The Importance of Transparency and Accountability in Public Management

Posted by Michel Lazare

Fiscal policy makers, academia, and public financial management practitioners in general agree on the positive impact of transparency and accountability on economic performance and on public confidence and trust in government. Proving this positive impact to the general public in a convincing and accessible manner is, however, often a challenge--a challenge that Maurice P. McTigue, Vice President of the Mercatus Center at George Mason University and former Minister in New Zealand in the early 1990s, seems to successfully meet. Two speeches he pronounced in Louisiana over the last few months attest of his success in this area.

Bridging HIPC and PEFA: Progress in PFM Reforms in 15 Countries, 2001-2006

Posted by Paolo de Renzio

In two previous blog posts of December 10, 2007 and April 21, 2008, Bill Dorotinsky explored the background, rationale and results of the joint World Bank-IMF HIPC AAP (Assessment and Action Plan) instrument, and provided a brief history of the origins of the Public Expenditure and Financial Accountability (PEFA) approach.

The two approaches are clearly linked to each other (the PEFA Performance Measurement Framework draws and builds on many of the HIPC AAP indicators), and share the common objective of providing a reference framework for assessing the quality of PFM systems in developing countries. While the PEFA framework has now come to be generally accepted as the overall assessment tool for this purpose, therefore replacing the HIPC AAP instrument, comparing the two and bringing together their complementary information can shed light on progress in PFM reforms across countries while the PEFA framework is still being rolled out.

A recent paper, "Tracking Progress in the Quality of PFM Systems in HIPCs: An update on past assessments using PEFA data", supported by the PEFA Secretariat has attempted to do just that, bridging the two approaches in order to track progress in the quality of PFM systems in poor countries. Using the original HIPC indicators as a basis, information contained in PEFA assessment reports was "retro-fitted" onto 11 of the 16 indicators, for the 15 countries for which both HIPC AAP assessments in 2001 and 2004 were carried out, followed by a PEFA assessment in the period between 2005 and 2007 (Benin, Burkina Faso, Ghana, Guinea, Guyana, Honduras, Madagascar, Malawi, Mali, Mozambique, Nicaragua, Sao Tome and Principe, Tanzania, Uganda and Zambia). The results are provided by country either in terms of benchmarks met or of underlying raw scores, which permit a more detailed analysis.

United Kingdom Concludes Its Fifth Multi-Annual Spending Round

2007 Comprehensive Spending Review

Posted By Richard Hughes

In October of last year, the UK Treasury published the conclusions of its latest multi-annual expenditure planning exercise.  The 2007 Comprehensive Spending Review (CSR07) set out how the UK Government plans to spend its £600bn (US$1.2 trillion) annual budget over the years 2008-09, 2009-10 and 2010-11 and the key outcomes it is looking to buy with taxpayers’ money over the period. 

While the UK’s fiscal and budgetary architecture has been stable for over a decade and biennial Spending Reviews have become a routine feature of the British political calendar, there were are number of noteworthy developments and innovations in this fifth multi-year spending round.  In particular, CSR07:

• took place within a more challenging macro-fiscal context than previous spending rounds and was a test of the capacity of the UK’s Spending Review process to deliver an expenditure-based fiscal consolidation;
• saw a major expansion in the length, breadth and depth of budgetary certainty that the UK system provides to frontline managers; and
• included a major streamlining of the UK’s performance management regime for public services.

Exchanging experiences and learning from others: PEM PAL approach

Posted by Urska Zrinski, CEF PEMPAL Secretariat

PEM PAL, the Public Expenditure Management - Peer-Assisted Learning (PEM-PAL) network, is a network of public expenditure management professionals from countries in Central and Eastern Europe (CEE), and Central Asia. The initiative, which was conceptualized in 2005 by the World Bank and the United Kingdom’s Department for International Development, represents an effort to develop capacity and share reform experiences among countries in CEE and Central Asia. At the beginning of 2008, the PEM PAL secretariat has been moved from the World Bank’s headquarters in Washington DC to the Center of Excellence in Finance, Slovenia, thus bringing the network closer to the region. (See a January 25, 2008 blog post for more on the Center.)

Post-conflict PFM -- IMF Lessons of Experience

Summary of lessons from FAD support

Posted by Bill Dorotinsky

The challenges of rebuilding fiscal institutions in post-conflict settings are daunting. An April 23, 2008, post summarized some lessons from USAID experience. The IMF Fiscal Affairs Department (FAD) has been directly involved in rebuilding fiscal institutions. Work done in 2004 summarized FAD's experience and some key lessons --- lessons reinforced by the recent USAID paper.

FAD experience was summarized in a 2005 Occasional Paper 247, Rebuilding Fiscal Institutions in Postconflict Countries, by Messrs. Gupta, Tareq, et. al. The work draws on background papers prepared in 2004, including a December 2004 paper "Rebuilding Fiscal Institutions in Post-Conflict Countries," and October 2004 case study summary Background Paper for "Rebuilding Fiscal Institutions in Post-Conflict Countries" (both available electronically).

DFID's Methodology for Managing Fiduciary Risks

Posted by Michel Lazare

Our March 31, 2008 post presented the recent DFID's Policy Paper on extending development aid through direct budget support. It indicated that provided that some conditions are in place DFID favors direct budget support. DFID like all the other development practitioners do recognize the fiduciary risks involved by the provision of aid through this form. Therefore, DFID has developed a methodology to manage fiduciary risk in its bilateral aid programs.

This methodology is the object of a DFID "How to note" published on January 30, 2008. Its full text can be accessed by clicking on the following link: Download howtonotefiduciaryrisk1.pdf .

This fairly technical note, which is mainly targeted towards DFID's country office staff, is nevertheless of interest for all PFM practitioners.

Practical Advice on Public Management

IBM Center for The Business of Government Web Site

Posted by Bill Dorotinsky

The volume of material on the Internet can be daunting to wade through, and finding quality, reliable information of practical use is nearly impossible. For the public management practitioners, more applied, pragmatic material is sought. One valuable site for practitioners found by PFM Blog is the IBM Center for The Business of Government. The Center, founded in 1998, "connects public management research with practice." The Centers reports cover a range of public management topics to "improve public sector effectiveness," and most are available for free on the site.

Post-conflict PFM -- USAID Paper Summary of Lessons

Posted by Bill Dorotinsky

Public financial management (PFM) has moved onto center-stage in country macroeconomic management, development planning, and international development fora, as has a focus on fragile and post-conflict states. The intersection of these fields has itself become a very current topic, particularly with respect to what specific areas of PFM to address in the short-run and how to sequence reform and capacity-building interventions.

A November 2007, USAID-funded paper, Building Fiscal Infrastructure in Post-Conflict Societies, prepared by Dr. Mark Gallagher, DAI, is worth a read. The paper is a summary of seven country case studies (Afghanistan, Angola, Bosnia and Herzegovina, El Salvador, Guatemala, Kosovo, and Liberia) and some general lessons he draws from them.

Public Expenditure and Financial Accountability (PEFA) Part 1

A complete history (abridged)

Posted by Bill Dorotinsky

The term 'PEFA' is rapidly entering the international public financial management lexicon, but there is still some confusion over the term and its application. This post provides some of the background and origins of the approach.

In a December 10, 2007, blog post, we wrote about the HIPC expenditure tracking initiative, which illustrated that an indicator-based tool could track PFM system performance over time. The result of this work by the IMF and World Bank also clearly illustrated that many country PFM systems were weak, despite many years of technical assistance. The Boards of the two institutions asked staff the right question -- What is wrong with PFM reform and capacity-building? Why has there not been more progress?

This set in motion some work by the IMF, World Bank, and other development partners to try to identify barriers to PFM reform and the lessons of successful reform. The post cited above listed some of the lessons that emerged from the HIPC work. The work on identifying cases and lessons is an on-going process, and focuses on several dimensions: country incentives; development partner and international financial institution (IFI) behavior; and technical approaches to PFM system improvement.

Responding to the need to improve PFM systems as a critical element for economic growth and development, several institutions came together in 2001 to form the Public Expenditure and Financial Accountability (PEFA) initiative -- a multi-donor effort composed of the European Commission, the UK's Department for International Development, the Swiss State Secretariat for Economic Affairs, the French Ministry of Foreign Affairs, the Royal Norwegian Ministry of Foreign Affairs, the World Bank, the International Monetary Fund and the Strategic Partnership with Africa.

Talking about Taxes....the International Tax Dialogue

Posted by Bill Dorotinsky

You cannot spend what you do not have. Any good PFM system must start with revenue collection. Preferably, sound revenue policies that do not inhibit or distort economic growth. For those eager to keep abreast of the latest developments in tax policy and administration, a very useful reference is the International Tax Dialogue.

The International Tax Dialogue (ITD) was launched in 2002 by the IDB, IMF, OECD, UN and World Bank Group to "encourage and facilitate discussion of tax matters among national tax officials, international organisations, and a range of other key stakeholders."

The site has a library of over 2,700 documents, links to other useful sites, the ability to register as a member and receive newsletters and post tax policy questions, and a searchable database of technical assistance activities. And, the site is available in English, Spanish, French, German, Dutch, Norwegian, Chinese, and Russian.

A sampling of some recent documents posted to the site:

• a report by the U.K.'s Comptroller and Auditor General on "Tackling the Hidden Economy"
• an IMF report on "The Fiscal Implications of Climate Change"
• an OECD paper on "Tackling Cross-Border Tax Evasion"

(despite the many references to 'tackling,' this is not all about American football)

Visit the site and book-mark the page -- you'll want to visit regularly.