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Case Study: The Role of Public Financial Management (PFM) in Health Systems Strengthening /

Public sector funding forms the cornerstone of every sustainable health system – the outbreak of the COVID-19 pandemic has made this more evident than ever. Effective public financial management (PFM) ensures that scarce resources have maximum impact and are deployed where they are needed most. This can help achieve government health policy and development objectives and set the stage for robust service delivery. Countries with strong, transparent and accountable PFM systems tend to deliver services more effectively and fairly.

However, PFM systems used by developed countries are not necessarily the right solution for other contexts. This means they cannot simply be applied in developing economies in a one size fits it all fashion: Creating the right climate for developing appropriate reforms – through an understanding of the local context and a focus on the functionality of the existing system and how the reform fits into it– is a key ingredient for success. Nevertheless, there is a set of common components which is always critical for an effective, overarching PFM reform: Political will, a robust technical framework, quality management and the coordination of all reform activities to achieve a holistic, integrated result in line with the existing institutional framework.

Having worked with governments around the world since 1833, Crown Agents collaborates with the public sector to make lasting changes to the way public money is managed. Based on our experience, we share our most significant lessons learned.

Setting the stage for robust health service delivery through budget planning

A great example of how PFM reform can have a positive impact on health service delivery can be showcased through the Accelerating the Sustainable Control and Elimination of Neglected Tropical Diseases (Ascend) programme:

Ascend is the UK Foreign, Commonwealth and Development Office’s (FCDO) £200m flagship health programme to advance the impact and sustainability of national programmes across the globe tackling Neglected Tropical Diseases (NTDs). Crown Agents is fund-managing the programme and leads a consortium of technical partners including Abt Associates, Oriole Global Health and The Royal Tropical Institute in the Netherlands (KIT) to implement the ASCEND programme Lot 1 across countries in East and Southern Africa and South Asia. Ascend Lot 1 is contributing particularly to health system strengthening and service delivery through supporting the advancement of the sustainable delivery of NTD control and elimination activities.

Ascend Lot 1 supports PFM systems with the aim to increase the prioritisation of NTDs in national plans and budgets. Budget planning is an essential part of the PFM process and dictates where and how much money the health sector will be allocated. Sometimes budget allocations are not made to tackle NTDs at all whilst in other cases the allocations don’t align with the varying geographical presence of NTDs. This can result in the suboptimal distribution of resources.

An example of this can be seen in Nepal: Under the new constitution adopted in 2015, Nepal embraced a federal structure of government comprising of seven provincial and 753 local governments, each with their own legislative, judicial and executive powers. Each of the governments have been receiving a small grant to tackle NTDs, even if NTDs were not endemic in a particular jurisdiction. The Ascend Lot 1 programme studied how these funds were disbursed and looked into how they might be allocated more effectively to target areas where NTDs were endemic. This would allow to promote a better allocation of funds to local governments by the central government of Nepal, which will evidently result in local jurisdictions having more money at their disposal to fight NTDs, benefitting the country as a whole.

Saving funds by strengthening existing systems

In Zambia, Ascend is working with the Ministry of Health (MOH) to provide health system strengthening and improve NTD programming. The Government has recently created an NTD Unit within the Ministry of Health (MOH), but financial constraints and visibility of the Unit have hampered its growth and functionality. To support the Unit, Crown Agents and its partners under Ascend Lot 1 have committed to using the Government’s own financial management systems rather than those of a third party implementing partner. This also involves providing training and upskilling of relevant government officials on Ascend Lot 1’s and the Government’s own financial guidelines, and expanding training on key elements of the Zambian Public Finance Management Act at the national, provincial and district levels. Using already available Government systems frees up additional donor resources to be spent on additional NTDs activities, resulting in value for money, further strengthening of the health system and local ownership.

Output and programme-based budgeting for enhanced service delivery

Only recently, the Government of Zambia has embarked on shifting its budgeting approach to Output-Based-Budgeting (OBB) to enable enhanced service delivery and monitoring of implementation. OBB is a tool to make social sector expenditure more result-oriented and to help achieve policy objectives. Through our USAID funded AGIS project in Zambia (Accountable Governance for Improved Service Delivery), we have been focusing on building public financial management capacity in OBB within the NTD Unit in the MOH in Zambia. To strengthen its application, we have been providing training to increase the capacity of the NTD Unit to engage with the MOH’s planning and budgeting processes. The training resulted in effective and more engaging conversations on securing more adequate funding for the Unit in the 2022 budget.

Mozambique is currently shifting towards programme-based budgeting (PBB), starting with the national 2022 budget. Programme Based Budgeting is an approach that allows for greater flexibility in implementation, unlike traditional line item budgeting that locks budgets into detailed budget lines. Under Ascend Lot 1, we are working with the Department of Public Health in the Ministry of Health in Mozambique to secure a specific budget for the NTD Unit. Having a discreet budget will significantly improve the Department’s ability to undertake NTD activities as it would not be dependent on the actual parent department.

In 2019 and 2020, the country performed well in implementing Mass Drug Administrations (MDAs) in a timely and cost-effective manner. At the time, a total of 20% of funds were withheld due to concerns around fiduciary risk, timely reporting and reconciliation. This was raised by the government as a particular constraint, especially at the subnational levels where there was no spare cash for delivery and a reluctance of suppliers to provide goods without immediate payment. Through the Ascend Lot 1 programme, we have now ensured that 95% are provided up front to enable easier implementation. This is very important as MDAs are conducted over a very short timeframe and sufficient funds need to be available to ensure effective and timely delivery.

Conclusion

We hope that this blog has illustrated the importance of Public Financial Management and some of the tools it can offer to ensure public funds are managed effectively. According to our experience, the key drivers of effective PFM are the following: An understanding of the importance of a robust budget planning process, balanced budget allocation, working with existing national systems and adopting the right budgeting approach. This way, PFM does not only maximise the impact of public funds and achieves value for money and enhanced service delivery, but also makes interventions sustainable by increasing local ownership. Undertaking this approach coupled with focusing on the local context – the cultural and political circumstances in which PFM is applied- can help produce a strong PFM system that plays a greater role in supporting and strengthening health systems.