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Indicator 2(a) assesses the degree to which partner countries have public financial management systems that are in line with broadly accepted good practices or have reform programmes in place to establish such systems. The scores for Indicator 2(a) for the 2008 Survey on Monitoring the Paris Declaration are derived from the assessment of the quality of a country’s budget and financial management system presented in the World Bank’s 2007 Country Policy and Institutional Assessment (CPIA), a diagnostic tool that measures the extent to which a country’s policy and institutional framework supports sustainable growth and poverty reduction.
Presented below is a short description of the criteria and methodology used to assess Indicator 2(a). More information on the CPIA and its scoring process are available here.
For questions, please contact: Rui Coutinho at rcoutinho@worldbank.org.
Assessment Criteria:
The CPIA criterion that assesses the quality of a country’s budget and financial management system covers three dimensions:
1. a comprehensive and credible budget, linked to policy priorities;
2. effective financial management systems to ensure that the budget is implemented as intended in a controlled and predictable way; and
3. timely and accurate accounting and fiscal reporting.
Assessment Methodology:
1. Scoring process: The scoring process involves two key phases. In the benchmarking phase, World Bank staff score a small, representative sample of countries drawn from all Regions, using the CPIA criteria as an anchor and taking into consideration a wide range of inputs including external indicators and internal and external documentation; this phase helps ensure that the scores are set at the right level and are consistent across countries and regions. In the second phase, World Bank staff rate the remaining countries using benchmark countries’ scores as guideposts.
2. Score: Each country is rated on a scale of 1 (low) to 6 (high) in half point increments (0.5). A score of 1 corresponds to a very weak performance and a score of 6 to a very strong performance. The overall score for the quality of a country’s budget and financial management systems builds on a set of suggested guidelines presented below.
3. Paris target: A half point increase on the CPIA scale for half of partner countries indicates a level of progress satisfactory to meet the Paris Declaration target.
Guidelines for assessing quality of budget and financial management systems
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Assessment criteria
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A comprehensive and credible budget,linked to policy priorities |
Effective financial management systems to ensure that the budget is
implemented as intended in a controlled and predictable way |
Timely and accurate
accounting and fiscal reporting, including timely and audited public accounts and effective
arrangements for follow up. |
1
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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, nor any 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. |
Expenditures across broad budget categories have little or no relationship to the amounts budgeted. There
is practically no monitoring and reporting of public expenditures. Payment arrears exceed 10% of total
expenditures, or cannot be determined. |
There is no reconciliation of cash accounts with fiscal records. No regular, in-year fiscal reports are
produced. Public accounts are seldom prepared, or are more than five years out of date. The use of public
resources is not on the public agenda. |
| 2 |
There is no discernible link with government policies or priorities, and no forward look in the budget. The
budget is formulated without meaningful consultation with spending ministries. No consistent budget
classification system is in use. Significant fiscal operations (e.g., extra-budgetary expenditures and donor
funded projects of 25-50 percent of total spending by value) are excluded from the budget. |
Actual expenditures often deviate significantly from the amounts budgeted (e.g., by more than 30 percent
overall or on many broad budget categories). There is no adequate system of budget reporting and
monitoring. Payments arrears exceed 10% of total expenditures. |
Reconciliation of banking and fiscal records is undertaken less frequently than monthly, and discrepancies
are often left unexplained. In-year fiscal reports are largely useless, due to lengthy delays or inaccurate
data. There are significant delays (more than three years) in the preparation of the public accounts. The
accounts are not (professionally) audited or submitted to the legislature in a timely way, and no actions are
taken on budget reports and audit findings. |
| 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. |
Expenditures deviate from the amounts budgeted by more than 20 percent overall, or on many broad
budget categories. Budget monitoring and control systems are inadequate. Payment arrears are 5-10% of
total expenditures. |
Reconciliation of banking and fiscal records is undertaken less frequently than monthly, or discrepancies
are not always accounted for. In-year budget reports are prepared quarterly less than 8 weeks after the end
of the period, but their usefulness is undermined somewhat by inaccurate data or reporting only at high
levels of aggregation. There are significant delays (e.g., more than 10 months) in the preparation of public
accounts. Accounts are not audited in a timely and adequate way, and few if any actions are taken on
budget reports and audit findings. |
4
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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. |
Actual expenditures deviate from the amounts budgeted by more than 10 percent on many broad budget
categories. Budget monitoring and control systems exist, but there are some deficiencies. Payment arrears
may exist but are less than 5% of total expenditures. |
Reconciliation of banking and fiscal records is undertaken satisfactorily, on a monthly basis. In-year
budget reports are prepared quarterly less than 6 weeks after the end of the period, with reasonably accurate
data, broken down to at least program or functional level. There are delays (e.g., more than 6 months) in
preparation of the public accounts. The accounts are audited in a timely and professional manner, but few
meaningful actions are taken on budget reports or audit findings. |
| 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. |
The budget is implemented as planned, and actual expenditures deviate only slightly from planned levels
(by less than 10 percent on most broad categories). Budget monitoring occurs throughout the year based on
well functioning management information systems. Payment arrears are negligible or non-existent. |
Reconciliation of banking and fiscal records is practiced comprehensively, properly, and in a timely way
(daily or weekly). In-year fiscal reports are prepared at least quarterly, issued within 4 weeks of end of
period, and provide accurate data on all budget items, with coverage of expenditures at both the
commitment and payment stages. The public accounts are prepared within 6 months of the end of the fiscal
year, and include full information on revenue, expenditure, and financial assets and liabilities. Accounts are
audited in a timely, professional and comprehensive manner, and appropriate action is taken on budget
reports and audit findings. |
| 6 |
Criteria for “5” on all three sub-ratings are fully met. In addition: |
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Budget supporting documents are submitted to the legislature, with the annual budget, with information on
macroeconomic assumptions, estimates of budgetary impact of major revenue and expenditure policy
changes, and comparisons to previous budget outturns or estimated outturns. |
Funds available to spending agencies or ministries are highly predictable within the budget year. In-year
adjustments are infrequent, follow pre-specified guidelines, and are consistent with stated priorities. |
The public has timely and inexpensive access to annual budget documentation, in-year and year-end
reports, and external audit reports. |
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