4. Conclusions of the analysis of PFM systems

The objective of this section is to present an integrated analysis on the basis of information provided in the preceding sections 2 and 3, and to state overall conclusions on the performance of PFM systems. In particular, the analysis seeks to assess how the performance of PFM systems may affect the government’s ability to deliver the intended fiscal and budgetary outcomes, and to identify the main weaknesses of the PFM system in that respect.

The indicative length of this section is six to ten pages.

4.1. Integrated assessment of PFM performance

The indicator assessment is explained in terms of its implications for the seven pillars of PFM performance:

  1. Budget reliability: In order for the government budget to be useful for policy implementation, it is necessary that it be realistic and implemented as passed.
  2. Transparency of public finances: Transparency of information on public finances is necessary to ensure that activities and operations of governments are taking place within the government fiscal policy framework and are subject to adequate budget management and reporting arrangements. Transparency is an important feature that enables external scrutiny of government policies and programs and their implementation.
  3. Management of assets and liabilities: Effective management of assets and liabilities ensures that risks are adequately identified and monitored, public investments provide value-for-money, financial investments offer appropriate returns, asset maintenance is well planned, and asset disposal follows clear rules. It also ensures that debt service costs are minimized and fiscal risks are adequately monitored so that timely mitigating measures may be taken.
  4. Policy-based fiscal strategy and budgeting: Policy-based fiscal strategy and budgeting processes enable the government to plan the mobilization and use of resources in line with its fiscal policy and strategy.
  5. Predictability and control in budget execution: Predictable and controlled budget execution is necessary to ensure that revenue is collected and resources are allocated and used as intended by government and approved by the legislature. Effective management of policy and program implementation requires predictability in the availability of resources when they are needed, and control ensures that policies, regulations, and laws are complied with during the process of budget execution.
  6. Accounting and reporting: Timely, relevant and reliable financial information is required to support fiscal and budget management and decision-making processes.
  7. External scrutiny and audit: Effective external audit and scrutiny by the legislature are enabling factors for holding the government’s executive branch to account for its fiscal and expenditure policies and their implementation.

In synthesizing the performance of the PFM system, the analysis aims at identifying the implications of PFM strengths and weaknesses identified in section 3. The analysis captures the interdependence between the indicators within each pillar. It also examines the links between indicators across the pillars in order to explain how performance of certain functions depends on the performance of others.

4.2. Effectiveness of the internal control framework

An effective internal control system plays a vital role across every pillar in addressing risks and providing reasonable assurance that operations meet the four control objectives: (i) operations are executed in an orderly, ethical, economical, efficient, and effective manner; (ii) accountability obligations are fulfilled; (iii) applicable laws and regulations are complied with; and (iv) resources are safeguarded against loss, misuse and damage.

The analysis of the internal control system should assess the extent to which it contributes to the achievement of those four control objectives, based on available information. This section should provide a unified and coherent overview of how