Risk Management in Public Expenditure Management and Aid in Malaysia: a Comparison of the World Bank and Government of Malaysia Financial Management System Approaches Under the Essp

The study seeks to clarify why donors such as the World Bank still insist on the use of their financial management system rather than the recipient country?s financial management system, despite the intention under the Paris Declaration 2005 to use the respective government?s systems. The study then explores the reasons why the financial management system used by the World Bank is more effective in managing risks related to public financial management and aid as compared to the Government of Malaysia approach. The study compares financial management by the World Bank and Ministry of Education Malaysia, in their parallel implementation of Educational Sector Support Projects (ESSP) under the Eighth Malaysian Plan, 2001-2005. The quality of financial management of projects in two systems is compared using established criteria of good financial management practice. Findings are based on evidence from interviews, documentation and direct observations. The study demonstrates the significant roles in reducing risks played in the World Bank approach by the Project Management Reports (PMR), high quality Project Implementation Unit (PIU) staff and better procurement procedures.