Practitioners guide 2nd Version

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					Supporting Capacity
Development in PFM – A
Practitioners Guide

                         January 2011
Table of contents
Abbreviations and Acronyms                                                       4

Executive Summary                                                                5

1. Introduction                                                                  9
   1.1 Context                                                                   9
   1.2 Contents                                                                  9

2 Definitions and Directions                                                    11
  2.1 Introduction                                                              11
  2.2 Definitions and Understanding of Key Concepts                             12
  2.3 Capacity Development minus the donors                                     14
  2.4 Key donor principles for Capacity Development                             15
  2.5 Post Paris – Lessons Learnt and Emerging Consensus                        16
  2.6 Square pegs in round holes (perverse incentives and disincentives)        17

3 Step One – Understanding the Operating Environment                            20
  3.1 Understand the Country and its Culture                                    20
  3.2 Know the Subject                                                          21
  3.3 Know Yourself (strengths and weaknesses)                                  22
  3.4 Improving the dialogue                                                    23

4 Step Two – Assessing the Need                                                 25
  4.1 Assessing the need                                                        25
  4.2 Ensuring the Value of the Assessment Process                              26

5 Step Three – Supporting Country Ownership and Leadership                      28
  5.1 Government led demand                                                     28
  5.2 Assessing Demand and Supporting Ownership                                 30

6 Step Three – In collaboration or going it alone?                              32
  6.1 Donor co-ordination                                                       32
  6.2 Working together                                                          33

7 Step Four – Designing support                                                 34
  7.1 Design of a Response                                                      34
  7.2 A More Effective Response                                                 36

8 Step Five – Flexible funding/choice of aid modalities                         39
  8.1 Funding choices                                                           39
  8.2 Balancing Flexibility and Accountability                                  41

9 Step Six - Providing Advice                                                   42
  9.1 Use of Technical Assistance                                               42
                  Capacity Development in PFM – Practitioners Guide Version 2
   9.2 Getting the Right Advice                                 44

10 Step Seven – Taking a longer- term perspective to learning   47
   10.1 From knowledge transfer to knowledge acquisition        47
   10.2 Supporting the new learning                             49

11 Step Eight – Assessing the Results and Benefits              50
   11.1 Monitoring and evaluation                               50
   11.2 Results, Uses and Benefits                              51

References (to be completed)                                    52

Annex A Methodology                                             57

Annex B Lesotho – Support to Capacity Development in PFM        62

Annex C Mali – Support to Capacity Development in PFM           71

Annex D Morocco Case Study                                      84

Annex E Nepal Support to Capacity Development in PFM            99

Annex F Rwanda – Support to Capacity Development in PFM         108

Annex G Possible Approaches to TA                               118

Annex H Learning Practice Approaches, Tools & Techniques        120
Abbreviations and Acronyms
   AAA         Accra Agenda for Action
   ABB         Activity Based Budgeting
   ACCA        Association of Cost and Certified Accountants
   ADB         Asian Development Bank
   AfDB        African Development Bank
   AFROSAI     African Organisation of Supreme Audit Institutions
   ASOSAI      Asian Organisation of Supreme Audit Institutions
   AusAID      Australian Agency for International Development
   CARTAC      Caribbean Technical Assistance Centre
   CIPFA       Chartered Institute of Public Finance and Accountancy
   COFOG       Classification of Functions of Government
   DAC         Development Assistance Committee
   DFID        Department for International Development (UK)
   EC          European Commission
   EDF         European Development Fund
   EU          European Union

   FMIS        Financial Management Information System
   FY          Financial Year

   GFS         Government Finance Statistics

   HDI         Human Development Index
   IMF         International Monetary Fund
   INTOSAI     International Organisation of Supreme Audit Institutions
   IPSAS       International Public Sector Accounting Standards
   MINECOFIN   Ministry of Economy and Finance (Rwanda)
   MTEF        Medium Term Expenditure Framework
   NZAID       New Zealand Agency for International Development
   OECD        Organisation for Economic Cooperation and Development
   PAC         Public Accounts Committee
   PEFA        Public Expenditure and Financial Accountability
   PFTAC       Pacific Financial and Technical Assistance Centre
   PFM PMF     Public Finance Management Performance Measurement Framework
   PI          Performance Indicator
   SAI         Supreme Audit Institution
   TA          Technical Advisor
   TC          Technical Cooperation
   UNDP        United Nations Development Programme

                      Capacity Development in PFM – Practitioners Guide Version 2
Executive Summary
As part of the global efforts to make aid more effective, high level commitments have been
made by partner countries to strengthen their national systems and by donors to use them to
the maximum extent possible. Although CABRI 2009:3 states that:“The important question
when deciding on how an aid flow should be managed remains: Will channelling this aid
through this particular system make it more effective, and/or will it lead to a better allocation
and management of public funds (domestic and external) in the medium to longer term?

In order to facilitate the implementation of these commitments, the Working Party on Aid
Effectiveness created a Global Partnership on Strengthening and Using Country Systems.
Two Task Forces were created to produce guidance and good practice notes on strengthening
Public Financial Management and Procurement systems. In particular, the Task Forces were
tasked with preparing a practitioner‟s guide to Supporting Capacity Development in PFM and
Procurement respectively. Encouraging governments to strengthen their systems and in
particular their PFM systems should of course be linked to the importance of sound PFM
systems to service delivery, economic growth and poverty reduction, not just to the
achievement of external targets.

This practitioners‟ guide on PFM is designed for donor representatives in country and in
headquarters. Given the broad scope of PFM, it is hoped that it will also be of interest to other
sector specialists. . It has already benefitted from visits to five countries1 and the input of
participants at the recent OECD-DAC workshop The guide adopts the broad CIPFA
definition of PFM, “Public Financial Management (PFM) is the system by which financial
resources are planned, directed and controlled to enable and influence the efficient and
effective delivery of public service goals” CIPFA 2010:? It also adopts the principle that a
level of financial literacy is required throughout government, as PFM is not just the domain
of economist and accountants.

In common with most donor definitions, it views capacity development as an ongoing process
that occurs at the level of individual, organisation and society. A process that is needed to
both maintain or strengthen existing operations and to enable reforms. Despite the use of the
term „development‟ it does not restrict potential options to the creation of something new,
recognising that an organisation‟s capacity can be enhanced through reducing demand on
capacity or making better use of existing capacity. It also adopts the view that both „new
reforms‟ and „ongoing capacity development‟ are change processes, which need to be
managed albeit differently to ensure sustainability and acceptance.

The guide does not pretend to be revolutionary. It is not a recipe book, a Do-It-Yourself guide
or a repair manual. There is no “magic bullet”. To the seasoned practitioner, some of the
guidance may appear too simplistic or just common-sense. In reality, common-sense is not
always that common. The four key principles set out in the OECD DAC (2006) guidelines for
supporting capacity development in PFM are still valid. These are that:

    Lesotho, Mali, Morocco, Nepal, Rwanda

                                     Capacity Development in PFM – Practitioners Guide Version 2
    Supporting country leadership and ownership should be central to donor approaches.
    Capacity development design and sequencing should fit specific country
     circumstances, rather than reflect standard or imported solutions.
    The institutional, organisational and individual levels of capacity development,
     including managerial and technical aspects, should all be taken into account in
     programme design and implementation.
    Donor support should be provided in a coherent, co-ordinated, and programmatic

Evidence from the country studies and experience elsewhere shows however that
implementation of these principles has been mixed, not least because PFM capacity
development is neither for the faint hearted nor the time-constrained, intertwined as it is with
broader governance, public service and general development issues. In-country discussions
also show that donors and partner governments have very different expectations of what
constitutes PFM and the „correct‟ support to Capacity Development

Consequently, rather than just focusing on „technical‟ issues of support to capacity
development e.g. how to do assessments, the guide takes a more holistic view of the issues
that need to be addressed. It starts therefore with a common requirement for all donor
support, know your country, know yourself, know your subject. Proposed actions include
following AusAID‟s principle of greater recognition of cultural differences, simple (some
would say too simple) recommendations to read the relevant documentation i.e. budget,
establishing mission teams with a more mixed skill set, and as done by USAID consideration
of changes to in-house recruitment policy to employ more PFM specialists.

In assessing capacity development needs, the guidance follows Olander et al 2007 who
describes four inter-related elements that need to be considered when assessing and
developing PFM capacity. The first relates to resources (staff, funds, equipment, facilities,
infrastructure and financial administrative networks). The second aspect looks at
management, (leadership and political will, operational and change management). The third
element is the institutional framework (legislation, procedures and organisational culture).
The final element relates to support structures (the role of tertiary education institutions,
professional bodies, other advisory bodies and the upgrading of skills). In response to the
frequently voiced concerns over yet more assessments, it promotes the view that (i) there is a
lot of information already available; (ii) PFM assessments should be used for the purpose for
which they were designed, and applied correctly; (iii) focus on what is there, not just what is
not there.

The guide then moves on to consider the most difficult principle, that of supporting country
ownership and leadership. It bases its suggestions on the view that ownership is a perception
not a concrete term, and as evidenced in numerous countries can be easily eroded, emerging
in design, but killed in implementation. The approach to promoting ownership and leadership
is a multi-faceted one and depends on the particular country context and the individuals
involved. However, as clearly seen from the case studies and elsewhere, before a partnership
can be established, there needs to be a relationship between donors and government that
enables constructive and open discussions to take place. More listening less talking. Trust is
imperative and the importance of establishing and maintaining a good working relationship,
even as individuals and circumstances change cannot be overstated. Micro-management is
not a solution, but at the same time the most effective way forward may be to look elsewhere
                        Capacity Development in PFM – Practitioners Guide Version 2
e.g. at the demand side of accountability through greater support to civil society and
In designing and implementing support, the guidance strongly recommends that it should be
linked to the assessment – to the specifics of the country2, place change management at its
core and recognise both the importance of timing (pace) and sequencing (order). Problems
should be addressed, not solutions provided and when strategic advice is provided,
governments should be presented with both the advantages and disadvantages. Furthermore,
it advocates that the design should recognise the scope of the support required, the
importance of all the players including those at the bottom of the chain, motivational issues
(e.g. recognition) not just technical ones.
In the form of support provided, the guide takes the view that technical advice should include
advice on „technical‟ aspects, change management, leadership, negotiation and other soft
skills. Advice can be both strategic and operational, it can be sourced from local, regional or
international providers in the form of multi-lateral agencies, academic institutions,
consultancy firms, regional associations, development institutions etc and be in various
forms, short-term, long-term, continuous, intermittent. Based on government responses, there
is a clear preference that „operational‟ advice is sourced from those with actual practical
experience, as indicated by the positive response to the support provided by various National
Audit Offices (NAOs). Concerns were raised about the quality and independence of some
advice and therefore it is recommended that further research is done on the development of a
more vibrant and quality focused technical advice market.
The guide also recommends that alongside support to greater professionalisation and a
broader audience, more innovative learning opportunities should be supported, the traditional
workshop has helped the hospitality industry, academic courses have benefitted the
individual, but these have not always been translated into organisational capacity, not least
because in several countries, they have been supply (donor) not demand driven. Several
examples of learning by doing, supported by technical advisors or peer organisations have
been cited as effective. Recognising that leadership and management courses may be
available through other support mechanisms, e.g. support to public service reform, the
importance of such skills in the field of PFM is highlighted, as these form the base for
countries taking forward their own agenda.
In recent years, emphasis has been on improved donor coordination and in the countries
visited there was a general recognition that it was improving, although still had a long way to
go, and several donors highlighted the cost in time and effort to maintain such arrangements.
In theory various papers and mechanisms are in place, in practice, they have proved to be less
effective. Effective coordination appears to be supported by strong individual skills and
challenged by institutional incentives and directives.
A frequent request from partner governments is greater flexibility. Achieving flexibility and
the ability to adapt to changing circumstances without compromising accountability to home
constituencies is a significant challenge. Overly bureaucratic procedures, inflexible terms of
reference and conditionalities that are set in stone impact negatively on support to capacity
development. The constraint for many donors and one that is not always recognised by

    If a village does not have electricity, consider carefully the introduction of a sophisticated financial management
      information system, if staff retention has been a continual problem consider solutions, which do not require a five-fold
      increase in personnel, remember government officials face daily challenges and crises.

                                 Capacity Development in PFM – Practitioners Guide Version 2
governments is that they are accountable to their home constituencies. A delicate balance is
therefore required in ensuring that funds are used for their intended purposes and not
misappropriated with the provision of more flexible (e.g. not tied to the training of debt
management officers, but rather to the improvement of the debt office operations) and longer
term funding3. Greater commonality between donors on fiduciary risk assessments and
greater transparency on how they are interpreted is viewed as one way forward.
At the end of the day, however the fact that the key principles are not being followed, that
square pegs continue to be placed in round holes is often the result of institutional incentives
and directives within the various organisations, donors, governments, advisory bodies. As
noted above, it is recommended that further research is done on establishing a vibrant market
for high quality and independent technical advice. It is also suggested that any
external/internal reviews of donor organisations‟ internal management requirements (e.g.
lending policies), agendas (e.g. gender and green budgeting) and performance targets (e.g.
amount disbursed) as well as individual performance targets should address the impact of
these factors. Some would even argue that in assessing capacity development needs in a
particular country, the constraints of participating donors should be included.

    Examples still required.

                               Capacity Development in PFM – Practitioners Guide Version 2
  1. Introduction
1.1     Context

  In the 2005 Paris Declaration, partner countries committed to strengthening their national
  systems and donors to using them to the maximum extent possible as part of the global efforts
  to make aid more effective. Both partners and donors agreed to accelerate and deepen these
  commitments during the Third High Level Forum on Aid Effectiveness held in Accra in
  2008. These international commitments result from strong evidence that although some
  progress has been achieved in strengthening country systems (since 2005, 36% of countries
  have improved their score for public financial management (PFM) against a target of at least
  50%), less progress has been achieved on the use of country systems, with only 45% of
  country systems being used in the countries surveyed in 2008 (as against the target of 80%).
  The survey results show a weak correlation between the quality of a country system and its
  use by donors. As a result, §15 of the Accra Agenda for Action (AAA) commits developing
  countries and donors to “strengthen and use developing country systems to the maximum
  extent possible”. Encouraging governments to strengthen their systems and in particular their
  PFM systems should however be linked to the importance of sound PFM systems to service
  delivery, economic growth and poverty reduction, not to the achievement of external targets.

  In order to facilitate the implementation of these commitments, the Working Party on Aid
  Effectiveness created a Global Partnership on Strengthening and Using Country Systems.
  Research undertaken as part of the preparations for the Accra High Level Forum showed that
  there are many obstacles in efforts to strengthen countries‟ PFM systems 4. In order to help
  address these obstacles, two Task Forces were created to produce guidance and good practice
  notes on strengthening Public Financial Management and Procurement systems. In
  particular, the Task Forces were tasked with preparing a practitioner‟s guide to Supporting
  Capacity Development in PFM and Procurement respectively.

1.2     Contents

  This second draft of the reference guide on support to PFM Capacity Development (CD) is
  based on a literature review of CD and Public Financial Management (PFM), visits to five
  countries; Nepal, Rwanda, Lesotho, Malia and Morocco and discussions5 with key
  practitioners from government, technical assistance centres and donors. Interviews in country
  were guided by a semi-structured interview process, which comprised of five broad themes:
  (i) conceptual understanding of PFM and CD; (ii) content of CD initiatives; (iii) process of
  design, implementation and assessment; (iv) impact of initiatives: and (v) sustainability of
  initiatives. The case studies reflect the various opinions and perceptions. It has also benefited
  from comments received during and after the OECD –DAC workshop in Delhi in December

      OECD-DAC (2008), Managing Development Resources: The Use of Country Systems in Public Financial Management,
        Better Aid Series, Paris.
      Telephone and email correspondence supported by the teams’ own knowledge and experience

                                      Capacity Development in PFM – Practitioners Guide Version 2
Further information on the methodology is included in Annex A, more detailed information
on the five country case studies is included in Annexes B – F. Annex G includes the pros and
cons of the various TA options and Annex H looks at some of the potential learning methods.
For the interested reader, the list of references contains a number of key documents on the
current (and not so new) thinking on capacity development and support to PFM.

Definitions of key concepts for PFM Capacity Development, as used in these guidelines, are
discussed in section 2.2. Section 2.3 then discusses some basic principles of capacity
development without donor support. Section 2.4 summarises some of the key principles
adopted by donors in their support to CD generally and section 2.5 sets out some of the
lessons learnt. Section 2.6 then discusses some of the challenges in implementing these
lessons and why there are still „square pegs in round holes‟.

Part Two contains the guidelines themselves – from pre-dialogue to post assessment and
beyond. The approach taken for each step is one of setting out the theory (how it should be –
good practice principles), the practice (how it really is - the good, the bad and the ugly) and
then providing some suggestions for moving towards better practice. Detailed papers and
guidelines on capacity development in fragile states and for procurement and audit have been
produced separately and will be referenced where appropriate6 in these guidelines.

6   Referencing will be done in later versions

                                                 Capacity Development in PFM – Practitioners Guide Version 2
 2 Definitions and Directions
2.1   Introduction

  As the guidance is intended to be practical in nature, philosophical debate about definitions
  and interpretations is left to alternative forums. However, findings from country visits and
  experience elsewhere show that there are differences in the understanding of key concepts
  e.g. capacity development, public financial management and reform both in governments,
  between governments, between donors and between governments and donors.

  In the dictionary, reform means the action or process of changing an institution or practice.
  There is no reference to the pace or scale of change, whether it is radical (e.g. New Zealand
  PFM reforms) or incremental (small step by step). Some practitioners (and some donor
  driven reform programmes) do associate reform with more radical change and in particular
  new technology, new processes and procedures. While, capacity development is often
  associated with incremental or evolutionary change, focussing on the people, the
  organisations and environment.

  In the country visits, most respondents believed capacity development is an ongoing process
  and one that is needed to both maintain existing operations and to enable PFM reform. One
  respondent neatly summarised reform as the policy decision e.g. to move from cash to
  accrual accounting, while capacity development was seen as the action (s) to enable the
  reform to take place. Institutional strengthening is defined as increasing the capacity of
  institutions to perform their functions. The various terms appear to be used interchangeably
  for example the World Bank has several Institutional Strengthening and Capacity Building
  Projects supporting PFM reforms. Some donors also confuse PFM, PFM Reform and a PFM
  Reform Programme.

  The emphasis on the need for clear definitions and plain language may appear pedantic,
  indeed some donors/authors do not consider it a critical issue, but without a common

                         Capacity Development in PFM – Practitioners Guide Version 2
        understanding and agreement, expectations are unlikely to be achieved. In some countries this
        has resulted in tensions and frustration on both sides. Experience has shown for example that
        donors supporting reform are unwilling to support development of capacity to sustain the
        status quo, for example back room operations in the debt office, while government officials
        see this as a legitimate activity.

 2.2       Definitions and Understanding of Key Concepts

2.2.1      Capacity

                             Capacity is the ability of people, organisations and
                           society as a whole to manage their affairs successfully
                                             (OECD, 2006:page)

        Most donors‟ generally concur with this definition. It contains no value judgement and makes
        no reference to best practice. It also views capacity at three levels, as shown in the figure.
                                                               Having defined what capacity is, a
                                                               more fundamental question arises –
                                                               „Capacity for What‟? In PFM circles
                                                               there is a general, although by no
                                                               means universal, agreement that there
                                                               is a need for capacity to achieve
                                                               aggregate fiscal discipline, effective
                                                               resource allocation and efficient
                                                               service delivery. Some practitioners
                                                               would also include transparency and
                                                               accountability, although others e.g.
                                                               UNDP view this as a governance issue,
                                                               implying as it does a value judgement.
                                                               It is also generally agreed that the
                                                               purpose of developing PFM capacity is
                                                               not an end in itself, but is essential for
                                                               a country‟s economic growth and

2.2.2      Capacity development

                           Capacity development is defined as the process
                        whereby people, organisations and society as a whole
                       unleash, strengthen, create, adapt and maintain capacity
                                    over time. (OECD, 2006:page)

        During the country visits it was discovered that capacity development is still often equated
        with human resource development. However, there is a growing realisation that the
        enhancement and sustainability of individual knowledge and skills depends crucially on the
        quality of the organisations and the enabling environment in which they operate. Capacity is
        not only about skills and procedures; it is also about incentives and governance. This concept
                                Capacity Development in PFM – Practitioners Guide Version 2
        applies equally to capacity development in PFM. Indeed, Olander7 describes four inter-related
        elements that need to be considered when assessing and developing PFM capacity. The first
                                                 relates to resources and includes the quantity and
                                                 quality of staff, adequate and timely financial
                                                 resources, equipment and facilities as well as
                                                 infrastructure such as, electricity supplies, banking
                                                 services and other key financial administration
                                                 networks. The second aspect looks at management,
                                                 including leadership and political will, operational
                                                 and change management. The third element is the
                                                 institutional framework that takes account of
                                                 legislation, procedures and organisational culture.
                                                 The final element relates to support structures
                                                 including the role of tertiary education institutions
                                                 and professional bodies, the upgrading of skills
                                                 through training and the role of consultants.

                                                 Capacity development recognises both creating and
                                                 building capacities, as well as the (subsequent) use,
        management and retention of capacities, with existing capacity as its starting point. Capacity
        building focuses only on the initial stages of building or creating capacity, assuming that
        there are no existing capacities.

        These guidelines refer to the broader concept of development rather than building. They also
        recognise that creating new capacity is not the only option available when developing
        capacity. Indeed, there are various operational strategies for capacity development. These can
        include: (i) eliminating old or inappropriate capacity; (ii) reducing demand on existing
        capacity; (iii) making better use of existing capacity and strengthening it; (iv)providing space
        for innovation and creative use of capacities, and (v) creating new capacity (Morgan, 1998).
        Making better use of capacity might mean for example reviewing an organisation‟s incentive
        systems or promoting collaboration between organisations (e.g. between internal audit
        departments of local authorities) or consolidating departments or ministries.

2.2.3        Support to Capacity development

                                “Promotion of capacity development” refers to what
                                  outside partners – domestic or foreign – can do to
                                 support, facilitate or catalyse capacity development
                                        and related change processes. (REF)

        Importantly this definition recognises that capacity development is a change process that may
        need support in itself. The UNDP view transformation as an essential ingredient in their
        capacity development approach. Therefore, they require that activities must bring about
        transformation that is generated and sustained over time from within. If something does not
        lead to change that is generated, guided and sustained by those whom it is meant to benefit,

            Olander, S. ed. (2007) Public Finance Management in Development Co-operation. Stockholm: SIDA.

                                     Capacity Development in PFM – Practitioners Guide Version 2
        then it cannot be said to have enhanced capacity, even if it has served a valid development

2.2.4      Public Financial Management

                           Public Financial Management (PFM) is the system by
                            which financial resources are planned, directed and
                             controlled to enable and influence the efficient and
                          effective delivery of public service goals.” (CIPFA 2010)

        Until recently, there was no universally agreed definition of PFM. The narrowest definition
        confined PFM to the downstream activities of budget execution, control, accounting,
        reporting, monitoring and evaluation (Allen et al, 2004). With the growing recognition of the
        importance of a sound PFM system to the delivery of a country‟s development efforts and aid
        effectiveness, there has been an increased focus on the need to understand - What is PFM and
        Who are the key players?. The CIPFA definition of PFM (CIPFA 2010), which is gaining
        international recognition and acceptance, focuses on its contribution to achieving strategic
        and operational goals as a key aspect of good governance.

        Furthermore, it moves away from the concept that „managing the money‟ rests solely with the
        Ministry of Finance. Every manager charged with delivering public services is equally
        responsible for ensuring that public money is managed well. As CIPFA (2010) notes “ Public
        financial management is not just about accountants keeping score”. Leaders and managers
        need to be financially literate and finance professionals need the skills to analyse, challenge,
        advise and not just control (or try to

        The complexity of PFM relationships
        and multiplicity of PFM role players is
        best illustrated in the following diagram
        (Andrews 2007), which also highlights
        the sometimes forgotten area of policy.
        In order to improve accountability and
        understanding, PFM capacity should
        therefore      be     developed      within
        government‟s core and spending entities
        as well as within civil society, the media
        and relevant oversight bodies. Although
        often dealt with as a special topic, most
        respondents included both procurement
        and audit in their interpretation of PFM and the key players.

 2.3       Capacity Development minus the donors

        Outside the „Development world‟, the term capacity development appears to be rarely used.
        Clearly, the actions of people, organisations and societies strengthening, creating, adapting
        and maintaining their capacity occurs, as individuals, businesses and societies react to
        internal and external circumstances. At the level of society, capacity development happens,

                                Capacity Development in PFM – Practitioners Guide Version 2
  perhaps in line with economic development and the development of education. Can lessons
  be learnt? Are there key principles which others can follow? Can success be guaranteed?
  Certainly a review of successful business would suggest that you need excellent analysis, a
  good (but flexible) plan and capable staff, but most importantly quality leaders with vision,
  drive and commitment. ADB (2008) in their review of the creation of Star Mountain
  Investment Holding Limited by the local community (without donor support) also highlighted
  local participation and ownership.

  Sometimes, there is an assumption that without donor intervention, there is no capacity
  development in or by developing countries. However, in China and India and other countries‟
  capacity development occurs without external intervention. Due to various constraints
  (structural, financial, knowledge etc.) the process may be different and outcomes may be less
  effective, but it would be wrong to assume that it is not changing and improving previous
  practices. Capacity development can take place, even on the most elementary and informal
  level where a person shows a colleague how to complete a form. Indeed some form of
  capacity development does take place all the time.

  Whether in the private or public sector there is no magic wand. There is no model or process
  that will ensure successful and sustainable capacity development in all contexts. It does not
  matter whether it is a private company or a public sector organisation, whether the process
  was well designed and funded or not, there are too many variables to guarantee success. The
  process needs more than good analysis, planning and action plans. It needs quality leadership
  and continuing commitment. It also needs „buy-in‟ from followers to make the change

  However, the absence of a process, may lead to ad hoc and in many cases unsustainable
  solutions. It may restrict thinking to simplistic „within the box‟ solutions e.g. formal overseas
  training, rather than endeavour to look for solutions „outside the box‟ e.g. use of technology,
  private sector, internal knowledge. Leaders who are looking for new ideas to improve
  productivity or service delivery, brave enough to adopt and implement them, are the ones that
  are the most successful in transforming their organisations. Without vision, courage to
  embrace the unknown and commitment, leaders only become managers.

2.4   Key donor principles for Capacity Development

  The UNDP (2008) emphasises that capacity development is not a one-off intervention but a
  process of design-application-learning and adjustment.
  They align their capacity development process to the
  project management framework as shown in figure
  below, but acknowledge that there are many variables
  that influence the process.

  In 2008, the EC developed its Backbone Strategy, with
  respect to capacity development, mainly in terms of
  reforming    technical   cooperation   and    Project
  Implementation Unit (PIUs) approaches. A recent study
  by the OECD Capacity Development Team (OECD
  2009) has started to develop an inventory of donor

                          Capacity Development in PFM – Practitioners Guide Version 2
  principles and practices with respect to Capacity Development. Increasingly donors are
  making capacity development a fundamental element of their programme of assistance. In
  theory, donors share a number of fundamental principles on capacity development, which
  align closely with the Paris Declaration on Aid Effectiveness. These include the need for:

         Local demand for capacity development efforts:
         Country ownership of capacity development initiatives;
         Donor alignment with national strategies and development priorities;
         An understanding of the country context;
         Donor co-ordination and joint actions on capacity development;
         Joint capacity need assessments;
         Better division of labour; and
         Building on existing capacities.

  Meanwhile, the OECD DAC (2006) guidelines set out four key principles in supporting
  capacity development in PFM. These are that:

       Supporting country leadership and ownership should be central to donor approaches.
       Capacity development design and sequencing should fit specific country
        circumstances, rather than reflect standard or imported solutions.
       The institutional, organisational and individual levels of capacity development,
        including managerial and technical aspects, should all be taken into account in
        programme design and implementation.
       Donor support should be provided in a coherent, co-ordinated, and programmatic

  Putting these principles into practice is acknowledged to be considerably more challenging,
  particularly with respect to government ownership and donor coordination. From paper to
  people is a giant leap.

2.5   Post Paris – Lessons Learnt
        and Emerging Consensus

  Prior to Paris, it is now recognised
  that both donors and partner
  countries       viewed       capacity
  development as primarily a technical
  process, a transfer of knowledge or
  „best practice‟ models from North to
  South.     Technical     co-operation
  defined by the DAC as “the provision
  of know-how in the form of
  personnel, training, research, and
  associated costs” was equated with
  capacity development. Despite the
  fact that a significant level of
  technical assistance was (and still is)
  employed to manage donor operations and therefore was (is) either not providing any form of

                          Capacity Development in PFM – Practitioners Guide Version 2
  capacity development or at best developing local capacity to run external systems. As
  illustrated in the diagram, there is now a shift in focus.

  Insufficient attention was paid to the political, economic and social context within which
  capacity development initiatives were taking place. According to Dorotinsky (2008) the way
  forward for donors is to allow countries to identify their most pressing PFM management
  challenges, and help them solve these with practical solutions, rather than advancing a
  specific set of reform measures, be it medium-term expenditure frameworks or gender-based

  The challenges of making changes in PFM are well known. PFM reform is not for the faint-
  hearted, nor the time constrained. In both developing and developed countries, progress to
  date has been mixed. Politics and the budget process are intertwined and changes are often
  triggered by fiscal or political crisis. Donor influence is perhaps not as strong as they believe.
  This does not mean that improvements are not being made on a daily basis, but rather that the
  pace of change does not always meet stakeholder expectations. Indeed the whole issue of the
  timing (pace) and sequencing (order) of reforms has received considerable attention and
  combined with the links with public service reforms and governance issues shows the
  complex environment in which PFM capacity development occurs. There is a growing
  recognition that a long-term focus is needed, that developing capacity in PFM is a
  continuous and dynamic process not a discrete and mechanical process. The fact that it is
  continuous and dynamic, implies that both a long-term and flexible approach is required.
  There is greater recognition that capacity development requires change in peoples‟ behaviour,
  and in PFM this means many people and many organisations. However, there seems to be
  less understanding of the fact that peoples‟ resistance to change, is not always rational.

  In terms of training, there is an emerging consensus that the focus should be on learning not
  training, knowledge acquisition not knowledge transfer and a move away from individual
  skills to organizational and institutional learning needs (OECD -DAC8 2009). The problem is
  that training (especially abroad) has become an incentive/reward for many government staff.
  It is also not always clear whether donors are willing to allow governments to learn through
  their mistakes – dismissing ideas that may have incremental success in favour of more radical
  „ideal‟ solutions.

  However, perhaps, the hardest lesson to put into practice is the growing realisation that CD is
  an internal change process. External partners cannot “do” capacity development of others.
  Instead of being the conductor of the Orchestra, they are just another musician. Faced with
  internal pressures, how to react if the conductor does not wish to take up the baton is the
  million dollar question.

2.6    Square pegs in round holes (perverse incentives and disincentives)
  Experienced practitioners (inside and outside government) acknowledge these basic „truths‟.
  Nevertheless, even from a purely technical perspective, an honest assessment of ongoing

      Exploring Capacity Issues “On the Road to Seoul”: Quality Training for Capacity Development Discussion Note

                                  Capacity Development in PFM – Practitioners Guide Version 2
initiatives would show that there are still several examples of square pegs being placed in
round holes. What should be done and is not done, and what is done but probably should not
be done is often the result of the following pressures:

          National (or sub-national) pride even sovereignty - countries (particularly
           politicians) like to be ahead of their neighbours or at least at the same level. The
           concept of going back to basics is often not palatable and for WAEMU countries
           is not possible. Addressing basics first or building the foundations are more
           marketable concepts;

          Private sector interests (e.g. profits) – few commercial companies are totally
           altruistic. They may dismiss what the organisation really needs (basic accounting
           software) in favour of „the latest technology‟ (highly sophisticated multiple
           modules using multiple currencies etc.) in their drive for greater profits or
           continuing existence.

          Donor organisations‟ internal management requirements (e.g. lending policies),
           agendas (e.g. gender and green budgeting) and performance targets (e.g. amount
           disbursed). Indeed some argue that a focus on disbursement rates can lead to
           inappropriate choice of aid delivery mechanism. In some cases internal rules and
           procedures are of greater significance than the organisation‟s mandate or goal.

          Professional pride (the desire to implement the latest trend); and

          Individual incentives (financial and non-financial). Promotions are based on loans
           approved not success of interventions. In PFM, vested interests play a dominant
           role even in „so-called‟ technical initiatives.

The challenge is how to address these issues or mitigate their impact. Based on real-life
success stories, good and bad practice, the following guidelines attempt to address some of
the challenges faced in supporting capacity development in PFM. It is not a recipe book, a
Do-It-Yourself guide or a repair manual. There is no “magic bullet”. To the seasoned
practitioner, some of the guidance may appear too simplistic or just common-sense. In
reality, common-sense is not always that common. Some suggestions are straightforward,
others such as the need to develop a more effective TA market will require further research.

The guidelines adopt the broad CIPFA definition of PFM, which recognises that financial and
non-financial personnel are involved in PFM. This is recognised to be broader than that
expressed in many of the countries visited, who frequently restricted their view to central
ministries or excluded oversight organisations. Capacity development is an ongoing process
and one that is needed to both maintain or strengthen existing operations and to enable
reforms. It is not restricted to individual capacity development or to one solution – creating
something new. They also adopt the view that both „new reforms‟ and „ongoing capacity
development‟ are change processes, which need to be managed to ensure their sustainability
and acceptance. Many of the ideas described in the following section have been raised on
numerous previous occasions. However, addressing many of the institutional incentives
described above, which have been shown to work against effective and appropriate support to
capacity development goes beyond a practitioners guide. Further research is required on how
                       Capacity Development in PFM – Practitioners Guide Version 2
e.g. current internal donor targets such as disbursement rates or loan approvals or
consultancy/software suppliers profits do distort the effectiveness of support provided.
Current logical frameworks, stakeholder analysis and change management strategies often
focus        on        only         one        side        of        the       equation.

                      Capacity Development in PFM – Practitioners Guide Version 2
 3 Step One – Understanding the Operating

3.1   Understand the Country and its Culture

  For a long time, multi-national companies have
  recognised the importance of country context            “Knowledge of the specific
  They understand that their bottom line depends          context (political, economic,
  on knowing how to do business in a particular           social and cultural conditions
  country. They realise that marketing a product          as well as formal and informal
  in a culturally inappropriate way may cause             power structures) is a key
  offence and ultimately affect their profits.            prerequisite to design external
  Increasingly, multi-lateral and bi-lateral donors       donor contributions”. OECD
  are also emphasising the importance of                  (DAC) 2008
  understanding the political, social and cultural
  dynamics in a country, the formal and informal
  structures and relationships. Significant time
  and money is spent on “drivers of change, power and institutional analysis”
  Culture, on the other hand operates on a sub-conscious level, where one is not even aware of
  ones‟ own norms and values. It is a relative concept because you only become aware of
  cultural differences when you come into contact with people with different cultural values
  and norms. “What is like our culture is normal, good, rational and safe. What is unlike our
  culture is abnormal, evil, irrational, dangerous” (Hofstede, ). The same applies when a
  donor (representing an organisation with its own unique organisational culture) cooperates
  with government officials (and other donors) from a different cultural background. Only
  when both parties understand the key cultural differences can they take steps to improve
  cross-cultural communication and understanding.
  During the country visits several government officials believed donors should understand the
  country context because of their long term organisational (if not individual) involvement.
  However, many at the same time noted implementation problems caused by: staff
  retention/transfer policy, lack of leadership, politics, cultural values, internal conflict, unions,
  resistance to change, low pay, poor motivation and lack of recognition. How donors take
  these factors into consideration is therefore unclear. The majority of respondents felt that
  actual understanding was limited, and did not recognise the real-life problems faced on a
  daily basis by senior government officials. Even when donors appear to understand these
  contextual problems, it is felt that they either ignore, or do not know how to deal with them
  during the design and implementation of support. Donors‟ response to cultural differences
  also varies.
  In Nepal for example, some government officials felt that the potential implications of a
  federal state were not sufficiently considered in deciding upon the introduction of the
  Treasury Single Account (TSA). In Mali, there were contrasting perceptions.

                           Capacity Development in PFM – Practitioners Guide Version 2
                                           Contrasting perspectives
         Donors were of the view that the cultural and organizational context is a very important issue
         in Mali. They quote in particular: the importance of consensus in the Malian society; the
         weight of interpersonal relations and family, village, clan relationships and its effect on
         hierarchical system and functional relationships; the emphasis on personal interests over
         public good; the general climate of mistrust; non- useof sanction; the great tolerance of
         absenteeism. Donors consider that these cultural and contextual factors are taken into account
         both in dialogue and by the fact that their staff members are either senior ex-government
         officials or persons having a very long experience of Africa. They also consider that the
         dialogue with the partner country is a means to take into account the obstacles in terms of life
         experience. In contrast, Malian officials believe that the cultural and institutional context is
         not always sufficiently taken into account; they cite the example of family and religious
         policies that they consider alien to their tradition For other officials the problem is not that
         donors should take into account the Malian context, but rather that Malians free themselves
         from outside influences, and not obey the latest "mode” for example decentralization and the
         creation of Court of Accounts are often quoted as a good illustration of this opinion.

  On a more positive note, AusAID in its assistance, including support to financial
  management9 tries to embrace cultural differences and factor them in to their support.

                                                  Embracing Differences
                       AusAID recognises the importance of the cultural dimension of capacity
                       development. This knowledge is used both in training course design,
                       technical adviser orientation and in broader programme design. As part of
                       this approach, in the Pacific both AusAID and NZAID require technical
                       advisers and country staff to undergo local language training.

3.2     Know the Subject

  Donors should have at least a basic knowledge of PFM in order to contribute to discussions
  on support to PFM capacity development. As a minimum, they should be able to read and
  analyse financial documents such as budgets and financial statements. This is vital as
  dialogue on PFM issues is frequently with specialist technicians from the government, who
  understandably may be irritated by clear lack of knowledge (senior government official
  complained of poor donor knowledge of PFM in one country) and inappropriate solutions.
  Care should also be taken not to assume that finance officials do not understand their subject,
  just because the country‟s PFM systems may be flawed.
  However, a theoretical knowledge of general PFM concepts is not sufficient. Effective
  dialogue requires an understanding of how these concepts are applied in country. This will
  enable dialogue to go beyond identifying the symptoms and to gain greater understanding of

      Material developed by Ben Goodman for Workshops in Solomon Islands Ministry of Finance & Treasury (2007)

                                       Capacity Development in PFM – Practitioners Guide Version 2
  the causes (see also Step two – assessing the need). “What could explain unrealistic revenue
  forecasts? Weak technical capacity in forecasting? Unpredictable external economic
  developments? Or deliberate manipulation of revenue forecasts in order to postpone hard
  choices to the budget execution phase?” (Tomassi 2009:9).

        Despite the training efforts and multiple diagnostics, donor representatives often
  acknowledge that their understanding of local PFM systems remains weak in many countries.
  For example, in Country Y10, donors place their support to PFM reform through the budget
  (appropriated by Parliament). However, the consequence of delays in parliamentary
  appropriation for the programme funding is not understood. Several offices with significant
  funding assigned as budget support do not have a copy of the budget!

       As dicussed later (see Step four), standard tools and concepts continue to be started
  regardless of country circumstances. For example, demands for daily reconciliation of bank
  statements (despite the fact that banking systems in some countries do not allow this to be
  done), or mass introduction of sophisticated computer systems (irrespective of capacity and
  infrastructure constraints e.g. some remote locations do not have electricity and if a generator
                                         is purchased, it is almost certain that a better use for it
                                         will be found).

                                                                  An increasing number of donors e.g. EC, DFID,
                                                             Royal Netherlands Embassy (RNE), SIDA and Danida
                                                             are providing in-house training for their staff on PFM.
                                                             AusAID has established a Capacity Development Panel
                                                             comprised of seven Australian and seven international
                                                             experts to provide guidance on capacity development
                                                             action throughout their own system. A similar initiative
                                                             has been launched recently by the European Union.

3.3      Know Yourself (strengths and weaknesses)

  An effective employee understands the culture of the organisation, its vision and mission,
  (how it should work) and its real modus operandi (lengthy rules and procedures). As
  mentioned in sub-section 3.1 a person only becomes aware of cultural differences when
  coming into contact with people from a different cultural background. In order to understand
  other cultures, one needs to look at ones‟ own cultural values and norms. Understanding the
  way you make decisions, behave in meetings, view time etc. will be a great benefit in
  understanding why others may behave differently11. Once the basic cultural differences have
  been established, then one can move forward in reconciling these differences and creating
  more sustainable relationships.

       It is considered prudent not to name the country at this stage.
       As a starting point look at where one can make a basic cross cultural comparison.

                                        Capacity Development in PFM – Practitioners Guide Version 2
         “Many cultures decline to change at the behest of western consultants unless the ways
         in which they will preserve their identity are made clear to them” (Trompenaars and
         Hampden Turner, 1997:133).
  A view clearly shared by some Malian officials as shown above.

      Development literature focuses heavily on understanding country context and the need
  for harmonisation and coordination of donor practices, but less emphasis is placed on
  understanding the aid environment, donors‟ own organisational and individual capacity.
  During the country visits concerns were raised that the donor staff profile in country does not
  always reflect adequately their own country programme. This lack of technical skill is further
  hampered by the limited technical support from Head Office.

         Internal procedures and excessive bureaucracy often limit the ability of in-country
  donor representatives to understand the country context, initiate dialogue or develop the
  necessary relationships, which as discussed later are essential for successful partnerships.
  There are also examples of donors/advisers arriving in a new country who do not allow
  themselves time (or are not allowed time) to become acquainted either with the country or
  their partners.

        In the Pacific and Caribbean regions, some (although not all) donors are coordinating
  their efforts through the Caribbean Technical Assistance Centres (CARTAC) and the Pacific
  Finance and Technical Assistance Centres (PFTAC) or are using their knowledge and
  expertise for quality assurance or in designing support.
3.4   Improving the dialogue
  Clearly to enter into meaningful dialogue, it is not necessary to be a specialist in every area of
  PFM or to be an expert on the political economy or cross-cultural management. As with
  driving a car, knowledge of the technical workings of the combustion engine is not a pre-
  requisite; however, you should have the skill to drive a car and have an informed
  understanding of the rules of the road in order to reach your destination (and avoid a crash in
  the process). The following paragraphs set out some ideas on how individual donor
  representatives in country can (and are) improving their knowledge, how individual donor
  organisations and the donor community could (are) improving their own capacity to support
  capacity development in PFM. Evidence from the case studies shows that there are clear
  differences between donors and government officials on both what is PFM and what type of
  support donors should provide. The first step in any dialogue therefore is to agree for each
  country on what is PFM and to understand the different expectations. The following
  recommendations are intended to enhance the ability of donor representatives to contribute
  effectively to the discussion.

             At an Individual level:

                            Capacity Development in PFM – Practitioners Guide Version 2
   For a better understanding of the enabling environment check out donors‟
    “institutional, power or drivers of change analyses”; social history and other
   Read government reports - the budgets, budget speeches, financial reports, the
    Constitution and relevant legal documents, they are first base13!;
   Read the multitude of donor diagnostics and analysis – e.g. PEFA assessments,
    Reports on the Observance of Standards and Codes (ROSC).
   Know your limitations (because others certainly will) and avoid the temptation of
    voicing opinions too early;
   Learn the language (it helps!); and
   Work on weaknesses (whether it is „soft‟ or „hard‟ skills). Remember strengths in one
    society (e.g. assertiveness) may be perceived as arrogance or ignorance in another

           At an Organisational level

   Consider the AusAID example for incorporating cross-cultural dimensions;
   Include more PFM information in staff induction courses, even for sector specialists
    such as health and education advisers. This would potentially mean a review of
    current skill sets including a broader understanding of public sector policy making
    and institutional relationships;
   Consider the need for a review the composition of staff advising on PFM matters to
    ensure that the appropriate level of expertise is available. This may mean recruiting
    specialist staff (accountants/auditors/budget analysts/procurement personnel). For
    example USAID is recruiting more chartered accountants and training them on
    development issues.
   Consider making better use of existing resources, available either in country or at
    headquarters e.g. local finance staff. For example, Irish Aid uses its internal auditors
    as key interlocutors with government on PFM issues.
   Establish key document libraries;
   Ensure that teams have the requisite skills (“hard” and “soft”), consider the use of
    multi-disciplinary mission teams; and
   Choose the right person for the location that can do the job but that can also fit in.

        At Donor level

      Develop regional networks/forums?examples
      Use more extensively the expertise of the TACs
      Develop more country-specific training courses? examples
      Develop international communities of practice? examples

Know Yourself: Know your Country: Know your Subject

     A World Bank study is on-going to look in more depth at the organisation of and the political economy of central
  finance agencies;

    Trainers frequently cite examples of participants at public policy courses who have never opened a budget or read the
  country‟s development plan

                            Capacity Development in PFM – Practitioners Guide Version 2
 4 Step Two – Assessing the Need
4.1      Assessing the need

  Capacity assessments are themselves part of           In order to agree jointly on the
  setting the stage for CD processes. How,              need for capacity development,
  when and by whom they are made is crucial             assessments need to be done jointly
  for the success or failure of subsequent CD           (ref: ....
  processes. Is there a real problem? What is
  the need for CD? Does it matter to an island
  nation of 10,000 people that there is no
  functional classification of expenditure? Or is it done for donor statistics? A key principle is
  that assessments should be done (agreed?) jointly. They should also be designed to
  understand the causes for a particular situation rather than just focus on the symptoms.
  Rather than identifying capacity gaps14, the starting point should be to focus on what already
  exists. Remember, „organisations do not always know what they know‟ and so this
  knowledge may prevent „re-inventing the wheel‟ interventions. Evidence from DFID (2006)
  supports the view that an understanding of the wider institutional context, as well as the
  specific features of the organisation, is critical for effective capacity development.
  Furthermore, in PFM CD - given the multitude of potential players, there is a growing
  recognition of the need to assess the capacity and the authority of those who are supposed to
  manage the CD process.
  PEFA assessments and associated drill-down assessments e.g. DeMPA, MAPS are only one
  input in designing reform or CD initiatives and must be used with care to ensure that short
  term pursuit of higher scores does not cloud a longer-term goal of capacity development.
  As mentioned in 2.2.2, Olander et al (2007) propose that a capacity assessment for supporting
  PFM CD should include an understanding of the institutional framework, management,
  resources and support structures. This is broader than the UNDP‟s capacity issues which
  include: 1) institutional arrangements; 2) leadership; 3) knowledge; and 4) accountability.

  Assessments carried out focus on particular aspects e.g. systems and procedures (PEFA
  assessments), organisational assessments (e.g. Audit maturity models), systems, procedures
  and some organisational issues (e.g. Methodology for the Assessment of Procurement
  (MAPS), Debt Management Performance Assessment (DeMPA)) or individual capacity
  building needs assessment. Despite guidance from the PEFA Secretariat to the contrary,
  application and interpretation of the PEFA assessments is also often focused at the centre and
  donors aggregate scores for their own internal requirements. In some countries e.g.
  Mozambique, Egypt, Philippines, sector assessments have been carried out, but again they
  only partially address some of Olander et al‟s four elements. Evidence or reference to more

       Note this methodology is different from that adopted by the guidelines on procurement which starts by identifying the difference between
         desired capacity and actual capacity.

                                         Capacity Development in PFM – Practitioners Guide Version 2
  comprehensive capacity assessments, which includes an overview of constraints e.g. poor
  banking services appears limited.

       Experience in the countries visited varies, Rwanda carried out an assessment in mid-
  2005 with an objective of ascertaining the required number and qualifications of accountants
  and auditors, the development of a recruitment plan for internal auditors and accountants and
  the design of a training curriculum necessary to improve the accounting and auditing
  professions in Rwanda. The scope of the assessment was limited to ministries, provinces,
  semi autonomous agencies and the Office of the Auditor General. More recently an
  assessment has been carried out for districts. All countries participated in PEFA
  assessments, although only the assessments in Rwanda were commissioned and organised by
  the Government. In other countries, there are examples of jointly commissioned PEFA
  assessments or where external assessors facilitated a government process including Samoa,
  Kosovo and some Nigerian states

             Mali complained of assessments overload, and was particularly critical of the large
  number of assessments/evaluations carried out almost exclusively for donor purposes. They
  described it as a ritualistic process, which repeated earlier recommendations and resulted in
  little change or recognition of what was felt to be important by the government. Nepal has
  adopted the PEFA assessment complete with recommendations as its guiding „light‟
  establishing a PEFA Secretariat (based in Kathmandu and unrelated to the Washington
  version) and PEFA implementation units in various ministries.. Rwanda is aiming for „A‟s,
  leaping onwards and upwards in the same way that it has done in the „Doing Business
  indicators‟. Some PEFA assessment processes (particularly annual or bi-annual repeat
  assessments) are still donor driven to meet donor conditionalities, rather than to inform, and
  some regional donor offices are still sending out ToRs for PEFA assessments in which they
  are described as external assessments!

4.2   Ensuring the Value of the Assessment Process

  The following proposals are intended to improve the capacity assessment process, so that the
  most appropriate support to capacity development is provided. It is not proposing that even
  more assessments are carried out, but rather that better use is made of the significant amount
  of knowledge and information available. This will require donors both to share information
  and for PFM donors to look outside the „technical‟ box and understand the relationship
  between PFM and governance (in general) and financial governance in particular.
  Governance studies may highlight for example issues, which may result in a change in the
  fiduciary relationship between the leaders and the public. At the same time, various sector
  studies (financial, education, telecommunications) may have identified constraints which are
  relevant to PFM, and advances and delays in associated public service reforms may impact
  on support to capacity development. Due regard to internal government reports e.g. internal
  and external audit reports are also an important source of information.

             The four elements (resources, management, institutional framework and

                         Capacity Development in PFM – Practitioners Guide Version 2
     support structure) and their sub-components, as set out in Olander et al 2007 should
     form the basis of any capacity needs assessment.
   The scope of a capacity development assessment should be agreed jointly. Should it
    be an all encompassing study of the whole (or at least the core entities) of PFM
    system, or should the focus be on single organisations or should it be ad hoc in units
    in different organisations?
   A joint decision to carry out an assessment does not imply that the assessment needs
    to be done together. As discussed in the section on country ownership and leadership,
    it is who makes the decisions on what is done that is important.
   Understand what the assessment is assessing, apply it correctly and use it
         o The PEFA assessment provides the common information pool for the
           strengthened approach to PFM reform. It is high-level snap shot at a particular
           point in time. It does not assess individual or organisational capacity
         o Critically PEFA assessments should not contain recommendations and are
           only one part of reform design.
   Understand the capacity of organizations (audit maturity models are particularly
    relevant for Supreme Audit Institutions (SAIs) and internal audit offices), and also
    (where relevant) their capacity to work together.
   Do not forget the assessments already carried out by internal and external audit. In
    some countries, these help identify the need for capacity development and assess
    progress of any ongoing initiatives.
   Assess the credibility of any change management process and in particular how it will
    operate at different levels e.g. central ministry of finance, line ministries.
         o Avoid over-confidence in legislative rules and regulations, e.g. Treasury
           circulars – in reality compliance is often low.
         o Test the practice and try to understand the constraints on the practitioners
   At the individual level, capacity needs assessments should begin with the question
    “capacity for what?” and avoid the trap of providing generic training on broad topics
    e.g. activity costing or gender-based budgeting, disconnected from the needs of the

Assess with an open mind.

                      Capacity Development in PFM – Practitioners Guide Version 2
5 Step Three – Supporting Country Ownership
  and Leadership

5.1    Government led demand                                                 Supporting country
                                                                             leadership and
 Theory                                                                      ownership should
 The first key principle of the OECD DAC (2006) guide                        be central to donor
 lines in supporting capacity development in PFM,                            approaches. OECD
 relates to country leadership and ownership. It is              DAC (2006)
 increasingly recognised that ownership implies a
 specific, active investment by partners (leadership, time,
 energy) and that successful capacity development - and associated support - depends on the
 change readiness of partners. Whether capacity development is demand (government
 requesting assistance) or supply (hard selling by donors) driven, can be a matter of
 interpretation. Donor ideas may be viewed by government as pressure. “Demand is expressed
 in specific, daily interactions: who calls a meeting, who defines the agenda, who sits at the
 end of the table, who talks and who listens” (EC, 2009:20)

 At the same time, before a true partnership can be established, there needs to be a relationship
 between donors and government that enables discussions to take place. The importance of
 establishing a good working relationship cannot be overstated. Even in the era of social
 media, personal relationships, which are essential for effective partnerships cannot be
 developed by email, or an annual review process. Trust and mutual respect is imperative. No
 trust = No partnership. It does not mean that differences or disagreements will not occur,
 even the best marriage has its ups and downs.
  In the context of capacity development, government ownership is required from the demand
 stage, through design, implementation, evaluation and importantly the accountability stage.

        “Government ownership is at its strongest when the political leadership and its
       advisers, with broad support among agencies of state and civil society, decide of
       their own volition that policy changes are desirable, choose what these changes
      should be and when they should be introduced, and where these changes become
       built into parameters of policy and administration which are generally accepted
                             as desirable.” (Killick et al (1998:87).

 Ultimately, however ownership is a perception or a belief, rather than a concrete and
 measurable term. It is also possible that there may be government ownership on a political
 level (or in the design stage), but on the organisational level (at implementation stage)
 officials believe that the donors are increasingly driving the process. The figure below
 illustrates how a country can start off with high ownership, but the arrow may swing towards
 greater donor ownership as they are increasingly driving the process ahead through targets
 and deadlines, using own systems and demanding accountablity. Similarly one side may
 believe that the other has ownership but because of factors such as donor funding and
 unequal power relationships, the other party may differ.

                         Capacity Development in PFM – Practitioners Guide Version 2
In real-life, the translation of this commitment to greater government ownership into working
practices is extremely challenging. It requires government leaders willing and able to lead
and appropriate incentives to encourage behavioral change. This will obviously differ
between countries and therefore donor response needs to be tailored to the situation. Some
would argue that the form and structure of response can be linked to a particular „type‟ of
country, e.g. low income, middle income, fragile state etc. Further research is required, but
awaiting concrete evidence to support this hypothesis, this practitioner‟s guide works on the
principle that each country is unique and ownership and leadership, a fluid term.

            During the country visits, it was noted that although demand was not specifically
initiated by the Government of Rwanda, there has been high-level political buy-in for the
need and subsequent ownership of PFM capacity development initiatives. At the same time,
there is a high-level of donor confidence in government‟s sincerity and commitment to
develop capacity in PFM. In Mali donors believe that the country owns the PFM capacity
development initiatives, BUT this view is not shared by all government officials15. In
Morocco, there is high-level support from the King, but the need for greater internal
leadership and coordination amongst senior management was also raised.

      In Vanuatu, senior politicians set out a clearly articulated need (one shared by resident
donors) and request for external support to the Auditor General‟s Office. AusAID‟s
Institutional Strengthening Project (ISP) with Vanuatu‟s Ministry of Finance and Economic
Management was described as being based on a “strong sense from individuals of what they
wanted.” The fact that the project was based out of the Treasury Department, rather than
being run through a Project Implementation Unit (PIU) contributed to this sense of ownership
(ADB 2008).

     In Morocco, the donors‟ support programmes to the PFM reform and the government‟s
reform have become confused with disbursements conditions effectively driving the process.

     Example to be expanded in next version.

                                      Capacity Development in PFM – Practitioners Guide Version 2
In several other countries, real ownership (or even basic buy-in) or leadership to ongoing
initiatives is very limited. Ownership and direction is skewed heavily to the donor.
The scenarios described below in Countries X and Y are not unique.

                                              Shifting Sands
        In Country X, country ownership of its own PFM reform agenda dwindled as project
        deadlines and pre-determined donor priorities curtailed the consultation process,
        sidelined key supporters and altered the modus operandi of the original reform
        programme. In country Y demand for improving PFM capacity declined as key leaders
        (political and technical) and donor representatives changed and the donor : government
        dynamics descended in a downward spiral. As discussed in Step Five, micro-
        management of PFM reform programmes prevails, seriously eroding government
        ownership and interest.

5.2    Assessing Demand and Supporting Ownership
        The burning question for all donor representatives is what to do if there is demand or
        what to do if there is no demand? Is there a shared view of key constraints on and
        opportunities for capacity development, inside and outside the organisation(s)? These
questions are common to providing support to any form of capacity development. Support to
capacity development in PFM is even more complicated as it involves a number of different
organisations, where demand, leadership and ownership varies significantly. The simplest
and at the same time the hardest route for donors is for them to say; “If there is no demand,
look elsewhere”. Yet not to do so, breaks the fundamental rule of capacity development i.e.
you cannot do capacity development of others. The non-sustainability of many earlier
initiatives proves this theory. In the case studies, one repeated comment was that ultimately
individual capacity development depends on the individual, the same would apply to
A senior government official in Country X recognised that certain ministries were unwilling
to improve their internal audit capabilities, they either did not want others to know how the
systems were operating or did not understand the potential benefits. A pragmatic approach
was taken, work with those who were willing and let the word spread and the benefits be
Alternatively as recommended at the recent Accra forum, providing support to developing the
demand side of PFM i.e. Parliament and civil society may be a more productive route.
In ensuring an enduring partnership, it has been observed in many countries that:
       Ownership is not a contract, it is a perception. Signed agreements (stating
        government ownership) and ownership at the design stage can be eroded by
        „interfering‟ donor practices during the implementation stage. Just as an architect can
        take over a house-build, ignoring the owners‟ demand and viewing it rather as his
        legacy, so donors can bulldoze the foundations of any country ownership.
       Ownership is relational. The general relationship between donors and government
        can affect the ownership relationship.
       The need for Capacity development should be demand driven. Give government
        the opportunity to verbalise their demands.

                          Capacity Development in PFM – Practitioners Guide Version 2
     Look and listen. Aim to learn and understand why things are the way they are and
      why government demands what they demand.
     Different levels. Ministerial support may not translate to ownership or leadership at
      other levels.

   If you are entering into partnership, get to know partner personally. In most countries
    people prefer to do business with people they know and trust.

Constructive partnerships support country ownership BUT if
there is no government demand – look elsewhere; No country
demand - think again!

                        Capacity Development in PFM – Practitioners Guide Version 2
 6 Step Three – In collaboration or going it alone?
6.1   Donor co-ordination

  Theory                                                          Donor support should
  An effective donor coordination arrangement should              be provided in a
  streamline the dialogue between government and donors           coherent, co-ordinated,
  and facilitate donor support to the government‟s PFM            and programmatic
  reform action plan. Collaboration among donors can              manner. (OECD DAC -
  avoid duplication and fragmentation in donor assistance         2006)
  and facilitate consistency in advice. This can take a
  number of forms including the pooling of funds,
  technical assistance, joint assessments, division of
  labour and the appointment of lead donors. This should also allow coordination across groups
  for example between PFM and decentralisation or public service donor groups.

  In response to the Paris Declaration and Accra Agenda, key donors are setting up
  mechanisms e.g. donor PFM working groups, Secretariats and basket or pooled funds which
  theoretically should improve donor coordination. Their success and failure often depends on
  the skills (especially „soft‟ skills) of the chair person.
  With the increased emphasis on external coordination, internal governance mechanisms,
  codes of conduct and clear divisions of labour have been established in many countries.
  Enforcement mechanisms are often weak. In Ghana (box to be added on donors‟ code of
  conduct in water sector) .....

       Generally, in all the countries visited, the view was that donor coordination had to some
  extent improved. In Rwanda, a small number of donors are supporting PFM and are working
  together in a more co-ordinated way. The relatively small number of donors involved is seen
  as a positive. At the time of the Nepal visit (October 2010), a World Bank managed multi-
  donor trust fund is being established. The Nepal Portfolio Performance Review (NPPR)
  process also facilitates a more coordinated way of reviewing overall government
  performance, at least for major donors (ADB, World Bank, DFID and JICA).

         In several other countries e.g. Tanzania, Kenya, Ghana, Mali donor working groups
  have been established, which support pooled or basket
  funds. Coordination across donor working groups is
  not always so structured, although in Tanzania efforts
  have been made to ensure attendance at other group
  meetings. Coordination with e.g. the activities of
  capacity building funds also appears ad hoc. Digging a
  little deeper shows that even within so called „basket
  or pooled‟ funds, there are multiple reporting
                         Capacity Development in PFM – Practitioners Guide Version 2
  requirements and competition between in basket and out of basket funds (even from the same
  donors). Even within established working group arrangements, major players have bypassed
  the agreed working relationship with the offer of funds.

         Arrangements for coordination of initiatives within donor organisations is also
  sometimes unclear, with many advisers working in silos. Specific examples include education
  sector support in Country B promoting the introduction of an MTEF, while the same donors
  supporting PFM had agreed with the Ministry of Finance that it was too early to introduce
  such a concept, given the problems with basic financial reporting and internal controls.

       Government officials also complain about receiving conflicting advice from different
  donors/technical advisors on the same subject. At the same time, governments do sometimes
  ask multiple donors for the same technical assistance or a specific diagnostic, as they do not
  know which donor can deliver and on what timeframe. At times two or three donors respond,
  duplicating work.

6.2   Working together
      Establishing effective donor teams that support, not suffocate Governments relies heavily
      on the skills of the individual donor representatives. Formal mechanisms for donor
       coordination, which set out codes of conduct, division of labour and internal governance
       mechanisms often exist on paper but not in practice. Reflection on why the donor
       community is in the country may be sobering. The following have been found to be of
        The „soft‟ skills of the chair person of the PFM donor working group are key, choice
         of an appropriate chairman is therefore fundamental to good working relations,
         rotation amongst members is not the necessarily the most appropriate solution.
        In terms of number of donors, the message seems to be the fewer – the better.
        Internal coordination (within donors) is as important as external coordination
         (between donors) but working in silos has been found to be common practice.
         Examples of good internal coordination -
        Given the fact that PFM capacity development is cross cutting, some attention needs
         to be given to establishing „mechanisms‟ to ensure coordination (at least information
         sharing) across the groups.

  Effective Coordination NOT Competition

                           Capacity Development in PFM – Practitioners Guide Version 2
 7 Step Four – Designing support
7.1   Design of a Response

  The OECD DAC (2006) principles are clear on
  what needs to be taken into account in                             The institutional,
  programme design and implementation in                             organisational and individual
  support of CD in PFM. Similar messages were                        levels of capacity development,
  conveyed (OECD-DAC) 2008 ahead of the                              including managerial and
  Accra meeting including: (i) Align support with                    technical aspects, should all be
  the government‟s reform; strategy and priorities                   taken into account in
  (ii) Do not impose a reform action program on                      programme design and
  partner countries; (iii) Do not attempt to
                                                                     implementation OECD DAC
  implement all PFM reforms at the same time;
  and (v) Do not attempt to transplant international
  models into partner countries. Design needs to be
  linked to an assessment of the needs and the

        Capacity development                Quist (2008) emphasises the importance of adequate
        design and sequencing               sequencing to ensure that reform efforts are positive,
        should fit specific country         reforming institutions can effectively manage the
        circumstances, rather than          reform effort (often a major problem), that they are
        reflect standard or                 not overwhelmed by the process, and to ensure more
        imported solutions OECD             effective coordination between the different
         DAC (2006)                         components of reform. More generically, but equally
                                            applicable (some would say even more) to
                                            supporting CD in PFM is that capacity development
                                            is change – and change often hurts. CD support,
                                            however well intended, is an intervention affecting
  the lives of people and organisations, for good or bad – or both. Chances are that change will
  imply wins for some, losses for others. Understanding who are the potential losers and
  potential winners is important in designing a change management strategy. Comprehensive
  change demands considerable leadership resources (including time and capacity) and
  requisite support from higher levels. Support to change management should therefore be an
  integral part of CD support. Identification of potential losers and winners is a key part of
  developing and implementing an appropriate change management strategy.

  Assuming a reasonably clear understanding of the overall context, organisational dynamics
  and relationships has been established, the next step is to think strategically about capacity
  development opportunities and constraints in that context. Efforts to develop the capacity of
  e.g the Ministry of Finance, the Auditor General‟s Office or the financial management
  capabilities of the Ministry of Education or the Local Authority are likely to be shaped as
  much by forces in the enabling environment (e.g. laws, regulations, attitudes, values) as by

                          Capacity Development in PFM – Practitioners Guide Version 2
factors internal to the organization, (skills, systems, leadership, relationships etc.). Similarly,
the success of a training program is likely to be as dependent on conditions in the
participating organization, such as incentives, supportive management or finances, as the
quality of the training inputs provided.
Practice (content)
The move to budget support and the pressure on donors to use country systems and
governments to improve their systems has led to a significant increase in PFM reform
strategies and action plans. In many cases, the extent to which these reflect country
circumstances or address meaningfully issues of sequencing (the order) and timing (the pace)
appears very limited. Although in Nepal a specific decision has been made by donors
supporting the new multi-trust donor fund to restrict support to a couple of interventions.
Although there is an increasing recognition of the importance of including line ministries in
PFM capacity development efforts, focus often remains on either senior management or
finance staff from that ministry. Little attention is paid to those directly involved in data
capture, classification or bank reconciliations at the level of spending unit. Yet as the proverb
says “For want of a nail the shoe was lost, For want of a shoe the horse was lost. For want of
a horse the rider was lost. For want of a rider the battle was lost. For want of a battle the
kingdom was lost. And all for the want of a horseshoe nail” The person at the bottom of the
chain often has a pivotal role in the quality of PFM in the country.
Importation of technical tools and standard solutions still continues. A significant number
seem to be still built around donor country programming/loan approval timescales.
Recognition of the constraints, particularly at the local level, imposed by broader
development issues such as energy supply, banking facilities and communication networks is
only addressed during implementation.
With some exceptions CD in PFM/PFM reform initiatives focus on technical issues, yet links
with broader civil service and educational reforms remain critical in addressing sustainability
issues. Most initiatives look at creating new capacity without considering making better use
of existing capacity, sharing expertise or using the private sector. There are of course a few

            In Nepal (and elsewhere), new web-based aid management systems are being
introduced, which facilitate the input of data by donors themselves, thus reducing the demand
on government capacity, but some donors reportedly consider it to be an additional burden. In
Benin, despite frequent requests donors were unable to provide detailed figures of their
amounts pledged, committed and disbursed to support PFM reform support operations while
requiring the government to do it.An example of the use of the private sector to improve
government‟s reporting capabilities is being used in Vanuatu

                                     Using the capacity of others
.         In Vanuatu, an innovative way of accounting for and reporting on the new funding
          for primary education (per capita grants) in the remote islands has been recently
          developed with the support of the local banking system. The Government
          recognises that it is impractical to have a network of finance ministry offices on
          every island. They also realise that it is neither realistic nor desirable to
          incorporate schools in the government‟s accounting system. An agreement has
          therefore been reached between the National Bank of Vanuatu and the
          government, in which both sides win. The major commercial bank provides
          statements to Capacitythe schoolsin and – Practitioners Guide Version 2 and Economic
                         both Development PFM the Ministry of Finance
          Management. Incentives were also provided to officials to use this system rather
          than a whole range of other bank accounts.
        In Morocco, the TGR (Trésorerie Générale du Royaume) has undertaken reforms on
  public procurement, internal controls and audit and accrual accounting. However, it has
  sequenced and paced its reform effort carefully. This is best demonstrated in its sequencing
  of the accruals accounting. The TGR had decided to embark upon it from 2011 with a careful
  modular approach. Its decision is based on its appraisal of the gains and risk, the institutional
  characteristics of the MEF (Ministry of Economy and Finance) and TGR that allows moving
  forward without drawing in all the
  Practice (process)
  Attention to change management issues
  remains       largely     focussed      on
  communication. Issues of Awareness -
  as to why change is needed; Desire - to
  support and participate in the change
  process; Knowledge - of how to change;
  Ability- to implement the new skills and
  behaviours, and Reinforcement - to
  sustain the change appear relatively
  under-emphasised. Focussing on salary
  improvements, the issue of rewards and
  incentives (a key component of most change models) appears not to be addressed
  appropriately. As shown in the Herzberg (1959) diagram: Absence of motivational factors
  does not lead to dissatisfaction (neutral satisfaction); Presence of motivational factors leads to
  satisfaction (positive motivational value); Presence of hygiene factors does not lead to
  satisfaction (neutral motivational value); Absence of hygiene factors leads to dissatisfaction
  (negative satisfaction).

                                              Seeing the light
              In Morocco, the Government recognises that in its recent reform efforts that
              focus has been on the „gadgets‟ and although making important technical
              improvements, it has paid insufficient attention to its „people‟ and thus the
              long-term sustainability of its efforts. The plan for the next phase of its CD
              sees a shift from technical tools to the people and places who use them
              (people and organisations).

7.2   A More Effective Response

  As set out in the 2006 guidelines, design and implementation of more effective support
  requires both recognition of country context, appropriate sequencing and a holistic approach.
  It cannot be stressed enough that the country circumstances should determine the response.
  It requires stakeholders to consider not only „what to support‟ but „how to support‟ and this
  will also depend on the existing level of capacity/development. The response in Morocco will
  not be the same as in Nepal or Lesotho.

                          Capacity Development in PFM – Practitioners Guide Version 2
Steps six and seven look at two forms of response, the provision of advice
(strategic/operational, technical, policy, management) and learning opportunities. Other
forms of response include provision of equipment or funds and all should be considered in
developing an appropriate response. The following list summarises some key pointers, many
of these are common sense, but have been included for completeness.

       Choose the right approach for the country or organisation - „no one size fits all‟ (e.g.
        platform, basics first...). There is a tendency to adopt the latest trend, whether it is
        platform, basics first, accounting first .... Yet this is not the route of many OECD
        countries, the „right‟ approach is the one that fits the country context, the evolution of
        Scandinavian systems is not the same as those in the UK or Australia. As Murphy
        2010 notes a rule driven society may suit the platform approach, other countries or
        organisations may benefit a more opportunistic approach.
       Ensure proposed solutions (more than one) to problems are developed, not a „cut and
        paste‟ tool, discuss alternative solutions, their costs and benefits and their
        implications. For example, there are pros and cons to the centralisation of payments,
        there are different costs and benefits associated with the introduction of a TSA, which
        may depend on governance structures. Some governments complain of conflicting
        advice, however provided that a balanced viewpoint is provided, contestability can be
       Be more creative, strive to think out of the box, so that „good practice‟ can be applied
        more effectively. Improving the external audit function may involve sub-contracting
        certain functions to private practice, but at the same time improving its supervisory
        and quality assurance capacity.
       Think small to gain big e.g. developing a filing and archiving system may be the most
        appropriate form of capacity development and a key pre- requisite to developing a
        successful accounting system.
       There are only 24 hours in a day - Many Government officials have to deal with real
        life crises on a day to day basis, capacity development is often seen as an additional
        burden and full advantage of many initiatives cannot be taken because of other more
        pressing concerns. Supporting capacity development for major reforms may require
        support for day to day operations.
       Use common sense – Is a sophisticated and costly computer system for 100
        transactions a month really needed? Why is it being proposed?
       Don‟t forget the infrastructure and logistics, the banking systems, electricity supplies,
        the internet connectivity.
       Do not dismantle, look to add value to what is there first.
       Address issues of sequencing (the order) and timing (the pace)16, or perhaps timing
        (the pace) and then sequencing (the order).

     It is proposed that the diagram in Towards Good Practice Guidelines in the Sequencing of PFM Reforms Jack Diamond
November, 2010 is referenced once the document is finalised

                               Capacity Development in PFM – Practitioners Guide Version 2
         Allow time for new ways of working to become the norm, (just as a golfer perfects his
          swing or a footballer his penalty kick). Continual change is tiring!
         Ensure that individual professional skills are continually updated through continuous
          professional development.
         Adopt an open mind, replacing an old dilapidated office with a new modern building
          may not solve the technical problems or provide the necessary motivation to change,
          but it may impact positively on attitudes17.
         Don‟t underestimate the power of people (positive and negative) and so ensure that
          change management is placed at the centre of support initiatives not at the periphery.
          Remember the five Ps
                  o Purpose: “What is reason for change? What is in it for me?”
                  o Picture: “What will things look like after change (vision)?”
                  o Plan: “What is timeline? What should we expect?”
                  o Part: “What is my part during change? What do you expect from me now and
                  o Passion:”Am I excited about the changes?”

         Be flexible and adaptable (see also step five flexibility of funding). Capacity
          development does not follow a linear path, the goal may be known, but the path may
         Allow mistakes to be made so that learning can take place, be humble Rome was not
          built in a day and British, French, American, German ... PFM capacity development
          has not always followed a linear path. Share your own country‟s experiences as they
          are a useful learning process
         Re-examine internal incentives in donor institutions– accountability/rewards for
          outcomes not loans designs/programming.

Design support that learns from others but recognises differences,
think out of the box – it may be more sustainable

     In Bangladesh, funds for renting a project office were used to renovate a government office. The „new look‟ office
       significantly reduced absenteeism and installed a sense of pride and belonging

                                  Capacity Development in PFM – Practitioners Guide Version 2
 8 Step Five – Flexible funding/choice of aid
8.1   Funding choices

  Given the nature of capacity development, there
                                                            Donor willingness to respond
  is a general agreement that donors‟ financing
                                                            quickly and flexibly to new
  mechanisms should be flexible and able to react           capacity development and TC
  constructively to new scenarios or directions.            demands enhances
  All types of aid modality can use country PFM             its effectiveness. ref
  systems (in part or in their entirety), whether it
  be project, programme, sector or general budget
  support. In theory, budget support provides the
  greatest level of country ownership, but perhaps not the greatest level of flexibility.
  The extent to which country systems are used is affected both by the choice of aid modality
  and the design of the specific instrument. Donors have a responsibility to ensure that the
  resources they provide are used for the intended purposes. Concerns over fiduciary,
  developmental or reputational risk and accountability responsibilities clearly influence the
  choice and the design.
  There is a common misperception that using country systems reduces demand immediately
  on government capacity, although clearly in aid-dependent countries, a requirement to
  procure and manage for example large infrastructure contracts will, at least in the short term,
  place additional demands on government resources. “The important question when deciding
  on how an aid flow should be managed remains: Will channelling this aid through this
  particular system make it more effective, and/or will it lead to a better allocation and
  management of public funds (domestic and external) in the medium to longer term? (CABRI

  The demand from all countries visited (and elsewhere) is flexibility and the ability to react to
  changing circumstances. Ad hoc bilateral project funding therefore is frequently winning over
  multi-donor funded programmes or multi-lateral funding. At times, the design of the funding
  instrument appears to contradict both the concept of using country systems and the benefits of
  a pooling arrangement. With few exceptions, funding arrangements are also short or medium
  term (3 or 4 years), one exception to this rule appears to be the 10 year AusAID Governance
  for Growth facility. Although, it is understood that this facility is primarily designed for
  investment type activities.

  According to IMF 2010, the IMF tax policy and administration topical trust fund will address
  some of the concerns over fragmented and disjointed funding and support the demand from
  countries for improved revenue administration. Nine modules will address critical areas in
  building sustainable revenue systems. As needed, they will be delivered individually or in
  small packages, or integrated into a sequenced program over several years, working in
  collaboration with existing donor programs. The global topical trust fund would have an

                          Capacity Development in PFM – Practitioners Guide Version 2
initial phase of 5 years, and cost in the region of $30 million to deliver TA to approximately
15 low and lower middle income countries. Contributions will be administered under a multi-
donor trust fund subaccount to be established by the IMF, and be guided by a steering
committee composed of donor representatives and IMF staff. A framework of outputs and
outcomes will be developed to effectively monitor the achievement of key objectives of each

         In Mali, a significant amount of support to PFM capacity development is actually
funded through budget support, however many officials believe it is controlled by donors.
This appears to reflect the donor influence on the budget support allocations18.

     In Rwanda, where there is a high level of trust between the donors and government, and
the donors believe there is high level political support, the pooled fund is managed by a small
PFM reform Secretariat overseen by a Steering Committee, which includes a donor
representative. This is not an unusual structure, but instead of the tight controls found
elsewhere, there are comparatively liberal „strings‟, although „no objections‟ from World
Bank are required in certain circumstances, the limit is set comparatively high, allowing
greater government control. Funding does however follow a strict planning and approval
process. In contrast, in Country X, detailed decisions on who should even attend training
courses (despite PS approval) are scrutinised (and sometimes rejected) by supporting donors.
Despite the rhetoric of pooled funding and donor coordination.

                                               Coordination or Confusion
         In Country X, while the total budget needs for the implementation of the PFMR programme is set
         out in the PFMR strategy, financial commitments of the Pooling Development Partners (P-DPs) are
         specified within the bilateral agreements between the Government and the individual DPs. This
         results in a lack of the complete picture on the available resources and undermines the
         implementation of the pooled funding mechanism. Further while JFA discourages the use of
         bilateral agreements, which contradict or diverge from the JFA, it still allows the development
         partners to establish individual bilateral agreements with conditionalities. In practice most of the
         DPs have individual arrangements with the Government, which set conditionalities for the use of
         their resources regardless of the joint mechanism.

     The experience in Morocco also demonstrates that donors‟ support has to be flexible.
Financing agreements need to be responsive to change of direction and objectives,
particularly when addressing reforms where the goal is known but the path to attain it is not.
This is the case with the GIP, the financial information management system, as the original
solution planned in the PARAP I financing agreement with the EU had to be modified with
the associated delays. With different donors having different programming cycle, it also
meant that coordinating between donors on their performance matrix meant additional burden
and delays for signing and managing financing agreements.

     Example to be extended in version three

                                      Capacity Development in PFM – Practitioners Guide Version 2
8.2   Balancing Flexibility and Accountability
  Achieving flexibility and the ability to adapt to changing circumstances without
  compromising accountability to home constituencies is a significant challenge. Overly
  bureaucratic procedures, inflexible terms of reference and conditionalities that are set in stone
  impact negatively on support to capacity development. The situation is further exacerbated by
  the fact that in the time taken for many projects to be designed and approved, the situation on
  the ground has changed.
  The constraint for many donors and one that is not always recognised by governments is that
  they are accountable to their home constituencies. A delicate balance is therefore required in
  ensuring that funds are used for their intended purposes and not misappropriated with the
  provision of more flexible (e.g. not tied to the training of debt management officers, but
  rather to the improvement of the debt office operations) and longer term funding.
       More extensive discussions with donor institutions‟ external auditors to assess risk
        and determine a suitable risk management plan e.g.
       Continue discussion on the development of a common Fiduciary Risk Assessment
        (FRA) and ensure that the conditions imposed by funding countries on the multi-
        lateral agencies are consistent.
       More examples of flexible and long-term funding arrangements required

         Flexible, adaptable long-term funding allows a goal to be
         achieved even when the path changes

                          Capacity Development in PFM – Practitioners Guide Version 2
 9 Step Six - Providing Advice
9.1             Use of Technical Assistance

  The literature on technical assistance and
  capacity development is vociferous on the
  importance of getting the „right advisor‟ or the          For TA to be effective for
  right advice-      the right mix of technical             CD it must be based on
  capabilities, personal attributes, cultural               genuine choice and explicit
  sensitivity, and openness to learning. ADB                demand from country
  (2008) highlighted the importance of factors
                                                            partners. ref
  such as: good personal relationships with local
  colleagues, solid knowledge of the local or
  national context, ability to speak the local
  language, long-term engagement, and an ability to function in an advisory capacity and
  transfer skills while leaving space for local colleagues to „get on with‟ their jobs. Critical of
  the lack of success of past technical cooperation (TC), the Accra Agenda also stresses the
  need for greater use of local and regional expertise and more South – South cooperation.

  It is now recognised that in the past a significant amount of TC19 has been supply driven -
  provided to support donor processes and procedures not governments. The EC (2009b)
  identifies four potential „uses‟ of TC/TA: (i) capacity development; (ii) policy/expert advice;
  (iii) implementation; and (iv) preparation or facilitation of EC cooperation. However, the
  division between policy advice, implementation and capacity development is not always clear
  cut. There may be a need for example to develop the capacity of policy makers, and capacity
  development may take place alongside implementation.

  As noted in AusAID‟s 2007 Discussion Paper on Technical Assistance and Capacity Building
  in Timor Leste, it is important to have a clear role for TA. Many „advisors‟ end up
  performing in-line functions, either because a counterpart is not available, or simply to fill an
  existing gap which may have been the unspoken intent. “Being clear about the purpose
  enables more accurate terms of reference, better matching of potential candidates to the role,
  and helps establish transparent performance expectations.” (AusAID 2007:5)

  Despite widespread criticism of long-term consultants in key positions, ADB (2008) explains
  that in certain regions, gap filling support may be justified, provided it is requested not
  supplied. Indeed gap filling in the Pacific reflects the reality, that for many countries in the
  region, there are three choices; go to the international market, rely on technical assistance
  provided by donor agencies, or do without.

       (EC 2009 b p 5) defines TC as the provision of know-how in the form of short and long-term personnel, training and research, twinning
         arrangements, peer support and associated costs. Technical Assistance (TA) refers to the individuals or teams.

                                         Capacity Development in PFM – Practitioners Guide Version 2
Technical advice is both strategic, often provided by donors and operational often provided
by technical advisers. During the country visits, the need for technical skills to be
accompanied by personal skills was emphasised. Partner governments also commented
positively on the appointment of technical advisors with practical hands-on experience, rather
than those who had only theoretical knowledge. In many cases, for long-term advisers, they
preferred practitioners who could combine their technical knowledge with more general
management skills, acting more as mentors. This preference for practical knowledge and
experience was also confirmed by the positive feedback on the support provided by national
audit bodies, the work carried out by the various regional supreme audit institutions, such as
AfroSAI- E and ASoSAI, as well as the international body, INTOSAI. However, demand for
„technical‟ assistance does not refer purely to e.g. accountancy or economic skills, „technical‟
can equally apply to change management or general management skills.

Currently, the provision of technical advice tends to be confined to the appointment of
technical advisers and for „technical‟ advice, although regional organisations are providing an
important source of advice and guidance.

            Poor quality of technical assistance, the provision of unrequested assistance and
insufficient government involvement in the recruitment, selection and management processes
were all mentioned during the country visits. In response to a bad experience, Country X took
decisive action requiring the prospective adviser to work with the country team for three
days. The team then decided whether the person was the „right fit‟ –someone with whom they
could work.

           In the last decade, there has been a growth in the number and diversity of regional
peer groups and associations, which provide members with the opportunity to share
experiences on a regular basis. There is general agreement that they provide a useful forum,
but it is understood that like other organisations some do not have the necessary leadership
and commitment to reach their full potential.

      In Morocco, the experience of institutional twinning has been a successful one.
Morocco has sufficient capacity to design their requirements, translate those into
specifications and contractual objectives. The unit managing the twinning arrangements
provides support for selecting, negotiating and contracting as well as for managing.
Beneficiaries are also selected based on the potential capacity development outcomes.

     From a donor perspective, in an effort to ensure quality, the IMF has a vetting process
for all its potential advisers. Similarly DFID used to have a governance panel, whereby
potential governance advisers had to go through a rigorous interview process assessing their
soft skills as well as their technical expertise.

                        Capacity Development in PFM – Practitioners Guide Version 2
       In Country B, advisors complained of poorly designed terms of reference leading to
  unachievable deliverables. In particular, the expected outcomes did not reflect a true
  understanding of the country‟s political system or of prevailing power struggles.

9.2      Getting the Right Advice

  Getting the best advice and/or advisor depends on the whole process of managing the TA
  process from identification of the need to monitoring and evaluation. ADB (2008) has set out
  the pros and cons of various TA options and this is attached as Annex G for information. This
  should be read in conjunction with Annex H on learning methodologies, as the two are
  clearly linked. Traditionally advice has been provided by international, regional and local
  consulting firms, academic institutions as well as the IMF, the World Bank and other key
  donors. Increasingly however there are a number of other sources of sound technical advice
  including local development institutes, professional associations, IMF regional technical
  assistance centres, regional associations and organisations and peer groups.

  Concerns over the quality of TA provided in many countries appears to support the need for
  further research on the conditions necessary for developing and maintaining a vibrant and
  highly competent TA market, particularly at the local level.

  Irrespective of the source of advice, a fundamental pre-requisite is the provision of an
  independent perspective. In practice, attempts are made to compromise independence, either
  through withholding of fees, reduced fees, requests for „confidential‟ information or other
  means. Clearly, this issue is one that would need to be considered in a review of the TA

  The following paragraphs summarise some key factors that have been found to be important,
  when considering the need for the provision of TA. It should be stressed that the term „TA‟ is
  used loosely, where the advice is sourced from, for what period, whether it is continuous or
  intermittent and how it is used (mentor, trainer, doer) are all issues to consider in selection.
  The merits of secondments, attachments and study tours should also be considered, although
  many donors discount study tours as ineffective shopping expeditions, there is no research
  done to prove or disprove this. Indeed secondments to donor organisations as practised by the
  World Bank have the potential to improve the capacity of the individual and both


       First and foremost, don‟t provide assistance if it has not been requested. Equally
        governments should reject unsolicited TA. Unless there is interest or dissatisfaction,
        provision of TA will be a waste of everyone‟s time and money.
       Determine what impact or benefit is expected, specific results or uses.
       Make sure everyone is clear on the expected role and outcomes?
       In identifying the need for TA look at the pros and cons of:

                          Capacity Development in PFM – Practitioners Guide Version 2
        o Short: long term; the dangers of long-term assistance are frequently cited, but
            at the same time short term advisers often are unable to establish the necessary
            working relations or to understand the working environment;
        o Continuous: Non continuous; Little attention has been given to the feasibility
            of long-term but intermittent support or to long-distance (the end of an email)
        o Local: regional: international.(or a combination of all three) – a local adviser
            will often understand the problem and what should be done, but in some
            countries may need an international or regional colleague to recommend
            changes. In some regions, an adviser from one neighbouring country may be
            perfectly acceptable, an adviser from another neighbouring country may be
            totally unacceptable.
    Consider the feasibility of twinning arrangements or peer review mechanisms.
    Look at potential options for short –term secondments,


    Ensure that the whole selection/ recruitment process is transparent and fair.
    For TA contracts in excess of more than one year, do not rely on CVs (even with
    Involve government in the selection of a short list and in the interview process. They
     are the people who will have to work with the prospective TA.
    Consider new contracting solutions e.g. joint donor/government pool, which will
     ensure that neither ownership nor quality is compromised.
    Start contracting procedures well in advance, short turnaround times may mean a less
     than optimum response.


    Arrange induction/orientation process for TAs (Individuals or institutions- local,
     regional or international) and their counterparts.


    Set out clear management arrangements, which ensure government ownership of the
     process, but at the same time provides appropriate safeguards for the TA provider
     (individual or institution).

Monitoring and Evaluation

    Devolve evaluation of long-term TA to counterpart staff.
    Consider the establishment of improved quality assurance processes for consultancies
     and consultants e.g. user forums for software to share experiences.

                        Capacity Development in PFM – Practitioners Guide Version 2
              For Capacity Development – Use Quality20 TA to support
              government development, NOT to manage donor funds

     The term quality is recognised to be subjective, it is not intended to imply that technical qualifications alone should be considered.

                                         Capacity Development in PFM – Practitioners Guide Version 2
10 Step Seven – Taking a longer- term perspective
   to learning
10.1     From knowledge transfer to knowledge acquisition

       Over the last few decades, billions of dollars
       have been spent on training with limited effect.         There is broad agreement on
       There is therefore now a growing consensus               the need to move beyond a
       amongst training institutes and experts that a           narrow vision of training, to
       new way of working is required. This new                 the broader concepts of
       consensus moves the focus from individual                learning and learning
       skills to organizational and institutional learning      practices Discussion note
       needs. Instead of training for training‟s sake,
       there is now a recognised need to ask (and
       answer) the following questions, Training on
       what and why? In PFM, there is a general
       agreement that a suite of learning opportunities
       are required from basic bookkeeping skills through to professional qualifications (at various
       levels) and continuing professional development, from specialist courses e.g. debt
       management to general overview of public financial management, from technical skills (e.g.
       use of accounting software) to soft skills of leadership, negotiation, change management.
       Under the auspices of IFAC (the International Federation of Accountants) and independent of
       donors and governments, there is also a professional environment that allows for the
       development of capacity from technical level to full professional qualification.

       OECD- Len CD (2010) provides an overview of the strengths and weaknesses of some of the
       different learning delivery approaches and is included in Annex H for information. The
       Africa Commission and others have argued that a major new investment is required in local
       training capacity (requested also in Mali). Others argue that any new investment should learn
       from earlier sustainability issues, recognise the advancements in technology and assess
       whether relevant organisations and the enabling environment will use the new-found skills

       There is also the need to recognise at least two different audiences, the professional PFM
       education and training for those in Ministries of Finance and finance functions in ministries
       and agencies; and PFM training for line managers who actually deliver services and require
       the fundamentals. Even in the UK, a recent UK Treasury report has emphasised the
       importance of financial management skills for all senior civil servants, if taxpayers‟ money is
       to be used wisely.

       Generally, it has been found that the emphasis is on technical training for a relatively narrow
       group, although increasingly non-financial personnel are included in specific PFM initiatives
       e.g. role and use of FMIS. In Nepal, senior leadership and management courses contain
                               Capacity Development in PFM – Practitioners Guide Version 2
elements of financial management modules, but these were not considered sufficient. In three
of the five countries visited, there was a specific demand for basic training of accounting
staff. On the job training and coaching are considered the most effective form of training,
with Mali referring to the workshop approach as useless.

 In Rwanda a more holistic approach is taken with a combination of functional, technical and
professional training. In Nepal, the provision of random training courses (supply not demand
driven) by donors continues and is considered ineffective. Overseas training is still offered
and requested, in Nepal the need for ensuring that the right person goes on the right course
for the right reason was emphasised.

Increased support to professionalization is not without its challenges as illustrated below, but
is intended to establish a life time learning and peer environment.

                                             Developing the Professionals
            In Lesotho and Rwanda, support is being provided for individuals wishing to pursue
            professional qualifications in accounting and procurement (Lesotho only). In Lesotho,
            specific support is being provided to two training institutions and this is planned for Rwanda,
            where there is also the intention to support the local professional institute. This is not a new
            practice, the road is not a smooth one and there remain significant challenges, not least the
            selection of suitable candidates. Level of graduates was noted as a challenge in both
            Rwanda and Lesotho. In Rwanda, participant‟s ability to cope with the different requirement
            of a professional programme compared with an academic one was also cited as a cause of
            concern, while In Lesotho, recognition of professional qualifications for promotion and
            salary purposes is also proving to be a challenge. In Nepal, any move to greater
            professionalization will also face the challenge of raising the status of accounting staff.

      In the Caribbean, an internationally designed workshop21 run by an international
consultant has been transformed to a region specific one managed and presented by regional
experts from the participating governments. The workshop‟s relevance is assessed as high
and the Belize finance ministry has reported that it has had a positive impact on the behaviour
of line ministries. CARTAC advisers also adopt a mentoring role in addition to their specific
training commitments.

A different approach to technical assistance was recently adopted in the Pacific, where
shortage of manpower is a significant constraint on everyday operations.

                                  Learning by doing – two birds with one stone
                    In the Pacific, regional audit teams comprising of skilled advisers and
                    auditors from three islands (Tuvalu, Nauru and Kiribati) carried out a six
                    month programme, whereby six weeks were spent in each of the three
                    islands carrying out specific audits. This was designed to improve the
                    capacity of the individual auditors on the team and the capacity of the audit
                    offices in country as well as helping with the backlog of outstanding audits

     Supported /funded by CARTAC

                                   Capacity Development in PFM – Practitioners Guide Version 2
10.2      Supporting the new learning

       As one government official remarked, willingness to learn is an individual choice. Although
       one issue raised during the visits was the willingness/ability of managers to allow people the
       time to „learn‟ and then to translate new-found knowledge into practice. As part of the
       capacity assessment, the availability of learning opportunities, formal and informal, should be
       assessed. However, it is recommended that support of government owned training institutions
       should look carefully at issues of sustainability. In the countries visited, many of the training
       institutes had received long-term external assistance, but are now facing serious funding
       constraints. This undermines the quality of the learning environment.

            In developing learning opportunities, determine what impact or benefit is expected,
             specific results or uses, whether it is a short-term or long-term intervention.
            One specific example used in OECD countries is to support general induction
             programmes for finance personnel, which provide them with an understanding of the
             work of the finance ministry, other key financial institutions and their role in the
             overall service delivery cycle. Examples from developing countries required
            Support similar programmes for non-finance managers providing them with an
             overview of key PFM dates, processes and institutions.
            Consider incorporating finance trainee programmes (in which trainees obtain practical
             experience in a variety of finance functions rather than (in addition to) academic
             knowledge) into professionalization schemes. Examples from developing countries
            Provide a suite of learning support (for all levels both technical and managerial)
            Ensure that equal emphasis is placed on applied leadership, policy making and change
             management skills, the skills that will help to take the organisation forward.
            Address the work:training balance – in the countries visited, work demands often led
             to the wrong person attending the course or non attendance.
            New normative behaviour requires follow-up support and re-enforcement.
            Consider a combination of methods (see Annex H) – combining learning with doing
             has been productive as discussed under step six.
            Provide courses in local language (particularly for instruction type courses) and as
             discussed elsewhere ensure that the right learning opportunities/training is provided to
             the right person
            Ensure that course content is relevant to the course participants; adaptation by
             regional presenters has proved beneficial.
            Ensure that courses are timely and that course participants have a chance to
             implement lessons learned as soon as they go back to the office.
       Other examples of successful learning practices

               Knowledge acquisition cannot be supply driven

                                Capacity Development in PFM – Practitioners Guide Version 2
11 Step Eight – Assessing the Results and Benefits
11.1     Monitoring and evaluation

       Some argue that capacity development is far too                     An appropriate results focus
       complex a process to allow a detailed results                      that goes beyond aid-
       based framework. Others argue that there is a                      supported deliverables (e.g.
       recognised need for an appropriate results focus,                  “training conducted”)
       but one that goes beyond aid-supported                             Ref:
       deliverables (e.g. “training conducted”), and also
       avoids rigid frameworks that are poorly suited to
       the dynamic nature and flexibility required of CD

       Given the importance of CD to Development in general, there is an increased level of
       attention being given to the monitoring and evaluation of capacity development support,
       including technical assistance and training alongside traditional results-based frameworks.
       This involves ways of assessing changes in hard and soft capacities. Use of evidence-based
       results/impact is still possible, but part of the challenge comes in reconciling long-term
       capacity interests with donors‟ usual commitment to „objectively verifiable indicators‟ of
       change in time scales of four to five years or less. Although the EU and Irish Aid have
       recently extended the life of their country assistance programmes.

       In terms of training, Kirkpatrick‟s Four Levels model for the evaluation of training is one
       option and includes: Level 1 Reaction: the immediate impressions of the participants and
       trainers, what they thought and felt about the training; Level 2 Learning: the developments
       in knowledge, skills and attitudes resulting from the training process; Level 3 Behaviour: the
       extent of behaviour and capability improvement and demonstrated application of the new
       learning within the work setting; Level 4 Results: the impact on work results; the return on
       the training investment

       Evaluating the impact of improving capacity is generally not yet done in a structured way,
       even in middle income countries like Morocco. Most evaluation of training courses appears
       to be restricted to level one of Kirkpatrick‟s model. However in Rwanda, the process has
       been formalised and results are shared, similarly in Rwanda and Morocco TA is evaluated by
       counterpart staff and/or coordination units e.g. the PFM reform Secretariat and the Twinning
       Management Unit respectively.

       Monitoring and evaluation of particular interventions appears to be still primarily donor
       driven, and in the country visits some government officials believed that the prime focus of
       many donors‟ evaluations was on the level of their support programmes and associated
       disbursements, thus not contributing to the overall evaluation of the capacity development

       One explanation for the focus on technical aspects of capacity development is the lack of
       recognition of the institutional and organisational changes that are required even for
                              Capacity Development in PFM – Practitioners Guide Version 2
       „technical‟ innovations. and so in multiple organisations: change processes are long, can take
       unexpected and unpredictable paths and thus evaluation needs to address objectives that may
       not be reached before years. This explains the focus on technical aspects of capacity

11.2     Results, Uses and Benefits

       Ideally, all CD interventions are designed to provide benefits for the individual, organisation
       or society at large. Achievement of clear benefits, particularly in PFM may take time, but
       ongoing use of new knowledge, systems etc can provide a clear indication of progress along
       the right path.
            Place government in the central role for monitoring and evaluating support. This will
               also develop organisational evaluation skills.
            Care needs to be taken not to impose perverse incentives or targets e.g. clean audit
               reports. Processes are more important.
            From a system perspective, repeat PEFA assessment, maturity models etc help
               demonstrate the results of particular interventions e.g. improvement in the quality of
            Improvements identified in external and internal audit reports in particular follow-up
               action on their recommendations, as well as those of the Public Accounts Committee
               can show the progress of capacity development support.

                               Capacity Development in PFM – Practitioners Guide Version 2
   References (to be completed)
   ACCA (date unknown) Improving Public Sector Financial Management in Developing Countries and
   Emerging Economies. London: Association for Cost and Certified Accountants (ACCA).

   ADB (2008) Learning from Success Capacity Development Series ADB, Manila

   ADB (2009) NEP: Governance Risk Assessment Report Prepared for the Nepal Country Partnership
   Strategy (2010-2012). Manila: ADB.

   ADB (2010) Nepal: Political and Economic Update. Manila: ADB.

   AfDB (2009) Rwanda: Poverty Reduction Strategy Support Programme (PRSSP-III) Tunis: AfDB.

   Andersson, G. and Isaksen, J. (2002) Best Practice in Capacity Building in PFM in Africa. SIPU

   AusAID (2006) A Staged Approach to Assess, Plan and Monitor Capacity Building. Canberra:

   AusAID (2007) Discussion Paper on Technical Assistance and Capacity Building in Timor Leste,
   Canberra: AusAID.

   AusAID and Government of France (2008) Thematic Meeting on whole Whole-of-Government
   Approaches to PFM in Fragile States. Paris 17-18 March 2008.

   Baingana, E. (date unknown) PFM Reforms: Key Achievements and Latest Developments. Kigali:
   Government of Rwanda.

   Bernardo, R. (date unknown) Capacity Development for Transition in Nepal: Building Effective
   Institutions of State and Delivering Services. New York: UNDP.

   Boesen (2006) Supporting PFM reform and capacity development – what can we do better?

   Byrne, M. (2004) PNG Enhanced Cooperation Package: Cultural Briefing on Arrival in Port
   Moresby. Canberra: United KFPW.

   CABRI (2009) Improving Aid on Budget in Rwanda in Briefing Paper 1/2009. Johannesburg: CABRI.

   CABRI (2009) CABRI Response to the Accra Agenda for Action Using Country Systems in Briefing
   Paper 2/2009. Johannesburg: CABRI.

   CIPFA (2010) Public Financial Management : A Whole System Approach (volumes 1and 2) CIPFA,
                            Capacity Development in PFM – Practitioners Guide Version 2
CIPFA (2010) The International Activity at CIPFA… 13 June 2010. London: Chartered institute of
Public Finance & Accountancy (CIPFA).

CIPFA (2010) To Situation Analysis: Progress towards Professionalisation: Lesotho: A Case Study.
London: Chartered institute of Public Finance & Accountancy (CIPFA).

Dhakal, N. (2009) Request for the World Bank Assistance to Implement PFMRP. Kathmandu:
Ministry of Finance.

DFID (2009) Nepal Portfolio Performance Review (NPPR) 3-4 December 2009. Kathmandu: DFID.
EC (date unknown) Supporting PFM Reform and Capacity Development – What can we do better?
Brussels: EC.

EuropeAID (2005) Institutional Assessment and Capacity Development: Why, What and How?
Brussels: EC.

EuropeAID (2009) Toolkit for Capacity Development (Reference Document no. 6). Brussels: EC.

EU (date unknown) Kingdom of Lesotho: Country Strategy Paper and National Indicative
Programme for the Period 2008-2013. Maseru: GoL and European Commission.

EU (date unknown) Capacity Building in Economic Planning. Maseru: EU

Government of Nepal (2008) PEFA Assessment. Kathmandu: GoN.

Government of Nepal (2010) Nepal Public Procurement Strategic Framework 2010-2013.
Kathmandu: Nepal.

Government of Rwanda (date unknown) Rwanda Vision 2020. Kigali: GoR.

Government of Rwanda (date unknown) Local Government Financial Management Committee.
Kigali: GoR.

Government of Rwanda (2008) GoR PFM Reform Strategy (2008-2012). Kigali: GoR.

Government of Rwanda (2008) PEFA Assessment and PFM Performance Report. Kigali: GoR.

Government of Rwanda (2010) PEFA Assessment and PFM Performance Report. Kigali: GoR.

Government of Rwanda (2009) Operations Manual for PFM Reform Basket Fund 2009-2012. Kigali:

GTZ (2008) Capacity Development and Aid Effectiveness (Discussion Paper in Preparation for the
High Level forum on Aid Effectiveness in Accra (September 2008). Eschborn: GTZ.

GTZ (2009) Public Finances in the Health Sector: (How) does Public Financing Work? (Newsletter
no.18). Eschborn: GTZ.
                         Capacity Development in PFM – Practitioners Guide Version 2
Hedger, E. and De Renzio, P. (2010) What do PFM Assessments tell us about PFM Reform? In
Background Note July 2010. London: ODI.

IFAC (date unknown) Nurturing the Development and Growth of Accountancy. New York:
International Federation of Accountants (IFAC).

Khanal, R. P. (2009) Result-based Management for Portfolio Performance and Development
Effectiveness. Kathmandu: Government of Nepal.

Ministry of Finance (2008) NPPR: Action Plan for Improving Portfolio Performance. Kathmandu:
Government of Nepal.

Ministry of Finance (2009) Nepal Portfolio Performance Review (NPPR) 2009. Kathmandu:
Government of Nepal.

Ministry of Finance (2010) Nepal Portfolio Performance Review (NPPR) 2010. Kathmandu:
Government of Nepal.

Ministry of Finance and Economic Planning (2008) GoR PFM Reform Strategy (2008-2012). Kigali:
Government of Rwanda

Ministry of Finance and Economic Planning (2008) IFMIS (Public Books) Implementation Strategy
(2008-2012). Kigali: Government of Rwanda.

Ministry of Finance and Economic Planning (2010) Integrated Financial Management Information
Systems/SMARTFMS. (Project Charter) Kigali: Government of Rwanda.

Ministry of Foreign Affairs of Denmark (2006) Guidance Note on Danish Support for Capacity
Development. Copenhagen: MoFA.

Ministry of Local Government (2008) District Capacity Building Needs Assessment and Planning:
Findings and Recommendations. Kigali: Government of Rwanda.

NASC (2008) Nepal Administrative Staff College (NASC): Information Leaflet. Kathmandu: NASC.
Nepal Office of the Auditor General (2009) Strategic Plan 2010-2012. Kathmandu: OAG.

Nino, E. (2010) Access to Public Information and Citizen Participation in Supreme Audit Institutions
(SAI): Guide to Good Practices. Buenos Aires: ACIJ.

OECD DAC (date unknown) Harmonising Donor Practices for Effective Aid Delivery (Vol. 2). Paris:

OECD DAC (date unknown) The Challenge of Capacity Development: Working Towards good
Practice. Paris: OECD.

OECD DAC (date unknown) Training and Capacity Development (Discussion Note). Paris: OECD.

                         Capacity Development in PFM – Practitioners Guide Version 2
OECD DAC (date unknown) Technical Assistance for Capacity Development (Discussion Note).
Paris: OECD.

OECD DAC (2008) Synthesis Report: capacity development on the Road to Accra. (Prepared as a
room document for the 15-16 May 2008 Bonn workshop on “Capacity Development: Accra and
Beyond”). Paris: OECD.

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Brief, 6 December 2009). Paris: OECD.

OECD (2009) Inventory of Donor approaches to Capacity Development: What we are Learning.
Paris: OECD.

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Brief 1, 2009. Paris: OECD.

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Paris: OECD.

OECD DAC (2009) Exploring Capacity Issues “On the Road to Seoul”: Quality Training for
Capacity Development (Discussion Note). Paris: OECD.

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March 2010. Paris: OECD.

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                         Capacity Development in PFM – Practitioners Guide Version 2
World Bank (2010) International Development Association Program Document for a Proposed Grant
and a Proposed Credit to the Kingdom of Lesotho for a Second Poverty Reduction Support Grant and
Credit. Washington: World Bank.

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Research Working Paper 5397). Washington: World Bank.

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Kathmandu: World Bank.

                        Capacity Development in PFM – Practitioners Guide Version 2
Annex A Methodology

In the 2005 Paris Declaration, partner countries committed to strengthening their national systems and
donors to using them to the maximum extent possible as part of the global efforts to make aid more
effective. Both partners and donors agreed to accelerate and deepen these commitments during the
Third High Level Forum on Aid Effectiveness held in Accra in 2008. These international
commitments resulted from strong evidence that despite some progress to strengthening country
systems, less progress has been achieved on the use of these country systems. The Accra Agenda for
Action (AAA) emphasised the commitment of developing countries and donors to “strengthen and use
developing country systems to the maximum extent possible”. The AAA defines country systems as
follows: „systems for public financial management, procurement, audit, monitoring and evaluation,
and social and environmental assessment‟. A Global Partnership on Strengthening and Using Country
Systems has been created in order to facilitate the implementation of these commitments, with the
following objectives:
         Accelerate progress in donors‟ use of country systems;
           Facilitate the strengthening of country systems and effective locally-rooted capacity to
            reform systems where deemed necessary;
           Better communicate the benefits of using country systems and involve a greater number
            of stakeholders (parliaments, CSOs) in overseeing the strengthening and use of country

Rationale for this assignment

The OECD(DAC) created two Task Forces to produce practical guidance and good practice notes for
practitioners both in donor headquarters and in the field, on strengthening Public Financial
Management (PFM) and Procurement systems. Both Task Forces have been tasked with preparing a
practitioner‟s guide to Supporting Capacity Development in PFM, building on ongoing initiatives and
interventions by donors and partner countries.
This assignment was commissioned by the Task Force on PFM Capacity Development. According to
the Terms of Reference (TOR), the objectives of the assignment are as follow:
          Assess the expectations from countries for donor support to their capacity development
              efforts in PFM, in terms of content, form and duration;
           Collect evidence from partner countries‟ perspectives of both good and „bad‟ practices in
            how donors support Capacity Development in Public Financial Management;
           Collect evidence from donors on the different ways in which donors (bilateral and
            multilaterals) approach capacity development in PFM to strengthen a country‟s
            sustainable development; using countries‟ case studies and wider research information;
           Using the partner country perspective as an entry point, produce a Reference Guide on
            approaches to responding to capacity development demand from countries, design
            support programmes and implementing capacity development in PFM, and

                          Capacity Development in PFM – Practitioners Guide Version 2
            Highlight the risks inherent to such support with regards to its goals (impact on
             performance), duration of partnership and support, quantum of civil servants dealing
             with PFM supported versus total quantum of civil servants dealing with PFM and

The assessment methodology included both desk research and visits to five partner countries (Nepal,
Lesotho, Rwanda, Mali and Morocco), representing both Anglophone and Francophone PFM systems.
These information sources was supplemented by the consultants‟ own knowledge and experience in
PFM capacity development in Africa, Europe, Asia, the Caribbean and Oceania. The Task Force on
Procurement was also consulted to establish links with their capacity building guide. Particular
attention was also paid to any capacity development guidance for specific operational areas e.g.
fragile states and other reform areas such as public sector reform.

Desk Research
The desk research focussed on gaining a good understanding of the following:
    Current Capacity Development (CD) discourse and formulating a suitable definition for CD in
    Donor‟s current principles and practices with respect to CD in PFM;
    Support to CD in PFM provided by regional organisations such as the East and Southern
       Africa Association of Accountant Generals (ESAAAG) and the regional technical assistance
       centres of the IMF e.g. Afritac- E and CARTAC;
    Recent evaluations of CD in PFM with or without donor assistance;
    Recent CD in PFM in the five selected case study countries including by government alone
       and with donor intervention/assistance.

The research was carried out through the review of published and unpublished reports, telephone
interviews and email correspondence.

Data Collection in Country
Interviews were conducted in the case study countries with key actors in PFM leadership roles within
partner governments, training institutions, professional bodies, donors and civil society. More
specifically, the consultants held meetings with relevant government officials in the Ministry of
Finance (e.g. budget, accountant general, internal audit), revenue authority (where applicable), line
ministries, local authorities (if applicable) as well as representatives from the auditor general‟s office,
parliament, accountancy bodies, training institutes and civil society. They also met with technical
advisers and donor representatives

The consultants used a qualitative research methodology to understand the current demand and supply
of CD in terms of content, form and duration, and also to collect evidence of stakeholder perceptions
and expectations of capacity development in PFM. It was based on semi-structured interviews
conducted either with individuals or small focus groups within the five selected case study countries.
This methodology allowed the interviews to be conducted in a focussed and structured way by
different interviewers (in the Anglophone and Francophone countries) and also to explore in depth,
areas of interest. This also allowed the information collected in the five countries to be compared as
well as identify general trends, irrespective of a country context.

                           Capacity Development in PFM – Practitioners Guide Version 2
A bespoke interview questionnaire was prepared consisting of 25 questions covering the following
broad themes: i) conceptual understanding of CD in PFM: ii) content, form and duration of ongoing
initiatives (with or without donor support); iii) the process of designing and implementing support to
CD (ownership, alignment, donor harmonisation and monitoring of CD in PFM; iv) impact of CD
interventions at an individual, organisational, institutional or societal level, and v) sustainability of
CD efforts.

Practical methodological issues

Methodology: The target participants were predominantly in PFM management positions. The
relative small number of participants made a quantitative approach impractical. The qualitative
approach allowed for structured interviews by different consultants, and to clarify information on
relevant subjects.

Interviews: Interviews were conducted both with individuals and in small focus groups. It was found
that in many cases the senior person spoke “for the group” while rest only confirm his/her views.

Subject: Although the main purpose of the interviews was to gather information relating to donor
support of PFM capacity development, participants preferred to focus on capacity development in
general within their respective organisations. This meant that all questions were not always answered
or was just a repeat of a previous answer.

Time: It was found that a one hour meeting was sometimes not enough to complete the questionnaire.
Consultants also found that five days were not enough to cover the number of interviews. It was found
that a maximum of five interviews per day were practically possible because consultants had to travel
across the city for meetings within different organisations.

                          Capacity Development in PFM – Practitioners Guide Version 2
     Semi-structured Interviews
     Guidelines for interview process
           The interview questionnaire has been designed to improve consistency (i.e. different countries
            and different interviewers) and to facilitate comparative analysis.
           Questions are open ended and interviewer should prompt for more information by asking for
            instance “Can you give an example, do you care to expand, please elaborate, etc” (Avoid bias
            by asking leading questions).
           Interviewers should be sensitive to feelings and attitudes and use neutral language such as
            “Would it be fair to say…, Am I right in thinking that…etc”.
           The questions are categorised under five elements for the sake of analysis.
           Interviewees will not be identified except for where they work.
           Staff from both Government and Donor organisations as well as other stakeholders (e.g. civil
            society, training institutions, parliament) will be interviewed.
           The results will be a „management‟ interpretation that will allow some data analysis, but it is
            not intended to be a detailed organisational analysis.
           The various questions are designed to support each other and validate different answers.

     Conceptual understanding
        1. Who would you consider to be key stakeholders in PFM in your country?
        2. What do you understand under PFM Capacity Development?
        3. What do you understand to be the difference between PFM capacity development
            programmes and PFM reform programmes?
        4. What do you think the Donors‟ role should be with regards to Capacity Development?

     Content of Capacity Development initiatives
        5. What is the focus of PFM Capacity Development in your country?
        6. How long do you think Donor support for Capacity Development initiatives should last?
        7. How are Capacity Development initiatives being supported after the end of donor support?
        8. Are any key stakeholders excluded in current Capacity Development? If so, why?
        9. If you had the power, how would you improve PFM Capacity Development?

     Processes involved in Capacity Development initiatives
        10. In practice, how do Donors align their Capacity Development support to a Government
            programme or strategy?
        11. How do Donors consider the organisational culture and country context when supporting
            Capacity Development?
        12. Who designed the Capacity Development initiatives in your organisation?
        13. How were you consulted when Capacity Development projects were designed?
        14. If you had the power to make Capacity Development policy in your organisation, what will
            you do?
        15. Who took the lead in managing the implementation of Capacity Development projects?
        16. Do you think the local system for donor coordination in PFM works effectively?
        17. If you had the power, what will you do to improve local donor coordination?
        18. How are Capacity Development efforts assessed by both Government and by Donors?
        19. Can you give an example of a Capacity Development success story and a failure?

     Impact of Capacity Development efforts

                              Capacity Development in PFM – Practitioners Guide Version 2

    20. Do you think that colleagues/staff have benefited from Capacity Development?
    21. What do you think are the biggest problem/stumbling block in developing capacity at (i) an
        individual level and/or (ii) organisational or system wide level?
    22. What do you think was the main benefit for your organisation of recent Capacity
        Development efforts?
    23. What impact do you think Capacity Development efforts in your organisation had on the
        wider PFM system?

Sustainability of Capacity Development efforts
    24. What are /have been the main constraints in ensuring sustainability (reasons for non
        sustainability) of CD initiatives?
    25. What has made CD initiatives more sustainable?

                          Capacity Development in PFM – Practitioners Guide Version 2
     Annex B Lesotho – Support to Capacity
     Development in PFM
     1 Background

     Institutional framework
     The Kingdom of Lesotho is a small, mountainous and landlocked country, completely surrounded by
     South Africa. Its geographical situation in the middle of a comparatively strong economy has
     important implications for employment and staff retention. The majority of the approximately two
     million inhabitants are dependent on subsistence agriculture and there are high rates of poverty,
     particularly in the rural areas. The public sector employs approximately 35,000 employees (including
     teachers, health workers and the defence force) and the associated wage bill represents about 13% of

     From an institutional perspective, Lesotho is a parliamentary constitutional monarchy22. The
     Legislative branch consists of a 33 member Senate and a 120 seat Assembly. There are two
     parliamentary committees that deal with financial matters, a Portfolio Committee (Economics and
     Development Cluster) that scrutinises the budget and a Public Accounts Committee (PAC) that
     scrutinises government accounts. Since independence in 1966, there have been a number of military
     coups and periods of authoritarian rule, including seven years of military government. General
     elections were last held in Lesotho on 17 February 2007, although an extended dispute23 followed the
     election. These periods of political instability have impacted negatively on the state of PFM in
     Lesotho e.g. no public accounts were presented for the fiscal years 1996-97 to 2000-01.

     The Cabinet, which is responsible for all government policies, consists of the Prime Minister and
     other Ministers. A Budget sub-committee has been established to consider all budget-related matters.
     The Office of the Auditor General (OAG) is the country‟s supreme audit institution. At the central
     government level, there are 19 ministries and 8 offices carrying out the main business of government.
     There are also a number of autonomous and semi-autonomous agencies. The Ministry of Finance and
     Development Planning (MoFDP) is responsible for overall financial management24. The Ministry is
     divided into six departments, with two semi-autonomous government agencies25 and three
     autonomous agencies26. At line ministry, responsibility and accountability for public funds rests with
     the Principal Secretary (PS) of each ministry who is the Chief Accounting Officer27 of their ministry.
     He/She is responsible for ensuring adequate financial control, maintaining proper systems of accounts
     and ensuring that the provisions of the Act and regulations are adhered to. In addition, each ministry
     has a financial controller (FC) who is an officer of MoFDP, reporting to the Accountant General.

     Sub-national government in Lesotho remains in its infancy, particularly with respect to administrative
     and fiscal decentralisation. Elections took place in 2005 and one Municipal Council (Maseru), ten
     District Councils and 128 Community Councils were created. The budget of the Ministry of Local
     Government and Chieftainship Affairs (MLGCA) provides for compensation of employees, travel and
     transport and certain operating costs for each district.

        Although the King has no legislative or executive powers
        Regarding the allocation of seats by proportional representation
        See for detailed information on the workings of the ministry.
        The Bureau of Statistics (BoS) and the National Manpower Development Secretariat (NMDS)
        Lesotho Revenue Authority (LRA), the Centre for Accounting Studies (CAS) and the Central Bank of Lesotho (CBL)
        A Chief Accounting Officers Guide has been developed.

                                   Capacity Development in PFM – Practitioners Guide Version 2

Current PFM reforms
GoL‟s overall government reform program is guided by its Vision 2020. A Poverty Reduction
Strategy (PRS) was developed for the period 2004/05 to 2006/07. The GOL has adopted an Interim
National Development Framework (INDF) to bridge the period between the end of the PRS and the
adoption of a comprehensive National Development Plan in 2012.

Ahead of its PRS, in 2001/02, the government devised its Public Service Improvement & Reform
Programme (PSIRP), although implementation only commenced in 2004. The PSIRP includes:

              Public Financial Management Reform: to improve planning, budgeting, accounting and
               accountability in the Public Service;
              Decentralisation: to bring service provision closer to end users; and
              Civil Service Reform: to improve the Public Service delivery.

Since the start of the programme, a number of fundamental changes have occurred in PFM. These
include the amalgamation of the Ministries of Finance and Planning, the introduction in 2005 of a
medium-term perspective to budgeting in Lesotho. The introduction of the Integrated Financial
Management Information System (IFMIS) in April 2009 means a number of business processes have
changed/are changing, including new expenditure commitment control procedures. New Banking
arrangements are also in place. Processing of payments is now decentralised, although actual
payments are still centralised. The Government is in the process of modernising its procurement
system and has decentralised the procurement function to line ministries, introduced standard
procurement documentation, and revised procurement thresholds.

Following its organisation review in 2007, LRA has positioned itself as a “taxpayer centric” entity,
organising itself along functional rather than tax specific lines e.g. taxpayer education, collections,
audit, not Income tax, VAT.

External factors
The development of PFM capacity and long-term sustainability of many initiatives cannot be isolated
from other broader development issues, including basic infrastructure, financial and communication
networks, health, education and employment opportunities. In Lesotho, about 25% of the country‟s
population lives in the rugged mountains (75% of the total country area), where extreme isolation
results in poor access to basic services, market opportunities and communications. The health of the
workforce is adversely affected by the fact that Lesotho has the third highest HIV adult prevalence
rate in the world at approximately 23% and the fifth highest Tuberculosis (TB) incidence in the world
with 635 cases per 100,000 people.

In terms of specific PFM related training facilities and institutions, the National University of Lesotho
offers a range of accountancy and related degree programmes, and these are complemented by
offerings from other training providers. These include in particular the Centre for Accounting Studies
(CAS), established some 30 years with the support of the Irish government. Traditionally CAS has
worked very closely with the Lesotho Institute of Accountants (LIA) to train students for membership
of the Institute28.

The LIA was formed in 1977 serving primarily the needs of the private sector, it has recently sought
to widen its scope of activity and influence to include the public sector. In pursuing this objective, it
has obtained an Institutional Development Fund (IDF) grant from the World Bank. A major

     LIA offers three classes of qualification: Technician, General and Chartered Accountant.

                                           Capacity Development in PFM – Practitioners Guide Version 2
     component of the grant was to “develop the LIA qualification system29 to qualify members for Public
     Finance Management requirements”, although it is understood that no work has yet got under way.

     The Chartered Institute of Public Finance and Accountancy (CIPFA) has also been active in Lesotho,
     since 2006, where it has been working with support from Irish Aid to help professionalise PFM in the
     country. The CIPFA programme in Lesotho commenced in December 2006, with the first intake of
     students beginning their studies in January 2007. The Centre for Accounting Studies (CAS), acted as
     the local course provider. Examinations management and administration, along with local assessment
     services, was provided by the Lesotho Institute of Accountants (LIA). Relationships amongst CIPFA,
     LIA and CAS were defined and regulated through a joint Memorandum of Understanding involving
     the three parties

     In 2008 the South Africa chapter of the Institute of Internal Auditors began providing training to staff
     from the government internal audit service. Around the same time the Institute for Development
     Management (IDM) inaugurated a programme of training leading to the examinations of the UK
     Chartered Institute of Purchasing and Supply (CIPS).

     Key PFM donors
     In recent years, support to PFM has been provided by a number of donors including DFID, Irish Aid,
     the European Union (EU), World Bank, African Development Bank (AfDB), the US Treasury and at
     local government level by GtZ. Specific support has included:
          A DFID supported PFM Reform programme (January 2005 – September 2010) with
             additional funding from EU and Irish Aid and a total value of £ 6.25 million. The programme
             had seven envisaged outputs including: (i) Strengthened macroeconomic analysis and
             forecasting linked to fiscal policy, budget performance and monitoring; (ii) Integrated
             planning and budgeting processes; (iii) Modern Procurement systems ; (iv) Modern integrated
             accounting, revenue and expenditure management systems; (v) Strong Independent Oversight
             Bodies and mechanisms; (vi) Information to facilitate effective Cabinet participation in the
             budget process; (vii) Ministry of Finance and Development Planning with enhanced capacity
             to support and sustain reform initiatives.
          Specific PFM-related programmes from Ireland included support for GoL‟s PFM programme
             with DFID (now completed); support to the CIPFA training for accountants and auditors, and
             ongoing support for the OAG, as well as support to selected civil society organisations to
             advocate for improved service delivery, transparency and accountability.
          EU support has included funds for the (i)Integrated Financial Management Information
             System (IFMIS) - 7.5 M€; (ii) Capacity Building for Economic Planning (CBEP) - 5.8 M€ .
             Assistance to reforms of the Government‟s budgeting and planning functions;
             macroeconomic analysis and modelling; and strengthening its capacity for production of
             reliable data; (iii) Capacity Building for Economic Planning II (CBEP II) - 4.9 M€. This
             builds on the CBEP I (now completed) activities to strengthen the government‟s macro-
             economic and financial management, as well as to improve the capacity of sectoral and socio-
             economic development planning; (iv) _Technical Cooperation Facility (TCF) I, II and III.
             These three consecutive phases respectively represent 2 M€, 0.6 M€ and another 2 M€. It
             finances technical assistance, training sessions and the organisation of conferences, which all
             aim at improving the efficiency of the National Authorising Office (NAO)‟s operations.
          US Treasury - The Budget Department is receiving twelve months assistance from a US
             Treasury Adviser for the preparation of the 2011/12 MTEF Estimates, and the 2011/12
             preparation cycle will focus on 6 pilot ministries to again assist them to define and manage

          Currently a joint examination scheme agreement exists between LIA and the Association of Chartered Certified
           Accountants (ACCA) of the UK, which allows for Lesotho variant papers in Taxation and Business Law.

                                       Capacity Development in PFM – Practitioners Guide Version 2

        Specific PFM-related programmes from Germany include support to managing the
         decentralisation process, local administration systems and governance (e.g. advice on
         management and organisation)
        World Bank – Support to PFM is being provided through the series of three annual
         development policy operations (DPO), envisaged in the FY 2006-09 CAS. As noted above,
         the World Bank has also been a strong supporter of the professionalization agenda30
        African Development Bank – Support to PFM is being provided through its ongoing
         Institutional Support Project and ....

2 Key findings
The following paragraphs summarise some of the key findings from discussions with government,
technical advisers and donor representatives on support to PFM capacity development in Lesotho.
These discussions have been supplemented with a review of various evaluation studies.

Conceptual Understanding
Central to all respondents‟ discussions on PFM in Lesotho was the Ministry of Finance and
Development Planning (MoFDP). This reflects the main focus of most capacity development
initiatives in the past on the MoFDP. The role of line ministries was mentioned by a few respondents,
but primarily the tasks of finance related personnel, not the role of managers or the chief accounting
officers, despite the legal responsibilities described above. Interestingly from those interviewed within
government, external audit and parliament was rarely seen by those outside of the OAG as being part
of PFM, viewing it rather as a separate oversight function. Donors on the other hand saw OAG,
parliament and civil society and the donor community as key stakeholders in PFM in the country.
From a system perspective, most respondents from government focused on the expenditure side of
PFM including procurement, planning, budgeting, accounting and reporting as key functions to be

In terms of PFM capacity development, all interviewees saw training as central to the whole capacity
development effort, indeed some saw the need to train individuals as a pre-requisite to improving
capacity at an organisational level. Reference was also made to the various technical approaches e.g.
MTEF and the use of technology e.g. IFMIS to enhance the government‟s ability to meet its aim of
developing a sound PFM framework. As in other countries visited, in discussing PFM capacity
development, the focus of discussions was generally on new or additional capacity. Although some
government officials did stress the importance of recognising existing capacity and understanding
why individual capacity did not always translate to improvements in organisational capacity.

There was some debate on the difference between PFM capacity development and PFM reform,
although the general conclusion was that they were two sides of the same coin. One respondent neatly
summed up the position as reform reflecting the decision or policy e.g. move from cash to accrual
accounting and capacity development the activities needed to achieve the reform. In supporting
capacity development government respondents saw donors‟ key role as the provision of financial
support and technical assistance, while some donors felt that they also had an advocacy role.

Content, form and duration
In recent years, a significant proportion of support to PFM capacity development has revolved around
the introduction of new technology and business processes e.g. IFMIS, new legislation e.g.
procurement and new ways of working e.g. medium-term expenditure frameworks, activity based
budgeting and programme budgeting. Support to the OAG, Lesotho‟s Supreme Audit Institution has

   Action 1a of the World Bank‟s Africa Capacity Development Management Action Plan (CDMAP) Strengthening public
financial management (PFM) and accountability, with its objectives of increasing the number of qualified accountants and
auditors in Africa generally, and supporting the development of local training and accreditation institutions.

                              Capacity Development in PFM – Practitioners Guide Version 2
     also involved the development of a strategic plan, audit manuals, pilot audits, time management and
     recording systems. Given the backlog in the provision of financial statements, support has also been
     provided to the production of an up to date statement of affairs as a basis for future financial
     reporting. Similarly assistance has been provided to the Bureau of Statistics (BoS) and the Department
     of Economic Policy (DEP) in data collection and data analysis.

     Support has been provided in a number of forms e.g. equipment, personnel (long-term and short-term
     technical advisors). This has been supplemented by internal and external training courses, although
     some government respondents believe that key training e.g. IFMIS needs to be both more intensive
     and more inclusive. Others felt that management training and basic accountancy training needed to be
     carried out, while others felt that study tours in which practical experience could be shared would be
     useful31. At an organisational level, some were of the view that the capacity of training institutions
     such as the Lesotho Institute of Public Administration and Management (LIPAM) should also be

     In 2006, a twinning relationship was established between the UK‟s National Audit Office (NAO), and
     the Office of the Auditor General (OAG) in Lesotho. The NAO has subsequently provided ongoing
     technical assistance to the OAG alongside support from the Swedish NAO and the African
     Organisation of Supreme Audit Institutions (AFROSAI).

     There has also been a growing emphasis on professionalization, for example as noted above, the link
     with the Institute of Internal Auditors (South Africa), for the delivery of their Internal Audit
     Technician Certificate to internal auditors in GoL. This is a two-year workplace based, logbook
     recorded, and externally evaluated professional development programme. This programme was
     launched in March 2008, with 22 officers participating. They completed all 8 modules early in 2010.
     As at October 2010, the final external evaluation of the programme (inspection of logbooks etc) was
     yet to be carried out. Certificates can only be awarded after the external evaluation.

     As part of its programme of support, CIPFA provided the student learning materials and quality
     assurance for its International Certificate and Diploma in Public Sector Accounting and Auditing, as
     well as running a number of specific training and capacity development initiatives, for CAS staff.

     Duration of most donor supported initiatives has followed a three or four year project based cycle32,
     although Irish Aid has now extended its Country Support Programmes (CSP) to five years. Most
     government respondents believed that donor support should not go on forever, but should be clearly
     linked to the achievement of concrete results. Under the AFROSAI/IDI initiative in the OAG, a pool
     of trainers has been developed, but the general perception is that the government does not have a clear
     plan to sustain initiatives after donor withdrawal. Some respondents noted the need for, but lack of
     clear donor exit strategies. With the closure of the DFID project in September 2010, many of the
     ongoing support activities have been outsourced and thus will exist beyond the life of the project (e.g.
     CIPFA, CIPS training, IFMIS technical support), while other tasks have been taken forward by the
     CBEPII and the US Treasury support.

     Design and Implementation
     There were mixed views on the involvement of donors, government and technical advisors in the
     design of the PFM reform programme and donor capacity building projects, the extent to which
     donors aligned their support to government strategies and the level of donor coordination. The latter is
     generally seen to be improving but with some way to go. Reference is also frequently made to the
     DFID programme, not the GoL programme managed by DFID funded consultants and financed by a
     number of donors.
          Donors were evidently sceptical about the motivation for study tours
          However, the US Treasury assistance is only for one year.

                                       Capacity Development in PFM – Practitioners Guide Version 2

It was originally envisaged that the detailed work of designing and implementing the reform agenda
should take place in three task forces, one for planning and budgeting, one for accounting and
reporting, and one for audit and oversight. In practice, government respondents felt that in most
instances, design and implementation of detailed activities was either co-led by the departmental head
and consultants or only consultant led. Participation by junior and middle management was viewed by
some respondents as limited. No respondents were able to identify ways in which organisational
culture and country context had been built into the original design. Indeed, some donors and most
technical advisors and government respondents felt that country context and organisational culture
had not been adequately addressed. Government involvement in the identification, management and
evaluation of technical advisors was also reported to be extremely limited. Recognising the support
and advice received from many of the advisors, some respondents did raise concerns about whether
some advisors had the appropriate qualifications for their assigned position. Other concerns raised
related to the receipt of conflicting advice, noting the importance of having different perspectives, it
was felt that more effort needed to be given to setting out the pros and cons within the Lesotho
context, so an informed judgement could be made by government personnel.

At an individual level, there has been no capacity development strategy or training 33 needs assessment
and so support has been ad hoc. At an organisational level, with the development of the OAG‟s
strategic plan, donors (Irish Aid) can respond to specific government requests. Government officials
were also particularly positive about the extent to which they were involved in the work done with the
audit offices of the UK and Sweden and AFROSAI-E.

Monitoring and evaluation

The view of many government respondents was that monitoring and evaluation of support was donor
driven and based more on for example, administrative issues or disbursement levels. Similarly,
progress is also assessed against deliverables on terms of reference, which may have become
irrelevant. Most respondents felt that there was no organised way of assessing by government but that
there should be. In contrast, the OAG has an internal process, which is then externally assessed by the

Impact and lessons learned
In Lesotho, the impact (positive or negative) of capacity development initiatives is not formally
evaluated. The following successes and failures are therefore anecdotal rather than scientifically
proven. OAG felt that the individual and organisational capacity development initiatives carried out
had led to an improved product and this is noted by the latest PEFA assessment. Although
respondents noted that wider impact on PFM has yet to be seen, as there is still limited government
response or action on their recommendations, and continuing delays in the enactment of legislation to
provide the Office with greater autonomy.

In terms of professionalization, the recent CIPFA review noted that after the first full set of
assessments, the performance of the first cohort of students was good, with more than two-thirds
completing the first Certificate course within 15 months of enrolment. However, year two saw the
start of a decline in student performance, and one that continued through into 2009. Several
government respondents felt that this was partly because the standard of entrants was not sufficiently
high and that more basic levels of training were required.

From an organisational culture perspective, government respondents generally felt that those
projects/assistance where good working relationships (working together) were established, had the
most success. Facilitating and interpersonal skills were viewed as just as important as technical skills.
The importance of establishing an esprit de corps for all employees within the Audit Office is seen as
     A Training adviser is in place under CBEP II, but the scope of his activities are limited by the project document.

                                   Capacity Development in PFM – Practitioners Guide Version 2
     an important management objective. The annual regional conference and sports event between the
     audit offices of Botswana, Lesotho, Namibia and Swaziland was given as an example. Respondents
     were also proud of the fact that the Lesotho performance audit manual, which was produced with
     assistance from Swedish NAO personnel, is now used regionally and that the Head of Performance
     audit is one of AFROSAI‟s course leaders.

     Poor communications and a general lack of understanding of the level of detail expected by
     government was cited as a reason for the non-use of the internal audit manual. The IFMIS is also seen
     by many respondents as not yet meeting expectations, a reflection perhaps that new technology is
     sometimes „sold‟ as the solution to everyone‟s problems.

     Finally, according to the review of the DFID reform programme, one of the lessons learned from the
     MTEF implementation has been the risk that implementing parallel reforms places excessive demands
     on the capacity of line ministries to implement them at the same time. In addition to the introduction
     of budget framework papers, the MTEF Task Team decided very early in MTEF implementation to
     also pilot a form of activity based budgeting (ABB) or activity based costing of budget estimates. This
     has now been sidelined and focus is on programme management.

     Donors, technical advisers and government officials all raised concerns about the sustainability of
     many of the recently completed and ongoing initiatives. Government representatives were particularly
     concerned about staff retention levels, although the impact of the global financial crisis is reported to
     have slowed down the outflows. Although pay levels were of concern, recognition of efforts and the
     need to feel valued were also highlighted. Other concerns included the future funding of accountancy
     training (if Irish aid leave), poor transfer /internalisation of skills, lack of independence of OAG and
     not being able to create additional posts despite significant changes in work loads as result of
     decentralisation/new legislation and non-recognition of accounting staff qualifications in the civil
     service terms and conditions of service. Although the PSs of Finance, Education and Public Service
     are working on this issue and towards the end of 2009, some progress was made, with recognition in
     the scheme of service for students undertaking the Chartered Institute of Purchasing and Supply’s
     procurement training programme

     An earlier external review of the PFM programme has also highlighted the fact that there is still
     significant dependence on technical advisors. Recognising the achievements made to date, the review
     noted that the sustainability of the assistance beyond and even within the MoFDP is fragile. The
     reason for the fragility is attributed to several factors including the impact of the structural changes
     (combining two ministries to form the MoFDP), personnel changes and insufficient emphasis on the
     behavioural change implications of technical reforms. Issues such as remuneration incentives,
     accountability and performance management of underperforming officials, staffing levels, workforce
     planning and succession planning, promotion based on seniority ahead of efficiency, and delays
     associated with the promotion and appointment processes, are considered to have all worked against
     the sustainability of the PFM reforms.

     The World Bank CPAR report of March 2008 acknowledged the changes already achieved, but
     warned of the risks to the sustainability of these reforms unless PPAD received further support to
     institutionalise the new regulations, procedures, structures etc.

     3 Country analysis
     In 2006, a set of four key principles were set out in OECD DAC 2006 to guide donors in their support
     to PFM capacity development. The following analysis looks at the extent to which they have been
     applied in Lesotho. It should be noted however that the most recent process of supporting GoL‟s
     PSIRP predated these guidelines.
                               Capacity Development in PFM – Practitioners Guide Version 2

    1.   Supporting country leadership and ownership should be central to donor approaches.

As set out in the guidelines, country ownership implies active government involvement in all phases
of designing and implementing support to PFM capacity development. While country leadership may
mean that donor specific interests are not necessarily always followed. This first principle assumes
implicitly that country leadership and ownership exists and is constant. In Lesotho, as in many
countries, the situation is not so clear-cut. Notwithstanding the fact that the reform programme was
frequently referred to as the DFID reform programme, several government respondents noted that
initially there was high-level ministerial and administrative support, although wider support even
within the MoFDP was less tangible. From an overall perspective, as implementation has progressed,
personnel has changed and implementation targets as well as day to day work pressures appear to
have shifted ownership and leadership away from government. Broad ownership of the overall
reforms by stakeholder line ministries is reported to be weak. Political support as evidenced by timely
approval of revised legislation has not occurred. There is a danger that activities may become driven
by external conditionalities (e.g. preparation of a National Development Plan (NDP) is required for
budget support release), rather than for establishing the basis of the government‟s budget allocation

At the same time, it is clear that at a more micro level, several government officials are actively trying
to develop the capacity of their organisations to fulfil their mandate. In these cases, despite the many
difficulties, it is their emphasis on the human element (recognition of efforts) that appears to be
facilitating progress. Leadership and ownership can therefore occur at many levels, not just at a
political or senior management level, it is not a constant and can also easily be derailed.

    2. Capacity development design and sequencing should fit specific country circumstances,
       rather than reflect standard or imported solutions.

The second principle revolves around the concept that effective capacity development starts with a
premise of building upon what already exists, rather than transplanting entirely new systems. In
Lesotho, the original design of many of the features of the DFID supported reform programme and
other donors supporting packages appear to have been fairly standard, e.g. the introduction of a
medium-term expenditure framework, an integrated financial management information system,
activity-based budgeting, programme budgeting and new procurement legislation. Some adaptation to
reflect country context did take place during implementation, for example sidelining activity based
budgeting and revised banking arrangements.

In terms of sequencing, GoL‟s original PSIRP recognised the inter-dependencies between civil service
and PFM reforms. In terms of the PFM reforms, during the May 2006 Joint Mission on Budget
Support, development partners expressed concern that insufficient attention had been given to the
optimal sequencing and inter-linkages between the various activities under the PFM reform
programme. Key sequencing issues were reviewed in June 2006 under the PFM reform programme.
Nevertheless, some government respondents highlighted the need to look more at sequencing issues
and impact of changes e.g. need to change legal framework to fit IFMIS (as system allows virement)
whereas previously PS Finance approval was required. From a practical perspective, it is also
difficult to understand how ABB could have been contemplated without even the most basic financial
information being regularly produced and internal financial controls not being followed.

    3. The institutional, organisational and individual levels of capacity development, including
       managerial and technical aspects, should all be taken into account in programme design and

The third principle focuses on the fact that capacity development must be viewed from a holistic
perspective, and not seen merely as a transfer (e.g. of skills, money, equipment). Donors must

                           Capacity Development in PFM – Practitioners Guide Version 2
     increasingly consider change management issues, and how the process of developing capacity can be
     managed effectively by the organisation.

     In Lesotho, donor support has focused on new legislation, systems and procedures, the
     professionalization of accounting, auditing and procurement and the associated capacity of training
     institutions. Problems with e.g. the introduction of the IFMIS have been partly attributed to poor
     change management. It would seem that insufficient attention was paid at the outset to the possible
     winners and losers and change management was equated with downwards communication. For
     example, as noted in one assessment of the PFM reform programme, in most MTEF reform
     programmes worldwide, increasing Cabinet involvement in the Budget process is a difficult goal.
     Cabinet and parliamentarians are frequently reluctant to be trained or lectured by civil servants, and
     civil servants are also reluctant to give up the control they have traditionally held over the allocation
     and prioritisation process, preferring to present Cabinet with a finished budget document for approval
     and submission to Parliament.

     As discussed in the sub-section on sustainability, poor prospects for sustainability are related to lack
     of emphasis on necessary incentives, which as per the discussions are not solely related to

         4. Donor support should be provided in a coherent, co-ordinated, and programmatic manner.

     One of donors‟ primary responsibilities should be to minimise the transaction costs, harmonise
     procedures and monitoring mechanisms and coordinate not compete. In Lesotho, donor coordination,
     alignment and harmonization has been facilitated with the formation of the Development Partners
     Consultative Forum (DPCF) in 2005. This is co-chaired jointly by UNDP and Irish Aid. All resident
     development partners are members of the DPCF, as are the USA and China. The DPCF is responsible
     for taking forward the 2005 Paris Declaration on Aid Effectiveness for Lesotho, as well as for donor
     coordination. The DPCF is intended to provide space for development partners to discuss their current
     and planned activities, to coordinate programs and to promote efficient and effective delivery of
     development projects. There are now also bi-monthly meetings of PFM donors involved in PFM.

     Despite these measures, several respondents felt that co-ordination of support and technical advisors
     could be improved. At the end of the DFID programme, all donor support is being provided
     separately, there is no pooled fund, no pooling of technical advisors, no formal mechanism to ensure
     that responses to requests are complementary not competitive. Some members of the donor
     community also felt that their own organisational set up did not facilitate effective dialogue on PFM
     matters and there was insufficient support from their headquarter specialists. A frequent complaint
     from all groups (government, technical advisors and government) was the lack of flexibility in the
     funding mechanisms to address the problems. For example, during a training needs assessment it is
     recognised that training is required on x for y, but the terms of reference/project documentation
     restricts any training to a for b.

     In summary, many of the principles set out in the OECD DAC guidelines were not originally followed
     in Lesotho and while there have been some important advances, many interventions are still ongoing.
     Again given the timescales required for PFM capacity development and the problems with staff
     retention in Lesotho, this is not unusual. Some donors are now refocusing their PFM capacity
     development efforts on particular sectors e.g. EU in the water sector, as this is their focal sector for
     the 10th EDF. Their CBEPII will continue until 2012, with some complementary support being
     scheduled to extend until 2013.

                               Capacity Development in PFM – Practitioners Guide Version 2

Annex C Mali – Support to Capacity
Development in PFM
1 Background

Institutional framework
Mali PFM system is widely drawing its inspiration from the Francophone model based on the division
of reponsibilities between accounting control officers and accounting officers (“contrôleurs et
comptables publics”) on the one hand, and authorizing officers – commitment and payment order
officers - (“ordonnateurs”) on the other. The West African Economic and Monetary Union
(WAEMU) directives contribute to enforce this model in Mali - particularly through the most recent
budget laws directives.

Two repeat PEFA assessments (2007 and 201034) showed progress in the Malian PFM system during
this period. However, it still has important weaknesses, particularly in internal controls, internal audit
and external audit.

External audit is one of the most salient weaknesses of the Malian PFM. The situation is complex:
- A new entity has been created according to the Anglophone model (Canada), the Auditor General
    Office (“Bureau du vérificateur general”) (BVG;). It has got a lot of resources.
- There is also a Section of Accounts of the Supreme Court (“Section des comptes de la Cour
    supreme”) (SCCS),) which has got very few resources and which must be turned into a Court of
    Accounts for putting the WAEMU directives into application.
- The General Audit of Public Utilities (“contrôle general des services publics”)” has the
    INTOSAI status of supreme audit institution (SAI) and represents Mali through it.

Current PFM reform
On 2004, Mali decided to propose an action plan over the medium term and give a coherent vision of
the desired reforms to be implemented to strengthen its PFM system. An interim plan was prepared
over the 2004-2005 period. After an independent evaluation made by an external expert, the interim
action plan was turned into a government action plan to improve and modernise the Public financial
management (“Plan d’action gouvernemental d’amélioration et de modernisation de la gestion des
finances publiques”) (PAGAMGFP) on April 2005. The objective was to bring the Malian PFM
system to a level of reliability that qualifies it for an international certification and help it to get
budget support. The plan had five purposes: 1) improve the quality of the preparation and execution of
the budget; 2) enhance financial and fiscal agencies and ministry departments; 3) integrate external
financial resources into the country budget system and procedures; 4) develop public procurement
effectiveness and transparency; 5) enhance governance and transparency.
At the end of 2009, PAGAMGFP I was evaluated35. The mains conclusions were:
- A bad preparation because of a bad coordination with CSCRP36 (PRS Poverty reduction strategy
    in Mali) and PDI (Institutional Plan of Development);
- The total cost of PAGAMGFP I was 26,7 billion FCFA (40 million euros);
- The results by theme were :

   Evaluation de la gestion des finances publiques au Mali, selon la méthodologie PEFA, Rapport Provisoire sur
la Performance de la Gestion des Finances Publiques, Mai 2010.
     Evaluation de la mise en œuvre du PAGAMGFP sur la période 2006-mi 2009 ; novembre 2009, ADE.
     CSCRP 2007-2011 la matrice d‟actions prioritaires et le cadre d‟évaluation.

                                       Capacity Development in PFM – Practitioners Guide Version 2
                    o     Donors were very active in supporting the Malian government and involved in the
                          technical committees enforcing harmonisation commitments;
                    o     Periodical and joint follow-up, review and evaluations of the Plan implementation by the
                          technical committee, the CARFIP (a little public Unit of the Ministry of finance
                          specifically created to coordinate the PAGAMGFP) and donors were done;
                    o     Fiduciary risk of PAGAMGFP expenditures was not enough controlled.

     Key PFM donors
     PAGAMGFP is in the country budget– consequently, main donor‟s support to PFM is placed through
     the budget and donors cannot be identified. However some activities are directly financed by donors
     like project-based support or sector support.

     2 Key findings

     Conceptual understanding
     The Ministry of economy and Finance (MEF) and especially the Unit in charge of the coordination of
     PAGAMGFP, CARFIP37, is regarded as the key actor of PFM and capacity development. The role
     played by the external audit – BVG, SCSP, CGSP – line ministers, and donors is considered to be less
     important. Great absents are the Parliament, which is never evoked neither by partner country officials
     nor by donors, and local authorities, civil society and training centres (e.g. “Ecole nationale
     d’administration” (ENA), for instance).

     Donors and partner country senior officials understand capacity development notion in an extensive
     meaning including : investment (building, computer systems, IT equipment, computer hardware);
     revision of the legal texts (in particular under the pressure of WAEMU); adoption of modern
     management tools (codes, standards, management, medium term expenditure framework,
     performance budgeting) often imported from outside, institutional reforms (external audit) and human
     resources development (training and staff management).

     All respondents say that training is very essential, but donors and partner country officials do not have
     the same approach. Partner country officials view training as the top priority, independently of other
     modalities of supports. They consider the country educational system as very ineffective and the
     general skill and competence level of ministry staff very low. They think that it is very urgent and
     necessary to create and sustain training centres in the long term. Donors bind together training and
     other forms of support into a “package” and they do not make any difference between short and long
     training courses, training and learning. They include in the notion of training issues referring to staff
     management (recruitment to eliminate favouritism, incentives to stimulate work) and cultural
     characteristics (the weight of interpersonal relations and distrust and the need of consensus).

     Very few officials make a clear distinction between capacity development and PFM reforms.
     However, it seems that capacity development is more bound to training and human resources
     development than PFM reforms. Besides, according to some of them, capacity development refers to
     ownership, integration of endogenous mechanism of reforms and good management, and

     All the Malian officials think that the first role that donors should play is financing capacity
     development. This expectation aroused some disappointment among officials. According to the
     donors‟s demand, PAGAMGFP was for its main part financed by budget resources and thus by
     country budget. Country officials want also that donors contribute to the reform while staying outside
     the process. They have also to advise, to inform about the best practices, to disseminate the
     international standards and to bring direct assistance when the topic is very technical.

          Cellule d‟Appui à la Réforme des Finances Publiques.

                                               Capacity Development in PFM – Practitioners Guide Version 2

Donors‟ appreciation is somewhat more extensive. They think that they also should suggest
emphatically strategic themes (for instance, external audit development). They also have to bring
conceptual, project management, government political will‟s support and continuity of the political
actions by imposing periodical reviews and follow-ups.

Content, form and duration
In terms of domains, the role of the Treasury (“Direction du Trésor”), the Tax Directorate
(“Direction générale des impots”) (DGI,) and the Customs Directorate (“Direction des douanes”) are
considered to be the nerve centre of capacity development, even if it is often said that this nerve centre
is not limited to MEF. Revenues are sometimes considered the most important domain where, for
some, "everything is to be made ".The four axes of PAGAMGFP are not quoted as such, what shows
that main strategic orientations of the PAGAMGFP are not well known and integrated in the minds.
Few persons in general know it and have a good comprehension of the strategic vision of capacity
development in Mali. In terms of institutions, the CARFIP is always quoted as the essential pole.

The question of duration of donors capacity development support could be differently put in
comparison with other countries because the main part of the plan (PAGAMGFP II from 2011) is
financed in Mali by General Budget Support (ABG). But it is not the case: all Malian officials and
donors consider that the plan is financed by donors. This confusion highlights the weakness of the
border between ABS and ABG in practice and the very constrained character of the exercise for the
government and thus the importance of the donors‟ influence on the budgetary allocations in ABG

All actors think the horizon of the support is distant (at least 7 years), because needs are very
important and actions have to last for a long time to be effective. Donors do not have a position on
this question, but their opinions diverge appreciably: some of them think that support will always be
necessary, others presume that support has vocation to stop because it has to build the conditions of its
disappearance and to insure PFM sustainability; others suggest that the support will have to last as
long as the ABG will exist; some people, finally, think that it would be dangerous to bring an answer
to this question.

Malian and donors gathered consider that the quality of PAGAMGFP II38 is hight and that it was well
prepared. In particular, all people underline its authentic participative character.

Main criticisms are focused on training (cf. above) and more widely on personnel management
considered by donors as not relevant to the upcoming problems. The problems are underestimated
while the accent is put on using modern tools (MTEF) requiring skills which do not exist any more.
The applied solutions are not the good ones, what is wished is the creation of schools or training
centres rather than the organization of scattered and short training seminars. Some respondents stress
the necessity to upgrade basic skills.

Other areas that should be privileged are also quoted: cash management and the problem of accounts
in the commercial banks; tax revenue provided by informal sector (fiscal "Malisation"), in particular
by real estate and by creation of a capital gains tax); encouragement in the productive activity; hiring
and training permanent local civil servant; paying more attention to fiduciary risk.

Some donors think that the degree of technicality of the program is too important, that a global
strategy more clear and assertive would have been necessary instead of a set of measures

  Deuxième Plan d‟Action Gouvernemental pour l‟Amélioration et la Modernisation de la Gestion des Finances
Publiques (PAGAM II), 12 juin 2010. Ministère de l‟économie et des finances, Secrétariat général, CARFIP.

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     insufficiently integrated into a package based on an accurate analysis of the stakes and issues and
     offering a "vision". This implies, according to them, a greater ability of the government to refuse the
     various proposals from donors in the only purpose to get benefits of the aid. They join, on this point,
     some national respondants who regret the excess of studies carried out by the donors that they
     consider very similar to each others, which are "ritualized "repeating the same recommendations and
     ultimately leading to walk round and round.

     A major effort of alignment has been conducted since 2005: new capacity building is mainly
     contained in the PAGAMGFP which is, largely, in the budget (ABG) and is placed under the
     authority of the government. Its design has mobilized the services of all ministries in a participatory
     process to which the donors have been associated. The government decided on the strategy, the
     donors - in fact the Canadian cooperation – providing only methodological support. However, some
     government leaders and donors argued that the real autonomy of the government was de facto often
     lower than the formal procedures because of its financial dependence. They believe that the partner
     country authorites select elements of strategy according to their expectations of donors. The fact that
     the PAGAMGFP is in country budget limits this bias but does not eliminate it.

     Donors regard the cultural and organizational context as a very important issue; they quote in
     particular: the importance of consensus in the Malian society; the weight of interpersonal relations
     and informal solidarities of belongings (family, village, clan) prevailing on hierarchical system and
     functional relationship ; the system of incentive is subject to immediate personal interest and attached
     to each individual action ; insufficient sense of public good; the difficulty to trust - creates a general
     climate of mistrust - and to delegate; refusal to use the sanction; the great tolerance of absenteeism.
     Donors consider that these cultural and contextual factors are taken into account in their actions by the
     fact that their staff members are either locals having assumed important responsibilities in ministries
     (SG of the MEF, former Minister of Finance) or persons having a very long experience of Africa.
     They also consider that the dialogue with the partner country is a means to take into account the
     obstacles in terms of life experience.

     Malian officials believe that the cultural and institutional context is not always sufficiently taken into
     account; they cite the example of family and religion policies that they consider alien to their tradition
     and a concession to their outside partners. They also consider that this context should adapt itself to
     external evolutions, but it must be gradual and must take the necessary time.

     For other officials the problem is not that donors take into account the Malian context but it is that
     malian free themselves from outside influences, including "culture" of international organization or
     from donors: according to them, the foreign impulses obey too much "mode” (the decentralization
     would be one...) and donors do not always take enough distance from their own culture or institutional
     context wich results in a wide variety of triggers and the fact that "everybody gets lost there ". The
     creation of Court of Accounts is often quoted as a good illustration of this opinion.

     According to donors, initiatives and broad guidelines are set by central authorities of their institution.
     The implementation is decentralized, in particular the choice of external consultants or outside experts
     when necessary. In delegations or representations, impulses and choices of the practical modalities are
     collective and managed by a focal point under the responsibility of a hierarchical leader or a
     supervisor. When experts are needed reports must be validated by government if this validation is not
     obtained, the report is considered as never having existed (a report on the court or accounts underwent
     this fate).

     According to Malian officials, certain of the directorates have strategic plans with a capacity
     development component; it is the case of the DGI but not the Ministry of Finance. PAGAMGFP II
     was designed in a participatory way under the coordination of CARFIP, nobody disputes it, and with
     assistance from Canada; the exercise was well organized, participatory and followed orderly stages:
     -       Evaluation by an external team of PAGAMGFP I and what remained to be done;
     --      Agreement on a method of preparing and coaching the PAGAMGFP II;

                                Capacity Development in PFM – Practitioners Guide Version 2

-         Organizing internal reflection within each department under the coordination of CARFIP and
appointing correspondents in each department;
-         Holding a preliminary workshop to define the overall expected results (4 in number) which
were formally selected by the Minister of Finance;
-         Organizations of subgroups (of public institution and donor representatives) for every global
result in charge of elaborating results;
-         Adoption by the Council of Ministers.
Malian officials think that the main PAGAMGFP II failure is the lack of long term training project
and the creation of effective training center (even virtual). They also express the necessity of
attempting to perpetuate the successful experiences (in this case, it was a center of initial training on a
long lasting - on one year - for the senior executives of the DGI).
Some country leaders however question the reality of the programming by the government of the
capacity developement strategy. They underline that links between CSCRP (of which the
PAGAMGFP is an element via the PDI) and the government is not sufficiently narrow and that
governement lack coherence – the tools of programming are numerous and too much detailed – this
raises difficulties for the alignment. Besides, donors, who are often at the origin of the impulses and
ideas, inspire the government what makes that, after all, donors aligns themselves with strategic axes.

The donors‟coordination is very close in Mali, very institutionalized, lively and diversified39:
- An overall coordination is insured around the CSCRP by the collective of the heads of agencies and
project managers - managed by a troika of the donors, one of them being leader - assisted by a
technical pool;
- A sector-based coordination is organized through ten thematic groups and three transversal groups
with leaders;
 -In 2005, In public finances (macro budgetary management and budget support together), a
specialized working group was set up to coordinate the dialogue with the government on the
PAGAMGFP and establish a consultation framework ensuring overall coordination of the donors on
these issues (the leader is the World bank; six bilateral donors, European Union and four multilateral

The interlocutor is the MEF. Agreements have been concluded: a framework arrangement was signed
in 2006 and is being updated to be coherent with the Paris declaration; a specific arrangement for the
budget support and many specific arrangements for sector-based budget support were also signed.
Works were led on the follow-up and annual evaluations of the CSCRP and its alignment on the
budget cycle as well as on the joint budget review. A joint country assistance strategy (SCAP 40) over
the period of the CSCRP was elaborated for the implementation of the Paris declaration within the
framework of the CSCRP with the government and the civil society. It is in this context that is
conducted the joint annual assessment of the operational implementation of the PAGAMGFP Action

Donors think that coordination has improved - five years ago there was no coordination - but there is
still room for improvement. Margins of progress can still be explored. It is very costly in time, so, if
the current situation is preferred to the absence of coordination, a more flexible solution is wished by
some donors.
Coordination is judged to give more weight to all the donors involved, but it also gives more capacity
of influence to the donors who work outside coordination. The appreciation of Malian officials is
more contrasted. They consider generally the coordination works well even if they consider it a little
bit heavy and complicated. A top manager of an important directorate of the ministry of finance is
severe, however, less on the coordination than on donors themselves. He considers that they do not

   Rapport sur la gestion des Finances publiques au Mali, Exercice 2009, Union européenne, Ambassade du
Mali, Rapport élaboré par Mathias ROBERT, Chargé de programmes - Economie du Développement.
   SCAP et Plan d‟action pour la mise en œuvre de la déclaration de Paris.

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     know, except rare cases, the functioning of a management of public finance system and that there is
     not among donors a pole insuring the compatibility between the macroeconomic approach and the
     sector-based approach of public finance. This lack of overall discipline instance - provided nationally
     by the Ministry of Finance - results in an overly "corporatist" budget approach by donors: each of
     them defending too much his own interest - what involves spending - without taking into account the
     need to balance the overall budget and therefore trade-offs between the demands of donors.

     Some leaders wonder whether budget support is relevant regarding the donors‟ lack of knowledge of
     public finance management and of Malian practical experience. This results in too many triggers and
     lack of consistency.
     The excess of evaluation and recommendations is also criticized. The excessive influence of certain
     donors is also regretted.
     Donors would like to have a more exhaustive and clearer knowledge of the activities of all the donors
     without undermining the freedom of everyone to choose the modality of support which is viewed to
     be the most relevant and the most effective. They also wish the government - the CARFIP –take more
     appropriate initiatives and be more proactive. They would like also to reduce the number of the
     donors who do not participate in the coordination.
     Malian officials consider that the coordination on strategy between donors is not sufficient. This unity
     of sight- which goes beyond mere common will of controlling own government's commitments –was
     lacking on some major issues: external controls; diversions of money at the global fund. Procedures
     should be streamlined and the number of triggers limited.
     Giving greater coherence to the requirements of donors would allow to clearly highlight strategy, lines
     of force and stakes. The coordination should focus on main points and avoid excessive discussions on
     details and methodological considerations.
     Partner country officials want that donors pay greater attention to the problems of feasibility.

     Evaluations are numerous and repeated. Were (and are) conducted as follow:
     ·       Annual evaluation by the CARFIP of the PAGAMGFP implementation;
     ·       Infra annual and annual joint evaluations of the implementation of the annual operational plan
     of the PAGAMGFP;
     ·       External evaluation at the end of PAGAMGFP (2009);
     ·       Two evaluations PEFA (in 2007 and 2010 – in progress at the time of the mission) with joint
     Donor- government TDR; at the same time a review was made by the World Bank in 2009.
         - An annual report (very exhaustive and well informed) by the EU on the management of public
             finances in Mali;
         - Institutional audits ordered by departments (in particular an institutional audit within the
             framework of the PDI in all ministerial departments);
         - Studies and evaluations ordered by donnors.

     The joint budget review – with a part dedicated to capacity development - was an exercise which
     remained too formal, notably because of the lack of specialists in public finances. For the first time it
     revealed itself very useful in 201041. This review is thus a meeting difficult to manage in ordinary
     time, but useful in the exceptional moments.
     Country officials and donors consider that the efforts of capacity building did not succeed in four
     main domains:
     ·       Reform of the SAI and the creation of a court of accounts according to the directives of
     ·       Computerization of the service of the land registry to follow the transaction (equipment
     delivered but not operational);
     ·       Reform of the Directorate of Public Procurement Contracts (DGMP);
     ·       Reform of the informal sector taxes (more widely applied to Malian companies).

          Government represented by several Ministers and a high magistrate used it to provide explanations to donors on the diversions of the Global Fund funds. But
            the government said that this presence must be considered as exceptional.

                                                Capacity Development in PFM – Practitioners Guide Version 2

Concerning successes, the first one is the PAGAMGFP itself. Within it the most striking successes
·       Computerization, although still unfinished;
·       Reform - still partial - of the tax revenues;
·       Implementation of the result-based budgeting (GAR);
·       Financial control (CF) devolution
·       Reform of the DGI (PAMORI) and, in particular the implementation of a center of initial
training in the DGI for the controllers and the implementation of a management system of careers;
·       BVG creation.

Impact of Capacity Development initiatives
Government officials think the main obstacles to the strengthening of capacities are the insufficient
strategic autonomy of the government and the lack of financial means. They add the lack of stability
and continuity of donor supports. In the short term, these weaknesses entail the loss of the best
suppliers of public procurement; in the long term, it results on a lack of support for the succeeding

In training area the difficulties are amplified by the fact that these trainings are not considered as a
necessity by the managers but as a reward or a part of wages (granted via per diem). Besides, donors
often offer skilled and motivated officials more advantageous conditions to manage their programs.
Donors think the main difficulties are in the cultural and institutional context as well as in insufficient
stability of the permanent civil servants and their weak motivation and implication in their work
which can be overcome only by long-lasting training initiatives. Insufficient capacity of the
government to refuse isolated offers to support from donors weakens the coherence of their collective
support and the capacity of elaboration by the Ministry of Finance of a real vision of capacity
development in PFM (which witnesses the absence of strategic plan of the Ministry of finance).

Some Malians also consider that overall actions of donors are too much centred on the reduction of
poverty and the OMD to the detriment of growth and structural reforms.
The impact of capacity development is still weakly visible according to country respondents because
of the slowness of the effects of this type of program and actions.
However, progress is already observable mainly in the area of tax revenues and financial credibility
(measured by PEFA) - as well as in the improvement of the quality of the external control and the
communication with the public.

Sustainability of the donor support is not a matter of great concern for Malians and donors.

3 Country analysis
This analysis is conducted in reference to the four fundamental rules of the OECD documents
Harmonising Donor Practice for Effective Aid Delivery (2006).

Supporting country leadership and ownership should be central to donor approaches

In Mali, the main elements of Capacity development considered as favorable to government
leadership and ownership has been gradually gathered and are now reunited (supra). Very strong
incentives for reform come from outside (HIPC in 2004 and WAEMU). The Ministry of Finance
played its active role of leadership and an "agent of change" was created with the institution of the
CARFIP in 2006, whose usefulness is praised by all the actors underlining its central role in the
design and implemention of capacity development programs.The action plan of the first phase of the
PAGAMGFP was prepared by the departments of Malian ministries. The second phase of the program
was planned in an explicitly participatory approach. This approach has mobilized all departments and
was driven by the CARFIP, donors (in this particular case, the Agency of development of Canada)
providing technical support without ever substituting theirselves for national actors and participating
in various workshops. Besides, to reinforce that ownership, donors wanted to finance the program
                           Capacity Development in PFM – Practitioners Guide Version 2
     using general budget support, which constitutes the better way to ensure the independence of the
     government decision.
     It is however necessary to note some weaknesses or to formulate some warnings.
     Country institutions independent of the government, the Parliament and especially the external control
     have not participated in the process.

     The first one is weak; the second was not associated with the preparation of the first PAGAMGFP and
     its weaknesses - owed to its division, the lack of independence and, for the jurisdictional auditing, due
     to its limited resources- as well as the fact that it was itself an important stake in the reform has not
     allowed it to play the role that it should be playing.

     The weight of the technical assistance provided by donors to the technique of programming (logical
     framework, type of risks...) is too important42. The PAGAMGFP II is presented in a too detailed and
     abstracted framework. In no part of the document the practical stakes of PFM capacity development
     for the state, the financial management, and the citizens were clearly highlighted. The reasons given
     to this choice are not clearly presented in a language easily accessible to all, including non specialists.
     The objectives and actions, the difficulties are not set out hierarchically.All departments of ministries
     can find in it what they have to do. All donors find in it the actions they wish to promote and to which
     they linked their supports and the importance of their influence. But the document in its presentation
     does not facilitate the ownership by all the actors of the overeall strategy of capacity development in
     all its dimensions and in its main purposes.

     Ownership is a difficult process to analyze. The relations of mutual influence are usually hidden
     beneath appearances dictated by the rules of propriety or diplomacy. In Mali, these relationships of
     mutual influence are strong. The government has, to some extent, the feeling to be unable to escape
     the outside influences (general - those of the doctrine or the international practice which it does not
     feel to have the power to resist - or particular - those of the PTF who support it financially). So that
     the budget programming can have all the appearances of an endogenous movement (driven by
     countryleaders) and remain genuinely exogenous (because of the external influences to which the
     national leaders are subject and thus partially unsuitable for the institutional structures, the national
     cultural experiences and for the needs felt. Training is a good example of this difficulty.

     Only few major ministry directorates succeed in escaping this latent influence. This requires a strong
     internal integration (highly collective management structure) excellent practice of donors and some
     skill to play their diversity and their rivalry. The DGI gives, in Mali, a very good example of a good
     practice in this field - it knew how to obtain in training support what it wanted while deviating from
     usual models. Donors should be able to discern these really endogenous experiences and support them
     with more strength as they have not inspired them.

     The lack of autonomy and ownership of the government and the national actors is also reflected in the
     pointillist follow-up of the implementation by the donors. This pointillism is associated with the lack
     of confidence of the PTF in the use of the aid funds by the country financial institutions: the fiduciary
     risk. The experience of Mali shows that there cannot be real ownership by government - implying that
     donors agree to audit only the results obtained without having insurance on the detailed use of funds
     before any credible guarantee is given to them on the control by the government of the fiduciary risk.
     This risk is never handled as such; it is nevertheless in everyone‟s mind. It should be specifically
     assessed and considered as a major purpose of capacity development (which was the case in
     PAGAMGFP but could not be done). Otherwise, there is a risk that through project aid, donors-
     instead of giving some room for manoeuvre to the government- reduces its liberty by interfering

          It is thus difficult to understand why the implementation of the first PAGAMGFP was postponed for about two years in spite of the will of all leaders and
              institutions. The reason is that the action plan already adopted by the Council of Ministers did not correspond to the rules of the logical framework and it
              was decided to rebuild a new consistent logical framework with the agreed actions. Two supplementary studies were needed; for what practical

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excessively in the budget process at each stage of its cycle. It is significant that the procedure for
spending the funds of PAGAMGFP has gradually changed from the procedures of the budget to ad
hoc heavier procedures (because of additional rules) so that some leaders preferred to give up these
supports because of this heaviness.

Capacity development design and sequencing should fit specific country circumstances rather than
reflect standard or imported solution
The process of preparation and implementation of the successive PAGAMGFP which has followed
joint and external evaluations, has implied all ministry department and has ended with adoption by the
Council of Ministers, was in itself - by its endogenous character and the quality of the appropriation
of the capacity development by the government - a guarantee that specific country circumstances are
taken into account in the strategies and their application.

More specifically, the two PAGAMGFP are strongly marked by the requirements of reform induced
by the membership of Mali in the WAEMU and its important ongoing program of public finance
reform included in the directives. The four political priorities of the PAGAMGFP II which are in its
four “strategic effects” result from these directives: the tax transition (from customs duties to taxes on
domestic economic actors), the decentralization, the transition from means –based to results –based
management and finally the institution of a Court of accounts. The PAGAMGFP I which had the
objective of raising the system of public finance management to a level of quality allowing it to
benefit from the general budgetary support was also a pressing necessity for the country.

The monitoring around a technical secretarial headed by the highest official of the Ministry of Finance
(Secretary general) assisted by an entity having important and adapted means allowed the program to
develop into a pragmatic approach according to circumstances. However, result-based budget and
management detailing, exactly, all the actions and making clear the performance measurement
framework have allowed all the actors to follow the implemantation of the plan precisely and to be
informed about the pace of execution of the program and about the modifications it was appropriate to
do in the light of case of obstacles and resistance. So, some of the points considered as the weakest of
the system (external audit, management system of procurement (in particular the information system
on the signing of contracts, except the creation of an independent authority), modernization of the
cadastral register were deferred while other equally important actions were completed or accelerated
(training system in DGI).

The idea to sequence the reforms according to the phases of the budget cycle (budget preparation,
classifications, accounting, recording and reporting of the operations) to gradually introduce better
procedures and practices from the simplest to the most complex and thus to take into account the state
of development of the country and its available capacities was not clearly held in the methodology of
the reform. The PAGAMGFP does not plan technological stages, successive steps of development
that must be followed to bring the system to the optimum targeted standards. Besides, it did not set
clear priorities on which efforts should be focused.
This deficiency is doubtless one of the reasons of the failures recorded for the goals which were
critical for the overall system of public finances (cadastral register).
The evaluation of the implementation of PAGAMGFP I that does not prioritize actions implemented
or not according to their intrinsic importance (for the economic development, for the fiduciary risk) or
for their impact on the quality of the whole system is in this respect insufficient. With regard to this
developmental perspective of actions and activities based on the importance of their impact, the
meaning of the calculation of the rate of actions implemented in relation to planned activities is weak.

The institutional, organisational and individual levels of capacity development including managerial
and technical aspects, should all be taken into account in program design and implementation

Consistency in all the aspects - institutional, organizational, and individual - of the capacity
development was ensured in Mali by a comprehensive plan and the setting-up of a cell dedicated to
the management of the change, the CARFIP. This allowed the head of the directorates of the
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     ministries or agencies to manage only strategic aspects of reforms and to continue managing the
     business from day to day without difficulty. Interdependence between actions was addressed at this
     level, even if the effects of spill over were insufficiently taken into account.

     However some existing heavy procedures in CARFIP could not be avoided. Moreover, the leadership
     of the CARFIP was not sufficient in itself and the mobilization of officials of various departments was
     a key condition for the success of actions planned for their areas. The success of the training center of
     DGI tax inspectors testifies that.

     The CARFIP promoted an effective management of external consultants, experts and technical
     supports. It welcomed in particular the consultants who supported the technical aspects of
     programming PAGAMGFP. However, this coordination of outside consultant supports could be

     This structure has failed to integrate some of the aspects considered as critical by all the leaders
     responsible for capacity development. Thus, the issues relating to staff training (particularly the in-
     service tranining considered as inadequate for the scale of the problem and the absence of a school
     specialized in the the training of senior civil servants), the system of incentive and penalty of the staff,
     and the fight against corruption were undervalued.

     Donor support should be provided in a coherent, co-ordinated and programmatic manner

     The coordination of the donors is a difficult work because the context is changing and new practices
     and strategies are developing: the donors are numerous, some of them are new (both at the multilateral
     level - the global fund - and bilateral - China), they have plentiful resources and some do not see the
     point of coordination.

     Besides, coordination is - financially – difficult to measure because the PAGAMGFP is funded
     through the country budget and thus on general and fungible budget support, which is very adequate
     with respect to alignment, but prevent from identifying the origin of funds.

     The progress was very fast according to this criterion, thanks to the leadership of one of them
     (European Union) which has developed sustained endeavours. Both donors and country government
     leaders consider it very useful, although some of them regret the transaction costs which it induces for
     donors or reduce this coordination to an ex post exchange of information avoiding duplications. The
     donor‟s unity is however more difficult to build in Mali than in other countries because of the
     differences between them regarding the model of PFM that should be promoted.

     The establishment of a comprehensive and coherent external audit complying with international
     commitments of Mali (WAEMU) suffered from this absence of a common strategic point of view.
     Studies ordered by donors remaining locked in existing models prevailing in the countries of the
     donors, failed to reach a common solution, which nevertheless exists. The national culture, the very
     specific country political system, the institutional domestic context were not sufficiently taken into
     account and the capacity of innovation was lacking. The implementation of an essential element of
     PFM system which has major spill over effects was postponed.

     This coordination however lacks an authority capable of imposing on all donors to take into account
     in their individual triggers the overall constraints weighing on the budget at all the stages from its
     designing to its execution. The financial, economic and thus macro support (the general balance of the
     budget and the public finance) is too separated from the sector-based support.

     This close coordination still collides with the obligations of the bilateral donors imposed by their
     government, domestic external audit control and national public opinion. They require that support
     integrated in a coherent country program strengthens its political influence, is useful to its interests,
     respects national rules of good management of public funds and is visible. However, this opposition is
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less strong in the case of support to governance which by nature cannot result in a high symbolic
value (unlike, for example the large urban central exchanger to which Malians have given the name of
the Country donor). The donor isolated support tendancy is still strong. Aid funds dedicated to
capacity development are still important. As a result, the residual needs of financing for the full
implementation of PAGAMGFP (I and II) remain underdefined, which hinders the government from
identifying and mobilizing the needed external resources.

Within the 10th FED institutional support relative to the Mali‟s OMD contract and the
implementation of the strategy framework of the EC (backbone strategy) the European Union wants
to define axes, contents and means of a harmonized multiannual program for institutional supports
(PPHAI) to federate all the donors around a specific objective consisting of accompanying the
government to cross a new stage of modernization of its PFM and significantly reduce the fiduciary
risk to sustain budgetary support.

                         Capacity Development in PFM – Practitioners Guide Version 2
                                         Liste des documents consultés

     Rapport annuel 2009, Le Vérificateur général du Mali, Bureau du Vérificateur général du Mali.
     Rapport sur la gestion des Finances publiques au Mali, Exercice 2009, Union européenne, Ambassade
     du Mali, Rapport élaboré par Mathias ROBERT, Chargé de programmes - Economie du
     Evaluation de la gestion des finances publiques au Mali, selon la méthodologie PEFA, Rapport
     Provisoire sur la Performance de la Gestion des Finances Publiques, Mai 2010.

     Deuxième Plan d‟Action Gouvernemental pour l‟Amélioration et la Modernisation
     de la Gestion des Finances Publiques (PAGAM II), 12 juin 2010. Ministère de l‟économie et des
     finances, Secrétariat général, CARFIP.

     Définition et analyse des modalités de mise en œuvre des appuis institutionnels attachés au contrat
     OMD pour le Mali, Rapport de programmation, Mars 2009, DFC, UE (Marc Raynaud et Pascal
     Arrangement Cadre relatif aux Appuis Budgétaires.

     Arrangement Spécifique relatif à l'aide budgétaire Globale.

     Arrangement Spécifique sectoriel en faveur des secteurs sanitaire et social.

     Arrangement Spécifique sectoriel en faveur du Programme d'Investissement dans le secteur de
     l'éducation (PISE II).

     SCAP et Plan d‟action pour la mise en œuvre de la déclaration de Paris.

     CSCRP 2007-2011 la matrice d‟actions prioritaires et le cadre d‟évaluation.
     Rapport d'appréciation par les PTF de la mise en œuvre du PAGAMGFP en 2006 et en 2007.

     Rapport préliminaire de l'étude sur le diagnostic des systèmes de contrôle public au Mali.

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                               Liste des abréviations et acronymes

ABG : Appui Budgétaire Général
ABS : Appui Budgétaire Sectoriel
ACCT : Agence Comptable Centrale du Trésor
ACDI : Agence Canadienne de Développement International
AFRITAC : Centre régional d‟assistance technique pour l‟Afrique de l‟Ouest
ARMDSP : Autorité de Régulation des Marchés Publics et des Délégations de Services
BCEAO : Banque Centrale des États de l‟Afrique de l‟Ouest
BVG : Bureau du Vérificateur Général
CARFIP : Cellule d‟Appui à la Réforme des Finances Publiques
CBMT : Cadre Budgétaire à Moyen Terme
CDI : Commissariat au Développement Institutionnel
CDMT : Cadre de Dépenses à Moyen Terme
CF/AN : Commission des Finances de l‟Assemblée Nationale
CGSP : Contrôle Général des Services Publics
CNFCTE : Centre National de Formation des Cadres des collectivités territoriales
CSCRP : Cadre Stratégique pour la Croissance et la Réduction de la Pauvreté
CT : Collectivités Territoriales
DAF : Direction Administrative et Financière
DGB : Direction Générale du Budget
DGCE : Direction générale du Contentieux de l‟État
DGD : Direction Générale des Douanes
DGDP : Direction Générale de la Dette Publique
DGI : Direction Générale des Impôts
DGMP : Direction Générale des Marchés Publics
DNPD : Direction Nationale de la Planification du Développement
DNTCP : Direction Nationale du Trésor et de la Comptabilité Publique
DRH : Direction des Ressources Humaines
EP : Établissement public
EP : Établissement public autonome
GAR : Gestion Axée sur les Résultats
GFP : Gestion des Finances Publiques
MEF : Ministère de l‟Économie et des Finances
PAGAMGFP : Plan d‟Action Gouvernemental pour l‟Amélioration et la Modernisation de la gestion
des finances publiques
PARAD : Programme d‟Appui à la Réforme Administrative et à la Décentralisation
PDI : Programme de Développement Institutionnel
PEFA : Public Expenditure and Financial Accountability
PFM-PR : Public Financial Management – Performance report
PTF : Partenaires Techniques et Financiers
PTI : Programme Triennal d‟Investissement Publics
RP : Recettes-Perceptions
SCCS : Section des Comptes de la Cour Suprême

                        Capacity Development in PFM – Practitioners Guide Version 2
     Annex D Morocco Case Study
                     Kingdom of Morocco – Preparing the grounds for reforms
                                         A case study

     A decade ago, Morocco launched a vast public sector and public finance management reform effort,
     which is focussing on reforming the civil service, simplifying transactions within the government
     apparatus and improving service delivery. Recent Interviews with civil servants and others in
     Morocco found that the participants welcome the reform efforts, which have led to important changes.
     However, an emphasis on “techniques” has been to the detriment of the other issues: no clear plan
     was developed for the reform to establish a clear goal, share a vision and manage change. Thus, the
     reform efforts haven‟t yet attained the overall objectives of increasing efficiency and better service
     This study includes some recommendations:
       - Engage the parliament, which will help focus budgeting on policies and programmes rather than
           adopt an ad-hoc project basis.

            the line ministries: these functions have been considered support, rather than non technical,
            functions. These often means little capacity in the units concerned. While this is changing, it
            remains a key weakness area.
      -     Boost coordination among reform streams. The reform over the past ten years has been an
            incremental process focusing on small steps and tools, but delinked from its overall objectives.
            This is largely due to the lack of leadership that would have recognised the need for
            transformational (framebreaking) change.

      -     Define the institutional arrangements for inter-ministerial work and coordination and for
            ensuring the interface between higher levels of management to middle management. There is a
            demand for clearer leadership and stewardship by the Prime Minister‟s Office, but leadership l
            is also required to trickle down to programme, sub-programme, and activity label.


        1.1 Key Elements of the Institutional framework
     Morocco gained its independence from France in 1956, with the restoration of the Alawi monarchy
     under King Mohammed V. In 1961, he was succeeded by King Hassan II, under whose leadership
     Morocco entered an era of economic development and public sector reforms initiated in the 1990‟s.
     Mohammed VI was only 36 when he succeeded his father at his death in July 1999.
     Morocco is a constitutional monarchy and the king is the dominant political figure, with a dual role as
     temporal leader and spiritual guide (amir al-muminin). The king appoints the prime minister and the
     government and heads the armed forces. King Mohammed VI has declared his intention to modernise
     the monarchy.

     The House of Representatives is elected, but has only limited powers and plays a weak role in the
     management of public finance. The Political Parties Law bans parties based on religion. However, the

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moderate Islamist « Parti de la justice et du développement » has the second-largest number of seats
in parliament and plays an important opposition role, although it is not included in the government. It
is the only party that has demonstrated a keen interest in the current management of public finance.

The re-birth of the audit bureau Cour des Comptes, in 2007, has been a game changer through the
publication of its first annual report. It has created the space for educating citizens and the media on
public finance management, creating demand for more transparency and accountability supported by
an emerging civil society.
Key Economic Data
Annual data                                       2010     Historical averages (%)             10
Population (m)                                    32.3     Population growth                   1.2
GDP (US$ bn; market exchange rate)                93.5     Real GDP growth                     5
GDP (US$ bn; purchasing power parity)             4        Real domestic demand growth         6
GDP per head (US$; market exchange                2,89
rate)                                             1        Inflation                           2.4
GDP per head (US$; purchasing power               4,71     Current-account balance (% of
parity)                                           1        GDP)                                -4.1
Exchange rate (av) Dh:US$                         8.37     FDI inflows (% of GDP)              2.9
Source:     Economist Intelligence Unit

The main economic policies are designed to generate faster growth, with the goal of reducing high
levels of unemployment, poverty and illiteracy. Progress has been constrained by policy inertia and a
bureaucratic and corrupt civil service. This has prompted a vast public sector reform, intertwined with
a public finance management reform since 2002. Public Finance Management was a fundamental
pillar, with the goals of reforming the budgeting process, focusing performance, liaising to the fight
against corruption and affecting procurement reform.
Today, the policy focus has shifted to recognise Morocco‟s special status with the EU (Statut Avancé)
and the necessary development of the regions. This is increasing the focus on public finance
management and civil service reforms to raise capacity and the administration capability to respond to
these challenges.

Morocco: Central Government Finance (source: IMF 2009)
                              2007     2008    2009                      2010
                              169.     203.                              188.
Revenue      in million MAD   3        7       187.2                     5
             in % GDP         27.5     29.6    25.3                      24.2
Expenditur                             212.                              224.
e            in Million MAD   177      4       209.09                    3
             in % GDP         26.7     30.8    28.5                      28.9
Wage Bill    in Million MAD   85.7     70      78.5                      80.5
             in           %
             Expenditure      48%      33%     38%                       36%

                          Capacity Development in PFM – Practitioners Guide Version 2
     The country's complicated tax system and relatively high tax rates are major constraints on business.
     However, Morocco has initiated a fiscal reform programme aiming at simplifying the tax system,
     reducing the tax burden. Tax exemptions and subsidies are being reduced.

     In recent years, Morocco has reduced its dependence on phosphate exports, emerging as an exporter
     of manufactured and agricultural products, and as a growing tourism destination. However, its
     competitiveness in basic manufactured goods, such as textiles, is hampered by low labour productivity
     and high wages. It has also been hit directly by the global crisis affecting the real economy. Although
     Morocco runs a structural trade deficit, this is typically alleviated by substantial services earnings
     from tourism and large remittance inflows from the diaspora.

         1.2 Recent PFM reforms and trends
     As described in a series of reports prepared for donors‟ support programme evaluations, reform efforts
     were initiated in the second part of 1990s. They include the Constitutional Reform of 1996 that led to
     the creation of the Cours Régionales des Comptes (CRC) in addition to the Cour des Comptes, which
     is the Supreme Audit Institution -SAI- of Morocco. The political commitment and the direction of
     reform were renewed in December 2001 when the Prime Minister issued a circular to orient the
     reform towards deconcentration, a major step to prepare the “advanced decentralisation”43 coming
     nowadays. This effort was supported by the Programme d‟Appui à la Réforme de l‟Administration
     Publique (PARAP) financed by the African Development Bank, the European Union and the World
     Bank. These efforts had the following goals:
             1.       Performance-based budgeting. The intended shift is from an item-based budget to one
             where activities respond to performance criteria. This was a response to a sclerotic
             administration with unclear goals in terms of service delivery. The reform effort has mainly
             focused on the definition of performance indicators pertaining to efficiency measures. It
             resulted in the definition of output indicators directly linked to activities and sometimes
             inputs. Many indicators44 are not useable as performance measure of programmes or
             activities, and cannot be measured or linked. The current budget classification does not permit
             linking performance to allocations. Most departments have defined indicators that now form
             part of the budget documentation, though its readability and usability is very limited.

                2.      Medium Term Expenditure Framework. The goal is to improve the readability of the
                budget, focusing on programmes and performance implied defining a new planning horizon to
                move from a yearly item-based budget. An MTEF classification and a manual were
                developed and most departments have developed an MTEF. However, the documents appear
                as theoretical constructs, delinked from the budget cycle and from the sector planning. The
                costing is weak and the planning not subject to an overall budget constraint.

                3.      Discretion to manager (globalisation des crédits). This echoes the move towards
                performance budgeting, recognising that making managers responsible for performance
                should come with additional discretion in the activity/resource mix. The focus was on
                defining the space in the budget classification within which managers could forego
                authorisation for virements. The Moroccan budget classification has seldom changed since

          Régionalisation Avancée
                     There are more than 250 pages of indicators published with the budget though there are not systematically
                informed by recent data, baselines, previous year realisation.

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        but the managers have been granted authority up to the “Paragraph”45. Note that though it
        consists in a simplification, the budget classification is still administrative and item-based and
        does not reflect programmes nor activities. This reform was also accompanied by a move
        from ex ante to ex post controls largely supported by the Inspection Générale des Finances
        (IGF) and the Trésorerie Générale du Royaume (TGR). This led the IGF to establish a
        capacity building programme in collaboration with the Inspection Générale de
        l‟Administration du Territoire (IGAT) and the TGR. The IGF and IGAT benefited from
        institutional twinning with the Office de Lutte Anti Fraude (OLAF) and Inspection Générale
        de l‟Administration (IGA France).

         4.       Human resources management reforms. The Ministry of Modernisation of the Public
         Sector (MMPS) leads the civil service reform, which aims at anchoring the Moroccan Civil
         Service in modernity with simplified status and performance-based remuneration. The reform
         faced resistance and corporatism to protect remuneration. The principle of professional
         development through training was introduced as the possibility to dedicate 1% of the wage
         bill of each department to training. This has permitted progress in many departments. Each
         department underwent functional analysis to determine the competences required and the
         existing gap with the current human resources. This did not systematically lead to capacity
         development plans but to a mapping of competence requirements (Référentiels Emplois
         Compétences REC). It did not lead either to systematically allocating earmarked resources
         (1% of wage bill) to reduce the gap.
In addition to these thrusts, largely led by the Ministry of Economy and Finance (1 to 3) and the
Ministry of Modernisation (4), the Trésorerie Générale du Royaume (TGR) has led and undertaken
reforms on public procurement, internal controls and internal audit and has introduced an accrual
accounting reform.
The TGR, contrary to the ministries, has sequenced its reform plan and has paced its reform effort
carefully, considering capacity issues and roll-out.
Computerisation (Gestion Intégrée de la Dépense GID), in support of the processes, was almost
complete by end of 2010 at central level, allowing the authorising officers to complete transactions
online, simplifying them and ensuring faster treatment.
In 2007, the Institut de Contrôle et de Prévention de la Corruption (ICPC) was established, following
work conducted in 1998 and 2005 on the incidence of corruption. Its board members span the civil
service, the parliament, the private sector and civil society, nominated intuitu personae to safeguard
their independence. It started work in January 2009, following the nomination of its members, and
focuses on fives axes: developing independent tools to measure corruption, improving the integrity
and transparency of the civil service and the budget process, bettering the integrity and transparency
of the judiciary, enhancing the role of the civil society and private sector and reforming the legal and
regularity framework of the political parties. The mandate of the ICPC is large and has many
ramifications for public finance management and public sector reforms.
For the majority of interviewees and from the evaluation reports prepared, the Prime Minister‟s
budget reform and deconcentration efforts are viewed as preparatory activities that will culminate in
the enactment of a new Budget by-law (Loi Organique de Loi de Finance) in 2011. This by-law would
bind the government and the administration to the principles and innovations brought in the 90‟s.
However, this approach has been seen some criticism of of its design and management.

           This is one level higher than the budget item and opens the possibility to design a
        paragraph as an activity‟s budget

                          Capacity Development in PFM – Practitioners Guide Version 2
         1.3 External factors impacting Capacity Development
     There are important training institutions in Morocco and opportunities for professional development.
     These are the Ecole Nationale d‟Administration (ENA), Institut Supérieur d‟Administration (ISA) and
     universities. Morocco has also entered an era of institutional twinning programmes and developed a
     specific mechanism to design and manage them, with a high success rate. This in itself demonstrates
     the skills and capacity available in the central administration as twinning arrangements require
     advanced procurement competencies.
     A key external factor has been Morocco‟s drive to obtain the “Statut Avancé” with the EU, making
     reforms a vehicle for increasing commercial exchanges with the EU. The European Commission, the
     Member States and other donors have respond to these efforts.
     The donors present in Morocco have contributed to the reform design and its financing, thereby
     importing “best practices” for OECD countries. This led to the focus on the four thrusts described
     above, but without an a priori assessment of the readiness of the administration and with inexact
     sequencing of the activities. This probably contributed to the current status quo described by the
     interviewees: Reform efforts have allowed introducing techniques but have not permitted reaching the
     overall objectives of increasing efficiency and better service delivery.
     The emphasis on techniques has been to the detriment of the “soft” issues: no clear plan was
     developed for the reform to establish a clear goal, share a vision and manage change. This has been a
     recurrent theme of the interviews. In addition, the focus on tools has also been to the detriment of a
     focus on making people capable of adopting and adapting the tools to the circumstances of Morocco.
     Morocco‟s administration faced two other challenges that impacted the reform design. First, the
     administration was overly procedural and burdened by practices that did not support institutional
     coordination. Second, the deconcentration and the decentralisation both implied an increase burden to
     manage expenditures while the capacity wasn‟t increased, creating a bottleneck. For example, the IGF
     is composed of 62 inspectors, theoretically in charge of 9500 entities.
     On the financial and administrative network, this study did not dwell sufficiently in depth to capture
     all the constraints, being limited to a series of interviews in the capital Rabat. Yet, interviewees
     mentioned challenges in the context of the deconcentration and the decentralisation, principally tied to
     its administrative network and level of capacity. This is of major importance for Morocco, which
     seeks to accelerate the development of its regions through greater devolution.
         1.4 Key PFM donors
     The Key PFM donors are the African Development Bank, the European Union and the World Bank.
     The combined size of the aid delivered, though significant in nominal terms, is not significant relative
     to the size of the Budget and the GDP (do you have any recent figures expressed as a portion of
     Other donors bring technical assistance. A good example are the exchanges with French Institutions
     through visits and training of high-level civil servants in French public administration schools, which
     take place outside the institutional twinning arrangements financed by the EU and WB contracts.
     Morocco seeks to learn from outside by acquiring new ideas to inform its decisions on the desired
     reform path and new practices applicable in its institutions. The weight of the European Union is
     important as a trade and political neighbour, whose “acquis communautaire” is valuable for Morocco
     in the Euromed partnership. Morocco seeks to acquire it to better its systems and to reap additional
     benefit from its “statut avancé” with the EU.

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   2    Summary of Interviews and Key Findings

    2.1 Conceptual Understanding
Donors define PFM in a broad sense and their financing agreements reflect an emphasis on the reform
led by the Ministry of Economy and Finance (MEF), while failing to include Parliament or reform
management indicators. Interviewees from the administration usually define PFM in its widest sense.
The MEF defines capacity development as a broad effort including policy coordination mechanisms,
publication for transparency, addressing resistance through dialogue, providing incentives through
recognition and training, engaging in regional and international learning projects and changing the
management style of the administration. Leadership, however, was found lagging and impeding the
motivation of all human resources.
On training programmes, Morocco seeks to develop learning paths, attached to careers‟ opportunities,
and thus tying their effort to the public sector reform. This means that learning is largley done through
events that include teaching, self-experiencing and application of concepts and tools, peer learning
through physical, online exchange at country and international levels and access to learning facilities.
Interestingly, only a few interviewees directly recognised the key combination of the roles of the Cour
des Comptes, Parliament and Civil Society organisations. Though each of them taken separately are
recognised as stakeholders of public finance management, their roles are largely deemed as peripheral
to the system. Only a few interviewees did emphasise the critical role of the publication of the
Supreme Audit Institution‟s annual reports and the added value for the quality of expenditure
management. This may be a reflection of the sample of interviewees, overwhelmingly biased to civil
servants. Yet the persons met were all aware of the wider concept of PFM and its importance, thus
this finding may rather reflect the current balance of power and historical trends where the Parliament
did not have much weight.
Capacity development was defined as an internal process. For example, the internal audit mechanism
can contribute significantly by highlighting weaknesses and thereby helping institutions develop
focused plans. This was made clear by IGF and IGAT. This role came with the new focus on ex-post
audit. This is an important aspect for IGAT given the current policy focus on decentralisation
(“Régionalisation Accélérée”) and the existing capacity constraints in deconcentrated and
decentralised entities.
The TGR has defined the concept of capacity development as the capacity to manage, thus making a
priority to increase the financial management capacity. The TGR led important reform initiatives on
public procurement, on internal controls and accounting standards. In doing so, it has demonstrated a
strong leadership and stewardship of the processes, making it a priority to define internally the reform
process and sequencing and to design mechanisms for internal learning processes such as centres of
excellence and forum on performance.
The TGR has also made the sequencing of reform activities and the change management an integral
part of its capacity development concept. It developed a plan to introduce accrual accounting, based
on its assessment of the capacity and institutional arrangements in place to maintain the public
accounts. It then developed a modular approach to sequence the reform effort, focusing first on a new
accounting referential, then, in turn, opening balance sheet, quality and viability of the information,
computerised system. To manage the overall effort, TGR also developed a change management plan.
To each component corresponds a well-sequenced series of activities. The TGR coordinated this work
with directorates in the Ministry of Economy and Finance and line ministries to prepare the opening
balance sheets.
Most interviewees link capacity development directly to their own professional development. As the
reform activities were principally about getting tools in place outside the TGR, interviewees
emphasised a lack in focus on human resources, organisational development and learning.

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     The quality of leadership and stewardship cannot be delinked from the capacity of an organisation.
     These two elements were clearly made part of the capacity development. For example, where
     organisations need to work towards common objectives, leadership can address previous practice of
     working in silo. This entails a capacity to work jointly and to coordinate activities, often in a
     sequenced manner.
     Finally, also mentioned was the role of the private sector, which need to be informed and
     communicated with so that it can effectively manage programmes and execute contracts.

         2.2 Content, form and duration
     Donors have attempted to respond to demand for capacity development and to provide support
     through relevant mechanisms and expertise to the government‟s efforts. The focus has been on high-
     level expertise to support specific tasks and the regularity of the inputs, at a pace determined by the
     Moroccan Administration. The second mechanism, crafted by the EU for its media programme, is
     institutional twinning. The World Bank, limitated by its financing instruments, in supported the
     administration technically. Importantly, the documentation of donor funded programmes does not
     reflect a clear and definite attempt to address the human and organisational dimensions of reforms
     through a carefully crafted change management strategy and human resources development that could
     contribute significantly to reinforcing institutional capacity.
     On the Moroccan administration side, the expectations are high and they seek to achieve specific
     objectives. The experience of the institutional twinning has been a successful one perhaps because the
     Moroccan Administration has established a specific capacity, helping the client entities to design their
     requirements and translate those into specifications and contractual objectives. The unit managing
     twinning provides a support for selecting, negotiating and contracting as well as for managing: it has
     developed a specific know-how and reduces transaction costs for the beneficiaries, negotiating with
     partners on the capacity development outcomes.
     Morocco designs and finances its own service contracts to recruit high level expertise, which can
     bring elements of strategic thinking and planning of reforms activities as well as practitioners‟ know-
     how. This includes services similar to the institutional twinning as in the case of the French Ministry
     of Finance, selected through competitive bidding. This reveals the capacity of the administration to
     define requirements to achieve capacity development and to design the contracting arrangements to
     acquire the necessary inputs. Interestingly, this responds directly to the UNDP definition of capacity:
      «The process through which individuals, organisations and societies obtain, strengthen and maintain
     the capabilities to set and achieve their own development objectives over time. Capacity Development
     helps strengthen institutions to perform better and more consistently over time and to respond to and
     manage shocks and change »

     Morocco can also count with professional development centres though its Ecole Nationale de
     l‟Administration (ENA), Institut Supérieur d‟Administration (ISA) and Institut National de
     l‟Administration (INA). They have entered into partnerships with other schools and universities
     abroad such as France‟s ENA, allowing visiting professors and students‟ exchanges. Each is
     institutionally attached to a ministry: ENA to the Ministry of Modernisation of the Public Sector
     (MMPS) and ISA to the Prime Ministry. ISA was set-up with the tasks to develop a highly qualified
     senior cadre. Though the schools cover different level of the cadre, it is envisaged to merge them. ISA
     allows civil servants and new entrants to prepare for high-level civil service functions over two years,
     receiving a practical and theoretical education from professors and experts recognised in Morocco and
     internationally. It serves as an internal capacity development centre: ISA has conducted special
     functions, e.g. capitalising on the IGAT institutional twinning financed by the EU, conducting a
     special programme for 15 persons to prepare Morocco‟s upgrading of the legal and regulatory
     framework to meet the challenges of the “Status Avancé”.

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The ICPC is another institution that responds to a demand for capacity development. Its strategy to
curb corruption is largely about making information available by developing databases on indices and
promoting and advocating the use of open budget practices. This role is fundamental for both the civil
society, as it allows access to the right information, and for the oversight institutions as the Parliament
(both chambers) whose role is enhanced by access to quality, regular and timely information. For
example, reducing the delay for presenting the appropriation accounts is a way of promoting the
oversight role of the Parliament. It also seeks to support budget analysis by elected members.

The government‟s interviewees have stressed that donors‟ programmes have had a pull effect,
providing useful financing. The Budget Support approach retained to finance the activities is
considered a factor of success with a high execution rate and a useful pull effect. The demand for
capacity development that emerges can be categorised as internally and externally oriented. The
internally oriented demand is one that the government can address both financially and technically. It
is principally about assigning resources to develop training centres and assign expertise to design and
deliver professional development courses. It also concerns the hiring of outside expertise in the
private sector. The externally oriented demand concerns the technical partners of Morocco, not only
donors as such. There is a real interest in studying, learning by experience and exchanging practices
with professionals from other countries. This can take the form of institutional twinning as well as of
joint assignments, study tours, exchange programmes and professional workshops. There is a wide
variety of interests and forms that can be explored.

One expectation has been raised by all interviewees. Capacity development requires developing
systems for monitoring selected indicators and for evaluating programmes, so that policies and
programmes design are better informed. Indeed they perceive this as a prerequisite for a move
towards the new budget by-law (LOLF) in 2011: Emphasis on costing and budgeting programmes,
their financial and economic analysis, reinforcing the control of programmes‟ implementation and
developing the monitoring function sustained by data collection systems, designing the evaluation
functions. As it constitutes an entirely new function, developing the legal and regulatory framework is
necessary to provide the mandate to the control institution (Cour des Comptes). Donors‟ programme
evaluation have been restricted to the financing agreements themselves and did not shed light on the
broader impact of the reforms supported.

If most interviewees emphasise that the past decade of reforms has been a critical step that created a
demand for change, they say the conception of the reform programme itself did not include the human
elements (human resources, change management, leadership) and the political economy. The reform
has been a top-down exercise with an emphasis on tools that did not respond to the need for a
conceptual change of how should public finance be managed. This led to a gadgetisation of the
reform, while the essence of it, the change of culture, did not emerge.

Although a demand for better public service and a more efficient administration existed in principle,
there was no demand formulated by the Parliament. At present this demand is emerging but the
capacity of parliamentarians to deal with public finance management is restricted. This is considered
as one of the main pitfalls. The political commitment for the reform has not been renewed since 2001.
It is expected that in 2011, the new budget by-law will result in a new commitment and a clear
leadership from the PM office to coordinate the activities of the Ministry of Modernisation of the
Public Sector and the Ministry of Economy and Finance.

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         2.3 Process
     There are stories emerging on the initiation of the ADB-financed PARAP reform programme, which
     was the fruit of a working group including line ministries that led to the PM‟s circular in December
     2001 and its guide. Donors, however, tend to view this reform as the fruit of their action. Part of the
     explanation lies in the PARAP‟s performance monitoring indicators, annexed to the EU and World
     Bank financing agreements, and that drove the release of the budget support instalments: the pull
     effect. As these indicators are mainly activity products, confusion was made on the reason for the
     activities: release of PARAP instalments rather than reform activities. This risks confusion on
     responsibilities and programmes‟ objectives, namely meeting donor conditions for disbursements or
     achieving effective change of the PFM system.
     There is no evaluation capacity in Morocco at this stage, neither of public policies at sectoral level nor
     of the reform efforts. This has been expressed as a clear need and an area where donor-support would
     be useful. Without such independent evaluation mechanisms, stakeholders feel that it is hard to lay
     foundations for better reform design, addressing weaknesses and institutional bottlenecks, on which
     all can agree.
     In the past decade, it is believed that the professional competence of the Moroccan administration
     increased significantly in response to an upgrading of the legal and regulatory framework. In this
     effort, interviewees recognised the important role of development partners. Indeed some reference
     was made to structural adjustment programmes as a necessary step to clarifying the respective roles of
     the public and private sectors prior to reforming the administration. The Government demonstrated its
     political willingness to reform and embarked on a modernisation of the public sector that included a
     large public finance management component. However, if development partners saw a coherent plan
     encapsulated in the PARAP, most interviewees of the government saw a series of fragmented efforts
     and isolated professional development plans. There was no clear goal, shared within the civil service
     and a coherent plan to manage the change and ensure institutional coordination.
     Focusing on technical aspects such as the legal and regulatory framework does not lead to sufficient
     progress. Budget support is a useful instrument to support governments‟ policies but may not be best
     suited for capacity development. As emphasised throughout the interviews, the “soft skill”
     components, mainly change management, institutional cooperation and leadership, have not received
     sufficient attention. Budget support is not suited for institutional capacity building, at least, not in
     initiating the process because it requires quantifiable indicators and predictable dates of achievements.
     Interviewees describe this as a weakness of the donor support available. The direct support available
     was perceived as donors‟ treating capacity development in the margins rather than confronting the
     difficulties. This is deemed important as resistance to change is important and moving from a toolkit
     reform to a reformed system and administration requires the buy in of all stakeholders including the
     senior manager and the operational employees.
     The ICPC and the Cour des Comptes played an important signalling role. Though the fight against
     corruption was not new in Morocco46, there was not legal framework to guide the work and to provide
     a mandate to an institution. In 2007, the ICPC was created, though its board member were only
     nominated in 2008 and work begun in earnest in January 2009. This sent an important signal.
     The role of the Cour des Comptes has been a “game changer” from the publication of its annual report
     in 2007. It made it into a credible control institution whose work had direct implications for all the
     public sector and other control institutions, which had to adapt their practice to support the work of
     the court. It has provided a mechanism for the media and the public to enter the public finance
     management arena. The court‟s role and the ICPC‟s one are mutually reinforcing. Both institutions
     induced transparency in the management of public finances and help creating a demand for it outside

          Specific work done in 1998 and in 2005

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the Government. With the regional courts, this process is trickling down to the lower tiers of
Interviewees consider that the concept of capacity development has been applied in a limited manner,
often through a specific focus on a “project” (an activity). This echoes the focus on tools during the
period under review: developing a set of indicators, develop a medium term budget, etc. However the
line ministries require wider capacity building to enable choices made on objectives, method of
implementations and evaluation of impact. It does not suffice to develop professional competence and
tools if the roles of the budgeting, accounting and contract management functions are not serving the
ministry‟s objectives more widely. These findings vary across the ministries, with the Ministry of
Transport for example being better equipped, largely due to the nature of its activities on large and
complex contracts.
    2.4 Impact of Capacity Development initiatives
As indicated above, the administration is not currently in a position to evaluate the impact of its
efforts. The Supreme Audit Institution is not in a position to address this either. This leads to a
difficult situation whereby stakeholders do have “a feel of what‟s happening” but cannot use an
analytical framework to support their understanding and make decision to gear the change process.
This is also true of donors‟ support as their impact is determined by the broader reform effort‟s
Interviewees indicated that the mapping of the human resources of the ministries and their skill
requirements would usefully be applied for two parallel processes: recruitment that depends on
competences and then professional development through continuous training. Professional
development generates high expectation both in terms of rewards / incentives and in reforming the
system. The 1% quantum of wage bill that each ministry is allowed to spend on training (in addition
to unaccounted time as training by peers from the ministry) does not appear to be used in a coherent
manner with the mapping. Thus, the impact of the public sector reform effort has been limited for
developing capacity in public finance management but the foundations has been laid.

A key impact of the reform has been a change of budgeting practice. The budget is no longer
comprised of recurrent expenditures and capital expenditure. Now, it is a single document, with a real
discretion devolved to managers for allocating resources within the space defined by the “paragraph”.
Though this is not truly an activity-based budget, the paragraph attempts to regroup items that
contribute to an activity. This change has been reflected into the institutional structure of the
ministries in 2009: the former directorate for economic affairs and planning in charge of the capital
budget and the directorate of judicial and administrative affairs responsible for the recurrent budget
have been merged into a financial directorate.
Box 1: Public Procurement
A new decree was promulgated in 2007 to initiate a reform of the public procurement system. The
TGR led this effort with a clear objective: convergence towards the EU. Three words are recurrent in
the description given: simplification, clarification and dematerialisation. A training programme
sustained the reform activities, with practical training for all staff and training leading to certification
for managers. Centres of excellence were identified for the quality of their procurement to serve as an
internal capacity building mechanism: developing internally a top-notch capacity to impact positively
on the other institutions and act as a resource centre. The TGR is now exploring distance-learning
possibilities. This effort was concomitantly led with the development of a web portal that provides
access to the public and thus private sector to information on the legal and regulatory framework and
on the operations (publication of all procurement above MAD 200 000 and allows controlling for
slicing through the financial management system). Dematerialisation and simplification also
materialised through the “vendor‟s vault‟, an online data repository that the vendor can update with its

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     administrative data and supporting documentation, and thereby diminish the administrative burden.
     For the TGR, capacity development meant that it had to develop its capacity to effectively manage.
     The recognition that legal and regulatory framework and internal controls are not sufficient safeguards
     and mechanisms to achieve efficiency and effectiveness in procurement, led to a sustained effort on
     professional development to better the practice. Mechanisms were developed to help disseminate
     information and standards across the kingdom. A new decree has been enacted to instigate unicity of
     the legal and regulatory framework for all public sector entities. In addition, it established the Council
     for competition and mandated the ICPC, reinforcing oversight and transparency.
     The impact of the ICPC is yet to be felt in practical terms given its recent start of activities; however,
     the impact on the civil society, the administration and transparency of transactions has already been
     felt. It is a strong message. The ICPC publishes an annual report in complement to other independent
     initiatives as Transparency International since 2009. It presents the status of corruption in the
     Kingdom. Similarly, the publication of the Cour des Comptes Annual Report since 2007 has led to
     changes, allowing the public, media and parliamentarians to obtain an analysis of the quality of
     expenditure management.

     Box 2: Internal Controls
     A new internal control system has been developed and implemented, allowing a modulated control
     whereby the services develop internal controls to support their activities rather than depending on an a
     priori internal audit. The TGR led this effort and coordinated it with the IGF. Indeed this is one of the
     rare examples where coordination of reform activities and sequencing has been fruitful, under the
     TGR‟s leadership. The contribution of international experience and expertise came through the French
     Ministry of Finance, hired through competitive bidding directly by the TGR. Thanks to this
     contribution, innovative capacity building was introduced: a forum of performance, making possible
     to identify good practices in the Moroccan administration and to replicate them. The support also
     assisted in developing manuals, templates and a files management chart. The TGR and IGF
     coordination allowed focusing efforts on different levels in the administration, using the network of
     the TGR to address the needs of the deconcentrated authorising officers. This is an on-going effort
     In the decentralised context, IGAT managed a successful capacity development programme. Three
     axes were followed: the revision of the legal and regulatory framework, the modernisation of the work
     techniques and methodologies, introducing information systems and a programme of professional
     development of the staff through new hiring procedures and training. To achieve this, IGAT focused
     on human resources and sequencing: taking a new audit function meant that internal controls had to
     be established first. It has thus taken a new role, as an internal resource centres responding to the
     needs of the decentralised entities, to develop internal controls and allow decentralised entities to use
     the audits as checks. It has entered into a twinning arrangement its equivalent structure in France to
     manage its reform. This twinning emerged after a careful definition of its needs and learning
     objectives, allowing a negotiation with the Inspection Générale de l‟Administation – IGA to secure
     the results.

     Box 3: Sequencing
     The TGR took a carefully sequenced approach to its accruals accounting reform: first the TGR and
     the division of the Ministry of Economy and Finance responsible for commitment control and
     accounting merged, making the TGR the central institution in control of all accounting in the
     Kingdom, then the TGR embarked upon a major capacity building programme including new
     accounting standards and practices. The TGR has taken a careful modular approach. Its decision is
     based on its appraisal of the gains and risks, and of the budget execution control and its institutional
     characteristics, placing the TGR in a central accounting position not drawing in all any ministry.

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   2.5 Sustainability
The first enhancing factor is the creation of internal capability to develop capacity: in Morocco, there
exist schools, universities and professional development mechanisms to develop capacity, mainly
through three processes. The first is reform of the system through legal and regulatory framework and
manuals, allowing modernising the basis for the practitioners. The second is the professional
development for the current practitioners. The third is the training of future practitioners in Morocco
in modern institutions and their recruitment through competitive selection. These three processes form
the basis upon which any administration can develop its own capability to create capacity and
establish its reforms‟ objectives.
Some interviewees recommended several leads for sustainability of the capacity development and
reform effort, as summarised below.
First, they view the role of technical partners as a useful catalyst and an important means to financing
activities that may be difficult to push through the budget process, such as pilots to test new methods
and techniques prior to upgrading systems and entering into a larger professional development phase.
There is a demand emerging for organisational learning and capacity in developing programmes and
curricula to support professional development. There are expectations on the role of the donors as
technical partners enabling access to such expertise.
Second, there is a need for capacity to evaluate the impact of public policies. All interviewees in a
senior management position pointed out that evaluation and the capacity to perform analysis of the
results obtained were necessary to secure the reform progress. Evaluation of public policies, whether a
reform or a sector ones, does not exist: this practically means that managers and decision makers are
not able to rely on analytical information to shape future programmes and address current
shortcomings. This, coupled to a lack institutional cooperation, certainly contributed to reducing the
capability to pilot the reform over the past decade.
Third, learning through others‟ experiences was emphasised. Morocco seeks to learn from the
European Union countries and compare itself to them. Peer exchange and visits are seen as an
important way to learn and seek to understand concepts and processes and how they can be applied to
the context of Morocco.
To these recommendations from the interviewees, we can add:
       Engaging the Parliament. The parliament is currently disengaged, though this may be the result
       of history and its limited capacity to comprehend PFM given the lack of readability of the
       budget, the absence of appropriation accounts submitted timely and of audit reports until 2007.
       This may change with publication of the Cour des Comptes Annual Reports and the ICPC‟s
       reports. Yet it may need support. The vote of the 2010 budget was done with a very little
       representation of the parliamentarians. Further change is expected from the new Budget by-law
       that shall de facto apply all the “gadgets” effectively to transform the Budget Bill from a list of
       difficult-to-relate figures and indicators to a programme-based budget. Engaging the Parliament
       is also considered necessary to help focus on policies and programmes rather than adopt an ad-
       hoc project basis: one example cited is the education sector, whereas in 2008, the King put the
       focus on education. The sector‟s budget quadrupled but results have yet to be seen and
       progresses reported.

     Leadership. One of the problems mentioned was a necessary change of attitude of senior
     management towards budgeting and accounting functions in the line ministries: these functions
     have been considered support functions, i.e. non technical ones as would be agronomist or
     transport engineers. This often translated to little capacity in the units concerned. This is now
     changing but remains a key weakness area. Interviewees emphasised the need for institutional
     changes to reposition the functions and grant the new divisions with the necessary budget and
     management discretion.

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            Productive Cooperation. Most interviews recognise that the overwhelming issue is how to
            respond to the leadership and stewardship requirements and ensure that leaders of different
            institutions are able to organise a productive coordination. The reform over the past ten years
            has been an incremental process focusing on small steps and tools, but delinked from its overall
            objectives. This is largely due to the lack of leadership that would have recognised the need for
            transformational (framebreaking) change. The TGR has certainly demonstrated a stronger
            appetite and ability to change. The challenge coming ahead is to develop capacity in all quarters
            of the country‟s public finance management perimeter: central administration, deconcentrated
            and decentralised administration, private sector and the elected members of parliament and

            Linkages. There‟s a need to better define the institutional arrangements for inter-ministerial
            work and coordination and for ensuring the interface between higher levels of management to
            middle management Leadership is required at programme, sub-programme and activity levels.

     3. Conclusion.
     Budget support coordinated between the African Development Bank, the EU and the World Bank has
     served as a useful incentive at times, but has lacked the vision beyond the indicators and a support to
     change management.
     From the Moroccan‟s side, the regular but punctual assistance of high calibre advisors to a reform
     process is seen as a very pragmatic and simple way to mobilise expertise: Morocco seeks more of it
     and not only from francophone countries. The experience of Morocco demonstrates that donor‟s
     support has to be flexible. Financing agreements should be able to resist change of direction and
     objectives. This is necessary when addressing reforms where the goal is known but the path to attain it
     is not.

        3     Country analysis

     The public finance management reform was born out of the Ministry of Economy and Finance,
     precisely the Direction of Budget. The document orienting the reform effort published by the Primer
     Minister Office was a reference framework, not a defined action plan. The approach was to initiate a
     reform effort and generate demand from the departments, making it an internally demand-led reform:
     building the tools into the system to prepare the move to a new budget by-law that would make it a
     legal requirement to manage and report on performance within a medium-term framework. The
     absence of a coherent plan and vision, supported by a change management strategy led to a
     gadgetisation of the reform. The lack of clear indicators and targets and the confusion between the
     Government‟s programme and the donors‟ support programmes that ensued, resulted in a feeling of an
     imposed reform set of activities.
     This is certainly recognised now. The past decade of reform effort has served as an important and
     useful learning period. Stakeholders worry that energy losses were important and could have affected
     the ability of the Moroccan Administration to transform itself but they all agree that today PFM
     should be defined in the widest possible sense, and reform effort implies that both technical activities
     and their sequencing, and capacity development cannot be treated in isolation. They all agree on the
     necessity and important role of leadership and stewardship for managing change. This is most visible
     at the TGR whose management developed a clear vision shared with the organisation‟s employees.
     Taking into consideration the lines of the DAC:
              1.      Supporting country leadership and ownership should be central to donor approaches:
              this has come about strongly through several channels. First key informants emphasised the
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necessity to establish clear leadership. This may include actions on defining further the PFM
reform as would be the case once the LOLF is passed. Second, the stewardship of the reform
process is deemed weak and Morocco would gain from a shared vision amongst the senior
management. Third, coordination is weak and led to isolated efforts. Introducing high-level
joint working groups to bring together the senior management in a coordinated management
is seen as a critical step to build capacity to manage and provide impetus (change
management). Fourth, the change management strategy should be developed and
implemented forcefully, giving an opportunity to all concerned to adhere to a vision and
understand how their work contributes to it.

2.      Capacity development design and sequencing should fit specific country
circumstances, rather than reflect standard or imported solutions: In Morocco, there is a
feeling that the PARAP, the donors‟ support programme, and the country‟s reform plan were
one and the same. This reflected in a single matrix of objectives that was born from the
necessity to determine donors‟ programme disbursement indicators and targets. That said, the
reform effort is country-born and led. The administration recognise the push-pull role that
international community can play but emphasise the powerful role and the impetus given by
the King in his public address as well.

3.     The sequencing was not clearly determined in a national strategy but two factors
informed the process:

        a.      Develop the skills and tools for moving towards performance management
        and budgeting: this is intended to form the base upon which the new budget by-law
        (LOLF) can enshrine the new focus rather than passing a new budget by-law and
        thereafter attempting to build the systems to implement it; it was done on a
        “voluntary basis” but has led to what some qualify as a “gadget” reform;
        b.      The TGR has demonstrated strong leadership and stewardship of the reform
        process, carefully sequencing its activities, coordinating with other institutions and
        defining a change management strategy that encompasses professional development.
        These two parallel approaches both responds to absorbing international practices and

4.       The efforts of the Government on public sector reform and capacity development
have been welcomed, as a demonstration of the political will to reform but have been
criticised as a series of fragmented efforts and isolated professional development plans. A
vision and a coherent plan are lacking. Without it, it has not been possible to anchor the
professional development efforts into the overall capacity development effort, inclusive of the
public finance management reform and contributing more significantly to the broader
development objectives of the Kingdom of Morocco. Clearly, there has been a significant
increase of professional competence and know-how but this has not been weaved into a
reformed administration: each institution operates in silo. There is no history of joint work
between institutions and the reform has not focused on creating these institutional
arrangements. This also means that no mechanism was developed for managing the reform
effort and coordinating institutions. Most interviewees raised this issue as a limitation of the
past decade and a challenge to face.

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     5.      The institutional, organisational and individual levels of capacity development,
     including managerial and technical aspects, should all be taken into account in programme
     design and implementation: clearly this was not the case in Morocco and may represent the
     biggest challenge and most important lesson. There exist centres of excellence in the
     Moroccan Administration, both practitionners centres (but they lack a forum) and
     professional development centres (but they lack a role in the broader reform agenda). The
     focus on developing capacity has been narrowly defined as developing professional
     competence through regular training programmes. The best example is probably the IGF that
     can only recruit small cohorts of students each year but cannot develop its programme further
     due to limited post opened, space and equipment limitations and time constraints for training
     new recruits47. This is by no mean sufficient to address the needs of the central
     administration, let alone to begin addressing the needs of the decentralised administration, at a
     time when the Kingdom is moving rapidly towards regionalisation (Régionalisation

     6.         Donors supported Morocco through two main mechanisms:

                        A budget support coordinated between the African Development Bank, the EU
                        and the World Bank that has served as a useful incentive at times to make
                        progress, but has lacked the vision beyond the indicators and a support to
                        change management;
                        Addressing requests from the Moroccan Administration to finance capacity
                        development projects: preparing manuals, delivering trainings, providing
                        technical assistance punctually and regularly. But the focus of these
                        interventions is often too narrowly defined: a good illustration is the
                        preparation of best-practice manuals that may not be applicable to the context.
                        It then falls onto responsibility of each department to take up the challenge,
                        learn about the new concepts and tools and attempt to apply them. This
                        approach has been dubbed “learning by doing” and reflects a strong willingness
                        to appropriate the reform by the Ministry of Economy and Finance. But it
                        shows its limits and the need for a much broader and bolder programme of
                        professional development.
                        Perhaps two specific mechanisms are worth highlighting given the positive
                        echoes. First the regular but punctual assistance of high calibre advisors to a
                        reform process is seen as a very pragmatic and simple way to mobilise
                        expertise: Morocco seeks more of it and not only from francophone countries.
                        Second the twinning arrangements are appreciated, providing a welcome
                        international peer exchange mechanism and in situ training. As this happens in
                        both countries, it allows adapting practices context making them relevant.

                 This is the case with the GIP, the financial information management system. The
                 solution planned in the PARAP I financing agreement with the EU was modified.

          It takes two years to train an inspector though each trainee may not pass the final exam nor stay with the IGF.
          All stakeholders met in the administration have clearly expressed that the Régionalisation Accélérée cannot
     proceed without deconcentration of central service. Both processes involve a tremendous capacity building effort
     and will call on the private sector and civil society capabilities too.

                             Capacity Development in PFM – Practitioners Guide Version 2

Annex E Nepal Support to Capacity Development
in PFM

Institutional framework
Nepal is a small landlocked country sandwiched between India and China in South Asia. It is
predominantly mountainous with the Himalayas in the north and flat river plains along the Ganges in
the south. Infrastructure outside the major cities and towns is poor due to the extreme geography.
Only 17% of the 29 million inhabitants of the country are urbanised. These two factors are major
constraints for government operations and service delivery to all citizens. Nepal is one of the poorest
countries in the world and is heavily aid dependent. Agriculture is the mainstay of the economy
providing a livelihood to almost 75% of the population.

The country has undergone major political transformation following more than a decade of conflict
between Maoists and Monarchists. On May 28, 2008, during the first Constituent Assembly meeting,
the Monarchy was abolished and Nepal was officially declared a Federal Democratic Republic. Since
then the country has continued to experience a period of political instability due to coalition parties
switching loyalty. The Prime Minister resigned in June 2010, but as of December 2010 he leads a
caretaker government which is in the process of drafting a new constitution due in May 2011.
Implications for future governance arrangements are not clear and the budget presented in November
2010 was blocked.

The institutional basis of the PFM system in Nepal revolves around the Ministry of Finance (MoF)
which is responsible for both revenue and expenditure management. There are nine divisions
(Financial Administration, Revenue Administration, Personnel Administration, Foreign Aid Co-
ordination, Budget and Programme, Corporation Co-ordination, Economic Affairs and Policy
Analysis, Financial Comptroller General Office (FCGO) and Legal division) and four departments
(Customs, Inland Revenue, Revenue Investigations, Revenue Administration Training Centre). The
National Planning Commission is responsible for planning and development. Spending units that
comprise the central ministries and other agencies are also a part of the system, as are the oversight
bodies of The Office of the Auditor General and Parliament. The Public Procurement Monitoring
Office (PPMO), in the Office of the Prime Minister and Council of Ministers, is responsible for
establishing procurement policy and standards, providing training, providing no objections for certain
procurements, and reviewing complaints from bidders.

The format of the Federal system awaits the new Constitution and devolution to local government has
not taken place. The local governance system, mandate and operational structure at the District
therefore is unclear. Currently At the local level, the spending units (such as, for example, the line
agencies that have a local presence) as well as the District Development Fund (DDF), Village
Development Fund (VDF), and the District Treasury Control Office (DTCO) are at the core of the
PFM system.

Current PFM reforms
Good governance was one of the major pillars in the Three Year Interim Development Plan, which
immediately followed the 2006 Peace Agreement. Despite the difficult political conditions, a number
of PFM initiatives have been introduced in recent years including an MTEF, a Budget Management
Information System (BMIS), an FMIS, significant changes to revenue administration and
improvements to the procurement system including in particular new legislation and a Public
Procurement Monitoring Office (PPMO)

                          Capacity Development in PFM – Practitioners Guide Version 2
      Following the PEFA assessment in 2008, which was based on 2005/6 data, a PEFA Action Plan was
      formulated. In order to coordinate the implementation of the PEFA action plan, the Government of
      Nepal (GoN) has i) created a PEFA Steering Committee, ii) set up a PEFA secretariat at FCGO, iii)
      established PEFA Units in twenty line ministries to oversee implementation of various actions, and iv)
      created a separate budget line item in support of this agenda.

      A long term Public Financial Management Reform Program (PFMRP) has also been developed and
      approved by the government. In the first phase (FY 2009/10- FY 2011/12), the strategy will focus
      implementation on revenue, budget planning and implementation, debt and cash management,
      accounting and auditing.

      The FCGO is at the moment focused on; i) a Single Treasury Accounts System, which was piloted in
      Bhaktapur and Lalitpur in FY2009/10, (IMF support) ii) IPSAS Cash Based Accounting Standards,
      and iii) further improvements to the Integrated Government Financial Management Information
      System (IGFMIS). Donor support has also been requested for the strengthening of the PEFA

      Efforts to introduce a result based management framework are also ongoing in the NPC and pilot
      ministries, and a new web based aid management system is being established with the support of the
      UNDP. A major innovation has also been the introduction of e-procurement in public infrastructure
      works to improve competition and reduce intimidation by and among contractors. While in external
      audit despite the lack of a substantive Auditor General and a high level of vacancies (approximately
      one third), a strategic plan has been developed.

      External factors
      Clearly a significant factor in PFM capacity development in Nepal has been (and continues to be) the
      uncertain political climate. In addition, the remoteness of villages where the majority of people live,
      poor infrastructure such as roads and electricity, lack of reliable communications and banking are key
      constraints to government service delivery, and the introduction of technology based PFM systems
      and procedures.

      In support of PFM capacity development in Nepal there are a number of training institutes based in
      Kathmandu. The Revenue Administrative Training Centre (RATC) is responsible for induction
      training of accounts staff. The newly formed Personnel Training Academy (PTA) is responsible for
      training all civil servants in general office management, IT literacy etc. The Nepal Administrative
      Staff College (NASC) is responsible for strategic management in the civil service and public

      The Accounting Standard Board and the Institute of Chartered Accountants of Nepal (ICAN) have
      been key contributors to the development of IPSAS Based Cash Accounting Standards for the GoN.
      Institute membership is however solely for private sector practitioners and although they provide
      basic accountancy training courses, these are not customised to the specific needs of public sector

      Key PFM donors
      The key PFM donors in Nepal include DFID, IMF, World Bank, Norway, ADB and UNDP. ADB is
      continuing to provide technical assistance to the Government to support the operationalization of
      “Managing for Development Results (MfDR)” in the NPC and pilot agencies of the central
      government. With regard to improving the auditing capacity and institutional strengthening of the
      OAG, the World Bank has been closely involved in assisting OAG through a number of IDF grants.
      OAG has also signed a Memorandum of Understanding (MOU) with the Norwegian Supreme Audit
      Institute (SAI), and also obtains support from the Asian Organisation of Supreme Audit Institutions

                                Capacity Development in PFM – Practitioners Guide Version 2

In November 2010, the World Bank was in the final stages of setting up a multi-donor trust fund to
improve the coordination of donor activities. Given concerns over capacity constraints, support is
being limited to two or three key activities, as well as support to civil society organisations to
continue the development of their capacity to scrutinise the budget, and wider public financial

Key findings
The following paragraphs summarise some of the key findings from discussions with government,
technical advisers and donor representatives on support to PFM capacity development in Nepal. These
discussions have been supplemented with a review of various government and donor studies.

Conceptual Understanding
Most interviewees considered the Ministry of Finance (MoF), Office of the Auditor General (OAG),
Public Procurement Monitoring Office (PPMO) and the FCGO as the key PFM stakeholders in Nepal.
Some included line ministries and the district level, but only so far as it includes accountants, which
are seconded FCGO staff. There was some but limited inclusion of Parliament, civil society, media,
training institutions, anti-corruption agencies and the Reserve Bank. Most respondents focussed on
finance staff only and all respondents (with the exception of donors) excluded donors as stakeholders.
It also seems that stakeholders are seen as organisations primarily involved in public expenditure
management (PEM). The role of line ministry managers in PFM was not widely considered.

Training was seen by all respondents as a key element of PFM capacity development, particularly
exposure to international practice through attachment or the pursuit of academic qualifications. Many
respondents also included activities related to the reform of systems and procedures, particularly
Information Technology (IT), Treasury Single Accounts (TSA), the introduction of Government
Finance Statistics (GFS) classifications, Medium Term Expenditure Frameworks (MTEF)) and the
introduction of international accounting standards. Most respondents focussed on „new‟ capacity.
Although some respondents did consider that this tendency by donors to dismantle the old, rather than
adding value was a fundamental flaw in donor support to PFM capacity development in Nepal.

One respondent said that reduction of demand could also improve capacity. He mentioned that the
donors were given direct access to the aid management system to enter their information. However, it
was suggested that the World Bank (WB) and Asian Development Bank (ADB) saw this as an
additional burden for their staff.

Broadly PFM capacity development and PFM reform were seen as having the same main objective.
The view was that all reforms required a capacity development element, particularly individual
training (individual capacity development). Maintaining and developing current systems was seen as
capacity development, while the introduction of new systems/structures was seen as both reform and
capacity development.

The role of donors with regards to capacity development was primarily seen as providing financial
support, for PFM related training (particularly overseas, but not exclusively), basic training for
accounts staff, purchasing of equipment (particularly IT) and (in a few cases) infrastructure (e.g. OAG
building). Technical support (through technical assistance) in response to specific government
requests was also seen as a valid activity. A few respondents also included advocacy of PFM good
practice and international standards as well as policy advice, but government respondents did not see
micro management of government business as an appropriate role for donors.

Content, form and duration
Most respondents felt that the focus of PFM capacity development in Nepal was on training (at
individual level) and systems (on an organisational). Some viewed training as supply (donor) driven,
particularly when it came to funding overseas courses. At an organisational level, many respondents

                          Capacity Development in PFM – Practitioners Guide Version 2
      refer to ongoing reform initiatives e.g. TSA, FMIS, accounting and auditing standards. There is no
      capacity development plan. It was generally said that the capacity development element of past
      project based reforms were fragmented and poorly coordinated. The government is currently working
      on an integrated capacity development plan. Overseas training is viewed as one of the few „perks‟ in
      the poorly paid public sector. It also seems that the focus is on „giving everybody a turn‟ rather than
      appropriate training for appropriate candidate. The two year rotation policy in the civil service also
      means that any training may only have short term benefit with very little organisational learning
      taking place.

      There were various responses on how long donor support to capacity development should last. It was
      generally felt that continuous support from donors is required on an individual level because of
      turnover issues, poor basic training and even political interference. Most agreed that support at the
      organisational level should be timeframe based, depending on the complexity of the reforms. Only a
      few respondents linked donor exit strategies to outcomes, results or sustainability. There was limited
      reference to fiduciary risk issues and no reference to donor constraints such as home constituencies
      and accountability issues.

      Most respondents agreed that they were not aware of any donor exit strategy or government
      succession plan to sustain capacity development initiatives at the end of donor support. One example
      that was mentioned the „stagnation‟ of the Revenue Authority Training Centre (RATC) following the
      exit of DFID about 10 years ago. The Ministry of General Administration (MOGA) is conducting
      sector specific Human Resource Development need assessment study in coordination with various
      line ministries.

      On an individual level, it was felt that accounting staff at line ministries and districts were often
      excluded from capacity development initiatives. A few reasons for this were given, including the fact
      that they are FCGO seconded to line ministries and therefore do not have an institutional home and
      that within the civil service, accountants have a relatively low status. At an organisational level, most
      respondents mentioned the exclusion of training institutions, but acknowledged that there are plans to
      address this under a new reform strategy. A few respondents also felt that more attention needed to be
      paid to developing the capacity of Parliament, anti-corruption bodies, private contractors, media and
      civil society (e.g. social auditing training by the NGO „Federation Nepal‟).

      A number of suggestions were made on how to improve future PFM capacity development.
      Individual level
       Need to address issues of motivation and incentives
       Ensure that there is a basic level of competency for accounts staff
       Correct person receives appropriate training

      Organisational Level
       Include better financial management /procurement training in general management training
       Ensure that there is a basic level of competency for accounts staff
       Correct person receives appropriate training
       Practical guidelines ; Practical training/attachments rather than theoretical courses
       Appropriate sequencing
       More focus on compliance and internal control issues
       Improving management and leadership
       Improving selection and relevance of technical assistance (e.g. use of pool of TA?)

      Institutional level
       Include private sector and oversight bodies (anticorruption bodies)
       Improve public awareness

                                Capacity Development in PFM – Practitioners Guide Version 2

   Ensure that there is a basic level of competency for accounts staff
   Correct person receives appropriate training
   Civil service reform issues (transfer policy and leadership)
   Professionalise accounting, internal auditing, auditing cadre
   Induction training (role of various institutions) Recognise more explicitly the linkages between
   Elevating value of independent OAG in improving PFM capacity development

The variety of responses reflects perhaps the lack of a capacity development plan for individuals and
the technical nature and/or limited dissemination of the PFM reform strategy.

Most respondents agreed that there was very little donor alignment of capacity development to
Government development programmes or strategies in the past and stated that donor assistance was
project based and ad hoc by nature. However, the recent development of the procurement strategy and
the PFMRP by Government means that donors will be able to align their support more closely to
government strategies.
Several respondents considered that donors understood the country context because of their long term
(organisational if not individual) involvement in Nepal. However, many at the same time noted
implementation problems due to the transfer policy, lack of leadership, political uncertainty and
influence, cultural values, internal (regional) conflict , power of the unions, resistance to change, low
pay, poor motivation and a lack of recognition (especially for accounts staff). One respondent noted
that donors seem to concentrate on strategic level but do not understand problems or issues at grass
roots or service delivery level. Other government respondents also were unclear on the rationale of
some donor support e.g. the introduction of a TSA despite current uncertainty about the potential
implications of the proposed federal system.

In terms of the relative inputs into the design of reform strategies, there were mixed responses. Some
donor respondents believed that GoN had full ownership of reform design. Other respondents stated
that the new PFM strategy was jointly developed by the government PEFA secretariat/steering
committee, and the procurement strategy was prepared by the PPMO with input from donors. Many
government respondents felt however that because of their knowledge and resources, donors tended to
be dominant in the design stage, although this meant that pre-conceived ideas and solutions tended to
be introduced, rather than home-grown initiatives. GoN did however provide the final approval to all
designs and therefore accepted the proposals by default.

Respondents generally felt that consultation on capacity development (individual level) was limited
because training courses, in many cases, were supply (donor) driven rather than demand (government)
driven. Some also mentioned that donors had inputs into GoN‟s course design e.g. procurement. At
the organisational level, it was noted that training institutions were not consulted on wider capacity
development issues. In terms of broad consultation on proposed capacity development initiatives,
there were some differing opinions as non-government personnel believed that consultation did take
place, but many government officials felt that it was superficial and that there was a need for more in-
depth and wider participation.

Most respondents agreed that if they could make capacity development policy they would develop a
training policy and a human resource (HR) development plan. They would like to identify training
needs first, ask donors for assistance, then be allowed to nominate correct person, based on needs (not

                          Capacity Development in PFM – Practitioners Guide Version 2
      on rotation). They would also like to see a greater emphasis on financial management (including
      procurement) training in general management and leadership training courses.

      Many respondents felt that although government was ultimately responsible for the implementation of
      capacity development initiatives, in several cases there was limited ownership of the process.
      Examples of unsolicited technical assistance were cited and no or limited involvement by government
      in the recruitment and selection of other technical advisers, their management or their evaluation.

      In terms of donor coordination in PFM, respondents from government and elsewhere felt that in the
      past this had been comparatively limited in comparison to the education and health sectors, where
      pooled funding exists. With the proposed introduction of the multi-donor trust fund, the situation is
      viewed as improving, but currently only a limited number of donors have actively „signed up‟ (WB,
      ADB and DFID). Respondents were not aware of a separate donor working group on PFM. Some
      government respondents said that they would do the following to improve local donor coordination on
       Harmonise conditionalities and use country systems;
       Establish a donor focal point (“one voice is better than multiple voices);
       Broaden the Programme based approach and include a larger number of donors; and
       Channel all funds through multi-donor trust funds.

      In collaboration with donors, the Government of Nepal has established an annual Nepal Portfolio
      Performance Review (NPPR) to discuss and monitor key issues affecting all project performance.
      However, there seems to be limited assessment of the individual, organisational and institutional
      benefits of capacity development efforts. Normal training course expectations and monitoring takes
      place during the project/course, but no evidence of medium to long term benefit analysis (that leads to
      organisational learning) could be found.

      Impact of Capacity Development initiatives

      Formal evaluation of impact of capacity development initiatives is not carried out in Nepal. Anecdotal
      examples of successes and failures from government respondents included the following:

         Procurement: Introduction of e-bidding for infrastructure projects (e.g. roads). It was said that it
          has led to greater access to bidding documents and largely addressed the problem of intimidation
          among bidders (although it is too early for formal impact assessment);
         Audit: Some respondents thought that strategic planning assistance and technical guidance
          received from ASOSAI/IDI was of great benefit to the OAG in helping them develop a strategic
          plan and project documents. However, despite reforms and capacity development initiatives that
          have lead to the increase of audit reports, there are still concern that there is limited response to
          recommendations and a lack of action.
          Budget: Introduction Budget Management Information System (BMIS). Reasons for success
          were ascribed to commitment by management, and data entry personnel specifically assigned (not
          additional work). To ensure sustainability, only two (out of five) staff members allowed to
          transfer every two years.

      The following examples were mentioned of recent failures/partial failures:
       Audit Guidelines: The guidelines produced with donor supported TA were felt by OAG
         respondents to be too advanced for practical use at the field level.
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   Line Budget Management Information System: Some donors mentioned that there was a lack
    of internalisation as well as poor capacity in line ministries.
   Training: Some training (e.g. academic) not always practical or relevant, resulting in poor
    organisational learning. The opportunity for overseas training (and travel) is seen by some as the
    only real benefit/reward for working in the poorly paid civil service.

At an individual level, government respondents considered that practical attachments were
particularly beneficial e.g. nine month attachment with CCF enabled participant to contribute to
improved audit planning on his return, and an attachment to the Danish Tax Office enabled the
participant to design tax audit selection criteria on his return.

The following issues were mentioned as the biggest problem/stumbling block in developing PFM
capacity, and ensuring that it has the desired impact:

Individual Level
 Insufficient resources: Lack of funding for training of trainers at local training institutions;
 Overload: Balancing daily tasks with (additional) training and reform activities;
 Motivation: Lack of motivation to attend local courses due to lack of incentives (e.g. midday
    meal, lack of credible recognition of qualification);
 Job gaps: Unwillingness to send people in some cases on courses (“who is going to do the job?”)
    Particular problem at district level;
 Line ministry accountants: Lack of engagement by both home department (FCGO) and
    particular line ministry. Poor quality of basic training leading to poor skills and low job status;
 Political parties: Pressure to influence choice of attendee, particularly for overseas
    training/travel, and
 Overseas training: Some see and treat it as a reward. A few respondents mentioned that this may
    be a perverse incentive as it leads to the wrong person receiving the wrong training leading to
    limited or no organisational benefit.

Organisational /Institutional Level
 Professionalization: No professionalization of audit and accounting staff;
 Transfer policy (every two years): Donor specific training of accounts staff of limited use;
 Normative behaviour: Conflict between development initiatives and overall organisational and
   societal values;
 Civil service reform: Government needs to address transfer policy, leadership issues,
   organisational culture (developing esprit de corps), poor remuneration etc.
 Donor-Government engagement: Government needs to be more pro-active and assertive, while
   donors need to listen more and assume less;
 External influence: Informal influence of political parties and unions should be limited on civil
   service, and
 De-motivation: Capacity development at individual level can be de-motivating because of system
   constraints (e.g. not allowed to apply new knowledge, no recognition for qualification).
 Donor use of own systems: Do their own thing and expect government to adapt to their systems.

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      As noted earlier many sophisticated reforms have been introduced and considerable amounts have
      been spent on individual training. However there remain concerns within and outside government that
      the initiatives have not had the anticipated impact on organisational performance or broader service
      delivery. Respondents attributed the non-sustainability of capacity development initiatives to the
      following factors:
       Limited political support: the political situation has meant that there has not always been
          sufficient focus on the importance of sound PFM and service delivery;
       Poor motivation: Low pay, low incentives (to change), lack of recognition, leadership issues;
       Unrealistic time scales: Some interventions (including TA) need longer term view to enable
          good working relationships to be formed;
       Incremental nature of project support/ lack of coordination between departments and
          inappropriate sequencing of interventions;
       Poor change management: At best, it is seen as top-down communication strategy and not
          addressing individual concerns;
       Poor organisational learning: Lack of internalisation – non transfer of skills; and
       Retention: transfer policy.

      Some government respondents believed that the broader use of the performance based incentive
      system would ensure greater sustainability (encourage people to change). The current group
      performance based incentive system in Revenue was considered to have had a beneficial impact. Its
      impact is currently being assessed, as some respondents consider that it has not been well designed
      (could be seen as an entitlement) and that there is a need to move to an individual performance-based

      Country analysis
      In 2006, a set of four key principles were set out in OECD DAC 2006 to guide donors in their support
      to PFM capacity development. The following analysis looks at the extent to which they have been
      applied in Nepal.

      1. Supporting country leadership and ownership should be central to donor approaches.

      As set out in the guidelines, country ownership implies active government involvement in all phases
      of designing and implementing support to PFM capacity development. While country leadership may
      mean that donor specific interests are not necessarily always followed. As noted above, concerns were
      raised about the extent to which GoN is in the driving seat, whether at design stage or implementation.
      Many training courses are viewed as supply not demand driven, TA is not viewed as truly owned by
      GoN and there are concerns over the implementation of the medium-term expenditure framework
      (MTEF) and the lack of political commitment to the process.

      2. Capacity development design and sequencing should fit specific country circumstances, rather
         than reflect standard or imported solutions.

      The second principle revolves around the concept that effective capacity development starts with a
      premise of building upon what already exists, rather than transplanting entirely new systems.
      Concerns were raised about the relevance of certain interventions e.g. gender based budgeting when
      the national budget is being „blocked‟ by political problems. Several respondents considered that
      donors should understand the country context because of their long term (organisational if not
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individual) involvement in Nepal, but were unable to identify specific examples of where they
modified the „standard pack‟.

It is understood that the rationale for limited support in the MTDF is partly a funding one and partly a
recognition of the need to recognise capacity constraints. Yet all interventions are the standard
imported solutions and some government respondents were particularly concerned about the
countrywide implementation of a TSA given the uncertainty over the future governance system in the
country and poor banking and communication facilities.

3. The institutional, organisational and individual levels of capacity development, including
   managerial and technical aspects, should all be taken into account in programme design and

The third principle focuses on the fact that support to capacity development must be viewed from a
holistic perspective, and not seen merely as a transfer (e.g. of skills, money, equipment). Donors must
increasingly consider change management issues, and how the process of developing capacity can be
managed effectively by the organisation. In Nepal, there is recognition of the need to support different
actors (e.g. government and civil society) but most support appears to have a technical bias and as
noted above is not yet addressing the capacity needs of training institutions. Although discussions are
ongoing about key civil service reform issues including pay and transfer policy, change management
issues remain on the periphery not at the centre of support and dialogue.

4. Donor support should be provided in a coherent, co-ordinated, and programmatic manner.

One of donors‟ primary responsibilities should be to minimise the transaction costs, harmonise
procedures and monitoring mechanisms and coordinate not compete. The Nepal Portfolio
Performance Review now includes GoN, ADB, World Bank, DFID and JICA, but there are calls for
broader donor participation. In PFM, it is generally recognised by both donors and government that a
coherent, co-ordinated programme of support is a work in progress. Earlier support was provided in
an ad-hoc and fragmented way, the introduction of a Multi-Donor Trust Fund (MDTF) is seen as the
first step to a more co-ordinated and coherent approach. The principles of the MDTF include
improved harmonisation and coordination, better policy dialogue, greater flexibility and participation.
While in procurement the joint support of the World Bank and ADB to PPMO‟s strategic plan is
intended to provide a more appropriate response to the identified needs.

                          Capacity Development in PFM – Practitioners Guide Version 2
      Annex F Rwanda – Support to Capacity
      Development in PFM
      1 Background
      Institutional framework
      Rwanda is a small landlocked country, with a relatively poor road network and transport system. A
      population of around 9 million living in a country of approximately 26, 000 square kilometres, makes
      it the most densely populated country in Africa, with over 300 persons per, Its economy is
      heavily dependent on agriculture and the country has limited access to water and energy supplies. The
      economy is also heavily aid dependent. Following the 1994 genocide against the minority Tutsi
      population, the government has taken various steps aimed at reconciliation and the prevention of
      ethnic conflict. British influence, at the cost of French, has been growing with English becoming the
      predominant official language in government and schools. One of the biggest changes impacting on
      PFM in particular has been the replacement of Francophone systems and structures with Anglophone

      Rwanda is a presidential republic, with the President being head of state and the Prime Minister being
      head of government under a multi-party system. The President of Rwanda is elected for a seven-year
      term by the people. The Prime Minister and the Council of Ministers are appointed by the President.
      The legislature established under the 2003 Constitution comprises a bi-cameral parliament with a
      chamber of deputies (80 elected Members for a five year term) and a Senate (26 elected or appointed
      members for an eight year term). Parliament is in the process of amending legislation allowing for the
      establishment of a Public Accounts Committee (PAC) during 201149.

      The 2003 Constitution defines the principles and overall legal framework for the management of
      public finances in Rwanda. An Organic Budget Law (OBL) was passed in September 2006 and
      ushered in a fundamental change in PFM in Rwanda by introducing broad but shared responsibilities
      in the management of government finances. It clearly assigns roles and responsibilities to the various
      actors in budget preparation, budget execution, financial reporting, accounting, auditing and external
      scrutiny, and it has decentralised powers to commit expenditures and thus financial accountability to
      Chief Budget Managers (Accounting Officers) at all levels of government.

      Overall policy direction is the responsibility of the Minister of Economy and Finance (Minecofin).
      According to the government website, administrative and technical responsibility for the Ministry
      comes under the Permanent Secretary/Secretary to the Treasury. There are then six directorates
      including National Development Planning & Research, National Budget, Macro Economy and
      External Resources, Internal Audit, General Accounting and General Services. The Office of the
      Auditor General of State Finances (OAG) came into existence in June 1998. Prior to this, external
      oversight was carried out under the Court of Accounts, which was effectively abolished with the
      promulgation of the new Constitution in 2003. Major civil service reforms in 1998/9 led to the
      downsizing of the civil service to only 8,500 staff.50 The drastic reduction in public sector staffing has
      limited the number of people available to supervise, analyze, and implement as well as to learn.
      According to OPM 2007, the adoption of uniform organizational charts for its central ministries
      coupled with a grade structure that is too flat is proving to be “uneconomic and inefficient.”

         East African Business Week, 17 January 2011. Rwanda to toughens budget control.

         GSDRC (2009) Civil Service Reform in Rwanda.

                                   Capacity Development in PFM – Practitioners Guide Version 2

Rwanda‟s decentralisation programme is proceeding at an ambitious pace with 30 districts and Kigali
City Council. New policy was elaborated in 2006 and is now in its third phase of implementation,
covering the period 2008 -12. The programme is strongly supported by donors, as reflected in the
proportion (15%) of overall official aid flows to Rwanda now being allocated for decentralisation.
Substantial numbers of central Government staff were transferred to Districts following Local
Government elections in 2006. District capacity building needs assessments and capacity building
plans were developed in 2009.

Current PFM reforms
Rwanda‟s long-term development plan, Vision 2020, seeks to transform Rwanda into a middle-
income country and an economic trade and communications hub by the year 2020. The Economic
Development and Poverty Reduction Strategy (EDPRS) was adopted in 2007, and grew out of
Rwanda‟s first Poverty Reduction Strategy Paper (PRSP) developed in 2002. Two areas of the
EDPRS which have particular significance for internal accountability, and where donor partners and
the government have built up strongly shared agendas, are public financial management (PFM)
reform and decentralisation. The PFM reform agenda has developed in the context of Rwanda‟s multi
donor budget support programme and is receiving a significant amount of support from donors and
other organisations.

Current PFM reforms continue to build on the numerous initiatives that have been established in the
last fifteen years, including the development of the Rwanda Revenue Authority (RRA), the
establishment of external and internal audit functions, production of consolidated financial statements,
new procurement procedures and improved budgeting practices. According to the 2010 PEFA
assessment, Rwanda continues to show marked improvements in its PFM.

In September 2008 the Public Financial Management Reform Strategy (2008-2012) of the
Government of Rwanda was presented and along with its detailed Action Plan, was approved by
Cabinet in December 2008. By 2012 the aim of the Public Financial Management Reform Strategy
2008-2012 is to have an "Enhanced Public Financial Management System" which is efficient,
effective, transparent and reduces opportunities for corruption.51 The PFM Reform Strategy is being
implemented under four pillars and eleven distinct complementary components. Similar to other
countries in the region they include:
 Pillar 1: Economic Management and Budget
I. Economic Management
II. Budget Formulation and Preparation
III. Domestic Revenue Generation; and
IV. Intergovernmental Fiscal Relations
Pillar 2: Financial Management and Reporting
V. Accounting and Reporting;
VI. Treasury and Expenditure Management;
VII. Implementation of IFMIS/SmartGov; and
VIII. Implementation of the IPPS
Pillar 3: Public Procurement
IX Public Procurement.
Pillar 4: Budget Execution Oversight
X. Internal Audit; and
XI. External Audit
In order to maintain parliamentary independence it was considered more appropriate to improve
parliamentary oversight within the broader framework of enhancing public financial management
outside the current PFM Reform Strategy.

     MINECOFIN, PFM Reform Secretariat, Quarterly progress report on the implementation of PFM Reforms - June 2010.

                                Capacity Development in PFM – Practitioners Guide Version 2
      External factors
      The development of PFM capacity and long-term sustainability of many initiatives cannot be isolated
      from other broader development issues, including basic infrastructure, financial and communication
      networks, health, education and employment opportunities. Access to energy is limited and costly,
      there is a small and developing financial sector and telecommunications is improving but still limited
      outside the main urban areas.

      In terms of specific PFM related training facilities and institutions, there are a number of training
      bodies including a newly formed Rwanda Revenue Training Institute. In addition to the National
      University of Rwanda, there is the School of Finance and Banking (SFB), a public institution of
      higher learning that was established in June 2002. The Management Faculty formerly part of Kigali
      Institute of Technology (KIST) was transferred to SFB in 2006. In addition to MBAs, SFB started
      offering Bachelor of Business Administration (BBA) programme in Accounting, Finance, Human
      Resources Management and Marketing specializations. In order to ensure sustainable capacity
      building efforts, arrangements are being made to establish a Procurement Training Centre at the SFB.

      The College of Business Studies Rwanda, (a private institution) in association with the Management
      and Accountancy Training Company (MAT) Uganda52 is currently providing ACCA training for
      government personnel, who constitute about 40% of their students. Currently the course is not tailored
      to public sector requirements although from January 2011, the taxation examinations will reflect local
      tax in Rwanda. The Institute of Certified Public Accountants of Rwanda [ICPAR] was established in
      2008 and launched in February 2009. It is therefore in its infancy with 101 registered accountants,
      although the government is hoping this number will increase to 500 registered accountants by 2015.53

      Existing training institutions in Rwanda are recognised as being under-equipped and understaffed.
      Supporting their capacity through training of trainers and/or institutional partnerships with training
      institutions in the region or beyond is a key component of the World Bank‟s Country Assistance
      Strategy (CAS). It is understood that support is to be provided to ICPAR by the World Bank.

      Key PFM donors
      Development partners increasingly provide funds through general budget support, with the World
      Bank currently being the largest budget support donor. At the same time, several donors including the
      World Bank, EU, DFID, AfDB, GtZ, SIDA, KfW and USAID have been supporting PFM for a
      number of years. In January 2010, a PFM Basket Fund and a separate fund for the OAG were created.
      Prior to the creation of the PFM Basket Fund, the main PFM Reform Strategy funding came from a
      Multi-Donor Trust Fund administered by the World Bank ,with funds from the EU and DFID (
      expired 30 November 2010), and a Public Sector Capacity Building Project54 grant from the World
      Bank that expires on 31 December 2011.

      Support to capacity building in Rwanda is also provided through the African Governance Initiative 55,
      the African Capacity Building Foundation and the Capacity Building Fund (CBF). CBF is a
      government fund managed by the Public Sector Capacity Building Secretariat (PSCBS). It was
      approved by the Cabinet in its session of February 11, 2009 to finance strategic capacity building
      activities in a coordinated, transparent and efficient manner. In the 2009/2010 financial year, the
      government allocated $5 million (Rwf 2.7 billion) to CBF.

         An accredited ACCA tuition provider
         All (2009) Rwanda: Certified Public Accountants Institute Officially launched.

         This has also obtained funds from AfDB, the African Capacity Building Foundation and Belgium
         Tony Blair‟s Office

                                    Capacity Development in PFM – Practitioners Guide Version 2

2 Key findings
The following paragraphs summarise some of the key findings from discussions with government,
technical advisers and donor representatives on support to PFM capacity development in Rwanda.
These discussions have been supplemented with a review of various evaluation studies. The first
paragraph on conceptual understanding shows people‟s perceptions of PFM, capacity development
and reform.

Conceptual Understanding
Government respondents in Rwanda included a wide number of stakeholders in their definition of
PFM including Minecofin, OAG, the Public Procurement Regulatory Authority (PPRA), line
ministries,(central government) districts (local government), parliament and donors. Equal weight
was given to revenue and expenditure management, and many respondents included both financial
and non-financial actors in their understanding of PFM stakeholders. Although, some Government
respondents noted that some donors appeared to confuse PFM, PFM reform, PFM reform programme,
with their requests to isolate all expenditure on PFM in the budget.

Most respondents saw training/skill development as key to PFM capacity development, but several
also saw it as broader including organisational issues (organisation structure and having the right
person in right place), the improvement of training institutions, provision of physical infrastructure
and also materials/equipment. One person noted the fact that there was no clear definition of capacity
in Rwanda, but included training, technical assistance, equipment/tools, anything that improves
performance. Despite the significant manpower constraints in Rwanda, emphasis tended to be on
additional capacity creation rather than making better use of what exists, although at the district level,
a few respondents considered it important to consider alternative scenarios, such as sharing
accountants between primary schools.

In terms of similarities or differences between PFM capacity development programmes and PFM
reform programmes, most government respondents saw a difference but that capacity development
was clearly linked to reform. A reflection, perhaps on the emphasis on individual capacity

Financial support (lack of funds was frequently cited) was seen as the main avenue for donor support
and in particular the provision of technical advisers/consultants. Some government officials also
considered donors an important source of technical advice and information on what was working

Content, form and duration
Most people saw the contents of the ongoing PFM reform strategy (programme) as the main PFM
capacity development effort in Rwanda. In addition to the introduction of the new SMART GOV
financial management information system (FMIS), the Strategy includes a large element of training
and the improvement of training institutions, as well as the development of the local accountancy
institute. Although there is no individual capacity development strategy, a capacity building needs
assessment was carried in 2005 for accountants and auditors in central government and the production
of District Capacity Needs Assessments (CBNA) and Capacity Building Plans in 2009 constituted
Output 3 of the National Decentralisation Implementation Plan (DIP). Indeed the focus of many
training initiatives is increasingly at the district level because of the decentralisation policy.

Another key element of capacity development in Rwanda is professional training and in particular the
sponsorship of 265 acountants and auditors currently undertaking ACCA training. Other learning
methods include continuous skill enhancement through PwC assistance in the production of
consolidated financial statements. Technical and general awareness training has started for both

                           Capacity Development in PFM – Practitioners Guide Version 2
      technical and non-technical personnel on SMARTGOV, although some respondents felt that this
      needs to be stepped up and more trainers trained56, if implementation is to be successful.

      Many government respondents did not see an end date to donor support for PFM capacity
      development, citing Rwanda as a special case, referring specifically to accountancy training, they
      wanted support until a critical mass was created in the country. The issue of a succession plan or a
      donor exit strategy is therefore not being built in to current initiatives. In terms of improving current
      capacity development efforts, the general response was that there is still significant need for capacity
      development at the local government level, e.g. district and below i.e school and health centre, where
      there can be > 100 schools in a particular district. Some respondents also felt that insufficient attention
      was being given to management training or negotiation skills, (although it is understood that there is a
      management training development fund). At an even broader level, some respondents felt that there
      was a need for improvements in numeracy at schools and improved quality of university degrees,
      which would then provide a good foundation for PFM capacity development.

      Civil society has not been particularly involved in PFM in Rwanda but is currently developing a
      proposal for assistance, to which donors have agreed in principle.

      Leadership at the highest level (presidential) is seen as key. Donors align their capacity development
      support through the PFM reform strategy which although written by consultants was endorsed by
      Cabinet, and generally government respondents felt that there was a high level of buy-in. Donors
      viewed the development of the reform strategy as a joint one, noting the participation of donors and
      government. In supporting capacity development, many government respondents felt that donors tried
      to understand the organisational culture and country context, although none could provide a specific
      example, others believed that donors would never really understand their particular difficulties.

      Some donors noted that they had not looked at political economy issues, although generally happy
      because of high level of political leadership, there were some concerns that constant pressure to
      improve and change could also be too demanding, and consequently have a negative impact on

      Government respondents considered donor coordination in Rwanda quite effective with a small
      number of donors contributing to the basket fund. This is seen as a shift in responsibility and therefore
      increasing demand on capacity, but at the same time reducing unnecessary bureaucracy with no
      objections required but a relatively high threshold. This is attributed by both donors and government
      to the fact that donors have a high degree of trust in government. Some government respondents still
      believed that there was a need for better harmonisation of reporting requirements. Although it is
      unclear why this should be the case as the operating manual for the Basket Fund implies the
      submission of a common set of reports. Rationale for requests of separate reports for example
      consultancies by nationality is unclear.

      Many government respondents (and donors) felt that the Rwandan government was more in the
      driving seat e.g. greater involvement in the preparation of ToRs for consultancies, than their
      colleagues in neighbouring countries, although consultants still play a key role and one person saw the
      donors as the generals (high command) and themselves as the soldiers (facing the bullets)! Similarly
      in the implementation of the capacity development project, government respondents felt that it was a
      joint effort and that there was a government led monitoring and evaluation process for both training
      courses and technical advisors. There is also a joint quarterly review of the reform programme,
      although there was a general view that there are still too many reviews, leaving little time for
      implementation. Less reviews, more action and therefore more disbursements, leaving everyone
           The intention is to use MINECOFIN personnel, which could of course impact on the day to day activities.

                                       Capacity Development in PFM – Practitioners Guide Version 2

happier. Evaluation of training courses is done either by exam or by simple questionnaire, the
subsequent evaluation process uses statistical software and reports are sent to originating department
/Secretary General and also sometimes to donors. For external advisers, the counterpart department
writes a report and he/she is also evaluated separately by the Reform Secretariat.

Impact of Capacity Development initiatives
Impact assessment of capacity development efforts was described by some government respondents
as weak and mostly subjective e.g. improved reporting. OAG do consider however that they have
been instrumental in stressing the importance of qualified accountants. Donors and government both
saw the 2005 accountancy training programme as a failure with a 1% pass rate. The reason for the
poor performance of the programme is attributed to: poor selection of personnel, with no clear criteria
and a poorly designed programme (the concept was essentially European with no recognition of
Rwandan constraints); managers with insufficient skills; and communication difficulties. The training
manual for IFMIS is also not yet meeting expectations as it is felt that it needs to be more user
friendly - very practical. Government respondents also felt that study tours had been extremely
beneficial and the second stage of ACCA training has meant that a number of people have now
qualified in the OAG, although they have now moved on to MTN and the Accountant General‟s

Respondents considered that the biggest problems/stumbling blocks in developing capacity are:
(i) At the individual level
      Work: training balance, several courses delayed because of other commitments, also wrong
          person sent (particularly from districts) – very limited resources at local level, one budget,
          one accountant, two internal auditors;
      For ACCA trainees understanding of difference between academic and professional training,
          amount of study leave, gaining sufficient experience (although this is being addressed by
      Low level of graduates/ absorption rate; and
      Language transition (additional complication) and need to develop culture of reading were
          also highlighted
(ii) At the organisational or institutional level
      Very lean civil service (reportedly one of the smallest )- + no‟ of vacant positions
      Some work is being done (top down ) on communicating need for change but noted that it is
          an issue – e.g why move from pastel?? Change management strategy for ifms only just being
          rolled out (sensitisation);
      Donors want quick wins;
      Retention is seen as a problem by all;
      No clear training strategy; and
      Management skills not adequately addressed.

Both government and donors noted that the sustainability of capacity development efforts is adversely
affected by:
     Problems with retention, people trained and then leave – „poaching‟ by private sector,
        although there are theoretically binding contracts, these are considered ineffective. Talent is
        not generally lost to Rwanda, more often lost to private sector, donor projects or donor
        organisations. Respondents noted that this was not just pay issue but also pressure of service
        delivery demands;
     Flat pay structure – Pay and retention policy is evidently being addressed but has been
        delayed57; and

     The consultant was described as having disappeared after the production of the inception report.

                                  Capacity Development in PFM – Practitioners Guide Version 2
             Motivation issues not addressed

      Some assessments e.g. the 2008 PEFA assessment also noted that the main threat to sustainability was
      the risk of „reform fatigue – expectations that too much can be achieved with existing resources in too
      little time. To improve the chances of capacity development efforts being successful, some
      government respondents felt that proposed training in the local language and the establishment of
      clear written guidelines for SMARTGOV will help ensure the sustainability of the new FMIS

      3 Country analysis

      In 2006, a set of four key principles were set out in OECD DAC 2006 to guide donors in their support
      to PFM capacity development. The following analysis looks at the extent to which they have been
      applied in Rwanda and whether there are any other principles, which have enhanced the effectiveness
      of donor support to capacity development.

      Supporting country leadership and ownership should be central to donor approaches.

      As set out in the guidelines, country ownership implies active government involvement in all phases
      of designing and implementing support to PFM capacity development. While country leadership may
      mean that donor specific interests are not necessarily always followed. As highlighted above, there is
      a general recognition that there is high-level leadership and support from the President for many of
      the ongoing PFM initiatives. The low level of corruption in Rwanda combined with this level of
      leadership means that there is a significant amount of trust between the main donors and government
      on PFM issues. Although reforms may not have been originally designed by government, there is a
      high level of government buy-in, which of course puts additional pressure on donors and their
      advisers to provide the Government with the most appropriate advice and support.

      Capacity development design and sequencing should fit specific country circumstances, rather than
      reflect standard or imported solutions.

      The second principle revolves around the concept that effective capacity development starts with a
      premise of building upon what already exists, rather than transplanting entirely new systems. In
      Rwanda, the move from a Francophone to an Anglophone system is clearly a major transformation.
      A review of the type of reforms being implemented suggests a fairly standard set of solutions. Some
      external stakeholders see the reforms as too ambitious and therefore ultimately unsustainable,
      although this is not a view shared by key government personnel.

      At the micro-level, some degree of sequencing viewed as the order in which activities are taking place
      is however evident, manual systems were replaced by Pastel financial software, which is now being
      replaced by SmartFMS. This system is designed to cover a range of eight financial management
      modules including Budget Preparation, Accounts Payable, Accounts Receivable, Revenue
      Management, General Ledger, Fixed Assets, Inventory and Procurement Management, supported by
      an access and user management module and a reporting facility embedded into SmartFMS system.

      A phased implementation approach has been adopted and the modules have been grouped into core
      and non-core modules. The first implementation phase, although significantly delayed, will cover
      Accounts Payable, Accounts Receivable, Revenue Management and General Ledger as core modules
      while other modules will come later. From July 2010, implementation began in 94 budget entities
      including those at district level.

      Whether the timing or pace of reforms is appropriate, given the need to also carry out routine duties is
      more difficult to ascertain. Also as noted above, Rwanda‟s streamlined civil service, both within
      Minecofin and at district level means that the impact of training initiatives is being adversely affected

                                Capacity Development in PFM – Practitioners Guide Version 2

by the work : training balance issues. Delays and barriers to parallel civil service reform measures,
particularly the lack of a career path and flat grading structures is also affecting sustainability.

The institutional, organisational and individual levels of capacity development, including managerial
and technical aspects, should all be taken into account in programme design and implementation.

The third principle focuses on the fact that capacity development must be viewed from a holistic
perspective, and not seen merely as a transfer (e.g. of skills, money, equipment). Donors must
increasingly consider change management issues, and how the process of developing capacity can be
managed effectively by the organisation.

The current and previous strategies are addressing/have addressed a number of institutional issues
including the creation of the OBL, which clearly sets out the responsibilities of the various actors.
New external and internal audit functions have been established and at the parliamentary level, a
Public Accounts Committee is to be formed, in addition to the current Budget Committee. It is
understood that some managerial training58 is ongoing for senior leaders outside the PFM reform, but
government respondents did note that this was not being adequately addressed. Training institutions
are to be included and as noted above it is understood that support is to be provided to the ICPAR.
Measures to address the practical constraints at the district level and below are not specifically
mentioned. Change management is considered but as in many countries, this appears to be relying on
downward communication rather than a more comprehensive change management strategy.

Links with other capacity development initiatives is not clear, not least because of the change in
responsibilities e.g. the creation of the PSCB Secretariat. An issue which appears not to be fully taken
into account in either the guidelines or reform design is flexibility and coordination with evolving

Donor support should be provided in a coherent, co-ordinated and programmatic manner.

One of donors‟ primary responsibilities should be to minimise the transaction costs, harmonise
procedures and monitoring mechanisms and coordinate not compete. Rwanda has a highly structured
coordination mechanism. Donor coordination in Rwanda is extensive, existing on several levels of the
development plane, from high level representatives to technical working groups. Similarly, a
monitoring system also exists on several levels, measuring performance and guiding coordination
from the technical level up to the donor level. Lastly, a formal Division of Labor guides the GoR and
development partners in the placement of development assistance.

The Development Partners Retreat (DPR) is a key senior-level monitoring and review event held
annually in Rwanda starting in 2005. The DPR brings together a wide range of stakeholders
(Government Ministers and officials, Multilateral and Bilateral Donors, Private Sector and
International and National NGOs) for several days to review and discuss coordination, harmonization
and alignment of programmes under the EDPRS.

The Development Partners Coordination Group (DPCG) provides the structure for regular aid
coordination, monitoring and review at a more technical level. The group comprises government
Secretary Generals, heads of bilateral and multilateral donor and representatives of civil society and
the private sector. Meetings are held every two months and are co-chaired by the Secretary General of
MINECOFIN and the UN Resident Coordinator on behalf of development partners. The Budget
Support Harmonisation Group (BSHG) is a technical working group of the DPCG which brings
together key government institutions and budget support donors. The BSHG carries out bi-annual
reviews and meets on a quarterly basis to discuss the macro-economic and PFM reform programmes.

     Provider to be clarified

                                Capacity Development in PFM – Practitioners Guide Version 2
      The overview mechanism for PFM and in particular basket funding adopts a structure used in many
      countries. A PFM Reform Steering Committee (SC) is responsible for the monitoring and directing
      of the Fund‟s activities. The PFM Reform Technical Committee is responsible for ensure strong
      ownership of the program activities and enhancing their sustainability after programme completion.
      The PFM Reform Coordinator reports directly to the Permanent Secretary /Secretary to the Treasury
      [PS/ST]. The PFM Reform Secretariat provides facilitation for the central coordination of the PFM
      Reform Strategy program.

                              Capacity Development in PFM – Practitioners Guide Version 2

Capacity Development in PFM – Practitioners Guide Version 2
      Annex G Possible Approaches to TA59

                                                          Pros                                       Cons / Risks

       A. Technical Assistance (Expert
              Long-Term International Advisor - provides             continuity,      enhances      - risks increasing dependency
             (resident in country) – advisory role prospects of building solid relationships         - may       be      question  of
                                                    and understanding of the local context            accountability to whom –
                                                   - - focus on provision of advice and               contractor? local partner?
                                                    building capacity
                                                   - able to take a ‘long view’ and avoid
                                                    unrealistic pressures for ‘short-term
              Long-Term International Advisor - provides             continuity,      enhances      - risks increasing dependency,
             (resident in country, in-line role)    prospects of building solid relationships         esp if in advisor is in a line
                                                    and understanding of the local context            position
                                                   - able to take a ‘long view’ and avoid            - may       be      question of
                                                    unrealistic pressures for ‘short-term             accountability to whom –
                                                    results’                                          contractor? local partner?
              Strategic Gap Filling (often long- - can advise on issues requiring highly            - doesn’t necessarily address
             term)                                  specialized skills not available locally, e.g.    longer-term capacity needs or
                                                    trade,                      anti-corruption,      systemic constraints
                                                   - can provide operational or policy
                                                    support in areas critical to functioning of
                                                    government, e.g. judges, legislative
                                                    drafting (esp important in small island
                                                    states with limited specialized capacity)
                                                   - can serve as change agent, bringing in
                                                    international expertise, ideas, practices
              Long-Term International Advisor - provides ‘space’ for local staff to          - advisor may have limited
             (in-and-out)                           develop new skills independently           understanding of organizational
                                                    between visits                             culture, capacity issues, informal
                                                   - stronger sense of ownership               systems
                                                                                              - may be more inclined to
                                                                                               respond to pressures for short-
                                                                                               term ‘results’ or deliverables vs
                                                                                               focusing on capacity issues
              Short Term International Advisor - responds to specific need at a particular - advisor may have limited
             (specialist expertise)                                                            understanding of organizational
                                                   point in time
                                                                                               culture, capacity issues, informal
                                                                                              - more inclined to respond to
                                                                                               short-term needs or pressures for
                                                                                               ‘deliverables’    vs. longer-term
                                                                                               capacity issues
              Short term International Specialist - broadens base of support for local -           potential to by pass local
             supported by regional institution      institution                                institutions
                                                   - draws on regional capacity and
                                                    encourages ongoing links (sustainability)

           Adapted from ADB (2008) Learning from Success Pacific Series

                                           Capacity Development in PFM – Practitioners Guide Version 2

                                    Pros                                          Cons / Risks

                                   - cost savings
                                   - local ownership
 Local Expert                     - work done in country; reliance on local      - limits opportunities to drawn in
                                    systems, procedures                             international expertise or build up
                                   - in-depth knowledge of context,                 external links
                                    including political economy, org’l culture    -
                                   - costs savings
                                   - local ownership
 Local expert supported        by - majority of work done in country with        - Seconding local staff to project
Specialist short-term TA            long distance support (e.g. e-mail,            team can (potentially) diminish
                                    teleconference) or short visits                capacity of local partner in short
                                   - in-depth knowledge of context,                to medium term
                                    including political economy, org’l culture    - immediacy of support can be
                                    etc.                                           diminished by nit having locally-
                                   - cost savings                                  based specialists
                                   - local ownership
 TA through twinning              - works where there is high ownership          - most ODA examples show few
                                   such as for pre-accession states to EU          relevant          outcomes       in
                                   - ongoing links to range of institutional       organisational strengthening
                                   capacities (experts, network partners,         - activities tend to become routine
                                   interactive websites)                          - capacity development objectives
                                   - can enhance credibility of local partner      have to be well defined
                                   (incentive for staff)                          -focus more on training than
                                                                                   learning so recourse to formal
                                                                                   courses rather than on-the-job
 TA through partnership with - as above                                          - as above
professional associations

 TA through pooling – different -full – government in charge, makes - can take a long time to put in
levels:                               decisions on TA; can reduce              place;     lowest      common
Full – untied with procurement and    transaction costs in long run, less      denominator kind of thinking ;
                                      opportunity for dev orgs to put non-     individual foreign TA may be
strategic management by partner
                                      developmental demands on TA;             unwilling to sign contracts with
country;                              transparent costs                        partner country; risk of
Mixed – tied or untied with -mixed – less time to put in place; relieves       corruption
procurement managed by donors         gov’ts with limited capacity       of - no opportunity to build up local
and strategic management by           managem’t esponsibilities; can reduce    procurement          capabilities
                                      coordination costs in long run           through experience; pool could
partner country;                   -loose – can be put in place relatively     be donor-led and undermine
Loose – tied or untied with           quickly; little pressure on partner      ownership; little transparency
procurement manged by donors and      country management systems               on costs
strategic management shared by                                               - no opportunity to build up local
                                                                               procurement capabilities; gov’t
donors and partner country
                                                                               needs and preferences may not
                                                                               be given adequate attention,
                                                                               thus reducing ownership; no
                                                                               transparency      on       costs;
                                                                               possibility of overwhelming

                        Capacity Development in PFM – Practitioners Guide Version 2
      Annex H Learning Practice Approaches, Tools &
      DESCRIPTION                      LEVEL AND                       STRENGTHS                       CHALLENGES
      Blended learning: Blended        Individuals and Groups:         The blend selected can be       It needs skilful design and
      learning is the combination      For any learning need that      problem focused or person       management to ensure the
      of different training and        has a mixture of theory and     focused. Enables quality        right balance between the e-
      learning technologies,           practice. For processes         assessment of e-learning        and person components of
      activities and events. It most   where large numbers of          processes. Enables rapid        the blend. Requires a high
      usually combines a mixture       people in different locations   roll-out to large groups. Can   level of (compatible)
      of e-learning and interactive    need to learn the same          be very cost effective          technology and study skills
      human contact.                   things.                         depending on development        as prerequisites.
                                                                       costs.                          Development costs can be
      Coaching and Mentoring:          Individuals and Groups:         Very focused way to support     Needs to be separated from
      Coaching is generally            As part of leadership           learning and performance        line management structures;
      focused on workplace             development programmes;         improvement; can be             coaches and mentors need
      challenges and issues and        follow up to training           offered by national             to have specific skills
      will be time bounded.            activities; anywhere that       personnel
      Mentoring is generally a         managers and professionals
      long-term process of             could benefit from focussed
      supporting an individual’s       guidance
      career and personal
      development. Both are
      tailored and contextual and
      can be used for individuals
      and groups.
      Communication:                   Groups, Organisations           Surfaces the implicit           Can be countercultural and
      Processes that bring             and Sectors: For working        knowledge and wisdom            create resistance; requires
      groups together to               on issues that have a           embedded in groups;             skilful facilitation; can raise
      connect and surface their        defined stakeholder group       ensures that all stakeholders   inappropriate expectations
      collective knowledge and         whose knowledge and             have voice in decisions that
      wisdom, and by so doing          wisdom can contribute to        concern them; empowers
      enhance and support              identification and solution     participants; creates
      learning and change              of problems within their        ownership and commitment
      within those groups.             domain; best used for           to action
      Considered by some to be         challenges that do not
      a cross cutting element of       have technical solutions
      all other processes, and by
      others to be a component
      of Knowledge
      Customised training:             Individuals and Groups:         Focused on the specific         Relevance and success
      Training that has been           For specific technical          needs of participants           depends on the quality of
      commissioned for the             skills for project                                              the needs assessment and
      needs of a specific group        implementation; for                                             design processes, which
                                       system compliance needs                                         often are inadequate and
                                                                                                       does not involve adequate
                                                                                                       follow up
      Degree level study               Individuals: For young          Individual learning which       Covering positions and
      overseas: Most usually           professionals; where a          results in positive and         workload during absences of
      scholarships for graduates       sector lacks a pool of          quantifiable impacts at both    years; adaptation and
      to study at masters and          personnel with academic         individual and organisational   application of new
      doctoral levels at overseas      level knowledge of its          level                           knowledge on return to
      universities                     technical needs                                                 workplace; risk of brain

           OECD DAC – LenCD (2010) Special consultancy by Jenny Pearson February 2010 Seeking Better Practices for Capacity
            Development: Training & Beyond, OECD, Paris

                                       Capacity Development in PFM – Practitioners Guide Version 2

Distance learning:            Individuals: For people       Give high level academic        Students are isolated;
Academic study                who do not have high          opportunities for people        requires high level of
programmes offered by         quality tertiary education    who are not able to go          English and study skills;
overseas universities for     available to them locally     overseas; flexible timing       needs good quality and
participants to follow from   and whose financial or                                        affordable Internet access;
home.                         personal circumstances do                                     little support for adaptation
                              not allow them to study                                       and application of new
                              overseas                                                      learning in the workplace
E-learning: Any               Individuals and Groups:       Offers individual and           Students are isolated;
technology-supported or       For learning needs that       flexible learning               requires high level of study
web based learning            have high knowledge or        opportunities without           skills and facility in the
system. E-learning can        technical components.         requiring direct human          language of instruction;
happen across distances       For working on processes      interaction so good for         needs good quality and
and borders or within one     with groups who are           people who do not have easy     affordable Internet access;
organisation and not          geographically distant.       access to learning resources    little support for adaptation
therefore, at a distance.                                   or facilitators. Can be very    and application of new
                                                            cost effective                  learning in the workplace
Experiential learning:        Individuals and Groups:       Starts where the participant    Can create resistance
Generic heading for           For advisors to build         is in their own experience;     because countercultural;
numerous structured and       capacity of counterparts      grounds learning into           requires strong facilitation
semi-structured processes     and teams; for training       workplace practice; works       skills; not so good for
which can support             follow up activities; as      well for those not              technical needs
individuals to learn from     monitoring tools              academically inclined
their workplace
Exposure: Exposure visits     Individuals and Groups:       Makes learning about new        If it involves international
take people to see what       For those who will benefit    ideas more practical and        travel exposure can be
others are doing in similar   from seeing new or            grounded in reality.            expensive and not cost
work situations to            different ideas in action.    Stimulates the spread of        effective. Needs to have very
themselves. Attending         For those who would           good practice and the           clear learning objectives
conferences and other         benefit from introduction     fertilisation of innovation     specified at the start, and
events provide exposure       to new knowledge, ideas                                       effective follow up
to new knowledge, ideas       and practices                                                 afterwards if new ideas are
and influences within                                                                       to be applied
External training courses:    Individuals: Technical        Relatively inexpensive and      Cannot be specifically
Courses for which the         subjects such as              readily available               tailored to participant needs;
content and curriculum        accounting, computer and                                      rarely have any pre-testing or
are predefined by the         ICT skills: language                                          follow-up activities; impact
provider, who may be a        development                                                   is difficult to assess; limited
private company, a                                                                          support for participants to
training institute, or not-                                                                 apply learning in the
for-profit organisation                                                                     workplace
Knowledge Management:         Groups, Organisations         Enhances communication          Can be very complex and
Considered by some to be      and Sectors: For sectors      and connection within           time consuming to
a cross cutting issue in      with rapid advances in        systems to ensures that they    implement; requires constant
CD it is the process by       knowledge e.g. health;        are using all the available     attention and updating; can
which organisations           sector’s that are             knowledge assets to best        become overly technical and
generate value from their     knowledge based e.g.          effect                          dependent on data
intellectual and              education and training; in                                    management systems
knowledge-based assets        multi-
by documenting what           disciplinary/stakeholder
staff and stakeholders        processes, such as
know about the                decentralisation
organisation’s areas of
interest, and then sharing
that collected data back to
those who need it to
enhance their job
Leadership Development:       Individuals and groups:       Gives emerging leaders the      Requires the background
Processes designed to         For development of the        skills and confidence to step   political economy to be such
enhance the leadership        next generation of leaders;   into leadership roles           that participants can practice
skills of existing and        where new challenges are                                      what they learn in order to
potential leaders within      emerging for which no                                         bring about change in their
systems. Most effective if    experience sector                                             own performance or within
a combination of training     leadership yet exists; to                                     their organisations
modules and                   help women overcome the

                              Capacity Development in PFM – Practitioners Guide Version 2
      supplementary activities      glass ceiling that prevents
      such as exposure visits,      their professional
      and coaching or               advancement

      Organisational                Organisations and sectors:    Works at the level of whole     Very complex, requiring
      strengthening: There are      For any organisation or       systems and therefore           high levels of conceptual
      three interrelated            system that does not yet      ensures that learning, change   and strategic thinking to be
      disciplines known as:         have the capacity to fulfil   and development are             transferred to operational
      organisational                its mandate; best used        simultaneous across the         realities, multiple concurrent
      development, change           when the development of       whole organisation or sector    interventions, and strong
      management and                capacity calls for multiple                                   facilitation skills; needs
      organisational learning. In   aspects of the system to                                      support of enabling
      summary working with          be learning and                                               environment
      coordinated learning and      developing in tandem
      change techniques to
      move organisations
      towards the levels of
      capacity necessary to be
      effective and fulfil
      Partnerships and              Organisations and sectors:    Provides opportunities for      Can be difficult to
      Networks: Mechanisms          For sharing knowledge         sharing knowledge and           coordinate and keep
      through which diverse         and experience across         experience across borders;      functional; power relations
      actors with mutual            borders; for developing       offer opportunities for         can become unbalanced,
      interests come together in    research capacity             mutual learning                 having a negative impact on
      order to achieve a                                                                          opportunities for learning
      common goal. This can
      include twinning
      organisations and
      institutions with similar
      mandates, and the same
      or different levels of

                                    Capacity Development in PFM – Practitioners Guide Version 2


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