The PEFA Partners*, including the World Bank, announced the release of the new version of PEFA, a framework for assessing public financial management (PFM) performance. The PEFA framework provides the foundation for evidence-based measurement of countries’ PFM systems. A PEFA assessment measures the extent to which PFM systems, processes and institutions contribute to the achievement of desirable budget outcomes: aggregate fiscal discipline, strategic allocation of resources, and efficient service delivery.
Effective institutions, processes, and systems of PFM play a critical role in the implementation of national policies concerning development and poverty reduction. Good PFM is the linchpin that ties together available resources, delivery of services, and achievement of government policy objectives. If it is done well, PFM ensures that revenue is collected efficiently and used appropriately and sustainably.
2016 marks the most comprehensive upgrade to the PEFA framework since it was first published in 2005 and incorporates new and updated benchmarks that reflect the changing landscape of PFM reforms, and the evolution of good practices over the last decade.
These include the addition of four new indicators, the expansion and refinement of existing indicators, and a recalibration of baseline standards for good performance in many areas. PEFA 2016 also introduces a stronger focus on the elements of internal financial control that can be observed in PEFA assessments and establishes a clearer and more consistent structure for reporting PEFA findings.
The development of PEFA 2016 has benefited from significant feedback from Partners, users, beneficiaries, and observers of PEFA during global public consultation in 2014, followed by extensive testing during 2015.
PEFA is a tool that helps governments achieve sustainable improvements in PFM practices by providing a means to measure and monitor performance against a set of indicators across the range of important public financial management institutions, systems, and processes. The PEFA methodology draws on international standards and good practices on crucial aspects of PFM, as identified by experienced practitioners. PEFA incorporates a PFM performance report for the subject government that presents evidence-based indicator scores and analyzes the results based on existing evidence. It emphasizes a country-led approach to performance improvement and the alignment of stakeholders around common goals.
PEFA reports outline the economic environment faced by the public sector, examine the nature of policy-based strategy and planning, and analyze how budget decisions are implemented. PEFA assessments examine the controls used by governments to ensure that resources are obtained and used as intended. PEFA provides a framework for assessment of transparency and accountability in terms of access to information, reporting and audit, and dialogue on PFM policies and actions. PEFA considers the institutions, laws, regulations, and standards used by governments in the PFM process. It also examines the results arising from the operation of PFM in key areas such as budget outturns, effectiveness of controls, and timeliness of reporting and audit.
Governments use PEFA to obtain a snapshot of their own PFM performance. PEFA offers a common basis for examining PFM performance across national and subnational governments. In addition to governments, other users of PEFA include civil society organizations and international development institutions. PEFA scores and reports allow all users of the information to gain a quick overview of the strengths and weaknesses of a country’s PFM system.
Users can also see the implications of the overall performance results for the key goals of fiscal discipline, strategic resource allocation, and efficient service delivery. The PEFA analysis thereby contributes to dialogue on the need and priorities for PFM reform.
For more information on PEFA, visit the website.
*PEFA Partners include the World Bank, IMF, European Commission and governments of France, Norway, Switzerland and the United Kingdom.