PI-4. BUDGET CLASSIFICATION

ABOUT THE INDICATOR

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 4.1. Budget classification.

IMPACT ON BUDGET OUTCOMES

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. This is essential for allocating and monitoring expenditure to support aggregate fiscal discipline, the allocation of resources to strategic priorities, and efficient service delivery

Dimension 4.1. Budget classification

DIMENSION MEASUREMENT GUIDANCE

4.1:1. 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.

4.1:2. The GFS classification1 provides a recognized international framework for the economic and functional classification2 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

 

Dimension 4.1. Scoring

Score Minimum requirements for scores
A 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.
B 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.
C 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.
D Performance is less than required for a C score.

 

 

1 The GFS Manual 2014 defines the concept of and describes the manner in which revenue and expenditures are classified in chapter 5 (page 84) and chapter 6 (page 114). Appendix 8 (page 385) provides all of the classification codes used in the GFS.

2 ‘Classification of expenditure according to the functions of the Government’ (GFS Manual 2014, page 142), describes the classification of expenditures according to the functions of the government, including classification codes.

1 The GFS Manual 2014 defines the concept of and describes the manner in which revenue and expenditures are classified in chapter 5 (page 84) and chapter 6 (page 114). Appendix 8 (page 385) provides all of the classification codes used in the GFS. 2 ‘Classification of expenditure according to the functions of the Government’ (GFS Manual 2014, page 142), describes the classification of expenditures according to the functions of the government, including classification codes.

PEFA Handbook Volume 1: The PEFA Assessment Process – Planning, Managing and Using PEFA