Public Financial Management and Accountability Governance Induction Hitchin 9th March 2004 What we want to get out of it?      A clearer understanding of the public financial management and accountability framework Some understanding of diagnostic instruments and the harmonisation agenda Taking the work forward Know when to ask for expert help and support Calling for more!! What we want to get out of it?      What is our vision…What are we aiming for? Where are we now…Diagnostics and drivers for change Moving on…Addressing the basics and strategic incrementalism Know when to ask for expert help and support Calling for more!! What is PFMA? Process by which decisions are made, implemented and accounted for     amount of resources to be spent balance between revenue and expenditure allocation of funds between entities /activities how resources will be managed and accounted for (emphasis on substantive outcomes) (covers the whole of the budget cycle) (covers broad institutional and managerial arrangements) Vision What are we aiming for?    Effective, transparent and accountable public financial management systems that will translate clearly defined development priorities into the effective delivery of public goods and services Country ownership consistent with evolving international standards, regular progress measurement supported by coherent donor support Overall fiscal discipline, allocative efficiency and value for money Why is PFMA important?        Sound management of all public finances are intrinsically important to development Transparency about how public resources are raised and then used is basic to democratic accountability Improvements can lead to big changes which benefit the poor (viz Uganda education) Off budget expenditure financed by donors undermines accountability Active scrutiny by legislature and public is essential Risk to service delivery of poor PFM systems (see WDR 2004) Improvements in PFM reduce opportunities for corruption (see WDR 2004) Where are we now?  Evidence shows that these systems are in very poor shape in many of our partner countries  Assessment of accounting in countries receiving direct budget support from DFID   No country met the proposed minimum standard IMF/WB review of HIPC countries 2002(2001)  Little upgrading = (2)  Significant upgrade = (7)  Substantial upgrade = 14 (16) Lets look at the system Reporting and audit Policy review Strategic planning Accounting and monitoring Budget execution Budget preparation Lets look at the system again Accountant General Auditor General Reporting and audit Policy review Ministry of Development/ Economic Planning Strategic planning Accounting and monitoring Budget execution Ministry of Finance Budget preparation Accounting & Monitoring Budget Execution Potential disconnects Policy review Planning Process Auditor General Accountant General’s Department Ministry of Finance Reporting and auditing Budget preparation Strategic planning Composition of the basic platform: Budget Formulation  Short-term  Comprehensiveness of coverage (all significant public resources and deployment captured) Look at the efficiency and effectiveness of resource deployment Build on existing reporting data Downstream Develop performance related data Composition of the basic platform: Budget Execution  Short term Integrity of key transaction processing systems Develop credibility and reliability of resource flows to sector ministries (contingency, control of commitments, etc)  Downsteam Use for management information and control… system improvement Detailed commitment accounting Composition of the basic platform: Accounting  Short-term Basic reconciliation Improved classification Reduce backlog of monthly/quarterly and annual reports  Downstream Improved IFMS New coding structure Composition of the basic platform: Scrutiny and Accountability  Short-term Funds flow tracking  Downstream Effectiveness/Efficiency reviews Liaison with SAI SAI Capacity Building Training for Legislative oversight committee Capacity building for Oversight committee DFID’s approach to Fiduciary Risk   Aim to improve Government systems so we can rely on them to make effective use of all resources, including DFID funds Willing to take risks by putting money through government systems,provided:  There has been a thorough evaluation of the public financial management and accountability systems  Risks are known and outweighed by benefits Safeguards can be introduced to support ongoing system reform  Government has a credible programme to improve PFMA  Assessments are explicitly recorded Key risk areas;  Accounting (where has the money gone?)  Procurement (corruption and VFM) Other issues Experiences of         Engagement at the political level Translation of priorities into resource allocation MTEF Fiscal decentralisation Participatory budgeting IFMS Role of the Auditor General’s Department Revenue PFMA team in Policy Division       Simon Gill, Kathy Ford, Helen Leadbetter, Caroline Bash….David Biggs (from August) Plus Julie Lynn (NAO secondee) Revenue secondee Nicola Smithers (seconded to the PEFA Programme in Washington) Luke Mukubvu (Based in Harare, with some time) Check out the PFMA page on Insight What is the PFMA team doing? Operational guidelines on Fiduciary Risk  Harmonisation agenda via PEFA and the OECD-DAC  Guidelines for working at the sectoral level  Broader issues of accountability  Training support  Audit guidelines…  Almost by Royal appointment!!  A Lesotho Case Study Critical appraisal of a reform programme Papers to review Executive Summary from IMF review Draft Government Action Plan Draft Project Memorandum prepared by a Consultant To discuss  How should the DFID programme team take forward PFM reform? Some thoughts     Need to improve legislative oversight Create some demand for reform Need to improve the credibility of the Ministry of Finance Identify some quick wins Address the need for a comprehensive reform agenda Link with other donors and the broader Public Sector Reform agenda Look at sequencing and priority Concentrate reform in the area of budget execution Develop a dialogue with Government (1)      Importance of PFM to translate Government strategies into practice Develop linkages between financial inputs and sectoral outcomes Need to develop broader accountability for the delivery of services Use of donor resources to strengthen Government’s own accountability Develop a common view with the wider donor community Develop a dialogue with Government (2)  Maintain a focus on the basics Basic financial reporting integrity Increasing transparency and oversight Incentives for reform Disincentives for corruption ... out of it?      A clearer understanding of the public financial management and accountability framework Some understanding of diagnostic instruments and the harmonisation agenda Taking the... systems,provided:  There has been a thorough evaluation of the public financial management and accountability systems  Risks are known and outweighed by benefits Safeguards can be introduced to... allocative efficiency and value for money Why is PFMA important?        Sound management of all public finances are intrinsically important to development Transparency about how public resources