A Quick Look at the Government’s Budget for 2024/25
Budgeting and proper internal controls are important for any organization; for the government, this is even more so. Proper internal controls help to ensure the reliability of financial reporting, the effectiveness and efficiency of operations, and compliance with applicable laws and regulations. As part of its good governance mandate, the Belize Chamber of Commerce and Industry (BCCI) conducted a budget variance analysis on the FY 2023/2024 revised estimates.
Why should we care about Budget Variance?
Variance can be looked at in various ways depending on the sector and inputs used. For example, Material Price Variance can be looked at in sectors that are very input heavy. Labor rate variance can also be looked at in industries with low automation. When looking at the GOB’s budget, the BCCI looked at Fixed Overhead (FOH) Spending Variance, which is calculated by Actual Costs – Budgeted Costs. Unfavorable Variance (overspending) can be a sign of ghost employees or inflated payments made to parties for kickbacks. Favorable Variance (underspending) can be a sign that assets were effectively used to extend their lifespan.
It is worth noting that while Favorable variance may seem like something worth ignoring, it is still worth looking into. Inflating budgeted prices, rates, or quantities can be manipulated to artificially lead to a favorable outcome. If there is persistent variation across budgets, both favorable or unfavorable, it may make it difficult for citizens to properly analyze and critique future spending plans.
What did the Analysis Find?
FY 2022/2023 was marked by consistent overspending by Government ministries. As Table 1 below shows, 11 ministries overspent their budget by an average of 17%. This coincided with 37% overspending in the CAP II account and 22% overspending in CAP III. This overspending was balanced by underspending in the recurrent account.
| Table 1. Fixed Overhead Variance FY 2022/2023 | ||||
| Variance Offenders | % of Major Heads | Value Overspent | Average Variance | |
| No. Overspent | 11 | 44% | $97,165,803 | 17% |
| No. Underspent | 6 | 24% | -$63,751,337 | -12% |
| Total | 17 | 68% | $33,414,466 | |
FY 2023/2024 differs from the previous year quite starkly. As Table 2 shows, 14 ministries underspent with an average rate of -19%. CAP II was overspent by 37% while CAP III was underspent by a corresponding 25%.
| Table 2. Fixed Overhead Variance FY 2023/2024 | ||||
| Variance Offenders | % of Major Heads | Value Overspent/Underpsent | Average Variance | |
| No. Overspent | 5 | 20% | $42,885,348 | 15% |
| No. Underspent | 14 | 56% | -$47,103,180 | -19% |
| Total | 19 | 76% | -$4,217,832 | |
The largest over spenders in FY 2023/2024 were the Ministry of Rural Transformation with 45% overspent, followed by the Ministry of Natural Resources with 26% and the Ministry of Health with 12%. The largest under spenders were the Ministries of Economic Development with -48% and the Ministry of Tourism with -41%.
Why Should We Care about Persistent Variance?
It is worth noting that while most of the variance found in last year’s figures was favorable, the number of ministries that did not budget properly remained the same. To be able to properly critique and analyze an upcoming budget, we must be able to trust that the budgeted figures are accurate. These consistently high variance levels can be a sign of poor budgeting or, in some instances, fraud. Presenting a comprehensive, accurate, and reliable account of the public finances is an essential OECD principle of good budgetary governance.
Conclusion
We should all care about the budget. When the government overspends or underspends, your tax dollars are being spent. Another important principle is ensuring that budget documents and data are open, transparent and accessible. While the draft estimates that are published can be intimidating to look at due to their length, the figures are quite easy to break down once you know how and where to look. To make the budget more transparent, the BCCI has developed a budget dashboard which is linked below.
Tableau Dashboard Link –
