PEFA is changing and donors are being let off the hook.

PEFAConsultations on the revised framework for Public Expenditure and Financial Accountability (PEFA) ended last Friday. For those unfamiliar with PEFA, it’s a performance measurement framework for public financial management.

It assesses whether a country has the tools to deliver three main budgetary outcomes: aggregate fiscal discipline; strategic resource allocation; and efficient use of resources for service delivery.

So why are changes to the PEFA framework of interest to us? Two main reasons:

  1. There are intrinsic linkages between aid transparency and budgetary outcomes, particularly for aid dependent countries – it’s not possible to obtain a full picture of resources available in-country without information on what flows are provided by donors. This has obvious implications for budget planning and management.
  2. Donors use PEFA assessments to make allocation decisions and can have a profound impact on country systems through the activities they support.

Some significant changes have been proposed in the revised framework (more on this here), to which we have prepared a joint response with other civil society organisations. The most worrying change for us is the proposal to drop the three donor indicators which capture the impact of donor practices on country systems: 1) Predictability of direct budget support; 2) Financial information provided by donors for budgeting and reporting and programme aid; and 3) Proportion of aid that is managed by use of national procedures.

Dropping the donor indicators is problematic on many counts:

1) There is an inherent hypocrisy in donors using a framework to assess country performance (and sometimes to make allocation decisions), without being held accountable for their own role in it. For aid-dependent countries, the provision of information by donors has a significant impact on public financial management, planning and timely disbursements of financial resources. The completeness and timeliness of the budget is undermined if donors don’t provide this information to partner countries. Partner countries should not be held accountable for failings that are caused by donors.

2) The rationale behind this is simply not convincing. The rationale for dropping these three indicators is that “donor funding is not relevant in some countries, and in those where it represents a significant proportion of revenues, aid funds should be analyzed together with other funding sources. In addition, other processes have been established to monitor mutual accountability between donors and recipient governments following the Paris Declaration on Aid Effectiveness”.

While there is merit to the argument that aid funds should be analysed together with other flows, not analysing aid funds at all isn’t the solution to the problem. The findings of the first GPEDC Global Monitoring Report released in April this year emphasised the need for increased cooperation between donors and partner countries on the regular exchange of information at country level. By dropping the donor indicators, PEFA will not only send the wrong message on mutual accountability but it will also miss an opportunity to maintain the pressure on both providers and partner countries to reform processes and systems for better data collection and provision.

3) The evidence for interventions and reforms will be weakened. Dropping the donor indicators and conflating aid information in others (for example in PI-2, which measures the composition of expenditure outturn compared to original approved budget) will mean it’s not possible to separate out whether donors are responsible for providing poor information or whether partner countries do not have the required systems in place.

We hope the updated framework that’s released in January 2015 will reinstate the donor indicators, provide improved guidance on the construction and underlying data sources for these and take into account the feedback on improving public access to information and engagement in budgeting processes.

The full text of the joint civil society submission is available here.

Shreya Basu

Shreya is a Research & Monitoring Manager at Publish What You Fund. You can reach her at shreya.basu@publishwhatyoufund.org.
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