sky Public Financial Management Trends and Lessons

8/8/2019 sky Public Financial Management Trends and Lessons

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Public Financial

Management Reform:

Trends and Lessons

Bill DorotinskyFiscal Affairs Department

IMF

ICGFM

June 18, 2008

Washington, D.C.


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Outline

Orientation

Objectives of PFM

PFM Cycle

Popular Reforms Recent Reform Trends

Observations


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Objectives of PFM and Budgeting

Three-level PFMFramework

Macrofiscal discipline Strategic allocation of

resources

Technical efficiency

Source: Public Expenditure Handbook World Bank (1998)

Three functions ofGovernment andbudgeting

Strategic Planning

Management Control

Operational Control

Source: Planning and Control Systems: A Framework forAnalysis. Robert Anthony (Boston, 1965)


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Planning

system

Medium term

plans, e.g. three

year rolling plans

Annual budgetsDevelopment,

recurrent and

revenue

Fund release

procedure, e.g...

warranting

Accounting for

revenue and

expenditure

Public expenditurereview Institutions

Reports and

financial statements

Audit system

Projectappraisal

Resourceallocation

Accountability

Expenditure

review

Financial management system boundaries

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.

Expenditure Management Cycle


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Popular Reforms

Macrofiscal

Discipline

Strategic

Allocation

Operational

Efficiency

Medium-Term Expenditure Frameworks

Performance, Program budgeting

IFMIS, automation

Fiscal Responsibility Laws

Treasury Single Account

Budget classification, chart of account

Reporting/ Transparency Procurement

Internal control/audit

External audit

Accrual Accounting ? ? ?

Recommended reforms generally try to change incentives to better

meet objectives by changing rules, roles and information


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And otherpopular themes.

Anti-corruption Anti-corruption commissions

Decentralization

Deconcentration

Demand-side Legislative oversight, involvement

Civil society oversight, participation

Sovereign wealth funds

Public-Private Partnerships

Monitoring and Evaluation

Sectoral measures (e.g. road funds)

Long-term planning

Debt sustainability analysis


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Anglophone OECD Model?

Changing role of MoF From control to monitoring/oversight and advisory role

Risk management: analysis of emerging issues, problems, andhealth of decision-making and finance system

From excessive budget detail to policy analysis and development Shifting authority and accountability towards line ministries

Emphasizing MoF training and guidance

Performance over compliance

New Public Management Separating policy from implementation

Contractual relationships, agency model

Empowering line ministries for efficiency

Caution: advanced industrial economies, to solve efficiencyproblems, not macrofiscal stability or sectoral allocation issues;good control structures, high transparency


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And otherpractices..

Fragmenting MoF Separate debt agency

Separate procurement function

Separate treasury

Separate budget

Separate revenue authority

Separate planning and policy processes (persistent staterather than trend)

All tend to weaken the MoF

Effect on financial management unclear Frequently done to improve pay or improve independence


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Budget Formulation

LIC*

(35)

LMIC*

(33)

UMIC*

(13)

MT Fiscal Framework 29% 45% 31%

MT Expenditure Framework 37% 39% 46%

Performance/ProgramBudgeting

23% 15% 38%

Capital-Investment Bdgts 9% 21% 23%

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 performancebudgeting 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 middleincome (LMIC) US$9063,595; upper middle income (UMIC) US$3,59611,115.


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Budget Execution

LIC

(35)

LMIC

(33)

UMIC

(13)

Treasury/Cash

management 51% 36% 31%

Commitmentcontrols 26% 18% 15%

Debt

management 11% 18% 8%

Accounting/classi

fication 40% 42% 23%

Payroll/Personnel 17% 9% 15%

Internal

audit/control 11% 12% na

Procurement 14% 12% na



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Other Reforms

LIC

(35)

LMIC

(33)

UMIC

(13)

IFMIS 49% 36% 23%

MoFReorganization 3% 18% 8%

Budget

Law/Legal 26% 36% 23%

Transparency 20% 30% 15%

PPPs 3% 21% 15%

Decentralization 26% 15% 23%



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Observations

LICs struggle to get basics in place Do advanced reforms may detract from this objective?

LMICs and UMICs frequently struggle to overcome legacy systems

Recently, slight movement away from larger reforms, towardspragmatic reforms linked to country problems

IFMIS to FMIS

Unbundling MTEFs, better sequencing

Challenges remain on Holistic views of PFM systems, focus on weakest links

Sequencing reforms

Limiting adverse impact of supply-push, transplanting of advancedreforms to weak environments

Realistic time horizons

Redefining ownership as helping the country solve practical financialmanagement challenges simply, directly

Right-sizing reforms, measures

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