Pillar Two: Transparency of public finances
PI-4. Budget classification
This indicator assesses the extent to which the government budget and accounts classification is consistent with international standards. There is one dimension for this indicator.
Dimension and scoring
|Minimum requirements for scores
4.1. Budget classification
|Budget formulation, execution, and reporting are based on every level of administrative, economic, and functional classification using GFS/COFOG standards or a classification that can produce consistent documentation comparable with those standards. Program classification may substitute for subfunctional classification if it is applied with a level of detail at least corresponding to subfunctional classification.
|Budget formulation, execution, and reporting are based on administrative, economic (at least “Group” level of the GFS standard—3 digits), and functional/subfunctional classification, using GFS/COFOG standards or a classification that can produce consistent documentation comparable with those standards.
|Budget formulation, execution, and reporting are based on administrative and economic classification using GFS standards (at least level 2 of the GFS standard—2 digits) or a classification that can produce consistent documentation comparable with those standards.
|Performance is less than required for a C score.
Last completed fiscal year.
A robust classification system allows transactions to be tracked throughout the budget’s formulation, execution, and reporting cycle according to administrative unit, economic category, function/subfunction, or program. The budget should be presented in a format that reflects the most important classifications. The classification should be embedded in the government’s chart of accounts (the accounting classification) to ensure that every transaction can be reported in accordance with any of the classifications used. The budget and accounting classifications should be reliable and consistently applied, providing users with confidence that information recorded against one classification will be reflected in reports under the other classification.
The GFS classification provides a recognized international framework for the economic and functional classification of transactions: revenues and expenditures are broken down into four and three classification levels, respectively. Although no international standard for programmatic classification exists, this type of classification can be an important tool in budget formulation, management, and reporting. The way it is applied should be explained in the report narrative if the highest score