The impact of annuality is felt by everyone involved with government budgeting. Annuality requires budget allocations to be spent by the end of the financial year or surrendered to the centre. It therefore provides an incentive to spend and, as the end of the financial year approaches, the incentive intensifies. This, it is argued, leads to the possibility of wasteful and extravagant spending. The first chapter of this report discusses the principle of annuality and its rationale.