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PEFA Handbook

Volume III: Preparing the PEFA Report

FINAL VERSION

March, 2016

PEFA Secretariat Washington DC

USA

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PEFA 2016 HANDBOOK Preface

About PEFA

The Public Expenditure and Financial Accountability (PEFA) program provides a framework for assessing and reporting on the strengths and weaknesses of public financial management (PFM). PEFA uses quantitative indicators to measure PFM performance. PEFA is a snapshot of PFM performance at the time of the assessment, but the methodology can be replicated in successive assessments, giving a summary of changes over time. A PEFA assessment incorporates a PFM performance report for the government. The PEFA report includes an overview of the PFM system and evidence-based measurement of performance against 31 indicators. The report also includes an analysis of the findings with respect to the overall system performance and for desirable PFM outcomes. PEFA is a tool that helps governments achieve sustainable improvements in PFM practices by providing a means to measure and monitor performance against a set of indicators across the range of important PFM institutions, systems and processes. The PEFA methodology draws on PFM international standards and good practices as identified by experienced practitioners and academics. PEFA provides a foundation for reform planning, dialogue on strategy and priorities, and progress monitoring. It emphasizes a country-led approach to performance improvement and the alignment of stakeholders on common methodology and data. PEFA reports outline the economic environment faced by the public sector. They examine the nature of policy-based strategy and planning, and analyze how budget decisions are implemented. PEFA assessments examine the controls used by governments to ensure that resources are obtained and used as intended. PEFA also provides a framework for assessment of transparency and accountability in terms of access to information, reporting and audit, and dialogue on PFM policies and actions. PEFA considers the institutions, laws, regulations, and standards used by governments in the PFM process. It also examines the results arising from the operation of PFM in key areas such as budget outturns, effectiveness of controls and timeliness of reporting and audit. PEFA does not include a detailed analysis of the causes of good or poor performance or the appropriateness of government policies. However, identifies the consequences for PFM performance and highlights many of the key risks to the effectiveness of fiscal policies. It provides a foundation for further analysis and dialogue on the causes of performance outcomes and the appropriate actions to address systemic weaknesses. Governments use PEFA to obtain a snapshot of their own PFM performance. PEFA offers a common basis for examining PFM performance across national and subnational governments (SNGs). Other users of PEFA include civil society organizations and international development institutions. PEFA scores and reports provide a quick overview of the strengths and weaknesses of a country’s PFM system. Users can also see the implications of the overall performance results for the key goals of fiscal discipline, strategic resource allocation, and efficient service delivery.

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The PEFA program also provides support, monitoring, and analysis of PEFA assessments. The PEFA Secretariat offers free advice on the use of PEFA as one of many sources of information for examining and improving PFM performance. Released on 1 February 2016, PEFA 2016 is a substantial upgrade responding to the changing landscape of PFM reform and the evolution of good practices over the previous decade. The upgrade was informed by significant feedback from PEFA partners, users, beneficiaries and observers during global public consultation in 2014, followed by extensive testing during 2015. PEFA 2016 builds on the foundations of the 2005 and 2011 versions with four new indicators to assess public investment and asset management, macrofiscal forecasting and fiscal strategy. Existing indicators have been expanded and refined, particularly for budget outturns, revenue management and service delivery performance. Baseline standards for good performance have been recalibrated in many areas. PEFA 2016 introduces a stronger focus on the elements of internal financial control and establishes a clearer and more consistent structure for reporting PEFA findings. PEFA 2016 has replaced PEFA 2011 as the framework to be applied for all new PEFA assessments. About the PEFA 2016 Handbook

The purpose of the PEFA Handbook is to provide users (i.e. government officials, assessors, development partners other interested stakeholders) with comprehensive guidance on planning, implementing and using PEFA 2016 detailed technical guidance on the scoring of all 31 performance indicators and 94 dimensions and preparing the PEFA Report. The handbook is presented in four separate volumes:

• Volume I: PEFA Assessment Process-Planning, Managing and Using PEFA which provides guidance on the key phases and steps in the PEFA assessment process.

• Volume II: PEFA Assessment Fieldguide which provides detailed technical guidance on scoring the 31 performance indicators and 94 dimensions of PEFA 2016 including data requirements and sources, calculation and definitions. The Fieldguide also includes a glossary of terms.

• Volume III: Preparing the PEFA report which sets out a template and instructions for preparing the PEFA

report.

• Volume IV: Supplementary Information for Assessing PFM Performance which will provide information on the relationship between PEFA 2016 and other complementary diagnostic tools and the potential for supplementing a PEFA assessment with other information.

The handbook is intended to be a dynamic document that will be regularly updated in response to issues, concerns and other frequently asked questions raised by government officials, assessors and other stakeholders. Periodic updates to the handbook will be announced on the PEFA website at www.pefa.org. For ease of use, the content of the PEFA 2016 framework document has been replicated within the relevant parts of the handbook (in particular, volume II) to avoid the need for cross-referencing between the various volumes and the framework.

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Volume III: Preparing the PEFA report About Volume III

The purpose of Volume III of the PEFA Handbook (the Handbook) is to provide PEFA users with expanded guidance on how to prepare a PEFA 2016 report following the public release of the Framework document on February 1, 2016. Volume III expands on the PEFA 2016 framework document by providing supplementary guidance on all components of the expected structure of the report. It also provides a description of the information to be included in the report. Volume III includes also the PEFA report template to help the assessment teams in preparing the PEFA assessment reports by showing how information is to be recorded and presented in the report. The template can be used as a basic format for the content of their report. Section 3 of Volume III includes guidance on how to assess performance changes between previous versions of the framework and PEFA 2016. This guidance is also available as a separate document Guidance on reporting performance changes in PEFA 2016 from previous assessments that applied PEFA 2005 or PEFA 2011 at www.pefa.org.

Purpose of the PEFA report As explained in the framework document, the PEFA report aims to provide a comprehensive and integrated assessment of a country’s PFM performance based on an indicator-led analysis of the key elements of a PFM system. It also aims to assess the extent to which PFM performance has changed since earlier assessments. Relevant information is included in the body of the report. Annexes are generally used only to present large data tables and detailed information on matters such as internal financial control, but not to elaborate on the analysis and findings of the report. The PEFA report is an assessment of current PFM performance. It does not include recommendations for reforms or action plans. Differences of views over the findings of the report between the government and other stakeholders involved in preparing the assessment can be accommodated by summarizing significant differences in an annex of the report. PEFA reports are produced for government and are intended to inform their PFM and associated reform initiatives. To that end, it is crucial that governments are engaged in the assessment and provide input and comments throughout the process. It is expected that PEFA reports will be published by governments and available to interested people within and outside the country covered by a report. The PEFA website contains every report provided to the PEFA Secretariat since the program commenced and all reports published by governments are available to the public through the PEFA website.

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Structure of the PEFA Report The structure of the report is shown in the table of contents on the next page. A table of contents and a list of abbreviations are provided at the beginning of the report, before the executive summary. Information on relevant details is also provided, such the fiscal year, the currency used in the report, and its exchange rate with major international currencies such USD or EUR. Certain mandatory data tables are specified in section 2 of the report and for selected indicators, in section 3. The tables should be filled in to the extent that the information is available. It should be presented in a format that assessors consider appropriate. Assessors are not expected to undertake a major exercise to collect and process data for the mandatory tables. The focus should be on using readily available data to present an overview of central government and its operations, as a basis for comment in the report narrative.

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STRUCTURE OF THE PEFA REPORT: Recommended table of contents

EXECUTIVE SUMMARY 1. INTRODUCTION

1.1 Rationale and purpose 1.2 Assessment management and quality assurance 1.3 Assessment methodology

2. COUNTRY BACKGROUND INFORMATION

2.1 Country economic situation 2.2 Fiscal and budgetary trends 2.3 Legal and regulatory arrangements for PFM 2.4 Institutional arrangements for PFM 2.5 Other important features of PFM and its operating environment

3. ASSESSMENT OF PFM PERFORMANCE

3.1 Budget reliability 3.2 Transparency of public finances 3.3 Management of assets and liabilities 3.4 Policy-based fiscal strategy and budgeting 3.5 Predictability and control in budget execution 3.6 Accounting and reporting 3.7 External scrutiny and audit

4. CONCLUSIONS ON THE ANALYSIS OF PFM SYSTEMS

4.1 Integrated assessment of PFM performance 4.2 Effectiveness of the internal control framework 4.3 PFM strengths and weaknesses 4.4 Performance changes since a previous assessment

5 GOVERNMENT PFM REFORM PROCESS

5.1 Approach to PFM reform 5.2 Recent and on-going reform actions 5.3 Institutional considerations

ANNEXES

Annex 1: Performance indicator summary Annex 2: Summary of observations on the internal control framework Annex 3: Sources of information Annex 4: Tracking changes in performance based on previous versions of PEFA (if a successive assessment) Annex 5 Calculation of budget variances for PI-1, 2 and 3

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Executive summary The objective of the executive summary is to provide an integrated and strategic overview of the findings of the report. The executive summary covers the impact of public financial management on three fiscal and budgetary outcomes: achievement of aggregate fiscal discipline, strategic allocation of resources, and efficient service delivery. It summarizes the main changes in performance since any previous assessment. The indicative length of this section is three pages. The section includes a table, not exceeding one page, which gives an overview of the scores for each of the PEFA indicators (See Table 1: Overview of the scores of the PEFA indicators). (Note: A more detailed table that sets out the scores at both indicator and dimension level, as well as a brief description of the requirements met is included in Annex 1. Performance indicator summary. Annex I also includes columns to capture scores from a previous assessment that used the PEFA 2016 methodology. However, annex 1 cannot be used to compare scores with a previous assessment that used the 2005 or 2011 versions of the framework. Tracking performance changes in these circumstances will require assessors to complete a supplementary annex (See Annex 4: Tracking changes in performance based on previous versions of PEFA). The supplementary annex should be prepared in compliance with the Guidance on reporting performance changes in PEFA 2016 from previous assessments that applied PEFA 2005 or PEFA 2011 at www.pefa.org.)) The executive summary presents a synopsis of the key information, data, and analysis presented in sections 1-5 of the report. It includes the following:

• Purpose and management A brief explanation of the main reason for the assessment and how it relates to the PFM reform agenda; and a brief description of the management arrangements, including the model of assessment (e.g., self or joint assessment) and the funding source.

• Scope, coverage, and timing Explanation of the assessment’s scope (e.g., central government, sub-national government), coverage (e.g., budgetary units and extrabudgetary units), and timing (i.e., what is being assessed and at what point in time).

• Impact of PFM on budgetary and fiscal outcomes Explanation of how PFM performance affects the three main fiscal and budgetary outcomes. This takes into account the specific economic, political and administrative structure of the country, and highlights the major strengths and weaknesses identified in the report that are likely to impact PFM performance.

• Performance changes (if applicable) A summary of the main performance changes since any earlier PEFA assessment. This is also structured according to the three main fiscal and budgetary outcomes.

• PFM reform agenda A brief overview of the country’s ongoing and planned PFM reform agenda or program, including links to recent performance changes and the main identified weaknesses identified in the report.

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Table 1: Overview of the scores of the PEFA indicators

PFM Performance Indicator Scoring Method

Dimension Ratings Overall Rating i. ii. iii. iv.

Pillar I. PFM-OUT-TURNS: Budget reliability PI-1 Aggregate expenditure outturn M1 PI-2 Expenditure composition outturn M1 PI-3 Revenue outturn M1 II. Transparency of public finances PI-4 Budget classification M1 PI-5 Budget documentation M1

PI-6 Central government operations outside financial reports M2

PI-7 Transfers to subnational governments M2 PI-8 Performance information for service delivery M2 PI-9 Public access to fiscal information M1

III. Management of assets and liabilities PI-10 Fiscal risk reporting. M2

PI-11 Public investment management M2 PI-12 Public asset management M2 PI-13 Debt management M2

IV. Policy-based fiscal strategy and budgeting

PI-14 Macroeconomic and fiscal forecasting M2

PI-15 Fiscal strategy M2 PI-16 Medium-term Perspective in expenditure Budgeting M2 PI-17 Budget preparation process M2 PI-18 Legislative scrutiny of budgets M2

V. Predictability and control in budget execution PI-19 Revenue administration M2

PI-20 Accounting for revenue M1

PI-21 Predictability of in-year resource allocation M2

PI-22 Expenditure arrears M1 PI-23 Payroll controls M1 PI-24 Procurement management M2 PI-25 Internal controls on non-salary expenditure M2

PI-26 Internal audit M1

VI. Accounting and reporting PI-27 Financial data integrity M2 PI-28 In-year budget reports M1

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PFM Performance Indicator Scoring Method

Dimension Ratings Overall Rating i. ii. iii. iv.

PI-29 Annual financial reports M1

VII. External scrutiny and audit PI-30 External audit M1

PI-31 Legislative scrutiny of audit reports M1

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1. Introduction The introduction explains the context and purpose of the PFM assessment, the process by which the PEFA report was prepared, and the methodology used in undertaking the assessment. The indicative length of this section is three to five pages.

1.1 Rationale and purpose This section describes the objective of the PEFA assessment and important background information, including why it has been undertaken at this time, reference to any previous PEFA assessment(s), and its relevance to on-going reform activities.

1.2 Assessment management and quality assurance This section describes the process of preparing the report, including:

i. The organization(s) that initiated, commissioned and funded the assessment; or any other funding arrangements;

ii. The extent to which government institutions and government officials were involved in the preparation of the report;

iii. The roles and contributions of any other stakeholders in the assessment, e.g., oversight agencies such as Supreme Audit Institutions (SAI), legislature, development partners, and non-state actors such as civil society organizations, chamber of commerce, etc.

The section includes information on the assessment management and quality assurance arrangements established for planning and managing the PEFA assessment as presented in the box below. Additionally, the section should make reference to the PEFA CHECK requirements (www.pefa.org) and any other information relevant to the quality assurance process.

BOX 1.1: Assessment management and quality assurance arrangements PEFA assessment management organization

• Oversight Team — Chair & Members: [names & organizations] • Assessment Manager: [name and organization] • Assessment Team Leader and Team Members: [name and organization for each]

Review of concept note and/or terms of reference

• Date of reviewed draft concept note and/or terms of reference: • Invited reviewers: [name and organization for each one, or as group e.g. the Oversight Team] • Reviewers who provided comments: [name and organization for each one, in particular the PEFA Secretariat

and date(s) of its review(s) or as group e.g. the Oversight Team] • Date(s) of final concept note and/or terms of reference:

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Review of the assessment report • Date(s) of reviewed draft report(s): • Invited reviewers: [name and organization for each one, in particular the PEFA Secretariat and date(s) of its

review(s) or as group e.g. the Oversight Team] • Reviewers who provided comments: [name and organization for each one]

1.3 Assessment methodology

This section describes the methodological choices made for the assessment. Four main topics are covered:

1. Scope and coverage of the assessment The scope refers to the tier of government covered, which is typically a central government or one subnational government. The report further specifies the coverage of the assessment by explaining which institutional units (such budgetary and extrabudgetary units) and operations are covered and which are not. Setting the boundaries of the government being assessed concerns both the boundaries with other tiers of government and the boundaries with other parts of the general government sector, for example, institutional units outside central government such as public corporations. Any deviations from the coverage of central government or a subnational government specified in the coverage for each indicator must be explained and justified. In particular, the coverage of social security funds, sovereign wealth funds, and structured financing instruments such as PPPs shall be specified. Definition of the assessment coverage shall be consistent with the description of institutional units and fiscal operations, as provided in subsections 2.3 and 2.4 of the report.

2. When performance is assessed

Description of the timeline for the assessment with the data cut-off date for measurement is to be clearly defined. The cut-off date is the last date for which data included in the assessment was considered. This is crucial for identifying the “last completed fiscal year” as well as for the “last three completed years” referred to in many dimensions, and the critical date for consideration of circumstances applying “at the time of the assessment”, which is relevant to some dimensions. In addition, useful information received up to the date the report goes for final formatting and issue should be mentioned in footnotes and clearly state that this late information has not affected the score.

3. Sources of information

The assessment team will need to collect information from officials from central finance agencies as well as from a variety of budgetary units and other institutional units. In order to obtain a fair representation of institutions within the resource constraints on the assessment team, the units from which information is to be collected need to be selected on an indicator by indicator basis. The basis for selecting government units from which information is collected is often specified in the guidance for individual indicators. The government units selected for an indicator should be described in the report within the narrative for each indicator, together with the method used for selecting a sample, where relevant. Other sources of information used for the assessment are described in this section of the report. This would include documents obtained from, and interviews with, representatives of other levels of government, public corporations, private sector, nongovernmental organizations, and external finance institutions and development partners. These latter sources will be particularly useful for corroborating evidence provided by government units. A full list of people interviewed and a full list of sources of information shall be provided in Annex 3 of the report. It is recommended that the sources of information are listed by indicator.

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See examples of presentation for Annex 3 A: List of related survey and analytical work; Annex 3 B: List of people who have been interviewed and provided information for the PFM performance; and Annex 3: C: Sources of Information by indicator.

4. Other methodological issues for the preparation of the report

This includes information such as any departure from use of the entire indicator set, and whether the assessment is a stand-alone assessment or is combined with any other analytical work. should be explained. The treatment of indicators or dimensions that are not applicable or not used is discussed in part 2, section 2.1.2 of the PEFA 2016 Framework document (page 7). The report should provide a clear justification of why a specific dimension or an indicator is considered not applicable or why it was not used. In the latter, the indicator not to be used would normally have been identified, explained and agreed at the Concept Note (CN)/Terms of Reference (ToR) stage.

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2. Country background information The objective of this section is to provide information on the country being assessed, to allow sufficient understanding of the wider context to PFM reforms as well as the core characteristics of PFM in the country. The indicative length of this section is six to ten pages.

2.1 Country economic situation

• Country context

The report presents information on the population, income level, percentage of population living below the poverty line, growth rate, inflation, economic structure and main challenges for growth and development. This should include information on any significant dependence of the economy and government revenue on specific sources, including extraction of natural resources or financial support from external finance agencies and development partners.

• The government’s main economic challenges and government-wide reforms

The report focuses on the issues that represent major fiscal risks and are likely to influence the objectives of fiscal and PFM reform.

• Key selected economic indicators

The report presents key selected indicators for the past three years (see illustration of key indicators in table 2.1).

TABLE 2.1: Selected economic indicators

FY T-2 FY T-1 FY T GDP GDP per capita (currency units) Real GDP growth (%) CPI (annual average change) (%) Gross government debt (% of GDP) External terms of trade (annual percentage change) Current account balance (% of GDP) Total external debt (% of GDP) Gross official reserves (months of import value)

Key indicators are illustrative only—others may be relevant to the country situation

2.2 Fiscal and budgetary trends The information for this subsection is drawn from existing recent fiscal and expenditure policy analysis or other recent relevant studies.

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• Fiscal performance

The report includes a short comment on the main trends in aggregate fiscal discipline for the last three years, based on the information provided by table 2.2. It also integrates other relevant information, for example on the debt stock, included in table 2.1. Information on stated aggregate fiscal objectives and targets, as well as any legislated fiscal rules, may be provided in this section or cross-referenced to PI-15 in Section 3 of the PEFA report.

TABLE 2.2: Aggregate fiscal data

Central government actuals (in percent of GDP) FY T-2 FY T-1 FY T Total revenue —Own revenue —Grants Total expenditure —Noninterest expenditure —Interest expenditure Aggregate deficit (incl. grants) Primary deficit Net financing —External —Domestic

The table should show the overall totals for the central government sector. If only budget data is included this should be specifically mentioned.

• Allocation of resources The report should highlight the trends in sectoral and economic allocation of resources. It also provides a statement on the priorities embodied in the national strategy and whether budget allocations have been developed with reference to those priorities.

TABLE 2.3: Budget allocations by function

Actual budgetary allocations by sectors (as a percentage of total expenditures) FY T-2 FY T-1 FY T Health Education Agriculture Etc.

Data for tables 2-2 and 2-3 shall be presented according to the classification used by the government TABLE 2.4: Budget allocations by economic classification

Actual budgetary allocations by economic classification (as a percentage of total expenditures) FY T-2 FY T-1 FY T Current expenditures —Wages and salaries —Goods and services —Interest —Transfers —Others Capital expenditures

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2.3 Legal and regulatory arrangements for PFM The report lists and summarizes the laws and regulations that determine the structure and guide the operation of the PFM system. Typically, the starting point is the country’s constitution. It explains the distinction between the different branches of government (legislative, executive, judicial), the legal basis for different layers of government (central, state, municipalities, etc.) and other organizational structures such as extrabudgetary units and public corporations. It describes the main laws governing PFM and the degree of integration or fragmentation of legislation covering different aspects of PFM such as budget management, revenue mobilization, investment and debt management, procurement, accounting, external oversight, etc. It also highlights important country–specific provisions. A brief description of recent changes made to the legal framework is included, if relevant. A subsection should also describe the legal and regulatory arrangements for the internal control system. According to international standards1, internal control is an integral process designed to address risks and provide reasonable assurance that, in pursuit of the entity’s mission, the following general objectives are being achieved: (i) executing orderly, ethical, economical, efficient, and effective operations; (ii) fulfilling accountability obligations; (iii) complying with applicable laws and regulations; and (iv) safeguarding resources against loss, misuse and damage. To achieve those general objectives, the internal control system should consist of five interrelated components: a control environment, risk assessment, control activities, information and communication, and monitoring. This integrated approach is designed for public entities to establish effective controls customized to their objectives and risks. It also provides a basis on which internal control can be described and evaluated. The description of the policies and the legal and regulatory arrangements for internal control in this subsection should be presented in relation to each of those five components. This description should be complemented in section 2.4 with information about the institutional structure supporting the implementation of the internal control system. An overall indication of the effectiveness of the internal control framework is given in section 4.2. That section draws on both this subsection and the control activities included in the performance indicator assessments. Thus, subsections 2.3 and 2.4 should describe the design of the internal control framework and section 4.2 should evaluate whether it operates so as to achieve the intended objectives.

2.4 Institutional arrangements for PFM The report here describes the structure of the overall public sector and the central government respectively, in terms of the number of institutions involved and the financial importance of each segment, as illustrated in tables 2-5, 2-6 and 2.7. The information may be gathered from various sources such as government financial statistics, consolidated government accounts, and statistics or accounts for individual institutions. Data should preferably

1 International Organization of Supreme Audit Institutions, “Guidelines for Internal Control Standards for the Public Sector” (INTOSAI GOV 9100).

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cover the last completed fiscal year. The sources of information are explained. Any double counting in totals or deviations from data used for scoring indicators PI-1, 2 and 3 should be mentioned. The information serves as a basis for understanding the coverage and boundaries of the assessment as presented in section 1.3 of the report. It also provides an opportunity to explain the relative importance of different segments of the public sector for the analysis in section 4. TABLE 2.5: Structure of the public sector (number of entities and financial turn-over)

Public sector Year Government subsector Social security

funds 1/ Public corporation subsector

Budgetary unit

Extrabudgetary units

Nonfinancial public

corporations

Financial public corporations

Central 1st tier subnational (State) Lower tier(s) of subnational

2/

1/ Depending on management control and funding arrangements, a social security fund is a public sector entity that may form part of a particular level of government or be classified as a separate sub-sector of the government sector (GFS 2014, para- graph 2.78). 2/ ‘Budgetary central government‘ comprises all central government entities included in the central government budget. TABLE 2.6: Financial structure of central government—budget estimates (in currency units)

Year Central government Budgetary

unit Extrabudgetary

units Social security

funds Total

aggregated 1/ Revenue Expenditure Transfers to (-) and from (+) other units of general government Liabilities Financial assets Nonfinancial assets

1/Where available this should be the consolidated total, but other aggregation method may be used (with explanation). TABLE 2.7: Financial structure of central government – actual expenditure (in currency units)

Year Central government Budgetary

unit Extrabudgetary

units Social security

funds Total

aggregated 1/ Revenue Expenditure Transfers to (-) and from (+) other units of general government Liabilities Financial assets Nonfinancial assets

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1/ Where available this should be the consolidated total, but other aggregation method may be used (with explanation). This subsection describes the responsibilities of the main entities involved in PFM, including those in the different branches of government (executive, legislative, and the judicial), those in the different tiers of government (central and subnational governments), and those in extrabudgetary units (where relevant with cross-reference to the data for relative importance of the different segments of the public sector as per subsection 2.3). Additional information on the broad responsibilities for public financial management between the central finance agencies (such as Ministry of Finance, Ministry of Economic Planning, Revenue Authority, the Central Bank, Supreme Audit Institution, etc.), and between the Ministry of Finance and the line ministries is included. The organizational structure and departmental responsibilities of the Ministry of Finance are described, with an organization chart, if available, to be included as an annex. Any recent changes in responsibilities are mentioned. In particular, the subsection highlights the institutional structures that have been established as part of the internal control framework, including their respective roles and responsibilities.

2.5 Other key features of PFM and its operating environment This subsection describes the key features of the PFM system. This includes:

i. The degree of centralization of the PFM system ii. The extent of earmarked revenue or extrabudgetary units

iii. The type of control exercised by the external oversight bodies, and iv. Any recent changes or reforms.

This subsection also explains any legal provisions and institutional structures for public participation in budget management, complementary to the role of the legislature as the representative of citizens’ interests. If no such legal provisions or institutional structures exist, this should be noted in the report. The information provided here is to be descriptive and is not intended to make a statement on compliance with existing rules or effective roles played by the legislature and external audit. Such issues are captured in the detailed assessment of the PFM system in section 3 and the cross-functional analysis in section 4.

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3. Assessment of PFM performance

The objective of this section is to provide an assessment of the key elements of the PFM system, as captured by the indicators. The indicative length for this section is 30-40 pages. The structure of the section is based on the seven pillars as follows:

3.1 Budget reliability 3.2 Transparency of public finances 3.3 Management of assets and liabilities 3.4 Policy-based fiscal strategy and budgeting 3.5 Predictability and control in budget execution 3.6 Accounting and reporting 3.7 External scrutiny and audit

Each subsection discusses the relevant indicators. For example, subsection 3.2 on transparency of public finances focuses on PI-4 to PI-9. Reporting follows the numerical order of the indicators. Each indicator is reported separately and discusses the assessment of the present situation, performance change over time, and a description of the reform measures being introduced to address the identified weaknesses. Guidance related to this section is also provided by:

• The PEFA Framework. A specific part is dedicated to the PEFA report (see PEFA Framework, pages 94 and 95.

• Volume II of the PEFA Handbook: PEFA Assessment Fieldguide. Each indicator presents measurement guidance both at the indicator and at the dimension level, with some elements dealing with narrative part.

To illustrate good practice on how to prepare the narrative for each indicator, the Secretariat offers two examples, PI-7 and PI-22 which have been drawn from recent PEFA 2016 reports. These examples represent good practices as they explain the main features of the system in the relevant country. They provide evidence-based information to assess the extent to which the indicator and dimension requirements are met. They also provide additional contextual information to understand how the system functions within the country’s context. Indicator led analysis should include five elements:

1. Summary of scores and performance table This subsection may be presented as specified in the PEFA framework. The column Brief justification of score should build on the evidence described under the subsection General description of the system in relation to the indicator. It must not be simply the repetition of the requirements corresponding to the specific score.

Example 1: PI-7. Transfers to subnational governments

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Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-7 Transfers to subnational governments B

7.1. System for allocating transfers A

As set forth in Table 7.1, the horizontal allocation of 91.7% of transfers to Pefalian municipalities is determined by transparent and rule-based systems.

7.2. Timeliness of information on transfers C

The process by which Pefalian municipalities receive information on their annual transfers is managed through the regular budget calendar. However, the actual transmission of the information on transfers experienced more than one-month delay in 2015. Information was received after the budgets were voted but before the start of the municipalities’ fiscal year.

Example 2: PI-22. Expenditure arrears Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-22. Expenditure arrears B+

22.1. Stock of expenditure arrears A The stock of arrears is less that 2 percent of total expenditure at the end of June 2015, 2014 and 2103.

22.2. Expenditure arrears monitoring B Data is monitored monthly, within two weeks from the

end of the month. Data collected cannot be aged.

2. General description of the characteristics of the indicator within the scope covered This subsection may describe the institutional and organizational arrangements and the legislation relevant to the subject being assessed by the indicator. Regarding institutional and organizational arrangements, the narrative may in particular highlight the case when the subject being assessed involves a large number of significant entities or is highly decentralized, as complete information on that subject may be impractical to collect as a result. This description would support the use of a sampling methodology. Regarding legislation, this section may for instance justify any country or region specific definition set out by the regulation that would differ from the definition of the PEFA Framework (e.g. expenditure arrears, major investment projects, etc.).

Example 1: P-7. Transfers to subnational governments Currently, there are 53 autonomous municipalities in Pefalia, and there was a significant increase in the number of municipalities in recent years, with the creation of 10 new municipalities in 2010 and 20 in 2015. The central Government budget transfers to municipalities consist of the allocation for the Municipal Compensation Fund (MCF), which serves to support the running costs of the municipalities; the Municipal Investment Fund (MIF) and allocations under the Strategic Program for Urban Poverty Reduction (SPUPR). In addition, the municipalities benefit from a share of the Road Fund.

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Example 2: P-22. Expenditure arrears Under Pefalia regulation, all categories of arrears except salaries and pensions are subject to the same rule: invoices owed for more than thirty (30) days after receipt become arrears. Salaries and pensions are due as specified in the contract (usually the last business day of the month) and become arrears if payment is not made on time. The Automated Financial Information System (AFIS) captures all the information needed to monitor arrears. AFIS enables to record budget appropriations, commitments against allocated funds, actual expenditure and corresponding disbursements. AFIS provides reports on arrears that are generated automatically at the end of the fiscal year (June 30).

3. Performance level and evidence for scoring of each dimension

For each dimension, this subsection may be presented as specified in the PEFA 2016 Framework (page 94).

• The text gives a clear understanding of the actual performance of each of the PFM dimensions captured by the indicators and the rationale for its scoring. Each dimension of the indicator is discussed in the text and addressed in a way that enables understanding of the specific score (A, B, C or D) achieved for the dimension.

• The report indicates the factual evidence, including quantitative data, which has been used to substantiate the assessment. The information is specific wherever possible, for example, in terms of quantities, dates, and time spans.

• Any issues in relation to the timeliness or reliability of data and evidence is noted. • If insufficient information has been obtained either for a whole indicator or one of its

dimensions, the text explicitly mentions it. The performance dimension narrative also refers to the compulsory elements and can be enhanced by using the specific guidelines described below.

Mandatory tables The PEFA Framework 2016 introduces compulsory tables: For instance,

• Calculation sheets for PI-1, 2 and 3 As a reminder, the calculation sheets for PI-1. Aggregate expenditure outturn and PI-2. Expenditure composition can be found at the PEFA website (www.pefa.org) at: https://pefa.org/sites/default/files/En-PI-1%20%20PI-2%20Exp%20calculation-Feb%202016.xls. The calculation sheet for PI-3. Revenue outturn, can also be found at PEFA website at: https://pefa.org/sites/default/files/En-PI-3%202%20Rev%20outturn%20calculation-Feb%201_%202016_0.xls. As per good practice, the tables presenting the results for PI-1, 2 and 3 are expected to be inserted as an Annex to support the scores given.

• PI-12, Table 12.1: Categories of nonfinancial assets, as described in the PEFA Framework, page 40. Recommended tables In addition to mandatory tables, different types of tables, i.e. summary tables, and summary boxes for checklist, etc., may be inserted to support the scoring and facilitate the report reading. Specific guidance is provided in the PEFA report template for each dimension where a table could be used. For instance:

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• PI-6. Central government operations outside financial reports. • PI-7.1. System for allocating transfers. • PI-8. Performance information for service delivery. • PI-10. Fiscal risk reporting, Table 10.1: Financial reports of public corporation. • PI-11. Public investment management. • PI-15. Fiscal Strategy: Table 15.2: Fiscal impact of policy proposals. • PI-16.4. Consistency of budgets with previous year’s estimates.

The assessment of most indicators combines multiple requirements. In such cases, for easy reference, the report could present the evidence used and the results of the assessment in a summary table. The list of indicators/ dimensions that could use a summary table is the following:

• PI- 17.1 Budget calendar. • PI-17.3 Budget submission to the legislature. • PI-18.3 Timing of budget approval. • PI-20.1 Information on revenue collections. • PI-20.2 Transfer of revenue collection. • PI-20.3 Revenue accounts reconciliation. • PI-21.1 Consolidation of cash balances. • PI-22.1 Stock of expenditure arrears. • PI-22.2 Expenditure arrears monitoring. • PI-27.1 Bank account reconciliation. • PI-27.2 Suspense accounts. • PI-27.3 Advance accounts. • PI-28.2 In-year budget report. • Pi-30-2 Submission of audit reports to the legislature. • PI- 31-1 Timing of audit report scrutiny.:

In some instances, indicators/ dimensions are assessed on the basis of a list of elements, for each of which specific requirements need to be met. In such cases, for easy reference, the report could present the evidence used and the results of the assessment in a summary box for checklists. The list of indicators/ dimensions that could use a summary box is following:

• PI-5. Budget documentation • PI-9. Public access to fiscal information • PI-24.3 Public access to procurement information • PI-24.4 Procurement complaints management • PI-30.4 Supreme Audit Institution independence

For each dimension, it would be useful to end the description by a short sentence stating the score given. For instance, “Hence, the score for the present dimension is ...” or “Based on the analysis and supporting evidence, the score for the present dimension is…”. See below one example for PI-22 for the country of Pefalia that is applying PEFA 2016 Framework.

Example 1: PI-22. Expenditure arrears Dimension 22.1. Stock of expenditure arrears

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At the end of the fiscal year, the Accountant General Department generates from AFIS:

• The list of all payments that have not been released; • The list of all claims that have not been processed.

Some of these expenditures may not be classified as arrears, as an age profile was not provided. However, the Accountant General Department confirmed that most of the invoices would have been owed for more than thirty (30) days, and as such become arrears by the end of each year assessed.

The table below presents a summary of outstanding payments as at June 30, 2015, 2014 and 2013. As shown in this table, the total value of unprocessed claims and unreleased checks is below two percent of total expenditure for each year assessed. Discussions with budget units support the findings. The Chamber of Commerce and Industry also expressed their satisfaction with payment coming from the government and did not report any issues with arrears. Based on the analysis and supporting evidence, the score for this dimension is A.

Table 22.1. Summary of stock of expenditure arrears Items June

June 2014 June 2015

Unprocessed claims 193,120 321,658 0 Unreleased checks 2,706,406 2,291,018 6,141,855 Total stock of arrears 2,904,526 2,612,676 6,141,855 Total expenditure for the year 502,711,265 501,835,655 499,081,331 Ratio Total stock of arrears/ Total expenditure (in %)

0.58 0.52 1.23

Dimension 22.2. Expenditure arrears monitoring The Accountant General Department monitors data on all outstanding payments monthly, within two weeks from the end of the month. The department gathers the information from budgetary units and presents the data to a dedicated Committee for a strategy/ funding to clear. As already indicated in the narrative under PI-22.1, the data collected does not include an age profile. Based on the analysis and supporting evidence, the score for this dimension is B.

4. Performance change since the previous assessment, where applicable

This subsection may be presented as specified in the PEFA 2016 framework (page 95). Performance change over time is reported for each indicator to complement indicator scoring in cases where an earlier PEFA assessment has taken place. This is intended to capture the dynamic aspects of the reform process and capacity development in the country while retaining sufficient rigor in assessing ongoing changes2. Reporting on performance change over time involves: • Presentation of evidence for each dimension and indicator score compared with the previous score.

2 The level of performance of the PFM system, as captured by the indicators, reflects a combination of historical, political, institutional, and economic factors and is not necessarily representative of recent or on-going efforts made by government to improve PFM performance. Improvement in the indicator scores may take several years due to the size of steps between scores in PEFA indicators and dimensions. This is why the PEFA report proposes the inclusion of commentary on progress made in improving PFM performance as captured by the indicators.

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• Highlighting comparability issues in relation to the previous assessment, such as differences in coverage, changes in definitions related to the subject, different interpretation of data, etc., so that the robustness of the evidence of change is fully disclosed.

• Explanation of changes in performance that may not be captured by a change of the score, but are nevertheless evidenced. These may include a performance change for one or more scoring requirements for a dimension or the fact that the overall indicator score may not have changed despite changes in one or more dimension scores.

This subsection is to be used only in successive assessments where both the previous and the current assessment use the PEFA 2016 Framework. If an assessment is undertaken applying PEFA 2016 while the previous assessment used the 2011 or the 2005 version of the framework, please refer to the Guidance on reporting performance changes in PEFA 2016 from previous assessments that applied PEFA 2005 or PEFA 2011 at www.pefa.org.

5. Recent or ongoing reform activities This subsection may be presented as specified in the PEFA 2016 framework document (page 95). The activities relevant to the indicator would include reforms that: • may already have impacted performance • have been implemented but where evidence for their impact is not yet available may be under

implementation, or • are to start during the time of the assessment.

The report does not attempt to assess reform relevance or success, and is limited to noting possible links between performance and reform. Reference to government reform plans or description of existing conditionality required by international finance institutions or donors (i.e., reform measures yet to be implemented) are not considered sufficient evidence for demonstrating status or progress of reform efforts. As for the previous subsection, this one is also to be used when the previous assessment applied the PEFA 2016 Framework. The same alternative guidance is also to be referred to where the previous assessment used an earlier version of PEFA.

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4. Conclusions of the analysis of PFM systems The objective of this section is to present an integrated analysis on the basis of information provided in the preceding sections 2 and 3, and to state overall conclusions on the performance of PFM. In particular, the analysis seeks to assess the PFM performance across the seven pillars and explain how this affects the government’s ability to deliver the intended fiscal and budgetary outcomes, and to identify the main weaknesses of PFM that need to be addressed. The indicative length of this section is six to ten pages.

4.1 Integrated assessment of PFM performance This subsection summarizes key strengths and weaknesses of PFM as identified by the performance indicators in Section 3, and explains them in terms of the overall implications for the seven pillars of PFM performance. The analysis captures the interdependence between the indicators within each pillar. It also examines the links between indicators across the pillars in order to explain how performance of certain functions depends on the performance of others. Where applicable the narrative for each pillar should highlight any improvements or deterioration in overall performance between the period being assessed and a previous assessment. It should also note any apparent links between the main strengths and weakness of the pillar and specific reform initiatives undertaken or planned. (Note: government reform initiatives are discussed further in Section 5.) To illustrate good practice on how to summarize strengths and weaknesses and its implications for each pillar the Secretariat offers the examples presented in text boxes below which have been drawn from recent PEFA 2016 reports.

PILLAR ONE: Budget reliability Pillar one performance indicators:

• PI-1. Aggregate expenditure outturn • PI-2. Expenditure composition outturn • PI-3. Revenue outturn

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In order for the government budget to be useful for policy implementation, it is necessary that it be realistic and implemented as passed by the legislature. Budget reliability is important for maintaining fiscal discipline – overspending and shortfalls in budgeted revenues have serious impacts on the fiscal balance and can lead to increased debt (and debt servicing costs). Unplanned changes in budget composition can undermine the government’s budget allocation priorities. The narrative should highlight the extent to which actual revenues and expenditures deviate from the originally approved budget. Assessors should note any apparent trends in any deviation e.g. consistent over or underspending compared to the original approved budget or significant deviations in composition of expenditures, as well as any specific factors that may impact on reliability such as global and regional economic shocks. The narrative should also cross-reference budget reliability as assessed by PIs1-3 with the performance of macroeconomic and fiscal forecasts as assessed under PI-14. It may also be relevant to cross reference to other indicators under pillars 3, 4, and 5.

Example: Pillar One- Budget reliability Aggregate expenditure deviated from the approved budget by between 8 and 10% for each of the last three completed fiscal years. The main reason for the deviation relates to the approval of donor funded expenditure after the budget has been enacted by the legislature. The approved annual budget only includes donor-funded project expenditure that has been formally agreed at the time of budget preparation. As new donor agreements are concluded during the budget year, supplementary estimates are prepared for legislative approval. Aggregate revenues reflect a similar deviation 7-9% respectively for each of the last three completed fiscal years. Variations in projections of domestic revenue were less than 2%. The variance is largely attributable to unreliable projections of donor grants, and their conservative budgeting; as with expenditures, only formally agreed donor grants are included in the revenue estimates. The aggregate control of both expenditure and domestic revenue facilitates control of the fiscal deficit. Contingency reserve in the annual budget is relatively high (13% of total expenditure in the most recent fiscal year), but actual expenditure is charged to the benefitting agencies and the budget is re-allocated. This is good international practice, even though it contributes to expenditure variance. At the agency level, there is high variance of expenditure. On an administrative classification, variance of expenditure composition from the budget (current and capital together) was more than 15% in each of the past three years. On an economic classification basis, there was also significant variance. These variances are largely due to the post-budget approval of donor capital expenditure. The composition of revenue (share of each revenue item in the total) also varied highly from the original budget, mainly because of the underlying variation in external grants. External grants are not included in the original budget unless confirmed. Such variations are beyond the control of the Government. Subsequent policy changes and confirmed grants are reflected in revised estimates later in the year.

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PILLAR TWO: Transparency of public finances Pillar two performance indicators:

• PI-4. Budget classification • PI-5. Budget documentation • PI-6. Central government operations outside financial reports • PI-7. Transfers to subnational governments • PI-8. Performance information for service delivery • PI-9. Public access to fiscal information

Transparency of information on public finances is necessary to ensure that activities and operations of governments are taking place within the government fiscal policy framework and are subject to adequate budget management and reporting arrangements. Transparency is an important feature that enables external scrutiny of government policies and programs and their implementation. Information on PFM should be comprehensive and accessible to users. This is achieved through comprehensive budget classification, transparency of all government revenue and expenditure including intergovernmental transfers, published information on service delivery performance and ready access to fiscal and budget documentation. Activities that are not managed and reported through the annual budget processes are unlikely to be subject to the same kind of policy scrutiny and financial controls as are those included in the budget. This increases the risks that those activities take place without reference to the policy priorities and fiscal targets decided by government as well as the potential risks to budgetary and fiscal outcomes (i.e. aggregate fiscal discipline, strategic allocation of resources and efficiency in service delivery). The narrative explains the extent to which the budget, its structure and supporting documentation includes all necessary information to support effective decision-making by the executive and the legislature. The narrative also explains the extent to which key fiscal information is available to the public and whether the budget and supporting documentation sets out the government’s plans for resourcing and monitoring and reporting on the performance of its service delivery programs. Where relevant, the report describes the transparency and timeliness of transfers from central to subnational governments. It may also be relevant to cross reference to other indicators where transparency is an important factor such as pillars 3, 4, 5, 6 and 7.

Example: Pillar Two- Transparency of public finances Pefalia produces extensive information regarding the finances of the budgetary central government. The chart of accounts (CoA), which underpins budget preparation, execution, and reporting, is comprehensive and broadly consistent with Government Finance Statistics (GFS) standards. The CoA is embedded within the

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Financial Management Information System (FMIS), which is able to produce timely and accurate data on the execution of the budget. This is used to prepare internal fiscal reports on a monthly and quarterly basis. Ex-post data on expenditure and revenues outside the budget is not provided but is estimated to be minimal and mainly relate to schools’ fees collected and used by primary schools. The fiscal risks of this are minimal. The financial reports of the social security fund which represents over 90% of extrabudgetary expenditure are available within six months of the end of the financial year. The transfers to subnational government, which are included in the budget, are determined by a transparent and rule-based system. As a result, the budget documents include all of the basic, and much of the supplementary information required to support a transparent multi-year budget process. In recent years Pefalia has commenced gathering performance plans and some agencies have begun producing some limited information on the outputs produced and outcomes achieved by the services they delivery. A basic performance reporting framework has now been developed which has the potential to be more widely used. Information on resources is not available to the main service delivery units of the two largest ministries, health and education (i.e. schools, hospitals and healthcare centers). No evaluation of the performance of service delivery was undertaken during the last three years. All fiscal information is made publicly available at the Ministry of Finance website within the timeframes specified in the PEFA framework.

PILLAR THREE: Management of assets and liabilities Pillar three performance indicators:

• PI-10. Fiscal risk reporting • PI-11. Public investment management • PI-12. Public asset management • PI-13. Debt management

Effective management of assets and liabilities ensures that risks are adequately identified and monitored, public investments provide value-for-money, financial investments offer appropriate returns, asset maintenance is well planned, and asset disposal follows clear rules. It also ensures that debt service costs are minimized and fiscal risks are adequately monitored so that timely mitigating measures may be taken. The narrative for this subsection explains key strengths and weaknesses of government’s system of monitoring and reporting on fiscal risks to ensure it understands its exposure to circumstances that could impact on the overall levels of expenditure and the value of assets and liabilities (both within government and the wider public sector). It should also describe how effectively the government evaluates costs and benefits, prioritizes and manages its key public investments. For example, are the investment decisions the highest priority for government in terms of its social and economic development objectives.

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The narrative also explains how successfully the government approves, records and reports financial and nonfinancial assets and liabilities and whether a debt management strategy exists to ensure that the costs of servicing debt and the government’s exposure to fiscal risks (such as guarantees) are minimized Lack of sound management systems for managing investments, assets, and liabilities can significantly impact fiscal discipline and resource allocation. The narrative should cross-reference to other relevant indicators such as PI-15, 17, 21, 22, 23, 28, and 29.

Example: Pillar Three-Management of assets and liabilities Fiscal risks to the central government budget are adequately monitored. Public corporations submit their annual reports, including audited financial statements, to the Ministry of Finance (MoF) within six months of the end of the year. Fiscal risks from their operations are monitored by MoF and summary information on the public corporations is included in the Annual Budget Report and consolidated Annual Financial Statements. MoF monitors local government revenues, expenditure and debt. The budget documents include information on contingent liabilities associated with guaranteed borrowings but no information relating to other fiscal risks. The impact of recent tropical storms on the lives of the citizens and government finances, highlights the importance of managing risk. Debt records are complete and accurate and reconciled monthly. A debt management strategy for the next three years was published on the MoF website during the last fiscal year. A comprehensive and inclusive process is taken to managing the public investment improvement program (PIIP). The majority of projects proposed for the PSIP are assessed by the Public Investment Prioritization Committee according to well-established guidelines that include comprehensive costing and economic appraisal. Project monitoring is undertaken by the implementing agencies with quarterly progress reports submitted to the MoF. However, to the extent that public investment programs result in the acquisition of non-financial public assets, these assets are not always recorded on an asset register nor are subject to periodic valuation. In addition, the disposal of assets may not always be in accordance with established rules and procedures. No records of assets or their disposal are published. A comprehensive register of financial assets is maintained, monitored and published. Records of debt and guarantees are complete and accurate and a debt management strategy was completed in the last fiscal year.

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PILLAR FOUR: Policy based fiscal strategy and budgeting Pillar four performance indicators:

• PI-14. Macroeconomic and fiscal forecasting • PI-15. Fiscal strategy • PI-16. Medium-term perspective in expenditure budgeting • PI-17. Budget preparation process • PI-18. Legislative scrutiny of budgets

Policy-based fiscal strategy and budgeting processes enable the government to plan the mobilization and use of resources in line with its fiscal policy and strategy. It means that fiscal strategy and the budget are prepared with due regard to government fiscal policies, strategic plans, and adequate macroeconomic and fiscal projections. Decisions regarding fiscal targets, debt levels, and revenue and expenditure policy require extensive macroeconomic and fiscal information and involve high-level discussions involving many stakeholders. Robust macroeconomic and fiscal forecasts and a clearly articulated and sustainable fiscal strategy underpin good budgeting. Reliable revenue forecasts support governments to manage budget expenditures consistent with available resources and are also essential for budget reliability (covered under pillar one). A clear fiscal strategy will help establish sustainable fiscal targets and budget policies. A medium term perspective in expenditure budgeting supports the government to implement its fiscal strategy and to align budget ceilings, strategic plans, and policy priorities and budget allocations with medium term fiscal targets. Participation in the budget process by relevant stakeholders—budgetary units, the cabinet, and the legislature—in the budget planning and preparation process supports decision-making on budget allocations consistent with the total resource envelope and in line with government priorities reducing the incidence of ad-hoc expenditure decisions. The narrative should provide an overall assessment of the budget preparation process, from the macroeconomic and fiscal forecasting to budget scrutiny and approval. It should explain the extent to which expenditure budgets are developed for the medium term based on a clear fiscal strategy and within explicit medium-term budget expenditure ceilings, the effectiveness of participants by relevant stakeholders in the budget preparation processes, and the nature and scope of legislative scrutiny of the budget. The narrative should cross-reference to other relevant indicators such as PI-8, 11, 12, 13, 19, 20 and 23.

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Example: Pillar Four- Policy based fiscal strategy and budgeting A strength of Pefalia’s PFM system is its fiscal framework for budget management. Fiscal planning and budgeting are based on quarterly macro projections prepared by a technical committee of officials from the MoF, Ministry of Economy and Central Bank. The projections set out the underlying assumptions and include a range of scenarios. Medium term revenue projections are then based on the macroeconomic projections using existing policy settings. These projections inform the preparation of the annual budget and its internal use, but are not published. A medium term approach is taken to expenditure budgeting, with baseline multi-year ceilings (i.e. budget and two following fiscal years) based on the forward estimates of the most recently approved prior budget, also reflecting currently approved policies and programs. All proposed changes in expenditure policies are costed for their fiscal impact in the budget year and two following fiscal years as are proposed new revenue measures. The government carefully assesses the fiscal impact of new expenditure policy proposals and reports on progress against fiscal strategy at the end of each year The government’s fiscal strategy setting is strong and well elaborated in the published budget documents. The Government has established a set of basic fiscal targets centered on a target debt to GDP ratio of 40 percent and target primary surplus of 3.0 percent of GDP. In working towards these targets, the government sets government-approved multi-year budget ceilings during the budget process based on a rolling medium term budget framework. While the MoF keeps track of the impact of new policy on the baseline multi-year estimates, it does not publish an explanation of the reasons for the changes in allocation in the budget documents. There is a clear budget calendar that is substantially adhered to, and budget agencies are provided Cabinet approved expenditure ceilings before they start their detailed budgeting. This provides enough time (around 8 weeks) for the agencies to decide their priorities. Two of the last three budgets were approved prior to the commencement of the financial year. The budget for the last FY under assessment was presented one month after the commencement of the financial year due to elections. The legislature had only a few days to deliberate on proposed allocations, as budgets have to be approved before the commencement of the financial year. However, the scope and depth of legislative scrutiny is expected to be further enhanced by the recent establishment of a permanent Finance Committee. There are clear rules for in-year budget adjustments by the executive and they are respected.

PILLAR FIVE: Predictability and control in budget execution Pillar five performance indicators:

• PI-19. Revenue administration

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• PI-20. Accounting for revenue • PI-21. Predictability of in-year resource allocation • PI-22. Expenditure arrears • PI-23. Payroll controls • PI-24. Procurement • PI-25. Internal controls on nonsalary expenditure • PI-26. Internal audit

Predictable and controlled budget execution is necessary to ensure that revenue is collected and resources are allocated and used as intended by government and approved by the legislature. Effective management of policy and program implementation requires predictability in the availability of resources when they are needed, and control ensures that policies, regulations, and laws are complied with during the process of budget execution. This means that the budget is implemented within a system of effective standards, processes, and internal controls, ensuring that resources are obtained and used as intended. The narrative provides an overview of the key strengths and weaknesses in the predictability and control in budget execution. A lack of predictability and control, such as poor synchronization of revenue administration and accounting and cash management may lead to increased interest charges (on government borrowing) or supplier surcharges (for late payments). Lack of predictability and control can lead to a build-up of arrears, which not only impact on fiscal discipline and service delivery, but can also have wider negative economic impacts. Budget execution can also be affected by the reliability of budget estimates (covered in Pillar I) and good budget planning (Pillar IV). Inaccurate forecasts and poor planning can result in the need for in-year reductions in budget allocations which can undermine the ability of governments to delivery services. Similarly, weak internal control arrangements may allow expenditures in excess of budget or revenue leakages, also leading to higher deficit, debt levels or arrears.

Example: Pillar Five: Predictability and control in budget execution Revenue administration is strong but some constraints remain. The taxation system is based on comprehensive legislation providing information on the tax liabilities of taxpayers. This is supported by information leaflets that can be accessed on-line and at departmental offices, as well as media broadcasts, training and awareness events. All discretionary powers have been removed in recent legislation. The appeals mechanisms are clearly defined by law, with Independent Appeals Boards in place. Risk based auditing is implemented in both the inland revenue and the customs and excise departments. Despite the advances made in revenue administration in recent years, arrears amount to $205m, of which only 5 percent was under one year outstanding, suggesting the need for further review and possible write-off. Revenue accounting is also of good standard, with prompt collection of revenues and transfer to Treasury-controlled accounts. The Treasury consolidates its bank account balances on a daily basis and thus has good information regarding the amount of cash available. In addition, the cash management team produces regular updates of cash forecasts based on current information. Budgets allocations are released on a monthly basis based on budget unit’s planned expenditure profile, and cash availability and these act as a ceiling on commitments. However, it sometimes occurs that allocations need to be reduced in reaction to the cash flow forecasts in an effort to avoid a situation where there is a cash shortfall. These reductions in allocations can

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challenge the spending plans of budgetary units. Nonetheless, this tight management of budget release has been largely successful in ensuring that arrears have not grown above two percent of total expenditure. Controls over salary and non-salary expenditure are generally strong and contribute to orderly budget execution. Personnel and payroll records are fully consistent with each other and payroll controls are in place and backed up by partial payroll audits. Overall financial management controls are in place with good segregation of duties and procedures. The new procurement law that was enacted in 2014 requires decentralized and competitive processes, but has not been effectively implement or enforced and has been recognized as requiring amendment. There is an independent procurement complaints process, though it is hardly used and both procurement and the complaints body suffer from shortage of trained and experienced personnel. Internal audit is functioning but conducts mainly ex-post reviews focused on financial compliance and not on the review and analysis of systems.

PILLAR SIX: Accounting and reporting Pillar six performance indicators:

• PI-27. Financial data integrity • PI-28. In-year budget reports • PI-29. Annual financial reports

Timely, relevant, and reliable financial information is required to support fiscal and budget management and decision-making processes. It means that accurate and reliable records are maintained, and information is produced and disseminated at appropriate times to meet decision-making, management, and reporting needs. Regular information on budget execution through in-year reports not only allows monitoring on the use of resources but also facilitates identification of bottlenecks and problems which may lead to significant changes in the executed budget. Inadequate information and records can reduce the availability of evidence that is required for effective audit and oversight of the use of funds and could provide the opportunity for leakages, corrupt procurement practices or use of resources in an unintended manner.

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The narrative provides a summary of financial data integrity and government’s ability to produce in-year and annual financial reports, in line with international standards, that present the fulfillment of government’s obligations to different stakeholders. The narrative should cross-reference to other relevant indicators such as PI-20, 21, 22, 23, 24, 25 and 30 relating to the quality and reliability of the reports. Perhaps P-8, 12, and 13 could also be relevant in regard to the comprehensiveness of reporting.

Example: Pillar Six-Accounting and reporting Accounts reconciliation and financial data integrity are areas of strength. There is a high level of integrity of data in the FMIS general ledger due to the strong internal controls in place, segregation of duties, logical CoA, and regular (monthly) bank reconciliation. Data integrity has benefited significantly from recent actions to eliminate suspense accounts and reduce the number of advance accounts. As a result of this good quality data, in-year budget execution reports are able to be prepared on a timely basis each month and quarter. However, these reports are not published and there is a lack of inclusion of commitment data in the expenditure analysis. Annual financial statements are prepared on a timely basis (exactly three months after the end of the year). While the annual financial statements reflect a cash-based approach to accounting and reporting, no international standard (such as IPSAS cash basis) is applied.

PILLAR SEVEN: External scrutiny and audit Pillar seven performance indicators:

• PI-30. External audit • PI-31. Legislative scrutiny of audit reports

Effective external audit and scrutiny by the legislature are enabling factors for holding the government’s executive branch to account for its fiscal and expenditure policies and their implementation. This means that public finances are independently reviewed and there is external follow-up on the implementation of recommendations for improvement by the executive. Limited scrutiny may reduce the pressure on government to consider long-term fiscal sustainability issues and to respect its targets. It may also reduce the extent to which government is held accountable for efficient and rule-based management of resources, without which the value of services is likely to be diminished. In addition, inadequate audit means that the accounting and use of funds is not subject to detailed review and verification.

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The narrative summarizes the characteristics of external audit and the supreme audit institution that is responsible for the independent audit of government’s revenues and expenditures. It should highlight the extent to which audit covers central government institutions and the standards applied. It should also explain the role of the legislature in scrutinizing audit reports and providing recommendations and any follow-up. The narrative should cross-reference to indicators on transparency, internal audit, revenue fraud and risk management. Internal control may also be relevant here in relation to the implications of other elements of the accountability and control framework.

Example: Pillar Seven-External scrutiny and audit The Supreme Audit Institution is active in carrying out financial and compliance audits. It has constitutional independence from the executive, has unrestricted access to all records and officers, and adopts ISSAI auditing standards to govern its work. However, there are a number of deficiencies. There are no audit plans in place and audits of the annual financial statements have taken multiple years to be completed. For example, the audit of the 2011 annual financial statements was not transmitted to the Minister of Finance until January 3, 2015. Perhaps as a result of these delays, there is very little follow up of the recommendations by the entities being audited. Similarly, external scrutiny of audit reports by the public accounts committee (PAC of the parliament) is limited as few hearings with accountable officers are held. This is due in part to uncertainty regarding the role of the PAC in a situation where audits have not been tabled in a timely manner.

4.2 Effectiveness of the internal control framework An effective internal control system plays a vital role across every pillar in addressing risks and providing reason- able assurance that operations meet the four control objectives: (i) operations are executed in an orderly, ethical, economical, efficient, and effective manner; (ii) accountability obligations are fulfilled; (iii) applicable laws and regulations are complied with; and (iv) resources are safeguarded against loss, misuse and damage. The analysis of the internal control system should assess the extent to which it contributes to the achievement of those four control objectives, based on available information. This section should provide a unified and coherent overview of how effectively the internal control system operates. This is done by drawing on relevant findings related to the internal control arrangements and activities, and by structuring the information around the five internal control components identified by international standards:

1. Control environment 2. Risk assessment 3. Control activities 4. Information and communication 5. Monitoring

The internal control framework approach to designing and operating internal control systems is a useful tool to build an integrated assessment and to highlight areas insufficiently addressed or where irregularities or errors might be more significant. It also helps to identify whether the control system goes beyond the traditional approach focused on isolated control activities.

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The assessment should draw on relevant documentation collected for the preceding sections of the report and conclusions leading to the scoring of the indicator set. It should build on the description of the design of internal controls (through legal, regulatory and institutional arrangements, in Section 2 of the PEFA report) as well as the individual assessment of specific control activities as covered by a significant number of performance indicators (without being exhaustive: PI-6, 8, 10, 11, 12, 13, 16, 19, 21, 22, 23, 24, 25, 27, 28 in Section 3). This section should also draw on recent evaluations of the effectiveness of internal control issued by internal audit, external audit, or other external bodies to the extent that such reports exist. Reports on the functioning of internal control issued by government may equally be useful. Cross-country assessments of governance by inter- national organizations may also provide useful inputs to the assessment if they provide insight into the establishment and performance of the government’s internal control framework. Detailed findings concerning the main elements of the five internal control components are summarized in a table (Annex 2) that also highlights any gaps in coverage of the control components by the assessed internal control system. External oversight mechanisms contribute to monitoring of the effectiveness of the internal control system and to putting pressure on the executive to improve it. Such mechanisms include, e.g., undertaking systems audits, review of audits by the legislature, follow-up systems for the executive’s implementation of remedial measures, and providing public access to relevant reports and debates. Such activities therefore serve as reinforcement mechanisms and form part of the analysis of effectiveness of the control systems. The interaction between the external oversight and the internal control system shall therefore be considered in the analysis. The analysis in this subsection also aims at reaching an impression of how internal controls contribute to addressing the risks related to achieving each of the three main fiscal and budgetary outcomes. To facilitate this analysis, assessors should consider how internal control elements of each individual indicator dimension contribute to each of the three main fiscal/budgetary outcomes. The effectiveness of internal control also offers a perspective on the reliability of data obtained from government systems and therefore contributes to explaining the degree of confidence with which conclusions may be drawn on the basis of indicator assessments which rely on such data.

4.3 PFM strengths and weaknesses This subsection analyzes the extent to which the performance of the assessed PFM system appears to be supporting or affecting the overall achievement of three important fiscal and budgetary outcomes. The subsection builds on the strengths and weaknesses identified across the seven pillars of PFM performance (subsection 4.1 of the PEFA report) and the extent of effectiveness found for various internal control components (subsection 4.2 of the PEFA report). It also identifies the links between the performance of different areas of PFM and the ability to deliver the three main fiscal and budgetary outcomes. This subsection explains why the weaknesses identified in PFM performance across the seven pillars would be a concern for the government by drawing into the analysis the specific country characteristics and policy objectives that are relevant to the three main outcomes.

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The analysis is organized along the three main fiscal and budgetary outcomes. However, the assessment does not examine the extent to which the intended outcomes are achieved, for example, whether revenue measures and expenditures incurred through the budget have their desired effect on spurring economic growth, reducing poverty, or achieving other policy objectives. Rather it assesses the extent to which the PFM system constitutes an enabling factor for achieving the planned fiscal and budgetary outcomes. This analysis integrates PFM system performance measured by the performance indicators, information on relevant economic country features, the government’s fiscal policy objectives, the structure of the public sector and characteristics of the PFM (subsection 2.1 through 2.5 of the PEFA report), as well as any other factors which have an impact on PFM performance. In sum, the analysis provides a story line, concluded by highlighting the three or four main weaknesses of the PFM system that appear to be the most important to address in order to support the government’s pursuit of its fiscal and budgetary objectives. To illustrate good practice on how to summarize how PFM strengths and weaknesses may impact the three budgetary outcomes, the guidance offers the examples presented in text boxes below which have been drawn from recent PEFA 2016 reports. AGGREGATE FISCAL DISCIPLINE Aggregate fiscal discipline requires effective control of the total budget and management of fiscal risks. Maintaining the balance between revenues and expenditures, the debt level, and other fiscal aggregates requires setting firm limits, in advance, that drive the budget decisions on both the annual and medium-term basis.

Example: Aggregate fiscal discipline In general, the government meets its fiscal targets but this is mainly due to careful control over spending during budget execution. Fiscal aggregates in the budget are not realistic. Cabinet level engagement regarding size and allocation of expenditures does not happen until late in the budget process, which makes it difficult to reign in any excessive budget submissions and address prioritization before the budget is due. Unrealistic revenue forecasts are adopted, which appear to support the expenditure program but these spending plans cannot be realized as the projected revenues do not materialize. Nonetheless, strong revenue administration ensures that revenues are efficiently collected (if not at the level originally forecast) and good treasury operations and cash management enable expenditures to be managed within the available resources using control over allotments and commitments.

STRATEGIC ALLOCATION OF RESOURCES Strategic allocation of resources involves planning and executing the budget in line with government priorities aimed at achieving policy objectives. The allocation of resources requires evidence on the importance and effectiveness of government’s activities and programs.

Example: Strategic allocation of resources Pefalia uses rolling three-year estimates to establish baseline ministry budget ceilings. The budget calendar reflects this two stage budget process where policy proposals for expenditure priorities above the baseline are submitted and prioritized by Cabinet within its aggregate fiscal target. Final budget allocations (ceilings)

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and estimates for the following two fiscal years are then finalized for each ministry. For each new spending proposal ministries are required to specify the objectives and planned results (quantifiable outputs and outcomes). In practice, the two stage budget process is yet to be fully implemented with the budget incremental in nature (i.e. requests for supplementation of line item expenditures) without significant policy-based reallocations during the budget process. As revenue forecasts have not been met, and full spending of the budget would result in cash shortfalls and widening fiscal deficit, spending and policy decisions have in effect been taken at administrative level regarding which expenditure can proceed. Implementing the planned two stage process, and completing the introduction of a performance framework will assist in improving the strategic allocation of resources within a realistic expenditure (revenue) envelope.

EFFICIENT USE OF RESOURCES FOR SERVICE DELIVERY Efficient use of resources for services delivery requires using budgeted revenues to achieve the best levels of public services within available resources. Services are critical points of contact between citizens and government. While improving public services extends beyond PFM, there are several aspects of PFM that contribute to it, including effective public procurement, investments, and assets management.

Example: Efficient use of resources The current weaknesses in the procurement system could have adverse implications for the efficiency in service delivery. While a new law has been promulgated it needs to be made operational and/or amended as required. Weaknesses in the accountability mechanisms make external audits and their scrutiny ineffective as counter checks on inefficient use of resources. The publishing of performance targets and outcomes, as well as systematic program evaluation, and better data on resources available at service delivery units would help to inform management decision making to support improved service delivery. On the revenue side, operational efficiency is compromised by the accumulation of tax arrears. Lack of effective tax debt collection undermines credibility of tax assessments and compliance and the principle of equal treatment of taxpayers.

The following table provides broad guidance on how PEFA performance indicators relate to the three budgetary outcomes. The narrative may focus on the indicators where major weaknesses have been identified and link those to the achievement of the PFM outcomes. The table may be used as a basis to draw main conclusions on PFM strengths and weaknesses without going into too much detail. It is not intended to include a comprehensive list of issues and implications of indicators for each of the outcomes but is more indicative of the kinds of issues that could be important, amongst many others that may vary between locations and systems. TABLE 4.3.1 : PEFA performance indicators and the three budgetary outcomes

Pillar/ Performance indicator

Aggregate fiscal discipline

Strategic allocation of resources

Efficient service delivery

Pillar one: Budget reliability The government budget is realistic and is implemented as intended. This is measured by comparing actual revenues and expenditures (the immediate results of the PFM system) with the original approved budget. PI-1. Aggregate expenditure outturn PI-2. Expenditure composition outturn PI-3. Revenue outturn

Aggregate expenditure and revenue outturns and composition that deviates significantly from the approved budget undermines fiscal

Reliable revenue forecasts and expenditure allocations are essential for the government to effectively and

Service delivery may be affected where large deviations from planned expenditure result in the contraction or suspension of services.

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Pillar/ Performance indicator

Aggregate fiscal discipline

Strategic allocation of resources

Efficient service delivery

discipline and the ability of governments to control the total budget.

predictably allocate resources to strategic policy priorities.

Pillar two: Transparency of public finances. Information on PFM is comprehensive, consistent, and accessible to users. This is achieved through comprehensive budget classification, transparency of all government revenue and expenditure including intergovernmental transfers, published information on service delivery performance and ready access to fiscal and budget documentation. PI-4. Budget classification PI-5. Budget documentation PI-6. Central government operations outside financial reports PI-7. Transfers to subnational governments PI-8. Performance information for service delivery PI-9. Public access to fiscal information

A robust classification system and comprehensive and publicly available annual budget documentation enables budget decisions, transactions and the performance of service delivery programs to be monitored throughout the budget’s formulation, execution, and reporting cycle which is essential for providing the executive and legislature a complete picture of central government public finances.

Transparent and comprehensive budget management information, including the performance of service delivery programs, strengthens accountability of government for budget allocation decisions, including transfers to lower levels of government, that are consistent with the country’s social and economic priorities.

Transparent Information on the structure of the budget, the resources available to, and the performance of service delivery units enables government and communities to monitor the efficiency of service delivery.

Pillar three: Management of assets and liabilities. Effective management of assets and liabilities ensures that public investments provide value for money, assets are recorded and managed, fiscal risks are identified, and debts and guarantees are prudently planned, approved, and monitored. PI-10. Fiscal risk reporting PI-11. Public investment management PI-12. Public asset management PI-13. Debt management

Failure to adequately monitor, report, and manage fiscal risks can undermine fiscal discipline. The efficient and effective management of public investment resources requires careful analysis to prioritize investment expenditure (and their future recurrent costs) within sustainable fiscal limits. The size and management of

The effectiveness and efficiency of public investment is a key determinant in maximizing its impact and helping to support government’s social and economic development objectives. Failure to monitor and manage financial liabilities may create unnecessarily high debt service costs diverting resources from the government’s social and economic priorities.

Sound public investment management promotes operational efficiency by supporting projects and programs that deliver outputs and outcomes in a cost-efficient manner. Information on assets not used or needed, allows government timely decisions on whether it is more efficient to transfer them to other users or exchange for different assets of greater value for more efficient service delivery.

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Pillar/ Performance indicator

Aggregate fiscal discipline

Strategic allocation of resources

Efficient service delivery

government assets and liabilities (in particular debt and guarantee obligations) can have a substantial impact on a country’s capacity to maintain fiscal discipline. The size and management of debt and guarantee obligations can have a substantial impact on a country’s capacity to maintain fiscal discipline.

Pillar four: Policy-based fiscal strategy and budgeting. The fiscal strategy and the budget are prepared with due regard to government fiscal policies, strategic plans, and adequate macroeconomic and fiscal projections. PI-14. Macroeconomic and fiscal forecasting PI-15. Fiscal strategy PI-16. Medium-term perspective in expenditure budgeting PI-17. Budget preparation process PI-18. Legislative scrutiny of budgets

Robust and verifiable macroeconomic and fiscal projections are essential to support the development of a predictable and sustainable fiscal strategy that supports aggregate fiscal discipline. Adherence to a clear fiscal strategy ensures that budget policy decisions align with fiscal targets. Medium term budgeting supports aggregate fiscal discipline by establishing forward year estimates that provide the baseline for future budget ceilings and allocations.

Robust macroeconomic and fiscal forecasts, a fiscal strategy that sets clear fiscal policy objectives, and a medium-term perspective in budgeting enable governments to more effectively plan budget allocations in accordance with priorities. An orderly budget process is necessary to provide government the information and time necessary to prioritize budget allocations among competing demands. Legislative scrutiny enables the government to be held accountable for its budget policy decisions.

Medium term budgeting provides greater predictability in budget allocations that supports budget units to plan resource use more efficiently. Legislative scrutiny can highlight potential inefficiencies in resources allocated for service delivery.

Pillar five: Predictability and control in budget execution. The budget is implemented within a system of effective standards, processes, and internal controls, ensuring that resources are obtained and used as intended. PI-19. Revenue administration

Efficient administration and accurate recording

A predictable revenue base and flow of

Frequent and unpredictable in-year

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Pillar/ Performance indicator

Aggregate fiscal discipline

Strategic allocation of resources

Efficient service delivery

PI-20. Accounting for revenue PI-21. Predictability of in-year resource allocation PI-22. Expenditure arrears PI-23. Payroll controls PI-24. Procurement PI-25. Internal controls on nonsalary expenditure PI-26. Internal audit

and reporting of tax and nontax revenue collections is important to ensure all revenue is collected in accordance with relevant laws to support the government’s budget framework. Expenditure arrears can have a significant impact on fiscal discipline because they constitute a failure in controlling commitments and making payments when obligations are due. Effective expenditure and payroll controls ensure resources are used are consistent with approved allocations.

resources to budget units helps ensure those priorities are implemented. Weak payroll controls can also undermine allocative efficiency if they result in unintended expansion of payroll costs (crowding out expenditures on other priorities) or unmet obligations to employees. Internal audit provides assurance that systems are operating to achieve government objectives efficiently and effectively.

adjustments can undermine the efficient delivery of services. The existence of arrears can be an indication that budget allocations are insufficient to meet the service levels expected. Weak payroll controls can lead to a higher wage bill than planned resulting in higher costs per output. A well-functioning procurement system improves the efficiency of service delivery by ensuring better value for money of government purchases. Internal audit helps identify weaknesses and inefficiencies in internal control and operations.

Pillar six: Accounting and reporting. Accurate and reliable records are maintained, and information is produced and disseminated at appropriate times to meet decision-making, management, and reporting needs. PI-27. Financial data integrity PI-28. In-year budget reports PI-29. Annual financial reports

The integrity of financial data and the availability of comprehensive annual financial reports and regular in-year reporting are important to ensure that budgets are executed as intended within approved fiscal targets.

Reliable fiscal data and reporting on financial information is important for ensuring resources are allocated, as intended, to the government strategic priorities.

Reliable fiscal data and reporting on financial information is an important part of internal control and a foundation for good information for efficiently managing service delivery.

Pillar seven: External scrutiny and audit. Public finances are independently reviewed and there is external follow-up on the implementation of recommendations for improvement by the executive. PI-30. External audit PI-31. Legislative scrutiny of audit reports

Reliable and extensive external audit, and legislative scrutiny of those audits provides assurance that

Reliable and extensive external audit and legislative scrutiny ensures governments are accountable for allocating resources in

Reliable and extensive external audit and legislative scrutiny is important for identifying inefficiencies in

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Pillar/ Performance indicator

Aggregate fiscal discipline

Strategic allocation of resources

Efficient service delivery

information in financial reports is accurate.

accordance with the approved budget.

government programs and service delivery.

4.4 Performance changes since a previous assessment This section introduces a dynamic perspective on PFM performance and its impact on achieving the three fiscal/ budgetary outcomes. It is relevant only to successive assessments. It draws on the description of change in performance included in the analysis of each indicator and the overview of performance changes provided in section 3 and the summary table in Annex 1, where the previous assessment used PEFA 2016. If there is no previous assessment or the previous assessment uses a difference version of the PEFA framework, annex 1 will only provide information related to the current assessment. Separate guidance is provided for previous assessments that used a different version of PEFA (see the Guidance on reporting performance changes in PEFA 2016 from previous assessments that applied PEFA 2005 or PEFA 2011 on pefa.org). For comparisons with previous assessments that used a different version of PEFA a supplementary annex using indicators of the previous version is required as set out in the separate guidelines. An assessment of how the changes since the previous assessment are likely to strengthen the ability to achieve of the three fiscal and budgetary outcomes and address the main weaknesses in this respect marks the conclusion of this subsection.

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5. Government PFM reform process This section aims to describe the overall efforts made by the government to improve PFM performance and to provide a forward-looking perspective on the factors that are likely to affect future reform planning, implementation and monitoring. The indicative length of this section is three to five pages.

5.1 Approach to PFM reforms

The government’s overall approach to PFM reform is described including the existence, origins, and structure of a PFM reform program or any alternative approach used such as several parallel, independent, or institution-specific reform and capacity development initiatives. It describes how the PFM reform program is linked to the overall policy and planning of government reforms, for example, through an overall national development plan, strategic planning arrangements, medium-term expenditure frameworks, etc. Relationships with other administrative reforms of the public sector are highlighted, including technical links and interdependencies, as well as planning and management coordination. Any recent external reviews or independent evaluations of the PFM reform program(s) are mentioned, including their main conclusions.

5.2 Recent and on-going reform actions

The most important recent and ongoing reforms are briefly summarized to give an overview of the progress made by government in strengthening the PFM system. The report shall provide a relevant summary of key objectives and expected outcomes of the reform program(s). This subsection highlights the extent to which ongoing reforms are targeting the PFM areas with the most important weaknesses identified in section 4 of the report.

5.3 Institutional considerations

This part of the report provides a forward-looking perspective of the extent to which institutional factors are likely to support the reform planning and implementation process. The following identifies several factors that are likely to be relevant in supporting an effective reform process in many country contexts. In each case, this part of the PEFA report takes into account recent and ongoing reform experiences and identifies, where appropriate, any other country specific factors in addition to those suggested below.

• Government leadership and ownership Government ownership is likely to contribute to a more effective PFM reform process by setting the objectives, direction, and pace of reforms, clarifying organizational responsibilities for the reform process, and addressing, in a timely manner, any resistance to change. Consideration may be given to the specific drivers or incentives for administrative reform, for example, based on information from section 2.1. Other

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drivers could include the extent of political engagement in the reform process, whether the government articulates a compelling case for PFM reforms, the dissemination of the government vision in public documents such as national development programs, specific PFM strategy or action plans, and the provision of resources by government for PFM reforms. Cross reference to information on whether the reform process is progressing according to government plans may be included.

• Coordination across government Coordination is likely to contribute to a more prioritized and sequenced reform agenda, as existing capacities of different entities and levels of government are taken into account in planning and implementing reforms. In assessing the extent to which arrangements for coordination are in place, consideration may be given to the contribution of relevant entities, especially line ministries, which are associated in the reform decision making process. Consideration may also be given to the existence of mechanisms to ensure timely decision-making especially for cross-cutting reforms, the clarity of roles and responsibilities in the implementation of reforms, and the existence of a focal point in government for coordination of donors in relation to PFM reforms. Involving the legislature and the external audit unit in the PFM reform process may also be considered, where relevant.

• A sustainable reform process Sustainability is likely to influence the impact of PFM reforms. The extent to which such a process is supported by existing arrangements should be considered. In this context, the report could examine the contribution of government experts or technical assistance, whether reforms are being associated with comprehensive capacity development programs, and retention of trained staff. Any information on funding of the recurrent costs resulting from the implementation of reforms may also be included.

• Transparency of the PFM program Transparency is important for setting expectations and soliciting contributions and collaboration from various stakeholders. The report describes transparency in terms of reform program documents being publicly accessible and the program’s financing fully reflected in the government’s budget documentation ex-ante and ex-post.

The assessment of those institutional factors is as factual as possible and does not rely on government plans or commitments. The report includes observations on the situation but does not make explicit recommendations for the reform program of the government. It does not make a judgment as to whether the government reform program addresses the right PFM weaknesses or whether the proposed reform measures are adequate.

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Annex 1: Performance indicator summary This annex provides a summary table of the performance at indicator and dimension level. The table specifies the scores with a brief explanation for the scoring for each indicator and dimension of the current and previous assessment. It also includes columns to capture scores from a previous assessment where the PEFA 2016 methodology was applied. However, annex 1 cannot be used to compare scores with a previous assessment that used the 2005 or 2011 versions of the framework. Tracking performance changes in these circumstances will require assessors to complete a supplementary annex (See Annex 4: Tracking changes in performance based on previous versions of PEFA). The supplementary annex should be prepared in compliance with the Guidance on reporting performance changes in PEFA 2016 from previous assessments that applied PEFA 2005 or PEFA 2011 at www.pefa.org.) Annex 1: Performance indicator summary- example

Current assessment for Pefalia applying PEFA 2016 Framework- PEFA 2016 Previous assessment (applying PEFA 2016 Framework)

No previous assessment in Pefalia using PEFA 2016 Framework

Indicator/dimension Score Description of

requirement met Score Explanation of

change (including

comparability issues)

I. Budget reliability

PI-1. Aggregate expenditure outturn 1.1 Aggregate expenditure outturn

B Aggregate expenditure outturn was between 90% and 110% of the approved aggregate budgeted expenditure in at least two of the last three years.

PI-2. Expenditure composition outturn

D+

2.1. Expenditure composition outturn by function

D Variance in expenditure composition by functional classification was more than 15% in the last three years.

2.2. Expenditure composition outturn by economic type

C Variance in expenditure composition by economic classification was less

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than 15% in at least two of the last three years.

2.3. Expenditure from contingency reserves

A Pefalia does not use a significant contingency reserve as it was on average 2.2 percent of the annual budget over the review period.

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Annex 2: Summary of observations on the internal control framework

Information for this annex should be drawn from the PEFA assessment only. No new information should be collected. Where there is no information to provide a summary of findings, the table should include the words ‘no information available from the PEFA assessment’. This summary complements the general description of the internal control framework provided regarding:

• The legal and regulatory arrangements as described under subsection 2.3 of the PEFA Framework (page 91)

• The institutional arrangements as described under subsection 2.4 of the PEFA Framework (page 92). As explained under subsection 4.2 of the PEFA Framework, the objective of the table presented under this Annex is bi-fold:

(i) Summarize the detailed findings concerning the five internal control components, and (ii) Highlight any gaps in coverage of those control components.

Guidance related to this section is provided in the PEFA Framework, under subsection 4.2 Effectiveness of the internal control framework, pages 96 and 97, and on page 102 https://pefa.org/sites/default/files/PEFA%20Framework_English.pdf). Annex 2: Summary of observations on the internal control framework- example3

Internal control components and elements Summary of observations

1. Control environment

There is a strong regulatory framework. Pefalia Constitution, Article XI, provides a strong imperative through its provisions on the accountability of public officers, supported by comprehensive Government instructions in the Administrative Code, National Guidelines on Internal Control Systems (NGICS), and Government Internal Audit Manual. These instructions provide standards to guide each government agency in developing its detailed and comprehensive system of internal controls. Agency characteristics such as mandate, functions, nature of activities, operating environment, human resource profile, size, and organizational structure will have to be considered in developing or improving the individual controls. A strong and responsive internal control system is an essential component of an organization’s internal and external processes. This regulatory framework is shown to be effective by the results assessed for PI- 23 and PI-25 on internal controls over payroll and non-salary expenditure, which were rated “B+”. PI-25.3 on compliance with payment rules and procedures was

3 Examples of tables can also be found in the following PEFA 2016 public reports: https://pefa.org/sites/default/files/PH-Jun16-PFMPR-Public%20with%20PEFA%20Check-Meth16.pdf (in English) https://pefa.org/sites/default/files/TG-Jul16-PFMPR-Public%20with%20PEFA%20Check.pdf (in French)

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rated “B”, and the assessment found that most payments comply with regular payment procedures. The CoA-conducted audits identify instances of non-compliance, which need to be corrected; but in the majority of cases, these exceptions are not the main causes of qualified opinions on the annual accounts. They are therefore not considered to seriously compromise the control environment as a whole but are significant in some cases. A more comprehensive, integrated, computerized accounting system for processing government transactions can provide a user-friendly set of controls that are applied automatically to prevent instances of failure.

1.1 The personal and professional integrity and ethical values of management and staff, including a supportive attitude toward internal control constantly throughout the organisation

The Administrative Code of Pefalia states that public officers and employees must at all times be accountable to the people; serve them with utmost responsibility, integrity, loyalty, and efficiency; act with patriotism and justice; and lead modest lives. This principle relates to accountability, norms of conduct and ethical standards, and performance of the management and staff, including the manner by which an agency operates and provides public service.

1.2 Commitment to competence

The Administrative Code of Pefalia requires Government employees to commit and demonstrate competence in the conduct of their duties and responsibilities. Each one, from the head of agency to the rank and file, must work for the achievement of the agency’s objectives. They must show full support for internal control and the continual improvement of systems and processes that would increase the efficiency and effectiveness of the agency.

1.3 The “tone at the top” (i.e. management’s philosophy and operating style)

The Administrative Code of Pefalia provides that all resources of the Government shall be managed, expended, or utilized in accordance with law and regulations and safeguarded against loss or wastage through illegal or improper disposition to ensure efficiency, economy, and effectiveness in government operations. The responsibility to take care that such policy is faithfully adhered to rests directly with the head of the government agency.

1.4 Organisational structure

The Administrative Code of Pefalia provides the basis for Government organization structures. The Code organizes departments on the basis of major functions to achieve simplicity, economy, and efficiency in government operations and minimize duplication and overlapping of activities. Adequate authority shall be delegated to subordinate officials. Administrative decisions and actions shall, as much as feasible, be at the level closest to the public. The organizational structure is to provide the framework within which the activities of an agency are planned, executed, controlled, and reviewed. It is to consider key areas of authority and responsibility and the appropriate lines of reporting.

1.5 Human resource policies and practices

Departments have human resource development services with divisions for staff development, employees’ benefits and payroll. The Administrative Code of Pefalia provides for entrance based on competitive examination, or based on highly technical qualifications; and for advancement through merit and fitness. There is periodic and continuing review of the performance through the performance evaluation promulgated by the Civil Service Commission (CSC). There is also a policy on discipline.

2. Risk assessment

For departments and agencies, the NGICS requires effective and efficient systems of risk management and internal control for PFM. It mandates the establishment of standards on risk management in public service organizations. It has a section on risk assessment with specifications on risk identification, analysis and evaluation. PI 19 revenue administration included an assessment of the approach to revenue risk management and rated it B for both BIR and BoC. For Government-owned or controlled corporation (GOCCs) annual performance agreements set out the

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components of internal control. The agreements include a charter statement and a strategy map, together with identification of indicators for measurement of performance. For LGUs summarized risks are identified and presented in annual Fiscal Risks Statements.

2.1 Risk identification

The NGICS includes - The purpose of doing risk identification is to generate a comprehensive list of risks based on factors that might enhance, prevent, degrade or delay the achievement of the general control objectives. This will include identifying the risks in case of not pursuing an opportunity. Comprehensive identification is very important because a risk that is not identified will not be included in the next step of analysing risks.

2.2 Risk assessment (significance and likelihood)

The NGICS includes - After the identification, it is necessary to consider possible causes and scenarios that would show what consequences can occur. All significant causes should be considered to estimate the risk.

2.3 Risk evaluation

The NGICS includes - This is about developing an understanding of the risk and providing an input to risk evaluation and to decisions on whether risks need to be responded to, as well as on the most appropriate response strategies and methods. The objective of evaluating risks is to assist in coming up with a decision on which risks need treatment based on the results of the risk analysis.

2.4 Risk appetite assessment

The NGICS includes - An organization should apply risk identification tools and techniques, which are suited to its objectives and capabilities, and to the risks faced.

2.5 Responses to risk (transfer, tolerance, treatment or termination)

The NGICS includes - Risk evaluation may lead to a decision to undertake further analysis or a decision not to treat the risk in any way but maintain existing risk controls (INTOSAI Guidelines for Internal Control Standards for the Public Sector). Responses to risks can be divided into the four categories. In some instances, risks can be transferred, tolerated or terminated. However, in most instances, the risk will have to be treated. The results of risk evaluation are an input to prioritizing treatment implementation. Risk evaluation may lead to a decision to undertake further analysis or a decision not to treat the risk in any way but maintain existing risk controls (INTOSAI Guidelines for Internal Control Standards for the Public Sector). The NGICS gives some illustrations on risk treatment.

3. Control activities

The NGICS has a section setting out control activities. In PI-25, internal control was examined. It was found that the Accounting Division, in charge of recording and keeping the books, is usually under the Financial Management Service and is separate from the Administrative Service, which normally handles the cashiering function. Procurement is also a separate function that works alongside the Bids and Awards Committee. Functions and responsibilities, as well as clear procedures in handling transactions, are also outlined in Volume 1 of the New Government Accounting System (NGAS) Manual and the Government Accounting Manual for National Government Agencies.

3.1 Authorization and approval procedure

The CoA-prepared Government Accounting Manual sets out the systems of authorization, policies, standards, and accounting procedures and reports used by the agencies to control operations and resources and enable the various units to meet their objectives. These systems and work processes are integral to the operations of agencies and are to be consistently applied by all units in the public service. These procedures or activities are implemented in order to achieve the control objectives of safeguarding resources, ensuring the accuracy of data and enabling adherence to laws, policies, rules and regulations.

3.2 Segregation of duties (authorizing, processing, recording, reviewing)

The NGICS sets out the usual internal control components, including segregation of duties. Key duties and responsibilities need to be divided or segregated among

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different people to reduce the risk of error or fraud. This includes separating the assignment of responsibilities for processing, reviewing, recording, custody, and approval/authorization of certain transactions. PI-25.1 segregation of duties is rated “A”. Segregation of duties exists throughout the process. Management override of controls occurs in some instances but not the majority.

3.3 Controls over access to resources and records

The NGICS sets out the usual internal control instructions for access over resources, assets, and facilities. PI-27.4, financial data integrity processes, is rated “C”. While access to records is restricted, often there is no audit trail; and the quality and reliability of financial reporting process is low due the absence of an integrated accounting and reporting system for government transactions. The practice of using spreadsheets that lack built-in controls for preparation of financial reports reduces assurance of financial data integrity.

3.4 Verifications

The NGICS sets out the usual internal control instructions for verification — review of transactions to check the propriety and reliability of documentation, costing, or mathematical computation. It includes checking the conformity of acquired goods and services with agreed quantity and quality specifications. The verification procedures should be built-in in every transaction. This is an internal checking procedure to avoid errors or fraud.

3.5 Reconciliations

The NGICS sets out the usual internal control instructions for reconciliation of financial and non-financial data. Operating procedures of every office require that the cash records of the accounting and the cash units should be regularly reconciled. PI-27.1, bank account reconciliation, was rated “D”. While monthly bank reconciliation statements are prescribed per law, issues of non-preparation, delayed submission, and non-recording of reconciling items are substantial as per CoA audit reports that cite unreliable cash balances.

3.6 Reviews of operating performance

The NGICS includes the evaluation of agency performance, which covers the financial position and results of operation of an agency. The Administrative Code provides that the President, through the Secretary of Budget and Management, shall evaluate on a continuing basis the quantitative and qualitative measures of agency performance.

3.7 Reviews of operations, processes and activities

The NGICS includes the Organizational Performance Indicator Framework, which is a useful tool in expenditure and budget accountability. The Framework directs resources of an agency toward its major final outputs that are linked to sectoral and societal goals.

3.8 Supervision (assigning, reviewing and approving, guidance and training)

The NGICS provides that supervision and control includes the authority to act directly whenever a specific function is entrusted by law or regulation to a subordinate. It provides guidance on administrative supervision.

4. Information and communication A performance evaluation system guidebook is used for GOCCs.

5. Monitoring

In departments and agencies, monitoring of internal control is dealt with in the NGICS covering ongoing monitoring and the work of the Internal Audit Service. Monitoring the internal control activities themselves should be clearly distinguished from reviewing the operations of a unit, which is an internal control activity performed by the unit and its management. PI-26, Internal Audit, found that internal audit has been formally established in most agencies and that audit programs are largely completed, but with delays. The performance is rated “C+”. Monitoring of GOCCs is exercised through a quarterly report to the Government. Monitoring of LGUs is exercised through a substantial performance monitoring system with multiple indicators, including fiscal risks, financial position, and debts.

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The performance indicator on fiscal risk reporting for GOCCs and LGUs is rated “B”. Audited annual reports for these entities are usually published by CoA within 9 months of year-end.

5.1 Ongoing monitoring

In the agency structure, the Financial and Management Service is tasked to assist agency management in the ongoing monitoring of internal controls by regular management surveys of the organizational structure, human resource, and operations. Control in government departments and agencies, according to NGICS, includes checking the completeness of transaction documents and reports. Transaction documentation has to be complete in order to substantiate the transaction. Operational and financial reports are tools for monitoring performance, subsequent planning, and decision-making. These reports have to be checked at the source and by the management of the operating unit concerned. These reports have to be certified for accuracy by management of the office concerned before they are submitted to the report users.

5.2 Evaluations

In the agency structure, the Internal Audit Service is mandated to conduct a separate evaluation or appraisal of the internal control system to determine whether internal controls are well designed and properly operated. The Internal Audit Service in departments and equivalent agencies shall consist of two divisions: Management Audit Division and Operations Audit Division. External review is carried out by the Commission on Audit. The Constitution, as well as the Administrative Code, provides that where the internal control system of the audited agencies is inadequate, CoA may adopt such measures, including temporary or special pre-audit as necessary and appropriate to correct the deficiencies.

5.3 Management responses

PI-26.4 examined response to internal audits and was rated “B”. Internal audit reports provide recommendations that are presented to the head of the audited unit. Management response is solicited to indicate corresponding action plan, and a formal response is received in most instances within 12 months. However the report is not shared beyond the audited unit with, for example, the oversight agencies (DBM, DoF, and CoA).

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Annex 3: Sources of information The annex lists every document from which information for the assessment has been used, such as legislation, government policy papers, budget documents, reports and statistics, as well as recent surveys and analytical work at national, regional or international level. This annex has three components:

• Annex 3A – is used for related surveys and analytical work. • Annex 3B – lists the persons who have been interviewed and provided information for the PFM

Performance Report, indicating the institutions they represent and their respective positions • Annex 3C – contains a table explaining the sources of information used to extract evidence for scoring each

indicator. An example of each of the three annexes is provided below. Annex 3 A: List of related surveys and analytical work – example

No Institution Document title Date

1 WB Education Public Expenditure Tracking Survey (PETS) 11-03-2016 www.worldbank.org

2 OBI Open Budget Survey 27-11-2015 www.internationalbudget.org 3 INTOSAI-IDI SAI PMF Report 15-05-2015 www.ao.pefalia.org 4 IMF Fiscal Transparency Report 25-02-2016 www.imf.org

Annex 3 B: List of people Interviewed – example

No Institution Department Person Position 1 Ministry of Finance Fiscal Policy & Planning Office Planning Officer 2 Ministry of Finance Treasury Directorate Director 3 Ministry Public Works Projects Department Deputy Director 3 Ministry of Education Budget Division Chief Administrative Officer 4 SAI General Directorate Deputy Auditor General 5 Legislature Budget Commission Chair 6 Chamber of Commerce President 7 Development Partner

Annex 3 B: Sources of information by indicator – example

Indicator Score Sources

PI-1 Aggregate expenditure out-turn A Fiscal Data from MoF; IFMIS data base

Annual and quarterly fiscal outturn reports for FY 2013, 2014, 2015 Laws that approved Annual Budgets for FY 2013, 2014 and 2015

PI-2 Expenditure composition outturn C

PI-3 Revenue outturn B

PI-4 Budget classification B Classifications and Chart of Accounts manuals and COA mapping guidelines, March 2012

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Indicator Score Sources Budget Classification of revenues, expenditures and financing

PI-5 Budget documentation A Budget Estimates for FY2015 Budget Speech 2015 Annual financial statements 2014

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Annex 4: Tracking change in performance based on previous versions of PEFA

This annex provides a summary table of the performance at indicator and dimension level. The table specifies the scores with a brief explanation for the scoring for each indicator and dimension of the current and previous assessment. This annex should present comparisons with previous assessments that used the 2005 or 2011 versions of the framework and should be prepared in compliance with the Guidance on reporting performance changes in PEFA 2016 from previous assessments that applied PEFA 2005 or PEFA 2011 at www.pefa.org.

Indicator/Dimension Score

previous assessment

Score current

assessment

Description of requirements met in current assessment

Explanation of change (include comparability

issues) A. PFM-OUT-TURNS: Credibility of the Budget PI-1 Aggregate expenditure out-turn compared to original approved budget

B C Deviation deteriorated from -9.3% in 2011/12, -10.5% in 2012/13 and 17.9% in 2013/14

Aggregate budget credibility deteriorated.

PI-2 Composition of expenditure out-turn compared to original approved budget

D+ D+

(i) Extent of the variance in expenditure composition during the last three years, excluding contingency items

D D Variance for 2011/12 was 20.7%., 2012/13 17.6% and 23% in 2013/14

In 2007/08 variance was 19.3%, for 2008/09 14.9% and 2009/10 30.6%

(ii) The average amount of expenditure actually charged to the contingency vote over the last three years.

A A Contingency only 2.5% of expenditure

Contingency was nil during the 2010 report review period

PI-3 Aggregate revenue out-turn compared to original approved budget

B D Deviation -3.1% in 2011/12, -8.2% in 2012/13 and -16.2% in 2013/14

Deviation was 2007/08 +4%, 2008/09 -7%, and 2009/10 -4%

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PEFA Report Template to be used as a basic format for the

content of the assessment report

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COVER PAGE

COUNTRY

PUBLIC EXPENDITURE AND FINANCIAL ACCOUNTABILITY (PEFA) PERFORMANCE

ASSESSMENT REPORT

Based on PEFA 2016

Date

Version of the Report

Baseline or successive assessment

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Country’s currency and indicative exchange rates

Fiscal Year

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Table of content

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Abbreviations and acronyms

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Executive summary The indicative length of this section is three pages. The template of table 1, which gives an overview of the scores for each of the PEFA indicators is provided below. Template of Table 1: Overview of the scores of the PEFA indicators

PFM Performance Indicator Scoring Method

Dimension Ratings Overall Rating i. ii. iii. iv.

Pillar I. Budget reliability PI-1 Aggregate expenditure outturn M1 PI-2 Expenditure composition outturn M1 PI-3 Revenue outturn M1 II. Transparency of public finances PI-4 Budget classification M1 PI-5 Budget documentation M1

PI-6 Central government operations outside financial reports M2

PI-7 Transfers to subnational governments M2 PI-8 Performance information for service delivery M2

PI-9 Public access to fiscal information M1

III. Management of assets and liabilities PI-10 Fiscal risk reporting. M2

PI-11 Public investment management M2 PI-12 Public asset management M2 PI-13 Debt management M2

IV. Policy-based fiscal strategy and budgeting

PI-14 Macroeconomic and fiscal forecasting M2

PI-15 Fiscal strategy M2

PI-16 Medium-term Perspective in expenditure Budgeting M2

PI-17 Budget preparation process M2 PI-18 Legislative scrutiny of budgets M2

V. Predictability and control in budget execution PI-19 Revenue administration M2

PI-20 Accounting for revenue M1

PI-21 Predictability of in-year resource allocation M2

PI-22 Expenditure arrears M1

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PFM Performance Indicator Scoring Method

Dimension Ratings Overall Rating i. ii. iii. iv.

PI-23 Payroll controls M1 PI-24 Procurement management M2 PI-25 Internal controls on non-salary expenditure M2

PI-26 Internal audit M1

VI. Accounting and reporting PI-27 Financial data integrity M2 PI-28 In-year budget reports M1 PI-29 Annual financial reports M1

VII. External scrutiny and audit PI-30 External audit M1

PI-31 Legislative scrutiny of audit reports M1

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1. Introduction The indicative length of this section is three to five pages.

1.1 Rationale and purpose

1.2 Assessment management and quality assurance

BOX 1.1: Assessment management and quality assurance arrangements PEFA assessment management organization

• Oversight Team — Chair & Members: [names & organizations] • Assessment Manager: [name and organization] • Assessment Team Leader and Team Members: [name and organization for each]

Review of concept note and/or terms of reference

• Date of reviewed draft concept note and/or terms of reference: • Invited reviewers: [name and organization for each one, or as group e.g. the Oversight Team] • Reviewers who provided comments: [name and organization for each one, in particular the PEFA Secretariat

and date(s) of its review(s) or as group e.g. the Oversight Team] • Date(s) of final concept note and/or terms of reference:

Review of the assessment report

• Date(s) of reviewed draft report(s): • Invited reviewers: [name and organization for each one, in particular the PEFA Secretariat and date(s) of its

review(s) or as group e.g. the Oversight Team] • Reviewers who provided comments: [name and organization for each one]

1.3 Assessment methodology

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2. Country background information The indicative length of this section is six to ten pages.

2.1 Country economic situation TABLE 2.1: Selected economic indicators

FY T-2 FY T-1 FY T GDP GDP per capita (currency units) Real GDP growth (%) CPI (annual average change) (%) Gross government debt (% of GDP) External terms of trade (annual percentage change) Current account balance (% of GDP) Total external debt (% of GDP) Gross official reserves (months of import value)

Key indicators are illustrative only—others may be relevant to the country situation

2.2 Fiscal and budgetary trends TABLE 2.2: Aggregate fiscal data

Central government actuals (in percent of GDP) FY T-2 FY T-1 FY T Total revenue —Own revenue —Grants Total expenditure —Noninterest expenditure —Interest expenditure Aggregate deficit (incl. grants) Primary deficit Net financing —External —Domestic

The table should show the overall totals for the central government sector. If only budget data is included this should be specifically mentioned. TABLE 2.3: Budget allocations by function

Actual budgetary allocations by sectors (as a percentage of total expenditures) FY T-2 FY T-1 FY T Health

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Education Agriculture Etc.

Data for tables 2-2 and 2-3 shall be presented according to the classification used by the government TABLE 2.4: Budget allocations by economic classification

Actual budgetary allocations by economic classification (as a percentage of total expenditures) FY T-2 FY T-1 FY T Current expenditures —Wages and salaries —Goods and services —Interest —Transfers —Others Capital expenditures

2.3 Legal and regulatory arrangements for PFM

2.4 Institutional arrangements for PFM TABLE 2.5: Structure of the public sector (number of entities and financial turn-over)

Public sector Year Government subsector Social security

funds 1/ Public corporation subsector

Budgetary unit

Extrabudgetary units

Nonfinancial public

corporations

Financial public corporations

Central 1st tier subnational (State) Lower tier(s) of subnational

2/

1/ Depending on management control and funding arrangements, a social security fund is a public sector entity that may form part of a particular level of government or be classified as a separate sub-sector of the government sector (GFS 2014, para- graph 2.78). 2/ ‘Budgetary central government‘comprises all central government entities included in the central government budget. TABLE 2.6: Financial structure of central government—budget estimates (in currency units)

Year Central government Budgetary

unit Extrabudgetary

units Social security

funds Total

aggregated 1/ Revenue

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Expenditure Transfers to (-) and from (+) other units of general government’s Liabilities Financial assets Nonfinancial assets

1/Where available this should be the consolidated total, but other aggregation method may be used (with explanation). TABLE 2.7: Financial structure of central government – actual expenditure (in currency units)

Year Central government Budgetary

unit Extrabudgetary

units Social security

funds Total

aggregated 1/ Revenue Expenditure Transfers to (-) and from (+) other units of general government’ Liabilities Financial assets Nonfinancial assets

1/ Where available this should be the consolidated total, but other aggregation method may be used (with explanation).

2.5 Other key features of PFM and its operating environment

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3. Assessment of PFM performance

The indicative length for this section is 30-40 pages. The structure of the section is based on the seven pillars as follows:

3.1 Budget reliability 3.2 Transparency of public finances 3.3 Management of assets and liabilities 3.4 Policy-based fiscal strategy and budgeting 3.5 Predictability and control in budget execution 3.6 Accounting and reporting 3.7 External scrutiny and audit

PILLAR ONE: Budget reliability

PI-1. Aggregate expenditure outturn Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-1. Aggregate expenditure outturn

Overall score

1.1. Aggregate expenditure outturn

Dimension score

1.1 Aggregate expenditure outturn Table: Total budget and actual expenditure

FY T-2 FY T-1 FY T Budget Actual % Deviation

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The methodology for calculating this dimension is provided in a spreadsheet on the PEFA website www.pefa.org. Calculations for the indicator should be included in the assessment report as an Annex. A template is provided in Annex 5: Calculation sheet templates for PI-1, PI-2 and PI-3.

PI-2. Expenditure composition outturn Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-2. Expenditure composition outturn

Overall score

2.1 Expenditure composition outturn by function

Dimension score

2.2 Expenditure composition outturn by economic type

Dimension score

2.3 Expenditure from contingency reserves

Dimension score

2.1. Expenditure composition outturn by function

The methodology for calculating this dimension is provided in a spreadsheet on the PEFA website www.pefa.org. Calculations for the indicator should be included in the assessment report as an Annex. A template is provided in Annex 5: Calculations sheets templates for PI-1, PI-2, and PI-3. 2.2. Expenditure composition outturn by economic type

The methodology for calculating this dimension is provided in a spreadsheet on the PEFA website www.pefa.org. Calculations for the indicator should be included in the assessment report as an Annex. A template is provided in Annex 5: Calculations sheets templates for PI-1, PI-2, and PI-3. 2.3. Expenditure from contingency reserves

The spreadsheet provided on the PEFA website for dimension 2.1 can also be used to assist with calculations for this dimension (see Annex 5: Calculations sheets templates for PI-1, PI-2, and PI-3). PI-3. Revenue outturn Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-3. Revenue outturn

Overall score

3.1 Aggregate revenue outturn

Dimension score

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3.2 Revenue composition outturn

Dimension score

3.1. Aggregate revenue outturn

Performance level and evidence for scoring the dimension.

The methodology for calculating this dimension is provided in a spreadsheet on the PEFA website www.pefa.org. Calculations for the indicator should be included in the assessment report as an Annex. A template is provided in Annex 5: Calculations sheets templates for PI-1, PI-2, and PI-3. 3.2. Revenue composition outturn

The methodology for calculating this dimension is provided in a spreadsheet on the PEFA website www.pefa.org. Calculations for the indicator should be included in the assessment report as an Annex. A template is provided in Annex 5: Calculations sheets templates for PI-1, PI-2, and PI-3.

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PILLAR TWO: Transparency of public finances PI-4. Budget classification Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-4. Budget classification

Overall score

4.1 Budget classification Dimension score

4.1. Budget classification

PI-5. Budget documentation Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-5. Budget documentation

Overall score

5.1 Budget documentation Dimension score

5.1. Budget documentation

The PEFA assessment report could present the evidence used and the results of the assessment for PI-5 in a summary box for checklists. A template for the summary box for checklists is provided below.

Element/ Requirements Met (Y/N)

Evidence used/ Comments

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PI-6. Central government operations outside financial reports Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-6. Central government operations outside financial reports

Overall score

6.1 Expenditure outside financial reports

Dimension score

6.2 Revenue outside financial reports

Dimension score

6.3 Financial reports of extrabudgetary units

Dimension score

For PI-6.1 and PI-6.2, it is recommended that the PEFA report includes a table that identifies known revenues and expenditures not recorded in government financial reports (see table 6.1).

Table 6.1. EXAMPLE of revenues and expenditures outside the government’s financial reports (Actual entities and other details will vary between countries)

Entity Type of revenue outside government financial reports

Extrabudgetary Units

Estimated amount of revenue reported outside government financial reports

Type of expendiure reported outside government financial reports

Estimated amount of expenditure reported outside government financial reports

Evidence and reporting

Health Authority Medical

registration fees

University Student facility fees

$ Minor office

equipment; Vehicles;

Meal allowances

$ Sports

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equipment, library acquisitions, computer hardware and software etc.

$ Revenues from registering medical professionals are retained by authority and not recorded in FMIS. Authority maintains separate bookkeeping accounts for retained revenue

Supplementary fee ($100 per student per year) imposed to supplement official tuition fee.

Natural Resource Fund

License fees and royalties from extraction.

Returns from investment of fund balances.

$ Fund

administration charges.

Annual reports from Natural Resource Fund operations. All transfers to the budget are reported

National Trust Entrance fees to $

historic buildings

Etc.

Operations of Budgetary Units outside central government financial reports Ministry of Transport

Direct grant for transport modernisation project funded by development partner

$ MoU between ministry and development partner.

Separate budgetary unit bank a/c. Quarterly report to development partner

6.1. Expenditure outside financial reports

6.2. Revenue outside financial reports

6.3. Financial reports of extrabudgetary units

PI-7. Transfers to subnational governments Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-7. Transfers to subnational governments

Overall score

7.1 System for allocating transfers Dimension score

7.2 Timeliness of information on transfers

Dimension score

7.1. System for allocating transfers

The PEFA assessment report could present the evidence used for assessing this dimension in a table: list of all transfers to subnational government from central government with the respective approved budgeted transfers and outturns actually transferred.

7.2. Timeliness of information on transfers

PI-8. Performance information for service delivery Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-8. Performance information for service delivery

Overall score

8.1 Performance plans for service delivery

Dimension score

8.2 Performance achieved for service delivery

Dimension score

8.3 Resources received by service delivery units

Dimension score

8.4 Performance evaluation for service delivery

Dimension score

8.1. Performance plans for service delivery The PEFA assessment report could present the evidence used and the results of the assessment for this dimension in a Table: list of ministries and services chosen, that have expenditure devoted to service delivery, presenting the corresponding estimate value, as described in Volume II-PEFA Assessment Fieldguide, para 8:7. A template of Table 8.1 is provided below.

Table 8.1: Scoring requirements dimension 8.1 (for program, service or function)

Score Program objectives

Key performance indicators Planned outputs

(quantity)

Planned outcomes

(Measurable)

Activities Materiality (No. of ministries) Output

indicators Outcome indicators

A Y Y Y Y Y NA Most (>75%)

B Y y y Y N NA Most (>75%) or B Y y y N Y NA Most (>75%)

C N Y Y N N N Majority (>50%) or C N N N N N Y Majority (>50%)

8.2. Performance achieved for service delivery

8.3. Resources received by service delivery units

8.4. Performance evaluation for service delivery

PI-9. Public access to fiscal information Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-9. Public access to fiscal information

Overall score

9.1 Public access to fiscal information

Dimension score

9.1. Public access to fiscal information

The PEFA assessment report could present the evidence used and the results of the assessment for PI-9 in a summary box for checklists. A template for the summary box for checklists is provided below.

Element/ Requirements Met (Y/N)

Evidence used/ Comments

PILLAR THREE: Management of assets and liabilities PI-10. Fiscal risk reporting Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-10. Fiscal risk reporting

Overall score

10.1 Monitoring of public corporations

Dimension score

10.2 Monitoring of subnational governments

Dimension score

10.3 Contingent liabilities and other fiscal risks

Dimension score

10.1. Monitoring of public corporations

The PEFA assessment report could present the evidence used and the results of the assessment for this dimension in a table: financial reports of public corporations, as described in Volume II-PEFA Assessment Fieldguide, para. 10.1:10. A template of Table 10.1: Financial reports of public corporation is provided below.

Table 10.1: Financial reports of public corporations Public

corporations Date of audited

financial statements

Total expenditure

As a % of total expenditure of public

corporations

Are contingent liabilities of the

public corporation disclosed in the

financial report? (Y/N)

10.2. Monitoring of subnational governments

10.3. Contingent liabilities and other fiscal risks

PI-11. Public investment management Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-11. Public investment management

Overall score

11.1 Economic analysis of investment projects

Dimension score

11.2 Investment project selection Dimension score

11.3 Investment project costing Dimension score

11.4 Investment project monitoring Dimension score

The PEFA assessment report could present the evidence used for assessing this indicator in a table: list of major investment projects is to be provided with the corresponding amounts, as described in Volume II-PEFA Assessment Fieldguide, para. 11:2. 11.1. Economic analysis of investment projects

11.2. Investment project selection

11.3. Investment project costing

11.4. Investment project monitoring

PI-12. Public asset management Summary of scores and performance table

Indicator/Dimension Score Brief justification for score

PI-12. Public asset management

Overall score

12.1 Financial asset monitoring Dimension score

12.2 Nonfinancial asset monitoring Dimension score

12.3 Transparency of asset disposal Dimension score

12.1. Financial asset monitoring

12.2. Nonfinancial asset monitoring

The PEFA assessment report could present the evidence used and the results of the assessment for this dimension in a table: categories of nonfinancial assets, as described in PEFA Framework, page 40. A template of Table 12.1: Categories of nonfinancial assets is provided below.

Table 12.1. Categories of nonfinancial assets Categories Subcategories Where captured Comments Fixed assets Buildings and structures

Machinery and equipment Other fixed assets

Inventories — Valuables — Nonproduced assets

Land Mineral and energy resources Other naturally occurring assets

Intangible nonproduced assets Note: The categories in the table are based on the GFS Manual 2014, but different categories applied by the government may be used.

12.3. Transparency of asset disposal

PI-13. Debt management

Summary of scores and performance table Indicator/Dimension Score Brief justification for score

PI-13. Debt management

Overall score

13.1 Recording and reporting of debt and guarantees

Dimension score

13.2 Approval of debt and guarantees

Dimension score

13.3 Debt management strategy Dimension score

13.1. Recording and reporting of debt and guarantees

13.2. Approval of debt and guarantees

13.3. Debt management strategy

PILLAR FOUR: Policy based fiscal strategy and budgeting

PI-14. Macroeconomic and fiscal forecasting Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-14. Macroeconomic and fiscal forecasting

Overall score

14.1 Macroeconomic forecasts Dimension score

14.2 Fiscal forecasts Dimension score

14.3 Macrofiscal sensitivity analysis Dimension score

14.1. Macroeconomic forecasts

14.2. Fiscal forecast

14.3. Macrofiscal sensitivity analysis

PI-15. Fiscal strategy Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-15. Fiscal strategy

Overall score

15.1 Fiscal impact of policy proposals Dimension score

15.2 Fiscal strategy adoption Dimension score

15.3 Reporting on fiscal outcomes Dimension score

15.1. Fiscal impact of policy proposals

The PEFA assessment report could present the evidence used and the results of the assessment for this dimension as described in Volume II-PEFA Assessment Fieldguide, para. 15.1:11. A template of Table 15.2: Fiscal impact of policy proposals submitted during budget preparation, is provided below.

Table 15.2: Fiscal impact of policy proposals submitted during budget preparation

Ministry Name of proposal Fiscal impact ($) Revenue/Cost information Revenue policy proposals

Do the proposals present total revenues to be collected for all budget years

Sub-total Expenditure policy proposals

Do the proposals present full costs (including current costs of capital projects) for all budget

years

Sub-total TOTAL

15.2. Fiscal strategy adoption

15.3. Reporting on fiscal outcomes

PI-16. Medium-term perspective in expenditure budgeting Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-16. Medium-term perspective in expenditure budgeting

Overall score

16.1 . Medium-term expenditure estimates

Dimension score

16.2 Medium-term expenditure ceilings

Dimension score

16.3 Alignment of strategic plans and medium-term budgets

Dimension score

16.4 Consistency of budgets with previous year’s estimates

Dimension score

16.1. Medium-term expenditure estimates

16.2. Medium-term expenditure ceilings

16.3. Alignment of strategic plans and medium-term budgets

16.4. Consistency of budgets with previous year’s estimates

The PEFA assessment report could present the evidence used and the results of the assessment for this dimension as described in Volume II-PEFA Assessment Fieldguide, para. 16.4:2. Regarding the format to present changes, such information could be presented in the form of a table that highlights and explains the various changes between the forward years presented in the previous budget and the final budget submitted to the legislature including any changes in assumptions, economic parameters and major policy changes and adjustments.

PI-17. Budget preparation process Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-17. Budget preparation process

Overall score

17.1 Budget calendar Dimension score

17.2 Guidance on budget preparation

Dimension score

17.3 Budget submission to the legislature

Dimension score

17.1. Budget calendar

The PEFA assessment report could present the evidence used and the results of the assessment for this dimension in a summary table showing the budget calendar, with the planned/required dates as well as the actual dates, for the last budget submitted to the legislature.

17.2. Guidance on budget preparation

17.3. Budget submission to the legislature

The PEFA assessment report could present the evidence used and the results of the assessment for this dimension in a summary table showing the budget submission to the legislature: actual dates of submission for last three completed fiscal years.

PI-18. Legislative scrutiny of budgets Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-18. Legislative scrutiny of budgets

Overall score

18.1 Scope of budget scrutiny Dimension score

18.2 Legislative procedures for budget scrutiny

Dimension score

18.3 Timing of budget approval Dimension score

18.4 Rules for budget adjustments by the executive

18.1. Scope of budget scrutiny

18.2. Legislative procedures for budget scrutiny

18.3. Timing of budget approval

The PEFA assessment report could present the evidence used and the results of the assessment for this dimension in a summary table showing the timing of budget approval: actual dates of approval for last three completed fiscal years.

18.4. Rules for budget adjustments by the executive

PILLAR FIVE: Predictability and control in budget execution

PI-19. Revenue administration Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-19. Revenue administration

Overall score

19.1 Rights and obligations for revenue measures

Dimension score

19.2 Revenue risk management Dimension score

19.3 Revenue audit and investigation

Dimension score

19.4 Revenue arrears monitoring Dimension score

19.1. Rights and obligations for revenue measures

19.2. Revenue risk management

19.3. Revenue audit and investigation

19.4. Revenue arrears monitoring

PI-20. Accounting for revenue Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-20 Accounting for revenue

Overall score

20.1 Information on revenue collections

Dimension score

20.2 Transfer of revenue collections Dimension score

20.3 Revenue accounts reconciliation

Dimension score

20.1. Information on revenue collections

The PEFA assessment report could present the evidence used and the results of the assessment for this dimension in a summary table showing information on revenue collections: breakdown by different categories of revenues, indicating the frequency of collection for each of them.

20.2. Transfer of revenue collections

The PEFA assessment report could present the evidence used and the results of the assessment for this dimension in a summary table showing transfer of revenue collection: breakdown by different categories of revenue, indicating the frequency of transfer for each of them. 20.3. Revenue accounts reconciliation

20.2. Transfer of revenue collections

The PEFA assessment report could present the evidence used and the results of the assessment for this dimension in a summary table showing revenue accounts reconciliation: breakdown by different categories of revenues, indicating the frequency of reconciliation for each of them.

PI-21. Predictability of in-year resource allocation Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-21 Predictability of in-year resource allocation

Overall score

21.1 . Consolidation of cash balances Dimension score

21.2 Cash forecasting and monitoring

Dimension score

21.3 Information on commitment ceilings

Dimension score

21.4 Significance of in-year budget adjustments

Dimension score

21.1. Consolidation of cash balances

The PEFA assessment report could present the evidence used and the results of the assessment for this dimension in a summary table showing consolidation of cash balances: list of bank and cash balances at the time of assessment, indicating the frequency of consolidation for each of them.

21.2. Cash forecasting and monitoring

21.3. Information on commitment ceilings

21.4. Significance of in-year budget adjustments

PI-22. Expenditure arrears Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-22 Expenditure arrears

Overall score

22.1. Stock of expenditure arrears Dimension score

22.2 Expenditure arrears monitoring Dimension score

22.1. Stock of expenditure arrears

The PEFA assessment report could present the evidence used and the results of the assessment for this dimension in a summary table showing stock of expenditure arrears: breakdown by different categories of arrears, indicating (i) the corresponding amounts of stock at the end of the fiscal year, for the last three completed fiscal years; (ii) the total amount of arrears; (iii) the total expenditure as determined in PI-1 and (iv) the percentage represented by the ratio total amount of arrears/ total expenditure.

22.2. Expenditure arrears monitoring

The PEFA assessment report could present the evidence used and the results of the assessment for this dimension in a summary table showing expenditure arrears monitoring: breakdown by different categories of arrears, indicating how frequently and quickly the information is generated.

PI-23. Payroll controls Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-23 Payroll controls

Overall score

23.1 Integration of payroll and personnel records

Dimension score

23.2 Management of payroll changes

Dimension score

23.3 Internal control of payroll Dimension score

23.4 Payroll audit Dimension score

23.1. Integration of payroll and personnel records

23.2. Management of payroll changes

23.3. Internal control of payroll

23.4. Payroll audit

PI-24. Procurement Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-24 Procurement

Overall score

24.1 Procurement monitoring Dimension score

24.2 Procurement methods Dimension score

24.3 Public access to procurement information

Dimension score

24.4 Procurement complaints management

Dimension score

24.1. Procurement monitoring

24.2 Procurement methods

24.3. Public access to procurement information

The PEFA assessment report could present the evidence used and the results of the assessment for the dimension in a summary box for checklists. A template for the summary box for checklists is provided below.

Element/ Requirements Met (Y/N)

Evidence used/ Comments

24.4. Procurement complaints management

The PEFA assessment report could present the evidence used and the results of the assessment for the dimension in a summary box for checklists. A template for the summary box for checklists is provided below.

Element/ Requirements Met (Y/N)

Evidence used/ Comments

PI-25. Internal controls on nonsalary expenditure Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-25 Internal controls on nonsalary expenditure

Overall score

25.1 Segregation of duties Dimension score

25.2 Effectiveness of expenditure commitment controls

Dimension score

25.3 Compliance with payment rules and procedures

Dimension score

25.1. Segregation of duties

25.2 Effectiveness of expenditure commitment controls

25.3. Compliance with payment rules and procedures

PI-26. Internal audit

Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-26 Internal audit

Overall score

26.1 Coverage of internal audit Dimension score

26.2 Nature of audits and standards applied

Dimension score

26.3 Implementation of internal audits and reporting

Dimension score

26.4 Response to internal audits Dimension score

26.1. Coverage of internal audit

26.2 Nature of audits and standards applied

26.3. Implementation of internal audits and reporting

26.4. Response to internal audits

PILLAR SIX: Accounting and reporting

PI-27. Financial data integrity Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-27 Financial data integrity

Overall score

27.1 Bank account reconciliation Dimension score

27.2 Suspense accounts Dimension score

27.3 Advance accounts Dimension score

27.4 Financial data integrity processes

Dimension score

27.1. Bank account reconciliation

The PEFA assessment report could present the evidence used and the results of the assessment for this dimension in a summary table showing bank account reconciliation: list of bank accounts, indicating how frequently and quickly data is reconciled.

27.2 Suspense accounts

The PEFA assessment report could present the evidence used and the results of the assessment for this dimension in a summary table showing the suspense accounts: list of suspense accounts, indicating how frequently they are reconciled, and how frequently and quickly they are cleared.

27.3. Advance accounts

The PEFA assessment report could present the evidence used and the results of the assessment for this dimension in a summary table showing the advance accounts: list of suspense accounts, indicating how frequently they are reconciled, and how frequently and quickly they are cleared.

27.4. Financial data integrity processes

PI-28. In-year budget reports Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-28 In-year budget report

Overall score

28.1 Coverage and comparability of reports

Dimension score

28.2 Timing of in-year budget reports

Dimension score

28.3 Accuracy of in-year budget reports

Dimension score

28.1. Coverage and comparability of reports

28.2 Timing of in-year budget reports

The PEFA assessment report could present the evidence used and the results of the assessment for the dimension in a summary table showing in-year budget report: period covered by the report and issuing dates of the reports.

28.3. Accuracy of in-year budget reports

PI-29. Annual financial reports

Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-29 Annual financial reports

Overall score

29.1 Completeness of annual financial reports

Dimension score

29.2 Submission of reports for external audit

Dimension score

29.3 Accounting standards Dimension score

29.1. Completeness of annual financial reports

29.2 Submission of reports for external audit

29.3. Accounting standards

PILLAR SEVEN: External scrutiny and audit

PI-30. External audit

Summary of scores and performance table Indicator/Dimension Score Brief justification for score

PI-30 External audit

Overall score

30.1 Audit coverage and standards

Dimension score

30.2 Submission of audit reports to the legislature

Dimension score

30.3 External audit follow-up Dimension score

30.4 Supreme Audit Institution independence

Dimension score

30.1. Audit coverage and standards

30.2 Submission of audit reports to the legislature

The PEFA assessment report could present the evidence used and the results of the assessment for the dimension in a summary table showing submission of audit reports to the legislature: Date of receipt of the financial report by the audit office and date of submission of the audit report to the legislature.

30.3. External audit follow-up

30.4. Supreme Audit Institution independence

The PEFA assessment report could present the evidence used and the results of the assessment for the dimension in a summary box for checklists. A template for the summary box for checklists is provided below.

Element/ Requirements Met (Y/N)

Evidence used/ Comments

PI-31. Legislative scrutiny of audit reports Summary of scores and performance table

Indicator/Dimension Score Brief justification for score PI-31 Legislative scrutiny of audit reports

Overall score

31.1 Timing of audit report scrutiny

Dimension score

31.2 Hearings on audit findings Dimension score

31.3 Recommendations on audit by legislature

Dimension score

31.4 Transparency of legislative scrutiny of audit reports

Dimension score

31.1. Timing of audit report scrutiny

The PEFA assessment report could present the evidence used and the results of the assessment for the dimension in a summary box for checklists. A template for the summary box for checklists is provided below.

Element/ Requirements Met (Y/N)

Evidence used/ Comments

31.2 Hearings on audit findings

31.3. Recommendations on audit by legislature

31.4. Transparency of legislative scrutiny of audit reports

4. Conclusions of the analysis of PFM systems The indicative length of this section is six to ten pages.

4.1 Integrated assessment of PFM performance

4.2 Effectiveness of the internal control framework

4.3 PFM strengths and weaknesses

4.4 Performance changes since a previous assessment

5. Government PFM reform process The indicative length of this section is three to five pages.

5.1 Approach to PFM reforms

5.2 Recent and on-going reform actions

5.3 Institutional considerations

Template Annex 1: Performance indicator summary This annex provides a summary table of the performance at indicator and dimension level. The table specifies the scores with a brief explanation for the scoring for each indicator and dimension of the current and previous assessment. It also includes columns to capture scores from a previous assessment where the PEFA 2016 methodology was applied. However, annex 1 cannot be used to compare scores with a previous assessment that used the 2005 or 2011 versions of the framework. Tracking performance changes in these circumstances will require assessors to complete a supplementary annex (See Annex 4: Tracking changes in performance based on previous versions of PEFA). The supplementary annex should be prepared in compliance with the Guidance on reporting performance changes in PEFA 2016 from previous assessments that applied PEFA 2005 or PEFA 2011 at www.pefa.org.) Template of Annex 1: Performance indicator summary will also be available in excel. Subject to a government’s approval for the publication of the final PEFA assessment report, the scores and notes as set forth in the Annex 1 in excel version will be published on PEFA Website: www.pefa.org. COUNTRY NAME:

Current assessment Previous assessment (applying PEFA 2016 Framework)

Pillar Indicator/Dimention Score Description of requirements met Score

Explanation of change (including

comparability issues)

Bud

get R

elia

bilit

y

PI-1 Aggregate expenditure out-turn

PI-2 Expenditure composition outturn

(i) Expenditure composition outturn by function

(ii) Expenditure composition outturn by economic type

(iii) Expenditure from contingency reserves.

PI-3 Revenue outturn (i) Aggregate revenue outturn (ii) Revenue composition

outturn

Tra

nspa

renc

y of

Pub

lic

Fina

nces

PI-4 Budget Classification PI-5 Budget Documentation PI-6 Central government

operations outside financial reports

(i) Expenditure outside financial reports

(ii) Revenue outside financial reports

(iii) Financial reports of extra-budgetary units

PI-7 Transfers to subnational governments

(i) System for allocating transfers

(ii) Timeliness of information on transfers

PI-8 Performance information for service delivery

(i) Performance plans for service delivery

(ii) Performance achieved for service delivery

(iii) Resources received by service delivery units

(iv)Performance evaluation for service delivery

PI-9 Public access to information

Man

agem

ent o

f ass

ets a

nd li

abili

ties

PI-10 Fiscal risk reporting (i) Monitoring of public

corporations

(ii) Monitoring of sub-national government (SNG)

(iii) Contingent liabilities and other fiscal risks

PI-11 Public investment management

(i) Economic analysis of investment proposals

(ii) Investment project selection

(iii) Investment project costing

(iv) Investment project monitoring

PI-12 Public asset management (i) Financial asset monitoring (ii) Nonfinancial asset

monitoring

(iii) Transparency of asset disposal

PI-13 Debt management (i) Recording and reporting of

debt and guarantees

(ii) Approval of debt and guarantees

(iii) Debt management strategy

Polic

y-ba

sed

fisca

l str

ateg

y an

d bu

dget

ing

PI-14 Macroeconomic and fiscal forecasting

(i) Macroeconomic forecasts (ii) Fiscal forecasts (iii) Macro-fiscal sensitivity

analysis

PI-15 Fiscal strategy (i) Fiscal impact of policy

proposals

(ii) Fiscal strategy adoption (iii) Reporting on fiscal

outcomes

PI-16 Medium term perspective in expenditure budgeting

(i) Medium-term expenditure estimates

(ii) Medium-term expenditure ceilings

(iii) Alignment of strategic plans and medium-term budgets

(iv) Consistency of budgets with previous year estimates

PI-17 Budget preparation process (i) Budget calendar (ii) Guidance on budget

preparation

(iii) Budget submission to the legislature

PI-18 Legislative scrutiny of budgets

(i) Scope of budget scrutiny (ii) Legislative procedures

for budget scrutiny

(iii) Timing of budget approval

(iv) Rules for budget adjustments by the executive

Pred

icta

bilit

y an

d co

ntro

l in

budg

et

PI-19 Revenue administration (i) Rights and obligations for

revenue measures

(ii) Revenue risk management (iii) Revenue audit and

investigation

(iv) Revenue arrears monitoring

PI-20 Accounting for revenues

(i) Information on revenue collections

(ii) Transfer of revenue collections

(iii) Revenue accounts reconciliation

PI-21 Predictability of in-year resource allocation

(i) Consolidation of cash balances

(ii) Cash forecasting and monitoring

(iii) Information on commitment ceilings

(iv) Significance of in-year budget adjustments

PI-22 Expenditure arrears (i) Stock of expenditure

arrears

(ii) Expenditure arrears monitoring

PI-23 Payroll controls (i) Integration of payroll and

personnel records

(ii) Management of payroll changes

(iii) Internal control of payroll

(iv) Payroll audit PI-24 Procurement (i) Procurement monitoring (ii) Procurement methods (iii) Public access to

procurement information

(iv) Procurement complaints management

PI-25 Internal controls on nonsalary expenditure

(i) Segregation of duties (ii) Effectiveness of

expenditure commitment controls

(iii) Compliance with payment rules and procedures

PI-26 Internal audit effectiveness (i)Coverage of internal audit

(ii) Nature of audits and standards applied

(iii) Implementation of internal audits and reporting

(iv) Response to internal audits

Acc

ount

ing

and

Rep

ortin

g

PI-27 Financial data integrity (i)Bank account reconciliation (ii) Suspense accounts (iii) Advance accounts (iv) Financial data integrity

processes

PI-28 In-year budget reports (i)Coverage and

comparability of reports

(ii) Timing of in-year budget reports

(iii)Accuracy of in-year budget reports

PI-29 Annual financial reports (i)Completeness of annual

financial reports

(ii) Submission of reports for external audit

(iii) Accounting standards

Ext

erna

l scr

utin

y an

d au

dit

PI-30 External audit (i)Audit coverage and

standards

(ii) Submission of audit reports to the legislature

(iii) External audit follow-up

(iv)Supreme Audit Institution (SAI) independence

PI-31 Legislative scrutiny of audit reports

(i)Timing of audit report scrutiny

(ii) Hearings on audit findings

(iii) Recommendations on audit by the legislature

(iv)Transparency of legislative scrutiny of audit reports

Total Scored 31 31

Template Annex 2: Summary of observations on the internal control framework

Internal control components and elements Summary of observations 4. Control environment 4.1 The personal and professional integrity and ethical values of

management and staff, including a supportive attitude toward internal control constantly throughout the organisation

4.2 Commitment to competence

4.3 The “tone at the top” (i.e. management’s philosophy and operating style)

4.4 Organisational structure

4.5 Human resource policies and practices 5. Risk assessment 5.1 Risk identification 5.2 Risk assessment (significance and likelihood) 5.3 Risk evaluation 5.4 Risk appetite assessment 5.5 Responses to risk (transfer, tolerance, treatment or

termination) 6. Control activities 3.1 Authorization and approval procedure 3.2 Segregation of duties (authorizing, processing, recording,

reviewing) 3.3 Controls over access to resources and records 3.4 Verifications 3.5 Reconciliations 3.6 Reviews of operating performance 3.7 Reviews of operations, processes and activities 3.8 Supervision (assigning, reviewing and approving, guidance

and training) 4. Information and communication 5. Monitoring 5.4 Ongoing monitoring 5.5 Evaluations 5.6 Management responses

Template Annex 3: Sources of information by indicator

Details of the data requirements and data sources for each indicator and dimension are included in Volume II of the PEFA Handbook – PEFA Assessment Fieldguide. Table below compiles the suggested list of data sources for each indicator/dimension as set out in the PEFA Assessment Fieldguide.

Indicator/dimension Data Sources I. Budget reliability

PI-1. Aggregate expenditure outturn 1.1 Aggregate expenditure outturn

• Annual budget law/documentation/estimates approved by the legislature;

• Annual budget execution report or Comparative Statement of Budget and Actual Results.

PI-2. Expenditure composition outturn • Annual budget law/documentation/estimates approved by the legislature;

• Annual budget execution report or annual financial statements (The above information should be available from the MoF.)

• Annual budget law/documentation /estimates approved by the legislature

2.1. Expenditure composition outturn by function

2.2. Expenditure composition outturn by economic type

2.3. Expenditure from contingency reserves

PI-3. Revenue outturn • Annual budget law/documentation/estimates approved by the legislature

• Annual budget execution report or audited annual financial statements

• Information on revenue outturn for the most recent completed fiscal year may also be presented in the budget estimates document

The budget originally approved by the legislature on which budgetary units base their annual expenditure plans at the commencement of the fiscal year. (The above information should be available from the MoF. Information on the main sources of revenue may also be available from the revenue authorities, although they may not be responsible for some sources of revenue about which data are required.)

3.1 Aggregate revenue outturn 3.2 Revenue composition outturn

II. Transparency of public finances

PI-4. Budget classification 4.1 Budget classification

• Relevant legislation and regulations identifying the application of the classification

• Annual budget document provided by the MoF for the last completed fiscal year

• Copy of the chart of accounts used for the last completed fiscal year

PI-5. Budget documentation 5.1 Budget documentation

• Last annual budget proposal submitted to the legislature.

• Supporting documentation for the budget

• Additional documentation relating to the budget submitted to the legislature prior to the budget proposal

PI-6. Central government operations outside financial reports

• Information from the MoF, central bank, SAI, and others about government bank accounts that are not managed by the Treasury

• Financial records of ministries and extrabudgetary units not reported in central government financial reports (e.g., bookkeeping and/or petty cash records, invoices, bank statements, etc.)

(Note: Assessors will have to identify the operations/accounts before they can collect records on them.) • Annual financial reports of extrabudgetary units • Correspondence with central agency regarding financial

reports

6.1 Expenditure outside financial reports 6.2 Revenue outside financial reports 6.3 Financial reports of extra-budgetary units

PI-7. Transfers to subnational governments • Legislation or rules governing transfers from CG to SNG. • Annual budget documents • MoF, or specific entity in charge of matters

such as Minister of Local Government or Decentralization;

• Triangulation with representatives of SNG, either at selected subnational entities or subnational associations subnational

7.1 System for allocating transfers 7.2 Timeliness of information on transfers

PI-8. Performance information for service delivery • Annual budget document and/or supporting budget documentation.

• Ministry budget statements and/or performance plans.

• Other documents on ministry service delivery plans containing performance information;

• Annual financial statements; • In-year budget execution reports • Financial reports or statements of donor

organizations • Budget management system or accounting system • Line ministries and departments • SAI • Internal audit department • MoF

8.1 Performance plans for service delivery 8.2 Performance achieved for service delivery 8.3 Resources received by service delivery units 8.4 Performance evaluation for service delivery

PI- 9 Public access to fiscal information • Listed documents may be accessible from the MoF, State Audit Institution, and procurement authority.

• Access should be, corroborated through availability at government bookshops, websites, public library, notice boards, and public interest groups as governance NGOs, chamber of commerce, development partner’s country offices.

9.1 Public access to fiscal information

III. Management of assets and liabilities

PI- 10 Fiscal risk reporting • A list of public corporations, and data on dates of submission, publication and audit should be compiled by the MoF or SAI

10.1 Monitoring of public corporations 10.2 Monitoring of sub-national government (SNG)

10.3 Contingent liabilities and other fiscal risks • MoF • Ministry of Local Government or similar • Triangulation with information from selected

subnational governments • Annual financial statements • Financial or other reports of budgetary units

PI- 11: Public investment management • Ministry of finance/planning • Line ministries and agencies • Agency in charge of public investments, if any • National guidelines to conduct economic analysis • Economic analysis of investment projects • Legislation on public investment • Annual budget documentation • Medium-term expenditure framework, if available • Guidelines on monitoring public investments • Databases • Project monitoring reports

11.1 Economic analysis of investment proposals 11.2 Investment project selection 11.3 Investment project costing 11.4 Investment project monitoring

PI-12: Public asset management • Consolidated financial statements, including notes relating to the holdings of financial assets.

• Asset management agency, if any. • Budget and extrabudgeary units holding financial and

non-financial assets • MoF, Treasury • Internal audit units • SAI Financial reports from various possible sources including:

• Asset management agency, if any • Budget and extrabudgeary units • MoF • Treasury • Internal audit units • SAI

12.1 Financial asset monitoring 12.2 Nonfinancial asset monitoring 12.3 Transparency of asset disposal.

PI-13: Debt management • MoF • Treasury • Debt Management office • Debt Management entities • Central Bank • Line ministries when necessary.

13.1 Recording and reporting of debt and guarantees 13.2 Approval of debt and guarantees 13.3 Debt management strategy

IV. Policy-based fiscal strategy and budgeting

PI-14: Macroeconomic and fiscal forecasting • Annual budget documents • Annual budget circular • Policy and analytical advice to government • MoF working papers • The reviewing entity • The unit preparing the initial forecasts • Records of legislative proceedings

14.1 Macroeconomic forecasts 14.2 Fiscal forecasts 14.3 Macro-fiscal sensitivity analysis

PI-15 Fiscal strategy

15.1 Fiscal impact of policy proposals • MoF • Office of the Prime Minister/President

15.2 Fiscal strategy adoption 15.3 Reporting on fiscal outcomes PI-16 Medium-term perspective in expenditure budgeting

• Annual budget estimates • Formal directions or instructions on ceilings to ministries • Budget circular • Ministry of Finance/ Planning (or equivalent entity) • Large sector ministries • MoF • Annual budget documents • Large sector ministries

16.1 Medium-term expenditure estimates 16.2 Medium-term expenditure ceilings 16.3 Alignment of strategic plans and medium-term budgets 16.4 Consistency of budgets with previous year’s estimates PI-17: Budget preparation process • MoF (budget department), corroborated by finance

officers of large spending budgetary units; • MoF (budget department), corroborated by the legislature

(budget/finance commission)

17.1 Budget calendar. 17.2 Guidance on budget preparation 17.3 Budget submission to the legislature PI-18: Legislative scrutiny of budgets • Budget director, secretary or chair of budget committee(s)

of legislature, corroborated by advocacy, civil society, and interest groups

• Legislature committees, corroborated by advocacy, civil society, and interest groups;

• MoF (budget department), corroborated by the legislature (budget/finance commissions)

• Internal and/or external audit reports

18.1 Scope of budget scrutiny. 18.2 Legislative procedures for budget scrutiny. 18.3 Timing of budget approval. 18.4 Rules for budget adjustments by the executive.

V. Predictability and control in budget execution

PI-19 Revenue administration • Tax code and other revenue legislation. In resource-rich countries, additional legislation may include relevant information as part of natural resource management arrangements

• Revenue agency websites and publications with information on key obligations and rights

• Customized information products tailored to the needs of key payer segments

• Documented procedures (of the entities collecting most or majority of the central government revenue)

(The best information sources are the revenue authorities, and investment and promotion agencies. Information should also be triangulated with taxpayer and business associations, chamber/s of commerce, etc. • Some countries have one-stop shops, government

service centers, or e-government portals that perform some or all of the client service involved in revenue administration.)

• Documented risk management approach used by revenue authorities to assess and prioritize compliance risks

• A register of identified compliance risks for each payer segment (and for large- and medium-sized payers at a

19.1 Rights and obligations for revenue measures 19.2 Revenue risk management 19.3 Revenue audit and investigation 19.4 Revenue arrears monitoring

minimum) • Documented compliance improvement plan • Status reports on progress in the implementation of

planned risk-mitigation activities and audit and fraud investigations

• Revenue collection authority records such as a documented report on (i) the stock of revenue arrears; and (ii) revenue arrears older than 12 months

PI-20 Accounting for Revenues • Entities/revenue authorities collecting CG revenue • Treasury or other designated revenue recipients • Central Bank

20.1 Information on revenue collections 20.2 Transfer of revenue collections 20.3 Revenue accounts reconciliation. PI-21 Predictability of in-year resource allocation

• MoF and/or Treasury • Budgetary units • Central Bank

21.1 Consolidation of cash balances. 21.2 Cash forecasting and monitoring. 21.3 Information on commitment ceilings. 21.4 Significance of in-year budget adjustments. PI-22 Expenditure arrears

• Treasury; • Budget directorate; • Government accounting office; • Budgetary units; • Debt Management Office • Chamber of Commerce/Industry and other private sector

representatives for triangulation;

22.1 Stock of expenditure arrears. 22.2 Expenditure arrears monitoring

PI-23 Payroll controls • Public service commission • Personnel management directorate or department. • Accountant General • Finance officers of budgetary units and agencies • SAI to triangulate information • Staff union to triangulate information • Audit units to triangulate information

23.1 Integration of payroll and personnel records. 23.2 Management of payroll changes. 23.3 Internal control of payroll. 23.4 Payroll audit.

PI-24 Procurement • MoF or entities where procurement monitoring has been centralized. In decentralized systems, see the five CG units with the highest value of procurement;

• As in dimension 24.1, plus procurement data publicly available in official websites

• Corroborations from civil society or business associations (e.g., chambers of commerce)

• Procurement complaints body, SAI, civil society or business associations (e.g., chamber of commerce)

• Internal and external audit reports • Meetings with civil society and private sector

24.1 Procurement monitoring. 24.2 Procurement methods. 24.3 Public access to procurement information. 24.4 Procurement complaints management.

PI-25 Internal controls on non-salary expenditure • Budget directorate • Accounting directorate • Treasury • Oversight body • Internal audit • Regulations and guidance on accounting and payment

processing

25.1 Segregation of duties. 25.2 Effectiveness of expenditure commitment controls. 25.3 Compliance with payment rules and procedures.

• MoF (Internal audit) • Accountant General • Heads and finance officers of major budgetary units • SAI • Information system

PI-26 Internal audit • MoF (Internal audit) • Accountant General • Heads and finance officers of major budgetary units • SAI for triangulation of information

26.1 Coverage of internal audit. 26.2 Nature of audits and standards applied 26.3 Implementation of internal audits and reporting. 26.4 Response to internal audits.

VI. Accounting and reporting

PI-27 Financial data integrity • Treasury • Accountant General • SAI • Central bank • Budget directorate • Accounting directorate • Oversight body • Internal audit

27.1 Bank account reconciliation. 27.2 Suspense accounts. 27.3 Advance accounts. 27.4 Financial data integrity processes

PI-28 In-year budget reports • Accountant General corroborated by SAI or internal audit

• Treasury or MoF

28.1 Coverage and comparability of reports. 28.2 Timing of in-year budget reports. 28.3 Accuracy of in-year budget reports PI-29 Annual financial reports

• Accountant General corroborated by SAI 29.1 Completeness of annual financial reports. 29.2 Submission of the reports for external audit. 29.3 Accounting standards.

VII. External scrutiny and audit

PI-30 External audit • SAI, corroborated by the parliamentary public accounts committee and civic interest groups;

• Information on submission of reports for audit can also be corroborated with the MoF or the Treasury ministries.

• SAI and internal auditors of major budgetary units, corroborated by Parliamentary Public Accounts committee, government ministers, the MoF, audited entities and civic interest groups

• SAI • Legislation • External reports on SAI independence and financial

governance

30.1 Audit coverage and standards. 30.2 Submission of audit reports to the legislature 30.3 External audit follow up. 30.4 Supreme Audit Institution independence.

PI-31 Legislative scrutiny of audit reports • SAI, MoF, legislature, and Budget Committee of the parliament, corroborated by civic interest groups;

• Respective legislative committees, the Budget Committee of the parliament, SAI, and the MoF, corroborated by civic interest groups

• Legislature corroborated by SAI and civic interest groups.

31.1 Timing of audit report scrutiny 31.2 Hearings on audit findings. 31.3 Recommendations on audit by the legislature. 31.4 Transparency of legislative scrutiny of audit reports.

Template Annex 4: Tracking change in performance based on previous versions of PEFA

This annex provides a summary table of the performance at indicator and dimension level. The table specifies the scores with a brief explanation for the scoring for each indicator and dimension of the current and previous assessment. This annex should present comparisons with previous assessments that used the 2005 or 2011 versions of the framework and should be prepared in compliance with the Guidance on reporting performance changes in PEFA 2016 from previous assessments that applied PEFA 2005 or PEFA 2011 at www.pefa.org.

Indicator/Dimension Score previous

assessment Score current assessment

Description of requirements met in current assessment

Explanation of change (include

comparability issues)

A. PFM-OUT-TURNS: Credibility of the Budget PI-1 Aggregate expenditure out-turn compared to original approved budget

PI-2 Composition of expenditure out-turn compared to original approved budget

(iii) Extent of the variance in expenditure composition during the last three years, excluding contingency items

(iv) The average amount of expenditure actually charged to the contingency vote over the last three years.

PI-3 Aggregate revenue out-turn compared to original approved budget

PI-4 Stock and monitoring of expenditure payment arrears

(i) Stock of expenditure payment arrears and a recent change in the stock.

(ii) Availability of data for monitoring the stock of expenditure payment arrears.

B. KEY CROSS-CUTTING ISSUES: Comprehensiveness and Transparency PI-5 Classification of the budget

PI-6 Comprehensiveness of information included in budget documentation

PI-7 Extent of unreported government operations.

(i) Level of unreported government operations

(ii) Income/expenditure information on donor-funded projects

PI-8 Transparency of inter-governmental fiscal relations.

(i) Transparency and objectivity in the horizontal allocation amongst Sub-national Governments

(ii) Timeliness and reliable information to SN Governments on their allocations

(iii) Extent of consolidation of fiscal data for general government according to sectoral categories

PI-9 Oversight of aggregate fiscal risk from other public sector entities.

(i) Extent of central government monitoring of

autonomous entities and public enterprises

(ii) Extent of central government monitoring of SN government’s fiscal position

PI-10 Public access to key fiscal information

C. BUDGET CYCLE C(i) Policy-Based Budgeting PI-11 Orderliness and participation in the annual budget process

(i) Existence of, and adherence to, a fixed budget calendar

(ii) Guidance on the preparation of budget submissions

(iii) Timely budget approval by the legislature

PI-12 Multi-year perspective in fiscal planning, expenditure policy and budgeting

(i) Multiyear fiscal forecasts and functional allocations

(ii) Scope and frequency of debt sustainability analysis

(iii) Existence of costed sector strategies

(iv) Linkages between investment budgets and forward expenditure estimates

C(ii) Predictability and Control in Budget Execution

PI-13 Transparency of taxpayer obligations and liabilities

(i) Clarity and comprehensiveness of tax liabilities

(ii) Taxpayer access to information on tax liabilities and administrative procedures

(iii) Existence and functioning of a tax appeal mechanism.

PI-14 Effectiveness of measures for taxpayer registration and tax assessment

(i) Controls in the taxpayer registration system

(ii) Effectiveness of penalties for non-compliance with registration and declaration obligations

(iii) Planning and monitoring of tax audit and fraud investigation programs

PI-15 Effectiveness in collection of tax payments

(i) Collection ratio for gross tax arrears

(ii) Effectiveness of transfer of tax collections to the Treasury by the revenue administration

(iii) Frequency of complete accounts reconciliation between tax

assessments, collections, arrears records, and receipts by the Treasury

PI-16 Predictability in the availability of funds for commitment of expenditures

(i) Extent to which cash flows are forecasted and monitored

(ii) Reliability and horizon of periodic in-year information to MDAs on ceilings for expenditure

(iii) Frequency and transparency of adjustments to budget allocations above the level of management of MDAs

PI-17 Recording and management of cash balances, debt and guarantees

(i) Quality of debt data recording and reporting.

(ii) Extent of consolidation of the government’s cash balances.

(iii) Systems for contracting loans and issuance of guarantees.

PI-18 Effectiveness of payroll controls

(i) Degree of integration and reconciliation between personnel records and payroll data.

(ii) Timeliness of changes to personnel records and the payroll.

(iii) Internal controls of changes to personnel records and the payroll.

(iv) Existence of payroll audits to identify control weaknesses and/or ghost workers.

PI-19 Competition, value for money and controls in procurement

(i) Transparency, comprehensiveness and competition in the legal and regulatory framework.

(ii) Use of competitive procurement methods.

(iii) Public access to complete, reliable and timely procurement information.

(iv) Existence of an independent administrative procurement complaints system.

PI-20 Effectiveness of internal controls for non-salary expenditure

(i) Effectiveness of expenditure commitment controls

(ii) Comprehensiveness, relevance and understanding of other internal

control rules/procedures.

(iii) Degree of compliance with rules for processing and recording transactions

PI-21 Effectiveness of internal audit

(i) Coverage and quality of the internal audit function.

(ii) Frequency and distribution of reports

(iii) Extent of management response to internal audit function.

C(iii) Accounting, Recording and Reporting PI-22 Timeliness and regularity of accounts reconciliation

(i) Regularity of bank reconciliation

(ii) Regularity and clearance of suspense accounts and advances

PI-23 Availability of information on resources received by service delivery units

PI-24 Quality and timeliness of in-year budget reports

(i) Scope of reports in terms of coverage and compatibility with budget estimates.

(ii) Timeliness of the issue of reports

(iii) Quality of information

PI-25 Quality and timeliness of annual financial statements

(i) Completeness of the financial statements

(ii) Timeliness of submissions of the financial statements

(iii) Accounting standards used

C(iv) External Scrutiny and Audit PI-26 Scope, nature and follow-up of external audit

(i) Scope/nature of audit performed (including adherence to auditing standards)

(ii) Timeliness of submission of audit reports to the Legislature

(iii) Evidence of follow up on audit recommendations

PI-27 Legislative scrutiny of the annual budget law

(i) Scope of the legislature scrutiny

(ii) Extent to which the legislature’s procedures are well established and respected.

(iii) Adequacy of time for the legislature to provide a response to budget proposals both the detailed estimates and, where applicable, for proposals on macro-fiscal aggregates earlier in the budget

preparation cycle (time allowed in practice for all stages combined)

(iv) Rules for in-year amendments to the budget without ex-ante approval by the legislature

PI-28 Legislative scrutiny of external audit reports

(i) Timeliness of examination of audit reports by the legislature

(ii) Extent of hearing on key findings undertaken by the legislature

(iii) Issuance of recommended actions by the legislature and implementation by the executive

Annex 5: Calculation sheet templates for PI-1, PI-2 and PI-3

Calculation Sheet for PFM Performance Indicators PI-1, PI-2.1 and PI-2.3

Calculations sheet can also be accessed in the PEFA website at https://pefa.org/pefa-assessment-templates Step 1: Enter the three fiscal years used for assessment in table 1. Step 2: Enter budget and actual expenditure data for each of the three years in tables 2, 3, and 4 respectively. Step 3: Enter contingency data for each of the three years in tables 2, 3, and 4 respectively. Step 4: Read the results for each of the three years for each indicator in table 5. Step 5: Refer to the scoring tables for indicators PI-1 and PI-2 respectively in the Performance Measurement Framework in order to decide the score for each indicator.

Table 1 - Fiscal years for assessment

Year 1 = Year 2 = Year 3 =

Table 2 Data for year = 0

administrative or functional head budget actual adjusted

budget deviation absolute deviation percent

1 2 3 4 5 6 7 8 9

10 11 12 13 14 15 16 17 18 19 20

21 (= sum of rest)

allocated expenditure interests contingency total expenditure Aggregate outturn (PI-1) composition (PI-2) variance

contingency share of budget

Table 3 Data for year =

administrative or functional head budget Actual

adjusted budget deviation

absolute deviation percent

1 2 3 4 5 6 7 8 9

10 11 12 13 14 15 16 17 18 19 20

21 (= sum of rest) allocated expenditure

interests

contingency total expenditure Aggregate outturn (PI-1) composition (PI-2) variance contingency share of budget

Table 4 Data for year =

administrative or functional head

1 2 3 4 5 6 7 8 9

10 11 12 13 14 15 16 17 18 19

20 21 (= sum of rest)

allocated expenditure interests contingency total expenditure Aggregate outturn (PI-1) composition (PI-2) variance contingency share of budget Table 5 - Results Matrix for PI-1 for PI-2.1 for PI-2.3

year total exp. deviation composition variance contingency

share 0

0 0

Calculation Sheet for Expenditure by Economic Classification Variance PI-2.2

Step 1: Enter the three fiscal years used for assessment in table 1. Step 2: Enter budget and actual expenditure data for each of the three years in tables 2, 3, and 4 respectively. Step 3: Read the results for each of the three years for each indicator in table 5.

Table 1 - Fiscal years for assessment

Year 1 = Year 2 = Year 3 =

Table 2 Data for year = 0

Economic head budget actual adjusted budget deviation absolute

deviation percent

Compensation of employees Use of goods and services Consumption of fixed capital Interest Subsidies Grants Social benefits Other expenses Total expenditure overall variance composition variance

Table 3 Data for year =

Economic head budget actual adjusted budget deviation absolute

deviation percent

Compensation of employees Use of goods and services Consumption of fixed capital Interest Subsidies Grants Social benefits Other expenses Total expenditure

overall variance composition variance

Table 4 Economic head budget actual adjusted

budget deviation absolute deviation percent

Compensation of employees Use of goods and services Consumption of fixed capital Interest Subsidies Grants Social benefits Other expenses Total expenditure overall variance composition variance

Table 5 - Results Matrix

year total expenditure deviation composition

variance 0 0 0

Calculation Sheet for Revenue composition outturn (February 1, 2016)

Step 1: Enter the three fiscal years used for assessment in table 1. Step 2: Enter budget and actual revenue data for each of the three years in tables 2, 3, and 4 respectively. Step 3: Read the results for each of the three years for each indicator in table 5.

Table 1 - Fiscal years for assessment

Year 1 = Year 2 = Year 3 =

Table 2 Data for year = 0

Economic head budget actual adjusted budget deviation absolute

deviation percent

Tax revenues

Taxes on income, profit and capital gains Taxes on payroll and workforce Taxes on property Taxes on goods and services Taxes on exports Other taxes

Social contributions Social security contributions Other social contributions

Grants Grants from foreign governments Grants from international organizations Grants from other government units

Other revenue Property income Sales of goods and services Fines, penalties and forfeits Transfers not elsewhere classified

Premiums, fees, and claims related to nonlife insurance and standardized guarantee schemes Sum of rest Total revenue overall variance composition variance

Table 3 Data for year =

Economic head budget actual adjusted budget deviation absolute

deviation percent

Tax revenues Taxes on income, profit and capital gains Taxes on payroll and workforce Taxes on property Taxes on goods and services Taxes on exports Other taxes

Social contributions Social security contributions Other social contributions

Grants Grants from foreign governments Grants from international organizations Grants from other government units

Other revenue Property income Sales of goods and services Fines, penalties and forfeits Transfers not elsewhere classified Premiums, fees, and claims related to nonlife insurance and standardized guarantee schemes Sum of rest Total revenue

overall variance composition variance

Table 4 Economic head budget actual adjusted

budget deviation absolute deviation percent

Tax revenues

Taxes on income, profit and capital gains Taxes on payroll and workforce Taxes on property Taxes on goods and services Taxes on exports Other taxes

Social contributions Social security contributions Other social contributions

Grants Grants from foreign governments Grants from international organizations Grants from other government units

Other revenue Property income Sales of goods and services Fines, penalties and forfeits

Transfers not elsewhere classified Premiums, fees, and claims related to nonlife insurance and standardized guarantee schemes

Sum of rest Total revenue overall variance composition variance