Functional Classification of Government Expenditure:

In a typical developing economy, each of recurrent and capital expenditures is usually grouped into the following headings:

a. General Administration: These are expenditures on defence, police and the cost of running the entire civil service.

b. Social and community services: These are expenditures on health care, education, public housing and other items which promote social and community development.

c. Economic Services: These are payments that take the form of a gift i.e., they are not for good exchanged or service rendered and they need not be repaid e.g. pension payments, unemployment allowance, payments to victims of national disasters like flood, fire, bird flew and motor accidents as well as bilateral grants.

Direct Money Transfers are usually a very important instrument of government to share money among the tiers of governments, as well as make payments to service debts.