National Budget Law: A Comprehensive Overview

Posted on Nov 26, 2024 in Economy

Purpose and Scope

Purpose of the Law

This law establishes the principles governing the national budget as outlined in Article 11 of Law No. 28,112 (Framework Law on Public Sector Financial Management), in accordance with Articles 77 and 78 of the Constitution.

Scope

This law applies to the following entities:

  • General government entities (national, regional, and local levels)
    • National Government:
      • Executive, legislative, and judicial bodies
      • Decentralized government agencies
      • Public universities
      • Autonomous constitutional bodies
      • Regulatory agencies
      • Collecting and supervisory agencies
      • Special funds with legal status
      • Charities and their dependencies
    • Regional Government: Regional governments and decentralized public agencies
    • Local Government: Local governments and their decentralized public agencies
  • Companies in regional and local governments
  • Funds without legal personality financed with public funds
  • Entities without legal personality with budget provisions in the public sector budget law (subject to their specific creation, organization, and operation rules)
  • The National Fund for Financing State Business (FONAFE) and its companies under Law No. 27,170 (only when expressly stated in this law)
  • Other public entities not mentioned above

Members of the National Budget

National Directorate of Public Budget

The National Directorate of Public Budget serves as the highest technical and regulatory authority in budgetary matters. It maintains technical and functional coordination with the budget office (or its equivalent) in each public entity, exercising functions and responsibilities as per Law No. 28,112.

Public Organization

  1. Public Entity: For the purposes of this law, a public entity is any body with legal personality at the national, regional, or local level, including decentralized public agencies, companies, public or private funds (when the latter receives public fund transfers), companies in which the state has a controlling interest, and constitutionally autonomous bodies.

  2. Budgetary Units: Public entities with an approved budget appropriation in the public sector budget law.

  3. Budgetary units are created or deleted by law.

Budget Office of the Organization

The budget office (or its equivalent) is responsible for conducting the entity’s budget process, subject to the National Directorate of Public Budget’s provisions. It organizes, consolidates, verifies, and presents budget information, coordinating and controlling the execution of authorized income and expenses.

Head of the Institution

  1. The head of an entity is the highest executive authority. In budgetary matters, they are jointly responsible with the regional council, city council, board, or relevant agency. This authority may delegate budgetary functions when expressly stated in this law, public sector budget laws, or the entity’s establishing standard. The head remains jointly liable with the delegate.

  2. Responsibilities of the Head of the Entity:

    • Manage the budget during programming, formulation, approval, implementation, evaluation, and expenditure control, adhering to this law, public sector budget laws, and the National Directorate of Public Budget’s provisions, within the principles of legality and the presumption of correctness.
    • Ensure that the objectives and targets set in the Institutional Operating Plan (IOP) and budget are reflected in the institutional functions, programs, subprograms, activities, and projects under their responsibility.
    • Align the IOP and institutional budget with the corporate strategic plan.

Public Sector Budget

The Budget

  1. The budget is the instrument enabling state organizations to achieve their objectives and targets outlined in their IOP. It is the quantified expression of planned expenditures during the fiscal year for each public sector entity, reflecting the revenues that finance these expenditures.

  2. Budgets are adopted by law for the public sector, regional governments, local governments, the National Fund for Financing State Business (FONAFE) and its companies, and the entities listed in Article 2, paragraph 2 of this law.

Contents

  • Maximum expenses entities may incur during the fiscal year, according to approved budget appropriations and revenues.
  • Objectives and goals for each entity with budget appropriations.

Purpose of Public Funds

Public funds are allocated to cover costs arising from fulfilling entity purposes, regardless of the funding source. Their collection is the responsibility of the relevant entities, subject to applicable regulations. Funds are used efficiently and in accordance with national development priorities.