Effective institutions and systems of public financial management (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.
The centrality of good PFM for effective global development has been acknowledged in many forums including United Nations commitments on financing for development and Sustainable Development Goals, and the Effective Institutions Platform. For instance, the representatives to the Addis Ababa Action Agenda in July 2015 committed themselves to addressing the challenge of financing and to creating an environment at all levels that enables sustainable development, building on the 2002 Monterrey Consensus and the 2008 Doha Declaration.
In accord with widespread international agreement on the importance of PFM, the Public Expenditure and Financial Accountability (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. In 2019, the Ministry of Finance of Slovak Republic and the Ministry of Finance of Grand Duchy of Luxembourg joined the PEFA partnership program. PEFA began as a means to harmonize assessment of PFM across the partner organizations. It was created to establish a standard methodology and reference tool for PFM diagnostic assessments. PEFA was also expected to provide a basis for dialogue on PFM reform strategies and priorities as well as a pool of information that could contribute more broadly to research and analysis of PFM. Since 2001 PEFA has become the acknowledged standard for PFM assessments. Mora than 600 PFM assessment reports from 151 countries have been completed as of October 1, 2019.
PEFA 2016 is a substantial upgrade from the previous version of PEFA, which was largely the same as the version introduced at the program’s inception. PEFA 2016 acknowledges the changing landscape of PFM reforms and the evolution of good practices over the last decade. Experience has also identified areas for clarification and refinement that have been integrated with the core PEFA guidance. The upgrade 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 2016 builds on the foundations of the 2005 and 2011 versions through 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 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. From the date of commencement, PEFA 2016 replaces PEFA 2011 as the framework to be applied for all new PEFA assessments.
This volume is the first of several documents produced by the PEFA Secretariat to explain and support the use of PEFA 2016. More detailed guidance and other information about PEFA is available on the website: www.pefa.org.