Role of Public Financial Management in Improving Service Delivery: What Can We Learn from PEFA?
The PEFA program is calling for proposals for short-term project collaborations between the PEFA Secretariat and interested public finance practitioners, scientists, researchers, and scholars to strengthen the understanding of the role of public financial management (PFM) in improving service delivery, preferably in education and health, by using the PEFA dataset.
The Call for Research Proposals aims to disentangle the role of PFM, as measured through PEFA, in strengthening public service delivery, particularly in education and health sectors. Research can be carried out at multiple levels, including global, regional (e.g., Europe and Central Asia, Sub-Saharan Africa, Latin America and the Caribbean, etc.), country level, and level of subnational governments. Research proposals might opt for a holistic approach to viewing PFM and its role on service delivery, particularly in education and health, or can investigate different PFM tools (e.g., medium-term expenditure frameworks, role of performance information and performance audits, cash management, Treasury Single Account, participatory budgeting, parliamentary oversight, etc.) as well as different approaches to PFM reform and to present their impact on service delivery.
Research proposals focusing on service delivery at the subnational level are particularly encouraged. In recent years, public sector reform and fiscal decentralization initiatives in many low and middle-income countries have given subnational governments (SNG) additional responsibilities for public financial management as well as for service delivery. The decentralization and delegation of service delivery responsibilities to SNGs are expected to bring decision making closer to people, leading to an increase in the effectiveness of the public sector and in the quality of public services. Since many public services —including education, health, water, sanitation — are consumed locally, decentralization is perceived as an important component of public sector reform efforts to achieve effective service delivery. However, decentralization of service delivery responsibilities requires establishment of core functional administrative systems, such as budgeting, accounting, internal control audits, procurement, human resource management, etc. In this context subnational PEFA assessments have played an important role in understanding weaknesses and strengths of PFM systems at the subnational levels.
Research proposals might also focus on the role of specific PFM actors in PFM reform and their impact on service delivery, including line ministries, local governments, citizens, legislatures, and others. For example, in decentralized settings PFM arrangements for service delivery tend to be more complex due to the multi-layered relationships, fragmented accountability, and complex resources flows and reporting arrangements; the research can therefore aim to provide a better understanding of different PFM systems and the role of related actors, and how they underpin service delivery systems. Similarly, citizens and media can have a potentially important role in incentivizing political commitment to sustain PFM reforms and make them impactful and ensure that sufficient funds are allocated to priority areas, reach frontline providers on time and are used for their intended purposes in the most economical and efficient manner.
Research proposals may also build on the existing research on fiscal policies and gender equality (e.g., IMF, 2017; OECD, 2017) and unscramble the role of gender in governance of service delivery. This can be done by assessing the role of different PFM institutions and tools (e.g., gender responsive performance indicators, inclusion of gender data in budget statements, etc.) – as measured by PEFA assessments and combined with other relevant tools and datasets – that promote gender equality or use gender-disaggregated data to enhance the equitable delivery of services.
Some of the existing research that has used the PEFA dataset to measure PFM improvements has suggested that the existing quantitative analysis needs to be complemented by qualitative research. This is envisaged to provide a more comprehensive understanding of the role of specific contexts, the role of different stakeholders and their motivations in pursuing PFM reforms and how this influences their results and impact (de Renzio, 2009; Andrews, 2010; Fritz et al., 2017). Consequently, research proposals are invited to include qualitative or quantitative research methods or a combination of both.
Public financial management has attracted significant interest and resources from development and research communities since the 1990s. Once development partners began to provide aid more programmatically, and especially began to provide budget support as opposed to targeted project-based aid, there was an acknowledgement that there was a critical need to focus on strengthening partner countries’ institutions (de Renzio, 2006) with an emphasis on the need to invest in strengthening PFM systems as one of the ways to minimize fiduciary risks (OECD, 2011) and as a tool for addressing poverty, inequality, and promoting economic growth (Sobhan, 2002; Allen, 2009).
PFM has therefore become a key component of the good governance agenda (Schiavo-Campo, 2007). Strong PFM systems are considered one of the enabling elements needed for the achievement of three of the quoted desirable fiscal and budgetary outcomes, namely: achievement of aggregate fiscal discipline by influencing the size of resource collection, management of debt, and public spending; strategic allocation of resources by influencing the composition of spending; and efficient service delivery by influencing the execution of spending and ensuring that budgeted revenues are used to achieve the best levels of public services within available resources (PEFA, 2016; Cangiano et al., 2013; Schick, 2013).
To have a better understanding of how different PFM systems perform, seven international development partners initiated the PEFA (Public Expenditure and Financial Accountability) program in 2001. They include the European Commission, International Monetary Fund, the World Bank, French Ministry of Foreign Affairs, Norwegian Ministry of Foreign Affairs, Swiss State Secretariat for Economic Affairs, and the UK's Department for International Development. The PEFA program provides a framework for assessing and reporting on the strengths and weaknesses of PFM using quantitative indicators to measure performance.
The PEFA framework was established to reduce duplication and costs of multiple assessments. It was conceptualized to facilitate a dialogue among governments and other relevant stakeholders on how to improve the effectiveness of fiscal policies. As part of the global effectiveness agenda, PEFA was also aimed at improving the results of development cooperation.
Measuring governance and effectiveness of institutions is often difficult (The World Bank, 1992; Punyaratabandhu, 2004). The PEFA framework does so by assessing and reporting on the strengths and weaknesses of PFM using 31 indicators that are further disaggregated into 94 dimensions. The performance of each indicator and dimension is measured against a four-point ordinal scale ranked from A to D. A, the highest score, is warranted if evidence clearly demonstrated the level of performance is consistent with existing good international practices, as judged by PEFA stakeholders. The 31 indicators are grouped into seven pillars of performance, focusing on essential features of an effective PFM system which provide the foundation for a PEFA assessment: i) budget reliability; ii) transparency of public finances; iii) management of assets and liabilities; iv) policy-based fiscal strategy and budgeting; v) predictability and control in budget execution; vi) accounting and reporting; and vii) external scrutiny and audit (PEFA, 2016).
Since 2005, PEFA assessments have been carried out 590 times in 150 countries. While countries have on average shown overall improvements in PFM (Figure 1), global progress has, however, been mixed with wide variations across different regions and income levels. For example, when examining regional variations, countries in Europe and the Central Asia region have seen significant progress over the last decade while there have been discrepancies in performance among Middle-East and North African and Sub-Saharan countries. When analyzing performance based on income, low-income countries have made some gains, albeit from a low base; and in general countries with higher income per capita show better PFM performance (pefa.org; de Renzio, 2009; Fritz et al., 2017).
Figure 1: Comparison of PEFA Scores Between the Previous Assessment and Latest Successive Assessment in Different Regions
There is a heated debate among PFM practitioners and academics as to the most appropriate approach and sequencing of PFM reforms (Schick, 1998 and 2013; Diamond, 2013: Tommasi, 2013). While research has shown that incremental improvements are common; non-technical aspects, such as political economy, also significantly impact on successful outcomes. In addition, budgets tend to be better planned than executed; relevant, and often well drafted legislation surrounding the PFM framework may be in place but are frequently not observed in practice and seldom affect actual behavior; ‘isomorphic’ reforms are common; there is often a limited ‘window of opportunity’ for reforms that should be seized; and finally, reforms are more successful when there is concentrated sets of actors involved in implementation (de Renzio, 2009; Andrews, 2010; Fritz et al., 2017; The World Bank, 2017).
PFM is expected to play a crucial role in the implementation of national and sectoral policies and ensuring more efficient provision of public services. As outlined above, efficient use of resources for services delivery requires using budgeted revenues to achieve the best levels of public services within available resources. Services are critical points of contact between citizens and government and while improving public services extends beyond PFM systems per se, there are several aspects of PFM systems that contribute to it, for example, effective public procurement and public investment management. A well-functioning procurement system improves the efficiency of service delivery by ensuring better value for money of government purchases; and effective public investment management promotes operational efficiency by supporting projects and programs that deliver outputs and outcomes in a cost-efficient manner.
Research of linkages between PFM and service delivery, particularly in the education and health sectors, have shown that good governance has a role to play (Goryakin et al., 2017). However, there is a ‘lack of detailed conceptualization as to how exactly, and through what mechanisms, the relationships between them operate’ (Welham et al., 2017). The recent research on the relationship between PFM and heath service delivery by Welham et al., 2017, noted the ‘relative absence of clear evidence in this field’, although it tentatively supported a ‘basics first plus accountability’ approach for PFM reform to health service delivery. The research also recommended, among other things, to build on the research by investigating different PFM types and tools that are needed to support (health) service delivery in different contexts.
All proposals should clearly describe the following:
Research proposal summary
Please provide one-page executive summary, up to 500 words. The summary should include: i) rationale, ii) objectives, iii) methods, iv) expected outcomes.
Please provide a two-page background that includes literature review of previous studies on the subject, stating its importance and rationale for proposing the study.
Please state the overall objective expected to be achieved from this research and specific objectives which break down the general objective.
The methodology section should describe the study design, data sources other than the PEFA data, and specify the approach to research and methods used.
Timeframe of proposed activities
Please indicate the activities to be conducted and the corresponding timing, including the submission of progress reports, first and final draft, as well as the final report including comments from the World Bank internal peer review process.
Any references cited should be listed using standardized citation style.
Proposal budget with justifications
Please include the research project budget breakdown with according justifications.
The deadline for submission of completed applications is February 28, 2019. Any applications received after this date will not be considered for funding.
Please note that the PEFA Secretariat is housed at the World Bank and that all selected research projects will be peer reviewed in line with the internal World Bank peer review process.
SUBSIDIES AND DURATION
The award amount will range from US$ 5,000 to US$ 50,000 for the research proposal. The proposed duration for which support is requested must not exceed 10 months. Selected individuals or firms will engage in consulting appointments or contracts with the World Bank.
ELIGIBILITY OF APPLICANTS
Public finance practitioners, scientists, researchers, and scholars are encouraged to submit proposals. While postgraduate students are not encouraged to submit research proposals on their own, they could support teams of main researchers.
Research proposals will be reviewed by the PEFA Research Committee, composed of a panel of representatives of PEFA partners as well as members from the academia. The PEFA Research Committee will evaluate all papers in terms of originality, analytical rigor, and policy relevance and agree on a shortlist of accepted papers.
Selected research proposals will be contacted by March 30, 2019 and will be required to produce an interim report outlining the initial research findings by August 30, 2019 and submit a final draft research paper for peer-review by October 11, 2019. The final papers are expected to be submitted by December 6, 2019 and presented at the PEFA Steering Committee meeting in December 2019.
Any queries regarding the participation and selection in PEFA Call for Research Proposals 2019 may be sent to:
PEFA 2019 Call for Research Proposals Coordinator
c/o The World Bank Group
1818 H Street, NW
Washington, D.C. 20433 U.S.A
Phone: +1 202 458 0526
Proposals should be submitted via email at email@example.com with a corresponding subject ‘PEFA 2019 Call for Research Proposal’.