1. Budget Execution Course – Opening Session
16 January, 2003
Overview Comments by David Shand
OPCFM

2. Does the government care about the budget
Does the government care about the budget? Is it just a pro-forma exercise of limited interest, rather than what we assume it should be – a key mechanism for determining government priorities and ensuring service delivery?
The three (or four) levels of objectives of PFM systems. Budget execution must assist in achieving these objectives
aggregate fiscal control
strategic resource allocation
operational efficiency
(external accountability)

3. What level of PFM performance should we expect from developing countries? But problems may reflect lack of incentives for good budget execution rather than lack of capacity.
Problem of formal rules versus informal rules. What are the incentives for compliance or non-compliance. Avoid just “technical” fixes.
Are donors and their requirements sometimes part of the problem?
To what extent can we improve budget execution in isolation from overall public sector reform?

4. Budget preparation and execution issues are inextricably linked
Budget preparation and execution issues are inextricably linked. Many issues or problems in budget execution arise from issues or problems in budget preparation processes. For example:
scope of the budget
realism – can it be implemented?
budget preparation dialogue – do ministries understand what they have been allocated for what?
basis of accounting – does it follow the budget?

5. Different basis of budget 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 if we are to monitor and report budget execution – surprising how often they diverge (accountants isolated from the budget office)

6. Importance of internal controls
Importance of internal controls. This concept is not understood in some countries – rather inspections and audits
Importance of good fiscal reporting – but we need international standards, and timely, reliable information
Getting value from audit institutions - there needs to be something to 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. Legislatures may be part of the problem rather than of the solution. Again, is there much interest in past events?