Budget Structure & Analysis

1. Budget Structure & Analysis Centre for Economic Governance and AIDS in Africa (CEGAA) Acknowledgements to IBP and IDASA.

4. Regional / sub-national budgets Sector/Programme budgets Divided into separate line-items Budget documents structure Federal / national budget Federal budget Regional Budget Bureau Health Sector budget Sector budget - Health Sub-programmes budget Sector budget - Health Sub-Programmes e.g Community Health Centres

5. Structure of national budget The national budget should provide: • A budget overview, including: • Highlights of the national macro-economic framework, the outlook over the MTEF • National total revenue: domestic, loans, external assistance, multi-lateral payments • National total expenditure, GDP, deficit, inflation indices • Summary tables of all national departments’ budgets, also by economic classification • Explanatory notes – very useful! • Detailed estimates of expenditure by vote.

6. Structure of department budgets Each department has its own budget (vote), which should have: • Overview: core functions, vision, mission, main services, constitutional / legal framework and external events impacting on budget decisions of the department. • Review of the previous financial year: should summarise the major achievements (for example distilled from Annual Report). • Outlook for the year: implications of challenges, policies and strategies on the departmental budget • Budget allocations

7. When we study a department budget, we first want to check: • How are programmes organised/ divided? • Does each region’s welfare department have the same five programmes? • What is the level of disaggregation? • Does each region and department provide the same level of detail in their budgets? • Is it understandable?? • Is there text describing programmes, aims, past achievements, next year’s plans, explanations for any major changes, etc.? • How many years of data are given?

8. 5 different starting points for your budget analysis: • 1. By sector: health, welfare, education • 2. By population group: people with disabilities, people living with HIV and AIDS, Roma children • 3. By government programme: harm reduction, random street drug testing, palliative care • 4. By issue: mental health, HIV and AIDS, immunization • 5. Using policy documents as a benchmark, including Poverty Reduction Strategy Papers

9. Example of years of data recorded on budget documentsAvailable information differs from country to country. Country teams to open their documents and check structure and years of budget data available • 2005/06 Actual Expenditure • 2006/07 Actual Expenditure • 2007/08 Estimated Actual Expenditure • 2008/09 Budget Estimate - Medium Term (Revenue and) Expenditure Framework (MTREF) • 2009/10 Budget Estimate - MTREF • 2010/11 Budget Estimate - MTREF

10. What determines the budget? (national resource allocation) • Previous budget • Policy priorities (political) • Constitutional obligations/legal framework • Rights/moral choices • Need (e.g. prevalence rates) • Cost of programmes • Cost effectiveness research • Equity • Capacity to spend • Available resources And many other factors!

11. Budget Analysis and Practical Skills

12. Doing budget analysis • Become familiar with finding information in budget documents • Learn to calculate: • Percentage of total budget • Share of total increasing or decreasing • Real and nominal amounts • Real growth rate • Average real growth rate over medium term • Become familiar with different levels of disaggregation in budgets • Practice!

13. How to do budget analysis What are we analysing the budget for? • Percentage share of the budget (priority) • Nominal growth in the budget (progress) • Adjusting for inflation (real budget figures) • Real growth in the budget (progress in real terms • Annual average growth (summary) • Per capita budgets (equity & adequacy) • Percentage difference from average (equity) • Real growth in per capita budgets (progress after adjusting for inflation and population growth) • Comparing budgets to expenditure (expenditure as % of the budget - efficiency)

14. Calculating percent share (ratios) • Terms to describe the status of the figures provided: • The term share refers to the size of a slice of the pie in relation to the entire pie. We express it in terms of a percent of the total. • For example, if the total county budget is 10 million Forint and 4 million is spent on health, we say health’s county share is 40%. Formula (Section/Total = Share) = F4mil x 100 F10mil = 40% • We use percentages to measure how much government prioritises a certain item in the budget. • We often use percent to express: • one national department as a share of the country’s budget • one programme as a share of the total department budget • one sub-programme as a share of the total programme budget

15. Converting an allocation from nominal to real termsWe want to convert everything to 2004/5 Rand so we make 2004/5 the base year. The deflator for the base year is = 1.We divide each allocation by the deflator for that year to get a real amount.The deflator represents the Consumer Price Index (CPIX) that tells us the real prices of goods and services

16. Calculating real growth and nominal growth rates

17. Calculating real growth

18. Calculating annual average real growth rate

19. Per capita spending • It is also important to adjust budget data on a per person or per capita basis to allow comparisons between countries or between states. • Per capita spending is obtained with the ‘population’ and ‘amount-spent’ variables. The equation is as follow: Spending/Population = Per Capita Spending Dwala Lami spent D6 billion on health care and there are about 12 million citizens (Lamicans), how much does each person get for health care in Dwala Lami? Shanghai Republic spent D2 billion on health care and there are 3.5 million people living there. How much does each person get for health care?