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Time for a rather large article from the MoF department. Made possible also by the fact there is no need any more to publish official articles in two languages as that would have costed even more time.
After a very turbulent and time consuming period on the Monetary Market (MM) it’s quiet there now which gave us the ime to focus on this. But that will be addressed further down the article. As the MM doesn’t consume all available time anymore we did spend a large amount of time preparing this article. An article for which there shouldn’t be any need but apparently there is. What’s it about then?

Transparency
As a lot of you no doubt have noticed a few players, mostly congressmen or political active players that are no part of government, do shout a lot, publish articles or in other ways try to make others believe government isn’t transparent on money spend. If it weren’t such a serious matter one could laugh about it. Fact is however that the last 18 months or so all actions regarding budgets are recorded in the financial sheet we have in place for that. Furthermore a lot of extra information is added. Information on spendings that were never recorded before or more specific information on the spending that were. Even matters MoD should have recorded and kept track were updated.

Also an overview “for Dummies” was presented on our forum to explain the budget sheet. All people from whom you’d expect they understand (Congress Members and government officials) have all the knowledge they need at hand so they should know all there is to know.

And although I think all players that are wondering about our finances already know where and how to find it there is also a group of people that don’t know. Part of them because they don’t care, part of them because they are relatively new in the game. And as the latter could easily be mislead by the populistic shouts or other statements from people that do know (or at least ought to know) but choose to ignore it in favour of cheap propaganda we decided to take the time to publish a rather lengthy article in which you’ll find some background information and an explanation on how budgets are actually set for 1½ year or so as that’s different from the law we have on that. A law that is very much outdated when it comes to our budget but changes have been refused. Strange as some things in it are contradicting each other or would lead to spending more than we can which can never be the intention of a law. Furthermore you’ll find an overview of income and expenses from the last two years per CP term.

Still having questions after having read it? Feel free to ask. Normal questions will be answered, insinuations or political statements will be ignored as will questions that are already answered in the article.

Our law on budget
Our law on budget is rather simple. In short; Tax income of a previous period will be set as budget for the current period. Sounds nice and in a stable situation with rather high tax income it could actually work if no one ever would overspend it’s budget. Sadly both isn’t the case. Our budget is only a fraction of what it used to be two years back and back then large amounts of cash were overspend as well. As a result we were facing bankruptcy and drastic measures had to be taken.
First of all; How did our tax income develop over the last two years? As you can see below this dropped drastically.


You can imagine this also had a dramatic effect on the things the government could do. Some of the older players no doubt remember the time that via a simple form you could ask for tanks and food on a daily basis that were enough to do you’re DO. Apart from filling the form no form of action was required. Or when we had a training war people could get large amounts of supplies to fight on top of that. That’s very hard to imagine nowadays. And as a matter of fact it was back then. The amounts of money burnt were very large and the reason why the program was started was quite silly to be honest; Keeping the money was of no use so we’d better spend it on supplies. Apart from that some other decisions were made as well that in effect meant even more money was spend. Much more then was allowed by the budget rules.

Given these facts it isn’t hard to imagine people that played back then think nowadays government is spending money on some hidden program as there are hardly any supplies now. Especially if a player hasn’t been around for a year or so and just returned in the game or in eNL. But looking at the fact our income dropped from around 3 million to around 10k 1½ year later also explains why the eDutch government can’t do much.

This drop of tax income is caused by in game changes of course but sadly also by the changing of taxes congress forced us to accept. Most taxes were lowered significantly worsening the effect of the game changes yet congress decided to do so and by that action any gov is hardly able to spend anything. But on the other hand those and other people criticize that same government for not supporting players via supplies or subsidies. I don’t know how it works with you at home, but if I don’t have the money I don’t spend it...

As you can see in aug ’13 our taxes rose again. This was caused by the introduction of the work tax that makes the tax income of our nation rise again so we are actually able to do a bit more again. And although one of the first things congress discussed was lowering this tax as well, this time they didn’t so we are actually able to do some minor things now. Signing a few MPP’s and replenishing our Emergency Fund are two of those but I’ll come back on spendings later in detail.

On a sidenote; Our law states the minimum amount of money MoD should get is 30k. With a total income of 10k it’s obvious the law isn’t fit for purpose anymore. Just like it was clear in an ever declining income cycle spending the amount of income from the previous term leads to depletion of reserves. And if those reserves are spend on weapons or on speculations as was the case in eNL that’s not even possible as there is nothing to deplete anymore so we would go bankrupt soon.

So what happened when I became MoF? Well not much at first. Being relatively new in the game back then and without knowledge of how things went in the game on the financial side and no one able or willing to explain things I started investigating first and stumbling upon rather strange matters like the ones described above. I started asking questions to people that were around a lot longer already but that hardly did shed a light on it. Also I started analysing our financial sheet as several matters didn’t add up. Or in other words; The recorded data about government spendings was incomplete or hidden. For a large part caused by manual recording of the same data on several places which is of course a guarantee for differences or recording it on places without a proper link to it. I started adapting the sheet so one baseline would be leading for all data in the sheet on the most commonly used issues. Not all was changed however as that would have been way to time consuming. As a matter of fact; preparing this article and gathering data starting jan 12 again showed a few extra flaw’s in the data which caused government to use the wrong budget due to these errors in the sheet. It didn’t have a large impact but still. It shows finances requires a carefull way of working along with the skills to oversee the total picture instead of only a part of it.

After having analysed the matter I developed another way of budgeting that would actually let's a government spend the same amount of money they receive. Congress however denied the need for it and refused to change anything. They even denied the possibility of going bankrupt. Despite this fact in my second term as MoF I started to use my own way of budgeting. That first month we were not able to stick to it as both MoD and congress insisted on keeping our expenditures high since the law dictates it. As a result in my second term as MoF our reserves depleted even further albeit less as would have been the case when I wouldn’t have changed the way budget was set. As you can see the budget set that month by me was 130k while our law dictates it should have been 395k.

In the next picture I’ll show you the budget that was used in the term at hand and the actual spending that term. Data is shown relative to budget by law and relative to actual income;


Or as a percentage of the actual income that month;


Special attention is asked for the overspending compared to our incoming funds during my term as MoF on may ’13. That overspending wasn’t the case with the data recorded back then. A few weeks after that however I added extra expenses to the sheet that were, until then, not recorded. That caused higher gov spendings in the months before as well which caused a higher depletion of the extra income generated by the gold rush campaign. As a result there was less budget left from that for this specific period causing an actual loss in this specific month. Of course I could have ignored the extra expenses, or skip the recordings of previous months to let it look like all was within budget but that wouldn’t have been fair and it’s my conviction we should always work with the right data. No matter the result.



How does MoF set budget?
How does the way I make a budget work then? Well it’s a bit more complicated as the way it was done before and consists of three main parts.

Part 1: Tax income
Instead of just using last periods realisation I analyse the amount of taxes to be received in the period at hand. That’s the basis for the budget. Or better stated; the expected budget as the actual budget is what we will receive in the month at hand but that you’ll know the day after the term ends. The budget is analysed on at least a weekly bases. So instead of having to conclude the game changed resulting in spending more than our actual income was I try to stay as close to the income realisation as possible with at least three moments of re-evaluating our budget and adapting it if needed. And if an in game change occurs that affects our income, budget is adapted immediately. As said; Goal is spendings to never exceed the income in the term at hand which would for sure be the case often when looking to a fixed amount of money based on outdated figures.

The way it was done before is rather strange; Imagine you get a salary in 2010 and you base your spendings in 2014 on it without taking into account the changes ever since. It won’t give you a problem if you have a rising salary and no increasing costs but if you’re salary declines because you’re fired or work less or if you have to spend more because of the fact you’re rent got up or bought a car it will cause troubles. That won’t work in real life yet it was the way it worked in the past when it comes to eNL’s budget end spending. It’s also the way our law still dictates it. The way the budget changes during the term is of course visible in the sheet as is the actual income at the end of the term;


Part 2: Extra income
Apart from tax income other income is also taken into account. If we for instance receive payment from a country that wants to sign a MPP (10.000cc) with us the payment is added to budget giving us the opportunity to spend more than our tax income alone. Or if someone or some party chips in extra budget as was done for instance by the gold rush action in the past this is added to it as well.


Part 3: Extra state funding
Apart from this income it is possible extra funds are used. The most common case is the use of our emergency fund in case of war (which is the only official legislation on it). Despite this in the past the EF has also been used simply because a CP asked for extra budget to play with which was granted to him by congress. Also the Air Strike we conducted into eCan recently was done via extra funding. In this case from our general reserve. This can be seen in the above picture as well.

The past two years the build-up of our income looked like this;

Or as a percentage;


As you can see our tax income has had a rather marginal share in our income on several occasions due to the very low taxes we have. It’s even more visible if you look at the percentage the parts of income represent;


Reservations
Spending of these (extra) funds could be done in the term at hand or be postponed if that would be wiser to next term or spread among several terms. At the end of a term you then would have so called reservations in you’re spendings. These reservations are not transferred to the (general) reserve but add up to next terms budget and would be earmarked for the intended goal. A common example of this is signing off MPP’s for which on several occasions a payment is made but the actual signing could be done one or even more terms later. Most of the people that actually did look into our financial sheet will no doubt have noticed several instances of this all accompanied by an explanation next to it explaining the reservation or added budget.


Another example of a reservation is the replenishment of our Emergency Fund (EF). If there is budget left at the end of a term MoF decides what to do with it. Normally the result will go to our general reserve but lately it has been used to replenish our EF. The last couple of months replenishment of the EF was even taken into our budget at the start of the term so a minimum for replenishment was set. As long as transfer to EF isn’t done you will see the reservation in our finance sheet. Once complete the donation is recorded and the reservation vanishes with the same amount.

The total spend at the end of a term is everything spend or reserved that term adding up to the total income in that same term. Like you would do at home; At the end of a month you’re spend and reservations will add up to what you have received that month although hardly anyone will do so litterally. But if you're planning on something you will safe some money to do so hence making a reservation. So be it actually spend or kept for future use, you're spendings and reservations add up to you're income. And once you saved enough you actually use the reservation for that game console and buy it. It goes without saying spendings can only be done if savings are sufficient. You don’t buy a game console at the start of the month if that would mean you couldn’t buy booze anymore for the birthday party to come or wouldn’t have left enough savings to replace the fridge that’s about to break down.

An overview of the last 2 years on budget usages was presented in the first table shown above.
A detailed overview is presented in the table below and split between spendings and reservations.


Don't make the mistake however to add up all reservations as if that is all in reserve now. As explained above; Several reservations are added to next months budget. If they are not spend they will occur again at the end of the term and it would look like we have doubled the reservation. Naturally that ain't the case. So what are our reserves then? Hard to tell what we should start with as te recording of data was far from complete. An attempt however based on the data that was recorded start of the januari '12 term and the developments after that. In the table below you'll se the amount of reserves at the start of a term, folowed by the actual income being taks ncome ant other income like donations. What we used out of our EF or on an Airstrike is subtracted from that and the result of a term added to it again which leads to the new reserve. As tabel and as, rather dramatic looking, graph;



As you are very nicely able to notice our reserve has risen to start with but then dropped dramatically due to the huge spending of money resulting in a negative reserve at the start of me being MoF. Of course some of you will notice a negative reserve aint possible and you are right. Problem however is the recording of our cc posessions were flawed at the start of the finance sheet and we haven't had time to solve that. As you may have noticed I've been on my own ever since the start and only lately got a capable ssMoF that actually works. It's also of no consequence at this point as the fact we are depleting our reserve further on several occasions due to use of EF or AS suffices to know we still are not able to spend much and need to replenish our reserves first. Having a bit more income due to the work taks actually makes that possible now.

It’s interesting to see what percentage of payments/reservations was done relative to our actual income. Due to the large differences however a graph in this case doesn’t really add extra information so it’s a boring table again;


One example explained as that could be confussing or difficult to comprehend if you're not into figures in detail. Looking at MaartnW's term as CP; Nov '13 you'll notice 17,8% is forwarded to next month while there has been a statement that all results would go to replenishing our EF. So how is it possible 17,8% is moved to next month? If you scroll up you'll notice the income of that term also had a 17,8% part coming from previous month. That represents the reservation we had for an MPP with eCan. That was not used during MaartenW's term and therefore again moved forward to the next month. It also explains again why you can't add up reservations at the end of a term otherwise in this case we would have had 20k reserved for an MPP with eCan. Would be nice if we could generate cash like that but sadly it ain't working that way.

Having summed this all up and shown all the data I guess that’s enough for now.



That leaves one issue;
The Monetary Market
Last month we saw an increase in gold price from 202 to around 228. But due to the rewards in the weekly challenge which actually made the amounts of hits you could do a day only be limited by the amount of tanks you could afford the price of gold dropped as people sold gold to buy weps. As a result the amount of transactions was huge and the market was almost empty at a certain point. Needless to say we had to act a lot, but it paid off as you can see in the familiar overview.


With the weekly challenge back to being less rewarding the price now is slightly above 200cc again but at such a small margin the reward is insufficient to take risks.



Weekstrom
Nictefa
Ministery of Finance



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