1. Implementing Budget Reforms
Global Lessons
Bill Dorotinsky
Fiscal Affairs Department
IMF
Budget Reform Conference
Jakarta
May 26, 2008

2. Outline Framework for considering reforms
Functions of administration and objectives of public financial management
Understanding the intent of budget reform
Broad Lessons of Reform
Case Lessons
Integrated Financial Management Information System (IFMIS) Projects
Performance Budgeting
Key Points

3. Objectives of PFM and Budgeting
Three-level PFM Framework
Macrofiscal discipline
Strategic allocation of resources
Technical efficiency
Source: Public Expenditure Handbook World Bank (1998)
Three functions of Government and budgeting
Strategic Planning
Management Control
Operational Control
Source: Planning and Control Systems: A Framework for Analysis. Robert Anthony (Boston, 1965)

4. Budget Reform Not only changing Budget document
Changing incentives (and therefore behavior and ultimately system outcomes) of all actors by changing
Rules/Process
Roles
Information*
*Source: A Contemporary Approach to Public Expenditure Management. Allen Schick. World Bank (1998)

5. Broad Lessons
The World Bank, IMF, and development partners have worked to understand
Why PFM reforms fail and systems remain weak?
What factors support successful reform?
Three factors present in sustained improvement in PFM systems
A country-led reform program – including a PFM reform strategy and action plan
A coordinated donor program of support to government strategy
A common framework for measuring and monitoring results over time – The PFM Performance Measurement Framework (PEFA)

6. HIPC Expenditure Tracking Lessons
Realistic expectations of reform progress are needed.
Over-all the countries improved 10 percent over three years, or about 3 percent per year
The "basics" of PFM systems were still not right.
Basic PFM system operations were very weak, but fads remain popular
A holistic – systems – approach to PFM system analysis and reform development is needed.
The connections between various PFM system components are understood, but infrequently emphasized or included in reform measure development

7. Lessons (continued)
Country ownership of reforms is the critical variable for PFM system improvement.
Country action plan implementation best predictor of PFM system improvements.
Efforts to improve PFM systems must begin with country ownership – leadership – in assessing performance, setting the reform agenda and implementing reforms.
How PFM system assessments, reform actions, and implementation are undertaken is at least as important as assessment instruments.
Joint action planning between authorities and technical assistance providers can yield better results.
Narrowly focused action plans, reflecting clear reform priority setting, might improve reform impact and PFM system performance.
Donor coordination around a more limited set of reforms might help keep reforms focused and yield better results.
Customized reforms to country needs may yield better results
Rather than donor pre-packaged measures
Country’s pragmatic needs for managing resources, self-defined, may be the best place to start

8. IFMIS Case: Risk, success & failure factors
Projects risks
20 % cited technical complexity, too many components
24 % lack of institutional capacity
21 % weak government commitment, understanding of reform objectives and benefits
Success factors
Full-time project coordinator (36%)
Champion at political level (14 %)
Training (14 %) (IT, FM, change management)
Failure factors
Full-time project coordinator (23%)
Commitment/understanding (23%)
Project design (20%)
Institutional resistance (10%)
HR capacity (7%)

9. Performance Case: Performance reforms have many objectives and drivers
MoF need for basis for reallocation of funds
Desire to get agencies to think about linking inputs and outputs
MoF desire to know what they buy
Desire for more accountability and control
Desire for greater efficiency, effectiveness
… are introduced in many situations
Weak accounting, reporting
Absence of budget offices (Burundi)
IT rich (Brazil) and IT poor (Burundi) situations
… and frequently with other reforms
Budget classification
IFMIS
Tracking spending
MTEF
Deconcentration of spending authority

10. Performance of what, for whom?
Different systems have been developed to meet different intents, problems
Government to society (Oregon – accountability)
Government to external stakeholders?
Bureaucracy to Elected officials (UK Next Steps – accountability; Brazil PPA; US High Impact Agency Initiative; Mexico National Plan)
Agencies to their managers (US GPRA – performance)
Ministries/programs to MoF/budget office (US PART – efficiency, effectiveness, parsimony)
Service providers to ‘purchasers’ (balanced scorecard, accountability)
Many reforms have been initiated without addressing what area of performance is being targeted, who will use the information, and how
Few also distinguish between performance monitoring (short-term) and assessments of effectiveness and impact (medium to long-term)

11. Program Budgeting Implementation Lessons
Lots of attention on communicating new methodology to line ministries
Initial efforts won’t be perfect, and commitment to continuous improvement important
Piloting can be useful, with lessons shared as it progresses
Ultimate responsibility for budget structure, budget format and indicators with line ministries
Budget office role is one of providing guidance, process framework, lesson learning and sharing, training
Do not use change process to reorganize or retrench
Regular brief stakeholders on progress

12. Key Points
Common view of reform objectives, problem to be solved important
As important as high-level leadership is reform organization, task assignment
The single best predictor of progress in PFM reform was rate of implementation of action plans