may not correspond with the calendar year.
Government budget includes
a) financial actions of the previous year
b) budget and revised estimates of the current year
c) the budget estimates for the following year.
Types of budgets
Based on the balancing of revenue and expenditure, budgets are divided into balanced budget
and unbalanced budget.

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Balanced Budget - A balanced budget is that over a period of time, revenue does not fall short
of expenditure. i.e., revenue is equal to expenditure (Revenue= Expenditure).
Unbalanced Budget - The Budget imbalance may be due to an excess of expenditure over
income or an excess of income over expenditure. In other words, budget may either be surplus
or deficit.

BASIC FEATURES OF GOVERNMENT BUDGETS AND THE EXTENT THEY

ATTAIN BUDGETARY CONTROL
Basic features of government budget
 It is a statement of expected revenue and proposed expenditure.
 It is sanctioned by some authority.
 It is periodicity, i.e generally annual
 It prescribes the manner in which revenue is collected and expenditure is incurred.
 Budget is prepared on cash basis/accrual basis.
 Rule of lapse- All unutilized funds within the year ‘lapse’ at the end of the financial year.
 Realistic estimation.
 Budget is on gross basis.
 Form of estimate is to correspond to Accounts.
 Estimates to be on departmental basis.

Importance of government budgets

Planning and allocation - Government budgets are the primary instrument for planning and
allocating public resources. They help the government to determine how much will be spent on
various government functions, services and programs.

Financial goals - Budgets help governments achieve financial objectives, such as reducing
deficits, controlling inflation, and promoting economic growth.

Accountability - Budgets promote financial accountability by requiring transparency and

providing a basis for evaluating government performance.

Financial reporting -Budgets are a key element of financial reporting, providing a basis for
evaluating government performance and ensuring that public funds are used appropriately.

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Budgetary control - Budgets serve as a framework for budgetary control, which involves
monitoring actual financial performance against the budget to identify and address variances.

Extent to which government budgets achieve budgetary control

Budgetary process - The quality of the budgeting process is crucial. A well-defined and
transparent budgeting process, includes clear objectives, detailed estimates, and rigorous review,
enhances budgetary control.

Monitoring and evaluation - Effective monitoring and evaluation are essential to track actual
performance against the budget and identify variances. Regular monitoring allows for timely
adjustments and corrective actions.

Enforcement mechanisms - Budgetary control is also dependent on robust enforcement

mechanisms. These include internal controls, audits, and legal frameworks to ensure that funds are
spent as authorized and that financial rules are followed.

Complexity of government operations - Large and complex government operations can present
challenges to budgetary control. The variety of spending areas and the need to balance multiple
objectives can make it difficult to maintain precise budgetary control.

External factors - External factors, such as economic downturns or unforeseen events, can also
impact the effectiveness of budgetary control.

THE BASIC PROCESS OF BUDGETARY PLANNING

The government budgetary planning process involves several key phases: budget formulation,
approval, execution, and accountability. This process typically starts with setting overall economic
goals and resource projections, followed by the formulation of specific budget proposals,
parliamentary debate and approval, budget implementation, and finally, a review and
accountability process. The following are the key stages in budget process.
1. Budget formulation
 Setting fiscal targets and expenditure levels - This involves determining the overall
economic direction, including revenue projections, expenditure levels, and financing
plans.

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  Formulating expenditure policies - Prioritizing spending areas based on government goals
and objectives.
 Allocating resources - Distributing funds to different sectors and programs in line with
priorities.
 Developing a Medium-Term Expenditure Framework (MTEF) - Planning for a longer time
period, often three years, to provide a broader perspective on resource allocation.
2. Budget approval
 Parliamentary debate and approval - The proposed budget is debated and voted on by the
parliament.
 Executive branch approval - The President or Cabinet may review and approve the budget
before submitting it to parliament.
3. Budget execution
 Spending the money - Government agencies use the approved budget to implement
programs and projects.
 Tracking progress - Monitoring spending against allocated funds and measuring program
performance.
4. Budget accountability
 Reporting on expenditures - Providing regular reports on how the budget was spent.
 Auditing and review - Ensuring that funds were used as intended and that programs are
meeting their objectives.
 Mid-year review - Evaluating the budget's performance and making adjustments if
necessary.

The role of Government on budgetary process

The government plays a crucial role in the budgetary process, encompassing planning,
formulation, approval, and oversight. The executive branch develops and proposes the budget,
while the legislature (parliament) reviews, amends, and approves it. The following are the
government role.
1. Planning and formulation
 Setting economic goals - The government establishes the overall macroeconomic goals and
priorities for the country, which are then reflected in the budget.

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 Resource allocation - The government determines how available resources will be allocated
among different sectors and programs, based on policy priorities and economic needs.
 Budget guidelines - The government may develop a medium-term expenditure framework
(MTEF) to provide a long-term perspective on budget planning and resource allocation.
 Budget Proposals - The executive branch prepares and presents the budget proposals to the
legislature, outlining projected revenues, expenditures, and policy initiatives.
2. Approval and scrutiny
 Legislative review - The legislature scrutinizes the budget proposals, often through specialized
committees, to ensure alignment with national policies, resource availability, and legal
requirements.
 Amendment and approval - The legislature can amend the budget proposals and ultimately
vote to approve or reject the budget, granting the government the authority to spend.
 Parliamentary oversight - The legislature plays a key role in overseeing the implementation of
the budget, ensuring that funds are spent as intended and that government programs are
achieving their objectives.
3. Budget execution and oversight
 Implementing the budget - The government implements the approved budget, ensuring that
funds are allocated and spent according to the approved plans.
 Monitoring and evaluation - The government monitors the performance of the budget and
evaluates the effectiveness of government programs and projects.
 Accountability - The government is accountable to the legislature and the public for the use of
public funds and the achievement of budgetary goals.

The role of Parliament on budgetary process

In a parliamentary democracy, the parliament plays a crucial role in the budgetary process, acting
as a check on the executive branch and ensuring public funds are used responsibly. This involves
approving the budget, scrutinizing its execution, and auditing public accounts. The following the
parliament's role.

1. Approving the budget

 The executive branch submits a draft budget to the parliament for review and approval.

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  Parliamentary committees, often with specific expertise in finance, examine the budget in
detail.
 The parliament can amend, modify, or even reject the proposed budget.
 This process ensures that the budget reflects national priorities and the will of the people,
not just the executive's agenda.
2. Scrutinizing budget execution
 Parliamentary committees oversee the implementation of the approved budget, monitoring
expenditure and ensuring compliance with the budget.
 This includes scrutinizing the performance of government agencies and departments in
utilizing allocated funds.
 Parliament may also require reports on the status of budget implementation, providing
transparency and accountability.
3. Auditing public accounts
 Parliaments often have a role in auditing public accounts, ensuring that public funds are
used efficiently and effectively.
 The National Auditor Institution reports to parliament, allowing them to assess the integrity
of the budget and the overall financial management of the government.
 This audit process helps to identify any waste, fraud, or abuse of public funds, promoting
transparency and accountability.
4. Other parliamentary powers
 Parliaments can also delegate authority to the executive to spend from contingency funds
for unforeseen emergencies, but with conditions on the size, nature of spending, and
reporting requirements.
 In some countries, the parliament has the power to establish public debt or incur debts on
behalf of the government.
5. Parliamentary oversight
 Parliamentary oversight of the budget helps to ensure good governance and accountability.
 It promotes transparency and allows citizens to have a greater say in how public funds are
used.
 By scrutinizing the budget, parliament can help to ensure that public resources are used
effectively and efficiently, benefiting the country as a whole.

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BUDGETARY CONTROL
Budgetary control is a technique used by governments to;
 Establish a clear spending plan - This involves setting financial objectives, allocating
resources, and outlining how money will be spent.
 Monitor actual spending - Regularly comparing actual expenditures against the budget to
track performance and identify any deviations.
 Take corrective action - If deviations occur, adjusting spending plans or implementing
measures to stay on track.
 Prevent fraud and mismanagement - Ensuring that public funds are used responsibly and
transparently.
 Improve efficiency and effectiveness - By aligning spending with stated objectives,
budgetary control helps governments achieve their policy goals.
How do governments achieve budgetary control?
 Strong financial management systems - These include accounting systems, budgeting
software, and internal audit functions.
 Transparency and accountability - Open budget processes, regular reporting, and public
scrutiny help ensure that government spending is aligned with the budget.
 Policy framework - A clear policy framework that guides the budget process and sets
priorities for spending.
 Effective budget execution - The ability to manage and execute the budget effectively,
including procurement processes and monitoring spending.
 Enforcement of fiscal discipline - Political will and mechanisms to ensure that government
agencies stay within their allocated budgets.
Factors affecting the extent of budgetary control
 Political instability - Frequent changes in government leadership can disrupt the budget
process and weaken fiscal discipline.
 Lack of technical expertise - Insufficient capacity to develop, implement, and monitor
budgets can hinder budgetary control.
 Corruption and fraud - These can undermine the budget process and lead to misuse of
public funds.

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 Economic shocks- Unexpected events like natural disasters or economic downturns can
strain budgets and require adjustments, potentially impacting budgetary control.

CONTROL AT PARLIAMENTARY LEVEL

Budgetary control at the parliamentary level involves parliamentary oversight and approval of the
budget, monitoring budget execution and scrutinizing the financial activities of government. These
are explained below.
1. Budget approval
 Parliament review the budget proposal submitted by the executive branch.
 They assess the budget's impact on various sectors, including fiscal policies, medium-term
fiscal forecasts, and priorities.
 Approval procedures are typically agreed upon in advance and adhered to.
 Parliaments may also include public consultation arrangements in the budget approval
process.
2. Monitoring budget execution
 Parliament monitor the implementation of the budget and assess whether the government
is adhering to the approved spending plan.
 This involves examining spending patterns, comparing actual expenditures to planned
expenditures, and identifying any deviations.
 Parliaments may use committees or other mechanisms to monitor the budget execution
process.
3. Financial scrutiny and oversight
 Parliament play a vital role in ensuring the integrity of public finances.
 They often oversee the audit of public accounts and ensure that government agencies are
held accountable for their spending.
 Parliaments may also conduct investigations or inquiries into specific areas of public
spending.
 In some cases, parliaments have the power to change the budget, either before or after it's
been approved.

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4. Transparency and accountability
 Parliament is responsible for ensuring that the budget process is transparent and that the
public has access to relevant information.
 They may require the government to provide detailed information about budget allocations,
revenue forecasts, and spending plans.
 Parliament also plays a crucial role in holding the government accountable for its financial
decisions.
5. Powers and responsibilities
 The ability of a parliament to influence the budget depends on the powers conferred upon
it and the effectiveness of parliamentary committees involved in the budget process.
 Some parliaments have the power to amend the budget, while others have more limited
powers of oversight.
 Parliament may have powers to review spending plans and to require government agencies
to justify their spending requests.

THE ROLE OF THE CONTROLLER OF BUDGET AND AUDITOR GENERAL

The Controller of Budget plays a crucial role in budgetary control by overseeing the
implementation of government budgets and ensuring the proper utilization of public funds. This
involves timely authorization of withdrawals, reporting on expenditure, and providing insights for
improving budget management. Essentially, the Controller of Budget acts as a key oversight body,
ensuring transparency and accountability in public finance.
1. Oversight and implementation
 Timely authorization - The Controller of Budget authorizes withdrawals from public funds,
ensuring that spending aligns with the approved budget.
 Reporting - They regularly report on the utilization of budgeted resources, providing
Parliament with data to monitor budget implementation and address any discrepancies.
 Fiscal discipline - By overseeing budget implementation, the Controller of Budget helps to
maintain fiscal discipline and prevent misuse of funds.
2. Enhancing transparency and accountability
 Oversight body - The Office of the Controller of Budget acts as an independent oversight
body, ensuring that the executive branch is held accountable for the use of public funds.

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  Independent monitoring - They monitor budget implementation, which allows for timely
identification and correction of any deviations from the planned budget.
 Reduced corruption and waste - By providing independent oversight, the Controller of
Budget helps to reduce the risk of corruption and waste of public resources.
3. Supporting effective budget management
 Performance evaluation - They analyze the credibility of initial budget hypotheses,
evaluate the sensitivity of results to key variables, and ensure the existence of a reserve
fund for unforeseen circumstances.
 In-year budgeting - They provide insights and recommendations for in-year budget
adjustments and improvements.
 Long-term planning - They contribute to the development of long-term financial plans and
strategies.
The role of the Auditor general/National
The Auditor General plays a crucial role in budgetary control by ensuring the efficient and
accountable use of public funds. This involves auditing government spending to ensure it aligns
with the budget and is used effectively and efficiently. The Auditor General also provides
oversight, reports on financial statements, and recommends improvements to financial
management practices. The Auditor general's role
1. Auditing and assurance
 Checking the spending of public money - The Auditor General scrutinizes government
spending to ensure it is used appropriately and for the intended purposes.
 Auditing financial statements - They audit the financial statements of public entities to
ensure their accuracy and reliability.
 Providing assurance - The Auditor general's audits provide assurance that government
spending is in line with the budget and complies with relevant laws and regulations.
2. Oversight and accountability
 Monitoring government spending - The Auditor General monitors how public funds are
allocated and spent, according to the National Audit Office of Tanzania.
 Reporting on financial performance - They report on the financial performance of public
entities, highlighting areas of concern and recommending improvements.

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  Fostering accountability - By auditing and reporting on financial matters, the Auditor
General helps to hold government officials accountable for the use of public funds.
3. Recommendations and improvements
 Identifying deficiencies - The Auditor General identifies deficiencies in internal control
systems, financial management, and governance structures.
 Providing recommendations - They offer recommendations for improvement to address
these deficiencies, according to the National Audit Office of Tanzania.
 Improving financial management - By promoting best practices and addressing
inefficiencies, the Auditor General contributes to improving overall financial management
in the public sector.

TREASURY ADMINISTRATION AND CONTROL OF PUBLIC FUNDS

Treasury administration and control of public funds involves managing and safeguarding
government financial resources. Key functions include developing and implementing financial
policies, managing government finances, and overseeing the use of public funds. These are
elaborated as follows.
 Financial policy development
The Treasury, along with the Minister of Finance, is responsible for creating and implementing a
macroeconomic and fiscal policy framework. This includes setting targets for government
spending, revenue generation, and debt management.
 Government finance management
The Treasury oversees the collection, storage, and disbursement of public funds. This includes
managing the Treasury Single Account, which provides a consolidated view of government cash
resources.
 Supervision and control
The Treasury ensures that public funds are used according to established regulations and
guidelines. This involves monitoring spending, ensuring accountability, and preventing fraud.
 Accountability and oversight
The Treasury works with the Accountant-General and the Controller and Auditor-General to
ensure proper financial records and accountability. The Public Accounts Committee and Local
Authorities Accounts Committee also play a role in overseeing public financial management.

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  Treasury Single Account (TSA)
A TSA is a unified structure of government bank accounts that provides a consolidated view of
government cash resources, allowing for better control and management.
 Central payment system
The Treasury manages and monitors the central payment system and decentralized Sub-Treasury
systems, ensuring efficient and secure payments.
 Accounting and financial systems
The Treasury develops and manages the government accounting and financial systems, which are
essential for tracking government finances.
 Legislation and regulations
The Treasury develops, monitors, and reviews accounting legislation, regulations, and guidelines
to ensure compliance.
 Special funds and deposits
The Treasury monitors special funds, miscellaneous deposits accounts, and other non-vote
expenditure/revenue accounts.
 Social security contributions
The Treasury manages and monitors statutory contributions to social security funds.
 Pension services
The Treasury facilitates, coordinates, and monitors pension services.
 Internal audit
The Treasury establishes and oversees internal audit services to ensure the integrity of public
finances.
 Annual reporting
The Treasury prepares and submits annual financial statements and reports to parliament.

DUTIES OF ACCOUNTING OFFICERS AND WARRANT HOLDERS

The Accounting officers
Accounting officers have crucial responsibilities in relation to the government budget, ensuring
its effective implementation and adherence to regulations. They are responsible for preparing
and implementing departmental budgets, managing public funds responsibly, and ensuring
compliance with the Public Finance Management Act (PFMA). Specifically, this includes

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submitting budget estimates, managing assets and liabilities, and ensuring proper accounting
practices are followed. These duties are discussed below.
 Budget preparation and implementation
Accounting officers prepare their department's budget based on national development plans and
measurable objectives, which are then approved by the relevant political authority. They are then
responsible for implementing and managing this budget, ensuring funds are allocated and spent
according to the plan.
 Financial management
They manage public funds responsibly, ensuring that expenditure is in line with the budget and
that services are delivered effectively. This includes managing cash flows, overseeing asset and
liability management, and ensuring proper accounting practices are followed.
 Procurement and compliance
Accounting officers are responsible for ensuring that procurement processes adhere to the PFMA
and relevant government policies. They also need to ensure that all financial transactions are
properly recorded and accounted for.
 Reporting and monitoring
They are required to submit regular financial reports, including quarterly expenditure
commitments and annual financial statements. They also need to monitor the implementation of
the budget and ensure compliance with budget regulations and directives.
 Asset and liability management
Accounting officers are responsible for the proper management of government assets and
liabilities, ensuring that they are used effectively and that liabilities are managed in accordance
with the Public Finance Management Act.
 Internal audit
They are also responsible for ensuring that an internal audit service is established and that it
operates effectively to monitor budget compliance and financial management.
 Promoting fiscal responsibility
Accounting officers are tasked with promoting fiscal responsibility within their departments and
ensuring that public funds are managed responsibly and efficiently.

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The Warrant holders
In relation to the government budget, a warrant holder's primary duty is to ensure the responsible
and authorized use of government funds allocated to them. They are responsible for managing and
disbursing allocated resources according to the approved budget, action plans, and cash flow
projections. Their duties are as follows.
 Resource allocation
Sub-warrant holders receive funds from the accounting officer and are responsible for allocating
those funds based on approved action plans and cash flow projections.
 Expenditure monitoring
They must ensure that all expenditures are in accordance with the approved budget and that funds
are used for the intended purpose.
 Action plan & cash flow projections
Sub-warrant holders are responsible for preparing and submitting action plans and cash flow
projections to the relevant department, which form the basis for resource allocation and
disbursement.
 Disbursement and allocation
They are responsible for disbursing funds based on the approved action plans, and no
disbursements should be made for activities not supported by an action plan.
 Accountability
They are accountable for ensuring the proper use of allocated funds and must maintain accurate
records of all expenditures.
 Adherence to budget estimates
Changes to expenditure items must be classified according to the approved budget estimates, and
funds must be used only for the purpose for which they were intended.
 Budget implementation
Sub-warrant holders are responsible for implementing the approved budget in accordance with the
activities outlined in the action plans.
 Warrant compliance
They must adhere to the terms and conditions of the warrants issued to them, including any specific
limitations or instructions.

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