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Measuring PFM Reform Effectiveness: Diagnostic Tools and Country Experiences

Explore how to measure Public Financial Management (PFM) reform effectiveness, diagnostic tools, and country experiences shared at ESAAG 26th Annual International Conference. Learn about PFM legislation, objectives, and reasons to measure effectiveness. Gain insights into diagnostic tools used, such as the PEFA Framework, for assessing PFM performance and fostering good practices in implementing reforms. Discover how measuring PFM reform effectiveness helps strengthen accountability, improve practices, and enhance knowledge sharing among development partners and countries.

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Measuring PFM Reform Effectiveness: Diagnostic Tools and Country Experiences

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  1. “How do we Measure Public Financial Management Reforms Effectiveness?”Presented by:Mumba ChandaDirector of Finance, Local Government Finance & Coordinator for Public Finance Management ReformsOffice of the Accountant GeneralMinistry of Finance, Zambia ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  2. Presentation Outline • 1.What is Public Financial Management (PFM)? 2. What are the objectives of Public Finance Management Reforms? • 3. Why measure PFM Reform effectiveness? • 4. How do we measure PFM Reform effectiveness? • 5. Broad Diagnostic Tools for Measuring PFM Reform Effectiveness • 6. Tools which focus in detail on individual PFM elements or institutions • 7. Tools used by donors in order to assess fiduciary risk and/or the use of country systems • 8. Country Experiences and Lessons Learnt • 9. Concluding Remarks ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  3. What is Public Financial Management (PFM)? • PFM refers to the set of laws, rules, systems and processes used by sovereign nations (and sub-national governments), to mobilise revenue, allocate public funds, undertake public spending, account for funds, audit results and legislative oversight. ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  4. Pictorial View of Public Financial Management PFM Legislation ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  5. What are the objectives PFM Reforms? • Allocative efficiency of public resources • - Planning & Budget Process (resulting in budget credibility, reliability and efficient flow of resources) • Efficiency, economic and effective use and accountability of public resources • - Procurement, Accounting, financial reporting, external auditing & parliamentary oversight ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  6. Why measure PFM Reform effectiveness? • To assess whether the PFM reforms being implemented are having the desired results • To strengthen accountability in PFM systems • To foster good practices in implementing PFM Reforms   ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  7. Why measure PFM Reform effectiveness? • To harmonise the measurement of PFM performance  • To share knowledge and experiences among development partners and countries on using country PFM systems  ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  8. How do we measure PFM Reform effectiveness? – cont’d • There a number of PFM diagnostic tools for measuring PFM Reform effectiveness. • A diagnostic review examines a country’s public financial management system and practices. ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  9. How do we measure PFM Reform effectiveness? – cont’d • Diagnostic reviews generally provide governments and donors with information on: - the strengths and weaknesses of public financial management systems. ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  10. How do we measure PFM Reform effectiveness? – cont’d • - The risks to which funds channelled through governments’ systems may be exposed. • - The government programmes aimed at improving these systems. ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  11. How do we measure PFM Reform effectiveness? – cont’d • PFM diagnostics can have some or all of the following elements: - Descriptive – providing a description of the PFM systems and/or institutional arrangements. ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  12. How do we measure PFM Reform effectiveness? – cont’d • - Diagnostic – providing an analysis of the strengths and weaknesses of the PFM system. - Prescriptive – proposing remedies for identified weaknesses. ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  13. How do we measure PFM Reform effectiveness? – cont’d • A study that was undertaken in 2011 by the 4th High Level Forum on Aid Effectiveness separates PFM Diagnostic into three categories: • Broad diagnostic or analytical tools covering the whole of the PFM ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  14. How do we measure PFM Reform effectiveness? – cont’d • Tools which focus in greater detail on individual PFM elements or institutions, and • Tools used by donors in order to assess fiduciary risk and/or the use of country systems. ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  15. How do we measure PFM Reform effectiveness? – cont’d ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  16. How do we measure PFM Reform effectiveness? – cont’d ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  17. Broad Diagnostic Tools • Public Expenditure and Financial Accountability (PEFA) Framework • PEFA began as means to harmonise assessment across the partner organisations • It was created to establish a standard methodology and reference for PFM diagnostic assessments. ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  18. Broad Diagnostic Tools • PEFA has become the acknowledged standard for PFM assessments. • PEFA Framework provides a framework for assessing and reporting on strengthens and weaknesses of PFM using quantitative indicators to measure performance. ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  19. Broad Diagnostic Tools • PEFA provides a snapshot of PFM performance at specific points in time and giving a summary of changes overtime ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  20. Broad Diagnostic Tools cont’d • The PEFA framework has 31 performance indicators • for measuring the following PFM pillars: • Budget Reliability • Transparency of public finances • Management of Assets and Liabilities • Policy – based Fiscal Strategy and Budgeting • Predictability and Control in Budget Execution • Accounting and Reporting • External Scrutiny and Audit ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  21. PEFA pillars and Budget Cycle (From PEFA Fieldguide) ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  22. Broad diagnostic tools Contd… • The PEFA Framework has a scoring methodology which assess each dimension and assign a score of A, B, or C, depending on the criteria listed. If the minimum requirements set out in C are not met, then a score of D should be assigned. • The PEFA Report is a concise document that has a standard structure and content. ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  23. Tools which focus in detail on individual PFM elements or institutions cont’d • Debt Management Performance Assessment (DeMPA) – (WB) • The DeMPA is a methodology for assessing public debt management performance through a comprehensive set of indicators spanning the full range of government debt management functions. ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  24. Tools which focus in detail on individual PFM elements or institutions cont’d • Initially developed by the WB in cooperation with its international partners during 2007-2008 to assist developing countries in improving debt management. • The objective of the program is to help strengthen capacity and institutions in developing countries so that they can manage government debt in an effective and sustainable manner in the medium to long term. ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  25. Tools which focus in detail on individual PFM elements or institutions cont’d • The DeMPA Framework has a scoring methodology which assess each dimension and assign a score of A, B, or C, depending on the criteria listed. If the minimum requirements set out in C are not met, then a score of D should be assigned. • The DeMPA report is a concise document that has a standard structure and content. ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  26. Tools used by donors in order to assess fiduciary risk and/or the use of country systems • DFID Fiduciary Risk Assessment (FRA) • DIFD has pioneered the use of fiduciary risks • assessments as part of its risk mitigation strategy and recommends a thorough evaluation of PFM systems and associated risks, including the risk of corruption. • This evaluation is mandatory for all countries and feeds into country programme planning processes. ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  27. Tools used by donors in order to assess fiduciary risk and/or the use of country systems • Based on this assessment, DFID considers balancing fiduciary risks against: • - the potential development benefits and • - suggests measures to mitigate these risks, • including measurable targets and monitoring • arrangements. ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  28. Country Experiences & Lessons • The Government of Zambia has over the • recent past undertaken all the three categories PFM Diagnostic reviews • - Consistently undertaken PEFA Assessments in 2005, 2008, 2012 and 2017. ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  29. Country Experiences & Lessons - Other diagnostic reviews undertaken include the following: (i) Country Procurement Assessment -2018 (ii) Public Investment Management Assessment - 2017 ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  30. Country Experiences & Lessons (iii) Tax Administration Diagnostic Assessment Tool (TADAT) – 2016 (iv) Supreme Audit Institution Performance Management Framework (SAI PMF) - 2018 ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  31. Country Experiences & Lessons • The findings of the assessments/reviews have revealed the following: • - Challenges in certain aspects of the budget cycle such as budget credibility, management of assets and liabilities ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  32. Country Experiences & Lessons - Improvements in areas such transparency of public finances, accounting and reporting, and external scrutiny and audit. - The assessments and reviews of the PFM system have been used to inform the design of the PFM Reform Program ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  33. Concluding Remarks • It is important to periodically undertake PFM systems assessments/ reviews for continuous improvements and to assure their effectiveness • PFM systems must always be adapted to changing trends • Effective PFM systems are cardinal for national development ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  34. ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  35. I THANK YOU. ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

  36. I THANK YOU. ESAAG 26TH ANNUAL INTERNATIONAL CONFERENCE

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