1. Introduction
This work aims to highlight the importance of the budget and its classification showing it as an element of planning and control expressed in economic and financial terms within the framework of a strategic plan, capable of being an instrument or tool that promotes integration in the different areas that the Public sector participation as a contribution to the set of initiatives within each responsibility center and the responsibility expressed in terms of programs established for its fulfillment in terms of a clearly defined structure for this process.
The classification of government budgets shows an important side since it highlights the flexibility that budget preparation must have, as well as its versatility, generating greater understanding and the ease of interpreting each phase of the budget cycle, which makes it possible for Government efforts are organized and controlled by it. A summary is also shown detailing the articles contained in the constitution for the correct preparation of the national budget.
2. The budget classifications
The public sector carries out a large number of income and expenditure operations to carry out its activities, so to study them and appreciate their meaning, it is necessary to shape the multitude of statistical data that reflect their meaning and scope. To order this information, there is a set of methods for budget classification that is unique and universally accepted, since the approaches to fiscal analysis can be diverse and require different forms of data distribution. This means that it is possible to prepare different government accounts in which income and expenses are classified according to various criteria.
In accordance with the progress made in tax accounting, the main government accounts that can be prepared are:
• Those of the administrative or conventional budget of the government
• The general government within the national income and product accounts scheme
• Those of the sector govern within the matrix of inter-industrial input-output transactions
• The government in the scheme of sources and uses of funds
• The government sector within the national wealth schemes.
Most government transactions are carried out through annual administrative or conventional budgets. These documents contain, in their budgets and closed fiscal year accounts phase, all the information about government transactions, which must be reclassified, adjusted and consolidated to prepare the necessary data to prepare the accounts.
It is convenient to examine below each one of the most significant government accounts schemes in order to determine their characteristics, their usefulness for the analysis and the formulation and execution of government policy.
Classification of government budget accounts
In reality, the government budget covers the entire public sector and should be presented in consolidated terms. For its preparation, the partial budgets formulated by the different public sector organizations are taken into account, which are prepared in combined terms, that is, including all their transactions and intersectoral transfers.
Through the budgets, the ministries and the public establishments carry out the governmental activity contained in the programs that have been prepared to fulfill the functions that the laws entrust to them. Accordingly, budget accounts should be arranged with a view to facilitating the formulation, execution and accounting of programs, for which they should be flexible and numerous enough to facilitate such phases of the budget cycle.
For the planning of budget accounts, the four fundamental purposes of such accounts must be considered. First, they must be structured in a way that facilitates the analysis of the economic and social effects of government activities. As government decisions alter the course of the economic and social life of the countries, it is necessary for the authorities to obtain the information required to measure the effects that their management must produce. Consequently, the classification should make it possible to study the influence that government income and expenditures have on the level and composition of the national product, on employment and on the rate of economic growth, as well as on the distribution of national income among the population.
Second, the accounts should facilitate the formulation of the programs that the government develops to fulfill its functions. Once the government's share of national income has been established, the composition of expenditures between consumption and capital expenditures must be calculated, adjusting activity levels with the private sector. Budget accounts are to be arranged so as to show scheduled decisions and recommended changes from year to year. In this way, the Congress and the Executive will know, when approving the budget, what they want to do with public money. In addition, the financing program must be clearly expressed, detailing tax revenues, rates, etc., and specifying to which sectors it is being recorded.
Third, budget accounts must contribute to smooth budget execution. The program administrator must know the amount of financial resources that will be available and the responsibilities that will have to be assumed. He is responsible for managing the funds made available to him, and the budget accounts system must allow him to apply his resources, throughout the fiscal year, intelligently and according to the goals set.
Fourth, budget accounts must facilitate fiscal accounting. The government must keep a complete record of fiscal operations and thus be able to establish the responsibilities that officials have in the collection of taxes, in the administration of funds and in the disposition of expenses. Fiscal accounts must allow to establish precisely the responsibility that could be assigned to specific people, in order to avoid embezzlement, fraud, or illegal handling, which is why budget accounts, together with making fiscal accounting possible, should enable effective inspection by people other than those who have legal responsibility for operations, through audit work.
Planning a budget classification is, therefore, a difficult and complex task, which must meet the requirements outlined above, taking care not to sacrifice one objective for the sake of another.
The information can be classified according to five main criteria:
• By institutions
• By object of expenses
• By economic lines
• By functions
• By programs and activities
Classification by institutions
To specify the subjects of the transactions carried out by public entities, it is convenient to distinguish some basic concepts: government, government sector, and public sector.
Government is the central executive or administrative organization charged with the affairs of a country and is primarily reduced to the executive branch and its dependencies. While the governmental sector, includes all the legislative, executive and judicial organs of the State, established through political processes, and which includes both the central government organs that exercise authority and whose jurisdiction extends to the total surface of the country, as well as the organs whose jurisdiction covers only a part of the territory. The government sector includes, in short, the national government, provincial governments and local governments, as well as the dependent bodies that are responsible for their actions, especially in relation to the collection and use of their funds before central organizations.
The concept of the public sector is, in turn, broader than that of the government sector, since it encompasses not only already defined government agencies, but also independent public bodies. The difference between one and the other derives from the degree of political control that it exercises over the institutions.
What characterizes the government sector is the fact of possessing the respective coercive powers of the people who work in the entities that comprise it. Within the government sector, the public powers stand out, and within these the Executive power with its ministries and administrative departments. It also includes state, provincial and local governments. Entities belonging to the government sector may be in charge of the production of services that do not trade in the market, as well as entities that produce goods and services that are traded, in the first case they are called government entities themselves, and in the second company.
Over time, the complexity of the public sector has increased, as a result of the appearance of a great multitude of new institutions. For this reason it is difficult to define its limits and determine the class of institutions that comprise it. The public sector is made up of a large number of entities, whose transactions exert a major influence on the national economy.
The organisms that belong to the governmental sector, should fulfill two requirements:
Act as an instrument for applying the decisions of a political entity, lacking in themselves the power to decide on their own; it clearly bears this character, for example a ministry and a general direction; On the other hand, a central bank cannot be considered a government agency, since it generally has the independence to make its decisions, despite the fact that it cooperates closely with government agencies, such as the treasury ministries.
Be supervised by political bodies and that their resources are administered for purposes defined by those bodies. In some cases, financial resources must be included in budgets approved by the political body and form part of the general budget, and in others, especially in the case of companies, it is done through authorization of the accounts of the commercial operations they carry out and of the approval of its pricing and investment policy.
The structure of the government sector can be subdivided from two main points of view: one territorial and the other institutional. According to the first criterion, the central government and the decentralized governments (state, provincial and municipal) are distinguished. Under the second, the government is made up of general government agencies, subsidiary agencies, and companies. Both central and state, provincial and municipal governments have general government, auxiliary and company agencies.
Classification according to the object of expenditure
Different public agencies need to acquire various goods and services to function, such as personal services, building leases, purchase of shelves, acquisition of desks, ink, paper and other materials. To buy these different things, certain sums of money are established, identifying them with the objects they have been destined for. The classification by object of expenditure orders each of the concepts to be acquired.
Its main purpose is to allow accounting control of expenses. The concepts of spending are uniform for the different public bodies and the tax accounting system controls that this money is actually spent for the purposes for which it was used. In short, it focuses its attention on the accounting aspects of government operations, trying to identify the expense incurred in each purchase.
Classification by object of expenditure is the basis of the so-called traditional budget, or item's enumerating budget. In this budget, the concepts of spending are usually broken down widely, as an expression of the distrust that prevailed throughout an era between the Legislative and the Executive, and as a way of making the accounting control of fiscal operations more complete. In truth, this classification represented an advance in its time, since it allowed greater control that made it possible to avoid embezzlement, embezzlement, and in general dishonest management of the budget. In addition, this serves to establish the composition of public spending and determine the structure of government demand or the rest of the economy.It allows to systematically order and identify the uses that will be given to the money assigned to each program and activity. For this reason, the type of goods and services to be purchased to fulfill the programs must be identified.
The classification of the budget by object of expenditure has the expenses classified by group which are:
• Personal services
• Non-personal services
• Materials and supplies
• Machinery and equipment
• Acquisition of real estate
• Buildings
• Current transfers
• Capital transfers
• Public debt
• Other financial outlays
• Global allocations.
Economic classification of government transactions
This classification makes it possible to identify each line of expenditure and income according to their economic nature, and consequently makes it possible to investigate the influence that public finances have on the rest of the national economy. The economic classification shows the part of the expenses that are destined to current government operations and the part of the expenses that are destined to the creation of capital goods that allow to expand the installed production capacity of the economy. It also shows the degree to which government services are provided directly through the use of funds invested by the government itself in goods and services or indirectly through government subsidies and loans granted to other bodies in charge of providing the same service.
The economic classification makes it possible to determine the impact of public expenditures on the level of composition of the national product, as well as on its distribution. In sum, it allows evaluating the economic effects of public spending on economic and social development, insofar as it is measuring public investment on monetary stability, insofar as it allows showing financing and subsidy policy at the level of prices. It is primarily concerned with ordering government transactions according to the economic nature of the effects it produces on national life.
Classification by functions
This classification groups government transactions according to the particular purpose for which they are intended. The purpose refers to the different services provided directly or that are financed by the government. Its objective is to present a description that allows reporting on the nature of government services and the proportion of public expenditures that go to each type of service.
The classification by functions, therefore, presents government expenditures according to the immediate or short-term objectives to which they are destined, that is, they do not consider the impact they may have in the long term and their impact on economic growth that they may have. reach. The manual defines it as a plan that includes all types of expenses established by political bodies and that are related in a defined way, with complete purposes.
The classification by functions fulfills the task of providing the programmer and the budget preparer with a vision about the purposes that the government has in each of the areas of activity.
3. Laws that support the budget
The budget must be presented on September 1 of each year, the draft income and expense budgets classified according to the provisions contained in articles 7 and 8 of this law. Said presentation will be limited to the instructions and forms determined by the aforementioned office.
Institutions must incorporate current loans or donations as income from each budget year, and they are external and internal of any nature, in the proportion estimated to be obtained in each budget year.
Among the items of expenses will be included, in the corresponding classifications, the disbursements for the payment of amortizations and interests of internal or external debt, and also the use or destination of the loans.
The institutions that receive contributions or fiscal transfers must present as income for this concept what is approved in the income budget and the Public Expenditure Law of each year.
Annually the institutions included in this Title will propose to the executive power, the remuneration scales that will govern for each following year for their officials and employees.
The different institutions must send to the national budget office, during ten working days of the month of January of each year, their respective budgets of income and expenses adjusted to the fund transfers, these must be sent to the President of the Republic, for his approval or rectification. Each institution will send, together with their respective budgets already adjusted, an annual cash program broken down by month, in accordance with the instructions issued by the National Budget Office in this regard.
All those institutions that are executing or starting to execute specific investment projects must keep special registers called «Project Resumes».
If the institutions have available cash and bank balances as of December 31 of each year, these will be incorporated as income from the new budget.
The commitments pending payment as of that date must be included in the new budget, in the corresponding classifications and sub-classifications.
Once the budgetary year is closed, the different institutions will send to the national budget office a balance of Income and Expenses budgeted Executed, which must be submitted no later than February 15 of the year following the year-end. This balance will be prepared according to the norms and specifications indicated by the national budget office and the corresponding institutions will send a copy of said Balance to the Comptroller and Auditor General of the Republic and the Chamber of Accounts.
4. Conclusion
Budgets are tools that governments use to forecast expenses and income for a certain period of time, usually a year. The budget is a document that allows governments, private organizations to set priorities and evaluate the achievement of their objectives. To achieve these ends, it may be necessary to run a deficit or, conversely, save, in which case the budget will present a surplus.
For greater compression and greater control, budgets classify accounts in order to create a reliable information system and a tool that will allow you to acquire a sustainable competitive advantage, making your processes efficient and optimizing your operations.
The National budget is a short-term planning instrument (for one year) has among its purposes and objectives to approve the guidelines of the policy in the allocation of financial resources, the same that govern the financial economic administration, the same that govern the administration economic and financial in annual form of the diverse organisms of the State.
It is important to show an adequate classification for the budget, since it can clearly show the information making it reliable and showing where the state funds are given and the expenses of the same are adequately justified.
Personal opinion
Budgets are tools that governments use in order to effectively control and manage the items of expenditure and income, for this reason it is essential to classify the items that support the accounts of said budget, which in turn generates greater control and greater efficiency when putting it into practice, since an adequate classification generates a perfect balance and is in turn an effective tool for administration.
The classifications must be done in a balanced way, since an inclination at the accounting level would damage the information for the formulation and execution of the programs, it is necessary that each one have a development at a fair level and measure for its greater understanding and management both in the tax field as well as at the programming and administration level. These are of great help because they provide information in time for decision-making and in some cases, such as the classification by object of expenses, which help to maintain adequate control of expenses, in many cases avoiding embezzlement of funds and unjustified expenses.
The classifications allow detailing both the public and private sectors, expenses and functions, and these in turn serve the multiple purposes incurred in the budget; If it is possible to integrate each of these divisions, a modern budget would be generated that meets the purposes and goals set by the institutions and governments.
Economic classifications allow each line of expenditure and income to be identified according to their economic nature, this makes it possible to investigate the influences that they exert on public finances on the rest of the national economy, this makes government efforts permissible and facilitates decisions to take, because an easier way to analyze and conclude in detail the economic state of a country is at hand.
In conclusion, the classifications and the articles that contain the national budget measures serve as a strategic guide for those who put into practice the multiple ways of preparing a budget.
Download the original file
