PUBLIC FINANCIAL MANAGEMENT TOPIC GUIDE

Public Financial Management Topic Guide-Free PDF

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Transparency International is a global movement with one vision a world. in which government business civil society and the daily lives of people. are free of corruption Through more than 100 chapters worldwide and an. international secretariat in Berlin we are leading the fight against. corruption to turn this vision into reality, Topic guides are a series of publications developed by the Anti Corruption. Helpdesk on key corruption and anti corruption issues They provide an. overview of the current anti corruption debate and a list of the most up to date. and relevant studies and resources on a given topic. www transparency org,Authors Matthias Morgner Marie Ch ne. Reviewer s Finn Heinrich PhD,Date 28 November 2014. 2014 Transparency International All rights reserved. With support from the European Commission, This document should not be considered as representative of the European Commission or Transparency. International s official position Neither the European Commission Transparency International nor any. person acting on behalf of the Commission is responsible for how the following information is used. TABLE OF CONTENTS,TABLE OF CONTENTS 1, CORRUPTION RISKS IN PUBLIC FINANCIAL MANAGEMENT AN OVERVIEW 2.
WHAT IS PUBLIC FINANCIAL MANAGEMENT 2,CORRUPTION RISKS IN PFM 2. PFM REFORMS AND ANTI CORRUPTION 4,GENERAL RESOURCES ON PUBLIC FINANCE MANAGEMENT 5. THE BUDGET PROCESS 13,BUDGET FORMULATION 13,BUDGET APPROVAL 14. BUDGET EXECUTION 15,RESOURCES ON THE BUDGET PROCESS 17. TAX ADMINISTRATION 23,OVERVIEW OF KEY ISSUES 23,OPPORTUNITIES FOR CORRUPTION 23.
ANTI CORRUPTION MEASURES AND APPROACHES 24,THE ROLE OF DONORS 25. RESOURCES ON TAX ADMINISTRATION 26,PUBLIC PROCUREMENT 31. CORRUPTION RISKS IN PUBLIC PROCUREMENT 31,ANTI CORRUPTION TOOLS AND APPROACHES 32. RESOURCES ON PUBLIC PROCUREMENT 34,QUASI FISCAL OPERATIONS AND OFF BUDGET FUNDS 43. OVERVIEW OF CORRUPTION RISKS 43,ANTI CORRUPTION TOOLS AND APPROACHES 44.
RESOURCES ON EXTRA BUDGETARY FUNDS 45,EXTERNAL AUDIT AND OVERSIGHT 50. SUPREME AUDIT INSTITUTIONS 50,ANTI CORRUPTION TOOLS AND APPROACHES 51. LEGISLATIVE OVERSIGHT 51,ANTI CORRUPTION TOOLS AND APPROACHES 52. RESOURCES ON EXTERNAL AUDIT AND OVERSIGHT 53, Each part of this topic guide provides an overview of major corruption risks and anti corruption. approaches and a compilation of the most up to date and relevant studies and resources on. CORRUPTION RISKS IN PUBLIC,FINANCIAL MANAGEMENT AN.
WHAT IS PUBLIC FINANCIAL MANAGEMENT, Public financial management PFM is a central element of a functioning administration underlying. all government activities It encompasses the mechanisms through which public resources are. collected allocated spent and accounted for As such PFM processes comprise the whole budget. cycle public procurement audit practices and revenue collection Sound transparent and. accountable public financial management is a key pillar of governance reform and of vital. importance to provide public services of good quality to citizens as well as to create and maintain. fair and sustainable economic and social conditions in a country. CORRUPTION RISKS IN PFM, PFM involves highly complex technical tasks and processes including macroeconomic forecasting. budget allocation accounting and auditing The complexity of such processes limits public scrutiny. and provides many opportunities for corruption The risk of corruption varies between and within the. different stages of the budget process Although corruption primarily manifests itself in forms that. involve illegal money transfers at the budget execution level other steps of the budget process may. create opportunities for corruption at other stages of the PFM process 1. Budget formulation The government forecasts expected revenue and expenditure and. plans the use of resources based on policy priorities At this stage of the budget process it. possible to prepare for future embezzlement by planning the allocation of resources. according to biased criteria Corruption can take the form of political corruption using. discretionary budgetary powers to give preferential treatment to certain groups or to allocate. budget resources to projects or areas based on political affiliations or rent seeking. opportunities, Budget approval The budget is debated and approved by the legislature At this stage of. the process corrupt parliamentarians backed by political parties or businesses may. deliberately amend the budget proposal to set funds aside for later misuse or to secure. favourable treatment for their constituencies Special interest groups may also unduly. influence parliamentarians to overturn the proposed budget or to safeguard an allocation or. The budget process and corruption Isaksen J 2005 U4 Issue 2005 3 Bergen Chr Michelsen Institute See more. at http www u4 no publications the budget process and corruption sthash Usd3tYMe dpuf. 2 TRANSPARENCY INTERNATIONAL, subsidies The risk of lobbying growing beyond public control and leading up to state. capture is especially high in this stage of the PFM process. Budget execution Resources approved at the budget formulation stage are disbursed to. pay the salaries of public servants running costs of the administration provision of public. goods and services to citizens public works and infrastructure debt management and so. on Budget execution also covers the collection of taxes duties and fees This stage of the. process is the most vulnerable to corruption as the money becomes tangible and a large. number of individuals are involved with monetary transactions in various ministries and. public institutions and at various levels of the administration. Corruption can manifest itself in various forms including bribery kickbacks embezzlement. and theft In particular public investment projects can be distorted both in size and in. composition for rent seeking purposes Bribery and kickbacks in public procurement bid. rigging and other forms of undue advantages to certain providers of services goods and. works are also common forms of corruption at this stage of the process The tax and. customs administrations may also be misused to pursue rent seeking and corrupt practices. Money can be stolen or used for expenditures which benefit certain individuals and their. business or political allies, Accounting and reporting Together with disbursing or collecting money spending agencies.
record and account for their expenditures or revenues collected Financial reports are. subject to internal audits to ensure that the rules and regulations at the department or. ministerial level in terms of procurement processes contract management and other basic. requirement have been enforced Financial reports from spending agencies are later. centrally consolidated by the Ministry of Finance which issues a report to show how the. budget has been implemented and which is subject to external oversight Weak flawed or. opaque reporting and accounting practices are likely to increase the corruption risk at other. stages of the execution process by reducing the chances of corruption to be adequately. prevented and detected Turning a blind eye or allowing for creative accounting to cover. corruption schemes may also be done deliberately, Extra budgetary funds Extra budgetary accounts for specific types of expenditure or. revenue are common in many countries While they may be set up for legitimate purposes. pension and social security funds or stabilisation or reserve funds managing surplus. revenue from for example the sale of natural resources their implementation control and. oversight is often not subject to similar PFM standards and instruments than on budget. funds Some off budget funds may be set up to reduce the political and administrative. controls that typically regulate budgetary spending Extra budgetary accounts can represent. an important share of government expenditures and the relative lack of scrutiny over these. funds may provide many opportunities for corruption. External oversight External audits are typically undertaken by supreme audit institutions. SAIs who have the mandate to ensure the accountability of public funds in general. Legislative oversight is normally ensured by the parliamentary public accounts committee. The budget execution of the executive is endorsed in a parliamentary debate and becomes. the legal basis for the work of the government for the future period Limited legislative. scrutiny lack of resources capacity and leverage and poor executive follow up are likely to. PUBLIC FINANCE MANAGEMENT TOPIC GUIDE 3, hamper external oversight of public accounts However in recent years parliaments civil. society and donors have shown an increased commitment to participate in the process and. strengthen external oversight,PFM REFORMS AND ANTI CORRUPTION. PFM reforms have typically focused on achieving and securing overall economic and fiscal stability. allocative efficiency and operational efficiency2 To this end PFM reforms mostly prioritise technical. approaches to improve the performance of the PFM systems including through the integration. modernisation and automation of PFM processes revenue collection public expenditure. management and procurement systems They traditionally include measures aimed at streamlining. budget processes supporting revenue administration improving procurement processes and. strengthening external oversight While these reforms are not primarily aimed at curbing corruption. there is a broad consensus that they can help prevent and detect misuse of public resources. through streamlined processes increased transparency and stronger oversight. Recent trends in PFM reforms call for moving beyond technical reforms and paying more attention. to transparency accountability and public participation in PFM Global initiatives such as the Open. Government Partnership the Global Initiative for Fiscal Transparency GIFT and the International. Budget Partnership are working for this purpose Traditional PFM reform promoters like the World. Bank IMF OECD regional development banks and bilateral donors are also updating their. standards benchmarks and principles to put more emphasis on transparency accountability and. public participation in PFM While not specifically focused on fighting corruption such approaches. may result in new forms of cooperation between government the private sector and civil society and. create new opportunities and tools to curb corruption in PFM. 2 Managing government expenditure a reference book for transition countries p 19 20 2001 Richard Allen and Daniel. Tommasi eds Paris OECD SIGMA www1 worldbank org publicsector pe oecdpemhandbook pdf. 4 TRANSPARENCY INTERNATIONAL,GENERAL RESOURCES ON PUBLIC FINANCE. MANAGEMENT,Background papers, Public financial management and its emerging architecture a guide to public financial.
management literature for practitioners in developing countries. Simson R Sharma N Aziz I Overseas Development Institute 2011. http www odi org sites odi org uk files odi assets publications opinion files 7542 pdf. This guide provides an easy access to relevant readings related to each stage of the PFM cycle. While its focus is more on PFM than specifically on anti corruption it offers a useful overview of the. budget cycle architecture and recommends literature that describes what a sound PFM system. looks like It also highlights specific areas where there is disagreement about the best approach or. where implementation practices differ widely between countries It sheds light on the gap between. theory and practice tackling the challenges low capacity and political and economic realities pose. for the ideal PFM system Links to country examples and case studies are also provided. Evaluation of donor support to public financial management reforms in developing countries. de Renzio P Andrews M Mills Z Overseas Development Institute 2010. http www afdb org fileadmin uploads afdb Documents Evaluation. Reports PFM 20Quant 20analysis pdf, This study evaluates the results of donor support to public financial management reforms To this. end the study analyses quantitative evidence on the quality of PFM systems from a sample of 100. countries and assesses factors that may have determined cross country differences and variations. in the quality of PFM systems over time The study has aimed to answer two questions namely 1. where and why do PFM reform efforts succeed 2 where and how does external support for PFM. reform efforts contribute most effectively to their success PFM reform success is thereby. assessed mainly against the set of criteria used in the public expenditure and financial accountability. programme PEFA, Managing government expenditure a reference book for transition countries 2001. Richard Allen and Daniel Tommasi eds OECD SIGMA, www1 worldbank org publicsector pe oecdpemhandbook pdf. This book remains a highly relevant comprehensive introductory textbook to public financial. management It covers all aspects of public expenditure management from the preparation of the. budget to the execution control and audit stages It is intended to be a practical operational guide. to help countries that are designing and implementing new laws and procedures relating to public. expenditure management and to improve the transparency of budgetary procedures and. information,Governance corruption and public financial . Transparency International is a global movement with one vision a world in which government business civil society and the daily lives of people are free of corruption Through more than 100 chapters worldwide and an international secretariat in Berlin we are leading the fight against corruption to turn this vision into reality

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