Presentation by David Nummy of Grant Thornton about sequencing of public financial management reform in emerging nation governments.

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

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

3. 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

4. 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

5. 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?

6. 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

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

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

9. 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

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

11. 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

12. PFM Evolution