Research and policy agenda on Public Financial Management and corruption

Our advisors and researchers look at why corrupt countries fail to implement sound and transparent public financial management (PFM) systems. We are studying how corruption in PFM leads to leakages, capital flight, reduced tax compliance, weak democracy, and poverty – dynamics that threaten development goals.

Corruption pressures in public financial management systems are global. Therefore, our research includes both developing country-contexts and international drivers of corruption. Our approaches include political economy, power-relations, and analyses of institutions and social networks.

The research frontier on corruption and public financial management

Recent corruption research shows that many anti-corruption approaches to PFM since the late 1990s have had disappointing results. Some anti-corruption initiatives have had partial success in one context but have not worked in others. For instance, the donor mechanism of direct budget support seems to have had very little effect on corruption overall, and may have had a negative effect in some countries. Likewise, the Integrated Financial Management Systems (IFMIS) reforms seem to have only worked when there has been true political will.

There is some evidence that PFM reforms can improve anti-corruption performance in certain contexts. But we need to understand who and what the corruption drivers are – in each context – to succeed with targeted anti-corruption efforts.

The Public Expenditure and Financial Accountability framework (PEFA) and reports help identify weaknesses in the PFM process in a given country. It is a useful tool for assessing the status of public financial management. PEFA reports do not cover all countries, however, and some country studies are not yet released. PEFA assessments provide a thorough, consistent and evidence-based analysis of PFM performance at a specific point in time, making it possible to assess weaknesses and strengths within a country's PFM system.

The international policy agenda

The sophistication of PFM systems – and attention to related corruption challenges – varies across sub-sectors.  In some sub-sectors, longstanding initiatives – e.g. International Budget Partnership and  Public Expenditure Tracking Surveys (PETS) – have attempted to curtail corruption with some success. A number of procurement reforms have also led to positive results, aligned with international standards and benchmarking.

Other sub-sectors have seen a more recent corruption focus, and therefore lacks evidence of success. Growing attention on domestic revenue mobilisation has led to a great number and range of tax administration reforms. We also see increasing attention on the role of special institutions, such as the auditor general. Many actors have started to emphasise civil society and media initiatives for scruitinising budget and PFM processes and the quality and outreach of government service delivery. However, the effect of these efforts on anti-corruption remains to be seen.

Lessons from PFM reforms

To fill knowledge gaps, we collect and synthesise lessons learned from evaluations, assessments and reports on PFM reforms. One problem that evaluations struggle to cope with is how to measure the direct impact of PFM reforms on corruption-levels.

There are some resources addressing these important issues:

• Sida Evaluation Brief: PFM Reform: Burkina Faso, Ghana and Malawi
• ODI Report: Evaluation of Donor Support to PFM Reform in Developing Countries