One of the important processes of national importance is budget financing. It is based on certain principles that make it possible to unify the rules for allocating appropriations and to make them simple and understandable.
Financing is carried out from budgets of all levels, it can be both free and repayable.
Money can be allocated not only for the needs of organizations or for the development of large-scale projects. Often the budget is subsidized by the population.
Whoever is the recipient of budgetary funding, state authorities must exercise control over the correctness of its allocation and expenditure. In case of violations, the perpetrators are administratively and criminally liable.
The concept of budget financing
For the execution of government orders, programs, and the maintenance of institutions and organizations, monetary support is always allocated. Its provision is called budget financing.
Government appropriations may fully cover the expenses of the recipient of funds. This may apply to individual institutions (cultural centers, secondary schools), structures (army, police), government bodies (state apparatus).
Some enterprises, industries, and even people receive part of the budget financing system. These funds go only to individual programs. Spending such money for other purposes is prohibited.
Principles
The budget financing is based on four constants that determine the rules for allocating funds:
- Irrevocability. Recipients of state appropriations should not give back what they spend, or pay interest on the use of money. Funds are allocated absolutely for nothing. An exception is repayable financing, which is part of some public investments.
- Intended use. All finances are given to recipients for specific predetermined expenses (for example, salaries, scholarships, meals, equipment, repairs). If the money spent on other purposes, not those that are planned, then the perpetrators must be punished.
- Existence of a limit. Funds are financed only within the limits of existing budgetary obligations. They are calculated on the basis of appropriations made earlier, or correspond to quantitative and qualitative planned indicators. Budget financing in excess of the established limit is prohibited by law.
- Efficiency. All budget allocations should be spent so that their use is as reasonable as possible, useful and economical. In the event that the inspection bodies detect deliberately high financing indicators, the perpetrators are punished, and the funds are returned to the budget.
The principles of budget financing are binding on all recipients of appropriations. Their observance is strictly controlled, which is fixed at the legislative level.
Sources
The origin of the funds used for financing may vary. The allocated money can be accumulated in various accounts before:
- federal;
- regional;
- local.
Sources of budget financing are approved for a certain period. Federal content can be drawn from external sources and internal. The first include:
- government loans;
- loans of international financial institutions, organizations, governments of other countries.
Sources of regional and local levels can only be internal. These are domestic loans, loans, credits, proceeds from the sale of property, adjustment of account balances.
In the event of a budget deficit, the Central Bank becomes the source of financing. Sometimes the lack of appropriations is covered by issuing money, but this option is not very effective because it causes inflation.
Methods and forms
Due to budget financing, a different degree of cost coverage can be implemented. Perhaps their full refund and partial:
- The gross budget system is used for recipients who are wholly in the state's maintenance. In this case, due to budget financing, there is a full coverage of current and capital costs, as well as all expenses arising in the process of activity.
- The “net budget” financing method provides for the allocation of funds only for some previously approved purpose.
There are various forms of budget financing:
- funds for the work of institutions, organizations;
- appropriations for payment of state and municipal contracts concluded with legal entities and individuals;
- transfers to the population (benefits, pensions, compensation, scholarships);
- additional funds necessary to cover expenses incurred due to decisions of state bodies;
- loans, subsidies, subsidies, subventions;
- money going to pay off various internal and external debts;
- loans.
The main purpose of any form of budget financing is to cover expenses within the approved indicators. Allocation of allocations over limited numbers is strictly prohibited.
Estimated financing
Each budget institution and organization has a main financial document. It is called an estimate. In this document all planned expenses of the enterprise in money terms are written and approved.
All figures recorded in the estimate must be reasonable. They are calculated according to existing industry standards and are grouped by budget classification codes. The amount of revenue from the state should cover the planned costs.
Financing of budgetary institutions is carried out in strict accordance with the approved indicators of the estimate. Planned figures are subject to change. In this case, adjustments are made to the estimates, and appropriations are allocated based on new data.
Subvention and subsidy
State budget funding is given not only to institutions, but also to authorities. It may be in the form of subsidies and subventions. In both cases, funds are allocated from a higher budget to a lower one, however, there are significant differences:
- Subsidy - does not imply targeted limitation of allocated funds. Money is allocated in total in case of insufficient filling of the minimum budget level of a lower level. According to the expense codes, appropriations are distributed by the recipient himself.
- Subvention - budget financing, given for a specific purpose. The appropriations must be disbursed within a certain period, which is established in the decision on the allocation of funds. In case of improper or untimely use, the subvention, in contrast to the subsidy, is subject to return.
Public investment financing
In any country, there are objects of great importance to the economy. Investment financing of budgetary funds is carried out for strategic purposes. It solves the national task of economic support for various sectors of the economy.
Investments can be free and repayable. However, even if it is necessary to return funds, obtaining such budget financing is considered very profitable.After all, the interest rate determined by the state is much lower than the remuneration that the bank requires when allocating a loan.
Subsidy
Budget financing may be provided to legal entities and individuals as gratuitous support. Such assistance is called a subsidy. It can be issued not only with money, but also with other material goods (products, equipment).
The subsidy is provided:
- irrevocably;
- for intended use only;
- according to the principle of co-financing.
Money can be allocated for scientific research, for the conversion of production facilities, in order to improve the skills of personnel. Budget financing is used to repay soft loans, provide insurance for depositors, and tax returns.
Subsidies are often allocated to low-income people and young families. These include the provision of housing, assistance in paying for utilities.
Control over budget financing
The correctness and validity of the allocation of all appropriations is necessarily verified. Oversight of budget financing is carried out by inspecting bodies that verify compliance with the law not only by fund managers, but also by their recipients.
Control over financing from the budget is carried out by:
- conducting validation checks on the requested funding;
- identification of misuse of funds;
- warning violations.
The authority to carry out such events is vested in the Ministry of Finance, the tax service, the treasury, insurance and financial and budgetary supervision. When violations are detected, various coercive measures can be applied:
- write-offs in favor of the budget;
- collection of interest, penalties, fines.
In addition, there is a criminal liability for violation of budget legislation.