Workshop Session I: Public Expenditure Financial Accountability (PEFA) Assessment

The PEFA Initiative & PFM Performance Measurement Framework ICGFM Conference Miami – May 21, 2009 PEFA Secretariat

The PEFA Program

PFM Performance Measurement Framework

Global Roll-Out of the Framework

PEFA support to users

Content

The PEFA Program

Content

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 if PFM performance is improving over time in a country

Monitoring of PFM reforms focused on inputs and activities , rather than performance

PEFA Public Expenditure & Financial Accountability

Objective: Results orientation in development of PFM systems & harmonization of PFM analytical work

Established: in 2001 by seven agencies. Today working in tandem with the 25 members of OECD-DAC Joint Venture on PFM

Strategy: Strengthened Approach to support PFM reform, aligned with Paris Declaration

What is the PEFA program?

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 performance and monitoring results over time

i.e. the PEFA PFM Performance Measurement Framework

Implications of the Strengthened Approach?

Focus on improvements in country PFM systems:

Emphasizing country leadership and ownership for result

Common information pool , fewer duplicative diagnostics

Joint donor work in country , reducing transaction costs and creating consistency in analysis

Less emphasis on diagnostics, more on capacity-building

With performance measurement framework, more learning of what works and why

The PEFA Program

Content

COMPONENTS OF THE FRAMEWORK

A standard set of high level PFM indicators (including revenue, expenditure, procurement, financial assets/ liabilities)

28 government performance indicators, covering all aspects of PFM

3 donor indicators, reflecting donor practices influencing the government’s PFM systems

A concise, integrated report – the PFM performance report developed to provide narrative on the indicators and to draw a summary from the analysis

FOCUS OF THE FRAMEWORK

Focused on central government operations

but also applicable at sub-national level, special guidelines available

Links to other parts of the public sector

Sub-National Governments

Public Enterprises,

to the extent these have implications for Central Government

Budget credibility

PFM Out-turns

PI-1 to 4

External scrutiny and audit Accounting, Recording, Reporting Predictability and control in Budget Execution Policy Based budgeting C. Budget Cycle PI-11 to 28 D. Donor Practices D-1 to 3 Comprehensiveness and Transparency STRUCTURE OF THE PERFORMANCE INDICATOR SET B. Cross-cutting features PI-5 to 10

CALIBRATION AND SCORING

Calibrated on a Four Point Cardinal Scale (A, B, C, D)

Reflecting internationally accepted ‘good practice’

Determine score by starting from ‘D’ going upwards

Do not score if evidence is insufficient

Arrow ▲

Can indicate an improvement not reflected in a change of the indicator score

INDICATOR DIMENSIONS

Most indicators have 2, 3 or 4 dimensions

Each dimension must be rated separately

In total 76 dimension ratings to be determined

Aggregating dimension scores to indicators; two methods M1 or M2, as specified for each indicator

Intermediate scores (B+, C+, D+) for multi-dimensional indicators, where dimensions score differently

Content of the PFM Performance Report

An integrated narrative report including:

Introduction with the context for the assessment

Country background information

Evidence and justification for scoring the indicators

Country specific issues

Description of reform progress and factors influencing it

Summary assessment of PFM system impact – bringing the analysis together

Strengths of the PEFA Framework

Rigorous/transparent framework for consistent and objective assessment – fixed content, rating methodology, international standards/accepted good practice

Provides a high level overview of all aspects of PFM systems performance – cost-effective

Provides a focus for PFM reform dialogue and subsequent analysis of selected subjects

Allows tracking of performance changes over time

Widely applicable to countries at different levels of development

Limitations of the PEFA Framework

The Framework does NOT provide:

An assessment of underlying causes for good or poor performance i.e. the institutional, organizational and human resource capacity factors

An assessment of public fiscal and financial policies

Full details for each PFM topic (refer to specialized drill-down indicator sets)

Risk of inappropriate application of the Framework – e.g. tick box approach; lacking evidence

The PEFA Program

Content

Implementation modality

Country focus and decision

Application of the PEFA Framework is entirely decentralized to the country level (if, when, how to use Framework)

Inclusiveness

All stakeholders can be involved and any agency can in principle undertake any role in its implementation; it does not ‘belong’ to any organization

Supported by a neutral body - the PEFA Secretariat

offers support to any user of the Framework without representing a particular interest

does not undertake or finance assessments

support is free of charge

Important Steps of a Typical Process 0. Agree the intention to undertake a PEFA based assessment 1. Agree purpose, scope and stakeholder roles 2. Prepare TOR 3. Mobilize assessment team 4. Introduction workshop for stakeholders 5. Review of existing information 6. Inception Report 7. Main field work 8. 1 st Draft Report 9. Quality Review 10. Supplementary field work 11. Draft Final Report 12. Presentation seminar 13. Final report 14. Use of the report for reform dialogue

Evolution of Number of Assessments

PEFA Assessments Map

Very good progress – globally

By February 2009: Completed in 95 countries, ongoing in a further 8, repeat assessments emerging

Increasingly used for Sub-National government

India, Pakistan, Iraq, Brazil, Colombia, Tanzania, Uganda, Ethiopia, Nigeria, Senegal, Switzerland

Guidelines for SN application issued March 2008

High country coverage in many regions

Africa and Caribbean 85-90% of countries

Latin America, Eastern Europe, Asia, Pacific 45-65%

Wide stakeholder involvement

About 25 donor agencies involved (leading, financing reference group)

World Bank and EC taking the lead in 85% of all assessments

Government leadership/self-assessment increasing, but not yet the norm

PEFA Framework adoption

Publication of Reports

Common information pool – facilitated by publication

Publicized by the leading organization – usually on a website

Hyperlinks placed on the PEFA website – for easy access to all public reports

As at April 2009, 52 reports publicly available (out of 77 finalized)

The PEFA Program

Content

New Focus: Support to the use of PEFA reports for

Tracking of performance changes over time

Prioritization and sequencing of PFM reforms

Peer learning

Utilization by stakeholders beyond central finance agencies and donors

… . and enhancing country ownership / donor collaboration for assessments & subsequent reform formulation / implementation

Other objectives will continue as under Phase II:

Support to quality assurance - training, advice, guidance on good practice, peer review and technical maintenance of the Framework = core services of the Secretariat