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August 2010

August 31, 2010

Internal Audit in the Public Sector: Underdeveloped and Underused

Posted by Sanjay Vani 

Of 107 countries in which Public Expenditure and Financial Accountability (PEFA) assessments have been undertaken, only 2 scored A (or A+) and only 4 scored B (or B+) for the indicator on internal audit (performance indicator (PI) 21 in the PEFA methodology, see www.pefa.org). The vast majority—101 countries—scored either C or D for the effectiveness of internal audit. The internal audit indicator is the only PEFA indicator that has been uniformly rated so low across a broad spectrum of countries:  high income/middle income/low income, Anglophone/Francophone, and stable/fragile status. Even Norway, a high-income country, scored D for the internal audit indicator. We can therefore conclude that globally internal audit is not yet as firmly established in the public sector as external audit. This post analyzes some key factors that have contributed to this situation.

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August 27, 2010

Improving Tax Collection Using XML and Object-Oriented Technologies

Posted by William B. Trautman* 

The recent financial crisis has led not only to significant public budget deficits in the United States and around the world, but also to a heated debate over what to do about them. Some argue for increased government spending to fund stimulus programs while others argue for reduced spending. Little attention has been paid, however, to increasing the collection of tax that is already owed. While tax administration information technology projects have a long and spotty track record, the advent of electronic filing in XML format and related technologies has significant potential for improving the collection of tax revenue, particularly with respect to complex business enterprises and high-wealth individuals.

This post will discuss an XML-based technology that the US Internal Revenue Service (IRS) has tested on the largest U.S. corporate taxpayers over a recent 18-month period. The technology has yielded cost savings in terms of more streamlined audit planning and has identified significant corporate tax revenue that otherwise would have gone undetected. The technology is essentially a data management and analysis system that allows one to construct virtual economic enterprises with a degree of detail constrained only by the available data and estimate the tax compliance risk of those enterprises in real time.

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August 25, 2010

Utah, Virginia, and Washington: Top Scorers in Government Performance in the United States

Posted by Mario Pessoa 

According to research sponsored by the Pew Charitable Trusts in partnership with Governing magazine, the states Utah, Virginia, and Washington have the best managed administrations in the US. They all scored A- in a recent study—on a scale from D to A.

The State of Utah scored the highest A- (A minus). Utah makes use of strategic planning combined with performance measurement, has good coordination between executive and legislature, keeps a low level of public debt, and maintains a sustainable pension fund for public employees. Overall, it provides a large amount of data on the performance of programs and agencies.

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August 24, 2010

Job Opportunity: World Bank Looking for PFM Expert Based at Center of Excellence in Finance in Slovenia

Posted by Bill Dorotinsky

The World Bank is looking for interested candidates to join the program for Public Expenditure Management Peer Assisted Learning (PEMPAL) of the Europe and Central Asia (ECA) Region as a Community Facilitator. Information about PEMPAL can be found at www.pempal.org.  While the recruitment for this Extended Term Consultancy assignment will be made through the World Bank Washington office, the Facilitator is expected to be permanently based at the Center of Excellence in Finance in Ljubljana, Slovenia. The initial duration of the assignment is 12 months, with a possibility for extension until June 30, 2012. The position is 100% funded by an external donor through a Trust Fund administered by the World Bank.

The advertisement for the position is posted at the World Bank web site. Applications should be submitted through the World Bank external JobWorld link (position number 101735). The deadline for applications is September 11, 2010.

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August 23, 2010

How Accrual Accounting was Implemented in New South Wales (Australia) and in France

Posted by Tej Prakash 

What is the coalition needed for introducing accrual accounting reforms? Have Ministries of Finance generally been resistant to introduction of these reforms? A paper on Accounting for Changed Accounting:  A Translation View Comparing Accrual Accounting Implementation in France and Australia, presented at the 12th Comparative Intergovernmental Accounting Research Conference in Modena (May 2009), by Mark Christensen and Sebastien Rocher, touches on these issues and traces in detail the move to an accrual based accounting system in France and New South Wales (NSW) in Australia. The research question posed by the authors is: what were the similarities and differences of NSW and France in their move from cash-based accounting? The paper uses the Actor Network Theory (ANT) approach to describe the process. ANT is based on the idea that for any institutional innovation to take place the interests of many actors interested in change have to converge. This convergence goes through different stages of identifying the problem, creating awareness, enrollment and mobilization of the actors. In the case of move to accrual accounting these actors were politicians and parliamentarians, bureaucrats and technicians, auditor generals and the news media.  

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August 20, 2010

Are International Standards Having an Impact on Transparency and Performance?

Posted by David Nummy 1/ 

The International Consortium on Governmental Financial Management (ICGFM) has issued a call for speakers, panel members, and presentations to be made at its winter conference, which will be held this year at the offices of the Inter-American Development Bank in Washington, DC, from December 6-8. The theme of the conference will be: Practical Uses of New Standards to Enhance Transparency and Program Performance

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August 18, 2010

US Financial Reform: A Surprise Boost for Public Financial Management in Resource-rich Developing Countries

Ian Gary, Senior Policy Manager, Oxfam America 

On June 21, President Obama signed into law sweeping financial reform legislation meant to address fundamental weaknesses in financial regulation in the US that contributed to the financial crisis. Buried within the 2,000+ page legislation is a provision-making disclosure of payments from “extractive industry” companies (oil, gas, and mining) to governments around the world a legal requirement for any company registered with the US Securities and Exchange Commission (SEC). This historic measure will increase financial transparency in the oil, gas, and mining industry and help reduce the corruption, mismanagement, and conflict that are too often associated with natural resource extraction booms. It will also greatly support improvements in public financial management in resource-rich countries around the world. The civil society Publish What You Pay US coalition had been pushing for years for the passage of this requirement and had supported stand-alone legislation introduced in the US Congress in 2008 and 2009.
Secrecy of oil, gas, and mining company payments to governments fosters government corruption and violent conflict in resource-rich countries that are home to more than half of the world's poorest people. The IMF has identified more than 50 countries around the world as “resource-rich” according to its 2007 Guide on Resource Revenue Transparency.

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August 16, 2010

New FAD Technical Note & Manual on the Interaction Between Government Cash Management and Other Financial Policies

Posted by Mike Williams

TNM_10-13_cover 1
Good government cash management matters. It matters not only from the fiscal and budgetary perspective of cost effectiveness and efficiency, but also because of the benefits it can bring to other financial policies—in particular to debt management, to monetary policy, and to the development of the local financial markets. This interaction between cash management and other financial policies is the focus of a new IMF Fiscal Affairs Department (FAD) Technical Note and Manual.

There is a growing understanding of what constitutes good practice in government cash management. Guidance is available from FAD on the core components: the development of the Treasury Single Account (TSA) and cash flow forecasting and management. Although this TNM touches on those issues, I have written it primarily for governments and their advisers looking to develop a more sophisticated cash management function, and specifically to move towards more active cash management. 

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August 11, 2010

A Stock-Take on African PFM

Posted by Matt Andrews

How strong has African PFM become? How do African public financial management (PFM) systems in place now facilitate effective public financial management? Where are the next challenges and how can they be met? A recent paper of mine addresses these questions, using PEFA analyses to identify central themes of the continent’s recent PFM story. The themes emerge from quantitative and qualitative data in 31 central government PEFAs completed prior to mid-2008 and tell a story in two parts: (i) across PFM processes, and (ii) across countries.

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August 09, 2010

IMF East AFRITAC Urgently Seeking a PFM Advisor

Posted by East AFRITAC


The IMF East Africa Regional Technical Assistance Center - East AFRITAC, based in Dar es Salaam, Tanzania, is urgently seeking a third Public Financial Management Advisor with experience in budget formulation, including medium-term fiscal and expenditure frameworks, and program budgeting. The position will be for a minimum of one year and up to a maximum of three to four years.

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Evaluation of Government Performance and Public Policies in Spain

Posted by Juan-Ramon Ruiz

Evaluation of government policies has taken place in Spain for many years, with a marked acceleration and qualitative improvement since 2005. However, despite Spain’s standing as an OECD country and EU member, it still has not developed a consolidated, government-wide evaluation system. Setting up evaluation systems and institutions which can operate them can be a complex and long-term process as the Spanish experience shows. The World Bank’s Independent Evaluation Group (IEG) recently produced an in-depth report on the challenges facing evaluation practices in Spain. The report can be downloaded here. The IEG usually provides technical assistance only to developing countries assisting them in design and implementation of effective monitoring and evaluation (M&E) systems and strengthening government evaluation capacities as an important part of sound governance. The study done for Spain focuses on the success factors and institutional aspects of the recently created State Agency for Public Policy Evaluation (AEVAL). The study highlights that developed countries are also still struggling to establish well-functioning government evaluation frameworks.

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August 06, 2010

IMF Fiscal Affairs e-Newsletter, July 2010

by Fiscal Affairs Department, International Monetary Fund


Today we turn our readers' attention to the July 2010 edition of our IMF Fiscal Affairs Department's e-Newsletter. It provides a convenient way to follow the Department's latest initiatives and research projects.

Please access the e-newsletter here. Happy reading!

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.


August 04, 2010

Sustainability Reporting: Can the Triple Bottom Line Thrive in the Public Sector?

Posted by Dimitar Vlahov

It’s common knowledge that today’s global economy is facing multiple challenges and imbalances. From the recent financial crisis, to concerns about distribution of wealth, to the ever-more-dangerous clashes between economy and environment, there are many reasons to pause and examine the whole system. Some experts have suggested that a large chunk of this ill condition can be attributed to the same cause – the problem of bad performance measurement. Businesses and governments alike, the argument goes, have been employing short-sighted measures of success that do not account for all medium- and long-term consequences of their organizations’ activities. Therefore, they need to expand their reporting to include social and environmental indicators of performance, and not just financial ones. With a better warning system, many of the present-day issues could be mitigated or avoided altogether. This post serves as a basic introduction to this approach and its main applications to date.

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August 02, 2010

Budgetary Reforms in Austria: An Emphasis on Performance and Accountability

Posted by Abdul Khan 

The Austrian Constitution was amended in 2007 to enshrine four principles— outcome orientation, efficiency, transparency, and a ‘true and fair view’ of public finances— as the basis for a comprehensive reform of the federal government’s budgetary framework. A two-stage reform process was initiated under which a medium-term expenditure framework (MTEF) was introduced in 2009, which is to be followed by the implementation in 2013 of performance budgeting, lump-sum budget funding (for personnel, operating and transfer expenditure with full flexibility of transfers among these categories), a results-oriented management of state bodies, and accrual budgeting and accounting.

The MTEF incorporates four-year binding ceilings at the level of five ‘headings’, e.g., ‘General Government Affairs, Court and Security’, and ‘Education, Research, Art and Culture’. In addition, annual mandatory ceilings would apply at the more detailed chapter level, representing the different ministries’ portfolios. Ceilings can be fixed or variable. As a rough rule of thumb, about 80 percent of total expenditure is fixed in nominal terms and the remainder would have variable ceilings.

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