A New IMF Fiscal Affairs Department's Publication: the Technical Notes and Manuals

Posted by Michel Lazare and Richard Allen.

The IMF has just launched a new series called: Technical Notes and Manuals.The first three issues have been authored by the IMF's Fiscal Affairs Department.

They deal with:

1. A Basic Model of Performance-Based Budgeting by Marc Robinson and Duncan Last  Download FAD Technical Manual 1
2. Transition to Accrual Accounting by by Abdul Khan and Stephen Mayes                     Download FAD Technical Manual 2
3. Modernizing Cash Management by Ian Lienert                                                              Download FAD Technical Manual 3

Earlier versions of these Technical Notes and Manuals were previously issued as part of a series of technical notes on our PFM blog.

Future issues will include topics in revenue administration, tax and expenditure
policy, and public financial management. Other IMF departments may also contribute notes to these series.

These notes and manuals aim at raising awareness among practitioners,
officials and academics of contemporary fiscal topics; and improving the dissemination of
FAD's TA advice. In particular, they will allow us to disseminate to a broader audience the advice now included in our TA reports, or provided through other advisory services.

Comments

[Doug Hadden]

I've been reviewing the Modernizing Cash Management Technical Note. This Note is very helpful to help sequence cash management functionality and makes a very good case for the use of the Treasury Single Account. We find that many governments focus on short-term liquidity. Yet, the use of commitment accounting can provide very accurate forecasting for longer term cash needs. Payroll can often be the largest periodic payment for governments, so payroll planning is also required. I've placed a longer review at: http://www.freebalance.com/blog/?p=441

[Doug Hadden]

Accrual accounting is worthy of discussion. No subject elicits controversy in Public Financial Management circles than accrual accounting. Is there are “true value of government”? Are the benefits of accrual accounting worth the effort in the government context? What are the incentives for politicians to expose the real long-term costs for popular programs? Abdul Khan and Stephen Mayes of the IMF have taken on this subject in the Technical Note, “Transition to Accrual Accounting.”

The Technical Note has important and valuable advice. The authors could have benefitted by introducing accrual accounting benefits earlier and with a slightly different structure.

The value of accrual accounting of providing a “broader measure of the burden of government financial commitments” than cash accounting is tackled in section 3. The authors make some compelling arguments. And, there are some very interesting use cases that put a face on the problem of accounting on a cash basis.

The authors have identified the three key pre-conditions for transition – acceptable cash-based system, political ownership and technical capacity. The stages for transition to accrual accounting are identified. There could have been more advice about these stages. For example, governments can move from full cash to modified cash to modified accrual And, the extent to accounting for assets and liabilities can be broadened over time in accrual accounting.

Longer review at: http://www.freebalance.com/blog/?p=446

[Doug Hadden]

Performance Management has had a significant impact on government thinking. Governments want to improve development outcomes. There are numerous techniques and tools used in the private sector. The key difference for government is the importance of budgeting. This is a very timely note.

The authors recommmend the use of performance indicators during budget preparation and execution. They recommend the use of program budgeting within Charts of Accounts. This is not entirely accepted within the PFM community, although the authors make a very compelling case.

The Technical Note does not address the complexity associated with defining and tracking outputs and outomes. Government organizations stuggle with uncovering effective measurements. There should be some thought on the sequencing of outputs and outcomes. Perhaps governments should begin by measuring outputs followed by outcomes.

More detailed review at: http://www.freebalance.com/blog/?p=448