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

378 Matthew Andrews
Level 0. Informal, weak PFM systems
1. Weak budget frameworks—unreliable resource forecasts, no policy foundation, no top-down budget limits
2. Poor structure and lack of respect in budget preparation process—budgets often late, unreliable
3. Weak resource management—no guidance or control of cash flow, debt, procurement, capital, or personnel
and no monitoring of resource use—resource mismanagement, unreliable budgets, corruption, waste
4. Weak or nonexistent budget controls—budget adjustments frequent, uncontrolled, opaque
5. Fragmented accounting and reporting system
6. No (or ineffective) external audit—limited accountability, transparency, weak discipline, poor budget quality
Level 1. Regulation and control
1. Control-oriented budget frameworks—strict, conservative “fiscal envelope” focus—resource forecasts and
initial move toward introducing top-down budget limits—limited policy detail
2. Focus on budget comprehensiveness—strong annual cash budget prepared in accordance with strict
timetable, driven by ministry of finance, with detailed economic classification—focus on operational spending
3. Highly controlled resource management—many centrally developed and implemented controls on cash
disbursements (short-term control)—high level of central control over personnel, procurement, capital
4. Very strong budget controls and monitoring, but done centrally—very little budget adjustment, based on
rigid rules—adjustments within and between economic items controlled
5. Cash-based central accounting and reporting system, with highly detailed controls based on economic
item—still fragmented accounts
6. External audit emerging, but only looking at compliance—high level of discipline, reliable budget, but little
attention given to spending quality—ex ante control focus
Level 2. Structured discretion
1. Budget framework determined centrally—strong top-down “fiscal envelope” elements (macromodeling and
ceiling identification) and increasing focus on policy and role of budget users (some national policy
development and strategic planning in line ministries)
2. Budget prepared according to timetable, with increasing role for budget users—budget still cash based with
requests reflecting economic classification controls, but reduced in detail—information provided on strategic
dimensions of spending (objectives, indicators of performance)—budget with some multiyear details and
increasing focus on capital spending
3. Resource management being decentralized—rules and regulations set and overseen centrally, but actual
resource management processes implemented by budget users, with some discretion—some commitment
controls introduced
4. Internal controls and audit and monitoring mechanisms developed in line ministries for use in managing—
internal controls and audit policies still centralized—budget adjustments still subject to rules, but with more
discretion for budget users (reallocation of a percentage of funds or within programs permissible)
5. Accounting and reporting system still cash based, but with some commitment and accrual information—focus
on developing strong accounting and reporting in line ministries, with central consolidation
6. External audit entity growing in influence and doing some financial and performance audits—blended ex
ante and ex post controls and move toward roles for central agencies and budget users
Level 3. High discretion, performance orientation
1. Strong budget frameworks established—reliable “fiscal envelope” elements locating budget in macroeconomic
context—national policy process yielding entrenched national expenditure priorities—line ministries
developing strategic plans that tie directly to budgets and detail performance goals and so forth—budget
ceilings reflecting both macro limits and policy direction
2. Multiyear budgets reflecting strategic plans that are classified predominantly by program, with performance
indicators and some accrual elements—budget users playing dominant role in developing budget, with
ministry of finance assisting and analyzing—parliament assessing strategic content of budget and
appropriating significant funds over multiple years
3. Strong, largely decentralized resource management, with built-in discretion for budget users (in procurement,
personnel, and so forth)—budget users entering into performance contracts and using resources to
deliver—central agencies playing role overseeing and enforcing contracts (with individuals and budget users)
4. Internal controls and audit fully decentralized, serving managers in budget users—monitoring mechanisms
in place providing in-year information on progress in meeting performance commitments—central oversight of
control policy
5. Accounting and reporting modified accrual basis, with strong processes in budget users and strong, reliable
reporting—significant focus on transparency—reporting also on performance
6. External audit entity strong, performing financial and performance audits—annual reports provided to
parliament—emphasis on ex post reporting and controls, with budget users held accountable for
performance
Source: Author’s representation.
FIGURE 11.5 Key Processes at Different Levels