report, the target audience and dissemination strategy, the participatory approach to be followed and the involvement of stakeholders, the role of other external partners, data issues, criteria for evaluating the success of the activity, and proposed quality assurance measures. The reporting and dissemination strategy is determined by the type of PER and the nature of the involvement by the government and other stakeholders.

The multipurpose function and adaptability of PERs are reflected by the fact that there are no formal guidelines for them, though draft guidelines are proposed in World Bank (2001). The draft guidelines reflect current thinking about PERs and their uses at a time when the Bank is seeking increased participation by clients and other stakeholders-in both public expenditure work and sector work more generally. As part of the development of a proposed new approach to public expenditure work, the Banks Public Sector Governance Board recently decided that these guidelines should be revised and issued formally.

The draft guidelines propose three prototype PERs involving different approaches to client participation:

In-house PERs, for which the Bank and consultants do the data gathering and analysis. Interaction with clients is limited and focuses on follow-up to the final product.

Bank-led participatory PERs, for which the Bank manages the process with substantial government participation in the analysis. Other stakeholders and donors may also be involved.

Joint or government-led PERs, with active Bank participation.

The first and second prototypes would look much like traditional PERs. The third would be less traditional-consisting, for example, of a summary assessment of the budget management process. Most PERs today fall into the second or third category, and the draft guidelines stress that while client-led efforts may be of lower quality, they are likely to have a greater impact if they respond to client concerns. The guidelines also state that traditional in-house PERs are justifiable only in special circumstances, such as when a client with sound public expenditure management seeks independent advice or when the Bank is familiarizing itself with a new client or reengaging in a country where it has been inactive.

Perhaps the best example of the third type is the annual PER that has been conducted by the government of Tanzania since fiscal 1998 (other African countries that have adopted a similar approach, or are considering doing so,

include Ethiopia, Kenya, and Uganda). In this case the two main objectives of the PER are to support the budget process through macroeconomic and sectoral studies and to provide the government with a peer review of fiscal issues. The review is led by the Bank and covers macroeconomic and fiscal developments, strategic allocation issues, and budget management questions. Many other donors and stakeholders are involved in the process, receive the findings, and participate in review meetings and seminars. In addition, Tanzanias annual consultative group meeting is part of the budget preparation and PER process. This type of government-led PER is radically different from the traditional approach in that it becomes an integral part of the annual budget cycle and is driven by government priorities and concerns.

WORLD BANK COUNTRY FINANCIAL ACCOUNTABILITY ASSESSMENTS

Country Financial Accountability Assessments (CFAAs) are the Banks main diagnostic tool for public financial management and accountability. Their objective is to enhance the Banks knowledge of financial accountability arrangements in client countries. The assessments support both the Banks:

Fiduciary responsibilities, by helping to identify risks in the use of Bank funds.

Development objectives, by designing and facilitating-in close cooperation with the national authorities-programs to improve financial accountability.

Given the growing share of adjustment and programmatic lending in the Banks overall lending, the Bank must have a sound understanding of the financial accountability environment in which its funds are spent. Such knowledge enables the Bank to better assess risks and advise countries on how to strengthen financial management. CFAAs also provide guidance on whether a countrys expenditure management system can be used to manage Bank-supported projects.

Formal guidelines for CFAAs were issued to Bank staff in July 2000 and updated in May 2003. Like all economic and sector work, CFAAs are subject to requirements for formal review and clearance-in this case by the anchor of the Financial Management Network, network advisers in the Banks regions, and country directors. The updated guidelines include a

section on quality and also refer staff to the internal quality section of the Quality Assurance Groups questionnaire for economic and sector work. As with all such work, task managers must make provisions for quality assurance, including peer reviews, when planning CFAAs.

The updated guidelines define fiduciary risk in greater detail than do the existing ones. They indicate that a CFAA does not try to assess value for money in public spending, nor does it assess the level of financial or sovereign risk-that is, the risk that Bank funds will not be repaid on time or at all. Rather, a CFAAs concern is whether Bank funds are spent on authorized or intended purposes, as expressed in the countrys budget. The key components of this type of risk are that the budget is not implemented as passed and that the budget does not cover significant areas of government activity.

Like related sector work, such as PERs, the context and processes for preparing CFAAs have evolved and now give more attention to consultation and collaboration with recipient countries. CFAAs are closely linked to Country Assistance Strategies (CASs), and Bank policy requires a through discussion of fiduciary issues. Information from CFAAs significantly influences decisions reflected in CASs about the amount and nature of lending to individual countries. This link can create tension between the need to promote country ownership of CFAAs and their use as a fiduciary instrument by the Bank.1

The Bank has decided that current (less than five years old) diagnostic assessments should be completed for all major borrowers by the end of fiscal 2004. Moreover, Poverty Reduction Support Credits require ex ante fiduciary assessments-and this is interpreted as a prima facie requirement for CFAAs. It is expected that the forthcoming revised guidelines for adjustment lending will make ex ante fiduciary assessments, including CFAAs, a prerequisite for such lending.

Between fiscal 1996 and 2001 about 20 CFAAs were completed. In fiscal 2002 another 21 were completed. The anchor of the Financial Management Network is preparing a program that will ensure that CFAAs are carried out in all client countries on a regular basis. Some will be done every two years, some every three years.

CFAAs are carried out by Bank staff in cooperation with country officials, and the revised guidelines encourage the involvement of civil society, the private sector, and other nongovernmental partners. The guidelines describe in detail the process that staff should follow in planning CFAAs, including finding the resources, establishing the role of the client and other donors, performing initial desk studies, conducting the planning mission, preparing an initiating memorandum or concept paper, and conducting the review meeting.