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Development Overview
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Public Administration

Budget system 4

Realizing Greater Democratization (1988 to 1997)

Beginning in 1991, the CBA gained the power to refuse excessive budget requests from ministries and departments, and to demand re-drafting of budgets in such cases. In 1994, ministries and departments were required to develop mid-term financial management plans (covering the subsequent five years) in drafting and requesting their budgets so that the overall national budget could be drafted with mid- to long-term interests in mind. In 1996, ministries and departments were required to define the objectives and performance indicators of their budget projects so as to make possible performance management, where applicable, as part of budget preparations. By 1997, all ministries and departments were required to submit their budget requests and data electronically to make saving and managing information easier.
 
<Table 3-21> Changing Features and Standards of the Budget System (1988-1997)
 
Fiscal Year Description
1991
  • The EPB Minister was authorized to reject excessive budget requests and demand re-drafting of budgets in such cases.
1993
  • The maximum rate of increase allowed for each project was 30 percent.
  • The heads of central agencies were required to prioritize, according to the given format, the unit projects of their budget items in submitting budget requests.
1994
  • Mid-term financial management plans were required as part of budget drafts and plans to help facilitate a national budget based on mid- to long-term interests.
  • Ministries and departments were requested to cut down their demands for budgets in comparison to the 1993 budget.
1995
  • Mid-term financial management plans were used to mitigate fiscal rigidity and devise a basic framework for how to distribute financial resources according to national priorities.
1996
  • Major projects to which performance measurement and management were applicable were required to be given clearly defined objectives and performance indicators that could be applied in the process of budget preparation.
1997
  • All budget requests were to be submitted electronically for easier management.
 
Consolidating Performance-Orientation (1998 to 2007)

Beginning in 1999, ministries and departments were required to survey all possible demands before submitting budget requests. The CBA, in turn, set up and operated the Advisory Council for Budgetary Policy so that the opinions of diverse stakeholders and sectors could be reflected in budget preparations. In 2000, the standard cost system, which provided budgets in a fixed manner according to given unit costs, was abolished and replaced with the basic operating expenses system. Under the new system, ministries and departments gained greater power to determine the details of their budget projects and spending plans. In 2000, ministries and departments were also required to keep the increase rate of their budget requests to single digits so that the overall government budget could be kept in check. In 2001, the Criteria for Principled Fiscal Support, devised to improve the effectiveness of government spending by at least 10 percent, guided the process of drafting budget requests. The POBS also began to be applied in a wider range of organizations and projects.

In 2004, a number of budget reforms were attempted, including the introduction of the national fiscal management plan, the a-priori (top-down) budget distribution system, preliminary works for applying the performance management system, the digital budget accounting system, and systems for analyzing and evaluating major fiscal projects.
 
<Table 3-22> Changing Features and Standards of the Budget System (1998-2007)
 
Fiscal Year Description
1999
  • The Advisory Council for Budgetary Policy was set up to hear opinions from diverse stakeholders and sectors of society on the budget demand as part of budget preparation.
  • The rate of requested budget increase was to be kept at single digits, while budget projects were to be prioritized.
2000
  • The monolithic standard cost system based on unit costs was abolished, allowing, instead, ministries and departments to determine the details of their projects and the costs involved. The budget preparation process was thus made more autonomous.
  • Each central agency could increase budget requests at a single-digit rate only, unless absolutely necessary to do otherwise, due to the increase in legal duty costs, etc.
2001
  • Each central agency was to request budgets according to the principled criteria of fiscal support.
  • Each central agency could increase budget requests from the 2000 budget at a single-digit rate only, unless absolutely necessary to do otherwise, due to the increase in legal duty costs, etc.
  • The range of organizations subjected to trial POBS was expanded.
2002
  • Each central agency could increase budget requests from the 2001 budget at a single-digit rate only, unless absolutely necessary to do otherwise, due to the increase in legal duty costs, etc.
  • The heads of organizations subjected to the trial POBS were required to submit budget requests along with performance plans and reports.
2003
  • Each central agency could increase budget requests from the 2002 budget at a single-digit rate only, unless absolutely necessary to do otherwise, due to the increase in legal duty costs, etc.
2004
  • Mid-term financial plans, trial a-priori distribution plans (top-down), preliminary work for performance management, and performance analysis and evaluation on major fiscal projects were introduced.
2005
  • The Special Account for Balanced Regional Growth was introduced.
2006
  • Central agencies were required to draft their budgets by surveying the opinions of a wide range of internal and external stakeholders.
  • Greater efforts were required to review project priorities and manage internal structural readjustment.

Source: Korea Institute of Public Administration. 2008. Korean Public Administration, 1948-2008, Edited by Korea Institute of Public Administration. Pajubookcity: Bobmunsa.