The PEFA Framework
Term of the Day - 27 March 2024
Today’s Term is “The PEFA Framework”.
Public Expenditure and Financial Accountability (PEFA) is a methodology for assessing the status of public financial management (PFM) systems, practices and institutions in a country. It provides a comprehensive framework for evaluating the condition of key systems and processes that underpin a government's ability to deliver public services consistently and sustainably.
The PEFA framework measures performance across 7 core pillars: budget reliability, transparency of public finances, asset and liability management, policy-based fiscal strategy, predictability and control in budget execution, accounting and reporting, and external scrutiny and audit.
By conducting PEFA assessments periodically, countries can identify PFM strengths and weaknesses, monitor progress over time, and inform reforms to improve their systems and ultimately enhance accountability and effective service delivery.
Budget Reliability - Measures the credibility of the budget by comparing actual revenues and expenditures to the original approved budget.
Transparency of Public Finances - Assesses the comprehensiveness, accessibility and quality of fiscal reporting and information available to the public.
Management of Assets and Liabilities - Evaluates the management of assets, fiscal risks from other public sector entities, and monitoring of public sector liabilities.
Policy-Based Fiscal Strategy and Budgeting - Examines the capacity to develop and cost fiscal strategy aligned with government policies and priorities.
Predictability and Control in Budget Execution - Analyzes the predictability of funding, payroll and procurement systems, controls over non-salary expenditures, and audit mechanisms.
Accounting and Reporting - Assesses the timeliness, understandability and quality of annual financial statements and reporting on service delivery performance.
External Scrutiny and Audit - Evaluates the arrangements for external audit and legislative scrutiny of audit reports and follow-up on recommendations.
By comprehensively covering these 7 pillars, the PEFA framework provides an evidence-based assessment of a country's PFM systems against internationally recognized good practices.
