public expenditure & pefa

Public Expenditure &

PEFAFinancial Accountability

IntroductionIntroduction





Outline

Why is a new approach needed?Why is a new approach needed?

What are PEFA’s goals & objectives?What are PEFA’s goals & objectives?

DiscussionDiscussion

Introduction: What is PEFA?Introduction: What is PEFA?1

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What are PEFA’s accomplishments & deliverables?What are PEFA’s accomplishments & deliverables?4

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1. Introduction: PEFA in brief

Ø A multi-institution project, jointly-financed by the World Bank, European Commission and the UK (DFID).

Ø The Secretariat, based at the World Bank in Washington, DC, was established in December 2001.

Ø Steering Committee members include: World Bank (PRMPS, OPCFM and OPCPR), IMF, EC, DFID and the Strategic Partnership for Africa (SPA).

Ø Current budget: $5 million over three years.

What is PEFA? …

Public

Expenditure and

Financial

Accountability



PEFA partners …

1. Introduction: Our partners

The World BankThe World Bank

The Department for International

Development (DFID)

The Department for International

Development (DFID)

The European Commission

The European Commission

The International Monetary Fund

The International Monetary Fund

France?

Possible Future Partners:

Norway?

Switzerland?

Others?





An overview of public expenditure and financial accountability

Budget Formulation

Governance & Institutional Environment

Executive & Legislative

Branches of Government

Economic Analysis of

Public Spending

Expenditure Monitoring, Reporting &

Auditing

Budget Execution (e.g., cash & debt

mgnt., control, internal audit)

National & Sub-National

Levels

Public Procurement

Expenditure Incidence

PE Process

Institutions

PE in Public Agencies & Enterprises

PE Policy/Impact Poverty

Impact

1. Introduction



What value can PEFA add?



Dissemination of good practice in

integration/coordination

Dissemination of good practice in

integration/coordinationImpartial

perspectiveImpartial

perspective

Encourage coordination across:-Bank departments

-PEFA partners

Encourage coordination across:-Bank departments

-PEFA partners

Independent monitorIndependent monitor

Linking integrated assessments to

follow-up

Linking integrated assessments to

follow-up

Trying out innovative

approaches

Trying out innovative

approaches

Contribute to harmonization of

international standards and benchmarks

Contribute to harmonization of

international standards and benchmarks

1. Introduction



Outline




Introduction: What is PEFA?Introduction: What is PEFA?Introduction: What is PEFA?1

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2. What are PEFA’s goals and objectives?

ü Develop a country-focused, strategic, collaborative and integrated approach to assessing and reforming countries’ public expenditure management systems

ü Support PEFA activities in 10-20 countries over a three year period

ü Identify PE performance indicators & benchmarks to address developmental and fiduciary objectives

ü Reduce transaction costs of assessments for countries

ü Enhance donor cooperation and coordination

ü Better meet the fiduciary and developmental objectives of client countries and development agencies

ü Improve impact of reforms

Four Goals Three Objectives

PEFA Goals

&Objectives



2. What is PEFA’s goals and objectives?

What do we mean by “strategic, collaborative and integrated” approach?

l Involves a program of work over a medium-term time frame (3-5 years)

l Includes the whole budget cycle

l Takes into account institutional and governmental factors, or is part of a wider public sector reform strategy

l Includes both diagnostic work and the development of reform programs

l Involves a program of work over a medium-term time frame (3-5 years)

l Includes the whole budget cycle

l Takes into account institutional and governmental factors, or is part of a wider public sector reform strategy

l Includes both diagnostic work and the development of reform programs

Working with partners, the Program will support the delivery of this approach.

l Strengthens coordination at the country level between the development organizations

l Encourages country ownership and participation

l Strengthens coordination at the country level between the development organizations

l Encourages country ownership and participation

l Is linked to the CAS or equivalent

l Leads to a PRSC or other budget support operation

l Is linked to the CAS or equivalent

l Leads to a PRSC or other budget support operation

CollaborativeStrategic IntegratedCountry Focused

l Brings together different instruments and analytical tools

l Takes a wider governance and institutional perspective in the analysis and development of reforms

l Seeks to fulfill the requirements of the individual countries as well as those of external stakeholders

l Brings together different instruments and analytical tools

l Takes a wider governance and institutional perspective in the analysis and development of reforms

l Seeks to fulfill the requirements of the individual countries as well as those of external stakeholders



Why is a new approach needed?

What are the problems with

existing approaches?

• To increase the focus on results, especially poverty-reduction

• To recognize how programmatic lending and budgetary support programs may increase fiduciary risks of lending

• To respond to criticism of existing approaches by external agencies (e.g., European Parliament)

• Heavy transaction costs on recipients• Many diagnostic instruments & considerable overlap• Uncoordinated donor activities• Neither fiduciary nor developmental goals are fully met• Low impact of reforms in many countries

3. Why is a new approach needed?

Many donors are looking for a new approach to assist client countries to improve their public expenditure, procurement and financial accountability systems



Outline





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Examples of diagnostic tools are widespread … and many overlap

3. Why is a new approach needed? Public Expenditure instruments

Public Expenditure Reviews (PER)

Expenditure Analysis Budget Formulation Budget Execution

Fiscal ROSC

Public Expenditure Tracking Surveys PETS

Country Procurement Assm’t Reviews (CPAR)

HIPC Expenditure Tracking Assessments

European Commission (EC) Audits

Governance Surveys (e.g., IGRs, Anti-Corruption, Public Officials, Household Incidence, Poverty, etc.)

Country Financial Accountability Assessments (CFAA)

Illustra

tive

Monitoring &Reporting



3. Why is a new approach needed? Harmonization efforts

International harmonization efforts include setting standards and defining indicators

International Federation of Accountants:Public Sector Committee

SPA: Financial Management Working Group

International Organization of Supreme Audit Institutions

Multilateral Development Banks (MDB):Groups on Public Expenditure Management, FM and Procurement

Task Force on Donor Practices—Sub-Groups on Financial Management and Accountability, and on Procurement



Outline





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What are PEFA’s accomplishments & deliverables?What are PEFA’s accomplishments & deliverables?4P



Accomplishments:

• Secretariat established (Dec 2001)

• Secured a first-class Steering Committee and Advisory Group

• Launched a review to map diagnostic instruments and approaches

• Identified several countries to support early PEFA activities (Zambia, Niger, Vietnam, The Philippines, and Andhra Pradesh)

• Created a partnership with OECD-DAC to carry-out work on benchmarking and performance measurement.

Since December 2001, PEFA is established and moving forward

4. What are PEFA’s accomplishments? The present …



DecNovOctSepAugJulJunMayAprMar

Key future deliverables:

PEFA has an ambitious roll-out schedule during 2002.

4. What are PEFA’s deliverables? The future …

Deliverables =

2002

Pilot Activities Underway

Mapping/Review of existing diagnostic tools

Development of benchmarks and indicators

Dissemination of ‘Good Practice’

Develop promotional materials (e.g., web-site, leaflet)

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We estimate that at least 10-20 pilot activities will be carried out over the next three years, with approximately half in Africa.

4. What are PEFA’s deliverables? Candidates for pilot activities



What value can PEFA bring to work in focus countries?

4. What are PEFA’s deliverables

§ Monitoring, lesson learning and dissemination of good practice.

§ Integration of different diagnostic instruments within a coherent program of work.

§ Coordinating amongst donors and researching the diagnosis, recommendations and support for follow-up.

§ Broadening the analysis, including institutional and governance aspects.

§ Development of performance indicators from which progress can be monitored.

§ Enhancing quality assurance procedures amongst donors.

§ Actively bringing the parties together where that has not previously been the case.

§ Piloting of new and innovative approaches.



Outline





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PEFA must address several obstacles …

5. Discussion

Different Donor ‘Agendas’

Entrenched Bureaucracies

Donor Driven Approaches

Disincentives to Change

… in order to succeed

public expenditure & pefa

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