8 Fiscal and financial management
The fiscal and financial management indicator is defined as: The quality of the budgeting process and the extent to which spending decisions are informed through economic appraisal and evaluation. It is an important measure of every system of public administration. The Indicator of the Strength of Public Management Systems (ISPMS) from the World Bank (2012) state “Public sector management arrangements must also encourage fiscal and institutional sustainability as less tangible but equally critical outcomes” and “Reforms of budgetary and financial management systems … are often crucial for development outcomes”. Holt & Manning (2014) also consider that “public administration practitioners break down the functioning of the central agencies into five management systems”, including fiscal and financial management which is made up of: “planning and budgeting; financial management; and accounting, fiscal reporting and audit”. The OECD’s recommendation paper on budgetary governance (2015) also sets out ten principles for good budgetary governance which include “ensur[ing] that performance, evaluation, and value for money are integral to the budget process … [and] …manag[ing] budgets within clear, credible and predictable limits for fiscal policy”.
The fiscal and financial management indicator is made up of six metrics, an increase of three from the 2017 Pilot. The sources for the indicator are:
- The OECD’s ‘medium-term budgeting index’ [2012] and ‘performance budgeting index’ [2016].
- The World Economic Forum’s Global Competitiveness Index (WEF) [2016 2017].
- World Bank Financial Management Information Systems & Open Budget Data (WB) [2017].
- International Budget Partnership’ s Open Budget Survey (IBP) [2017].
| Metric | Source | Type | Public sector proxy | Data transformation | Weighting within indicator | Definition of the source metric (e.g. question wording) | ||
|---|---|---|---|---|---|---|---|---|
| In theme (A) | Theme (B) | Total (C=A*B) | ||||||
| Efficiency of public spending | ||||||||
| Efficiency of public spending | WEF | Business opinion survey | No | None | 100.0% | 10.0% | 10.0% | How would you rate the composition of public spending in your country? [Rated 1 (extremely wasteful) to 7 (highly efficient in providing the necessary goods and services)] |
| Transparency of public spending | ||||||||
| Composite score on the openness of budgetary publications/processes [new] | IBP | Expert assessment | No | None | 40.0% | 50.0% | 20.0% | Index of the openness of budget process [Composite score ranging from 0 to 100] |
| Overall score on the FMIS approach taken by countries [new] | WB | Expert assessment | No | None | 40.0% | 50.0% | 20.0% | Composite score derived from assessments of what information about public finances is published [Composite score ranging from 0 to 100] |
| WB data on types of public finance data published [new] | WB | Expert assessment | No | None | 20.0% | 50.0% | 10.0% | Categories of public expenditure/revenue published |
| Budgeting practice | ||||||||
| Index of medium-term budgeting practices | OECD-MT | Government assessment | No | Composite | 50.0% | 40.0% | 20.0% | Use of a medium-term perspective in the budget process [Index ranging from 0 to 1] |
| Index of performance-based budgeting practices | OECD-PB | Government assessment | No | None | 50.0% | 40.0% | 20.0% | Use of performance budgeting at the central level of government [Index ranging from 0 to 1] |
| Tables 3.6.A & 3.6.B in the original 2019 publication | ||||||||
8.1 Imputation of missing data
None of the 38 countries selected for the 2019 edition of InCiSE have completely missing data for the fiscal and financial management metrics. As a result the imputation of missing data for the fiscal and financial management metrics is based solely on the data within the indicator.
8.2 Changes from the 2017 Pilot
The fiscal and financial management indicator has seen the introduction of three new data points to increase the scope and robustness of the indicator. These include a metric on the publication of medium-term budgeting data from the World Bank into the theme of the same name and two new metrics under the economic appraisal and evaluation theme: two data points measuring the extent of external scrutiny or audit and two data points measuring the extent of transparency based on the publication of budgetary reports.