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Mr. James A Chan and Mario Pessoa

. More specifically, since government is supposed to operate on a not-for-profit basis, cost is—or should be—used as a basis to set user fees—and perhaps taxes as well, if possible. Furthermore, government operations should be economical and efficient in order to keep taxes and fees as low as possible. The government of the State of São Paulo is implementing a public service cost system (PSCS) to better inform the public about the cost of public services. 1 The primary objectives are to generate savings, improve public service efficiency, strengthen budget realism


In recent years, the countries of Latin America have embraced reforms in public financial management and have made many important advances—however, many challenges remain. This book brings together IMF and IDB staff and representatives from 16 governments in the region to document these reforms, and to examine the experiences and lessons learned. It is a valuable resource for those looking at issues in public financial management.

Mr. Jack Diamond
Many emerging market economies are trying to improve their budget processes and move to performance-based budgeting. This paper first reviews the evolution of the "new" performance budgeting model, increasingly being applied in industrial countries. By identifying its main components, the tasks faced by emerging market economies when converting their present budget systems to this model are determined. It is recognized that this conversion will not be easy and will require four major reform elements. First, any existing program structure must be set in the wider context of strategic budget planning and medium-term budget frameworks. Second, this typically involves redesigning and refining existing program structures. Third, existing budget-costing systems and associated skills will probably need to be improved. Fourth, and perhaps most difficult, a new system of accountability and budget incentives needs to be introduced. For emerging market economies, these should be viewed as the prerequisites for a successful introduction of the new performance-budgeting model.
Mr. Jack Diamond

a need to redesign or refine present program structures to remove institutional and information constraints that often impede their usefulness for budget managers. Third, there is usually also a need to improve budget-costing systems, whose rather limited role in traditional budget systems needs to be expanded. Fourth, and perhaps most difficult, a new system of accountability and budget incentives needs to be introduced, thus recognizing that budget management is only one dimension of effective public resource management. II. T he R oad from O ld to N ew

Mr. Jack Diamond

Structure B. The Institutional Coverage of Programs C. Existence of an Adequate Management Information System VI. Costing Systems VII. Concluding Remarks References Boxes 1. Terminology: The Road to the New Performance Budgeting 2. Limitations of a “Bottom-Up” Planning Process 3. Connecting Planning with Budgeting 4. Process for Agreeing on Program Budget Format 5. General Guidelines on the Design of Programs 6. Attributes of a Costing System 7. Basic Steps of a Program-Based Costing System

Mr. Jack Diamond

countries have been forced to acknowledge that this aspect of their PEM systems is problematic. Three areas related to internal management control systems have generally been found weak: internal audit, management information systems, and costing systems. This section explores some of the problems faced by emerging economies in each of these areas and reviews the generally recommended solutions to these problems. First, by reviewing the nature of internal control systems, this section stresses their importance not only for an effective PEM system but also more widely for