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January 2018

January 17, 2018

Is the Open Budget Survey Biased against Francophone Countries?

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Posted by Ian Lienert1

In the Open Budget Surveys (OBSs) published prior to 2015, the average overall score of francophone countries were quite a lot lower than those of comparable non-francophone countries. This led some French-speaking observers to remark that the OBS is biased against francophone countries.

Is there any validity in this claim? Are there specific features of francophone countries’ PFM system that are not captured in the OBS, or which lead to bias?

A new study considers these questions, by examining:

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January 12, 2018

Gender Budgeting in Central America

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Posted by Virginia Alonso Albarran[1]

The IMF’s Technical Assistance Center for Central American Countries and the Dominican Republic (CAPTAC-DR), and the IMF’s Fiscal Affairs Department (FAD) organized a seminar on Gender Budgeting in Costa Rica in December 2017.

More than 20 representatives from seven countries participated (Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, Panama). The seminar was conducted by FAD together with experts from UN Women, Mexico and Spain. The country participants were mainly technical staff of the budget directorates and, for Costa Rica, also from the Women’s Institute.

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Reorganization of the Budget Directorate in Senegal

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Posted by Bruno Imbert[1]

The budget department in Senegal underwent recently a major reorganization, having remained broadly unchanged for several decades. The old structure had outlived its useful life and is being replaced by one that is better able to meet the challenges of technological advances in budget preparation and execution, enhanced requirements for transparency, and the implementation of performance-based budgeting and other PFM reforms.

Since the early 1950s, responsibility for both the preparation and execution[2] of the annual budget has been assigned to the Ministry of Finance (MoF), but it took several decades to progressively shape a department of the ministry to take charge of the budget.

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La réorganisation de la Direction générale du budget (DGB) au Sénégal

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Publié par Bruno Imbert[1]

Après plusieurs années d’une relative stabilité la direction en charge du budget a récemment vécu des changements majeurs. L’ancienne organisation a été remplacée par une nouvelle plus à même de faire face aux enjeux liés aux avancées technologiques pour la préparation et l’exécution du budget, aux exigences croissantes en matière de transparence et à la mise en œuvre des réformes de finances publiques telle que la gestion axée sur les résultats.

Au Sénégal, la responsabilité pour la préparation et l’exécution du budget[2] annuel a, de longue date, été confiée au Ministère des Finances mais il faudra attendre plusieurs décennies pour que se dessine progressivement une véritablement direction en charge de ces problématiques.

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January 05, 2018

Top Ten PFM Blog Posts of 2017

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Posted by Richard Allen, Teresa Curristine, and Daniel Shrift[1]

2017 was another bumper year for the PFM blog, with nearly 70 articles being published. The blog also celebrated its 10th anniversary! Readership levels maintained their high level of the previous year, as did the rich diversity of our articles, authors and readers. Nearly half of these articles, and a similar proportion of the Top Ten, were written by external contributors from a wide range of organizations in the public sector, academia, and the private sector. Topics ranged widely, from fiscal rules and fiscal councils, to stress-testing the public finances, to the sequencing of PFM reform, to medium-term budget frameworks, to digitization and fiscal policy. Some of these topics are old perennials, others were breaking new ground and stretching the envelope of knowledge.

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January 03, 2018

New Cash Basis IPSAS

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Posted by Guohua Huang[1]

Recently, the International Public Sector Accounting Standard Board (IPSASB) published its revised Cash Basis IPSASFinancial Reporting under the Cash Basis of Accounting—thus replacing the standard first published in 2003 and modified in 2006 and 2007. It is not a high-profile accounting standard compared to the other accrual basis standards. But many organizations, including the IMF, have already been assisting some developing countries, especially those with limited PFM capabilities, to implement the Cash Basis IPSAS, as a stepping stone to possible future implementation of the accrual basis standards. A robust government accounting system, which produces timely, accurate, consistent, and comprehensive financial reports on a cash basis, can dramatically improve these countries’ fiscal transparency and accountabilities. This international standard is therefore an important instrument in enhancing the quality of financial reports of low-income countries.

The main purpose of this revision is to remove some significant barriers to the adoption of Cash Basis IPSAS. So far, very few countries have fully adopted the standard. Two main challenges have been experienced: first, in the preparation of consolidated financial statements; and, second, in the disclosure of information about external assistance and third-party payments.

The previous cash basis standard required that the financial statements of all “controlled entities”, such as subsidiary agencies of ministries and state-owned enterprises, should be consolidated by their controlling entity. Many of these enterprises, however, are established as companies, and already report on an accrual basis. It may be burdensome therefore for the government to adjust the financial statements of state-owned enterprises to a cash basis before they can be consolidated. Difficulties in applying the control criteria in a low-capacity environment can also make the consolidation process challenging.

The revised standard does not require countries to carry out this consolidation any more, although it encourages them to do so. The standard also encourages governments to present a consolidated financial statement for the budget sector, the general government sector[2], and other entities that represent core government activities. Such information is highly relevant for fiscal transparency and efficient budget management, and for assessing the impact of the government’s fiscal policies and liquidity position on the rest of the economy.

The second important change is to recast the previous requirement for disclosing information about external assistance and third-party payments[3] as a voluntary disclosure which is nevertheless encouraged. Some governments have complained about the onerousness of acquiring the mandatory information on third party payments, and disclosing details of external assistance, some of which is not even required in accrual IPSAS. Nonetheless, external assistance received in cash still needs to be recognized in the financial statements.  

In addition to addressing these barriers to the adoption of the Cash Basis IPSAS, the IPSASB has also recognized its role in supporting governments in their transition to accrual IPSAS. Indeed, the new standard notes that “the Cash Basis IPSAS has been developed as an intermediate step to assist in the transition to the accrual basis of financial reporting and adoption of accrual IPSAS”. It also strongly encourages countries to collect and disclose information that is not recognized in cash accounting. Such information includes receivables, payables, borrowings, non-cash assets, and accruing revenues and expenses. Some countries implementing the Cash Basis IPSAS may need significant time, resources and technical support to build up their capacities to collect these data on a timely and reliable basis. After that, they should be well prepared to move ahead with the adoption of accrual IPSAS.

[1] Senior Economist, Fiscal Affairs Department, IMF.

[2] Comprising the central government, state or regional governments, local governments, and social security funds.

[3] Third party payments refer to purchases of goods or services on behalf of a government entity, or the settlement of obligations of the entity, when the money is paid directly to the suppliers.

Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.

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