1. Recent Developments of the PEFA Program Video-conference of the PEMPAL BCOP PEFA Working Group February 20, 2009 Frans Ronsholt Head of PEFA Secretariat

2. 2 Future of the PEFA Program Country Uses of PEFA assessments Country Comparisons Monitoring PEFA applications Content

3. 3 Future of the PEFA Program Country Uses of PEFA assessments Country Comparisons Monitoring PEFA applications Content

4. 4 Main focus: Establish PEFA Framework as a globally accepted PFM assessment tool Achievements: –More than 100 PEFA assessments completed. Baseline established in > 90 countries. Repeat assessments emerging. –About 25 donors involved in assessments. Many have included PEFA assessments in internal procedures for aid decisions –Contributed to common understanding of strengths/weaknesses, and (in some countries) to reform formulation / revision –Data used for selected research purposes Supporting activities: –Training – more than 1000 trained from government, donors and consultants –Technical support services to planners, managers and assessors –Quality assurance support Achievements of Phase II 2006-2008

5. 5 Main focus: Support to the use of PEFA reports for –Tracking of performance changes over time –Prioritization and sequencing of PFM reforms –Peer learning –Utilization by stakeholders beyond central finance agencies and donors …. and enhancing country leadership / donor collaboration for assessments & subsequent reform formulation / implementation Other objectives will continue as under Phase II: –Expansion of country coverage, espec. MICs and HICs –Support to quality assurance - training, advice, guidance on good practice, peer review and technical maintenance of the Framework –Monitoring of roll-out & quality ; impact assessment PEFA Phase III 2009-2011

6. 6 Future of the PEFA Program Country Uses of PEFA assessments Country Comparisons Monitoring PEFA applications Content

7. 7 What can countries use the PEFA Framework for? Inform PFM reform formulation, priorities Monitor results of reform efforts Harmonize information needs for external agencies around a common assessment tool Compare to and learn from peers

8. 8 PEFA reports for reform sequencing (1) PEFA report is one – out of several - inputs –Identification of main strengths and weaknesses – and potential impact on budgetary outcomes –Other factors: political economy, institutional, culture, constitution/legal, resources, capacity at entry Ownership means government decisions on priorities –Government to consider all factors in deciding priorities –Reform dialogue with donors to allow ample space Do not use Indicator scores simplistically –A low score is not sufficient justification for high priority reform –Other factors: relative importance of subject, complexity/timeframe for improvement, interdependence with other elements, weakest links

9. 9 PEFA reports for reform sequencing (2) Complementary analysis to PEFA may be required –Detailed analysis of underlying causes needed for formulation of detailed action plan –Limit such analysis to priority areas –Drill-down tools – some exist, others under development PEFA to prepare guidance on use of PEFA reports in reform formulation –Stock-taking of conceptual approaches used –Country case studies illustrating good practice and potential misuse (proposals welcome)

10. 10 PEFA incorporated in PFM reform monitoring system –baseline 2005, repeat assessment 2007, planned follow-up 2010 Important performance improvements 2005-2007 in budget execution –revenue administration, cash management, internal controls Improvements resulted from: –Reforms already well under way in 2005 (e.g. IFMIS/SISTAFE and revenue administration) –Small managerial/admin changes (including quick-wins identified on the basis of 2005 assessment) –New reform initiatives in pay-roll control (identified from the 2005 assessment as an important neglected area of reform) Country case - Mozambique

11. 11 Findings of Norad-managed self-assessment presented to OECD- DAC in December 2007 The assessment showed low scores for seven areas of PFM system performance Ministry of Finance reaction: –Weaknesses in procurement practices and follow-up to external audit findings need to be addressed. –Three areas of low scoring not considered priority at present (Multi-year program/sector budgeting, Limited extent of internal audit, no consolidated overview of risks from autonomous agencies and public corporations) –Two indicators scored low but are municipal responsibilities; central government will not get involved. Country case - Norway

12. 12 Future of the PEFA Program Country Uses of PEFA assessments Country Comparisons Monitoring PEFA applications Content

13. 13 PEFA reports for country comparison PEFA Framework developed primarily for in-country use –‘Summary assessment’ provides nuanced overview of strengths and weaknesses as basis for reform prioritization –No method given for arriving at one measure for ‘overall performance level’ (aggregation) Wide interest in country comparison –Researchers - learning on determining factors –Donors - aid allocations –Governments - peer learning Preferred method of country comparison –A nuanced comparison of two assessment reports –Consider country context, ensure comparison of ‘like with like’ PEFA Secretariat supports access to data – Publicized reports & database of indicator ratings

14. 14 Aggregation for country comparison Aggregation often desired –To deliver a condensed message –For comparing many countries Aggregation requires three decisions –Conversion from ordinal to numerical scale –Weighting of indicators (generally and by country) –Weighting of countries (for country cluster analysis) No scientifically correct or superior basis for deciding conversion and weights exists –Each user takes those decisions on individual opinion –PEFA program will not endorse any particular method In case aggregation is desired: –Be transparent on aggregation methods used –Discuss reasons for choice –Sensitivity analysis to illustrate impact on findings

15. 15 Future of the PEFA Program Country Uses of PEFA assessments Country Comparisons Monitoring PEFA applications Content

16. 16 Monitoring PEFA applications Why? – Follow trends in global roll-out and assessment quality, to: – Inform dissemination & training strategy – Input to technical maintenance of the Framework How? – Monitoring Report 2009 on global roll-out, compliance with methodology and issues in tracking progress over time (to be completed mid-2009) – Previous reports in 2006 & 2008 (on PEFA website)

17. Q&A