Wholeheartedly agree with Matt Andrews

If only all development organizations were required to provide background stories like these for the innovations they so easily reproduce everywhere. One wonders if ministers of finance in French speaking African countries would so willingly agree to Medium Term Expenditure Framework reforms if they knew where these ideas came from (select advanced Anglophone countries like Australia), what kind of process MTEFs emerged from in these settings, what kind of political context they demand, what capacities they require etc. Ditto for just about every good, better or best practice one can think of. We need more of what ISS is providing: materials to help theorize what makes a best or innovative practice best or innovative and to assist us in thinking about whether these practices fit into new contexts...or what will be required to facilitate the fit. Visit their web site at http://www.princeton.edu/successfulsocieties/

New PFM Blogger

Matt Andrews

PFM Lesson of the Day

Albert van Zyl reviews some reviews of PFM systems;

So for example, Matt Andrews (2010), in his study of 31 countries in Sub-Saharan Africa found that “they have alarmingly similar reforms in place” (page 44), “an MTEF was implemented in 28 countries, programme budgeting in 25 and an IFMIS in 20”. As a result of these findings, Andrews calls for “less similarity of reforms and more context appropriateness”, as one of his three main recommendations.

Related:
Weekend reading- Mathew Andrews paper mentioned above.
Budgets are made better than they are executed

Timor-Leste, PFM consultants heaven!

Democratic Republic of Timor-Leste: Public Financial Management-Performance Report
Timor-Leste: Report on Observance of Standards and Codes (ROSC)-Fiscal Transparency Module

Highlights from the ROSC;

There is no clear and simple citizen’s guide to the budget.

 Short term recommendations;

• Initiate identification and costing of new government initiatives in the budget, both on the expenditure and revenue side, and identify recurring costs of public investment for the medium term. (2.1.3 paragraph 40)
• Require donors to provide estimates of planned expenditure volumes on a multiyear basis (but not on individual projects), and include these in the multiyear fiscal presentation and the expenditure projections in the budget. (2.1.5 paragraph 47)
• Start building capacity in costing and analytic review of capital projects and program expenditure. (2.1.1 paragraph 34)
• Include in the budget documents analysis of revenue and expenditure outturns compared to plan, for the three prior years to the budget year. (3.1.2 paragraph 63)
• Publish a clear and simple summary guide to the budget in Tetum and Portuguese to inform the population. (3.2.1 paragraph 72)
• Specify in the financial regulations the process and conditions for the access to contingency reserve funds to prevent use for other purposes. (2.2.3 paragraph 55)

 Medium Term Recommendations;

-Strengthen capacity in basic macrofiscal forecasting and use of the financial programming model. Document the macroeconomic framework. Basic macroeconomic assumptions underlying the budget estimates should be published at an early stage of the budget cycle and clearly presented in the budget documents. Extend the macrofiscal framework towards the medium term by estimating the main revenue and expenditure flows over the medium term; develop of a medium-term fiscal framework. (2.1.2 paragraphs 36 and 37)
-Develop a medium-term PIP with clear principles for the evaluation, prioritization, and approval of investment projects. Capacity building and/or buying in cost-benefit analysis in the context of multiyear investment projects is essential. (2.1.1 paragraph
34)
- Include in the timeline for budget preparation an extended period for line ministries to prepare and for the MOF to analyze and discuss the rationale and costing of the budget. For the latter, additional review capacity in MOF is needed to verify costing and challenge the recurrent and capital project budget submissions requests and correspondent links. (2.1.1 paragraph 35)
-Review and further develop the program classification of expenditure and better link it to line ministry policies; use it initially for budget planning and presentational purposes; extend the functional classification to include subfunctions and items.(3.2.2 paragraph 73)
-Strengthen the strategic planning capacity in the prime minister’s office, MOF, and line ministries, and establish clear links to the AAPs and line ministries’ budgets and
include in budget documents additional analysis on government priorities, programs, and targets. (3.2.4 paragraph 74)
-Cost existing policies and clearly separate them from new policies in the preparation of budget and forward estimates. This would enable the presentation of “baseline” expenditures at the start of the budget process. (2.1.3 paragraph 39)
-Develop a more robust methodology to expand production of baseline and budget estimates over the medium term.
-Decide on line ministry expenditure ceilings in the COM at the start of the budget cycle on the basis of baseline estimates, new expenditure initiatives and possible savings targets. These ceilings should be provided to line ministries in the budget circular, and cover both recurrent and capital expenditure
-Develop presentations in the budget in the following areas: fiscal risks, quasi-fiscal activities (including by petroleum companies), and contingent liabilities. (3.1.3 paragraph 66);
-Develop an overview of existing and new tax expenditures in the budget. (1.2.1 paragraph 22)
-The MOF should develop or commission occasional reports on long term expenditure and revenue trends. Such analyses would provide a good framework to address structural issues like population growth and the costs associated with this, or the limitations of natural resources. This would be particularly important in the preparation of the Vision 2020 plan update. (3.2.4 paragraph 74)

Random thoughts on Improving PFM Technical Assistance

'The best solutions are those where international experience is judiciously mixed with local genius'-Suhas Joshi

Some more comments on Richard Allen's post about improving effectiveness of PFM TAs';

- I don't see any problems in moving towards what locals and advisers see as best practice; as long we consider that there are many recipes of 'best practice'

-TA reports should always start the dialogue, but how does one institutionalise discussion and follow up of TA reports on PFM? Which committees should be responsible, and at which level?

- Mr. Joshi also makes importance points in the comments-'countries therefore do not need large prescriptive reports but help is resolving the constraints they have'. I fully agree, 'it is more useful to have as a TA someone who understands the country and has spent some time there'

- One of the biggest problems I've seen are consultants who want to take you for a ride- this is a problem for assistance provided by some international donors who have weak internal expertise, exceptions include World Bank and IMF. Countries need to seriously think the donor they approach for reform PFM areas and whether they have a comparative advantage in them.

Wanted - Costing Experts!

Cost accounting is relatively overlooked area in Central Finance Agencies in low income countries- which I think aught to be an important area if we want to progress to a comprehensive MTEF. The following job advertisement for an expert to Brazil, sounds interesting;

The objectives of the project are to (i) implement the public cost system in phases, starting with four pilot entities (health, education, prisons, and social assistance); (ii) develop a cost methodology adequate to the public services at the state level; (iii) organize seminars, courses, and other training events to educate the state officials on how to prepare and use cost information; (iv) document the cost methodology used in the existing projects; (v) prepare guidelines for external dissemination of cost data; and (vi) prepare progress reports.

Database of Central Finance Agencies

Sounds like World Bank PFM people are doing important work;

Richard Allen is currently working on a project with the World Bank that is analyzing the role and responsibilities of central finance agencies (CFAs) in low-income countries. A database covering 70-80 countries is being prepared, along with case studies of selected countries. The project includes a strong emphasis on the analysis of political economy and institutional characteristics of CFAs.

PFM Books

The Many Faces of Public Management Reform in the Asia-Pacific Region;

During the past decade, globalization and democratization have been the major forces that helped transform the structures, functions, and processes of Asian public sectors. Nevertheless, these transformation efforts of Asian countries vary considerably depending on local context, and have met with different degrees of success. Some countries experienced smooth transformations. For others, the reform process has been more volatile. These issues were explored at a conference July 7-9, 2008 in Bangkok, Thailand, hosted by the Faculty of Political Science, Chulalongkorn University, and co-sponsored by the International Public Management Network, the Asia-Pacific Governance Institute, and Thailand Democracy Watch. This book presents some of the works contributed by participating scholars and practitioners at the conference. The contents fall into three categories: corruption and anti-corruption initiatives, public financial management reforms, and public management reforms with emphasis on performance and results.

Editor are Clay Wescott, Bidhya Bowornwathana, L.R. Jones,

Highly recommended:
World Bank, 2008. Public Sector Reform: What Works and Why? An IEG Evaluation of World Bank Support.