Table Of Content

PUBLIC SECTOR GOVERNANCE AND ACCOUNTABILITY SERIES BUDGETING AND BUDGETARY INSTITUTIONS Edited by ANWAR SHAH BUDGETING AND BUDGETARY INSTITUTIONS Introduction to the Public Sector Governance and Accountability Series Anwar Shah,Series Editor A well-functioning public sector that delivers quality public services consistent with citizen preferences and that fosters private market-led growth while managing fiscal resources prudently is considered critical to the World Bank’s mission ofpoverty alleviation and the achievement of the Millennium Development Goals.This important new series aims to advance those objec- tives by disseminating conceptual guidance and lessons from practices and by facilitating learning from each others’experiences on ideas and practices that promote responsive(by matching public services with citizens’preferences),responsible(through efficiency and equity in service provision without undue fiscal and social risk),and accountable(to citizens for all actions) public governance in developing countries. This series represents a response to several independent evaluations in recent years that have argued that development practitioners and policy makers dealing with public sector reforms in developing countries and,indeed,anyone with a concern for effective public governance could benefit from a synthesis ofnewer perspectives on public sector reforms.This series distills current wisdom and presents tools of analysis for improving the efficiency, equity,and efficacy ofthe public sector.Leading public policy experts and practitioners have contributed to this series. The first 14 volumes in this series, listed below, are concerned with public sector accountability for prudent fiscal management;efficiency,equity,and integrity in public service provision; safeguards for the protection of the poor, women, minorities, and other dis- advantaged groups;ways ofstrengthening institutional arrangements for voice,choice,and exit;means ofensuring public financial accountability for integrity and results;methods of evaluating public sector programs,fiscal federalism,and local finances;international practices in local governance;and a framework for responsive and accountable governance. Fiscal Management Budgeting and Budgetary Institutions Public Services Delivery Local Budgeting Public Expenditure Analysis Local Public Financial Management Local Governance in Industrial Countries Performance Accountability and Combating Corruption Local Governance in Developing Countries Tools for Public Sector Evaluations Intergovernmental Fiscal Transfers: Macrofederalism and Local Finances Principles and Practice Citizen-Centered Governance Participatory Budgeting PUBLIC SECTOR GOVERNANCE AND ACCOUNTABILITY SERIES BUDGETING AND BUDGETARY INSTITUTIONS Edited by ANWAR SHAH THE WORLD BANK Washington,D.C. ©2007 The International Bank for Reconstruction and Development / The World Bank 1818 H Street,NW Washington,DC 20433 Telephone:202-473-1000 Internet:www.worldbank.org E-mail:[email protected] All rights reserved 1 2 3 4 10 09 08 07 This volume is a product ofthe staffofthe International Bank for Reconstruction and Development / The World Bank.The findings,interpretations,and conclusions expressed in this volume do not necessarily reflect the views ofthe Executive Directors ofThe World Bank or the governments they represent. The World Bank does not guarantee the accuracy ofthe data included in this work. The boundaries,colors,denominations,and other information shown on any map in this work do not imply any judgement on the part ofThe World Bank concerning the legal status ofany territory or the endorsement or acceptance ofsuch boundaries. Rights and Permissions The material in this publication is copyrighted.Copying and/or transmitting portions or all ofthis work without permission may be a violation ofapplicable law.The International Bank for Reconstruction and Development / The World Bank encourages dissemination ofits work and will normally grant permission to reproduce portions ofthe work promptly. For permission to photocopy or reprint any part ofthis work,please send a request with complete information to the Copyright Clearance Center Inc.,222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office ofthe Publisher,The World Bank,1818 H Street,NW,Washington, DC 20433,USA;fax:202-522-2422;e-mail:[email protected]. ISBN-10:0-8213-6939-3 ISBN-13:978-0-8213-6939-5 eISBN-10:0-8213-6940-7 eISBN-13:978-0-8213-6940-1 DOI:10.1596/978-0-8213-6939-5 Library ofCongress Cataloging-in-Publication Data Budgeting and budgetary institutions / edited by Anwar Shah. p.cm. Includes bibliographical references and index. ISBN-13:978-0-8213-6939-5 ISBN-10:0-8213-6939-3 ISBN-10:0-8213-6940-7 (electronic) 1. Budget—Developing countries. 2. Finance, Public—Developing countries. I.Shah,Anwar. HJ2216.B86 2007 336.09172’4—dc22 2006102152 Contents Foreword xv Preface xvii Acknowledgments xix Contributors xxi Abbreviations and Acronyms xxv Overview 1 Anwar Shah Part I A Primer on Budgeting and Budgetary Institutions CHAPTER 1 Budgeting Institutions for Better Fiscal Performance 27 Jürgen von Hagen Budgeting Institutions 28 Budgeting Institutions and the Principal-Agent Problem 35 Budgeting Institutions and the Common Pool Problem 38 v vi Contents Conclusions 48 Notes 49 References 49 2 The Budget and Its Coverage 53 Salvatore Schiavo-Campo Good Governance and Public Expenditure Management 54 The Meaning ofFiduciary Risk in Public Finance 55 The Unity ofthe Budget 55 Coverage,Periodicity,and Definitions 56 Principles ofExpenditure Policy Choices and of Budget Coverage 60 Extrabudgetary Funds 61 Beyond Direct Expenditure 72 Basic Budget Legislation 81 Notes 86 References 87 3 Capital Budgets: Theory and Practice 89 A.Premchand Evolution 90 Current Practices 101 Notes 108 References and Other Sources 108 4 Budget Methods and Practices 109 Alta Fölscher The Nature ofthe Problem 109 Beyond Incrementalism:Rationality and Incentives in Budget Methods 118 Conclusion 134 Note 134 References 134 Contents vii 5 A Primer on Performance Budgeting 137 Anwar Shah and Chunli Shen Public Budgeting:Motivations for Reform 138 Performance Budgeting:Basic Concepts 143 Considerations in Performance Budgeting Reforms 145 Why Pursue Performance Budgeting? 151 How to Do Performance Budgeting: International Experiences 153 Critical Conditions for Successful Implementation of Performance Budgeting 171 Concluding Remarks 175 References 176 6 Accrual Accounting in the Public Sector: Lessons for Developing Countries 179 Paul Boothe Differences between Cash and Accrual Accounting in the Public Sector 181 Accrual Accounting in OECD Countries 182 Accounting Regimes and Incentives for Policy Makers 188 Accrual Accounting in Developing Countries 195 Lessons for Policy Makers 197 Notes 199 References 200 7 Activity-Based Cost Management in the Public Sector 203 Gary Cokins Activity-Based Cost Management Supports Fact-Based Decision Making 203 Political Pressures to Hold Down Costs 204 An Excessive Focus on Functions 206 A Fixation on Inputs 206 Removing the Blindfold:Outputs,Not Just Resources and Expenditures 208 viii Contents A Simple Way to Understand ABC/M 210 From the Spending View to the Activity and Output View 211 ABC/M Is a Cost Assignment Network 212 How Do Cost Drivers Work? 214 Multiple-Stage ABC/M Approach 216 One City’s Benefits from ABC/M 218 Operational ABC/M for Productivity 220 But Our Department Does Not Have Outputs 221 ABC/M Uses (and Some Pitfalls) 223 Multiple Views ofCosts Are Empowering 225 Realizing True Cost Savings or Future Cost Avoidance 226 Why Change Now? 227 Annex 7A:Case Study 228 Note 233 8 Budget Preparation and Approval 235 Salvatore Schiavo-Campo Three Prerequisites for Budget Preparation 236 Bad Practices in Budget Preparation 244 The Budget Preparation Process 252 Division ofRoles and Responsibilities:Finance and Planning 268 Budget Approval and the Role ofthe Legislature 270 Notes 276 References 277 9 Budget Execution 279 Daniel Tommasi The Budget Execution Cycle 280 Controlling Compliance in Budget Execution 284 Managing and Monitoring Budget Execution 288 Cash Management 308 Strengthening African Budget Execution Systems 319 Notes 320 References and Other Resources 321

Description:

Introduction to the Public Sector Governance and Accountability Series exit; means of ensuring public financial accountability for integrity and results; financial accounting came to loom so large in the minds of business execu- medium-term fiscal perspective to frame the preparation of the annu