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7 BUDGET REFORM AND DISSEMINATION OF INFORMATION BACKGROUND ON REFORMS This chapter extends the earlier discussion in chapter 5 and elsewhere in the book of budgeting and financial management systems reform. A common fallacy among practitioners and academics alike has been to equate the topic with progress toward achievement of only program or performance-type budgeting. In that “reform” has come to mean this kind of advanced budgeting in the minds of many people, it may have actually worked against the more needed budget reforms that can increase the efficacy of public expenditures.We often forget that the earliest reform efforts and many underway in developing and transitional countries related to accounting and reporting of government expenditures. Relating expenditures to actual program results beyond formal budget documents is considered science fiction by many practitioners. But the perception still exists that this is what the field is all about. Fundamental budget reform really means having budgets that cover all expenditure types and revenue sources, and getting expenditure classifications right so that they measure what is actually received in revenues and spent over the fiscal year. Not very exciting stuff but that is from where reforms must start. In a historical and institutional sense, reforms are shaped by the problems and cultural values of the time and by the successes/failures of past reform efforts. Prior budget and policy commitments logically constrain future commitments (a major type of the “path dependency” noted in the institutional economics literature ). More importantly, existing systems of law and the values they represent can predetermine the framework for reform. For example, the civil code system found in most transitional and developing countries places a high premium on rules and compliance with them before action can be permitted. If it isn’t explicitly authorized , one must presume it to be prohibited under this pervasive cultural-legal 207 system.This “state-centered dominance of public law” (Stillman 2002, 20, cited in Wright and Nemec) profoundly affects the behavior of public managers and especially budget managers and reformers. For fiscal managers in civil law–based countries, matters must be carefully planned and scripted by law or permission is withheld for budget modifications, for budget supplements, new programs, and even for the installation of new treasury and accounting systems. Since this is difficult to do in practice, the operational systems are plodding and lethargic.They are hard to change.They force managers in many cases either to do nothing or to circumvent the law. Only actions specifically authorized by law are permitted. By contrast, common law areas, such as the United States and Commonwealth countries operate from a different premise—laws derive from precedent and are driven by practice. Actions are presumed to be permitted unless explicitly prohibited. Budget formulation and execution is more of a matter of management discretion than legal compliance.There is more flexibility and discretion in budget formulation and management systems and this can encourage professionalism, innovation, and program entrepreneurship.Without sound fiscal controls, of course, it can and has encouraged misappropriation of funds and abuse of power. Years ago, Schick distinguished control, management and planning reforms without implying any progression or evolution (Schick 1966). Early control reforms in the nineteenth century (United States) simply attempted to get accounting control of budgets and to add up the deficits—corruption was a big problem in the early days of modern state budgeting.The economic classification was a reform over previous systems that amounted to one large slush fund or “other” category for politicians to play with. As will be discussed further below, Nigeria used a homegrown classification system that allowed for large amounts of “slush” as recently as 2003.The U.S. 1971 “current services budget” was a reform to the concept of the baseline needed for annual preparation. For discretionary programs (not mandated by law, such as social security and other entitlements), MOFs and the U.S. OMB need estimates of inflation-adjusted line ministry budgets that include workload changes but ignore policy changes (Axelrod 1988, 36).They also require that departmental or ministry expenditure requests be calculated in nominal amounts (un-adjusted for inflation) that include at the line ministry level after policy changes. Before this reform, budget “bases” were variously defined as past year’s planned budget (not approved!) or actual expenditures (when it takes about two years to audit yearly accounts!).This led to loss of control over the budget and the initial preparation and approval stages. In most places, the base became the...

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