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

Use of PEFA assessments ICGFM Conference Miami – May 21, 2009 PEFA Secretariat

Harmonize information needs
Common information pool
Inform PFM reform formulation and priorities
Compare to and learn from peers
Monitor results of reform efforts
What can countries use the PEFA Framework for?

PEFA reports for reform formulation (1)
PEFA report is one – out of several - inputs
Identification of main strengths and weaknesses – and potential impact on budgetary outcomes
Other factors: political economy, institutional, culture, constitution/legal, resources, capacity at entry
Ownership means government decisions on priorities
Government to consider all factors in deciding priorities
Reform dialogue with donors to allow ample space
Do not use Indicator scores simplistically
A low score is not sufficient justification for high priority reform
Other factors: relative importance of subject, complexity/timeframe for improvement, interdependence with other elements, weakest links

Implement PFM reforms Recommend PFM reform measures Identify main PFM weaknesses High level performance overview Coverage of PFM Performance Report in the PFM Reform Cycle Investigate underlying causes Formulate PFM reform program Identify main PFM weaknesses Recommend PFM reform measures PFM-PR

PEFA reports for reform formulation (2)
Complementary analysis to PEFA required
Detailed analysis of underlying causes needed for formulation of detailed action plan
Limit such analysis to priority areas
Drill-down tools – some exist, others under development
PEFA is preparing guidance on use of PEFA reports in reform formulation
Stock-taking of conceptual approaches used
Country case studies illustrating good practice

Purposes of Standard Diagnostic Tools

Findings of Norad-managed self-assessment presented to OECD-DAC in December 2007
The assessment showed low scores for seven areas of PFM system performance
Ministry of Finance reaction:
Weaknesses in procurement practices and follow-up to external audit findings need to be addressed.
Three areas of low scoring not considered priority at present (Multi-year program/sector budgeting, Limited extent of internal audit, no consolidated overview of risks from autonomous agencies and public corporations)
Two indicators scored low but are municipal responsibilities; central government will not get involved.
Country case - Norway

Inform PFM reform formulation, priorities

PEFA reports for country comparison (1)
PEFA Framework developed for in-country use
‘ Summary assessment’ provides nuanced overview of strengths and weaknesses as basis for reform prioritization
No method given for arriving at one measure for ‘overall performance level’
Wide interest in country comparison using aggregation
Researchers - learning on determining factors
Donors - aid allocations
Governments - peer learning
Aggregation requires three decisions
Conversion from ordinal to numerical scale
Weighting of indicators (generally and by country)
Weighting of countries (for country cluster analysis)

PEFA reports for country comparison (2)
No scientifically correct or superior basis for deciding conversion and weights exists
Each user takes those decisions on individual opinion
PEFA program will not endorse any particular method
Preferred method of country comparison:
A nuanced comparison of two assessment reports
Consider country context, ensure comparison of like with like
In case aggregation is desired:
Be transparent on aggregation methods used
Discuss reasons for choice
Sensitivity analysis to illustrate impact on findings

Repeat Assessments
As at March 2009, thirteen ‘real’ repeat assessment undertaken
Expected to become common from 2008/2009 onward i.e. three years after the first series of baseline assessments

What we want to determine?
Specific changes in system performance
What has changed?
How much?

Comparison of Indicator Scores
Indicator scores will provide a crude overview of changes over time, but …
Dimensions may change differently
Performance may not always change enough to change the score (use of arrow)
So more detailed explanation is required

Other Possible Reasons for Change in Scores
Changes in definitions
Improved availability of or access to information
Different information sampling & aggregation
Scoring methodology mistakes in previous assessment

Reporting on Progress Made
Explain all factors that impact a change in rating indicator-by-indicator
Identify the performance change
Ensure that any reader can track the change from the previous assessment – what performance change led to the change in a rating

Reporting on Progress Made Indicator Score 2005 Score 2007 Performance change Other factors PI-1 C B Performance appears improved based on 2005: last deviations 6%, 11%, 18% 2007: 5%, 11%, 6% Not clear if all external project funds were excluded from data for 2005 assessment but probably insignificant issue. PI-4 (i) A C Performance change is uncertain, despite reported arrears increase from 1% in 2005 to 6% in 2007. 2005 assessment used data on pending payment orders only, not overdue invoices.

Organizational Requirements
Performance tracking to be clearly reflected in the TOR
Use of same assessment team desirable but rarely possible
The lead agency of the previous assessment, if different, should assist with access to previous assessors’ notes
… and be part of the reference group for the repeat exercise

PEFA incorporated in PFM reform monitoring system
baseline 2005, repeat assessment 2007, planned follow-up 2010
Important performance improvements 2005-2007 in budget execution
revenue administration, cash management, internal controls
Improvements resulted from:
Reforms already well under way in 2005 (e.g. IFMIS/SISTAFE and revenue administration)
Small managerial/admin changes (including quick-wins identified on the basis of 2005 assessment)
New reform initiatives in pay-roll control (identified from the 2005 assessment as an important neglected area of reform)
Country case - Mozambique

Thank you for your attention

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

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Workshop Session II: Public Expenditure Financial Accountability (PEFA) Assessment — Presentation Transcript