PFM Reform

Programmes
Presentation by Mary Betley

WBI/CABRI/East AFRITAC PFM Training

Seminar
18-20 June 2007
 Outline
• Overview of PEFA
• Lessons from experience - Do’s and
Don’t’s
• Case Studies – Zambia and Ghana
• What Next – Links to Budget Reform
Programmes

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 Public Expenditure and Financial
Accountability (PEFA) at a glance
• Global, standardised set of high-level indicators to
measure current status of PFM
• Focus is mainly on PFM systems, not on budget
policy
• PEFA uses scored indicators (A, B, C, D) rather than
statistical values
• Can be used for:
– Initial baseline assessment: snapshot of PFM
systems: where are we now?
– On-going monitoring of health of PFM: are we
going in the right direction?
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Key PFM Dimensions Assessed by PEFA

C. Budget Cycle

D. Donor Practices
Policy
Based
budgeting

A. PFM Out-turns
B. Cross-cutting
features Predictability Budget
External and control credibility
scrutiny and Comprehensiveness in Budget
audit and Transparency Execution

Accounting,
Recording,
Reporting
 Assessment Do’s
Be value neutral
Assess on basis of evidence, PEFA
scoring criteria
Focus on operation of Government
systems, not agencies’ or individuals’
performance
Government ownership
Triangulate information
Plan, plan, plan
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Assessment Don’t’s
x PEFA is not for conditionalities
x PEFA is not for grading systems as
“good” or “bad”
x Don’t review/update too often
(< every 3-5 years)
x Not for comparing countries
x Assessment for current status, not
for making recommendations
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 Undertaking Assessment -
Methodology
Government DPs

Government’s own Government’s own External assessment only

self-assessment self-assessment, then no Government
as stand-alone external validation involvement

► overly optimistic ► entrenched positions ► possible antagonism

scores if not guided and “negotiations” ► poss. incorrect scores
sufficiently ► undermine ownership
► undermine
assessment’s Joint Government-donor
credibility
exercise
Ghana
from beginning Zambia

► strengthen ownership
► focus on evidence => robust assessment
 Thus:
• Government ownership is critical

• Preparation of all stakeholders is

key

• Quality of team is important

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 Other lessons
Write-up of assessment
• Assessment should be stand-alone diagnostic
report, following the PEFA Guidelines, even if
part of wider analytical work
• If part of a wider review process, assessment
should be separate but an accompanying report
may be written, which can include
recommendations and include “quick wins”

Peer review: role of PEFA Secretariat

• PEFA reports are reviewed by PEFA Secretariat
to provide quality assurance and ensure
consistency across assessments
• PEFA Secretariat provides clarifications to
indicators from time to time
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 Case Study - Zambia
• PEFA undertaken as first evaluation under PEMFA
reform programme
• Assessment carried out by team of Government
(MoFEP) staff, facilitated by two external
consultants
• Close team work: 3 short field visits
• Team worked with relevant departments to agree
current status in relation to PEFA criteria
• Relatively short elapsed time for assessment:
October-December
• One of first assessments to be published on PEFA
website – shown as Government assessment
• PEFA now part of on-going M&E framework for
PEMFA
 Case Study - Ghana
• PEFA undertaken as part of annual multi-development
partner review process
• Collaborative process/ team approach, with both
Government and DPs in discussions
• Process led by senior MoFEP staff – strong
Government ownership
• Focus on documentary evidence
• Triangulation of information, including civil society
• Relatively short elapsed time for assessment:
February-May
• Outcome was assessment which was jointly agreed and
Government owned. Areas of disagreement between
assessors and Government explicitly noted.
• PEFA has helped Government to focus greater
attention on particular areas of weakness, facilitated
joint Government-DP policy dialogue
 After PEFA:
What next?

PEFA and Links to Budget Reform

Programmes

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 Role in wider PFM
programme
Designing a PFM programme
• PEFA can help identify areas of strengths and weaknesses
• However, in itself, it cannot provide the design for a reform
programme, as it does not distinguish:
– Government’s own reform priorities
– Sequencing issues
– Underlying causes for weaknesses
– Capacity constraints, including absorptive capacity
– Information needs and interplay of information
Refocussing a PFM programme
• PEFA diagnostic can help with comparison of areas of
weakness against those addressed by the reform
Monitoring a PFM programme
• PEFA can have role in monitoring progress over time in
reform programme, including specific areas addressed by
reforms 14
PEFA is a diagnostic tool…..

…………not a menu for reform

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From PEFA to Reform Programme:
Recommended Analyses
PEFA indicator

PFM Area

Underlying causes

Potential Impact/Benefits

Prior Actions Required

Other timing/sequencing issues (e.g. capacities)

Areas of Relevant Potential Potential Prior Actions Timing/Se
Weakness Key PFM Underlying Impact/ Required quencing
Issue Causes Benefits Issues

PI-24. Reporting Overall Greater Requires High

Quality and on trust requirement transparency changes in priority
timeliness funds for in use of business to
of in-year
reporting on trust fund processes for
strength-
budget resources trust fund
trust funds en basic
reports: (i) compared to resources,
Scope of is more plan. budget
Commitment
reports limited than Improved to greater
discipline
(PEFA for normal external transparency
score: D) budget scrutiny over
funds all public
sector
resources
Broad Sequencing of PFM System
Measures

1. Ensure basic (and appropriate) budget

procedures in place
2. Enforce existing budget procedures
3. Upgrade, extend budget processes,
including more advanced strategic
elements

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Potential trade-offs between
priority and sequencing

Priority
High Low
Sequencing
High

Low