At this stage, it might useful to create a PFM reform matrix with a list of strengths and weaknesses identified by the PEFA report that provides the basis for further discussion of reform (see table 2.2). The guide expands the matrix example to reflect each of the stages, providing example data for illustrative purposes.
Table 2.2 Example of a PFM reform matrix: Strengths and weaknesses identified by PEFA assessment
|Performance indicator or dimension||PEFA score||Underlying strengths and weaknesses|
|PI–1||D||Aggregate expenditure outturns exceed original budget by more than 20% in each of the last three years.|
|PI–1||D||Variance in expenditure composition by functional classification was greater than 15% in each of the last three years. Such variations undermine the predictability and availability of budget allocations to key service delivery agencies.|
As an important note of caution, it may not be realistic or desirable for all countries to aspire to an A score on all performance indicators or for a C or D score to indicate a need for a specific reform (as, for example, with Norway’s 2008 self-assessment)2. It is sometimes necessary to look beyond the low scores to see the country context and impact of the performance of specific indicators on overall PFM performance.
The weaknesses identified should be presented from the highest to the lowest priority, with key stakeholders, such as government agencies, decision makers, development partners, and civil society, participating in this initial prioritization process. Sometimes, a low score may not be a priority for reform, and sometimes an A score may hide significant problems. For example, an A in PI–1, Aggregate budget outturn, may be the result of cash rationing rather than good budget planning.
This stage reflects only an initial prioritization. Sequencing of reform initiatives will need to consider other factors, including resources, capacities, institutional constraints, political commitment, and others (discussed later). These factors will determine the feasibility of implementing a particular reform and its priority relative to other possible reforms.
2Norway’s self-assessment in 2008 gave the government several C and D scores, with particular weaknesses identified in internal audit and procurement. The Norwegian response was to acknowledge that procurement systems needed improving, but that internal audit reforms were not necessary because strong internal controls were already in place