Interactive Financial Data and XBRL: the Way Forward?

Posted by Dimitar Vlahov 

Today’s means of exchanging financial data have entered a process of global synchronization and standardization. Intuitively, this makes sense given the interconnected and interdependent nature of economic and business entities around the world, coupled with advances in computing power. In practice, the trend is evidenced by the rapid spread of XBRL, a novel set of programming rules for recording and reporting financial data electronically. Over the last several years this new freely-available open standard has been employed by more than 550 major companies, organizations and governments, including many central banks, finance ministries, the International Accounting Standards Board (IASB), the U.S. Securities and Exchange Commission (SEC), and the Tokyo Stock Exchange. A Forbes report estimates that XBRL encoding is used by companies representing more than 75% of the world's market capitalization. So popular has XBRL become that one can now even buy “XBRL for Dummies” on Amazon. This note provides a quick account of what XBRL is and why it is relevant for public financial management.

IFAC Recommends Adoption of Accrual-based Accounting for the Public Sector

Posted by Sanjay Vani 

The International Federation of Accountants (IFAC) has recently issued a  letter to G-20 participants, who are meeting on June 26‐27, 2010 in Toronto, Canada. This letter is a follow-up to their previous submissions to the G‐20 in 2009 addressing the global financial crisis. In this letter, IFAC is recommending adoption of accrual-based accounting for governments and public sector entities. The full text of the recommendation is as follows:

"The G-20 should strongly encourage all governments to provide greater transparency and accountability in public sector finances.

The Role of Independent Fiscal Institutions in Fiscal Management: The Perspective from an International Conference in Hungary

Posted by Dávid Mihályi[1] 

On March 18-19, 2010, the Fiscal Council of the Republic of Hungary hosted a conference on independent fiscal institutions at the Hungarian Academy of Sciences, in Budapest. Speakers included heads of sister institutions, senior government officials, and academics from more than 20 countries. The principal objective of the conference was to examine the experience of independent fiscal institutions in promoting the transparency and sustainability in public finances.

In the wake of the global financial crisis, with public debt reaching historical heights, policymakers are exploring solutions to unprecedented problems with sovereign debt sustainability. As minor adjustments appear insufficient to ensure medium-term consolidation, many advanced and emerging-market economies have introduced, or are about to introduce, a comprehensive fiscal policy framework to strengthen their commitment to fiscal responsibility. This often includes setting permanent fiscal policy and procedural rules. In addition, as part of the framework, an increasing number of governments have established independent fiscal institutions to ensure the reliability of government accounts and projections, and to monitor compliance with fiscal rules. The conference provided a forum for discussing accumulated experience and emerging best practices in this area.

IMF Goes Wiki!

Posted by Julie Cooper 

The IMF has recently updated the details on Public Finance included in Wikipedia by adding a section to cover the Government Financial Statistics Manual 2001 as the relevant statistical reporting framework/methodology for government. The new section provides a succinct and clear message of the purpose, use, and importance of government financial statistics as a tool to support public finance management, financial accountability and economic analysis. GFSM 2001 is the internationally accepted standard for collecting and reporting on government financial statistics. The new section explains that the GFSM 2001 is consistent with regionally accepted statistical methodologies such as the European System of Accounts 1995, and also with the methodology of the System of National Accounts (SNA 1993), and broadly in line with its most recent update, the SNA 2008.

New Issue of International Journal of Governmental Financial Management (IJGFM) Now Online

Posted by Andy Wynne, Editor of the IJGFM

The first issue, for 2010, of the International Journal of Governmental Financial Management is now available for download from: www.icgfm.org/digest.htm

As usual the Journal covers a wide range of issue relating to public financial management especially in developing countries.

The first paper provides an insightful critique of the draft conceptual framework recently issued by the International Public Sector Accounting Standard Board. Petri Vehmanen of the University of Tampere, Finland observes that whilst the prime aim of private sector financial statements is to provide information for investors to make decisions about the entity, the prime purpose of public sector financial statements is to enhance accountability. This should be recognised and would result in the definitions of such prime elements as assets and liabilities being revised. His paper also recasts the qualitative characteristics of public sector financial statements. Petri concludes by saying that his proposals “are by no means radical”, but they do suggest that the specific characteristics of public sector financial reporting needs greater consideration.

Proposed Revisions to PEFA Indicators PI 2, 3 and 19 -- Request for Comments on Exposure Draft

Posted by the PEFA Secretariat 

The PEFA Steering Committee is seeking comments from any interested party on proposed revisions to Performance Indicators 2, 3 and 19. These three PIs have been ‘fine-tuned’ in response to feedback from practitioners, and subject to comments received, will be implemented later this year. This exposure period will close on July 30, 2010.

Comments by email to (both) pefa@worldbank.org, copied to psinnett@worldbank.org

The paragraphs below set out the reasons why these three PIs were selected, the intention of the changes, and provide a brief description of the revisions. The revised pages for the English version of the Framework (the ‘BlueBook’) and additional guidance for Assessors are available here.

Monitoring and Evaluation? Performance Management? It is CLEAR!

Posted by Michel Lazare 

The World Bank's Independent Evaluation Group, together with partner institutions,1/ is launching a new multiregional training and learning initiative to "contribute to strengthening the monitoring and evaluation (M&E) and performance management (PM) capacity of countries and their governments to achieve development outcomes."

The new initiative CLEAR (Centers for Learning on Evaluation and Results) "will support (1) regional centers to provide in-region capacity development and technical assistance services, and (2) global learning to strengthen practical knowledge-sharing on M&E and PM across regions." The CLEAR website provide the following details on these two dimensions of the initiative:

Regional Centers

The four Regional Centers envisaged by CLEAR "will be housed in existing academic/training institutions in Africa, East Asia, Latin America, and South Asia.  The institutions will be selected competitively. The centers will provide customized, demand-driven, cost-effective, and sustainable capacity development, including training, advice, evaluation research, and other knowledge services. Government agencies, development institutions, and donor and civil society organizations, among other clients, will be able to access regionally based high-quality knowledge and expertise. The centers will focus on applying technical knowledge to address practical problems."

The Cash Planner, the IFMIS, the Spreadsheet, and the Very, Very Simple Objective

Posted by John Gardner 

The principle objective of central government cash flow planning is very, very simple. The aim is to forecast the total liquid cash resource available to the government at a point in time—typically the end of each day for the current month; the end of each week for the next two months; and then the end of each month to the fiscal year-end. This is one single figure per time period; a uni-dimensional time series; the profile of the government bank statement across the year.

It is not the purpose of this piece to go into detailed discussion on the reasons why getting that single number reasonably correct is so difficult for many countries. Neither is it necessary to dwell on the clear sense and benefits for a government to have that single sum held at a single bank account at the central bank—the TSA. It will also not go into why the rest of government—budget departments, spending units, and revenue agencies alike—can rarely understand that there is this one clear objective. Government agencies in many developed, as well as developing, countries often attribute nefarious ulterior motives to these cash flow projections. They believe that the cash manager is given the authority to obtain cash planning data in order to exert secretive powers over the execution of the budget. If provided with true plans of a spending unit, the cash manager will conspire with the budget department to ration the amount of cash available, or somehow manage to control planned procurement policies—steal some of the power of the institution. Such motives would not be very, very simple—but the sole objective of cash planning is.

UK Public Finances Opened Up to Scrutiny

Posted by Suzanne Flynn 

Last week, for the first time, the UK Treasury released the Combined On-line Information System—known as COINS—covering millions of individual lines of public sector expenditure. It is one of a raft of Whitehall databases to be made public as part of the new coalition government's commitment to greater openness (salaries of top civil servants earning over £150,000 is another). Naturally, the British press has leapt on some key data from the database: a headline in at least two broadsheets proclaimed that during the past year the (old) government spent 1.8 billion pounds on consultants alone. Easy to criticize the spending, but the detail does not tell us what those consultancy contracts achieved.
 
The Treasury press notice hailed it as ''the most detailed UK public expenditure data ever released''. However, it also suggested it would be of more interest to ''institutions and experts'' than the ordinary public as the material was ''complex'' and was being released ''in its raw form, requiring technical expertise to process''. My experience confirmed this, I failed to download the main data files (only the adjustment files which then had to be uploaded into MS Access to be meaningful), it seems the main file is too large for my PC to cope with, once downloaded the files are in access of 500Mb. The Treasury has helpfully provided a 31 page guidance note and a promise that more directly useful and accessible datasets that draw on the contents of the COINS databases will be available from August this year. Already software companies have developed solutions to enable easy access and data manipulation.

Review of Performance Reporting: Insights from International Practice

Posted by Teresa Curristine 

Performance Reporting: Insights from International Practice by Richard Boyle[1] is one of the latest additions to the Managing for Performance and Results series published by the IBM Center for the Business of Governments. This publication evaluates and compares a selection of performance reports produced in four countries (Australia, Canada, Ireland, and the United States). Despite the abundance of performance indicators developed (80% of OECD countries develop performance measures) there are very few cross-country comparisons of performance indicators produced by government departments. To date, research on performance reporting has largely concentrated on analyzing central agencies’ performance frameworks, systems, and guidelines. This paper makes a valuable contribution by providing a cross national comparative analysis of the nature and quality of output and outcome performance indicators contained in departmental government performance reports in four countries and three sectors (Agriculture, Health, and Transportation). It is important to note that this report concentrates on the indicators themselves not on the actual results produced by governments. Even this type of cross-country comparison can be challenging due to governments’ different organizational structures and dissimilar degrees of functional decentralization.

The study produces a number of interesting findings. The United States' government’s performance reports clearly come out top. Nearly all the indicators contained in the reports examined are SMART (Specific, Measurable, Achievable, Relevant, Time bound). Over 80% are outcome indicators, reflecting the US focus on reporting on programme as opposed to agency performance. Almost all indicators are quantitative, and have targets and baseline data associated with them. Many also include multiple year trend data.  Boyle attributes the United States’ good practice in performance reporting to among other things having a strong performance management framework which promotes a standardized approach to presentation of performance information. In addition he stresses that having the Mercatus Center an influential independent external reviewer of agencies’ performance reports has helped improve report quality.

Le message de Michel Camdessus au gouvernement français : pas de bonne règle d’équilibre des finances publiques sans institutions budgétaires solides

Affiché par Guilhem Blondy 

Alors que la dette publique a atteint 78% du PIB fin 2009, le gouvernement français a mis en place un groupe de travail chargé de proposer une nouvelle règle d’équilibre des finances publiques, presidé par l’ancien directeur général du FMI Michel Camdessus. Ce groupe dont les conclusions définitives seront connues fin juin a rendu un rapport d’étape le 20 mai dernier.

Le principal intérêt du rapport réside dans le lien fort établi entre la mise en oeuvre d’une nouvelle règle macroéconomique et la nécessité de renforcer les procédures de gestion des finances publiques, et notamment le cadrage budgétaire à moyen terme.

Michel Camdessus's Message to the French Government: No Good Fiscal Rule Without Strong Budget Institutions

Posted by Guilhem Blondy 

As public debt reached 78 percent of GDP at the end of 2009, the French government set a working group chaired by former IMF Managing Director Michel Camdessus to propose a new fiscal rule. This group, whose final conclusions will be known at the end of June, published a preliminary report on May 20.

The main interest of the report is the strong link established between the implementation of a new macro-fiscal rule and the need to strengthen public financial management procedures, and especially the medium-term budgetary framework.

India: Public Financial Management Performance Assessment Report

Posted by Pratap Ranjan Jena (jena@nipfp.org.in), National Institute of Public Finance and Policy, New Delhi

The PFM Performance Assessment Report for India (Download INDIA_PEFA2010[1]) at the central Government level (carried out during the period March 2009 to June 2009) provides a comprehensive assessment of the current status of the PFM system following the Public Expenditure and Financial Accountability (PEFA) framework. The performance of PFM systems, procedures, and practices are assessed based on six critical dimensions of the PEFA framework; credibility of the budget, comprehensiveness and transparency, policy-based budgeting, predictability and control in budget execution, accounting, recording and reporting, and external scrutiny and audit. Some of the major assessment results are summarized here. The assessment indicates both the strengths and weaknesses of the existing PFM system and serves as a baseline against which progress on PFM performance can be measured over time.

While the role of PFM systems in contributing to fiscal discipline, strategic resource allocation through better programme management, and improving service delivery has gained attention in India in recent years, the focus and implementation of reform initiatives in this regard leaves much to be desired. The initiatives to improve the PFM systems and processes in recent years include the introduction of outcome budget in 2005-06 to move to clearly defined outcomes of all government programmes, adoption of rule based fiscal management by enacting the Fiscal Responsibility and Budget Management (FRBM) Act, appointing a Task Force to suggest reform measures to strengthen internal audit, initiating the process to move to an accrual based accounting system, revising the responsibilities and duties of the Financial Advisors placed in spending departments in a system of delegated financial powers, and tightening cash management through monthly expenditure limits. However, the intents did not match the outcomes due to discontinuities and indifferent implementation. The achievement of economy, efficiency, and effectiveness in PFM systems has remained elusive.