What Is Fiscal Analysis?

C. Mitchell

In the broadest sense, fiscal analysis is any analysis that has to do with budgets, finances, and money matters over time. The phrase is most frequently found in government settings, however. Most national and local governments have fiscal analysis departments designed to keep watch over budgets, record how spent money is actually being used, and provide advice on improving financial matters in coming years. Private organizations and researchers also frequently engage in in-depth analysis in order to make government spending transparent to the public.

Fiscal analysis is any analysis that has to do with budgets, finances, and money matters over time.
Fiscal analysis is any analysis that has to do with budgets, finances, and money matters over time.

There exist several prevailing methods of financial analysis, but all draw a connection between three factors: money available, money requested, and money spent. Analysts are usually looking at government spending with budget as a backdrop, but the point of the analysis is not always to track whether a government or government entity stayed within any prescribed budget. Fiscal analysis studies are usually more concerned with how money was delegated and whether certain groups or entities received disproportionate payouts.

In most places, governments derive the bulk of the money they have to spend by collecting tax payments from citizens and residents. Laws and regulations often place limitations on how tax money can be used, and how it must be apportioned between a government’s many branches and agencies. Financial analysis can identify whether government spending is in line with the relevant laws. It can also provide accountability information to the taxpayers. In many countries, taxpayers are entitled to vote on a host of government proposals, officials, and operations, and even when taxpayers have no say at all in how tax-derived money is spent, they almost always have an interest in knowing.

For governments, fiscal analysis helps to shape fiscal policy. Fiscal policy is the government’s stance on using spending, revenue collection, and financial incentives to influence the economy. An analyst working for a government entity will look first at the state of the economy to identify any problems. Then, the analyst will think of ways that different spending strategies could ameliorate those problems. Aspects of fiscal theory can help determine the economical pros and cons of any spending decision.

Fiscal analysis jobs in the private sector are usually quite a bit different. Rather than looking for ways to maximize or minimize spending, private fiscal analysts are looking for ways to expose government spending. Most of the time, privately employed analysts focus on specific spending issues, like education, health care, or unemployment. These analysts might also conduct fiscal policy analysis, looking for ways in which the government has leveraged spending, either in present-day circumstances or in the past.

The job of a fiscal analyst is usually different from that of a financial analyst. Both work with money and track spending, but a financial analyst is usually concerned only with a single private sector company's spending or solvency. Corporate financial analysts work with accountants and budget executives to track a company’s stability over time. On the surface, financial analysis can look like fiscal analysis, but the end results are usually used very differently.

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