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Key Text Understanding and Reforming Public Expenditure Management

Author: Department for International Development
Date: 2001
Size: 82 pages (954 KB)

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Summary

What is the best way forward for public expenditure management (PEM)? How does the whole system fit together? These guidelines by Oxford Policy Management seek to support Department for International Development (DFID) advisers in engaging with partner governments about PEM. They are intended to give the reader a sense of the implications of different aspects of the system for the pacing and sequencing of reforms.

In recent years, there has been a dramatic surge of interest in public expenditure issues among governments, development agencies and the wider public. Governments are increasingly realising the importance of public expenditure as a tool for achieving their objectives, particularly in the area of poverty reduction. Countries with similar incomes and growth over the past three decades have seen significantly different impacts on poverty. These differences partly reflect divergences in the ability of governments to direct resources to activities to support the poor. This is compounded by variations in the efficacy of delivering public services, especially basic social services to the poor. The answer does not lie only in spending allocations: The policy and institutional framework for expenditure management and service delivery is often of equal, or greater, importance.

PEM is the way in which public resources are allocated and managed in pursuit of fiscal discipline, strategic prioritisation and value for money. In addition:

Fiscal discipline is often the priority but methods for achieving fiscal discipline can sometimes undermine the other objectives
Any analysis of a PEM system must take the budget process, policy process and institutional arrangements into account
Policy review and strategic planning set the framework for budget preparation and execution while monitoring and reporting provide control and information to feed into the next budget process
At any one time three or more budget cycles will be in flow, as most budget processes have six generic interactive stages
Three key relationships underpin the budget process: (1) The legislature and executive, (2) the executive and Ministry of Finance, and (3) Ministry of Finance and spending ministries.

Governments are increasingly defined and judged by the way they manage public expenditure. DFID’s experience has highlighted some key lessons for project design, resources and management arrangements:

Always use an Information System Adviser to advise DFID and the government, if they are willing, throughout the whole of the project cycle
Consider the underlying design of the system, particularly whether it should comprise one system or several stand-alone systems
Ensure a very clear separation between the consultants advising the government on systems and the contractors implementing the systems
Advise government to contract one supplier to deliver the working system in order to ensure that government is not involved in disputes over the allocation of blame if things go wrong
Encourage government to develop the capacity to manage and maintain the system, and consider the organisational changes that the new system requires. Restructuring is often necessary to reflect changes in roles and responsibilities
Consider sustainability: In terms of local support for hardware and software, the availability of a sufficient number of qualified staff in government, and also related recurrent cost implications.

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Source: UK Department for International Development, 2001, 'Understanding and Reforming Public Expenditure Management: Guidelines for DFID,' DFID, London
Author: Department for International Development (DFID), http://www.dfid.gov.uk