Information Flow For MTEF Operation and its implication to

the Korean Government

March, 19, 2004 March, 19, 2004

Seoul, KoreaSeoul, Korea

Junghun ChoJunghun Cho

World BankWorld Bank

MTEF, FMIS and Other PS Reforms – MTEF 73% of OECD Countries 73% of OECD Countries

Different Objectives of MTEF In Countries Different Objectives of MTEF In Countries

Sweden – Fiscal SustainabilitySweden – Fiscal Sustainability

UK - Sectoral AllocationUK - Sectoral Allocation

Korea : Linking Budgetary Allocation with Korea : Linking Budgetary Allocation with

National Policy Priority National Policy Priority

MTEF, FMIS and Other PS Reforms – FMIS

Source : World Bank Experience with FMIS Projects (Dorotinsky & Cho, 2003)Source : World Bank Experience with FMIS Projects (Dorotinsky & Cho, 2003)

013

02

4

2

6

3

3

5

7

0

5

10

15

I (86-89) II (90-93) III (94-97) IV (98-02)

PERIOD

FMIS PROJECT TREND

FMIS reform Financial management reform Public sector reform

TREASURY SYSTEM

FUNCTIONALPROCESS

CENTRALBANK

DEBTM ANAGEM ENT

BUDGETM ANAG.

CASHM ANAG.

GOVT.SPENDINGAGENCIES

REVENUE COLLECTIONAGENCIES PAYING/

RECEIVINGBANKSTAXES CUSTOM S

BUDGET PREPARATION

BUDGET M ANAGEM ENT& FISCAL REPORTING

Ac.Receiv. Ac. Payable

Treasury General Ledger

AGENCYBUDGET

EXECUTION

DEBT M ANAGEM ENT

POSITIONM ANAGEM ENT

PAYROLL &PENSIONS

PERSONNELM ANAGEM ENT

TAXATION

AGENCYBUDGET

PREPARATION

CUSTOM S

Dom estic Foreign

Investm ent Current

CASHM ANAGEM ENT

AUDITINGSam ple Transactions from Governm ent System s to Auditing

BudgetGuidelines

Cash Forecasts; A llocations

COMMERCIAL

BANKS

M ACROECONOM IC

FORECASTING

BUDGETPREPARATION

BUDGETM ANAGEM ENTACCOUNTING

&FISCAL

REPORTING

CASHM ANAGEM ENT

DEBTM ANAGEM ENT

REVENUEADM INISTRATION

CIVIL SERVICE M ANAGEM ENT

AUDITING

Estim ateof

Borrowing and

Public Debt

Interest

Macro Econom ic Fram ework

Budget Proposals;old & new program s

AUDITORGAN.

Revenue Estim ates

Approved Agency Budget

CENTRALBANK(TSA)

Paym ent Instructionsto Central Bank

Report on Paym ents& Receipts to TSA

Reports on

RevenueReceipts

Information Systems Architecture for Government Fiscal Management

CENTRALOFFICE

REGIONALUNITS

ECONOM ICPOLICY

TREASURY

M INISTRY OF FINANCE

Governm entBanking Arrangem ents

Feedbackfrom

Audit

Vendors

TaxPayers

M ACRO ECONOM IC FORECASTING

MTEF, FMIS and Other PS Reforms

Sub-national Government

Sub-national Government

Sub-nationalGovernment

Sub-nationalGovernment

Sub-national Government

Sub-national Government

Formulation Execution Reporting/ Evaluation

FMIS for Fiscal Decentralization

FMIS for Performance Management

FMIS for Medium Term Expenditure Framework (MTEF) - Central

New Information Needs for MTEF Operation

Sectoral Budget

Preparation

Macro-economic

forecasting

Sectoral Ceiling

Setting for multi years

Fiscal Target

Total Expenditure

SettingFor multi

years

New sectoral

demand for t+2

(priority/cost)

Annual Budget

Formulation

Updated costestimate of

existingpolicy/program

Information Flow For Budget Formulation (1)

Macroeconomic ForecastingMacroeconomic Forecasting

Fiscal Target and Total Expenditure Setting Fiscal Target and Total Expenditure Setting

for Multi-Yearsfor Multi-Years

Sectoral Ceiling Setting for Multi-yearsSectoral Ceiling Setting for Multi-years

Annual Budget FormulationAnnual Budget Formulation

Information Flow For Budget Execution and Reporting Relatively Few Changes Relatively Few Changes MPB’s In-year access to Line Ministries’ MPB’s In-year access to Line Ministries’

Detailed Spending InformationDetailed Spending Information Information Coverage of Agencies and Sub-Information Coverage of Agencies and Sub-

national governments national governments Budget Classification and Charts of Budget Classification and Charts of

AccountAccount

Analysis of Current FMIS to Support MTEF (1) Fragmented Systems Among Ministries, Fragmented Systems Among Ministries,

Agencies, and Sub-national GovernmentsAgencies, and Sub-national Governments

Low Utilization for High-level Budgetary Low Utilization for High-level Budgetary

Decision MakingDecision Making

Lack of Capacity to Record/Monitor Lack of Capacity to Record/Monitor

Costing and Performance InformationCosting and Performance Information

Analysis of Current FMIS to Support MTEF (2)

Inappropriate Regulatory FrameworkInappropriate Regulatory Framework

- Complex budget classification and charts of - Complex budget classification and charts of

accountsaccounts

- Narrow budget coverage - Narrow budget coverage

- Inappropriate government statistics for internal - Inappropriate government statistics for internal

transferstransfers

11 Political commitment/ownership Political commitment/ownership

22 Right skills in project teamRight skills in project team

33 Proper institutional reform/changeProper institutional reform/change

44 More narrowed project focusMore narrowed project focus

55 Close project supervision by the Close project supervision by the Bank Bank

66 Coalition building with key playersCoalition building with key players

77 Flexible project managementFlexible project management

88 Comprehensive diagnostic study and Comprehensive diagnostic study and clear clear implementation planimplementation plan

99 Coordination among key agenciesCoordination among key agencies projects projects

FMIS Success Factors

Source : World Bank Experience with FMIS Projects (Dorotinsky & Cho, 2003)Source : World Bank Experience with FMIS Projects (Dorotinsky & Cho, 2003)

Implementation Strategy for Improving FMIS and MTEF Leadership and Management SupportLeadership and Management Support

Inter-Ministerial CoordinationInter-Ministerial Coordination

Institutional MindsetInstitutional Mindset

Risk of Reform FatigueRisk of Reform Fatigue