Development agencies use a variety of instruments to assess these systems; this study focuses on World Bank Public Expenditure Reviews (PERs), Country Financial Accountability Assessments (CFAAs) and Country Procurement Assessment Reports (CPARs), International Monetary Fund (IMF) Reports on the Observance of Standards and Codes of Fiscal Transparency (Fiscal ROSCs), IMF-World Bank Public Expenditure Tracking Assessments and Action Plans for Heavily Indebted Poor Countries (HIPC AAPs), EC audits of public expenditure management systems, and U.K. Department for International Development (DFID) assessments of fiduciary risk.

The studys review of these assessment instruments raises many important issues. Accordingly, its findings and recommendations are intended to generate discussion and debate between development agencies, recipient governments that are (or may become) the subject of such assessments, and other stakeholders.

If the findings and recommendations are accepted, they will need to be translated into changes in the operational rules and practices of the agencies concerned. Organizational structures, management processes, staffing requirements, training programs, and internal incentives will need to be reviewed, as will arrangements for improving cooperation and coordination between development agencies, recipient governments, and other stakeholders.

The World Bank, IMF, European Commission, and other development agencies are already considering important reforms to their approaches to public expenditure work, including ways of increasing their collaboration. But increased efforts are needed-and it is hoped that this study will contribute to these and other emerging reforms.

MAIN FINDINGS

At the core of this study is a mapping exercise that compares the main features and focuses of donor instruments for assessing public expenditure management. This comparison, complemented by interviews with government and donor officials and by reviews of assessment guidelines and sample reports, shows that the wide variety of assessment instruments has evolved in an uncoordinated way. As a result these instruments often impose high transaction costs on recipient governments and development agencies.

The instruments have a range of objectives, including gauging fiduciary risk, supporting development goals, defining action plans, and monitoring progress on implementing those plans. Sometimes these objectives are combined in a single instrument, as with CFAAs, CPARs, and EC audits. This mix of objectives-both within and across instruments-often inhibits clear, coherent assessment work. Moreover, though the instruments reviewed in this study are often referred to as assessments of public expenditure management, some provide limited coverage of a broader set of issues-including the forecasting of government revenue, and the management of public debt, of the governments assets (physical and financial), and of the procedures for maintaining records of its financial business and transactions. This broader concept should be used in rationalizing the use of these instruments.

Though efforts are being made to strengthen it, collaboration on assessments between the World Bank, IMF, European Commission, and other donors remains relatively weak. As a result there is substantial overlap between some of the instruments coverage of public expenditure management-especially between CFAAs and Fiscal ROSCs. In addition, there is overlap between CFAAs and PERs on upstream (preparation and programming) and especially downstream (execution, accounting, control, reporting, monitoring and evaluation) issues. But in most cases this overlap is manageable because CFAAs focus on budget comprehensiveness, realism, and classification, and draw on analysis from PERs whenever possible.

Guidelines for EC audits were recently revised, while those for HIPC AAPs were only recently developed. Both instruments have different approaches and objectives from the others, and as such add value to assessment efforts. EC audits include compliance tests, which use audit techniques to provide reasonable assurance that public expenditure management systems and procedures are implemented consistently, in line with relevant rules and regulations. HIPC AAPs provide comprehensive summaries of public expenditure management systems and performance- including benchmarks and indicators that allow for monitoring over time. Although efforts are needed to integrate HIPC AAPs with other diagnostic work, work on HIPC AAPs is genuinely collaborative, relying on joint teams of Bank and IMF staff.

None of the instruments provides a comprehensive analysis of government management of taxes and revenues-though revenue issues are partly covered in PERs, and recently updated CFAA guidelines recommend

addressing accounting and control issues. There are also gaps in coverage of asset management, aid and debt management, management of government financial records, and public finance issues related to subnational governments, public enterprises, and off-budget public agencies.

Analysis of institutional and governance issues-including corruption- is also insufficient. Better understanding of the political, cultural, and institutional underpinnings of the budget process would enhance dialogue with recipient governments, strengthen risk assessments, and improve the development and implementation of action plans.

Finally, the extent and speed of reform for assessment instruments may be subject to donor-driven constraints, including statutory obligations, operational and scheduling issues, requirements of management boards and oversight bodies, and institutional turf, cultures, and incentives.

MAIN RECOMMENDATIONS

Assessments and reforms of public expenditure management should be country-led but supported by donors and based on a coherent, integrated medium-term strategy. To that end, efforts are needed to streamline the coverage of assessment instruments (to avoid unnecessary duplication), enhance collaboration between donors, governments, and other stakeholders, provide more complete, accurate, timely assessments of fiduciary risk, and increase the development impact of assessment work. But reforms could go further-which is why this study also recommends developing a programmatic, modular framework for assessments.

Streamlining coverage

The Bank, IMF, European Commission, and other development agencies should adjust their instruments to reduce unnecessary overlap.

Though the measures being considered to strengthen collaboration between CFAAs and Fiscal ROSCs should address the overlap between the two, it would be desirable for the Bank to first provide an authoritative clarification of the boundaries between CFAAs and PERs.

The Bank, IMF, European Commission, and other agencies should consider how to fill the gaps in coverage, whether by supplementing current