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

366 Matthew Andrews
with these weaknesses requires introducing complexity that goes beyond
PEFA, but such complexity is necessary. The argument here is simple:
There are a number of processes in a PFM system, and all of them are
required to produce desired outturns (so they must be correctly identified).
System effectiveness derives from implementing appropriate mechanisms
in all process areas and ensuring connections between the various process
areas (so enough attention must be given to each area and—of great
importance—to the connections between areas).
If some process areas look appropriate (as assessed in PEFA) but some
areas do not exist at all (but are missed in PEFA), or if the appropriate
mechanisms in place in different areas introduce different kinds of
control or accountability, outturns will be compromised.
Figure 11.2 illustrates the multiple process complexity well and allows
for an effective discussion of PEFA’s weaknesses. First, it identifies at least
seven key process areas in the PFM system, from national and sectoral policy
review and development through strategic budgeting; budget preparation;
resource management in budget execution (including cash management,
procurement, and personnel and capital management); internal controls,
internal audit, and monitoring; accounting and reporting; and external
audit and accountability. 9 Second, it identifies the fact that all of these areas
are necessarily connected—by one continuous line in the figure. Connections
between the process areas are required to ensure consistency and operational
integrity of the system.
PEFA’s Framework Does Not Include All of the PFM Process Areas
In particular, PEFA lacks treatment of the policy review and development
process, which is shown as connected to the core PFM system (though having
some external standing as well). PEFA does not introduce the process by
which policy goals and outcomes are identified into either the framework or
indicator set, but “rather focuses on assessing the extent to which the PFM
system is an enabling factor for achieving such outcomes” (PEFA 2006: 3).
This omission reflects the complexity of the process area (variation between
countries is particularly high in this area, and the donors could not agree on
even high-level characteristics of strong systems), as well as obvious
thoughts that PFM is not about policy making (but rather about policy
implementation only).