The PEFA Program

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The PEFA Program and the PFM Performance
Measurement Framework

• Public Financial Analysis and Management (PFAM)
  Course
• World Bank
• Washington DC, April 24, 2007

Frans Ronsholt PEFA 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 governments 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 IMFs 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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Structure of the Indicator Set
C. Budget Cycle
Policy Based budgeting
D. Donor Practices
A. PFM Out-turns
B. Cross-cutting features
Budget credibility
External scrutiny and audit
Predictability and control in Budget Execution
Comprehensiveness and Transparency
Accounting, Recording, Reporting
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Content of Indicator Set

• A. PFM Out-turns
• Credibility 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 issues
• Comprehensiveness 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 Cycle
• i. 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 (contd)

• C. Budget Cycle
• ii. 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

• Governments 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
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Diagnostic Packaging Coverage of PFM
Performance Report
Implement PFM reforms
High level performance overview
Formulate PFM reform program
PFM-PR
Identify main PFM weaknesses
Identify main PFM weaknesses
Recommend PFM reform measures
Recommend PFM reform measures
Investigate underlying causes
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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
  Frameworks 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