The connection between preventive financial control and budgetary execution

*Legatura dintre controlul financiar preventiv si executia bugetara* (11/2008, p. 57)

Budget execution is the process of monitoring, adjusting, and reporting on the current
years budget. In every country, including Romania, this task must be accomplished by the
Government, more exactly by the minister of finances. The concern on legal administration and
performance of public resources , determinate the gouvernament to take measures for perfecting
financial control on intern public fonds and on extern fonds.
One of these measures that our government took at the beginning of 2003 is to
determine public institutions to respect the four stages of budget execution, more exactly the
commitment, validation order and payment of expenditure, and also to organize , to lead and to
report the budgetary and legal arrangements
The Ministry of Finance elaborated methodological procedures which, despite the fact
that it refeirs in detail at the modalities of implementing the obligations mentioned in the public
financial law, it creates lots of difficulties in applying them which made it difficult for public
institutions, even after four years, to understand very well how to apply them.
Anyway, there are many workers in the domain that claim simplifying the procedures,
the number of documents that must be written and the number of persons that contribute.
In our opinion, the regulation from 2002 (Public Financial Law and the Ministry of
Finances order Nr. 1792/ 2002 for approving the methodological norms that refer to faze
evidence of the budgetary execution) has positive sides but it also has some week points that
makes it inefficient.
The bright side consist in involving more persons or responsibility factors in
exercising preventive financial control, preventing and following, evidencing and reporting
obligations that conducts to a higher responsibility on spending public fonds.
We must agree on the fact that a much to bigger number of papper work that must be
drawn for every payment operation, the necessity to assure the proper staff that must take part at
the budgetary execution and the variety of interpretations of the treasury units on legal clauses
arent helping the budgetary execution process.
Which is the connection between preventive financial control and budgetary execution
phases? How can this positively influence the quality of growth of the budgetary execution
process? If the preventive financial control, but also the concomitant control and the subsequent
control are implied in the unwinding of the budgetary execution phases, the quality of this
process will grow.
Commitment of expenditure
The first phase of the budgetary execution is the commitment of expenditure, which,
according to law, it represents the beginning of institution commitments spread in two phases:
the legal commitment and the budgetary commitment which are global and individual.
By legal commitment we understand any document with juridical effect from which it
results or it could result an obligation on public fonds or public patrimony (laws, contracts, other
juridical laws)

The budgetary commitment represents the administrative procedure which reserves the
budgetary credit for full payment of a payment obligation that results from an ulterior execution
of an legal obligation.
When we talk about the global budgetary obligation we must take into account that this is a
budgetary obligation associated with a legal commitment which relates to current functioning
administrative expenses, like:
-

Travel expenses
Protocol expenses
Maintenance expenses
Assurance expenses, etc.

In contrast with those, the individual budgetary commitment refers to a commitment

specific to a new operation that is to be made. The commitment of expenditure considers
documents with legal value that give obligations to the organisations or institutions.
Those documents that hire the institution in making commitments must recive the acceptance of
the preventive financial control.
According to law, the control object in this phase is having budgetary clauses and
account reserves. Otherwise, law sanctions the commitment of expenditure if those conditions
are not respected.
Therefore, the connection between preventive financial control and the commitment of
expenditure phase is direct so that any organization commitment legal or budgetary must
be controlled on the objectives of preventive financial control.
Validation of expenditure
Validation of expenditure is the second phase of the budgetary execution in which the
existence of commitment is verified, the amount of sum that must be paid back is checked and
the conditions in which the legal commitment is made is also verified, based on the supporting
documents that validates the operation.
As a rule, for this activity are named different persons from those who are implied in
giving approval for preventive control. A signature of the person responsible with checking the
fulfillment of requirements asked by validation of expenditure is also required.
Expenditure orders
Expenditure order is the budget execution phase where delivery of goods and payment
of other debts are confirmed so that the payment can be made. These objectives must be
followed, according to law, by the persons who signes the document named ,,expenditure order.
Because of the fact that the approval for the preventive financial control is necessary
for every payment operation, the expenditure order must be prepared in every case where we
have payment operations.
This procedure implies an extra work volume, insistenly reported by the domain
workers, which is not always justified, especially when we take into account medium and small
entities that make payments with values that are not significant enough to make preventive
control necessary.

That is why, in this situations, we belive that is importaint to let the credit relase
authorities to decide the value limits that determine the necessity of reciving the acceptance
regarding preventive financial control.
Expenditure payment
Expenditure payment is the final phase of the budgetary execution. In this phase the
public institution is released by its obligations to creditors. The expenditure payment is made by
authorized persons, that, according to law, are named accountants. They have the obligation to
make payments in the limit of budgetary credits and in the limit of destinations approved by legal
dispositions through treasury and public accounting units. An exception to the rule are payments
made in currency by banks or other payments that, according to legal dispositions must be made
through bank. These payments can be made by the accountant only if the documents and
operatios respect certain conditions.
Those conditions are:
- The expenditures that must be paid went thorugh all the budgetary execution phases.
- There are open or assigned budgetary credits or cash in escrow accounts
- The approved budget subdivisions correspond to the nature of expenditure concerned
- All the supporting documents that justify the payment exist
- The signitures on the supporting documents belong to the credit release authority
- The amount beneficiary is the one entitled, according to the documents that certify the
service performed.
- The amount owed to the beneficiary is corrected
- The documents are prepared with all the data the form requires
- Other terms required by the law.
The law also establishes concrete conditions in which payments can not be made, as the
following situations:
- When there are no open or assigned budgetary credits or there are insufficient fonds
- When there is no confirmation of the performed service and the documents are not approved
for a good payment situation
- When the bebeficiary is not the one for whom the institution has obligations for
- When there is no approval for the preventive financial control on the order of payment and
the authorization the law demands is also inexistent.
The person that has the power to give approval for preventive financial control is
usually the head of financial accounting department or the financial director. This authorized
person that gives the approval for the preventive financial control is, according to law, in an
incompatibility situation if he makes payments that were approved by the preventive financial
control that he also performed.
As a result, the payments must be entrousted to others that are authorized to give
preventive financial control approval so that it can be made an objective examination of the
documents and situations.
The head- accountant or the authorized person that is entitled to give approval for
preventive financial control wants to find out if the objectives provided by law are performed.

We belive that the person who makes payments should not be the same person that gives the
approval for the preventive financial control in order to avoid a possible subjective
interpretation. A proper person for this operation could be the head of financial accounting
department .
On the other hand, the responsabilities that this person has must be simplified and
reduced to the real level of his practical possibilities of decision making.
In practice, it was very easy for the law courts to sanction, injustly sometimes, this kind
of persons that had no decision power in their units, but had overwhelming responsabilities
established by our relevant legislation.
As a conclusion, we consider that, if the only responsibility for the person that makes
payments is to verify the signatures of all persons that are implied in the budgetary execution
process and in the preventive financial control , the superpositions between the assignments
each person has would vanish, the process would be more clear and the time spend to complete
all the phases wold be less.