1. Adapting to New Demands on PER Work
Integrating PER, CFAA and CPAR perspectives
Anand Rajaram, PRMPS
Public Expenditure Analysis and Management
May 22-24, 2001

2. Growing Expectations of PERs
Continue to provide analysis of equity and efficiency of budget allocations
Provide analysis of institutional aspects of expenditure management
Now, also provide an assessment of institutions of accountability for resource management

3. The Conceptual Toolkit has to expand as well
Public expenditure analysis
macro - sustainability
Sectoral analysis
Three level analysis of PEM systems
Macro-framework and fiscal discipline
policy and budget formulation
budget implementation & op.efficiency
Accounting, procurement and audit systems
chart of accounts, UNCITRAL, Supreme Audit Institutions

4. PERs also expected to be Participatory
Collaborative approach to analysis
Govt. to lead with WB support
Other donors to participate
Objective: Better impact
Insiders insight improves analysis
Ownership of recommendations

5. Pragmatically, approach has to be tailored to circumstances
Participation: Depends on receptivity of country counterparts
Coverage of issues: Depends on
counterpart views
donor consensus
skills available
ESW budget

6. Turkey: Public Exp.and “Institutional” Review
What do we mean by “institutional”?
Budgetary institutions?
Political institutions?
“Rules of the game”?
Something elastic to cover relevant aspects of governance?

7. Turkey PEIR Government: Bank Requested “process oriented” PEIR
Requested Bank to undertake PEIR and CFAA jointly
Requested Fiscal Transparency report
Asked Bank and IMF to co-ordinate PEIR and FT work
Bank
Worked with counterpart team in seminar/workshop format over 1 year
Coordinated PEIR and CFAA missions
Consulted with subsequent CPAR mission
Collaborated with IMF on FT and PEIR perspectives

8. Turkey PEIR Joint PEIR and CFAA missions
Peter Dean as “swing man” to integrate PEIR and CFAA perspectives
Overlap with CPAR mission and informal discussions
Focus in PEIR on impact of procurement on investment efficiency - link to CPAR
Substantive collaboration with IMF on FT and FAD technical assistance on GFS budget classification

9. Turkey PEIR: Format Overview Analysis of Government Expenditure
Public Investment Management
Health expenditure
Education expenditure
Institutional Basis for Policies, Plans & Budgets
Systems of Financial Accountability
Toward More Effective and Accountable Government

10. Turkey PEIR: Main Insights
Absence of disciplined policy formulation - govt. turnover
Very limited coverage in fiscal reporting - much of central government spending outside Parliamentary purview
Accumulation of fiscal deficits due to off-budget and quasi-fiscal programs
Growth of contingent liabilities poses fiscal risks
Lack of functional classification a handicap to sector policy
Audit fragmented and narrowly focused on compliance
Procurement problematic and source of investment inefficiency and corruption

11. Procurement and Public Investment
Large number of projects, low completion rates
What are incentives for such outcomes?
Procurement based on discounts to estimated price.
Open ended aspects which allow ex post adjustment of contract cost
Project costs almost doubled in real terms

12. Procurement case study
State Hydraulic Works agency
, 55 projects completed
36 of 55 contracts bid discounts of 11-50%
Contract variations resulted in total project costs being 90 percent more than initial estimate (and about 4 times the bid price) in real terms.
Decisions to undertake a project were based on inadequate information on real cost commitment.
Such cost escalation would significantly reduce project completion rates.

13. Next generation: Bosnia PEIR
Joint PEIR, CFAA and CPAR mission
Integrated assessment of budget, financial management, audit and procurement system
Work in progress

14. Joint PER-CFAA-CPAR work enhances both development impact and fiduciary perspective
PER provides the material to motivate real policy dialogue on systemic issues
CFAA provides an understanding of financial management and accountability system
CPAR is essential to improving operational efficiency and value for money
More comprehensive, integrated understanding
Better quality, internally consistent advice

15. Joint ESW? The whole is greater than the sum of the parts
The necessary skills to do enhanced PERs are currently distributed across PREM, FM and Procurement parts of the Bank
Good collaboration within the Bank is critical to getting an integrated perspective on public expenditure management and the correct problem definition
Even more critical is good collaboration with our counterparts who ultimately have the best insights into the weaknesses in their systems