Four critical sections of the new budget law which seek to make transparent government spending and allow for a four year financial planning cycle will not be effective until the end of this year but the rest of the Act has come into force.

Finance Minister Saisna-rine Kowlessar, signed an order giving effect to the Fiscal Management and Accountability Act but not sections 15, 68, 72 and Part XII. These will come into force from December 15.

However, full implementation of this new budget law, which provides a framework for modernising and better regulating the financial management practises of Govern-ment, will test the institutional framework at the Ministry of Finance and other Govern-ment agencies.

The law, passed last December, calls for much work by the Ministry of Finance, including a four-year financial plan; a half-year economic review by September of each year; an end of year budget outcome and reconciliation statement as well as statements from each agency/ region on the performance of each budgeted programme. The new law sets out the detailed requirements for the annual budget presentation, budget execution and the control of and accounting for public moneys and property.

However, with the exception of parliamentary clearance of supplementary expenditures before they are incurred; limiting variations within programmes to 10% of their total appropriation; a ban on spending of appropriated sums after the fiscal year has lapsed; the creation of an extra-budgetary and a contingency fund; as well as a half-year review of the economy and the issuance of the budget circular for the new fiscal year six months in advance instead of the usual three months: implementation of the other crucial provisions of the Act has been deferred.

A challenging task

"It is a challenging task to get all the things required in place for the full implementation of this new Act but we are putting measures in place to ensure the Act is fully implemented within a year," Finance Minister Saisnarine Kowlessar told Stabroek Business on Friday. He dubbed the provisions which stop parliamentary endorsement of supplementary expenditures after the fact and a ban on spending appropriated sums after the fiscal year "a good thing" to do. The auditor general for years has complained of the latter practice.

Kowlessar acknowledged that the burden on the ministry has now been made far greater and will test the institutional mechanisms in place at implementation but he is confident that the task is "doable".

For Kowlessar, the Act will streamline what his ministry has been doing and brings into effect new reporting requirements while clearly defining his responsibility and those of the various agencies submitting budgets for approval.

"The legislation is good for transparency, accountability and good governance and brings together various pieces of legislation. It is the first time we have a document which deals in a comprehensive manner with the budgetary process. It is modern legislation and provides for better regulation and it is going to be a challenging task for implementing it. I would not say it is over ambitious," Kowlessar says.

The government is receiving technical assistance from various international agencies to bolster its institutional framework aimed at implementing this new law.

Section 15, the most crucial section of the act, provides that the annual budget has to be set in a four year financial plan and requires, apart from an overview of the medium-term domestic and international economic outlook and the major economic assumptions upon which the financing plan is based:

* a statement on the government's medium term fiscal policy objectives;

* a statement of the government's social and economic policy objectives and priorities for the next ensuing fiscal year (the budget is expected to be prepared before the start of the new fiscal year);

* a review of the execution of the current year's budget, together with a projection of the likely outcome for the full fiscal year and explanations for any major differences between the financial plan against actual performance;

* tabulation and analyses of actual and projected tax, non-tax and other revenues for past relevant years, the current fiscal year, the new fiscal year, and the next following three fiscal years, including proposed changes to the government's revenue bases required to support the expenditure proposals of the government; in the case of non-tax revenue, details of the type of revenue to be received in the next ensuing fiscal year by each budget agency is required;

* tabulations and analyses of actual and projected expenditures, classified by government function for the past relevant years, the current fiscal year, the new fiscal year and the next following three fiscal years, including a discussion of any new or changed expenditure policy by the government;

* estimates of all statutory expenditures for the past relevant years, the current fiscal year, the new fiscal year and the next following three fiscal years;

* estimates of expenditure for investments by each budget agency for the new fiscal year and the next following three fiscal years;

* a statement of usage of a planned budget surplus or the sources of financing a budget deficit, as the case may be;

* a statement setting out the budget surplus or deficit and the stock of short-term public debt and long-term public debt;

* details of the fiscal relationship between the government and the regions, including proposed general and special purpose transfers to the regions during the new fiscal year and the following three fiscal years;

* a programme performance statement from each budget agency that administers one or more programmes of the Government for which an appropriation during the next ensuing fiscal year is to be sought;

* copies of the appropriate bill to cover for each fiscal year and drafts of any proposed new legislations or amendments to existing legislation required to implement the revenue, expenditure and financing policies presented in the annual budget proposal.

Budget outcome report

Section 68 of the Act requires the Minister of Finance at the end of each fiscal year to prepare an end of year budget outcome and reconciliation report in respect of the immediate preceding fiscal year, which has to include

* annual estimates and outturn for revenues and current and capital expenditure;

* a detailed explanation of any significant differences between annual estimates and out-turn, including the impact of

a) movements in the underlying economic assumptions and parameters used in the preparation of the annual budget proposal;

b) changes to revenue and expenditure policies during the fiscal year and

c) slippages, if any, in the delivery of budget measures.

Section 72 requires each budget agency of the government to prepare a programme performance statement on the performance of each programme administered by that agency which is to be presented to parliament in accordance with section 15.

These statements have to be endorsed by the relevant minister and have to contain an objective of the programme; what the main programme impacts of the programme are; the strategies employed by the budget agency to achieve the programme impacts; quantitative and qualitative indicators of the programme impacts achieved during the current fiscal year; the amount of funds approved for the programme, the amount spent during the fiscal year and the amount of funding being sought for the new budget year as well as the anticipated programme impacts the programme is aiming to achieve if the funding sought for the new year is approved by parliament.

Part 12 of the Act allows in cases where provisions were not made in law to have a statutory body established to have the budget for this body submitted to the appropriate minister and then the finance minister for approval. This part also requires such budgets be submitted to the National Assembly by the time the annual budget proposal is submitted. It also requires annual report of each statutory body to be submitted to the national assembly.

This new law has to be enacted within one year of its passage in parliament and establishes the office of the Finance Secretary as opposed to the Secretary to the Treasury. It also sets out the head of budget agencies (the permanent secretaries in the various ministries) and details the specific responsibilities of these with respect to their financial management functions.

Budget circular

The Act requires the budget circular to be issued no later than 180 days after the start of the fiscal year to establish a timetable for the preparation of the next fiscal year's budget. This circular goes to all budget agencies, includes the timetable for the budget; details the economic situation and the fiscal policy objectives and priorities of the government; contains the medium term fiscal policy objectives and priorities of the government including a brief statement on how the government intends to manage the public debt, its target for a budget surplus or deficit and a pro forma of annual estimates as well as the budget costing parameters.

Mid year report

The act now requires the minister to present by September, a mid year report providing an update on the current macroeconomic and fiscal situation; a revised economic outlook for the remainder of the fiscal year; a statement of the projected impact of these trends on the annual budget for the current fiscal year; a comparison report on the out-turned current and capital expenditures and revenues with the estimates originally approved by parliament with explanations of any significant variances; and a list of all major fiscal risks for the remainder of the fiscal year, together with likely policy responses that the government proposes to take to meet the expected circumstances. This will have to be done by September of this year and Kowlessar says his ministry will have to meet that deadline.

The Act also allows the minister to prescribe fees and charges where these are not otherwise prescribed in law and establishes the concept of conditional appropriation where an agency can be given a sum conditional on it achieving specified levels of revenue in accordance with an agreement entered into with the minister.

The new law also restricts officials from incurring expenses and they can only do so using valid drawing rights, all of which lapses at the end of each fiscal year. Only 0.083% of the previous year's budget can be issued in drawing rights by the Minister of Finance in the new fiscal year until the budget is passed.

Extra budgetary funds can also now be created if needs be and a Contingencies Fund as a sub Fund of the Consolidated Fund. The act also allows for deposit funds for short-term deposits.