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The PEFA Program – and the PFM Performance Measurement Framework

Washington DC, May 1, 2008 Bill Dorotinsky IMF

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Content

 What is PEFA ?

 The Strengthened Approach to Supporting PFM Reform  The PFM Performance Measurement Framework

What is PEFA ?

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    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

PFM Diagnostics in the 1990s

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Large amount of PFM work undertaken,

– – mostly by development agencies a good deal of knowledge generated.

LIMITATIONS

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Duplication and lack of coordination

burden on partner governments.

led to heavy  

Not possible to demonstrate improvements

performance over time in a country in PFM 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

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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 assess performance to

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

A concise, integrated report – Performance Report the PFM

– – – 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

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May be applied to sub-national government

- Requires minor modifications

Principles of Indicator Design

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High level system performance is measured

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Assesses performance, but not underlying capacity factors

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Full overview of the PFM system

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revenue, expenditure, procurement, financial assets/ liabilities

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Basis for design :

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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

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Widely applicable development, to countries at all levels of 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

External scrutiny and audit

B. Cross-cutting features

Comprehensiveness and Transparency Predictability and control in Budget Execution

A. PFM Out-turns

Budget credibility Accounting, Recording, Reporting

Content of Indicator Set

11 A.

B.

C.

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.

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.

Budget Cycle

i. Policy-based budgeting

Indicators 11-12 Annual budget preparation process, multi-year perspective in fiscal planning, expenditure policy and budgeting

Content of Indicator Set

(cont’d) 12 C.

D.

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 Donor Practices Indicators D1- D3 Predictability of direct budget support; donor information for budgeting and reporting; use of national procedures

Calibration and Scoring

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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 ’

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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