Public Expenditure Management Systems Research Articles

PUBLIC EXPENDITURE MANAGEMENT FRAMEWORK IN NIGERIA: RETHINKING THE CONCEPT FOR THE 21ST CENTURY

Ponte Academic JournalFeb 2021, Volume 77, Issue 2 PUBLIC EXPENDITURE MANAGEMENT FRAMEWORK IN NIGERIA: RETHINKING THE CONCEPT FOR THE 21ST CENTURYAuthor(s): Kanayo OgujiubaJ. Ponte - Feb 2021 - Volume 77 - Issue 2 doi: 10.21506/j.ponte.2021.2.11 Abstract:Nigeria has made remarkable advancement within the last 10 years by setting the rudiments of a contemporary public expenditure management system. However, lack of coordination in its budget management before 2000 culminated in wide government deficits, higher external debt that resulted in declining manufacturing capacity utilization. The existing expenditure framework in Nigeria is encumbered with absurdities that derail it from positive outcomes. Furthermore, the negative externality effects, affect other macro aggregates. This article reviews conceptual issues in public expenditure, principles and approaches of national budgeting, policy and institutional frameworks for national expenditure management. Using a desktop approach, the article x-rays issues surrounding the uses and abuses of national expenditures and financial management system amongst other dynamics in Nigeria. Based on the synopsis, we recommend a rethinking of the conceptual frameworks of public expenditure management in Nigeria. This will improve the current budget system outcomes in the country. Download full text:Check if you have access through your login credentials or your institution Username Password

New development: Lessons and recommendations from South Korea’s experiences with integrated financial management information systems

ABSTRACTThe South Korean government has been reforming its public expenditure management system since 2004. During this time, South Korea adopted new budgeting processes (for example mid-term expenditure framework, top-down budgeting, performance-based budgeting) and developed a new integrated financial information management system. In the course of implementing these reforms, South Korea has important insights and lessons to share with developing countries.

Integrated Financial Management Information System: a conceptual framework for Migori County, Kenya

In the modern world, developing countries like Kenya, Tanzania, Ethiopia and several others in the African continent have been encouraged to reform their public expenditure management systems through computerization of the entire public sectors in response to the increasing volume of data or information that need to be processed. There are, however, various factors to be considered prior to the implementation of the public expenditure management information systems. This paper undertakes a theoretical review of the critical success factors that impact on the implementation of an Integrated Financial Management Information System (IFMIS) with a view to identify factors applicable to the Migori County of Kenya. The paper, then, identifies the key factors to be incorporated in the proposed IFMS framework. The proposed framework draws from the Technology Acceptance Model (TAM), Innovation Diffusion Theory (IDT) and the Work Around Theory (WAT). The paper fuses these theories towards a successful adoption of use of modern technology within the public sector IFMS. The key factors include technical, organizational, environmental, cultural and ethical behavior. These factors could improve efficiency and transparency through direct payments to suppliers and contractors, reduced prices due to gains based on the time value of money, as well as the comparative analysis of market rates and advanced relations across the numerous organizational units within government on execution, reporting, and thoroughness of budget transactions.

Public–private partnership conceptual framework and models for the funding and financing of water services infrastructure in municipalities from selected provinces in South Africa

This paper presents public–private partnership (PPP) framework models for funding and financing of water services infrastructure at local government (municipalities) level (sphere) in South Africa. Data were assembled from various stakeholders, viz., private and public sector institutions in the Gauteng and Limpopo Provinces of South Africa. The framework for PPPs identified three models, viz. state, hybrid and private sector models. In the ‘state model’ the water services value chain is 100% government funded and owned infrastructure. Government is a key player in infrastructure investment and inefficiencies within the public expenditure management systems are particularly detrimental, e.g., there are significant problems in spending of infrastructure budgets. In the ‘private model’ harnessing the significant potential for capital markets to finance water infrastructure, particularly local bond markets, is contingent on their strengthening and further development. Well-functioning and appropriately institutional investors (pension funds, insurance companies, etc.) would be natural sources of long-term financing for water services infrastructure because liabilities would better match the longer terms of water infrastructure projects. The ‘hybrid model’ is in the middle of the water services value chain, i.e., a partnership between government and the private sector. The use of this framework is essential in the including of the private sector in the implementation of water infrastructure development projects. The research results highlight the underlying principles that underpin, support, determine and confirm the success of the PPP models and value chain framework for local government water infrastructure in South Africa. Twelve key parameters were identified that would drive the success of any water services infrastructure PPP model. Even though PPP is an alternative procurement vehicle, PPP models are considered to be used as vehicles for addressing institutional challenges in local government. However, in most cases it has been indicated that lack of technical and financial skills and monitoring of the private operator are serious challenges. Keywords: financing, funding, Gauteng and Limpopo Provinces, PPP framework, PPP models, water services infrastructure

Medium Term Expenditure Framework: A Departure from Traditional Budgeting in Zambian Local Governments

From the historical perspective traditional local government budgeting was being prepared on incremental basis as a result the process could not achieve the objectives of local public expenditure management (LPEM) system. It is argued that the planning, budgeting, accounting and reporting of local governments from the incremental method could not enhance credibility due to the lack of comprehensiveness of the overall budget and financial data. In addition, over the years it became evident that the ability to collate and analyse financial performance of councils across the country of the revenues and expenditures could not be easily ascertained with accuracy and predictability. Moreover, councils’ prepared shopping list type of traditional local government budget without considering the resource availability and their implementation capacity. However, there was also a serious concern of lack of a clear linkage between the planning and the budgeting system in councils and so often these budgets were not formulated on basis of detailed strategic plan. Probably, proponents of Medium Term Expenditure Framework (MTEF) process supported the introduction of performance-focused planning and budgeting because it would enhance local public accountability in the budget process. On the other hand, opponents of the MTEF argued that before the MTEF reforms and procedures could be readily adopted by local governments, there was a need to address the financing mechanism of local governments. Perhaps, this can be said that it was a misguided assumption because the MTEF process was meant to achieve a key objective of enhancing local public expenditure management within available resource envelop. It can also be argued that the MTEF process was important in order for local governments to spread resources evenly within a rolling period of three years. Also the MTEF process was quite instrumental in the realisation of the fiscal decentralization reform agenda and to promote local public expenditure management system from the view point of vertical downwards accountability thus between the citizenry and the elected officials (Councillors).

Managing Public Health Expenditure in Indonesia

Following decentralization in Indonesia there is evidence of a mismatch between spending responsibilities at the local level and local government’s ability to effectively manage resources. This research investigates the relationship between institutional arrangements for public expenditure management (PEM) and inequalities in health outcomes in selected districts of Bengkulu Province, Indonesia. The primary aims of this study are to identify factors contributing to health outcome attainment differences and efficiency determinants. The role of the central government and the own-source capacity of district-level governments in financing health resources are also explained. This research differs from previous works by focusing on the inefficiency of the district-level health sector that is associated with weak PEM systems in order to explain the significant disparity in health outcome attainment within a country, using the new institutional economics (NIE) perspective as a guideline. Mixed methods procedures were adopted: quantitative and qualitative data were collected concurrently. The quantitative study utilized secondary data from data sets of government institutions. A correlational analysis, using the software package SPSS, was applied to assess the relationship between public health expenditure and other determinants with health outcomes at the provincial level. The qualitative study used primary data from in-depth face-to-face interviews with 20 key actors involved in the budget process for the health sector in four district governments of Bengkulu Province. Qualitative data were analysed using the QSR NVivo software program. This study reveals that changes in public health expenditure as a percentage of GRDP and real public health expenditure per capita and other determinants can be important factors behind observed declines in infant and child mortality and increases in life expectancy in Bengkulu Province. Other determinants of health outcomes comprise real GRDP per capita, the percentage of population participation in managed care, the percentage of delivering mothers assisted by health personnel, the ratio of midwives per 100,000 population, and the female literacy rate. The role of central government in financing health resources in the districts studied is also very prominent. These districts rely heavily on the central government and have limited financial capacity. Consequently, district governments have difficulty in performing their functions in the health sector properly because of frequently insufficient and reduced public health spending that originates from the central budget. This study also finds that the inability of institutional arrangements to adopt PEM principles has undermined the efficiency of government intervention in the health sector at district level. Weak institutional arrangements in PEM have had harmful effects on the size, allocation and use of public health expenditure, which contributes to inequalities in health outcome attainment in Bengkulu Province. Such weaknesses include the absence of constructive political engagement, lack of policy clarity, consistency and affordability, the presence of poor predictability, lack of transparency, the presence of poor comprehensiveness and integration and a lack of accountability. District governments also face severe inefficiencies in PEM that are created by delays in the budget approval processes. The introduction of market-based practices in PEM of the district governments studied has been unable to prevent potential opportunistic political behaviour. This has led to failure in reducing or eliminating the costs of negotiating and enforcing political agreements in allocating public resources by policy makers, since the budget can be viewed as a contract. These findings reinforce the criticism that the applicability of the PEM technique is country-specific. Proper institutional arrangements that address an Indonesia-specific context are required for the success of PEM. Using the NIE perspective, the findings support the view that hierarchies as an alternative mode of governance are more appropriate than markets, which cannot reduce transaction costs. Results-oriented cultures of the PEM approach cause difficulty in implementing this approach due to serious measurement problems in the health service.

The Reform of Public Expenditure Management Systems in OECD Countries

Blőndal examines the key institutional features in the reform of public expenditure management systems in OECD countries. He notes that the countries which are experiencing the best fiscal outcomes are generally those that have more successfully modernized their budget processes. The paper identifies the most relevant aspects for the control of public expenditure: the use of medium-term frameworks, prudent economic assumptions and top-down budgeting techniques; the relaxation of central input controls; the focus on results; the emphasis on budgetary transparency and the introduction of modern financial management practices concerning, inter alia, accruals, capital charges, carry-overs of unused appropriations and interest-bearing accounts. The paper examines the benefits and the problematic aspects of each of these factors and stresses that they must be taken as a package.

A Principal-Agent Theory Approach to Public Expenditure Management Systems in Developing Countries

A well-functioning public expenditure management system is considered a critical pillar of government efficiency. This article discusses PEM systems in developing countries using an analytical framework based on principal-agent theory. This simple model can be applied to various PEM systems and allows for comparisons between institutional settings. To illustrate this, the authors analyse the benefits derived from the use by the ministry of finance of ex post audits and ex ante controls, and assess their value in terms of their ability to deter cheating. The authors derive a set of possible “control regimes” which can be used by the ministry of finance.

A review of health resource tracking in developing countries

Timely, reliable and complete information on financial resources in the health sector is critical for sound policy making and planning, particularly in developing countries where resources are both scarce and unpredictable. Health resource tracking has a long history and has seen renewed interest more recently as pressure has mounted to improve accountability for the attainment of the health Millennium Development Goals. We review the methods used to track health resources and recent experiences of their application, with a view to identifying the major challenges that must be overcome if data availability and reliability are to improve. At the country level, there have been important advances in the refinement of the National Health Accounts (NHA) methodology, which is now regarded as the international standard. Significant efforts have also been put into the development of methods to track disease-specific expenditures. However, NHA as a framework can do little to address the underlying problem of weak government public expenditure management and information systems that provide much of the raw data. The experience of institutionalizing NHA suggests progress has been uneven and there is a potential for stand-alone disease accounts to make the situation worse by undermining capacity and confusing technicians. Global level tracking of donor assistance to health relies to a large extent on the OECD's Creditor Reporting System. Despite improvements in its coverage and reliability, the demand for estimates of aid to control of specific diseases is resulting in multiple, uncoordinated data requests to donor agencies, placing additional workload on the providers of information. The emergence of budget support aid modalities poses a methodological challenge to health resource tracking, as such support is difficult to attribute to any particular sector or health programme. Attention should focus on improving underlying financial and information systems at the country level, which will facilitate more reliable and timely reporting of NHA estimates. Effective implementation of a framework to make donors more accountable to recipient countries and the international community will improve the availability of financial data on their activities.

Designing a Legal and Regulatory Framework for Better Public Financial Management: Some Issues for Consideration from Trinidad and Tobago

Ill fitting legal shoes pinch citizen’s foot. Chinese Proverb Never ask of money spent where the spender thinks it went. Nobody was ever meant to remember or invent what he did with every cent. Robert Frost There is a sense in which discussions of public law and debates about budgeting have a good deal in common. Both budgets and law are essential to the task of public administration. Without legal authority and budgetary resources, agencies cannot function. Indeed, without legal authority they do not even exist, and without financial resources they exist in name only. Cooper, Phillip J (1999) ‘Courts and Fiscal Decision Making’, in: Handbook of Government Budgeting (San Francisco: Jossey‐Bass) p 502. In a global environment of emerging trading blocs, it is imperative for small island states to pay attention to the adequacy of a major plank of a country’s financial infrastructure viz, the public financial management system. For the purposes of this paper, the components of this system are considered...

South Africa: Transition to Democracy Offers Opportunity for Whole System Reform

This case study considers the substantial reforms to the South African public expenditure management system undertaken since the mid-1990s. The key aspects of the reform process have been: establishing the institutional framework for budget reforms through the new Constitution and further national legislation and practice; adopting a multi-year budget framework and top-down budget process; developing a framework for public financial management and reporting; improving the classification system of public finances; and creating a performance-oriented public service. South Africa has successfully implemented a number of these reforms and has radically altered the way in which it budgets for public services and how it accounts for public expenditure and commitments. The case study concludes by drawing on the lessons learned through this process.

Introducing Financial Management Information Systems in Developing Countries

In the past decade, developing countries have been encouraged to reform their public expenditure management systems and have increasingly embarked on major projects to computerise their government operations. Most popular among these have been projects to computerise government accounting and payment operations, by introducing government financial management information systems (FMISs).

A Principal-Agent Theory Approach to Public Expenditure Management Systems in Developing Countries

A well-functioning public expenditure management (PEM) system is considered a critical pillar of government efficiency, on par with a low-distortion tax system and efficient tax administration. The paper discusses PEM systems in developing countries using an analytical framework based on principal-agent theory. This simple model can be applied to various PEM systems, and allows for comparisons between institutional settings. To illustrate this, we analyze the benefits derived from the use by the Ministry of Finance (MoF) of two instruments; ex post audits and ex ante controls, and assess their value in terms of their ability to deter cheating. We derive a set of possible control regimes which can be used by the MoF. Although we illustrate the use of the model using developing countries, it is also relevant to developed economies.

A Principal-Agent Theory Approach to Public Expenditure Management Systems in Developing Countries

A well-functioning public expenditure management (PEM) system is considered a critical pillar of government efficiency, on par with a low-distortion tax system and efficient tax administration. The paper discusses PEM systems in developing countries using an analytical framework based on principal-agent theory. This simple model can be applied to various PEM systems, and allows for comparisons between institutional settings. To illustrate this, we analyze the benefits derived from the use by the Ministry of Finance (MoF) of two instruments; ex post audits and ex ante controls, and assess their value in terms of their ability to deter cheating. We derive a set of possible control regimes which can be used by the MoF. Although we illustrate the use of the model using developing countries, it is also relevant to developed economies.

Democratic Republic of S�o Tom� and Pr�ncipe: 2005 Article IV Consultation and First Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility: Staff Report; Staff Statement; Public Information Notice and Press Release on the Executive Board Discussion; and Statement by the Executive Director for the Democratic Republic of S�o Tom� and Pr�ncipe

São Tomé and Príncipe pursued economic reforms and tried to reduce poverty amidst macroeconomic imbalances under the Poverty Reduction and Growth Facility (PRGF) program. Executive Directors supported the authorities’ decision to sustain the process of fiscal consolidation, and stressed the need for implementing a good budget and public expenditure management system. They commended the monetary and financial stances and the central bank’s international reserve position; welcomed the authorities' commitment to improve coverage, timeliness, and periodicity of basic macroeconomic statistics; and emphasized to accelerate structural reforms and achieve full transparency in oil revenue management.

Achieving education for all: how much does money matter?

This paper explores the extent to which differences in the resources allocated to education explain differences in educational access and performance across countries. Cross-country regression analysis shows that the link between educational access and performance and public education expenditure is weak.. The paper suggests that levels of household spending, the effectiveness of the public expenditure management system and the composition of public education spending are important factors explaining this weak link. The results imply that the achievement of the education millennium development goals will require more than just increases in expenditure on primary education. This does not imply that resources are unnecessary, but that increasing resources alone is unlikely to be sufficient. The composition of resources and institutions that govern the use of these resources play a central role in translating resources into better schooling outcomes. A stronger focus on these aspects of education systems will be required if the Millennium Development Goals in education are to be achieved.

Selected African Countries: IMF Technical Assistance Evaluation: Public Expenditure Management Reform

This report focuses on IMF Technical Assistance Evaluation—Public Expenditure Management (PEM) Reform in Selected African Countries. Most of the countries examined were colonies of the United Kingdom, inheriting similar and relatively simple budget systems based on an interpretation of the “Westminster model” around the time of independence. Country reviews suggest that PEM problems are widespread and that there are few areas in the PEM systems of the countries covered that do not require strengthening in some way.

Introducing Financial Management Information Systems in Developing Countries

In the past decade, developing countries (DCs) have been encouraged to reform their public expenditure management systems and have increasingly embarked on major projects to computerize their government operations. Most popular among these have been projects to computerize government accounting and payment operations, by introducing government financial management information systems (FMISs). This paper investigates the reason for almost universal failure to implement and sustain FMISs in DCs. It starts with a review of the received wisdom in implementing these projects, and then analyzes problems in its application in the DC context to identify key factors to explain why FMIS projects have been so problematic. Based on the identified negative factors, suggestions for addressing them are offered in the hope of improving success rates.

Introducing Financial Management Information Systems in Developing Countries

In the past decade, developing countries (DCs) have been encouraged to reform their public expenditure management systems and have increasingly embarked on major projects to computerize their government operations. Most popular among these have been projects to computerize government accounting and payment operations, by introducing government financial management information systems (FMISs). This paper investigates the reason for almost universal failure to implement and sustain FMISs in DCs. It starts with a review of the received wisdom in implementing these projects, and then analyzes problems in its application in the DC context to identify key factors to explain why FMIS projects have been so problematic. Based on the identified negative factors, suggestions for addressing them are offered in the hope of improving success rates.

Reforming the Russian Budget System: A Move to More Devolved Budget Management?

The Russian federal government has recently initiated a fundamental reform of its budget system, encompassing important policy, procedural, and institutional changes. This paper reviews this reform agenda with reference to the experience of industrial countries that over the past two to three decades have followed a similar reform path toward a more devolved budget management system. From this perspective, the importance of the strength of existing public expenditure management systems to accommodate increased devolution and the scope for employing decentralized agencies is explored. An assessment of the present Russian reform plans in light of this review reveals a number of concerns. First, the speed of the reforms contemplated appears overly ambitious when judged by the experience of other countries. Second, the preparedness of budget institutions is questionable. Third, change management capacity needs strengthening with a more carefully defined strategy. Last, in light of these concerns, it is argued that the scope and big-bang approach of the current reform plans may need reformulation into a more sequenced strategy with clearer reform priorities.