## 1. Principles Underlying the Belgian Budget-Management System

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### Introduction
- Governments require constitutional-institutional continuity for effective collective decision-making (quote from James M. Buchanan).
- Paper examines choices already made and those still open given constitutional constraints.

### The Inherited Budget Management System—Pre-1994
- Framework and legal basis
  - Rwanda inherited a budget management system inspired largely by Belgium and codified in 1979 by Decree-Law No. 23/79, confirmed by Law No. 01/82 of January 26, 1982.
  - The 1979 Decree-Law incorporated four key principles (with exceptions):
    - Annual basis of budget (no medium term framework)
    - Universality (comprehensiveness)—budget and accounts cover all levels of government; revenues and expenditures are recorded on a gross basis
    - Unity—one common pool for all revenues; revenues are not earmarked
    - Specialization—expenditures authorized only for specific purposes; detailed line-item, input-based budget
    - Publication—of the budget and its accounts
  - Decree-law required a consolidated budget (budget général) composed of four parts:
    - the ordinary budget (budget ordinaire)
    - the development budget (budget de developpement)
    - the budget for public entities (budget des établissements publics)
    - third-party transactions (budget pour ordre)
- Practical divergences from law
  - A dual budgeting system developed: an “ordinary” budget for current operations and a “development” budget for investment expenditures (including donor-financed projects).
  - Budgetary unity broke down: central bank (Banque Nationale du Rwanda—BNR) acted as government cashier; decree-law did not explicitly require all revenues be paid into a single treasury account; Minister of Finance could open off-budget accounts and use obligatory deposits and profits of public bodies for cash management.
  - Specialization was weak: recurrent budgets followed economic classification (salaries, goods and services); development budgets were largely listings of donor-financed projects; until the mid-1990s two ministries prepared budgets (Ministry of Finance for recurrent; Ministry of Plan for investment).
  - Publication principles not embodied in the 1979 decree-law; budgets often adopted very late (example: 1990 budget adopted in November—11 months after the fiscal year began).
- Administrative arrangements (often not implemented)
  - President of the Republic was Ordonnateur Général; Minister of Finance was Ordonnateur Général Délégué.
  - Delegated ordonnateurs for recurrent budget included other ministers; for development budget the Minister of Plan.
  - Separation of ordonnateur and comptable enshrined; additional posts included Ordonnateur-Trésorier, General Financial Inspector, Financial Controllers, and gestionnaires de credits.
  - General Financial Inspector and Ordonnateur-Trésorier did not perform envisaged functions; nationwide treasury accountant system never set up; payments in Kigali occurred at BNR, making the central bank de facto repository of tax collections and cash expenditure records.
- Summary: the 1979 decree-law remained the legal basis but was out of touch with modern budgeting realities.

### The Inherited Budget Execution System
- Four-stage Belgian model (roles and administrative units)
  1. Commitment (engagement)
     - Key players: Ordonnateur (authorizing officer), controller of commitments
     - Administrative units: Controllers placed in spending ministries, but appointed by the Minister of Finance
  2. Accrual (liquidation)
     - Key players: Ordonnateur, pre-auditors
     - Administrative units: Spending ministries; Court of Accounts
  3. Payment order issuance (ordonnancement)
     - Key players: Ordonnateur, pre-auditors, treasury officers
     - Administrative units: Spending ministries; Court of Accounts; Ministry of Finance (Treasury)
  4. Payment (Paiement)
     - Key players: public accountant
     - Administrative units: Post Office Checking system, (exceptionally the National Bank)
- Operational details and controls
  - First-stage commitments require a priori approval (“first visa”) by a financial controller appointed by the Ministry of Finance.
  - Liquidation involves provisional liquidation by spending department upon receipt of goods/services and invoice, and issuance of a provisional payment order.
  - Court of Accounts performs verification and a second “visa” control (liquidation definitive), enabling the Treasury Division to issue a final payment order (ordonnancement de paiement definitif).
  - Ordonnancement d’imputation allows Court of Accounts and Treasury to record transactions in budget accounts.
  - Exemptions/special procedures: ordonnancement d’imputation (exempted from a priori Court approval for rapid ordinary spending or revolving funds); ordonnancement de regularization for expenditures not requiring Court intervention.
- Rwandan implementation: roles and responsibilities were only partially realized; fragmentation and unclear responsibilities limited effective functioning.

### Changes in Budget Management Since 1994
- A. Restoration of Basic Budgeting Capacity
  - Post-1994 genocide, capacity eroded; shortages of qualified personnel and language/work-practice heterogeneity between French-speaking and Anglophone-trained officials.
  - Early post-genocide budgets (1995–96) were not adopted before the fiscal year start; by the late 1990s the budget was prepared on time and of average standard for comparable low-income countries.
- B. Reforms in Budget Formulation
  - Late 1990s reforms included a new budget classification system introduced in 2000.
  - All ministries required to formulate budgets in terms of programs and subprograms to focus on objectives and program results.
  - Annual budget formulated within a medium-term budget framework allowing reorientation towards priority expenditures (education, health, agriculture, defense).
  - Movement toward integrating the development budget with the recurrent budget; budget began to be presented as one unified document, though development expenditures were not fully programmatically integrated.
- C. Adoption of a Second External Audit Body
  - 1991 Constitution referred to the Court of Accounts as external audit agency.
  - In 1998, an Office of the Auditor General (OAG) was established to perform efficiency and effectiveness audits in addition to financial audits, modeled on the United Kingdom.
  - Technical assistance from United Kingdom and other donors supported the OAG; pre-genocide continental European donors did not strengthen the Court of Accounts.
  - In practice, neither external audit body functioned fully due to unavailability of consolidated annual government accounts.
- D. Decision to Decentralize Budget Management to Local Governments
  - Rwanda has a long tradition of administrative decentralization down to “cells”.
  - In 2000 government supplemented administrative decentralization with political decentralization via four laws relating to provinces, districts, the city of Kigali, and urban authorities (Law No. 43/2000; Law No. 4/2001; Law No. 5/2001; Law No. 7/2001).
  - Laws aim to transfer progressively certain revenue and expenditure competencies to the 106 districts, intended to be focal point of political decentralization.

### The 2003 Constitution — Legislature and Executive (Parliamentary Powers)
- Constitutional adoption and structure
  - Constitution approved in a national referendum on May 26, 2003, and adopted in Parliament on June 4, 2003.
  - Recognizes a multi-party system with three separate and complementary branches: legislature, executive, judiciary.
- Key constitutional budget provisions
  - Article 79: “the Chamber of Deputies shall receive the finance bill before the commencement of the budget session.”
  - Article 71: The budget must be presented before the beginning of the third parliamentary session, which is mandated to be October 5.
  - Article 91: Bills and statutory amendments that reduce government revenue or increase State expenditure must indicate proposals for raising revenues or making savings equivalent to the anticipated expenditure—this constrains Parliament from increasing the fiscal deficit proposed by the executive and contributes to fiscal discipline.
- Constitution does not impose quantitative fiscal rules (e.g., limits on public sector debt or a cycle-average zero-deficit requirement).

### Box 3 — The 2003 Constitution: Legislature and Executive (Highlights)
- A. The Legislature
  - Bi-cameral Parliament: an elected chamber of deputies (80 members) and a Senate (26 members), elected or appointed.
  - Parliament has sole prerogative to enact laws.
  - Each chamber has its own budget and enjoys financial and administrative autonomy.
  - Chamber of Deputies can initiate a vote of no confidence in the government.
- B. The Executive
  - President of the Republic:
    - elected by universal suffrage for a 7 year period
    - promulgates laws or may veto them
    - makes appointments of the Prime Minister, other Ministers and very senior public servants
    - can dissolve parliament, after consultation with all three branches of government
  - Cabinet:
    - members appointed by the President of the Republic, selected from political organizations on the basis of their seats in the Chamber of Deputies
    - deliberates on bills and draft decree-laws
    - implements national policy agreed by the President of the Republic
    - accountable to the President of the Republic and Parliament
  - Prime Minister:
    - presides over Cabinet meetings, unless attended by the President of the Republic
    - makes appointments of some senior public servants, including Secretary-Generals of Ministries
  - Official languages: Kinyarwanda, French, and English
- Role of the Senate in budget process (uncertainties and scenarios)
  - Constitution: Chamber of Deputies must adopt the budget; Article 79 states “Before the final adoption of the budget, the President of the Chamber of Deputies seeks the opinion of the Senate on the finance bill”.
  - Unclear provisions and possible conflict scenarios:
    - No constitutional mechanism for resolving conflicts between chambers on the draft budget.
    - Senate competence over organic laws and laws relating to defence and security (Article 88) raises questions about whether Senate must approve annual budget estimates for defence and security and whether separate appropriation bills would be required.
    - Similar questions for budget items pertaining to the National Electoral Commission.
    - Appointment approvals: Senate must approve certain senior officials (including the Auditor General) — unclear whether this is exclusive or if the Chamber of Deputies has influence, and how this coordinates with presidential Cabinet orders.
    - Termination of senior public servants: Constitution empowers the President to sign Cabinet orders terminating services; Constitution is silent on parliamentary involvement in cessations (e.g., Auditor General).
- C. Organic Laws That Affect the Budget Process
  - Three-tier legislative framework: The Constitution; Organic Laws; Ordinary Laws (e.g., Annual Budget Law).
  - Voting thresholds: Ordinary laws adopted by simple majority; Organic laws require a majority of three fifths of the members present in each Chamber.
  - Constitution mentions three organic laws relevant to budget: the annual budget law that determines State revenues and expenditures; the powers of the bureau of the Chamber of Deputies; the powers of the bureau of the Senate.
  - At time of writing, none of these organic laws had been adopted.
  - Recommendation: organic laws should contain general principles; avoid detailed provisions that hinder budget management flexibility.
- D. Budget Preparation and Execution (constitutional provisions and timelines)
  - Constitution does not require Chamber of Deputies to adopt the budget before fiscal year begins.
  - Article 80: if finance bill not voted and promulgated before commencement of a financial year, Prime Minister authorizes by an order a monthly expenditure on a provisional basis equal to one twelfth of the budget of the preceding year.
  - Budget execution reporting for the previous year:
    - Cabinet must submit, before June 30th of the following year, to the Chamber of Deputies a finance bill with a report on implementation of the budget, certified by the Auditor General.
    - To meet this deadline, “Cabinet shall submit a report on the implementation of the budget to the Auditor General not later than March 31st of the following financial year”.
  - Constitution does not specify current year reporting requirements; only ex post reporting concerning the previous year is constitutionally mandated.
- E. External Audit (Office of the Auditor General—OAG)
  - OAG established as independent national institution; independence guaranteed: “no person shall be permitted to interfere in the functioning of the Office or to give instructions to its personnel.”
  - De facto abolition of the Court of Accounts by omission from the 2003 Constitution.
  - OAG responsibilities include audit of State finances, local governments, public enterprises and parastatal organizations; verify conformity with laws, sound management, legality and necessity; carry out accounts, management, portfolio and strategy audits.
  - Annual reporting:
    - Auditor-General required to submit to each Chamber of Parliament, prior to commencement of session devoted to examination of the budget of the following year (i.e., in early October), a complete report on implementation of the State budget of the previous year.
    - Report must indicate the manner in which the budget was utilized, expenses contrary to the law and whether there was misappropriation of public funds.
    - Copy submitted to President of the Republic, Cabinet, President of the Supreme Court and Prosecutor General of the Republic.
  - Lima guidelines (INTOSAI) noted: independence and submission of an annual report to Parliament are requirements; Constitution does not explicitly state that the OAG’s annual report needs to be published.
  - Constitution silent on parliamentary involvement in removal of the Auditor-General; President could constitutionally make removal alone; reasons for dismissal unspecified.
- F. Public Service Commission (PSC) and Office of the Ombudsman
  - PSC responsibilities (as specified in Constitution):
    - recruitment and appointment of public servants in central government and other public institutions
    - submission of names of candidates to institutions concerned for employment, appointment and promotion of candidates who fulfill all required conditions and have the most suitable qualifications
    - management and personnel prohibited from seeking/accepting instructions from outside the Commission
    - “The Public Service Commission submits each year its program and activity report to the Parliament and Cabinet”.
  - Implications and uncertainties:
    - centralization of recruitment raises questions about PSC independence and potential conflicts with Secretary Generals of ministries.
    - role in establishing guidelines for total salary bill and staff numbers is unclear.
  - Office of the Ombudsman responsibilities include preventing and fighting corruption in public administration, and investigating complaints from individuals and associations against acts of public officials.
- G. Decentralized Authorities and Fiscal Relations
  - Constitutional provisions:
    - public administration shall be decentralized in accordance with the provisions of the law.
    - decentralized organs shall fall under the Ministry having local government in its functions (currently MINALOC).
    - a National Dialogue Council established, bringing together the President of the Republic and five representatives of each district, municipality and town council; Members of Cabinet, Parliament, governors of provinces and the mayor of the city of Kigali may attend meetings.
  - Administrative structure and fiscal implications:
    - Laws establishing provinces, districts, urban authorities, and the city of Kigali adopted in 2000 and 2001.
    - The 11 provinces are arms of central government, administered by provincial governors appointed by the President of the Republic. Provinces are part of the central government’s budget, whereas districts and cities have budgetary autonomy.
    - Limited local revenue-raising capacity implies dependence on central government transfers or foreign grants.
  - Needs and ambiguities:
    - design an appropriation mechanism for intergovernmental transfers.
    - monitor inflows and outflows of local government finances, inclusive of donor grants, to ensure national objectives (e.g., Poverty Reduction Strategy Paper) are achieved.
    - ensure local government indebtedness does not derail central fiscal objectives.
    - Coordination ambiguity between MINALOC and Ministry of Finance on oversight roles and macro-fiscal management; authority of the National Dialogue Council unclear.
    - Harmonization needed of budget preparation systems and accounting frameworks to facilitate OAG audits.
- H. Key Outstanding Issues Affecting Budget Management (summary findings and recommended legal/regulatory actions)
  - Framework completion needed by organic laws, ordinary laws, and executive orders/decrees/regulations/instructions covering:
    - budget preparation and execution—responsibilities mainly of the Executive
    - adoption by law of the annual budget—Parliament’s responsibility
    - audit of the annual budget—the principal task of the Auditor General
  - Priority actions for Organic Budget Law (OBL):
    - include general principles of unity, comprehensiveness, and specificity (classification of revenues, expenditures, assets and liabilities; the appropriations structure)
    - define deficits/surpluses; require a medium-term macro-fiscal framework; specify main documents to present to Parliament; provide for supplementary budgets
    - leave detailed calendar to MOF’s annual budget circular; leave detailed execution procedures to Financial Regulations, procurement rules, Internal Audit guidelines
    - public debt: either include general principles in OBL or draft a separate Public Debt Law; establish annual public debt limits consistent with medium-term strategy (quantitative limits better in annual budget law or ordinary law)
    - accounting arrangements: executive to establish accounting standards following generally accepted accounting practices in collaboration with OAG and parliamentary budget committee
    - fiscal reporting: OBL to list essential reports feasible for MOF: monthly, mid-year, and annual accounts—for central and local governments (inclusive of extrabudgetary funds)
  - Responsibility of spending ministries:
    - OBL under consideration proposes a strong Minister of Finance with considerable powers over budget preparation, execution, accounting, and fiscal reporting.
    - Minister of Finance should be authorized to obtain periodic fiscal reports from districts to ensure consistency with overall fiscal policy and public debt strategies.
    - OBL could spell out responsibilities of senior officers (Secretary Generals, Prefects, Council Chairpersons or Mayors) and chief budget officers for integrated budget management.
    - Special arrangements needed for constitutionally independent entities (two chambers, OAG, Electoral and other Commissions) with greater autonomy in preparing their budgets.
  - Organic laws relating to Parliament internal organization:
    - organic laws to determine powers of each Bureau, standing committees, departmental organization, members’ conduct, and voting modes.
    - recommendation: keep organic laws principle-based and place procedural detail in internal regulations.
    - Chamber of Deputies currently has nine committees; two key committees for budgeting: Committee on Economy and Trade; State Budget and Property Committee.
    - parliamentary committee structure options: single budget committee with subcommittees (one for draft budget, one for budget outcomes) or two separate committees; internal regulations should limit debate time to aim for budget adoption before fiscal year start.
  - Role of the Senate in budgeting:
    - Senate competence on organic laws, defence, security, and elections requires clarification of how its “opinion” on draft annual budget will be treated (binding vs non-binding).
    - Article 95 requires a joint Commission to seek compromise on draft laws; Constitution silent on resolution if compromise fails—one option: grant Chamber of Deputies final authority.
    - organic law or internal regulations should specify Senate powers and timing in appointment approvals and terminations of senior officials (to avoid delays, especially for Auditor General).
  - Government accounting system issues and urgent needs:
    - establish a unique chart of accounts to be used nationwide; harmonize accounting systems of central and district governments for consolidated nationwide fiscal reporting.
    - harmonize budgeting and accounting frameworks so cash spending reports align with budget nomenclature.
    - use harmonized frameworks to generate consolidated reports for general government (central government, local governments and extrabudgetary funds).
    - draft and disseminate Accounting Manuals and Guides.
  - External audit legislation changes planned (Cabinet-approved amendments by November 2003 include):
    - elaborating AG reporting requirements: AG’s report on the draft law on the annual accounts (June 30th) will certify annual accounts; AG’s detailed annual report to Parliament prior to October session will summarize audits conducted
    - stating explicitly that the OAG’s annual report will be published
    - specifying that the President can terminate the services of the AG, but only on grounds of physical or mental disability, improper behavior, or incompetence; the Senate must ratify any such suspension
  - Decentralization and capacity-strengthening:
    - harmonize budget/accounting frameworks across central and local government; establish oversight roles between Ministry of Finance and MINALOC
    - capacity needs: reestablish functioning central government accounting system capable of producing in-year and annual accounts; training and institutional capacity strengthening across executive and Parliament, and in the 106 districts
    - donor technical assistance available; government must ensure knowledge transfer and consider civil service remuneration to retain trained staff

### VI. Concluding Remarks (institutional choices and priorities)
- Institutional changes and choices established include:
  - a two-chamber parliament, both houses competent to approve organic laws (including annual budget law and loi des comptes)
  - an elected Chamber of Deputies that adopts the annual budget; Parliament can amend the draft budget but “may not lower taxes or raise total expenditures.”
  - decentralized budget management: districts and cities have administrative and financial autonomy
  - an elected president who appoints all ministers and regional governors; Prime Minister appoints Secretaries General of spending ministries
  - Cabinet deliberates on draft laws and submits the annual budget to Parliament three months before the fiscal year begins
  - the Office of the Auditor General with wider powers than the Court of Accounts under the previous constitution
  - the independent Public Service Commission responsible for fair recruitment and appointment of public servants
  - the Ombudsman to receive complaints against public officials and perform anti-corruption functions
- Remaining legal and regulatory priorities:
  - adopt (1) an organic budget law relating to the annual budget law, (2) organic laws for internal organization of the two chambers of Parliament, and (3) revisions to the 1998 Act Establishing the Auditor General
  - legislative timetable: presidential and parliamentary elections must be held no later than six months after the constitutional referendum; following legislative elections and appointment of the 26 Senators, these laws are planned for the legislative agenda
  - the new OBL must be accompanied by financial regulations, a clear nationwide accounting framework, and explanatory guides to budget preparation, execution, and accounting for central and local government
- Implementation caveat:
  - successful implementation requires finalizing new laws, administrative regulations, and training staff; sustained unity among political leaders, civil servants, citizens, and donors in striving for transparency and discipline in public financial management is critical.

*Source: _wp04132 - 1. Principles Underlying the Belgian Budget-Management System (PDF).*

### 1. Principles Underlying the Belgian Budget-Management System .........................................4

### 1. Principles Underlying the Belgian Budget-Management System

### Introduction
- Governments require constitutional-institutional continuity for effective collective decision-making (quote from James M. Buchanan).
- Many countries inherit budget systems that constrain reform; the paper examines choices already made and those still open given constitutional constraints.

### The Inherited Budget Management System—Pre-1994
- Rwanda inherited a budget management system inspired largely by Belgium and codified in 1979 by Decree-Law No. 23/79, confirmed by Law No. 01/82 of January 26, 1982.
- The inherited system shared similarities with the French system but differed in a high degree of fragmentation of actors in budget execution and accounting; the Belgian Court of Accounts is involved in pre-audit/internal control as well as ex post audits.
- The 1979 Decree-Law incorporated four key principles but with exceptions (Box 1):
  - Annual basis of budget (no medium term framework)
  - Universality (comprehensiveness)—budget and accounts cover all levels of government; revenues and expenditures are recorded on a gross basis
  - Unity—there is one common pool for all revenues; revenues are not earmarked for specific expenditures
  - Specialization—expenditures are authorized only for specific purposes. This translates into a detailed line-item budget based on inputs.
  - Publication—of the budget and its accounts
- Decree-law required a consolidated budget (budget général) composed of four parts:
  - the ordinary budget (budget ordinaire)
  - the development budget (budget de developpement)
  - the budget for public entities (budget des établissements publics)
  - third-party transactions (budget pour ordre)
- In practice:
  - A dual budgeting system developed: an “ordinary” budget for current operations and a “development” budget for investment expenditures (including donor-financed projects).
  - The principle of budgetary unity broke down: the central bank (Banque Nationale du Rwanda—BNR) was established as government cashier, but the decree-law did not explicitly require all revenues be paid into a single treasury account; the Minister of Finance could open off-budget accounts and use obligatory deposits and profits of public bodies for cash management.
  - Specialization was weak: recurrent budgets followed economic classification (salaries, goods and services), development budgets were largely listings of donor-financed projects; until the mid-1990s two ministries prepared budgets (Ministry of Finance for recurrent; Ministry of Plan for investment).
  - Publication principles were not embodied in the 1979 decree-law; budgets were often adopted very late (example: 1990 budget adopted in November—11 months after the fiscal year began).
- Administrative arrangements in the decree-law (often not implemented in practice):
  - The President of the Republic was the Ordonnateur Général; the Minister of Finance was Ordonnateur Général Délégué.
  - Delegated ordonnateurs for recurrent budget included other ministers; for development budget the Minister of Plan.
  - Separation of ordonnateur and comptable was enshrined; additional posts included Ordonnateur-Trésorier, General Financial Inspector, Financial Controllers, and gestionnaires de credits.
  - The General Financial Inspector and Ordonnateur-Trésorier did not perform envisaged functions; a nationwide treasury accountant system was never set up; payments in Kigali occurred at BNR, making the central bank the de facto repository of tax collections and cash expenditure records.
- Summary statement: the 1979 decree-law remained the legal basis but was out of touch with modern budgeting realities.

### The Inherited Budget Execution System
- The Belgian budget execution system is based on four stages (Box 2):
  1. Commitment (engagement)
     - Key players: Ordonnateur (authorizing officer), controller of commitments
     - Administrative units: Controllers placed in spending ministries, but appointed by the Minister of Finance
  2. Accrual (liquidation)
     - Key players: Ordonnateur, pre-auditors
     - Administrative units: Spending ministries; Court of Accounts
  3. Payment order issuance (ordonnancement)
     - Key players: Ordonnateur, pre-auditors, treasury officers
     - Administrative units: Spending ministries; Court of Accounts; Ministry of Finance (Treasury)
  4. Payment (Paiement)
     - Key players: public accountant
     - Administrative units: Post Office Checking system, (exceptionally the National Bank)
- Operational details:
  - First-stage commitments require a priori approval (“first visa”) by a financial controller appointed by the Ministry of Finance.
  - Liquidation (accrual) involves provisional liquidation by spending department upon receipt of goods/services and invoice, and issuance of a provisional payment order.
  - Court of Accounts performs verification and a second “visa” control (liquidation definitive), enabling the Treasury Division to issue a final payment order (ordonnancement de paiement definitif).
  - Ordonnancement d’imputation allows Court of Accounts and Treasury to record transactions in budget accounts.
  - The system includes exemptions and special ordonnancement procedures (e.g., ordonnancement d’imputation exempted from a priori Court of Accounts approval for rapid ordinary spending or for revolving funds; ordonnancement de regularization for expenditures not requiring Court intervention).
- In Rwandan implementation, the decree-law’s complex roles were only partially realized; fragmentation and unclear responsibilities limited effective functioning.

### Changes in Budget Management Since 1994
- A. Restoration of Basic Budgeting Capacity
  - Post-1994 genocide, budget preparation and implementation capacity were seriously eroded with shortages of qualified personnel and language/work-practice heterogeneity between French-speaking and Anglophone-trained officials.
  - Early post-genocide budgets (1995–96) were not adopted before the fiscal year start; by the late 1990s the budget was prepared on time and of average standard for comparable low-income countries.
- B. Reforms in Budget Formulation
  - Late 1990s reforms included a new budget classification system introduced in 2000.
  - All ministries were required to formulate budgets in terms of programs and subprograms to focus on objectives and program results.
  - The annual budget was formulated within a medium-term budget framework allowing reorientation towards priority expenditures (education, health, agriculture, defense).
  - Movement toward integrating the development budget with the recurrent budget; the budget began to be presented as one unified document, though development expenditures were not fully programmatically integrated.
- C. Adoption of a Second External Audit Body
  - The 1991 Constitution referred to the Court of Accounts as the external audit agency.
  - In 1998, an Office of the Auditor General (OAG) was established to perform efficiency and effectiveness audits in addition to financial audits, modeled on the United Kingdom.
  - Technical assistance from United Kingdom and other donors supported the OAG; pre-genocide continental European donors did not strengthen the Court of Accounts.
  - In practice, neither external audit body functioned fully due to unavailability of consolidated annual government accounts.
- D. Decision to Decentralize Budget Management to Local Governments
  - Rwanda had a long tradition of administrative decentralization (previously divided into 12 provinces, including Kigali, with subdivisions down to “cells”).
  - In 2000 the government supplemented administrative decentralization with political decentralization via four laws relating to provinces, districts, the city of Kigali, and urban authorities (Law No. 43/2000; Law No. 4/2001; Law No. 5/2001; Law No. 7/2001).
  - The laws aim to transfer progressively certain revenue and expenditure competencies to the 106 districts, intended to be the focal point of political decentralization.

### The 2003 Constitution — Legislature and Executive (Parliamentary Powers)
- A Constitutional Commission drafted a new constitution to guarantee basic human rights and lay out governance structures; the constitution was approved in a national referendum on May 26, 2003, and adopted in Parliament on June 4, 2003.
- The Constitution recognizes a multi-party system with three separate and complementary branches: legislature, executive, judiciary.
- Key provisions affecting budgeting:
  - Article 79: “the Chamber of Deputies shall receive the finance bill before the commencement of the budget session.”
  - Article 71: The budget must be presented before the beginning of the third parliamentary session, which is mandated to be October 5.
  - Article 91: Bills and statutory amendments that reduce government revenue or increase State expenditure must indicate proposals for raising revenues or making savings equivalent to the anticipated expenditure—this constrains Parliament from increasing the fiscal deficit proposed by the executive and contributes to fiscal discipline.
- The Constitution does not impose quantitative fiscal rules (e.g., limits on public sector debt or a cycle-average zero-deficit requirement); such rules may limit fiscal flexibility and may require strong independent oversight to be effective.

*Source: _wp04132 - 1. Principles Underlying the Belgian Budget-Management System (PDF).*

### Box 3. The 2003 Constitution—Legislature and Executive

### Box 3. The 2003 Constitution—Legislature and Executive

### A. The Legislature
- A bi-cameral Parliament, with an elected chamber of deputies (80 members) and a Senate (26 members), elected or appointed
- Parliament has sole prerogative to enact laws.
- Each chamber has its own budget and enjoys financial and administrative autonomy.
- The Chamber of deputies can initiate a vote of no confidence in the government.

### B. The Executive
- President of the Republic:
  - elected by universal suffrage for a 7 year period
  - promulgates laws or may veto them
  - makes appointments of the Prime Minister, other Ministers and very senior public servants
  - can dissolve parliament, after consultation with all three branches of government
- Cabinet:
  - members appointed by the President of the Republic, selected from political organizations on the basis of their seats in the Chamber of Deputies
  - deliberates on bills and draft decree-laws
  - implements national policy agreed by the President of the Republic
  - accountable to the President of the Republic and Parliament
- Prime Minister:
  - presides over Cabinet meetings, unless attended by the President of the Republic
  - makes appointments of some senior public servants, including Secretary-Generals of Ministries
- Official languages : Kinyarwanda, French, and English

### Role of the Senate in Budget Process (uncertainties and scenarios)
- Constitution: Chamber of Deputies must adopt the budget; Article 79 states “Before the final adoption of the budget, the President of the Chamber of Deputies seeks the opinion of the Senate on the finance bill”.
- Unclear provisions and possible conflict scenarios:
  - No constitutional mechanism for resolving conflicts between chambers on the draft budget (e.g., if the Senate’s view on spending composition differs widely from the Chamber of Deputies).
  - Senate competence over organic laws and laws relating to defence and security (Article 88) raises questions about whether the Senate must approve annual budget estimates for defence and security and whether separate appropriation bills would be required.
  - Similar questions arise for budget items pertaining to the National Electoral Commission (Constitution-established).
  - Appointment approvals: Senate must approve certain senior officials (including the Auditor General) — unclear whether this is exclusive or if the Chamber of Deputies has influence, and how this coordinates with presidential Cabinet orders.
  - Termination of senior public servants: Constitution empowers the President to sign Cabinet orders terminating services; the Constitution is silent on parliamentary involvement in cessations (e.g., Auditor General).

### C. Organic Laws That Affect the Budget Process
- Three-tier legislative framework:
  - The Constitution
  - Organic Laws
  - Ordinary Laws (e.g., Annual Budget Law)
- Voting thresholds:
  - Ordinary laws adopted by simple majority.
  - Organic laws require a majority of three fifths of the members present in each Chamber.
- Constitution mentions three organic laws relevant to budget:
  - the annual budget law that determines State revenues and expenditures
  - the powers of the bureau of the Chamber of Deputies
  - the powers of the bureau of the Senate
- At time of writing, none of these organic laws had been adopted.
- Recommendation: organic laws should contain general principles; detailed provisions that hinder budget management flexibility should be avoided.

### D. Budget Preparation and Execution (constitutional provisions and timelines)
- Constitution does not require the Chamber of Deputies to adopt the budget before the fiscal year begins.
- Article 80: if the finance bill is not voted and promulgated before the commencement of a financial year, the Prime Minister authorizes by an order a monthly expenditure on a provisional basis of an amount equal to one twelfth of the budget of the preceding year.
- Budget execution reporting for the previous year:
  - Cabinet must submit, before June 30th of the following year, to the Chamber of Deputies a finance bill with a report on implementation of the budget, certified by the Auditor General.
  - To meet this deadline, “Cabinet shall submit a report on the implementation of the budget to the Auditor General not later than March 31st of the following financial year”.
  - French version: the finance bill is a law concerning accounts: une loi des comptes (budget execution laws “loi de règlement definitif” are typical in francophone countries).
- Constitution does not specify current year reporting requirements; only ex post reporting concerning the previous year is constitutionally mandated.

### E. External Audit (Office of the Auditor General—OAG)
- OAG established as an independent national institution responsible for the audit of State finances; independence guaranteed: “no person shall be permitted to interfere in the functioning of the Office or to give instructions to its personnel.”
- De facto abolition of the Court of Accounts by omission from the 2003 Constitution.
- OAG responsibilities include:
  - audit whether revenues and expenditures of the State, as well as local governments, public enterprises and parastatal organizations, were in accordance with the laws and regulations in force.
  - verify whether expenditures were in conformity with sound management and whether they were legal and necessary.
  - carry out all audits of accounts, management, portfolio and strategies which were applied in institutions mentioned above.
- Annual reporting:
  - Auditor-General required to submit to each Chamber of Parliament, prior to the commencement of the session devoted to the examination of the budget of the following year (i.e., in early October), a complete report on the implementation of the State budget of the previous year.
  - This report must indicate the manner in which the budget was utilized, expenses which were contrary to the law and whether there was misappropriation of public funds.
  - A copy of the report shall be submitted to the President of the Republic, Cabinet, the President of the Supreme Court and the Prosecutor General of the Republic.
  - The AG’s report appears fuller than the Article 79 June 30th draft law on the annual accounts.
- Lima guidelines (INTOSAI) noted: independence and submission of an annual report to Parliament are requirements; Constitution does not explicitly state that the OAG’s annual report needs to be published.
- Constitution silent on parliamentary involvement in removal of the Auditor-General; President could constitutionally make removal alone; reasons for dismissal unspecified.

### F. Public Service Commission (PSC) and Office of the Ombudsman
- Public Service Commission:
  - Responsibilities (as specified in Constitution):
    - the recruitment and appointment of public servants in central government and other public institutions.
    - the submission of names of candidates to the institutions concerned for employment, appointment and promotion of candidates who fulfill all the required conditions and have the most suitable qualifications for the job for which they have applied, taking into account the record of their conduct.
  - Management and personnel prohibited from seeking/accepting instructions from outside the Commission.
  - “The Public Service Commission submits each year its program and activity report to the Parliament and Cabinet”.
  - Implications and uncertainties:
    - centralization of recruitment, questions about PSC independence and potential conflicts with Secretary Generals of ministries.
    - role in establishing guidelines for total salary bill and staff numbers is unclear.
- Office of the Ombudsman:
  - Responsibilities include preventing and fighting corruption in public administration, and investigating complaints from individuals and associations against acts of public officials.
  - Potential role in reducing corruption and injustices emanating from the public sector if effective.

### G. Decentralized Authorities and Fiscal Relations
- Constitutional provisions:
  - public administration shall be decentralized in accordance with the provisions of the law.
  - decentralized organs shall fall under the Ministry having local government in its functions (currently MINALOC).
  - a National Dialogue Council established, bringing together the President of the Republic and five representatives of each district, municipality and town council; Members of Cabinet, Parliament, governors of provinces and the mayor of the city of Kigali may attend meetings.
- Laws establishing provinces, districts, urban authorities, and the city of Kigali adopted in 2000 and 2001.
- The 11 provinces are arms of central government, administered by provincial governors appointed by the President of the Republic. Provinces are part of the central government’s budget, whereas districts and cities have budgetary autonomy.
- Decentralization fiscal issues:
  - limited local revenue-raising capacity implies dependence on central government transfers or foreign grants.
  - needs:
    - design an appropriation mechanism for intergovernmental transfers.
    - monitor inflows and outflows of local government finances, inclusive of donor grants, to ensure national objectives (e.g., Poverty Reduction Strategy Paper) are achieved.
    - ensure local government indebtedness does not derail central fiscal objectives.
  - Coordination ambiguity between MINALOC and Ministry of Finance on oversight roles and macro-fiscal management; authority of the National Dialogue Council unclear.
  - Harmonization needed of budget preparation systems and accounting frameworks to facilitate OAG audits.

### H. Key Outstanding Issues Affecting Budget Management (summary findings and recommended legal/regulatory actions)
- Framework needs completion by organic laws, ordinary laws, and executive orders/decrees/regulations/instructions covering:
  - budget preparation and execution—responsibilities mainly of the Executive.
  - adoption by law of the annual budget—Parliament’s responsibility.
  - audit of the annual budget—the principal task of the Auditor General.
- Priority actions for Organic Budget Law (OBL):
  - include general principles of unity, comprehensiveness, and specificity (classification of revenues, expenditures, assets and liabilities; the appropriations structure).
  - define deficits/surpluses; require a medium-term macro-fiscal framework; specify main documents to present to Parliament; provide for supplementary budgets.
  - leave detailed calendar to MOF’s annual budget circular; leave detailed execution procedures to Financial Regulations, procurement rules, Internal Audit guidelines.
  - public debt: either include general principles in OBL or draft a separate Public Debt Law; establish annual public debt limits consistent with medium-term strategy (quantitative limits better in annual budget law or ordinary law).
  - accounting arrangements: executive to establish accounting standards following generally accepted accounting practices in collaboration with OAG and parliamentary budget committee.
  - fiscal reporting: OBL to list essential reports feasible for MOF: monthly, mid-year, and annual accounts—for central and local governments (inclusive of extrabudgetary funds).
- Responsibility of spending ministries:
  - OBL under consideration proposes a strong Minister of Finance with considerable powers over budget preparation, execution, accounting, and fiscal reporting.
  - Minister of Finance should be authorized to obtain periodic fiscal reports from districts to ensure consistency with overall fiscal policy and public debt strategies.
  - OBL could spell out responsibilities of senior officers (Secretary Generals, Prefects, Council Chairpersons or Mayors) and chief budget officers for integrated budget management.
  - Special arrangements needed for constitutionally independent entities (two chambers, OAG, Electoral and other Commissions) with greater autonomy in preparing their budgets.
- Organic laws relating to Parliament internal organization:
  - organic laws to determine powers of each Bureau, standing committees, departmental organization, members’ conduct, and voting modes.
  - recommendation: keep organic laws principle-based and place procedural detail in internal regulations.
  - Chamber of Deputies currently has nine committees; two key committees for budgeting: Committee on Economy and Trade; State Budget and Property Committee.
  - parliamentary committee structure options: single budget committee with subcommittees (one for draft budget, one for budget outcomes) or two separate committees; internal regulations should limit debate time to aim for budget adoption before fiscal year start.
- Role of the Senate in budgeting:
  - Senate competence on organic laws, defence, security, and elections requires clarification of how its “opinion” on draft annual budget will be treated (binding vs non-binding).
  - Article 95 requires a joint Commission to seek compromise on draft laws; Constitution silent on resolution if compromise fails—one option: grant Chamber of Deputies final authority.
  - organic law or internal regulations should specify Senate powers and timing in appointment approvals and terminations of senior officials (to avoid delays, especially for Auditor General).
- Government accounting system issues and urgent needs:
  - establish a unique chart of accounts to be used nationwide; harmonize accounting systems of central and district governments for consolidated nationwide fiscal reporting.
  - harmonize budgeting and accounting frameworks so cash spending reports align with budget nomenclature.
  - use harmonized frameworks to generate consolidated reports for general government (central government, local governments and extrabudgetary funds).
  - draft and disseminate Accounting Manuals and Guides.
- External audit legislation changes planned (Cabinet-approved amendments by November 2003 include):
  - elaborating AG reporting requirements: AG’s report on the draft law on the annual accounts (June 30th) will certify annual accounts; AG’s detailed annual report to Parliament prior to October session will summarize audits conducted.
  - stating explicitly that the OAG’s annual report will be published.
  - specifying that the President can terminate the services of the AG, but only on grounds of physical or mental disability, improper behavior, or incompetence; the Senate must ratify any such suspension.
- Decentralization and capacity-strengthening:
  - harmonize budget/accounting frameworks across central and local government; establish oversight roles between Ministry of Finance and MINALOC.
  - capacity needs: reestablish functioning central government accounting system capable of producing in-year and annual accounts; training and institutional capacity strengthening across executive and Parliament, and in the 106 districts.
  - donor technical assistance available; government must ensure knowledge transfer and consider civil service remuneration to retain trained staff.

### VI. Concluding Remarks (summary of institutional choices created by the Constitution)
- Institutional changes and choices established include:
  - a two-chamber parliament, both houses competent to approve organic laws (including annual budget law and loi des comptes).
  - an elected Chamber of Deputies that adopts the annual budget; Parliament can amend the draft budget but “may not lower taxes or raise total expenditures.”
  - decentralized budget management: districts and cities have administrative and financial autonomy.
  - an elected president who appoints all ministers and regional governors; Prime Minister appoints Secretaries General of spending ministries.
  - Cabinet deliberates on draft laws and submits the annual budget to Parliament three months before the fiscal year begins.
  - the Office of the Auditor General with wider powers than the Court of Accounts under the previous constitution.
  - the independent Public Service Commission responsible for fair recruitment and appointment of public servants.
  - the Ombudsman to receive complaints against public officials and perform anti-corruption functions.
- Remaining legal and regulatory priorities:
  - adopt (1) an organic budget law relating to the annual budget law, (2) organic laws for internal organization of the two chambers of Parliament, and (3) revisions to the 1998 Act Establishing the Auditor General.
  - legislative timetable: presidential and parliamentary elections must be held no later than six months after the constitutional referendum; following legislative elections and appointment of the 26 Senators, these laws are planned for the legislative agenda.
  - the new OBL must be accompanied by financial regulations, a clear nationwide accounting framework, and explanatory guides to budget preparation, execution, and accounting for central and local government.
- Implementation caveat:
  - successful implementation requires finalizing new laws, administrative regulations, and training staff; sustained unity among political leaders, civil servants, citizens, and donors in striving for transparency and discipline in public financial management is critical.

*Box 3. The 2003 Constitution—Legislature and Executive*

### References

### _wp04132 - References

### Bibliographic entries
- Bouley, D. J. Fournel, and L. Leruth, 2002, “How Do Treasury Systems Operate in Sub-Saharan Africa,” IMF Working Paper 02/58 (Washington: International Monetary Fund).
- Cieutut, Bernard, 2001, “La Cour des comptes et la réforme,” Revue francaise de finances publiques, No. 76, November.
- Drain, Michel, 1995, “Le cas particulier du contrôle de l’exécution de la loi de finances,” La documentation francaise, No. 5012-13, Paris.
- Harcourt, Claude, 2001, “La réforme de l’ordonnance organique vue par un ordonnateur,” Revue francaise de finances publiques No. 76, November.
- IMF, 2002, “Actions to Strengthen the Tracking of Poverty-Reducing Public Spending in Heavily Indebted Poor Countries (HIPC),” available on IMF website at http://www.imf.org/external/np/hipc/2002/track/032202.pdf , March.
- ——, 2003, Reports on Standards and Codes, Fiscal Transparency module, http://www.imf.org/external/np/rosc/rosc.asp.
- Kopits, George and Steve Symansky, 1998 “Fiscal Policy Rules,” IMF Occasional Paper No. 162, Washington, International Monetary Fund.
- Krafchik, Warren and Joachim Wehner, 1999, “The Role of Parliament in the Budget Process,” paper prepared for the Institute for Democracy in South Africa, available on http://www.internationalbudget.org/resources/library/parliament.pdf .
- Lienert, Ian, 2003, “A Comparison Between Two Public Expenditure Management Systems in Africa,” IMF Working Paper 03/02, Washington, International Monetary Fund.
- Saidj, Luc, 1993, “Reflexions sur le principe de séparation des ordonnateurs et des comptables,” Revue Francaise de Finances Publiques, No. 41:64–72, Paris, France.
- van de Voorde, A., and G. Stienlet, 1990, “Le Budget de l’Etat dans la Belgique Federale,” Centre d’Etudes Economiques et Sociales, Brussels, Belgium.

*Source: _wp04132 - References*

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