Transcript No Slide Title

Contemporary Budget Reform
in OECD Member countries
Jón R. Blöndal
Directorate for Public Governance
Santiago de Chile
27January 2003
Successful Fiscal
Consolidation
• Economic Growth
• Political Commitment to Fiscal
Discipline
• Institutional Arrangements for
Budgeting
Institutional Arrangements
•
•
•
•
•
•
•
Medium-Term Budget Frameworks
Prudent Economic Assumptions
Top-Down Budgeting Techniques
Budget Transparency
Relaxed Input Controls
Focus on Results
Accruals
Medium-Term Frameworks
• Fiscal Objectives Operationalized
•Credibility/Stability of Fiscal Policy
• Enables Managers to Plan Better
• Key Features
•Level of Detail
•Time-span
•Living Document (Reconcile Changes)
• Caution: Economic Assumptions
Economic Assumptions
• The Most Significant Fiscal Risk
• Good Working Methods
•Full Disclosure
•Sensitivity Analysis
•Comparison With Private Forecasters
•Independent Board
• “Prudency” Factors
•Canada
•The Netherlands
Top-Down Budget Process
• Pre-Set Spending Limit for Each Ministry
•Reflects Political Prioritization
•Pre-Set Limits Hamper “Auto” Increases
• Better Decision-Making
•“Ownership” of Actions
•Information Asymmetry
•Easier to Reallocate
•Reduces Game-Playing
Budget Transparency
• Significant Advances in late 80s/early 90s
–“Things are really as bad as we told you.”
• Three Elements
–Release of Budget Data
–Effective Role for the Legislature
–Effective Role for Civil Society
• OECD Best Practices
Relaxing Input Controls
• “Deregulation” in the Public Sector
• Level of Detail of Budget Appropriations
–Salary, travel, etc.
• Decentralization of HRM Function
• Common Service Provisions
–Office accommodations, etc.
• Heads of ministry/agency in best position
to manage resources effectively &
efficiently
Focus on Results
• “Quid Pro Quo” for Increased Flexibility
• Very difficult in practice
•Some more easily measured than others
•Outcomes versus outputs
•“What gets measured, gets managed”
•Information Overload
•Reliability and Consistency
•Targets
Accruals
• Financial Reporting versus Budgeting
•Selected Transactions Only
• Treatment of Unique Assets and Liabilities
•Heritage, Military, Infrastructure Assets
•Social Insurance Programs
• Valuation Methodology
• Accounting Standards-Setting
Conclusion
• All OECD Member countries are moving
in this same direction
• The OECD Journal on Budgeting
• www.oecd.org/gov/budget