World Bank PEM Core Diagnostic

Source: SIDA 2002.

NOTES

1. Economic and sector work is the Banks primary country-based analytical and advisory work, and includes these three instruments. For Bank policies on economic and sector work, see the Operational Manual and Policies O.P. B.P.2.11 (Country Assistance Strategy), O.P. 8.40 (Technical Assistance), and O.D. 8.60 (Adjustment Lending Policy) at http: wbln0011.worldbank.org/ Institutional/Manuals.

2. This study does not substantively review similar instruments developed by other international organizations, government self-assessments (which do not follow standardized procedures), or donor analyses performed as part of technical assistance operations and aid proposals (such as IMF and World Bank support for treasury systems, debt management, and tax administration). Instruments developed by other organizations (and described in annex 1) include the United Nations Development Programmes Country Assessment on Accountability and Transparency (CONTACT) and by Support for Improvement in Governance and Management (SIGMA), a joint program of the European Commission and Organisation for Economic Co-operation and Development, used to assess

Table 1: Features of questionnaires and checklists used by various assessment instruments

Number of questions Multiple

Instrument or indicators choice?

the public expenditure management and institutional capacity of Central and Eastern European countries applying for EU membership. In addition, the Asian Development Bank has developed an instrument-called Financial Management and Governance Issues in Selected Developing Member Countries-covering accounting, auditing, and other financial management issues, which has been applied in several countries; see http: www.adb.org/ Documents/Books/Financial Mgt/Selected DMCs/default.asp.

3. Much of the information in this section was drawn from World Bank (2001).

4. The first PER with an explicit institutional dimension was World Bank (1989b). But by the late 1990s fewer than a quarter of recent PERs had paid serious attention to budget management or institutions; see World Bank (1999).

5. The new focus has not always been accompanied by a commensurate expansion in the technical skills required for such analysis. In some cases the previous neglect of expenditure management has given way to the far worse outcome of superficial analysis and bad recommendations-usually in a mechanical imitation of complex practices introduced in a handful of industrial countries.

6. A proposal has been made to revise the Banks Operational Policy, OP/BP 8.60, such that as a precondition for all development policy support lending, an ex-ante fiduciary assessment of the countrys public expenditure management, procurement, and financial accountability systems is required. Key findings of the fiduciary assessment would be reported in the CAS [Country Assistance Strategy] (World Bank 2002d, p. 28).

7. The EC approach to audits has been strongly criticized by the European Parliament and by the EC internal audit service for failing to adequately assess the weaknesses and risks of the public financial management systems for which the Commission provides aid; see EC (2001a, b).

8. The PEM Core Diagnostic has a 60-question Summary Version and a 252-question Master Version. Both can be found at http: www-wbweb. worldbank.org/prem/prmps/expenditure/petoolkit.htm.

Methodology and Main Findings

METHODOLOGY AND SOURCES

The study has mapped each instruments coverage of the various dimensions of public expenditure management, in order to reveal the core issues and identify unnecessary duplications or gaps in coverage. Describing and assessing public expenditure management systems generally calls for reviewing the legal and organizational framework and the stages, processes, and procedures of budgeting. In turn, the budgeting cycle is conventionally understood as comprising three parts: expenditure programming and budget preparation; budget execution and monitoring; and accounting, reporting, auditing, and external oversight. In addition, the state of administrative and financial management capacity at all stages of the public expenditure management cycle is fundamental to any assessment of financial systems and the prospects for their improvement. The mapping exercise breaks down these broad areas into 15 major components and 94 sub-components, as shown in box 2.

The major instruments described below have been mapped according to the extent of their coverage of the 94 subcomponents of the public expenditure management cycle. Annex 3 shows the detailed map, with an explanatory note. A summary map, covering the 15 major components, is in figure 1 below, in which the extent to which each instrument covers each of the public expenditure management components is shown as high, medium, or low or none, illustrated as black, gray and white, respectively.