Introduction to the PEFA Methodology

This course provides a brief introduction to the PEFA Performance Measurement Framework as a tool based on a high level indicator set, the scope and coverage of the tool.    The PEFA common assessment tool is compared with other diagnostic tools and its consequences on the use of other diagnostic and assessment tools such as CFAA, CIFA, PEMFAR, CPAR, IPR, FRAs, and ROSCs  is discussed.  A recounting of the development of the Performance Measurement Framework and the role of the PEFA Secretariat is presented.   The tool’s origins and evolution from the HIPC Expenditure Tracking Survey benchmarks, the IMF Fiscal Transparency Code and the adoption of international standards is explained.   The PEFA Performance Measurement Framework analytical framework is examined in some detail.  It also discusses the qualitative aspects of the assessment – the narrative covering indicator evidence and explanation, the legal and regulatory framework and the institutional arrangements.  For each of the indicators the types of evidence for establishing the scorings are outlined.  How the PFM context is addressed in PEFA is presented including the macroeconomic context, the current fiscal performance, and a description of on-going reforms along with institutional and donor support of reforms 

The calibration basis for scoring is described including the aggregation of M1 and M2 type indicators, and the treatment of improvements that have been introduced in PFM process that has not been established long enough to impact the indicator scorings.   The consequence of the calibration basis on the evolution over time of indicator scorings is explained.

The limitations of PEFA as a tool to assess procurement performance is pointed out and a brief outline of how another tool – the OECD/DAC national procurement assessment framework can be used in a complimentary way.   Note that this course does not detail or attempt to train the participant in the use of the complementary tool.  

The course outlines the main stages of a PEFA assessment – the preparing and circulating the Terms of Reference; the desk assessment, the training workshops, the   interviews with PFM actors– whom to interview (government agencies, donors, civil society, private sector entities); the main documents (external and internal); circulating the draft report to Government officials and Donors for comment, the role and importance of the exit workshop.

This course also provides an understanding of the strengths and weaknesses of the framework which is necessary to enable fruitful dialogue and make decisions on designing reform and supporting programmes. It explains the consequences of using high level indicators, the compromise between universality and detail that results in a bias towards the top-down dimensions versus the bottom-up aspects of public finance management.  It considers the role of the indicator narrative to gaining insight into PFM process and practice in a given country.  It describes specific errors and inconsistencies in the PEFA tool.  

Further it discusses the comparability of assessments over time and the value to dialogue and monitoring progress over time.  It points out what the PEFA Assessment does and does not tell you – the political context, the macroeconomic context, the macro-fiscal context, coverage of PFM measured by the PEFA Assessment, the legal and regulatory framework, the capacity for PFM, overall status of PFM performance and practice, credibility of the budget, comprehensiveness and transparency, policy based budgeting, predictability and control in budget execution, accounting recording and reporting, external scrutiny and audit, donor practices, ongoing PFM reforms, monitoring of PFM progress over time.

The module demonstrates using examples how not to focus on just analyzing individual scores and also pay attention to interpreting linked scoring patterns.  This course also presents ways to distil the indicators scorings and narrative to a qualitative summary of the six dimensions of PEFA, and the three objectives of sound PFM namely fiscal discipline, operational efficiency and allocative efficiency as a way to identify appropriate PFM reform platforms. Some special issues are considered.  These may include whether and when to include the assessment of assess non-tax revenues from natural resources and whether to include publicly traded companies with some government ownership. 

By the end of the course participants will:

• Be equipped with some basic analytical frameworks for looking at and understanding the PEFA Performance Management Framework.  In particular to appreciate the strengths and weaknesses of the PMF tool and so avoid an over simplistic extrapolation of indicator scorings to a measure of the status of PFM activities in a given country.

• Understand the context in which the PEFA Assessment tool was developed as the appropriate tool for supporting PFM reform using the “Strengthened Approach” an approach derived from the Paris Agenda (Paris Declaration 2005).

• Be able to distil the results of a PEFA assessment into a keen sense of the status of PFM process and practice in a given country into what should be the appropriate reform platform focus.

• Be able to review PEFA ToRs, PEFA Draft reports and meaningfully comment on these. Further, to actively and effectively participate in dialogue with other development partners as well as Government officials on the PEFA Report.

• Be able to identify the ways in which the PEFA analysis can help in identifying key elements for PFM reform and be able to question the nature and relevance for a given country of some popularly promoted PFM reforms – such as performance budgeting, budgeting by objectives, activity based budgeting, the use of MTEF, accrual accounting, IFMIS, and public-private partnerships.Be able to identify the type of capacity development support that will be needed to support the PFM reform effort.

The learning methods will include the following:

• Introduction to key concepts of the PEFA Performance Measurement Framework through direct presentation and discussion methods

• The use of original source material developed by the consultants as well as  training material developed by the PEFA Secretariat

• The use of extensive examples from many different countries with different experiences to illustrate the points put across

• The use of short work group exercises to provoke and consolidate certain points raises

• The use of two major case studies to deepen the understanding of deriving indicator scorings from the available evidence, as well as be able to distil through consideration of a summary assessment into appropriate reform platform focus.