A study by the PEFA Secretariat identifies 46 diagnostic tools for PFM systems that were in use as of December 2016 (PEFA Secretariat 2018a).

In other cases, governments may apply tools such as a Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis or the Problem Driven Iterative Adaptation (PDIA) approach (for example, the PDIA toolkit from the Center for International Development at Harvard University). The companion document, A Guide to PFM Diagnostic Tools, highlights the coverage of each tool but does not provide recommendations on which tools to use (PEFA Secretariat 2018b).

It is important to identify such factors because they may also act as constraints on or enablers of developing and implementing reform (discussed in stage 5). Analysis may identify reforms that are technically feasible but politically unacceptable. Sequencing and prioritization should take place following a more comprehensive deep dive into the nontechnical factors.

Building on the matrix example of weaknesses and strengths identified in stage 1, table 2.3 adds the underlying causes of strong and poor performance.
Table 2.3 PFM reform matrix example: Underlying causes of strengths and weaknesses
Performance indicator or dimension PEFA score Main strengths and weaknesses Underlying causes
PI–1 D Aggregate expenditure outturns exceed original budget by more than 20% in each of the last three years. Overly optimistic economic and fiscal projections Unavailable economic and fiscal forecasting models Lack of capacity in economic and fiscal forecasting Political involvement in setting fiscal projections
PI–2.1 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.