ODA) Panacea Once-forall MBA (Top-down) QC (Middle-led Bottom up) 5 6. NPM: DC LDC 7. 4

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1 GRIPS) GRIPS) GRIPS) 2 2 I. I. I. II. II. II ODA ODA ODA WB/ADB/ WB/ADB/ WB/ADB/DfID DfID DfID III. III. III.

2 ODA) Panacea Once-forall MBA (Top-down) QC (Middle-led Bottom up) 5 6. NPM: DC LDC 7. 4

Relief Initiative New Money Quality Public Services Development Assistance (Operating) Framework Assistance Modality Budgetary Support Sector BS General BS + Project Assistance + Program Assistance

3 I. 1 (WHAT?) 5 Context in Developed Countries = New Public Management Official Statement/Approach Policy Goals PRSP 1Sound Management of Macro-Economy and Growth 2Poverty Reduction Prerequisite HIPC Debt Relief Initiative New Money Quality Public Services Development Assistance (Operating) Framework Assistance Modality Budgetary Support Sector BS General BS + Project Assistance + Program Assistance Instrument MTEF (Mid-term Expenditure Framework) Fiduciary Aid Fungibility Conceptual/Operational Framework 4 - layer Analytical Framework Fiscal Discipline Costing Allocative Efficiency Technical Efficiency MIE/F Performance Auditing Audit Guiding Principle Governance Participation Predictability Transparency Procurement Accountability Decentralization Ownership and Capacity Building 6

4 Policy Issues and Operational Tools Layers Fiscal Discipline Allocative Efficiency Technical Efficiency Monitoring /Evaluation Policy Issues 5 PRSP ( FMIS CS-DRMS Common Basket MTEF, Budget Calendar, Primer on Off-Budget FMIS Performance Indicators Fiduciary s, PEFA- Financial Recording and Reporting Policy Evaluation, Value for Money Auditing Policy Tools FMIS, Performance Indicators, (Compliance and Performance Auditing) 7 Cross-Cutting Issues 1. Capacity Building and Incentive System Seminar and Workshop, Manuals 2. Financial Management Information System (FMIS) Computer System (IT) 3. Rules and Regulations, and Job Description Manuals 3 8

5 Quality Public Services (Value for Money Public Sector) T P A Good Governance P P: Predictability - P: Participation - T: Transparency - A: Accountability - 9 Framework by Dr. Allen Schick (1) operators through Public Fund (Tax, non-tax Revenue Transfer) Sustainable over the medium-term and beyond The Machinery of Budgeting (Allocation of public money) Part of a broader set of institutional and governmental arrangements, not only a process! Budget Execution 1. Desired Policy Outcomes in an efficient manner 2. Operational budget outcomes 1. Supplements substantive policy norms 2. Covers broad institutional and management arrangements 3. - Le vel Framework I. Fiscal Discipline II. Allocative Efficiency (1) Allen Schick, A Contemporary Approach to Public Expenditure Management, 1998, pp. III. Technical Efficiency (1) 10

6 11 I. I. I ODA ODA ODA (WHY) (WHY) (WHY) 12 (1) Tribunary NPM (New Public Management),

7 1 Philosophers A. Conceptual Framework) 1. Philosophers (UK: Mick Foster, USA: Michel Holmes, India; Sanjay Pradaan etc.) 2. TA 3. Ownership Self-sustainability 4. BS Poverty Expenditure Tracking Survey PETS) BS 5. Development Partners Governance ( M. Foster, Integrating Aid into Budget Management, ODI Paper, 1999, pp.1-4) B. (Operational Framework) Policy Triggers 13 Fungibility WB: Expenditure Tracking Survey 14

8 Budget Management HIPC Application (Bill Dorotinsky, Budget Execution: Overview, WB PRMPSMay 2001) Benchmark Description Formulation Execution Reporting Comprehensiveness 1. Composition of the budget entity "Close-fit or better" to GFS definition of general government 2. Limitations to use of off-budget transactions Extra (or off) budget expenditure is not substantial 3. Reliability of budget as guide to outturn Level and composition of outturn is "quite close" to budget 4. Data on donor financing Both capital and current donor funded expenditures included Classification 5. Classification of budget transactions Functional and/or program information provided 6. Identification of poverty-reducing expenditure Identified through use of classification system (e.g., a virtual poverty fund) Projection 7. Quality of multi-y ear exp enditure p rojections Projections are integrated into budget formulation Internal Control 8. Level of p ay ment arrears Low-level of arrears accumulated 9. Quality of internal audit Internal audit function (whether effective or not) 10. Use of tracking surveys Tracking used on regular basis Reconciliation 11. Quality of fiscal/banking data reconciliation Reconciliation of fiscal and monetary data carried out on routine basis Reporting 12. Timeliness of internal budget reports M onthly expenditure reports provided within four weeks of end of month 13. Classification used for budget tracking Timely functional reporting derived from classification system Final Audited Accounts 14. Timeliness of accounts closure Accounts closed within two months of year end 15. Timeliness of final audited accounts Audited accounts p resented to legislature within one y ear 15 Relative Need for Upgrading WB, Bill Dorontinsky Percentage of Countries Requiring Substantial Upgrading Comprehensiveness Internal Control Classification Projection Reconciliation Reporting Final Audited Accounts Formulation Execution Reporting 16

I. 3. WHO and HOW I) 17 Poor Strategic Planning: Vague policy objectives Political initiatives to budget allocation Budgeting for short-term objectives Paucity of human capital Poor opportunities of

public accounting Poor internal and external auditing process Poor cash management Weak expenditure review Poor agency coordination Poor management of effective operations Poor agency/department

9 I. 3. WHO and HOW I) 17 Poor Strategic Planning: Vague policy objectives Political initiatives to budget allocation Budgeting for short-term objectives Paucity of human capital Poor opportunities of capacity building Lack of motivations to do well Public sector as social safety net and overstaffing Political appointees in ministries Problems as Encountered by Poor Expenditure Control Cash-based public accounting Poor internal and external auditing process Poor cash management Weak expenditure review Poor agency coordination Poor management of effective operations Poor agency/department coordination Red-tapes in bureaucracy Lack of clear and formalized job-description Corruption Paucity of compliance to laws, regulations and guidelines, particularly in investments Conventional Budgeting Incremental budgeting Short-term (one-year) budgeting Overestimation of required funds Patronage system for continued budget 18

10 Budget Reform (1) 1. Single-year Budgeting 2. Line Item Budgeting 3. Non-Program Budgeting 4. Isolated Budgeting 19 MTEF: Mid-Term Expenditure Framework 23 Activity-Based Performance-Based Budgeting 20

11 : 1 (DOD) US$310 milgdp47.8% 2. US$30-35 mil ( 22

12 US$mil GDP % 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% GDP GDP (Real GR) GDP (%) 23 Debt Position) US$ million Change in Debt Position) GDP 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% (EDT) GDP DSR (Change in External Debt Structure) (US$ million ODA DOD SC 24

13 US$ million) ( )Change in Debt Burden % 6% 5% 4% 3% 2% 1% 0% DSR) DSR (a) Baseline Model Alternative % 0.75% (40 ) (30 ) Baseline Model 2,840 US$0.26 million Alternative 2,060 US$0.19 million 2,130 US$0.19 million 1,540 US$0.14 million DSR 0.16% DSR DSR 2 Debt Service 4.2% Export % 7.6% 8.4% 9.2% 10.1% 10.9% 11.8% 12.6% 13.4% 14.3% 15.1% 16.0% 16.8% 17.6% 18.5% 19.3% 20.2% 21.0% % 6.9% 7.6% 8.4% 9.2% 9.9% 10.7% 11.5% 12.2% 13.0% 13.7% 14.5% 15.3% 16.0% 16.8% 17.6% 18.3% 19.1% % 6.3% 7.0% 7.7% 8.4% 9.1% 9.8% 10.5% 11.2% 11.9% 12.6% 13.3% 14.0% 14.7% 15.4% 16.1% 16.8% 17.5% % 5.8% 6.5% 7.1% 7.8% 8.4% 9.0% 9.7% 10.3% 11.0% 11.6% 12.3% 12.9% 13.6% 14.2% 14.9% 15.5% 16.2% % 5.4% 6.0% 6.6% 7.2% 7.8% 8.4% 9.0% 9.6% 10.2% 10.8% 11.4% 12.0% 12.6% 13.2% 13.8% 14.4% 15.0% % 5.0% 5.6% 6.2% 6.7% 7.3% 7.8% 8.4% 9.0% 9.5% 10.1% 10.6% 11.2% 11.8% 12.3% 12.9% 13.4% 14.0% % 4.7% 5.2% 5.8% 6.3% 6.8% 7.3% 7.9% 8.4% 8.9% 9.4% 10.0% 10.5% 11.0% 11.5% 12.1% 12.6% 13.1% % 4.4% 4.9% 5.4% 5.9% 6.4% 6.9% 7.4% 7.9% 8.4% 8.9% 9.4% 9.9% 10.4% 10.9% 11.4% 11.9% 12.4% % 4.2% 4.7% 5.1% 5.6% 6.1% 6.5% 7.0% 7.5% 7.9% 8.4% 8.9% 9.3% 9.8% 10.3% 10.7% 11.2% 11.7% % 4.0% 4.4% 4.9% 5.3% 5.7% 6.2% 6.6% 7.1% 7.5% 8.0% 8.4% 8.8% 9.3% 9.7% 10.2% 10.6% 11.1% % 3.8% 4.2% 4.6% 5.0% 5.5% 5.9% 6.3% 6.7% 7.1% 7.6% 8.0% 8.4% 8.8% 9.2% 9.7% 10.1% 10.5% % 3.6% 4.0% 4.4% 4.8% 5.2% 5.6% 6.0% 6.4% 6.8% 7.2% 7.6% 8.0% 8.4% 8.8% 9.2% 9.6% 10.0% % 3.4% 3.8% 4.2% 4.6% 5.0% 5.3% 5.7% 6.1% 6.5% 6.9% 7.3% 7.6% 8.0% 8.4% 8.8% 9.2% 9.5% DSR 5-10% 2 8%DSR % 70% 2004 DSR8% 90% 10% %

14 DOD) Y = X 1-2.1X 2-4.6X 3-0.6X 4 Y X 1 X 2 X 3 X 4 Findings and Policy Implication 10 IMF 27 I. 4.WB/ADB DFID (WHO and HOW II) 28

15 Conceptual Framework of Public Expenditure Management Development Targets: Growth, Poverty Alleviation Problems Governance Issues Transparency, Accountability CDF Causes Institutional Reform Mr. Holmes Mutually Supportive Mr. Mick Foster T/As DFID - Fiscal Discipline - Allocative Efficency - Technical Efficiency PERLs/ GIRLs Public Expenditure Policy/ Institutional Reform MTEF Fungibility PER Donors - Receipient Countries Partnership LACI Budgetary Support Performance Evaluation/ Indicators Concept/ Current Thought Instruments/ Tools 29 Expenditure Management Cycle Bill Dorotinsky, Budget Execution: Overview, WB PRMPSMay 2001 Financial management system boundaries Planning system Project appraisal Medium term plans, e.g. three year rolling plans Resource allocation Annual budgets Development, recurrent and revenue Expenditure review Liquidity management Public expenditure review Accountability Audit system Post event review Project monitoring Information technology A core tool of integration Reports and financial statements Monitoring & controlling Accounting for revenue and expenditure Fund release procedure, e.g... warranting Expenditure control Source: Integrated Financial Management. Michael Parry, International Management Consultants Limited. Training Workshop on Government Budgeting in Developing Countries. THE UNITED NATIONS. December

16 Players of the Public Expenditure Management Game in The World Bank Economics Group Mr. Holmes, Dr. Swaroop, Dr. Pradhan, etc. Intellectual Inputs Collaboration Undergoing conceptual development and refinement as a management tool IMF: Shortterm Fiscal Policy Operations Policy and Strategy Ms. Salop, Mr. Bruce, etc. PERL/ GIRL Loans PER Operational Inputs Watch and Evaluate Input MTEF, Loans, TAs Operations Evaluation Dr. Shah, etc. Loan Operation Country Operation Financial Management Mr. Miovic, Mr. Ahlers, Mr. Tsutsumi, Mr. Byrnes, etc. Training/ Education (ODI) Mr. Shand, etc. Training Disseminate Knowledge Workshops Recipient Countries Source 31 Without With Social Technical Social Technical Risk Analysis Environmental Risk Analysis Environmental Stakeholder Participation Economic Institutional Financial Stakeholder Participation Public Finance Economic Institutional Financial Financial Management 1. Without 2. With 32

17 1. Country Assistance Strategy (CAS),Economic Sector Work (ESW) Loan Operation Refer 2. t Various s for F/F, Appraisal Power Economic s.. Social s Transpo rt Environmental Impact.. Other Sectors Budgetary Support PERLs/GIRLs/TAs WB Pow er Sect or Transp ort Sector Educat ion Sector Sector Power Transport Budgetary Support Other Sectors 33 Players of the Game in ADB Board Budget, Personnel and Management Systems Department, Training and Development Division Mr. D. Bucher Inputs Internal Training Dr. Clay Wascott (officer or Director) Programs Department (West) President Governance Group Dr. Y. Iwasaki Dr. R. Beschel Dr. Schiavo-Campo Dr. N. Hamid Mr. J. Zhuang Strategy and Policy Office (SPO) Dr. J. De Campos Dr. C. Buentjen (Officer or Director) Programs Department (East) Guidelines Evaluation Economic and Development Resources Center Dr. J. Nugent Operations Evaluation Office Ms. C. Heider Mr. Van der Linden Dr. Y. Iwasaki Mr. S. Nishimoto Loan Operation Departments ADB Institute (Japan) TAs/ Loans Policy Dialogue/ Assistance Programing Asian and Pacific Member Countries External Training Dr. T. Morrison Attachment 3-8 source: Guidelines 34

18 : DFID: Human Capacity Building Program in Sub-Sahara Sahara Countries and Debt Management Capacity Guide (1) (Legal and institutional Frameworks) (2) Human Resources (3) (Management, Supervision, Working Environment) (4) Disbursement (5) Financial Reporting (6) Serviceability (7) macroeconomic Projection (8) Poverty Reduction Programming and Forecasts (9) (Portfolio and Risk Analysis) (10) Debt Portfolio and Risk Analysis (11) (Political Priority and Leadership) (12) (Transparency, Evaluation, and Control) 35 Debt Strategy Enhancement of Human Capacity, Human Capacity Building ] 36

19 Conclusive Remarks (1) (2) (3) LDC (4) 37 III. 38

20 IMF DfID) WB/IMF Ownership Public Sector Reform, Government Reengineering, Program Assistance, Budgetary Support The Public Sector includes central/local governments, central bank, supreme audit institution, parestatals Due Process) Policy Framework Operational Framework PCM 40

21 2 Policy Framework, Strategy Formulation (PRSP, Sector Strategy Paper, etc.,) Operations (Budget Execution) PCM Linkage) 41

ODA ODA ODA ODA ODA ODA GRIPS

ODA ODA ODA ODA ODA ODA GRIPS GRIPS Development Forum Discussion Paper No.6 ODA 2004 7 ODA ODA 2003 3 54 ODA ODA ODA ODA 2004 7 GRIPS ODA 2004 7 Discussion Paper JICA PRSP 2002 3 2004 3 GRIPS ODA ODA 1. 1 1.1 1.2 1.3 1.4 2. 1 5 2.1