1. Public Expenditure Management: The Essentials for a PER
Bill Dorotinsky,
PREM public sector group
PEAM Course
March 21, 2005

2. Outline What is Public Expenditure Management? Applications Rules
Three- objectives
Process: Expenditure Management Cycle
What institutions to review?
Functions
Organizations, Systems
Applications
Rules
Roles
Information

3. Three Objectives of Public Expenditure Management Systems
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
And make room for new investment
Technical efficiency
Getting the most from each zloty spent
And just delivering core services

4. Expenditure Management Cycle
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
Accountability
Financial management system boundaries
Formulation covers ‘expenditure review’ insofar as this is a step in preparation of future plans, and goes through to “annual budgets..”
-- need for good budget
-- Brazil roads, congress, MoF
-- linking budget to cash management
-- dc grants management
Execution covers from ‘liquidity management’ through to PER’s, insofar as PER’s are part of the ex poste accountability system.
Half of cycle
(2) Hardware and software do not solve problems in human systems. Must know source of problem, and seriously assess whether computerization will solve the core problem. (DC Example)
Underlying all of this is good recording of transactions and reporting!
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. What institutions to review?
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

6. Ministry of Finance Functions
Core Functions
Budget
Execution
Macroeconomic
Forecasting
Budget
Formulation
Fiscal Policy
Revenue
Administration
Debt
Management
Treasury
Procurement
Policy
Internal
Audit
Non-core Functions
Lottery &
Gambling
Financial Asset
Management
Financial
Market
Regulation
Financial
Investigations
Procurement
Administration

7. Line Ministry PFM Functions
Sector Strategy, Policy
Planning, Budget
Formulation
Operations, Administration
Budget
Execution
Procurement
Administration
Revenue
Administration
Accounting,
recording
Personnel Mngmnt,
Payroll
Internal
Audit
Asset
Management
Reporting Spending,
Performance

8. Budget and Policy Execution System in Hungary (1999)

9. Exploring: Rules and Incentives
Budget Impasse
Executive-legislative relations
What rules might govern a budget impasse?
How might they effect incentives between the legislature and executive?
What might be important considerations for designing a rule?

10. Rules and Outcomes Application
Source: World Bank – OECD budget procedures database at