The UK needs assistance of Thunderbirds proportions to meet its overseas aid targets, but CIPFA is ‘go’ to help achieve them
On May 7 there could be a different international development secretary in Palace Street. But will there be real differences in party priorities? Labour, the Conservatives and the Liberal Democrats have all pledged to achieve the United Nations-inspired Official Development Assistance target of 0.7% of Gross National Income by 2013.
This target is highly reminiscent of a Thunderbirds episode: tension builds as the tractor beam reaches into space to rescue three astronauts. The beam stretches away from Thunderbird 3 to reach its goal with seconds to spare. Will that happen here?
The UK’s total ODA spending is second only to that of the US. And it is already achieving a level of 0.56% of GNI, compared with 0.2% for the US. If the UK can reach the 0.7% target, it will be in the doubly virtuous position of being in the leading donor group by proportion of GNI as well as in the top two for total spending.
This would provide an opportunity to demonstrate leadership and influence in a field where moral – as well as fiduciary, administrative and management – contributions are both required and respected.
The wider implications of the aid budget go some way to explaining why the major parties are so keen to ring-fence increases to reach the target level by 2013. But achieving the target is not an end in itself: the spending has to meet specified objectives and achieve value for money. Within this growing budget there are many competing priorities for the Department for International Development to address.
There is clearly a real need in many developing countries to strengthen (and, in some cases, build almost from scratch) the public finance management systems to underpin all public service provision. CIPFA has identified the five main priorities.
First is learning and growing – which is shorthand for professionalisation and training. Donors have too often initiated unsupported short-term training activities. But training for professional qualifications, technical effort and institutional support provided by a local professional body can become embedded in local customs. PFM standards and quality can be maintained by suitably configured professional institutions.
Secondly, there is the whole system of management. Efforts to improve PFM have focused on strengthening budget systems in isolation from the wider management. Budgets are not best formulated in a vacuum by a ministry of finance but in departments and agencies by accountable line managers. Financial management reform will improve by strengthening the internal control environment, management of risk and non-financial management.
The third priority is internal and external audit. Audit independence is particularly threatened in non-democratic environments. Internal audit should support the management of basic systems and controls before evolving into the more sophisticated areas common in advanced economies. External audit should also cover the fundamentals of financial audit before performance or value-for-money audit.
Fourthly, there are accounting and auditing standards. The importance of consistency of financial reporting and audit cannot be overemphasised but it must be contextual. There is a live debate on cash and accrual-based International Public Sector Accounting Standards and whether there should be standards for the pathway to accruals. The practical implications of implementing accounting standards need to receive sufficient attention.
Finally, co-ordination of donor efforts to garner resources and target partner country needs is important. PFM touches all parts of government but many donors still compete for the traditional core zones of budget strategy and operations and ignore wider areas of concern. The Organisation for Economic Co-operation and Development’s Development Assistance Committee is an umbrella organisation for donors that will expect significant contributions from leading nations.
CIPFA, the Department for International Development and others already work together in these areas. Whoever wins the election, CIPFA is ‘go’ to promote sound public financial management experience internationally.
Peter Boulding is assistant director, international, at CIPFA
