Balancing Control and Flexibility in Public Expenditure Management : Using Banking Sector Innovations for Improved Expenditure Control and Effective Service Delivery
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 co...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| 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 http://hdl.handle.net/10986/32488 |
| 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. |
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