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January 03, 2013

Simplifying Budget Documents – Time for an International Standard?

Posted by Camille Karamaga

Improving the quality of budget documentation lies at the heart of many reforms aimed at enhancing understanding of the content of the budget estimates as well as fostering transparency and accountability. Some budget laws prescribe a minimum set of documents to accompany the budget estimates. These may include, for example, reports on: (i) the medium-term macroeconomic forecast; (ii) fiscal policies and public expenditure trends; (ii) medium-term forecasts of government revenues, expenditures, debt, and the fiscal balance; (iii) medium-term resource ceilings; (iv) government guarantees, contingent liabilities and other fiscal risks; (v) spending on expenditure programs and projects by sector; and (vi) projections of donor aid flows. In countries with a Westminster tradition, the budget speech includes much of this information, but additional documents may be presented to the parliament.

Improving the content and quantity of fiscal information is not the same, however, as improving its quality or transparency. More does not always mean better or clearer. Indeed, it often means the reverse. Governments tend to respond to demands for information from the parliament, financial markets, NGOs and ordinary citizens by producing more and more data, often in unprocessed form. This may get them off the hook of public “accountability”, but places them squarely on another hook, accusations of information overload and obfuscation.

The design of a strategic planning framework, medium-term budget frameworks and program budgets has led to a proliferation of detailed information, performance indicators, and monitoring and evaluation reports. Mountains of annual budget books are produced with separate estimates volumes being prepared by each line ministry. The excessive detail contained in the budget estimates weakens their usefulness as raw material for discussion by parliamentary committees. Nor are they meaningful to the general public. In short, much of the  information produced by the government easily becomes a “data cemetery” which contributes little to the decision-making process or enlightened public debate.

Is there a way out of this dilemma? Developing an international standard on fiscal documentation is one answer. The IMF’s recently published paper on Fiscal Transparency, Accountability, and Risk notes that currently no there are internationally accepted standards for the content and presentation of the budget and related documents. However, some progress is being made. The International Budget Partnership’s Open Budget Survey, for example, periodically examines to what extent countries produce eight key documents during each budget cycle. These documents comprise the pre-budget statement; the budget proposal (budget estimates); the budget as approved by parliament; in-year financial reports; the mid-year review of budget execution; the year-end report; the report of the external audit agency on the government’s annual financial statement; and the citizen’s budget.

Many developing countries, for example in sub-Saharan Africa, are making an attempt to meet such standards of good practice. However, there is no specific guidance on the standard size and content of these reports. Some published documents turn out to be voluminous and are indigestible for many readers. Some countries’ budget books run to over 500 pages, while in others, line ministry budget estimates are over 1000 pages. Some countries have a practice of presenting highly detailed sector estimates as part of their national budget. In others, the budget speech runs to more than 300 pages!

Meaningful scrutiny of the budget proposals may thus be limited by the sheer bulkiness of the documents and the time constraint for submission and approval of the budget. In addition to core budget material, there are increasing demands for governments to publish detailed financial information on extra-budgetary funds, state enterprises, local authorities and other public entities. As a consequence, the usefulness of fiscal documents runs the risk of being compromised by their number and length.

Moreover, policy makers tend to confuse the volume of information with its quality and usefulness. Governments attempting to “play safe” may decide to publish everything, but that is not helpful to the different consumers of information, including parliamentarians, taxpayers and the general public. The objectives of accountability and transparency are often placed side by side, as twins that cannot be separated. In practice, however, the two objectives are different and are not easy to reconcile. Accountability may require countries to produce more information, transparency to produce less, or at least to be more selective in the way information is prepared and presented.

Policymakers therefore need to decide what information should be published, and in what form. Government officials, parliamentarians, academics and think tanks, the media, and ordinary citizens have differing requirements for information, which needs to be presented in a form that the recipients can understand and make use of in taking decisions, writing op-ed pieces for local newspapers, or lobbying local politicians. The assumption that all users require all information at the same time and in the same format is unhelpful from the perspective of accountability and transparency.  

Some sub-Saharan countries have recognized the need to downsize their key documents without losing content. For example, Ghana, Rwanda, Kenya all produce highlights to the budget proposals in manageable volumes. Technical documents, though improved in quality for policy purposes, may still need to be simplified to suit the needs of ordinary people whose lives are impacted by the national budget. Simpler versions of budget speeches may have to be crafted for dissemination and outreach purposes to NGOs. A citizens’ guide to the budget is becoming a common feature as demands increases for more participation and transparency in the budgetary process. 

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. 


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We can learn something from technology standards. Not the big committees and compromises but the notion of different levels of compliance. Governments could achieve differnt levels of compliance to budget reporting standards where each level specifies the type and depth of budget information. This could augment the open budget index.

WHY REINVENT THE WHEEL? The Government Finance Officers Association (GFOA) established the Distinguished Budget Presentation Awards Program (Budget Awards Program) in 1984 to encourage and assist US state and local governments to prepare budget documents of the very highest quality that reflect both the guidelines established by the National Advisory Council on State and Local Budgeting and the GFOA’s best practices on budgeting and then to recognize individual governments that succeed in achieving that goal. Why not emulate this program and learn from the numerous states and local governments that have participated for years? http://www.gfoa.org/index.php?option=com_content&task=view&id=33&Itemid=57/download

The BEST PRACTICES IN PUBLIC BUDGETING http://www.gfoa.org/services/nacslb/ is another set of "practices" that do not need to be re-invented. The "National Advisory Council on State and Local Budgeting" (NACSLB) framework catalogs best practices across all phases of the budgeting process. The NACSLB positions budgeting as a strategic process that is attuned to long-term financial sustainability. While the NACSLB framework is not a cutback budgeting method, following its four major principles will help any budget process reach more financially sustainable decisions.

1) Establish broad goals to guide decision making. A government should have broad goals that provide it with overall direction and serve as a basis for decision making. (e.g., strategic planning, long-range financial planning)

2)Develop approaches to achieve goals. A government should have specific policies, plans, programs, and management strategies to define how it will achieve its long-term goals. (e.g., financial policies, business plans, performance measurements, individual performance objectives)

3) Develop a budget consistent with approaches to achieve goals. A financial plan and budget that moves toward achievement of goals, within the constraints of available resources, should be prepared and adopted. (e.g,. strategically focused budget: outcome-based, performance based)

4) Evaluate performance and make adjustments. Program and financial performance should be continually evaluated, and adjustments made, to support progress in achieving goals. (e.g., quarterly and annual budget and performance reports, performance audits, special evaluation studies, strategic and financial plan revisions)Budgeting (NACSLB). They are set up in PRINCIPLES, ELEMENTS and PRACTICES:

Principle I – Establish Broad Goals to Guide Government Decision Making

Element 1 – Assess Community Needs, Priorities, Challenges and Opportunities

Practice 1.1 – Identify Stakeholder Concerns, Needs, and Priorities
Practice 1.2 – Evaluate Community Condition, External Factors,
Opportunities, and Challenges

Element 2 – Identify Opportunities and Challenges for Government Services,
Capital Assets, and Management

Practice 2.1 – Assess Services and Programs, and Identify Issues,
Opportunities, and Challenges
Practice 2.2 – Assess Capital Assets, and Identify Issues,
Opportunities, and Challenges
Practice 2.3 – Assess Governmental Management Systems, and Identify
Issues, Opportunities, and Challenges

Element 3 – Develop and Disseminate Broad Goals

Practice 3.1 – Identify Broad Goals
Practice 3.2 – Disseminate Goals and Review with Stakeholders

Principle II – Develop Approaches to Achieve Goals

Element 4 – Adopt Financial Policies

Practice 4.1 – Develop Policy on Stabilization Funds
Practice 4.2 – Develop Policy on Fees and Charges
Practice 4.3 – Develop Policy on Debt Issuance and Management
Practice 4.3a – Develop Policy on Debt Level and Capacity
Practice 4.4 – Develop Policy on Use of One-Time Revenues
Practice 4.4a – Evaluate the Use of Unpredictable Revenues
Practice 4.5 – Develop Policy on Balancing the Operating Budget
Practice 4.6 – Develop Policy on Revenue Diversification
Practice 4.7 – Develop Policy on Contingency Planning

Element 5 – Develop Programmatic, Operating and Capital Policies and Plans

Practice 5.1 – Prepare Policies and Plans to Guide the Design of
Programs and Services
Practice 5.2 – Prepare Policies and Plans for Capital Asset Acquisition,
Maintenance, Replacement, & Retirement

Element 6 – Develop Programs and Services That are Consistent with Policies and

Practice 6.1 – Develop Programs and Evaluate Delivery Mechanisms
Practice 6.2 – Develop Options for Meeting Capital Needs & Evaluate
Acquisition Alternatives
Practice 6.3 – Identify Functions, Programs, and/ or Activities of
Organizational Units
Practice 6.4 – Develop Performance Measures
Practice 6.4a – Develop Performance Benchmarks

Element 7 – Develop Management Strategies

Practice 7.1 – Develop Strategies to Facilitate Attainment of Program
and Financial Goals
Practice 7.2 – Develop Mechanisms for Budgetary Compliance
Practice 7.3 – Develop the Type, Presentation, and Time Period of the

Principle III – Develop a Budget Consistent with Approaches to Achieve Goals

Element 8 – Develop a Process for Preparing and Adopting a Budget

Practice 8.1 – Develop a Budget Calendar
Practice 8.2 – Develop Budget Guidelines and Instructions
Practice 8.3 – Develop Mechanisms for Coordinating Budget Preparation
and Review
Practice 8.4 – Develop Procedures to Facilitate Budget Review,
Discussion, Modification, and Adoption
Practice 8.5 – Identify Opportunities for Stakeholder Input

Element 9 – Develop and Evaluate Financial Options

Practice 9.1 – Conduct Long-Range Financial Planning
Practice 9.2 – Prepare Revenue Projections
Practice 9.2a – Analyze Major Revenues
Practice 9.2b – Evaluate the Effect of Changes to Revenue Source Rates
and Bases
Practice 9.2c – Analyze Tax and Fee Exemptions
Practice 9.2d – Achieve Consensus on a Revenue Forecast
Practice 9.3 – Document Revenue Sources in a Revenue Manual
Practice 9.4 – Prepare Expenditure Projections
Practice 9.5 – Evaluate Revenue and Expenditure Options
Practice 9.6 – Develop a Capital Improvement Plan

Element 10 – Make Choices Necessary to Adopt a Budget

Practice 10.1 – Prepare and Present a Recommended Budget
Practice 10.1a – Describe Key Policies, Plans and Goals
Practice 10.1b – Identify Key Issues
Practice 10.1c – Provide a Financial Overview
Practice 10.1d – Provide a Guide to Operations
Practice 10.1e – Explain the Budgetary Basis of Accounting
Practice 10.1f – Prepare a Budget Summary
Practice 10.1g – Present the Budget in a Clear, Easy-to-Use Format
Practice 10.2 – Adopt the Budget

Principle IV – Evaluate Performance and Make Adjustments

Element 11 – Monitor, Measure, and Evaluate Performance

Practice 11.1 – Monitor, Measure, and Evaluate Program Performance
Practice 11.1a – Monitor, Measure, and Evaluate Stakeholder Satisfaction
Practice 11.2 – Monitor, Measure, and Evaluate Budgetary Performance
Practice 11.3 – Monitor, Measure, and Evaluate Financial Condition
Practice 11.4 – Monitor, Measure, and Evaluate External Factors
Practice 11.5 – Monitor, Measure, and Evaluate Capital Program

Element 12 – Make Adjustments as Needed

Practice 12.1 – Adjust the Budget
Practice 12.2 – Adjust Policies, Plans, Programs and Management
Practice 12.3 – Adjust Broad Goals, If Appropriate

DO NOT RE-INVENT THE WHEEL. Many of the budgeting, performance measurement, and public sector accounting topics presented would provide PFM Readers with some empirical and not theoretical examples by US State and Local Government practioneers who - with an email, would share and converse with PFM Readers on practically any public budgeting or public sector accounting issue they encounter.

Absolutely agree with your point that more information does not mean better budget. The core of the issue is that some times the lack of quality in budget presentation is unintentional and is simply because of the lack of maturity for analysis or presentation but many times it could be intentional to keep the things in grey and hence the role of entities like IMF and World Bank becomes increasingly important to have a better transparency.

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