State Budget Control at your Fingertips--Financial Management Information Systems Have Modified Public Finance Management in the State of Sao Paulo - Brazil

Posted by Mario Pessoa

The Brazilian State of Sao Paulo has implemented a set of financial information systems in the 1990s and 2000s to enhance transparency and reliability of fiscal data. Two of the most relevant systems are: SIAFEM and SIGEO.

The first one is a typical integrated financial management information system (IFMIS) that encompasses all fiscal transactions from the budget preparation and execution to the preparation of the financial statements. SIAFEM is used by more than 5,000 civil servants of 800 entities. All budgetary transactions have to be done using the system. Additionally, SIAFEM is linked to a treasury single account. The general ledger is the core of the system that uses the same economic classification for both budget and accounting purposes. All reports regarding the fiscal responsibility law and the financial statements are generated by the system.

Extending Research on Corruption to Specific Features of PFM Systems

Posted by Francois Michel

If one wanted to summarize briefly how research on corruption has evolved in recent years, one could say that it has made progress in four different areas:

• The search for determinants of corruption and its transmission mechanism to growth and the exploration of linkages between corruption and other economic—GDP per capita, capital flows, aid, income distribution, inflation, etc.—or political variables. This is often achieved through panel data analyses;
• The improvement of transparency indexes—see Daniel Kaufmann and Aart Kraay’s recent article on "Governance Indicators: Where Are We, Where Should We Be Going?";
• Efforts to leverage insights from the corruption literature into sectoral, country-specific reform plans, and that have formed the core of the World Bank’s strategy in recent years. As the Bank’s recent flagship publication on corruption makes clear, public financial management reform are instrumental in tackling corruption;
• New microeconomic models explaining how corruption can originate in auctions of procurement contracts—e.g. on allowing ex-post collusion opportunities between the bureaucrat and one bidder.

An Apparent Paradox? What the Political Economy Literature on Fiscal Institutions Could Say about Second Generation PFM Reforms

Posted by Francois Michel

Research on the political economy of fiscal institutions has made considerable progress in the past two decades, with numerous contributions from major economists including, among others, Douglas North, Alberto Alesina, Allan Drazen, Andres Velasco, Mark Hallerberg, Gian Milesi-Ferreti, Roberto Perroti, Torsten Persson, James Poterba, Guido Tabellini, and Jürgen von Hagen.

The political economy of fiscal institutions

This progress is related to the more general, progressive emergence of comparative political economy, which in turn benefited from advances in econometric techniques, as a major field of economics. A good example is Persson and Tabellini's classic book on The Economic Effects of Constitutions, in which the authors seek to establish some causality between two constitutional choices (majoritarian or proportional representation; presidential or parliamentary form of government) and economic outcomes.

Another example is Mark Hallerberg and Guntram Wolff's recent article on Fiscal institutions, fiscal policy and sovereign risk premia in EMU (Public Choice, Volume 136, Numbers 3-4 / September, 2008). These authors attempt to take stock of Daron Acemoglu's remarks that endogeneity issues make the assessment of causal effects of institutions and constitution particularly difficult by showing that budget institutions influence the perception of countries' default risks by financial markets (less subject to endogeneity problems).

Welcome to the New "MTEF Blog"

Posted by Michel Lazare

The new "MTEF Blog" has started posting about "Public Expenditure Management, Medium-Term Expenditure Frameworks and All Things Fiscal" on August 1, 2008. Not surprisingly, the first posts published were about what is an MTEF and discussed MTEF implementation in a few countries, including in Laos. From there, the MTEF Blog broadened the scope of its posts to cover many other fiscal issues: accountability, fiscal rules, the Government Fiscal Statistics for Mauritius (and the IMF ROSC data module for Mauritius), a (of course, rather old) video interview with Milton Friedman, etc. This is by and large consistent with the objective set for itself by MTEF Blog in its August 1 post: "This blog is an aggregation point and a discussion forum for latest research on public expenditure management and multi-year budgeting practices. "

PFM blogs particularly likes the rich list of PFM relevant links in th eright column of MTEF Blog.

MTEF Blog is published by "MAI." Regrettably, the MTEF Blog's profile does not provide information on who MAI is.

PFM Blogs welcomes the arrival of MTEF Blog among the still relatively short list of blogs focusing on public financial management and wishes full success to its author.

IMF’s 8th Debt Managers Forum--Warsaw--July 14-15, 2008

Posted by Brian Olden

The IMF’s Debt Managers Forum, sponsored by the Fund’s Monetary and Capital Markets Department took place in Warsaw on July 14- 15 2008. The National Bank of Poland and the Polish Ministry of Finance acted as co-hosts of the conference (and did an excellent job by the way). The Deputy Managing Director of the Fund, Mr. Murilo Portugal, also attended and chaired the opening session. The conference was well attended by participants from 30 emerging and mature market economies as well as some private sector representatives.

The opening session focused on the global economic and financial market outlook. Consensus opinion from both private and public sector representatives was that claims advanced by some commentators that Emerging Market Countries (EMCs) were decoupling from advanced economies were, greatly exaggerated and that problems in advanced economy financial markets, coupled with the rising trend in inflation, posed considerable risks to the stability of most EMCs.

Canada Strengthening Strategic Reviews of Spending

Posted by Bill Dorotinsky, World Bank

In a July 21, 2008, post, Ian Lienert blogged about Canada's recent establishment of a Parliamentary Budget Office. We'll, there are broader reforms of Canadian public financial management (PFM) underway. PFM Blog has run across a February 2008 presentation by Ivan Blake, Executive Director of Management Accountability with the Canadian Treasury Board Secretariat, on Management Reform in the Canadian Public Service. The presentation was delivered at the Tenth Annual Government Performance Summit 2008, held in Arlington, Virginia. PFM Blog has asked the Treasury Board Secretariat to itself prepare a blog on the reform, but pending more detail, we thought it useful to bring this interesting development to our readers attention.

The Good, the Bad and the Ugly of MTEFs?

Posted by Ismail Manik, consultant, World Bank Institute

An interesting recent working paper by Clay G. Wescott, of the Asia Pacific Governance Institute, has a good review of country experiences with MTEF implementations. The working paper is a background paper to the World Bank’s Independent Evaluation Group’s report ‘Public Sector Reform: What Works and Why?’ 

Norway's public financial management system

-- a PEFA-based assessment

Posted by Bill Dorotinsky, World Bank

In previous posts, we've blogged about the Public Expenditure and Financial Accountability (PEFA) Performance Measurement Framework, launched in 2005 and applied in over 80 developing countries (see our April 21 and August 4, 2008 posts).

Norway has supported the development of this framework to assess the performance of a country’s public financial management system. This PEFA assessment of the Norwegian public financial management is the first time the framework has been applied in a high income OECD country. The aim of the assessment was to get further experience with the framework by using it in another country context. A special section on management of Norwegian petroleum revenue is included in the report.

PFM Reforms in Developing Countries

Lessons from Ghana, Tanzania and Uganda

Posted by Bill Dorotinsky

In trying to learn what public financial management (PFM) reforms work, it is important to challenge conventional wisdom and look afresh at what has been tried, and its relative success. Model reforms need to be compared with actual experience, and lessons learned based on evidence need to be drawn and fed back into the reform processes. A 2005 working paper "Public Financial Management Reforms in Developing Countries: Lessons from Ghana, Tanzania and Uganda" by Andy Wynne does just that, looking at medium-term expenditure framework (MTEF) and integrated financial management information system (IFMIS) reforms in the three African countries cited. The working paper was published in December 2005 by The African Capacity Building Foundation.*

Decentralization: The Bad Things Have not Happened.... Yet?

Posted by Luc Leruth

On June 26, 2008, I took part in a Banque de France Workshop on the Impact of Decentralization on Public Finances in St. Germain-en-Laye, near Paris (Download Workshop_programm_decentralization.doc, Download List_of_participants.pdf). The Workshop looked at a number of critical issues related to decentralization, including the role of fiscal rules, the impact of decentralization on economic growth, and the pre-conditions for successful decentralization. It was attended by about 50 senior representatives of international organizations, central banks, the private sector, and academia. The discussions were opened by Mr. Ophele, Deputy Director General of Economic Studies and International Relations at the BdF and I was invited to take part in the concluding roundtable chaired by Mr. Franco of the Banca d’Italia.

Having been asked to be a little provocative, I observed in my presentation (integrating comments from Messrs. Keen and Norregaard of FAD) (Download Decentralization_and_tax_competition.ppt)that the bad things associated with decentralization and discussed in academic circles had not really happened (much) yet. For example:

• Empirical evidence showed that vertical tax rate competition had remained limited (although it existed, but only a little bit)
• As sub-National governments took over more responsibilities, the fiscal base had tended to remain stable (although even a very immobile base eventually became mobile).

I argued that the reason for which this had not happened was that the environment in which decentralization had taken place had been largely stable and predictable in the last decades.

IMF to prepare Guidelines for Fiscal Risk Disclosure and Management

Posted by Aliona Cebotari

On June 16, 2008, the Executive Board of the International Monetary Fund (IMF) held a seminar on “Fiscal Risks—Sources, Disclosure, and Management”. The topic has gained importance in many IMF member countries, as interest in promoting fiscal sustainability and transparency grows. The staff paper on which the discussion was based reviews the experience with fiscal risks in a wide range of countries and provides practical advice on risk identification, disclosure and management. This includes a set of Guidelines for Fiscal Risk Disclosure and Management, and a possible Statement of Fiscal Risks.

Public Expenditure and Financial Accountability (PEFA) -- Part 2

Posted by Bill Dorotinsky

In an April 21, 2008, post, we described the origins of the PEFA framework, with a promise to blog about the framework itself. This post provides a brief overview of the assessment framework and indicator set.

The authoritative reference for the PEFA indicators is the PEFA Public Financial Management Performance Measurement Framework handbook, available in English, French, Spanish, Portuguese (Brazilian and Continental), Russian, Ukrainian, and Arabic.

Keeping-Up with Governance Issues -- World Bank Institute Governance Newsletter

Posted by Bill Dorotinsky

Stepping-back from core public financial management issues, there are frequently other public administration or 'governance' issues that emerge when trying to implement public financial management reforms. Civil service, parliamentary roles and responsibilities, and administrative reforms fit together to either enable or in some cases prevent PFM reforms.

For those interested in the broader context of governance, a useful resource is the World Bank Institutes monthly Governance and Anti-Corruption Newsletter, featuring recent, ongoing and upcoming events, publications and research, data and capacity-building issues, links, etc.

For example

• the recent May 2008 newsletter noted an upcoming Parliamentary Indicators and Benchmarks - International Seminar and Workshop at Griffith University, Brisbane, Australia (September 21 - 23, 2008). The workshop "will bring together key organizations working to develop parliamentary indicators and benchmarks with the aim of developing a generally accepted framework to measure parliamentary performance." This is an exciting development, building on the other indicator work we've blogged about (see the April 21, 2008 PEFA post).
• the June 2008 newsletter noted a recent event on Building Transparency and Reducing Corruption Related to Defense Establishments, Geneva, Switzerland (May 5-7, 2008). The workshop is part of a new, developing body of knowledge and practice that seeks to promote best practice and address the negative problems caused by corruption in defense establishments. This event was hosted by Geneva Centre for Security Policy (GCSP), the Geneva Centre for Democratic Control of Armed Forces (DCAF) and Transparency International UK (TI-UK).

Events include training for civil society and the media in budget monitoring, support to establish parliamentary budget offices, training for parliamentarians in the financial oversight roles, and many other relevant topics.

Interested readers can subscribe to the newsletter at the web site link above.