Public Sector Governance and Accountability Series: Budgeting and ...

376 Matthew Andrews
Level 0. Informal, weak PFM systems
System is characterized by limited accountability, little transparency, weak
discipline, and poor budget quality. Budget is informal and unreliable.
Level 1. Regulation and control: PFM goal focus is fiscal discipline
Reforms entrench control, resulting in disciplined and reliable budget-critical PFM
systems, but little attention is paid to spending quality, and there is an ex ante
control focus. Budget is formal and reliable but not very strategic.
Level 2. Structured discretion: PFM goal focus is allocative efficiency
Reforms blend ex ante and ex post controls and move toward enhanced roles for
central agencies and budget users. Some more strategic practices are in place.
Budget is formal and some thought is given to allocations.
Level 3. High discretion, performance orientation: PFM goal focus is technical
and operational efficiency
Emphasis is on ex post controls, with budget users held accountable for
performance. More strategic practices are in place.
Budget is formal and the focus is on strategy and efficiency.
Source: Andrews 2005b.
Note: See http://ksghome.harvard.edu/~mandrew/ for a full discussion of this approach and other materials.
FIGURE 11.4 Levels of PFM System Development
Level 2 systems introduce a certain amount of structured discretion. The
PFM goal focus is allocative efficiency. The system blends ex ante and
ex post controls and moves toward enhanced roles for central agencies
and budget users—allowing some practices that are more strategic and
that foster strategic resource use.
Level 3 systems are characterized by high levels of discretion and by a performance
orientation. The PFM goal focus is on technical or operational
efficiency. The emphasis is on having ex post controls, with budget users
held accountable for performance. More strategic practices are in place.
The budget is formal, and the focus is on strategy and efficient resource
use (in an allocative and cost sense).
Figure 11.4 provides a graphic presentation of the argument that different
goal focuses should yield different-looking PFM systems. The case is most
regularly presented in a basics first argument that suggests governments move
gradually from level to level (as the arrows in the figure suggest). Such a
progression would imply that governments in industrial and developing contexts
should have different-looking systems—and that it is possible to know
what the differences should be (judging the achievement of goals will yield
information about what stage the system should be reflecting).