tests of CONTACT have been carried out in several countries, and training in its use conducted in almost 30 countries in Asia and Africa.

The CONTACT methodology includes guidelines and checklists covering 12 areas: accounting infrastructure, information management, expenditure planning and budgeting, internal control and audit, financial reporting, external audit, revenue administration, debt management, project and foreign aid management, procurement and asset management, corruption prevention and control, and public cash management.

CONTACT guidelines have much broader coverage than the other instruments reviewed in this report-particularly their treatment of the management of government records, revenue administration, debt management, project and foreign aid management, and corruption issues. And unlike in World Bank assessment instruments, asset management is linked with procurement rather than treated as an expenditure management issue.

NOTES

1. See BP (Bank Procedure) 2.1.1, annex A (January 1995), as amended, at http: wbln0018.worldbank.org/Institutional/Manuals/OpManual.nsf/ whatnewvirt/F773411614919ECF8525672C007D080A?OpenDocument.

2. Ibid.

3. This section draws heavily on World Bank and IMF (2002).

4. For the status of countries covered by the HIPC initiative, see http: www.worldbank.org/hipc/progress-to-date/status table Sep03.pdf. Of the 28 countries that have received debt relief, 20 countries have reached the decision point (reached after a country has established a three-year track record of appropriate policies and reforms), and eight have reached the completion point (reached after a further period of strong policy performance, where the Bank, IMF, and other donors commit to provide sufficient relief to reduce a countrys debt to a sustainable level).

Annex 2

Measuring Performance in Public Financial Management-Guidance from the Development Assistance Committee

KEY ISSUES

Effective financial management of public resources is essential to achieve the objectives of development programmes. It also promotes accountability within developing countries and provides donors with assurance on the use of their funds. Good financial management systems in partner countries are required for all forms of aid, but are particularly important for budget support, where donor funds are not allocated to finance specific expenditures. Diagnostic reviews in public financial management are a growing source of information to both governments and donors. They reflect the state of public financial management systems, the risks and constraints that these pose to the implementation of development programmes and the use of donor resources (Box A2.1).1 Diagnostic reviews and performance meas-

Note: This annex contains the text of chapter 3 from Harmonizing Donor Practices for Effective Aid Delivery, a volume published in 2003 by the OECDs Development Assistance Committee.

Box A2.1

What is a diagnostic review?

A diagnostic review examines a partner countrys public financial management system and practices. Diagnostic reviews are generally not audits and do not track individual items of expenditure. Nor do they provide a pass or fail assessment of a countrys public financial management system in terms of its adequacy for managing external funds. Rather, they provide donors and governments with information on:

The strengths and weaknesses of public financial management systems.

The risks to which funds channelled through governments systems may be exposed.

The government programmes aimed at improving these systems.

ures assist governments in creating strategies that improve management of public finances.

Diagnostic reviews provide information on the strengths and weaknesses of the public financial management systems of partner countries. They support country efforts to improve the performance of their public financial management systems, and so contribute to improved development outcomes. They also provide information to allow donors to consider the risks that their funds may not be used for agreed or appropriate purposes. Thus, partner country governments and donors have a shared interest in high quality diagnostic reviews.

In recent years, the proportion of development funds made available through government financial systems has increased significantly. Efforts by donors to improve their understanding of the functioning of these systems have brought about the risk of an uncoordinated development of different diagnostic reviews. For developing countries, this means that a disproportionate amount of scarce administrative resources may be spent fulfilling multiple donor requirements. For development agencies, it may lead to unnecessary duplication of work. Thus there is considerable value, for donors and partner countries alike, in harmonising different diagnostic reviews and placing them in the context of a coherent, sequenced programme of work to strengthen public financial management. This, in turn, should be an integral part of participating donors strategies for country assistance and the countrys own poverty reduction strategy.