Budget offices and line ministries

2. Enabling partnerships between budget offices and line ministries

The evolving relationship between the budget office and line ministries reflects a deeper shift in how governments manage public money. Fiscal responsibility remains essential, but it must go hand in hand with the ability to design and deliver effective policies. As pressures on public budgets grow, success increasingly depends on how well budget offices and line ministries work together: one to manage the overall framework, and the other to make informed decisions within it.

This underlines the need to go beyond the introduction of tools and focus on building the institutional and human capacity required to use them well. For the reforms to deliver better outcomes, line ministries must have the skills, systems, and internal processes to take on this greater role. Without these, greater flexibility may not lead to better policy or spending decisions.

Thus, shifting the relationship between budget offices and line ministries is not simply a matter of issuing new rules or introducing new tools. It requires deliberate efforts to build new ways of working, supported by trust, shared understanding, and professional capability on both sides that is not built through formal rules alone. It depends on consistent behaviours and practices. Based on experience from reform efforts in OECD countries, and from the direct practice of budget officials, three key pillars stand out as critical to making this transition effective:

• Strengthened expertise within both the budget office and line ministries to manage resources.

• Effective interaction between budget offices and line ministries throughout the budget cycle.

• Active participation of line ministries in the design and implementation of reforms.

Each of these elements reinforces the others. Where they are in place, reforms have a stronger foundation. Where they are missing, efforts to shift budgeting relationships often stall or revert to control-based models. Over time, these practices help shift the relationship from one based on compliance and control to one based on shared responsibility for public finance outcomes.

2.1. Strengthened expertise

The shift to a more collaborative budgeting model places greater technical demands on both budget offices and line ministries. Managing resources effectively, linking budgets to policy outcomes, and operating within medium-term fiscal constraints require a broader and deeper set of skills than traditional budgeting models demanded.

This is particularly true for internal budget offices within line ministries. These units are expected to lead the ministry’s budget preparation, monitor implementation, co-ordinate with policy divisions, and engage directly with the budget office.

In practice, they function as the ministry’s counterpart to the budget office, translating fiscal constraints into practical plans, ensuring that financial discipline is maintained, and that spending choices are aligned with policy goals. To do this effectively, they must co-ordinate across policy divisions within the ministry, ensure consistency between plans and resources, and secure high-level engagement in key decisions. This requires technical skills, but also seniority and authority, these units must be led by experienced officials who can advise the minister, negotiate with the budget office, and lead internal resource discussions with credibility.

Strengthening expertise must be seen as a continuous investment, not a one-time effort. Both budget offices and line ministries need professionals who can interpret financial and performance data, assess policy trade-offs, model multi-year budget scenarios, and manage risks proactively, as shown in Box 3. Ministries must be able to develop realistic programme proposals that align with both their policy objectives and the available fiscal space. This requires strong analytical capacity, effective co-ordination between policy and finance teams, and the ability to turn plans into credible, well-prioritised budget submissions.

Box 3. Building expertise to support reform implementation in France

As part of the implementation of the new budgetary framework under the LOLF (Loi organique relative aux lois de finances), France established a dedicated “LOLF School” to support the reform. Housed within the Ministry of Finance’s training centre, the school played a key role in equipping civil servants across ministries with the technical and managerial skills needed to apply the budget framework.

The training covered a range of topics, including programme structuring, performance measurement, cost analysis, and internal control. Management of human resources in the context of performance budgeting was also addressed. Participation was encouraged for both senior officials and new staff, with a strong emphasis on peer learning and practical application. The school also set clear quality standards, aiming for a minimum 75% participant satisfaction rate.

In addition to formal training, the Ministry of Finance provided tools such as the LOLF Practical Guide and annotated reading guides to help ministries navigate and implement the reform effectively. These resources supported consistent interpretation and application of the new requirements across government. Over time, this approach helped foster a shared understanding of budgeting principles and promoted their integration into day-to-day management practices.

Source: The French Ministry of Economics, Finance and Industrial and Digital Sovereignty (2019[5]), La loi organique relative aux lois de finances (LOLF).

Building these capabilities demands more than passive training. Workshops targeted technical support, and regular engagement across the budget cycle are critical tools. Continuous communication between budget offices and line ministries, throughout planning, submission, negotiation, and execution phases, helps officials apply skills in real time and respond to emerging challenges. Regular opportunities to seek clarification, review proposals, and adjust assumptions are essential for embedding technical skills into practical budgeting.

Staff rotation policies can play a significant role in strengthening public financial management across government. When designed well, they help build sectoral knowledge, support career development, and create a broader pool of experienced budget professionals. While approaches vary, many systems allow budget analysts to spend a few cycles working with line ministries, helping them understand policy and delivery contexts. In turn, some officials from line ministries may move into roles in the budget office, bringing valuable operational insight. These movements - whether part of formal rotation schemes or informal career paths - contribute to a more connected and capable budget community. They also help embed good practices, promote mutual understanding, and reinforce collaboration between the centre and line ministries.

For budget offices, sustaining expertise also means investing in their own capacity to support and challenge line ministries effectively. Desk officers and policy analysts must combine technical rigor with sector knowledge and the ability to facilitate constructive dialogue. Without this ongoing commitment to building skills and maintaining communication, reforms risk becoming formal exercises rather than practical improvements in how public money is planned, managed, and used.

2.2. Effective interaction

Effective interaction between the budget office and line ministries is essential for shifting towards a more collaborative budgeting relationship. This is not simply a matter of more frequent contact; it depends fundamentally on the design of the budget process itself.

To support more effective interaction, the central budget office should engage directly with the budget offices or financial directorates within line ministries, not with individual policy or operational units. This practice ensures clearer lines of responsibility, avoids fragmented communication, and reinforces the internal finance function as the ministry’s single point of contact for budget matters. In doing so, it strengthens the role and professional stature of these internal budget offices, helping to position them as credible actors in planning and resource management. The creation of financial directorates in each line ministry in Greece has been considered instrumental to the success of reform, as shown in Box 4.

Box 4. Creating a finance function in spending ministries in Greece

Greece has undertaken an ambitious overhaul of its public financial management system since the 2008 financial crisis. A cornerstone of this reform agenda was the Organic Budget Law, adopted by Parliament in July 2010. The law introduced a range of key budgeting tools, including a medium-term expenditure framework, and programme and performance budgeting. Just as importantly, it aimed to build financial management capacity within line ministries to improve control over public finances and strengthen accountability across government.

A key institutional innovation under the law was the creation of a General Directorate of Financial Services (GDFS) in every line ministry. These directorates were designed to professionalise financial management and standardise core functions across government. Each GDFS was required to include at least four dedicated units:

• A budget unit – responsible for budget preparation, appropriation monitoring and management, cash forecasting, and fiscal reporting.

• A procurement unit – responsible for overseeing purchasing and procurement procedures.

• An accounting unit – responsible for processing payments, subject to all required financial controls.

• An oversight unit – responsible for supervising the legal entities operating under the ministry’s authority.

The GDFS model has delivered significant benefits. By creating a permanent finance function within each line ministry, it has strengthened fiscal oversight, clarified responsibilities, and enhanced co-ordination between ministries and the Budget Office. It has also played a pivotal role in enabling a more top-down approach to budgeting, while supporting a more consistent application of financial rules and procedures across the administration. The reform is widely regarded as a successful element of Greece’s broader budget system transformation.

Source: OECD (2019[6]), Budgeting in Greece.

Strong budgeting practices create the conditions for meaningful communication. A medium-term expenditure framework provides line ministries with earlier and clearer information about fiscal parameters, enabling them to plan more strategically over multiple years rather than reacting to short-term constraints. Top-down budgeting gives ministries greater autonomy within defined limits, while also requiring earlier dialogue about priorities and trade-offs.

Spending reviews and performance budgeting further reshape communication. They move discussions beyond incremental funding requests toward more structured assessments of what programmes achieve, where savings can be found, and how resources can be reallocated to support government priorities. In doing so, they create regular opportunities for line ministries and budget offices to engage not just at the point of budget submission, but throughout the planning and implementation cycle.

Maintaining trust and building a closer partnership requires regular communication and information sharing. In nearly all countries, ICT supports regular flow of information from ministries to the budget office on actual spending and updated spending forecasts (Figure 2). This supplements regular meetings and informal information exchanges.

Figure 2. Interaction between the budget office and line ministries

Note: Data for Lithuania and Mexico are not available. Other includes IT systems for regular exchange of information. Question 31.

Source: OECD (2023[4]), Senior Budget Officials Survey on Budget Frameworks.

For the interaction to be effective, both sides must also be clear about their roles and expectations. budget offices must provide consistent signals about fiscal limits and policy priorities, and line ministries must be prepared to present well-developed proposals, supported by evidence on costs and results.

To maintain trust, the budget office also needs to apply spending controls in a way that is seen as predictable and fair. This needs to be grounded in a shared understanding of the rules of spending control. The budget office also needs to be transparent about the goals that it is trying to meet through the budget process, recognising that the line ministry is likely to have different objectives.

Where the interaction is structured and timely, it strengthens trust, improves the quality of budget decisions, and reinforces the shared responsibility for public financial management.

2.3. Active participation in reforms

Strengthening the relationship between budget offices and line ministries requires more than consultation. It demands meaningful participation in shaping the reforms that determine how public resources are planned, allocated, and monitored. When line ministries are actively involved in both the design and implementation of reforms, those reforms are more likely to be grounded in practical realities, and more likely to succeed. Without such involvement, reforms risk being perceived as externally imposed, disconnected from the day-to-day work of ministries.

To support this, governments can establish regular, structured platforms for engagement, as shown in Box 5. These may take the form of working groups, technical committees, or periodic reform forums where line ministries can raise concerns, share perspectives, and contribute operational insight. Early engagement helps identify potential obstacles, supports adaptation to sectoral needs, and fosters shared ownership across government.

Box 5. Building internal finance functions in line ministries in Iceland

Iceland’s Organic Budget Law (OBL), adopted in 2015, introduced a broad package of budget reforms, including a medium-term expenditure framework, top-down budgeting, and performance and programme budgeting. A central aim of the reform was to improve the internal capacity of line ministries to manage resources well and take on greater responsibility within the new framework.

To this end, specific emphasis was placed on strengthening the finance function within line ministries, ensuring it had the authority, skills, and positioning to work closely with policy departments. This alignment between policy and finance functions was seen as critical to enable planning, credible budgeting, and more effective follow-through. The reform was supported by earmarked funding from Parliament to allow ministries to recruit qualified staff and reinforce their internal capabilities, an approach framed at the time as creating “a finance ministry in every ministry.”

To complement these institutional changes, the Budget Office established a “sounding board” mechanism that brought together representatives from line ministries, both policy and finance staff, for regular discussions. The platform provided a structured space for ministries to raise implementation challenges, contribute practical insights, and shape reform tools and processes from an early stage. This helped ensure the reforms were grounded in the operational realities of ministries.

During the legislative process, the Budget Committee of the Icelandic Parliament stressed the need for ministries to revise their internal processes and strengthen co-ordination between finance and policy teams. It also highlighted the importance of clear procedures and active follow-up, particularly in relation to the preparation of fiscal strategy proposals.

Together, these measures helped ensure that line ministries were not just subject to new budgeting requirements, but equipped and empowered to meet them, through stronger internal capacity and structured engagement in reform implementation.

Source: Government of Iceland (2015[7]), Public Finance Act.

Participation also improves the credibility and uptake of reform. When ministries are involved in shaping elements such as spending review processes, performance reporting, or medium-term planning tools, they are more likely to embed these practices in their own planning and management routines.

For budget offices, this means going beyond the issuance of guidelines or reform mandates. It requires ongoing dialogue with line ministries about what is working in practice, where adjustments are needed, and what support might help. This two-way engagement strengthens trust, improves the technical quality of reforms, and helps embed a budgeting culture built on collaboration, not just compliance.