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February 02, 2016

Upgraded PEFA 2016

PEFA


Posted by Lewis Hawke[1]

On February 1, 2016, the seven PEFA partners[2] announced the release of the PEFA 2016 framework for assessing countries’ public financial management (PFM) performance. PEFA 2016 aims to enhance the relevance of PEFA while preserving as much comparability over time as possible. It will provide an improved basis for monitoring PFM performance and for discussing and designing reform initiatives. Consequently, it will be more useful for governments and other stakeholders.

PEFA 2016 is a substantial upgrade from the previous version of PEFA in 2011, which was largely the same as the version introduced in 2005. PEFA 2016 acknowledges the changing landscape of PFM reforms and the evolution of good practices over the last decade. Analysis of more than 500 PEFA assessment reports from 149 countries identified specific areas where the assessment would benefit from clarification and refinement and these have now been integrated into the PEFA framework. The upgrade also benefited from significant feedback from partners, users, beneficiaries, and observers of PEFA during a global public consultation process carried out in 2014, followed by extensive testing during 2015.

PEFA 2016 builds on the 2005 and 2011 versions through the addition of four new indicators, expansion and refinement of existing indicators, and recalibration of baseline standards for good performance in many areas. The upgraded framework 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.

Other improvements include:

  • Strengthened requirements for greater public access to more comprehensive financial information, including budget documentation, financial reporting, procurement, fiscal strategy, and fiscal risks
  • Increased emphasis on the use of macro-fiscal forecasts, the medium-term fiscal strategy and outlook, a medium-term perspective in expenditure budgeting, and the alignment of strategic plans with budget allocations
  • Expansion of coverage of revenue administration to include both tax and nontax revenues
  • The impact of donor practices on PFM outcomes is examined through refined and expanded indicators and a more focused report narrative rather than separate indicators
  • The adoption of a consistent approach to considering the size and materiality of performance throughout an indicator set, resulting in a clearer graduated scoring system, and replacement of PEFA-specific definitions with the terminology of the IMF’s Government Statistics Manual (GFSM 2014), where practicable
  • The application of a ‘D’ score for all practices below the basic level of performance and where there is insufficient information to validate a higher score. ‘D’ also replaces the ‘NR’ (not rated) code used previously where there was insufficient information on an indicator.

PEFA 2016 replaces the 2011 version as the framework to be applied for all new PEFA assessments. The ability to track changes in performance from one assessment to the next is one of the key strengths of the PEFA framework. Therefore, the release of the new version will be accompanied by guidance to enable governments and development partners to continue to track changes in performance of PFM system over time. This will ensure that PEFA continues to play a critical role in supporting and monitoring the achievement of countries’ sustainable development objectives, through improvements in the design and implementation of PFM systems, institutions, and processes.   

To learn more about PEFA 2016 go to the PEFA website, watch the video, or contact the PEFA Secretariat at services@pefa.org

[1] Head of the PEFA Secretariat.

[2] The PEFA program was initiated in 2001 by seven international development partners: The European Commission, International Monetary Fund, World Bank, and the governments of France, Norway, Switzerland, and the United Kingdom.

Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.

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