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Finnish Aid in a PRSP context

Helsinki workshop19th – 21st May 2003

Day 3: Consultants & Researchers

Plan for today

• Introduce OPM• Look at changes in demand for services• Highlight new skills that are needed • Look at what skills are already in Finland• Examine changed environment in relation to

business plans and strategies

What is OPM?

• Small consultancy based in Oxford• Privatised department of the university• 25 consulting staff mainly economists• Works mainly for DFID, WB, EC, ADB and other

bi-lateral donors• Worked in over 80 countries• Main focus in SSA, South Asia, the Caribbean

What sectors do we work in?

• Economic policy

• Social policy

• Public sector finance and management

Changes in aid context:

• Shift in objective from stabilisation & adjustment to growth and poverty reduction

• Change in instrument from project to sectoral/budget support

• Shift in framework to PRSP aligned to budget

• Possible change in volume of aid (aid flows may increase to support achievement of MDGs)

Changes in aid management:

• More untied aid

• Greater use of local technical assistance

• More decentralisation by donors to local offices

• Larger projects

• More recipient government management/co-ordination

At the same time as PRSP/GBS, donors adopting new themes, including:• Pro-poor growth/sources of growth

• Private sector development

• Business environment

• Trade

• Governance

What does this mean for consultancy companies?

• With GBS/sectoral support, aid flows directly to recipient governments, not through companies

• We won’t be implementing projects any more

• All that is left is technical assistance to support PRSP process and implementation of GBS

It’s not the end of the world…

• Many countries not ready for GBS and won’t be for a long time (2001/02, £290m of budget support was provided to 17 countries, equivalent to 18% of the DFID bilateral programme)

• Cynics waiting for sectoral support/GBS to fail

• Unless PRSP and GBS completely aligned then plenty of room for “projects” within PRSPs

But, fewer projects when:

Conditions are good for GBS

Projects could also work but would create distortions; transactions costs

Reduce projects and focus on TA and non-Gov. projects

Conditions for GBS mixed but moving in the right direction

Projects will undermine government budget and accounting systems

May be greater need for piloting and TA to strengthen systems

Conditions unsuitable for GBS

Projects equally unlikely to be effective in changing overall performance

Focus projects on non-government sector

And projects outside GBS when:

TA projects which ‘pilot’ new or risky approaches

Government not well placed to source TA; cannot afford the cost of failure

Legitimate donor input, if policy is ‘moving in direction’ of the innovation

Environmental or global public goods

Government resource constraints too sharp to justify

Legitimate donor investment, if Gov. provides policy framework

Investments where donors have a comparative advantage

Transactions costs and management risks too high for Government

Legitimate donor investment, if recurrent costs can be covered in the future

Technical assistance in a PRSP/GBS

world

Policy formulation

Communication

Policy implementation

Monitoring and evaluation

Poverty analysis

Financing

PRSP process: Results oriented, evidence based

policy making?

Policy formulation

Communication

Policy implementation

Monitoring

Poverty analysis PRSP process:

the theory

Financing• Quantitative and qualitative

data on poverty• Analysis of growth and poverty linkages

• Goal setting • Facilitation of participatory process

• Research eg impact of macro policies on poverty (PSIA)

•Strengthening statistical agencies

Monitoring and evaluation

Policy formulation

Communication

Policy implementation

Monitoring

Poverty analysis PRSP process:

the theory

Financing

•Examining performance of existing programmes (though service

delivery surveys etc)

•Identifying policies and programmes that can contribute to poverty reduction goals

•Costing policies and programmes

Policy formulation

Communication

Policy implementation

Monitoring

Poverty analysis PRSP process:

the theory

Financing

• Aligning PRSP with budget process•Strengthening PFM

• Supporting specific diagnostic tools (see below)• Supporting transition from projects to sector/GBS

•Identification of fiduciary safeguards for donors•Training donors in PFM

Policy formulation

Communication

Policy implementation

Monitoring

Poverty analysis PRSP process:

the theory

Financing

• Developing communications strategies for recipient governments

•Participatory process with civil society

Policy formulation

Communication

Policy implementation

Monitoring

Poverty analysis PRSP process:

the theory

Financing• Supporting improved

implementation • Continuing to provide services

but within PRS framework• Running pilot projects within PRS framework

• Implementation of (new) poverty programmes

within PRS

Policy formulation

Communication

Policy implementation

Monitoring

Poverty analysis PRSP process:

the theory

Financing• Supporting the design of m&e frameworks:

i. Aid flows/donor behaviourii. PRSP process

iii. Policy commitmentsiv. Budget processes

v. Inputs/outputsvi. Poverty outcomes

Nb monitoring of GBS and PRSP should be linked

Monitoring and evaluation

Policy formulation

Communication

Policy implementation

Poverty analysis

Financing

Monitoring and evaluation

PRSP process: Results oriented, evidence based

policy making?

What skills are required?

• Process skills

• High level policy advice

• Research on outcomes and impacts (like PSIA, LSMS, SDSs, PPAs)

• Statistical/monitoring support

• PEM and PFA

Example: GBS requires new diagnostic tools

• Three requirements are necessary to build capacity for PFA:(1) An effective, transparent and publicly accountable system for revenue, expenditure and cash management(2) External audit that is independent and open to scrutiny(3) Information on operational efficiency and results

• Knowledge of formal systems for PFA has developed since the late 1990s. It remains in many case incomplete.

Change in type of work required:

• Until the late 1990s, diagnostic work focussed on one aspect of PFA – namely budget processes through public expenditure review work.

• The emphasis has now shifted from management to the governance of public resources (involves issues of internal control, reliable and timely public accounts, performance reports, external audit.

• More attention is now given to the effectiveness of legislative and corporate oversight functions (ie: budget and audit committees), access to information, and the freedom of the media.

• Good accounting and audit in the private sector are necessary

Changing diagnostic instruments:• Public Expenditure Reviews (PER) focus on the policy-budget link,

budget processes and expenditure control

• Key new PFA diagnostic instruments are the CFAA and CPAR to support the exercise of fiduciary responsibilities, by helping to identify the risks to the use of donor funds and development objectives

• The Country Financial Accountability Assessment (CFAA) designed to gather detailed data on accounting, auditing and internal control systems.

• Country Procurement Assessment Review (CPAR) on the public procurement system.

Other new instruments:• Other instruments include Public Expenditure Tracking

Surveys (including payroll), • Service Delivery Surveys, which provide a mix of qualitative

and quantitative impact data.• IMF Report on Standards and Codes, which looks at

fiscal transparency practices (quality, timeliness, availability, completeness and use of fiscal data). Highlights problems with internal control and recording systems

• The Institutional Governance Review, attempts to assess capacity and constraints (social, economic, cultural) to improvement.

The budget process

Policy Review

Strategy Budget Form.

Budget Exec.

Acc. & Mon.

Rep. & Audit

Public Expenditure Review

Country Fin. Acc. Assessment

CPAR

Diagnostic tools