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Modernization of Public Sector Management

This deals with recent public sector management reform, especially public expenditure management


Allen, Richard., Schiavo-campo, Salvatore. and Garrity, Thomas Columkill. 2004. Assessing and Reforming Public Financial Management: A New Approach. Washington, DC, World Bank.

A New Approach compares and contrasts the various instruments and approaches used by the World Bank, IMF, European Commission and other development agencies to assess and reform public financial management systems in developing and transitional countries. It recommends an approach to assessment and reform that is country-led, has multi-donor support and is based on a coherent and integrated medium-term strategy for public financial management work, linked to a country's poverty reduction strategy and other key policy goals. This report makes concrete and practical recommendations to streamline the coverage of instruments and enhance collaboration between, donors, governments and other stakeholders. In doing so, it provides a firm basis for achieving more efficient and effective use of aid flows and national budgetary resources, to reduce poverty and realize other key policy goals and development outcomes. Assessing and Reforming Public Financial Management was written as part of the work of the Public Expenditure and Financial Accountability (PEFA) Program, a partnership of the World Bank, European Commission, IMF and several bilateral donor agencies that was established in December 2001. (Abstract in the e-BookMall)  

Allen, Richard. and Tommasi, Daniel. 2001. Managing Public Expenditure: A Reference Book for Transition Countries. Paris, OECD.

This book fills an important gap in the literature on public expenditure management both in terms of its depth and breadth of coverage and its specific orientation towards the needs of countries in transition, especially in Central and Eastern Europe. Even after ten years of transition, many fundamental reforms remain to be completed in these countries, and past reforms are being rethought. The hurdles facing countries in transition that strive to achieve an acceptable standard of performance in budgeting, accounting and auditing become ever higher, as OECD countries modernise their own systems, building on one another’s experience and good practices, and as new international standards are developed. The book covers all aspects of public expenditure management from the preparation of the budget to the execution, control and audit stages. It is intended to be a practical, operational guide to help countries that are designing and implementing new laws and procedures relating to public expenditure management, and to improve the transparency of budgetary procedures and information. Beyond its immediate target audience in Central and Eastern Europe, the book will be of interest to developing countries and countries in transition - and developed countries also - in all parts of the world. Good budgeting systems rest on certain classic principles and practices of administration, wherever these systems are to be found. (Foreword in the publication)

Asian Development Bank. 1999. Governance, Corruption and Public Financial Management. Manila, Asian Development Bank.

This book is an assembly of the major papers presented during the Seminar on Public Financial Management and Accountability, and the World Conference on Governance held in Manila in April and June 1999, respectively. [Topics covered include]: the fundamentals of public financial management and the role of transparency and accountability in promoting aggregate fiscal discipline, the strategic allocation of budgetary resources, and the efficiency in the delivery of public services. Also presented are an analysis of the reforms and plans of the Philippine Government, the role of information technology in improving public financial management, and the fundamental factors that encourage and promote corruption in public finance. :(Abstract in the ADB website)

Atkinson, Paul. and van den Noord, Paul. 2001. Managing Public Expenditure: Some Emerging Policy Issues and a Framework for Analysis. Paris, OECD.

This paper highlights some key policy issues regarding the performance of public expenditure and proposes an analytical framework for its assessment. The framework distinguishes three economic objectives of policies in the pursuit of better performance of public expenditure: macroeconomic sustainability, allocative efficiency (better outcomes per unit of public expenditure) and technical efficiency (less resource inputs per unit of public output). Against this backdrop, the paper discusses experiences of governments of OECD countries with various policy instruments, including fiscal rules, medium-term fiscal frames, market-based allocation mechanisms and flexible management and control. These experiences could serve as a starting point for peer reviews and international benchmarking. (Abstract in the publication)

De Renzio, Paolo. 2004. Why Budgets Matter: The New Agenda of Public Expenditure Management. London, ODI. (ODI Briefing Paper)

This briefing paper summarises the arguments for focusing on budgets and budget processes, highlights some the main lessons from past CAPE research, and outlines the main areas where future research should concentrate in order to improve the linkages between aid, budgets and poverty reduction. (Excerpts from the text)

DFID. 2001. Understanding and Reforming Public Expenditure Management: Guidelines for DFID. London, DFID.

These guidelines have been written for governance advisers and economists within DFID. However, others in DFID, and officials in other development agencies and in developing or transition countries may also find them useful. Their objective is to provide a coherent approach, a set of basic principles, and some diagnostic tools to utilise in the design and implementation of DFID support to Public Expenditure Management (PEM) reforms in partner countries. To make the most of these guidelines, the reader will need to learn how to apply the principles to particular contexts. They should be a living document. To respond to requests for PEM support, governance advisers and economists will also need to know something about the nuts and bolts of PEM systems. The DFID Economists Manual on Aid and Public Expenditure Management, produced by the Centre for Aid and Public Expenditure (CAPE) at ODI, provides more detail on some areas and should be referred to. It also covers issues surrounding the interface between aid and the PEM systems of partner countries. Other texts providing more detail on particular matters are referred to in the guidelines. These guidelines will not convert the reader into an expert in PEM reform or do away with the need for specialist consultancy inputs in particular aspects of PEM. But they should give the reader a sense of the big picture, how one aspect of the system links with another and what implications that may have for the pacing and sequencing of reforms. They should also help DFID advisers to be wary of the most common problems and, over time, to develop an instinctive feel for what is important and what is not. (Introduction in the publication)

Diamond, Jack. 2005. Establishing a Performance Management Framework for Government. Washington, DC, IMF.

Based on the experience of budget management reforms that have been introduced over the last two decades in a large number of member countries of the Organization for Economic Cooperation and Development (OECD) it is not uncommon to find emerging market economies moving toward performance-based budgeting where measures of performance play a key role. While it might be tempting for middle income countries to press forward to adopt a full-blown outputs and outcomes framework, there are some risks in the move. Such a change in orientation is only possible once managers have had adequate experience in refining the definition of programs and their objectives, and on this basis developing a comprehensive system of performance measurement. It is argued in this paper that to develop a comprehensive performance measurement system requires resolving a number of issues involved in clearly defining how to measure “performance” as well as overcoming a number of technical issues in the design and use of measures of that “performance.” However, perhaps the most critical step is introducing a system whereby performance information can influence resource allocation decisions, i.e., establishing a performance management system. Based on international experience, this paper reviews each of these hurdles in moving toward a performance management framework. (Abstract in the publication)

Diamond, Jack. and Khemani, Pokar. 2005. Introducing Financial Management Information Systems in Developing Countries. Washington, DC, IMF.

In the past decade, developing countries (DCs) have been encouraged to reform their public expenditure management systems and have increasingly embarked on major projects to computerize their government operations. Most popular among these have been projects to computerize government accounting and payment operations, by introducing government financial management information systems (FMISs). This paper investigates the reason for almost universal failure to implement and sustain FMISs in DCs. It starts with a review of the “received wisdom” in implementing these projects, and then analyzes problems in its application in the DC context to identify key factors to explain why FMIS projects have been so problematic. Based on the identified negative factors, suggestions for addressing them are offered in the hope of improving success rates. (Abstract in the publication)

Foster, Mick. and Naschold, Felix. 2000. Expenditure Framework and Partnership. Washington, DC, World Bank.

The medium-term expenditure framework and sectorwide approaches are two new approaches to development cooperation that focus on donor-government partnership in the budget process. The budget is a crucial instrument for operationalizing the objectives of the Comprehensive Development Framework (CDF) at the country level. How can the principles of partnership be brought to bear in this area? How can a new form of conditionality work in practice? This paper focuses on the key concerns of achieving a holistic approach to a budget process owned by government, supported in a spirit of partnership, with a strong emphasis on achieving results. In the past, instruments of cooperation, such as the policy framework paper, tended to be standardized documents, reflecting mainly the concerns of the World Bank or the International Monetary Fund (IMF). Today, a new approach focuses on an overall development vision, with a strong emphasis on poverty reduction, as translated into a medium-term expenditure framework tied to specific performance targets, with authority and responsibility cascading down through the civil service. This paper reviews attempts to develop the budget process at macroeconomic and sector levels as a framework for coordinating government and donor efforts more closely in support of agreed objectives, in order to derive lessons for the CDF. Most of the examples of recent policy innovations are drawn from Africa, though many of the lessons should be relevant in other aid-dependent countries. After looking at several countries that have sought to inform the budget process and resource allocation decisions with a clear view of the role of the state, the paper discusses their efforts to introduce a medium-term expenditure framework, emphasizing attempts to integrate donors within the budget framework. The paper also examines experience with sectorwide approaches to coordinating government and donor efforts under the leadership of government. Throughout, the paper focuses on the key CDF concerns of achieving a holistic approach, owned by government, supported in a spirit of partnership, with a strong emphasis on achieving results. The new approaches offer scope for government ownership, but only if supported by donors. On this basis, sectorwide approaches offer an attractive instrument for partial implementation of the CDF. (Introduction in the publication)

Fozzard, Adrian. and Foster, Mick. 2001. Changing Approaches to Public Expenditure Management in Low-income Aid Dependent Countries. Helsinki, United Nations University and World Institute for Development Economics Research (UNU/WIDER).

The present paper critically examines how aid dependent low-income countries have approached the process of public expenditure management reform during the 1990s. It begins with an overview of broader public sector reform initiatives in LDCs which provide the backdrop against which expenditure management reform has taken place. It then assesses progress in six key areas of reform: the role and structure of the State; attempts to improve agency performance; the introduction of resource and expenditure planning tools; measures to improve the governance of public expenditure; the development of new aid management instruments; and finally, recent experiences in improving the poverty reduction impact of public expenditure. It concludes with an assessment of the likely success of these initiatives and the priorities for future interventions. (Abstract in the publication)

Heimans, Jeremy. 2002. Strengthening Participation in Public Expenditure Management: Policy Recommendations for Key Stakeholders. Paris, OECD.

Participation in public expenditure management - by poor people themselves, or by the civil society organisations and parliaments who represent them - is emerging as a major new arena for political activity and economic policy-making in developing countries at all levels of government. This brief analyses the challenges facing the three main stakeholders in participatory budgeting (PB) - governments, civil society and legislatures - in effectively engaging with participation. A series of policy recommendations is offered focusing on how these key domestic stakeholders can better contribute to successful participatory budgeting programmes. (Introduction in the publication)

ODI. (no date). Good Practice Guidance Note: Implementing a Medium-Term Perspective to Budgeting in the Context of National Poverty Reduction Strategies. London, ODI.

This Guidance Note is based on a Synthesis Report reviewing country experience with the implementation of Medium Term Expenditure Frameworks (MTEFs) and the links being made to national poverty reduction strategies (PRSPs). The Synthesis is based on nine country case studies: Albania, Benin, Burkina Faso, Cameroon, Ghana, Rwanda, South Africa, Tanzania, and Uganda. Except for the Albania case, which was prepared separately and is included with the kind permission of the World Bank author, all the cases were undertaken between June and October 2002 with the financial assistance of DFID and the EC. Consultants carrying out the case studies followed a common checklist of questions covering the main features of MTEF functioning, organisational and institutional integration and links with the national Poverty Reduction Strategy Paper (PRSP) and other strategic planning processes. This Guidance Note is an attempt to translate some of the main findings and messages from the Synthesis Report and the Case Studies into a set of principles and practices for those working in the field of public expenditure reform and poverty reduction. (Introduction in the publication)

Potter, Barry H. and Diamond, Jack. 1999. Guidelines for Public Expenditure Management. Washington, DC, IMF.

Economists working on fiscal policy and fiscal management need a good understanding of how the expenditure side of the budget is planned, prepared, and executed. This publication is designed for those interested in the macroeconomic impact of such budget processes, rather than in the perhaps more familiar microeconomic perspective of expenditure policies. The analysis provided and the guidelines offered on good practices in budget management are intended for economists reviewing the fiscal sector of the economy and judging the feasibility of fiscal policy actions. The material should also provide a helpful background to other advisors or officials working on budgetary matters in developing countries and economies in transition who do not have specialized macroeconomics training. The guidelines cover what such individuals need to know to:

  • ensure that consistent data on planned and past public expenditures are prepared in a consolidated format, compatible with a macroeconomic framework;
  • assess the adequacy of budget preparation procedures, in particular the level and composition of public expenditure planned before the budget year starts;
  • analyze whether the budget execution system can deliver planned spending within the budget aggregates; whether any steps are necessary to strengthen expenditure control; and how to intervene to enable any necessary in-year adjustments to be made to planned spending; and
  • assess whether there are adequate cash planning and management arrangements for a government to meet its fiscal targets on borrowing and prevent sudden, unanticipated borrowing that could disrupt achievement of monetary policy targets or undermine monetary discipline.

The focus of the analysis is on how to accomplish the above tasks within a country's existing budget system, which may be considered as given in the short run. This short-term focus, however, should not deter fiscal economists and general budget advisors from being interested in, and able to identify the need for, longer-term improvements. (Introduction in the publication)

Roberts, John. 2003(a). Managing Public Expenditure for Development Results and Poverty Reduction. London, ODI. (Working Paper 203)

This paper is a survey of the practice of results-oriented – or performance-based – public expenditure management in low income developing countries. It is based on seven country case study working papers commissioned by the Centre for Aid and Public Expenditure (CAPE) at the ODI with a view to comparing and contrasting the experience of countries of broadly similar size and per capita income, and to identifying factors conducive to at least some elements of performance budgeting. The paper also draws on a commissioned working paper which surveys recent descriptive and interpretative literature on programme and performance budgeting in OECD countries, and on ODI-CAPE desk studies on public expenditure and aid issues in education and health and local government finance and performance management. The sample of countries whose budgeting and performance management practices have been reviewed consists of Bolivia, Burkina Faso, Cambodia, Ghana, Mali, Tanzania and Uganda. These countries were chosen for their low incomes, their geographical spread, the diversity of their budget and public expenditure management practices, and the fact that they have drawn up one or more interim or final Poverty Reduction Strategy Papers which lay out their priority development objectives and the means they intend to deploy. The overall conclusion of the research programme is that low income countries are practicing performance budgeting and management, in some cases to useful, if unspectacular, effect. They have, with modest external support, been finding their own solutions to the problem of how to translate public expenditure into pro-poor development results. They face many challenges, and in some cases their experiments have not wholly succeeded. Nevertheless, in this highly empirical field of activity, they have been willing to learn from their own experiences and from those of others. Their initiatives will play a vital role in the successful implementation of their poverty reduction strategies. They accordingly deserve strong external interest and encouragement. (Introduction in the publication)

Roberts, John. 2003(b). Results-Oriented Public Expenditure Management: Will it Reduce Poverty Faster? London, ODI. (ODI Briefing Paper)

This Briefing Paper is based on Roberts, John. 2003. Managing Public Expenditure for Development Results and Poverty Reduction. London, ODI. (Working Paper 203) cited above.

Rose, Aidan. 2003. Results-Orientated Budget Practice in OECD Countries. London, ODI. (Working Paper 209)

This is a background paper to seven country studies on the practice of results-oriented – or performance-based – public expenditure management in low income developing countries. The studies were commissioned by the Centre for Aid and Public Expenditure (CAPE) at the ODI with a view to comparing and contrasting the experience of countries of broadly similar size and per capita income, and to identifying factors conducive to performance budgeting, the preconditions for its adoption and the benefits that even poor countries can derive from it. This body of research has been undertaken at a time when there is mounting concern, in both developing countries and in donor countries, to achieve visible, tangible and sustainable development ‘results’. The sample of countries whose budgeting and performance management practices have been reviewed consists of Bolivia, Burkina Faso, Cambodia, Ghana, Mali, Tanzania and Uganda. These countries were chosen for their geographical spread, the diversity of their budget and public expenditure management practices, and the fact that they have drawn up one or more interim or final Poverty Reduction Strategy Papers which lay out their priority development objectives and the means they intend to deploy. (Excerpts from ‘Preface’)

Schiavo-campo, Salvatore. and Tommasi, Daniel. 1999. Managing Government Expenditure. Manila, Asian Development Bank.

This is a comprehensive manual of managing government expenditure, based on a sound conceptual foundation but with a deliberate operational thrust, covering the entire public expenditure management cycle – from multiyear expenditure programming and budget formulation through budget execution, audit, and evaluation. The approach is largely a synthesis of the literature in this area and of international experience, with a view to a pragmatic assessment of the benefits, costs, risks, and implementation requirements for different budgetary practices in different country circumstances. (Abstract in the ADB website)

Shah, Anwar. (ed.). 2007. Local Public Financial Management. Washington, DC, World Bank. (Public Sector Governance and Accountability Series)

Transparent and prudent local financial management has come to be recognized as critical to the integrity of local public sector and to gaining and retaining trust of local residents. Such integrity and trust is sometimes lacking in some local governments in developing countries, especially in the Africa region. This volume attempts to provide practical guidance to local governments interested in establishing sound financial management systems. Leading international experts have contributed to all relevant aspects of local public financial management - cash management, internal controls, accounts, audits, and debt management. (Overview in the publication)

Shah, Anwar. (ed.). 2005(a). Fiscal Management. Washington, DC, World Bank. (Public Sector Governance and Accountability Series)

Accountability of government to citizens-the idea that the public sector must answer to the people for its performance-is the foundation for good governance. Under good governance, public expenditures are allocated to maximize welfare, revenues are collected efficiently, and the public at large has access to a number of public services including water and sanitation, infrastructure, education and health. Unfortunately in many developing countries, the people suffer the results of dysfunctional governance systems that fail to provide even minimal levels of vital public services. This happens because of an acute deficiency in government accountability, such that public servants lack the incentives to show results or manage government resources more efficiently. The key message of the New Institutional Economics is that incentives matter. In the public sphere, incentives for public servants and policymakers are derived from the countries' accountability frameworks-the rewards, sanctions, and measurement of performance-that shape public sector performance. Fiscal Management and Accountable Public Governance applies this fundamental insight to fiscal/budgetary analysis and public service delivery, giving the reader tools and real world examples from around the globe of institutional arrangements to help citizens hold government accountable for their performance. (Abstract in the World Bank website)

Shah, Anwar. (ed.). 2005(b). Public Expenditure Analysis. Washington, DC, World Bank. (Public Sector Governance and Accountability Series)

For various reasons-whether philosophical, political, humanitarian, or by institutional mandate-people are concerned for the well being of the most vulnerable groups in society: women, the poor, and the elderly. Some would even measure the value of a political system by how well it cares for the least of its members. Related to this is the orientation of government toward the public more generally and the extent that it listens and responds to its citizens. More specifically, it is the rules and norms - the institutional framework - of government through which it takes into account the preferences of people on a day-to-day basis, not just at the ballot box. "Public Expenditure Analysis" explores two themes: the orientation of government towards its more vulnerable groups and the extent to which government is responsive to its citizens. The first part of the book provides tools, methodologies, and examples of how to examine the impact of government expenditures, taxes, pension systems and other policies on women, the poor, and the elderly. The second part looks at the different ways that the government listens to citizens' voices and proposes a new institutional framework for governments that wish to implement reforms that increase responsiveness: citizen-centered government and citizen-centered budgeting. (Abstract in the World Bank websitez)

Tanaka, Hideaki. 2005. Fiscal Rules and Targets and Public Expenditure Management: Enthusiasm in the 1990s and its Aftermath (Pacific Economic Papers No. 346). Canberra, The Australian National University.

The 1990s saw an era of fiscal consolidation in industrialised countries, which struggled with fiscal deficits throughout the 1970s and 1980s. Reforms in public expenditure management, typically the introduction of fiscal rules and targets, together with favourable economic growth contributed to a significant improvement in fiscal positions. However, fiscal deficits have been increasing again since the turn of the 21st century in many OECD countries. Interestingly, some countries have been able to maintain fiscal discipline since the achievement of fiscal balance in the latter half of the 1990s. What has caused this difference? This paper derives important lessons for reform in public expenditure management from the experiences of major OECD countries’, including Australia, France, Germany, Japan, the Netherlands, New Zealand, Sweden, the UK and the USA. Essentially, success in maintaining fiscal discipline lies in maintaining a firm political commitment, and strengthening expenditure management that underpins any such commitment, specifically a medium-term fiscal plan in line with fiscal rules and targets in a centralised and transparent manner. Public expenditure management reform is a cornerstone of the restructuring of public sector services, especially in welfare programs aimed at overcoming problems arising from an aging population. (Abstract in the publication)

Van den Noord, Paul. 2002. Managing Public Expenditure: The UK Approach. Paris, OECD.

The UK medium-term budgetary framework introduced in 1997 addressed a number of weaknesses of the former regime, notably a bias against capital expenditure and, more generally, poor conditions for longerterm planning adversely affecting central government spending departments, local authorities and public enterprises. Departmental spending was indeed characterised by pronounced swings and capital spending was squeezed to very low levels. These weaknesses are considered the major cause for the poor performance of crucial public services. The present paper discusses the new budgetary framework and examines the scope for further improvement. (Abstract in the publication)

World Bank. 1998. Public Expenditure Management Handbook. Washington, DC, World Bank.

This handbook provides a framework for thinking about how governments can attain sound budget performance and gives guidance on the key elements of a well-performing public expenditure management (PEM) system. The multiple purposes that budgeting serves - legislative control of the executive, macroeconomic stability, allocations to strategic priorities, managerial efficiency - make budget reform an ongoing task, a pilgrimage more than a destination. For any reform agenda, the handbook highlights the importance of the budget’s interaction with other systems and processes of government. The handbook therefore focuses attention on three key principles that underpin a well-performing public sector: clarity in who has the authority to make what decisions, the matching of authority (flexibility) and accountability, and the capacity and willingness to reprioritize and reallocate resources. (Introduction in the publication)

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