Budget Execution Course

1
Budget Execution Course Opening Session

• 3 November, 2003
• Overview Comments by David Shand
• OPCFM

2

• Does the budget matter ? Just a pro-forma
  exercise rather than a key mechanism for
  determining government priorities and planning
  service delivery?
• A political and technical document ?
• Need for budget ownership ministers, heads of
  department and program managers not just MOF
  and finance staff
• The three (or four) levels of objectives of PFM
  systems. Budget execution must assist in
  achieving these objectives

• aggregate fiscal control (usually functions OK)
• strategic resource allocation (more
  problematical)
• operational efficiency (also problematical)
• (external transparency)

3
What level of PFM sophistication is appropriate
for a developing country ? But problems may
reflect lack of incentives for good budget
execution rather than lack of capacity.
Formal rules versus informal rules. What are the
incentives for compliance or non-compliance ?
Avoiding just technical fixes institutional
issues.
To what extent are donors and their requirements
part of the problem ? E.g. project ring-fencing,
funding uncertainty
To what extent can we improve budget execution
(PFM generally) in isolation from overall public
sector reform?
4
Budget preparation and execution issues are
inextricably linked. Problems in budget execution
may arise from problems in budget preparation.
(It is hard to effectively implement a badly
constructed budget) For example

• scope of the budget extra-budgetary funds ?
• realism of both revenues and expenditures can
  the budget be implemented?
• budget preparation dialogue do ministries
  understand how much they have been allocated and
  for what purposes ?
• basis of accounting does it follow the budget ?
  
• how devolved is the budget ?

5
Different basis of budget measurement or point of
control

• obligations (commitments)
• cash payments
• costs

Different systems (anglophone, francophone) may
use a different point of control.
Importance of a common basis of budgeting and
accounting (both classification and measurement)
to monitor and report budget execution
surprising how often they diverge (accountants
isolated from the budget office)
6
Importance of internal (self) controls. This
concept is not understood in some countries
rather (external) inspections and audits
Importance of good fiscal reporting timely
reliable information based on international
standards which ? A major deficiency
Getting value from audit institutions - fixing
systems before fixing audit, avoid a gotcha
approach, add to the credibility of financial
statements. But to what extent is there
political or public interest in the past?
Getting value from legislative review. To what
extent can legislature amend the budget ?
Legislatures may be part of the problem ? Is
there much interest in past events?