BUDGET & FINANCIAL MANAGEMENT AT SUBNATIONAL LEVELS LAC Experience

Truth & Fallacy of Big Numbers 14,000 municipalities More than 200 intermediate governments Less than 1 percent have access to direct credit All of them can accumulate indirect, floating and contingency debt With little or no political or auditing controls

Concentración geográfica del stock de deuda municipal (2003)

Deuda municipal a nivel departamental (2002)

Deuda registrada por tipo de acreedor (como porcentaje del total de la deuda registrada)

Where does the problem lie? Anticipated payments, commitments and within the year budget reforms are not adequately reflected in budget provisions, treasury or medium term fiscal planning High moral hazard and/or lack of adequate accounting and provisioning for labor and judicial (contingency) liabilities Poor revenue forecasting – Weak enforcement of hard budget constraint

What are the countries doing? Ex-Post Visit to the ABC Colombia: Accounting back at the center Mexico: ERP for automatic linkages and adjustments between commitments (procurement and legal liabilities), budgeting, disbursements and fiscal plans Integrated Financial Management (now part of ERP) as standardization tool Accounting comes back to Min. of Finance

What is still missing? Slow transition towards international accounting standards Resistance to standardization (federal) Resistance to ERP as a means towards reform of structures and personnel