The Role, Responsibilities, Structure and Evolution of Central Finance Agencies

Abstract

In this chapter we review the role, responsibilities and organizational structure of the central finance agency (CFA), which may be defined as the group of government ministries and agencies — notably the ministry of finance — that is responsible for developing policy on and implementing the core finance functions of the state (Dressel and Brumby 2009; Allen and Grigoli 2012). The discussion is based on the proposition that public finance is at the heart of government and affects all decisions on the allocation and use of public resources, however small. Decisions related to public finance determine the shape and course of economic development and the viability and performance of all institutions, whether in the private sector or the public sector. Financial crises occur frequently, some with extreme severity, and it is no coincidence that on such occasions the CFA is at the center of the political debate. Following from this proposition, the chapter argues that the organization of a country’s CFA — namely, its structure, internal management and business processes, as well as its relationship with other important players such as the central bank, the cabinet, line ministries and the parliament — is of crucial importance because it determines how effective a government will be both in taking decisions on the budget and other financial issues and in executing financial policies.