Balancing Control and Flexibility in Public Expenditure Management
The control protocols that underlie public expenditure management have direct implications for a government's ability to pursue fiscal discipline and service delivery objectives. The literature recognizes the inherent challenge in balancing control with flexibility and that these two objectives are often in conflict with one another. This paper argues that applying a universal set of expenditure controls across all transactions naturally cannot meet both of these objectives. One the one hand, a regime with universal, tight ex ante commitment controls lends itself to prudent fiscal management but constrains the ability of service providers to react adequately to rapidly changing needs. On the other hand, loosening controls equally for all transactions would introduce fiscal risks. To overcome this conundrum, the paper argues for a paradigm shift: a purposeful policy shift that subjects high-value transactions to the full set of rigorous controls, while relaxing controls for low-value transactions that apply to important aspects of the service delivery sectors. Such controls could be built into the financial management information systems that facilitate transactions and institute these controls. However, the evidence suggests that these systems are frequently not deployed to their full potential. Flexibility is inadvertently inhibited where it is necessary without providing the controls for transactions that constitute a fiscal risk. Recognizing this problem, the paper develops a two-pronged, risk-based deployment strategy for financial management information systems: (1) deploy such systems to high-value transactions, and (2) use banking sector innovations for advance payments, such as smart cards or mobile money, to facilitate flexibility for low-value transactions without compromising the integrity of transactions or accountability.
| Main Authors: | , , |
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| Format: | Working Paper biblioteca |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019-09
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| Subjects: | PUBLIC SPENDING, FISCAL DISCIPLINE, PUBLIC SERVICE DELIVERY, PUBLIC FINANCIAL MANAGEMENT, EXPENDITURE CONTROLS, FINANCIAL MANAGEMENT INFORMATION SYSTEM, RISK MANAGEMENT, ACCOUNTABILITY, |
| Online Access: | http://documents.worldbank.org/curated/en/751041569599184245/Balancing-Control-and-Flexibility-in-Public-Expenditure-Management-Using-Banking-Sector-Innovations-for-Improved-Expenditure-Control-and-Effective-Service-Delivery https://hdl.handle.net/10986/32488 |
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| Summary: | The control protocols that underlie
public expenditure management have direct implications for a
government's ability to pursue fiscal discipline and
service delivery objectives. The literature recognizes the
inherent challenge in balancing control with flexibility and
that these two objectives are often in conflict with one
another. This paper argues that applying a universal set of
expenditure controls across all transactions naturally
cannot meet both of these objectives. One the one hand, a
regime with universal, tight ex ante commitment controls
lends itself to prudent fiscal management but constrains the
ability of service providers to react adequately to rapidly
changing needs. On the other hand, loosening controls
equally for all transactions would introduce fiscal risks.
To overcome this conundrum, the paper argues for a paradigm
shift: a purposeful policy shift that subjects high-value
transactions to the full set of rigorous controls, while
relaxing controls for low-value transactions that apply to
important aspects of the service delivery sectors. Such
controls could be built into the financial management
information systems that facilitate transactions and
institute these controls. However, the evidence suggests
that these systems are frequently not deployed to their full
potential. Flexibility is inadvertently inhibited where it
is necessary without providing the controls for transactions
that constitute a fiscal risk. Recognizing this problem, the
paper develops a two-pronged, risk-based deployment strategy
for financial management information systems: (1) deploy
such systems to high-value transactions, and (2) use banking
sector innovations for advance payments, such as smart cards
or mobile money, to facilitate flexibility for low-value
transactions without compromising the integrity of
transactions or accountability. |
|---|