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Author Topic: Conversation with Frans Ronsholt, Head of PEFA Secretariat  (Read 16164 times)

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Frans

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Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #15 on: November 06, 2010, 18:39:16 GMT »
Reply to question no. 8

John raises two issues in his question. First the issue is of OECD countries being the least frequent users of the PEFA Framework for assessment. This is a fact, and one the PEFA Secretariat would like to change but it is not an easy one handle, since our primary entry point in most OECD countries is the aid agency rather than the ministry of finance. Nevertheless, the application of the PEFA Framework in Norway and Switzerland show that system weaknesses are identified even in these very high income countries which have had a long and steady development of systems and institutions. Similar results emerged from the the testing of the Framework's exposure draft in 2004, where it was applied to the UK and Germany. If we add the US - where the budget for the current year has not yet been approved, large chunks of expenditure are funded through supplementary appropriations and the GAO declares large portions of expenditure as not auditable - it is obvious that most the OECD countries would show a number of weaknesses if the PEFA Framework was applied. The main message to developing countries would be that no government scores straight 'A's and that they should not expect to do so either, but that this does not mean that the govenment shouldn't strive to improve its systems, where weaknesses are found.

The other issue is whether the coverage of fiscal risk is sufficiently covered by the PEFA Framework. Maybe it isn't. But the problem with a broad tools that attempts to cover all aspects of PFM, is that there is a trade-off between comprehensiveness of coverage on the one hand and the complexity and resource demand in applying it on the other hand. As PEFA has been limited to 31 indicators (with a total of 74 dimensions) there are limits to how detailed an assessment it can provide. At the same time, we continuously learn from the use of the Framework and try to address issues as they are identified and to the extent they are seen as essential for a well-functioning tool, ref. issues of 'clarifications' to the Framework and three indicators currently under revision. Perhaps the issue of the government fiscal risk from lack of regulation may be addressed by the Framework sometime in the future.

petagny

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Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #16 on: November 07, 2010, 10:04:58 GMT »
Question 10 (Follow-on to the reply to question 8 ).

There was a recent post on the IMF PFM Blog about Brazil gaining more 'A' scores than Norway in its PEFA assessment. I read this with a pinch of salt (and to be honest I think that this is the way it was probably meant to be taken).

The Norway PEFA seems to me to indicate that the basic PEFA framework needs always to be accompanied with country-specific insights. While acknowledging genuine weaknesses, the (self-) assessment suggests that some of the lower scores for certain dimensions, effectiveness of internal audit for example, may reflect reasonable national institutional arrangements rather than weaknesses that might need to be corrected.

Where would you be more comfortable paying your taxes, Brazil or Norway? Or does this example go to reconfirm the problems with making inter-country comparisons?
« Last Edit: November 08, 2010, 07:26:01 GMT by petagny »

marybetley

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Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #17 on: November 07, 2010, 23:19:36 GMT »
Question no.11

What is the PEFA Secretariat’s view on the benefits and challenges of sector PEFA assessments?  To what extent is the PEFA tool relevant to what is essentially a subset of PFM?
« Last Edit: November 08, 2010, 07:01:21 GMT by Napodano »

Napodano

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Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #18 on: November 08, 2010, 07:00:35 GMT »
PFMBoarders,

time is over to pose questions.
After Frans replies to the three remaining questions, the interview will be archived.
« Last Edit: November 08, 2010, 10:49:18 GMT by Napodano »

Frans

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Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #19 on: November 08, 2010, 23:17:44 GMT »
Reply to question no. 9

This is essentially three different questions. So let's take one at a time.

Appropriate PFM systems for SN government.
What is an appropriate sophistication level of a PFM system depends to some extent on the size of the government irrespective of whether this is a national government or a sub-national government. One can discuss how to measure the size of government - monetary turnover or number of employees etc - but that probably does not make a big difference. We see many examples of sub-national governments (e.g. states in Brazil, India, Nigeria and Ethiopia) which are far bigger than some national governments being assessed (e.g. Caribbean or Pacific Island states). The size of the government - and therefore the seriousness of certain low indicator ratings - should be considered when the Summary Assessment section in the report is drafted and during the subsequent use of the assessment for reform dialogue and fiscal risk considerations. That the PEFA Framework refers to certain standards for A ratings does not mean that it is equally important for all governments to adopt those exact standards. So in relation to a local government with just 12 employees, the real question is whether it makes sense to use a comprehensive tool like the PEFA Framework for such a small entity. Nevertheless, if for some reason it is decided to do so, it should be simple to assess if a proper control system is in place. Calling the staff on a regular basis - and possibly recording attendance in some minutes so that the chief administrator can provide evidence to auditors and superiors - seems a strong control tool to me. This situation is not very different from the PEFA Secretariat (six regular staff and a few part time consultants) where we also have control tools in place so that our supervisors and funding agencies can be assured that staff payments are well justified.

Multi-year fiscal forecasts PI-12(i)
If three year fiscal forecasts exist only as an emply shell - and I fully agree that this is often the case - then the score of this indicator dimension is unlikely to be higher than 'C'. A higher rating requires a rather sophisticated system of using the fiscal forecasts both within the year they are made and as a basis for the following years' budget preparation. This means that the first year estimates are used to set the budget ceiling for the upcoming budget preparation process and that the following year's update of the three year fiscal forecasts is using the 2nd and 3rd year estimates from the previous exercise as a starting point (adding an further year) and explains why the estimates for those two years may have been adjusted, with reference to growth, inflation revenue forecasts, policy changes etc. If this actually happens, the fiscal forecasts are far more than just an empty shell.

Not applicable or no score PI-24(i)
'Not applicable' may be used for an indicator if there is no reason why the indicator should be assessed. This typically happens for indicators such as D-1 (if there has been no GBS during recent years), PI-8 and PI-9(ii) (if there is no sub-national government that may be assessed separately), PI-9(i) if there are no public corporations or autonomous government agencies or PI-3 (if this is a sub-national entity with no local revenue generation). But this situation is not the case for PI-24 and most other indicators at the indicator rating level. If budget execution reports are not prepared, the indicator drops to a D rating, because the PI-24(ii) requirement for a D rating is "quarterly reports are either not prepared or ...". You can say that dimensions (i) and (iii) become not applicable when there are no reports, which means skipping them in the assessment, but that means that PI-24 is rated only on the basis of PI-24(ii) and therefore results in an overall D rating for the indicator. I admit that this could be more clearly expressed in the Framework and should be subject to an official 'Clarification'.

Frans

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Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #20 on: November 10, 2010, 16:50:46 GMT »
Reply to question no. 10

I can only agree with Petagny that the IMF PFM Blog post about Brazil should be taken with a grain of salt. In fact I found the post rather counterproductive, because it implies that you can compare countries by counting their respective numbers of A, B  etc scores i.e. simplistic aggregation, which the Secretarait is constantly warning against. Norway and Brazil are two very different places, so only careful read of the details of the reports - including the country context chapters - will lead to any meaningful comparison. What is important is whether the two countries learned something from the assessments and helped them set their respective priorities for improvements. In the case of Norway, the reaction from the Ministry of Finance was that the findings on procurement practices and follow-up on the findings of the external audit reports were taken note of and would be areas where the government wants to make improvements, whereas other low scores were not seen as priorities for various reasons. The merits of a more uniform implementation of internal audit systems across Norwegian MDAs may be subject to debate - a debate which may be facilitated by the report being publicly available.

Reply to question no. 11

First of all, there is no such thing as a 'PEFA sector assessment'. The PEFA Framework is simply not geared to making assessments for a sector. We have seen several attempts by various donors to undertake sector PFM assessments using an indicator based approach similar to the PEFA Framework, but those are initiatives by individual study teams and have no endorsement by the PEFA Program. So calling them PEFA secotr assessments is totally misleading. There is not even a common approach to such sector assessments emerging, as every study appears to have its own take on what should be assessed and how. The same is the case with several other indicator based assessments of specific PFM topics. In only one case has such a tool been developed in close collaboration with the PEFA Secretariat - namely the DeMPA tool (Debt Management Performance Assessment) and nobody calls that a PEFA debt assessment.

Nevertheless, there are a number of the PEFA indicators that require information on the performance in the MDAs or sectors (based on a sample) as a necessary input to arrive at a rating of performance across government. One thing that is missing in many - if not most - PEFA assessment reports is explanation of what sectors were investigated, what were the findings in each sector and how the assessors have used those findings to arrive at an overall performance rating for the government. More details in that respect would substantially improve understanding of sectoral variance to the benefit of those who work with specific sectors and to improve general quality of and trust in the reports' findings. The PEFA program is working on guidelines on this topic.

As this was the last question, I will close by saying thank you very much to Napodano for inviting me to this conversation and to the PFM Boarders for your many, highly relevant questions. I hope you have found the answers clear and helpful to your daily work as PFM professionals.

Napodano

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Re: Conversation with Frans Ronsholt, Head of PEFA Secretariat
« Reply #21 on: November 10, 2010, 17:29:43 GMT »
With the last post from Frans, we conclude our conversation (the topic is now locked and archived)
This was a first for the Board and it came out very well, considering that the inteview was viewed by 174 persons.

My personal thanks go to Frans and all the PFM Boarders who posted questions.

The transcript of the interview with replies and answers in a sequence can be downloaded below
« Last Edit: November 10, 2010, 17:38:27 GMT by Napodano »

 

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