The PEFA Program – and the PFM Performance Measurement Framework

1. The PEFA Program – and the PFM Performance Measurement Framework Washington DC, May 1, 2008 Bill Dorotinsky IMF

2. Content • What is PEFA ? • The Strengthened Approach to Supporting PFM Reform • The PFM Performance Measurement Framework

3. 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

4. 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

5. 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

6. The PFM Performance Measurement Framework

7. 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 government’s 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

8. Coverage of the Public Sector • Focused oncentral government operations • Links toother 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

9. Principles of Indicator Design • High levelsystem performance is measured • Assesses performance, but not underlying capacity factors • Full overviewof the PFM system • revenue, expenditure, procurement, financial assets/ liabilities • Basis for design: • The 16HIPC Expenditure Tracking Indicators, but broader • draws onIMF’s Fiscal Standards and Codes(ROSC) • internationally acceptedstandardse.g. GFS, IPSAS, INTOSAI • Widely applicableto countries at all levels of development,but not intended for cross-country comparison

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

11. Content of Indicator Set A. PFM Out-turns Credibility of the budgetIndicators 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

12. Content of Indicator Set (cont’d) C. Budget Cycle ii. Predictability & control in budget executionIndicators 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 auditIndicators 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

13. Calibration and Scoring • Calibrated onfour 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