State Budget

Lecture (4)
Theoretical Part

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 The State Budget definition

 The Financial program or plan of the government

activities for a coming fiscal year.
 Or: Comprehensive structure of all estimated public
revenues and proposed public expenditures.

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• Important notes:
 The Budget contains Comprehensive structure of all
estimated public revenues and proposed public
expenditures.
 The fiscal year differs from the calendar year (the
financial year not necessary starts at January) → (Egypt
starts it`s fiscal year at 1/7 while USA starts at 1/10)
because each country collect it`s revenues at different
times.

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 Budgetary process

• The Four stages of the State Budget:

1) formulation
2) Reviewing and enactment
3) Implementation
4) control and auditing

Q1: discuss the four stages of the state budget?

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 (1) formulation (or preparation):

• it is the responsibility of the government (executive

authority).
• The formulation process is long and complex process, to
guarantee the participation of different department and
levels (it takes 9 months to be prepared).
• This process consists of cutting, trimming and
rearranging departmental estimates
• The central authority in charge of the preparation of the
budget in Egypt → is the ministry of finance.

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 (2) Reviewing and Enactment

• It is the responsibility of the legislative authority (parliament).

• The proposed budget is taken up in separate parts by different
subcommittees of the parliament (such as health committee,
education committee, agriculture and industry).
• Each subcommittee reports an appropriation bill to the full
committee (the plan and the budget committee in Egypt), which
report its action to the full parliament for voting.
• When it's approved by the parliament it gets the power of law
and its execution (application) becomes obligatory.
• The parliament has the eligibility of altering and reconsidering
the proposed budget but within certain limits.

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Budget Parliament Budget
project Before After
Approval law

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 (3) Implementation (Execution)

• It is the responsibility of the government (executive authority).

• Each department play its role indicated in the budget in both
directions spending and collecting revenues.

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 (4) Control and Auditing

• It is the responsibility of the legislative authority (parliament).

• legislative authority has the right (according to constitution) to
revise and audit the financial performance of government’s
departments and agencies, by examining books and documents,
as contracts.
• This post auditing is Vital to discover and discourage any
fraud.

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 Q1: COMPLETE THE FOLLOWING PHRASES:

1. ………….is the Financial plan of the government activities for a

forthcoming financial period, usually one year.
2. ………….process consists of audit the financial performance of
the various departments and agencies of the government, by
examining books and documents, as contracts.
3. ………….. process consists of cutting, trimming and rearranging
departmental estimates
4. The formulation of the budget is the responsibility of ………the
budget making process is ……….. guarantee the participation of
different department and levels.
5. The control and auditing is vital to ………….
6. The execution of the financial program is the responsibility
of………
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 Q2: JUSTIFY WHY YOU AGREE OR DISAGREE WITH each of THE
FOLLOWING PHRASES:
1- The formulation of the budget is the responsibility of the
legislative authority.
→ Disagree, as it is the responsibility of the executive authority.
2- The reviewing stage consists of cutting, trimming and
rearranging departmental estimates to reflect central policy
planning.
→ Disagree, as this happen in formulation stage not reviewing stage.
3- The reviewing and enactment is the responsibility of the
executive authority.
→ Disagree, as they are the responsibility of the legislative authority.
4- The implementation of the state budget program is
responsibility of the parliament.
→ Disagree, as the implementation of the budget is done by the
government. 11
5- The control and auditing of the implementation of the state budget
is taken by the government.
→ Disagree, as this stage is the responsibility of the legislative
authority according to the constitution.
6- The state budget is considered a proposal before the approval of
the legislative authority.
→ Agree, as the budget gets the power of law only after the approval
of the legislative authority.
7- The state budget is considered a proposal before the approval of
the executive authority.
→Disagree, as the budget is a proposal before the approval of the
legislative authority.
8- The acceptance of the executive authority of the state budget
assures the cooperation of citizens in implementing it.
→ Disagree, as the acceptance of the legislative authority is the action
that assures the cooperation of citizens in implementing it.
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9- The formulation of the budget is considered important but not
sufficient for the implementation of the budget.
→ Agree, as there should be reviewing and enactment step after formulation in
order to be able to implement the budget.
10- The formulation of the budget is assigned to the legislative
authority as it is the best in reflecting the wants and needs of the
citizens.
→ Disagree, as the formulation of the budget is done by the executive authority
and approved by the legislative authority.
11- state budget represents a comprehensive structure of all actual
public revenues and the public expenditures (X) estimated
12- the stage of reviewing and enactment provides the right to the
legislative authority to revise the financial performance of the in the field
of revenue and spending (x) the stage of control and auditing.
13- in the stage of reviewing and enactment the proposed budget get the
power of law and its execution became obligatory (√).
14- the budget usually contains financial data for the previous year
estimated figures for the current year (√). 13
 Principles of the State Budget

1) Yearly basis: The budget is made for one fiscal year why??
Because the period of one year covers all the four seasons
affecting in the revenues and expenditures.
Note: if it is made for less than one year it will be so difficult as it takes
at least 9 months and if it was made for more than one year the
accuracy estimation will be less.
2) Comprehensiveness: it means that the state budget must
include all public expenses and revenues without any
deductions (no deductions of expenses).
3) Condominium (non allocation of revenue): It means that
no specific fund should be appropriated for certain service
or activity.
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4) Unity: It means that the state has a unified public budget, including
all revenues in one side and all expenses in the other side.
5) Clarity: the budget items should be clear and digestible for all, and
classified into chapters and items.
6) Accuracy: the budget figures (expenses – revenues) should be
estimated with high accuracy and care otherwise the budget will be
unbalanced.
7) Flexibility: refers to:
- its easy application.
- measures should not hinder the budget implementation actively.

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 Q3: COMPLETE THE FOLLOWING PHRASES:

1. The principle of ………………….of the state budget means that

the budget is done usually for one year.
2. The principle of …………………………….means that the revenues
will be included in the budget without deduction of expenses.
3. The principle of ………………………means that there is no specific
funds should be appropriated for certain specific activity.
4. The principle of ……………..means that the state budget contains
all returns in one side and all the expenses in the other.
5. If we don`t take into consideration the essentials of
……………………. principle, this may lead to …………………………...

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6. We can`t present customs authority in the budget by saying that it
transferred to ministry of finance net revenues 40 million, as this
represents breaking of ………………………….. principle.
7. If we made the budget for more than one year this may lead to
………………………………………………...
8. If we made the budget for less than one year this may lead to
………………………………………………….
9. If ministry of finance use the tax revenues from teachers` salaries
to finance developing the public schools infrastructure, this is
considered a breaking of ………………. principle.

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 Q3: Answers:

1. Yearly basis.
2. budget comprehensiveness.
3. budget condominium.
4. budget unity.
5. the budget accuracy + unbalanced budget.
6. comprehensiveness.
7. decreasing the accuracy of budget prediction.
8. increase the cost of budget preparation.
9. condominium.

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 The framework governing the State Budget of Egypt:
• According to the article No. 124 of the Constitution: The
Budget draft must be presented by the government to the
parliament at least 3 months before the beginning of the
fiscal year.
• According to the Law No. 53 of 1973 (Executive
Regulations of the Budget):
A. State Budget is the financial plan for the coming year to
achieve objectives within the general plan (Economic,
Social and Political).
B. The Budget is financial plan for a fiscal year starting
from the 1st of July and end in 31 of June every year.
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C. The Budget includes all uses and resources of the state
performed by its administration including:
1- All ministries.
2- Local governments units including governorates.
3- Public organizations, agencies and finance funds.

VIP Note:
Budgets of economic public organizations:
1) the state budget doesn`t include the budgets of the economic
organizations (as petroleum organizations and suez canal ) as they
have separated budgets from the state budget
2) the only relationship between such separate budgets and the state
budget → that the state budget include only the number of surplus
or subsidies or loans (in case of deficit).

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 Q4: JUSTIFY WHY YOU AGREE OR DISAGREE :

1- The state budget of Egypt includes the budget of all economic organizations
in it.
→ Disagree, as the budget of the economic organizations is prepared separately and
presented by minister of finance to cabinet council to refer It to house of representatives.
2- The Egyptian state budget is one of the financial tools to achieve state general
policy.
→ Agree, yes as it represented prediction of the ways and projects done by the
government to achieve citizens` priorities.
3- Public finance funds budget isn`t included in the state budget and these
organizations prepare separate budgets.
→ Disagree, as the budget of the public finance funds and organizations are
prepared in the state budget, but only the economic organizations are preparing
separate budgets.
4- If the budget covers more than one year, this will increase the accuracy of
prediction and formulation of both expenses and revenues.
→Disagree, as this will increase the cost of preparing the budget and decrease the
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accuracy.
 Approaches for budget formulation:

There are Two approaches for the formulation of the

Public Revenues:
1- Accounting approach:
Based on rate of the recorded growth of public
spending in pervious year for each source. This approach
has its limitation, because its relationships with other parts
of the economy are not organized.
2- Economic approach:
Based on national economic parameters, like the increase in
GNP, the inflation rate. Advantages: accurate estimation of
public revenues for the next fiscal year. 22