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Harmonization in Financial Management

Financial Management harmonization efforts began in 2001 with the establishment of the Financial Management Harmonization Working Group (FMHWG) among the major multilateral development banks. An initiative with the bilateral partners under the auspices of the the Development Assistance Committee of the Organization for Economic Cooperation and Development (OECD-DAC) resulted in the Joint Venture on Public Financial Management (JV-PFM).

The JV-PFM issued the DAC Guidelines and Reference Series: Harmonizing Donor Practices for Effective Aid Delivery -- Volume 1 (PDF, 1.0 Mb) and Volume 2 (PDF, 1.4 Mb). The FMHWG also issued notes on harmonozation of FM practices in a number of areas.

Financial Management harmonization was a focus area of the 2003 High Level Forum (HLF) on Donor Harmonization in Rome, where international and bilateral organizations, and donor and recipient country representatives committed "to take action to improve the management and effectiveness of aid and to take stock of concrete progress" by early 2005 at the second High Level Forum (HLF2) in Paris. HLF2 concluded with the signing of the Paris Declaration by over 100 partner and donor countries and international organizations, committing to "continuing and increasing efforts in harmonization, alignment, and managing for results," and to monitor progress using a set of monitorable actions and indicators to accelerate progress in 12 areas, including PFM.

The Paris Declaration PFM indicators (PDF, 26 Kb) measure the reliability of country PFM systems (Indicator 2a) and use of country PFM systems by donors when they are recognized to be acceptable or progressing with reforms to this end (Indicator 5a). Indicator 2a is based on the Country Policy and Institutional Assessment (CPIA) rating on the quality of budgetary and financial management.  Indicator 5a is being monitoring by means of a survey.

In preparation of the Third High Level Forum on Aid Effectiveness (HLF3) in Accra, held in September 2008, the JV-PFM issued The Report on the Use of  Country Systems in Pubic Financial Management. The report is part of the JV’s ongoing work on facilitating the implementation of the Paris Declaration. It takes stock of progress on using country systems and outlines recommendations on how best to achieve the 2010 Paris Declaration targets.

Harmonization efforts with the United Nations family resulted in a World Bank-United Nations Financial Management Framework Agreement (PDF, 1.34 Mb) in March 2006. The agreement provides for streamlined and harmonized FM arrangements when the World Bank engages with UN Organizations through the provision of grants that are either funded by the Bank or by Bank administered Trust Funds.

The Bank also supports harmonized international accounting and auditing standards through its partnerships with international standard setting bodies.

For further information on FM Harmonization, contact Ivor Beazley, ibeazley@worldbank.org, tel. +1-202-458-7947.




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