Information Systems:

Key tool for analysts

Many advantages

Must serve users

Good data systems help analysts to understand: if budget estimates are appropriate

if a budget is sustainable

budget issuesPlan

Actual

Good data systems help analysts to understand:

budget alternatives, or options actual expenditures during execution financed activities and results (non-

financial data)

Some Questions To Answer

1. What is an information system?

2. What is the difference between a spreadsheet and a database?

3. In what situation is each type of information system most effective?

4. With what kinds of analysis are information systems useful, or not useful?

5. Why do information systems change?

Information Systems

An information system is similar to an electric power grid system:

Information, like electricity, is handled by a number of organizations, such as spending ministries, and has a variety of “channels”, each of which may be under the responsibility of a separate organization.

Information Systems

There are agreements between organizations about the data to be collected, and the schedule and format of its presentation, and to whom it should be submitted. There may be a number of steps in the flow of information.

Information Systems

Different organizations may perform similar tasks simultaneously at one stage of the system.

For example, the Finance Ministry, the Transport Ministry and the Parliament may all draw information from a data system when the annual budget law is debated

Information Systems Definition:

the regular

production, collection, transmission and presentation of data

in an explicitly defined manner that meets the needs of users.

Information Systems

However, unlike the power system, information systems should be designed by starting with the needs of the users, and then by working backwards to data presentation, data transmission, data collection and data production.

USERSystem

NOT THE REVERSE!!

Budget Information Systems

Components include procedures and products, plus decisions on:

the sources of data, format of data, the schedule of presentation, and who should receive the information

Budget Information Systems are not just machines and programs Budget instructions (particularly schedules

and forms)

Regular budget office staff contacts with spending ministry budget staff

Meetings of decision makers

More than machines and programs:

Decision forms and decision reports Budget (Appropriation) bills and backup

information Budget execution reports (normally from

the Treasury or Central Bank)

Budget Information Systems

Physical information channels:

Paper reports

Electronic files

More Budget Information Channels

Oral discussions and presentation (meetings and telephone conversations)

Specialized inter-agency computer systems Integrated financial management systems

Budget Information Systems

So all of these activities and objects are part of the budget information system:

Budget office meetings Budget office written reports Budget office spreadsheets Budget office databases and related financial

data management systems that may share information

Budget Information Systems: Support Analysis. Analysis can be

performed by changing the presentation of data. Examples are: numbers versus the change in numbers; percent versus number; or share of the total budget versus share of GDP.

Save data and institutionalize data collection to quickly prepare and defend a budget.

Save time

Information systems influence users

We change our concepts of how to use information based on the availability of types, or quality, of data.

For example, if a database displays many historical versions of the budget, we see trends more clearly.

Introduction to Databases

Tables organize data by

1. columns (fields) and

2. rows (records).

Introduction to Databases

Reports are based on queries. Reports group data, sum data according to groups and present information in its final form.

Reports manipulate data without changing the underlying data.

Introduction to Databases

Queries do the heavy work of databases. They are used primarily to link tables, select fields for inclusion in reports and select data according to certain criteria. Queries form the basis for reports and may be thought of as unformatted reports.

Introduction to Databases

A database is a collection of tables, forms, queries and reports, each of which are separately programmed and named.

A table is a collection of data.

There are, generally speaking, two types of tables:

1. data tables (which contain data plus codes that link to lookup tables) and

2. lookup tables (which contain additional coding and data that is often repeated in reports, such as names). Lookup tables can form the basis for analysis.

Introduction to Databases

Lookup tables are almost always based on classifications, which are used for selecting, grouping, summing and sorting data in the main data table.

The key to tables useful for analysis is the selection of good classifications

Using Databases Means

Less data need be entered, than with spreadsheets, because:

1. one set of data is used by a variety of reports. Reports are small programs.

2. data is entered only at the lowest level of classifications, with the reports summing data to higher levels.

3. fewer mistakes are made

Introduction to Databases

A major weakness: Databases are more complex than spreadsheets, separating the end user from the programming staff who must perform detailed design. There are high fixed costs, in terms of effort, to develop a database report.

Integrated Financial Systems

Are inflexible, and should never be used when institutional roles, data definition, analysis and presentation are not well developed. This situation is true in most transition countries.

Are never appropriate for internal management information systems because they cannot quickly change to meet management needs.

Spreadsheets

Spreadsheets should be used when there are:

small amounts of data, or non-standard data

data are largely of interest to a single analyst, or to a limited number of analysts

few ways of reporting data

Databases should be used when there are:

large amounts regular/standardized data seen by many people

many ways of reporting data, especially to identify changes based on various classifications

requirements to rapidly include or exclude data in reports, especially when considering budget alternatives

When to use a database:

As a rule, if the number of cells required for composing reports is more than 500, then a database should be used. This is especially true if the number of cells derives from reporting the same data in three or more ways.

Programmers and Analysts

1. Tell the programmer how you want to use the system. Usually, this means what information you want to see. The programmer can then work on the details.

2. The more you discuss with programmers, the more you can learn. With a little compromise you may get almost what you want but save work.

3. Use paper diagrams to design reports. Ask the programmer to draw the report.

Some people think that management information systems should be difficult to change.

Change WILL occur.

If systems are difficult to change, managers and staff may simply ignore the system or experience great frustration and waste.

The Classification Key

A classification is simply a way of selecting, grouping, summing and sorting data that is meaningful, or answers a question. Thus, there can be as many classifications as are considered useful.

Classifications are a key to analysis using database information systems.

Some Classifications:

1. Organization

2. Economic (line item)

3. Functional (GFS)

4. Program or activity

5. Location

6. Population groups who benefit (young, elderly)

More Classifications

One-time or ongoing (projects or programs) Capital or recurrent Risk (high, medium, low danger of failure) Financing sources (internal, external) Sector of government (this is an example of

classifying the organization classification) Decision options (ministry request vs. current)

Keep Classifications Flexible!

The Budget Analysis Unit must be able to set and change classifications in databases.

Classifications may be added based on management decisions.

- For example, the Prime Minister may want to add this classification: “Government Priorities financed in the Budget”

Working with data: Time Series

A trend line = funding amounts for a single budget classification item (such as organization, program or economic line item) over a number of periods.

This could be line graph of actual amounts, a moving average, or a fitted regression line.

The more years included in the trend line the better.

Time Series

Budgeted amounts in a small number of budget versions is the most common way to display budget changes.

The series can show next year’s budget plan compared with the current budget year plan and a previous “actual” year; or differences between budget plans and actual expenditures over several years.

Working with Time Series

Last Current Request Change+/- Out

Year Year Year Year

Actual Estimate

 1000    1100 1200 +100 1300

Time Series Chart

0

200

400

600

800

1000

1200

1400

1600

1 2 3 4 5Year

Comparing rates of change in a time series: Rate of change for a single budget compared

to the entire budget – we want to compare the rate of change of individual elements to the budget as a whole.

In many cases, this is how policy priorities are reflected in an annual budget.

The priority programs, activities or organizations should increase at a faster rate than the whole budget.

Rates Of Change

EM Spending Trends, Previous Budget Year compared to Current Budget Year

Universities: up 10% University Student Benefits up 1% Lower Education up 5% Culture/Media: up 1% Research Academy up 2% EM Total up 5%

Costs per Student (Odh)

Past Year

Cur-rent

% change

Re-quest %

Outyear 1 %

Higher Education 30,812.50 32999 7.1 35111.5 6.4 37751.5 7.5

Lower Education 1975 2073 5 2125.5 2.5 2,200.30 3.50

Comparing rates of change

Rate of change among financial and non-financial elements.

For example, compare the rate of change of number of students (-3%) with operating expenditures for lower education (+5%).

Non-financial elements are often the “drivers”, discussed in Lesson 2.

• Comparing “rates of change” for “apples and oranges” (example: students and money)

Comparing Relative Amounts

Example: Share of the budget in a cross section – the percent of the total budget accounted for by budget classifications (such as organization, program or line item).

Comparing

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

Currentexpenditures

Capitalexpenditures

Use of EUfunds

Loans andcredits

Budget Expenditures

2004 State Budget

2003 State Budget

Comparing

a

b

c

d

e

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

Ministry Budget Increases

Common techniques for standardizing data

1. Using real or nominal numbers

2. Rigidly designing forms to collect data

3. Classifying data, with the most common classifications being organization, economic, functional, program and source of revenue .

4. Calculating a budget base, adjusting for inflation, one time items, etc,

Comparing

Budget decision making is an iterative process, reviewing more than one proposed allocation of funds.

Database information systems can help us evaluate alternatives by manipulating data quickly and retaining information, including various optional or proposed allocations.

2/13/2003 7:10:24 AM Economic Class 1 - by Organization 1 Historical Classification All funds Col. 1 Col. 2 Col. 3 Col. 4 Col. 5 Col. 6 State budget Nominal values 1999 Actual 2000 Actual 2001 2002 2003 2003revised

Report total /%change 1,231,900.2 3% 1,264,116.0 -20% 1,012,861.6 24% 1,259,527.5 12% 1,415,359.8 6% 1,494,600.0

1 - Current expenditures 395,737.2 32.1% 390,959.4 30.9% 300,155.2 29.6% 401,457.8 31.9% 497,698.2 35.2% 571,614.1 38.2% 1 - Parliament and Related Organizations 9,671.6 0.8% 8,544.0 0.7% 7,718.4 0.8% 9,556.2 0.8% 8,680.7 0.6% 10,502.8 0.7% 2 - Central Elections Commission 1,702.6 0.1% 2,240.2 0.2% 550.0 0.1% 420.8 0.0% 2,371.4 0.2% 420.8 0.0% 3 - Chamber of Control of 2,690.5 0.2% 2,555.5 0.2% 1,757.2 0.2% 3,260.0 0.3% 3,124.4 0.2% 2,970.0 0.2% 4 - Constitutional Court of 532.6 0.0% 983.0 0.1% 955.6 0.1% 1,267.6 0.1% 1,047.6 0.1% 1,248.6 0.1% 5 - Supreme Court of 1,318.9 0.1% 1,704.0 0.1% 1,785.0 0.2% 2,255.0 0.2% 2,130.0 0.2% 2,075.0 0.1% 6 - General courts 4,205.1 0.3% 6,756.0 0.5% 6,760.0 0.7% 8,460.0 0.7% 8,460.0 0.6% 8,060.0 0.5% 7 - The council of Justice 422.0 0.0% 551.7 0.0% 493.4 0.0% 590.0 0.0% 360.5 0.0% 540.0 0.0% 2 - Interest 165,923.0 13.5% 181,200.0 14.3% 141,504.5 14.0% 173,750.0 13.8% 165,300.0 11.7% 187,474.8 12.5% 24 - Ministry of Justice of 1,874.8 0.1% 25 - The Ministry of Culture of 4.5 0.0% 35 - Ministry of Finance 165,923.0 13.5% 181,200.0 14.3% 141,500.0 14.0% 173,600.0 13.8% 165,100.0 11.7% 185,600.0 12.4% 55 - State Road Department 150.0 0.0% 200.0 0.0% 3 - Subsidies and transfers 338,861.6 27.5% 399,526.8 31.6% 360,818.0 35.6% 384,075.0 30.5% 467,532.3 33.0% 503,642.7 33.7% 8 - State Chancellery 48.2 0.0% 266.4 0.0% 53.4 0.0% 53.4 0.0% 59.0 0.0% 59.0 0.0% 19 - Ministry of Education 520.4 0.0% 527.4 0.0% 146.2 0.0% 190.2 0.0% 475.4 0.0% 469.6 0.0% 21 - The Ministry of Economics, Industry and Trade of 206.1 0.0% 237.3 0.0% 237.3 0.0% 237.3 0.0% 312.3 0.0% 312.3 0.0% 4 - Capital expenditures 24,953.4 2.0% 32,366.0 2.6% 9,351.5 0.9% 20,626.1 1.6% 14,954.3 1.1% 10,368.4 0.7% 1 - Parliament 520.0 0.0% 300.0 0.0% 273.9 0.0% 247.2 0.0% 18.7 0.0% 387.2 0.0% 3 - Chamber of Control 50.0 0.0% 40.0 0.0% 117.4 0.0% 230.0 0.0% 4 - Constitutional Court 132.0 0.0% 20.0 0.0% 40.0 0.0% 20.0 0.0% 5 - Net lending 239,850.0 19.5% 214,600.0 17.0% 159,372.8 15.7% 227,838.0 18.1% 269,875.0 19.1% 221,500.0 14.8% 35 - Ministry of Finance 239,850.0 19.5% 214,600.0 17.0% 159,372.8 15.7% 213,575.0 17.0% 253,000.0 17.9% 221,500.0 14.8%

2/13/2002 7:18:21 AM Organization Budget – by Program Historical Classification All funds Col. 1 Col. 2 Col. 3 Col. 4 Col. 5 Col. 6 . State budget Nominal values 1998 Actual 1999 Actual 2000 Actual 2001 Actual 2002 Approved 2002 Revised

Report total/% change 11,802.4 -7% 10,966.7 -12% 9,624.7 20% 11,551.0 17% 13,532.2 17% 15,890.4 17%

25 - The Ministry of Culture %of Tot.

1- Institutional Support Program 3,713.5 31% 3,701.0 34% 3,316.1 34% 4,248.5 37% 5,818.8 43% 6,917.9 44% a – Theater sub program 553.7 5% 548.9 5% 560.3 6% 560.3 5% 654.0 5% 1,224.0 8% – Element/Activity: original works 553.7 5% 548.9 5% 560.3 6% 560.3 5% 654.0 5% 1,224.0 8% b – Museums sub program. 1,495.7 13% 1,500.3 14% 1,332.7 14% 1,472.5 13% 1,747.6 13% 3,008.9 19% - Renovation Project 1,495.7 13% 1,500.3 14% 1,332.7 14% 1,472.5 13% 1,747.6 13% 3,008.9 19% c- Music sub program 1,664.0 14% 1,651.8 15% 1,423.1 15% 2,215.7 19% 3,417.2 25% 2,685.0 17% – Element/Activity: original works 1,664.0 14% 1,651.8 15% 1,423.1 15% 2,215.7 19% 3,417.2 25% 2,685.0 17%

2 – Cultural Development Program 8,089.0 69% 7,265.7 66% 6,282.8 65% 7,302.5 63% 7,713.4 57% 8,972.5 56% a– New artists sub program 8,089.0 69% 7,265.7 66% 6,282.8 65% 7,302.5 63% 7,713.4 57% 8,972.5 56% – Element/Activity: scholarships 7,515.1 64% 6,779.4 62% 6,115.4 64% 7,052.2 61% 7,507.5 55% 7,877.8 50% – Project new art 573.9 5% 486.3 4% 167.4 2% 250.3 2% 205.9 2% 1,094.7 7%

Bridging

If classifications have changed over time, then make a “bridge table” or “crosswalk table” from an old classification definition to the new definition.

Example: The Economy Ministry was merged with the Finance Ministry. To see the historical time series, add the two organizations together for previous years.

Defending the Budget

All budget offices must defend the budget. We defend the budget by having ready

answers to potential questions. Defending the budget is often directly

related to various financing alternatives. This requires different versions of data and

possible budget options in the database.

Managing budget execution

Execution data allows us to compare revenues and expenditures with other reference data, including the annual budget plan and prior year expenditures for the same period.

-Examples: First calendar quarter revenues for 5 different budget years; accumulated deficit by quarter; expenditures by month

Managing budget execution

Monitoring the quantity and cost of activities and services provided will let us measure the efficiency, and accountability of managers.

- Example: Is the monthly expenditure pattern different for the same program at different locations? For different beneficiaries?

Budget execution

Capturing individual adjustments to the budget during execution will help us formulate next year’s budget. Databases can store updated versions to the budget during execution, offering an important tool of analysis.

- Example: Does historical data show recurring budget changes that demonstrate inaccurate requests, such as the unemployment fund needing extra money each year?

In summary, good data systems help analysts to understand:

1. whether priorities are really reflected in the budget

2. if organizations or programs are efficient

3. what the base budget is

4. What budget adjustments are being made

5. what is “driving” changes in the budget

Data is what analysts paint with!

Data-based Analytical Picture:

Social Fund “Running Dry”

Data-based Analytical Pictures: Rising Revenues Can Finance New

Services – funds may flow to beneficiaries

Oil Prices Drive Deficit Higheroil

Deficit

Data-based Analytical Picture:

Unit Costs Peak Above European Average

Oravia unit cost

EU Unit cost

Data-based Analytical Pictures:

Budget Pie Grows As GDP Rises

Analysts Paint With Data

Can You?