Recent Developments in Public Sector Accounting – World Bank Seminar

Posted by Ian Lienert.

The International Public Sector Accounting Standards Board (IPSASB), an independent standard-setting board within the International Federation of Accountants (IFAC), sets international public sector accounting standards (IPSASs) and encourages implementation of them in all countries. Given the evolving worldwide financial crisis and its impact on public sector balance sheets, it is important to know whether government accounting standards are adequate and if so, whether they are being applied. This was one question asked at a World Bank seminar, held on May 15, 2009.

The speakers, Professor Andreas Bergmann (member, IPSASB) and Mr. John Stanford (Deputy Director, IPSASB) addressed four evolving issues: (1) the conceptual framework for general purpose financial reporting by the public sector; (2) specific public sector projects; (3) convergence of public sector and private sector accounting standards; and (4) promotion and communication activities of IPSASB.

Sound Public Financial Management Systems are a Key Element to the Successful Fiscal Decentralization Process

Posted by Mario Pessoa

Arguments in favor of decentralization range from devolving political decision making to the periphery to improving the provision of public services. However, the availability or lack of technical, human and financial resources and implementation quality seem to be critical to the success of the process. Even in places in which decentralization fails, the tendency is to continue implementation of the process because decentralization is often considered as one of the most important elements of a democratic system. So, the question raised is how to be more efficient in the decentralization process in order to prevent repetition of past failures.

First Issue of the IMF Fiscal Affairs Department's e-Newsletter

Posted by Michel Lazare

In April 2009, the IMF's Fiscal Affairs Department (FAD) published the first issue of its e-newsletter. As explained in the presentation letter (full text below) of FAD's Director, Carlo Cottarelli (see picture above), the aim of FAD's e-newsletter is to "reach out to a broad and diverse group of people who may be interested in FAD's activities.

This first issue focuses on FAD's activities on key fiscal topics:

• Fiscal policy and the global financial crisis;
• Fiscal policy in low-income countries;
• Fiscal risks; and
• Fiscal structural reforms.

In addition, the e-newsletter includes links to three categories of publications on fiscal issues:

1. IMF publications;
2. IMF working papers; and
3. External publications

And guess what? Surprise, surprise ! The e-newsletter includes a link to PFM blog!

The e-newletter is accessible on the www. imf.org website.

Long live the FAD's e-newsletter!

Fiscal Policy in Sub-Saharan Africa in Response to the Impact of the Global Crisis: One Size does not Fit All !!

Posted by Michel Lazare

The IMF is sometimes accused of systematically making the same old and abrupt recommendations to tighten fiscal policy whatever the circumstances and the country considered. This is an accusation often levied against the IMF policy recommendations regarding low-income countries in Africa.

It is actually an unfair accusation. I already made this point (see comments on Andy Wynne's post of May 6, 2009.) Here is an other illustration: The May 14, 2009 IMF staff position note on "Fiscal Policy in Sub-Saharan Africa in Response to the Impact of the Global Crisis" clearly states that, in Africa, fiscal policy response to the global crisis should vary depending on the national circumstances.

See for instance the full text of the staff position note (Download Spn0910[1]) or the text of the Executive Summary (in italics below):

The global financial crisis poses significant challenges to fiscal policies in Sub-Saharan African countries. Growth will weaken considerably as export prices and volumes,remittances, tourism, and capital flows decline. The fiscal effects of the crisis are likely to be large and to operate mainly via revenue losses, with commodity-related revenues particularly hard hit.

 

 Countries will need to weigh their options for fiscal policy responses. Countries with output gaps and sustainable debt and financing options have scope to implement expansionary policies, by letting automatic stabilizers work, accommodating declines in commodity-related revenues, and in some cases implementing discretionary fiscal stimulus. The main focus of fiscal stimulus should be on the expenditure side, particularly infrastructure and social spending given pressing needs, as reducing tax rates may be inequitable and the scope for doing so is limited given low revenue ratios. Other countries will have to adjust, in a way that will not affect critical spending. Additional donor support would reduce the need for adjustment. In all cases, countries should give priority to expanding social safety nets as needed to cushion the impact of the crisis on the poor.

IMF Job offer: Public Financial Management Expert Based in Washington D.C. (Job Number: 0900469)

Posted by Michel Lazare

The Fiscal Affairs Department seeks qualified candidates to fill a vacancy in the Public Financial Management Division II as Headquarters-based consultants for an initial period of two years at headquarters in Washington, D.C.

The selected candidate will provide technical assistance (TA) to IMF member countries on public financial management issues, such as:

• Budget preparation methodologies and procedures (including budget classification, budget appropriations framework, budget coverage, documentation, calendars and processes, medium-term fiscal and expenditure frameworks, fiscal decentralization, performance budgeting, expenditure review processes, and capital budgeting).
• Management of budget execution, reporting and oversight (including cash and debt management, commitment control, accounting and reporting, computerized financial management information systems, internal control, and audit). 
• Regulatory environment for public financial management. 
• In addition, the selected candidates will be required to travel frequently on mission, sometimes at short notice, and to supervise resident experts based in member countries and/or the IMF's Regional Technical Assistance Centers (RTACs).

IMF Job Offer: Public Financial Management Resident Advisors (based in Mali and Gabon) (Job Number: 0900463)

Posted by Michel Lazare

The Fiscal Affairs Department (FAD) is looking for two well-qualified experts to fill Public Financial Management (PFM) Resident Advisor positions at the (i) West African Regional Technical Assistance Center (West AFRITAC), established in 2003 and based in Bamako, Mali; and (ii) Central African Regional Technical Assistance Center (Central AFRITAC), established in 2007 and based in Libreville, Gabon. The Advisor's appointment term would be for a period of one year, on a renewable basis, subject to satisfactory performance.

The Advisor will provide technical assistance (TA) on a range of PFM areas to the ten (10) countries covered by West AFRITAC, namely Benin, Burkina Faso, Côte d'Ivoire, Guinea, Guinea Bissau, Mali, Mauritania, Niger, Senegal, and Togo, or the eight countries (8) covered by Central AFRITAC, namely Burundi, Cameroon, Central African Republic, Chad, Democratic Republic of Congo, Equatorial Guinea, Gabon, and Republic of Congo. The Advisor's work program will cover all PFM areas: legal and regulatory framework; budget preparation (including budget classification, medium-term budgetary frameworks, performance-oriented budgeting); budget execution (including expenditure control, treasury operations, cash management, accounting, fiscal reporting, and financial management information system), internal control and internal audit.

 

New book on the politics of government auditing in emerging economies

The Political Economy of Government Auditing: Financial Governance and the Rule of Law in Latin America and Beyond by Carlos Santiso (London: Routlegde, May 2009) Available from May 18 at http://www.routledgelaw.com/books/The-Political-Economy-of-Government-Auditing-isbn9780415477734

IFAC’S International Public Sector Accounting Standards Board Launches Review of Cash Basis Reporting in Developing Countries

Posted by Michel Lazare

The International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) is undertaking a review of the International Public Sector Accounting Standard, “Financial Reporting Under The Cash Basis of Accounting” (the Cash Basis IPSAS). The Cash Basis IPSAS was first issued in January 2003 and subsequently updated in 2006 and 2007.

As the invitation letter of Erna Swart, IPSASB Deputy Chair and Chair of the Task Force for the Review of the Cash Basis IPSAS puts it: "The primary objective of the review is to identify the major technical issues that public sector entities in developing economies have encountered, or are anticipated to encounter, in implementing the Standard. The IPSASB will then consider whether the Standard should be modified in light of these difficulties and/or if further guidance on its application should be provided by the IPSASB. The review will also identify whether additional reporting requirements should be added to the Standard.

The IPSASB is particularly interested in drawing on the experience of those who have been involved in, or have advised on, the adoption of the Cash Basis IPSAS in developing economies or have otherwise had exposure to the Cash Basis IPSAS and can provide input to this review."

The deadline for responses to the questionnaire (below) is July 15, 2009.

Gender Budgeting - What is that?

Posted by Davina Jacobs

"Gender budgeting," which refers to the systematic examination of budget programs and policies for their impact on women, has been tried in a range of countries in recent years. Australia was the first country to formally incorporate gender budgeting into its budget process by developing the concept of a “women’s budget” to address inequalities between women and men. Government ministries and departments were required to provide an analysis of the impact of the annual budget on women and girls, focusing mainly but not exclusively on public expenditures. Gender budgeting is sometimes seen as outside mainstream research on budgeting.

However, several studies in recent years point out the benefits of gender budgeting as women are often disadvantaged relative to men, according to key economic, social, and political measures of equality, but in many areas, such as education, differences are narrowing. The concept of externalities underlies the arguments for including gender considerations in budget programs and policies. Other arguments have a weaker economic basis but may be more socially or politically compelling.

Sweden’s Experience on Banking Resolution and Budget Consolidation

Posted by Ian Lienert.

With financial markets in turmoil and with governments intervening on a large scale in a number of countries, there is considerable interest in learning from past experiences. With this in mind, on April 23, 2009, the Nordic-Baltic Office of IMF Executive Directors conducted an internal IMF seminar on the lessons from Sweden’s experience of handling its banking crisis and fiscal consolidation of the early 1990s.

Key lessons include: be transparent and rapid when taking actions to solve the problems facing the financial sector; adopt a predictable approach, yet maintain flexibility; adapt to changing circumstances (including correcting mistakes); obtain political consensus; separate policy decision-making from technical implementation of financial sector crisis resolution; ensure coordination between various public sector agencies; and take measure to restore macroeconomic stability at the same time as financial sector problems are being tackled.

Moving Towards Outcome-Oriented Performance Measurement Systems

Posted by Tej Prakash.

 A recent research study on outcome-oriented performance measurement systems[1] points out that while it is easy to measure outputs, it is far more difficult to measure outcomes, especially as many public services are delivered a complex network of contracts, outsourcing, collaboration between private sector and NGOs.

The authors focus on community driven evaluation of programs that directly impact the communities. These are community indicator projects (CIP) which are housed by independent organization (NGO, etc.) and focus on high level community conditions that contribute to the quality of life rather than program specific functions. These are also unlike government performance measurement indicators which are data and indicator driven. The emphasis of CIP is on information sharing and establishing cross program links so as to get the broader picture. It recognizes that specific program may not control broader outcomes but can influence them.

Are balanced budgets really still essential in the fight against global recession and poverty?

Posted by Andy Wynne, editor of the International Journal of Governmental Financial Management.

[note from the PFM Blog's editor: this post represents the views of its author and not necessarily those of PFM Blog or the IMF]

The IMF appears to be taking contradictory positions with governments who are adopting budget deficits in order to reflate their economies.  This is being welcomed in the case of the industrial world, but still being discouraged in countries which have turned to the IMF for support.

Most OECD countries are now running significant budget deficits in an attempt to ensure a rapid end to the global recession.  The Managing Director of the IMF, Dominique Srauss-Khan, praised the G20 countries for adopting the fiscal stimulus that was needed, whilst warning that more may be required. However, the risks of a prolonged recession or depression remain significant. In March, the Wall Street Journal asked about 50 economic forecasters for their views. Around 55 per cent predicted an L-shape, or a prolonged recession, a further 20 per cent suggested a depression (a reduction in output per person of more than 10 per cent) was the most likely outcome.  In this situation, what is needed is a concerted effort by all counties in the world to push-start the global economy.  Indeed before the recent G20 meeting, the US government criticised some European governments for not spending enough.

Global Crisis -- Using Fiscal Policy to Stimulate Growth (an IMF Podcast)

Posted by Michel Lazare

In a recent podcast, our colleagues Paolo Mauro, Charles F. Kramer, and Steven A. Barnett of the IMF's Fiscal Affairs, Western Hemisphere, and Asia and the Pacific departments respectively, talk about using public money to compensate for declining private demand and how the U.S. and China are doing it. (click here for a link to the podcast.)

This podcast is a rich source of information on how to use fiscal policy in a time of crisis, and more specifically in the current global financial crisis. Paolo Mauro who heads one of the Fiscal Operations Divisions of the Fiscal Affairs Department makes the point that there is now a consensus that fiscal stimulus are in the present circumstances necessary to counteract the fall in private sector demand and the overall contraction in demand. He underscores the need for international dialog and coordination on fiscal policy.

He also stresses, however, that fiscal stimulus should not be used by all countries because different countries are facing different initial fiscal positions and sustainability constraints.

Attention should also be paid to the nature of the spending to include in the package in order to maximize effect on demand: increasing public infrastructure spending looks attractive, while other types of spending (e.g., transfers) should be targeted. Countries, as a matter of fact, have used a wide varieties of modalities.

Listen to the podcast for many other points and a presentation of the U.S. and China fiscal stimulus packages.

FAD Technical Guidance Notes on Public Financial Management

Posted by Richard Allen

Since 2007, FAD has produced a series of technical guidance notes on public financial management (PFM). These notes are intended to fulfill several purposes:

• To provide up-to-date guidance on technical PFM issues, and the sequencing of reform, in areas in which the Fund has relevant expertise, and which are not well covered in existing handbooks or textbooks on the subject.
• To suggest to the extent possible a common approach to reform in areas of PFM where, currently, a variety of approaches and practices prevail.
• To be of use to practioners providing advisory services in the field, and also to decision-makers and policy advisors in governmental organizations, international financial institutions, donor agencies, research institutes, consulting companies, and other organizations.