Posted by Bill Dorotinsky
Extra-budgetary funds (EBFs) are a large and persistent issue in developed and developing countries. An October 26, 2007, blog post highlighted the magnitude of such funds, offered a taxonomy of EBFs, and suggested some questions for evaluating them. This post offers a similar perspective, drawing on a draft World Bank policy note prepared for the Polish authorities in 2001.
Public finance professionals generally oppose creation or continuation of 'extra-budgetary funds' because they undermine comprehensive budgeting, fragment financial reporting and cash management, and frequently there are transparency, oversight, and accountability concerns for the EBF's directly. But there are principles that, if followed, can minimize the risks from EBF’s, effectively removing their ‘extra-budgetary’ character.