Public Expenditure Management The Essentials for a PER

Public Expenditure Management: The Essentials for a PER Bill Dorotinsky, PREM public sector group The World Bank PEAM Course March 21, 2005

Outline • What is Public Expenditure Management? • • • Three- objectives Process: Expenditure Management Cycle What institutions to review? Functions Organizations, Systems • Applications – Rules – Roles – Information The World Bank

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 • And make room for new investment • Technical efficiency – Getting the most from each zloty spent • And just delivering core services The World Bank

Expenditure Management Cycle Financial management system boundaries Project appraisal Planning system Resource allocation Medium term plans, e. g. three year rolling plans Annual budgets Development, recurrent and revenue idity Liqu ent agem man Expenditure review Public expenditure review Institutions Pro Accountability Fund release procedure, e. g. . . warranting t jec re itu d l n pe ntro x E co t ev revi ent ew g Pos n ori nit mo Audit system Reports and financial statements g itorin Mon ling ntrol o c & Accounting for revenue and expenditure 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. The World Bank

What institutions to review? • 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 The World Bank

Ministry of Finance Functions Core Functions Macroeconomic Forecasting Debt Management Fiscal Policy Revenue Administration Non-core Functions Budget Formulation Treasury Internal Audit Financial Asset Management The World Bank Financial Investigations Procurement Administration Budget Execution Procurement Policy Lottery & Gambling Financial Market Regulation

Line Ministry PFM Functions Sector Strategy, Policy Planning, Budget Formulation Revenue Administration Internal Audit The World Bank Operations, Administration Budget Execution Accounting, recording Reporting Spending, Performance Procurement Administration Personnel Mngmnt, Payroll Asset Management

Budget and Policy Execution System in Hungary (1999) The World Bank

Exploring: Rules and Incentives • Budget Impasse – Executive-legislative relations • What rules might govern a budget impasse? • How might they effect incentives between the legislature and executive? • What might be important considerations for designing a rule? The World Bank

Application Rules and Outcomes Source: World Bank – OECD budget procedures database at http: //ocde/dyndns. org/ The World Bank