Irish Fiscal Advisory Council

The government announced the establishment of the Irish Fiscal Advisory Council (IFAC) on July 7, 2011. The IFAC is mandated to provide an assessment of:
(i) the soundness of official macro-fiscal forecasts;

(ii) the appropriateness of the fiscal stance (including the government’s stated medium-term budgetary objective); and

(iii) the consistency between budgetary plans and fiscal rules (the latter are to be specified in a Fiscal Responsibility Bill by year-end).

The IFAC will submit, at least three times a year, written reports to the Minister for Finance, which will automatically be communicated to the Oireachtas within 24 hours. This effectively means that the IFAC’s reports are published with the Minister having advance notice of their content. There are no restrictions, otherwise, on the Council’s communication with the public.

The IFAC comprises five members, appointed by the Minister for Finance for initial tenures of two to four years. The members will serve in a voluntary capacity, assisted by a small secretariat including full-time economist staff. The Council has been allocated initial funding for the remainder of 2011.

Among the range of fiscal councils in Europe, the IFAC appears most similar to the Swedish Fiscal Policy Council, both in terms of mandate and funding. For instance, the IFAC is charged with assessing, rather than producing, the official macro-fiscal forecasts, which explains its relatively modest resources compared with say, the U.K.’s Office for Budget Responsibility

-Ireland: Third Review Under the Extended Arrangement - Staff Report

Government Results Act fails

The bill, known as the 2010 Government Performance and Results Modernization Act, would also have required agencies to post program performance scorecards on a single public website on a quarterly basis, the release said.

It set a first-year goal of a 10 percent reduction in the number of written reports required by previous Congresses and presidential administrations that are little used or obsolete. As Federal Times has previously reported, agency officials sometimes have to compile massive reports that are outdated as soon as they are printed.

"Taxpayers fund 44 separate programs in nine different federal departments that support workforce training, and we also pay for 17 separate initiatives across seven federal departments that deal with food safety," Warner said in the release. "We need a better system — a system that allows us to review the results of each program and evaluate its impact in addressing overall policy goals, whether it's the important work of retraining people who've lost their jobs or ensuring the safety of the food we eat."

The Obama administration has already created its own website, performance.gov, to track agency progress in meeting high-priority goals laid out in the administration's 2011 budget request. The site, available to federal managers since August, was supposed to open to the public this year. That move has now been delayed to "kick the tires a little more" and to get agency feedback, Office of Management and Budget spokeswoman Moira Mack said Friday

-House kills bill to improve agency performance

Infographic of the Day- How Laws Are Made

How Our Laws Are Made

Efficiency what?

Efficiency savings: in recent years there has been a concerted drive to reduce the costs in commodities like electricity, to professionalise property management and to make more use of shared services. Here there is a question about control – how far should control be centralised or devolved
to best make efficiency savings. Striking the right balance is difficult, but
possible, as the Institute’s recent work on IT makes clear. The second question is about how such savings translate into cash coming out of the system – to be credible it must be clear which budgets have been reduced in anticipation of these savings, and therefore which ones have to make up any shortfall should the projected efficiencies not be realised.

Source: Undertaking a fiscal consolidation: A guide to action. Institute for Government

Related:
Mark Robsinson reviews the report;

Politics are also the reason why the real tough work required for a successful fiscal consolidation usually takes within the first two budgets after a change of government. If this doesn’t happen, the sense of urgency amongst voters dissipates. Political support for consolidation falls away rapidly, with the electorate falling prey to what the London-based Institute for Government calls – in its interesting recent report Undertaking a Fiscal Consolidation – “consolidation fatigue”.

The Secret to Happiness?

David Brooks writes;

If the relationship between money and well-being is complicated, the correspondence between personal relationships and happiness is not. The daily activities most associated with happiness are sex, socializing after work and having dinner with others. The daily activity most injurious to happiness is commuting. According to one study, joining a group that meets even just once a month produces the same happiness gain as doubling your income. According to another, being married produces a psychic gain equivalent to more than $100,000 a year.

If you want to find a good place to live, just ask people if they trust their neighbors. Levels of social trust vary enormously, but countries with high social trust have happier people, better health, more efficient government, more economic growth, and less fear of crime (regardless of whether actual crime rates are increasing or decreasing).

Further Reading;
The Hidden Wealth of Nations by David Halpern

The Politics of Happiness: What Government Can Learn from the New Research on Well-Being
Derek Bok

Women Fact of the Day

Only 20 of 128 economies have equal legal rights for men and women in several important areas for entrepreneurs and workers, according to a new World Bank Group report, Women, Business and the Law 2010.

EU Financial Stability actors

OECD Economic Surveys: Euro Area 2009

People to Watch

Retired Army Lt. Col. John Nagl

Related:
Learning to Eat Soup with a Knife: Counterinsurgency Lessons from Malaya and Vietnam

Performance Budgeting in Mauritius

2009 Budget Circular

Manual for Programme-Based Budgeting (PBB)

The ideal macro-fiscal policy department?

IMF gives some suggestions for institutional strengthening of Armenian Ministry of Finance;

The Armenian authorities are taking steps to establish a strategic, coordinated, and multi-year approach to macro-fiscal policy. Recent measures include strengthening public financial management systems, further institutionalizing the MTEF, and adopting performance-based budgeting over the next few years. In the last few months, macroeconomic projections and analysis have been strengthened with the use of fiscal impulse indicators for macro-fiscal analysis during the budget preparation. However, macrofiscal policy-making could benefit from a more elaborated analytical approach within an enhanced and supportive institutional environment.

28. Many countries have relied on strong macro-fiscal policy departments to strengthen their policy framework. Best international practice suggests that an effective macro-fiscal policy department should “own” its country’s fiscal framework by helping:

-Develop the fiscal framework, through forecasting, analysis, and monitoring of other
short- and medium-term fiscal policy developments;
-Monitor the implementation of the fiscal framework, by assessing budget execution and by linking it to developments in other macroeconomic areas such as growth and inflation; and
-Protect the fiscal framework, by advising the Minister on emerging near and mediumterm risks; flagging the need to undertake corrective actions; and identifying possible alternatives.

29. The core tasks of the department should be well coordinated and carried out in close cooperation with other units within the Ministry of Finance, and relevant institutions with related responsibilities. The value added of the department would come from adopting a topdown or big-picture perspective, thus helping the work of other units in related areas:

- By performing macroeconomic analysis the department should ensure an internally consistent macroeconomic framework.

- By performing fiscal modeling, forecasting and impact analysis, the department should develop multi-year fiscal projections under the baseline of unchanged policies that allows to superimpose the impact of any expected or potential policy change, all of which could be included in budget documents. This task requires sound fiscal forecasting to examine the linkages from the real, monetary, and external sectors into the fiscal sector.

- By aligning all aspects of fiscal policy toward the achievement of the government’s economic objectives, the department should help create a consistent framework in which policies and objectives are clearly linked. The appropriate path for the fiscal aggregates within a specific time horizon can be chosen to attain objectives such as macroeconomic stability, medium-term growth, poverty reduction, and fiscal and debt sustainability. The impact of these targets on macroeconomic stability can be examined through macroeconomic analysis, while the appropriateness of the fiscal path’s financing implications can be assessed through debt and fiscal sustainability analysis. Once a consistent set of policies is determined, revenue, expenditures and debt targets can be refined. A macro-fiscal policy department plays a key role in assessing this consistency, and also in identifying fiscal risks associated with the proposed policies, through the examination of alternative scenarios and stress tests.

- By monitoring fiscal performance, the department should analyze in-year budget outcomes—financing, revenues, and expenditures; help explain deviations of outturns from plans; assess the implications of such deviations for end-year forecasts; and determine whether some in-year corrective measures are required. It should also participate in the design of such corrective policies from the analysis of their impact on the short- and medium-term. Close coordination with other departments is required to avoid duplication.

Related;
Armenia MTEF

Prioritization of Expenditures in Tanzania

Some of the institutional weaknesses for creating fiscal space;

budget classification: the country’s budget classification, reporting and accounting systems do not allow for the ready identification and monitoring of public infrastructure expenditure—part of which is either conducted outside of the central government or not systematically recorded in the government’s accounts;

project selection: a 2006 audit of procurement practices of 20 public entities found significant weaknesses, with compliance only at 39 percent of procurement regulations. Several recent high profile scandals have also highlighted the weaknesses in this area, in particular regarding the lack of transparency in the bidding process and problems enforcing large government contracts;

budget execution: in 2006-07 only about 50 percent of central and local governments’ development expenditure was executed. While the creation of the Tanzania National Roads Authority has helped to boost budget execution rates for major trunk road projects from around 50 percent in 2002-03 to over 75 percent in 2006-07, execution rates for regional and local road rehabilitation projects remain around 40 percent (Ministry of Infrastructure Development, 2007); and

regulatory frameworks: the AICD estimates that hidden fiscal costs resulting from underpricing and other inefficiencies in the power sector amounted to nearly 2.5 percent of GDP between 2001 and 2006 (Briceño, Smits, and Foster 2008).

If infrastructure investment is a key development priority, governments should look to ensure that it is given adequate emphasis in their expenditure planning and budgeting procedures. Over the past decade or so, a number of governments in both developed and developing countries looking to alter the intersectoral allocation and the impact of public expenditure have made effective use of two public financial management tools:

expenditure reviews: comprehensive program reviews designed to improve the efficiency of public expenditure and to create fiscal space on the expenditure side of the budget have become a regular feature of the budget process in countries such Canada, Chile, France, the Netherlands, South Korea and the United Kingdom. Box 1 discusses the UK experience with using expenditure reviews to put greater emphasis on public investment within their resource allocation process over the past decade;

-medium-term expenditure frameworks (MTEFs) which enable governments to “lock in” savings identified in lower productivity/priority sectors and reallocate them to higher productivity/priority sectors over a period of years. MTEFs are a now a common feature of budgeting systems in Africa and a number of countries have made effective use of them to alter the sectoral allocation of expenditure over a number of years. For example, in Uganda, the government’s most recent National Budget Framework Paper envisages a real reduction in expenditure on security, justice and governance from 39 percent of the national budget in 2008 to 36 percent in 2011 to allow for a scaling up of pro-poor expenditure on rural development, energy, road infrastructure and human development over the next 3 years.

An Anti-corruption Ministry?

An interview with Paraguayan President Fernando Lugo;

Transparency Watch: How do you plan to institutionalise the fight against corruption?

Fernando Lugo: First, as a basis, by auditing and establishing permanent controls by and within each of the government’s departments. Additionally, through the creation – which will be finalised at the appropriate time – of a National Anti-corruption Ministry, which will set the political and technical norms to elevate such a battle to the most institutionalised level possible.

via PSD Blog

Indonesia: Progress in Fiscal Institution Building

Recommended reading- Indonesia: Selected Issues, chapter IV;

Progress has been made in strengthening technical capacity at the central government level. Within the Ministry of Finance (MoF), the Fiscal Policy Office (FPO) is now fully operational with a mandate for macro-fiscal projections and analysis, including assessments of fiscal risks. The FPO now prepares fiscal risk statements that are included in the annual budget documents—making Indonesia one of the pioneers in fiscal risk analysis among emerging market economies. Operational management of debt-related risks is undertaken by the Directorate General (DG) for Debt Management, which is responsible for both domestic and external debt management.

Despite some progress, parliament’s technical capacity for fiscal policy analysis is still limited. Parliament’s (DPR) budget committee plays an important role in the budget approval processes, though with excessive emphasis on details which are usually seen as being within the province of the executive (such as close scrutiny of macroeconomic assumptions and detailed review of expenditure items—as opposed to scrutiny at a more aggregated level found in other countries). In contrast with this wide ranging mandate, the DPR had limited qualified technical staff and few with specializations. Some improvement in these areas has been achieved through: (1) increasing the number of technical staff; and (2) greater specialization of staff through the establishment of specific parliament commissions (e.g., the economic commission). These commissions are now able to provide some analytical and technical support to members of parliament, though the DPR’s effectiveness in budget scrutiny and oversight is still inadequate. Intense involvement of the DPR at the pre-budget presentation stages remains (6–7 months before the new fiscal year), but there is only limited focus on medium-term budget issues and on the results of policies embedded in the annual budget. The 2003 State Finances Act calls for an unusually early date for approval by parliament of the annual budget law (2 months before the new fiscal year); nonetheless, DPR committees continue to be involved in budget approval after the annual budget law has been adopted in plenary session. The DPR’s follow-up on the external audits of the Supreme Audit Institution (BKP) remains weak.

Progress has been made in improving the quality of government accounts, but is still incomplete. The adoption of government cash management regulations in July 2007 was an important step in improving the transparency of government banking arrangements. The regulations strengthen the Minister of Finance’s powers to consolidate government bank accounts. On this basis, the MoF conducted a census of government bank accounts operated by ministries and budget users outside treasury control. The ensuing ministry-by-ministry analysis of accounts revealed that over 20,000 government accounts existed. Some of these off-budget bank accounts have either been closed or integrated with the treasury. This was a sizeable step towards establishing an operational treasury single account (TSA). However, there are still a few impediments to the establishment of a TSA. In particular, government deposits held at Bank Indonesia (BI) are poorly remunerated, which impedes the development of active cash management (since the opportunity cost of idle government deposits is small). Transparency also improved following the incorporation of the regional development and investment accounts into financial reports and budget documents. Progress in integrating the operation of other extrabudgetary funds in the budget has been limited

The disclosure of fiscal information to the public has improved significantly.
Several recent amendments to ministerial decrees should help improve fiscal data quality and transparency. In particular, the chart of accounts now requires that the budget, in-year fiscal reports, and annual financial statements use the same terminology, which should simplify budget monitoring. The publication of a comprehensive fiscal risk statement accompanying the annual budget document significantly improves the transparency of fiscal policies and associated risks. In this context, improved reporting of information by SOEs should enable the FPO’s risk management unit to better assess risks for selected key SOEs. The reporting of information on central government debt is now comprehensive and timely, and key contingent liabilities are also disclosed in the annual fiscal risk statement (including those related to public-private partnerships). However, little progress has been made on reporting general government debt (though local government debt remains negligible), and debt accumulated by public enterprises.

Early progress has been achieved in strengthening internal and external audit bodies and in fighting corruption among public officials. The BPK mandate has been strengthened by the adoption of a 2006 law (and associated decrees in 2007). BPK staff headcount has been significantly increased (currently 6,000 staff covering 28 provinces) and training has been improved in both the IG and BPK, though needs remain significant. However, both the MoF’s IG and BPK are experiencing difficulties in accessing taxpayers data needed to investigate potential misconduct of tax officials owing to taxpayers privacy concerns, even though the law provides both institutions such access. Memorandum of understandings between the MoF and the internal and external auditors to address this issue are under discussion. Finally, the role of the Financial and Development Supervisory Agency (BPKP) as an internal audit body has not been reviewed—BPKP is part of the president’s office and has jurisdiction on central government finances. However, it shares internal audit responsibilities related to ministries with the IG, with an unclear distinction between their mandates.

Doing Business beauty contest

Doing Business 2009 - Five years of reforms;

This year's top reformer is...drum roll please...Azerbaijan! Azerbaijan improved on 7 out of 10 of the indicators tracked by DB and moved up 64 slots in the overall rankings

Prime MInister fired for cooking

Thai Prime Minister Samak Sundaravej has been ordered to resign after being found guilty of violating the constitution over a TV cookery show.

His entire cabinet has also been ordered to step down.

Mr Samak was found to have violated a ban on ministers having outside interests by taking money from a private company to host a TV show...

In court in Bangkok, Judge Chat Chonlaworn said that Mr Samak had "violated Article 267 of the constitution" and that "his position as prime minister has ended".

-Court says Thai PM 'must resign'

FedFlix?

FedFlix is a joint venture with the National Technical Information Service (NTIS). Each month they send us government videotapes. We upload them to the Internet Archive and YouTube, then send the government back their videotapes and a digital copy for their files. No cost to them, more data for all of us

There's no substitute for integrity of public officials

Quote of the Day;

Even when developed to the ultimate stage of perfection, governmental accounting cannot become a guaranty of good government. At best, it can never be more than a valuable tool for promotion of sound financial management. It does not offer a panacea for all the ills that beset representative government; nor will it fully overcome the influence of disinterested, uninformed citizens. It cannot be substituted for honesty and moral integrity on the part of public officials; it cannot eliminate the demands of selfish interests, whether in the form of individual citizens, corporations, or the pressure groups which always abound to influence government at all levels.

-(Mikesell, 1956: 10), (cited in Wescott, 2008)

Explainer on Budgeting during the Presidential transition

Budgeting During Transition

Quote of the Day

‘We might hope to see the finances of the Union as clear and intelligible as a merchant’s book, so that every member of Congress, and every man of any mind in the Union, should be able to comprehend them, to investigate abuses, and consequently to control them.’

-Thomas Jefferson writing to his Secretary of the Treasury in 1802, cited in Walker 2004:10.

(cited in Carlos Santiso 2005)