Budget Classification - Concepts and Issues

8/3/2019 Budget Classification - Concepts and Issues

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Budget classification:

Concepts and Issues

Public Finance PRC : Local Government Budget

Management Seminar The views expressed in this paper are the views of the author and do not necessarily reflect the views or policies of the Asian Development

Bank Institute (ADBI), the Asian Development Bank (ADB), or its Board of Directors, or the governments they represent. ADBI does not

guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used

may not necessarily be consistent with ADB official terms.



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Purposes of budget classification

A means of introducing some order from

diversity A pre-requisite for other budget reforms

Expenditure program formulation, analysisand monitoring

Budget execution

Accountability

Economic stabilization



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Major types on budget classification

Functional classification Classification by organizational unit

Classification by objects of expenditure Classification by expenditure program

Classification by economic character



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United Nations functional classification

710 General public services

702 Defense703 Public order and safety

704 Economic affairs

705 Environmental protection706 Housing and community amenities

707 Health

708 Recreation, culture and religion

709 Education

710 Social protection



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Types of classification and purposes

Policy formulation and performance

accountability

Program

Compliance control, internal managementand economic analysis

Object

Statistical reporting, fiscal control and

economic analysis

Economic character

Accountability; budget administration and

legal appropriation

Organizational

Historical analysis; policy analysis and

comparisons

Functional

PurposesType of Classification



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Budget classifications used in Australia

Classification by organizational unit

Functional classification Classification by economic character



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Outcomes of Australian Ministries

Outcomes of the Department of Finance andAdministration Sustainable government finances Improved and more efficient government operations

Efficiently functioning Parliament

Outcomes of the Department of the Treasury Sound macroeconomic environment

Effective government spending and taxation arrangements

Well functioning markets



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Functional classification : Australia



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Functional classification : Australia



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Department of Defense : Statement of

Financial Performance



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Budget classification in PRC

Reform has commenced The need for reform:

Expenditure policy analysis Distinguish between capital and recurrent

expenditures

Features of a new system: Inclusion of all revenues and expenditures

Compatible with other budget reforms



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Budget classification in PRC

Benefits from reform: Better decision making

Improved information

More transparency

Adoption by all levels of government is

important: Expenditure aggregation and comparative

analysis



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Implications for local government in PRC

Assistance should be sought System chosen depends on needs

Functional classification has advantages Classification by organizational unit allows

tighter control



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Budget classification : Australian local

government



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Budget classification : Australian local

government



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Conclusion

Budget classification systems can be

expensive But essential for modern and effective budget

management

Budget Classification - Concepts and Issues

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