workshop cash and budget “cash is king!”

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Workshop Cash and Budget

“Cash is King!”

Helmer VossersMinistry of Finance The Netherlands17 February 2006

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Budget process:summing up

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Questions: Is the budget the instrument for implementing

government policies? Do you report on a regular basis on the budget-

outcomes during the execution? Can you relate your cash information to budget-

lines? Do you analyze every year the budget outcome

and the budget forecasts? Is this review done for every line-item?

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Budget paradox

Trend: we see reforms towards performance based budgeting and management

But cash info still remains very important why?1. fiscal aggregates (EMU-deficit) is based on

cash (sub-national parts!)2. allocation, authorisation accounting is on cash3. 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…. The rules of budgetary discipline Status rules: part of coalition agreement, no

law Main rule: Compensate within your own

budget! An unwritten law but even used in parliament Surplus windfalls are for minister of Finance,

but Carry-over principle ( 2 % of total budget)

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The rules of the game, part 2!

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

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

Multi layer financial responsibility: flexibility Bottom-up approach: estimates based on

assumptions from line ministries Estimations in unchanged prices Assumption of unchanged policy (demographic

development included) Check by ministry of Finance

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Bookkeepers budget analysts!

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How does it really work?

Example of budget preparations and budget execution in relation to

overruns and compensation

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

delivered

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Multi annual budgeting

year t t+1* t+2* t+3* t+4*

100

110 120 130 140

15 15 10 5 0

15 10 5 0

110 120 130 140

Exec

Comp

115Total

Appr.

budget

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Conduction of central administration

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

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Government

Offices

Commercial bank

Ministry of Finance

Central Bank

Customer/person

a

b

1

2

c

d

e

Information flow

Real money transfer

Information flow; but zero balancing

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To wrap up….

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

Budgetary system RIS/IBOS forecasts versus realization explanation of mutations insight in liabilities (intended and realized) on a multi annual basis

linked with cash information through banking accounts

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Check your position on the web

16Animatie door Daan Vossers

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To summarise All mentioned features and agreements of Dutch

Budget policy are covered in our IT-systems Systems comply with division of responsibilities Conditions: Information shoud be in time, complete

and correct: but also sharing of information Rules, rules, rules Teach the line-ministeries System works with multi annual figures Cash info essential for reliability