Key Benefits:
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PROPOSED LAW NO. 32 /XII
Exhibition of Motives
In the fifth amendment to the Budget Framework Act, presented by the XVIII
Government to the Assembly of the Republic on December 23, 2010, includes a new article
referring to the submission of a multiannual budget programming framework, referring to
its effective implementation for the following legislature at the end of 2013, the year of the foreseeable taking
of possession of a new Government.
In the face of the meanwhile occurring dismissals of the Government and the holding of early elections,
this calendar has lost natural operationality, and it is necessary to redefine the strategy and the
procedures to be adopted for the fulfilment of the objectives that are underlying the
said legislative innovation.
It was in that sense that Law No. 52/2011 of October 13, introduced in its Article 6 to
obligation for the Government to present, together with the proposal for the Budget of the Budget of the
State for the year 2012, the strategy and procedures to be adopted in the framework of the law of
budget framework and, as well, the timing for its effective
implementation, anticipating it relatively to the initial intention to perform it only to
of 2013.
Considering the strategic importance and the effective contribution to a process
more transparent budget that this measure ends, understands the Government, notwithstanding the
your submission in annex to the State Budget Report for 2012, duty
submit in an autonomous degree to the approval of the Assembly of the Republic the strategy and the
procedures to be adopted within the framework of the law of the budget framework duly
calendarized for the period 2012/2015, among which include the parameters for
operationalisation of the multiannual framework of budget programming.
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With this legislative measure gives the Government compliance with the provisions of the said
article 6 of Law No 52/2011 of October 13 and Article 12-D of Law No 91/2001, of
August 20, in the wording given by Law No. 22/2011 of May 20, as regards the
presentation of a proposal for a law with the multiannual framework of budget programming,
consubstantiated in the linking, in terms of implementation of the strategy and
procedures, to a previously defined calendar, contributing to making the process
clearer and transparent budget.
This proposed law proceeds with the approval of the strategy and procedures to be adopted in the
scope of the budget framework law passed by Law No. 91/2001, 20 of
August, amended and Republicated by Law 52/2011, of October 13, including the
operationalisation of the multiannual framework of budget programming, and the timing of its
effective implementation up to 2015.
Thus:
Under the terms of the paragraph d) of Article 197 (1) of the Constitution, the Government presents to the
Assembly of the Republic the following proposal for a law:
Article 1.
Subject
This Law gives compliance with the provisions of Article 6 of Law No. 52/2011, 13 of
October, which amended the Budget Framework Act (LEO), passed by the Law
n. 91/2001, of August 20, and amended and republished by Law No. 52/2011, 13 of
October, approving the strategy and timing of the procedures to be adopted in the framework
of the LEO, pursuant to the provisions of Annex I that it is an integral part of.
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Article 2.
Review of timing
The timetable referred to in the preceding Article, which replaces, inter alia, the provisions of paragraph 2
of Article 12-D of the LEO, is the constant of Annex II to this Law which is part of it
member, and shall be the subject of the semiannual review, to be sent to the Assembly of the Republic,
upon porterie of the member of the Government responsible for the area of Finance.
Article 3.
Entry into force
This Law shall come into force on the day following that of its publication.
Seen and approved in Council of Ministers of November 9, 2011
The Prime Minister
The Minister of State and Finance
The Deputy Minister and Parliamentary Affairs
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Annex I
(referred to in Article 1)
Strategy and procedures to be adopted in the framework of the Framework Act
Budget
1. Introduction
The budget process comprises the set of rules and procedures, of character
formal or informal, which govern the elaboration, approval, implementation, monitoring, control
and correction of the budget, as well as the provision of accounts. By its size, by the
number of actors involved, by their complexity and by the nature of the incentives
present, the budget process poses important coordination and technical challenges
accountability of the different actors.
It is today widely recognized that the characteristics of the budget process are
determinants for the performance of public accounts. In this sense, the profound change
of the rules, procedures and practices in the budgetary field is a key pillar
of the financial and macro-economic adjustment strategy in Portugal. It is intended to
budget framework that promotes the stability and lasting sustainability of the accounts
public, as well as the quality, effectiveness and efficiency of public spending.
The guiding lines of this process of change, set out in the Government Programme and
in the Economic and Financial Assistance Programme (PAEF), they derive largely from
of the profound changes to the Budget Framework Act (LEO) approved by the
Assembly of the Republic in April 2011. The implementation of these changes will have to reflect the
current developments in the European plan, specifically with regard to the reinforcement of the
economic governance in the European Union and to the definition of minimum requirements that the
national budgetary frameworks should respect.
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They describe the main weaknesses of the current budget process,
enunciate the principles and characteristics of a new budget model aligned with
international best practices and present themselves with the strategy and the plan of achievement
of the budget reform. The immediate priorities are the improvement of the quality of the
budgetary information, the strengthening of control of the commitments made by the various
public entities, the reform of the Ministry of Finance and the operationalization of the framework
multiannual of budget programming.
2. Fragilities of the Portuguese budget process
The Portuguese budget process suffers from important fragilities, which are known and
are found to be widely documented. In generic terms, the budget process
portuguese is characterized by planning mechanisms assented in a logic of flows
of cash, annuality and absence of focus on the results to be achieved. For his shift, the
mechanisms for control and accountability are very detailed, based on
legality and regularity of expenditure, with excessive bureaucratic burden.
The most important weaknesses of the system are the high fragmentation of the budget, the
absence of a multiannual budget framework to anchor the expenditure and the absence of a
complete accounting system and critical information for evaluation of performance.
2.1. Fragmentation of the budget process
The fragmentation of the budget process manifests itself in different plans.
In the methodological plan , there is consideration of the differences between the optics of national accounting and
the optics of public accounting. The national-optical accounting relevant to the
clearance of the accounts in the European framework and, specifically to affer compliance
of the requirements under the Stability and Growth Pact-is based on a principle
of specialization of the exercise (" accrual ") , considering by this way the compromises
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assumed in the exercise. It is also based on a classification of the entities in relation to the
nature of the activities they carry out (mercantile or non-market). For his shift, the
public accounting, used in the drafting of the State Budget, in the implementation
budget and in the provision of accounts by the different public entities, has
assented in an optics of cash flows and classification of the entities depending on their
legal regime, excluding so from the public sector universe the public entities
corporate, public and other companies as the foundations.
The coexistence of these two optics translates into differences, which in recent years have
assumed particular expression, either at the level of the universe of the entities that are part of the
public sector wants at the level of the revenue and expenditure clearance of the year. These different
approaches affect the transparency of public accounts and hinder budgetary control
in real time. The amendment of the LEO last May includes standards that promote the
convergence of the two universes.
In the organizational plan , there is to consider the organic fragmentation within the own
public accounting. The drafting and implementation of the budget and the provision of non-
are centralised at the level of the Ministries. The Central Administration consists of almost
600 entities rematch in integrated services, without financial autonomy and funded
essentially by the State Budget, and in Services and Autonomos Funds (SFA),
who hold financial autonomy and are financed by transfers from the Budget of the
State and by own revenue. This situation obliges the Ministry of Finance to maintain
several hundred interlocutors, making also here difficult to keep in real time a
global vision and budget analytics and preventing effective budgetary control. The
situation is aggravated by the fact that many entities submit more than a budget
(for example, the Autonomous Funds and Services submit the so-called " budget
deprivation " and a budget pertaining to the application in expense of the transfer they receive
of the State Budget). In total, they are submitted to the Ministry of Finance more than
750 budgets for analysis and validation (Table 1).
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Table 1. Central Administration-Budgets Submitted to the Directorate General of the
Budget
Ministry
Entities that
submit
Budget
Number
Budgets
Submitted (1)
State General Charges 23 31
Presidency of the Council of Ministers 107120
Ministry of Finance 36 44
Ministry of Foreign Affairs 19 20
Ministry of National Defence 23 25
Ministry of Internal Administration 20 21
Ministry of Justice 29 29
Ministry of Economy and Employment 81-91
Ministry of Agriculture, Sea, Environment and Territory Planning 61 77
Ministry of Health 34 58
Ministry of Education and Science 136237
Ministry of Solidarity and Social Security 12 13
Total 581766
Source: M inOffice of Finance.
Notes: (1) Includes budgets relating to the transfer of the OE received by the FSA and specific appropriations.
In the accounting plan , the rules regarding the drafting and implementation of the budget settlement
in an excessive detail and complexity, hindering control by the organs
competent and the management on the part of the bodies. The classifiers of expenditure and revenue
are independent and do not settlement in a common structure and terminology. The multiplicity
and level of detail of budget classifications make numerous changes inevitable
budgetary officers during the implementation and undermine the management and budgetary control. In effect,
the budgeting of the expenditure is done by organic classification; by functional classification;
by budget programme, measures and project or activity; and still by classification
economic and by source of funding. The budgeting of expenditure by classification
economic may contain up to five levels of disaggregation. For his shift, the budgeting of the
recipe is made by distinguishing consignment recipes and general recipes. With respect to the
classification of expenditure and revenue, the budgetary keys of registration are constituted
respectively by 46 and 26 digits, in addition to the account of the Official Accounting Plan
Public (POCP). It additionally checks that the budget classifiers have been
unduly used to supply diverse information needs, to the detriment
of the widespread use of economic accounting (analytics or cost) and financial,
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of the evolution and integration of information systems and the systematization of legislation
current beholdant and inherent procedures.
Also at the level of the information systems , the fragmentation is very considerable (Table
2). In effect, budgetary information systems are poorly integrated and lack
unionization of concepts and data structures between systems. The information
accounting for integrated services has been centralised in a cash optics in the
Central Accounting System, being possible to keep up with budget information
on a daily basis. The SFA have, in general, own accounting systems, based on the
POCP or sectoral plans, being required to report on a monthly basis to the Ministry of
Finance the accounting information (on a cash and patrimonial basis). This reporting is done
through the designated Information System and Budget Management. The information on
appointments is dispersed in the Central Multi-Annual Charge System and on the bases
of Assumed Charges and Non-Pagos data. Please refer, however, that the information
of the entities that already use the GeRFiP/RIGORE Heritage Accounting System-
Location (with ongoing dissemination) is aggregated and consolidated, whether from the point of view
budget wants heritage, in the designated RIGORE-Central system, by checking a
significant developments in the quality of information for management, which will deepen the
measure that the universe of users increases.
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Table 2. Budget Information Systems
Acronym Object Location
SOE Information System of the Drafting of the State Budget Loading of the budget proposal of each entity
public on the perimeter of the OE. Institute of Informatics
SCEP Central Multiannual Charges System
Registration, on a permanent basis, of the expenditure on incidence
multi-annual of the Integrated Services, Services and Funds
Autonomous and the Public Entities Reclassif icadas (EPR).
Replaces the SCCP-Contract Information System
Multiannual.
Institute of Informatics
SCC Central Accounting System Accounting aggregate of the budgetary management of SI and
transfers from the OE. Institute of Informatics
SI Information System of Integrated Services Budgetary Control of Integrated Services. Institute of Informatics
SFA Information System of the Services and Autonomous Funding budgetary control of the Autonomous Services and Funds. Institute of Informatics
SCR Central Revenue System aggregate revenue from general revenue and revenue
consignments of the SI. Institute of Informatics
SGT Treasury Account Management System of the IGCP Bank Treasury System. Institute of Treasury Management
and the Public Credit
HB Homebanking of the Treasury Board of registration of non-budgetary bank accounts. Institute of Treasury Management
and the Public Credit
SCE State Collection System Control and collection issuance of the DUCs. Institute of Treasury Management
and the Public Credit
SIIAL Integrated System of Local Administration Information Management and Local Administration's patrimonial management.
Replaces the DOMUS application of DGO.
Directorate-General of Municipalities
Locations
CGE State General Account Issue of maps for the General Account of the State Institute of Informatics
ECE Accounting Entity State Control of issuance of funds for the entities adhering to
GerFip, SIG-DN and SFA. Institute of Informatics
RIGORE-Central State Integrated Resource Management Network-Central
Aggregated and consolidated information on management
budget, patrimonial and analytical of services and bodies
of the central administration.
Institute of Informatics
Acronym Object Location
SIC Accounting Information System Budget Management. Services and bodies of the
central administration
SGR Revenue Management System Accounting for revenues. Services and bodies of the
central administration
SRH Human Resources System Management of personnel and remuneration processing. Services and bodies of the
central administration
SIG-DN National Defence Management Information System Management budget and logistics of the Ministry of National Defence. MDN services and bodies
GeRFiP-RIGORE Management of Shared Financial Resources
Budget management, heritage and analytics of services and
bodies of the central administration in service regime
shared.
Institute of Informatics
Acronym Object Location
BIORC Business Intelligence for application in the Budget analysis System of management support information. Budget Director-General and
Institute of Informatics
-Online Services
Portal w eb for loading of information to be sent to DGO
by the Coordinating Bodies of Budget Programs,
Integrated Services, Services and Autonomos Funds,
Social Security, Autonomous Regions and Entities
Reclassif icated in National Accounts.
Budget Director-General
Source: M inOffice of Finance.
Central systems
Local systems
Other systems
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2.2. Absence of a multiannual budget framework
The Stability and Growth Programme (PEC) has been the only instrument of
medium-term budget schedule. The PEC presents the policy intentions
budget of the Government and sets budget targets for a four-year horizon
at a fairly aggregate level. Typically the measures presented to target the
budgetary objectives have a general and, even, programmatic character. The past experience
reveals that the defined objectives are not respected. The evidence suggests the absence of
any mechanism of correction (Graph below).
Budget Balance-Objectives of Stability and Growth Programs
PEC 1999-2002
PEC 2003-2006
PEC 2005-2009 (June)
PEC 2010-2013
Observed
PEC 2007-2011 PEC 2004-2007
PEC 2002-2005
-12
-10
-8
-6
-4
-2
0
2
1999 2000 2001 2002 2003 2004 2006 2007 2008 2009 2010 2010
2.3. Incomplete accounting system and absence of performance information
The available accounting and information systems do not provide, with equal
periodicity, crucial information for good management and effective delivery of accounts and
accountability of the managers of public money. As noted, the information on
budget implementation is still largely based on a cash optics, preventing
a timely knowledge of the totality of the commitments made. The systems
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existing also do not allow to obtain, in good time, consolidated information on the
financial position of the public sector. Equally, it is very incipient the information
on the cost of activities and projects financed by the State Budget.
The mandatory use of POCP by public bodies is found
provided for in the law some fifteen years ago (Decree-Law No. 232/97 of September 3), but the
its implementation has been time-consuming, the similarity of the experience of diverse countries. In the
however, in recent years very significant steps have been taken in this process.
At present, more than 90% of the Central Administration's SFA apply the POCP, or a
plan of sector accounts. For its part, the number of integrated services using the
POCP has increased significantly in the context of the GeRFiP project (Resource Management
Shared Financial). Since January 2011, the GeRFiP is available and in
operating in 65 bodies of the Central Administration (Integrated Services and SFA),
belonging to 9 Ministries (plus 7 Ministries than in 2010). For these organisms is
already possible to obtain consolidated accounts through the RIGORE-Central system.
Additionally, the ongoing project of expansion of the RIGORE-Central will allow
incorporate and consolidate in an integrated manner the financial position of budget implementation and
of the results, not only of the services and bodies of the Central Administration that apply the
POCP and sectoral plans, but also of the reclassified public entities, which passed
to integrate the SFA sub-sector and which use the SNC.
The Social Security sector and that of the Local Authorities also have systems of
equity accounting based on sectoral account plans. In the framework of the
Local administration there is already in operation for the entirety of the 308 municipalities a
system for collection of budgetary and heritage data, on a monthly basis, quarterly or
annual, depending on the typology of information (SIIAL system).
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3. Characterization of the new budget model
The literature on public finance and the international experience allow to identify a
set of principles that are invariably present in the budgetary process of the
countries that tend to be better successful in the discipline of public accounts and of
quality of public expenditure.
The budget framework should be based on four key principles, which strengthen
mutually: stability, sustainability, effectiveness and efficiency. A budgetary process
based on this set of principles contributes decisively to stability
macroeconomic in general and for the growth of productivity in the joint
economics.
In the macroeconomic plan, the budget framework should promote stability and
sustainability of public accounts, encouraging consistent policies with a degree
reasonable predictability of future taxation levels.
In the microeconomic plan, fundamental concerns should be to promote effectiveness
and efficiency of public expenditure and revenue capturing. The production of goods and services by the
public administration should be oriented towards the results that are intended to obtain with the
public policies. The productive process should be organized in such a way as to ensure that, for
a given quantity and quality of goods and services, the combination of resources is used
that allows to minimize production costs. Likewise, for a given level of
revenue, tax policy should be drawn in such a way as to minimise economic distortions
arising from taxation. For its part, public policies should be defined with the
concern to minimise the associated bureaucratic burden.
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This set of principles has been translated into the adoption, increasingly widespread in the
international plan, of a budget model based on five pillars: Budget rule;
Multiannual budget framework; Budget in Programs; Accounting patrimonial; and
Independent budgetary institutions. This is the model underlying the new Law of
Budget Framework and also to the Council Directive of the European Union
on the requirements for the budgetary frameworks of the Member States.
4. Budget reform strategy
Successful international experiences reveal that the modernization of the framework
budget is a demanding and time-consuming process, which implies not only legislative changes
and the adaptation of the budget support information systems and the evaluation of the
performance, but mainly the construction of technical capacity in the Ministries and a
change of attitude based on a widespread culture of transparency and accountability.
The complexity and magnitude of the changes needed to ensure the realization in the
terrain of the new budget architecture imply that the reform will be a process
continuous. It is important to ensure that the detailed design of the new model and its
timetable for implementation translating a broad consensus among the different actors-
Government, Assembly of the Republic and Court of Auditors. It is equally fundamental
develop a communication strategy that will clarify the society on the benefits
that can be removed from the new budget model.
The reform has to be properly planned, accompanied on the ground and the subject of
permanent evaluation. The strategy of defining and implementing the new model
budget will be assented on the following vectors:
i) Reform led by the Ministry of Finance , ensuring the involvement of the
key players in the budget process.
ii) Phased and themed approach , yet ensuring the vision of set and
overall coherence of the budget model under construction;
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iii) Plan of action , containing the detailed cast and calendarization of the actions to
develop, as well as the identification of the entities responsible for their
concretization;
iv) Follow-up, control and evaluation continuous of the work in progress and of the
changes implemented;
v) Technical assistance of international institutions , in particular of the Monetary Fund
International and the European Commission, benefiting from the broad knowledge
of these institutions on international best practices and difficulties
and challenges that arise for budgetary reform.
5. Actions to be developed
The immediate priorities consist in the adoption of reinforced mechanisms of control of
expenditure and commitments, to be applied from the beginning of 2012; in the reflection on the
reform of the Ministry of Finance; and at the launch of the necessary work to the
concretization of the LEO, with emphasis on the operationalisation of the budget framework
multiannual. In a midterm perspective, the reform does not run out in the current LEO,
deserving particular emphasis on the need for review of the accountability process.
5.1. Enhancing control of expenditure and commitments
The strict compliance with the quarterly and annual limits for the budget deficit and the
limits on the accumulation of debts imposed by the PAEF requires temporary and effect measures
prompt to strengthen the control of expenditure and commitments made
by the different entities and levels of the public administration. In this sense, they will
pursued until the end of 2011, various lines of performance.
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5.1.1. Reinforcement of expenditure control procedures
In the 2012 budget implementation, measures will be adopted aiming at improving the quality of the
budget information, limit the fragmentation of the budget and strengthen the control of the
expenditure and commitments made by the different sectors of the Administration
Public.
The approximation of the universe of the State Budget to the universe of accounting
national, as of January 2012, will make it possible to substantially improve the comprehensiveness of the
budget information available monthly.
With the aim of alleviating the difficulties of control arising from the high
budget fragmentation, have been indicated, by each Minister, political interlocutors and
technicians with the Ministry of Finance for the monitoring and control of the implementation
budget. By the end of 2011, a process will be defined, involving the Ministry of
Finance and the Coordinators of the Budget Programs, for follow-up
permanent of the evolution of public expenditure and the number of herds by Ministry, which
allow for an overall view of the financial situation of each Ministry. In line with the
recommendations from the IMF's technical assistance mission and the European Commission on Management
public financial, held in July 2011, particular attention will be paid to control
of the overdue debts (" arrears ") and to the situation of public companies and PPPs.
A monthly report of the Minister of Finance to the Council will also be instituted
Ministers on budget implementation. Each Minister will be responsible for the strict
compliance with the budgetary limits set for its Ministry, by its fit,
specifically, the responsibility to correct any deviations.
The procedures to be defined should, to the extent that this is warranted, have consecration in the
Decree-Budget Implementation Act, which will be approved in Council of Ministers until
end of 2011.
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In the framework of the reform of budgetary procedures and the strengthening of control of the
expenditure, will still be reassessed the budgetary circuits of the co-financed programmes
by the European Union with the aim of enabling precise mapping between the
budget and annual implementation and multiannual programming.
5.1.2. Review of the State Financial Administration Regime and control of
appointments
The Law on Bases of Public Accounting (Law No. 8/90 of February 20), as well as the
constant regulation in the Decree-Law No. 155/92 of July 28 laying down the
Regime of the State Financial Administration (RAFE), will be reviewed by the end of 2011,
with a view to improving procedures, to make sanctions more effective by
default and broaden the scope.
Following the publication of Circular No 1368 of the DGO of September 9, 2011,
on cabins, commitments and arrears, measures will be adopted from
strengthening control of commitments, specifically through the introduction of standards
to limit the assumption of commitments to the existing financial means in this period of
credit constraint; from the creation of a system of certifying appointments (without which
payments to suppliers will be refused); from the creation of more effective mechanisms of
control of multiannual commitments; and of enhanced penalties in cases of
default.
Still in the framework of the RAFE review, it will be weighted to mandatory periodically
be reviewed the own and consignment recipes of public bodies when these do not
result from the sale of goods and merchant services or contracts with third parties.
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5.1.3. Revision of the Finance Law of Autonomous Regions and the Finance Act
Locations
It is planned to submit by the end of 2011 of a proposal for a review of the Laws of
Regional Finance and Local Finance, with the aim of adapting them to the principles and
rules established by the new LEO. This amendment should cover various aspects,
deserving particular highlight the reduction of the fragmentation of the budget and the introduction of
mechanisms for political accountability of financial decision-makers.
5.1.4. Rethinking the role of the Ministry of Finance as the custodian of the
stability and sustainability of public accounts
The detailed definition of the methodologies and operating procedures is condition
necessary, but not sufficient, to ensure the effectiveness of the new budget architecture. The
new budget model requires the creation of analytical and managerial capacity in the Ministries
sector-specific and, above all, in the Ministry of Finance. It also requires a reorientation of the
Focus of the Ministry of Finance, which should go on to focus its performance on the definition
and control of the multiannual framework, in the evaluation of major public investment projects
and in control of the financial situation of public companies. The reform process
budget is thus inseparable from the reform of the Ministry of Finance itself.
The Ministry of Finance becomes reserved the competence of preparing the Programme of
Stability and Growth and of, in that scope, define and propose the budget framework
multiannual. Additionally, the Ministry of Finance should focus on the
monitoring of the overall budget implementation of each Ministry, analysing trends,
detecting deviations and discussing with the sectoral Ministries their correction and
scrutinising decisions with multi-annual impacts. This reflection on the role of the
Ministry of Finance cannot be disconnected from deeper reflection on the
organisational and management model of the Ministry within the framework of the 2 phase of the PREMAC.
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5.2. Implementation of the Budget Framework Act
The implementation of the standards of the new Budget Framework Act, from the
State budget for 2012, will bring significant changes to the budget process, which
will translate into visible improvements in the area of budgetary transparency and contribute
to significantly alleviate some of the above-identified fragilities.
By virtue of the provision in Article 2 of the new Law, an approximation of the universe of the
public accounting to the universe of national accounting. In effect, the entities
public that, regardless of their nature and form, have been included in the sector
of the Public Administrations in the framework of National Accounts published by the Institute
National Statistics, and referring to the year before that of the tabling of the Budget,
go on to integrate the State Budget, being for the effect equated to Funds and
Autonomous Services. In this context, they integrate the State Budget for 2012, 53
new entities of the 65 included in the sector of Public Administrations of Accounts
Nationals in 2010 (but not in the OE universe), highlighting large companies
public transport sector (Roads of Portugal, REFER, Metro de Lisboa e
Metro of Porto), the School Park, the University Foundations, the various Societies
Polis, the Arsenal of the Alfeite, the Air Means Company, the RTP, the National Theatres and the
Santa Casa da Misericórdia de Lisboa.
As previously referred to, and in the line of best practices and recommendations to
European level, the budgetary architecture underlying the new LEO is based on five
key elements: budgetary rules; multiannual budget framework; budgeting
by programs; heritage accounting; and independent budgetary institutions.
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5.2.1. Budgetary rules
Pursuant to Article 12-C of the LEO, the budget balance, corrected for cyclical effects and
temporary measures, may not be lower than the medium-term target set out in the
scope of the European Union's budgetary supervision procedures. This objective
is currently set at -0.5% of GDP, in the Portuguese case. Any deviations from this
rule should be corrected in the following years, contradicting this form the trend
past of systematic accommodation of budgetary deviations. The budgetary rule applies to
from 2015, owing to the annual reviews of the Stability and Growth Programme a
present in the meantime to provide for the adjustment trajectory compatible with the achievement
of the defined purpose.
With respect to the budget rule it is necessary:
i) Define the methodology to be used in the determination of the structural balance and the
how to operationalize the mechanism of correction of deviations from the
budgetary objectives;
ii) Re-evaluate the medium-term target for the budget balance defined in the
scope of the Stability and Growth Pact;
iii) Define how the transition will be made to the full application of the rule of
budget balance.
5.2.2. Multiannual framework of budget programming
The Government will submit annually to the Assembly of the Republic a proposal for a law with the
multiannual framework of budget programming, which it will define, for the Administration
Central, expenditure limits of the funded by general revenue for the following four years,
in line with the objectives of the Stability and Growth Programme (Article
12.-D of the LEO). Binding limits will be established for each budget programme
for the year with respect to the Budget (year N + 1); for groupings of programmes by
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areas of policy intervention for the year N + 2 and for the set of all programs for
the years N + 3 and N + 4.
A multiannual budget framework based on a credible macroeconomic scenario and in
binding limits for large areas of the imprint expenditure on the conduct of policy
budget a medium-term perspective, countering the bias for a
excessive growth of expenditure inherent in the public sector activity. The existence of
a multiannual budget framework still allows the managers of public bodies
know, with a reasonable degree of certainty, the resources with which you will be able to count in a
set of years, contributing in this way to improve their ability to
planning, resource affection and accountability for the results achieved.
To operationalize the multiannual framework of budget programming, it becomes necessary
define:
i) The universe of expenditure subject to limits and the nature of these limits
(indicative or binding). In particular, it is necessary to respond to
issues such as: The expenses that do not depend on the action of the Government (by
example, the payment of the financial contribution to the European Union) must
be subject only to indicative limits? They should be considered as the
expenses financed by consigned revenue?
ii) Procedures for elaboration of expenditure projections and revenue to medium-
deadline, including the elaboration of the underlying macroeconomic scenario, the
construction of the scenario of invariant policies and the assessment of the impacts of
new policy measures;
iii) Rules on the transition of balances, specifically in respect of balances
of revenue from consignothing or funds to finance investment projects.
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The multiannual framework of budget programming will be submitted for the first time to the
Assembly of the Republic in April 2012, at the same time with the presentation of the
Stability and Growth Programme. Once the elaboration of projections of
medium term is a very complex exercise that requires capacity development
analytics and the accumulation of experience, the defined expense limits will be, in a
first phase, indicative.
5.2.3. Budget by Programs
The State Budget will hend be structured by programs, allowing for a
better perception of resources allocated to the different public policies (Articles 18 to 20.
of the LEO). A Budget-by-Programs framework, complements the traditional
organic and functional classification of the expenditure with a classification focused on the objectives
of the policies and the results to be achieved.
The formulation of the State Budget by programmes has been already tested in the Budget
relative to 2011 and will be consolidated in 2012. Table 3 elenates the 14 programs
budget that will be vigorous in the State Budget for 2012. Each budget programme
will have a single executor ministry, i.e. there will be no horizontal programmes, reinforcing-
if, in this way, the responsibility of the Ministries for the results achieved. In the
generality of the cases, each Ministry will be responsible for a single program, which
allows for greater flexibility in the implementation of the budget. The Ministry of Education and
Science has chosen to define independent programs for Basic and Secondary Education and
School Administration and for Science and Higher Education. The Ministry of Finance
will also carry out two programmes: Finance and Public Administration and Management of the
Public debt.
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Budget Programmes and Managing Entities
Code of the
Program Ministry Executive Program
001 Organs of Sovereignty General Charges of the State
002 Governance and Culture Presidency of the Council of Ministers
003 Finance and Public Administration Ministry of Finance
004 Management of Public Debt Ministry of Finance
005 External Representation Ministry of Foreign Affairs
006 Defence Ministry of National Defence
007 Internal Security Ministry of Internal Administration
008 Justice Ministry of Justice
009 Economics and Employment Ministry of Economics and Employment
010 Agriculture, Sea and Environment Ministry of Agriculture, Sea, Environment and Territory Planning
011 Health Ministry of Health
012 Basic and Secondary Education and School Administration Ministry of Education and Science
013 Science and Higher Education Ministry of Education and Science
014 Solidarity and Social Security Ministry of Solidarity and Social Security
Source: M inOffice of Finance.
In line with the philosophy behind budgeting by programmes, Article 72 of the
LEO provides for the Government to send to the Assembly of the Republic, by March 31 of the year
following, a report of the implementation of the budget programmes, explaining the results
obtained and the resources used. Since the State Budget for 2012 is the
first to be drawn up and implemented in accordance with the new LEO, this report should be
presented for the first time in March 2013.
The full implementation of a system of budgeting by programs requires:
i) Set out general guidelines regarding the definition and collection of indicators of
performance;
ii) Clarify the articulation of the indicators with the evaluation systems of the
existing performance and, specifically, the SIADAP;
iii) Clarify the allocation of responsibilities between the Ministry of Finance and
the sectoral ministries.
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5.2.4. Accounting procedures and accountability
The LEO predicts that the accountability by all public entities should be
made on the basis of POCP, with the exception of the entities that apply the System of
Accounting Normalization (SNC) or to draw up their accounts in accordance with
the international accounting standards (Article 11 of the LEO).
As noted above, the adoption of POCP has been a very time-consuming process,
even though a major progress has been made in recent years. The Government is
committed to completing this important reform of adoption of an accounting
patrimonial by the Public Administration, which will integrate the three strands of accounting-
budget, heritage and analytics-allowing to know with greater rigor the situation
financial of the different public entities, as well as the costs of goods and services
produced.
The adoption of modern management information systems and the use of computer science of
management is a crucial option of the modernization of the budget process. The adoption of these
systems must, also oblige a redesign of processes and procedures
budgetary and accounting. In fact, the current processes and procedures were
drawn about 20 years ago. In this period of time there has been a huge
evolution of management information systems. The gains from the use of these new
systems arise not so much from the adoption of a new technological platform, but from the
redesign of process and procedures that a new technological platform allows.
In Portugal has been followed the route of introduction new information systems without
concomitant alteration of the processes. The absence of this reengineering of processes
budgetary and accounting has consequences for the quality of the information, for the
control and for the costs of implementation. In fact, the management information systems
tend to include processes that reflect standards international, so the abandonment of the
idiosyncrasies nationwide facilitates considerably the transition to information systems
more sophisticated.
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This option means an extensive review of current budgetary procedures and
accounting and accountability, either relatively to the form or in respect of
content. In fact, on the one hand, the documentation of accountability is extensive,
confused and often repetitive. On the other hand, the provision of accounts should allow
measure and compare results. These should be compared to the past, with the rest
economy and with other public sectors. These three dimensions of assessment impose that the
process of accountability is stable over time; which use, as much as
possible, principles, methods and valuations identical to those used by the remaining economy;
and that it follows, albeit with possible adaptations to concrete situations, the standards
international accounting.
In the framework of the technical assistance provided for in the PAEF, it was suggested that the
principles of International Public Sector Accounting Standads (IPSAS) in the presentation of accounts
of the public sector entities. According to the international institutions, the adoption
of these accounting principles would increase transparency in the provision of accounts and the
accountability. However, the reporting of cash-in-the-box information would remain a
important part of the process of accountability due to the need to predict the
needs for treasury and financing in global terms.
A further aspect referred to in the framework of technical assistance is the need for certification
external of the accounts in the context of the accountability process. This development
will force a significant reformulation of the external evaluation and certification process of the
General account of the State and the accounts of the various public entities.
5.2.5. Council of Public Finance
An independent body will be set up-the Council of Public Finance (CFP)-whose
mission is to pronounce on the budgetary objectives and scenarios, the
sustainability of public accounts and compliance with the rules on balance
budget, the expenditure of the central administration and the borrowing of the Autonomous Regions
and Local Authorities (Article 12-I of the LEO).
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International experience reveals that the creation of an independent entity of this
nature allows to significantly increase transparency about the situation
budget and public sector patrimonial. The CFP will thus be instrumental to the
improvement of the political decision-making process and thus for the quality of Democracy. Will be
equally fundamental in the recovery of the external credibility of the Country in the face of
international investors.
The Assembly of the Republic adopted the Statutes of the CFP at the end of September 2011. The
appointment of the members of the Superior Council of the CFP will occur before the end of 2011,
being expectable for the Council to start its activity in the first months of 2012. The
members of the Higher Council will be appointed by the Council of Ministers under proposal
joint of the President of the Court of Auditors and the Governor of the Bank of Portugal.
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Annex II
Timetable for effective implementation of the strategy and procedures referred to
in Article 2, to be carried out by 2015
Operational issues and timing
The detailed design of the new budget framework and its progressive implementation
are to be viewed in a project management perspective. In this sense, it will
constituted a Steering Committee and two Thematic Working Groups (GT). The Steering
Committee will be led by the Minister of State and Finance and composed of the
Secretaries of State of the Ministry of Finance, leaders of the Ministry of Finance and
external experts, and it will be able to guide and follow up the work of the Working Groups.
The GT on the Reformation of the Ministry of Finance will be responsible for the drafting of
a proposal for reform of the Ministry of Finance and implementation timetable. The
GT on Public Expense Control will be responsible for submitting a proposal of
operationalisation of the budgetary rule and the multiannual framework contained in the LEO, including the
calendar of implementation. Working Groups will be composed of technicians from the
Ministry of Finance, and may integrate technicians from other Ministries and other experts
national or international, particularly in the context of technical assistance by the
International Monetary Fund and the European Commission.
The works will have three phases. Phase 1 is intended for the design of the solutions to be adopted in the
scope of each area of work and is expected to culminate in the delivery of a proposal of
solution and implementation. In phase 2 decisions will be made as to the solution to
implement. Phase 3, which will be able to behave multiple steps, will be of implementation.
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Data-bound Action Responsible
Nov 30-11
Submission to the Council of Ministers of Proposal for reinforcement of expenditure control
(process involving MF and Programs Coordinators) to be enshrined in the Decree-Law of
Budget implementation
Minister of Finance
Dec 15-11 Nominating members of the Council of Public Finance Council of Ministers Council of Ministers
Dec 29-11 Approval of the DL of Execution Budget Council of Ministers
Dec 31-11 Proposal for revision of the Law No. º8/90 (Public Accounting Bases Act) and the DL
N. º155/92 (Regime of Financial Administration of the State) Minister of Finance
Dec 31-11 Proposal for a review of the Local and Regional Finance Laws of the Council of Ministers
Feb 28-12 Approval of the drawing of the multiannual budget framework and implementation schedule Minister of Finance
Apr 15-12 Submission to the AR of Budget Strategy Document 2013-2016, including limits
multi-annual spending by area of policy Minister of Finance
Apr 30-12 Submission Programme for Stability and Growth to the European Union Minister of Finance
Oct 16-12 The State Budget for 2013 Minister of Finance
Jan 1-13 Start of implementation of new organizational model of the Ministry of Finance GT Reform MF
Mar 31-13 Report of implementation of budget programmes (Article 72 of the LEO) Sectoral ministries
Implementation of the Budget Framework Act
