Framework For Effective Local Government Finance. World Bank – Public Sector Management Thematic Group Michael Schaeffer March 2005. The ‘Quick Start’ Framework. Components of Effective Local Government Finance A Shift in the Nature of Local Government Budgeting The Capital Budget
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World Bank – Public Sector Management Thematic Group
Effective Financial Management System
Formulation and Execution
Community (Participation) Driven
Effective Treasury and Cash
Standardized Transparent/ Accountable
Chart of Accounts (External / Internal Audits)
Accounting SystemsAn Effective Financial Management System
“New Public Expenditure
Transparency and AccountabilityShift in the Nature of Local Government Budgeting
Budgets are Fundamental for Meeting Three Important Policy Objectives:
In Theory and Practice
Good Budget Practices
Poor Budget Practices
Contestable: Subject to review and evaluation
Information must be accurate and timely.
Transparent: Information about budget practices must be accessible and communicated to a wider audience.
Accountable: Decision makers must be held responsible for the exercise of authority provided to them.
Source: Public Expenditure Management Handbook (1998) World Bank
Unrealistic Planning and budgeting
Short-term budgeting with no medium or long-term implications
Numerous budget revisions throughout the year
Government spends as cash becomes available not according to preset priorities
Deferred budgeting: Arrears build-up as expenditures are pushed into subsequent years.
Informal management: Extralegal behavior dictates how government operates with respect to hiring and procurement etc.,
Corruption: Lack of enforcement of formal rules breeds illegal behavior (corruption).
Source: A. Shick (1998) A Contemporary Approach to Public Expenditure Management. World Bank Institute.
Source: A. Premchand (2000) “Capital Budgets: Theory and Practice.”
Source: A. Premchand (2000) Capital Budgets: Theory and Practice, and Schaeffer et al Croatia: Investment Packaging Manual (2004)
Budget and Performance Integration
Human Capital Management
Resource Cost Accounting
Life Cycle Management
Planning and Decisions Support
Annual Performance Report
Feeders: Local Government Information Systems
HR & Payroll
Core Financial Functions
General Ledger Management
Chart of Account /
Data Mining and MappingFramework For LGU Financial Management