Question 2

Does the Executive’s Budget Proposal or any supporting budget documentation present expenditures for the budget year by functional classification?
 * a. Yes, expenditures are presented by functional classification.
 * b. No, expenditures are not presented by functional classification.
 * c. Not applicable/other (please comment).

Note on expenditure classifications
There are three different types of expenditure classification. Each classification system has different advantages and answers a different question:
 * Administrative unit ==> who spends the money
 * Functional classification ==> for what purpose is the money spent
 * Economic classification ==> what is the money spent on

Unlike classification by administrative unit, which tends to be unique to each country, functional and economic classifications for government budgeting have been developed and standardized by international institutions. Cross-country comparisons are facilitated by adherence to these international classification standards.

Questions about expenditure classification are repeated throughout the questionnaire, for each of the various budget documents. It is important that budget data are presented in a consistent format throughout the different stages of the budget process to facilitate transparency and accountability.

Guidelines
Question 2 addresses the presentation of expenditure by functional classification. This classification indicates the programmatic purpose, sector, or objective for which the funds will be used, such as health, education, or defense. Administrative units are not necessarily aligned with functional classifications. For instance, in one country all functions connected with water supply (which fall into the “Housing” function) may be undertaken by a single government agency, while in another country they may be distributed across the Ministries of Environment, Housing, and Industrial Development. In the latter case, three ministries have programs addressing water supply, so three ministries contribute to one function. Similarly, some administrative units may conduct activities that cut across more than one function. For instance, in the example above, some programs of the Ministry of Environment would also be classified in the “environmental protection” function.

To answer “a,” the Executive’s Budget Proposal or its supporting documentation must present expenditures for the budget year organized by functional classification.

"Other" categories
Watch out for aggregate categories, such as “other.” To receive an “a” answer, the “other” category has to be smaller than 3% of the total. If the “other” category is more than 3%, then the score should be “b.”