Public Financial Management

Promoting transparency and accountability in the management of public funds

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Public Financial Management 3

The Importance of Efficient Public FinancialManagement

Our Global Experience

Budget Policy, Systems & Management

Budget Transparency

PEFA & FRA

External Audit

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Contents

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Good development outcomes

Robust PFM Systems

Fiscal transparency + accountability

Fiscal +macroeconomic strength

Effective public service deliver

3Public Financial Management

Adam Smith International builds on the principles of fiscal discipline, legitimacy, predictability, transparency and accountability to reform and strengthen public finances throughout the world.

We have been a leader in public financial management for over 20 years and have assisted the economic growth and governance reform programmes of many developing and transitional economies.

Robust public finances are essential to effective government.

Transparent, equitable and accountable expenditure and appropriate management and monitoring systems provide a platform for governments to deliver a strong enabling environment for business and effective public services.

The Importance of Efficient Public Financial Management

The Budget Department has come a long way since 2007. The guidance and support of the ASI team has been an important part of getting us there and we are grateful for their support.

Mustapha Mastoor Deputy Minister, Budgets and Treasury, Ministry of Finance, Afghanistan

4Libya: Making the economy the central issue to the formation of the new Libyanstate

We worked with media institutions and civil society groups to inform people of financial management principles, making economic development the most important issue debated in the formation of the new Libyan state.

Nigeria: Building the capacity of economic management systems

We worked with the Ministry of Finance and provided technical assistance across the areas of macro-policy, statistics, and institutionaldevelopment.

Burundi: Establishing a revenue office

We worked with the government to design financial management and budgeting systems for the new Office Burundais des Recettes, Burundis first revenue authority.

Our Global ExperienceWe have worked across the world with many clients and governments on an award-winning portfolio of projects, promoting transparency and accountability in the management of public funds. Throughout this brochure, you will find examples of our work you can see a small selection here. For further information on our wider portfolio, visit www.adamsmithinternational.com/exploreourwork.

Our Offices London | United KingdomNew Delhi | IndiaNairobi | AfricaSydney | Australia

Regions: Public Financial Management

The Americas & Caribbean Central & Southern Africa West Africa East Africa Middle East & North Africa Europe & Former Soviet Union Central Asia

South Asia & Asia Pacific

Regions: Other projects

Various

Public Financial Management 5

Afghanistan: Strengthening the budget at the national and provincial level

We helped the Ministry of Finance develop a sustainable budgeting process, underpinned by a medium-term fiscal framework.

Indonesia: Assessing public financial management systems

We assessed the risks and benefits of using the Government of Indonesias public financial management systems to deliver aid funding in the health sector.

Palestine: Strengthening planning, budgeting and financial managementprocesses

We supported the Palestinian Authority to develop an integrated budget and accounting system, supporting the Prime Ministers state-building agenda.

Iraq: Assisting the reform of centralgovernment

We improved the transparency and accountability of the Iraqi government by supporting the development of a PFM action plan and consecutive budget strategies.

6Many conflict-affected or transitional countries have very weak links between policy and budget allocation. Combined with limited capacity to analyse and prioritise budget allocations, this can mean that too few or too many resources are allocated to particular priorities.

We understand the importance of the budget in managing resources to deliver the best possible services. We are a recognised global leader in establishing and developing a range of budget-focused competencies in our counterparts.

As well as the development of core skills, particularly in the management of budgets, we offer expertise in:

Budget Formulation and Execution

Budget Process Reform

Medium Term Expenditure Frameworks

Aid Management

Expenditure Monitoring

External Audit

Policy Review

Budget Preparation

Strategic Planning

Budget Execution

Accounting& Reporting

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SIX PHASES OF THE BUDGET CYCLE

If public funds are to deliver the services for which they have been allocated, financial planning, execution, and monitoring systems need to be in place and working.

Budget Policy, Systems & Management

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We undertook a wide ranging project to help the Palestinian Authority position itself as a legitimate governance body. We were contracted to assist the Ministries of Planning & Administrative Development and Finance in improving public financial processes and strengthening policy-making, national planning, monitoring and evaluation, and aid coordination.

We also supported training and mentoring of ministry employees, which enabled them to develop the foundations of the Palestine National Programme 2011-2013.

We established a Monitoring and Evaluation Directorate and helped establish a comprehensive aid management database to evaluate and channel donor funding.

This project supported the Prime Ministers State Building Agenda and was instrumental in demonstrating the improved effectiveness of the Palestinian Authority.

Strengthening Palestines planning, budgeting and financial management processes

Enabling development of 23 sector strategies, the basis of the 2013 National Programme

Helping Iraqs resources deliver the best possible services

Following decades of mismanagement and exacerbated by numerous conflicts, the ability of Iraqs government to effectively manage state finances to deliver essential services was extremely weak.

Our centre of government reform projects built on our earlier assistance to the Ministry of Finance to undertake public finance and economic policy reforms. This included supporting the Iraqi government in negotiating and finalising a stand-by arrangement with the International Monetary Fund and establishing an implementation unit to coordinate and report on the governments implementation of the agreed programme.

Focused on making Iraqs resources deliver the most benefit, our more recent work built capacity within the Ministry of Finance for public financial management in general, and for national priorities, budget strategy, accounting procedures, audit capability, and legislative budget scrutiny in particular.

Improving delivery of essential services through PFM reform

Palestine

Iraq

Palastine

Iraq

That sort of spending is immensely valuable. Itis some of the best aid and development expenditure I have seen anywhere in the world.

Rt. Hon. Andrew Mitchell MP former Secretary of State for International Development speaking about financing the Palestinian planning, budgeting and financial management processes.

8Transparent budgeting has a range of powerful benefits, including the development of greater trust in government institutions and the willingness to contribute through taxes.

A transparent budget process also holds governments to account as progress against, or deviations from, the budget are easy to see.

Often included as a component of our work delivering a wider range of public financial management reforms, we attach considerable importance to budget transparency.

We are a leading specialist in this area and have successfully promoted budget transparency within our public financial management projects in countries including Afghanistan, Burundi and Iraq.

The team are invaluable. They have passion, commitment and belief in what they do. Without them, making the progress we have made over the last couple of years would have been much harder.

Budget Policy and Reform Director, Budget Department, Ministry of Finance, Afghanistan

Budget transparency is a key element of the broader process of public financial management reform, allowing the public to scrutinise and respond to the government programme.

Budget Transparency

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Strengthening Afghanistans budget at national and provincial levels

We have worked with the Afghan Ministry of Finance since 2007 to strengthen systems for fiscal forecasting, analysis and reporting. We developed a medium-term fiscal framework to underpin the budget process, rolling out programme budgeting across 56 budgetary units to align expenditures with development plans.

We are now helping donors channel more than 50% of aid through the budget. We assisted the Government to revise its Aid Management Policy, overhauled the donor assistance database, and designed modalities for on-budget financing of programmes.

The budget process has developed from being virtually non-existent to compliant with international best practice. Afghanistan

Awarded British Expertise Major Project of the Year 2011

Afghanistan

Libya

Raising awareness of governmental financial

responsibilities

During the period of Libyas transitional government, there was enormous pressure to spend at unsustainable levels. Failure to do so was being met with accusations of corruption and incompetence.

We are working to address the level of public awareness of basic public financial management principles and their role in good governance.

Tamkeen supports activist groups in developing research and advocacy campaigns that focus on the financial drivers behind key public policy issues.

We are developing a Public Financial Management Charter to define the governments financial responsibilities and ratify them.

Tamkeen: Promoting inclusion of good public financial management in Libyas new social contract

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We are a leading provider of PEFA assessments, in countries as diverse as Iraq and Pakistan. We see them as an important step in benchmarking public financial management systems and measuring progress as reforms are implemented.

Fiduciary Risk Assessments are undertaken by donors to identify the risk associated with financial aid granted directly to a government. They are mandatory in such cases -

evaluating the national public financial management system is critical in assessing the risk involved in any financial assistance.

We are a recognised specialist in conducting FRAs and have successfully completed many in a range of countries, including Afghanistan, Bangladesh, Burundi, Palestine, Papua New Guinea, Vietnam and Zambia.

We are a leading provider of PEFA assessments and FRAs, both critical in measuring ongoing progress and monitoring the risk involved in financial assistance.

Public Expenditure & Financial Accountability (PEFA) and Fiduciary Risk Assessments (FRA)

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Undertaking public finance risk assessments in Punjab

We provided the Punjabi government in Pakistan with a detailed analysis of the state of public finance and accompanying risk of corruption. We deployed a team of experts to the Punjab who gathered evidence from a range of government institutions at both provincial and district levels. This research was used to construct a detailed PEFA assessment and three FRAs.

These addressed issues in health and education as well as the overall provincial public sector. The assessments also help to promote improved public financial management and stronger domestic financial accountability.

Pakistan

Limiting the risk of corruption in local government

Pakistan

Tonga

Improving health sectorprovision

Tonga faces many of the challenges of other small, developing island states: isolation, small markets, a narrow revenue base and high levels of migration.

In the health sector, the high prevalence of non-communicable diseases is placing a strain on the health services and life expectancy is falling. The Australian Government is supporting the country through the Tonga Health Systems Support Programme.

We assessed Tongas public financial management systems in the health sector. We examined the current use of government systems for the delivery of the programme, identifying the risks and benefits, and advising on the current implementation arrangements.

Assessing Tongas public financial management systems in the health sector

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In such a system, ministers and officials, as well as implementing partners, are held to account for spending public resources.

Effective external audit reduces opportunity for corruption and ensures more effective policy development, ultimately leading to better public service delivery and greater value for money for taxpayers, both in the recipient and donor country.

Adam Smith International recognises the important role of external audit in the delivery of effective and sustainable public finances.

We are a leading provider of services to support the establishment and development of independent and competent audit bodies in transitional countries across the globe, including in Afghanistan, Iraq andPalestine.

The ongoing support that Adam Smith International has provided has been invaluable.

Permanent Secretary, Ministry of Public Administration, Trinidad and Tobago

The ability of any government to undertake an external audit, with an independent auditor, is a vital component of a transparent and accountable public financial management system.

External Audit

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The Auditor Generals Department of Trinidad & Tobago is responsible for contributing to the transparent and accountable use of public funds by conducting audits of all enterprises that are owned by the state, and that receive publicfunding.

Following a PEFA assessment, we assessed the departments capacity to implement a number of recommendations. In close collaboration with the Auditor General, we benchmarked the department against international standards and designed a capacity building strategy and action plan.

As a result of our work, the UK National Audit Office led a value for money programme and supported pilot audits.

Promoting transparency and good practice for

state funding

Helping the Palestinian Authority achieve fiscal

transparency

Trinidad and Tobago

Palestine

We supported the Palestinian Ministry of Finance to develop the Palestinian National Authoritys Financial Statement for 2008 to share for the first time with external auditors and donors. The resultant statement met the requirements set down in Palestines Basic Law and we offered follow-on assistance to respond to specific comments of external auditors.

To ensure this support led to sustainable change, the team supported the Ministrys move to International Public Sector Accounting Standards - compliant financial reporting through a structured progression. This included developing formats and guidelines for manual production of financial statements and training in accounting concepts and principles.

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Support to development of externally audited financial statements in Palestine

Institutional strengthening of the Auditor Generals department in Trinidad & Tobago

Find out more

For an in-depth look at any of these projects and more of our Public Financial Management experience, visit www.adamsmithinternational.com.

For assistance, please contact:

Jalpa Patel Head of Public Financial Management E: jalpa.patel@adamsmithinternational.com

Copyright 2014 Adam Smith International. All rights reserved.

www.adamsmithinternational.com

Adam Smith International is an award-winning professional services business that delivers real impact, value and lasting change through projects supporting economic growth and government reform internationally.

We specialise in the design, management and delivery of complex projects.

Our wide-ranging experience is grouped into two areas: Economic Growth and Government Reform. Economic Growth includes services in Private Sector Development, Infrastructure Development, Extractive Industries Governance and Climate Change. Government Reform includes services in Public Administration Reform, Justice, Security and Peace-building, Revenue Reform, Public Financial Management, Education Development, and Civil Society and Demand-Side Accountability.

Often working in challenging environments and conflict affected areas, we have a proven track record for achieving tangible results.

Adam Smith International @adamsmithint

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