Living up to the Busan Partnership for effective development co-operation? Assessing Government Financial Systems

Abstract

Experience shows that when low and middle income country national administrative systems are bypassed aid has not been effective and sustainable (OECD, 2012) hence the start of the millennium saw a new concerted effort to improve aid effectiveness in reducing global poverty, improve human rights, democracy and the rule of law . In the five high level meetings in Rome (2003), Paris (2005), Accra (2008), Busan (2011) and Mexico (2014) three components for effective aid are recognised as co-ordination amongst development partners and governments, a government led reform agenda that uses country systems with aid disbursed via general budget support, and a shared information pool on public financial management (PFM) systems accepted and shared by all stakeholders. To achieve general budget support governments need to agree a PFM reform strategy aimed at reducing corruption, waste and inefficiency with funding and technical assistance from development partners. This paper is based on research carried for, and funded by the PEFA Secretariat to help develop guidance on the tools available for development partners and governments to assess the efficacy of country systems. The first stocktake in 2004 identified 11 diagnostic tools this has now increased to 45 used internationally. As the complexity and the number of tools increases, the potential for choosing the appropriate tools for a specific purpose increases, but so does the potential for omitting useful ones, poor sequencing of diagnostic assessments. The research aims to give the first central repository of diagnostic tools with guidelines on their se so governments and development partners are aware of the full range of tools available and to highlight the issues that need to be considered when choosing a diagnostic tool. Despite the aim to rationalise the tools since the 2010 stocktake an additional 12 tools are used. The PEFA assessment has become the development partner’s broad diagnostic tool of choice with over 582 carried out since 2001. The other tools can be divided into drill down and complementary tools. If the use of the tools can be co-ordinated it can help in reducing transaction costs, limiting duplication of work minimising political and administrative resistance in Ministries from over assessment. The typology recognised: Broad diagnostic tools covering all aspects of the PFM system (12); individual PFM sub-systems (24), and finally tools used by development partners to assess fiduciary risk (10). The expansion has focused on sub-systems increasing to 24, ten of which covering revenue administration, emphasizing the focus on minimising the tax gap (though tax evasion, avoidance and corruption). Most PFM sub-systems are now covered by specialized drill down tools. The tools increasing use performance indicators with an ordinal scale against specific performance criteria reflecting the move to quantitative performance measurement. This study aims to enhance harmonization and alignment of PFM assessments.