The piecemeal approach to public financial management in developing countries doesn’t work: ‘growing’ professionals does
The problems facing us all – the economy, climate change, conflict – have a huge impact in developing countries. Poor people face shortages of food, housing, education and access to health services and justice. To tackle these, developing countries need good systems of government and governance, but initiatives are often piecemeal and difficult to sustain.
Leaders of public services in the UK take it for granted that systems of public financial management include: all the elements for regulation; standard-setting; planning, providing and controlling expenditure and services; providing assurance and scrutiny; and developing both people and organisations.
It is understood that without all of these, the systems will fail. But a development approach to weak public financial management systems in a developing country generally means only one or two initiatives, such as: better macroeconomic forecasting; or developing revenue policy; or instituting medium-term planning and budgeting; or strengthening the equivalent of the National Audit Office or the Public Accounts Committee. My pet hate among these is the MTEF (medium-term expenditure framework). Every developing country seems induced by donors to have one, although it often has little relevance or meaning in their particular context.
The real root to sustainable development must be through the development of people and institutions. Without them, no initiative or system will achieve its potential and is likely to fail over the longer term.
CIPFA, with support from the UK Department for International Development, recently launched an international consultation paper, Public financial management and the PFM international architecture – a whole system approach. It does two things: it sets out a complete picture of all of the pieces that work together for effective public financial management and it also maps the range of global, regional and national institutions and bodies that support or influence PFM development. Surprisingly, that knowledge has never been brought together before.
It helps everyone working in the field of development to have a common understanding of what needs to be done, and why the success of one initiative depends on many others. That certainly isn’t the case at the moment. Donors put a lot of effort into better joint planning, but political realities and the supply of cash often get in the way. And many of the institutions and enablers of good public financial management are unknown to donors or their role is not fully understood. Now all of this is written down in one place; the next step is to get the picture universally understood and supported.
It would be so much easier for everyone if there were a ready supply of trained professionals at all levels to support good governance and good public financial management in developing countries. There are 53 countries in Africa, but only 25 of these have a well developed accountancy institute. You can count the number of accountants in some countries on one hand, and they are not working in the public sector. No wonder initiatives fail.
So the challenge is to grow the institutes that grow and sustain the professionals – financial administrators, accounting technicians and professional accountants. There have been many in-country initiatives to train people in the basics of financial management before, but these too have failed over the longer term because there is nothing in place to develop new people and to keep skills up to date. It would be a great step forward if donors and other organisations lined up behind CIPFA’s initiative to share a common understanding and approach to the development of PFM.
The closing date for responses to CIPFA’s consultation paper has been extended to January 8.
Deborah Williams is a government and international development adviser and deputy chair of the International Federation of Accountants developing nations committee. CIPFA’s paper can be found at www.cipfa.org.uk/international/consultation.cfm
