The PEFA Program- an Overview

Presentation to be used by SC members

Prepared by the PEFA Secretariat – June 2011

CONTENT

- Program Overview- The PEFA Framework- Use & Impact- The PEFA Secretariat

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PROGRAM OVERVIEW

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PEFA = Public Expenditure & Financial Accountability Program Objective:

Results orientation in development of PFM systems Harmonization of PFM analytical work

Established: Established in 2001 by seven agencies. Working in tandem with the OECD-DAC Task Force on PFM Contributing to development effectiveness through: The

Strengthened Approach to Supporting PFM Reform

What is the PEFA program?

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The PEFA stakeholders

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The Strengthened Approach to Supporting PFM Reform

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

priorities; implemented through government structures

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

3. A common information pool based on a framework for measuring performance and

monitoring results over time i.e. the PFM Performance Measurement Framework

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THE PFM PERFORMANCE MEASUREMENT

FRAMEWORK

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The PEFA Framework

PFM Performance Measurement Framework • Better known as ‘the PEFA Framework’• The ‘flagship’ product of the PEFA Program• Launched in June 2005

Designed to measure performance of national PFM systems

• Applicable to countries and different stages of development

• Also applicable for Sub-National government systems

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PFM Links to Development Goals

PFM system performance

Budgetary Outcomes

Fiscal/Exp Policy Goals

Service Delivery Goals

Dev Goals

MDGs, PRSP, Political Manifesto

Budget deficit, Sector allocations, Investment, Debt

ratio, Tax burden etc

Fiscal discipline, Strategic allocation,

Operational efficiency

PEFA Framework

Other influencing factors

Purpose of the PEFA FrameworkObjective • To determine if a country has the tools to deliver three main budgetary

outcomes (aggregate fiscal discipline; strategic resource allocation; efficient service delivery)?

It provides:• a high level overview of all aspects of a country’s PFM systems

performance • includes revenue, expenditure, procurement, financial assets/ liabilities

It does not provide:• Assessment of underlying causes for good / poor performance• An assessment of government fiscal/expenditure policies

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Components of the PEFA Framework A standard set of high level PFM performance indicators

(PIs) 31 performance indicators (with 76 sub-indicators) Grouped in six critical dimensions A compromise between simplicity and

comprehensiveness

A standard report format the PFM Performance Report (PFM-PR) developed to provide country background, evidence on

the indicators and an integrated, analytical summary.

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Dimensions of PFM system performance

Policy-based budgeting:

Is the budget prepared with due regard to

government policy?

Accounting, recording & reporting:

Are adequate records & information produced,

maintained & disseminated to meet decision-making, control, management &

reporting purposes?

Comprehensiveness and transparency :

Are the budget & fiscal risk oversight comprehensive, & is fiscal & budget information

accessible to the public?

Budget credibility:Is the budget realistic,

& implemented as intended?

Predictability & control in budget execution:

Is the budget implemented in a predictable manner & is control &

stewardship exercised in the collection & use of public funds?

External scrutiny & audit:

Are there effective arrangements for scrutiny of public

finances & follow up by the executive?

6 critical dimensions

of PFM system

performance

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Implementation modalities 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 (managing, financing, quality review)

The Framework does not ‘belong’ to any single organization

Due process is crucial to acceptance and use - Joint work is encouraged

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Stages in a typical process

0. Agree the intention to undertake a PEFA based assessment1. Agree purpose, scope and stakeholder roles

2. Prepare TOR3. Mobilize assessment team

4. Introduction workshop for stakeholders5. Review of existing information

6. Inception Report7. Main field work

8. 1st Draft Report9. Quality Review

10. Supplementary field work11. Draft Final Report

12. Presentation seminar13. Final report

14. Use of the report for reform dialogue14

USE & IMPACTOF THE PEFA FRAMEWORK

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Very good progress – globally 220+ assessments substantially completed, covering 120+

countries. Since 2010, mostly Repeat assessments and Sub-National

assessments

High country coverage in many regions Africa and Caribbean 90% of countries Latin America, Eastern Europe, Asia, Pacific 50-80%

Used in many Middle Income Countries Upper MICs: Brazil, Turkey, Belarus, Russian Federation, South Africa Lower MICs: India, Kazakhstan, Ukraine, Morocco, Egypt, Thailand,

Philippines, Indonesia, Colombia, Peru

PEFA Framework adoption

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Stakeholder involvement

Government leadership/self-assessment Active government participation in assessment is key to the use

in reform policy dialogue Full self-assessment may be very demanding on govt. capacity Increasing frequency of Self-assessment with expert assistance

and external validation – but still a minority of cases

Development Agencies About 25 development banks and donor agencies involved

(leading, financing or in reference group) World Bank and EU has taken the lead in 85% of all assessments Increasing frequency of joint work and partner inclusiveness

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Coverage of PFM-PR in Reform Cycle

Implement PFM reforms

Recommend PFM reform measures

Identify main PFM

weaknesses

High level performance

overview

Investigate underlying

causes

Formulate PFM reform

program

Identify main PFM

weaknesses

Recommend PFM reform measures

PFM-PR

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PEFA contribution to results orientation Frequently used as basis for reform dialogue

Useful in deciding reform priorities Ownership means government decisions on priorities Indicators used to set targets for reform program results but: PEFA assessment is one of several inputs Do not use Indicator scores simplistically Complementary analysis to PEFA required to identify root causes

Measuring performance change Results from 33 repeat assessments indicate pace of progress in different

areas of PFM – positive global trend but wide variation among PFM features Peer learning

Used as basis for discussions in regional groups of government PFM experts (e.g. Eastern Europe, West Africa, Caribbean)

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Use of PEFA for Development Agencies’ Internal Processes Used by all seven PEFA partners for internal processes

(GBS/DPL, FRA, CPIA, Debt Limits etc) Similarly used by several other development agencies Increasingly, PEFA assessments are directly mentioned in

internal guidelines as key or preferred input PEFA assessment information is rarely considered the only

source of information to a process Most of the processes have financial consequences for partner

countries – though the impact of PEFA is usually indirect.

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Assessment comparisons

PEFA Framework developed to measure progress over time in one country• ‘Summary assessment’ provides overview of strengths &

weaknesses as basis for reform prioritization in a country• Comparison of assessments over time is robust where repeat

assessments are explicitly comparing to baseline

Country comparisons• Comparing scores alone can be misleading• Must be approached cautiously - ensure comparison of like

with like• Aggregation - No method given for arriving at single measure

of ‘overall performance’ – no attempt to create ‘league table’

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Harmonization of PFM diagnostic tools

Common information pool being created Considerable use of PEFA assessments for many different purposes Several earlier instruments replaced by PEFA

Transactions costs in PFM diagnostics appear not to decline, due to: Still several overlapping assessment instruments Many uncoordinated fiduciary assessments Proliferation of new ‘drill-down’ PFM tools Few countries have multi-year plans for analytical work

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THE PEFA SECRETARIAT

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Role of the PEFA Secretariat

Neutral body Supporting / advising any user of the Framework does not represent a particular interest does not undertake or finance assessments support services are free of charge

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Activities of the PEFA Secretariat (1) Custodian of the PEFA Framework

Development and maintenance of the Framework Issues guidance notes and clarifications

Quality reviews of assessments Both at concept note and report stage, on request

Training Develops and shares training materials Supports training institutes in delivering PEFA courses Delivers training selectively, mainly on a regional basis

Dissemination Conference presentations, PFM blogs, PEFA Newsflash Sharing PEFA assessment reports through website

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Role of the PEFA Secretariat (2)

Monitoring Semi-annual updates of PEFA assessment status list Periodic monitoring reports Ad hoc surveys

Promotes harmonization in assessment of PFM systems Working with OECD-DAC Task Force on PFM Stocktaking study of PFM diagnostic instruments Supports developers of ‘drill-down’ assessment tools

Support PFM research Availability of PEFA indicators database

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PEFA Secretariat quality review• On request, free of charge, quick feedback (10 business days)

• For Concept Notes/TOR and as well as Assessment Reports

• Appraises adequacy of background info (sections 1, 2 & 4)

• Appraises application of performance indicators (section 3)

• Review of each indicator: correctly interpreted, sufficient evidence, scoring method correctly applied?

• Considers whether summary assessment brings out clear message consistent with indicator analysis and background

• Follow-up reviews – evaluates responses to the initial review

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