Initiating Program Budgeting in Hungary

Article excerpt

"Anyone who needs information about the city can obtain it from the budget." That is the motto of Szenres--a mid-size Hungarian city with a population of 33,000. Today the citizens of Szentes can pick up the budget and know more about how their city works than they could three years ago when budget reform was initiated by Szentes. Prior to 1997, the Szentes budget contained no information beyond what was required by central regulations. It was a list of expenses with no details on service accomplishments and program results. It did not facilitate objective decision making by the city council, nor did it explain to citizens the governments policies or use of revenues.

Initiating Budget Reform

Leaders of the financial office felt that making informed decisions required a completely restructured budget document that provided information on any duplicate services and related expenditures, so that decisions could be made based on facts and data rather than subjective policies. To achieve this, Szentes began to transform its budget from one that was based on line items to one with a program focus.

For the 1997 budget, city officials targeted a relatively small but suitable sector for implementing program budgeting techniques--communal services. Two subprograms were identified: 1) park maintenance and green area management, and 2) public area cleanliness.

A program budget cannot be initiated without the political support and guidance of policymakers. In Szentes the "champions" of program budgeting were the mayor and the head of the finance department, and they initiated the reform process as follows.

* Council members were first informed about the proposed budget reform in the semi-annual report in June 1996.

* The needed reform in the target subprograms was outlined and a work plan was developed.

* Internal meetings were held to inform everyone of the budget reform and concepts of program budgeting.

By the time the budget concept was discussed at the end of 1996, each council member understood the changes that had been made in the structure and content of the budget, and practically all of them supported these changes.

After adopting the 1997 budget, the city decided to expand the program budget to include the entire communal and social sector. In addition, a separate volume of indicators also was developed for all city institutions. It included tables with fiscal and performance indicators from 1995 to 1998 for all institutions, and tables with all line items of revenues and expenditures for all institutions from 1996 to 1998. For the 1999 budget, the city developed a program budget for all its sectors. In addition, Szentes also prepared a separate capital and operating budget and a volume of indicators.

Budget Reform in Szentes

The process of budget reform involved the following.

* Evaluation of Community Needs. Szentes started its budget reform with a SWOT (strengths, weaknesses, opportunities, and threats) analysis. This led to the development of program alternatives, a detailed knowledge of current service levels, and identification of future needs and how to achieve them. The budgeting process, however, still lacks direct involvement by the public. In general, public complaints and demands are currently identified in the following ways: 1) via public forums, city council forums, and office hours, and 2) letters addressed to and processed by the finance department. The city is aware that this is inadequate and is trying to increase direct contact with the citizens.

* Organization of the Budget Process. The budget process was made smoother by preparing a budget calendar/work plan, improving cooperation among departments, and adhering strictly to realistic deadlines. Szentes incorporated all of these elements into its budget process. The head of the finance department also prepared several forms for the 1997 budget that had to be completed by each institution. …