Accountants to the Rescue! A Whole System Approach to PFM Architecture
Posted by Suzanne Flynn
The UK based Chartered Institute of Public Finance and Accountancy (CIPFA) has issued an ambitious, but also a somewhat theoretic, draft consultation paper, with support from the UK’s Department for International Development (DFID) on what constitutes a PFM system. The paper aims to clarify the scope and characteristics of PFM systems, but also what PFM “architectures” exist to guide measures and aid program development, with the ultimate aim of improving public service delivery. The draft is available at http://www.cipfa.org.uk/international/consultation.cfm. Comments on the draft are welcomed by the Institute by the end of November of this year. If this document is to be useful—and clearly a lot of work and thought has gone into it—comments from a broad range of PFM practitioners would add tremendously to its value. In my view, particularly the views of non-accountants would enrich the present draft.
CIPFA, for those of you who are not aware, is a founding member of the International Federation of Accountants (IFAC), the standard setting body for the accounting profession, which, through its International Public Sector Accounting Standards Board (IPSASB), has achieved much in recent years in providing guidance to national, regional, and local governments in accounting and reporting. CIPFA is the only accountancy body which focuses exclusively on the public sector and is probably best known internationally for provision of specialist public sector education and training for accountants and auditors. Naturally, CIPFA has strong views on PFM, but the question is, are these views sufficiently broad, or does this document reflect the view of the accountancy profession with an interest in PFM?
The draft paper starts off with introducing a new definition of PFM, commenting that previous definitions have become overly “clustered” around core government financial activities (the World Bank definition) and the budget (the IMF definition). CIPFA’s proposed universal definition is:
"Public financial management is the system by which the financial aspects of the public services’ business are directed, controlled and influenced, to support the delivery of the sector’s goals."
CIPFA’s expectation is that the underlying comprehensive description and analysis of the processes that enable a PFM system to function will facilitate better designed support for the development of country systems. Coupled with a supportive institutional and social context, this analysis would allow donors collectively to allocate resources more efficiently.
The document goes on to define elements and components of the PFM architecture and provides a series of process descriptions (which would probably be better placed in an appendix). Many of these processes are, however, in practice carried out not by accountants and auditors but by economists, budget specialists, tax administration officials, procurement specialists, and debt managers, both at the national and the sub-national level. If interventions are to be more effective, the description and analysis of the architecture must reflect the views of these professional groups.
A key element of the process architecture distinguished in the document is processes for "learning and growing"—individual and collective development through learning from best practice, peers, mentors, and partners, as well as service users. This element is of course essential to continuous improvement of PFM and to be expected from an Institute with a history in education and training in the public sector. PFM specialists, however, might consider this as not a core part of the PFM architecture, but more a support component. Again, the response from other professions might enrich the analysis here.
A second purpose of the proposal is to apply the process descriptions to the existing pattern of PFM institutions and their regional distribution and consider the implications and requirements for strengthening financial management systems in developing countries through aid programs. To achieve this, the paper goes on to model the institutional architecture by level, international, regional, national, and sub-national, and by type.
This is where the paper somewhat awkwardly becomes dominated by accounting and auditing related institutions in formulating PFM standards. There are some regional institutions mentioned, such as the Collaborative African Budget Initiative (CABRI), the Public Expenditure Management Peer Assisted Learning network (PEMPAL), but the main global bodies mentioned are accounting related—CIPFA, IFAC, and INTOSAI. Here again there needs to be a review by other PFM professions to ensure that bodies identified reflect the full range of professional skills required to "learn and grow" in PFM if this approach is to be useful and not be seen as a self-seeking proposal by the accounting profession and CIPFA in particular. Organizations such as the OECD, the World Bank and the IMF itself could, in my view, contribute more to the ongoing debate on PFM system development.
CIPFA has helpfully annotated the document with a number of questions on which it is specifically seeking feedback, although it also welcomes general comments. If this paper is to be useful in informing the debate on PFM, and in particular in improving technical assistance to developing countries, it is important that a wider range of views is taken into account and that the paper, and in particular the description and analysis of PFM’s institutional architecture, reflects this. Comments can be sent to email@example.com