Public Sector Governance and Accountability Series: Budgeting and ...

What Would an Ideal Public Finance Management System Look Like? 361
the G8 finance ministers wanting to identify a PFM code. How do you
standardize a way of thinking about systems that are obviously highly contingent
on the kinds of role players engaged and the kinds of goals being
addressed?Although systems should of necessity look different across different
contexts, this article argues that it is certainly useful to think about a
guiding code that can be used in all situations to assist governments in thinking
about their own systems. This code needs to allow for a truly integrated
approach to thinking about PFM systems, the complex engagements
between role players in the PFM “population,” and the contingency of PFM
“look” on PFM goals.
This chapter provides some background thoughts intended to build on the
PEFA indicator set and lay an even stronger foundation for full elaboration
of a dynamic and useful PFM code (not to prescribe and fully standardize, but
to guide thinking). The chapter begins by introducing the PEFA indicators in
brief. It then discusses the three dimensions of complexity in analyzing PFM
systems and in all areas notes what the elaboration of a PFM code will require
beyond PEFA. Some specific ideas are presented for further study, though they
are not provided as final solutions but rather as initial thoughts. The chapter
concludes with a summary of the “PEFA and beyond” discussion.
Basics of the PEFA Indicator Set
In the first half of 2005, the multidonor PEFA group concluded a two-year
initiative to identify basic indicators of a “critical”PFM system (PEFA 2006: 2).
The PEFA framework is shown at its most basic in box 11.1, which identifies
major areas that the donor group considered important in the PFM system.
The 28 indicators in PEFA’s framework are structured into four categories:
(a) PFM system outturns, such as the comparison of executed budget
with the formulated budget and the level of arrears; (b) cross-cutting features
of the system, such as basic transparency and comprehensiveness; (c)
budget-cycle issues, which capture the “performance of the key systems,
processes and institutions within the budget cycle of the central government”
(PEFA 2006: 3); and (d) donor practices, which capture “elements of
donor practices which impact the performance of country PFM system”
(PEFA 2006: 3).
Figure 11.1 shows the framework in diagrammatic form. The framework
links outturns (or goals) with process quality, implicitly arguing that PFM
system performance can be assessed only by looking at both dimensions. This
broad “effectiveness” approach to organizational assessment is increasingly
embraced in initiatives like the Government Performance Project in the