Managing and Controlling Extrabudgetary Funds, Issues 2006-2286
International Monetary Fund, Dec 1, 2006 - Business & Economics - 29 pages
This paper addresses issues relating to the establishment and financial management of extrabudgetary funds (EBFs), a large group of government entities that on average accounts for 40 to 45 percent of central government expenditure-two-thirds of which represents social security funds-in countries at various stages of development. If improperly designed and managed, EBFs can undermine effective fiscal control. However, they also bring potential benefits in the form of greater autonomy of decision-making in countries with well-established governance and financial management systems that have applied the "agency model" of devolved public management and fiscal control. The paper develops a typology of EBFs and argues that EBFs are frequently created because of failures in the budget system and political economy factors that need to be recognized and, where possible, corrected. The paper recommends that data on EBFs be consolidated within a unified system of fiscal reporting and proposes an analytical framework that governments might use to evaluate the effectiveness and utility of their EBFs.
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Why Do EBFs Exist?
The Problems Created by EBFs
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administration agency model allocation annual budget appropriate Armenia assets benefit principle budget documents budget process budget system failures budgetary failures Bulgaria central government expenditures classified commercialized or privatized concept consolidated budget context countries for data criteria data on EBFs defined definition developing countries earmarked revenues earmarked taxes EBFs exist economic efficiency entities environmental fund example external audit extrabudgetary accounts extrabudgetary activities Extrabudgetary funds extrabudgetary transactions financial management arrangements financial management system fiscal discipline fiscal policy fiscal reporting fiscal tables funds established GFSM governance and financial HM Treasury hypothecated IMF's impact incentive maintenance mechanisms microeconomic ministry of finance nondepartmental public body nonprofit institutions nonrenewable resource OECD countries operations overall oversight paper percent political economy factors principle of taxation priorities problems public financial management public sector rationale reform requirements road funds separate social security funds specific transition and developing transparency unified budget United Kingdom World Bank