presented by: richard allen, head pefa secretariat

Public Expenditure &

PEFAFinancial Accountability

Presented by:Richard Allen, HeadPEFA Secretariat

Procurement and the PEFA ProgramProcurement and the PEFA Program

“Strengthening Procurement Capacities in Developing Countries”OECD/DAC – World Bank RoundtableParis, France January 22-23, 2003





Introduction: PEFA in brief

A partnership, jointly-financed by the World Bank, European Commission, UK (DFID), and Switzerland (SECO).

The Secretariat, based at the World Bank in Washington, DC, was established in December 2001.

Steering Committee members currently include: World Bank, IMF, EC, DFID, SECO and the Strategic Partnership with Africa (SPA).

Current budget: $5 million over three years.

What is PEFA? …

Public

Expenditure and

Financial

Accountability



PEFA partners …

Introduction

The World BankThe World Bank

The Department for International

Development (DFID)

The Department for International

Development (DFID)

The European Commission

The European Commission

The International Monetary Fund

The International Monetary Fund

France

Possible Future Partners:

Norway

Switzerland



Netherlands

Canada



The scope of PEFA’s interest …

Budget Formulation

Governance & Institutional Environment

Executive & Legislative

Branches of Government

Economic Analysis of

Public Spending

Expenditure Monitoring, Reporting &

Auditing

Budget Execution (e.g., cash & debt

mgnt., control, internal audit)

National & Sub-National

Levels

Diagnostic Analysis of

PEM Systems

Public Procurement

Expenditure Incidence

PE Process

Institutions

PE in Public Agencies & Enterprises

PE Policy/Impact Poverty

Impact

Introduction



What are PEFA’s Goals and Activities?

Strengthen existing diagnostic instruments and reduce duplication through a fundamental review of their scope and application

Support the development of benchmarks and performance measures

Support activities in countries where integrated approaches are being applied

Disseminate information on good practice and lessons learned

Work with other organizations that are developing international standards and harmonizing approaches

Reduce transaction costs of assessments for countries

Enhance donor cooperation and coordination

Better meet the fiduciary and developmental objectives of client countries and development agencies

Improve impact of reforms

Goals Activities

PEFA Goals

&Activities



PEFA’s Approach

Involves a program of work over a medium-term time frame (3-5 years)

Includes the whole budget cycle

Takes into account institutional and governmental factors, or is part of a wider public sector reform strategy

Includes both diagnostic work and the development of reform programs

Involves a program of work over a medium-term time frame (3-5 years)

Includes the whole budget cycle

Takes into account institutional and governmental factors, or is part of a wider public sector reform strategy

Includes both diagnostic work and the development of reform programs

Working with partners, the Program will support the delivery of this approach.

Strengthens coordination at the country level between the development organizations

Encourages country ownership and participation

Strengthens coordination at the country level between the development organizations

Encourages country ownership and participation

Is linked to the Country Assistance Strategy (CAS) or equivalent

Leads to a Poverty Reduction Support Credit (PRSC) or other budget support operation

Is linked to the Country Assistance Strategy (CAS) or equivalent

Leads to a Poverty Reduction Support Credit (PRSC) or other budget support operation

CollaborativeStrategic IntegratedCountry Focused

Brings together different instruments and analytical tools

Takes a wider governance and institutional perspective in the analysis and development of reforms

Seeks to fulfill the requirements of the individual countries as well as those of external stakeholders

Brings together different instruments and analytical tools

Takes a wider governance and institutional perspective in the analysis and development of reforms

Seeks to fulfill the requirements of the individual countries as well as those of external stakeholders



Examples of diagnostic tools are widespread … and overlapping

3. Why is a new approach needed? Public Expenditure instruments

Public Expenditure Reviews (PER)

Expenditure Analysis Budget Formulation Budget Execution

Fiscal ROSC

Public Expenditure Tracking Surveys PETS

Country Procurement Assm’t Reviews (CPAR)

HIPC Expenditure Tracking Assessments

European Commission (EC) Audits

Governance Surveys (e.g., IGRs, Anti-Corruption, Public Officials, Household Incidence, Poverty, etc.)

Country Financial Accountability Assessments (CFAA)

Illustra

tive

Monitoring &Reporting



Procurement Aspects of the PEFA Program

Mapping Review

CPAR is one of the key instruments under review

Institutional Review

Procurement and other public management reforms in Philippines

Short-term Measures

How to build a “platform” for PFM and procurement reform that promotes long-term development objectives

E.g., OECD-DAC/WB Roundtable, country activities

Benchmarking and

Performance Measurement



Country Activities

Support for CPARs and other procurement activities as part of an integrated work program, e.g., Kenya, Madagascar



The basic objectives are to obtain goods and services needed to deliver government programs at the appropriate quantity, quality and price (value for money)

Procurement expenditures are often a significant component of public expenditure and GDP (10-15%)

Many procurement projects involve multi-year expenditures

Procurement is therefore a financial management issue – not just adhering to legal requirements or obtaining goods and services that meet technical requirements

Inappropriate procurement will reduce both strategic resource allocation and operational efficiency, through inappropriate goods and services and higher than necessary costs. It may also threaten aggregate fiscal control through cost blowouts in major projects.

The basic objectives are to obtain goods and services needed to deliver government programs at the appropriate quantity, quality and price (value for money)

Procurement expenditures are often a significant component of public expenditure and GDP (10-15%)

Many procurement projects involve multi-year expenditures

Procurement is therefore a financial management issue – not just adhering to legal requirements or obtaining goods and services that meet technical requirements

Inappropriate procurement will reduce both strategic resource allocation and operational efficiency, through inappropriate goods and services and higher than necessary costs. It may also threaten aggregate fiscal control through cost blowouts in major projects.

Procurement

Why Procurement is an Integral Part of Public Financial Management



1. Greater Performance Focus in the Budget:

• Poor procurement will show higher unit costs

• Performance based procurement?

1. Greater Performance Focus in the Budget:

• Poor procurement will show higher unit costs

• Performance based procurement?

2. Strengthening Internal Control & Audit:

• Procurement is a key element of internal control and internal audit systems

• The procurement audit function in Supreme Audit Institutions (SAIs) is important

2. Strengthening Internal Control & Audit:

• Procurement is a key element of internal control and internal audit systems

• The procurement audit function in Supreme Audit Institutions (SAIs) is important

3. Accrual Accounting and Budgeting:

• Focuses on accountability of total costs, including maintenance and depreciation

• Part of the issue of improving the management of public assets

3. Accrual Accounting and Budgeting:

• Focuses on accountability of total costs, including maintenance and depreciation

• Part of the issue of improving the management of public assets

How Procurement Fits with Key Themes of Budget Design & Reform

5. Medium-Term Approach to Budgeting:

• Does not require multi-year appropriations, rather a forward look to provide indicative figures for planning purposes

• Planning of capital investment programs and projects an integral part of multi-year budgets

5. Medium-Term Approach to Budgeting:

• Does not require multi-year appropriations, rather a forward look to provide indicative figures for planning purposes

• Planning of capital investment programs and projects an integral part of multi-year budgets

6. Transparency:• Fiscal transparency, as

with transparency of procurement transactions, may improve overall fiscal performance and counter corruption

6. Transparency:• Fiscal transparency, as

with transparency of procurement transactions, may improve overall fiscal performance and counter corruption

7. Other Applications:

• eProcurement• Public-private

partnerships (PPI)

7. Other Applications:

• eProcurement• Public-private

partnerships (PPI)

4. Budget Design:• Integrating capital and

recurrent budget preparation and execution involves procurement issues

4. Budget Design:• Integrating capital and

recurrent budget preparation and execution involves procurement issues



Mainstreaming Procurement as a Financial Management Activity – An Example

Budget Planning

Execution Monitoring Reporting & Execution

Demand Planning

Budget planning

Acquisition management

Logistics Management

• In South Africa, procurement as a technical and peripheral function has been put aside and is being integrated into the overall public expenditure management process

• The term “procurement” is no longer used. Procurement officers are called “financial management officers”

• Under the name of “Supply Chain Management” traditional budget management in line ministries is being restructured from:

• In South Africa, procurement as a technical and peripheral function has been put aside and is being integrated into the overall public expenditure management process

• The term “procurement” is no longer used. Procurement officers are called “financial management officers”

• Under the name of “Supply Chain Management” traditional budget management in line ministries is being restructured from:

Disposal Management

To:

• Even though “Acquisitions Management” deals with most functions of traditional procurement, each stage of the process engages financial officers, including “procurement” experts.

• By doing so, officers in charge of demand planning are better able to prepare a more practical and feasible plan for the logistics and procurement stages later on

(N.B. the concept of supply-chain management bas been popular in private companies since the early 1980s)

• Even though “Acquisitions Management” deals with most functions of traditional procurement, each stage of the process engages financial officers, including “procurement” experts.

• By doing so, officers in charge of demand planning are better able to prepare a more practical and feasible plan for the logistics and procurement stages later on

(N.B. the concept of supply-chain management bas been popular in private companies since the early 1980s)



Q&A

&

Discussion

presented by: richard allen, head pefa secretariat

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