Budget and Budgetary System

Lecture 4 Budget and budgetary system Slide 1

Public Budget represents the basis of every country’s financial system, expressing the specific type of financial relations - budgetary relations that are implied in the processes of formation, distribution and use of budgetary funds necessary for the national (central) and local state bodies.

Public Budget represent the economic relations that manifest themselves in the process of formation and utilization of the main centralized cash fund of the state and of the administrative-territorial units’ funds, with the purpose of financing the activities focused on improving the quality of life, the economic development of the country, scientific research, improving and widening the infrastructure, creating state reserves, national defense, and public and law order

Public Budget represents the main document, viewed as a law, which establishes the nature and the size of income that is mobilized by the state on one side, and on another side the type and the amount of budget allocations that the state will forward to fund various activities during the year.

There are three categories of financial (budget) laws:

A.The annual law of finance or the law of initial budget which stipulates and authorizes the set of state resources and expenses for each financial year and it is known as the State Budget Law;

There are three categories of financial (budget) laws:

B.The adopted laws of the state budget (adopted for the current year) focus on the rectification (correction) of the provisions of the initial budget law (the number of the provisions is not fixed and can vary from year to year);

There are three categories of financial (budget) laws:

C. Law of finance regulation (Law of execution of the Budget). After expiration of the budget year ( usually after one year), through which is established the real execution of budget and approved differences between recorded results and forecasts of annual law of finance, fulfilled by adjusting laws. This law can be considered in a narrow acceptance.

Adopted by the Parliament, the budget is the main document from public life, because it is the financial expression of action plan of the state for the period of one year. It can be seen under four main approaches:

a)From the juridical point of view, budget is a financial document with the power of law which includes certain norms and normatives for organization of a clear and explicit financial administration; these norms are for organization of a transparent administration of state finances and determination of Governmental authorities in the budget field.

b) From the accounting point of view the budget represents the set of accounts that administrate financial resources of the state. Here, from the technical point of view we are interested especially in processes of elaboration and execution of budget as methods of forecasting and evaluation of different categories of revenues and expenses of the Budget.

c)From the economic point of view can be mentioned the specific funds that pass through budgetary account. These funds represent the considerable weight of GDP taken through taxes and expenses made by the state.

d)From the political point of view the budget is considered as the expression of Governmental options in the set of fields (economical politics, social, educative, cultural, military etc.); these options are reflected through accumulation and distribution of revenues and expenditures and are determined by multiple factors related to doctrines of political parties, past influence, inertial phenomena etc.

Budget must execute three functions:

1.Control over expenditures by which is supervised budget execution by public authorities.

2.Efficient use of financial resources and staff for managing and realizing the supposed activities.

3.Planning of state activities by which are established objectives and are formulated different alternative programs being evaluated by financing possibilities.

Budgetary System of Federal Type states is formed from three parts:

1.The budget of federation;

2.The budget of territorial units (components of federation);

3.Local budget.

Budgetary System of Unitary Type is composed from two components:

1.Budget of state central administration;

2.Local budget of territorial-administrative units.

The budgetary system of the Republic of Moldova has the unitary type. According to the Law of the Republic of Moldova “ Regarding budgetary system and budgetary process”, Nr.847 from 24.05.96 “ Budgetary system is a unitary system of budgets and funds, which constitute the national public budget, comprising:

a) state budget

b) budget of social insurance of state

c) budgets of territorial-administrative units

State budget reflects financial relations expressed by expenditures corresponding to realization of objectives and actions of national interest, respectively financial resources mobilized in State disposal.

Budgets of territorial-administrative units (TAU) are the financial relations corresponding to the expenditures of certain actions for local collectivities, (state or region). The TAU budgets ensure with financial resources’ realization for satisfaction of socio-economic and cultural needs of population as for development of the territory in subordination.