Rome, November 18, 2017 - 13.00
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State Budget

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State Budget

The need to augment budget data with further economic elements and data in order to make public-finance decisions more meaningful - including relative to assessment of the cost of public-administration services and activities - led to reform of the 1997 State accounting and budget system and to the introduction of analytic economic accounting through cost centres, an approach to be implemented in addition to financial accounting.

This instrument provided Government and Parliament with increased knowledge of administrative realities and improved both the assumptions upon which public-finance decisions are based and the involvement and accountability of management, on the basis of the objectives to be pursued.

The information provided - which establishes a relationship between the objectives pursued and the resources actually used - gives decision-makers better knowledge of the procedures relating to such resources and their consumption in relation to the results achieved by the government departments responsible for the carrying out of administrative tasks. Furthermore, it enables these bodies to qualify the relative procedures and consumption.

The fundamental principle of economic accounting is the recording of costs, understood as assigning a monetary value to the use or consumption of resources (economic competence), while expenditure, which characterises financial accounting, is expressed by the monetary disbursement required to purchase those resources.

Since 2000, therefore, the State Central Administrations have been involved in an innovative budgetary process that results in informative documents prepared by the Government and presented to Parliament.

The economic data make it possible to identify both the functional needs and the concretely feasible objectives. They support the budget creation process (specifically, budget construction and approval) and are an element of transparency and knowledge in the use of resources.

Today, five years after its introduction, cost analysis enables the State Central Administrations to carry out effective self-supervision and to allocate resources appropriately once budget proposals have been formulated and programs and objectives have been identified. It enables the Minister of the Economy and of Finance to assess better, on the basis of the cost of the tasks carried out and the services provided, the financial proposals made by various departments.

The budget illustrates the costs (the value of the actual use of resources) that the State expects to sustain this year, consistent with the financial allocations (the expense of acquiring resources and of transfers) approved by Parliament with the Budget Law for the current year.

The data are prepared and recorded directly by the Administrations and collected by the State Department of General Accounts' economic accounting system. The differences between the financial projections and the cost projections are reconciled by means of relative statements, prepared at both the State and the individual Administration levels.

Each year, the budget creation process involves:

- the formulation of the proposed budget, which illustrates the costs projected for the concrete objectives on the basis of the financial resources requested by the individual central Administrations for the subsequent year. It is prepared before the month of May preceding that to which the budget refers;

- the preparation of the presented budget, reformulated on the basis of resources projected in the Draft Budget Law presented by the Minister of the Economy and of Finance before 30 September of the year preceding that to which the budget refers.

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- the definitive budget, in which the objectives and the costs projected are redefined in line with the financial resources actually made available with parliamentary approval of the Budget Law.

The definitive budget prepared by the State Department of General Accounts illustrates the economic data of the central Administrations relative to budget forecasts and to the preparation of the budget for the subsequent year.

The budget identifies the costs that the State Central Administrations expect to sustain in a specific reference period, in terms of real, concrete use of human, financial and instrumental resources in the achievement of pre-established objectives. The managers of each Administration's cost centre validate the data.

The budget is intended to be a means of providing the Government and Parliament with an informative budgetary tool of use in qualifying public-finance decisions and in prearranging the assignment of resources to management as a function of the objectives to be pursued. In this context, the definitive budget refers to the economic forecasts reformulated with respect to the financial manoeuvre and on the basis of the resources projected in the Draft Budget Law.

In the document, costs are identified according to three categories within the economic accounting system, which make it possible to assess the economic data according to nature (Chart of Accounts), to duties (Institutional Missions) and to responsibility (Cost Centres). The document is divided into two main sections: the first relative to the overall State; the second dedicated to the individual State Central Administrations. In particular, the first part illustrates the costs that the State expects to sustain during the year, divided into "own" costs (that is, resources used directly by the central Administrations) and "allocated" costs (that is, costs transferred to bodies other than the State Central Administrations and that take on the nature of cost only subsequently).