PEFA Framework: Enhancing Public Financial Management Worldwide

1. Public Expenditure and Financial AccountabilityIntroduction to the framework and lessons learned from its use in Mozambique Health Sector Tanzania, February 2015

2. Contents • General Introduction • About the Mechanics • The Indicator Set • Performance Reporting (PFM-PR) • Assessment Process • Sector Application • Lessons Learned from Mozambique Health Sector

3. General Introduction

4. PFM Links to Development Goals MDGs, PRSP, Political Manifesto Other influencing factors Dev Goals Budget deficit, Sector allocations, Investment, Debt ratio, Tax burden, etc Fiscal / Exp Policy Goals Fiscal discipline, Strategic allocation, Operational efficiency Budgetary Outcomes PEFA Framework PFM system performance

6. Traditional products CFAA (WB) CPAR (WB) FRA (DFID) Fiscal ROSC (IMF) TA reports (IMF) Stand alone PFM-PR Integrated products CIFA, IPFMA, PEMFAR PEFAR, ERPFM IFA Some combined products are modular (annually sequenced modules); others are discrete (full package every 3-5 years) Range of PFM Diagnostic Tools

7. What is the PEFA program? PEFA = Public Expenditure & Financial Accountability Objective: • Results orientation in development of PFM systems • Harmonization of PFM analytical work Establishment: • Established in 2001 by seven agencies • Works in tandem with OECD-DAC Task Force on PFM • Contributing to development effectiveness through: ‘Strengthened Approach’ to Supporting PFM Reform

8. The PEFA stakeholders

9. PEFA Framework Adoption Very good progress – globally • 220+ assessments, covering 120+ countries. • Since 2010, mostly Repeat & Sub-National assessments High country coverage in many regions • Africa and Caribbean: 90% of countries • Latin America, Eastern Europe, Asia, Pacific: 50-80% Used in many Middle Income Countries • Upper MICs: Brazil, Turkey, Belarus, South Africa • Lower MICs: India, Kazakhstan, Ukraine, Morocco, Peru, Egypt, Thailand, Philippines, Indonesia, Colombia

10. PEFA Assessments Map

11. Coverage of PFM-PR in Reform Cycle Implement PFM reforms High level performance overview Formulate PFM reform program PFM-PR Identify main PFM weaknesses Recommend PFM reform measures Recommend PFM reform measures Identify main PFM weaknesses Investigate underlying causes

12. About the Mechanics

13. The PEFA Framework PFM Performance Measurement Framework • Better known as ‘the PEFA Framework’ [Blue book] • The ‘flagship’ product of the PEFA Program • Launched in June 2005 Designed to measure performance of national PFM systems • Applicable to countries at different stages of development • Also applicable to Sub-National government systems • Sectoral application and institutional application …

14. Purpose of the PEFA Framework Objective • To determine if a country has the tools to deliver three main budgetary outcomes (aggregate fiscal discipline; strategic resource allocation; efficient service delivery) It provides: • High level overview of all aspects of a country’s PFM systems performance, including revenue, expenditure, procurement, financial assets/liabilities It does not provide assessment of: • Underlying causes for good / poor performance • Government fiscal / expenditure policies.

15. Components of the framework • A standard set of high level PFM indicators to assess performance against 6 critical dimensions of a PFM system • 28 government indicators, covering all aspects of PFM • 3 donor indicators, reflecting donor practices influencing the government’s PFM systems • (Now: Test version of 30 Government indicators) • A concise, integrated performance report – the PFM-PR – developed to provide narrative on the indicators & draw a summary from the analysis

16. Budget credibility: Is the budget realistic, & implemented as intended? External scrutiny & audit: Are there effective arrangements for scrutiny of public finances & follow up by the executive? Policy-based budgeting: Is the budget prepared with due regard to government policy? Dimensions of PFM system performance 6 critical dimensions of PFM system performance Accounting, recording & reporting: Are adequate records & information produced, maintained & disseminated to meet decision-making, control, management & reporting purposes? Comprehensiveness and transparency : Are the budget & fiscal risk oversight comprehensive, & is fiscal & budget information accessible to the public? Predictability & control in budget execution: Is the budget implemented in a predictable manner & is control & stewardship exercised in the collection & use of public funds?

17. The Indicator Set

18. Structure of the indicator set

19. The standard set of high-level indicators • CREDIBILITY OF THE BUDGET: PFM OUT-TURNS (1- 4) • COMPREHENSIVENESS & TRANSPARENCY (5 - 10) • BUDGET CYCLE • POLICY-BASED BUDGETING (11 – 12) • PREDICTABILITY & CONTROL IN BUDGET EXECUTION (13 – 21) • ACCOUNTING, RECORDING & REPORTING (22 – 25) • EXTERNAL SCRUTINY & AUDIT (26 – 28) • INDICATORS OF DONOR PRACTICES (D1 – D3)

20. Calibration & Scoring Calibrated on 4 Point Cardinal Scale (A, B, C, D) • Reflecting internationally accepted ‘good practice’ • Determine score by starting from ‘D’, go upwards • Do not score if evidence is insufficient Arrow ▲ • Can indicate an improvement not reflected in a change of the indicator score

21. Indicator dimensions Most indicators have 2, 3 or 4 dimensions • Each dimension must be rated separately • Aggregate dimension scores for indicator; two methods M1 or M2, specified for each indicator • Intermediate scores (B+, C+, D+) for multi-dimensional indicators, where dimensions score differently

22. Performance Reporting

23. Content of the PFM Performance Report An integrated narrative report including: • Introduction with the context for the assessment • Country background information • Evidence & justification for scoring the indicators • Country specific issues • Description of reform progress & factors influencing it • Summary assessment of PFM system impact

24. Assessment Process

25. Stages in a typical process 0.Agree the intention to undertake a PEFA based assessment 1.Agree purpose, scope and stakeholder roles 2.Prepare TOR 3. Mobilize assessment team 4.Introduction workshop for stakeholders 5. Review of existing information 6. Inception Report 7.Main field work 8.1st Draft Report 9.Quality Review 10.Supplementary field work 11.Draft Final Report 12.Presentation seminar 13.Final report 14.Use of the report for reform dialogue

26. Sector Application

27. A sector suggestion

28. A sector application

29. Lessons Learned from Mozambique Health Sector

30. Experience in the Health Sector in Mozambique (using PEFA) • 2008 / 2009: 1st National Health Sector Assessment (PEFA + OCDE DAC Procurement) • 2010 / 2011: Zambezia Province • 2012: SETSAN Central • 2012/13: 8 Sectors in Tete Province • 2013/14: 6 Sectors in Gaza Province • 2014: 6 Sectors in Maputo Province • 2014: 4 Districts in Tete Province Assessments by other DPs using similar methodologies: FRA (DFID) Stage 2 Risk Assessment (USAID / USG) EU PFM Monitoring and Evaluation (…)

33. Some of the lessons learned… • PFM is not just accounting or just auditing • Planning Vs Budgeting Vs Accounting Vs Reporting • It is important to know which are the risks and how vulnerable the sector is (heat map) • Risk is not just at programme conception, it is trough out implementation and needs to be part of dialogue • Where and how to provide meaningful TA • Documenting the assessment and doing it with partner institution increases level of acceptance of risk

34. Some of the lessons learned… • Solutions / Recommendations are not technically challenging and are identified by institutions • PFM is not just the Finance Department or just the Audit Report – needs a holistic approach within MoH and also the structure of government • There are interventions needed above sector and institutional level • (….)

35. Some of the lessons learned…

36. Some of the lessons learned…

37. Questions? Comments?