Budget Classifications
The budgetary system has a tool called budget classifications, which seeks to facilitate the analysis of the economic and social effects of government activities, enable the formulation of government programs to fulfill its functions, contribute to an expeditious execution of the budget and, above all, facilitate tax accounting.
Budgetary classifications must be established by supreme decree issued by the Ministry of Finance, according to this, the following categories are established.
- Institutional classification: Corresponds to the budgetary grouping of the agencies included in the Public Sector Budget Law, as follows: Item: Higher level of grouping assigned to the Presidency of the Republic, the National Congress, the Judiciary, the General Comptroller of the Republic,
Public Ministry, to each of the various Ministries and to the Item "Public Treasury" that contains the estimate of revenue of the Treasury and of the expenses and contributions of fiscal charge.
Chapter: Subdivision of the Item, which corresponds to each of the organizations that identify with budgets approved directly in the Budget Law.
Program: Budgetary division of the Chapters, in relation to specific functions or objectives identified within the budgets of public bodies.
Classification by object or nature of the expense: Corresponds to the ordering of the budgetary transactions according to their origin, in relation to the income, and to the reasons to which the resources are destined, in regard to the expenses. It contains the following divisions:
Subtitle: Grouping of budget operations of characteristics or homogeneous nature, comprising a set of items.
Item: Represents a "significant reason" for income or expense.
Allocation: Corresponds to a "specific reason" for income or expense.
S ub-allocation: Subdivision of allocation into concepts of "more particular nature".
- Classification by currencies: Corresponds to the separate identification of income and expenses in national currency and in foreign currencies converted to dollars.Classification by investment initiative: Corresponds to the organization, through special assignments, of studies, projects and programs, to which the investment initiatives refer, in accordance with the provisions of subsection 5 of article 19 bis of Decree Law No. 1,263, of 1975. Such special assignments will correspond to the code and name assigned to it in the Integrated Bank of Projects (BIP). Classifications by degree of budget affectation: Corresponds to the instances prior to accrual in the execution of the budget,that public entities must use and report in order to know the progress in the application of budgetary resources.
Preafectación: Corresponds to decisions that account for spending intentions and their amounts and that do not create obligations with third parties, such as the identification of investment initiatives, regional distribution of expenses, selection processes, request for direct quotes or through the Public Purchasing and Procurement Directorate systems, calls for bids and the like.
Affectation: Corresponds to the decisions that matter the establishment of obligations with third parties subject to the improvement procedures that, in each case, correspond, such as contract awards or selection of suppliers of goods and services included in framework agreements signed by the Directorate of Public Procurement and Contracting.
True Commitment: Corresponds to spending decisions that, due to the progress in their concretion, give rise to reciprocal obligations with third party contractors, such as the issuance of purchase orders for contracting the supply of goods or services or the execution of works, as appropriate. This includes legal and contractual obligations associated with the plant personnel already hired.
Implicit commitment: Corresponds to those expenses that by their nature or convention, do not previously go through any of the aforementioned stages of affectation and originate simultaneously with the accrual, as is the case of basic services, tolls, circulation permits for vehicles and the like.
THE ACCOUNTING EQUATION
To emphasize that the owner's estate is a residual right, secondary to the rights of creditors, it is often helpful to reverse the terms of the equation, as follows:
Assets - Liabilities = Owner's Equity
300,000 - $ 80,000 = $ 220,000
Note that if a business has liabilities that exceed its assets, the owner's equity will be a negative amount.
EXAMPLE
Let us review the effects of the transactions of the business of the organization "Copayapu" in a detailed expression of the accounting equation for the transactions carried out in the month of November 2005.
EXERCISES
Consider the following economic facts and make the daily book
- Initial cash contribution of $ 200,000 Deposit in the Banco del Estado $ 250,000 Furniture purchase with check from the Banco del Estado $ 130,000 Purchase of merchandise on simple credit $ 61,000 Deposit in the Banco del Estado $ 100,000 Payment of telephone and electricity $ 13,480
EXERCISES
Consider the following economic facts and make the daily book
- Initial contribution: car $ 4,500,000, merchandise $ 400,000, cash $ 350,000. Current account is opened at Banco de Chile $ 150,000 Purchase merchandise $ 100,000 canceled 50% cash, check balance $ 12,000 is paid for the use of telephone. Letters are canceled for $ 50,000 Furniture is purchased for $ 80,000 Radio advertising is paid by check $ 33,000
EXERCISES
- Initiation of activities with: machinery $ 521,000, cash $ 2,360,000, merchandise $ 1,253,000. Opening of a current account at Banco de Chile for $ 1,500,000 in cash. Purchase of merchandise for $ 830,000 paying 25% in cash, a 35% by check per day and the balance to the simple credit. Check # 236 is drawn to cancel the water for $ 25,000. Debt is canceled to the simple credit of transaction C.), in cash. A current account is opened at Banco Santiago with Banco Chile check for $ 630,000. Banco de Chile grants us a loan of $ 520,000.
Make the corresponding daily book according to the following operations:
EXERCISES
- Activities are started with: cash $ 7,200,000, vehicles $ 4,500,000, furniture $ 1,200,000 and bank loan $ 1,050,000. Buys merchandise for $ 950,000, canceling 20% in cash and paying off simple credit. Current account is opened at Banco Santander for $ 1,000,000 in cash. Purchase of merchandise for $ 123,000 canceling 80% with check and simple credit balance. Advance payment is given to employees for $ 200,000 with check. A van is purchased on credit for $ 7,000,000. opens a checking account at Banco de Chile for $ 453,000 of which 60% is with cash and the balance with a check from Banco Santander. Goods are purchased for $ 265,000 paying with a Santander bank check 50% and the balance in cash. They buy furniture at $ 550,000, 60% is canceled on simple credit and 40% with a Banco de Chile check
The State and Finance
The State as a social and political organization must fulfill multiple functions through its different roles, and as a consequence of this, it becomes a subject of financial activity, whose ends are the collective interests defined as the Common Good.
We know that the State has limited resources and must meet multiple needs to achieve the Common Good, which is why it must prioritize and establish an assessment of the objectives to be met. In order to achieve these objectives, the State must make disbursements and, therefore, must obtain income to meet said disbursements.
State Financial Administration System
The State Financial Administration corresponds to those activities or processes through which the State collects income, which must then be used to finance its various objectives. These income and expenses should be previously established in a general budget.
In this sense, the State Financial Administration has been defined as the set of administrative processes that allow obtaining financial resources and their application to the achievement of the State's objectives4. The Chilean Financial Administration System is made up of various processes, which include the planning, budgeting, fund administration, public credit, accounting and financial control processes.
Currently, the State must not only seek financing of public expenditures, since it must also exercise or intervene, depending on the situation, in order to achieve economic or social goals, seeking to ensure social welfare, encourage the redistribution of income, the development of certain productive sectors, full employment, etc. Thus, the financial activity of the State becomes a useful tool both to satisfy public needs and to achieve the necessary regulation and state intervention in the economy.
The State Financial Administration System regulates the services and institutions that comprise the Public Sector, it must carry out all the processes of DL N ° 1,263 that contains the Organic Law of the State Financial Administration, which was created under the following principles: Universality, Unity, Flexibility, Uniformity, Decentralization and Programming. This law has two generic functions, that of obtaining the necessary funds and determining the efficient allocation of said funds. For this, it has various support tools, such as:
- Institutional policies and objectives Planning process Budgeting process Financial and management information system Financial analysis and accounting information Assessment techniques
Public Sector Budget
The budget stage can be defined as a management tool that helps to foresee, coordinate and control the different operations that an entity must carry out, within the framework of its objectives. Based on the Dictionary of the Chilean Public Administration, we can say that the budget is the document that contains a forecast, generally annual, of the income and expenses related to a certain economic activity.
The Public Sector Budget consists of a financial estimate of the income and expenses of this sector for a given year, making available resources compatible with the achievement of previously established goals and objectives.
This definition granted by the same Organic Law of Financial Administration of the State also presents the Public Sector Budget Cycle, this implies a series of phases through which public financial management goes through, which are:
1) Formulation: Consists of the preparation, by each public service, of the projections of income and expenses in accordance with the activities to be carried out and the priorities established through the entity's policies, programs and projects. It should be understood that previously a process of identification and delimitation of the current or potential problems or needs of society and the determination of possible alternatives for their solution were carried out. 2) Discussion:It consists of the joint analysis of the estimates and the elements of judgment and background that serve as support, between the personnel of the affected public service and the technicians, authorities of the Budget Directorate and the Ministry of Planning and Cooperation. This stage concludes with the proposal to the Budget Director of the analyzed budget proposal.
Approval: It takes place through different instances of review at the level of the Executive Power and with the corresponding approval of the Legislative Power and this stage ends with the enactment of the Budget Law by the Executive, for a given year.
Execution: This stage is carried out simultaneously with the Fund Administration, Accounting and Control processes. At this stage, in terms of spending, the following phases can be distinguished.
Administrative Phase: Registers the instances prior to accrual and are intended to know the progress in the application of budgetary resources.
Accounting Phase: Corresponds to the accounting recognition of the obligations, two principles are distinguished:
Accrued: It is the instance in which the payment of a certain amount becomes payable. That is, with the receipt of the goods, the provision of the services or when their payment is arranged, in the case of transfers.
Perceived: It is the instance that registers the cancellation of the accrued obligation. Consequently, it supposes the existence of an accrued obligation.
Control and Evaluation: This stage involves the verification and valuation of the actions undertaken with the purpose of establishing to what extent the objectives set in the Public Sector Budget Law have been met, and, at the same time, determining the necessary corrections to adjust the original provisions with the new guidelines that emerge during this process.
These phases or stages are developed at different levels of the Public Sector, which are:
- National: Made up of the Budget Directorate, the Ministry of Finance, the Presidency of the Republic and the National Congress. Sectorial: Conformed by the Ministries and their respective cabinets. Institutional: Made up of all the institutions that make up the Public Administration.
The purpose of the projections is to illustrate the role that fiscal policy of public revenues and expenses can play in the coming years, according to the various growth hypotheses postulated by the economy as a whole in a development plan. The levels of public spending and its composition between consumption and capital are determined by the global programming and sector programming models.
Expense budgets are estimates of the maximum limit that public expenditures and commitments can reach. For this we must understand that for the budget of the Public Sector, we understand expenses as effective payments, which demonstrate an effective decrease in wealth. On the other hand, commitments are those obligations accrued, that is, over which third parties have already acquired rights.
Public Sector Fund Administration
This process consists of obtaining and managing financial resources from the Public Sector and their subsequent distribution and control, according to the needs of public obligations, determined in the budget. This process operates on the basis of global collections and allocations of resources and direct payments made by the General Treasury of the Republic, through programs of the Partida del Tesoro Público. It also has certain instruments, which are:
- Single fiscal account : It is an account opened in the State Bank that is used to operate with the funds. There is the main account, administered by the General Treasury of the Republic to carry out global collections and payments, and the subsidiary accounts, which operate the services to control their own monetary resources. By Finance Decree, services and institutions can be exempted from maintaining resources in the single fiscal account, to operate with private banks. Cash program: Instrument by which the Treasury Service is authorized to deliver the funds of the fiscal contribution. This instrument is formulated by the Budget Directorate. Money transfer:Document by which the services operate centrally to withdraw the funds authorized by the Cash Program.
Accounting process
In accordance with the provisions of the Political Constitution of the State and the provisions of its Organic Law No. 10,336, the General Comptroller of the Republic, among other functions, is responsible for keeping the general accounts of the Nation.
The CGR as the highest organ of oversight of the State Administration, a condition that the 1980 Constitution gives to a constitutional rank, therefore it must be understood that it is not subject to the supervision of the Executive power or the National Congress, thus it enjoys autonomy in the development of their functions.
In his task as the nation's accounting officer, he has been implementing a comprehensive, unique and uniform system, aimed at systematizing and rationalizing the accounting and reporting of the various economic events, in which each entity is involved, regardless of its legal nature, administer resources and obligations of the State. Since each entity makes up the Nation accounting body of responsibility of the General Comptroller of the Republic.
In all this context, it is the responsibility of the Controlling Body to exercise a fundamentally normative role that translates into the establishment of a general doctrinal framework - principles, standards and technical procedures - as well as the control and technical supervision of the units. of accounting of public services and institutions, in harmony with the principles of internal control that ensure the accounting of accounting records and reports and compliance with current regulations.
General norm
The general accounting system of the Nation is the set of principles, standards and technical procedures that allow the recording of the economic facts inherent in the operations of the State. Its objective is to satisfy the information needs to support control and for the decision-making process of administrators and stakeholders in management
When any entity that is under the wing of the CGR, has doubts about the way in which various operations should be accounted for or in general, about the application of the principles, rules and procedures that they regulate, they will be responsible for resolving the differences the CGR, for which effect it can act ex officio or at the request of the interested parties.
The application of the general accounting system of the Nation will be uniform and consistent. And regarding primacy, if there is a contrast between the current legal norm and the accounting rules and procedure, the former will prevail.
The system is based on the generally accepted accounting theory, constituting the basis on which the accounting process is based. In this order they are applicable to all entities of the State Administration and must be observed uniformly.
As generally accepted precepts, they allow the accounting entity and its financial characteristics to be conceptualized; determining the bases to express in monetary terms the economic events of the State.
Organic Law of the Financial Administration of the State (Decree Law No. 1,263 of 1975).
Concept.
- The State Financial Administration System is the set of administrative processes that allow the obtaining of resources and their application to the achievement of the State's objectives (art 1 ° DL N ° 1.263). NOTE: Every system involves the interaction of processesin an organized, coherent way according to predetermined objectives. Said processes and their interactions are regulated by principles, rules and procedures, and in the public sphere, as in this case, the bodies or entities responsible for their operation are added. The State Financial Administration System includes the following services and institutions, which for these purposes, will be understood by Public Sector (the Law enumerates them).Also, it includes in general, all the services and institutions of the Centralized and Decentralized Administration of the State, even when they are not included in the preceding enumeration., this subsection will not be applicable to the Universities of Chile and Santiago de Chile (art 2 DL No. 1,263).
Entities of the State Administration:
Centralized Sector: Centralized public services are characterized by:
- They act under the legal personality and with the property and resources of the Treasury and depend on the President of the Republic through the corresponding ministry.
Decentralized Sector: Decentralized public services are characterized by:
- They act with legal personality and their own assets that the law assigns them and are subject to the supervision of the President of the Republic through the respective ministry.
This system will be made up of a medium-term financial program and duly coordinated annual budgets.
This financial program is an instrument of financial planning and management for three or more years in the public sector prepared by the Budget Office. This includes forecasts of income, expenses, internal and external credits, public investments and personnel needs. Also an estimate of the Structural Balance of the Public Sector, which will be calculated annually by the Budget Directorate.
The Public Sector Budget consists of a financial estimate of income and expenses for a given year (Art. No. 11).
The budget year will coincide with the calendar year. And these accounts will be closed as of December 31 of each year; and the income received afterwards will be incorporated into the following budget. As of January 1 of each year, no payment can be made, except from the current budget (Art.12).
The Budget must be fully processed no later than December 1 of the year prior to its effective date (Art. No. 14).
SAFE processes.
| Budgetary System: | |
| The study contracts for in | versions, execution of works and machinery, may be held for longer than the year at the end of the respective year.
be made in the budget year funds. will only be responsible for investments (Art. No. 19 bis). |
| acquisition of materials and
are fulfilled or paid in budgetary or later But in these cases, partial imputations of the corresponding public service may be valid until the concurrence of the funds |
The commitments pending payment as of December 31 of each year will be canceled against the new budget.
In any case, the public services will notify the Comptroller
General of the Republic, these unpaid commitments as of December 31 of each year. (Art. N ° 24), as well as accrued and uncollected income, as of December 31 of each year (Art. N ° 25).
SAFE processes.
2nd Fund Administration Processes:
Definition:
Fund Administration is understood as the process consisting in obtaining and managing the financial resources of the Public Sector and their subsequent distribution and control, according to the needs of the public obligations determined in the budget (Art. 6).
Objective:
This process responds to the need to obtain a better use of State resources and to rationalize their distribution to Public Sector Services and Institutions.
SAFE processes.
Fund Administration Process: “Collection, Payment and Refund Regime.
This regime mentions that all income from the Public Sector will be made by the Treasury Service, except for those that constitute the service's own income (Art. No. 30).
All these revenues from the Public Sector must be deposited in the Banco del Estado, in a Cta. Cte. called “Sole Fiscal Account”.
This Account Cte. It will be subdivided into " Main Account, maintained by the Treasury, and Subsidiary Accounts, intended for the different services (Art. No. 32).
The General Treasury of the Republic may maintain bank accounts in the Central Bank of Chile, either in national or foreign currency (Art. No. 33).
SAFE processes.
3rd Process of Debt Management or Public Credit:
Definition:
It is the capacity of the State to contract internal or external obligations through operations aimed at obtaining resources.
The public debt will be constituted by those monetary commitments acquired by the State derived from future payment obligations or from internal or external public loans (Art. N ° 39).
Objective:
The regulation of the levels of indebtedness that can be reached by both the state and each of the entities that comprise it.
SAFE processes.
Debt Management or Public Credit Process:
Public Debt Classifications (Art. N ° 40):
Public Direct Debt: Constituted by the treasury and other services directly committed to payment.
Indirect Public Debt: It is one that has the guarantee or endorsement of the State or of some Public Sector body legally authorized to grant it and in which the main debtor is a natural or legal person from the private sector.
Internal Public Debt: It is the one that the State contracts with natural or legal persons of public or private law, residents or domiciled in Chile, which is required within the national territory (Art. No. 42).
External Public Debt: It is one in which obligations are agreed with another State or international organization or with any natural or legal person without residence or domicile in Chile and whose fulfillment is required outside the national territory (Art N ° 41).
NOTE: The Comptroller General of the Republic will endorse all the public debt documents that are issued, no public debt document will be valid without this endorsement (Art. No. 46).
The Ministry of Finance will supervise the proper use of said credit (Art. N ° 50).
SAFE processes.
4th Government Accounting Process:
Definition:
Government Accounting is the set of standards, principles and technical procedures, arranged to collect, measure, prepare, control and report all income and expenses and other operations of the State (Art. No. 63).
Government Accounting, is comprehensive and applicable to all agencies of the Public Sector, is uniform in terms of standards, principles and procedures, chart of accounts, statements and financial reports (Art. No. 64).
The Comptroller General of the Republic, will keep the accounts of the nation (Art. No. 65).
SAFE processes.
Government Accounting Process:
Public services must prepare, as of December 31 of each year, a Balance of Income and Expenses and a statement of financial position. These statements will be sent to the Office of the Comptroller General of the
Republic and the Budget Directorate (Art. N ° 68).
| The Office of the Comptroller General of the Republic will be responsible for preparing consolidated statements on.
1. Budgetary Situation. 2. Financial situation 3. Equity situation NOTE: Notwithstanding the foregoing, the Comptroller General of the Republic may prepare other financial and / or analytical statements that are required for better information. |
SAFE processes.
5th Financial Control Process:
Definition:
It includes all the actions aimed at protecting and supervising the correct administration of State resources. It fundamentally verifies the fulfillment of the ends, the compliance with the legal and regulatory provisions and the achievement of the goals programmed by the services that make up the Public Sector (Art. No. 51).
The financial control of the State corresponds to the Comptroller General of the Republic (Art. No. 52).
SAFE processes.
Financial Control Process:
The Office of the Comptroller General of the Republic, may require from the public services subject to its supervision, the necessary reports that enable it to verify income and expenses (Art. No. 53).
The Comptroller is responsible for examining and judging the accounts of public sector organizations (Art. No. 54).
The income and expenses of the services or entities of the State must have the backing of the original documentation that justifies such operations (Art. No. 55).
For the purposes of financial control and examination of accounts, the Comptroller General of the Republic may request checks paid from the main account and / or subsidiary accounts to the Banco del Estado de Chile.
ORGANIC LAW OF THE FINANCIAL ADMINISTRATION OF THE STATE, DECREE LAW N ° 1263/75.
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