IFAC Response to Updating the Public Expenditure and Financial Accountability (PEFA) Indicators Draft

IFAC has submitted a comment letter to Updating the Public Expenditure and Financial Accountability (PEFA) Indicators—Draft for Public Consultation. Among other comments, IFAC refers to its October 2012 response to PEFA’s consultation Guidance Note on Sequencing Public Financial Management Reforms and several recommendations made relating to the need for greater focus to be placed on the accounting systems and processes in the PEFA framework—including the importance of elements such as accrual-based financial reporting and budgeting as the aim for all governments—and for implementing the necessary institutional arrangements required to enhance public sector financial management.

IFAC believes these elements are an essential part of good public sector financial management, and are crucial when making assessments of jurisdictions’ public sector financial management and improvements that might be made. There is a risk that, by focusing on a range of separate performance indicators, advances and progress will be somewhat fragmented. Jurisdictions might well focus on adhering to the indicators, rather than focusing on the overall picture of reliability and coherency in the underlying processes and systems.

Without sound accounting systems and processes, founded on acceptable accruals-based financial reporting framework and standards, the preparation of financial and other reports and key documents will potentially be based on ad hoc systems and processes. They will lack the essential discipline that exists and is available from the adoption and implementation of high-quality international standards, such as International Public Sector Accounting Standards™ (IPSASs™), and from important institutional measures that promote transparency and accountability. Furthermore, without a strong foundation and common base for all jurisdictions, the usefulness of the performance indicators is somewhat diminished, as comparisons of the robustness of public sector financial management arrangements across jurisdictions will be much less meaningful.

Additional specific feedback is available in the full comment letter.