PFM Reform Programmes Presentation by Mary Betley WBI/CABRI/East AFRITAC PFM Training Seminar 18-20 June 2007

Outline Overview of PEFA Lessons from experience - Do’s and Don’t’s Case Studies – Zambia and Ghana What Next – Links to Budget Reform Programmes

Public Expenditure and Financial Accountability (PEFA) at a glance Global, standardised set of high-level indicators to measure current status of PFM Focus is mainly on PFM systems, not on budget policy PEFA uses scored indicators (A, B, C, D) rather than statistical values Can be used for: Initial baseline assessment: snapshot of PFM systems: where are we now? On-going monitoring of health of PFM: are we going in the right direction?

Key PFM Dimensions Assessed by PEFA C. Budget Cycle D. Donor Practices Policy Based budgeting A. PFM Out-turns B. Cross-cutting features Budget credibility Predictability and control in Budget Execution External scrutiny and audit Comprehensiveness and Transparency Accounting, Recording, Reporting

Assessment Do’s Be value neutral Assess on basis of evidence, PEFA scoring criteria Focus on operation of Government systems, not agencies’ or individuals’ performance Government ownership Triangulate information Plan, plan, plan

Assessment Don’t’s PEFA is not for conditionalities PEFA is not for grading systems as “good” or “bad” Don’t review/update too often (< every 3-5 years) Not for comparing countries Assessment for current status, not for making recommendations

Undertaking Assessment - Methodology DPs Government Government’s own self-assessment as stand-alone Government’s own self-assessment, then external validation External assessment only no Government involvement possible antagonism poss. incorrect scores undermine ownership overly optimistic scores if not guided sufficiently undermine assessment’s credibility entrenched positions and “negotiations” Joint Government-donor exercise from beginning Ghana Zambia strengthen ownership focus on evidence => robust assessment

Thus: Government ownership is critical Preparation of all stakeholders is key Quality of team is important

Other lessons Write-up of assessment Assessment should be stand-alone diagnostic report, following the PEFA Guidelines, even if part of wider analytical work If part of a wider review process, assessment should be separate but an accompanying report may be written, which can include recommendations and include “quick wins” Peer review: role of PEFA Secretariat PEFA reports are reviewed by PEFA Secretariat to provide quality assurance and ensure consistency across assessments PEFA Secretariat provides clarifications to indicators from time to time

Case Study - Zambia PEFA undertaken as first evaluation under PEMFA reform programme Assessment carried out by team of Government (MoFEP) staff, facilitated by two external consultants Close team work: 3 short field visits Team worked with relevant departments to agree current status in relation to PEFA criteria Relatively short elapsed time for assessment: October-December One of first assessments to be published on PEFA website – shown as Government assessment PEFA now part of on-going M&E framework for PEMFA

Case Study - Ghana PEFA undertaken as part of annual multi-development partner review process Collaborative process/ team approach, with both Government and DPs in discussions Process led by senior MoFEP staff – strong Government ownership Focus on documentary evidence Triangulation of information, including civil society Relatively short elapsed time for assessment: February-May Outcome was assessment which was jointly agreed and Government owned. Areas of disagreement between assessors and Government explicitly noted. PEFA has helped Government to focus greater attention on particular areas of weakness, facilitated joint Government-DP policy dialogue

After PEFA: What next? PEFA and Links to Budget Reform Programmes

Role in wider PFM programme Designing a PFM programme PEFA can help identify areas of strengths and weaknesses However, in itself, it cannot provide the design for a reform programme, as it does not distinguish: Government’s own reform priorities Sequencing issues Underlying causes for weaknesses Capacity constraints, including absorptive capacity Information needs and interplay of information Refocussing a PFM programme PEFA diagnostic can help with comparison of areas of weakness against those addressed by the reform Monitoring a PFM programme PEFA can have role in monitoring progress over time in reform programme, including specific areas addressed by reforms

PEFA is a diagnostic tool….. …………not a menu for reform

From PEFA to Reform Programme: Recommended Analyses PEFA indicator PFM Area Underlying causes Potential Impact/Benefits Prior Actions Required Other timing/sequencing issues (e.g. capacities)

Reporting on trust funds Areas of Weakness Relevant Key PFM Issue Potential Underlying Causes Potential Impact/ Benefits Prior Actions Required Timing/Sequencing Issues PI-24. Quality and timeliness of in-year budget reports: (i) Scope of reports (PEFA score: D) Reporting on trust funds Overall requirement for reporting on trust funds is more limited than for normal budget funds Greater transparency in use of trust fund resources compared to plan. Improved external scrutiny over all public sector resources Requires changes in business processes for trust fund resources, Commitment to greater transparency High priority to strength-en basic budget discipline

Broad Sequencing of PFM System Measures Ensure basic (and appropriate) budget procedures in place Enforce existing budget procedures Upgrade, extend budget processes, including more advanced strategic elements

Potential trade-offs between priority and sequencing High Low