PEFA Secretariat Report on CAPE conference on "Reforming for Results: Can Public Financial Management Uplift Government Performance?"

By Peter Fairman, Senior Public Sector Specialist, PEFA Secretariat

1. Introduction

I represented the PEFA Secretariat at the annual conference (November 12-13, 2008) hosted by Centre for Aid and Public Expenditure (CAPE), based in Overseas Development Institute in London.  The theme of the conference was “Reforming for Results: Can PFM Reform Uplift Government Performance?”, with particular focus on service delivery.  Attendance was close to 100 participants from overseas governments, aid agencies, academia and consulting companies.  The presentations and list of participants are available on the ODI website (www.odi.org.uk).

Issues directly and indirectly concerning the PEFA program were addressed in many of the presentations; the main messages from some of these are presented below (references to PEFA indicators are mine). 

Driving Government Performance through the Ministry of Finance: Graham Scott, Executive Chairman of Southern Cross Advisors, Former Secretary to the New Zealand Treasury

• PFM reforms (and public sector reforms in general) should concentrate first on addressing the weakest links in the provision of services.  Clearing out a whole lot of useless duplicative controls (ref. PEFA performance indicator 20 – ‘Effectiveness of internal controls for non-salary expenditure’) and developing a practical new management model are good first starts.

• Personality is very important.  PFM reform may happen just because of the efforts of one person.

• Be wary of mechanical sequencing methodologies and pre-cooked PFM reform products:  Trying to “get the basics right first” could result in ignoring opportunities to introduce some “non-basics” with potentially strong impacts in terms of service delivery.  For example, empowering line ministry management to contract out service delivery to NGOs (e.g. Afghanistan) may enable higher predictability of health service delivery (ref: inducing higher scores for PEFA PI-2 --‘Composition of expenditure out-turn compared to original approved budget’).

Sector Budgeting and Resource Allocation: Mick Foster, Director, Mick Foster Economics

• Service delivery units (SDUs) should be cost centers, as reflected in budget classification systems, so that it is easier to see how much is budgeted for each SDU and how much each actually receives and spends (ref. PEFA PI-23 – ‘Availability of information on resources received by service delivery units’);

• Strengthening budget timetabling and predictability of in-year funding would help improve service delivery.  For example, higher scores for PEFA PI 11 – ‘Orderliness and participation in the annual budget process’ – and PI 16 – ‘Predictability in the availability of funds for commitment of expenditure’-- may induce higher scores for PI 19 –‘Competition, value for money and controls in procurement’ through facilitating planning for procurement;

Sector PFM & Service Delivery: Tim Williamson, Research Associate, ODI

• Too many funding transmission mechanisms (“pipes”) for funding SNGs may be reflected in unreliable and intransparent funding (pipes often blocked and leak).  For example, in Uganda, the central government provides 33 conditional grants to sub-national governments (SNGs) and donors directly fund projects at SNG level.  In terms of the PEFA Framework, such a situation might be reflected in:  low scores for PI 8 – ‘Transparency of inter-governmental fiscal relations’;  D-2 and D-3 – ‘Financial information provided by donors for budgeting and reporting on project and program aid’ and ‘Proportion of aid managed by national procedures’;  and SNG PEFA HLG- 1 – ‘Predictability of transfers from higher level government’.  Low scores for these indicators might impact negatively on SNG PFM performance with potential impact on service delivery. 

Role of Decentralized Tiers of Government:  Paul Smoke, Professor of Public Finance and Planning, New York University

• Indonesia:  Big movement away from de-concentrated to decentralized government.  But undermined to some extent by stand-alone donor projects that do not fully comply with the new system  (ref. possible influence of low scores for PEFA D2-D3 on SNG PFM performance);

• Uganda:  Paul’s comments reinforced Tim Williamson’s.  Recurrent and capital expenditure at SNG level are insufficiently integrated as numerous recurrent expenditure-oriented conditional grants are not well harmonized with capital expenditure-oriented grants, including via donor-supported projects.  PFM performance and ultimately service delivery may be negatively impacted (ref: possible influence of low scores for PEFA PI 12 – ‘Multi-year perspective in fiscal planning, expenditure policy and budgeting’ - and D2-D3).

SIDA’s Approach to PFM reform: James Donovan, PFM advisor to SIDA

• PEFA assessments form a good basis on which to prepare/strengthen PFM reform strategies and to monitor progress in PFM performance; the assessments identify the main strengths and weaknesses in PFM and point the way forward in terms of reform priorities.  The PFM reform strategies cannot, however, be extracted directly from the assessments.  Extra work is necessary to prepare these strategies (perhaps using generic sequencing approaches such as the “Platforms” approach as a guide), taking into account issues concerning political, legal, public administration and civil service systems.

PFM Reform Strategy – what role for donor agencies? Matthew Andrews, Assistant Professor of Public Policy, Harvard Kennedy School. USA

• Matthew used PEFA data and reports to compare PFM –subsystem performance across African countries and to infer the influence of donors on performance.  He found that up-stream (e.g. budgeting) PFM sub-systems performed better than downstream (e.g. budget execution), as the influence of donors appears to be felt more at upstream level (e.g. Ministry of Finance), rather than at downstream level (e.g. service delivery unit).  Use of PEFA data for cross-comparison purposes mainly involved conversion of PEFA scores to numbers and then averaging.  I pointed out the potential hazards of doing this, in terms of issues in ensuring that like is being compared with like.

Comments

[Geoff Handley]

Peter,

Many thanks for your write up of the 2008 CAPE conference. For those interested in accessing the conference materials, the full link is:

http://www.odi.org.uk/events/details.asp?id=295&title=reforming-results-can-public-finance-management-reform-improve-government-performance

The conference report will be posted there in the coming weeks.

Regards,

Geoff Handley and Ed Hedger (ODI - CAPE)