Public Financial Management brochure

Public Financial Management

Promoting transparency and accountability in the management of public funds

2

Contents The Importance of Efficient Public Financial Management

3

Our Global Experience

4

Budget Policy, Systems & Management

6

Budget Transparency

8

PEFA & FRA

10

External Audit

12

Public Financial Management

3

2

The Importance of Efficient Public Financial Management Robust public finances are essential to effective government.

Transparent, equitable and accountable expenditure and appropriate management and monitoring systems provide a platform for governments to deliver a strong enabling environment for business and effective public services.

Adam Smith International builds on the principles of fiscal discipline, legitimacy, predictability, transparency and accountability to reform and strengthen public finances throughout the world.

We have been a leader in public financial management for over 20 years and have assisted the economic growth and governance reform programmes of many developing and transitional economies.

Good development outcomes

Effective public service deliver

Fiscal + macroeconomic strength

Fiscal transparency + accountability

Robust PFM Systems

“The Budget Department has come a long way since 2007. The guidance and support of the ASI team has been an important part of getting us there and we are grateful for their support.�

Mustapha Mastoor – Deputy Minister, Budgets and Treasury, Ministry of Finance, Afghanistan

Public Financial Management

3

Our Global Experience We have worked across the world with many clients and governments on an award-winning portfolio of projects, promoting transparency and accountability in the management of public funds. Throughout this brochure, you will find examples of our work – you can see a small selection here. For further information on our wider portfolio, visit www.adamsmithinternational.com/exploreourwork.

Libya: Making the economy the central issue to the formation of the new Libyan state We worked with media institutions and civil society groups to inform people of financial management principles, making economic development the most important issue debated in the formation of the new Libyan state.

Nigeria: Building the capacity of economic management systems We worked with the Ministry of Finance and provided technical assistance across the areas of macro-policy, statistics, and institutional development.

Our Offices London | United Kingdom New Delhi | India Nairobi | Africa Sydney | Australia

Regions: Public Financial Management The Americas & Caribbean Central & Southern Africa West Africa East Africa Middle East & North Africa Europe & Former Soviet Union Central Asia South Asia & Asia Pacific

Regions: Other projects Various

4

Burundi: Establishing a revenue office We worked with the government to design financial management and budgeting systems for the new Office Burundais des Recettes, Burundi’s first revenue authority.

Palestine: Strengthening planning, budgeting and financial management processes We supported the Palestinian Authority to develop an integrated budget and accounting system, supporting the Prime Minister’s state-building agenda.

Iraq: Assisting the reform of central government We improved the transparency and accountability of the Iraqi government by supporting the development of a PFM action plan and consecutive budget strategies.

Indonesia: Assessing public financial management systems We assessed the risks and benefits of using the Government of Indonesia’s public financial management systems to deliver aid funding in the health sector.

Afghanistan: Strengthening the budget at the national and provincial level We helped the Ministry of Finance develop a sustainable budgeting process, underpinned by a medium-term fiscal framework.

Public Financial Management

5

Budget Policy, Systems &Â Management If public funds are to deliver the services for which they have been allocated, financial planning, execution, and monitoring systems need to be in place and working.

Many conflict-affected or transitional countries have very weak links between policy and budget allocation.

Combined with limited capacity to analyse and prioritise budget allocations, this can mean that too few or too many resources are allocated to particular priorities.

We understand the importance of the budget in managing resources to deliver the best possible services. We are a recognised global leader in establishing and developing a range of budget-focused competencies in our counterparts.

6 Policy Review

5 External Audit

1

4

Strategic Planning

SIX PHASES OF THE BUDGET CYCLE

Accounting & Reporting

As well as the development of core skills, particularly in the management of budgets, we offer expertise in: Budget Formulation and Execution

Budget Process Reform Medium Term Expenditure Frameworks

Aid Management Expenditure Monitoring

6

3

Budget Execution

2

Budget Preparation

“That sort of spending is immensely valuable.

It is some of the best aid and development expenditure I have seen anywhere in the world.”

Rt. Hon. Andrew Mitchell MP – former Secretary of State for International Development speaking about financing the Palestinian planning, budgeting and financial management processes.

Strengthening Palestine’s planning, budgeting and financial management processes We undertook a wide ranging project to help the Palestinian Authority position itself as a legitimate governance body. We were contracted to assist the Ministries of Planning & Administrative Development and Finance in improving public financial processes and strengthening policy-making, national planning, monitoring and evaluation, and aid coordination.

We also supported training and mentoring of ministry employees, which enabled them to develop the foundations of the Palestine National Programme 2011-2013.

We established a Monitoring and Evaluation Directorate and helped establish a comprehensive aid management database to evaluate and channel donor funding.

This project supported the Prime Minister’s State Building Agenda and was instrumental in demonstrating the improved effectiveness of the Palestinian Authority.

Enabling development of 23 sector strategies, the basis of the 2013 National Programme

Palestine Palastine

Helping Iraq’s resources deliver the best possible services Following decades of mismanagement and exacerbated by numerous conflicts, the ability of Iraq’s government to effectively manage state finances to deliver essential services was extremely weak.

Our centre of government reform projects built on our earlier assistance to the Ministry of Finance to undertake public finance and economic policy reforms.

This included supporting the Iraqi government in negotiating and finalising a stand-by arrangement with the International Monetary Fund and establishing an implementation unit to coordinate and report on the government’s implementation of the agreed programme.

Focused on making Iraq’s resources deliver the most benefit, our more recent work built capacity within the Ministry of Finance for public financial management in general, and for national priorities, budget strategy, accounting procedures, audit capability, and legislative budget scrutiny in particular.

Improving delivery of essential services through PFM reform

Iraq

Iraq Public Financial Management

7

Budget Transparency Budget transparency is a key element of the broader process of public financial management reform, allowing the public to scrutinise and respond to the government programme.

Transparent budgeting has a range of powerful benefits, including the development of greater trust in government institutions and the willingness to contribute through taxes.

Often included as a component of our work delivering a wider range of public financial management reforms, we attach considerable importance to budget transparency.

A transparent budget process also holds governments to account as progress against, or deviations from, the budget are easy to see.

We are a leading specialist in this area and have successfully promoted budget transparency within our public financial management projects in countries including Afghanistan, Burundi and Iraq.

“The team are invaluable. They have passion, commitment and belief in what they do.

Without them, making the progress we have made over the last couple of years would have been much harder.�

Budget Policy and Reform Director, Budget Department, Ministry of Finance, Afghanistan

8

Strengthening Afghanistan’s budget at national and provincial levels We have worked with the Afghan Ministry of Finance since 2007 to strengthen systems for fiscal forecasting, analysis and reporting. We developed a medium-term fiscal framework to underpin the budget process, rolling out programme budgeting across 56 budgetary units to align expenditures with development plans.

We are now helping donors channel more than 50% of aid through the budget.

We assisted the Government to revise its Aid Management Policy, overhauled the donor assistance database, and designed modalities for on-budget financing of programmes.

Awarded British Expertise Major Project of the Year 2011

The budget process has developed from being virtually non-existent to compliant with international best practice.

Afghanistan

Afghanistan

Tamkeen: Promoting inclusion of good public financial management in Libya’s new social contract During the period of Libya’s transitional government, there was enormous pressure to spend at unsustainable levels. Failure to do so was being met with accusations of corruption and incompetence.

We are working to address the level of public awareness of basic public financial management principles and their role in good governance.

Tamkeen supports activist groups in developing research and advocacy campaigns that focus on the financial drivers behind key public policy issues.

We are developing a Public Financial Management Charter to define the government’s financial responsibilities and ratify them.

Raising awareness of governmental financial responsibilities

Libya

Public Financial Management

9

Public Expenditure & Financial Accountability (PEFA) and Fiduciary Risk Assessments (FRA) We are a leading provider of PEFA assessments and FRAs, both critical in measuring ongoing progress and monitoring the risk involved in financial assistance.

We are a leading provider of PEFA assessments, in countries as diverse as Iraq and Pakistan. We see them as an important step in benchmarking public financial management systems and measuring progress as reforms are implemented.

Fiduciary Risk Assessments are undertaken by donors to identify the risk associated with financial aid granted directly to a government. They are mandatory in such cases -

10

evaluating the national public financial management system is critical in assessing the risk involved in any financial assistance.

We are a recognised specialist in conducting FRAs and have successfully completed many in a range of countries, including Afghanistan, Bangladesh, Burundi, Palestine, Papua New Guinea, Vietnam and Zambia.

Undertaking public finance risk assessments in Punjab We provided the Punjabi government in Pakistan with a detailed analysis of the state of public finance and accompanying risk of corruption. We deployed a team of experts to the Punjab who gathered evidence from a range of government institutions at both provincial and district levels. This research was used to construct a detailed PEFA assessment and three FRAs. These addressed issues in health and education as well as the overall provincial public sector. The assessments also help to promote improved public financial management and stronger domestic financial accountability.

Limiting the risk of corruption in local government

Pakistan

Pakistan Assessing Tonga’s public financial management systems in the health sector Tonga faces many of the challenges of other small, developing island states: isolation, small markets, a narrow revenue base and high levels of migration.

In the health sector, the high prevalence of non-communicable diseases is placing a strain on the health services and life expectancy is falling. The Australian Government is supporting the country through the Tonga Health Systems Support Programme.

We assessed Tonga’s public financial management systems in the health sector. We examined the current use of government systems for the delivery of the programme, identifying the risks and benefits, and advising on the current implementation arrangements.

Improving health sector provision

Tonga

Public Financial Management 11

External Audit The ability of any government to undertake an external audit, with an independent auditor, is a vital component of a transparent and accountable public financial management system.

In such a system, ministers and officials, as well as implementing partners, are held to account for spending public resources.

Adam Smith International recognises the important role of external audit in the delivery of effective and sustainable public finances.

Effective external audit reduces opportunity for corruption and ensures more effective policy development, ultimately leading to better public service delivery and greater value for money for taxpayers, both in the recipient and donor country.

We are a leading provider of services to support the establishment and development of independent and competent audit bodies in transitional countries across the globe, including in Afghanistan, Iraq and Palestine.

“The ongoing support that Adam Smith International has provided has been invaluable.”

Permanent Secretary, Ministry of Public Administration, Trinidad and Tobago

12

Institutional strengthening of the Auditor General’s department in Trinidad & Tobago The Auditor General’s Department of Trinidad & Tobago is responsible for contributing to the transparent and accountable use of public funds by conducting audits of all enterprises that are owned by the state, and that receive public funding.

Following a PEFA assessment, we assessed the department’s capacity to implement a number of recommendations. In close collaboration with the Auditor General, we benchmarked the department against international standards and designed a capacity building strategy and action plan.

As a result of our work, the UK National Audit Office led a value for money programme and supported pilot audits.

Promoting transparency and good practice for state funding

Trinidad and Tobago

Support to development of externally audited financial statements in Palestine We supported the Palestinian Ministry of Finance to develop the Palestinian National Authority’s Financial Statement for 2008 to share for the first time with external auditors and donors. The resultant statement met the requirements set down in Palestine’s Basic Law and we offered follow-on assistance to respond to specific comments of external auditors.

To ensure this support led to sustainable change, the team supported the Ministry’s move to International Public Sector Accounting Standards compliant financial reporting through a structured progression. This included developing formats and guidelines for manual production of financial statements and training in accounting concepts and principles.

Helping the Palestinian Authority achieve fiscal transparency

Palestine

Public PublicFinancial FinancialManagement Management1315

Adam Smith International is an award-winning professional services business that delivers real impact, value and lasting change through projects supporting economic growth and government reform internationally.

We specialise in the design, management and delivery of complex projects.

Our wide-ranging experience is grouped into two areas: Economic Growth and Government Reform. Economic Growth includes services in Private Sector Development, Infrastructure Development, Extractive Industries Governance and Climate Change. Government Reform includes services in Public Administration Reform, Justice, Security and Peace-building, Revenue Reform, Public Financial Management, Education Development, and Civil Society and Demand-Side Accountability.

Often working in challenging environments and conflict affected areas, we have a proven track record for achieving tangible results.

Find out more For an in-depth look at any of these projects and more of our Public Financial Management experience, visit www.adamsmithinternational.com.

For assistance, please contact: Jalpa Patel Head of Public Financial Management E: jalpa.patel@adamsmithinternational.com

www.adamsmithinternational.com Headquarters

Africa

South Asia

Asia-Pacific

240 Blackfriars Road

Bharat Yuvak Bhawan

507/46-56 Kippax Street

London

2nd Floor, Cavendish 14 Riverside Drive

1 Jai Singh Road

Surry Hills

SE1 8NW

PO Box 26721-00100 Nairobi

New Delhi 110 001

Sydney NSW 2010

United Kingdom

Kenya

India

Australia

T: +44 20 7735 6660

T: +254 20 444 4388

T: +91 11 4150 2291/93/94/95

T: +61 2 8265 0000

Adam Smith International @adamsmithint

Copyright Š 2014 Adam Smith International. All rights reserved.