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Public Expenditure Management: An Introduction. Presented by: Bill Dorotinsky PREM Public Sector Group http://www1.worldbank.org/publicsector/pe/index.cfm. Presented to: PREM – WBI Core Course on Public Sector Governance & Anticorruption. February 14-17, 2005. Outline.

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Public Expenditure Management:

An Introduction

Presented by:

Bill Dorotinsky

PREM Public Sector Group

http://www1.worldbank.org/publicsector/pe/index.cfm

Presented to:

PREM – WBI Core Course on

Public Sector Governance &

Anticorruption

February 14-17, 2005


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Outline

  • What is Public Expenditure Management?

    • What institutions matter?

    • Process: Expenditure Management Cycle

    • Organizations, Systems

    • Three- objectives

  • Applications

    • Rules

    • Roles

    • Information


  • What institutions matter l.jpg
    What institutions matter?

    • Formal and Informal Rules

      • Laws and regulations

        • Constitutions , fiscal, budget, procurement, civil service, special funds, sector laws, public enterprises, mandatory spending

    • Process

      • Policy

      • Planning

      • Financial/resource management

    • Organizations and their roles

    • Information


    Expenditure management cycle l.jpg
    Expenditure Management Cycle

    Financial management system boundaries

    Project

    Resource

    Annual budgets

    Medium term

    appraisal

    allocation

    Development,

    Planning

    plans, e.g. three

    recurrent and

    system

    year rolling plans

    revenue

    Expenditure

    Liquidity

    management

    review

    Public expenditure

    Institutions

    review

    Fund release

    procedure, e.g...

    warranting

    Accountability

    Expenditure

    Project monitoring

    control

    Audit system

    Post event

    Accounting for

    Monitoring

    review

    revenue and

    & controlling

    expenditure

    Reports and

    financial statements

    Source: Adapted from Integrated Financial Management.Michael Parry, International Management Consultants Limited.Training Workshop on Government Budgeting in Developing Countries. THE UNITED NATIONS. December 1997.



    Three objectives of public expenditure management systems l.jpg

    Framework

    Three Objectives of Public Expenditure Management Systems

    • Macrofiscal discipline and stability

      • Support economic growth and stability (and reduce poverty)

      • Avoid public finance crises

    • Strategic allocation of resources

      • Match government policy with programs, objectives

        • And assure social safety nets, and promote growth

    • Technical efficiency

      • Getting the most from each zloty spent

        • And just delivering core services


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    Application

    Rules and Outcomes

    Source: World Bank – OECD budget procedures database athttp://ocde/dyndns.org/


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    Application

    Informal Rules

    Dominican Republic Budget Deviation, 1996-2000

    Identifying sources of weakness for further investigation

    Identifying incentives at work

    Source: Dominican Republic PER 2003, background data


    Dominican republic l.jpg

    Application

    Dominican Republic

    Budget Deviation (ratio of executed to approved budget)

    Identifying trends for transparency

    Source: Dominican Republic PER 2003, background data


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    Application

    Roles and Information

    Republic budget revenues have performed closely to budget estimates, owing in large part to ZOP efficiency in revenue collection. Between 1995 and 2001, actual revenues collected averaged 99 % of planned levels. (This excludes own revenues and other off-budget revenues.)

    Republic expenditures have been less successfully contained. Between 1996 and 2001, actual Republic expenditures averaged 106 % of planned expenditures, with the variation growing to 119 % for 200 and 117 % for 2001.

    The Pension Fund has run a deficit in five of seven years between 1995 and 2001. The Health Fund has run a deficit in three of the last seven years, broke-even in three years, and had a surplus one year. The financing gaps requiring Republic Budget or other nonsocial contribution support has been increasing.

    Source: Serbia and Montenegro PEIR 2003, Volume III Montenegro


    Information l.jpg

    Application

    Information

    Technical efficiency

    In terms of technical efficiency, as with the Federal and Republic of Serbia systems reviewed in Volume 1, we have no detailed numbers on costs per unit of service delivered, or comparative procurement costs. However, a proxy measure is variation in aggregate budget position.

    For 2000, the wage bill variation from approved budget, by budget users, was 15 percent, ranging from a high of 42 % above budget for the Ministry of Justice to a low of 54 % below budget for the Customs Service.

    This degree of volatility in funding levels undermines effective program implementation. Budget users cannot plan in advance, focus on program effectiveness, efficiency, or improved productivity, if they are spending most of their time battling arrears or having no funds to operate their program.

    Source: Serbia and Montenegro PEIR 2003, Volume III Montenegro


    Exploring problems l.jpg

    Above-the-waterline observation

    100 clinics,

    but only 70 operating

    Exploringproblems

    WHY?

    Budget not comprehensive

    Budget fragmented

    Cash triage

    10 built with

    donor funds,

    donor funds

    off-budget

    10 built with

    domestic funds,

    capital budget

    separate

    10 funded in

    budget, but no

    cash allocated

    to operate

    WHY?

    Weak budget law

    Too rigid budget execution

    Low public pay

    WHY?

    Donor ring-fencing

    for “accountability”

    Line ministry gets

    flexible resource pool

    Local staff seek

    higher PIU pay

    And what can be done about it?


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    Q&A

    Additional information is available on the Public Expenditure website:

    http://www1.worldbank.org/publicsector/pe/index.cfm