Figure 2. The public sector and its main components, as defined by GFS and referred to in PEFA
Source: excerpt from IMF (2014), Government Finance Statistics Manual 2014, op. cit. * Budgetary units, extrabudgetary units and social security funds may also exist in state, provincial, and local governments. # Social security funds can be combined into a separate subsector as shown in the box with dashed lines.
WHAT PEFA DOES NOT INCLUDE
The PEFA indicators focus on the operational performance of key elements of the PFM system rather than on all the various inputs and capabilities that may enable the PFM system to reach a certain level of performance. PEFA thus does not measure every factor affecting PFM performance, such as the legal framework or human resource capacities within the government. These are matters that should be taken into account, however, in addition to PEFA, as part of a dialogue on PFM reform after the PEFA report has been finalized. Further analysis, including more detailed examination of specific areas, may be required in addition to PEFA to explore the underlying factors affecting performance.
PEFA also does not involve fiscal or expenditure policy analysis that would determine whether fiscal policy is sustainable. It does not evaluate whether expenditures incurred through the budget ultimately have their desired effect on reducing poverty or achieving other policy objectives, or whether value for money is achieved in service delivery. A more detailed analysis of data, or utilization of country-specific indicators, would be required for such an assessment.
International organizations and research institutions have such tools at their disposal to perform more detailed analysis, such as public expenditure reviews (PER) performed by the World Bank. PEFA focuses on assessing the extent to which the PFM system is an enabling factor for achieving such outcomes.
PEFA does not provide recommendations for reforms or make assumptions about the potential impact of ongoing reforms on PFM performance. However, PEFA does acknowledge actions taken by governments to reform PFM systems by describing recent and ongoing measures. The PEFA report thus summarizes the government’s reform agenda but does not evaluate that agenda. Such considerations inform the actions to be taken after a PEFA assessment and form part of the dialogue between relevant stakeholders that contribute to the development of a new PFM improvement initiative. For the purpose of a PEFA assessment elements of the defense, public order and safety function may not be included if information is not available. This pertains to many PEFA indicators, including PI-6, PI12, PI-23 and PI-24.
PEFA Handbook Volume 1: The PEFA Assessment Process – Planning, Managing and Using PEFA
