CPIA 2006

Q13: Quality of Budgetary and Financial Management

BBL

Ivor Beazley/Steve Knack, 6 December 2006

Objectives

Raise awareness of CPIA Q13 and FM’s role

Improve the quality of Q13 ratings Provide information on process and

resources Address issues and concerns

Context

Country Policy and Institutional Assessment (CPIA)

Overall CPIA scores help determine shares of IDA allocation given to each country

Annual scoring process 16 indicators, No 13 and 16 cover financial

management and accountability Disclosure for IDA countries (scores only)

How to rate Q13 - principles

Ratings are based on actual policies and performance, not on promises or intentions

Improvement is measured against benchmark criteria,

Score will not change on the basis that Government has started a reform initiative

Objective criteria have been clearly set out for assessing performance on Q13

Data Requirements

Substantial work is involved to collect data.

Q 13 assessment comprises: 3 sub-questions. Each sub-questions is

made up of a number of “dimensions” or lower level question

= total of 13 separate pieces of data 3 Sub-questions deal with at the quality

of:a) Budget processb) Control over expenditurec) Accounting, reporting and auditing

Scoring system

Countries are scored from 1- 6 on each sub-question. For Q13 there is a two stage aggregation process:

Stage 1 Rate each dimension on the 1-6 scale Work out the average of the dimensions,

rounding up or down to the nearest half point Stage 2

Simple average of the 3 sub-questions (rounded to the nearest half point) gives overall Q13 score.

Example:Sub-question a) “budget link to policy priorities”

This sub-question covers 5 issues/dimensions: (i) budget-policy link; (ii) forward look in budget; (iii) consultation with spending

ministries in budget formulation; (iv) budget classification; and (v) budget comprehensiveness

Tools

A simple worksheet is available to help score each dimension on a consistent basis

A write up template is provided to set out the write up on each sub-question

Worksheet for sub-question a) Budget links to policy priorities

Rating Budget-Policy Link

Forward Look in Budget

Consultation with Spending

Ministries

Budget Classification

Budget Comprehensiveness

1 If there is a budget, it is not a meaningful instrument, nor an indicator of policies or tool for allocation of public resources

There is no forward look in the budget

No meaningful consultation with spending ministries

No consistent budget classification system is used

More than 50 percent of public resources from all sources do not flow through the budget

2 There is no discernible link of the budget with government policies or priorities.

There is no forward look in the budget

The budget is formulated without meaningful consultation with spending ministries.

No consistent budget classification system is used

Significant fiscal operations (extra-budgetary expenditures and donor funds 25-50 % of total spending) are excluded from the budget

3 Policies or priorities are explicit, but are not linked to the budget

There is no forward look in the budget

The budget is formulated in consultation with spending ministries

The budget classification system does not provide an adequate picture of general government activities

A significant amount of funds controlled by the executive is outside the budget (e.g., 10-25%), and a number of donor activities bypass the budget.

4 Policies and priorities are broadly reflected in the budget

Some elements of forward budget planning are in place

The budget is formulated in consultation with spending ministries, from a sufficiently early stage in the budget preparation process.

The budget classification system is comprehensive, but different from international standards

Less than 10% of funds controlled by the executive are outside the budget

5 Policies and priorities are linked to the budget

Multi-year expenditure projections are integrated into the budget formulation process, and reflect explicit costing of the implications of new policy initiatives

The budget is formulated through systematic consultations with spending ministries and the legislature, adhering to a fixed budget calendar

The budget classification system is comprehensive and consistent with international standards

Off-budget expenditures are minimal, and transparent.

Timetable

Benchmarking exercise complete by end Nov Mid-Jan deadline for regional

submissions Scores finalized by OPCS end March

Issues to be aware of

“Known unknowns”, for example on, extent of operations outside the budget and arrears :

PREM or FM, or both? Upward pressure on ratings

Not a reward for good intentions Need demonstrable progress

Issues - Quality of write ups

Insufficient evidence in may write-ups Not addressing the specific dimensions

which are used to measure performance 8 out of 20 benchmark countries initially

rated “un-graded” on basis of poor write ups

Particular weakness on points b) and c)

Information sources

Not just CFAA Internal sources

CFAA, IFA etc. PE(I)R Recent DPL and PRSC documents (updates)

External sources PEFA Assessments (EC, DFID etc.) IMF Fiscal Transparency ROSC (IMF Website) IMF - PRSC Joint Staff Advisory Notes, Art IV

Direct from Government (MoF)

Trend in Q 13 Scores 2003-5

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Rating

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Trend in ratings by sub-question 2003 to 2005

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SQ(A) SQ(B) SQ(C)

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Trend in Ratings by Region - 2003-5

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Issues going forward

Consistency with PEFA indicators (PEFA Secretariat will do a study)

Consistency over time – changes in basis of rating from year to year Decentralization Procurement?

Anchor Review Role

OPCFM and PRMPS review ratings for: Quality of write up, including evidential

support Cross check with other available

information Carefully scrutiny of all changes in

ratings Do a comparison across countries

Anchor is also there to provide support and advice

Good luck!