1. CPIA 2006 Q13: Quality of Budgetary and Financial Management BBL Ivor Beazley/Steve Knack, 6 December 2006

2. Objectives  Raise awareness of CPIA Q13 and FM’s role  Improve the quality of Q13 ratings  Provide information on process and resources  Address issues and concerns

3. Context  Country Policy and Institutional Assessment (CPIA)  Overall CPIA scores help determine shares of IDA allocation given to each country  Annual scoring process  16 indicators, No 13 and 16 cover financial management and accountability  Disclosure for IDA countries (scores only)

4. How to rate Q13 - principles Ratings are based on actual policies and performance, not on promises or intentions Improvement is measured against benchmark criteria, Score will not change on the basis that Government has started a reform initiative Objective criteria have been clearly set out for assessing performance on Q13

5. Data Requirements  Substantial work is involved to collect data.  Q 13 assessment comprises:  3 sub-questions. Each sub-questions is made up of a number of “dimensions” or lower level question  = total of 13 separate pieces of data  3 Sub-questions deal with at the quality of: a) Budget process b) Control over expenditure c) Accounting, reporting and auditing

6. Scoring system  Countries are scored from 1- 6 on each sub-question. For Q13 there is a two stage aggregation process:  Stage 1 Rate each dimension on the 1-6 scale Work out the average of the dimensions, rounding up or down to the nearest half point  Stage 2 Simple average of the 3 sub-questions (rounded to the nearest half point) gives overall Q13 score.

7. Example: Sub-question a) “budget link to policy priorities”  This sub-question covers 5 issues/dimensions: (i) budget-policy link; (ii) forward look in budget; (iii) consultation with spending ministries in budget formulation; (iv) budget classification; and (v) budget comprehensiveness

8. Tools  A simple worksheet is available to help score each dimension on a consistent basis  A write up template is provided to set out the write up on each sub- question

9. Worksheet for sub-question a) Budget links to policy priorities RatingBudget- Policy Link Forward Look in Budget Consultation with Spending Ministries Budget Classification Budget Comprehensiveness 1 If there is a budget, it is not a meaningful instrument, nor an indicator of policies or tool for allocation of public resources There is no forward look in the budget No meaningful consultation with spending ministries No consistent budget classification system is used More than 50 percent of public resources from all sources do not flow through the budget 2 There is no discernible link of the budget with government policies or priorities. There is no forward look in the budget The budget is formulated without meaningful consultation with spending ministries. No consistent budget classification system is used Significant fiscal operations (extra-budgetary expenditures and donor funds 25-50 % of total spending) are excluded from the budget 3 Policies or priorities are explicit, but are not linked to the budget There is no forward look in the budget The budget is formulated in consultation with spending ministries The budget classification system does not provide an adequate picture of general government activities A significant amount of funds controlled by the executive is outside the budget (e.g., 10-25%), and a number of donor activities bypass the budget. 4 Policies and priorities are broadly reflected in the budget Some elements of forward budget planning are in place The budget is formulated in consultation with spending ministries, from a sufficiently early stage in the budget preparation process. The budget classification system is comprehensive, but different from international standards Less than 10% of funds controlled by the executive are outside the budget 5 Policies and priorities are linked to the budget Multi-year expenditure projections are integrated into the budget formulation process, and reflect explicit costing of the implications of new policy initiatives The budget is formulated through systematic consultations with spending ministries and the legislature, adhering to a fixed budget calendar The budget classification system is comprehensive and consistent with international standards Off-budget expenditures are minimal, and transparent.

10. Timetable  Benchmarking exercise complete by end Nov  Mid-Jan deadline for regional submissions  Scores finalized by OPCS end March

11. Issues to be aware of  “Known unknowns”, for example on, extent of operations outside the budget and arrears :  PREM or FM, or both?  Upward pressure on ratings Not a reward for good intentions Need demonstrable progress

12. Issues - Quality of write ups  Insufficient evidence in may write-ups  Not addressing the specific dimensions which are used to measure performance  8 out of 20 benchmark countries initially rated “un-graded” on basis of poor write ups  Particular weakness on points b) and c)

13. Information sources  Not just CFAA  Internal sources CFAA, IFA etc. PE(I)R Recent DPL and PRSC documents (updates)  External sources PEFA Assessments (EC, DFID etc.) IMF Fiscal Transparency ROSC (IMF Website) IMF - PRSC Joint Staff Advisory Notes, Art IV  Direct from Government (MoF)

17. Issues going forward  Consistency with PEFA indicators (PEFA Secretariat will do a study)  Consistency over time – changes in basis of rating from year to year Decentralization Procurement?

18. Anchor Review Role  OPCFM and PRMPS review ratings for: Quality of write up, including evidential support Cross check with other available information Carefully scrutiny of all changes in ratings Do a comparison across countries

19.  Anchor is also there to provide support and advice  Good luck!