1. Information Systems: Key tool for analysts Many advantages Must serve users

2. Good data systems help analysts to understand: if budget estimates are appropriate if a budget is sustainable budget issues Plan Actual

3. Good data systems help analysts to understand: budget alternatives, or options actual expenditures during execution financed activities and results (non- financial data)

4. Some Questions To Answer 1. What is an information system? 2. What is the difference between a spreadsheet and a database? 3. In what situation is each type of information system most effective? 4. With what kinds of analysis are information systems useful, or not useful? 5. Why do information systems change?

6. Information Systems An information system is similar to an electric power grid system: Information, like electricity, is handled by a number of organizations, such as spending ministries, and has a variety of channels, each of which may be under the responsibility of a separate organization.

7. Information Systems There are agreements between organizations about the data to be collected, and the schedule and format of its presentation, and to whom it should be submitted. There may be a number of steps in the flow of information.

9. Information Systems Different organizations may perform similar tasks simultaneously at one stage of the system. For example, the Finance Ministry, the Transport Ministry and the Parliament may all draw information from a data system when the annual budget law is debated

10. Information Systems Definition: the regular production, collection, transmission and presentation of data in an explicitly defined manner that meets the needs of users.

11. Information Systems However, unlike the power system, information systems should be designed by starting with the needs of the users, and then by working backwards to data presentation, data transmission, data collection and data production.

12. USER System NOT THE REVERSE!!

13. Budget Information Systems Components include procedures and products, plus decisions on: the sources of data, format of data, the schedule of presentation, and who should receive the information

14. Budget Information Systems are not just machines and programs Budget instructions (particularly schedules and forms) Regular budget office staff contacts with spending ministry budget staff Meetings of decision makers

15. More than machines and programs: Decision forms and decision reports Budget (Appropriation) bills and backup information Budget execution reports (normally from the Treasury or Central Bank)

16. Budget Information Systems Physical information channels: Paper reports Electronic files

17. More Budget Information Channels Oral discussions and presentation (meetings and telephone conversations) Specialized inter-agency computer systems Integrated financial management systems

18. Budget Information Systems So all of these activities and objects are part of the budget information system: Budget office meetings Budget office written reports Budget office spreadsheets Budget office databases and related financial data management systems that may share information

19. Budget Information Systems: Support Analysis. Analysis can be performed by changing the presentation of data. Examples are: numbers versus the change in numbers; percent versus number; or share of the total budget versus share of GDP. Save data and institutionalize data collection to quickly prepare and defend a budget. Save time

20. Information systems influence users We change our concepts of how to use information based on the availability of types, or quality, of data. For example, if a database displays many historical versions of the budget, we see trends more clearly.

21. Introduction to Databases Tables organize data by 1. columns (fields) and 2. rows (records).

22. Introduction to Databases Reports are based on queries. Reports group data, sum data according to groups and present information in its final form. Reports manipulate data without changing the underlying data.

23. Introduction to Databases Queries do the heavy work of databases. They are used primarily to link tables, select fields for inclusion in reports and select data according to certain criteria. Queries form the basis for reports and may be thought of as unformatted reports.

24. Introduction to Databases A database is a collection of tables, forms, queries and reports, each of which are separately programmed and named. A table is a collection of data.

25. There are, generally speaking, two types of tables: 1. data tables (which contain data plus codes that link to lookup tables) and 2. lookup tables (which contain additional coding and data that is often repeated in reports, such as names). Lookup tables can form the basis for analysis.

26. Introduction to Databases Lookup tables are almost always based on classifications, which are used for selecting, grouping, summing and sorting data in the main data table. The key to tables useful for analysis is the selection of good classifications

27. Using Databases Means Less data need be entered, than with spreadsheets, because: 1. one set of data is used by a variety of reports. Reports are small programs. 2. data is entered only at the lowest level of classifications, with the reports summing data to higher levels. 3. fewer mistakes are made

28. Introduction to Databases A major weakness: Databases are more complex than spreadsheets, separating the end user from the programming staff who must perform detailed design. There are high fixed costs, in terms of effort, to develop a database report.

29. Integrated Financial Systems Are inflexible, and should never be used when institutional roles, data definition, analysis and presentation are not well developed. This situation is true in most transition countries. Are never appropriate for internal management information systems because they cannot quickly change to meet management needs.

30. Spreadsheets Spreadsheets should be used when there are: small amounts of data, or non-standard data data are largely of interest to a single analyst, or to a limited number of analysts few ways of reporting data

31. Databases should be used when there are: large amounts regular/standardized data seen by many people many ways of reporting data, especially to identify changes based on various classifications requirements to rapidly include or exclude data in reports, especially when considering budget alternatives

32. When to use a database: As a rule, if the number of cells required for composing reports is more than 500, then a database should be used. This is especially true if the number of cells derives from reporting the same data in three or more ways.

33. Programmers and Analysts 1. Tell the programmer how you want to use the system. Usually, this means what information you want to see. The programmer can then work on the details. 2. The more you discuss with programmers, the more you can learn. With a little compromise you may get almost what you want but save work. 3. Use paper diagrams to design reports. Ask the programmer to draw the report.

35. Some people think that management information systems should be difficult to change. Change WILL occur. If systems are difficult to change, managers and staff may simply ignore the system or experience great frustration and waste.

36. The Classification Key A classification is simply a way of selecting, grouping, summing and sorting data that is meaningful, or answers a question. Thus, there can be as many classifications as are considered useful. Classifications are a key to analysis using database information systems.

37. Some Classifications: 1. Organization 2. Economic (line item) 3. Functional (GFS) 4. Program or activity 5. Location 6. Population groups who benefit (young, elderly)

38. More Classifications One-time or ongoing (projects or programs) Capital or recurrent Risk (high, medium, low danger of failure) Financing sources (internal, external) Sector of government (this is an example of classifying the organization classification) Decision options (ministry request vs. current)

39. Keep Classifications Flexible! The Budget Analysis Unit must be able to set and change classifications in databases. Classifications may be added based on management decisions. - For example, the Prime Minister may want to add this classification: Government Priorities financed in the Budget

40. Working with data: Time Series A trend line = funding amounts for a single budget classification item (such as organization, program or economic line item) over a number of periods. This could be line graph of actual amounts, a moving average, or a fitted regression line. The more years included in the trend line the better.

41. Time Series Budgeted amounts in a small number of budget versions is the most common way to display budget changes. The series can show next years budget plan compared with the current budget year plan and a previous actual year; or differences between budget plans and actual expenditures over several years.

42. Working with Time Series Last Current Request Change+/- Out Year Year Actual Estimate 1000 1100 1200 +100 1300

43. Time Series Chart

44. Comparing rates of change in a time series: Rate of change for a single budget compared to the entire budget – we want to compare the rate of change of individual elements to the budget as a whole. In many cases, this is how policy priorities are reflected in an annual budget. The priority programs, activities or organizations should increase at a faster rate than the whole budget.

45. Rates Of Change EM Spending Trends, Previous Budget Year compared to Current Budget Year Universities: up 10% University Student Benefits up 1% Lower Education up 5% Culture/Media:up 1% Research Academy up 2% EM Total up 5%

46. Costs per Student (Odh) Past Year Cur- rent % change Re- quest% Out year 1% Higher Education30,812.50329997.135111.56.437751.57.5 Lower Education1975207352125.52.52,200.303.50

47. Comparing rates of change Rate of change among financial and non- financial elements. For example, compare the rate of change of number of students (-3%) with operating expenditures for lower education (+5%). Non-financial elements are often the drivers, discussed in Lesson 2.

48. Comparing rates of change for apples and oranges (example: students and money)

49. Comparing Relative Amounts Example: Share of the budget in a cross section – the percent of the total budget accounted for by budget classifications (such as organization, program or line item).

50. Comparing

52. Common techniques for standardizing data 1. Using real or nominal numbers 2. Rigidly designing forms to collect data 3. Classifying data, with the most common classifications being organization, economic, functional, program and source of revenue. 4. Calculating a budget base, adjusting for inflation, one time items, etc,

53. Comparing Budget decision making is an iterative process, reviewing more than one proposed allocation of funds. Database information systems can help us evaluate alternatives by manipulating data quickly and retaining information, including various optional or proposed allocations.

56. Bridging If classifications have changed over time, then make a bridge table or crosswalk table from an old classification definition to the new definition. Example: The Economy Ministry was merged with the Finance Ministry. To see the historical time series, add the two organizations together for previous years.

57. Defending the Budget All budget offices must defend the budget. We defend the budget by having ready answers to potential questions. Defending the budget is often directly related to various financing alternatives. This requires different versions of data and possible budget options in the database.

58. Managing budget execution Execution data allows us to compare revenues and expenditures with other reference data, including the annual budget plan and prior year expenditures for the same period. -Examples: First calendar quarter revenues for 5 different budget years; accumulated deficit by quarter; expenditures by month

59. Managing budget execution Monitoring the quantity and cost of activities and services provided will let us measure the efficiency, and accountability of managers. - Example: Is the monthly expenditure pattern different for the same program at different locations? For different beneficiaries?

60. Budget execution Capturing individual adjustments to the budget during execution will help us formulate next years budget. Databases can store updated versions to the budget during execution, offering an important tool of analysis. - Example: Does historical data show recurring budget changes that demonstrate inaccurate requests, such as the unemployment fund needing extra money each year?

61. In summary, good data systems help analysts to understand: 1. whether priorities are really reflected in the budget 2. if organizations or programs are efficient 3. what the base budget is 4. What budget adjustments are being made 5. what is driving changes in the budget

62. Data is what analysts paint with!

63. Data-based Analytical Picture: Social Fund Running Dry

64. Data-based Analytical Pictures: Rising Revenues Can Finance New Services – funds may flow to beneficiaries Oil Prices Drive Deficit Higher oiloil Deficit

65. Data-based Analytical Picture: Unit Costs Peak Above European Average Oravia unit cost EU Unit cost

66. Data-based Analytical Pictures: Budget Pie Grows As GDP Rises

67. Analysts Paint With Data Can You?