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September 2012

September 28, 2012

Public Prominence and “Muscle” — the Role of the French Court of Accounts

Posted by Maximilien Queyranne and Delphine Moretti

Supreme Audit Institutions (SAIs) are the national bodies, found in many countries around the globe, responsible for reviewing public expenditure and providing an independent opinion on government financial reporting. The Court of Accounts (Cour des Comptes) in France is one of these bodies but has a wider range of responsibilities, and a more prominent place in public life and political debates than in other countries.

The Court is part of the judicial system and consequently operates independently of the executive and legislative branches of government. Since a ruling by the Supreme Court (Conseil Constitutionnel) in 2001, the Court’s independence as well as its institutional relationship with the executive and legislative branches has been protected by the Constitution. A revision of the Constitution in July 2008 incorporated these important principles (article 47-2).

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September 26, 2012

New FAD Brochure Explains It All

Posted by the Fiscal Affairs Department of the IMF

The casual reader of the PFM Blog may have wondered what part of the IMF is actually responsible for the posts on this website. The website is maintained by the two PFM Divisions in the Fiscal Affairs Department (FAD), one of the functional (in contrast to geographic) departments of the IMF. For the upcoming Annual Meetings of IMF and World Bank Group in Tokyo from October 9-14 the attached brochure has been produced. It should be clear that FAD is much more than PFM alone! 

Download FAD Brochure 2012

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September 25, 2012

Views from the Field No. 1 – AFRITAC South

Posted by Vijay Ramachandran and Jean-Luc Helis

The PFM blog is launching a new series of “Views from the Field”, aimed at presenting the experience and views of PFM advisors and government officials working in developing countries and regions. We anticipate that the series will be of special interest to practitioners in the field.  The first post in the series is written by the two resident PFM Advisors in AFRITAC South (AFS): Vijay Ramachandran (VR) and Jean-Luc Helis (JLH).  AFS, based in Mauritius, is the IMF’s regional technical assistance center (RTAC) covering 12 countries in Southern Africa.  The countries use three different official languages—English, French, and Portuguese—which adds to the practical challenges of working in the region but also to the variety and richness of the working environment.

Vijay and Jean-Luc were interviewed recently by FAD’s Richard Allen (RA).

RA:  What are the main strengths and challenges of PFM in the region?

VR/JLH:  The region has focal points of excellence like South Africa and Mauritius which provide opportunities for peer-to-peer exchanges. AFS member countries are able to provide regular updates on rudimentary cash based revenue and expenditure information. Member countries are also able to appropriate annual budgets in accordance with constitutional provisions.  The main PFM challenges being addressed in the region are risks related to mineral and customs union revenues; legal frameworks that require updating; weak medium-term policy perspectives; obsolete and non-functional IT systems; fluctuating ownership of reforms;  and weak capacity for implementing reforms.

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September 20, 2012

Government Accounting Tricks Designed to Conceal Rather Than Reveal

Posted by Tim Irwin

Working paper logo
It’s well known that governments sometimes use accounting devices to make their reported deficits smaller than, in some sense, they really are. But how do these devices work? And how can they be revealed?  A new IMF working paper by FAD’s Tim Irwin—Some Algebra of Fiscal Transparency: How Accounting Devices Work and How to Reveal Them—discusses these issues.  

One way to answer the questions is to consider future deficits. Deficit devices, unlike genuine changes in fiscal policy, reduce this year’s deficit only at the expense of future ones. And their use can therefore be revealed if governments also produce good fiscal forecasts.

This paper takes a different approach. It starts by defining the deficit as the decline in the government’s net worth and then shows how deficit devices can be analyzed as transactions involving assets and liabilities that are not recognized on the government’s balance sheet. For example, many governments do not include nonfinancial assets such as land and buildings on their balance sheets, so they can reduce their reported deficit by selling these assets, even though this doesn’t really improve their finances. It would seem, then, that accounting devices can be prevented by ensuring that all assets and liabilities are recognized on the balance sheet.

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September 18, 2012

“IPSAS Explained” – Second Edition [1]

Posted by Delphine Moretti

The recent publication of the second edition of “IPSAS Explained” is good news for readers who do not have time to plough through the two volumes and daunting 1,500 pages of the International Public Sector Accounting Standards (IPSAS) Board’s Handbook. The book is written by Thomas Mueller-Marques Berger who is himself a member of the IPSAS Board.

The main asset of the book is its very clear and concise presentation of the standards, which, as the author notes in his foreword, are “sometimes complex and inapprehensible”, especially to non-accountants. As was the case with the first edition, the new book fully succeeds in providing the reader with essential information – compressed into 5-10 pages - about each of the 32 standards. For this we are indebted to the author’s comprehensive knowledge and understanding of the field. For each standard, a brief chapter describes factually the objective of the standard, the international financial reporting standard (IFRS) on which it is based, together with an assessment of its scope and content, definitions used, relevant accounting rules and principles, and application date. The coverage of existing and recently published standards and exposure drafts includes a section on the much awaited IPSAS 32 “Service concession arrangements: grantor” together with a discussion of the exposure draft on reporting the long-term sustainability of finances of public sector entities. A third edition of the volume is to be expected as the on-going process of aligning the IPSAS with their IFRS counterparts should bring further changes to the IPSAS framework very soon, and some major additions to the framework are scheduled in the years ahead.

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September 14, 2012

Recent Meetings of the PEMPAL Network in Europe and Central Asia

Posted by Deanna Aubrey, PEMPAL PFM Adviser

The three ‘communities of practice’ of budget, treasury, and internal audit of the Public Expenditure Management Peer Assisted Learning (PEMPAL) network had a series of meetings in the first six months of 2012. PEMPAL covers up to 22 governments in the Europe and Central Asia region and brings practitioners together regularly to discuss common priority issues in PFM reform. PEMPAL is supported by the World Bank, Switzerland’s State Secretariat for Economic Affairs (SECO), the Russian Federation, and OECD SIGMA.

Members of Treasury Community of Practice (TCoP) gathered in Tbilisi, Georgia from February 27-29. Treasury experts from 10 countries met to learn more about Georgia’s PFM reforms implemented by the State Treasury Service, who co-hosted the meeting. The workshop was an opportunity to exchange experiences in modernizing national treasury systems particularly related to issues of integration of external financing. Participants also had the opportunity to visit the customs clearance zone of the Ministry of Finance in Lilo district in Tbilisi as an example of modernization public services through information technology. More information can be found at http://www.pempal.org/event/read/55 and in IMF’s PFM blog at http://blog-pfm.imf.org/pfmblog/2012/04/georgian-state-treasury-hosts-workshop-on-treasury-and-external-financing-reforms.html

Fifty-seven participants from Ministries of Finance from 18 ECA countries from Budget Community of Practice (BCOP) met in Bohinj, Slovenia on March 27-29 to exchange experiences in program budgeting as part of the Budget Community of Practice (BCOP) work program. Country cases of France, Australia, Poland, and Slovenia were showcased and reform progress shared by Kazakhstan, Russian Federation, Armenia, Croatia, and Bosnia and Herzegovina. Most PEMPAL member countries have implemented elements of program budgeting including defining and identifying programs, formulating program objectives, and selecting performance information. However, the quality of performance information remains generally poor, is in many cases not systematically monitored, and has limited influence on budget decision making. Countries acknowledge that the reform process is long and ongoing and are planning on exchanging information and meeting more on this topic in the future. More information can be found at http://www.pempal.org/event/read/58 and in IMF’s PFM blog at http://blog-pfm.imf.org/pfmblog/2012/05/program-budgeting-is-on-the-reform-agenda-across-europe-and-central-asia.html

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September 11, 2012

Timing is Everything: Why Delays in Budget Approval are Undermining Fiscal Policy in Africa…And What Can Be Done About It

Posted by Camille Karamaga

A number of serious public financial management (PFM) problems in Africa can be traced back to a single, simple issue – late submission to and approval of the budget by the legislature. Limited legislative scrutiny of fiscal and budgetary policies undermines transparency and accountability in resource allocation and utilization which form the cornerstone of a good PFM system. Failure to provide the legislature with adequate time to scrutinize the budget reduces their ability to undertake critical analysis of fiscal policies and service delivery objectives. Late approval of the budget also prevents government entities from initiating procurement processes at the start of the financial year based on the approved budget, especially where special warrants or pro forma rules rather than systematic cash plans prepared by spending agencies are used to release funds.

The need to provide adequate time for parliament to scrutinize the budget and for line ministries to plan for the year ahead is recognized in both international standards and national laws. International experience recommends that the annual budget estimates be tabled in the legislature at least three months before the beginning of the new financial year in order to allow meaningful scrutiny. Guidelines on good practice in this area are provided in documents such as the IMF’s Code of Fiscal Transparency, the OECD’s Guidelines on Transparency, and the PEFA Performance Measurement Framework.

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September 06, 2012

Has Global PFM Improved in the Last Decade?

Posted by Sanjay Vani

It is relatively easy to spot the trajectory of Public Financial Management (PFM) progress in any given country but how do we get a sense of the global trend during the last decade? A very useful and reliable source of information is provided by the World Bank’s Country Policy and Institutional Assessment (CPIA)[1] database. CPIA data offers a more complete source of comparative information than Public Expenditure and Financial Accountability (PEFA) assessments, data on which began to be collected only in 2005. 

The CPIA exercise is conducted annually for all the Bank’s borrowing countries. It has evolved into a set of criteria which are grouped in four clusters: (a) economic management; (b) structural policies; (c) policies for social inclusion and equity; and (d) public sector management and institutions. Ratings for each of the criteria focus on the quality of each country’s current policies and institutions. CPIA is the only measurement tool that provides an annual numerical rating for the quality of PFM and other aspects. The annual CPIA exercise is informed by various available diagnostics including PEFA assessments and, as such, provides a good basis for analyzing trends in PFM.

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September 04, 2012

Performance Budgeting: Facing Up to the Hard Questions

Posted by Dirk Kraan[1]

The IMF’s new resident advisor for South Eastern Europe, Dirk Kraan challenges the practicality of performance budgeting, one of the favourite innovations of New Public Management. Has performance information on a government program provided by a line ministry ever provided a critical assessment of its success? Are Ministries of Finance really interested in performance, let alone equipped to deal with it? Some of the hard questions that will be discussed in this post.....  

The history of performance budgeting now stretches over forty years. Arriving at the Dutch Ministry of Finance in 1980, I well remember how we tried to cope with the article of the Budget Code introduced in the early 1970s prescribing that the budget documentation had to provide “performance information”.  Around the same time  the ideas of the Planning,  Programming, Budgeting, System (PBBS) and Management by Objectives (MBO) had been blown over the ocean and been adapted to European conditions in the form of “Rationalisation des Choix Budgétaires” (France), Program Budgeting and Review (UK), and “Policy Analysis” (the Netherlands). The latest attempts to implement these reforms were still very much alive in 1980.

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