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

What Would an Ideal Public Finance Management System Look Like? 379
times. Close inspection of the PEFA measures, however, suggests that they
relate to critical dimensions of PFM—level 1 with some level 2 elements—
and have very little content relevant to a more strategic performance orientation
in PFM. Thus, PEFA is useful to most governments (because most are
still struggling with fiscal discipline), but it also has limited use in addressing
the G8 request for a PFM code speaking to “results management” issues
(RosBusinessConsulting 2006).
This observation calls for the need to introduce a complementary set of
indicators to go beyond PEFA. These indicators could be called more strategic
practices (MSP) and would relate to PEFA as follows:
PEFA would provide the critical dimensions of PFM. This first set of criteria
would represent the critical or basic dimensions of PFM, as reflected
in the PEFA’s PFM indicators. These indicators would show whether individual
process areas have progressed to a point where they facilitate basic
fiduciary control and accountability. Governments performing well
against these indicators would tend to have strong fiscal discipline and to
be in the early stages of addressing allocations quality and technical efficiency
problems. (This stage equates roughly with having achieved a level
1 competence in the system.)
The MSP indicators constitute the second set of criteria. They relate to
the quality of PFM processes in the context of more strategic government.
These criteria are derived from various sources and characterize
the processes seen in more strategic PFM systems, in which level 2 and
level 3 allocations of quality and operational efficiency are emphasized.
The criteria center on some key principles: (a) there is a strong policy
orientation (political and managerial) in the PFM system; (b) PFM
accountability relationships are clear and are based on policy implementation
and service delivery; (c) there is clear capability to manage
money around policy goals; (d) there are clear incentives across the system
for the compliant, efficient, and effective use of resources; (e) the
system provides appropriate information to facilitate accountability
relationships and decision-making processes; and (f) there are appropriate
decision rights in the system (politicians can hold managers
accountable, managers can decide how best to structure their organizations
to deliver, and so forth).
The difference between criteria sets is apparent in an example of line
ministry planning (building on the discussion arising in table 11.1). The