Workshop Cash and Budget
“Cash is King!”
Ministry of Finance
17 February 2006
Budget process:summing up
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
Do you analyze every year the budget
outcome and the budget forecasts?
Is this review done for every line-item?
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
3. input info needed for benchmarking: number
of personel, it and housing-costs
The rules of the game, part 1!
Dealing with windfalls and overspendings….
The rules of budgetary discipline
Status rules: part of coalition agreement, no
Main rule: Compensate within your own
An unwritten law but even used in parliament
Surplus windfalls are for minister of Finance,
Carry-over principle ( 2 % of total budget)
The rules of the game, part 2!
….. But can only be maintained when budget is
Monthly report of budget-execution
Monthly meeting inspectorate and spending
Under- and overspending review for 4-5 years
Strong link between realization and multi-year
To be supported by IT-system
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
Check by ministry of Finance
Bookkeepers budget analysts!
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
Multi annual budgeting
year t t+1* t+2* t+3* t+4*
100 110 120 130 140
Exec 15 15 10 5 0
Comp 15 10 5 0
Total 115 110 120 130 140
Conduction of central administration
Spending department can decide on the number of
No ex-ante checks on payments
Discussion on cash forecasts by spending units
All government units included!
Working processes supported by IT-systems
Information flow; but zero balancing
Government Ministry of
1 a d
Customer/person Real money transfer
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
Information exchange supported by
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
Check your position on the web
Animatie door Daan Vossers
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