About the Guidance

Public financial management (PFM) arrangements at the subnational government (SNG) level are likely to depend on arrangements determined by the central government (CG) in national legislation or national constitution. PFM arrangements can vary considerably by country. Variations reflect differences in, among other things, population and geographic size, governance, functions and responsibilities, administrative traditions, and the degree of operational discretion. 

This guidance for SNG PEFA assessments supplements the Public Expenditure and Financial Accountability (PEFA) Framework document published on February 1, 2016, and replaces the Supplementary Guidance for Subnational PEFA assessments, published in December 2016. 

It provides additional guidance for applying the PEFA methodology at the subnational level. To this end, it offers recommendations on how each of the PEFA indicators and dimensions can be applied or modified to better suit the characteristics of SNGs. It introduces some new indicators and a new pillar on intergovernmental fiscal relations which consists of two indicators, including: Higher Level of Government (HLG) 1: Transfers from higher levels of government; and HLG 2: Fiscal rules and monitoring of fiscal position. 

Part 1 and 2 of the guidance present the general features and the methodology of the SNG PEFA framework, which are similar to the use of PEFA at the national level. 

Part 3 focuses on indicators, including how the standard PEFA 2016 indicators may be applied or modified, if necessary, to accommodate differences at the subnational level (see subsection 3.2 for the full set of indicators).

Part 4 describes the particularities of the PEFA process for subnational governments.

Acknowledgements

The guidance for subnational government (SNG) PEFA assessments is a product of knowledge sharing and collaboration among numerous experts. The guidance was prepared by Guillaume Brulé and Julia Dhimitri, under the leadership of the Heads of the PEFA Secretariat Srinivas Gurazada and Jens Kristensen. Additionally, members of the PEFA Secretariat provided input to the guidance: Helena Ramos, Holy-Tiana Rame, Urška Zrinski, Martin Bowen, Antonio Leonardo Blasco, Silvia Lubenova Kirova, Nene Mane, and Ashikur Rahman. 

The team benefited from extensive input from the SNG working group composed by representatives of the PEFA partners including:  Franziska Spoerri, SECO; Lorena Vinuela, Senior Public Sector Specialist, World Bank (WB); Kirti Devi, Senior Municipal Finance Specialist, WB; Bastien Sayen, Project Manager, Local government and Urban development division, Agence Française de Développement (AFD); and PFM experts including Mary Matjeke, Director for Provincial Budget Analysis, South African Treasury; Ahmed Guidara, CFO Ville de Sfax and Public Financial Management (PFM) consultant; and Sylvie Zaitra, consultant. The team also benefited from technical review by Gabriele Buchholz, John Short, Kris Kaufman, and Nihad Nakas, PEFA and PFM experts. 

We want to thank the teams who helped with piloting of the guidance for the SNG PEFA assessments in the following countries: Spain, Burkina Faso, Belgium, Argentina, China, Mexico, Nepal, Ukraine, Moldova, Mongolia, Cambodia, Mali and Rwanda. 

In addition, the team benefited from comments from the public consultation, which took place from January 29 to March 15, 2020. The following experts shared their views: Jesper Steffensen, Decentralization and PFM expert; Eleonora Papastavrou, Programme Officer, Public Financial Management Centre of Thematic Expertise on Public Administration Reform, DG NEAR Unit, European Commission; Reiko Kawabata, Japan International Cooperation Agency, Public Governance and Financial Management Team, Governance Group, Industrial Development and Public Policy Department; Serdar Yilmaz, Lead Public Sector Specialist, World Bank Group; Stefan Bruni, Lucerne University of Applied Science and Art and Ron Hackett, PFM advisor; Rajul Awasthi, Senior Public Sector Specialist, World Bank Group; and Juan Pablo Guerrero, Network Director, Global Initiative for Fiscal Transparency (GIFT).