Study On Deepening Departmental Budget Reform

Departmental budget is a specific form of governmental budget under the public financial system, and it is a legal document of budget prepared by all governmental departments following universal budget preparation method, content and system regulations, which is submitted to legislative organ for examination and approval after being checked by the financial department, and which can reflect all incomes and expenses. I. Necessity for reform of departmental budget China has begun to use the concept of departmental budget in financial theoretic circle and financial departments since 2000. The departmental budget consists of departmental income budget and departmental expenditure budget. The departmental income budget includes income from appropriation in financial budget, receipts out of budget and other kinds of legal income, while departmental expenditure includes basic expenditure and project expenditure. 1. Disadvantages of traditional unit budget Firstly, the content of budget is incomplete, and funds in and out of the budget are not compatible. Funds out of budget and other funds owned by individual units cannot be arranged to use as the financial power of government for macro control so that the funds out of budget is independent from budget management. Funds required for a department to exercise its functions cannot be reflected thoroughly in a budget even for appropriation in financial budget, however, they have to be reflected by means of nature of funds, expenditure features and channel for obtaining the appropriation. Secondly, the budget preparation is not made in a rational way and standard process, and it is short of perspective consideration and scientific analysis and forecasting, leading to poor quality of implementation; funds are divided into different pieces and given to some governmental department to distribute, which seriously affects the normal financial distribution order; there is great shortage and willfulness for arrangement of expenditure, and annual budgetary increase is hard to control; budget preparation mainly uses the basic figure method, which protects existing profits of the departments, unbalanced distribution between different departments and units cannot be overcome, and financial distribution cannot make reasonable configuration to the limited resources; time for preparation of budget is late, and the period for preparation of budget is short. Thirdly, budget preparation is so simple that its authority is not so high. Concerning budgetary draft submitted by governments at different levels to the National Peoples'Congress (NPC) at the same level for examination, the expenditure can be only listed to the budgetary figures in the first category, and deputies to NPC have no ideas to judge whether the budgetary expenditure is reasonable, and procedural significance for NPC to examine the budget is higher that the physic significance. Fourthly, the implementation of budget is not so serious, and benefit from use of funds is not high. Due to low transparency of budget, coarse distribution of funds in budget and frequent increase of funds during implementation, the normal implementation of budget is impacted. Payment of financial funds is not rational, and decentralized payment system is exercised, expenditure process is independent of financial monitoring and control, detention of funds is serious, and efficiency is not high. Effective supervision cannot be made, the process of procurement is not transparent, and cost of procurement is high since departments and units use financial funds to buy goods and employ labor service independently. 2. Special features of departmental budget Overall nature of budget content. It can reflect all activities involving funds of departments comprehensively, and arrange expenditure centrally according to all of income so as to realize centralized control of public resources of departments, and guarantee realization of budgetary control targets on micro basis. Scientific nature of budget preparation. It uses zero base budget preparation method, which breaks through the concept of basic figure for preparation of budget. It executes strict standard preparation procedure to make the content of budget preparation in more details. Legal nature of budgetary procedure. What will be submitted by governments at different levels to NPC at the same level for examination is not only the overall expenditure budget of the local government, but also the departmental budget, which increases the authority and transparency of thedepartmental budget. Serious nature for implementation of budget. When financial department of the government is preparing a budget, the basic expenditure of the department must be prepared and checked according to the centralized norm and standard, which must be implemented strictly as soon as it is approved by NPC, and no additional increase and regulation of the budget can be made willfully during implementation of the budget. To carry out reform of departmental budget is necessary for not only establishment of public finance compatible for socialist market economy, but also scientific and legal management of financial budget, reinforced funds management of financial budget, and improvement of funds utilization efficiency. II. Evolution of departmental budget reform Our country has tried to prepare the departmental budget since 2000. Through five years'practice, the reform of departmental budget has improved the placement of budgetary funds at beginning of the year, standardized the budget management, hardened budget restriction, and reinforced serious nature of budget, which plays important role for mobilization of initiatives of both departments and units, achieving good effect. (I) Completeness of budget preparation is reinforced It has realized transfer from the incompatible funds in and out of budget to comprehensive budgetary management. All items of income and expenditure of departments can be embodied in the same budget, which can thoroughly reflect financial power and specific expenditure of departments. (II) Scientific nature of budget preparation is enhanced It has established improved basic database; changed the traditional way to prepare unit budget purely according to the expenditure functions, realized transfer from functional budget to combined departmental budget and functional budget; realized transfer from basic figure method to zero base budget; and realized "two ups and two downs"preparation procedure. (III) Separated budget preparation, implementation and supervision are achieved It has realized transfer of management system from integrated preparationand implementation to separated preparation, implementation and supervision; it has realized transfer of financial funds fro scattered payment to centralized management; the government procurement system reform has been actively put forward to improve scientific nature and standardization for implementation of budget; the governmental audit organ and NPC organ have strengthened their supervision and examination of the budget, which plays an important role to standardize and improve departmental budget preparation, improve scientific nature and standardization of budget preparation and reduction of lawful and disciplinary violation behavior. (IV) Experiment for evaluation of expenditure performance is implemented Through establishment of "Performance investigation"system based on evaluation of benefit from financial expenditure and reform practice, it has played an important role to strengthen the authority and binding power of departmental budget preparation, give full play of departmental budget reform and norm determination in standardization for use and management of financial funds and improve performance for use of financial funds. III. Problems encountered in current reform of departmental budget (I) Governmental financial power is not fully put into budgetary management Departmental budget reflects only all funds under management of financial departments, however budgetary funds under management of those departments without budgetary distribution cannot be reflected in the departmental budget at beginning of the year, which have to be redistributed during implementation of the budget before delivery, forming the additional budget. The special funds appropriation given by the overhead governmental financial department or authorities concerned to the subsidiary government cannot be reflected in the departmental budget of the subsidiary government at the beginning of the year. With such decentralized financial power, and low utilization efficiency of funds, all departments can obtain financial power in many channels, which reduces the transparency of departmental budget. (II) Budgetary norm system is not perfect Norm calculation is not accurate, norm criterion is not rational, norm system coverage is not complete, and therefore, it has to rely on the original"basic figure increase"preparation method. Non-tax income of the government has not realized the true "separated income and expenditure"to the real sense, which disobeys the principle of justice for departmental budget. (III) Additional funds increase during implementation of budget is too frequent Binding power of departmental budget is not strong, additional funds increase during implementation of budget is too large, and difference between final account and budget is too big. For extra financial income of the government, the NPC organ can hardly made efficient supervision, and willful additional increase is a hard nut. The mobile funds reserved in the expenditure budget of the government are too big, which causes frequent additional increases during implementation and impact the normal implementation of the budget. Subsidy transferred from the overhead government to the subsidiary government during implementation of the budget has also caused frequent additional increase during implementation of the budget. (IV) NPC's work on budgetary examination and supervision is weak There is no corresponding legal environment for budget examination and supervision, and therefore, it is hard to produce real effect, and more are done in the form. Some special funds can be hardly allocated to the specific projects when NPC examines the departmental budget, which have to form the secondary distribution after approval of the budget. The budget preparation is not so specific, which weakens NPC's supervision and binding on departmental expenditure of the government, and therefore, reduces the transparency of departmental budget. (V) Budget system lacks performance information The existing budget preparation method remains to be the traditional input budget, which lacks performance information. All departments focus on obtaining the budget appropriation instead using budgetary funds to make good achievements, which leads to the result of budget implementation run out of the policy purpose of the government that the budget should embody, and causes low efficiency of financial expenditure. IV. Countermeasures and recommendations to deepen reform of departmental budget(I) To realize overall aspects budget The public will realize the supervision over budgetary management, and require all financial funds to be included within the range of public supervision, which requires all resources occupied by the government to be included into the budget, and governmental financial power obtained by the departments should be completely reflected into a budget. Therefore, to deepen reform of departmental budget is of first importance, and the governmental financial power that has not yet included into the departmental budget should be fully included to prepare the overall aspects budget. (II) To implement legal budget and sunlight budget Budget Law should be revised in time, and construction of NPC organ budget examination team should be accelerated, hearing system should be carried out, disclosure of departmental budget information should be reinforced, and departmental budget should be open to the social public at appropriate time so as to realize sunlight budget. No hard gap will be arranged in the budget, and additional budget should be minimized. For all additional items increased during implementation of annual budget, specific items should be listed separately when submitting the final account to NPC. (III) To regulate period of budget preparation To extend period of budget preparation and prepare the budget in an earlier time is an important guarantee to improve the preparation quality of the departmental budget in our country, which will benefit transfer of NPC's examination on the budget from procedural to concrete nature, improve transparency of budget, and guarantee open, fair and just budget distribution. To extend budget preparation period, and to carry out rolling budget on project expenditure will guarantee continuance and stability of the budget and improve the scientific nature of the budget preparation. The budget year should be regulated from April 1 each year to March 31 of the next year. (IV) To establish performance examination system In consideration of practice in our country, the examination of performance should mainly include the following contents: completion of performance goals, utilization of budget funds arranged for the performance goal and financial management conditions, and management system and measures of departmentsto reach the performance goals. Performance examination should be made in combination of quantitative and qualitative methods, using comparison method, factors analysis method, public evaluation method, and cost-profit analysis method, etc. (V) To propel and improve matching reforms Reasonable budget norm system and expenditure standard should be established; separated income and expenditure reform should be deepened, existing profits of department should be broken through, and all kinds of income of governmental departments should be separated from expenditure of funds; reform for implementation system of budget should be continuously accelerated, and centralized payment system by state treasury should be carried out in all aspects, while the range and scope for governmental procurement should be enlarged.