The End of Ex-ante Audits? Belgium Takes a Leap Towards Westminster

Posted by Lewis Kabayiza Murara

Uncommon to countries applying the Westminster model of external auditing, the practice of ex-ante audits is not so rare to those following the Napoleonic (or judicial) model of public sector auditing. The Spanish world has also long known the practice of pre-expenditure audits, sometimes by multiple institutions. Ex-ante audits in their most common form mean that the Supreme Audit Institution (SAI) is responsible for checking and giving prior approval to certain types of public expenditure.

In countries following the Westminster model, the auditor role may in some cases be combined with that of comptroller, and authorization to spend may be released before payments are made by budget entities. In countries applying the Napoleonic model of external auditing, particularly Belgium, Italy, Portugal and some of their former colonies, it is common for SAIs to issue prior approval before individual payments are made. The difference between the pre-approval practice in the Napoleonic model and the comptroller role in the Westminster model is that the former is a transaction-based, detailed review of certain types of expenditure, while the latter is performed at a higher, aggregate level which does not involve detailed reviews of individual expenditure items. Authorization may involve approval of funds release from the consolidated fund to departmental accounts for a certain period, per expenditure type.

Views from the Field No. 5 – Nepal

Posted by Udaya Pant

Richard Allen interviewed Udaya Pant, FAD’s PFM Advisor in Nepal for the latest in the series “Views from the Field”.  For the first time on the Blog, the interview includes a Poem on PFM, written by Udaya Pant!

RA:  What have been the challenges you experienced in moving to Nepal? How have you dealt with these challenges?

UP:  I first came to Nepal in August 2009, primarily to implement the treasury single account (TSA), using a TSA implementation study report by FAD.  I took a break of about six months from December 2011 and rejoined in June 2012 with a broadened mandate covering almost all aspects of PFM.

Nepal suffers from political uncertainty and turmoil much of the time.  This creates a problem of continuity.  The present Government (in a caretaker role for the past six months) is the fourth one in the last three years. The budget cycle is not respected.  Civil servants have to rotate after every two years. The capacity to implement reforms is low and fiduciary risk in the country very high. I have seen four Prime Ministers, no regular Auditor General, and eight Financial Comptroller Generals (FCGs).  Another problem is that all government business is conducted in the Nepali language and few officials speak English.

New Budgetary Reforms in Austria: An Emphasis on Flexibility, Performance, and Gender

Posted by Ralph Schmitt-Nilson

Following up on a first set of reforms in 2010, the Austrian budget for 2013 introduces a new set of public financial management (PFM) reforms. Whereas the first stage focused on implementation of a medium-term expenditure framework, the second and latest stage of reform brings fundamental change in a range of fields. It signals three main aspects: more discretion for line ministries, a new performance-oriented budget structure, and a commitment to Gender Responsive Budgeting (GRB).

To improve flexibility for line ministries and big federal agencies, appropriations are shifted to a more aggregated level. The budget entities are given clearly structured duties and global budgets for flexible use. The stated rationale is that an increase in autonomy and responsibility leads to more motivated management and staff of institutions and more efficient use of funds. This builds upon positive experiences that Austria has with the introduction of more flexibility for line ministries since 2000. Line ministries also receive the authority to carry over a substantial part of the budget into the next year. The aim is to avoid spending sprees at the end of the fiscal year when departments often look for ways to use up the current budget. A carry-over facility gives them an incentive to remain frugal with their spending until the end of the year and to improve room for maneuver in the next year. Still, these developments could also be dangerous for yearly budget credibility. First, carry-over facilities make it harder to exactly plan expenditures for the fiscal year on an aggregate level. Second, high levels of carry-over can weaken the incentive for solid budget planning at the line ministry level.

Views from the Field No. 4 – Francophone West Africa

Posted by Jean-Gustave Sanon and Bruno Imbert

For the latest in our series of “views from the field” Richard Allen interviewed Jean-Gustave Sanon and Bruno Imbert, FAD’s regional PFM advisors in the IMF’s regional technical assistance center for Western Africa (AFW) based in Abidjan (Côte d’Ivoire). The AFW Center covers ten countries in Francophone West Africa: Benin, Burkina Faso, Côte d’Ivoire, Guinea, Guinea-Bissau, Mali, Mauritania, Niger, Senegal and Togo.

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

JGS/BI: All of the countries are engaged in relatively “advanced” PFM reforms including multi-year budgeting, performance-based budgets and accrual accounting. Such reforms are obviously a huge challenge for countries that are frequently cited as lacking basic tools and methods of PFM. The Republic of Guinea has recently adopted a new by-law on public finance and soon Mauritania will start working on a new financial constitution as well, with FAD and AFW support. Developments in the Western African Economic and Monetary Union (WAEMU), which includes all the AFW countries except Guinea and Mauritania, are a major driver of PFM reform across the region. In 2009, the Council of Ministers of WAEMU passed six regional by-laws (directives) which have to be transposed by the member states into their own legal framework and will substantially affect the way their PFM systems operate.

What Lies Beneath: Issues in Debt Statistics

Posted by Robert Dippelsman

Most key macroeconomic indicators such as GDP, the consumer price index (CPI), data on monetary aggregates, or balance of payments follow internationally accepted definitions. In contrast, public debt data can have different meanings. This problem is discussed in the recently released Staff Discussion Note What Lies Beneath: Statistical Definitions of Public Debt by Robert Dippelsman, Claudia Dziobek, and Carlos Gutiérrez Mangas of the IMF Statistics Department.  

The discussion note shows that the failure to adopt global standards can lead to important misunderstandings because of the potentially large magnitudes involved. However, international guidelines on the compilation of public sector debt are well established and set out in the recently published Public Sector Debt Statistics Guide: Guide for Compilers and Users (Debt Guide). The note identifies some key dimensions of public sector debt that need to be considered:

Views from the Field No. 3 – Liberia

Posted by Kubai Khasiani

For the third in our series of “Views from the Field” Richard Allen interviewed Kubai Khasiani, FAD’s PFM Advisor at the Ministry of Finance in Liberia. Kubai was formerly a senior budget official in the Kenyan government.

RA: What have been the challenges you experienced in moving to the new position? How have you dealt with these challenges?

KK: I took over in 2011 from a PFM Advisor who had been in the position for three years, so there were already established channels of communication with the Minister and senior management which I inherited.  Many important changes in PFM had already taken place, or were in process. The country achieved the post-HIPC completion point in 2010; a Poverty Reduction Strategy (PRS) and a PFM Act were being implemented; and a PFM Strategy and Action Plan had recently been approved by the government. Development partners already in post were very accommodating, making it easy for me to adapt.

Job Offer: Technical Assistance Advisor - Public Financial Management (IMF Job Number: 1200765)

The Fiscal Affairs Department (FAD) of the IMF is looking for well-qualified technical assistance (TA) advisors to fill headquarters-based (in Washington, D.C.) contractual positions in the Public Financial Management 2 Division. The advisor's appointment term would be for a period of two years, on a renewable basis, subject to satisfactory performance.

The selected candidates will provide technical assistance (TA) on PFM matters to IMF member countries, and will also supervise the technical assistance work of experts based in member countries and/or at the IMF's Regional Technical Assistance Centers. The work programs may cover all PFM areas: the legal and regulatory framework; budget preparation (including budget classification, medium-term budgetary frameworks, performance-oriented budgeting); budget execution (including expenditure control, treasury operations, cash management, accounting, fiscal reporting, and financial management information system); and internal control and audit. The TA advisor will be required to travel overseas.

Job Offer: Public Financial Management Advisor for Myanmar Based in Thailand (IMF Job Number: 1200764)

The Fiscal Affairs Department (FAD) of the International Monetary Fund is looking for a well-qualified expert to fill a Public Financial Management (PFM) Advisor position for Myanmar. The advisor will be based in Bangkok, Thailand. The Advisor's appointment term would be for a period of one year, on a renewable basis, subject to satisfactory performance.

The Advisor's tasks will be focused on modernization of the treasury function in the Ministry of Finance in NayPyitaw. His work program is expected to cover budget execution, including expenditure control, treasury operations, cash management, debt management, accounting, fiscal reporting, financial management information systems and internal control issues. He will also  provide ongoing strategic guidance to the authorities on the overall PFM reform process. A limited part of the Advisor's time may be devoted to technical assistance in one of the other South-East Asian countries. Coordination with donors and other providers of technical assistance to Myanmar will be an important feature of the Advisor's role.

New Harvard Course – Getting the Most from PFM Reform

Posted by Matt Andrews, Harvard Kennedy School

The posts on this blog are a continuous reminder that the PFM reform community has come a long way. We have a lot of great ideas and potential interventions that could have significant and lasting impact on governments across the globe. The posts are also a reminder of how limited many reforms are, and how difficult it is to get the functionality we so desire from PFM systems we are working to improve. 

In working through some of these difficulties, posts on this blog have referenced many common problems, raising questions about sequencing, fitting solutions to context, working around and within political constraints, managing capacity challenges, and the like. We are launching a new PFM course at the Harvard Kennedy School to tackle these kinds of questions. It runs from January 6–11, 2013 and will focus explicitly on how to do PFM reforms. 

The course will tackle the thorny issue of how PFM reforms can be most effectively introduced. These include: Who needs to be involved? How should the reforms be packaged? What should the sequence look like? Where lessons can be learned, and how?

Views from the Field No. 2 – Regional PFM Advisor for Central Asia

Posted by John Zohrab

For the second in our series of “Views from the Field” Richard Allen interviewed John Zohrab, FAD’s regional PFM advisor for Armenia, Georgia, Tajikistan, Kazakhstan, Kyrgyz Republic, and Uzbekistan.  John, who is a New Zealand citizen, is based in Tashkent, Uzbekistan. 

RA:  What have been the challenges you have experienced in working in the countries of Central Asia?

JZ:  The main challenge has been to convince governments in the region that we will make a valuable contribution to their work. This is not just a technical issue, but also one of trust. Accepting a “man from the IMF” as an advisor is not an easy decision for any ministry, as ministries are concerned that we will try to direct rather than advise them. Meeting the challenge of convincing ministries that our contribution has a unique, high value and that we can be trusted requires us to demonstrate our skill and sincerity every day in everything we do.