1. The Changing Face of PE Work – Financial Management Perspectives
PREM Learning Week
17 June 2002
David Shand
Financial Management Advisor
OPCFM

2. Fiduciary Assessment
Ex ante “Integrated Fiduciary Assessment” covering public expenditure, financial management, and procurement
Becoming a de facto requirement for adjustment lending
Is a formal requirement for PRSCs
Need to consider the PFM system as an integrated whole
Upstream budget construction processes and downstream budget implementation, monitoring, and ex post review
Where do CFAAs and PERs (PFM component) meet?

3. Bank PFM Diagnostic Tools
CFAAs – relatively new fiduciary ESW diagnostic
HIPC expenditure tracking studies – carried out in 24 HIPC countries using 15 PFM performance benchmarks
PERs – variable and potentially very broad in scope. PFM diagnostics one component
CPARs – the other fiduciary diagnostic. Has tended to operate rather separately from other diagnostics

4. Relevant Developments in Financial Management
General movement of Bank fiduciary work to a country, rather than a project focus
Moves to develop a performance focus in PFM, improve PFM criteria and harmonize/collaborate internally and externally
(See Financial Management website on Bank Intranet)

5. Meaning of “Fiduciary”
An accountability rather than a legal concept
“Risk to Bank funds” – in adjustment lending = risk to country and other donor funds
Risk of what?
Funds disappearing
Funds not spent according to budget
Funds not well spent
Not knowing how the funds were spent (poor fiscal transparency)

6. Using CFAA Diagnostics
So what? Just another piece of ESW?
Not a pass/fail situation
No minimum PFM standards established for adjustment lending
Rather CFAA is a knowledge tool about the environment into which we are putting Bank funds
Adequate PFM may be an outcome of lending, or a precondition
Need for focused, results-based conditionalities

7. Fiduciary and Developmental (Capacity Building) Issues
Seen as complementary, not mutually exclusive
Standard practice in all sectors – FSAPs, poverty assessments, normal project appraisals
A fiduciary assessment requires government cooperation and participation
A government committed to reform reduces risk to Bank (and country) funds

8. Key future issues
Improving the performance focus of PFM diagnostics (HIPC, IDA 13, CPIA)
Not just technical fixes – institutional issues, signals, and incentives
Better integration with CASs and lending programs
Coordinating and harmonizing PFM diagnostic work, within the Bank (PREM, FM, and Procurement)

9. Internal Integration of Diagnostics
PER more upstream, CFAA more downstream. At what point do they intersect?
Integration of what – processes, reports, or both?
A fully integrated approach may not be possible, differences in timing and time scale
PERs too large to integrate; integrate only the PEM component ?

10. External Collaboration/Harmonization
Other donor involvement in CFAAs (IADB, ADB, UNDP, DFID, SPA)
Harmonization of approach on PFM performance measurement, risk assessment, and fiduciary safeguards
PEFA program to assist in this

11. Other Key Issues Future emphasis on capacity development
PFM a focus area under new IDF guidelines
Extending PFM diagnostics to sub-national governments
Bank skills gap
Of PFM generally in PREM
Of Public Sector issues generally in FM

12. CFAA Coverage CFAA formal ESW since July 2000
Formal Guidelines issued September New draft guidelines June 2002
Through FY01 28 CFAAs done, of which 23 less than five years old
20 CFAAs likely to be delivered in FY02
Steady state of per year
Coverage of all active borrowers by FY 04