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Our Money, Our Responsibility
A Citizens’ Guide to Monitoring Government Expenditures
Guide to Budget Work, October 2001 - Part 1, International Budget Project Part VII. Additional Resources
Because budget terminology can differ considerably between countries, it is difficult to compile a common glossary for all systems. Users of this Guide are therefore encouraged to access a glossary on budget terminology compiled by their government, which may often be included in the national budget. Below is a small compilation of budget terms used in this Guide; most of the definitions were taken directly from other glossaries, including:
1. Managing Public Expenditure - A Reference Book for Transition Countries, by the World Bank, available at http://www1.worldbank.org/publicsector/pe/befa05/OECDGlossaryBiblio.pdf
2. Manual on Fiscal Transparency, by the IMF, available at http://www.imf.org/external/np/fad/trans/manual/gloss.htm
3. Glossary of Economic Terms, by the Organization for Economic Cooperation and Development, available at http://stats.oecd.org/glossary/index.htm
4. Code of Ethics and Auditing Standards, by the International Organization of Supreme Audit Institutions, available at http://intosai.connexcc-hosting.net/blueline/upload/1codethaudstande.pdf
Glossary
Accounting system
The set of accounting procedures, internal mechanisms of control, books of account, and plan and chart of accounts that are used for administering, recording, and reporting on financial transactions. Systems should embody double entry bookkeeping, record all stages of the payments and receipts process needed to recognize accounting transactions, integrate asset and liability accounts with operating accounts, and maintain records in a form that can be audited.Accounts payable/receivable
Money owed to/by suppliers/customers.Accrual accounting
A form of accounting that records fund flows at the time economic value is created, transformed, exchanged, transferred, or extinguished. Thus, flows that imply a change of ownership are entered when ownership passes, services are recorded when provided, output is entered when products are created, and intermediate consumption is recorded when materials and supplies are being used.Apportionment
Authorizations or distributions of funds generally made by the ministry of finance to line ministries and other spending units, permitting them to commit and/or pay out funds within a specified time period and within the amounts appropriated and authorized. See also Warrant.Appropriation
An authority granted under a law by the legislature to the executive to spend public funds, up to a set limit, for a specified purpose. Annual appropriations are made through annual budget laws or, in some countries, separate appropriation acts consistent with the budget. Supplementary budgets/appropriations are sometimes granted subsequent to the annual law if the annual appropriation is insufficient to meet the specified purpose. The term “standing appropriation” is sometimes used to define an authority extending beyond a single budget year under separate legislation (such as social security legislation). In most countries, agencies and departments require specific executive authorization (“apportionment, allotment, or warrant”) to actually incur an obligation against an appropriation.Arrears
Amounts that have not been paid or received by the date specified in a contract or within a normal commercial period. Payment arrears may arise from non-payment by government ministries/agencies in areas such as bills due from suppliers, salaries due, transfers, or debt repayment costs. Tax arrears are taxes due to government but not paid.Audit opinion
An audit opinion is rendered by an auditor at the end of an audit investigation. The auditor reports on the nature of his or her work and on the degree of responsibility assumed. In the audit opinion, the auditor indicates whether in his or her opinion the client's financial statements present fairly the financial position, results of operations, and changes in financial position for the year-ended. Typically, there are four types of audit opinions made by an auditor, including unqualified opinion, qualified opinion, adverse opinion, and disclaimer.Benchmarking
Methods and procedures for comparing one organization with another as a means of improving performance. Process benchmarking is the study and comparison of the processes and activities that turn inputs into outputs. Results benchmarking compares the actual performance of organizations using performance indicators or measures.Cash accounting
A form of accounting that records only cash payments/receipts and records them at the time they occur.Cash management
The development of agency and central cash flow forecasts, the release of funds to spending agencies, the monitoring of cash flows and expected cash requirements, and the issue and redemption of government securities used to finance government programs.Contingency fund (or contingency reserve)
A fund or a budget provision set aside within the annual budget total, to be allocated later, designed to meet unforeseen changes in external circumstances. In medium-term budgeting, contingency and policy reserves are used to provide flexibility and to avoid premature expenditure commitments, with progressively bigger reserves in the totals set aside for later years.Contingent liability
Obligations that have been entered into but whose timing and amount are contingent on the occurrence of some specified future event. They are therefore not yet actual liabilities (and may never be if the specific contingency does not materialize).Disclaimer of audit opinion
A disclaimer the auditor issues when s/he is unable to arrive at an opinion regarding the financial statements taken as a whole, due to a fundamental uncertainty. The disclaimer makes clear that an opinion cannot be given and specifies all matters of uncertainty.Double-entry accounting (or double-entry bookkeeping)
A system in which each flow gives rise to two equal-valued entries: one credit and one debit. By convention, increases in asset accounts and decreases in liabilities and net worth accounts are debits. Conversely, decreases in asset accounts and increases in liabilities and net worth accounts are credits. Use of the double entry system facilitates consistency checks of recorded flows and stocks.Economic classification
The classification of expenditures (or expenses) and the acquisition/disposal of assets into economic categories, which emphasize the economic nature of the transaction (salaries, interest, transfers, etc.).Emphasis of matter (audit opinion)
A separate paragraph of an audit opinion in which the auditor points out unusual or important matters that are necessary to a proper understanding of the financial statements. It should not be used to rectify a lack of appropriate disclosure in the financial statements or as a substitute for qualifying the opinion. See also Qualified audit opinion.Ex ante control (or a priori audit)
Prior authorization of a specific expenditure. Payment orders and supporting documentation received are checked to verify that the transaction is properly authorized, is legal and regular, and that there are sufficient resources in the budget. Such inspections may be carried out by the central authority of the ministry of finance or by line ministries/agencies.Financial management
The legal and administrative systems and procedures put in place to permit government ministries and agencies to conduct their activities so that the use of public funds meets defined standards of probity, regularity, efficiency, and effectiveness. Financial management includes the raising of revenue, the management and control of public expenditure, financial accounting and reporting, cash management, and in some cases asset management.Financial statements
Accounting statements prepared by a reporting entity to communicate information about its financial performance and position. An accrual accounting system commonly entails the preparation of a financial position statement (or balance sheet), which lists total assets, liabilities, and net worth; a financial performance statement (or operating statement), which lists revenues and expenses during the period; and a statement of changes of net worth, which explains movements in the opening and closing balances. These accrual-based statements are supplemented by a statement of cash flows.Functional classification
The classification of expenditure (as well as expense) transactions and acquisitions/disposals of financial assets according to the purpose for which the transactions are undertaken. A functional classification is independent of the administrative organizations or units that carry out the activities or transactions concerned.Gross domestic product
An aggregate measure of production, equal to the sum of the gross values added of all resident institutional units engaged in production (plus any taxes, and minus any subsidies, on products not included in the value of their outputs).Internal audit
An audit carried out by a department or unit within a ministry or another government organization, entrusted by its management with assessing the organization’s systems and procedures in order to minimize errors, fraud, and inefficiency. Internal audit units must be functionally independent within the organization they audit and report directly to the organization’s management.Performance measurement
Assessment of the efficiency and effectiveness of a program or the activities of an organization through an examination of the relevant inputs, processes, outputs, and outcomes.Qualified audit opinion
An opinion in which the auditor disagrees with or is uncertain about one or more items in the financial statements that are material but not fundamental to an understanding of the statements. The wording of the opinion normally indicates a satisfactory outcome to the audit, subject to a clear and concise statement of the matters of disagreement or uncertainty giving rise to the qualified opinion.Unqualified audit opinion
An opinion in which the auditor is satisfied in all material respects that:
(a) the financial statements have been prepared using acceptable accounting bases and policies, which have been consistently applied;
(b) the statements comply with statutory requirements and relevant regulations;
(c) the view presented by the financial statements is consistent with the auditor’s knowledge of the audited entity; and
(d) there is adequate disclosure of all material matters relevant to the financial statements.An auditor may not be able to express an unqualified opinion if there has been a limitation in the scope of the audit, the auditor considers the financial statements to be incomplete, misleading, or in violation of acceptable accounting standards, or there is uncertainty affecting the statements.
Virement
The process of transferring an expenditure provision from one line-item to another during the budget year. To prevent misuse of funds, spending agencies must normally go through approved administrative procedures to obtain permission to make such a transfer.Warrant
A release of all or (more commonly) a part of the total annual appropriation on a quarterly or monthly basis that allows a line ministry or spending agency to make commitments.
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