Understanding the Public Budget Cycle Stages

The Public Budget Cycle Stages

The life of a budget can extend for at least three years. It involves four main phases:

• Preparation
• Discussion and Approval
• Implementation
• Control

1. Budget Preparation

This phase involves multiple negotiations, which are the most direct responsibility for preparing the budget document among the various ministerial departments and state bodies. Proposals originating from administrative units at lower and upper levels are consolidated into the project presented by the government. The absolute executive power plays a crucial role in budget preparation during this stage.

2. Discussion and Approval

The legislative power, represented by the chambers, is the protagonist here. If the budget for the new financial year has not been approved by the start date, it creates a significant legal problem. In Spain, this is resolved through the automatic extension of the previous year's budgets, assigning the same spending credits for the new year.

3. Budget Implementation

Once the budget document is approved by parliament, it becomes law. Budget execution begins at the start of the budget year (January 1st in Spain). This involves the administration's activity aimed at realizing the expected revenues and expenses over the period.

Two key issues arise during this stage:

1. The administration's linkage with the budget document.
2. The procedure through which the administration develops this phase.

Via of Expenses and Revenue

Expenses: The administration is legally limited in its spending.

Revenue:

• Ordinary Income: Management focuses on achieving the desirable income level to cover expenses.
• Extraordinary Income: Debt is incurred, which, similar to public expenses, is limited by the administration.

Procedure for Execution

Expenditure involves four phases:

• Authorization or Commitment: An agreement by the competent body to incur an expense.
• Provision and Settlement: Assessment of the amount previously committed and spent.
• Arrangement: An order to pay is issued on behalf of the administration by the authorized official (the payer).
• Payment: Payment is made by delivering the funds to the creditor of the public sector.

Revenue: The public sector employs coercive means to compel individuals to fulfill their tax obligations.

4. Budget Control

This phase temporarily overlaps with the previous implementation stage and involves three methods of control:

Internal or Administrative Control

Established by a body belonging to the government but independent of the managing agencies. This body performs a pre-audit of each implementation phase to monitor its legality.

Judicial Control

This control resides within the judiciary. In Spain, this is executed by a special court with exclusive budgetary power, the Court of Auditors, which reviews the legality of activities conducted in budgetary management.

Parliamentary or Political Control

This is performed by the legislature (parliament). Having already intervened in the discussion and approval stage, parliament now checks whether the executive has adhered to the budgetary mandates.