Defence Budgeting and Financial Management

Defence budgeting is the process of allocating financial resources to defence activities. It is a comprehensive process encompassing budget planning, execution, reporting and auditing. Transparent defence budgeting and accountable financial management are key to ensuring the integrity of all defence activities and reducing the potential for corruption in defence. Non-transparent financial management in defence combined with the lack of accountability is a powerful enabler of corrupt practices. Even if there are no obvious cases of corruption, poor planning, a disconnect between policymaking, planning and budgeting, and poor control of expenditures severely undermine performance in the defence sector and de-motivate both military and civilian personnel.

This chapter focuses on budgeting principles and process issues. Of key interest is how to promote integrity in the budgeting process. The roles of parliament, the audit office, society and other players in the process are examined in the respective chapters in part III of this Compendium. 

Principles and Requirements

Budgeting and financial management in defence reflect the budgeting procedures and practices used in the public sector. Hence, the analysis of enablers of corruption in defence, related to financial management, may start with an analysis of the implementation of key principles of sound budgeting in the public sector, presented in Box 6.1. Although the mandate of the World Bank does not cover security and defence, these principles equally apply to budgeting and financial management in the defence sector.

In the modern understanding of defence budgeting, the allocation of money—and, respectively, people, materiel and infrastructure—to defence activities clearly supports the attainment of security and defence objectives and the implementation of military strategy. In the words of former US President Harry S. Truman, “strategy, programs, and budget are all aspects of the same basic decisions.

... For the full text of this chapter see the accompanying file below.