Good Practice Note on Sequencing PFM Reforms – Taking on Board Comments Received

Posted by Jack Diamond

Following the posting of a  draft Guidance Note on Sequencing PFM Reforms on the PEFA website  and on this blog (along with two Background Papers by Messrs. Tommasi and Diamond), the PEFA Steering Committee met on 15 November, 2012 to review the response to a number of comments received. Comments came both from development partners (such as SECO, DFID, the Inter-American Development Bank), as well as PFM experts in the field. Most of the comments dealt with specific issues, and were generally aimed at ensuring greater clarity in the text. Accordingly, the majority of these comments were easily accommodated in revised drafts of the Guidance Note and Background Papers, 1 and 2. There were, however, a number of general issues raised that were more thoroughly discussed by the Steering Committee, which are summarized in this blog.

PEFA Newsflash: Good Practice Note on Sequencing Reform

Posted by the PEFA Secretariat

Following publication of the draft “Guidance Note on Sequencing PFM Reforms”together with two Background Papers in September 2012, several comments were received and reviewed by the authors and these have been incorporated into the final version of these papers, published as a 'Good Practice Note'. The work was undertaken following an extensive period of research and debate around the issues between the PEFA Partners, led by IMF and the European Commission. The documents were authored by Jack Diamond (former Division Chief in the IMF's Fiscal Affairs Department), and Daniel Tommasi, and can be found by clicking the links at the bottom of the page.

Job Offer: Financial Management ETC Based in San Salvador, El Salvador (World Bank Job # 130174)

Posted by T.K. Balakrishnan, Manager, Financial Management, Latin America and Caribbean Region, World Bank

The World Bank has an opening for a Financial Management Extended Term Consultant (FM-ETC) based in San Salvador, El Salvador. Job description and qualifications are detailed in the job announcement, posted on the World Bank's website: Financial Management ETC based in San Salvador, El Salvador --  Job # 130174

The Closing Date is February 17, 2013.

For convenience, we provide the PFM Blog readers with excerpts from the Job Announcement.

Recent Performance-Based Budgeting Reforms in The Netherlands – Another Lap Around the Windmill!

Posted by Maarten de Jong[i]

An unknown person once noted that a cynical person is an idealist who, at some point, made the mistake of turning his ideals into his expectations. Looking at the increasing amount of critical studies on the impact of performance-based and program budgeting reforms, one could become a bit cynical towards this popular and ambitious type of budget reform. Not unlike the experience in other countries, the implementation of performance-based and program budgeting in the Netherlands over a decade ago has only partly lived up to its expectations.

There has not been much evidence that major reallocation of spending has taken place as a result of these reforms. In addition, the informational value of budgets and the administrative burden for line ministries have been continuous sources of debate.  Nevertheless, the concept of linking funding to results has proven its usefulness in agency management and does help the Ministry of Finance differentiate between a powerful claim and a powerful claimant in the budget process. Neither is anyone inclined to give up the benefits of increased transparency and enhanced managerial flexibility that resulted from introducing a program budget. Instead of becoming cynical or glorifying the "good old days" of input budgeting, the Netherlands Ministry of Finance accepted the fact that it may have had some unrealistic expectations and that some of the criticism on performance budgeting as implemented actually made sense and demanded a solution. This resulted in a major overhaul of the budget presentation and program structure in recent years called “Verantwoord Begroten” (translated as Accountable Budgeting).

Chinese Social Media Support Fiscal Transparency

Posted by Qi Zhang and James L Chan[i]

In the past four years, the Chinese government has made unprecedented efforts to implement public access to government financial information. This new policy of fiscal transparency is part of a larger project of public disclosure of government information. The policy basically revoked the long-standing state secret status of government financial information contained in annual government budgets and year-end financial reports.

Under the direction of the Chinese Communist Party (CCP) and with the encouragement of the National People’s Congress (NPC, the Chinese parliament), the State Council (the cabinet) took a major step in 2007 to lift the veil of secrecy over a wide range of government information. The release of financial information is the center-piece of this new policy initiative. Under the leadership of outgoing Premier Wen Jiabao, the pace of implementation has accelerated in the past two to three years through a series of administrative directives. It is noteworthy that in addition to releasing official government finance statistics, the spotlight is on the so-called san gong jingfei (literally ‘three public expenditures’), expenditures for official cars, receptions and travel.

These hotbeds of waste and abuse, as well as outright fraud, have been the targets for public outcries against official corruption. They are also the usual subjects of investigations by the National Audit Office, whose reports over the past dozen years have kicked up annual ‘audit storms’. Since virtually all of this information is usually communicated in the Chinese language only, these ‘dirty linens’ are effectively shielded from the outside world. Similarly, the new fiscal transparency policy has also drawn little international attention.

How Can the Pace of Budget Transparency Be Increased? Examining the Results of the Open Budget Survey 2012

Posted by Vivek Ramkumar

The International Budget Partnership (IBP) and the World Bank Institute (WBI) are pleased to invite you to join practitioners in the fields of development and fiscal management in a discussion on how to increase budget transparency and participation around the world. The discussion will include a presentation of the results of the IBP’s latest round of the Open Budget Survey and then focus on indentifying innovative and practical suggestions for rapidly improving country performance on the Survey.

Date: 5 February 2013
Time: 9.30-11 am (Breakfast will be served from 9 am)
Venue: IFC Auditorium, 2121 Pennsylvania Avenue, Washington D.C.

There is growing interest in the role of open budgeting systems in development. An increasing body of evidence shows that the best way to manage public funds efficiently and equitably is through budget systems that are transparent, inclusive, and monitored through independent oversight institutions. Recent research studies also show that transparency can help to attract easier and cheaper international credit and thereby increase public revenues. On the other hand, lack of fiscal transparency can undermine fiscal discipline,increase borrowing costs, and promote opportunities for corruption and other leakages.

Are We Entering a New Era in PFM: “Rule of the Accountants”?

Posted by Renaud Duplay[1]

Accountants—especially at parties—may sometimes feel like no one is paying attention to what they have to say. A recent research paper by Jens Heiling, a Technical Manager with the International Public Sector Accounting Standards Board (IPSAS), and James Chan, Professor Emeritus of Accounting at the University of Illinois, should reassure them.

Based on individual experiences from different countries, the authors draw a pattern of the evolving relationship between accounting and budgeting in the public sector. Their findings describe a five-stage process of development during which accountants exert an increasingly strong influence on the budgeting process in addition to their traditional responsibilities for government accounting systems and financial reporting.

In stage 1, budgeting and accounting live in separate worlds. The authors assume that in this stage accounting information would generally be poor, inaccurate or take too long to produce. In stage 2, accounting supplements budgeting by providing up-to-date information on revenues and spending that allows internal budgetary control within the fiscal year. However, complete data on budget execution that can be matched to the original budget are often still lacking. This is provided at stage 3, where financial reporting appears but still follows the rules and standards, essentially cash-based, on which the budget is prepared. It is only at stage 4 that accounting starts to develop the own accrual-based standards that provide a broader picture of public finances, but the budget continues to be prepared and presented on a cash basis. At this point, accountants (and the external auditor) may start criticizing the methods used to prepare the budget, and press the government to provide a reconciliation of cash-based budget execution data and accrual-based financial reports. This process is extended in stage 5 where both the budget and financial reports are prepared on an accrual basis, and the budget includes comprehensive information on the government’s operating statement and cash flow, as well as its assets and liabilities.

Job Offer: Financial Management Analyst Based in Buenos Aires, Argentina (World Bank Job # 130068)

Posted by T.K. Balakrishnan, Manager, Financial Management, Latin America and Caribbean Region, World Bank

The World Bank has an opening for a Financial Management Analyst (FMA) based in Buenos Aires, Argentina. Job description and qualifications are detailed in the job announcement, posted on the World Bank's website (click on this link): Financial Management Analyst based in Buenos Aires, Argentina --  Job # 130068

The Closing Date is January 29, 2013.

For convenience, we provide the PFM Blog readers with excerpts from the Job Announcement.

New Guidance for Sub-National PEFA Assessments

Posted by Greg Horman

The PEFA Program earlier this week released new guidelines for applying the PEFA framework to sub-national governments.

Of the nearly 300 PEFA assessments carried out to-date, more than 70 have been at the sub-national level. Sub-national governments are highly diverse across the world in terms of administrative tradition, functions and responsibilities, the degree of discretion in running their operations independently of the central government, and the role of inter-governmental fiscal transfers. The populations, budgets, and economies of some sub-national entities are far larger than those of other entire countries. So PFM outcomes at the sub-national level matter.

Simplifying Budget Documents – Time for an International Standard?

Posted by Camille Karamaga

Improving the quality of budget documentation lies at the heart of many reforms aimed at enhancing understanding of the content of the budget estimates as well as fostering transparency and accountability. Some budget laws prescribe a minimum set of documents to accompany the budget estimates. These may include, for example, reports on: (i) the medium-term macroeconomic forecast; (ii) fiscal policies and public expenditure trends; (ii) medium-term forecasts of government revenues, expenditures, debt, and the fiscal balance; (iii) medium-term resource ceilings; (iv) government guarantees, contingent liabilities and other fiscal risks; (v) spending on expenditure programs and projects by sector; and (vi) projections of donor aid flows. In countries with a Westminster tradition, the budget speech includes much of this information, but additional documents may be presented to the parliament.

Improving the content and quantity of fiscal information is not the same, however, as improving its quality or transparency. More does not always mean better or clearer. Indeed, it often means the reverse. Governments tend to respond to demands for information from the parliament, financial markets, NGOs and ordinary citizens by producing more and more data, often in unprocessed form. This may get them off the hook of public “accountability”, but places them squarely on another hook, accusations of information overload and obfuscation.

The design of a strategic planning framework, medium-term budget frameworks and program budgets has led to a proliferation of detailed information, performance indicators, and monitoring and evaluation reports. Mountains of annual budget books are produced with separate estimates volumes being prepared by each line ministry. The excessive detail contained in the budget estimates weakens their usefulness as raw material for discussion by parliamentary committees. Nor are they meaningful to the general public. In short, much of the  information produced by the government easily becomes a “data cemetery” which contributes little to the decision-making process or enlightened public debate.