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The PEFA Program – and the PFM Performance Measurement

Framework

Public Financial Analysis and Management (PFAM) CourseWorld Bank

Washington DC, April 24, 2007

Frans RonsholtPEFA Secretariat

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Content

What is PEFA ? The Strengthened Approach to Supporting

PFM Reform The PFM Performance Measurement

Framework Roll-out of the Framework Assessment Process Issues The Role of the PEFA Secretariat

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What is PEFA ?

Public Expenditure and Financial Accountability Program

– aimed at harmonization and alignment– supporting the Monterrey, Rome and Paris Declarations

Established by a core group of international financial institutions and donor agencies

– World Bank, IMF, European Commission, UK, France, Norway, Switzerland

– Guides and finances the Program

Working closely with other donor agencies– through the OECD-DAC Joint Venture on PFM

PEFA Secretariat located within World Bank

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PFM Diagnostics in the 1990s

Large amount of PFM work undertaken, – mostly by development agencies– a good deal of knowledge generated.

LIMITATIONS Duplication and lack of coordination led to heavy

burden on partner governments. Not possible to demonstrate improvements in PFM

performance over time in a country Monitoring of PFM reforms focused on inputs and

activities, rather than performance

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The Strengthened Approach to Supporting PFM Reform

A country-led PFM reform program– including a strategy and action plan reflecting country

priorities; implemented through government structures

A donor coordinated program of support– covering analytical, technical and financial support

A common information pool– based on a framework for measuring and monitoring

results over time– i.e. the PEFA PFM Performance Measurement

Framework

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The PFM Performance Measurement Framework

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Components of the Framework

A standard set of high level PFM indicators to assess performance

– 28 government performance indicators– 3 donor indicators, reflecting donor practices influencing the

government’s PFM A concise, integrated report – the PFM

Performance Report – Standard content and format– provides the narrative to support the indicator assessments

(the evidence)– draws a summary from the analysis

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Coverage of the Public Sector

Focused on central government operations Links to other parts of the public sector

- Sub-National Governments- Public Business Enterprises

to the extent these have implications for Central Government

May be applied to sub-national government- Requires minor modifications

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Principles of Indicator Design

• High level system performance is measured• Assesses performance, but not underlying capacity factors

• Full overview of the PFM system• revenue, expenditure, procurement, financial assets/ liabilities

• Basis for design:

• The 16 HIPC Expenditure Tracking Indicators, but broader

• draws on IMF’s Fiscal Standards and Codes (ROSC)

• internationally accepted standards e.g. GFS, IPSAS, INTOSAI

• Widely applicable to countries at all levels of development, but not intended for cross-country comparison

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Budget credibility

A. PFM Out-turns

External scrutiny and

audit

Accounting, Recording, Reporting

Predictability and

control in Budget

Execution

Policy Based

budgeting

C. Budget Cycle D. Donor Practices

Comprehensiveness and Transparency

Structure of the Indicator Set

B. Cross-cutting features

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Content of Indicator Set

A. PFM Out-turnsCredibility of the budget Indicators 1- 4

Deviations from aggregate budgeted expenditure and revenue as well as expenditure composition. Level of expenditure arrears.

B. Key Cross-cutting issuesComprehensiveness and transparency Indicators 5-10

Coverage of budget classification, budget documentation, reporting on extra-budgetary operations, inter-governmental fiscal relations, fiscal risk oversight and public access to information.

C. Budget Cyclei. Policy-based budgeting Indicators 11-12

Annual budget preparation process, multi-year perspective in fiscal planning, expenditure policy and budgeting

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Content of Indicator Set (cont’d)

C. Budget Cycleii. Predictability & control in budget execution Indicators 13-21

Revenue administration, predictability in availability of funds, cash balances, debt & guarantee management, payroll controls, procurement, internal controls and internal audit

iii. Accounting, recording and reporting Indicators 22-25

Accounts reconciliation, reporting on resources at service outlet level, in-year budget execution reports, financial statements

iv. External scrutiny and audit Indicators 26-28

Scope, nature and follow-up on external audit; legislative scrutiny of annual budget law and external audit reports

D. Donor Practices Indicators D1- D3

Predictability of direct budget support; donor information for budgeting and reporting; use of national procedures

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Calibration and Scoring

Calibrated on four point ordinal scale (A, B, C, D)– Requirements for each score explicitly specified

Scoring based on extent of internationally recognized ‘Good Practice’

Indicators have 1, 2, 3 or 4 dimensions– in total 74 dimensions

– to provide detailed information & transparency of score

– each dimension must be rated separately

Aggregation only from dimensions to indicator

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Roll-out of PEFA based Assessments

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Roll-out of PFM Assessments

PFM Performance Measurement Framework launched June 2005

Assessment Status as at March 2007– 45 substantially completed i.e. draft/final report– 24 on-going but report not yet issued– 27 agreed with government but not started– Roll-out rate: a steady 2-3 new assessments per month

Outlook for mid 2008– 75-80 countries covered– 8-10 repeat assessments

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Geographical distribution

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Assessment Process Issues

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Decentralized Process

Application of the PEFA Framework to be decided at country level. Decisions to be made:

– If and Why ?– When ?– How ?

Recommended by international organizations as good practice (e.g. OECD-DAC, ComSec)

No supra-agency mandates or responsibilities. Each country and organization decides its interest in a PEFA assessment and ability to contribute.

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Government Involvement

Government’s role Self-assessment (with external validation) Joint assessment (joint team) Collaboration with donor-led assessment

Determined by interest and capacity What are the benefits to government? Government staff may need training

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Donor Collaboration

A donor reference group is essential to ensure that needs of all parties are addressed to ensure common acceptance of findings

The reference group to agree internally and with the government on:

Diagnostic packaging Resources for assessment work Stages and timing of the assessment work Quality assurance arrangements

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Diagnostic Packaging -

Purposes of Standard Diagnostic Tools

PER CFAA CPAR Fiscal ROSC

TA report

FRA PFM-PR

Review of public expenditure policies & budgetary outcomes

X

Review of political incentives

X X

High level overview of PFM performance

X

Identification of PFM strengths/weaknesses

X X X X X X

In-depth analysis of capacity factors

X X X X X

Recommendations for reform

X X X X X

Assess risk to public funds

X X

Track progress over time * * * X * if performance indicators are incorporated

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Implement PFM reforms

Recommend PFM reform measures

Identify main PFM

weaknesses

High level performance

overview

Diagnostic Packaging – Coverage of PFM Performance Report

Investigate underlying

causes

Formulate PFM reform program

Identify main PFM

weaknesses

Recommend PFM reform measures

PFM-PR

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Diagnostic Packages

Stand-alone PFM-PR - Recommended -e.g. input to decision on focus of subsequent in-depth

analysis PFM Performance indicators integrated into other

product - in combination with PER, CFAA or PEMFAR/CIFA

- a problematic concept; rarely working well PFM-PR as a separate/early module of a broader

analytical product - often works well (e.g. Afghanistan PER, Ghana

ERPFM)

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Quality Assurance

Terms of Reference & Draft Report to be Q.A.’d Government and donor reference group

– Should ensure that information is used correctly and reflects the situation in the country

Donor specific arrangements to be respected e.g. World Bank peer review mechanism

The PEFA Secretariat can contribute as peer reviewer, if requested

– Will consider if the product respects the Framework’s standards and methodology

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The PEFA Secretariat

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Mission of the PEFA Secretariat

To disseminate information on the Strengthened Approach to Supporting PFM Reform and the PEFA Performance Measurement Framework.

To support applications of the PEFA Framework at country level for quality and usefulness of the assessments.

Reports to the seven-agency PEFA Steering Committee

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Activities of the PEFA Secretariat

Development of the Framework; interpretation and clarification of the indicators

Provision of support and guidance for quality in implementing the assessment in each country

Development of training programs and materials Monitoring roll-out of the strengthened approach for

lesson learning and input into training and guidance

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Support Services and Tools

Support tools for assessment managers on the website (www.pefa.org):

List of completed, ongoing and planned assessments – updated 3-4 times annually

Links to completed reports, if they are made public

Support to assessment managers on request: Advice / Video-conference briefings to country teams on

assessment planning List of consultants with PEFA assessment experience Review of terms of reference Quality reviews of draft assessment reports

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Support Services and Tools

Support tools for assessors & trainers on the website: Translations of the Framework (English, French, Spanish,

Portuguese, Russian, Arabic) Calculation spreadsheets for some indicators Guidance on information / evidence for assessment Clarifications and additional guidance on indicators Training materials

Support to assessors on request: Indicator interpretation and other advice to assessors

during implementation

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Thank You for Your Attention