Bill Dorotinsky November 3, 2003 Performance Measurement for Budget Execution

Planning system Medium term plans, e.g. three year rolling plans Annual budgets Development, recurrent and revenue Fund release procedure, e.g... warranting Accounting for revenue and expenditure Public expenditure review Institutions Reports and financial statements Audit system Project monitoring Project appraisal Resource allocation Liquidity management Expenditure control Monitoring & controlling Post event review Accountability Expenditure review Foundations: Comprehensiveness (I.1 GFS, I.2 off-budget, I.4 donor, I.11 reconcil’n) National/sub-national I.3 outturn = relation of 4 & 6 I.5 bdgt class’n = 4, 5 I.6 poverty expend = subset of 4, 5, 6, 7 I.7 MTEF = I.8 arrears = performance I.9 audit = 8 (for ex ante, 5, 6) I.10 PETS = partial ‘substitute’ for I.9 I.12 timely reports = performance of 7 I.13 tracking class’n = nature of 7 I.14 closure = nature of 7 I.15 audit timely = performance of 8 Relations:       2. Assessment Approach: Expenditure Management Cycle.

Approaches to assessing performance Data on system or organizational component performance - outcomes Reference to PEM principles, 3-level framework Functionality - HIPC expenditure tracking Good practice institutional features - framework

System or Component Performance System – budget volatility – budget deviation Elements – Treasury -Cash management -arrears, level and trend -late payment penalties -overdraft facility use -Accounting -Record error rates -Reporting -Timeliness, frequency of in-year reporting -Timeliness of year-end reporting -Debt management -Frequency of missed or late payments; arrears

System or Element Performance Internal control – percentage of erroneous payments – recovery rate for overpayments – employment records exist; error rates in records, payroll Internal Audit – audit coverage (% total spending), audit cycle (years) – number material weaknesses found annually, number outstanding – remediation (correction) rates External audit – same as for internal audit, above

3-Level Framework

15 HIPC Expenditure Tracking Indicators

Relative need for upgrading PEM Systems 9 15 Substantial Upgrading Required Benin (8) Burkina Faso (9) Chad (8) Guyana (8) Honduras (8) Mail (8) Rwanda (8) Tanzania (8) Uganda (9) Some Upgrading Required Little Upgrading Required Bolivia (5) Cameroon (4) Ethiopia (6) Gambia, The (5) Ghana (1) Guinea (5) Madagascar (7) Malawi (7) Mauritania (7) Mozambique (5) Nicaragua (5) Niger (3) Sao Tome & Principe (4) Senegal (4) Zambia (3) (8) Number of Benchmarks met Source: “Actions to Strengthen the Tracking of Poverty Related Public Spending in Heavily Indebted Poor Countries (HIPCs), World Bank and IMF, March 22, See March 2002 Results

The HIPC Expenditure Tracking paper illustrated the need to improve public expenditure management systems Source: “Actions to Strengthen the Tracking of Poverty Related Public Spending in Heavily Indebted Poor Countries (HIPCs), World Bank and IMF, March 22, See 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% (Percent of countries not meeting each benchmark) Benchmark number: Note: Based on 24 countries’ Final Assessments Meets GFS definition of general government Data on donor financing Classification of budget Pov. Red. Exp. Identified Projections integrated into budg. formulation Low level of arrears Quality of internal audit (effective or not) Regular tracking Fiscal & monetary data reconciled Month reports Timely functional reporting from class system Accounts closed within two months of y/e Audited accounts to legislature within 1 year Outturn close? Extra (off) budget expend. Reporting ExecutionFormulation March 2002 Results

Key contacts Ministry of Finance – budget officer -front-line budget office staff – treasurer – accountant general Line ministry budget staff Internal auditor External auditor Valuable for assessing over-all performance, as well as for individual line ministry performance