Public Financial Management Performance Measurement Framework

1. Public Financial Management Performance Measurement Framework June 5, 2007 Presentation by Nicola Smithers, AFTPR Slides provided by PEFA Secretariat

2. WHAT WE’LL COVER • WHAT IS THE PFM PERFORMANCE MEASUREMENT FRAMEWORK ? • AN EXAMPLE • WHERE AND HOW IS IT APPLIED? • CASE OF ZAMBIA

3. CONTEXT - 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 assessment and monitoring framework • the PEFA* PFM Performance Measurement Framework *Public Expenditure and Financial Accountability Program

4. The link between the different elements of the Strengthened Approach to supporting PFM reforms Government PFM Reform Strategy, Action Plan and Results Coordinated program of analytical/TA/fundingsupport PFM Performance report PFM indicators Government/Donor Policy Dialogue Donor Country Assistance Strategy and knowledge requirement

5. PFM Performance Measurement 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

6. COVERAGE OF PFM INDICATORS 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 Budget Execution Budget credibility Comprehensiveness and Transparency Accounting, Recording, Reporting

7. 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

8. 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

9. Calibration and Scoring • Calibrated onfour point ordinal scale (A, B, C, D) • Requirements for each score explicitly specified • Scoring based on 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 • Two scoring methodologies

10. Example

11. Applying the Framework

12. Roll-out of PFM Assessments • PFM Performance Measurement Framework launched June 2005 • Assessment Status as at March 2007 • 45 substantially completed i.e. draft/final report • 24 on-going but report not yet issued • 27 agreed with government but not started • Roll-out rate: a steady 2-3 new assessments per month • Outlook for mid 2008 • 75-80 countries covered • 8-10 repeat assessments

13. Geographical distribution

14. Decentralized Process • Application of the PEFA Framework to be decided at country level. Decisions to be made: • If and Why ? • When ? • How ? • Recommended by international organizations as good practice (e.g. OECD-DAC, ComSec) • No supra-agency mandates or responsibilities. Each country and organization decides its interest in a PEFA assessment and ability to contribute.

15. Government Involvement • Government’s role • Self-assessment (with external validation) • Joint assessment (joint team) • Collaboration with donor-led assessment • Determined by interest and capacity • What are the benefits to government? • Government staff may need training

16. Donor Collaboration • A donor reference group is essential • to ensure that needs of all parties are addressed • to ensure common acceptance of findings • The reference group to agree internally and with the government on: • Diagnostic packaging • Resources for assessment work • Stages and timing of the assessment work • Quality assurance arrangements

17. Diagnostic Packaging – Coverage of PFM Performance Report Implement PFM reforms High level performance overview Formulate PFM reform program PFM-PR Recommend PFM reform measures Identify main PFM weaknesses Recommend PFM reform measures Investigate underlying causes

18. Quality Assurance • Terms of Reference & Draft Report to be Q.A.’d • Government and donor reference group • Should ensure that information is used correctly and reflects the situation in the country • Donor specific arrangements to be respected e.g. World Bank peer review mechanism • The PEFA Secretariat recommended as a peer reviewer • Will assess whether the product respects the Framework’s standards and methodology • Can also provide advice and guidance

19. Zambia case