## _cr0542

## Source details

**Canonical URL:** [_cr0542](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2005/_cr0542.pdf)

## Other formats

- [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2005/_cr0542.pdf.md)
- [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2005/_cr0542.pdf.json)

---

### Background and purpose
- First fiscal ROSC issued in October 1999; experimental and based on a self-assessment and 1999 Article IV mission staff commentary.
- 2001–2003: short updates on fiscal transparency practices and ROSC recommendations.
- 2004 Article IV consultation reviewed developments to update practices and implementation of earlier ROSC recommendations.
- This 2004 update focuses on central government fiscal reporting and public expenditure issues pending a complete revision of the 1999 fiscal ROSC planned for 2005.
- Mission often did not have the opportunity to verify and cross-check information provided by the authorities; local governments are not covered unless indicated.

### Progress since 1999: scope and achievements
- Key 1999 ROSC recommendations:
  - Clarify treatment of state enterprises, the investment budget, quasi-fiscal activities, and state financial assets.
  - Provide a clear statement of the accounting basis underlying the budget.
  - Hold parliamentary hearings on audited financial statements to bolster oversight.
- Four assessed areas: clarity of roles and responsibilities; public availability of information; open budget preparation, execution, and reporting; independent assurances of integrity.
- Progress achieved:
  - Publication of tax expenditures of central government.
  - Reporting on guarantees, share participation, and transfers to public entities.
  - Limiting scope of and improving reporting on extra-budgetary funds.
  - Improved availability of information on the budget, taxes, public debt, and civil service remuneration through government websites and other channels.
  - Greece subscribed to the IMF’s SDDS program in November 2002.
  - Participation in the data module of the Report on the Observance of Standards and Codes (the data ROSC) in 2003.
- Significant 2004 development: government “fiscal inventory” with Eurostat cooperation led to substantial changes in fiscal reporting methodology agreed with Eurostat and upward revisions to deficit and debt figures for 1997–2003 and no-policy change expectations for 2004 and future years.

### Fiscal data revisions: magnitude, causes, and implications
- Magnitude and timing:
  - In the period 2000 to 2003 the deficit for each year was increased by more than two percentage points (2.9 percent in 2003).
  - General government debt increased by more than 7 percentage points.
  - In the 1997–99 period the deficit revisions have been slightly under two percentage points per year.
  - Over the period 1997–2003 the deficit figures were never below the Maastricht limit of three percent per year.
- Primary causes of deficit revisions:
  - Off-budget recording of military expenditure financed through special defense borrowing.
  - Overestimation of the surpluses of social security funds (previously estimates were based on antiquated and partial survey methodology).
  - Misreporting of EU funded capital transfers as capital injections.
  - Non-reporting of capitalized interest payments.
  - Misclassification of the expenditure of the Greece’s privatization agency, DEKA.
  - Assignment of tax revenues to the wrong year (a factor in 2003).
- Primary causes of general government debt upward revision:
  - Non-recording of capitalized interest obligations.
  - Inadequate debt consolidation over government.
  - Misclassification of social security funds.
  - Non-recording of debt after calling of guarantees.
- Eurostat (report of November 22, 2004) indicates all major issues resolved with Greek authorities, while a number of smaller technical issues still require clarification.
- Implication: the magnitude of revisions calls into question adequacy of public expenditure management systems and systemic/institutional recording, control, and verification mechanisms.

### Clarity of roles and responsibilities — findings and issues
- Progress:
  - Separation of government from non-government functions since joining the EU; consistent legal framework developed.
- Remaining problems:
  - Organizational fragmentation of public expenditure management functions between and within institutions causing uncertainty about responsibility and accountability and coordination/communication problems.
  - Pre-audit of central government expenditure divided among internal line ministry audit units, the General Accounting Office (GAO) deconcentrated control units, and the Court of Audit — largely procedural/legalistic and broadly similar executive-focused control processes.
  - Proposal for a fourth control organization in the GAO of a more investigative nature; usefulness depends on clearly distinct function and may be preferable to expand responsibilities of an existing service.
- Debt management:
  - Public Debt Management Agency (PDMA) has modernized maturity and risk management.
  - Accounting and reporting for debt management retained by the GAO; GAO-managed component was a source of misreporting in Eurostat revisions — lack of role clarity contributed to reporting weaknesses.
- Privatization:
  - Policy development by directorate for privatization in Ministry of Economy and Finance (MEF); implementation by both the directorate and DEKA; reporting by GAO.
  - Recommendation: concentrate all privatization tasks in one agency/directorate responsible for reporting to the minister and parliament and audited by the Court of Audit.
- Court of Audit:
  - Does not audit public debt reporting nor routinely check appropriate translation of Eurostat fiscal reporting methodology into GAO practices when approving central government annual account.
  - Does limited or only partial audits of social security funds and local government.
  - Institutional strengthening and resource review warranted if Court’s mandate is expanded.
- Performance measurement and value-for-money evaluation:
  - Almost no progress; no assigned institutional roles.
  - Recommendation: build expertise in line ministries, GAO, and Court of Audit; initiate performance measurement/analysis in GAO to support allocative decision-making and efficiency gains; Court of Audit to eventually undertake full range of external audit activities including performance audit across public sector.

### Public availability of information — improvements and gaps
- Improvements:
  - Increased reporting on tax expenditure budget, guarantees, share participation, and transfers to public entities.
  - Improved timeliness and adherence to release calendars over the last two years.
  - MEF improved its website and issued ministerial directives to improve responsiveness in providing information to the public.
- Remaining weaknesses:
  - Eurostat revisions exposed past weaknesses in key areas despite some basic data quality/timeliness improvements.
  - Little improvement in providing policy- and program-oriented information: budget policy statements are general; ministries do not provide detailed policy-based descriptions of spending plans.
  - Budget presentation is input-cost oriented and lacks programmatic structure and program-level costing with detailed policy-based targets — normative practice in most OECD countries at central government level.

### Open budget preparation, execution, and reporting — weaknesses and reform directions
- Current weaknesses:
  - Budget lacks clarity and does not support policy analysis or accountability; purposes of spending are not apparent despite detailed itemization.
  - Execution reporting limited to comparisons of actual spending versus budgeted amounts without assessment of outcomes or value for money.
  - Budget lacks a program structure and multi-year perspective:
    - Appropriations are not made by program and contain no statements of objectives or goals.
    - No legislative connection between funds and specific program purposes; programmatic assessment of efficiency and effectiveness not possible.
    - No multi-year budgetary framework, although MEF publishes semi-annual multi-year macro-fiscal forecasts that are top-down and aggregated with minimal connection to annual budget formulation.
  - Accounting, classifications, and reporting need changes to improve consistency, comprehensiveness, and transparency.
  - MEF considering moving from cash to accrual accounting; no final decision — authorities aware full accrual change will take time and are considering intermediate approaches.
  - GAO implementing a new chart of accounts on a pilot basis linking Budget and Treasury line divisions with domestic software, intended to eventually link main ministries and automate slow/manual procedures.
- Specific transparency shortfalls:
  - Excludes substantial part of defense spending and other off-budget spending through extrabudgetary special accounts.
  - Ordinary and investment budgets not integrated to show overall spending plans.
  - Weak reporting on preparation, execution, and completion of investment projects; expenditure data aggregated and provides insufficient insight into project purpose, societal impact, efficiency, or cost-effectiveness.
  - Investment project selection lacks objective standardized screening by MEF using modern methodologies such as cost-benefit analysis.
  - Existence of extrabudgetary and special purpose accounts compromises transparency; cash positions of some reported but detailed revenue/expenditure flows not disclosed; Court of Audit indicates number of special purpose accounts involving public funds is substantially greater than reported in budget documentation.
- Harmonization with ESA95:
  - Deviations from ESA95 in areas such as definition of capital transfers versus equity participation, classification of guarantees to loss-making enterprises, treatment of EU funds in the investment budget, and inclusion of all defense expenditure in the budget.
- In-year reporting: improving for central government but further progress needed, especially for social security sector.

### Independent assurances of integrity — credibility and institutional independence
- Need for independence to enhance credibility of fiscal data providers.
- Politicization of top technical administrative functions has undermined technical independence of key institutions.
- Specific examples and recommendations:
  - National Statistical Service of Greece (NSSG): credibility would be enhanced if made an independent agency outside the MEF.
  - MEF budget data: credibility could be enhanced by independent review of underlying assumptions by an independent agency.

### The Court of Audit: role, risks, and recommendations
- Role and functioning:
  - Court of Audit provides assurances on regularity and legality of the budgetary process.
  - Functioning modeled on the French auditing system where the Court is part of the judicial system.
  - Heavily involved in the pre-audit of all non-regular expenditure of central government.
- Potential weakness:
  - Heavy pre-audit involvement may compromise the Court’s ex-post audit, as pre-audit implies assessment of the Court’s own actions.
  - Many countries have eliminated external pre-audit of expenditure, making pre-audit the sole responsibility of the Executive.
  - If external pre-audit is retained in Greece, there should be assurances that the Court of Audit can maintain adequate independence between its pre- and post-audit activities.
  - The Court maintains the pre-audit, focusing on the legality of the payment obligation, is only an extension of its post audit function, which focuses on the execution of the payment order.

### Social security sector monitoring and reporting
- Sector scale and current arrangements:
  - Greece has a large social security sector absorbing more than 12 percent of GDP.
  - Monitoring, control, and consolidated reporting are shared by the Ministry of Labor and Social Security (MLSS), the GAO and the NSSG.
  - GAO monitoring is limited to Funds that receive grants from the central government.
  - The MLSS reports on the social security sector with a considerable time-lag, and only on an annual basis.
  - Until recently, the NSSG provided estimates to Eurostat based on an inappropriate survey methodology.
- Recommendations:
  - Substantially improve monitoring and control to meet fiscal transparency and EU reporting requirements.
    - Regular consolidated report of the operations of all social security funds, at least quarterly, both to the MLSS and the MEF.
    - Regular consolidated reporting would allow developments in this sector, which is under full regulatory control of central government, to be incorporated in fiscal and expenditure management decisions.
  - Improved arrangements agreed between Eurostat and NSSG for surveying annual and quarterly realization figures of the sector; these data should be shared with GAO and MLSS to substitute for their limited monitoring of the sector.
  - Fiscal transparency would be enhanced if a comprehensive, prospective report on the social security sector would be added in the budget documentation, and a consolidated picture of the general government for the coming year would be presented to Parliament.

### IMF staff assessment and priority recommendations
- Overall assessment:
  - Recent efforts to improve fiscal transparency have been major and in line with EU requirements, but important processes and institutional issues still hinder attainment of transparency comparable to other EU countries.
  - Previous ROSC updates have noted initiatives: medium-term budget frameworks; improved budget preparation procedures; analysis of fiscal risks; an improved accounting system; and strengthened audit procedures.
  - The full ROSC reassessment proposed for 2005 will provide an opportunity to examine these issues in greater depth.
- Key findings and policy recommendations on budget process and management:
  - Reorient budget management toward program structure; current system concentrates on economic categories and detailed line items masking policies and programs.
  - Adopt a multi-year budget framework to assess sustainability of current fiscal policies and to judge fiscal space for future measures.
    - Multi-year projections based on current policies are particularly relevant for Greece given the need to chart fiscal consolidation.
    - Publish a fiscal risk analysis with the budget, including realistic specifications of risks inherent in Greece’s many types of loan guarantees and risks from public-private partnerships.
  - Make the budget more comprehensive:
    - Include all spending on defense in the budget (without compromising national security).
    - Include all other off-budget spending in budget totals.
    - Gradually integrate the ordinary and investment budgets to improve transparency of government expenditure plans.
    - Manage investment expenditure with attention to selection criteria, monitoring, and performance assessment.
  - Transparent and efficient budget execution requires closing all special accounts and existence of a Treasury Single Account (TSA) that truly captures the government’s overall cash position.
    - Providing an overview in budget documentation of liquidity held in special accounts is a useful first step, but does not reveal the size or nature of gross inflows and outflows of these accounts.
  - Provide a mid-year report on budget implementation.
  - Move internal controls away from a focus solely on legality of resource use toward emphasis on efficiency and effectiveness.
    - Reform the internal control structure characterized by layers of detailed input controls; overlap in pre-audit functionality is wasteful and inefficient and not in line with OECD best practice.
    - Court of Audit should extend its work into policy-sensitive areas, including value for money audits.
- Accounting, reporting, and debt management recommendations:
  - Develop a more integrated accounting approach that can accommodate accruals while recognizing national fiscal data will probably need to remain on a cash basis for the time being.
  - GAO must harmonize national fiscal data with Eurostat definitions and instructions (ESA95).
    - Examples needing improvement: definition of capital transfers versus equity participation; classification of guarantees to loss-making enterprises; treatment of EU funds in the investment budget; inclusion of all defense expenditure in the budget.
  - Delineate debt management and reporting from fiscal management and reporting.
    - Concentrate debt management tasks in one agency to aid coordination, concentration of expertise, transparency, and data integrity.
    - Integration of debt functions appears to have been the original intention behind legislation creating the present PDMA; supporting PDMA’s independent position in legislation should provide a positive signal for financial markets and Eurostat.
- Institutional structure and independence:
  - Examine need for further rationalization of the MEF’s organizational structure to reduce fragmentation, clarify individual roles, and improve accountability.
  - Reduce politicization of top technical administrative functions to safeguard technical independence of key institutions.
    - Grant independence to the NSSG from the MEF given past fiscal data problems.
  - Enhance credibility of MEF-reported budget data by establishing an independent agency—possibly reporting directly to Parliament—to review assumptions, inputs, and models used by agencies within the ministry and provide an independent assessment of budget estimates.
    - Alternative: a private agency or university could supply some independent evaluation of budget assumptions.

*Source: _cr0542 - Introduction; IMF Staff Commentary (excerpts).*

### Introduction

### _cr0542 - Introduction

### Background and purpose
- First fiscal ROSC issued in October 1999; experimental and based on a self-assessment and 1999 Article IV mission staff commentary.
- 2001–2003: short updates on fiscal transparency practices and ROSC recommendations.
- 2004 Article IV consultation reviewed developments to update practices and implementation of earlier ROSC recommendations.
- This 2004 update focuses on central government fiscal reporting and public expenditure issues pending a complete revision of the 1999 fiscal ROSC planned for 2005.
- Note: the mission often did not have the opportunity to verify and cross-check information provided by the authorities; local governments are not covered unless indicated.

### Description of progress since 1999
- Key recommendations in 1999 ROSC:
  - Clarify treatment of state enterprises, the investment budget, quasi-fiscal activities, and state financial assets.
  - Provide a clear statement of the accounting basis underlying the budget.
  - Hold parliamentary hearings on audited financial statements to bolster oversight.
- Four main areas covered (and assessed): 
  - Clarity of roles and responsibilities;
  - Public availability of information;
  - Open budget preparation, execution, and reporting;
  - Independent assurances of integrity.
- Progress achieved:
  - Publication of tax expenditures of central government.
  - Reporting on guarantees, share participation, and transfers to public entities.
  - Limiting scope of and improving reporting on extra-budgetary funds.
  - Improved availability of information on the budget, taxes, public debt, and civil service remuneration through government websites and other channels.
  - Greece subscribed to the IMF’s SDDS program in November 2002.
  - Participation in the data module of the Report on the Observance of Standards and Codes (the data ROSC) in 2003.
- Significant 2004 development: government “fiscal inventory” with Eurostat cooperation that led to substantial changes in fiscal reporting methodology agreed with Eurostat and upward revisions to deficit and debt figures for 1997–2003 and no-policy change expectations for 2004 and future years.

### Fiscal data revisions: scale, causes, and implications
- Magnitude and timing:
  - In the period 2000 to 2003 the deficit for each year was increased by more than two percentage points (2.9 percent in 2003).
  - General government debt increased by more than 7 percentage points.
  - In the 1997–99 period the deficit revisions have been slightly under two percentage points per year.
  - Over the period 1997–2003 the deficit figures were never below the Maastricht limit of three percent per year.
- Primary causes of deficit revisions:
  - the off-budget recording of military expenditure financed through special defense borrowing
  - overestimation of the surpluses of social security funds (previously estimates were based on antiquated and partial survey methodology)
  - the misreporting of EU funded capital transfers as capital injections
  - non-reporting of capitalized interest payments
  - misclassification of the expenditure of the Greece’s privatization agency, DEKA
  - assignment of tax revenues to the wrong year (a factor in 2003)
- Primary causes of general government debt upward revision:
  - non-recording of capitalized interest obligations
  - inadequate debt consolidation over government
  - misclassification of social security funds
  - non-recording of debt after calling of guarantees
- Eurostat (report of November 22, 2004) indicates all major issues resolved with Greek authorities, while a number of smaller technical issues still require clarification.
- Implication: the magnitude of revisions calls into question adequacy of public expenditure management systems and systemic/institutional recording, control, and verification mechanisms.

### Clarity of roles and responsibilities — findings and issues
- Progress in separating government from non-government functions since joining the EU; consistent legal framework developed.
- Remaining problems:
  - Organizational fragmentation of public expenditure management functions between and within institutions causing uncertainty about responsibility and accountability and coordination/communication problems.
  - Pre-audit of central government expenditure divided among internal line ministry audit units, the General Accounting Office (GAO) deconcentrated control units, and the Court of Audit — largely procedural/legalistic and broadly similar executive-focused control processes.
  - Proposal being prepared for a fourth control organization in the GAO of a more investigative nature; usefulness depends on clearly distinct function (e.g., evaluation of efficiency and effectiveness) and may be preferable to expand responsibilities of an existing service.
- Debt management:
  - Public Debt Management Agency (PDMA) has modernized maturity and risk management.
  - Accounting and reporting for debt management retained by the GAO; GAO-managed component was a source of misreporting in Eurostat revisions — lack of role clarity contributed to reporting weaknesses.
- Privatization:
  - Policy development by directorate for privatization in Ministry of Economy and Finance (MEF); implementation by both the directorate and DEKA; reporting by GAO.
  - Recommendation: concentrate all privatization tasks in one agency/directorate responsible for reporting to the minister and parliament and audited by the Court of Audit.
- Court of Audit:
  - Does not audit public debt reporting nor routinely check appropriate translation of Eurostat fiscal reporting methodology into GAO practices when approving central government annual account.
  - Does limited or only partial audits of social security funds and local government.
  - Institutional strengthening and resource review warranted if Court’s mandate is expanded.
- Performance measurement and value-for-money evaluation:
  - Almost no progress; no assigned institutional roles.
  - Recommendation: build expertise in line ministries, GAO, and Court of Audit; initiate performance measurement/analysis in GAO to support allocative decision-making and efficiency gains; Court of Audit to eventually undertake full range of external audit activities including performance audit across public sector.

### Public availability of information — improvements and gaps
- Improvements:
  - Increased reporting on tax expenditure budget, guarantees, share participation, and transfers to public entities.
  - Improved timeliness and adherence to release calendars over the last two years.
  - MEF improved its website and issued ministerial directives to improve responsiveness in providing information to the public.
- Remaining weaknesses:
  - Eurostat revisions exposed past weaknesses in key areas despite some basic data quality/timeliness improvements.
  - Little improvement in providing policy- and program-oriented information: budget policy statements are general; ministries do not provide detailed policy-based descriptions of spending plans.
  - Budget presentation is input-cost oriented and lacks programmatic structure and program-level costing with detailed policy-based targets — normative practice in most OECD countries at central government level.

### Open budget preparation, execution, and reporting — weaknesses and reform directions
- Current weaknesses:
  - Budget lacks clarity and does not support policy analysis or accountability; purposes of spending are not apparent despite detailed itemization.
  - Execution reporting limited to comparisons of actual spending versus budgeted amounts without assessment of outcomes or value for money.
  - Budget lacks a program structure and multi-year perspective:
    - Appropriations are not made by program and contain no statements of objectives or goals.
    - No legislative connection between funds and specific program purposes; programmatic assessment of efficiency and effectiveness not possible.
    - No multi-year budgetary framework, although MEF publishes semi-annual multi-year macro-fiscal forecasts that are top-down and aggregated with minimal connection to annual budget formulation.
  - Accounting, classifications, and reporting need changes to improve consistency, comprehensiveness, and transparency.
  - MEF considering moving from cash to accrual accounting; no final decision — authorities aware full accrual change will take time and are considering intermediate approaches.
  - GAO implementing a new chart of accounts on a pilot basis linking Budget and Treasury line divisions with domestic software, intended to eventually link main ministries and automate slow/manual procedures.
- Specific transparency shortfalls:
  - Excludes substantial part of defense spending and other off-budget spending through extrabudgetary special accounts.
  - Ordinary and investment budgets not integrated to show overall spending plans.
  - Weak reporting on preparation, execution, and completion of investment projects; expenditure data aggregated and provides insufficient insight into project purpose, societal impact, efficiency, or cost-effectiveness.
  - Investment project selection lacks objective standardized screening by MEF using modern methodologies such as cost-benefit analysis.
  - Existence of extrabudgetary and special purpose accounts compromises transparency; cash positions of some reported but detailed revenue/expenditure flows not disclosed; Court of Audit indicates number of special purpose accounts involving public funds is substantially greater than reported in budget documentation.
- Harmonization with ESA95:
  - Deviations from ESA95 in areas such as definition of capital transfers versus equity participation, classification of guarantees to loss-making enterprises, treatment of EU funds in the investment budget, and inclusion of all defense expenditure in the budget.
- In-year reporting: improving for central government but further progress needed, especially for social security sector.

### Independent assurances of integrity — credibility and institutional independence
- Need for independence to enhance credibility of fiscal data providers.
- Politicization of top technical administrative functions has undermined technical independence of key institutions.
- Specific examples and recommendations:
  - National Statistical Service of Greece (NSSG): credibility would be enhanced if made an independent agency outside the MEF.
  - MEF budget data: credibility could be enhanced by independent review of underlying assumptions by an independent agency.

*Source: _cr0542 - Introduction*

### 22.      The Court of Audit in Greece plays a very important role in the Greek public

### 22.      The Court of Audit in Greece plays a very important role in the Greek public

### Role and functioning of the Court of Audit
- The Court of Audit provides assurances on regularity and legality of the budgetary process.
- The Court’s functioning is modeled on the French auditing system where the Court is part of the judicial system.
- The Court is heavily involved in the pre-audit of all non-regular expenditure of central government.
- Potential weakness: heavy pre-audit involvement may compromise the Court’s ex-post audit, as pre-audit implies assessment of the Court’s own actions.
- Many countries have eliminated external pre-audit of expenditure, making pre-audit the sole responsibility of the Executive.
- If external pre-audit is retained in Greece, there should be assurances that the Court of Audit can maintain adequate independence between its pre- and post-audit activities.
- The Court of Audit maintains that the pre-audit, focusing on the legality of the payment obligation, is only an extension of its post audit function, which focuses on the execution of the payment order, implying no duplication of its scrutiny.

### Social security sector monitoring and reporting
- Greece has a large social security sector absorbing more than 12 percent of GDP.
- Monitoring, control, and consolidated reporting are shared by the Ministry of Labor and Social Security (MLSS), the GAO and the NSSG.
- GAO monitoring is limited to Funds that receive grants from the central government.
- The MLSS reports on the social security sector with a considerable time-lag, and only on an annual basis.
- Until recently, the NSSG provided estimates to Eurostat based on an inappropriate survey methodology.
- Recommendation: substantially improve monitoring and control to meet fiscal transparency and EU reporting requirements.
  - This would involve a regular consolidated report of the operations of all social security funds, at least quarterly, both to the MLSS and the MEF.
  - Regular consolidated reporting would allow developments in this sector, which is under full regulatory control of central government, to be incorporated in fiscal and expenditure management decisions.
- Improved arrangements have now been agreed between Eurostat and NSSG for surveying annual and quarterly realization figures of the sector; these data should be shared with GAO and MLSS to substitute for their limited monitoring of the sector.
- Fiscal transparency would be enhanced if a comprehensive, prospective report on the social security sector would be added in the budget documentation, and a consolidated picture of the general government for the coming year would be presented to Parliament.

### IMF Staff assessment of fiscal transparency and institutional issues
- Recent efforts to improve fiscal transparency have been major and in line with EU requirements, but important processes and institutional issues still hinder attainment of transparency comparable to other EU countries.
- Previous ROSC updates have noted initiatives: medium-term budget frameworks; improved budget preparation procedures; analysis of fiscal risks; an improved accounting system; and strengthened audit procedures.
- The full ROSC reassessment proposed for 2005 will provide an opportunity to examine these issues in greater depth.

Key findings and recommendations on budget process and management:
- The traditional, highly centralized budget management system works against fiscal transparency:
  - Budget presentation concentrates on economic categories of spending and does not allow a clear view of underlying policies.
  - Control procedures emphasize correct use of very detailed line items, masking policies and programs and diverting attention from efficiency.
  - Recommendation: fundamental reorientation of budget management toward program structure.
- Adopt a multi-year budget framework to assess sustainability of current fiscal policies and to judge fiscal space for future measures.
  - Multi-year projections based on current policies are particularly relevant for Greece given the need to chart fiscal consolidation.
  - A fiscal risk analysis should be published with the budget, including realistic specifications of risks inherent in Greece’s many types of loan guarantees and risks from public-private partnerships.
- Make the budget more comprehensive:
  - Include all spending on defense in the budget (without compromising national security).
  - Include all other off-budget spending in budget totals.
  - Gradually integrate the ordinary and investment budgets to improve transparency of government expenditure plans.
  - Investment expenditure should be managed with attention to selection criteria, monitoring, and performance assessment.
- Transparent and efficient budget execution requires closing all special accounts and existence of a Treasury Single Account (TSA) that truly captures the government’s overall cash position.
  - Providing an overview in budget documentation of liquidity held in special accounts is a useful first step, but does not reveal the size or nature of gross inflows and outflows of these accounts.
- Provide a mid-year report on budget implementation.
- Move internal controls away from a focus solely on legality of resource use toward emphasis on efficiency and effectiveness.
  - Reform the internal control structure that is characterized by layers of detailed input controls; overlap in pre-audit functionality is wasteful and inefficient and not in line with OECD best practice.
  - The Court of Audit should extend its work into policy-sensitive areas, including value for money audits.

### Accounting, reporting, and debt management
- The MEF has been studying moving government accounting from cash to accruals; GAO has begun implementing a new chart of accounts.
- A more integrated accounting approach that can accommodate accruals is recommended.
  - National fiscal data will probably need to remain on a cash basis for the time being, but ESA95 data is specified on an accrual basis, requiring GAO to harmonize national fiscal data with Eurostat definitions and instructions.
  - Harmonization examples needing improvement: definition of capital transfers versus equity participation; classification of guarantees to loss-making enterprises; treatment of EU funds in the investment budget; inclusion of all defense expenditure in the budget.
- Debt management and reporting should be delineated from fiscal management and reporting.
  - Most OECD countries have found it useful to integrate all tasks related to debt management in one functional agency, ranging from policy development and debt issuance to accounting and reporting.
  - Concentrating debt management in one agency would aid coordination, concentration of expertise, transparency, and data integrity.
  - This integration appears to have been the original intention behind legislation creating the present PDMA.
  - If supported by legislation establishing PDMA’s independent position, such a move should provide a positive signal for financial markets and Eurostat.

### Institutional structure and independence
- Slow implementation of transparency-enhancing reforms may partly stem from institutional structure of agencies.
  - Fragmented organizational structure within the MEF exhibits less than full integration of two previously separated ministries.
  - Different units share functions, obscuring individual roles, causing coordination problems, and sharing responsibility for results which undermines enforcing accountability.
  - Recommendation: examine need for further rationalization of the MEF’s organizational structure.
- Politicization of top technical administrative functions undermines technical independence of key institutions.
  - Example recommendation: grant independence to the NSSG from the MEF given past fiscal data problems.
- Enhance credibility of MEF-reported budget data by establishing an independent agency—possibly reporting directly to Parliament—to review assumptions, inputs, and models used by agencies within the ministry and provide an independent assessment of budget estimates.
  - Alternative: a private agency or university could supply some independent evaluation of budget assumptions.

*IMF Staff Commentary (excerpts).*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2005/_cr0542.pdf_