The objective of PEFA to provide an assessment of the implications for overall system performance and desirable public financial management outcomes. PEFA is designed to provide a snapshot of PFM performance at specific points in time using a methodology that can be replicated in successive assessments, giving a summary of changes over time.

The PEFA Report has many uses and applications by the government and other interest groups. The uses and application of PEFA reports include:

• Governments use PEFA to obtain a snapshot of their PFM performance.
• PEFA offers an everyday basis for examining PFM performance across national and subnational governments.
• PEFA scores and reports allow both governments and others users (such as civil society organisations and international development institutions) of the information to gain a quick overview of the strengths and weaknesses of a country’s PFM system.
• PEFA assist users in appreciating the implications of the overall performance results for the key goals of fiscal discipline, strategic resource allocation, and efficient service delivery.
• The PEFA analysis contributes to dialogue on the need and priorities for PFM reform.
• PEFA program provides support, monitoring, and analysis of PEFA assessments.

(Any four points @ 1 mark each = 4 marks)

The sources of information include, among others:

• legislation,
• the PEFA uses various laws, especially those related to public financial management, such as the Public Financial Management Act 2016, Public Financial Management Regulation 2019, the Public Procurement Act 2003 as amended etc.
• Government policy papers,
• This includes government fiscal policy documents and medium-term development plans. This document provides insight into the policy direction of the Government.
• budget documents,
• The budget document serves as a critical document in assessing the plans and projections of the government and the extent of reliability, predictability and policy orientation.
• Reports and statistics,
• National statistical data is useful in determining the aggregate fiscal disciple
• recent surveys and analytical work at the national, regional or
• international level, which independent institutions and donors may carry out.
• General Purpose Financial Statement of Government/Public Sector.

(Any four points @ 1 mark each = 4 points)

The Public Expenditure and Financial Accountability (PEFA) framework provides a framework for assessing and reporting on the strengths and weaknesses of public financial management (PFM) using quantitative indicators to measure performance. PEFA is designed to provide a snapshot of PFM performance at specific points in time using a methodology that can be replicated in successive assessments, giving a summary of changes over time.

The PEFA framework is useful in the following ways:

• PEFA is a tool that helps governments achieve sustainable improvements in PFM practices by providing a means to measure and monitor performance against a set of indicators across the range of important public financial management institutions, systems, and processes.
• PEFA provides a framework for assessment of transparency and accountability in terms of access to information, reporting and audit, and dialogue on PFM policies and actions.
• Governments use PEFA to obtain a snapshot of their own PFM performance. PEFA offers a common basis for examining PFM performance across national and subnational governments.
• PEFA scores and reports allow all users, such as civil societies and international organisations, of the information to gain a quick overview of the strengths and weaknesses of a country’s PFM system.

1 mark for purpose of PEFA and 1 mark each for any 2 usefulness discussed. (1+1*2) = (3 marks)

Budget reliability
The government budget is realistic and implemented as intended. This is measured by comparing actual revenues and expenditures with the original budget.

Transparency of public finances
Information on public financial management is comprehensive, consistent, and accessible to users. This is achieved through comprehensive budget classification, transparency of all government revenue and expenditure including intergovernmental transfers, published information on service delivery performance and ready access to fiscal and budget documentation.

Management of assets and liabilities
Effective management of assets and liabilities ensures that public investments provide value for money, assets are recorded and managed, fiscal risks are identified, and debts and guarantees are prudently planned, approved, and monitored.

Policy-based fiscal strategy and budgeting
The fiscal strategy and the budget are prepared with due regard to government fiscal policies, strategic plans, and adequate macroeconomic and fiscal projections.

Predictability and control in budget execution
The budget is implemented within a system of effective standards, processes, and internal controls, ensuring that resources are obtained and used as intended.

Accounting and reporting
Accurate and reliable records are maintained, and information is produced and disseminated at appropriate times to meet decision-making, management, and reporting needs.

External scrutiny and audit
Public finances are independently reviewed and there is external follow-up on the implementation of recommendations for improvement by the executive.

An effective internal control system plays a vital role across every pillar in addressing risks and providing reasonable assurance that operations meet the control objectives. Controls are instituted in a PFM system to achieve these objectives:

• To ensure that operations are executed in an orderly, ethical, economical, efficient, and effective manner;
• To ensure that accountability obligations of public officers and institutions are fulfilled;
• To insist that applicable laws and regulations put in place are complied with; and
• To ensure that resources are safeguarded against loss, misuse and damage.

(Any 3 well explained point @ 1 mark each = 3 marks)

• Control environment. The control environment deals with values and culture of the organisation. It sets the tone of the control at the top by which the entire organisation is directed and controlled.
• Risk assessment. It emphasizes the identification and mapping of risk in the organisation to ensure that risk is effectively managed by management. It moderates the exposure of the entity to risk of the organization.
• Control activities. It relates to the rules, policies and procedures that are instituted within the organisation to ensure that resources are safeguarded. Accounting controls is an example of control activities.
• Information and communication. It deals with information flow within the entity. The right information is received by the right person at the right time.
• Monitoring. It entails review and monitoring procedures that are put in place to ensure that deficiencies in systems and policies are corrected.

The PEFA framework is a very usefulness too for improving public financial management across countries and governments. However, the framework has some inherent limitations:

• The PEFA indicators focus on the operational performance of key elements of the PFM system rather than on all the various inputs and capabilities that may enable the PFM system to reach a certain level of performance.
• PEFA also does not involve fiscal or expenditure policy analysis that would determine whether fiscal policy is sustainable.
• PEFA does not provide recommendations for reforms or make assumptions about the potential impact of ongoing reforms on PFM performance.
• For the purpose of a PEFA assessment elements of the defense, public order and safety function may not be included if information is not available.

(Any 2 points @ 1 mark each = 2 marks)