1. Budget Management and Financial Accountability: Overview
Parminder Brar, OPCSFM Bill Dorotinsky, PRMPS
Budget Management Course
March 1-2, 2004

2. Outline The challenge of budget management. Budget management cycle.
Why is budget management important?
Key challenges:
How to monitor progress for systemic improvements and budgetary outcomes?
How to better support budgetary reform in client countries? What is the new approach?
Can budget reform be achieved without a wider reform program?
What impact will decentralization have on budget management?
Organization of the course

3. The challenge of budget management.
Budgeting is a highly political process
Budget reform is extremely challenging – “Tragedy of the Commons”.
Success has been much more modest than expected.
Institutional incentives are key to budget reform.
The principal-agent problem distorts budgetary outcomes.
Budget is NOT an accounting document
What are the incentives for compliance or non compliance?
What are the lessons we can learn?

4. Budget management cycle
Planning
system
Medium term
plans, e.g. three
year rolling plans
Annual budgets:
Development,
Recurrent and
Revenue
Fund release
procedure, e.g...
warranting
Accounting for
revenue and
expenditure
Public expenditure
review
Institutional Politics and Power Sharing
Reports and
financial statements
Audit system
Project monitoring
Project
appraisal
Resource
allocation
Liquidity
management
Expenditure
control
Monitoring
& controlling
Post event
Accountability
Formulation covers ‘expenditure review’ insofar as this is a step in preparation of future plans, and goes through to “annual budgets..”
-- need for good budget
-- Brazil roads, congress, MoF
-- linking budget to cash management
-- dc grants management
Execution covers from ‘liquidity management’ through to PER’s, insofar as PER’s are part of the ex poste accountability system.
Half of cycle
(2) Hardware and software do not solve problems in human systems. Must know source of problem, and seriously assess whether computerization will solve the core problem. (DC Example)
Underlying all of this is good recording of transactions and reporting!
What are the main impediments to reform and what can be done to address them?

5. Why is budget management important?
Budget Management systems are weak in client countries.
The MDG’s cannot be achieved unless budget systems improve.
Matching Plan to Implementation
Good Macrofiscal
But, look at sectoral allocations. Who gets harmed?
3-level framework
Cash, accrual, commitment

6. New approach to support reform
Government PFM Reform Strategy, Action Plan and Results
Diagnostics
Performance indicators
Government / Donor Policy Dialogue
Coordinated program of capacity building work
Donor country Assistance Strategy

7. Organization of the course
What can we do in the short term to improve systems in client countries?
What is the new approach to supporting country reform strategies?
Why has been our experience with reform of Treasury Systems?
What can be done to strengthen internal and external controls?
Will decentralization improve budget management?
How can transparency and accountability be improved?
What are the links between budget management, governance and impact?
Time for questions and discussion
Evaluation