Nummy Sequencing Pfm

The Phases of Public Financial Management Reform David Nummy, Executive Director, Grant Thornton FreeBalance International Steering Committee Cascais, Portugal January 30, 2008

Current PFM Reforms Initiation • Started in the early 1990s • Collapse of communism • Over 20 countries need to transition from command economy to market economy

Current PFM Reforms Influence of IFIs • Coincides with predominant view that macroeconomic stability is paramount • IMF need to grasp national accounts to support monetary stability • World Bank determines lack of basic governance expertise is more urgent than traditional development focus

Current PFM Reforms • Focus on PFM and resources available to support reform efforts draws expertise • Focus on PFM moves outside of eastern Europe and FSU • Over 15 Years, a pattern of phases of PFM reform has evolved in numerous countries

A Series of Questions Evolve Phase 1 -- How much money are we spending? Phase 2 -- What are we spending money on? Phase 3 -- Why are we spending money? Phase 4 -- How are we spending money?

Phase 1 – How Much Money Are We Spending? • Single Account Treasury • Unified budget • Eliminate extra-budgetary accounts • Customs and tax • Organic budget Law • Commitment accounting

Phase 2 – What Are We Spending On • Unified accounting classification • Unified chart of accounts • Accounting standards • FMIS

Phase 2 – What Are We Spending On • Macro-economic forecasting • Multi-year budgeting • Cash management • Debt management • MTEF • Auditing

Phase 3 – Why Are We Spending This Money • Program definition • Further refinement of chart of accounts • Development of analytical capacity • Greater explanation of spending in public documents • Performance budgeting • Decentralization

Phase 4 – How Are We Spending Money • Procurement • Civil Service Reform • Human Resource Management • Budget Support

Most Difficult Challenges to Overcome • Resistance to closing Ministry bank accounts • Donors inability to provide timely and usable information on their activities • Getting beyond cash rationing • Performance measures

PFM Evolution

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Nummy Sequencing Pfm

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