Question 41

Does the Executive’s Budget Proposal or any supporting budget documentation present estimates of expenditure arrears for at least the budget year?
 * a. Yes, estimates of all expenditure arrears are presented, along with a narrative discussion.
 * b. Yes, estimates of all expenditure arrears are presented, but a narrative discussion is not included.
 * c. Yes, estimates of some but not all expenditure arrears are presented.
 * d. No, estimates of expenditure arrears are not presented.
 * e. Not applicable/other (please comment).

Guidelines
Question 41 asks about estimates of expenditure arrears, which arise when government has entered into a commitment to spend funds but has not made the payment when it is due. (For more information see sections 3.49-3.50 of the IMF’s GFS Manual 2001, [] (page 29)). Though equivalent to borrowing, this liability is often not recorded in the budget, making it difficult to assess fully a government’s financial position. Moreover, the obligation to repay this debt affects the government’s ability to pay for other activities.

To answer “a,” the Executive’s Budget Proposal or supporting documentation must present for at least the budget year both estimates covering all expenditure arrears and a narrative discussing the arrears. If a narrative discussion is not included, but estimates for all expenditure arrears are presented, then a “b” answer is appropriate. A “c” response applies if the presentation includes estimates covering only some, but not all, expenditure arrears (regardless of whether it also includes a narrative discussion). Answer “d” applies if no estimates of expenditure arrears are presented.

If expenditure arrears do not represent a significant problem in your country, please mark “e.” However, please exercise caution in answering this question. Public expenditure management laws and regulations often will allow for reasonable delays, perhaps 30 or 60 days, in the routine payment of invoices due. Expenditure arrears impacting a small percentage of expenditure that are due to contractual disputes should not be considered a significant problem for the purpose of answering this question.

How small should arrears be to say that “they do not represent a significant problem” (response “e”)?
The team did not agree on a threshold or rule of thumb, as the percentage may not say much.

In the case of Bulgaria, answer choice “e” was selected because:
 * A very small percentage was in arrears, which was caused by disputed payments (see []). Based on the guidelines, this question was answered “e” -- contractual disputes should not be considered a significant problem for the purpose of answering this question.
 * From a budget perspective, arrears are a problem because it is a form of “off the books” borrowing. But if there is a legitimate dispute about whether a contract has been fulfilled, then not paying the bill does not really seem like an arrears issue.

External References

 * IMF’s Government Finance Statistics Manual (2001), sections 3.49-3.50 (page 29) []