BUDGET EXECUTION AND CONTROL
Ministry of Budget and Planning ensures that actual expenditure reflects budget priorities as well as achieving sound budget expenditure accountability.
Budget execution is one of the crucial sub-processes in the budget cycle and consists of a series of activities that start as soon as the budget is passed into law. These activities would usually begin in January, the first month of the fiscal year.
This sub-process relies on the budget classification and chart of accounts used in allocating resource and recording transactions. Budget is executed by spending units classified as administrative entities such as organization (Ministries) and sub- organizations (service providers).
The budget execution at the State level would usually consist of the following activities:
- Preparation and submission of quarterly work plans by the MDAs;
- Aggregation of MDA quarterly work plans
- Quarterly cash forecasts by the office of the Accountant –General;
- Prioritization and approval of projects/activities based on expected cash inflows;
- Drawing up of a Procurement Plan based on prioritized projects and activities;
- Due Process Mechanism
- Issuance of expenditure warrant (general) for approved projects/activities
- Release of mandate (cash releases)
- Procurement of works, goods or services (tendering and award of contract)
- Mobilization to site by Contractor
- Project implementation
- Project implementation reporting
- Payment process
- Expenditure recording & accounting (Vote Book Management)
- Monthly expenditure transcription
- Bank reconciliation by the spending unit (and Treasury Dept.)
- Monthly account reconciliation
- Supplementary budgeting
- Recording and accounting for revenues
- Treasury functions
- Draft final accounts of Government
- Audit of annual accounts
The main outputs from this sub-process are:
Request of Work –Plan
At the inception of the budget implementation the MoBP would in consultation with the ESEPC and MoF issue budget implementation guideline and request for work plan (or programme) from all spending entities within the State Government. The adjusted work plan of the MDAs would be the basis for making capital expenditure projections on quarterly basis.
On the basis of the work plan submitted by the spending units for capital investment, the MoBP would meet with the ESEPC, Office of the State Accountant General and MoF to produce aggregate monthly expenditure projections for:
- Personnel Costs
- Overhead (Operational) Costs
- Capital Investment costs and
- Debt Servicing
Cash Requirement Forecasting
The Office of State Accountant General would request the revenue generating agencies to provide a realistic revenue forecast for first quarter and subsequent quarters for all sources of revenue.
The revenue forecast would normally include the following information:
- Name of MDA;
- MDA Code
- Sources of revenue, approved estimates and code; and
- Collection per source per quarter
The Office of the Accountant General would collate the submissions from all revenue generating MDAs and produce a consolidated quarterly revenue forecast for the State Government.
Tentative aggregated cash requirement forecast will be prepared by the Office of the Accountant General using the aggregate monthly expenditure projection and consolidated quarterly revenue forecast.
It will be the responsibility of the cash planning/allocation committee (or treasury board) to approve the cash requirement of all budget entities. The members of the committee shall include:
- Commissioner for Finance (Chairman);
- Commissioner for Budget and Planning;
- Executive Secretary State Economic Planning Commission;
- Permanent Secretary Ministry of Finance;
- Permanent Secretary Ministry of Budget and Planning;
- Accountant –General;
- Chairman of Board of Internal Revenue; and
- Director, treasury
The cash Management/Allocation Committee will review the monthly expenditure projection and quarterly revenue forecast as well as consider, deliberate and approve monthly cash requirement forecasts for each budget entity (i.e., the ministry, department or spending agency that undertakes the expenditure) and the use according to economic classification (i.e., kind of transaction- personnel, overhead, capital and others).
Expenditure Warrant (General)
The MoBP will on approval of the monthly cash requirement forecasts prepare for signature of the authorizing commissioner:
- A general monthly warrant in accordance with the approved monthly cash requirement forecasts for each budget entity for the approved recurrent expenditure.
- A specific warrant for any capital expenditure item in the Annual Appropriation Law that the spending ministry, department or agency has obtained due process certification in accordance with Enugu State Procurement Law.
Release of Mandate (Cash Backing)
A copy of the warrant duly signed by the authorizing commissioner shall be forwarded to the Office of the Accountant General. On the basis of the due process certificate issued to the spending unit in accordance with the requirements of Enugu State Procurement Law and the specific warrant duly signed by the authorizing commissioner, the Office of the Accountant General shall issue cash mandate to the spending unit and to the Bank.
Mobilization to Contractor
The startup of project execution would normally lead to constituting a project implementation team with a desk officer designated in the spending unit who would be responsible for liaison with all participants in the project for purposes of raising interim and completion certificates.
Project Implementation Reporting
The Monitoring and Evaluation Department in the MoBP as well as the desk officer in the spending unit shall prepare project implementation report for each project being executed by the State Government which is basically a value for money assessment. The following information should be captured by the project implementation report:
- Project Description;
- Budget Control Code;
- Executing Agency;
- Desk Officer;
- Original Value of Contract;
- Cost Variation (if any);
- Project Tenure;
- Startup date;
- Completion date;
- Total value of disbursement;
- Value of commitment; and
- Value of outstanding bills
The payment and recording process is an essential accounting function with a number of financial controls which is intended to enhance accountability of resource management. The following steps should apply for payment and recording:
- Project Inspection;
- Certificate of Completion;
- Invoice received;
- Verification of Services or goods delivered;
- Payment authorization;
- Preparation of payment vouchers;
- Pre- payment audit
- Payment; and
- Preparation of accounts
Pre-payment audit (internal auditing)
The pre-payment audit in the State Government is aimed at ensuring that each payment voucher has complied with basic procedures and all required documents have been attached as the basis for payment.
The following check list is usually reviewed by the pre-payment audit:
- Project Description;
- Budget Control Code;
- Organization code;
- Sub-head code;
- Contractor name;
- Sub-contractor name;
- Tenders’ board minutes of meeting;
- Contract document;
- Certificate of completion;
- Percentage completed and value;
- Contractor/sub-contractor’s invoice;
- Evidence of deductions (where appropriate, e.g., VAT, withholding tax, retention fee, etc.); and
- Evidence that payee/contractor who should pay tax does that (e.g., copy of current tax clearance certificate should be produced).
Expenditure Recording & Accounting (Vote Book Management)
The Government financial instructions require each spending unit to maintain a set of books of accounts to record all transactions relating to revenue by sources and expenditure by line items.
Basic books of accounts are:
- Departmental vote books;
- Registers (e.g., Contractors Register);
- Cash Book;
- General Ledger; and
- Budget performance statement
Bank Reconciliation by the Spending Unit
The spending unit is required to carry out at least once a month bank reconciliation of each bank accounts maintained and forward the statement and reconciliation to the Office of the Accountant General each month.
Monthly Expenditure Transcription
Each spending unit is required to prepare monthly transcription of expenditure from its books of accounts and submit to the office of the State Accountant General and the MoBP for both recurrent and capital projects.
For expenditure returns, the spending unit is expected to summarize the expenditure broadly:
- Personnel Cost;
- Overhead by line items; and
- Capital Projects.
Monthly Accounts Reconciliation
The spending unit would forward transcripts of its expenditure to the Office of the Accountant General and a designated desk officer is required to ensure that transcripts agreed with the State Treasury accounts.
Supplementary budget could be prepared by the State Government during the fiscal year to propose for additional expenditures occasioned by additional revenue or to cover emergency occurrence from the contingency reserve.
Draft Annual Accounts
The final accounts department of the Office of the State Accountant General is responsible for consolidating the monthly revenue returns and expenditure transcripts to produce draft annual accounts of the government financial operations.
Financial Reporting: The technical Sub-Committee of the Federation Account Allocation Committee issued a “Report on Standardization of Federal, States and Local Governments accounts in Nigeria’ in May 2002. In the Report, the following financial Statements are specified:
- Responsibility for Financial Statement
- Statement of Opinion of Auditor – General
- Cash Flow Statement
- Statement of Assets and Liabilities
- Statement of consolidated Revenue Fund
- Statement of Capital Development Fund
- Notes to the Financial statements
Audit of Annual Accounts
The Accountant General of the State is required to prepare the accounts and financial statements of the State Government operations for every fiscal year within six months of the end of the fiscal year and submit to the State Auditor General for examination and opinion.