PPT English
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Transcript of PPT English
Fiduciary Risk AssessmentPublic Financial Management
Performance Measurement Framework
PEFA Public Financial Management Performance Measurement Framework and its PrecursorsICGFM May 08 2006David Joseph Ormandy MA CGA CIM FCSIAdvisor to the Financial SecretaryGovernment of Montserrat
Why Perform FRA/PEFA/PEM ?
Link governance and development Build capacity to govern to reduce poverty Provide environment to
– Encourage development– Resolve conflict– Root out corruption
Focus of FRA/PMF
The goal of the exercise are gradual improvements in financial governance
– Non-hectoring– Focus on constraining potential abuses of power – Making long term commitment to institutional reform
What is new about these processes ?
These incentives reduce the focus on individual aid projects (“enclave” projects) to reduce poverty which were in many cases unsuccessful as aid is fungible. And to increase the emphasis on poverty reduction by promoting sound public administration and efficient delivery of public services
Role of PEFA in Good Governance
- encourage macroeconomic stability- Promote investment- Account for public sector resources- Promote honest and accountable
government
Economic Stability/Investment
Support markets and liberalization of markets Government involvement is between
centralizing and disaggregating Promote state institutions to administer
financial policy Regulate financial activities including private
property rights
Account for public sector resources/budgetary outcomes
Encourage effective government spending by fiscal discipline including debt management
Establish strategic prioritization of spending Assure efficiency and effectiveness to
minimize corruption by transparency in procurement systems (value for money)
Promote honest and accountable government
Failure here will compromise other objectives Minimize “grand” corruption” Independent audit of government financial
systems and independent parliamentary oversight of spending (via “Public Accounts Committee)
“Transparency in Accountability”
Components of PEM System
The Budget Process
Links between expenditure and public policy (such as links between recurrent spending and national development priorities)
The political legal and institutional context
The Budget Process
Policy Review Strategic Planning Budget Preparation Budget Execution Accounting and monitoring Reporting and audit
Links between expenditure and public policy
• In developing countries, in the absence of a MTEF or Strategic Plan, recurrent spending may not be prioritized.
The political legal and institutional context
The institutional structure is the framework of rules, customs and incentives which influence how expenditures are made and how people behave. A good public sector will have well defined rules for authority for delegation.
All systems will operate on the basis of informal and formal rules which determine to what extent “official” policy is acted on or ignored.
When does DFID perform a FRA?
Mandatory when providing Poverty Reduction Budget Support (PRBS either general or earmarked support) and where government systems are the primary channels for financial aid
FRA should be undertaken every three years if there are no material changes in circumstances or deterioration in public financial management otherwise, annually.
Why does DFID perform a FRA?
Audit discharge requirements to UK government
1 Accounting/Financial discharge-evidence that funds have been paid
2 Fiduciary Discharge evidence for effective use of the funds The FRA is undertaken because of the limited reliance which may be available from the financial statements and SAI reports
What documentation may be examined in the FRA
ISO/Audit reports Public Accounts Committee reports National Public Accounts Service Delivery Surveys Budget Execution Reports Public Expenditure Tracking Surveys Poverty reduction Strategy Progress Reports Additional examination for anti-corruption,
institutional context and procurement
PEM Diagnostic tools
Formerly– PER WB Public Expenditure Review– CFAA WB Country Financial Accountability
Assessment– CPAR WB Country Procurement Assessment– ROSC IMF Report on Fiscal Transparency– HIPC AAP WB/IMF public expenditure tracking in
HIPC– EC audits
From 2005 “PEFA” PFM Performance Management Framework
The PEFA PFM Performance Measurement Framework and Report provides a common pool of information for measurement and monitoring of PFM progress and common platform for dialogue
June 2005 further revision pending www.pefa.org
PEFA Goals
Reduces the transaction costs to countries. Enhances donor harmonization. Allows monitoring of progress of country PFM
performance over time. Better addresses developmental and fiduciary
concerns. Leads to improved impact of reforms. Encourages country ownership.
Why is PEFA a “strengthened approach” to PEM/PFM
Country led “non-hectoring”/non-admonitory International donor harmonization Result focused on improvements Based on dialogue Achieves objectives of
Account for public sector resources/budgetary outcomes
Encourage effective government spending by fiscal discipline including debt management
Establish strategic prioritization of spending Assure efficiency and effectiveness to
minimize corruption by transparency in procurement systems (value for money)
6 Critical Dimensions for an open and orderly PFM system which are measured by PEFA
Credibility of the budget Comprehensiveness and Transparency Policy based budgeting Predictability and control in budget process Accounting recording and reporting External scrutiny an audit Concern with Country specific issues ( e.g.
“persistent volcanism”)
These 6 dimensions are measured by 28 indicators of 3 types
PFM system outturns expenditures and revenues actual compared with planned
Cross cutting features of the PFM system comprehensiveness of the PFM system across the budget cycle
Budget cycle performance of key systems processes and institutions within budget practices
+ donor practices which impinge on PFM performance
PFM Performance Report5 Sections approx 35 pages
1 Summary assessment 3-4 pages Contains assessment of PFM along 6 dimensions, assessment of weakness in PFM and prospects for reform planning
2 Introduction to preparation of report 1 page
3 Country related Information 4-5 pages
4 Body 60 indicators in total + country specific issues 18-20 pages
5 Section on ongoing government reform activities
No recommendations for reform or action plans are included in the Performance Report
PFM High Level Performance indicator Set
A. PFM Out-Turns Credibility of Budget
PI-1 Aggregate expenditure outturn compared to original approved budget
PI-2 Composition of expenditure outturn compared to original budget
PI-3 Aggregate revenue out-turn compared to original approved budget
PI-4 Stock and monitoring of expenditure payment arrears
PFM High Level Performance indicator Set
B. Key Cross Cutting Issues (Comprehensiveness and Transparency)
PI-5 Classification of Budget
PI-6 Comprehensiveness of budget documentation
PI-7 Extent of unreported government operations
PI-8 Transparency of inter-government fiscal relations
PI-9 Oversight of fiscal risk from other public sector entities
PI-10 Public access to key fiscal information
PFM High Level Performance indicator Set
C. Budget CycleC(i) Policy Based Budgeting
PI-11Orderliness and participation in the annual budget process
PI-12Multi-year perspective in fiscal planning expenditure and other public sectors
PFM High Level Performance indicator Set
C. Budget CycleC(ii) Predictability and Control in Budget Execution
PI-13 Transparency of Taxpayer obligations and liabilitiesPI-14 Effectiveness of taxpayer registration and assessmentPI-15 Effectiveness in collection of tax paymentsPI-16 Predictability in availability of funds for commitment of
expenditures.PI-17 Recording and management of cash balances debt and
guarantees.PI-18 Effectiveness of payroll controlsPI-19 Competition value for money and controls in procurementPI-20 Effectiveness of internal controls for non-salary expensePI-21 Effectiveness in Internal Audit
PFM High Level Performance indicator Set
C. Budget CycleC(iii) Accounting Recording and Reporting
PI-22 Timeliness and regularity in account reconciliation
PI-23 Availability of information on resources received by service delivery units
PI-24 Quality and timeliness of in-year budget reports
PI-25 Quality and timeliness of annual financial statement
PFM High Level Performance indicator Set
C. Budget CycleC(iv) External Scrutiny and Audit
PI-26 Scope nature and follow up of external audit
PI-27 Legislative scrutiny of the annual budget law
PI-28 Legislative scrutiny of the external audit reports
PFM High Level Performance indicator Set
D. Donor Practices
D-1 Predictability of Direct Budget Support
D-2 Financial information provided by donors for budgeting and reporting
D-3 Proportion of aid that is managed by use of national procedures.
Scoring-PFM High indicators
Each of the 28+3 indicators has one to four individual “dimensions” (sub-indicators) which are graded on the basis of specific benchmark grades A to D.
Where there is more than one dimension the individual grades are averaged to determine an overall core for that indicator
Scoring is described in a narrative and tabulated
PFM Performance Report
Indicators
+Country Specific Issues
+ Description of Reform Activities
= Basis for Report Summary
Performance Measurement Framework
Wrap up Because the sponsors of the Performance
Measurement Framework, who are the PEFA secretariat, include many development agencies if your country is dependant of external aid you may well be faced with a PFM evaluation in the future.
PS: Don’t get “hectored” !
PEFA Partners
The PEFA Partners World Bank (WB) European Commission (EC) U.K. Department for International Development (DFID) Swiss State Secretariat for Economic Affairs (SECO) Norwegian Ministry of Foreign Affairs French Ministry of Foreign Affairs International Monetary Fund (IMF) Strategic Partnership with Africa (SPA)