Country Financial Accountability Assessments Paul Bermingham Head, Financial Management Sector Board June 22, 2001

Overview What is a CFAA? Strategic Context – Where Does it Fit? What is a CFAA used for? Future Directions

What is a CFAA?

Diagnostic tool designed to enhance the Bank’s knowledge of financial accountability arrangements in client countries Supports both:  the exercise of fiduciary responsibilities by helping to identify risks to the use of Bank funds  the Bank’s development objectives by facilitating the design and implementation of capacity building programs Together with the PER and CPAR, emerging as a key underpinning for country assistance strategies and programmatic lending

Scope and Content of CFAA Public sector budgeting Public sector accounting and financial reporting Public sector internal control system and records management Public sector auditing Legislative scrutiny of the management of public finances Private sector financial accounting and auditing practices Corporate governance Public access to information on public finances Non-governmental and community-based organizations

Completed Argentina Armenia Bangladesh Bhutan Bolivia Brazil Colombia Croatia Egypt Ghana Indonesia Jamaica Jordan Kazakhstan Korea Latvia Maldives Moldova Mozambique Nigeria Papua New Guinea Poland Slovakia South Africa Turkey Uganda Viet Nam Yemen Number of CFAAs Done 28 Algeria Armenia Benin Bhutan Bosnia-Herz Chad India Mexico OECS countries Pakistan Panama Peru Romania Russia Ukraine 15 Underway Burkina Faso Cameroon Dominican Republic Ethiopia Laos Madagascar Malawi Mozambique Philippines South Africa Tanzania Under Discussion 11

Strategic Context: Where Does it Fit?

Strategic Context Country development business model PRSP, CAS, diagnostic work, programmatic support, CDF Greater realization of the importance of institutions Shifting Bank resource transfer patterns Adjustment lending, debt relief, sector programs Fiduciary assessments in CASs (MIC Paper, April 2001) Fiduciary assessments as an underpinning for PRSCs (PRSC guidelines, May 2001)

Relationship to Bank product lines Global products and partnerships Standards Bank activity

Global products and partnerships Diagnostic ESW work Standards Assessment Bank activity Relationship to Bank product lines

Global products and partnerships Diagnostic ESW work CAS, lending operations, advice Standards Assessment Response Bank activity Relationship to Bank product lines

Public Expenditure and ESW Products PolicyPreparationExecutionReportingOversight Budget

Public Expenditure and ESW Products PolicyPreparationExecutionReportingOversight PER Budget

Public Expenditure and ESW Products PolicyPreparationExecutionReportingOversight PER CPAR Budget

Public Expenditure and ESW Products PolicyPreparationExecutionReportingOversight PER CPAR CFAA Budget

Public Expenditure and ESW Products PolicyPreparationExecutionReportingOversight PER CPAR CFAA Fiduciary Assessment Budget

Sources of Information CFAA Procurement reviews Public expenditure reviews Institutional and governance reviews CPIA ratings Bank portfolio performance information IMF Fiscal transparency reports IMF Safeguards assessments IMF “Red cover” reports MDB and other donor diagnostic products SAI reports Other official oversight agencies in client countries International organizations World BankOther

What is a CFAA used for?

Uses of a CFAA Facilitate dialogue with borrowers and partners on financial accountability matters An input to the design of the Bank’s overall country assistance strategy (CAS) Underpins Bank advice and lending to strengthen country financial accountability Reference point in assessing financial management arrangements in individual projects Support fiduciary risk management strategy (e.g., staffing, mitigation measures)

CFAA – Future Directions

CFAA - Future Directions Increased country coverage Better integration with other diagnostic tools, especially PERs and CPARs Enhanced linkage to borrower development strategies and Bank programs Increasingly carried out with development partners Emerging as a priority area for collaboration in financial management harmonization process Enhanced quality Likely to focus more on public sector, as private sector issues addressed by ROSC assessments of accounting and auditing