Optimal Structures for Ministries of Finance
Posted by Ian Lienert
The need for internal restructuring of ministries of finances (MoFs) arises from time to time in the Fiscal Affairs Department’s (FAD) discussions with country authorities. Existing structures may no longer be conducive for attaining the desired outcomes of the ministry in the most effective manner. Ministerial restructuring needs a high-level political decision. For mergers of two ministries (e.g., planning and finance) one minister of the Cabinet of Ministers loses his post. When a ministry is split into two ministries, a new minister may be added to the Cabinet. Such mergers or splitting of the MoF are not common. It is more frequent for the MoF to undergo an internal restructuring, to “modernize” the ministry or rationalize its functions. For example, new business processes may have been developed (MTEF, performance budgeting, modernized treasury management, etc.) and now need to be embedded in the organizational structure.
Are there any guidelines that could be used for restructuring a MoF? Clearly a starting point is to examine the generic functions of any MoF. The attached listing of core and non-core functions of a MoF could be a starting point for national authorities that may be considering an organizational restructuring of its MoF. I would like to solicit your comments on this proposal.
• Is it possible to draw up generic functions of a ministry of finance to cover all situations? Or would it be better to draw up a “model” of such functions for a MoF with a “modern” budget system, i.e., one for which the budget process is geared towards performance, where the MoF plays an important oversight role, and a different model when there is a more “conventional” or “traditional” budget system, i.e., one in which the emphasis is on budget control, including of detailed line item budgets?
• Is the “planning” function so distinct from the “budget and PFM” functions that a separate model “ministry of planning” or “ministry of economy” is needed, especially for accommodating the “non-core” functions of a MoF? More fundamentally, could clarity and consensus ever be reached on the definition of a “generic” MOF?
• Is it possible to distinguish core functions from specialist functions, as proposed in the attached document? For example, some people consider that the function intergovernmental coordination is a core function under decentralized regimes, while aid management is a core function in all countries where external resources constitute a significant share of resource envelope.
• Finally, is the presented framework useful for considering organizational restructuring of the MOF of a particular country when the following situations apply: (a) it is believed that there is no single best model; (b) institutional setups are very different across countries and “our country” does not fit any model ; and (c) politics is considered to rule decisions in this area so why bother to be too “scientific” about seeking the “ideal” structure?
Your comments on these questions are welcomed!