Budgetary leeway in the forecasts? Multiyear forecasts audited

We conclude from our audit of five cases that parliament lacks the information necessary to correctly assess the underpinning and quality of multiyear forecasts in the government’s budgets. It also has too little information on the leeway in the budgets. As a result, parliament is at a disadvantage when debating alternative expenditure options with the government.

Audit findings: Multiyear forecasts not always up to date or correct

Audit findings: Multiyear forecasts not always up to date or correct

Multiyear forecasts ought to be the best possible projections of the expenditure necessary to implement current policy or, for instance, maintain and manage the existing land and water areas or military assets. Owing to the way in which multiyear forecasts are made, however, it is uncertain whether the figures that parliament sees in the ministries’ budgets are really the best forecasts of the expenditure needed to continue policy without change. We come to this conclusion on the basis of the cases we audited because: 

  • the assumptions and data in forecasting models are not always up to date or accurate; 
  • forecasting models often include quality assurances regarding the amount concerned (q) but far fewer regarding the price (p); 
  • forecast outcomes are sometimes adjusted to better align them with the available budget. The underlying decisions are not made clear to parliament. 

The findings presented in our report are based largely on the cases we audited. We do not claim that they are representative of all forecasts in central government. But they do illustrate the problems and risks at play more widely in the current budget system. 

Why did we audit multiyear forecasts?

Parliament has the right to approve the budget. It therefore plays a decisive role when decisions are made on the allocation of public funds (who receives how much money and for what?). To fulfil this role correctly, parliament must first know how much money is available in both the short and the long term. It must also fully understand government proposals that affect the budget. We wanted to learn from this audit whether parliament received sufficient information to exercise its right to approve the budget correctly.

The House of Representatives has told the government in recent years that it would like to receive more information on: 

  • the budget flexibility of expenditure,
  • the legal basis of expenditure in multiyear forecasts,
  • the preparation of multiyear forecasts and the figures underpinning them.

What methods did we use in our audit?

Our audit centred on the preparation of the multiyear forecasts that parliament receives and parliament’s understanding of the leeway in the budget. We set ourselves the following audit questions: 

  1. How does budgetary leeway arise in practice within the multiyear forecasting system? 
  2. What information does parliament receive on budgetary leeway and at what point in the budget process? 
  3. Does the information that parliament receives on budgetary leeway enable it to exercise its right to approve the allocation of funds correctly? 

To select the cases we first carried out a quantitative analysis of the budgeted and actual figures in the government’s budgets as from 2016. We then made an initial selection and sent a list of open questions to several ministries asking about their forecasting practices. Interviews were then held with the respective financial and economic affairs departments. Following the interviews, a final choice was made of the ministries and cases.

Current status

The audit was published on Wednesday 22 June 2021.