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September 2016

September 26, 2016

A Roadmap for Implementing Accrual Accounting

Accrual in the Public Sector

Posted by Suzanne Flynn, Delphine Moretti, and Joe Cavanagh[1]

Last week the IMF published a new paper in its technical notes and manuals (TNM) series, a guide to “Implementing Accrual Accounting in the Public Sector” by Joe Cavanagh, Suzanne Flynn and Delphine Moretti (TNM 16/06). The technical note is available here.

Many countries have changed or are considering changing the basis of their financial accounts from cash to accruals. This TNM explains what accrual accounting (AA) means for the public sector and discusses current trends in moving from cash to accrual accounting.  It outlines the factors that governments should consider in preparing for and sequencing the transition. The note recognizes that governments will have different starting points and objectives, and varying practices in preparing financial statements. Countries also vary considerably in the volume of stocks and flows, and the number of public sector entities, that are recorded outside the government accounts. These factors need to be considered when planning and sequencing the implementation of AA.

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September 21, 2016

Managing Government Wages and Employment

Wages and Employment

Posted by Teresa Curristine and Mercedes Garcia-Escribano[1]

Government wage and employment policies have important social and economic implications. The government is the major employer in many countries, delivering key public services and typically spending around 25 percent of its budget on the wage bill (See Chart 1). Given its sizable budget weight, how the wage bill is managed heavily influences the sustainability of public finances, the quantity and quality of key public services, and as governments are major employers, private sector pay and employment.

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September 19, 2016

Sharing Resource Revenues: Common Mistakes and How to Get it Right

Natural Resource Revenue Sharing cover

Posted by Andrew Bauer and Sofi Halling[1]

In nearly every country, subnational governments receive public funds, either through direct tax collection or intergovernmental transfers. But in more than 30 countries—from Bolivia to Canada to DRC to Indonesia—policymakers have chosen to create a special revenue sharing system to distribute non-renewable natural resource revenues (see map below). A recently published report by the Natural Resource Governance Institute (NRGI) and the United Nations Development Programme (UNDP) examines this important topic (NRGI link to report; UNDP link to report).

In most of these countries, oil-, gas- or mineral-producing regions receive a percentage share of the production value extracted from their territory. In a subset of these countries—including Ecuador, Mongolia and Uganda—resource revenues are pooled separately from other fiscal revenues and distributed according to a unique formula that includes, for example, poverty and population indicators. Every year, hundreds of billions of dollars are distributed through these systems.

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September 15, 2016

The (Fiscal) Benefits of Transparency

Transparency Fiscal Benefits

Posted by Ben Roseth[1] and Carlos Santiso[2]

Crime doesn’t pay, but what about corruption?

Since the 1960s, some have argued that corruption is the grease on the wheels of development. Inefficient bureaucracies need graft to help circumvent roadblocks of excessive red tape or unmotivated civil servants, increase efficiency and improve outcomes in investment and overall economic growth (see Leff 1964, Leys 1964). This line of argumentation has been pushed back with a slew of empirical research. Numerous widely cited articles now document the deleterious effects of corruption on governance and the rule of law, on economic growth and public investment, and more.  

Nevertheless, in the real world, corruption is still a scourge. Recent events in Latin America have reminded us just how harmful corruption can be. But once the tide of scandals and protests has subsided, will anyone care about corruption? As policymakers and civil servants navigate the turbulent waters of anti-corruption policy design and implementation, perhaps it is useful to focus on a timeless outcome: money. Simply put, when a country suffers from corruption, everyone pays. And when a country improves its corruption indicators, everyone stands to gain.

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September 07, 2016

Progress on PFM Reform in Liberia

Thinkstock_Item_#546209602

Posted by Bernard Jappah[1]

The Liberian civil wars, which lasted for most of the 14 years from 1989 to 2003, destroyed much of the country’s public and private infrastructure, as well as its human capital. Most people tend to forget or play down the fact that the public finance system – essential for the effective planning and execution of the budget, as well as the efficient management of cash, public debt and overseas development assistance - had also collapsed. The advent of the Ellen Johnson-Sirleaf administration, in 2006, provided a signal for positive change.

Challenges were in abundance, with financial management and economic governance taking center-stage. The Ministry of Finance and Development Planning (formerly the Ministry of Finance) was challenged to develop and apply a mix of policy measures to rebuild the confidence of partners, create an enabling business environment, reduce the debt burden, and restore the faith of the citizens.

With support from the IMF, and the strong leadership of Antoinette Sayeh, the then Minister of Finance, a Public Finance Management (PFM) law was enacted in 2009, while the country achieved HIPC completion status in 2010. There was buzz throughout Monrovia that good things were on the horizon. It became necessary to work on mainstreaming the new law within the country’s governance architecture.

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