1. Public Financial Management Reform: Trends and Lessons Bill Dorotinsky Fiscal Affairs Department IMF ICGFM June 18, 2008 Washington, D.C.
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4. Expenditure Management Cycle Source: Adapted from Integrated Financial Management . Michael Parry, International Management Consultants Limited. Training Workshop on Government Budgeting in Developing Countries. THE UNITED NATIONS. December 1997. Planning system Medium term plans, e.g. three year rolling plans Annual budgets Development, recurrent and revenue Fund release procedure, e.g... warranting Accounting for revenue and expenditure Public expenditure review Institutions Reports and financial statements Audit system Project monitoring Project appraisal Resource allocation Liquidity management Expenditure control Monitoring & controlling Post event review Accountability Expenditure review Financial management system boundaries
5. Popular Reforms Recommended reforms generally try to change incentives to better meet objectives by changing rules, roles and information External audit ? ? ? Accrual Accounting Internal control/audit Procurement Reporting/ Transparency Budget classification, chart of account Treasury Single Account Fiscal Responsibility Laws IFMIS, automation Performance, Program budgeting Medium-Term Expenditure Frameworks Operational Efficiency Strategic Allocation Macrofiscal Discipline
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9. Budget Formulation Recent Reform Emphasis Different drivers of reforms confuse the picture. Which are donor-driven? Which country driven? Which address real need? Which are simply fashionable? If higher income enables more self-direction, interesting that performance budgeting of greater interest in upper-middle income countries. * 2006 gross national income (GNI) per capita. The groups are: low income (LIC) US$905 or less; lower middle income (LMIC) US$906–3,595; upper middle income (UMIC) US$3,596–11,115. 23% 21% 9% Capital-Investment Bdgts 38% 15% 23% Performance/Program Budgeting 46% 39% 37% MT Expenditure Framework 31% 45% 29% MT Fiscal Framework UMIC* (13) LMIC* (33) LIC* (35)
Formulation covers ‘expenditure review’ insofar as this is a step in preparation of future plans, and goes through to “annual budgets..” -- need for good budget -- Brazil roads, congress, MoF -- linking budget to cash management -- dc grants management Execution covers from ‘liquidity management’ through to PER’s, insofar as PER’s are part of the ex poste accountability system. Half of cycle (2) Hardware and software do not solve problems in human systems. Must know source of problem, and seriously assess whether computerization will solve the core problem. (DC Example) Underlying all of this is good recording of transactions and reporting!