PEFA 2019 FAQ

The following FAQs are intended to address the most common issues raised by users in planning, managing and implementing assessments in the transition to PEFA 2016. The FAQs will also include links that direct users to relevant guidance materials as these are developed.

 

General FAQ About PEFA 2016

PEFA 2016 acknowledges the changing landscape of PFM reforms and the evolution of good practices over the last decade. Analysis of more than 600 PEFA assessment reports from 151 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
  • Service delivery performance
  • 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.

For further information on the changes please see:

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, while assessment of donor disclosures and the use of country financial management systems have been left to other diagnostic tools, such as the Global Partnership for Effective Development Cooperation. The attached diagram showing the links between PEFA 2016 and the previous version of the framework can be seen here.

The PEFA Secretariat recommends that the testing version assessments are aligned with PEFA 2016. The options for aligning the testing version with PEFA 2016 will vary depending on whether or not the reports have been finalized:

  • Where reports have not been finalized – countries may revise the draft report to use PEFA 2016 report format, indicators and dimensions;
  • Where reports have been finalized – the report could be revised and re-issued as a PEFA 2016 report, or preparation of an addendum containing an updated PI summary may be preferred to revision of the whole report.

Updating the testing assessments to PEFA 2016 will ensure that the baseline for future assessments will be aligned with the approved, final version of the upgraded Framework. It will incorporate the most up-to-date content of the indicators and report to facilitate dialogue on planning and monitoring PFM reform initiatives with countries. The additional data to align with PEFA 2016 is more accessible at the present time than if alignment is deferred. Alignment will also avoid future additional costs in collecting data to track changes since the previous assessment during any subsequent assessment. To support the alignment, the PEFA Secretariat has published a separate guidance on Aligning PEFA testing version assessments with PEFA 2016.

The PEFA Secretariat is currently developing a comprehensive package of upgraded guidance materials. This will include a new comprehensive PEFA Handbook which will include the following four volumes:

  • Volume I: PEFA Assessment Process – Planning, Managing and Using PEFA which will provide guidance to PEFA users and other stakeholders on the key phases and steps in the PEFA assessment process.
  • Volume II: PEFA Assessment Fieldguide which will provide detailed technical guidance on scoring the 31 performance indicators and 94 dimensions of PEFA 2016 including measurement guidance, data requirements and sources, and definitions.
  • Volume III: The PEFA Report which will set out a template and detailed instructions for preparing the PEFA report; and
  • Volume IV: PEFA Add-Ons and Links to Other Diagnostic Tools which will provide information on the relationship between PEFA 2016 and other complementary diagnostic tools and the potential for supplementing a PEFA assessment with other diagnostics.

It is expected that the PEFA Assessment Fieldguide will be published on the PEFA website in early June. Other guidance materials will be progressively published on the PEFA website as they are completed.

Guidance notes already available on the PEFA website include:

PEFA 2016 replaces the 2011 version as the framework to be applied for all new PEFA assessments. Given the comprehensive nature of the upgrade to PEFA 2016 much of that guidance is now redundant. Nevertheless, for countries that had commenced assessments using the previous version of the PEFA framework prior to the release of PEFA 2016, relevant previous methodological guidance has been retained on the PEFA website for ease of reference. This guidance will also be useful for assessors tracking performance changes since previous assessments, where the previous assessment has used an earlier version of the PEFA framework. Separate guidance has been prepared by the PEFA Secretariat on reporting performance changes in PEFA 2016 from previous assessments that applied PEFA 2005 or PEFA 2011.

The PEFA Secretariat uses three official languages – English, French and Spanish.The original documents are prepared in English language and translated into other languages. Translations into other languages may follow depending on the level of demand. Currently the PEFA Framework is also available in Arabic, ChinesePortugueseRussian and languages.

Assessment planning using PEFA 2016

Following the release of PEFA 2016, the PEFA Secretariat has published a guidance table with 10 steps for planning, managing and using a PEFA assessment. The guidance sets out the four stages of the PEFA cycle – assessment planning, field work, reporting and PFM reform action planning – which are further broken down into 10 key steps, with adaptations for specific circumstances as needed. Each of the ten steps list the activities required to complete each step together with responsibility, indicative timeline and available guidance and other resources. Additional guidance is provided in the PEFA Handbook Volume I: The PEFA Assessment Process.

Updated guidance for applying the PEFA methodology at subnational assessments in accordance with PEFA 2016 is available here.

A new PEFA 2016 concept note templates and guidance instructions has been developed. The new template is based on the checklist for concept notes that was provided for 2011 Framework based assessments with a few more specific details added.

The Template and Guidance for the preparation of PEFA Assessments CN or TOR for Central Governments

The Template and Guidance fro the Preparation of PEFA Assessments Concept Note or Terms of Reference for Sub-National Governments

The additional time and resource implications of PEFA 2016 are difficult to quantify and will vary from country to country. However, feedback from the testing phase in 2015 suggests, indicatively, that the number of person/days required for an assessment will increase by about 20% compared to the application of the previous versions.

Additional resources will also be required to undertake an assessment of performance changes since the previous assessment where the previous assessment used an earlier version of the framework. Again, based on testing phase feedback, it is estimate that this will require an additional 20% of the resources required for a baseline PEFA 2016. These additional resources will only be required for the first assessment using PEFA 2016 because future assessments will measure progress using the same version of the framework.

Undertaking fieldwork using PEFA 2016

While much of the content from PEFA 2011 has been retained, PEFA 2016 includes 94 dimensions compared to 76 dimensions in PEFA 2011. In addition, for many of the indicators and dimensions that have been retained, there have been changes in the number and calibration of dimensions. The new and modified indicators will require additional data collection, analysis and reporting.

A table highlighting the changes to scope, data requirements and calibration is included in the Guidance on reporting performance changes in PEFA 2016 from previous assessments that applied PEFA 2005 or PEFA 2011.

Preparing a PEFA report using PEFA 2016

PEFA 2016 provides for a clearer and more consistent structure for reporting PEFA findings. The new structure now includes an executive summary, and separate sections on assessment and analysis of PFM performance and PFM systems. The content of subsections has been revised to eliminate overlap and duplication and there is a stronger focus on reporting on the elements of internal financial control.

The outline of the revised PFM report format structure is included in PEFA 2016 Framework. Further Guidance could be found in Volume III of the PEFA Handbook.  

While much of the content from PEFA 2011 has been retained, the inclusion of new indicators and dimensions, and changes in the number and calibration of previous indicators and dimensions, means that it is not feasible to make direct comparison of scores at the indicator level between PEFA 2016 and earlier versions of the framework. A precise comparison between the last PEFA and the period covered by the new assessment can, therefore, only be achieved by using the same version of PEFA as the last assessment.

Performance changes since the previous assessment are reported in three sections of the PEFA 2016 report: the executive summary; conclusions of the analysis of PFM systems (chapter 4); and performance indicator summary (annex 1). However, for comparison with previous assessment that used an earlier version of the PEFA Framework (i.e. 2005 or 2011) a supplementary annex will need to be completed. The supplementary annex will compare the scores of the previous assessment with scores for the current assessment period based on the earlier framework (including the donors’ practices indicators D1 – D3, where relevant).

Further information is available in the Guidance on reporting performance changes in PEFA 2016 from previous assessments that applied PEFA 2005 or PEFA 2011.

PFM reform action planning using PEFA 2016

PEFA reports can be used as one among several inputs to PFM reform planning processes. Guidance on how to approach PFM reform planning is available in Volume IV of the PEFA Handbook.

Technical guidance FAQs

PEFA defines extrabudgetary units and public corporations in accordance with the IMF’s GFS Manual 2014.

For PI-6 (dimension 6.3), entities with individual budgets not fully covered by the main budget are considered extrabudgetary in accordance with the IMF’s GFS Manual 2014. These entities are separate units that operate under the authority or control of a central government (or in the case of an SNG assessment the state, or local government). They may have their own revenue sources, which may be supplemented by grants (transfers) from the general budget or from other sources. Even though their budgets may be subject to approval by the legislature, similar to that of budgetary units, extrabudgetary units have discretion over the volume and composition of their spending. Such entities may be established to carry out specific government functions, such as road construction, or the nonmarket production of health or education services. Budgetary arrangements vary widely across countries, and various terms are used to describe these entities, but they are often referred to as “extrabudgetary funds” or “decentralized agencies” (ref GFS Manual 2014, Ch 2, s2.82).

Extrabudgetary units may also include certain public enterprises that have legally been established as ‘public corporations’ but that do not meet the statistical requirement of ‘public corporation’ if they do not charge economically significant prices (see below). Government-owned enterprises, such as the central bank, post office, or railroad, which are often referred to as public corporations, state-owned enterprises, or parastatals in a legal sense, may be part of the general government or public sector depending on the nature of their business and ownership (ref. GFS Manual 2014, Ch. 2, s2.1, 2.64, 2.65, 2.88). Sometimes such entities exist as unincorporated enterprises within government ministries. When these unincorporated enterprises produce goods and services for the market at economically significant prices, and have separate sets of accounts, they are quasi-corporations and classified as part of public corporations (ref. GFS Manual 2014, s2.33). However, unincorporated enterprises owned by government units that are not quasi-corporations remain integral parts of those units and, therefore, must be included in the general government sector (ref. GFS Manual 2014, s2.59).

Implicit expenditures such as quasi-fiscal operations, donor grants-in-kind and tax expenditures are not included in the coverage of the indicator. (Quasi-fiscal operations are government operations carried out by institutional units other than general government units. They are part of the public sector (ref. GFSM 2014, s2.4)). 

Whether an entity is classified as budgetary, extrabudgetary or a public corporation depends on the specific circumstances. Factors that need to be considered include whether the entity is part of the central government sector or broader public sector and whether the entity engages in market or non-market activities. For example, depending on the country, the post office may be a government department, an extrabudgetary unit or public corporation (or even a private corporation subject to a PPP) depending on the nature of the business and level of government control. Assessors should refer to the GFS manual for further guidance and explanation of which institutions, revenues, and expenditures are considered extrabudgetary when assessing this indicator.

For PI-10, public corporations are defined in accordance with GFS 2014. Public corporations are resident corporations controlled by government units or by other public corporations that are potential sources of financial gains or losses to the government units that own or control them. Public corporations are recognized by law as separate legal entities from their owners, and are set up for purposes of engaging in market production. In some cases, the corporation issues shares, and thus the financial gain or loss is clearly allocated to the shareholders. In other cases, no shares are issued, but it is clear that a specific government unit controls the corporation’s activities and is financially responsible for it (ref GFS Manual 2014 Ch 2, s2.31, s2.48).

Public corporations may be created to: generate profits for general government; protect key resources; provide competition where barriers to entry may be large; and provide basic services where costs are prohibitive. These public corporations are often large and/or numerous, and may have a significant economic impact (ref GFS Manual 2014, Ch 2, s2.105).

Public corporations may be involved in quasi-fiscal operations (i.e., they carry out government operations at the behest of the government units that control them). As such, public corporations may exist to serve as an instrument of public (or fiscal) policy for government. Most directly, a public corporation can engage in specific transactions to carry out a government operation, such as lending to particular parties at a lower-than-market interest rate or selling their product, such as electric power, to selected customers at reduced rates. More generally, however, a public corporation can carry out fiscal policy by employing more staff than required, purchasing extra inputs, paying above-market prices for inputs, or selling a large share of its output for prices that are less than what the market price would be if only private producers were involved (ref GFS Manual 2014, Ch 2, s2.104).

It is possible that certain institutional units that are legally constituted as corporations may not be classified as corporations for statistical purposes if they do not charge economically significant prices.  Government-owned enterprises, such as the central bank, post office, or railroad, which are often referred to as public corporations, state-owned enterprises, or parastatals in a legal sense, may be part of the general government or public sector depending on the nature of their business and ownership (ref GFS Manual 2014, Ch 2, s2.1, 2.64, 2.65, 2.88).

Public corporations may be involved in quasi-fiscal operations (i.e., they carry out government operations at the behest of the government units that control them). As such, public corporations may exist to serve as an instrument of public (or fiscal) policy for government. Most directly, a public corporation can engage in specific transactions to carry out a government operation, such as lending to particular parties at a lower-than-market interest rate or selling their product, such as electric power, to selected customers at reduced rates. More generally, however, a public corporation can carry out fiscal policy by employing more staff than required, purchasing extra inputs, paying above-market prices for inputs, or selling a large share of its output for prices that are less than what the market price would be if only private producers were involved (GFSM 2014, s2.104).

Assessors should determine whether the public corporation engages in market or non-market activities and should refer to the GFS 2014 manual for further guidance and explanation.

Further learning opportunities for PEFA 2016

The PEFA Secretariat is organizing regional events and other training initiatives in countries. Information on new training opportunities is being posted on the PEFA website, Facebook and Twitter when dates, locations and venues are set. Please contact the Secretariat on services@pefa.org and let us know that you would like training and where you are based.

The Secretariat wants to hear from anyone planning or implementing a PEFA assessment, or who has questions about a PEFA assessment in their location. It offers advice on designing an assessment, preparing concept notes, planning for data collection, the assessment process, preparing reports, reviewing draft reports, using PEFA as part of PFM reform dialogue or development of PFM reform initiatives, monitoring progress over time, monitoring performance over time, training and capacity building in PEFA and many, many more issues. The Secretariat has experienced staff who speak several languages and can advise you based on knowledge developed from more than 600 previous PEFA assessments in 151 countries. Contact the Secretariat by email at services@pefa.org or by phone at +1-202-458-8545