Dominican Republic Budget Deviation, 19962000 ... Source:

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Public Expenditure Management An Introduction
Presented by Bill Dorotinsky PREM Public Sect
or Group http//www1.worldbank.org/publicsector/p
e/index.cfm

Presented to PREM WBI Core Course on Publ
ic Sector Governance
Anticorruption
February 14-17, 2005

2
Outline

• What is Public Expenditure Management?
• What institutions matter?
• Process Expenditure Management Cycle
• Organizations, Systems
• Three- objectives
• Applications
• Rules
• Roles
• Information

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What institutions matter?

• 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

4
Expenditure Management Cycle
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.
5
Budget and Policy Execution System in Hungary
(1999)
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Three Objectives of Public Expenditure Management
Systems
Framework

• 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
  
• Technical efficiency
• Getting the most from each zloty spent
• And just delivering core services

7
Rules and Outcomes
Application
Source World Bank OECD budget procedures
database at http//ocde/dyndns.org/
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Informal Rules
Application
Dominican Republic Budget Deviation, 1996-2000
Identifying sources of weakness for further
investigation
Identifying incentives at work
Source Dominican Republic PER 2003, background
data
9
Dominican Republic
Application
Budget Deviation (ratio of executed to approved
budget)
Identifying trends for transparency
Source Dominican Republic PER 2003, background
data
10
Roles and Information
Application
Republic budget revenues have performed closely
to budget estimates, owing in large part to ZOP
efficiency in revenue collection. Between 1995
and 2001, actual revenues collected averaged 99
of planned levels. (This excludes own revenues
and other off-budget revenues.)
  Republic expenditures have been less successful
ly contained. Between 1996 and 2001, actual
Republic expenditures averaged 106 of planned
expenditures, with the variation growing to 119
for 200 and 117 for 2001.   The Pension Fund
has run a deficit in five of seven years between
1995 and 2001. The Health Fund has run a deficit
in three of the last seven years, broke-even in
three years, and had a surplus one year. The
financing gaps requiring Republic Budget or other
nonsocial contribution support has been
increasing.
Source Serbia and Montenegro PEIR 2003, Volume
III Montenegro
11
Information
Application
Technical efficiency In terms of technical effici
ency, as with the Federal and Republic of Serbia
systems reviewed in Volume 1, we have no detailed
numbers on costs per unit of service delivered,
or comparative procurement costs. However, a
proxy measure is variation in aggregate budget
position.   For 2000, the wage bill variation f
rom approved budget, by budget users, was 15
percent, ranging from a high of 42 above budget
for the Ministry of Justice to a low of 54
below budget for the Customs Service.
This degree of volatility in funding levels
undermines effective program implementation.
Budget users cannot plan in advance, focus on
program effectiveness, efficiency, or improved
productivity, if they are spending most of their
time battling arrears or having no funds to
operate their program.
Source Serbia and Montenegro PEIR 2003, Volume
III Montenegro
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Exploringproblems
Above-the-waterline observation
100 clinics, but only 70 operating
WHY?
Budget not comprehensive
Budget fragmented
Cash triage
10 built with donor funds, donor funds off-b
udget
10 built with domestic funds, capital budget
separate
10 funded in budget, but no cash allocated t
o operate
WHY?
Weak budget law
Too rigid budget execution
Low public pay
WHY?
Donor ring-fencing for accountability
Line ministry gets flexible resource pool
Local staff seek higher PIU pay
And what can be done about it?
13
QA
Additional information is available on the Public
Expenditure website http//www1.worldbank.org/pu
blicsector/pe/index.cfm