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

14 Anwar Shah
implement their budgets efficiently. Except under special circumstances,
in-year financial plans must be in line with budget forecasts.
Generally, in African countries, it is particularly important to get the
basics right. To ensure efficient program implementation and to keep
expenditure under control, the most pressing needs are to strengthen the
arrangements for reporting, accounting, and internal control systems. Cash
management and in-year financial planning should be strengthened in most
countries. Reliance on arbitrarily determined cash control systems—notably
on cash budgeting systems—should be reduced through preparation of a
more realistic budget and transparent control of commitments.
Strong political willingness to ensure that the budget is implemented
according to the policies adopted by the legislature and to ensure that the
existing rules are enforced with rigor will be required to bring about lasting
improvements in the PEM system in Africa.
Stephen B. Peterson, in chapter 10, reviews the experience with automated
public financial management systems. The principal recommendation
to developing countries for automating their financial systems is to adopt
off-the-shelf integrated financial management information systems
(IFMISs). Experience shows that these systems usually fail or underperform,
yet research to date has not adequately explained their poor performance.
Peterson presents two frameworks and a case study from Ethiopia that
illustrates an approach to automation that has worked. The first framework
distinguishes between business process innovation (reengineering) and
process change. Process innovation is a comprehensive change of procedures
and organization, driven by information technology. Process change is an
incremental strategy, driven by procedural reform and supported by
information technology. Process change is far less risky than process innovation.
The conventional off-the-shelf IFMIS reform is principally process
innovation, and it exceeds the capacity of most public bureaucracies in
developing countries. Process innovation is appropriate because the
financial systems in most developing countries are relatively sound and thus
provide a basis for improvement.
The second framework concerns the three factors of risk to an automation
project: scope, schedule, and budget. The availability of concessionary aid to
many developing countries means there is not a hard budget constraint;
consequently, schedule and scope slip. The virtual absence of a financial and
social cost-benefit analysis of these large and questionable investments is a
serious failing in the use of development assistance and loans.
Finally, the custom IFMIS developed to support the Ethiopian reform
is presented as an example of a successful low-risk strategy of automation in