Lecture 4 Budget and budgetary system
Lecture 4 Budget and budgetary system Public Budget represents
the basis of every countrys financial system, expressing the
specific type of financial relations - budgetary relations that are
implied in the processes of formation, distribution and use of
budgetary funds necessary for the national (central) and local
state bodies. Public Budget represent the economic relations that
manifest themselves in the process of formation and utilization of
the main centralized cash fund of the state and of the
administrative-territorial units funds, with the purpose of
financing the activities focused on improving the quality of life,
the economic development of the country, scientific research,
improving and widening the infrastructure, creating state reserves,
national defense, and public and law order Public Budget represents
the main document, viewed as a law, which establishes the nature
and the size of income that is mobilized by the state on one side,
and on another side the type and the amount of budget allocations
that the state will forward to fund various activities during the
year.
There are three categories of financial (budget) laws: A.The
annual law of finance or the law of initial budget which stipulates
and authorizes the set of state resources and expenses for each
financial year and it is known as the State Budget Law;
There are three categories of financial (budget) laws: B.The
adopted laws of the state budget (adopted for the current year)
focus on the rectification (correction) of the provisions of the
initial budget law (the number of the provisions is not fixed and
can vary from year to year);
There are three categories of financial (budget) laws: C. Law of
finance regulation (Law of execution of the Budget). After
expiration of the budget year ( usually after one year), through
which is established the real execution of budget and approved
differences between recorded results and forecasts of annual law of
finance, fulfilled by adjusting laws. This law can be considered in
a narrow acceptance.Adopted by the Parliament, the budget is the
main document from public life, because it is the financial
expression of action plan of the state for the period of one year.
It can be seen under four main approaches:a)From the juridical
point of view, budget is a financial document with the power of law
which includes certain norms and normatives for organization of a
clear and explicit financial administration; these norms are for
organization of a transparent administration of state finances and
determination of Governmental authorities in the budget field.b)
From the accounting point of view the budget represents the set of
accounts that administrate financial resources of the state. Here,
from the technical point of view we are interested especially in
processes of elaboration and execution of budget as methods of
forecasting and evaluation of different categories of revenues and
expenses of the Budget.c)From the economic point of view can be
mentioned the specific funds that pass through budgetary account.
These funds represent the considerable weight of GDP taken through
taxes and expenses made by the state.d)From the political point of
view the budget is considered as the expression of Governmental
options in the set of fields (economical politics, social,
educative, cultural, military etc.); these options are reflected
through accumulation and distribution of revenues and expenditures
and are determined by multiple factors related to doctrines of
political parties, past influence, inertial phenomena etc. Budget
must execute three functions: 1.Control over expenditures by which
is supervised budget execution by public authorities.2.Efficient
use of financial resources and staff for managing and realizing the
supposed activities.3.Planning of state activities by which are
established objectives and are formulated different alternative
programs being evaluated by financing possibilities.Budgetary
System of Federal Type states is formed from three parts:1.The
budget of federation; 2.The budget of territorial units (components
of federation);3.Local budget. Budgetary System of Unitary Type is
composed from two components:1.Budget of state central
administration;2.Local budget of territorial-administrative units.
The budgetary system of the Republic of Moldova has the unitary
type. According to the Law of the Republic of Moldova Regarding
budgetary system and budgetary process, Nr.847 from 24.05.96
Budgetary system is a unitary system of budgets and funds, which
constitute the national public budget, comprising:a) state budgetb)
budget of social insurance of statec) budgets of
territorial-administrative units State budget reflects financial
relations expressed by expenditures corresponding to realization of
objectives and actions of national interest, respectively financial
resources mobilized in State disposal. Budgets of
territorial-administrative units (TAU) are the financial relations
corresponding to the expenditures of certain actions for local
collectivities, (state or region). The TAU budgets ensure with
financial resources realization for satisfaction of socio-economic
and cultural needs of population as for development of the
territory in subordination. According to the legal framework, TAU
elaborates and approves its own annual budgets in limits of
available financial resources which are formed from:1.Own revenues,
formed from local duties and taxes, for each separate territory,
according to Fiscal Code and are spread directly to the respective
budgets. 2.Special means; - are revenues of public institutions, in
the form of donations, sponsorships and other cash means
incorporated legally in the possession of public
institution.3.Transfers from general revenues of the state,
according to normative percentage established through annually
budgetary law. 4.Transfers from the state budget; - are the
allocated financial means, according to the legal provisions, with
a definitive title and in an absolute amount, from state budget to
the district budgets, or from district budgets to the local budgets
for leveling financial possibilities of administrative-territorial
units, in order to ensure execution of certain public functions,
financing activity fields which correspond to the competence of
local public authorities. 4.Special funds; - represent cash means
for sustaining some programs of local interest, in accordance with
legal disposals.5.Annual expenditures of TAU budgets are coming
under responsibility of representative authorities and are approved
just in limits of available financial resources. These are related
to the fields like education, healthcare, culture and art, sports
and activities for teenagers, etc. The budget of state social
insurance (BSSI) comprise the financial relations expressed through
expenditures specific for this field, reflected through pension
payments, assistance and compensations, social protection,
respectively through revenues characteristic for this domain, first
of all contributions for social insurance.Insurance of obligatory
medical assistance represent the system, warranted by the state and
protects the populations interests in the field of health
protection. These funds cover expenditures of treatment in
situations conditioned by happening of ensured events.Budgetary
process can be defined as the set of activities and operations,
which takes place annually comprising elaboration of budget
project; its aprovement; budget execution and bugetary control.BP
has the decisive type, which consists from ordination of priorities
and allocation of necessary financial resources for concerned
objectives, with public utility. Decision that should be taken is
one of the most complicated, as mobilized resources are limited and
are situated, in all situations, under the level of public
necessities of the period. BP is a political predominant, as
decisions related to allocation of mobilized budgetary resources
are not based on criteria or information on the market, they are
just based on the objectives of the governing program, established
by the party which has the majority in the Parliament. BP has a
complex character, because it is realized through participation of
a big number of subjects of different nature with own interests,
needs and possibilities. BP is cyclic, being realized successively
under a rigid (strict) calendar, according to the requirements of
annual principles and budgetary publicity.BP is strictly regulated
by the legislation and methodological norms elaborated by the
Ministry of Finance. The main participants in the budgetary process
are:1) entities financed from the budget (institutions,
administrative-territorial units etc.) 2) main officers of the
budget (ministers and leaders of other specialized bodies of
central public administration ) 3) Ministry of Finance4)
Government5) Legislative body (Parliament)6) Groups of interest and
citizens. The stages of the budget process are the following:
1.elaboration of the budget project, 2.adoption of the budget
project, 3.execution of budget, 4.budget control. 1.Stage
elaboration of the budget project
The Ministry of Finance presents the main economic data,
necessary for the elaboration of state budget project, in terms
fixed by the Government and it includes: a) Forecast of
macroeconomic and social indicators for the next budgetary year,
which is determined, elaborated and presented by the Ministry of
Economics. b) Forecast of indexes and demands of the state social
insurance budget, which is determined, elaborated and presented by
the Ministry of Labor, Social and Family Protection.c) Forecast of
the balance of payments, of credits, of external obligations and of
other indicators that characterize the credit monetary policy of
the state, determined, elaborated and presented by the National
Bank of Moldova.
After the amendments have been included, if they existed, the
Government approves the project for the next budget year.Until the
October 1-st of each year, the Government presents to the
Parliament:a) The project of budget law for the next budget year
and the explanatory note;b) The list of modifications in the
legislation resulted from project of annual budget law.
2. Stage The examination and adoption of the annual budget
lawThe Government presents to the Parliament until October 1-st of
each year the project of annual budget law. Additionally to the
project of annual budget law, the Ministry of Finance presents
calculations of budget incomes and expenditures. Stage 3 The
execution of state budgetThe Government has the responsibility for
the execution of state budget. In term of 10 days after the
adoption of the annual budget law, the Ministry of Finance:a)
Requests form central public authorities their financial plans, as
well as plans of the their subordinated institutions;b) Prepares
the breakdown of monthly distribution of incomes stipulated by the
annual budget law and by other legislative documents. Stage 4 The
report regarding the execution of annual budget law and its
approvalOn December 31-st of each year, Ministry of Finance makes
the final balance of all accounts opened during the current budget
year, in order to make the annual report.All incomes uncollected
until December 31 are cashed in the budget account for the next
year.At the end of each budget year, the Ministry of Finance issues
the report regarding the execution of the state budget, which is
presented to the Government and Parliament until May 1-st of the
next year after the current one. The budget control - the control
over execution of the state budget represents a stage from the
budget process that is based on the restrictions, taking into
account that budgetary resources have limited character. In this
context, the necessity of control over the budget derives from
political and financial interests. Juridical control is performed
by the specialized organs of the state for the purpose of
establishing of the juridical responsibility of the subjects
implicated in the budget execution process in case of defective
administration of political funds. For this purpose, the Court of
Accounts activates as a basic control organ from annual budget law
state. Administrative control includes the performed control by
specialized organs of Ministry of Finance (IFPS, Treasury, etc) as
well as the realized control inside of each institution under the
form of control made by the main ordinates of budget credits over
the way of how these credits are consumed by subordinates.
Depending on the time of its accomplishment, the budgetary control
may be: Preventive Concomitant; Post-operative. Preventive control
is the most effective, because it can stop running illegal
operations or those judged to be inappropriate and inefficient.
Concomitant control has limited effectiveness, but should not be
underestimated, because by determining the legality or illegality
of the operation, there is prevented the initiation of similar
actions in future.Post-operative control can not fix what was done,
but by identifying deviations from the law and determining those
responsible, it may establish measures for the recovery of damages
to the state.
