IV. SPAIN

following year, and no other appropriations are available, a supplementary State budget is allowable under the following conditions (Art. 55).

●Should the need arise in non-financial operations of the budget, the supplementary budget shall be financed by offsetting it against the expenditure in the contingency fund or in other non-financial funds. (See section 4.3.3 and footnote for a discussion of non-financial operations.)

●Should the need arise in financial operations of the budget, it shall be financed with public debt by reducing expenditures of the same type.

The MOEF proposes draft supplementary budgets to the Council of Ministers, following a report by the Directorate General of Budgeting. After approval by the Council of Ministers, the bill is submitted to Parliament. Supplementary budgets for autonomous bodies and social security are prepared using procedures similar to those for the State budget (Art. 56 for SGCs and Art. 57 for social security).

4.2.10. Budgetary implications of other bills

The GABS and the GBA require that legal provisions and regulations, during their draft stage, their preparation and approval, administrative acts, contracts and co-operation agreements and any other actions by the public sector, take into account their budgetary effects and be subject to strict compliance with budgetary stability requirements (Art. 6.2, GABS; Art. 26, GBA).

4.3. Budget execution

4.3.1. Apportionment of expenditure authority

After approval of the State budget, the MOEF prepares and approves, at the proposal of the Director General of Public Finance and Financial Policy, an annual budget execution plan that contains a projection of State revenue and accommodates the issuance of payment orders (Art. 106.1). To prepare the budget execution plan, the Director General of Public Finance and Financial Policy gathers from the State sector any data, projections and documentation it considers necessary on payments and revenues that may have an impact on the State budget (Art. 106.2). The budget execution plan may be modified throughout the year in accordance with data on execution or changes in revenue or payment projections (Art. 106.3). The amount of payments ordered at any time is required to be consistent with the annual budget execution plan (Art. 107.1).

IV. SPAIN

4.3.2. Cancellation of budget authority and other in-year expenditure control

The law does not require the government to spend approved appropriations in their entirety. In exceptional circumstances, where State sector entities have more cash available than initially projected, the MOEF is authorised by the GBA to cancel part or whole of the budgeted transfers to these State sector entities, without the approval of Parliament (Art. 45).

4.3.3. Emergency spending, excessive spending and contingency funds

The GABS, later confirmed by the GBA, prescribes the procedure for the use of a contingency fund during budget execution (Art. 15, GABS; Art. 50, GBA). In order to meet non-discretionary spending that had not been foreseen when the budget was approved, the State budget can include a “contingency fund for budget execution” for an amount of 2% of total spending.9 In no case may the fund be used to finance programmes or policies that originate in discretionary decisions of the government.

The use of the contingency fund requires the approval of the Council of Ministers following a proposal made by the MOEF. The government, through the MOEF, will submit to the Budget Committees of the Deputies and of the Senate for their information, a quarterly report on contingency fund spending. Credit remaining at the end of the fiscal year may be carried over to the next fiscal year.

4.3.4. Transfers and virement of appropriations within the year

Transfer between lines of appropriations is permissible, but these are subject to certain conditions (Art. 52). Restrictions are not applied to transfers of expenditures arising from administrative restructuring or the devolution of authority to SGCs. In summary:

●Transfers are not possible between non-financial spending and financial spending, nor from capital expenditures to current operations.

●Transfers are not possible between the expenditure of different budget sections.

●Transfers shall not reduce mandatory expenditures or expenditures that have been extended or supplemented during the year (except for social security spending and for public debt).

●Within the social security system, expenditures may not be reduced except to finance other expenditures.

Transfers between expenditures of the same programme or between programmes of the same service are possible; these are at the discretion of line ministers on the basis of a favourable report by the delegate comptroller

IV. SPAIN

in the ministry (Art. 63). However, the government, upon a proposal of the MOEF and at the initiative of the ministries involved, has the power to authorise transfers between different budgetary sections as a result of administrative reorganisation, and the MOEF has the power to authorise certain other transfers (Art. 61).

4.3.5. Cash planning and management of government assets and debts

The MOEF has overall responsibility for cash planning and government asset and debt management (Titles IV and VI, GBA). Cash management is based on the principle of a single account (see below). Money is paid out of the single treasury account according to the budget execution plan prepared by the MOEF. The MOEF also has authority over State debt management and procedures (Art. 98, GBA). The GBA requires the MOEF to report to the Parliament on the amount and the characteristics of the main public debt guarantees and public debts issued during the year.

4.3.6. Internal audit

A strong framework of internal control of public finance operates in Spain, and each ministry or public body has its own internal control function. The next tier of control is provided by the MOEF, in particular the General Controller of State Administration (GCSA), which has staff based within, but fully independent of, each public body (United Kingdom National Audit Office, 2001). The GBA governs the overall procedures for internal oversight of financial management of the State sector (Title VI). The GCSA exercises, in accordance with the terms and conditions set forth in the Constitution, internal oversight of the financial management of the State sector (Art. 140) in line with the following objectives (Art. 142):

●To verify compliance with regulations on the management of public finance.

●To verify the proper recording and accounting of operations, and their faithful and regular reflection in accounts and statements.

●To ensure that the activity and procedures under oversight are performed in accordance with the principles of good financial management and particularly those contained in the GABS.

4.4. Government accounting and fiscal reporting

4.4.1. The accounting framework

The GBA provides the legal framework for the accounting arrangements of the State sector (Title V, Arts. 119-139). At the recommendation of the GCSA, the MOEF has the powers (Art. 124) to approve the chart of accounts, which contains and develops public accounting principles. The MOEF also

IV. SPAIN

determines the criteria for recording data, presenting accounting information, and specifying the contents of the annual accounts that must be submitted to the COA (Art. 124). The GCSA, under guidelines provided by the MOEF, plays an important role in implementing public accounting (Art. 125).

Accounting in the State sector is defined as “a system of financial and budgetary information that has the aim of showing, through financial statements and reports, a faithful status of the assets, financial situations, results and budgetary performance of the State sector” (Arts. 119 and 120). For the administrative public sector, accounting principles and the chart of accounts are based on modified accrual accounting. In contrast, the semicommercial public sector (for example, semi-commercial public enterprise, State commercial entities) applies the accounting norms and principles contained in the Commercial Code and the chart of accounts used by private companies, with some adaptation (accrual based accounting) (Art. 121).

4.4.2. Government banking arrangements

In general, revenue and payments of the State and its autonomous bodies are to be channelled through accounts held in the Bank of Spain (Art. 108.1 and Art. 13, Bank of Spain Autonomy Act 13/1994). In exceptional circumstances, the MOEF may authorise the Director General of Public Finance and Financial Policy to open accounts in other lending institutions.

4.4.3. In-year reporting to Parliament

The GCSA requires monthly budget execution information, including for social security, to be provided to the Budget Committees of the Deputies and of the Senate (Art. 135). This report is published in the Official State Gazette and on the MOEF Internet site.

4.4.4. Annual accounts and reports

The Constitution requires that the State accounts be submitted to the COA for audit (Art. 136). The GBA specifies this procedure further (Arts. 127-134). It requires all entities in the State sector to prepare annual accounts within three months following closure of the fiscal year and to place them at the disposal of the auditors (Art. 127). These consist of the balance, the economic and assets result account, the cash balance of the budget and the annual report (Art. 128). Entities in the State sector are required to submit to the COA, through the GCSA, the required accounting information (Art. 137).

The General Account of the State, which is the consolidated general accounts of all entities of the State sector, is prepared yearly by the GCSA, and is forwarded to the government for its approval before its submission to the COA prior to 31 October of the following year (Art. 131). The General Account