• BRW.l/8
Distr. LHIITBD 8 September 1961
DOCUMENTS OFFICE
SCONO~IC COI~lISSION
FOR AFRICA Workshop on Problnms of Budget
Reolassification and Management
FILE COpy
NO TO BE TAKEN OUT
Spcnsored jcintly by the United Nations Eoonomic Commission for Africa, the United Nations Bureau of Technical Assistance Operations, the Division of Public Administration and the Fiscal and Financial Branch of the Department of 2conomic and Social Affairs of the United Nations
4-15 September 1961 Addis Ababa, 2thiopia
SCONOI;IC AIJD FUNCTIONAL RECLASSIFICATION OF CEriTRAL GOVERNNSNT .J;XPENDITURES FOR THE
RSPUBLIC OF LIBERIA FOR THE YEAR 1960
SQbmitted by the Participants from the Republic of Liberia
64-2220
•
/::::'(,,18 AJTD FUNCTIONAL R"CLASSIFICATION ,':F C~J\~Tfi..A'L GL!V--:::RN1~=.JNT .;;XFEl'TDlTUR::::';S FUR
TE~ ~~PUBLIC
OF
1IB~RIAF01,::rI13 YI:AR 19(,0
r'}l<~ pr-escrrt r,~cl:~ssifico, tion of the expenditures of the: Govern.nh.~nt
of Lib0ria for tho ca Lcnd ar- YGar 1960 is pri.ma.ri Ly d c s c r-Lp b Lvo , mainly be c aus e ·suet a c La s si fi c.it i on is not pr-e s errtLy used. for oi thc r policy- making or for bUQe;Gt .idmi m str-a.t Lo n purposes. ':'h3 classification that is found in the United iiations pub Iic at.io n A LJ.E!...uJ.l f,gr -':conomic and Functional Cli1ssifipation of Gov0rnment Tr":.!!-,,~~~~(:Jni toQ ;;ations, Department of 2conomic and Social .-l.ffairs, IG11 York, 1)50) was f'o Ll owcd rather ffi0chanically in this particular 2x~rcise. ?~2r~ is ~t presont no purpose in carrying out a modification uct i I }.,roc2(iur8S for the
LmpLementa't i.on of eoo noui.c policy J..nQ for buclt.8t admi ni st.rati on are clarified an~ Tefurmod.
Cne ra-lson for following a stclndard classifics-tion is that it promotes international cor,~pn~;,-3.bility .o,f gcvor-nmerrt expcnd ; tur-o s ,
Hovcver-, it must b e rem0mbor<,)d that a.ny gi vo n s t.r-uctur-a L fact about tIl<-:
expend.it ur o of eOv..:Jrnr:h.::nts (for axampLc ,
ttG:
f'raot
i on of gov0rnm..::ntexpendxtur o s porrt On od.uo atLo n ] iiO a reaQL tant of tho past history of t.h«
g'overnm0nt and lr,so"t policy .of tho country, so tt~t one c~nnot usc th.e comparison of Srch .r f'a.ct .is the..) -bac i.c of criticism of th,0 porforlJ.::lr~c·~::.;
of onc country in tarrns of thOS0 of anoth er-, ..:~ cLc.s c i.f'Lc a'tion into br-oa.
cJ.,tegoriG8 is us e f'u.l , .n.-Jv8rth,:jlBsS, in CGttint:: J, ro~[sh picture of tl)~
di.visi cn of' gov-2rru:h::nt ~),:,-pciYJditJ..rcs 3.I:iOng tl:e various act ivi.ti as an.I .services that a c.orrtr a), govcrD.ill~nt may be -::!xpcct;,:;d to cu.rr;y out.
F\1.rth8rmor0, a division into ~,J.t8gorio~ of currcnt '2XfJ,:;!',liture s and
capi tal 8x;dndi tJ.TG cartai nLy Ci.ids in t.h ; c on str ucti.on of n~"'tic':n::.:.l acccunt s in an Jcol1omy v:rhGr0 th , n.rtiona L ao oounti ng cy stcm is not COlTliJ12tC:d..
Furth ar apec i.I'Lc :problGms ~'rill be tO~0110d L-I:pon Lat ar ,
- 2 -
The ~conomic Cl~ssification. Jnfortuna-tely, tllO aconomic
cla.ssifica.tion of Uov'-JrY)..illdnt of Ld bo r i.a ex pe ndi,t.urc docs not .::.,risG from
t.L.,:; COLlfJL..Jtu s]st\:::m of Gov·JrnmJnt of ....;ibcri a tr.J.Ds:J.ction account s , In
:9articula.r, r ..o 021Jita I J ..ccounte J..t all ar c .ivai Lab Lo for government, so t.h.it tho oxpondi,ture of Gov ar-nmc nt of Liberia 'has buo n rliv i.d.ed into current .and ca.p.i tal ex poudi,tar o mainly ac c ord i.ng to' tho knowlGd~0 of ap oci.f'Lc functions of the) cx p andi,t ur o and ac co ru a n.; to ths official Dames of tha expe ndi t ur c accounts. Hot- all of t h.: acc ourrt s in the aconomic classification, which ar o summari zed in Table 26 on paLd 159 of tI-"G referenca manual, are of usa in this '.Jx8rcise, mainly be c.iu s e curtain activities of gov~rnment shown in this tablG do not. Gxist in Cove r nmcrrt of 1iheria..~
Indepenu8nt govornm0nt trading orGaniz~tidns ur0 ~lmo8t non- cxi stant in Govor-n.nont of ~iboria oxc e pt for the PO-dor Autllority whi.ch does -iot pr....-sont 3. sop.::..r-J.t.) set of accounts. :'!l'.:-I"13foro, the oatcg o.r Les u s od in tLis cla.ssification \Tore~ current expondit ur-o on go'ods and sarvic0s, interost on goneral debt, subsidios, t~an8f0rs to illtiomo of household.s, tl',J.nsfur"s to 1 oco.I g-ov,::: r nra,nt , and transf8TS to 3.broad, all of i-h: ch bainG c uz-trc nt ~)xlJ(;nrlituros; gross fixed capital fornation of
£;.:;noral governmont, calli tJ.l tr.J,,1sfors .:to Lee a I governmont, to o t.h.rr domustic SectOL'S, ",nd to abroad. No loans and advanc\Js to any sector, d ornoati o or for\Jig'l" 1ICT2 raado , ',Iith r e s poct to the spcc Lf'Lc activit i e s and Gxpc(,CLit.ur c c of the govornmont, on , should nota t ..__.at dr3.Y"'~ts to
pr-Lvate and somi--.1-:ri va.t ; oducational institut i on s , such a s mission schools W01'8 takGn as subsiJi08, local scholarships as tr~Bsfors to the income account of nou sch oLds , foreir;n acr.o Lar-shi ps Cl,S cur-r-ent trunsfers abroad, and oxpondi t ur c on the furnishing and equi pmcrrt of embassies and
ccnsulatGs as current rather than oapital expenditurG abroad. A major
element of arbitrarinoss in the clCl,ssification relatGs to thG classification of capital expe ndi t.ur-c on social and cornmuni.ty sar-vi cc a , Capi tal
expenditure on roads, strG8ts, water supplios, SOffi0 power supplies, SGwerabv,
and municcpal buildings was list8~ as a capit~l transfer to local gOVGrnm0L'
- 3 -
while capital Qxp8nditure on the constructicn cf sehocls was listad under
goneral govornment capital ~xp8nditure. On3 T0ason is th~tit
is possibloto divide the first set of items into expenditure in specific geegraphic
areas, but that gov0rr~0nt accounts do not show such a division for th3 -' second sot of oxpcndi tLITGs. a second roascn is that schools are nationall;yadministered, whila there
~repotentially or actually independent
authorities for the administration of power supplies, stroots, and water and sewerage facilities. These reasons oannot be pressed, however. The
division is basically
~rbitrary. ~ote,however: 1) that four fifths of .r oad s and streets expenditure is specifically a,llocated to, the streets of
the city ef l·,enrovia; 2) that at least fifty per cent of sanitation and '.rater supply expenditure is also specifically made for the city of Iionrovia·
3) that the capital transfer for local government on pO<Ter supply <Tas made for a power plant in lJaryland County; and 4) that the general transfer to local government for capital expenditure was specifically for the Eonrovi:l City Hall. 'Both l!ionrovia and Uaryland County have independent government organizatiens that presumably have taxing power, though they do not now use ,such power.
For purposes of classification, the broadest possible concept of capital was taken' all expenditures for buildings, plant and equipment, all expenditures for transportation equipment, and most expenditUre for
furniture and fixturos were considered as capital expenditures. All expendi.tUTes on roads ~'fdrG taken -o.s capi tal expandrtur o s , lfitb. the
exception of
c8rt~incentral administrative expenditures of the Department of }'ubliclorks ani Utilities. Tho line of reasoning is' 1) the design and euper-v.i s
ion of reads and streets construction is part' of the cons
t.ruo
tior.
.cost;
2)
maintenance of highuayEl, roads, and s-t r eet s -is a capitalcensumption charge. Thus, only basic office administration eseaped classification as a capital expenditure on highways, r.cad s , and streets.
The division of the actual expandi t,U'es of the Department of I'ubiic >iorks
and Utilities, both from the regular
~udbetof the Government of Liberia
and the bud c'3t of the Joint Ccnm.i s a
ior , was accomplished by examining the
specific functienal divisions of the repartmcnt ef rublic Jorks and
Utilities for a re::lsor3LJ.c basis of assignment of all its cpor-a.t Lon s , Fortunately, tho di vi s i.o ns of the D'3partmcmt of Fub Li.c 'forks and Utili ties allowed for a fairly s t.r-a i.ghtf'or-war-d assignment of its
activi ties into general adrni ni str at Lon , on tho one hand, and administratiV'2,
supervisory, design, and mai nte nanc e act i.vit i.o o on roads, on, the other ha.nd In t.h o construction of roads, and, i.nd c od , in tho troatrncmt of 3,11 constrClc-- tion activities, th c totaI c ost of all construction wa s cL3Xged to the ~18clI:
of paymont, r a.t.h c r tb~n rror.:-::.tcd ei,tL8r OV~~ t.he period of construction o:
over the life of th~ facilitiGs built.
,
The functional classification.· There are a
nw~berof arbitrary
olements in tha funotional clussifioation, beoaase the Govormnent of1iber~a has Qany ovor-lapping aotivities distributed among its various departments, and be c aue c it has many QuI ti-purpose and spacial purpose organizations attaohed to it. All of this .re au L't ed in a division of many Government of ~ib8ria dGpartments into various functional categories
according to the know lodge of the classifiers. It is to '08 not ad that th.:.;
c api,tal oosts of particular functions 'i0re d i.str a.buted as fully as poa s LbL.
among thGSG functions. 'l'hus, fiscal adminiutration lias cr.arb'3d with the capi tal cost of thc n"", 'I'r aa suz-y building (or rather, '"i th the amount of the 1960 payQcnt of ~;OO,OOO for construction thereon), and the legislature was char-g.sd with capital expenditures on tho Capi,tol Building in which th,,;, meet. On the oth.sz- h and , the general supply oporations of the government--
the rental of houses, the activiti0s of the central purohasing agenoy, etc.
-- were lumped together. Otherwisc, an arbitrary and time-consuming division of th8S0 charges -iraong all using d2partments ,'I'lould havo been necessary, with a relatively small return in information.
Finally, some i tom s of no spec afi.c pur po se ~'I"cre left in "Otherll
catGgories~ for OXJJ:-;plo, th0 presidc:ntial yacht s , tho' Liberian Tnf'ormatLon Service" etc.
In more d ot ai Lad pr-c s entaci on , on e may note that many organs of government vcr c Lef t, intact; but that the,'~ ,ore usually bureaus within departments, rather than the d8partITlt::Dts th0'il3elv8s. ilor cxampl.e , one
- 5 -
may, cite the Bureau of th8 Budget, Audits, Internal Revenues and Customs, all of which are grouped under the Treasury Department with the exception of the Budoet Bureau, yet ~ll of these agencies of government fall into the general catogory of fisoal adrr.inistration. On the other hand, or",anizations such as the lTational ,Production ~ouncil "ore divided
according to their specific projects. The same tr0atment was applied to tho Departments of .a.gric'.ll turo anti Commerce, Public Aorks and. Utili ties, and the National Public Health Sorvice. The details of the division are availa-ble in tho r a w d . at a , and are not r - e v ea . li r.s; o t h e r - wi s e, since the expenditure of no slngle department (such as Treasure, Department of
Public 'larks and Utili ties, Department of Agriccll ture and Commerce and tho National ,:ublic He;;>llh Service) was moved out of the general category -in
"hich one WOLlld expect to find it, save for one isolated case involving the Interior Department becaLlse of its multi-purpose structure and functions. Anot~er item of the govurru~ent accounting system that
underwent ~ major division was Chapter XXI of the Budget - Construction Proj8cts. This chapter accounts for approximately one third of all gross fixed capital formation of general governmont but is not (apparently) centrally administerod. The functional category of "general transfer to local governrrent" is again treated. somewhat arbitrarily, but consists basically of capital ex pondi,ture on tho r:onrovia City Hall, current
expenditures on township and county affairs ("hich are supported by national as "ell as local taxes), and some services of the DepartDent of the
Interior, ,'hich has executive and judicial responsibility for interior and tribal affairs.
Use of Object Classes. 'i'hc names of object classes u.sed in the r-epcr t
of the Buroau of Audits wore taken as cenerally self-explanatory. Thus, Government of Liboria Basic Buclget classes 51, Offioe ~Quipment,
55,
:,utomotive EQUipment,
57,
Furniture and Fixtures, and59,
3Quipffient, "erG the classes of expencliture from "hich was derived ~ost of the Capitalit"lils. Class
44,
Subsidies and Contributions, was also used as above named.~ 6 -
These 118ro the primary rources for capi tal cx pcndi tur e s , subsidies and contributions, oxcept for special items such
as'
1) IJaintenClnce oxpondi tur"" of Dep3.rtment of Public Hcrks and Utiliti<JsJ
2) Class 19~ l.ia i.ntonanc o , Ilherc the aocount lias clearly a capital maintenance ox)enditure and/or was l.'lrge relative to the - total 8xiJenclit.ur e of thl:.l ro Lovant Governrnent of Liboria. a.goncy~
3) Glass 52, ~lec·tri(,idl-:::;C1uipment and. Fixt'ITGs 1 lfhero the account ~,las cLoarLy labeled and/or large;
4) Class 53, PO'dor Generation :JJquipment, whore the account waG clearly Labo Lod ,
(It shculd be noted that ?bject class descri~tions seem to over .lap a g02sl__do~l_:0'_..th~.a_s:i,.c_ b!,:dJ:i:.~t_.2:c.co.!-'.nt:i,.ng2y.s.!:.em and nom2nolatur-e ,
The nomenclature of tho Joint Commission f'o Ll.ou a tL.at 'of the U.S," gov8rn- Qent ~nd is somewhat less confusinc)o
The treatmont of thesG classes Has somovnar irregular, and depended,
·largely, on impressions of tile size of the expenditure relative to the total expenditure of the r~levant Govorl~ont of Liberia agenoy. It is unlikely that the margin of error ocoasioned
by
tLe irregularitiesexceeds 1 ~8r cent of total ca~ital expenditurGs9 or even that measurable
"orror" is di s c cr nab'l c • . 'The reason for this is that the very faot of classifioation by objeot olass name introduces extreme roughness into tile oomputation. The broad s tr uc tur e of the expondi tur o pattern of the Goverlliilont is largely unaffeoted.
Omissi0rl~' I'r-c babLy tho major gap in t;18 cover-age of the Audits Ro pcr-t on vrhi ch tho roolassifioation projeotdGpend.edfor its rav datu is the absence of account» for tn e 'Fovcr ii.1J.thori ty which is rGsponsible for all powe r goneration ill the 11onrovia area and for the colleotion of payments for the usc of eleotrioal power • Tho division of Light and Paver of the Dopar tr.ent of I'ub.l i.c ulor-ks , and Utili t:'es sU'Dsidies the operation of the PO;18r Authority to tl:.e extent of"~8l,OOO.OO-as shown in Chapter l2-A of t.hc Audits Report. The remainder of the oosts and revenues of the Fovcr Au~hority ar o shown nowhere e180.
- 7 -
., Brief Communt on tho Utilization of 1l.ocl~0ifi"dExporiJi turo Data , It is fairly olear th~t tho raclassification of gov3rlunont 3xpend- iture in a form rolated to the 0conomic classification carriod out fOT Government of Liberia expenditure in
