Managment Orientation Program

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Section 6 (a)
Government Budget Process
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Budget Process

• Why Budget?
• Government v.s. Private Sector Budgeting
• Resources Allocation Difficulties
• Government Budgeting Concepts
• Budget Process Mechanics
• Subsequent Budget Adjustments

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Why Budget?

• Legally Required - The Financial Administration
  Act, 1993 - Sec 12
• Parliamentary Convention
• Communicates the Governments Annual Plan
• Permits Public Review of Plan prior to
  Implementation
• Assists in Evaluating Government
• Alternatives - pay as you go

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Government vs Private Sector Budgeting

• Government does not generate profits or ROI
• Government expenses not related to revenues
• Government allocates resources to public need
• Government budget is reviewed publicly
• Government budget impacts majority of the public

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Resource Allocation Difficulties

• Determining, quantifying public need
• Governments role in resolving the need
• Ability to address the need
• Priorities
• Interest/lobby groups
• Political considerations

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Concepts to Understand

• Legislatures Control over Spending
• Single Consolidated Fund (GRF)
• Gross Budgeting
• Appropriations - main, interim, Special Warrant,
  vote, subvote, statutory.

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Main Actors Involved

• Legislative Assembly
• Reviews Governments budget plans and approves
  all new revenue and spending plans
• Cabinet
• Establishes priorities and direction. Approves
  budget plans recommended by Treasury Board.

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Main Actors Involved cont..

• Treasury Board
• Directs departments to prepare budgets options.
  Reviews department plans Makes recommendations on
  those plans to Cabinet
• Minister of Finance
• Chair of Treasury Board. Primary role in
  taxation, revenue and borrowing issues. Delivers
  and defends Budget.

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Main Actors Involved cont.

• Department of Finance
• Staff to Treasury Board.
• Review and Analyse Budget Proposals
• Develop Tax Policy Alternatives.
• Perform Fiscal and Economic Forecasts
• Review Department Strategic Plans

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Main Actors Involved cont..

• Departments / TB Crown Corporations
• Prepare budget options. Formulate policy and
  policy direction specific to their mandate.
  Communicate to Treasury Board the financial and
  policy implications of their budget proposals.

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Budget Process Cycle

• Economic Fiscal Framework
• Budget Guidelines
• Cabinet Planning
• Treasury Board Review
• Cabinet Finalization
• Estimates Speech Production
• Budget Address
• Legislative Review and Approval

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Budget Process Cycle
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Economic Fiscal Framework

• Fiscal Trends
• Fiscal Forecasts
• Demographic forecasts
• Economic Forecasts, e.g. GDP, Jobs, Interest
  rates, CPI, Unemployment rate etc.
• Credit Rating, Debt Availability
• Risks and Pressures
• Likely Future Events

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Economic Forecasting
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Call for Estimates (budget guidelines)

• Assumptions to use - wage interest rates,
  rental rates, inflation rates.
• Reduction Options
• New Initiatives
• Borrowing or Loan Guarantees
• Capital Spending
• Format and Content for Budget Submission

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Cabinet Planning

• Fiscal Strategies
• Broad Policy Priorities
• Health Stabilization
• Education Training
• Highways
• Welfare Reform
• Jobs
• Safe Communities
• Tax Reduction
• Expenditure and Revenue Initiatives

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Department Budget Preparation

• Prepare a Status Quo Budget using guidelines
  (inflation, wage rates etc.)
• Compare Status Quo with Budget Guidelines
• Prepare Alternatives (reductions new
  initiatives)
• Negotiate and Deal with Treasury Board Branch

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Department TacticsEverything is Essential
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Departmental TacticsDire Consequences
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Department Tactics - Other

• Lobby Premier, Ministers, MLAs
• Have Interest Groups Lobby Ministers etc.
• Offer Politically Unpalatable Alternatives
• Portray Interesting Interpretation of Facts
• Ignore Budget (overspend and SW fix)
• Use CDI Process to revisit and avoid competition
  for funds

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Finances Tactics
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Treasury Board Branch Review

• TBB Review and Analyses Departments Plans
• TBB and Dept. Negotiate Differences

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Treasury Board Review

• Departments Plan Reviewed by Treasury Board -
  Dept. TBB present
• Further Budget Direction
• Second Review by TB
• Treasury Board Finalization

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Cabinet Finalization

• Cabinet Reviews Treasury Boards Recommendations
• Senior Finance and Executive Council Officials
  Present
• Department Not Present
• Cabinet makes final decision

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Legislative Review Approval

• 5 Day Budget Debate
• Committee of Finance Review
• Vote by Vote Review
• Department Officials Present to Assist their
  Minister
• Interim Supply
• Main Appropriation

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Subsequent Budget Adjustments

• Special Warrants
• Virements
• Cabinet Decision Items (CDIs)

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Special Warrants

• Additional Funding (Appropriation) Sec 14
• Urgently and Immediately Required
• Expense Unforeseen / Insufficiently Provided
• Provided by Cabinet / Lieutenant Governor when
  Legislature is not sitting
• Subsequently Approved by Legislature

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Special Warrants

• Somewhat controversial as they avoid prior
  scrutiny by Assembly
• Require Treasury Board Review
• Department expected to minimize SW
• Fund interim CDIs.
• Fund over budget spending - deliberate and
  unavoidable

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Virements

• Move funding from one subvote to another within
  the same vote
• Cannot move funds between Votes
• Reviewed by Treasury Board Branch
• Require Minister of Finance Approval
• Usually Approved by DM of Finance on Ministers
  Behalf

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Cabinet Decision Item

• When a Minister needs Cabinet support and
  approval in a public policy decision
• Determined by
• Ministers own Authority
• Impact of Decision on other Ministers
• Sensitivity / Significance of Decision

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Typical Cabinet Decision Items

• Develop, Amend a Policy Decision
• Develop, Amend , Delete Existing Program
• Create New Program
• Request for New Funding
• Request for Changes to Existing Funding

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Abuses of CDI Process

• Used to revisit a budget decision the department
  did not like.
• Submit proposals known at budget time that will
  fare better in ad hoc decisions process.
• Cover your butt because decision would be
  Cabinets not the ministers or the depts.
• Portray TB or Cabinet as bad guy instead of
  minister or department.

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CDI Process
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Financial Cycle
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Comptrollers Role

• Chief Accountant for Government.
• Appropriation Control.
• Supervises receipt, disbursement and recording of
  monies.
• Financial Statements - Public Accounts.
• Accounting Administrative Policy.
• Responds to Provincial Auditors Reports.

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Report on Stewardship - Public Accounts

• Volume 1
• General Revenue Fund Financial Statements
• Summary Financial Statements - All Government
• Volume 2
• Details of Revenue - GRF
• Details of Expense - GRF
• Appropriation Detail

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Complete the Financial Cycle

• Public Accounts Audited by The Provincial Auditor
• Provincial Auditor Issues Reports to the
  Legislature (Spring and Fall report)
• Public Accounts Committee Review Public Accounts
  and Auditors Reports

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Public Accounts Committee

• All party committee meets to review issues and
  recommend to Legislature
• Usually chaired by MLA from Opposition
• 10 members, 6 from Government side
• Open meetings, sometimes in-camera
• Meet twice a week during session and one full
  week in the fall

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Any Questions?