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Adapting to New Demands on PER Work

Adapting to New Demands on PER Work. Integrating PER, CFAA and CPAR perspectives Anand Rajaram, PRMPS Public Expenditure Analysis and Management May 22-24, 2001. Growing Expectations of PERs. Continue to provide analysis of equity and efficiency of budget allocations

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Adapting to New Demands on PER Work

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  1. Adapting to New Demands on PER Work Integrating PER, CFAA and CPAR perspectives Anand Rajaram, PRMPS Public Expenditure Analysis and Management May 22-24, 2001

  2. Growing Expectations of PERs • Continue to provide analysis of equity and efficiency of budget allocations • Provide analysis of institutional aspects of expenditure management • Now, also provide an assessment of institutions of accountability for resource management

  3. The Conceptual Toolkit has to expand as well • Public expenditure analysis • macro - sustainability • Sectoral analysis • Three level analysis of PEM systems • Macro-framework and fiscal discipline • policy and budget formulation • budget implementation & op.efficiency • Accounting, procurement and audit systems • chart of accounts, UNCITRAL, Supreme Audit Institutions

  4. PERs also expected to be Participatory • Collaborative approach to analysis • Govt. to lead with WB support • Other donors to participate • Objective: Better impact • Insiders insight improves analysis • Ownership of recommendations

  5. Pragmatically, approach has to be tailored to circumstances • Participation: Depends on receptivity of country counterparts • Coverage of issues: Depends on • counterpart views • donor consensus • skills available • ESW budget

  6. Turkey: Public Exp.and “Institutional” Review • What do we mean by “institutional”? • Budgetary institutions? • Political institutions? • “Rules of the game”? • Something elastic to cover relevant aspects of governance?

  7. Government: Requested “process oriented” PEIR Requested Bank to undertake PEIR and CFAA jointly Requested Fiscal Transparency report Asked Bank and IMF to co-ordinate PEIR and FT work Bank Worked with counterpart team in seminar/workshop format over 1 year Coordinated PEIR and CFAA missions Consulted with subsequent CPAR mission Collaborated with IMF on FT and PEIR perspectives Turkey PEIR

  8. Turkey PEIR • Joint PEIR and CFAA missions • Peter Dean as “swing man” to integrate PEIR and CFAA perspectives • Overlap with CPAR mission and informal discussions • Focus in PEIR on impact of procurement on investment efficiency - link to CPAR • Substantive collaboration with IMF on FT and FAD technical assistance on GFS budget classification

  9. Turkey PEIR: Format • Overview • Analysis of Government Expenditure • Public Investment Management • Health expenditure • Education expenditure • Institutional Basis for Policies, Plans & Budgets • Systems of Financial Accountability • Toward More Effective and Accountable Government

  10. Turkey PEIR: Main Insights • Absence of disciplined policy formulation - govt. turnover • Very limited coverage in fiscal reporting - much of central government spending outside Parliamentary purview • Accumulation of fiscal deficits due to off-budget and quasi-fiscal programs • Growth of contingent liabilities poses fiscal risks • Lack of functional classification a handicap to sector policy • Audit fragmented and narrowly focused on compliance • Procurement problematic and source of investment inefficiency and corruption

  11. Procurement and Public Investment • Large number of projects, low completion rates • What are incentives for such outcomes? • Procurement based on discounts to estimated price. • Open ended aspects which allow ex post adjustment of contract cost • Project costs almost doubled in real terms

  12. Procurement case study • State Hydraulic Works agency • 1980-2000, 55 projects completed • 36 of 55 contracts bid discounts of 11-50% • Contract variations resulted in total project costs being 90 percent more than initial estimate (and about 4 times the bid price) in real terms. • Decisions to undertake a project were based on inadequate information on real cost commitment. • Such cost escalation would significantly reduce project completion rates.

  13. Next generation: Bosnia PEIR • Joint PEIR, CFAA and CPAR mission • Integrated assessment of budget, financial management, audit and procurement system • Work in progress

  14. Joint PER-CFAA-CPAR work enhances both development impact and fiduciary perspective • PER provides the material to motivate real policy dialogue on systemic issues • CFAA provides an understanding of financial management and accountability system • CPAR is essential to improving operational efficiency and value for money • More comprehensive, integrated understanding • Better quality, internally consistent advice

  15. Joint ESW? The whole is greater than the sum of the parts • The necessary skills to do enhanced PERs are currently distributed across PREM, FM and Procurement parts of the Bank • Good collaboration within the Bank is critical to getting an integrated perspective on public expenditure management and the correct problem definition • Even more critical is good collaboration with our counterparts who ultimately have the best insights into the weaknesses in their systems

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