Workshop on the Strengthened Approach to Supporting PFM

Workshop on the Strengthened Approach to Supporting PFM Reform PFM Performance Measurement Framework And Procurement Pamela Bigart World Bank

Procurement Elements of PFM Indicators o Dedicated indicator # 19 focuses on unique aspects of procurement system not captured in other indicators n n Degree of Competition in system Dispute Resolution to augment controls o Related indicators #4, 10, 12, 20, 21, 24, 26 and 28 capture aspects of procurement performance

Procurement Performance Measurement o OECD/DAC and World Bank Joint Procurement Roundtable developed detailed procurement benchmarking and measurement tools WHY? o To provide international standards and stop imposing individual donor standards o To facilitate integration of CPAR with the strengthened approach now to be applied for PFM

Why Focus on Procurement? o 30 to 70% of budget expenditures are managed through the procurement system o Key area of interest for countries to increase efficiency of expenditure and improve service delivery o Key area of interest for donors to help manage risk of misuse of funds and to achieve development objectives

A Quick Look at the Procurement Measurement Tool Pillar I - Legal Pillar II - Institutional o Integrated w/PFM o Legal Framework o Management Capacity o Implementing tools Pillar III - Operations o Operational Practices o Functioning Market o Contract Mgt. o Institutional Dev. Cap. Pillar IV - Integrity o Control/Audit Systems o Appeals Mechanism o Access to Information o Anticorruption Measures

What is the Relationship? o PFM indicators can be applied without use of the detailed procurement tool o Procurement tool can support a more detailed assessment and contribute to the PFM indicators across range of related areas o Procurement tool can be applied on its own to support assessments and progress of reform initiatives and to support fiduciary requirements of donors

Some Suggestions for Improving the Treatment of Procurement o A well integrated PEFA report should address aspects of the full system that contribute to the indicator being rated. A good practice example with regard to procurement is Armenia Integrated PFM report. n n n Why: Early involvement of all members of team to develop a shared understanding of the work Created a mapping to show links and cross impact Dealt with procurement as part of an integrated discussion for all indicators where procurement links to the topic under review. Uses the narrative to build a complete picture. Go well beyond indicator 19!

Indicator Description Procurement Issues PI-12 Multi-year perspective in fiscal planning, expenditure policy and budgeting (i) Preparation of multi -year fiscal forecasts and functional allocations; (ii) Scope and frequency of debt sustainability analysis (iii) Existence of sector strategies with multi-year costing of recurrent and investment expenditure; (iv) Linkages between investment budgets and forward expenditure estimates. o Developing multi-year procurement (i) Effectiveness of expenditure commitment controls. (ii) Comprehensiveness, relevance and understanding of other internal control rules/ procedures. (iii) Degree of compliance with rules for processing and recording transactions. o. Aside from personnel, most PI-20 Effectiveness of internal controls for non-salary expenditure plans tied to budgets o Reflect future year contract costs o Investments typically contracted commitments are contracts o. Good controls over contracting essential for avoiding arrears, enabling efficiency

Indicator Description Procurement Issues PI-4 Stock and monitoring of expenditure payment arrears (i) Stock of expenditure payment arrears (as a percentage of actual total expenditure for the corresponding fiscal year) and any recent change in the stock. (ii) Availability of data for monitoring the stock of expenditure payment arrears. o. Arrears might be generated by PI-10 Public access to key fiscal information (i) Annual budget documentation (ii) In-year budget execution reports (iii) Year-end financial statements (iv) External audit reports (v) Contract awards: Award of all contracts with value above approx. USD 100, 000 equiv. are published at least quarterly through appropriate means. (vi) Resources available to primary service units Timely availability of contract awards is an important dimension of procurement system accountability and anti-corruption weak contract approval/signature processes. o Existence of arrears may lead to increased price of contracts, as vendors build-in anticipated late payment. o Reports should indicate where available any information on impact of arrears on procurement prices and processes.

Indicator Description Procurement Issues PI-21 Effectiveness of internal audit (i) Coverage and quality of the internal audit function. (ii) Frequency and distribution of reports. (iii) Extent of management response to internal audit findings. o Internal audit must include PI-24. Quality and timeliness of inyear budget reports (i) Scope of reports in terms of coverage and compatibility with budget estimates (ii) Timeliness of the issue of reports (iii) Quality of information o Timely expenditure info by PI-26 Scope, nature and follow-up of external audit (i) Scope/nature of audit performed (incl. adherence to auditing standards). (ii) Timeliness of submission of audit reports to legislature. (iii) Evidence of follow up on audit recommendations. o External audit critical dimension of checking on procurement processes, outcomes o Frequently internal auditors lack expertise, need to pair with procurement officers/experts commitment and cash important for monitoring contract execution o Should be related with physical progress and verification of receipt of goods/service (internal controls) over-all procurement system integrity o Especially for large contracts, irregularities cost a lot of money, and risk of corruption is high o As with IA, EA frequently lack expertise in procurement, need training, support

Indicator Description Procurement Issues PI-28 Legislative scrutiny of external audit reports (i) Timeliness of examination of audit reports by the legislature (for reports received within the last three years). (ii) Extent of hearings on key findings undertaken by the legislature. (iii) Issuance of recommended actions by the legislature and implementation by the executive. o Legislative oversight of adequacy of procurement system, key results, especially on large contracts, essential element to encourage executive corrective measures o Hearings might be useful tool, as well as legislative instructions to executive to take corrective measures