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Reforming Public Internal Control: Lessons (Not) Learned Raymond Hill, CGAP European Commission DG Budget. Content. European Commission's long tradition of coaching PIC development Challenges in reforming PIC Lessons not learned Conditions for successful reforms. - PowerPoint PPT Presentation
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Reforming Public Internal Control: Lessons (Not) Learned
Raymond Hill, CGAPEuropean CommissionDG Budget
Content
• European Commission's long tradition of coaching PIC development
• Challenges in reforming PIC
• Lessons not learned
• Conditions for successful reforms
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2009 PIC Conference in Brussels
• Purpose: To review and learn lessons from the implementation of PIC in the recently-joined EU Member States
• Delegates provided positive feedback on:
– Comprehensiveness of the PIC reform model– Our coaching on the sequencing of reform steps– Our guidance on the competency requirements of key staff in the PIC
environment
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Many challenges to PIC implementation were identified
• Absence of hard law: only reliance on non-binding international standards– Various good practices: no definition of best practice
• Long time needed for reforms– Political pressure for fast visible results– Short term nature of technical assistance
• Reforms were sometimes pushed too fast by the donor community: outstripping national absorption capacity
• Management traditions and resistance
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Managerial Traditions and Resistance
• Sometimes the top manager tries to control every detail– Lack of understanding of Managerial Accountability
• Sometimes there is no manager!– Unclear delegation procedures do not allow to identify the task manager
• Managers have a fear of transparency
– Transparency is often only seen as highlighting negative aspects: however it can also serve to highlight good performance
• Better internal control is not the same as more controls
5
PIC Reform – Lessons (not) learned
1. Policy before Prescription
2. A revised legal framework is not a reform
3. A hasty legal transplant leads to problems at implementation
4. Plan ahead for sufficient resources
5. Avoid excessive segmentation – keep an eye on the big picture
6. Internal Control should match the PFM system
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Lesson 1: Policy before Prescription
• A government approved Reform Policy should set the direction for Internal Control reforms
• Pilot Projects are an effective way to test a new approach
• Pilot Projects should come before legal prescription– There is no point in adopting a law and then testing its application
through Pilot Projects!
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Lesson 2: A revised legal framework is not a Reform
• As well as a solid legal foundation, fundamental public sector reform requires a long term change management strategy for modernising administrative culture
• Change management strategy includes:
– Visible political leadership– Reasoning for the change– Milestones: champions and role models– Feedback and a learning perspective– Encourage civil society interest in public governance
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Lesson 3: A hasty legal transplant leads to problems at implementation
• Law-making takes time
• New laws require wide consultation of stakeholders
• New laws should be developed in line with the national administrative culture and national cost/benefit analysis. National ownership is required.
• Non democratic law-making can move quickly but it will often break down at implementation
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Lesson 4: Plan ahead for sufficient resources
• Reforms take time. Allow for plenty.
• Need for skilled, motivated and empowered staff at central level
• Need for sustainable training facilities
• Seek agreement for medium/long term Technical Assistance support
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Lesson 5: Excessive segmentation – Not seeing the big picture
• Excessive segmentation can produce hyper-focussed approaches that ignore systemic problems and fail to add up to an integrated effective whole.
• Co-ordination and sequencing of all related PIC reforms (especially Public Administration reform, Budgeting and Accounting reform) is required – at strategic level.
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Lesson 6: Internal Control should match the PFM system
There are 3 basic stages of Public Financial Management development:
Stage 1: Enforce basic financial complianceCharacterized by traditional input controlled budget
Stage 2: Ensure fiscal stability over the medium termCharacterized by medium term budget frameworks
Stage 3: Attain policy objectives in efficient/effective wayCharacterized by “performance budgeting/management”
12
PIC Reform: Conditions for success
• Ownership:
– Political commitment: politicians lead, technicians follow– Top managers accept that reform is necessary
• Ensuring change in administrative culture:
– Understanding that law-making and adherence to legal rules is not enough but that there is a need for managerial accountability and real delegation
• Sufficient resources:
– An adequately resourced and skilled Central Harmonisation Unit to drive the change and face stakeholder expectations
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PIC Reform: Conditions for Success (cont)
• An integrated approach:
– PIC is not a stand-alone, technical fix but part of the overall public Finance Management and Public Administration reforms
– A comprehensive reform is better than piecemeal changes– Long-term project management
• Ongoing and sustainable training for all
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