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Assessing and Reforming Public Financial Management: A New Approach

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Over the past 15 years donors seeking to advance development and abate poverty have placed growing emphasis on the need for effective public expenditure management and financial accountability systems. Numerous trends explain this evolution, including the realization that aid resources are fungible, the shift toward policy-based adjustment lending, the need to strengthen the links between policymaking and budget preparation, and the recognition of corruption’s destructive effects. As a result many donors have introduced new diagnostic instruments and reports that describe and assess public expenditure and financial accountability laws, systems, and procedures in countries that receive international aid and technical assistance.

These diagnostic instruments contain information on the fiduciary risks facing aid donors and recipients, and are often required by donors before aid is provided. Such information is also valuable to a recipient country as a foundation on which it can craft sustainable reforms in public expenditure and budgeting, and build institutional capacity.

Drawing on a technical mapping of current assessment instruments’ coverage, a review of staff guidelines and sample assessment reports, and interviews with experts from donor agencies and recipient governments, this study recommends a new approach to assessing and reforming public expenditure management.
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