BUDGET ORGANIZATION AND BUDGET PROCESS

Foreigner: Could you give me a general idea of budget organization and budget process in Someland?

Somelandian: Certainly. First of all, by the budget organization we mean the structure of our budget system and its major components.

F.: I suppose there is a close link between the budget organization and your state system, isn’t there?

S.: Yes, there is. We have the state budget, regional budgets and local budgets.

F.: I see. I know that in the past you used to have a single budget including the government and local budgets, didn’t you?

S.: Yes, that’s true. But now the situation has changed. Our system of governance is moving from a centralized one to a more decentralized. Our regional and local authorities have been given considerable budget autonomy now.

F.: Do you mean to say that some of expenditure responsibilities have been handed down from the central government to the subnational governments?

S.: Exactly. I would also like to stress that our consolidated budget is not subject to approval any longer. It is used only for analysis and calculation.

F.: If I got you right, now the budget system of Someland represents a sort of a compendium of the state, regional and local budgets.

S.: Correct, but it is a unified budget system based on the principles of integrality, independence and balance of all budgets.

F.: How do these contradictory principles work in practice? For instance, independence and integrality?

S.: Well, these principles do not contradict each other because each has its own sphere of influence on the budget system.

F.: Could you be more specific, please?

S.: Yes, the principle of integrality means the integrality of the legal base, use of the unified budget classification and budget documentation, submission of statistical data from one level to another for the preparation of the consolidated budget.

F.: In what way does budget independence manifest itself?

S.: Over the transition years a number of laws have been passed that grant local governments more autonomy in budgetary matters. Thus governments at different levels have their own revenue-raising sources now and use them at their discretion.

F.: I’m clear now. And how is the budget process arranged?

S.: The budget process includes all activities of government bodies on formulation, consideration, approval and execution of the budget.

F. What governing bodies are involved in this process?

S.: As elsewhere, different governing bodies are involved in the process. The executive branch is responsible for the preparation and execution of the budget; budget consideration and approval is the responsibility of the legislative branch.

F.: Are there any bodies controlling the execution of the budget?

S.: Of course. First of all, it’s the Chamber of Accounts, then Treasury System.

F.: It seems the Government has done a lot to create a new budget system and to elaborate a new budget policy and methods of budget planning.

S.: You are absolutely right.

F.: I’m also interested in how budget revenues are formed and distributed at different levels. What revenue sharing arrangements are practised?

S.: It is done in accordance with the tax law. Budget revenues include tax and non-tax revenues. To distribute revenue sources between budgets of different levels we divide revenues into assigned, regulating and additional.

F.: If I’m not mistaken you’ve worked out more uniform rules for revenue sharing and expenditure assignments for all subjects of the state.

S.: Yes, that’s right, but so far we haven’t eliminated the contradiction between the need for greater subnational autonomy and measures to increase central control.

F.: All federal countries face tax sharing problems. In my country the big defect is that local government hasn’t got enough resources.

S.: We also work to relieve subnational administrations of the burden of unfunded mandates.

F: As far as I know, there are 27 subjects in Someland. Public authorities at all levels need revenue to meet the cost of social and municipal services. What if the revenue is not sufficient?

S.: Deficits, if they arise, are covered at the expense of budget funds transferred from the budget of a higher level of authority. Besides, subsidies, subventions and other forms of financial assistance can be granted.

F.: I see. It’s obvious that different regions of Someland have unequal possibilities for raising revenue and different requirements for financial resources due to natural and climatic conditions, demographic situation, geographical position, social and economic development. How do you solve this problem?

S.: The “equalization” is done through transfers which are the key element of the new mechanism of the interbudgetary relations. Government assistance is granted to regions where the per capita budget revenues are lower than the average for Someland.

F.: Now I understand that you are really engaged in improving your budget process.

VOCABULARY LIST

(А) public finance(s) – державні фінанси

turnover n (of money/capital) – оборот, обертання (капіталу)

purview n – зміст закону, норма/норми закону, сфера дії закону, сфера компетенції

threefold adj – потрійний

efficient outcomes – гарні результати

violate v – порушувати

scope of government – сфера держави

deter v – утримувати, віднаджувати

tax relief – знижка з податку

thrift institution – ощадна установа

community n – спільнота

government authorities – органи державної влади

maintenance of a stable macroeconomic environment – підтримка стабільної макроекономічної ситуації

estimate n – оцінка, кошторис

ensuing adj – наступний

planning of recurrent and capital expenditure – планування поточних та капітальних витрат

determination n – підрахунок

extrabudgetary and reserve funds – позабюджетні та резервні фонди

subnational governments – органи влади суб’єктів держави

increasingly adv – в більшій мірі

to compile and present the budget – скласти і представити бюджет

(В) budget organization – бюджетний устрій

expenditure responsibilities – зобов’язання по витратам

to hand down from... to – передавати від... до

consolidated budget – консолідований бюджет

unified budget system/classification – єдина бюджетна система/класифікація

principles of integrality independence and balance – принципи єдності, незалежності та збалансованості

contradictory adj – такий, що суперечить

contradict v – суперечити

submission of data подання даних

manifest v – виявиляти, проявляти

grant v – надавати

at smb’s discretion, at the discretion of – на чий-небудь розсуд

execution n – виконання

elsewhere adv повсюди

Chamber of Accounts – Рахункова палата

Treasury System – система казначейства

elaborate v – розробляти

revenue sharing arrangements – порядок розподілу державних доходів

in accordance with, according to prep у – відповідностідо; згідно

assigned, regulating and additional revenues – закріплені, регулюючі та додаткові доходи

expenditure assignments – розподіл зобов'язань на витрачання коштів

tax sharing – розподіл податкових надходжень

relieve v звільняти, полегшувати

unfunded mandates зобов'язання, щонефінансуються

sufficient adj – достатній

subvention n – субвенція

due to prep – завдяки, внаслідок

equalization n – вирівнювання

interbudgetary relations – міжбюджетні відносини

per capita budget revenues – доходи бюджету в розрахунку на душу населення

EXERCISES

Ex. 1. Answer these questions:

(A) 1. What is finance and financial system? 2. What parts does finance comprise?

3. What functions does public finance perform? 4. What is a country’s budget? 5. What does the process of budget preparation include?

(B) 1. What is the budget organization of Someland? Is it similar to the budget organization in Ukraine? 2. How is the system of governance in Someland changing? Has it changed in our country? 3. What principles underlie the unified budget system of Someland (Ukraine)? 4. How are revenues classified? 5. What taxes are mentioned in the dialogue? 6. What measures can be taken if subjects of the state have deficit budgets? 7. Why do different regions of Someland have unequal possibilities for raising revenue? Is the same situation typical for Ukraine? 8. What mechanism of budget revenue “equalization” is used in Someland? 9. What bodies control the execution of the budget?

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