Public Sector Reform, Delegation, and PFM/IC

Abstract

This guide makes clear that the PFM/IC reform should be regarded as much as a management reform as a technical reform. Consequently those involved in the development and application of this reform ought to consider as part of the reform process, those managerial related issues which will affect implementation. One is the structure of the civil service (and by extension, the local government service), another is delegation and sometimes delegation can be inappropriate. A further topic that should be considered is the personnel management arrangements. Are these compatible with a managerial approach to the implementation of the PFM/IC reform. Again, where proposals are made involving public administration reform, these must be compatible with the reforms that are necessary to achieve an effective PFM/IC reform. These are the issues which are discussed in this chapter.

An organisation combines both human and material resources to achieve its objectives. The major players in establishing an effective public organisation are those with responsibility for giving direction to the organisation, the politicians, and the top executive management within the civil or local government service. In this chapter the linkages between public sector reform, incorporating civil service reform, personnel management, and public financial management and internal control reform are discussed, together with an analysis of what ‘delegation’ means and where it is appropriate to introduce it. Delegation is treated by many PFM/IC reformers as though it were a single activity, but, whether it is appropriate or not is a more complex issue which does require careful consideration and which also requires to be accompanied by other reforms. An important consideration depends upon the quality of the civil service (or local government service) and the extent to which it has been reformed moving from an administrative style to a managerial style. This guide shows what an extensive management reform introducing PFM/IC is. The reform does not just affect the top and senior management but how the personnel of an organisation perform. Effective personnel management (and personnel are the most important asset of an organisation) is of central importance to a successful organisation. To gain the benefits of the PFM/IC reform that reform should underpin civil service/public service reform by providing the information and analysis that managers require for the efficient and effective delivery of public services.

14.1 Public Sector, Including Civil Service Reform, and PFM/IC

14.1.1 Introduction

A central feature of PFM/IC is that it is about making better use of public resources. The systems associated with PFM/IC make this possible but an essential requirement is the managerial reform that ought to accompany it. Without managerial reform PFM/IC will be just another bureaucratic system. That managerial reform should introduce significant change to a traditional style of public administration where top managers are political appointees and management structures are based upon a hierarchy of rules with a centralised hierarchy of decision making and controls with a civil service organisation and appointment system that in some countries was (is!) heavily dependent upon political patronage.

An important element of public sector reform is the recognition of the significance of the complementarities of the roles of the politicians and the top-level civil servants (or for local governments, top local government officials). For this to work civil servants must be well trained and apolitical. Unfortunately, many countries that have started to introduce the PFM/IC reform have not, in general, appreciated the extent of these complementarities because the reform has simply been regarded as a technical financial reform and training has tended to be in the bureaucracy of the reform rather than in the managerial opportunities that the reform creates. Earlier in this guide the impact of the PFM/IC reform upon different levels of management has been described and, particularly the impact upon the political and senior civil and local government officials. The impact upon the head of finance is also significant. What has also been pointed out is that the PFM/IC reform has a major impact upon budgetary, accounting, and financial reporting arrangements.

Because the PFM/IC reform has such a significant impact upon all these managerial arrangements, and not least upon the relationships between the political and the official levels of management, the PFM/IC reform ought to be coordinated with the arrangements for public sector and civil service reform.

Reference is usually made in policy papers prepared to advise on the implementation of PFM/IC to the need to delegate responsibility and to establish managerial accountability. Earlier in this guide the argument has been that broadly, policy and strategy should be the responsibility of the political level of management, whether ministers or deputy ministers, mayors, or deputy mayors and that operational management should be delegated to the appointed official level of management. However, the politician may not have the skills, experience, or technical knowledge to formulate policy or to define how it is to be implemented. The top civil service (or the equivalent in local government) should be the key advisers to the politician on the development of policy as well as having the responsibility for policy implementation. In effect their role is to turn political ideas into practical public services and activities. This requires though a stable, well-trained civil service (or local government service) with knowledge of the history of the experience of delivering the service or activity.

Although, in general terms, the civil (or local government) service should have the delegated responsibility for policy implementation, this is too simple a distinction. It does not recognise the complexities of many public service delivery arrangements and nor does it recognise the different circumstances often involved in decision making, and not least ‘personalities’. These can complicate a delegation decision. In some circumstances politicians should become involved in operational management decision making. What should be avoided though, is politicians becoming involved in the day-to-day management of the organisation for this should be very firmly the responsibility of the civil or local government service top official.

The delegation of decision making is also a matter for operational management because delegation should be a feature of operational management. The question then is, what types of decision should be delegated by senior managers to more junior managers?

In this chapter an analysis of the different types of decision or factors affecting a delegation decision are discussed. This will allow ministers of finance and in particular the state secretary of the ministry of finance along with the ‘driver’ department responsible for the implementation of the PFM/IC reform to focus their efforts on specific areas where delegation can or should occur and where not or where delegation may be problematic. What to delegate and what not, does require careful consideration.

Along with delegation goes ‘accountability’. In considering delegation and accountability the prior question is: ‘what is management’? There is no universal definition but an authoritative definition is: ‘management control is the process by which managers assure that resources are obtained and used effectively and efficiently in the accomplishment of the organisation’s objectives’.¹

This idea of management underpins the whole concept of PFM/IC.

Success with implementing the PFM/IC reform depends upon the extent of managerial reform, which should be at the core of civil service reform. Those responsible for civil service reform should recognise the implications for management of the PFM/IC reform. In most countries the impact upon management has not been the starting point and as a result there is no ‘ownership’ of the reform by organisation top and senior management. Consequently PFM/IC is often seen as an imposed ministry of finance reform of benefit to that ministry rather than one of benefit to the management of the organisation itself. Where the reform is a function of foreign aid arrangements then the dominant party is the foreign aid organisation which adds to the difficulties of achieving ‘ownership’. Success in achieving ‘ownership’ makes possible the transfer of control from an external organisation, such as the ministry of finance and also, because of the centralisation of decision making about personnel matters, from the organisation responsible for personnel management, to the internal management of an organisation.²

Governments want to achieve their policy objectives. Assuming that the resources are available, this is not achieved by simply ‘top-down’ instruction. An effective managerial organisation coupled with effective personnel management are essential components. The following quotation illustrates this:

If people are the greatest creators of value in organisations, then good performance management is critical for an organisation’s success. Employees need to understand what’s expected of them, and to achieve those goals they must be managed so that they’re motivated, have the necessary skills, resources and support, and are accountable. Performance management is the activities and processes that focus on these areas to maintain and improve employee performance in line with an organisation’s objectives. Ideally, performance should be managed holistically, throughout the range of HR [Human Resource] activities and processes.³

14.1.2 The Main Features of Public Management-Oriented Organisations

A pre-requisite therefore to the introduction of the PFM/IC reform is that there is a commitment to the reform of the structures involved in the management of government. The process of reform should be that the managerial approach to PFM/IC builds upon an existing robust public administration (i.e. essentially one based upon Weberian principles) but then evolves from that public administration style into a public management style. A ‘Weberian’-type public administration is a bureaucracy that has these six characteristics:

• 1. Task specialisation (division of labour)

• 2. A hierarchical management structure

• 3. Formal selection rules

• 4. Efficient and uniform requirements

• 5. An impersonal environment

• 6. Achievement-based advancement

If a Weberian-style bureaucracy does not exist then the first step in the reform process should be its creation. To then move from a Weberian-type bureaucracy to a management style of organisation requires that the following features are established:

• i. Defined objectives and performance standards

• ii. A strong managerially trained leadership with the authority to drive the organisation to meet its objectives and performance standards and expressing core values based upon achievements and the needs of the client/customer (see Chap. 7)

• iii. Effective governance arrangements (see Chap. 1)

• iv. A powerful financial leadership, (finance director type role) focussed upon achieving objectives efficiently and effectively with an aim of improving productivity by ensuring that all public resources are either properly utilised or disposed of (see Chap. 8)

• v. The management being responsible for internal control and the application of those external controls that would otherwise have been directly implemented by external organisations, such as the ministry of finance (see Chap. 3)

• vi. A budgetary system which provides to managers the information they require as well as the information that the ministry of finance requires (see Chaps. 5 and 8)

• vii. A stable budget for the organisation, including also stable funding of that budget during the year with the actual funding occurring to an agreed timetable, so that managers can plan with certainty recognising that this may not always be possible in all circumstances (see Chap. 4)

• viii. A financial and management accounting system which provides managers with the financial control and the financial analytical information managers require, such as cost centre and cost driver information (see Chaps. 5 and 8)

• ix. A financially aware management (see Chap. 8)

• x. A management trained in managerial concepts (see Chap. 9)

• xi. Managers having the discretion within agreed boundaries, to make decisions about how to achieve their objectives and therefore how to utilise the resources available to them, or in some instances to dispose of those resources such as redundant assets (see also point iv above and Chap. 7)

• xii. Individual managers being accountable for their achievements in terms of objectives and performance standards (see Chap. 7)

• xiii. Senior appointed management, with a separate political management, which recognises that it has an external accountability responsibility for the achievement of the organisation’s objectives and performance standards and objectives, efficiently and effectively and within the relevant laws and regulations and for the quality of its internal control system (see Chap. 13)

To summarise, for PFM/IC to be an effective reform, as opposed to a cosmetic reform or token reform, there should exist advanced management arrangements within government organisations. Those advanced management arrangements require the involvement of both the political officials and the civil (and local government) service appointed officials. This, in practice, means that political decisions about policy, including the strategy for the implementation of that policy, should have regard to the practical experience and advice of the civil (or local government) officials about implementation. These two groups of officials should not be operating independently of each other and neither should the political officials feel that they should have responsibility for making all decisions (i.e. both policy and operational). Political officials should recognise that the experiences and advice in the formulation of policy and on proposals for the implementation of policy gained by appointed officials can make an essential contribution to the development and implementation of effective policy. The benefits of PFM/IC will not be achieved without this cooperation between these two groups of officials.

However, to make this change is neither simple nor a speedy process. Some of the problems are discussed below in Sect. 14.2.1. An identifying aspect of a managerially oriented organisation is that managers have clear objectives and performance standards and objectives that they are expected to work to and that they have the performance and financial information to enable them to make the best use of public resources in the delivery of their objectives and performance standards and performance objectives.

Another identifying aspect is that the managerial structures in public organisations should be designed to reflect the objectives that the organisation is expected to achieve.

All this impacts upon the arrangements for civil service recruitment and training and can represent a significant change in their role. Civil and local government servants experienced in operating within a traditional public administration but expected to operate in future in a managerially oriented organisation do not become managers ‘overnight’. Managerial training should be an essential component of the reform.

If these management features summarised above do not exist or are not envisaged within the civil service/public sector reform programme, yet are requirements of the PFM/IC reform, clearly the two are incompatible. The experience of this author is that the question of compatibility is rarely considered by those responsible for implementing the reform. Civil service/public sector reform programmes and PFM/IC reform programmes are considered independently. This compatibility is also what foreign aid donors should be looking for before agreeing to support the introduction of PFM/IC, although they do not seem to do so. If that commitment to achieve compatibility does not exist then achieving success with the introduction of the PFM/IC reform is most unlikely.

14.1.3 Managing Complex Public Sector Organisations: Whether Delegation Is Appropriate or Not

A central theme of PFM/IC is the development of delegation and managerial accountability.

In practice, little is said in any of the literature or in advice from the European Commission or professional bodies such as IFAC⁴ about the nature of delegation and managerial accountability and how it affects decision making. The central theme of this guide is that improving the utilisation of public resources depends upon developing a managerial approach to the management of those resources. It is not simply about introducing techniques: what matters is how those techniques are utilised and that in turn depends upon the quality of management. The IMF, for example, in its discussions about the introduction of performance based budgeting argues that ‘the introduction of performance based budgeting will ideally require greater flexibility for ministries and program managers, who are expected to become more accountable for results’.⁵ Performance-based budgeting is a technique but its success depends upon the quality of the management, not simply the existence of the technique. An appreciation of the context in which delegation is to occur and then how managerial control is exercised through managerial accountability arrangements is necessary if PFM/IC is to be effectively implemented. Delegation is not a simple matter and depends upon particular circumstances. A more sophisticated approach to delegation and managerial accountability is needed than a simple blanket policy. Such a ‘blanket’ policy is simply unhelpful because it does not provide any clarity about what could or should be delegated and what not. The aim of this section of this guide is to explore what may be appropriate to delegate and what not. However, central to the idea of delegation and managerial accountability is the existence of a managerially oriented organisation.

Public sector organisations such as ministries and local governments will be headed by a single politically appointed official, a minister or mayor. Nominally this official is the single ‘all-powerful’ decision maker for the organisation and in many countries the law reinforces this position. But this person can maintain this ‘all-powerful’ position ‘only to the extent that he is not dependent upon others within his organisation’.⁶ The reality is that in practice in complex organisations, as are most public organisations, the objectives of the organisation are derived from compromises between different powerful groups (power bases!) within, and sometimes external, to the organisation. This single politically appointed official therefore cannot make all decisions about the operation of an organisation. He/she must have regard to those groups that exercise influence which can be internal or external to the organisation. One of those groups is, or ought to be, the bureaucracy bringing to any discussion information about the experience of policy development and application as well as a detailed knowledge of the ‘market’ for that policy. PFM/IC is about supporting the development of a more informed bureaucracy. A former foreign minister of Australia made the point that a minister (referring to the Westminster system) has ‘two broad ambitions:

• To implement their policy ambitions, and

• To survive as a minister and even prosper to promotion’.⁷

He also went on to say: ‘In reality, for a minister the implementation of policy efficiently and effectively is by far the most important function of the civil service.’⁸

In a political organisation, key influencers will be the prime minister and the minister of finance. Other influencers will be external regulators and pressure groups. This idea of the ‘omnipotent individual’ is also negated by other conditions, which include:

• ‘When the complexities of the technology or technologies exceeds the comprehension of the individual, and this is not to do with the individual’s intelligence but rather his/her experience.’

• ‘When the resources required exceed the capacity of the individual to acquire.’

• ‘When the organisation faces contingencies on more fronts than the individual is able to keep under surveillance.’⁹

When such circumstances exist, as they will with most ministries and local governments, the number of power bases within the organisation expands and the result is that in highly complex organisations, such as ministries and local governments, power is, in reality, dispersed. Consequently, any decisions, apart from those that have only a very narrow impact, have to take into account the views and information available from those different power bases, That is, to use the observation of the former Australian minister, if the minister (or mayor) is to survive and prosper. A task of the bureaucracy is to bring together those different views and to ensure that the information available from those different sources is properly reflected in the advice to policy makers. The consequence of this is the emergence of what one academic commentator, Thompson, called a ‘dominant coalition’ which represents the different interests within an organisation. However, to get business done Thompson argued that what actually emerges in complex organisations is an ‘inner circle’. This may be a formal or an informal group but which effectively conducts the business of the organisation that is, exercises leadership. Membership of that ‘inner circle’ should be dynamic to reflect changing circumstances and particular interests. The question then becomes who should be the members of this ‘inner circle’ in a public organisation? This is very important in considering the implications of the application of PFM/IC because it raises the question as to whether the membership of the ‘inner circle’ should be restricted only to the political appointees, in effect shutting out the bureaucracy. It therefore affects delegation. An ‘inner circle’ that excluded the most senior official and possibly certain professionals, depending upon the nature of the organisation would not facilitate the development of an efficient and effective organisation and would be incompatible with the idea of delegation. This is because to achieve the objectives of a complex organisation different interests and experiences need to be considered, not least those of the bureaucracy. For example, in some public organisations where there is a high technical professional input into decision making processes, such as in health, military, or educational organisations the ‘inner circle’ ought to include representatives of that technical professional element of the organisation. However, in the operational delivery of public services there is always (apart from very small public organisations) a ‘high professional input’, but not necessarily just a technical professional input. That high professional input will include ‘professional’ officials (i.e. the civil or local government service) whose responsibility will be to ensure that operational delivery reflects not just ‘technical professional’ opinions, but also other opinions such as that the decision can be financed, that it is compatible with government policy, that it is legal, that it is practical, that it represents an efficient and effective utilisation of public resources. The implementation of PFM/IC improves the capability of the bureaucracy to make that ‘professional’ contribution.

The main representative of the civil service would be the most senior civil servant such as the state secretary in a line ministry (or the equivalent in a local government) and depending upon the circumstances other officials may be involved. In making their contribution to the decision making processes those senior civil servants should exercise judgement and political astuteness. They, in turn, will be advised by the different ‘professionals’ within the bureaucracy. One of those would be the head of finance. ‘Developing capabilities, including judgement, in those civil servants whose roles bring them into a close working relationship with politicians starts with clear and evidence-based analysis of the requirements which make civil servants effective in working with politicians.’¹⁰ This requires great skill and experience.

In all public organisations a critical factor is finance, that is the availability of appropriate financial resources, stability of the finances of the organisation and how well the available finance is utilised not only in its allocation against priority objectives but also in its operational utilisation. This means that that ‘inner circle’ in practice ought to include not only representatives of those responsible for operational delivery, but also including those responsible for the management of the finances of the organisation.¹¹ As public organisations operate in a dynamic environment and frequently in an environment where there are many complex issues and judgements that need to be made the responsibility of the political element of management in making decisions should have regard to the views of all those whose knowledge and experience would have an impact upon the quality of the decision.

This demonstrates the need to involve the civil or local government service in advising on the policy making processes as well as on operational management decision making processes. This involvement would be particularly appropriate where the decisions that need to be made are for those areas of business where the ‘professional official’ (technical and/or civil service) has the most appropriate knowledge. These are the circumstances which apply with both policy formulation and operational management. They would be the characteristics of a Weberian type civil service reformed to reflect a managerial operating environment.

Thompson pointed out that decisions involve two major dimensions: preferences regarding possible outcomes, the political values and beliefs or the facts about cause/effect relations.¹² Complicating any decisions are either ‘certainty’ or ‘uncertainty’. This impacts upon who should make the decision, that is, on the appropriateness of delegation. These relationships were shown in a table by Thompson (which in turn was initially developed with a colleague¹³) and has been further developed by this author to reflect the operational environment of the public sector (see Table 14.2).

In the public sector the primary concern of the politician, the minister or mayor, should be about policy and securing the implementation of that policy. Political policy is an expression of ‘values’. Central to policy decision making is judgement about values and the politician will make those judgements. The most important responsibility for a political leader is to reach an agreement on ‘values’. Political values will be formed by many factors, including how special interest groups react, the views of independent policy ‘think tanks’, political party historical policy, and by the information available from the official bureaucracy. In a democratic country political policy is also likely to be challenged.

In developing policy, a wide range of factors, some of which are external to the country do need to be considered. This task of assembling, assessing, and advising on the impact is essentially the responsibility of the bureaucracy. For example, internal and external factors can include a wide variety of matters such as those affecting financial regulation, food safety standards, environmental management systems, taxation, intellectual property, telecommunications, and infectious disease control, all depending upon the coverage of the policy. The bureaucracy should be familiar with all such factors. External factors are likely to increase as the influence and activities of international organisations increases, for example, over addressing climate change, economic management, and world health.

An example of a ‘value’ question which only politicians may need to address is, should technical and further education be delivered by public sector organisations or by private sector organisations? Whatever the arrangement, a further element of ‘value’ is a decision about who should meet the cost? Should it be the state from taxation or the student or a combination of the two or in some circumstances an employer? Another example of a ‘value’ decision would be who should be responsible for the delivery of health care and if the public sector, should that cover all aspects of healthcare or only some and for those that are to be delivered by the public sector should the public sector have a monopoly in health care provision or not? Associated with these questions is a further question about how should the services be financed, such as through taxation or by charging or by some combination of the two? Another question that would arise would be about the practicality of any decision. If, say, a decision was made to require technical and further educational provision to be provided by the private sector then officials should assess the capacity of the private sector, the likely cost, the practicality of such a policy decision, the arrangements for the monitoring of quality (see example of the TAFE arrangement in Australia, Chap. 12) and for the audit of consequential public expenditure. All such ‘value’ questions are likely to be controversial with the parties to any debate being more or less certain about the outcomes.

In summary, the political decision about values should be informed by facts or factors and the responsibility for providing information about the facts or factors should lie with the civil (or local government) service. Where advice has been accepted by politicians about the development of a government policy from external sources or where much of the analytical work may have been undertaken by third parties, such as academics, the civil service should have the capacity to assess or to make an independent assessment of the quality of such analytical work, including about levels of certainty. This assessment should cover costs, impacts, and forecast outputs and practicality. For many public service activities, the facts or factors may be uncertain. Costs can often be defined with reasonable accuracy, although not with complex projects, when assessments of impacts and outputs can be very subjective.

The civil service should also advise ministers on an evaluation of possible alternatives and of the potential opposition to the proposed policy. This form of briefing serves to inform not only the political officials but also the civil service officials themselves about the strengths and weaknesses of policy proposals.

A summary of the facts or factors, including any international issues that the civil service should be concerned with in advising a minister on the development of a particular policy is set out in Table 14.1.

Table 14.1 Dimensions for analysing public policy^a

Table 14.2 The Thompson-Tuden matrix^a

As for both the values and the factors affecting any decision there can be either certainty or uncertainty. An objective of both ministers and officials should be to achieve as much certainty as possible. Achieving certainty in values can be made more complicated where more than a single organisation is involved in making the judgement about values. For example, where different ministries or different levels of government are involved, each may have its own view of values. The same can be true for all the factors affecting any decision.

Once a political decision has been made because there is agreement or majority agreement on values, policy can then be defined. This will require, as shown above, the determination of the cost, the establishment of feasibility and the acceptability of the proposed policy. This would be the responsibility of the civil (or local government) service taking into account all possible sources of advice. Their further responsibility is to then implement that decision.

Without agreement on values there cannot be a clear implementation of policy.

There will be occasions where changing circumstances mean a rethink of values and similarly with facts (as the Covid pandemic has shown) in which event, implementation policy may need to change. This though is not about uncertainty but is about changes of circumstances. How complex decision making can be is illustrated by the following matrix shown below at Table 14.2.¹⁴

The civil or local government official cannot be the decision maker so far as the values element of the matrix is concerned or indeed about the principles of implementation: that is entirely a political responsibility. But the civil or local government official should be able to advise on such decisions and should be particularly well informed given his/her responsibility for the development of information about the facts or factors affecting implementation and the historical knowledge of previous policy initiatives.

Where there is certainty about a particular policy and about both the values and the facts coupled with agreement that resources are available, no further political decision is required and implementation can proceed (i.e. implementation would fall into quadrant 1 with implementation being the responsibility of the bureaucracy, that is delegated to the official level of the organisation). As operational implementation is developed practical questions may emerge which may require political intervention but these normally should be at the margin.

However, where the political policy is agreed but there is uncertainty about how the facts or factors will affect the implementation of the policy then a political judgement should be made about whether to proceed with operational implementation, and if so on what terms? In this situation there will be an element of guesswork about the effects of implementation and therefore a learning process will be required in which the civil service (or local government) officials responsible for implementation will need to consult with the political level. The terms of the political approval to implementation will determine the scope that the bureaucracy has to make operational decisions and the point at which political approval will be required. The overall message should be that in such circumstances implementation should be applied with caution and is likely to involve more detailed consultation between appointed officials and the political level but that does not mean that the political level should be responsible for all implementation decisions. What it may mean is that implementation should be more tentative. Application of policy under these conditions would fall into quadrant 2.

An approach to implementation in such circumstances is that advocated by Karl Weick of looking for small wins: ‘A small win is a concrete, complete, implemented outcome of moderate importance. By itself, one small win may seem unimportant. A series of wins at small but significant tasks, however, reveals a pattern that may attract allies, deter opponents, and lower resistance to subsequent proposals.’¹⁵

Small wins can also hugely influence motivation, by offering people a sense of progress and achievement.¹⁶

Where there is uncertainty about values but there is certainty about the facts or factors affecting implementation, application of the policy would fall into quadrant 3. Appointed official-level responsibility for implementation will be affected by the tentative nature of political confidence about the outcome of the policy to be pursued and the pressures upon the political decision maker will be intense as agreement is sought on values, or to find the best possible compromise. This may result in frequent modifications to policy. But this should not mean that the politician should seek to take over responsibility for implementation. Why should that occur? The problems of implementation will become more complex and that requires a more professional and experienced official responsible for implementation capable of advising the political level about alternative policies to meet uncertainty about values. What it should mean is closer cooperation between the official and political levels of management.

Where policy development and application fall into quadrant 4, that is, uncertainty about both values and facts or factors, an impossible situation exists which neither politician nor official can fully address. In this circumstance, the most effective option is for the minister or mayor to work to achieve the maximum consensus on values when only then can a decision be made about operational implementation recognising the uncertainty about the factors affecting implementation. In such circumstances the official responsible for operational implementation should exercise great caution working with the political level but any attempt by the political level to take over responsibility for operational implementation should be resisted. However, the reality is that a decision must be made: there cannot be paralysis, and the politician should take that decision but knowing the level of uncertainties which exist and the responsibility of the official is to then implement that decision to the best of his/her ability. This also will require very close cooperation between politician and official.

Politics is the art of the possible. The aim of both the politician and the official should be to move all activity as far as possible into quadrant 1.

This type of Thompson-Tuden analysis can only be undertaken where there has already been established a Weberian style of public administration with its development into a managerial style. For many developing and transition economy countries this emphasises the need for civil service/public sector reform as a condition for the implementation of PFM/IC. Without that there is only limited clarity about the roles and responsibilities of politicians and officials. The experience of this author is that politicians tend to absorb the decision making responsibilities of the official, even for some of the most routine and minor administrative decisions. They would particularly see their role as decision maker where there are the levels of uncertainty as expressed in quadrants 2–4 and of course officials, who could be anxious to avoid criticism, may be willing to let politicians take decisions in such circumstances. The extent to which politicians take over decisions about implementation in effect limits the delegation of authority and prevents the development of the quality of the civil or local government service as an adviser to the political level. It also prevents the civil service being influential in the decision making process, that is, in the ‘dominant coalition’ or ‘inner circle’ envisaged by Thompson. That is detrimental to effective decision making because it removes an important dimension from the decision making process. Where such circumstances exist and there is limited clarity about the roles and responsibilities of politicians and officials, the application of the PFM/IC policy is inappropriate unless there is a commitment to civil service/public sector reform. However, sometimes politicians express a lack of confidence in the quality of the civil or local government service and resist delegation for this reason. In such circumstances the most appropriate course of action is to reform the civil or local government service, not seek to substitute for the existing service, elected officials or ‘friends’ of elected officials who are unlikely to be able to bring that detached view which is so essential to effective policy implementation and not least to provide ‘challenge’. Where this lack of confidence exists the introduction of PFM/IC is inappropriate.

Taking the example above to illustrate the circumstances where there is an inappropriate distinction between the roles of politicians and officials would be decisions about the routine administration of a ministry or local government. Routine administration should be treated as a civil or local government service responsibility. Yet in many developing and transition economy countries this does not always happen or only happens in part. The politician becomes involved in the administrative decision making process. Delegation even at this most basic of levels is often limited and administrative decisions risk becoming politicised. Where the politician takes on the role of the administrator this also alters the structure of those comprising the ‘inner circle’ membership. The same information would still be required for effective decision making but the personalities making the decision would change from the official to the politician. In such circumstances the role of the politician in effect changes from politician to administrator and this will affect the membership of the ‘inner circle’. That does not necessarily improve the quality of decision making, perhaps the opposite, and is likely to introduce other factors into administrative decision making, not least political values. Another factor that also should be borne in mind is that where the politician becomes the operational decision maker it creates opportunities for rent seeking because the politician has access to suppliers and the appointment of other officials. It also assumes that a managerial capability exists amongst elected officials not available to the civil or local government service. However, where such a situation occurs the message that really needs to be appreciated is that either there is a breakdown in the relationships between the political and appointed official levels (and the reasons for this need to be established) or the bureaucracy is not, or is not perceived to be, of the appropriate quality. This almost certainly means that the bureaucracy does not meet the requirements of a Weberian style bureaucracy with the capacity to develop into a managerial style bureaucracy which is a necessary reform with the implementation of PFM/IC.

An alternative analysis of decision making to the Thompson-Tuden matrix which has a similar focus, although using different language, has been developed by Hofstede.¹⁷ The Hofstede classification asks these questions:

• (a) Are the objectives of the activity unambiguous or ambiguous? From a PFM/IC perspective the greater the clarity of the objectives the greater the possibilities of delegation. This therefore asks the question of the politician, can he/she be clearer about what the aim of the policy is. If so, this would allow the politician/official relationship to be more clearly specified. This also has the added benefit that the political level itself must be more specific about what its aims are.

• (b) Are the outputs measurable or non-measurable? Again, an aim of PFM/IC is to achieve a definition of outputs which is measurable, if possible. Measurable objectives would enable the politician to express more clearly what is expected of the civil service. This would then allow the political level to have more confidence in the performance of the civil service and therefore encourage delegation.

• (c) Are the effects of management interventions known or unknown? Achieving an understanding of management interventions is an aim of PFM/IC. Where there is little or no awareness of the impact of civil service actions, the likelihood is that delegation will be extremely difficult to achieve and therefore an aim over time should be to focus on developing awareness before seeking to implement delegation.

• (d) Is the activity repetitive or non-repetitive? If the activity is repetitive, then the politician should be aware of the results and that would argue in favour of delegation. If the activity is non-repetitive then whether delegation was appropriate would depend upon analysis based upon points (a) to (c) above.

Those responsible for considering the issues surrounding delegation should consider both the ideas contained in the Thompsom-Tuden matrix and those of Hofstede. Whether the objectives (or using the Thompson-Tuden analysis, values) are unambiguous or ambiguous (item a) above) is regarded by Hofstede as the most crucial criteria affecting how the activity is to be managed. If there is clarity about the objectives (or values) and this is a political responsibility to be derived from political values then there can be a clear target to be achieved and this makes delegation in principle to the civil or local government service relatively easy (i.e. provided a managerial capability exists within the official level of management and is recognised by politicians to exist). However, the reality is that often objectives can be unclear for several reasons such as conflicts of interest and/or, of values. The example of a prison given in Chap. 1, illustrates the point: the director of the prison may be most concerned about security, psychiatric staff may be concerned about rehabilitation, and higher levels of management may be concerned about overall cost. Thus, what is the objective of management? This lack of clarity may require a political decision but once that decision has been made there is no reason why delegation could not occur. Other reasons for lack of clarity include rapid changes in the operational environment, such as new legislation, developments in IT, new drugs and so on where political agreement may be required to the appropriate response. However, responsibility for implementation, once agreement has been reached should remain at the official level and appropriate accountability arrangements then developed. Clarity of management responsibility then becomes clear. Where unambiguous objectives exist and there are no conflicts of interests and/or values then delegation to the official level would be appropriate.

The second Hofstede classification (b above) is, are the outputs measurable (quantifiable) or non-measurable. If measurable, management control presupposes that the output of an activity can be identified and compared to the targets that have been set (or could be set). Consequently, if variations occur during implementation, decisions can be made about how to ensure as far as possible that the original targets can be met or alternatively whether the original targets remain valid. Again, where such circumstances exist delegation to the bureaucracy is possible. However, many public organisation activities cannot be easily quantifiable and Hofstede gives as examples, an army in peacetime or a public relations department or the outputs of an education ministry. In these circumstances Hofstede argues that what can only be measured are inputs rather than outputs and those measures of input activities which can provide an indicator of the quality of performance in different circumstances should be used. Another example of the problem of measurement would be the assessment of the educational performance of individual schools. This may be measured by examination results although disputes may occur about the appropriateness of the examinations and whether, for example, they assess simply memory or a capacity for critical analytical thought. Another measure could be the proportion of children of different sexes and age ranges attending school and attending consistently or the proportion of children in a school from lower income families. The political responsibility is to provide clarity about the values and from that, about the objectives to be achieved by management. In all such circumstances delegation is appropriate once clarity exists although consultation with politicians may be needed, but a requirement for consultation does not mean that the politician should take on the responsibility for operational management.

The third classification (c above) is, are the effects of management interventions known or unknown? Where the civil servant or local government official knows how and when to intervene in order to obtain the desired result and has the authority to manage resources to enable the desired results to be achieved delegation could occur. Hofstede points out that the relationships between a manager’s intervention and the reaction of the organisation must be clear. In practice these relationships are not always clear particularly with the delivery of ‘social welfare’ and ‘educational’ activities. Usually what is important in such circumstances is the historical knowledge and experience of the civil servant or local government official as manager. Where there is no delegation and politicians become the operational managers, such managers can change frequently and the opportunity for the political official acting as the manager to gain such a degree of historical knowledge and experience to achieve the objectives is likely to be very limited. This argues again in favour of delegation of operational management to a more stable group, which should be the civil or local government service officials.

The fourth classification (d above) is, is the activity repetitive or non-repetitive? Repetitive activities (those that occur daily, weekly, a few times a year, once a year) allow a learning effect to occur. Repetitive activities facilitate learning. But this again can only occur if the operational management is stable and therefore has the opportunity to learn from repetitive activity which again points to delegation to civil or local government service officials from the political level. (Securing operational management stability is an important responsibility of the top operational manager.)

What this analysis points to is that opportunities for delegation do exist. Whether delegation can be achieved depends upon several factors. Delegation to be effective must be accompanied by a range of other reforms referred to in this guide such as those impacting upon the organisation of the civil service, budgetary processes, and the development of financial analytical and performance information. A critical factor though in the development of delegation is the level of confidence that the political level has in the civil or local government service because with delegation the civil or local government service has to make decisions, including about the utilisation of resources. Political stability is also very important because where instability exists the boundary between political and appointed official decision making is also likely to be unstable and this will make delegation potentially much more difficult. Attempting to require delegation without looking at the wider consequences of delegation would be a mistake.

Having determined which decisions should be delegated and to whom, the form of the accompanying managerial control or how accountability arrangements should work, needs to be established. Hofstede defined six types of control. These are:

• 1. Routine control: This can be developed where there are unambiguous objectives, measurable outputs, known effects of interventions, and activities are repetitive. This type of control can be prescribed in precise rules and regulations and can be applied through the normal civil service/local government hierarchy. (Examples would be in the treatment of social insurance claims or the issue of passports.) Where routine control arrangements can be applied then the message is that this should be the first focus for the development of delegation and the consequential managerial accountability arrangements. Such controls should form the basis for reporting to higher levels of civil service management and ultimately to the political level of management.

• 2. Expert control: This applies where objectives are unambiguous, outputs measurable, the effects of interventions (i.e. outputs, not outcomes) known but the activity is not repetitive. In such circumstances appropriate expertise should be recruited to the civil or local government service. Utilising an expert in such circumstances enables the responsible public official to take advantage of the ‘repetitive experience’ of the expert even though the organisation itself may have no such repetitive experience. This points to a need for delegation to a civil or local government servant who is familiar with current operations and through that familiarity can ensure that expert activity is integrated with current knowledge and experience. The message is the same as for ‘routine control’, namely that such controls should be applied through the civil or local government service hierarchy and form the basis for reporting ultimately to the political level of management. (An example would be the introduction of new IT systems or development of new infrastructure.)

• 3. Trial and error control: This form of control can be appropriate if objectives are unambiguous, outputs measurable, the activity is repetitive but the effects of interventions are not known. The use of rigid rules and prescriptions is not possible but this type of control would be exercised through a thorough ex-post analysis of both successes and failures. Examples would be the introduction of new products, services, or treatments. The argument is that in these circumstances the organisation can learn to control through its own successes and failures. Expert knowledge of the operational environment in which the new product, service, or treatment is to be introduced though is essential. Because of the possible level of uncertainty, the likelihood is that even though this type of control would be exercised at the appointed official level, probably this would be in close coordination with the political level. (Examples would be the use of new social welfare or child care procedures.) This would affect the form of the accountability arrangements.

• 4. Intuitive control: This is similar to the ‘trial and error control arrangement but would apply where the activity is not repetitive. Intuitive control relies upon the quality of management and that means responsibility for the exercise of the control should fall upon a person or persons who can be trusted to intuitively find the proper form of intervention needed to achieve the desired results. An example of where intuitive control may be necessary is how to reinvigorate a demoralised group or unit. If the delegation of operational management has been developed then there is every reason to delegate activities to appointed officials where this type of control is appropriate. However, where delegation is only being currently developed control decisions of this type will probably tend not to be delegated, at least initially. Where delegation does occur, this again would affect the form of the accountability arrangements.

• 5. Judgemental control: What is to happen where outputs are not measurable even though objectives are unambiguous? In these circumstances the first question to be asked is whether any indirect measures of outputs (performance indicators) can be found which can be considered acceptable ‘surrogates’ or ‘proxies’ for the missing direct measures. If such measures can be found that make sense and are acceptable to the parties involved, the control problem will become similar to the case of measurable output. If no indirect measures are available control of the activity becomes a matter of subjective judgement. In such circumstance delegation does become more difficult and the political level may wish to retain responsibility for decision making. That though does not necessarily make the quality of decision making of any better quality. The circumstances in which judgemental control is exercised will determine the precise accountability arrangements.

• 6. Political control: This form of control applies where objectives are ambiguous (quadrant 4 in the Thompson-Tuden analysis). Here the political management should attempt to clarify the ambiguity by making a decision so that for those lower down the organisation there is no ambiguity. But until such a decision is made delegation is not possible. Political control may also be appropriate in the management of a reaction to an emergency such as a major fire or accident or earthquake or pandemic or a terrorist incident. Where there is political control, the involved politician will still be accountable to his/her peers. But in many circumstances of this type, collaboration between the political and appointed official levels is essential even though decisions may remain at the political level.

Because the provision of public services can be complex, cooperation between ministries and other public bodies (not least local government) can often be essential. Cooperation complicates decision making processes and when several organisations are involved, conflicts of objectives can occur. In such circumstances policy decisions will almost inevitably tend to remain at the political level but such political decisions can also determine how operational management decisions will be made.

14.2 The Effect of Introducing the Concept of Efficiency and Effectiveness into Public Service Administration

14.2.1 The Impact of Introducing Efficiency and Effectiveness into the Managerial Arrangements

A practical problem that public sector administrators have working within traditional public administrative arrangements is that they generally have little financial information on which to make decisions. There is no market test or pricing mechanism which limits or otherwise affects the demand for public services. Similarly, there is little or no information about the actual costs of providing a service or information about what drives costs or even detailed performance information. Therefore, a critical factor in the success of a move from public administration to public service management, as has been pointed out earlier in this guide, is the existence of public service financial management. The aim of public financial management is to provide the range of financial analytical information, linked to performance, that the manager needs as well as that needed to meet budgetary constraints.

Ministers responsible for the delivery of public services and other public service officials are prone to believe that the resources allocated through the annual budget are inadequate to meet the needs of the users of these services or activities. (There is never enough funding!) This can be a cause of tension between ministers responsible for service delivery and ministers of finance. However, unless a public financial management reform has been introduced incorporating financial information additional to that only usually available with traditional arrangements for public financial administration, neither ministers nor officials have a clear idea about what services actually cost. Generally, ministers and other public service officials want to provide the best possible quality of service and there can be a presumption that reducing the cost of service delivery conflicts with this objective. Yet reduction in cost may emerge through improvements in efficiency. An objective of ministries of finance in seeking to impose economies can be to drive service ministries into looking for improvements in efficiency.

Improving efficiency and effectiveness is not simply a function of a ‘top-down’ style of management. It requires the engagement of all who are involved in the management process, not least in the ‘inner circle’ identified by Thompson. That demands delegation. The benefits of delegation and managerial accountability in this context include:

• Allowing top managers (ministers and mayors and their deputies) time to focus on more important strategic and political issues.

• It motivates managers at different levels and their staff, boosts creativity and innovation, and facilitates ownership by staff of the particular area of business for which they are responsible.

• It creates opportunities for wider discussion and debate about alternatives (no single person has a monopoly of ideas and knowledge).

The idea of efficiency and effectiveness introduced into the delivery of public services changes the characteristics of public service administration into one of management, that is if the term ‘efficiency and effectiveness’ is to have substantive meaning. No longer is it simply a matter of delivering the same type of service or activity and keeping within budgetary limits. Yes, budgetary limitations do have to be observed, but if managers are to deliver efficiency and effectiveness, they will need more opportunity to use their initiative and to make decisions about how to best deliver services and activities. To improve efficiency and effectiveness requires a recognition that ‘challenge’ is a necessary component of management. Traditional hierarchical structures generally do not facilitate ‘challenge’. A managerial approach would include not just considering ways in which the costs of present delivery arrangements could be reduced but also considering alternative methods of delivery. Managers within an organisation will themselves need to decide what they require in terms of resources to deliver their objectives but of course within any overall financial constraints imposed by the ministry of finance. The IMF paper on performance based budgeting referred to above makes the point about ‘[i]ncreased input flexibility: line managers should be given greater flexibility to choose the input mix that can most efficiently deliver services. This requires a reduction of the large number of distinct limits imposed upon expenditure by economic classification (“line item”) in traditional budgeting.’¹⁸

The question then is, is it possible to manage public services and activities and deliver efficiency and effectiveness without moving to a managerially oriented organisation? As has been pointed out elsewhere in this guide many countries in seeking to introduce PFM/IC use the term ‘efficiency and effectiveness’ but without any recognition of what it actually involves. In this guide the point has been repeatedly made that managerial change is necessary. Managers will be required to spend more time on assessing costs and benefits and where changes in the arrangements for the delivery of services and activities are to be made this adds to the time demands upon those responsible managers. Expert judgements will be increasingly required to assess alternatives (and there will always be alternatives, although following analysis, one of which will be to maintain the status quo but this too must be justified). The ability to make expert judgements depends upon knowledge and experience as well as upon training. It is not feasible for traditional administrative structures with operational management a political responsibility, to be maintained and at the same time undertake all these additional activities. Delegation therefore becomes essential, not only from politicians to officials but also from senior to more junior officials. However, as has been pointed out, delegation itself is not a simple matter. The terms of delegation need to be clear. This means that those to whom responsibility is delegated must know what they are expected to do, that the delegated responsibility is within their competence and they have available and under their control the resources to enable them to deliver the delegated objectives. Only then they can be held fully accountable. If these conditions do not exist then accountability is diluted.

To establish a managerially oriented organisation with a focus on efficiency and effectiveness, radical change is very often required and delegation must become an essential feature of the organisation. Without delegation (and the accompanying managerial accountability) the top hierarchy cannot undertake all the analysis and actions necessary to deliver objectives with efficiency and effectiveness. If an attempt is made to retain decision making authority within a small group at the head of the organisation, that is, the politically appointed group, this small group is unlikely to have available within it the skills and specific knowledge that an operational manager requires and only through managerial activity can substantive meaning be given to the terms ‘efficiency and effectiveness’. (Economy is easier to interpret because economy is often equated with cheapness, or least cost, irrespective of the relationship with benefits and economy can be the enemy of efficiency.) Concentration of power as in traditionally organised public administrations, which is usually accompanied by penalties and other forms of sanction, means that the administrative structures which exist in many developing and transitional economy country public service organisations do not in reality facilitate effective management and consequently delegation. Delegation may exist in a nominal form but in practice decision making remains concentrated at the top of the organisation.

The development of managerial structures with appropriate arrangements for delegation facilitates the achievement of organisational objectives efficiently and effectively. Without a managerial structure delegation giving managers discretion and then accountability for how that discretion has been used, is not possible. A managerial structure enables higher levels of management to, in turn, become accountable and control the way in which the actions of individual managers at different levels in an organisation can be coordinated to achieve the delivery of the objectives of an organisation.

14.2.2 Achieving Delegation and Managerial Accountability in Practice: The Importance of ‘Trust’ and Other Factors

An important factor affecting membership of the ‘dominant coalition’ referred to by Thompson is ‘trust’. Where, as with traditional systems of public administration, there has been historically no separation of policy and strategy development from operational management a failure to achieve separation is often caused by a potential lack of trust between politicians and appointed officials. As a result, politicians can be reluctant to delegate operational and administrative decision-making powers to civil service (or local government) officials or for those officials to accept such responsibilities. Sometimes, because of a lack of trust, key administrative positions may become politicised. This situation has several negative effects. These were described in a SIGMA/OECD paper as:

• 1. A tendency to politicise administrative decisions, that is, decisions tend to be based more on political convenience than in what is established in legislation so that it encroaches negatively on the principle of legality and legal certainty that must preside over administrative decisions.

• 2. This also promotes the blurring of political and administrative responsibilities and a clear distinction of either field.

• 3. Crowding the organisational top with any, big or small, administrative decision creates bottlenecks and overloads at the top that are inimical both to efficiency in administrative decision making and to the development of strategic approaches to policy making (politics becomes devalued and administration becomes miserable).

• 4. Civil servants at lower ranks in the hierarchy tend to inhibit themselves from participating in administrative decision making unless personally required to do so because they do not see it as constituting part of their jobs.

• 5. Weak participation, or lack of it, tends to produce de-motivating effects and in the end, it is an impediment towards developing a more professional civil service.’¹⁹

All of this destroys professionalism within the civil (and local government) service. The essential principles for any administrative organisation to work efficiently and effectively, as the SIGMA/OECD paper points out are lacking in traditionally organised governments. To achieve an improvement in practice according to this paper:

there has to be an adequate distribution of work and responsibilities (competency), while ensuring internal and external coordination and cooperation, all this in pursuit of a common purpose (or mission) mainly through a more or less tight hierarchical control.

The paper also points out:

However, one major problem is that the still prevailing culture is based on command and controls (verticalism) and makes it not easy to translate these constitutional principles into real administrative practice. A co-related problem is that certain administrative legal techniques that could contribute to efficiency and effectiveness of public administration are either conceptually underdeveloped or not sufficiently regulated in legislation or, what is even more worrisome, not applied in real practice of organisational behaviour in public administration.²⁰

What is missing in this analysis is the point about inadequacy of information, financial and non-financial, leading to uncertainty. That information may not be simply performance information but also would include information about the adequacy of controls. Whilst there is no argument in theory about the effects of a failure to delegate, politicians are only likely to be persuaded to delegate where they can be confident that the change of culture (i.e. from a hierarchical command and control culture) will not cause them to lose control of operational activities even though ultimately, they remain responsible. Important factors in achieving such a change of cultural approach are the adequacy of the accountability arrangements, including the information available to the politician and the quality of the managerial controls. This presents a major problem for ministries of finance and their department responsible for the implementation of PFM/IC. Not only do they need to ensure that administrative law facilitates delegation (which in some countries it may not. Therefore, change will be required to effectively implement PFM/IC). However, where the operational culture discourages delegation, particularly through a lack of trust, information, and the quality accountability arrangements, that operational culture is much harder to change. Policy papers designed to facilitate the introduction of PFM/IC tend to overlook these problems and how they might be addressed unless careful preparation prior to the implementation of the PFM/IC policy occurs (see Chap. 9).

A failure to recognise these changes that the PFM/IC reform should bring about means that the implementation of PFM/IC will be more nominal than substantive. The SIGMA/OECD paper suggests that the best solution ‘is to promote informed debates and training aimed at producing changes in the prevailing politico-administrative culture’.²¹ Reviewing the law is relatively easy, what is much more difficult is culture change. The reality is that cultural reform cannot be achieved simply through pressure to implement PFM/IC. As has been said previously coordination with those responsible for civil service/public service reform is essential. Careful pre-reform preparation is also necessary as described in Chap. 9. Included in this is how to achieve recognition of the deficiencies with the traditional arrangements, not least the difficulties of delivering public services and activities within a constrained budgetary envelope against rising demands, particularly when there is a serious lack of information. Policy papers introducing PFM/IC do not in general address these difficulties because of the focus on the procedural features of the reform. The deficiencies also include (as the SIGMA/OECD paper points out) ‘[a]ccountability mechanisms for damage or losses caused by inefficient performance in traditional systems are in general weak or non-existent and responsibility is difficult to demand from politicians and civil (or local government) servants’.²²

Whilst laws introducing PFM/IC almost always refer to the delivery of public services and activities efficiently and effectively they do not indicate how this will be achieved and merely introducing these terms in legislation, as has been pointed out earlier in this guide, without recognising what is required to achieve them, is pointless. Given the need to change cultural approaches merely including such statements in the law is unlikely to have any practical effect, not least because not only is it necessary to introduce a managerial structure to facilitate delegation but those who have managerial responsibilities also need training and the support and information to enable them to determine whether a service or activity is being delivered efficiently, effectively as well as economically and is achieving its objectives. As has been indicated previously, this means that changes are also required to the budgeting and accounting arrangements with the complementary development of financial techniques, such as cost analysis, as well as operational performance information. None of this is usually referred to in policy papers leading to the introduction of PFM/IC.

Another pressure which exists on public organisations, which is complementary to the need to focus on efficiency and effectiveness, is a requirement for more openness through increased transparency and accountability for performance. This in turn should help politicians and senior civil service management to demand improvements in efficiency and effectiveness as well as generating wider debate about quality and value for money in the delivery of public services by parliament and civil society. PFM/IC is part of the process for remedying the deficiencies of the traditional arrangements.

The SIGMA/OECD paper also remarks:

No administration can work effectively if all the decision-making power is wielded only by the top of the organisation. For an organisation to work smoothly it needs to delegate power down the hierarchical ladder. This delegation is also a condition of developing necessary policy-making capabilities, and administrative management skills and responsibility that will not emerge otherwise.²³

Delegation requires a financially aware civil or local government service which understands the costs of providing services and activities and which has the capability to decide on those reforms that will improve efficiency and effectiveness, some of which may require political-level approval and some may not. These are characteristics of an efficient and effective public management. They also facilitate a higher quality of corporate governance because the distribution of responsibilities allows for a wider range of factors and opinions to be considered in any decision. It also separates political considerations from managerial decisions where that is desirable (i.e. the majority of cases). Delegation creates the opportunity to develop sound management at different levels in an organisation and has a better chance of making the optimum use of resources (efficiency!). This is because it allows the development of expertise and it also creates more time for top and senior management to focus of developing a higher quality of policy and strategy which is the basis for an efficient and effective public management. In addition, delegation through the development of managerial accountability, provides the opportunity for the top and senior political management to assess how efficient and effective the civil (and local government) service actually is.

As the SIGMA/OECD paper points out:

[Q]uality considerations include: cost to the budget and the economy; whether implementation can be assured and controlled/enforced; interaction with other policies; legal quality criteria in the case that the policy leads to a legal instrument that the text responds to. All this needs the expertise that a professional civil service is meant to input into the policy-making process.²⁴

The paper further points out that ‘good legal arrangements for delegation may promote improved administrative practices that in turn may have positive operational consequences in organisational design and in developing an efficiency-oriented managerial culture and that may ultimately contribute to:

• An organisation of ministries whereby ministers and policy staffs are freed from the day-to-day implementation of policies and can instead concentrate on devising policies, drafting statutes, and overseeing their implementation.

• A public sector which, in the areas in which it operates, is given specific tasks to fulfil with a degree of management autonomy, within the framework of clearly laid out legal structures.

• An administration where an accountable and committed professional management takes root.’²⁵

Civil (and local government) servants should have the training, experience, and technical expertise to enable them to make operational decisions. Those operational decisions may involve a rethinking of how public services are delivered. An example is the increased utilisation of information technology and another would be the development of partnerships with other organisations such as charities, local governments, and private sector organisations. None of this detracts from the overall responsibility of the public sector manager to ensure that where public money is involved, such funds must be appropriately and efficiently utilised. Civil and local government servants because they would normally be in post for longer periods than politicians also provide continuity and knowledge of implementation that would not be available to politicians acting as operational managers. Their position is not, or should not be determined by the political cycle. Continuity and knowledge are essential to efficient and effective public management. Delegation coupled with accountability makes it possible for these beneficial features to be taken advantage of.

14.2.3 Delegation and Questions About the Activities of the Organisation

In Sect. 14.1.3 of this chapter the issues that should be considered in determining when and what to delegate were discussed. Delegation is not an absolute. In other words, there is no such thing as complete delegation. There will be some responsibilities of ministers and deputy ministers (or the equivalent in local governments) that are inappropriate to delegate at any point in time or, in particular circumstances. Also, those circumstances may change over time. Pressure to delegate (by the ministry of finance and the ‘driver’ department responsible for the introduction and oversight of the PFM/IC process) should be therefore an informed pressure considering the issues and circumstances that should be considered in any delegation proposal. A very important point is that delegation means nothing, as has been said earlier, unless accompanied by the authority to make managerial decisions and the availability of resources. Those promoting delegation should be looking for evidence of this. That authority to make decisions should include improving efficiency and effectiveness, and this requires, as pointed out previously, delegated control over material and human resources. Withholding that diminishes the extent to which managers can be held to account. (Yet in countries introducing PFM/IC delegation is usually considered but without any substantive regard to the extent to which delegation requires knowledge of and control over budgets or human resources.)

Accompanying delegation should be arrangements for accountability.

However, delegation occurs within a context which is the overall objectives of the organisation. In determining the appropriateness of the activities of the organisation for which he/she is responsible, the political leader in conjunction with the top operational manager (the state secretary or equivalent), should consider these questions:

• What is our mission, that is, why are we doing what we do?

• Who is our client/customer? Being clear about this is the basis for deciding what the clients/customers regard as important and this in turn helps in defining the results that should be aimed for and developing a plan of action.

• What does the client/customer value? That is, what satisfies the client/customer needs, wants, and hopes: this will include, for example, making clear that the client/customer views are listened to and that feedback mechanisms are effective.

• What are the expected results? Usually, ministries and local governments focus simply on ‘needs’, but information about results is essential to know whether those needs are being adequately met. Thus, does performance information exist which indicates progress and achievements both in quantitative and in qualitative terms. Having that information allows for programmes to be adjusted as necessary. Therefore, programmes should be designed in such a way that results can be identified.

• ‘What is the plan?’ A plan, which includes the budget, describes where the organisation is going and how it will get there.²⁶

What this means is that decisions about delegation policy should be considered as part of an overall review of what the organisation is aiming to achieve.

14.2.4 Professional Experts and Delegation

A complicating factor in making decisions about the delegation of responsibility in the provision of public services is the role of professionally skilled staff such as doctors, police, teachers, social workers, and engineers. (A further complicating factor in some countries will be the influence of foreign technical advisers.) The politician should not seek to impose his/her judgement over that of the professional in the professional’s area of expertise. But where the professional is advising on the development of policy the situation is different. Such experts may have professional objectives that are incompatible with the objectives of politicians. Where the professional has a dominant role, the professional ethos will be to adopt the highest professional standards and approaches to the delivery of a service or activity. This may contrast with the approach of the politician who may have a limited budget and whose policy aim could be to deliver the maximum possible benefit for the least cost and who also may be subject to a range of political pressures which do not impact on the professional. That may require some form of compromise on professional standards or professional approaches to the delivery of a service or activity. (Professional standards can often be matters of opinion, rather than objective fact.) This raises questions about the ability of the politician to adjudicate on the views of the professional and in making the judgement the politician ought to be able to rely on the advice of the civil servant (or local government official). That would require that such officials are well informed about all aspects of a decision. A policy of delegation should result in a more informed civil or local government service better able to advise the politician. If there is no delegation then the risk is that a minister or other politician is exposed only to a single source of advice. A difficulty for the politician in such circumstances is how to decide which professional expert to rely upon and how far to rely on their advice and opinion.

An important consideration in the development of delegation arrangements and managerial accountability therefore is the capacity of the civil or local government service to effectively support the political management in policy development and to provide an objective assessment of the quality of any advice being provided by professional experts considering the overall limitations on the resources available to the organisation. This capacity should enable the politician to take a wider view of the policy and financial consequences of proposals advanced by professionals for the delivery and development of services and activities. That policy advisory capacity should be provided directly by or under the supervision of the most senior civil servant such as a state secretary (or equivalent). In other words, delegation provides a substantive opportunity to develop alternative arguments or approaches to those of the professional. Without the existence of delegation to an informed civil or local government service, the possibility is that the politician will become ‘trapped’ by the views of the professional. This may result in the inefficient allocation of resources given the totality of the demands upon the available budget and to increased risk for the political decision maker.

14.3 The SIGMA ‘Principles of Public Administration’

14.3.1 The SIGMA Principles and Management

PFM/IC is about management not just about procedures and techniques. With PFM/IC control is about both control of inputs and of outputs and, at the same time, ensuring that those outputs are delivered efficiently and effectively. Managerial control is therefore ‘multi-layered’ compared with the administrative control that exists with traditional public administration arrangements. In effect, introducing PFM/IC is a commitment to moving from an administrative state where regulations, procedures, and techniques have priority to a managerial state where delivery of objectives, to quality, to time, to standard, efficiently and effectively but within the laws and regulations become the primary concern of the manager. That managerial concern must extend to the interests of the user of the public service. In November 2022, in a meeting of the Public Governance Committee (PGC) at ministerial level, OECD ministers committed to ‘reinforce, promote and strengthen the foundations of democracies acknowledging that they should rise to the challenges of growing and changing citizens’ expectations in terms of representation, responsiveness, open government, and integrity of institutions, as well as green policies including through innovative approaches in the public sector’ and to ‘continue efforts to build professional, effective and efficient public institutions, and high-performing leadership and civil servants in support of stronger democracies’.²⁷

That affects the whole approach to the delivery of public services and which must be reflected in the application of PFM/IC.

SIGMA publishes a set of ‘Principles of Public Administration’. The latest edition (issued in 2017) is currently undergoing review. That review will reflect recent thinking about the organisational arrangements for public administration, which were summarised in the quotation above of the PGC. The emphasis upon the creation of ‘professional effective and efficient public institutions and high-performing leadership and civil servants’ supports many of the arguments set out in this guide. The ministry responsible for the policy of the PFM/IC reform and the head of the department responsible for the practical implementation of PFM/IC should therefore have particular regard to these Principles when they are published as relevant to this reform. The 2023 edition of the Principles will demonstrate some change and reflect more fully the managerial requirements of PFM/IC. In the Annex to this chapter an early draft of the revised Principles is shown but readers should recognise that this is not the final version. This will be incorporated into this guide when it becomes available.

Although the ‘Principles of Public Administration’ are primarily designed for countries wishing to join the European Union these Principles are equally applicable to a much wider range of countries. This is because they provide one of the most comprehensive statements of the issues that need to be addressed in public administration reform.

14.4 Personnel Management (Human Relations—HR)

14.4.1 The Significance of Personnel Management in the PFM/IC Reform

Success with the introduction of PFM/IC depends upon the existence of high quality operational management. This requires that a well-managed, incentivised, and well-trained civil and local government service exists. A key requirement is that ‘[p]rofessionalism of public service is ensured by good managerial standards and human resource management practices’.²⁸

The SIGMA Principles make clear that recruitment of public servants based on merit is of utmost importance for developing and implementing policies as effectively as possible, regardless of the government of the day. The ‘Principles’ also make clear that the public service should be apolitical and that public servants are distinguished from political appointees (i.e. political positions are not included in the scope of public service). They also recognise that an effective public service also depends upon other factors such as level of remuneration, performance appraisal, professional training and development, integrity measures and disciplinary procedures. ‘These are needed not only to attract quality employees to the public service, but also to retain them and motivate them to achieve the strategic goals of the state. The ‘Principles’ also make clear that ‘regular professional training is recognised as a right and duty of all public servants. With PFM/IC that training not only has to cover technical training but, as has been pointed out earlier in this guide, it also should cover management training for all civil servants who have managerial responsibilities or who aspire to those responsibilities:

Modernising public administrations remains a key concern throughout the enlargement countries. Politicisation continues to erode capacities and public administrations’ attractiveness as an employer. While there is awareness of key reform needs for creating more professional and merit based administrations overall, more leadership and effort will be needed for improving policy planning, public finance, people management and accountability.²⁹

In no policy papers relating to the introduction of PFM/IC has this author seen any reference to developing the quality of the civil service, apart from technical training in the bureaucratic arrangements for the implementation of PFM/IC. This is even though PFM/IC imposes quite significant additional and often completely new responsibilities, upon the civil or local government officials. Almost certainly this is because PFM/IC has been treated as simply a technical financial reform rather than as a reform impacting heavily upon management. The OECD has published several papers on civil service training which heads of the ‘driver’ department responsible for the application of PFM/IC may find helpful such as ‘Skills for a High-Performing Civil Service’.³⁰

Francis Cardona in a SIGMA paper ‘On the Attractiveness of the Public Service’ said:

The correlation found between public service attractiveness and the idea of the public interest emphasizes the dimension of the quality of the public governance arrangements and management systems as a magnet attracting people to work in the public service. Such correlation is also vital in fostering the commitment of individuals to public service values. This commitment may compensate for relatively lower financial rewards if compared with the private sector.³¹

This SIGMA paper also stated:

If a good governance system is not in place it will be very difficult to attract a significant share of the most talented people in the country and to utilise them effectively, which is a condition to retaining them in the service of the state: Governance environments that do not effectively practice the rule of law and do not protect and defend due procedures, justice, integrity and transparency usually do not have good public institutions that are able to attract and retain bright professional people.³²

PFM/IC, if to be effective, will require the employment of ‘talented people’ and some, such as heads of finance who in many countries do not presently have the required range of skills, will need to develop those skills or if that is not possible, they will need to be replaced. The difference between PFA/IC and PFM/IC from an administrative/managerial perspective and which summarises why talented people are required to establish PFM/IC is that PFA/IC is input driven and rule driven with an emphasis upon procedures that control resources, while PFM/IC is output driven with an emphasis on managerial initiative in using resources better to achieve objectives (see also Chap. 3).³³

In Chap. 1 the aim of PFM/IC was described as: ‘to provide the information management requires to deliver the objectives and performance standards of the organisation, as expressed through the budget, efficiently and effectively, to time and within budget’. Delivery occurs through the actions of the civil and local government service within the context of the policy and objectives determined by the political level of government. PFM/IC is about achieving delivery performance and that means that the personnel policies should be designed to support that. Consequently, an important feature of PFM/IC should be to support the development of a personnel or HR policy which has the following characteristics:

• establish objectives through which individuals and teams can see their part in the organisation’s mission and strategy;

• improve performance among employees, teams and, ultimately, organisations; and

• hold people to account for their performance by linking it to reward, career progression and termination of contracts.³⁴

To these characteristics could also be added ‘provide challenging work’.

This does mean that personnel policies, as the Chartered Institute of Personnel and Development points out, should be established which aim to link an individual’s performance and development priorities with the objectives of the unit or department of the ministry or other public organisation in which an individual works, which in turn should be linked to the organisation’s objectives. This then allows individuals and managers to draw up appropriate plans and facilitates performance monitoring and allows for regular feedback between the manager and the individual employee. These feedback arrangements could be supported by periodic formal performance reviews. The plans can also highlight organisation-wide processes that are required to support performance; for example, leadership, internal communications, and others. This links personnel policies to the COSO control environment and the information and communications standards described in Chap. 11.

14.5 Summary

This chapter discusses the linkage between the PFM/IC policy and that for civil service/public service reform. It emphasises that that linkage should be extremely close and that if the two reform policies are not integrated either the PFM/IC reform will be difficult to implement or it will try to drive the civil service/public service reform, which would be inappropriate! Unless the objective of PFM/IC reform is clear, that is to introduce into government a managerial capability the likelihood is that the focus of public service reform will be simply limited to public administration reform, that is, a reform with no managerial focus. An important element in developing PFM/IC is an appreciation of the complexities of the decision making process and the uncertainties associated with that process, not just in terms of establishing agreement about the values leading to the policies that are to be pursued but also establishing as far as possible certainty about the facts or factors affecting the implementation of those policies. The greater the degree of certainty and the operational management has an important contribution to make to both elements, the better the quality of the decision. The decision about values is and will remain a political decision.

An important element of PFM/IC reform is the development of delegation and managerial accountability. The greater the degree of certainty, the greater the opportunity exists for delegation! Delegation and managerial accountability together are about making better use of resources. However, delegation is a complex issue and not all operational managerial activities are suitable for delegation. Different factors need to be considered in making decisions about the extent of delegation, including the nature of the activity to be delegated, and the control arrangements which exist or can be established.

In implementing the PFM/IC reform the relevant SIGMA Principles of Public Administration Reform should be considered recognising the greater emphasis upon the development of management that the latest version of the Principles envisage. This is a necessary pre-condition for the development of PFM/IC. However, there is little or no evidence that those responsible for PFM/IC reform in individual countries or donors supporting them consider the need for complementary managerial reform, or indeed that those responsible for civil service/public administration reform consider the implications for PFM/IC reform.

A further important factor in developing PFM/IC is personnel policy. Personnel policy is critically important in recruiting and retaining high quality staff which is essential for effective public service management. Effective staff management is linked to the COSO standards relating to the control environment and information and communications. Unless in applying these standards, personnel policies are also considered those standards cannot be effectively applied.

Annex: SIGMA Principles of Public Administration of Relevance to the Introduction of PFM/IC (An Early Draft of the 2023 Version Which May Be Subject to Change)

The Principles as drafted are grouped into the following thematic areas:³⁵

Thematic areas	Core values
Strategy	The government ensures a strategic vision and leadership for an agile, innovative, and continuously improving public administration responsive to new challenges.
Policy development and coordination	The government ensures that policies and budgets are harmonised, effectively planned, coordinated across whole-of-government, implemented, monitored, and evaluated against clearly defined policy objectives. Ministries develop coherent public policies through an open and participatory process, informed by sound evidence and analysis.
Public service and human resource management	Public servants act with professionalism, integrity, and neutrality. They are recruited and promoted based on merit and equal opportunities and have the right competencies to deliver their tasks effectively.
Organisation, accountability, and oversight	The organisation of the public administration is efficient and effective across all levels of government. Public administration bodies are open and transparent and apply clearly defined internal and external accountability mechanisms. Strong oversight bodies protect the rights of citizens and the public interest.
Service delivery and digitalisation	The public administration places users at the centre and delivers high-quality and easily accessible services online and offline to all people and businesses. Digitalisation enables data-driven decisions, effective and efficient processes, as well as high-quality and accessible services.
Public financial management	The public administration plans and manages public finances to ensure that they are sustainable and transparent and allow the delivery of policy objectives. Control, procurement, and oversight arrangements are in place to ensure the economic, efficient, and effective use of public resources shared across all levels of government.

The Principles apply to all public bodies, including local and regional governments.³⁶

To secure the effective application of the Principles, there are a number of prerequisites which are not written into every Principle. (All of which are fundamental to the introduction of PFM/IC and have been reflected in this guide.) They are:

• adequate legislative framework exists (both primary and secondary legislation);

• established institutional and organisational exists with clearly defined responsibilities, as well as adequate capacities of responsible institutions;

• the right people with the right skills, supported by good management are in place;

• an orientation towards outcomes for citizens and businesses is established (in this guide the reference for managerial control purposes has been to ‘outputs’ and concepts of internal control should cover both ‘inputs’ and ‘outputs’);

• government decisions are informed by reliable evidence and data (emphasising the importance of clarity about objectives and performance standards and thorough financial analyses);

• systematic monitoring and evaluation of performance occurs to create a learning and feedback loop (and also necessary for effective management);

• organisational culture internalising the desired values and behaviours (emphasising good governance) is established; and

• change management is accepted.

Principle 1: A comprehensive, credible, and sustainable public administration reform agenda is established and successfully implemented, fostering innovation and continuous improvement.

Comment: Officials responsible for the implementation of PFM/IC should ensure that the public administration reform arrangements fully reflect the requirements of PFM/IC.

Principle 2: Public policies are coherent and effectively coordinated by the centre of government; decisions are prepared and communicated in a clear and transparent manner.

Comment: This also means from a PFM/IC perspective, that policies are affordable and do not have adverse effects upon financial resilience. It consequently means too that there is effective coordination between strategic plans, operational plans, and financial plans.

Principle 3: The government plans and monitors public policies in an effective and inclusive manner, in line with the government fiscal space.

Comment: This requires that policy and financial plans are aligned, that objectives and performance standards are defined and appropriate.

Principle 4: Public policies are developed based on evidence and analysis, following clear and consistent rules for law making; laws and regulations are easily accessible.

Comment: This means that the cost implications are calculated and are consistent with available budgetary resources. This also emphasises the importance of the role of financial analysis in the policy making process.

Principle 5: All key external and internal stakeholders and the general public are actively consulted during policy development.

Comment: Implementing this Principle means that financial assessments may be subject to challenge, not just internal challenge but also to external challenge. Heads of finance should be prepared for that.

Principle 6: Public policies are effectively implemented and evaluated, enhancing policy outcomes and reducing regulatory costs and burdens.

Comment: The head of finance should be involved in the evaluation process, not least because this will enable that person to assess the quality and robustness of initial financial calculations, and therefore the impact upon budgets and financial resilience.

Principle 7: The parliament effectively scrutinises the government policy making and ensures overall policy and legislative coherence.

Comment: Implementation of this Principle will mean that heads of finance are likely to be required to provide evidence which may be challenged as part of the parliamentary process.

Principle 8: The employment framework balances stability and flexibility, ensures accountability of public servants and protects them against undue influence and wrongful dismissal.

Comment: This Principle includes a requirement that public servants have the obligation to act professionally and neutrally and that they have the right to reject unlawful instructions, and that they also have protection against undue political and other interference in their professional judgement. Although not specifically identified in these Principles heads of finance can be subject to inappropriate interference, especially in circumstances where in their professional judgement policy proposals and other actions generate risks to financial resilience or offend financial principles such as those requiring that published accounts present a true and fair view of a financial position.

Principle 9: Public administration attracts and recruits competent people based on merit and equal opportunities.

Comment: Application of this Principle should help to ensure that competent staff are appointed to finance departments and that they have appropriate experience.

Principle 10: Effective leadership is fostered through competence, stability, professional autonomy and responsiveness of accountable top managers.

Comment: This is a very important Principle, not least because it defines ‘top management’ as: ‘The term “top managers” shall apply to the highest levels of professional management in public administration bodies, where managers enter into direct interactions with the political leaders. It shall apply to top-of-pyramid public servants in ministries (general secretaries or professional state secretaries), general directors of ministerial departments or equivalent positions in ministries, and heads of agencies. It shall not apply to political leadership in the executive (prime minister, minister, deputy minister, political state secretary and similar).’

Throughout this guide emphasis is placed on the role of the ‘top manager’ and the leadership that that manager provides. This Principle reiterates that as follows:

• a. The law establishes top managers as a specific category. The scope of top management is adequately defined, ensuring that senior managerial positions in ministries and agencies are not treated as political offices.

• b. Top management positions are made attractive through fair recruitment, competitive remuneration, professional challenges, autonomy, and mitigation of career risks.

• c. Recruitment procedures are merit-based, professionally led, impartial and transparent, allowing selection and appointment of top managers with sufficient high-level experience, knowledge, skills, and competencies to perform their job well against predefined standards.

• d. Recruitment policies and practices support equal opportunities, gender balance and non-discrimination in top managerial positions.

• e. Top managers in public administration have clearly defined objectives, aligned with the mission of the organisation and objectives of the government, and their performance is regularly assessed.

• f. Top managers in public administration have sufficient professional and managerial autonomy, enabling them to assume responsibility for the management of staff, resources, and work.

• g. Top managers in public administration develop their skills in line with the needs of the job, both present and future.

Each of these points is consistent with the effective introduction of PFM/IC.

Principle 11: Public servants are motivated, fairly, and competitively paid and have good working conditions.

Comment: This Principle is relevant to the appointment and maintenance of a high quality finance staff especially those requiring a skilled expertise. Public sectors generally have difficulty in attracting and retaining skilled financial experts (qualified accountants) and recruitment policies need to recognise this. As this guide has pointed out financial experts require a wide range of skills and such skill requirements will be increasingly needed by governments with the adoption of these Principles which emphasis the significance of managerial capabilities.

Principle 12: Professional development, talent, and performance management enhance the skills, efficiency, and effectiveness of public servants and promote civil service values.

Comment: This Principle refers to the need for employees to have clear objectives (which in turn means that organisations themselves require clear objectives otherwise the employee objectives have limited credibility), that continuous learning processes exist and that appropriate training programmes are in place. All of this is central to the effective development of PFM/IC.

Principle 13: The organisation and management of public administration foster accountability, effectiveness, and efficiency.

Comment: This Principle addresses the need for coordination between public sector bodies, to avoid the development of ‘silo’ mentalities and also the need for the first-level body to effectively manage the second-level bodies for which it has responsibility. It also includes the point that ‘[m]anagers at all levels have clearly assigned responsibilities, delegated authority for making decisions and the autonomy and resources necessary to achieve the results they are accountable for’. These requirements are all essential for the effective implementation of PFM/IC.

Principle 14: This is about the allocation of responsibilities between the different levels of government.

Principle 15: Public administration is transparent and open.

Comment: A feature of good corporate governance is that the public and interested parties have access to information. This includes access to all financial information, including budgets and financial statement. Heads of finance should bear in mind that the presentation of information in a format for management and statutory purposes can be inappropriate for public information purposes and therefore may require representation. Openness may also result in challenge about the quality and coverage of financial analysis on which policy decisions have been made which emphasises the need for quality.

Principle 16: The parliament, ombudsperson, supreme audit institution and civil society effectively scrutinise public administration.

Comment: This emphasis upon scrutiny may result in challenge to the quality in the arrangements for PFM/IC.

Principle 17: The right to good administration is upheld through administrative procedure, judicial review, and public liability.

Comment: This Principle is primarily concerned with the quality of the public administration.

However, it can ask questions about the quality of public financial management and may lead to challenge about the organisation of government institutions, both first- and second-level bodies. As has been pointed out in this guide, for example, the role and responsibilities of second-level bodies should be periodically review.

Principle 18: A coherent and comprehensive public sector integrity system minimises the risks of corruption.

Comment: This Principle is aimed at minimising the risks of corrupt activity occurring. Those responsible for financial management (i.e. the operational implementation of PFM/IC) could well come across potential instances of corrupt or fraudulent activity. Examples would include where decisions are made which are difficult to justify, or where conflicts of interest become apparent or transactions occur which are not properly authorised, or potential income is either not levied or collected, or assets are inappropriately used or disposed of.

Principle 19: Users are at the centre in design and delivery of administrative services.

Comment: This guide has pointed out that generally public services are designed with the interests of the supplier paramount. This is inappropriate and it diminishes the possibilities of achieving ‘effectiveness’. This Principle emphasises that regard should be had to the interests of the user in designing public services and the bureaucracy that goes with them.

Principle 20: The public administration delivers streamlined and high-quality services.

Comment: This Principle emphasises again the need to take into account the interests of the user by ensuring that service delivery is streamlined for the maximum convenience of the service users.

Principle 21: Administrative services are easily accessible online³⁷ and offline, taking into account different needs, choices and constraints.

Comment: This Principle again emphasises the interests of the user and encourages the use of both offline and online methods of communication, including the use of concise and understandable language. This is particularly important from a PFM/IC perspective in terms of financial communications with the public and where relevant information about the collection of income such as taxation income.

Principle 22: This is about the digitalisation of public services and the maintenance of cyber security.

Comment: This applies equally to those financial services for which a head of finance is responsible.

Principles 23–32 are about public financial management. The summary of this section of the Principles is: ‘The public administration plans and manages public finances to ensure that they are sustainable and transparent and allow the delivery of policy objectives. Control, procurement and oversight arrangements are in place to ensure the economic, efficient and effective use of public resources shared across all levels of government.’ This theme is entirely consistent with that of PFM/IC. However, the Principles extend beyond the areas covered by this guide to include economic management, purchasing, external audit, and the financing of local and regional governments.

Comment: Those involved in the development of PFM/IC and in PFM/IC activity in the course of public business must recognise the significance of all these Principles and that Principles 23–32 are essentially concerned with the technical aspects of PFM/IC and not with the managerial aspects which are addressed in the other Principles and which are essential to the effective application of PFM/IC.

Principle 23: The annual budget is comprehensive and formulated within a credible and rolling medium-term framework, balancing policy needs with fiscal constraints.

Comment: An effective budget underpins PFM/IC and effective financial management depends upon the linkage of service objectives and plans with those both explicit and implicit in the budget. Equally medium-term operational and financial plans should be consistent with the medium-term fiscal framework set out in the budget documents. This in turn is essential to securing financial resilience.

Principle 24: The government supports budget implementation and service delivery by ensuring liquidity in the short and medium term.

Comment: This Principle links with the point made in this guide that cash flow forecasts should be reliable and that liabilities should not be entered into which are inconsistent with the current budgetary allocations.

Principle 25: The government implements the budget in line with estimates and reports on it in a comprehensive and transparent manner, allowing for timely scrutiny.

Comment: This Principle embodies the requirements of financial control, including control of fiscal risk. Whilst aimed at central government, for this Principle to be effectively implemented all public organisations should follow the same requirements. This guide also emphasises two other key features that ought to apply, namely that the monitoring of the budget should be at least monthly and that accompanying the published financial statements should be a ‘statement of internal control’.

Principle 26: Public administration bodies manage resources in an effective and compliant manner to achieve their objectives.

Comment: This Principle covers all the internal control requirements described in this guide also it does not specifically refer to COSO using instead the term ‘international standards’. It identifies the need for objectives, for delegation, for managers to have the necessary information, including on performance, and that internal control arrangements should have regard to the risks that might affect the achievement of the objectives. It also refers to the need for appropriate controls to be exercised by first-level organisations over second-level bodies, including enterprises. The Principle makes clear that public managers are responsible for the implementation of management and control systems that ensure the legal, effective, efficient, and economic management of operations, assets, and resources. This guide makes clear that the ultimate responsibility for the quality of management lies with the head of operational management who in turn is responsible to the appropriate minister

Principle 27: Internal audit improves the management of public administration bodies.

Comment: This Principle requires the implementation of internal audit. This Principle advises that the internal auditor should report to the ‘head’ of the organisation which would be to the head of operational management. Principle 10, footnote 14, makes clear who should be the top operational manager. Where an audit committee exists the reporting arrangements would take into account the existence of that committee.

Principles 28–30 are concerned with procurement arrangements, including public-private partnerships and concessions.

Principle 31: All public funds are effectively audited by an independent auditor that provides assurance on the use of public resources and helps improve the functioning of the public sector.

Comment: Although this guide does not specifically address external audit, nevertheless effective arrangements for PFM/IC will be of concern to the external auditor particularly with the auditor’s concern for how organisations are aiming to achieve the efficient and effective utilisation of public resources.

Principle 32: Regional and local governments have resources and adequate fiscal autonomy for exercising their competences, with financial oversight to foster responsible financial management.

Comment: This Principle addresses the need for subsidiary governments to have available to them a level of resources commensurate with their needs. This is a very important consideration in discouraging such organisations from taking