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Transcript of PPT English

  • 1. Fiduciary Risk Assessment Public Financial Management Performance Measurement Framework PEFA Public Financial Management Performance Measurement Framework and its Precursors ICGFM May 08 2006 David Joseph Ormandy MA CGA CIM FCSI Advisor to the Financial Secretary Government of Montserrat
  • 2. 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
  • 3. 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
  • 4. 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
  • 5. Role of PEFA in Good Governance
    • encourage macroeconomic stability
    • Promote investment
    • Account for public sector resources
    • Promote honest and accountable government
  • 6. 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
  • 7. 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)
  • 8. 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
  • 9. 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
  • 10. The Budget Process
    • Policy Review
    • Strategic Planning
    • Budget Preparation
    • Budget Execution
    • Accounting and monitoring
    • Reporting and audit
  • 11. Links between expenditure and public policy
    • In developing countries, in the absence of a MTEF or Strategic Plan, recurrent spending may not be prioritized.
  • 12. 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.
  • 13. 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.
  • 14. 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
  • 15. 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
  • 16. 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
  • 17. 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
  • 18. 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.
  • 19. 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
  • 20. 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)
  • 21. 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
    • Predicta