The PEFA Program - an Overview Presentation to be used by SC members Prepared by the PEFA Secretariat – June 2011 CONTENT - Program Overview The PEFA Framework Use & Impact The PEFA Secretariat 2 PROGRAM OVERVIEW 3 What is the PEFA program? PEFA = Public Expenditure & Financial Accountability Program Objective: Results orientation in development of PFM systems Harmonization of PFM analytical work Established: Established in 2001 by seven agencies. Working in tandem with the OECD-DAC Task Force on PFM Contributing to development effectiveness through: The Strengthened Approach to Supporting PFM Reform 4 The PEFA stakeholders 5 The Strengthened Approach to Supporting PFM Reform 1. A country-led PFM reform program including a strategy and action plan reflecting country priorities; implemented through government structures 2. A donor coordinated program of support covering analytical, technical and financial support 3. A common information pool based on a framework for measuring performance and monitoring results over time i.e. the PFM Performance Measurement Framework 6 THE PFM PERFORMANCE MEASUREMENT FRAMEWORK 7 The PEFA Framework PFM Performance Measurement Framework • Better known as ‘the PEFA Framework’ • The ‘flagship’ product of the PEFA Program • Launched in June 2005 Designed to measure performance of national PFM systems • Applicable to countries and different stages of development • Also applicable for Sub-National government systems 8 PFM Links to Development Goals MDGs, PRSP, Political Manifesto Other influencing factors Dev Goals Service Delivery Goals Budgetary Outcomes Fiscal/Exp Policy Goals Budget deficit, Sector allocations, Investment, Debt ratio, Tax burden etc Fiscal discipline, Strategic allocation, Operational efficiency PEFA Framework PFM system performance 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: • a high level overview of all aspects of a country’s PFM systems performance • includes revenue, expenditure, procurement, financial assets/ liabilities It does not provide: • Assessment of underlying causes for good / poor performance • An assessment of government fiscal/expenditure policies 10 Components of the PEFA Framework A standard set of high level PFM performance indicators (PIs) 31 performance indicators (with 76 sub-indicators) Grouped in six critical dimensions A compromise between simplicity and comprehensiveness A standard report format the PFM Performance Report (PFM-PR) developed to provide country background, evidence on the indicators and an integrated, analytical summary. 11 Dimensions of PFM system performance External scrutiny & audit: Budget credibility: Is the budget realistic, & implemented as intended? Comprehensiveness and transparency : 6 critical dimensions of PFM system performance Are the budget & fiscal risk oversight comprehensive, & is fiscal & budget information accessible to the public? Policy-based budgeting: Predictability & control in budget execution: Is the budget prepared with due regard to government policy? Is the budget implemented in a predictable manner & is control & stewardship exercised in the collection & use of public funds? Are there effective arrangements for scrutiny of public finances & follow up by the executive? Accounting, recording & reporting: Are adequate records & information produced, maintained & disseminated to meet decision-making, control, management & reporting purposes? 12 Implementation modalities Country focus and decision Application of the PEFA Framework is entirely decentralized to the country level (if, when, how to use Framework) Inclusiveness All stakeholders can be involved and any agency can in principle undertake any role in its implementation (managing, financing, quality review) The Framework does not ‘belong’ to any single organization Due process is crucial to acceptance and use - Joint work is encouraged 13 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 14 USE & IMPACT OF THE PEFA FRAMEWORK 15 16 PEFA Framework adoption Very good progress – globally High country coverage in many regions 220+ assessments substantially completed, covering 120+ countries. Since 2010, mostly Repeat assessments and Sub-National assessments 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, Russian Federation, South Africa Lower MICs: India, Kazakhstan, Ukraine, Morocco, Egypt, Thailand, Philippines, Indonesia, Colombia, Peru 17 Stakeholder involvement Government leadership/self-assessment Active government participation in assessment is key to the use in reform policy dialogue Full self-assessment may be very demanding on govt. capacity Increasing frequency of Self-assessment with expert assistance and external validation – but still a minority of cases Development Agencies About 25 development banks and donor agencies involved (leading, financing or in reference group) World Bank and EU has taken the lead in 85% of all assessments Increasing frequency of joint work and partner inclusiveness 18 Coverage of PFM-PR in Reform Cycle Implement PFM reforms High level performance overview Formulate PFM reform program PFM-PR Recommend Recommen PFM reform d PFM measures reform measures Identify main main Identify PFM weaknesses Investigate underlying causes 19 PEFA contribution to results orientation Frequently used as basis for reform dialogue Useful in deciding reform priorities Ownership means government decisions on priorities Indicators used to set targets for reform program results but: PEFA assessment is one of several inputs Do not use Indicator scores simplistically Complementary analysis to PEFA required to identify root causes Measuring performance change Results from 33 repeat assessments indicate pace of progress in different areas of PFM – positive global trend but wide variation among PFM features Peer learning Used as basis for discussions in regional groups of government PFM experts (e.g. Eastern Europe, West Africa, Caribbean) 20 Use of PEFA for Development Agencies’ Internal Processes Used by all seven PEFA partners for internal processes (GBS/DPL, FRA, CPIA, Debt Limits etc) Similarly used by several other development agencies Increasingly, PEFA assessments are directly mentioned in internal guidelines as key or preferred input PEFA assessment information is rarely considered the only source of information to a process Most of the processes have financial consequences for partner countries – though the impact of PEFA is usually indirect. 21 Assessment comparisons PEFA Framework developed to measure progress over time in one country • ‘Summary assessment’ provides overview of strengths & weaknesses as basis for reform prioritization in a country • Comparison of assessments over time is robust where repeat assessments are explicitly comparing to baseline Country comparisons • Comparing scores alone can be misleading • Must be approached cautiously - ensure comparison of like with like • Aggregation - No method given for arriving at single measure of ‘overall performance’ – no attempt to create ‘league table’ 22 Harmonization of PFM diagnostic tools Common information pool being created Considerable use of PEFA assessments for many different purposes Several earlier instruments replaced by PEFA Transactions costs in PFM diagnostics appear not to decline, due to: Still several overlapping assessment instruments Many uncoordinated fiduciary assessments Proliferation of new ‘drill-down’ PFM tools Few countries have multi-year plans for analytical work 23 THE PEFA SECRETARIAT 24 Role of the PEFA Secretariat 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 25 Activities of the PEFA Secretariat (1) Custodian of the PEFA Framework Development and maintenance of the Framework Issues guidance notes and clarifications Quality reviews of assessments Both at concept note and report stage, on request Training Develops and shares training materials Supports training institutes in delivering PEFA courses Delivers training selectively, mainly on a regional basis Dissemination Conference presentations, PFM blogs, PEFA Newsflash Sharing PEFA assessment reports through website 26 Role of the PEFA Secretariat (2) 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 Support PFM research Availability of PEFA indicators database 27 PEFA Secretariat quality review • On request, free of charge, quick feedback (10 business days) • For Concept Notes/TOR and as well as Assessment Reports • Appraises adequacy of background info (sections 1, 2 & 4) • Appraises application of performance indicators (section 3) • Review of each indicator: correctly interpreted, sufficient evidence, scoring method correctly applied? • Considers whether summary assessment brings out clear message consistent with indicator analysis and background • Follow-up reviews – evaluates responses to the initial review 28 Stay in touch with PEFA Visit the PEFA website: www.pefa.org Send questions to the Secretariat: services@pefa.org Get on PEFA’s news distribution list: Send your name and email address to the Secretariat