Figure 1. PEFA Pillars and the budget cycle
WHAT INSTITUTIONS PEFA COVERS
The core PEFA methodology was initially focused on central government, including related oversight and accountability institutions, such as the legislature and supreme audit institution. However, PEFA has increasingly been used in the assessment of subnational government PFM performance. The scope of the category of ‘central government’, as used in PEFA, is based on the classification structure developed by the International Monetary Fund (IMF) for Government Finance Statistics (GFS). PEFA methodology refers to the GFS terminology where possible to provide a standard basis of reference, but this does not imply that PEFA is only relevant where GFS methodology is used. PEFA is adaptable to situations where other classifications and standards are used.
Other parts of government, outside central government, that are identified in GFS include different administrative tiers with separate accountability mechanisms and their own PFM systems, such as budgets and accounting systems. These can include subnational governments such as
state, provincial, regional, and local governments, including districts and municipalities. An abbreviated summary of the public sector components, as defined in the GFS 2014 manual, is provided in figure 2
The PEFA indicator set is focused on the financial operations of the entire level of government covered by the assessment. For instance, activities of central government implemented outside the budget are included in the coverage of a small number of indicators and are referred to as expenditure and revenue of extrabudgetary units and expenditure and revenue related to the extrabudgetary activities of budgetary units—for example, in PEFA indicator (PI)-6. Public corporations are referred to in PI-10. Subnational governments with a direct relationship to central government are referred to in PI-7 and PI10. The measurement guidance explains how each indicator relates to GFS categories, where relevant. PEFA examines operations outside of the government being assessed only to the extent that they have an impact on the fiscal performance of the central government.
1. PEFA Overview