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Author Topic: Conversation with Frans Ronsholt, Head of PEFA Secretariat  (Read 17132 times)

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Napodano

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Conversation with Frans Ronsholt, Head of PEFA Secretariat
« on: October 28, 2010, 17:24:26 GMT »
Dear PFMBoarders,

it is a great honour for the Board to start up this section of online interviews with leading PFM practitioners by having a chat with Frans Ronsholt, Head of PEFA Secretariat.

I met Frans twice during his regular PEFA presentation rounds and I was always inspired by his dedication to perfecting this assessment tool. PEFA  has helped us practitioners in our assessment works of public finances, while in the process enhancing our dialogue with MoF partners in developing and transition countries.

If you are a registered member of the Board, you have the possibility to pose a question to Frans by making a post (REPLY button) to this topic. The time allotted for questions is  Monday 1st to Sunday 7th November 2010. After this period the interview will be closed and remain in the archive for future reference.

Dear Frans,

welcome to the board fire place. Let me start by asking you a general question for the (very) few of us PFMBoarders who are not yet familiar with PEFA

Q1: What does PEFA stand for and what is its purpose?
« Last Edit: November 01, 2010, 13:51:55 GMT by Napodano »

Frans

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Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #1 on: October 29, 2010, 18:00:04 GMT »
Dear Mauro and PFM Boarders.

Let me first congratulate you with the establishment of the PFM Board. It is a real pleasure to be able to communicate with you this way. The group of PFM experts that work internationally is always spread all over the globe and difficult to reach through one medium, so the Board has an important function in that respect. But to get back to your question:

PEFA is an abbreviation of Public Expenditure and Financial Accountability. The motivation behind the PEFA Program, which was established in 2001, was to strengthen the ability of aid recipients and donors to assess and improve country public expenditure, procurement and financial accountability systems. PEFA was, thus, born out of a partnership between the World Bank, the European Commission, UK's Department for International Development (DFID), the Swiss State Secretariat for Economic Affairs, the French Ministry of Foreign Affairs, the Royal Norwegian Ministry of Foreign Affairs, and the International Monetary Fund (IMF). A Steering Committee, comprising members of these agencies, manages the Program and a Secretariat, located in Washington DC, implements the PEFA program activities.

The PEFA Program goal is to help improve government financial management systems. The Program has approached this goal by developing a tool to measure the strengths and weaknesses of a country’s public financial management (PFM) systems, and by promoting processes that enhance government ownership of PFM reforms and lead to stronger collaboration and coordination among the donor agencies that support the formulation and implementation of the reform programs. This is also known as the 'Strengthened Approach to Supporting PFM Reform'.

This entails, in the first stage, the undertaking of a detailed examination of the status of a country’s PFM systems. In line with the Strengthened Approach  this shoud be done as a joint effort using a commonly agreed assessment tool. For that purpose PEFA developed the PFM Performance Measurement Framework, known as the PEFA Framework. The initial assessment helps establish performance baselines while repeat assessments help in monitoring performance progress over time, all of which have the potential for making a significant positive impact on the formulation of reform programs as well as monitor the effectiveness of those reforms. The Secretariat provides objective guidance and expert advice on the application of the Framework to any interested party.

Napodano

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Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #2 on: October 29, 2010, 18:08:34 GMT »
Frans,

Thank you for the kind words on the Board. Dialogue is what we always say being important in our profession and this board can support it in a community-like manner, away from pressure and formality of assignments.

Q2: Since its first application in 2005 I believe, in how many countries the PEFA tool has been applied? From these assessments can we draw lessons/trends on the status of Public Financial Management in developing and transition countries?
« Last Edit: October 29, 2010, 18:15:22 GMT by Napodano »

Osa

Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #3 on: November 01, 2010, 01:54:13 GMT »
Dear Frans,
I would like to introduce myself, I am Public Finance management Specialist at Aid Effectiveness Secretariat in Jakarta, Indonesia to support the Government of Indonesia which is The National Development Planning Agency ( Bappenas). Our objective is to make all grants received from Development Partners by the Indonesian Government more effective and efficient. This has been stipulated by The Paris Declaration and The Jakarta Commitment.

Question 3 : Last year  around 17 Line Ministries has been audited by the National Audit Board as receiving grants from the Development partners with "off treasury". This means that the line ministries directly receive grants without conducting registration and administration to the Ministry of Finance, as stated in the Guidelines on Accounting System on Foreign Grant, by MoF. What kind of chart do you think is necessary to smoothen this administration ? Usually we have to register all grants as "on budget - on treasury" in our state budget

Question 4 : How do you approach Development Partners to really conduct the process of aid as 'government driven', and not "donor driven" ? How do you separate this difference and what way should the government proceed to resolve this ? As you may know, many countries have different fiscal years ( such as JICA - Japan, or GTZ - Germany) which have sequences April-March or July-June, while the Indonesian Govt's fiscal year is January-December.

Thank you for attention.

Best regards,
Osa Hartoyo/ Mr.
« Last Edit: November 01, 2010, 07:56:51 GMT by Napodano »

Napodano

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Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #4 on: November 01, 2010, 07:59:38 GMT »
This is clarification for future questions to Frans by PFM Boarders.

Questions should be related to the PEFA program and assessment tools for PFM.
That said, I trust that Frans will answer to the two questions already made by Osa

John Short

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Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #5 on: November 01, 2010, 13:46:05 GMT »
Question 5: The PEFA scoring guidelines are evidence based and clear as are the differences between the scores of A, B, C and D.  However, sometimes I get the feeling that some of the users of PEFA have preconceived views on what the score should be based on their own sector work and as a result do not find the PEFA results  to be as acceptable as they should be.  This may be due to a lack of “drilling down” which reflects the high level nature of PEFA indicators as much as a lack of appreciation of what PEFA is trying to achieve.  Is this a common perception that you and the PEFA Secretariat may have had feedback on?
« Last Edit: November 01, 2010, 13:51:34 GMT by Napodano »

Frans

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Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #6 on: November 01, 2010, 21:00:13 GMT »
Reply to question #2

We have just finished the semi-annual stocktaking of PEFA assessments in October. It shows that the PEFA Framework has been applied in 119 countries - in some cases for multiple entities in one country when you include assessments done for sub-national government PFM systems. Some 45 assessments were 'repeat' assessments i.e. they assess the same level of government in a country for the second or third time. You can find the full list of country details on the PEFA website www.pefa.org.

So do these repeat assessments indicate improvements in the performance of PFM systems? We are not yet sure what they show. Before we are able to pronounce anything firm on that subject, it is necessary to look at how robust the tracking of change is between the initial (or baseline) assessment and the subsequent (repeat assessment). Are the ratings comparable in the sense that they are adequately evidenced, and are changes in ratings accompanied by explanations of what has happened between the two assessment years, so you are confident that the changes in indicator scores reflect actual changes in how a particularly aspect of the PFM system is managed - as opposed to being subject to differences in interprepation by different assessors.

Another important issue for gauging the usefulness of the data set is to understand the drivers of repeat assessments. Why do some countries have frequent repeat assessments, whereas others have none (within the recommended 3-5 year interval)? And how does that affect the overall conclusions from the dataset (e.g. are repeat assessments undertaken mainly in countries that can show improvement and not in those that experience backsliding?) These issues are currently under investigation by a team at the PEFA Secretariat. So conclusions about trends in PFM system performance on a global scale will not be attempted until we have some firm conclusions on those two issues.
« Last Edit: November 02, 2010, 07:44:17 GMT by Napodano »

Napodano

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Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #7 on: November 02, 2010, 08:02:35 GMT »

I can see that you are cautious on drawing quick lessons on trends shown by the repeat assessment. I share your view  that this is correct approach as a 'nitty gritty' judgment could be detrimental to the future of PFM reform in some countries and in general for the credibility of the PEFA tool.

For more stats on the geograpichal distribution of PEFA assessments in the last year, PFM Boarders can read the PEFA October 10 Newsletter (attached here)


Frans

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Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #8 on: November 02, 2010, 20:17:45 GMT »
Let me try today to answer the questions by Osa (#3 and 4) and John (#5).
Osa asks how the government ensures that external funding are registered as 'on budget /on treasury'. Let me first emphasize that this is not a subject the PEFA program directly addresses, so it is my personal opinions expressed here rather than an institutional position. In my opinion it is largely for the government itself to ensure that this happens. Line agencies invariably like to receive external funds outside the centralized budget allocation and control systems (i.e. funds not counted as part of overall sector allocations) and donors like to have direct interaction with line agencies, rather than having to go through the ministry of finance, as they may be able to demonstrate direct contact with (and implicitly, influence on) sector decision makers and program managers. The central finance agencies may gain control of such arrangements if they control the negotiations and final approval of agreements with external funding agencies and if they control the opening of project bank accounts. So the government will need to ask itself if the ministry of finance has got the legal powers to exercise this control and if so, whether the ministry of finance effectively enforces those provisions.

On your other question, 'government driven' or 'donor driven' aid processes are two sides of the same coin. The government can only drive the aid process if it is willing to assign the required resources (staff time) to take the lead and if it is willing to forfeit certain aid allocations if the relevant donor(s) is unwilling to fit in with the government's agenda. If the government fails on those two counts, the aid processes easily become donor driven. Donors, on the other hand, may help the process by providing sufficient time at different stages of the process for the government to consider work done and take its decisions on priorities and allocations on that basis, often with political considerations as an important input. This is one reason why PEFA assessments do not include recommendations or action plans. Action plans (including revision of existing ones) are clearly expected to emerge from a PEFA based PFM assessment, but if they are already included in the assessment report, they have a tendency to be based only on technical considerations, and to address all areas where weaknesses are found. That approach to action plans often leads to too many recommendations/actions with insufficient consideration of the polital realities of reform - with the effect that the reform do not get implemented. It is important that the government has enough time to digest the description of current strengths and weaknesses and decide for itself what reform priorities it wants to set - based on what is seen by the government as the most urgent improvement needs, and what vested interests the government is willing and capable to confront at any one time.

And then to John's question (#5). Users' impression of PFM performance from the sectors they are familiar with, is a fact of life. One reason why this may affect the acceptability of the indicator ratings is that sector variance for a particular indicator rarely is described in the PEFA assessment report. This is clearly a weakness, because many of the PEFA indicators require that system performance is assessed at sector level (in a sample of sectors) before these performance assessments are combined into an overall indicator rating across government ministries and agencies. In some cases, PFM system are fragmented and each major component needs to be assessment separately e.g. (for PI-18) there may be different payroll systems in operation for education, health, security services and the remainder of public servants respectively. In other cases, user opinions on general PFM performance may be influenced by the sector's input mix e.g. the education sector performance becomes associated with how personnel is managed, whereas the transport sector may be associated with how large public works contracts are managed - even if the same type of system performs uniformly across government entities. The PEFA program is working on guidelines for how to strengthen the sampling of sectors as a basis for arriving at overall rating for the relevant indicators, and how to present the results as evidence for the ratings in the report, without significantly expanding the work of an assessment and the length of the report.
« Last Edit: November 02, 2010, 22:28:56 GMT by Napodano »

petagny

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Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #9 on: November 03, 2010, 11:04:01 GMT »
Question 6
How do you see PEFA assessments as informing the design of PFM reform programmes?

I had always thought that the assessment should be used to identify the important areas of concern. This would then be followed by more in-depth, 'drill-down' work in order to develop a coherent set of country-specific reforms. I was horrified recently to see an attempt to go straight from PEFA scores to reform design in a very mechanistic way. Admittedly this was only a prototype and I have not seen this approach put into practice.

It would be interesting to hear how the PEFA Secretariat sees the PEFA assessments being used in assisting the design of PFM reforms.

Frans

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Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #10 on: November 03, 2010, 21:00:57 GMT »
Response to question 6 from 'petagny'.

Going from the PEFA assessment to a new reform program/action plan (or revision of a existing one) is a complex business. Surely you do not want to see a simplistic use of PEFA indicators in that respect for many reasons. Let's take an example of a poor, fragile state coming out of civil war with practically no systems working. All indicators may score D, so a simplistic use of them would mean a reform program that addresses all parts of the system more or less simultaneously. At the same time, this is probably a government with the lowest capacity to implement reforms and with potentially limited political capital and important vested interest by different factions of the government, in other words a government that can only hope to make improvements in a few areas at a time, to be carefully selected, based on their crucial importance to the government's grip on public finances. 

There is a lot of work going on at the moment, trying to develop good practices/guidelines for that reform formulation process. It is an area in which many practitioners have experience, but where it is difficult to find elements of a common approach - and one that can be shown to have positive impact on reform implementation.

In my opinion, such an approach needs to include
- the relative importance of each of the areas covered by individual PEFA indicators (e.g. is oversight of risk from public corporations of importance?)
- technical  links between individual parts of the system (some things need to work before others can meaningfully be embarked on - 'get the basics right first')
- political priorities and opportunities (e.g. what are the government's most pressing problems relating to PFM systems; is there a new government with a new agenda?)
- political capital (how many vested interest is the government prepared to take on at any one time?)
- capacity to implement (what is the capacity at entry to implement reforms in a certain area, including the existence of individual politicians or managers who can drive the change?)
- a drill-down (as you mention) into the underlying causes for poor performance of systems in those (presumably few) major areas where reform is a priority
- organizing selected reform elements into stages (or platforms)
Adding an assessment of the socio-economic impact of reforming different parts of the system would be helpful, but I have not yet come across any workable way of doing such an analysis (e.g. what is the impact of reforming the procurement system compared to a reform of the external audit function)

Whilst some of the technical features of this list should be possible to develop into commonly accepted guidelines or tools, the political features will be much harder to address, as they do not easily lend themselves to joint work among stakeholders.

The summary assesment chapter of a PEFA assessment is meant to help provide a first input to such a process of identifying reforms. It should highlight linkages between indicators, relative importance of some PFM features depending on the structure of the public sector, the links of indicators to achieving the three main budgetary outcomes (which may themselves to subject to prioritization) and institutional constraints to reform planning and implementation. Those are important elements to start with, but far from enough to facilitate the completion of the reform formulation process.

As further development is work in progress, we will have to be patient for a while until a general set of guidelines emerge on how to conduct the process of moving from the diagnostic to the reform.
« Last Edit: November 04, 2010, 06:16:24 GMT by Napodano »

Napodano

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Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #11 on: November 04, 2010, 08:13:32 GMT »
Question no. 7

Your responses to questions no.2 and 6 about the impact of PEFA assessments (and specifically the repeat ones) on the PFM reform in a particular country are very interesting.

Could you mention two cases of PEFA assessement in two different countries that have produced different results (naming the countries would not be necessary).
« Last Edit: November 04, 2010, 08:59:14 GMT by Napodano »

John Short

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Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #12 on: November 04, 2010, 09:51:22 GMT »
Question no. 8

It would be interesting to carry out a historical PEFA for the two countries in These Isles to see whether the fault lines that have emerged in the PFM systems and processes would have been shown up by the assessment methodology.  The fiscal risk from regulation (or lack of it) may not be covered and given its significant impact on public finances, particularly on Ireland, may suggest that somehow the coverage of fiscal risk and its impact on PFM may need to be revisited in the methodology.

Are there any plans for OECD countries to carry out a PEFA Assessment in the future?  While I realise that the various countries’ Aid Agencies are the link with PEFA and the Department responsible for Finance would be the instigator of a PEFA in an OECD country, there may be a danger of “do as I say, rather than do as I do” accusation levelled at them.  Certainly, if one looks at the DFID website on its procurement, PI-10 (v) would not get a tick, and, as is discussed in the PFMBoard post Re PEFA Comments on PI-19 ( http://pfmboard.com/index.php?topic=113.0 ), overall UK Government procurement systems and processes may not score well.
« Last Edit: November 04, 2010, 10:08:59 GMT by Napodano »

harnett

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Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #13 on: November 04, 2010, 14:37:56 GMT »
Question 9

My recent work with 5 local councils in Sierra Leone has thrown up a few issues.

First of all, it appears that the more sophistacated PFM systems are not always appropriate at SN level, and although the SN government in question has a perfectly good system for the size of operation, it ends up with a low score.  As an example we could look at PI-18 Payroll Controls, dimension iv. Payroll Audits.  A SN entity with 12 staff does not actually need an audit as such.  The Chief Administrator simply calls all staff to the office on a regular basis.  To me this is an effective payroll control but only merits a C score, as it is not a formal audit.

Another issue concerns PI-12, dimension i, multi-year fiscal forecasts and is probably also an issue for many CGs.  It is often the case that the forecasts exist for 3 years (to satisfy MTEF demands) but often they are simply an empty shell, bearing no relation to a functioning MTEF - nevertheless, as the forecasts exist it is possible to score an A, even though they are not constructed or used in a robust manner.

Finally - and i'm sure this issue will be dealt with in greater detail when I submit the Sierra Leone SN PEFAs for your review - I feel there should be more guidance when a "not applicable" should be used or a "no score" or even a "D".  As an example, PI-24 - In-Year Budget Reports.  If they don't exist then logically a n/a should be given (the information was given so it's not a No score, and to merit a "D" the reports - implicitly - should exist).  Or do you advise that a No score should be given in that case.


Frans

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Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #14 on: November 06, 2010, 18:02:58 GMT »
Reply to question no. 7

Let's look at two countries which have had repeat assessments and where the reports are available on the internet - so no need to keep them anonymous - Mozambique and Afghanistan (see attachments below).

The repeat assessment for Mozambique provides a compelling story about how the baseline assessment was used to adjust the existing PFM reform program and the impact of those reforms at the repeat assessment stage a few years later. The baseline assessment in 2005/06 identified a number of new measures with a potential for short-term impact ‘quick wins’ - e.g. improved dissemination of information; changes to report formats - as well as new structural reforms with a potential impact over the medium to long-term - e.g. payroll management and external audit capacity. These measures were then incorporated into the reform action plan. The repeat assessment noted a significant number of improvement in indicator ratings. Many of those related to completion of reforms that had been initiated long before the PEFA baseline assessment i.e. they had nothing to do with the use of the baseline assessment. But the 2008 report also showed improvements in the areas where quick-wins had been identified by the baseline asessment and progress in payroll control, leading to improved rating of some aspects of indicator PI-18. Future repeat assessments should show if further progress is being made in payroll control and performance of the external audit function.

Afghanistan's repeat assessment report also showed improvements in a significant number of indicator ratings compared to the 2005 baseline. The MOF realized, however, that these improvements largely were a result of the externally recruited and funded experts who - as technical assistance personnel - operated substantial parts of the government's PFM functions. The challenge for the government, therefore, was seen not to identify further technical reforms, but to try to keep systems performance at the reasonably healthy performance level it had reached, while the external personnel is being gradually replaced by local capacity.

[Note for the reader: the interview with Frans continues on page 2. Click on page 2 at the left bottom of your screen]
« Last Edit: November 06, 2010, 19:23:58 GMT by Napodano »

 

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