Is This Your Rainy Day?—Cash Management in Small Resource Dependent Economies

Posted by Tej Prakash 

Small economies where resource revenues are a significant part of the budget often face volatile inflows due to fluctuations in production, demand, and price. Hence, if the budget is based on a particular reference price for the resource, actual revenues will often over- or under-perform based on the actual resource price. In case of underperformance, the country then faces, the choice of continuing the smooth implementation of the budget, if price movements are only seen as temporary, or adjusting expenditure downward. The question is, are there approaches to insulating the budget from such unpredictable cash flows?

What They Don’t Teach You at University—Public Financial Management, for Example!

Posted by Dimitar Vlahov [1]

It is easy to see that public financial management (PFM) employs many thousands, maybe  even hundreds of thousands of people around the world. All professionals involved in the operation, management, development or review of budgetary processes can be considered PFM practitioners. In all modesty, these professionals could consider themselves pillars of the governance process, be it at the level of multinational administrations, national governments, or even the most humble local government entity. All government organizations need money and need to manage their monies systematically to enable their activities. Add to all these civil servants the  international experts at places such as the World Bank, the IMF, and other multi-lateral organizations, together with private consultants and NGO/non-profit advisors, and you get a very large crowd. Why is it, then, that there is no graduate university degree in PFM,  especially in the United States with its academically diverse offering of curriculums? The big demand for PFM-skills, one might reason, would suggest this is an unlikely outcome.

Gender Budgeting—A New Handbook for Practitioners

Posted by Davina Jacobs

Gender budgeting has in recent years moved from just being “fashionable” to having a “normative” impact on budget practices. In an earlier entry on this blog, I gave a short introduction to what gender budgeting means in practice. Recently, the Gender Responsive Budgeting website, which is a collaborative effort between the United Nations Development Fund for Women (UNIFEM), the Commonwealth Secretariat and Canada's International Development Research Centre (IDRC), has published a very interesting new book, Gender Budgeting: Practical Implementation Handbook, prepared by Sheila Quinn (pdf copy available below.)

GAO Explains It All: Towards Enhanced Understanding of U.S .Government Financial Report

Posted by Abdul Khan

Making sense of the finances of what the U.S. Government Accountability Office (GAO), without undue modesty, refers to as the “the most diverse, most complex, and arguably the most important entity on earth” is not meant to be easy. However, this is precisely what the GAO, the so-called congressional watchdog, has set out to do through its publication Understanding the Primary Components of the Annual Financial Report of the United States Government.[1] Written in non-technical language, this guide to the U.S. government financial report should go a long way to help citizens and other interested parties achieve a broad understanding of the federal government’s finances.

Accountants to the Rescue! A Whole System Approach to PFM Architecture

Posted by Suzanne Flynn

The UK based Chartered Institute of Public Finance and Accountancy (CIPFA) has issued an ambitious, but also a somewhat theoretic, draft consultation paper, with support from the UK’s Department for International Development (DFID) on what constitutes a PFM system. The paper aims to clarify the scope and characteristics of PFM systems, but also what PFM “architectures” exist to guide measures and aid program development, with the ultimate aim of improving public service delivery. The draft is available at http://www.cipfa.org.uk/international/consultation.cfm. Comments on the draft are welcomed by the Institute by the end of November of this year. If this document is to be useful—and clearly a lot of work and thought has gone into it—comments from a broad range of PFM practitioners would add tremendously to its value. In my view, particularly the views of non-accountants would enrich the present draft.

IMF Updates the Portal on Fiscal Transparency

Posted by Mario Pessoa

Fiscal transparency is one of the most relevant elements of a modern public financial management system. Because of that, starting in the late 1990s, the IMF developed a code of good practices in fiscal transparency and a specific framework to evaluate transparency practices in its member countries. The Fiscal Affairs Department developed a set of guides and manuals to help carry out a standardized evaluation. The Report on the Observance of Standards and Codes (ROSC) of Fiscal Transparency –often called the “Fiscal ROSC” is a voluntary exercise that has been already undertaken by more than 90 countries.

CIPFA Consultation on International Architecture for Public Financial Management

  Posted by Michel Lazare

 

The Chartered Institute of Public Finance and Accountancy (CIPFA) is a UK-based global professional accountancy body that specialises in the public services. We have an active international strategy including PEFA and PFM training, professionalisation and consultancy.

CIPFA is currently undertaking a PFM consultation on a document covering a definition of PFM (from a service delivery perspective) a whole system approach (holistic) process architecture and regional institutional architecture. The link to the CIPFA webpage announcing the consultation is here and the consultation paper can be accessed by clicking on the following link: Download PFM_IA_Whole_System_Approach[1]
 

Maintain Fiscal Support, but Devise Credible Exit Strategies, Says the IMF's Fiscal Monitor

Posted by Michel Lazare.

On November 3, 2009, the IMF published the second issue of its Cross-Country Fiscal Monitor.

This Fiscal Monitor stresses that while, fiscal policy will continue to provide substantial support to aggregate demand in most countries this year, and is projected to remain supportive of economic activity in advanced countries in 2010, government debt in advanced G-20 economies is projected to reach 118 percent of GDP in 2014.

To get debt below 60 percent by 2030 will require raising the average structural primary balance by 8 percentage points of GDP over 2010-20 and then keeping it there for a further decade.

This is not a trivial amount of fiscal consolidation to say the least. The FIscal Monitor, however, considers that this could be achieved by a combination of non-renewal of stimulus measures; a freeze in real per capita spending excluding pensions and health; reforms to keep the growth of pension and health spending in line with that of GDP; and tax increases averaging about 3 percentage points of GDP for advanced G-20 countries.

Most PFM experts would probably agree that such a sizable fiscal consolidation over such a long period also requires a sound PFM system and pretty solid fiscal institutions.

Legislative Oversight and Budgeting – A World Perspective

Posted by Ian Lienert

The legislature has three core functions—representation, lawmaking, and oversight. The oversight function is perhaps the least studied and practiced. This is perhaps because oversight is bolstered somewhat less by external institutions. Oversight involves assessing implementation processes. It comes toward the end of the policy process, during the implementation of laws. In many countries, even those with a formal separation of legislative policy making and executive administrative powers, oversight provides the opportunity for legislators to participate in implementation. When it comes to budgeting, evaluation is needed to assess how well policies have been implemented. Legislative oversight includes examining fidelity to budget laws, probity in spending, efficiency in choices, and the effectiveness of the budget in producing the desired outcomes. Since it is the legislature that examines executive behavior, oversight is also a tool for checking the behavior of the budget system’s single most powerful political actor.

Although policy making and lawmaking are central tasks of the legislature, concern with the implementation of law is the realm of legislative oversight. A World Bank Institute book, published in 2007, examines the different facets of how executives implement budget laws. This book, edited by Rick Stapenhurst, Riccardo Pelizzo, David Olson, and Lisa von Trapp, and originated in large part with the concern of practitioners about increasing and improving the part played by legislative oversight in governing developing democracies. As part of its governance program, the World Bank Institute seeks to strengthen parliamentary oversight and to promote enhanced government accountability and transparency. The book is an eclectic compilation that samples the worlds of practice and scholarship.

Performance-Based Budgeting in France: An Evaluation by Parliament

Posted by Franck Bessette.

 
  
  
In France, the parliament was the initiator and driver of performance-based budgeting, introduced by the organic by-law of  August 1, 2001 (the so-called Loi Organique sur les Finances Publiques -- LOLF) [for more details, see in particular this previous blogpost by Bill Dorotinsky  and its embedded PowerPoint presentation by Phillipe Debrose] and fully applied from January 1, 2006. This was a managerial “big bang” which reorganized completely the budget structure and public accounting (accrual based accounting was introduced), defined new players (program managers), new chains of decision, and for every program a series of objectives and indicators.

After three years of complete implementation, the Economic and Finance Committee of the National Assembly (Assemblée Nationale) has evaluated this performance-driven budgetary reform and made recommendations to further improve implementation. A general report followed by annexes for individual programs was recently published [click here for a copy of the report ]