Author Topic: Conversation with the CIPFA International Team  (Read 28066 times)

atseacliff

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Conversation with the CIPFA International Team
« on: May 22, 2011, 21:18:45 GMT »
For our third conversation on the Board, it is a big pleasure for us to welcome the Team from the CIPFA International. They are Alan Edwards, Director, and Assistant Directors Peter Boulding, Gordon Ferrier and Tony Redmond. 

The Chartered Institute of Public Finance and Accountancy (CIPFA) is the only professional accountancy body and member of the International Federation of Accountants (IFAC) that specialises in the public sector. Their Team are involved in a wide range of international projects around the World. 
If you are a registered member of the Board, you have the possibility to pose a question to the CIPFA International Team by making a post (REPLY button) to this topic. The time allotted for questions is Monday 23rd May to Wednesday Ist June 2011. After this period the interview will be closed and remain in the archive for future reference.


Gentlemen; welcome on the Board. Let me kick off the conversation by asking

Question 1 Some Board Members might not be familiar with CIPFA.  Please give us a bit of background to the organization and why a not-for-profit organization gets involved in international activities? 

Question 2 How can become a member of CIPFA; and what are the benefits of being a member?

Napodano

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Re: Conversation with the CIPFA International Team
« Reply #1 on: May 23, 2011, 04:53:34 GMT »
Hi, Team; it is an honor for the Board to have you with us.

I like to pass on to you two questions often heard from local officials in seminars organized in transition countries.

Question 3: ‘ We are working in the Financial Management  Unit of the ministry, we are few staff and overworked. What is wrong with asking our colleagues from internal audit to help us in our routine work for financial control? Can’t they validate our work ex-ante so that  it can be adjusted in real time? They are well paid and  received a lot of training, so why not?’

Question 4: ‘We are working in the Financial Management Unit of the ministry,  we are few staff and overwhelmed by the audit inspections from our  internal audit unit, the  external audit agency and the Tax Inspectorate as well. They seem to ask all the same questions but in different formats? Now Government is about to create a Council for the  promotion of the internal audit function, which could have among its responsibilities that of revising  audit reports. Isn’t all the above an overlap of functions and too much too soon for a transition country?’
« Last Edit: May 24, 2011, 08:32:57 GMT by Napodano »

peterboulding

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Re: Conversation with the CIPFA International Team
« Reply #2 on: May 23, 2011, 11:47:17 GMT »
Answer to question 1:

CIPFA, The Chartered Institute of Public Finance and Accountancy, is one of the six UK and Irish Accountancy bodies and the only one that specialises in the public services, indeed it is unique in this. We have a membership of some 14,000 who have qualified or are qualifying through a three part examination system: all members are required to undertake continuous professional development. We have members working in the UK (central and local government, internal and external audit, mostly) in European institutions (the Commission, Court of Audit, Anti-Fraud Office, NATO and elesewhere) in UN institutions and many others. Many members work in international consultancy and have worked across the globe. The CIPFA secretariat is based in London with a small international directorate (six staff headed by Alan Edwards). Currently one of the assistant directors, Tony Redmond, in based in South Africa where he co-ordinates our work in the region. We see professionalisation as the key to sustainable PFM capacity development (this was very much the theme of our recent International Conference in March - see our website www.cipfa.org.uk for full details and webcasts of each presentation). CIPFA is active in the EU, south eastern Europe and Africa (notably Nigeria, Lesotho and South Africa with other countries in prospect).

In the UK CIPFA's Policy and Technical directorate is recognised as a centre of excellence by Her Majesty's Treasury and provides accounting and internal audit standards for local government, as well as advice on the transition to accrual accounting, and support to the devlepoement of CIPFA's Financial Management Model - an assessment tool for organisations on their progress with PFM best practice. Our Education and Membership department has a specialist education and training centre that provides professional international and UK training. We aso offer a rich diversity of benchmarking, statistical and a portfolio of short course training.

Why do we get involved with international work? We see this stategically. CIPFA's Strategic purpose is set as folows: "Working to promote high standards and deliver excellence in governance and financial management throughout the public services." Our vision for CIPFA is expressed as: "To be acknowledged globally as the leading institute for public financial managment." You may say this is easy to achieve as CIPFA is the only global institute, but it is the acknowledgement we are working hard to get to. We recognise that globalisation has created an inter-connected world where high public sector standards of governance and fiduciary responsibility are ingreat demand. CIPFA has been in existence of over 125 years now and has built up a substantial portfolio of materials which can resonate in other juristidictions, and not just the English speaking world. We look to find optimal ways to share this experience across the world. CIPFA was a founder member of the International Federation of Accountants and its staff and officials hold a number of key positions on or advising committees there; giving us an important platform for influence. We see a particular need to promote professionalisation as an important plank of sustainable PFM reform because of the legacy effects created by a cadre of professionally qualified accountants and auditors whose skills are sustained by strong professional bodies offering demanding examinations and follow on support through continuous professional development and other services. In our opinion much short course training falls very short of the mark.

Answer to question 2:

How to become a CIPFA member. There are in essence two main routes to obtain CIPFA professional PFM qualifications: the CIPFA qualification for UK graduates (three levels leading to full membership) and our international PFM qualifications. Both routes require the passing of examination papers that test professional competence at various levels. The international route currently consists of a Certificate course (financial and management accounting papers and a local module covering the PFM environment in that country) the a Diploma course covering managing finance, managing organisations, audit and assurance and public sector financial reporting. Our international qualifcations board is reviewing the International Certificate and Diploma with a view to encouraging even greater access and progression.

The benefits of membership, holding a specifically designed PFM qualification by an individual, are numerous.
They include:
*acquisition of a valued and broad range of skills - finance, leadership, business, strategy, communication, negotiation, influence and management, etc;
*attractiveness to a broad range of employers - the global public sector is diverse;
*standing and status - upholding public trust and integrity;
*satisfaction - in improving the communities where you work; and
*variety and challenges - this is especially true in the international sphere where the diversity is immense.


Organisational benefits include keeping staff up-to-date, the maintence of professional discipline through a code of ethics, colaborative working to imporve PFM and the acquisition of access to sources of information and expertise.
« Last Edit: May 23, 2011, 15:35:21 GMT by Napodano »

petagny

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Re: Conversation with the CIPFA International Team
« Reply #3 on: May 24, 2011, 07:04:03 GMT »
Question 5: I read with interest the consultation paper on CIPFA's 'Whole system approach to PFM' back in 2009, but unfortunately I rather lost track of where things went afterwards. Please could you give some background on how this initiative has developed and how it now fits in with CIPFA's ongoing international work?
« Last Edit: May 24, 2011, 07:51:35 GMT by Napodano »

AlanEdwards

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Re: Conversation with the CIPFA International Team
« Reply #4 on: May 24, 2011, 12:28:26 GMT »
Answer to question 5

The Whole System Approach and the other thought pieces that we have prepared for DFID have formed the basis of all our international PFM work. Effectively that was the rationale for our International PFM conference that we held in March. This was a major success with over 200 delegates from over 40 countries. You can view the videos of the presentations on our website www.cipfa.org.uk/international. As for the actual documents that we have produced we have pulled them all together in a single website on professionalisation that went live last week!

For a good summary of our approach to professionalisation and how that sits with a whole system approach you can see my presentation at the CAPA public sector conference last week in Seoul. This was a great event attended by accounting bodies and PFM practitioners from all over asia pacific region. The need for professional development to sit alongside the move to international standards was well understood. Catch my talk and all our thinking on professionalisation at www.cipfa.org.uk/ppfm


Alan Edwards, CIPFA International Director
« Last Edit: May 24, 2011, 12:57:05 GMT by Napodano »

atseacliff

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Re: Conversation with the CIPFA International Team
« Reply #5 on: May 24, 2011, 13:15:33 GMT »
Question 6

Alan

Regarding your response to Question 5 - thanks very much for the link to your professionalism website and to last weeks presentation. I can readily see the link between the systems approach and the development of PFM staff. 

In Eastern Europe and Central Asia there is a very fragmented approach towards professional training and no tradition of public sector accounting institutions.  Often the Government relies on short courses run by international experts and technical updates by MOF staff.  In this environment can you suggest how Government's might develop a stronger cadre of budget and finance professionals?  Should the Government be encouraged to develop professional accounting bodies or perhaps work with private sector oriented organizations, and if so how?   What advice can you suggest on creating  and institutionalising  sustainable professional finance associations. 


 

gordonfcipfa

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Re: Conversation with the CIPFA International Team
« Reply #6 on: May 24, 2011, 14:54:37 GMT »
Hi,
My first post on this Board, and delighted to see such interest in CIPFA's work.

Response to Q6

My experience of professionalising PFM (and I'm writing this from Abuja, where we are working with the Federal government to do just that at the moment) is that leadership is key to making progress. And that means someone (usually the Acc Gen, but the Aud Gen can also play a key role) needs to decide that s/he wants to see some progress. The nature of that progress can vary. Here in Nigeria we are starting on two fronts: working with the Federal Treasury Academy to help them "modernise" their governance, working practices, structures, systems and people; and with the Institute of Chartered Accountants of Nigeria (ICAN) to develop a joint qualification in PFM that FTA can train for. The initiative benefitted greatly from the leadership shown by the then Acc Gen, Ibrahim Dankwambo. Unfortunately he has just managed to get himself elected Governor of Gombe State, and so we are having to start to build a new relationship with the interim Acc Gen. But that shows the importance of leadership and of building relationships. I ought also to say that we have the support of the World Bank - Winston Cole has been terrific in "encouraging" local stakeholders to take ownership of the initiative.

On one of your other points (before I shut up and let others have their say) we prefer to work with an existing Professional Accountancy Body if there is one. There simply aren't the resources around to finance the creation of a new body, and it's always easier to work with something that exists, even if it has no experience at all of meeting the rather different needs of the public sector, than try to create a new body. And it also helps the PAO to develop its capacity and to see the wide range of services that it could provide to a whole new market.

That's enough from me for the moment. Keep posting those questions!

Gordon
« Last Edit: May 24, 2011, 14:57:59 GMT by gordonfcipfa »

gordonfcipfa

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Re: Conversation with the CIPFA International Team
« Reply #7 on: May 24, 2011, 15:09:59 GMT »
Another point in relation to Q5

One of the motivating forces in our thinking on the whole system approach (and I speak as someone who was involved with this thinking from the start) was to try to encourage people (particularly donors and those designing reform programmes) to think about the "whole system". We thought there were too many examples of single initiatives e.g. "let's train all the auditors in audit techniques" without considering what impact this might have on other parts of the system. What's the point of spending money on training staff of the SAI to report on how bad the accounts are, when you are doing nothing to train the accountants to produce better accounts in the first place? We also wanted to investigate the linkages between components of the system - what really happens when e.g. IFAC issues a new accounting standard? There is a general presumption that doing that is a good thing, but there is increasingly more and more work showing that producing technically "better" standards may not be the best way forward. And the number of countries who report themselves as "implementing" (note present tense) or "planning to implement" international standards is actually way more than the number who are really working actively towards that. Why is that? Is it in part because, as Matt Andrews pointed out in his isomorphism paper, that countries feel under pressure to appear to be conforming to the extermally set norms, but in practice they are rather embarassed to admit that they don't really know what to do?

We were trying to stimulate thinking in a new way, across a whole range of topics related to PFM reform. It's encouraging to see the interest there has been in the work, but we (the community) still have a lot to do.

Gordon

John Short

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Re: Conversation with the CIPFA International Team
« Reply #8 on: May 24, 2011, 20:44:25 GMT »
Question 7

I have been familiar with the good work of CIPFA as far back as the 1970s in relation to local authority spending in the UK and also in your training and certification of public sector accountants around the world, in Africa in particular. My question relates to the concept of "whole system approach".

Would I be correct in deducing that this relates to the training (formal and hands-on) and certification relating to downstream PFM activities (accounts, internal and external auditing) as well as the institutional arrangements, but less so in the upstream elements of PFM (planning and budget formulation) and the terms "whole system" reflects the approach to assistance in developing these downstream elements of PFM rather than the PFM system as a whole that the PEFA structure describes?

One of the issues I see in many "developing and emerging" economies is that donors often focus more on the downstream and less so the upstream (though not excluding it completely) and that fiduciary risk is more attuned to accounts and audits rather than the credibility of the budget in terms of allocating resources to deliver policies that are planned to deliver services. Indicators PI-11 but particularly PI-12 are generally the poorest performers in terms of PEFA scores which I think reflects this situation. There is danger of Rubbish-in Rubbish-out in IT parlance, albeit the rubbish may well be very well accounted for and audited!
« Last Edit: May 25, 2011, 02:56:24 GMT by Napodano »

peterboulding

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Re: Conversation with the CIPFA International Team
« Reply #9 on: May 25, 2011, 08:24:22 GMT »
Reply to question 7
Thanks for this John - if you look at the process architecture in the WSA equal weight is given to the upstream areas of planning and budget preparation. We show in diagramatic form the key components of PFM within the budget cycle. Both parts of the cycle are clearly vital and it was one of the guiding principles of the WSA that participants should be aware of the whole of PFM (inlcuding learning and growing - preferrably profesisonally).

My experience of Russia is the reverse of your experience: there there was considerable emphasis placed (by the EU in a succession of projects) on the upstream and almost nothing on budget execution! The consequences for accounting and reporting there were pretty horrendous, but that's another story...  CIPFA's interest traditionally (we are accountants after all, not economists) is much more in public service delivery rather than the macro-economic side of PFM and out definition of PFM pretty much reflects this.

Our fundamental point is that we (the enitire PFM community, but donors and governments in particular)  need to take a holistic view of PFM reform and not just focus on the easy or convenient bits that come to hand in any particular country. This leads towards the sequencing debate (platforms etc) which is being reviewed by the OECD DAC TAsk Force (another new publication coming out soon I believe?). CIPFA has also been leading the produciton of a practical guide to PFM capacity development (with the EC for the Task Force) which is about to hit the streets - watch this space... There is also something coming from the same stable on PEFA (but others are better qualified to assist there).

atseacliff

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Re: Conversation with the CIPFA International Team
« Reply #10 on: May 25, 2011, 09:43:23 GMT »
Comment on Question 6 - Question 8

Gordon (and your CIPFA colleagues) - many thanks for that. 

It is nice to hear a positive story regarding leadership and the supportive role of the donors.  In one Eastern European country I'm working in at present the Government is comfortable engaging on the technicalities of the system (developing GFMIS, writing new IA and accounting regulations) but dialogue on a broader approach to the professional development of PFM professionals is extremely difficult.  While the Government, with the support of the donors might be able to put a credible technocratic PFM project capacity building tends to be (at best) very fragmented. A longer term (holistic) and more professional approach to professional development has been pushed into touch as a problem for a broader civil service/public administration reforms (an excuse for doing nothing).  We have also tried to secure enagagement between the Government and the local accounting association without success.  The country (and most ex-Communist countries) lack a tradition of involving NGOs in the affairs of Government.

I wonder if, given my rather long winded scene setting, whether the WSA could be used as a analytical framework for a dialogue with Government and donors on this issue; and if so how?  WSA isn't a toolkit as such unless I misunderstand the nature of the beast - is there any intention to develop a toolkit which would enable WSA principles to be applied in practice?   

gordonfcipfa

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Re: Conversation with the CIPFA International Team
« Reply #11 on: May 26, 2011, 06:52:56 GMT »
In response to atseacliff's comments on Q6-Q8

The link between the WSA and the professionalisation of PFM comes through the Learning & Growing component. The idea of a toolkit is a great one: I say that in part because CIPFA has started to develop such a toolkit! We have a number of analytical devices and approaches that we have been field testing over the last three years. (And our thanks are due to another donor, DFID, whose financial support has helped us to do that). We're getting close to the point where we will be able to post these to our professionalisation micro-site, although some have appeared there already in a sumary form. As examples of what we are doing:

  • We have developed a "readiness assessment" methodology. That consists of a comprehensive questionnaire examining all aspects of the institutional and systems framework that influences or directly affects the approach that should be taken to professionalisation
  • We have a framework for designing a strategy for professionalisation, based on the results of the questionnaire and other information gathered during the analytical phase. That framework provides guidance on the shades of emphasis that ought to be paid to adressing particular components of the strategy, depending on the country circumstances.
  • We are currently finalising a guide to determining the most appropriate governance and organisational structure for the local PAO. We've said elsewhere that we prefer to work with what already exsts, even if that means significant capacity development, because that provides better and more sustainable long term solution.
  • We offer a template for making the business case for professionalisation. That's a Word document with some background material on what professionalisation is and what the generic benefits ought to be. It also has some likely risks identified, with space for the country to insert how they intend to manage those risks.
  • We have produced a guide to developing an appropriate business model to support professionalisation in the country or region. The basic argument is that, whereas donors and government themselves may provide investment funding initially, they will not do so without limit of time (nor should they). So at some point it becomes necessary to work out how the local institutions involved (the PAO and the local education and training providers in particular) are to generate the revenues that they will need to ensure that they can survive within whatever financial environment government expects of them. (We acknowledge that, in some cases, government may choose to subsidise professional training, so that may be part of the financial equation). The business model provides a structured framework for the locals to determine a number of key variables e.g. precisely what products and services they will offer to the local market, beyond the education and training of students.

All of these are "Professionalisation 1.0" and we expect them to evolve over time as our experience grows. Watch the micro-site for news of their formal publication.

Gordon

petagny

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Re: Conversation with the CIPFA International Team
« Reply #12 on: May 26, 2011, 07:39:56 GMT »
On the Response to Question 7

I agree with Peter Boulding that in the past too much effort may have been put into 'upstream' initiatives at the expense of 'downstream', but I wonder if the pendulum is now swinging too far the other way. A PFM system that doesn't have reasonable upstream processes, including workable interfaces with the political process, risks being an empty shell. I don’t believe this is something that can be tagged on once the ‘engine room’ is finished.

I see that the architecture for the WSA includes strategy and planning functions and reference to the MTEF, which is important. But I also see some less convincing features, such as 'Political economy: priorities' being outside the 'PFM space' and a conscious decision to exclude national economic management and fiscal policy from the scope of the WSA.

Priority setting is an interactive/iterative process involving the political level, policy analysts and PFM technicians and cannot really be divorced from consideration of the resource envelope (revenue forecasts surely fall within the scope of PFM?). Similarly, the fiscal policy stance is a product of interaction between the political and technical levels. Is it really possible to say that these vital parts of public financial management lay outside the scope of a 'whole system approach'?

More specifically, I'm not sure how an MTEF would be expected to work without strong linkages to national economic management and fiscal policy, and with 'political economy: priorities' being taken as an external given. In my view, the MTEF is not simply a technician’s tool, but a tool for making the interface between political and technical/administrative processes.

The boundary between PFM and the policy-making/planning process is certainly ill-defined and different people have different views (this came up in the Fireside Chat with Gord Evans). All the same, I thought I’d throw these ideas into the ring in the interests of a lively discussion.

I probably also need to read the CIPFA documentation more thoroughly – I admit to having only scanned the most recent material on the WSA!
« Last Edit: May 26, 2011, 15:18:15 GMT by petagny »

peterboulding

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Re: Conversation with the CIPFA International Team
« Reply #13 on: May 26, 2011, 11:23:51 GMT »
Responses to Questions three and four

I say responses because these interesting questions have no clear right or wrong answers, we can shade in some good practice but each issue has to be taken in context and these vary gloabally...

response to Question 3

Oh so much here... Who is not understaffed and overworked? But I'll overlook that and consider the impications from both good internal audit practice and also pragmatic management practice, positions:
- there would be a clear compromise of internal audit independence should they be involved in operations (they would not then be able to provide an opinion on their own work);
- ex-ante or pre-audit is generally a waste of time and effort dating from, among other places, old Soviet-style inspection and punishment practices rather than progressive financial management;
- if senior management felt there was sufficient of a problem with the Financial Management Unit's activities it should include in the audit plan a systems review of the unit to understand the problem and recommend areas for improvement (this could include training and increased staff numbers if appropriate);
- do I detect a local inbalance here between the prestige of internal auditors and accountants? I have seen it in South Eastern Europe, where accountancy is equated with book-keeping and internal audit has much higher status: this could be another Soviet remnant effect? At CIPFA we offer professional courses that make no such false distinctions and recognise the complete range of skills required for both auditors (internal and external ) and accountants. It looks as though the professional organisation in the country involved here shoudl be strengthened to bring things into a proper balance...
- pragmatically there just maybe a case for using Internal Audit resources for such work if it was considered by management (and who is that? - hopefully spread further than Mayors and Ministers?) to be a real emergency demanding the short term deployment of Internal Audit to get out of a crisis - I doubt if this routine work would count.

Response to Question Four

Audit and inspection overlap is not just a problem for transition countries, it has happened in the UK where there has been a thinning of the inspection culture (some see the demise of the Audit Commissin as part of that) and resulted in some reductions in indicators. It needs regulators across the board to take a long hard look at the cost-benefit of their audit and inspection regimes, some joined up action and participants being prepared to share results and collaborate to minimise transaction costs for their auditees. Not easy. The donors have tried to harmonise across the globe but stll struggle to do it (See OECD materials on the Accra Agenda for Action for instance). This also makes a good case for sequencing reforms and developing the platform approach, for instance.

So the answer is for governments to take sane approaches to such matters, something we all live more in hope than expectation of...
« Last Edit: May 26, 2011, 11:44:32 GMT by Napodano »

atseacliff

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Re: Conversation with the CIPFA International Team
« Reply #14 on: May 26, 2011, 13:52:33 GMT »
Question 9

Thanks to Gordon in highlighting the development of various tools to complement the WSA. Do you see any overlaps between the development of these new tools and other existing assessment tools - particularly the PEFA PMF?


peterboulding

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Re: Conversation with the CIPFA International Team
« Reply #15 on: May 26, 2011, 15:22:50 GMT »
Response to Question Nine

You raise the interesting matter of overlap or otherwise between PEFA indicators and the Whole System Approach. I see this much more as complementarity: PEFA indicators measure progress in achievement of good public financial management. The indicators naturally can only measure the measurable and there are some aspects of the whole PFM universe that fall outside that, such as several aspects of learning and growing. In the process architecture we have tried to describe the constituents of that universe as we see them now. As we have said before it is currenlty a description of the whole system not a toolkit for reform programme design and implementation, but that is something we hope to develop in association with PEFA and the donor communities.

CIPFA is an enthusiastic supporter of PEFA as this recent news item on international training demonstrates:

CIPFA’s Education and Training Centre goes to Mozambique

CIPFA’s Education and Training Centre (CETC) has further developed its experience in international public financial management.  Chris Lees, Course Director, CETC Midlands has spent five weeks in Africa as part of a team conducting Mozambique’s third PEFA assessment.  PEFA stands for public expenditure financial accountability, and is an assessment of a government’s systems of financial management.  The PEFA methodology has been developed since 2005 and has global coverage, with many countries now on repeat assessments or extending the PEFA assessments to sector level (eg health and education), or to sub-national level (regional or local government).  The PEFA methodology consists of scoring Governments in 28 indicators, most with more than one dimension.  There are also 3 indicators with which to score donor agencies, which many countries, such as Mozambique rely upon to support development.   

CETC has conducted PEFA training in India, Armenia, Tanzania, Frankfurt, London and Brussels in the past and Chris’s experience in conducting an actual assessment will add a new dimension to the training offering.

The assessment itself consists of a lot of information and evidence gathering with which to score the indicators.  This involves interviews with a number of government staff, politicians, donor agencies (such as the European Union, and the Norwegian and Canadian aid agencies) and representatives of civil society.  Evidence is also gathered from government reports and other information, including reports from other bodies, for example the CPAR (Country Procurement Assessment Report).  Once this evidence is gathered the country is scored and the PEFA report drafted, consulted upon, re-written and then finally submitted.  PEFA reports when finalised are sent to the PEFA Secretariat in Washington where they are reviewed and placed on its web-site (www.pefa.org) where it can be accessed by interested parties.


We have also recently included a PEFA session at our International Conference with presentations from Frans Ronsholt (Head of PEFA), Andy Mackie (Independent PFM Consultant) and Stephen Sharples (DFID Head of PFM) see http://www.cipfa.org.uk/pfmconference/ for videos of this and all the other sessions. An article arising from this session will appear in Public Money and Management early next year (PMM is an independent review of policy, management and finance in the public services. Articles are reviewed by academics and practitioners to ensure quality and practical impact. PMM is owned and managed by CIPFA, which wishes it to be regarded as a neutral forum for debate and dissemination of knowledge.)

CIPFA are also hosting a PEFA workshop on 15-17 June 2011 in London. This workshop is designed for Government officials and representatives of donor agencies, who are likely to have an involvement in supporting the PEFA assessments, and will provide oversight of and examples in the PEFA methodologies. Spaces are limited, but further details are available at http://www.cipfa.org.uk/cetc/qualifications/workshop.cfm There are special rates for early booking and we are seeking donor sponsorship for attendees unable to meet the full cost of the workshop.



Martin Johnson

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Re: Conversation with the CIPFA International Team
« Reply #16 on: May 27, 2011, 09:41:13 GMT »
Question 10

Leaving aside for the moment the search for a great WSA unifying theory of PFM that will bring together the general relativity of policy makers and spending with the quantum mechanics of MTEFs, performance budgeting, accounting and auditing standards and the like,

what I would be interested in is CIPFA's take on internal audit and internal control. In particular, in those (many) environments where internal control is mistaken for and confused with internal audit what are the key factors in CIPFA's experience that have successfully generated a better understanding of the difference and that have resulted in a meaningful movement towards establishing a modern internal audit function? There is many a PEFA PI-21 score waiting on this one.
« Last Edit: May 27, 2011, 09:52:21 GMT by Napodano »

petagny

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Re: Conversation with the CIPFA International Team
« Reply #17 on: May 27, 2011, 12:08:19 GMT »
Addendum to Question 10
Might we be expecting too much of many of the countries in which we work as far as internal audit is concerned? It's a comparatively new (post-Enron?) phenomenon in the more advanced countries isn't it? For example, I'm working with a public sector organisation from an older EU Member State where internal audit has only recently been established.

harnett

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Re: Conversation with the CIPFA International Team
« Reply #18 on: May 29, 2011, 14:56:13 GMT »
Question 11

The financial rewards to accountants are well known to be generally higher in the private than the public sector - this situation is even more apparent in the countries we work in overseas, and often results in a lack of quality amongst public sector accountants, given the lack of qualified accountants in poorer countries.  Obviously CIPFA can address this to some extent with training courses but in some cases this training merely provides course recipients with greater leverage to work in the private sector.  Does CIPFA have any view on this unwanted impact of its training?  Does it recommend any preventative measures - such as the "top-ups" that we have seen for public sector salaries?  Or are these issues beyond its remit?
« Last Edit: May 29, 2011, 15:58:26 GMT by Napodano »

gordonfcipfa

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Re: Conversation with the CIPFA International Team
« Reply #19 on: May 31, 2011, 09:58:20 GMT »
Replying to Q9 for the moment, and with apologies for any delay but I've just returned from Abuja and yesterday was a holiday here in the UK

Overlap with other tools? Potentially yes, and something that we try to be very conscious of, and therefore avoid. I don't think we can completely achieve that, but in any event a number of the tools work in slightly different PFM spaces. The PEFA indicator set, for example, excellent as it is and very much worthy of support from stakeholders, doesn't cover the same width of PFM topics as does CIPFA's WSA, for example. We started doing a comparison between the two a few months ago, to try to map out where, specifically, the differences lie. Although we haven't taken that much beyond the initial mapping stage, I was surprised to find the number of areas that WSA covered that weren't directly addressed by PEFA. These included a number of aspects of leadership, which is interesting I think given the points I made in another post about the importance of leadership in professionalising PFM.

None of this is to say "WSA good, PEFA bad". Far from it. PEFA is an excellent set of indicators that gives a very good snapshot of the state of PFM in a country at a point in time. WSA comes at the problem from a different perspective, perhaps more of a New Public Management angle, particularly where it comes to the role of PFM and public finance professionals in leading change and innovation. For all sorts of good reasons PEFA doesn't really address that particular perspective.

So, potential for overlap, yes but I think so long as we are aware of that potential we can avoid any downside aspects to that. But really looking at the same issue from a number of different perspectives isn't such a bad idea, and it can help to find solutions to problems and issues that may have gone unnoticed.

Gordon

gordonfcipfa

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Re: Conversation with the CIPFA International Team
« Reply #20 on: May 31, 2011, 10:18:05 GMT »
Picking up some points from Q11

We've had the full range of views on the "unwanted impact" of providing PFM staff with qualifications that equip them to work in the private sector. On the one hand government says that it doesn't really mind because the talent remains in the economy as a whole and therefore there isn't any real loss. By way of contrast, it's frustrating for government to put time and effort into training people only to have them walk away and take more highly paid jobs in the private sector. Some countries try to stem the flow by requiring students to sign documents "committing" them to remaining in government for a period of time after qualification.

FWIW my own (probably mostly personal) thoughts on this and the issue of salary top ups are:
  • The "indentured" approach may be illegal (it almost certainly would be in the UK, for example, where EU law and directives tend to frown on restraints to trade like this. In any event it only defers the problem if there is one, and so can only be a temporary solution
  • I think it's important to ensure that governments pay salaries and other benefits and rewards that are sufficiently attractive to retain staff. That isn't the case in most of the countries I'm familiar with at the moment. I can appreciate the difficulties: however unless government is prepared to reward people who work hard to achieve professional qualifications then they ought not to be surprised if they walk away
  • We recently produced a "recognition study" for government in Lesotho. That identified a very clear need to do something about recognition and reward. Government's response was to want a very long period of years (I can't remember how many off the top of my head but think 10+) to implement the recommendations. That isn't going to do anything to retain staff. It's back to leadership again.
  • Salary top ups are a fact of life, it seems to me. Donors aren't crazy about them but they often simply have to be paid to get decent people into senior positions. Personally I think it would be good VFM to use these to get really inspirational leaders into Acc Gen and Aud Gen posts. They could really make a difference. Unfortunately that doesn't always happen.
  • This may be regarded as naive, but I think we need more managers and leaders properly trained to emphasise the non-financial rewards that come from working in government. The challenges of reforming PFM to help achieve MDGs and improve the economic circumstances of the country more generally are enormous. That's where the real satisfaction comes from. But I appreciate that people do need to eat first of all.
  • The problem isn't confined to developing or transition economy countries, although it is most acute there. My own daughter did her CPFA in local government in Scotland. Since then she has worked for Procter & Gamble, SAB Miller and is now head of investor relations with the Weir Group, a FTSE-100 engineering company. Good people will seek fame and fortune in whatever aspect of life is attractive to them, and there isn't anything that could or should be done about that. Again I appreciate this scenario is several steps removed from the problem that is being described by harnett.

Now if you will excuse me I'll get off my hobby horse!

Gordon

peterboulding

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Re: Conversation with the CIPFA International Team
« Reply #21 on: May 31, 2011, 15:02:11 GMT »
Response to Question 10 and its addendum

Firstly, to be formal, here are two definitions form our Role of the Head of Internal Audit document http://www.cipfa.org.uk/roleoftheHIA/download/Role_of_the_HIA.pdf:

Internal audit
An assurance function that provides an independent and objective opinion to the organisation on the control environment, by evaluating its effectiveness in achieving the organisation’s objectives. It objectively examines, evaluates and reports on the adequacy of the control environment as a contribution to the proper, economic, efficient and effective use of resources.

Control environment
Comprises the systems of governance, risk management and internal control. The key elements include: establishing and monitoring the achievement of the organisation’s objectives;
the facilitation of policy and decision-making ensuring compliance with established policies, procedures, laws and regulations – including how risk management is embedded;
ensuring the economical, effective and efficient use of resources and for securing continuous improvement; the financial management of the organisation and the reporting of financial management; and, the performance management of the organisation and the reporting of performance management.

NB these definitions came about before our recent moves to collaborate with the IIA, but are broadly in the same territory.

What they do point to is a developed view of Internal Audit and Internal Control (IA and IC from now on) that clearly differentiated between internal control (as a management environment) and internal audit (that provides assurance on how well that environemnt is being maintained). This viewpoint is present in the PIFC agenda (Robert de Koning for the EC) that has been widely promulagated as part of the EU accession process (though it appears less visible once that process is completed, discuss).

A key factor in my opinion is the recognition that IC is a management function and for it to operate successully and to be properly monitored by an independent IA unit requires a pretty well-developed management infrastructure the like of which is unlikely to exist in many transition or developing countries. Such a structure would have levels of delegation of trust and responsibility as well as idividual managers (financial and otherwise) with devolved scope to make decisions and to manage effectively. In many of the places we are talking about this freedom simply does not exist or is restricted to mayors and ministers who exert what they consider as internal control with unyielding vigour. Internal control can become the new vocaulary for authoritarian inspection regimes whose main ambition is to punish the guilty rather than bring about improvements to systems.  By the way, it may not always a great idea for inspectors to be recruited to the audit ranks (but sometomes it cannot be avoided). I am grateful to Noel Helpworth for reminding me of all these basics recently in relation to South East Europe.

In designing reform programmes (and evaluating progress) it is necessary consider where the country has started from and move forward accordingly (whether using platforms or not). It is a good idea to evauate the management and public administration context and progress before setting up more demanding structures (like IA) that have little chance of survival without a favourable management environment. DFID have been through phases of fixation with Political Economy but in the case of IC and IA some understanding of the political context is justified. A notable Auditor General from Southern Europe has been vocal in his emphasis on the need for Parliaments to be considered in reform programmes - this would certainly help in informing these key stakeholders about the destinctions between IC and IA and the outcomes to expected from them.

So to get back to the question(s) in hand - we need to get closer to the broad public administration and public management agendas (recognising that PFM reforms may have to tread water to let these others catch up) to make a case for IC and then IA as being more appropriate to the second or third platforms (or phases); with only scene setting of the basics taking place initially. This is all very locally contextual and there have been examples where IA has developed more effectively than others (e.g. Slovenia). IA is a relatively new phenomenon and it has resonated well in the western (particulary Anglo-Saxon) world but it might not suit every circumstance or be the panecea for every form of management. For example, in the UK, audit committees are the norm for public sector bodies but they have found much less traction elsewhere.

I would conclude by pointing out that the IC/IA area is far richer than one might expect at first sight and coping with it in the field requires an appreciation of cultural and political context in addition to good PFM skills. I wonder if contributors to this Board have any really good examples of the successful implementation of IC environments with commensurate quality of IA review and opinion?

harnett

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Re: Conversation with the CIPFA International Team
« Reply #22 on: May 31, 2011, 15:20:13 GMT »
Thanks a lot for your reply Gordon.  You're obviously struggling with similar issues to us economists, though I imagine even more acute in the accountancy world.  I was wondering if there had been any innovative moves to "contract out" services to the private sector, given the paucity of talent in some countries.
« Last Edit: June 01, 2011, 02:51:22 GMT by Napodano »

John Short

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Re: Conversation with the CIPFA International Team
« Reply #23 on: May 31, 2011, 16:25:51 GMT »
Replying to Q9 by Gordon

I wonder if we are addressing the same thing but with the introduction of additional "soft" management skill features.  PEFA looks at PFM systems, processes and procedures in many of the indicators (such as PIs- 11-15) and the consequence in others (PIs-1- 4) and provides a benchmark score for indicators and dimensions.  The introduction of management issues - leadership, diary management, meeting management etc. will undoubtedly improve PFM, but are not uniquely related to Public Finance.
« Last Edit: June 01, 2011, 02:51:43 GMT by Napodano »

tonyrcipfa

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Re: Conversation with the CIPFA International Team
« Reply #24 on: May 31, 2011, 20:31:42 GMT »
Further comment on Q6

This is my first input to the conversation - travel, meetings and problems with internet access last week all got in the way.

Gordon sets out very clearly the principles we follow in professionalisation.  I just want to add something about the practicalities.

It remains the objective that we work with local institutes wherever possible - we see our role as being to strengthen and develop those institutes (and not to compete with them) so that they can effectively support the public sector as well as fulfilling their traditional role within the private sector.  However, the local institutes have to be willing to make this transition and we need to be ready to find an alternative approach in the event that they are not prepared to do so.

I would hesitate to say that we yet have a strategy in place for such an eventuality but we are gradually feeling our way towards one based on the experience we are gaining from working with a number of governments.  At the moment there are two strands to this, one which we are already pursuing and one which we may need to pursue should it be necessary.  The first is to take a 'bottom-up' approach to developing professionals in PFM.  Peter referred to CIPFA's International Certificate and Diploma qualifications in one of his answers and this now forms a central part of CIPFA's offer on professionalisation.  These qualifications are aimed at, for want of a better phrase, rank and file staff members in PFM in the accounting, budgeting and audit fields but those who demonstrate understanding and competence by succeeding at both of the qualifications can clearly be considered as potential achievers of a full professional qualification.  So we are working hard to construct a professional superstructure above the Diploma level which has both common material and standards with the CIPFA's own professional qualification but which is tailored wherever possible to local needs.  As part of this we are also developing a fast-track route for unqualified senior staff to enable them to achieve professional status as quickly and efficiently as possible so that they can form a nucleus of the PFM professional body.

The second strand may need us to look at regional provision of PFM professional qualifications.  If incumbent professional bodies in individual countries really are unwilling to support the professional needs of the public sector, or there is no incumbent body at all, we may have to consider working with regional accountancy and audit associations (such as ESAAG, FAAGWA and AFROSAI) to create regional provision for the public sector in order to arrive at the critical mass of members required to support a fully functioning professional body.  The paper Gordon refers to as currently in draft floats some ideas on how this might happen.  As yet this is a theoretical model but donors seem keen to explore the idea and we would certainly not rule it out.  We are already in discussion with two regional associations about creating a professionalisation implementation 'platform' to deal with country-by-country readiness assessments and capacity development initiatives, and this may provide a basis from which to proceed should it be necessary.

Tony

Napodano

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Re: Conversation with the CIPFA International Team
« Reply #25 on: June 01, 2011, 16:44:15 GMT »
PFMBoarders,
time is over to pose questions.


atseacliff (on his way to Washington) asked me to lock the conversation. I take the opportunity to thank the CIPFA Team for having been with us. Please come back again to share your knowledge.

atseacliff will make a final post this weekend to attach a transcript of the conversation with an orderly  sequence of questions and answers.
'til the next conversation, stay knowledgeable!

atseacliff

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Re: Conversation with the CIPFA International Team
« Reply #26 on: June 01, 2011, 21:16:58 GMT »
Just to add a sincere note of thanks for the engagement of the CIPFA International Team over the last 10 days.  You have provided fellow Boarders with a rich narrative on CIPFA, its international work, the WSA and a variety of other PFM issues. 

Best regards to you all.

 

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