Transcript of 1 PEFA Assessment (Select PI’s) Udaya Pant IMF’s PFM Advisor, Nepal.
- Slide 1
- 1 PEFA Assessment (Select PIs) Udaya Pant IMFs PFM Advisor,
Nepal
- Slide 2
- In This session General (may skip if required) PI-5-10 PEFA
assessment issues (Comprehensiveness and transparency) Ground
Situation in Nepal 2
- Slide 3
- PEFA PEFA is a global initiative to improve Public Expenditure
Management. PEFA is an integrated Public Financial Management
Reform (PFMR) Agenda of countries..replaced CFAA PEFA directly
contributes to the overall Public Financial Management (PFM). The
PFM reform program starts from the planning, budget formulation and
ends at public scrutiny and evaluation. The core Objective of PEFA
is to reduce Fiduciary Risk in the country through strengthening
systems, processes and Institutions. 3
- Slide 4
- Goals The goals of the PEFA Program are to strengthen recipient
and donor ability to : Assess the condition of country public
expenditure, procurement and financial accountability systems, and
Develop a practical sequence of reform and capacity building
actions, 4
- Slide 5
- Core Objective Core Objective of PEFA is to Reduce Fiduciary
Risk in the countries through strengthening: Systems Processes; and
Institutions 5
- Slide 6
- Efforts undertaken by Nepal Public Financial Management Reform
Program (PFMRP) Based on PEFA-DAP, PFM Strategy for Nepal's PFMRP
Phase I (2009/10 -2011/12..extended further till PFMRP-II) was
prepared and approved by the Government. PFMRP Phase-I had
identified 18 output areas including institutional capacity
improvement. Under a separate budget head for Public Financial
Management Reform Program has been provisioned from FY 2009/10
onwards. MDTF funded project Strengthening PFM has components on
TSA, IPSAS, Strengthening PEFAS, Strengthening OAG, PRAN (more
sub-projects have been identified are: MTBF, Strengthening PFM in
Line Ministries, IA, IFMIS; and NIPF) 6
- Slide 7
- PFM Performance Measurement Framework and Indicators 7
- Slide 8
- PFM Performance Measurement Framework An Integrated monitoring
framework that allows measurement of country PFM performance over
time. The PEFA Framework is designed to provide a snapshot of how
PFM systems in aggregate are performing It consists of a set of 28
indicators, broken into six thematic groups which measure the
performance of national PFMA systems and 3 indicators which measure
donor performance. 8
- Slide 9
- Critical Dimensions of Performance of PFM Against the six core
dimensions of PFM performance, the set of high level indicators
measures the operational performance of the key elements of the PFM
systems, process and institutions of a country. 1. Credibility of
the budget: Budget is realistic and implemented as intended 2.
Comprehensiveness and transparency: Budget and fiscal risk
oversight are comprehensive and fiscal and budget information is
accessible to the public 3. Policy - based budgeting: Budget is
prepared with due regard to government policy 4. Predictability and
control in budget execution: Budget is implemented in an orderly
and predictable manner and there are arrangements for the exercise
of control and stewardship in the use of public funds. 5.
Accounting, Recording and Reporting: Adequate records and
information are produced, maintained and disseminated to meet
decision-making control, management and reporting purposes 6.
External scrutiny and audit: Arrangements for scrutiny of public
finances and follow-up by the executive are operating. 9
- Slide 10
- The Set of High level Performance Indicators The selected 28
indicators for the countrys PFM system are structured into three
categories: PFM systems out-turns Cross-cutting features of the PFM
system Budget cycle In addition to the indicators of country PFM
performance, this framework also includes Donor practice 10
- Slide 11
- Budget credibility A. PFM Out- turns External scrutiny and
audit Accounting, Recording, Reporting Predictability and control
in Budget Execution Policy Based budgeting C. Budget Cycle D. Donor
Practices Comprehensiveness and Transparency Structure of the
Performance Indicator Set B. Cross-cutting features 11
- Slide 12
- Cross-cutting features of the PFM system: These capture the
comprehensiveness and transparency of the PFM across the whole of
the budget (our concern for this session PI 5 to 10) 12
- Slide 13
- PI-5. Classification of the budget The budget formulation and
execution is based on administrative, economic and sub-functional
classification, using GFS/COFOG standards or a standard that can
produce consistent documentation according to those standards.
(Program classification may substitute for sub-functional
classification, if it is applied with a level of detail at least
corresponding to sub-functional.) 13
- Slide 14
- PI 5 Dimension to be assessed (Scoring method M1): (i) The
classification system used for formulation, execution and reporting
of the central government's budget. Points to note: Reports often
only refer budgetary classification for formulation, but execution
and reporting are part of the requirement. Dimension (i) The
classification system used for formulation, execution and reporting
of the central governments budget. 14
- Slide 15
- Key questions 1. Is budget formulation & execution based on
administrative, economic & functional classification? 2. If
not, what types of classification are not possible? 3. Is any
economic classification compatible with GFS (1986 or 2001 manuals)?
4. Is any functional classification compatible with UN- COFOG to
main function level, or to sub-function level, or to program level?
Coverage Budgetary central government. Critical period/time Last
completed FY. Quantifiable data required Requires review of types
of classification actually in use in budget documents and chart of
accounts. Information sources Budget books provided by the Budget
entity for the last completed FY 15
- Slide 16
- Rating criteria A The budget formulation and execution is based
on administrative, economic and sub-functional classification,
using GFS/COFOG standards or a standard that can produce consistent
documentation according to those standards. (Program classification
may substitute for sub-functional classification, if it is applied
with a level of detail at least corresponding to sub-functional.) B
The budget formulation and execution is based on administrative,
economic and functional classification (using at least the 10 main
COFOG functions), using GFS/COFOG standards or a standard that can
produce consistent documentation according to those standards. C
The budget formulation and execution is based on administrative and
economic classification using GFS standards or a standard that can
produce consistent documentation according to those standards. D
The budget formulation and execution is based on a different
classification (e.g. not GFS compatible or with administrative
break-down only). 16
- Slide 17
- PI-6 Comprehensiveness of information included in budget
documentation Dimension to be assessed (Scoring method M1): (i)
Share of the above listed information in the budget documentation
most recently issued by the central government (in order to count
in the assessment, the full specification of the information
benchmark must be met). Points to note: Requires review of types of
information included in actual budget documentation PEFA
Field-guide: Dimension (i) Share of the 9 elements listed
information in the budget documentation most recently issued by the
central government (in order to count in the assessment, the full
specification of the information benchmark must be met). 17
- Slide 18
- Key questions Does the annual budget documentation (annual
budget & budget supporting documents), as submitted to the
legislature for scrutiny & approval include 9 elements?
Coverage Budgetary central government. Critical period/time Last
budget presented to legislature. Quantifiable data Requires review
of the types of information included in actual budget
documentation. Information sources Latest budget & supporting
documents presented to the legislature 18
- Slide 19
- Rating criteria A. recent budget documentation fulfils 7-9 of
the 9 information benchmarks B recent budget documentation fulfils
5-6 of the 9 information benchmarks C recent budget documentation
fulfils 3-4 of the 9 information benchmarks D recent budget
documentation fulfils 2 or less of the 9 information benchmarks
19
- Slide 20
- PI-7 Extent of unreported government operations Dimensions to
be assessed (Scoring method M1): (i) The level of extra-budgetary
expenditure (other than donor funded projects) which is unreported
i.e. not included in fiscal reports. (ii) Income/expenditure
information on donor- funded projects which is included in fiscal
reports. 20
- Slide 21
- Rating criteria A. The level of unreported extra-budgetary
expenditure (other than donor funded projects) is insignificant
(below 1% of total expenditure). B. The level of unreported
extra-budgetary expenditure (other than donor funded projects)
constitutes 1-5% of total expenditure. C. The level of unreported
extra-budgetary expenditure (other than donor funded projects)
constitutes 5-10% of total expenditure. D. The level of unreported
extra-budgetary expenditure (other than donor funded projects)
constitutes more than 10% of total expenditure. 21
- Slide 22
- PI-8 Transparency of Inter-Governmental Fiscal Relations
Dimensions to be assessed (Scoring method M2): (i) Transparent and
rules based systems in the horizontal allocation among SN
governments of unconditional and conditional transfers from central
government (both budgeted and actual allocations); (ii) Timeliness
of reliable information to SN governments on their allocations from
central government for the coming year; (iii) Extent to which
consolidated fiscal data (at least on revenue and expenditure) is
collected and reported for general government according to sectoral
categories. 22
- Slide 23
- PI 8: Dimension (i) Transparent and rules based systems in the
horizontal allocation among SN governments of unconditional and
conditional transfers from central government (both budgeted and
actual allocations) Rating criteria A. The horizontal allocation of
almost all transfers (at least 90% by value) from central
government is determined by transparent & rules based systems
B. The horizontal allocation of most transfers from central
government (at least 50% of transfers) is determined by transparent
and rules based systems. C. The horizontal allocation of only a
small part of transfers from central government (10-50%) is
determined by transparent and rules based systems. D. No or hardly
any part of the horizontal allocation of transfers from central
government is determined by transparent and rules based systems.
23
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- P 8: Dimension (ii) Timeliness of reliable information to SN
governments on their allocations from central government for the
coming year Rating criteria A. SN governments are provided reliable
information on the allocations to be transferred to them before the
start of their detailed budgeting processes. B. SN governments are
provided reliable information on the allocations to be transferred
to them ahead of completing their budget proposals, so that
significant changes to the proposals are still possible. C.
Reliable information to SN governments is issued before the start
of the SN fiscal year, but too late for significant budget changes
to be made. D. Reliable estimates on transfers are issued after SN
government budgets have been finalized, or earlier issued estimates
are not reliable. 24
- Slide 25
- P8:Dimension (iii) Extent to which consolidated fiscal data (at
least on revenue and expenditure) is collected and reported for
general government according to sectoral categories Rating criteria
A. Fiscal information (ex-ante and ex-post) that is consistent with
central government fiscal reporting is collected for 90% (by value)
of SN government expenditure and consolidated into annual reports
within 10 months of the end of the fiscal year. B. Fiscal
information (ex-ante and ex-post) that is consistent with central
government fiscal reporting is collected for at least 75% (by
value) of SN government expenditure and consolidated into annual
reports within 18 months of the end of the fiscal year. C. Fiscal
information (at least ex-post) that is consistent with central
government fiscal reporting is collected for at least 60% (by
value) of SN government expenditure and consolidated into annual
reports within 24 months of the end of the fiscal year. D. Fiscal
information that is consistent with central government fiscal
reporting is collected and consolidated for less than 60% (by
value) of SN government expenditure OR if a higher proportion is
covered, consolidation into annual reports takes place with more
than 24 months delay, if at all. 25
- Slide 26
- PI-9 Oversight of aggregate fiscal risk from other public
sector entities Dimensions to be assessed (Scoring method M1): (i)
Extent of central government monitoring of AGAs and PEs. (ii)
Extent of central government monitoring of SN governments fiscal
position. 26
- Slide 27
- PI 9: Dimension (i) Extent of central government monitoring of
AGAs and PEs. ..Key questions 1. What are major AGAs & PEs? 2.
Do current legislation & regulations oblige AGAs & PEs to
forward in-year financial statements & yearend financial
statements to the central government? And do they do so? 3. Do
current legislation & regulations require central government to
monitor fiscal risk of AGAs, PEs & SN entities on a regular
basis (at least annually)? And does it do so? 4. Can SN governments
borrow without prior approval of the central government? Does
borrowing include short- term overdrafts and suppler credit? 5.
Does central government monitor AGAs & PEs? 6. If yes, is
monitoring carried out through (semi-annual or annual) fiscal
reports & annual audited accounts submitted by AGAs & PEs?
7. Are fiscal risk issues of AGAs & PEs consolidated annually
into a report by the central government? 27
- Slide 28
- PI 9: Dimension (i) Rating criteria A. All major AGAs/PEs
submit fiscal reports to central government at least six-monthly,
as well as annual audited accounts, and central government
consolidates fiscal risk issues into a report at least annually. B.
All major AGAs/PEs submit fiscal reports including audited accounts
to central governments at least annually, and central government
consolidates overall fiscal risk issues into a report. C. Most
major AGAs/PEs submit fiscal reports to central governments at
least annually, but a consolidated overview is missing or
significantly incomplete. D. No annual monitoring of AGAs and PEs
takes place, or it is significantly incomplete. 28
- Slide 29
- PI 9: Dimension (ii) Extent of central government monitoring of
SN governments fiscal position Key questions 1. Are SN entities
legally entitled to borrow with or without CG approval? Does this
cover short-term overdrafts and supplier credit? 2. Does central
government monitor SN entities fiscal position at least annually?
3. Does government elaborate a consolidated overview (in form of an
annual report) on the fiscal position of SN entities? 29
- Slide 30
- Rating criteria A. SN government cannot generate fiscal
liabilities for central government OR the net fiscal position is
monitored at least annually for all levels of SN government and
central government consolidates overall fiscal risk into annual (or
more frequent) reports. B. The net fiscal position is monitored at
least annually for the most important level of SN government, and
central government consolidates overall fiscal risk in report. C.
The net fiscal position is monitored at least annually for the most
important level of SN government, but a consolidated overview is
missing or significantly incomplete. D. No annual monitoring of SN
governments fiscal position takes place or it is significantly
incomplete. 30
- Slide 31
- PI-10 Public Access to key fiscal information Elements of
information to which public access is essential include: (i) Annual
budget documentation: A complete set of documents can be obtained
by the public through appropriate means when it is submitted to the
legislature. (ii) In-year budget execution reports: The reports are
routinely made available to the public through appropriate means
within one month of their completion. (iii) Year-end financial
statements: The statements are made available to the public through
appropriate means within six months of completed audit. (iv)
External audit reports: All reports on central government
consolidated operations are made available to public through
appropriate means within 6 months of completed audit. (v) Contract
awards: Award of all contracts with value above approx. USD 100,000
equiv. are published at least quarterly through appropriate means.
(vi) Resources available to primary service units: Information is
publicized through appropriate means at least annually, or
available upon request, for primary service units with national
coverage in at least two sectors (such as elementary schools or
primary health clinics). Dimensions to be assessed (Scoring method
M1): (i) Number of the above listed elements of public access to
information that is fulfilled (in order to count in the assessment,
the full specification of the information benchmark must be met).
31
- Slide 32
- Rating criteria A. the government makes available to the public
5- 6 of the 6 listed types of information B. the government makes
available to the public 3- 4 of the 6 listed types of information
C. the government makes available to the public 1- 2 of the 6
listed types of information D. the government makes available to
the public none of the 6 listed types of information 32
- Slide 33
- NEPAL Ground Situation on select Items RATC33
- Slide 34
- Budget Coverage These items are still not part of the budget
program and neither disclosed in the budget document: Revenues not
covered by the budget are revenues paid direct to extra-budgetary
funds. These include the Army Welfare Fund (AWF), and the Police
Welfare Fund. While the mission does not have access to all full
list of such funds, various documentation mentioned the Local
Operational Fund, National Level Welfare Fund, Pashupati Area
Development Trust, Peace Fund, Roads Fund and Rural Water and
Sanitation Fund. The Tourist Board also receives revenue from
tourist development fees. In most cases the funds are managed by
sector ministers/ministries. Expenditures of autonomous agencies
such as universities and public hospitals are not also covered in
the budget documentation. Not all external financial assistance
(grants) which is an important share of foreign aid to Nepal is
recorded in the budget. These grant-funded activities
off-budgetdonor-funded activities, are largely managed by donors
directly with the relevant line ministry and in some cases are
passed through to District Development Committees (DDCs).
Monitoring of progress on the use of Nepals country systems by
donors under the 2005 Paris declaration indicates that there is an
improvement. On average for each donor, 58 percent of assistance
was on budget in 2011 (an increase from 46 percent in 2008) and on
average 63 percent of donor funds used the FMIS for budget
execution. However, given donor concerns about the condition of
Nepals PFM system, many are still reluctant to put their assistance
on budget or execute it through the FMIS. The International
Economic Coordination and Cooperation Division (IECCD) of MOF
estimates that about 30 percent of external assistance bypasses the
budget. 34
- Slide 35
- Putting such organizations or funds on budget does not
necessarily mean that all expenditures would become subject to
parliamentary appropriation or that autonomous agencies would lose
their financial autonomy The new Chart of Accounts (COA) introduced
for 2011- 12 mostly complies with the standards suggested by the
IMF. In addition to the standard COA elements, the budget and
accounts provide a multi-dimensional classification. The new COA
includes GFSM 2001 revenue and expenditure classifications, but the
codes for assets and liabilities have not been included 35
- Slide 36
- Transparency of fiscal forecasts and targets There are some
data completeness issues in preparing the macro-economic forecasts
and they are sometimes prepared using only eight months of data
from the previous year. On fiscal targets, the Ministers Budget
speech makes no reference to any fiscal targets, either in terms of
past results or intentions for the ensuing budget year. The Budget
Speech provides no reference to the MTEF document which is part of
the Budget Documents. Fiscal forecasts and targets reflected in the
MTEF or MTBF in the future, should be acknowledged and referred to
in the annual Budget Speech or any consolidated budget document.
36
- Slide 37
- Local bodies At present, there is no consolidated financial
statement of LBs, thus adequate analysis of the financial capacity
of local bodies is not be possible. There is no clear fiscal
reporting oversight on LBs. The existing legislations do not
clearly state accounting and reporting standards To address these
issues, the development and implementation of the LBs reporting
system should be pursued and well-coordinated. ADB-funded project
to strengthen PFM at the local level and enhance linkages between
central and local fiscal management. 37
- Slide 38
- Public Enterprises The existing classification of enterprises
should follow GFS Manual 2001. The reliability of financial reports
from SOEs seems to be a problem. The Public Enterprises Board
should develop and enforce corporate governance standards on
financial management by SOEs to improve quality of information
Transparency of information on SOEs should be improved through
proper disclosure in the various fiscal reports. The PECD should
identify the focus of monitoring by identifying the public
corporations that pose the greatest fiscal risks to the central
government. 38
- Slide 39
- Reporting and monitoring of fiscal risks There is no systematic
discussion of fiscal risks in the Budget Documents Components of
Fiscal Risks Statement Variations from key economic forecasting
assumptions Contingent liabilities, such as guarantees, indemnities
and warranties entered into by the government Uncertainty about the
size of specific expenditure commitments already made in the budget
Other items not included in the budget because of the extent of
uncertainty about their timing, magnitude or eventuality 39
- Slide 40
- Fiscal Risks..continued In Nepal, the guarantees provided for
public enterprise borrowing are a clear component of fiscal risk.
Related to this is the need to fund operating losses of some public
enterprises which are financially insolvent. There are significant
quasi-fiscal activities (QFAs) carried out by industrial, financial
and utility based SOEs but they have not been quantified. Nepal has
a large number (37) of state owned enterprises which are reported
on in detail in the Yellow Book which is part of the Budget
documents. Fourteen of them are currently loss making (several of
which are insolvent) and others have low profitability due to
government decisions to control their prices as well as to
over-staffing and management problems. In the coming budget
preparation, the Budget Division should prepare a formal statement
of fiscal risks as part of the annual budget documentation. 40
- Slide 41
- Reporting of tax expenditures The IMF Manual of Fiscal
Transparency states that the inclusion of a statement of tax
expenditures as part of the budget documents is a basic requirement
of fiscal transparency. Tax expenditures in Nepal are significant
with many exemptions and differential rates included in the tax
laws. For example the Budget Speech for 2012-13 contains a series
of proposed initiatives involving exemptions and tax rate changes
to support a range of social objectives. MOFs Revenue Division is
of the view that the existing tax exemptions and other concessions
are well documented and understood, are not put in place without
some costing by Inland Revenue Department and Customs Department
and are subject to some form of review. MOF should consider the
preparation of a statement of tax expenditures to be included in
the budget documentation. 41
- Slide 42
- Reporting on debt and financial assets CFS already contains
some information on financial assets and liabilities it would not
be difficult to present such a report in the budget documents and
in the CFS. The CFS already includes extensive information on
domestic and external debt, including on- lending; and loans and
equity investments in SOEs and information on cash balances.
Information on financial assets such as tax arrears could be
readily added. 42
- Slide 43
- Comparative status of PEFA Indicators Nepal (2007) Afghanistan
(2005) Afghanistan Repeater (2007) Norway (2008) India (2010)
43
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- PI DescriptionAfghan (2005) Nepal (2008) India (2010) Norway
(2008) Afghan (2007) Repeat A.PFM OUTTURNS: Credibility of the
budget PI-1 Aggregate expenditure outturn compared to original
approved budget CBCAD PI-2 Composition of expenditure outturn
compared to original approved budget CCCAD PI-3 Aggregate revenue
outturn compared to original approved budget AAAAA PI-4 Stock and
monitoring of expenditure payment arrears D+ NRAD+D+ B.KEY
CROSS-CUTTING ISSUES: Comprehensiveness and Transparency PI-5
Classification of the budget CCAAC PI-6 Comprehensiveness of
information included in budget documentation CBAAB PI-7 Extent of
unreported government operations BCAAB+ PI-8 Transparency of
inter-governmental fiscal relations DCB+BD PI-9 Oversight of
aggregate fiscal risk from other public sector entities DD+CC+D+
PI-10 Public access to key fiscal information CBABB
- Slide 45
- C.BUDGET CYCLE C(i) Policy-based Budgeting PI-11 Orderliness
and participation in the annual budget process CC+ AB PI-12
Multi-year perspective in fiscal planning, expenditure policy and
budgeting C(ii) Predictability and Control in Budget Execution
D+C+D B PI-13 Transparency of taxpayer obligations and liabilities
D+C+ AC PI-14 Effectiveness of measures for taxpayer registration
and tax assessment D+CB+AC PI-15 Effectiveness in collection of tax
payments D+ A PI-16 Predictability in the availability of funds for
commitment of expenditures D+C+ AB+ PI-17 Recording and management
of cash balances, debt and guarantees C+ AAB+ PI-18 Effectiveness
of payroll controls CCC+A PI-19 Competition, value for money and
controls in Procurement CCNRBB PI-20 Effectiveness of internal
controls for non-salary expenditure CCD+AC+ PI-21 Effectiveness of
internal audit CD+ DC
- Slide 46
- C(iii) Accounting, Recording and Reporting PI-22 Timeliness and
regularity of accounts reconciliation C+ BB+B PI-23 Availability of
information on resources received by service delivery units DCDDD
PI-24 Quality and timeliness of in-year budget Reports CC+ PI-25
Quality and timeliness of annual financial statements C(iv)
External Scrutiny and Audit CC+ AB+ PI-26 Scope, nature and
follow-up of external audit CD+ B+C PI-27 Legislative scrutiny of
the annual budget law DD+AB+ PI-28 Legislative scrutiny of external
audit reports D D+ C+ D. DONOR PRACTICES D 1 Predictability of
Direct Budget SupportADNA B+ D 2 Financial information provided by
donors for budgeting andD+DNA D reporting on project and program
aid D3 Proportion of aid that is managed by use of national
procedures DDNA D
- Slide 47
- Important References for Details GON Nepal PEFA Assessment
Report 2008 PFMRP-Phase I, Nepal PEFA HQ PEFA Field Guide SNG
Supplementary Guidelines New and amended Clarifications to the PEFA
Framework, March 2012 Good Practices in PEFA Framework Note on
Aggregation and Comparison of PEFA Rating, May 2013 No score
methodology Procurement Indicators Table Guidance Note on repeat
Assessments 47
- Slide 48
- Questions?
- Slide 49
- 49 Thank You for your patience and indulgence!