Gov’t explains changes to budgeting approach and presentation of estimates

Office of the Prime Minister

PRESS RELEASE – The country’s current fiscal challenges has increased the need for greater focus and scrutiny to be placed on all aspects of Public Financial Management (PFM) and by extension the budget process which is an integral component of PFM.

It is against this backdrop that the Ministry of Finance and the other OECS finance ministries have embarked on an exercise intended to reform the budget process. This reform exercise has resulted in changes in the appearance of the estimates as the governments embrace performance budgeting. In the case of St. Lucia it is our view that this change will make the document more enlightening and it is our hope that it will continue to contribute meaningfully to the discussions during the Budget process.

The budget reform process has been a bit challenging as agencies come to terms with the need to consciously measure the performance of their various programmes. As the government attempts to address the fiscal deficit, expenditure management will of necessity have to play a critical role in that process.  Agencies must justify their expenditure through the performance of their programmes as the government attempts to resolve its fiscal situation. In an environment where resources are scarce there is the need to measure the results of government spending in order that more resources can be more efficiently allocated.

A move toward strategic budget reform would entail the introduction of the following measures of which some are new to the current budget exercise:

•    Strengthen the fiscal framework by developing a comprehensive Medium-term Macroeconomic and Fiscal Outlook Statement early in the budget cycle;
•    Introduce three-year budget and forward estimates process to establish hard budget ceilings;
•    Strengthen the application and effectiveness of programme performance budgeting;
•    More effectively integrate the Public Sector Investment Programme (PSIP) within the annual budget planning cycle and process; and
•    Strengthen within-year budget discipline.

New to the process is the introduction of the forward estimates or multi-year budgeting. Multi-year budgeting reflects the current financial obligation of government extrapolated into the medium term and adjusted for future commitments.

The second key element of the budget reforms is the introduction of programme performance budgeting (PPB). Under PPB, the 2014/15 Budget Estimate will include narrative information about the purpose, priorities and planned results of government expenditure for each agency. At the agency level, agencies will be required to present a mission statement and their strategic priorities. For each programme, agencies are required to present a programme objective, key performance indicators (i.e. output indicators – what the agency produces or delivers and outcome indicators – the impact or effectiveness of the programme in meeting the programme objective) and key strategies (i.e. strategies and actions intended to improve programme outputs and outcomes).

This information is intended to inform parliament of the results and value for money being achieved by government agencies and their programmes to guide future budget allocation decisions as well as improve the accountability of civil service programme managers for the performance (i.e. results achieved) of government programmes and services.

As indicated earlier the process is new and agencies may not have all the expected information in this cycle. However, in the upcoming years it is anticipated that they will become more proficient in the identification and measurement of their performance indicators.

The Estimates of Revenue and Expenditure and the performance information have been consolidated into a single document labeled Volume 1. Personal emoluments details have been published as a separate document labeled Staff Positions for Wages and Salaries to accompany Volume I. the two publications should be interpreted as one continuous document with relevant sections and appendices. It is important to note Volume I contains data that in unaudited and is subject to change.

The estimates are result of extensive discussions extending over several months between the Office of the Budget, Finance Technical and Policy Committees and all government agencies.

The Minister for Finance would like to extend his sincere appreciation to everyone involved in the preparation of the 2014/2015 Budget Estimates.

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2 comments

  1. The fact that Canada and Australia HAD budget surpluses has more to do with the fact that they are resource driven economies than the way they go about their government budgeting processes. Australia is now running a huge deficit due to the reduced growth from its major market in China and the pressure that a massively inflated currency imposes on exports in an export-oriented economy, and therefore profits subject to tax.

    Indeed St Lucia could benefit from preparing its accounts under Generally Accepted Accounting Principles (GAAP), including the accruals basis, such that they could use statistical information to properly estimate tax revenues and target those revenue levels rather than simply book the tax that actually gets collected.

    I'm quite sure they don't book KNOWN liabilities for tax refunds under their non-payment (we don't have the money) SCAM.

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  2. More effective than any all these arm-chair approaches would be the acceptance and incorporation, as an essential part of the budgeting process, the accrual accounting method. Along with this would be financial control. This would put in place a parliamentary mechanism that monitors expenditures with the authority to put things back on track. Canada and Australia that have experienced annual surpluses from a record of deficits are useful examples of this form of financial discipline.

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