Measuring PFM Performance The PEFA program and tool CReCER Managua, October 29-31, 2012 Charles Seibert, PEFA Secretariat

PEFA Partners World Bank European Commission International Monetary UK Department for International Development French Ministry of Foreign Affairs Norwegian Ministry of Foreign Affairs Swiss State Secretariat for Economic Affairs. Founded in 2001 as a partnership

A multi-donor initiative in PFM: The Approach Promote results-orientation in PFM development work Harmonize the support to PFM systems provided to governments by international development agencies Build on the principles of the Strengthened Approach to Supporting PFM Reform, as an approach to aid effectiveness in the area of PFM (Paris Declaration, Accra Agenda for Action, Busan Declaration) Work closely with OECD Development Assistance Committee Task Force on PFM for collaboration with a wider group of stakeholders

The Strengthened Approach in reform of PFM Ownership : a country-led agenda reflecting country priorities and implemented through government structures A coordinated program of support from donors and international finance institutions A shared information pool on public financial management based on a common assessment framework A. PFM Outturns B. Comprehensiveness and Transparency (PI-5-10) C. Budget Cycle D. Donor Practices (D-1-3) C(1) Policy-based budgeting (PI-11-12) C(3) Accounting, Recording and Reporting (PI-22-25) C(4) External scrutiny and audit (PI-26-28) C(2) Predictability and control in budget Execution (PI-13-21) Budget Credibility (PI-1-4) The PEFA Performance Measurement Framework

Components of the PEFA Framework A standard set of high level PFM performance indicators (PIs)  31 performance indicators (each 1 to 4 sub-indicators or dimensions, 76 dim. In total )  scored on a 4-grade ordinal scale (A, B, C, D)  grouped in six critical aspects of PFM  a compromise between simplicity and comprehensiveness A standard report format  the PFM Performance Report (PFM-PR)  to provide country background, evidence on the indicators and an integrated, analytical summary

The PEFA Framework Objectives To determine if a country has the tools to deliver three main budgetary outcomes: aggregate fiscal discipline strategic resource allocation efficient use of resources for service delivery Implement PFM reforms High level performance overview Investigate underlying causes Formulate PFM reform program Identify main PFM weaknesses Recommend PFM reform measures PEFA Assessment Measures progress through a set of standardized indicators Builds capacity for PFM reform through diagnostic and periodic progress monitoring Facilitates donors’ decision on use of country systems Promotes joint country analytical work Fosters stakeholder coordination around one common assessment tool PEFA in PFM Reform Cycle

Purpose of the PEFA Framework The Framework provides: a high level overview of all aspects of a country’s PFM systems performance (revenue, expenditure, financial assets/liabilities, procurement): are tools in place to deliver 3 main budgetary outcomes (aggregate fiscal discipline; strategic resource allocation; efficient service delivery)? It does not provide an assessment of: underlying causes for good or poor performance i.e. capacity factors government fiscal & financial policies

; ; Credibility in coverage: 285 assessments prepared in 135 countries including 28 government-led and 103 Sub National assessments: PEFA Framework used by governments in most countries to take control of their PFM reform agendas Effectiveness: adopted globally by 83% of Low Income Countries (LIC) and 89% of Middle Income Countries (MIC) at the baseline level and more than 96 repeat assessments at a completed or planned stage. Country focus and decision Application entirely decentralized to the country level (if, when, how to use Framework) The Framework does not ‘belong’ to any single organization Applicable for central government level as well as sub-national level PEFA data provides opportunity for peer learning and research PEFA experience by income group Global adoption by partner countries and donors 18%89%88%83%

PEFA assessments map

The PEFA Secretariat Location, structure and operations Funded by the 7 partners and located in Wash DC (World Bank main building). A Steering Committee comprising the 7 agencies manages the Program while the PEFA Secretariat implements the PEFA related activities Main tasks 1. Training 2. Quality review of: a) PEFA Concept Notes and Terms of Reference; b) PEFA field assessments; 3. Methodological studies and overall guidance on PEFA issues Role: 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

Activities of the PEFA Secretariat Custodian of the PEFA Framework  Development and maintenance of the Framework  Issues guidance notes and clarifications Support PFM research  Availability of PEFA indicators database Dissemination  Presentations; PFM blogs; PEFA Newsflashes; sharing PEFA assessment reports through website 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

What is next? External evaluation of program (2011): “Resoundingly positive” created credible framework for PFM assessment assessments comparable over time & constitute common information pool on PFM performance 95% LICs, 80% MICs (& 8% HICs!) have used it used by practically all major DPs working with PFM systems (design, monitoring, or FRA) adopted by many governments to inform design of PFM reforms, monitor progress over time & assess quality of PFM at sub-national levels Phase IV priorities Using assessments for elaboration of PFM reform programs: guidance being developed Framework review & update, to reflect newly accepted ‘good practices’ (but recognizing need for time series to allow progress tracking) encouraging use of the database compiled from completed assessments initiatives to broaden voice of stakeholders & improve transparency of program management strengthening QA arrangements: ‘PEFA Check’

Framework review & update Target for new release = 1 July 2014 Purpose of revising the Framework Incorporate editorial ‘clarifications’ Update ‘good practices’ Improve areas of weakness It is not intended to: Change the purpose Undermine comparability over time

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