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 governments 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 on central government operations Links to other 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 level system performance is measured Assesses performance, but not underlying capacity factors Full overview of the PFM system revenue, expenditure, procurement, financial assets/ liabilities Basis for design : The 16 HIPC Expenditure Tracking Indicators, but broader draws on IMFs Fiscal Standards and Codes (ROSC) internationally accepted standards e.g. GFS, IPSAS, INTOSAI Widely applicable to countries at all levels of development, but not intended for cross-country comparison

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

11 Content of Indicator Set A.PFM Out-turns Credibility of the budget Indicators 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 Annual budget preparation process, multi-year perspective in fiscal planning, expenditure policy and budgeting

12 Content of Indicator Set (contd) C.Budget Cycle ii. Predictability & control in budget execution Indicators 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 Accounts reconciliation, reporting on resources at service outlet level, in- year budget execution reports, financial statements iv. External scrutiny and audit Indicators 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 on four 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