PEFA in Latin America, Seven Years of Implementation The Inter-American Development Bank’s Experience Katharina Falkner-Olmedo Division Chief of the Operations Financial Management and Procurement Services Office Vice Presidency for Countries (VPC)

Completed and Planned PEFAs in the LAC Region – National Level PEFA IN THE REGION Completed and Planned PEFAs in the LAC Region – National Level AR BL BA BO BH CH DR EC ME NI GY HA BR VE JA SU TT PE PR PN UR CO ES HO CR 26 IDB Borrowing Member Countries GU 85% of IDB countries have completed a PEFA assessment 20 Countries – Completed* +2 Countries – In Process 36 National PEFAs done in 20 of 26 IDB countries (BH, BL, BO, BR, CO, CR, DR, ES, GU, HA, HO, JA, PY, PE, TT, NI, GY, EC, BA, SU) National not done yet in: Mexico, Venezuela, Argentina and Chile 2 Countries in process, meaning the fieldwork completed but report not final (PN, UR) First national PEFA in Panama, Uruguay IDB Led 7 PEFAs in 6 Countries (CR, GU, GY, NI, PN, SU) IDB Co-Led 18 PEFAs in 14 Countries (BA, BL, BO, CO, DR, EC, ES, GU, HO, JA, NI, PE, PR, UR) 5 Countries - National PEFAs planned for 2013 and 2014 * 10 countries have had repeat PEFA assessments Source: www.PEFA.org, as of November 19, 2012

Completed and Planned PEFAs in the LAC Region – Sub-national Level PEFA IN THE REGION Completed and Planned PEFAs in the LAC Region – Sub-national Level AR BL BA BO BH CH DR EC ME NI GY HA BR VE JA SU TT PE PR PN UR CO ES HO CR 26 IDB Borrowing Member Countries GU 5 Countries – PEFAs completed at the Sub-national and Local levels 1 Country – 2 Sub-national PEFAs planned for 2013 5 countries with 13 Sub-national PEFAs done in PE, BR, CO, AR, HO 1 Local PEFA in Tegucigalpa, Honduras - 2 Sub-national PEFAs planned for 2013 in Peru Source: www.PEFA.org, as of November 19, 2012

PEFAs in the LAC Region – IDB Use of PEFA Results PEFA IN THE REGION PEFAs in the LAC Region – IDB Use of PEFA Results As a Donor, PEFAs help the IDB in… Establishing a basis for dialogue with the country (one of several inputs to country strategies). Providing a quick overview of a country’s Public Financial Management Systems. Measuring the progress of Bank-financed reforms through the monitoring of selected indicators. Promoting better coordination/harmonization with other donors. The PEFA has gained importance to the IDB and the Region as a starting point for discussions related to the use of (and reliance on) country PFM systems for IDB-financed projects and PFM reform.

PEFAs in the LAC Region - IDB Use of PEFA Results PEFA IN THE REGION PEFAs in the LAC Region - IDB Use of PEFA Results IDB use in country strategy, programming and project cycles PFM Reform Projects Measuring results Project completion Project design Programming Country strategy Project execution Monitoring progress and advances Country Dialogue Other Projects Using PFM Systems Strengthening and use of Country Systems

PEFAs in the LAC Region – the IDB’s Experience – Points to Consider PEFA IN THE REGION PEFAs in the LAC Region – the IDB’s Experience – Points to Consider Expectations management and current PEFA framework Uneducated readers sometimes misinterpret PEFA scope and results thinking that it is a diagnostic reflecting country performance rather than a measurement against indicators and international standards and best practices Donors often require additional, more in-depth information (from a fiduciary perspective) than what the PEFA provides, to determine the use of country systems, resulting in additional work and diagnostic fatigue Efforts to make the PEFA consistent, straightforward and quantitative, have resulted in: qualitative aspects not always being considered or the methodology not as adaptable to “non-traditional” situations (also relates to point below regarding consultants) Inclusion of ID-19 related to Procurement continues to present challenges for the technical team in coordination, receiving timely data, overlap with MAPS, etc. Translation of implementing guidance into Spanish could be more timely and complete Our Recommendations: PEFA framework – need something more adaptable to unique situations (UR 5-year budget, sub-national, decentralized gov’ts like PN) Need diagnostic to go into greater depth and provide recommendations or next steps toward developing an action plan, remove procurement indicator ID-19, provide more timely, complete and better translations of PEFA guidance into Spanish, more training workshops in Spanish in the Region (not in DC) and addresses more detailed, specific topics

PEFA IN THE REGION PEFAs in the LAC Region – the IDB’s Experience – Points to Consider (cont.) Length of the process and sharing preliminary results Process can be too long, resulting in greater costs to the government and donors and a report that becomes quickly outdated. If donor not part of PEFA exercise and report not published, donor may never see the results and need to perform additional work. Consultants and quality of the process Selection of consultants is critical, in terms of applicable technical expertise and the ability to produce a timely and quality report. Our Recommendations: Length of process/sharing results – recommend that gov’ts establish someone with political power to help facilitate providing PEFA team with comments and documents in a timely manner share results with all donors (not just those involved in the PEFA) confidentially when work substantially completed and reviewed Post interim evaluations of subsystems and indicators on PEFA website or manner to share with all donors confidentially Consultants - an agreed-upon (among donors) database of good quality consultants to perform PEFAs, some automatically do more than described in PEFA while others just do the minimum – especially, since don’t have the expertise