Stage 2

Determine the underlying causes of strengths and weaknesses


Once the PFM strengths and weaknesses are identified and weaknesses are initially prioritized, further analysis may be required to establish or understand better their underlying technical and nontechnical causes or contributing factors. While a PEFA report provides extensive evidence for scoring an indicator or dimension, it does not always identify all of the technical and nontechnical causes of good or poor performance. PFM reforms seldom start from a clean slate. Analysis of what has worked or not and the lessons learned is particularly important to understand the underlying causes of PFM performance, to guide reform initiatives, and to identify constraints in later stages.

Further analysis may take different forms. Some problems may require more formal technical analysis, while others may be addressed by more informal, quick inquiry. Countries also should consider other analyses and assessments of underlying issues, such as those undertaken internally by government and externally by think tanks, fiscal councils, supreme audit institutions, nongovernmental organizations, and others.

A review of existing assessments, audits, and other reports is recommended. Reports may include internal and external audit reports, procurement audits, service delivery assessments, surveys, and sector reviews, among others.

Findings and recommendations of other broad PFM diagnostic tools (for example, the International Monetary Fund’s Fiscal Transparency Evaluation) or technical assistance reports may also be used. This information could include the application of other PFM diagnostic tools that focus on individual elements of PFM, such as the Tax Administration Diagnostic Assessment Tool (TADAT), Debt Management Performance Assessment (DeMPA), and Methodology for Assessing Procurement Systems (MAPS).

Some of these diagnostic tools may have been applied prior to the PEFA assessment, and relevant data and analysis may be included as evidence in the PEFA report At other times, governments may see a need to apply one or more of these diagnostic tools after a PEFA assessment, although countries need to be mindful of the resources and time required for these analyses. Specific reform initiatives may be developed as part of a comprehensive and integrated strategy and reform program or based more loosely on individual, prioritized, problem-driven initiatives. Whether to have a formalized and structured reform action plan or strategy or to take a more ad hoc approach will depend on the country’s technical capacity and institutional environment as well as on the extent to which problems, solutions, and commitments are adequately understood and agreed on at the outset.