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8/3/2019 Budget Classification - Concepts and Issues
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Budget classification:
Concepts and Issues
Public Finance PRC : Local Government Budget
Management Seminar The views expressed in this paper are the views of the author and do not necessarily reflect the views or policies of the Asian Development
Bank Institute (ADBI), the Asian Development Bank (ADB), or its Board of Directors, or the governments they represent. ADBI does not
guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used
may not necessarily be consistent with ADB official terms.
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8/3/2019 Budget Classification - Concepts and Issues
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Purposes of budget classification
A means of introducing some order from
diversity A pre-requisite for other budget reforms
Expenditure program formulation, analysisand monitoring
Budget execution
Accountability
Economic stabilization
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Major types on budget classification
Functional classification Classification by organizational unit
Classification by objects of expenditure Classification by expenditure program
Classification by economic character
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United Nations functional classification
710 General public services
702 Defense703 Public order and safety
704 Economic affairs
705 Environmental protection706 Housing and community amenities
707 Health
708 Recreation, culture and religion
709 Education
710 Social protection
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Types of classification and purposes
Policy formulation and performance
accountability
Program
Compliance control, internal managementand economic analysis
Object
Statistical reporting, fiscal control and
economic analysis
Economic character
Accountability; budget administration and
legal appropriation
Organizational
Historical analysis; policy analysis and
comparisons
Functional
PurposesType of Classification
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Budget classifications used in Australia
Classification by organizational unit
Functional classification Classification by economic character
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Outcomes of Australian Ministries
Outcomes of the Department of Finance andAdministration Sustainable government finances Improved and more efficient government operations
Efficiently functioning Parliament
Outcomes of the Department of the Treasury Sound macroeconomic environment
Effective government spending and taxation arrangements
Well functioning markets
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Functional classification : Australia
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Functional classification : Australia
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Department of Defense : Statement of
Financial Performance
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Budget classification in PRC
Reform has commenced The need for reform:
Expenditure policy analysis Distinguish between capital and recurrent
expenditures
Features of a new system: Inclusion of all revenues and expenditures
Compatible with other budget reforms
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Budget classification in PRC
Benefits from reform: Better decision making
Improved information
More transparency
Adoption by all levels of government is
important: Expenditure aggregation and comparative
analysis
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Implications for local government in PRC
Assistance should be sought System chosen depends on needs
Functional classification has advantages Classification by organizational unit allows
tighter control
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Budget classification : Australian local
government
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Budget classification : Australian local
government
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Conclusion
Budget classification systems can be
expensive But essential for modern and effective budget
management
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