I. Context. 1 In January 2011 the PFM PMF was modified by the revision of 3 indicators (PI-2, PI-3, and PI-19), in order to take in account

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1 Terms of Reference Consultant team to assist the PEFA Secretariat in the review and finalization of the Guidelines for PEFA Framework Application at the Sub-National level I. Context 1. The PEFA Program is a partnership between the World Bank, the European Commission, and the UK's Department for International Development, the Swiss State Secretariat for Economic Affairs, the French Ministry of Foreign Affairs, and the Royal Norwegian Ministry of Foreign Affairs, the International Monetary Fund, initiated in PEFA aims to support integrated and harmonized approaches to assessment and reform in the field of public expenditure, procurement and financial accountability. The goals of the PEFA Program are to strengthen the ability of partner countries and donor agencies to: (i) assess the condition of country public expenditure, procurement and financial accountability systems, and (ii) Develop a practical sequence of reform and capacity-building actions. 3. The PFM Performance Measurement Framework (PFM PMF) frequently referred to as the PEFA Framework was developed during and officially launched in June It was designed to measure performance of national PFM systems and is divided in two main components: (i) the PFM Performance Indicators (PI): 31 high-level indicators, subdivided into 76 dimensions, covering the entire budget management cycle and all main PFM subjects 1, evidence-based; (ii) the PFM Performance Report (PFM PR), which describes the country context; the process and scope of the assessment; the government reform process; and presents an integrated analytical summary. 4. Because of the early interest in using the PEFA Framework for Sub National Government (SNGs), guidelines for the application of the PEFA Framework at SNG level were issued as exposure draft in two volumes in March 2008 but due to lack of response from practitioners at that stage were not finalized The increasing number of SNGs assessments and the substantial differences in the fiscal design 3 and institutional framework for intergovernmental relations 4 across countries makes it important to confirm that the Framework is valid for application at the SNG level, and to identify 1 In January 2011 the PFM PMF was modified by the revision of 3 indicators (PI-2, PI-3, and PI-19), in order to take in account needs for more specific analysis. Guidance is provided on how to implement the new indicators. An indicator - HLG-1 - was added in 2008 for sub-national level (SNL) assessments. 2 Guidelines for application of the PEFA Performance Measurement Framework at Sub National Government Level Volume 1 Main Guidelines, Exposure draft, PEFA Secretariat, March Vol. 1 Main Guidelines and Vol. 2 Annex ( 3 E.g. federal/unitary; elected or appointed officials; tax- and expenditure power assignments; significant vertical imbalance. 4 E.g. degree of clarity in task assignments; staffing, procurement, internal & external audit requirements and borrowing. 1

2 where the guidelines need clarification, strengthening and/or expansion. The guidelines also need to be made more user-friendly. II. Main objectives of the assignment 6. The objective of this consultancy is to assist the PEFA Secretariat in carrying out a study with the objective of identifying: (i) any necessary strengthening of the current guidelines to ensure efficiency and relevance of Public Financial Management (PFM) assessments for SNGs, (ii) review the indicators set (PIs), the definitions and methodology, (iii) consider additional Clarifications for those PIs to be retained and (iv) review the special SNG indicator HLG-1 (Predictability of transfers from Higher level of Government) as needed. The study will be divided into two phases. III. Specific activities Specifically, the consultant s tasks will include: 7. Phase 1: 7.1 Based on the Secretariat scores data base and reviews and the SNG assessments themselves, identify which indicators are used or not used (due to either being not applicable or omitted without justification) and discuss the reasons behind the lack or limited applicability; 7.2 Review feedback from lead agencies and assessors on issues related to application of the PEFA Framework at SNG level and address areas of concern such as revenue classification, borrowing policy/debt management, procurement framework, audit, national government oversight functions and other issues raised by SNG assessments. 7.3 Starting from the initial feedback received from assessors the consultant team should prepare a set of more specific questions to be shared with a sample of practitioners, in particular assessors that have carried out SNG PEFA, in order to get additional feedback on the application of the framework at SN level. 7.4 The consultant team may undertake interviews by phone, via the PEFA Community of Practice, or have face to face talks with SNG assessors when possible and as far as needed. However, neither field missions nor specific travel is planned. 7.5 Consider and propose a typology of SNGs, suitable in relation PEFA based assessments, and redesign/reformulate Chapter 2 (currently in Volume 1 of the SNG guidelines, as deemed appropriate; 7.6 Discuss whether it is necessary to establish more HLG type indicators (i.e. need for additional indicators specifically developed to reflect the relation between different levels of government); 2

3 7.7 Discuss the usefulness of a separate Country Facts Sheet on inter-governmental fiscal relations, and if justified propose the content of such a Country Facts Sheet 5 ; if this is not appropriate, an alternative course of action should be recommended. 8. Phase 2: taking into account recommendations from phase 1: 8.1 Each indicator will be reviewed individually and a revised version of the SNG guidelines will be prepared. Some indicators might be adapted and/or reformulated and some Clarifications 6 be added if necessary. Proposed indicator changes (other than clarifications ) should be kept to an absolute minimum and suggested only where no other reasonable approach can be proposed, as they represent changes to the core PEFA Framework. 8.2 The finalized guidelines should be produced as a simplified single document, instead of 2 volumes as currently, and be more user-friendly. IV. Specific outputs expected from the consultancy (i) End of phase 1 a interim report with specific recommendations for any strengthening of the PEFA Framework for SNG; (ii) End of phase 2 a final report with the SNG PEFA Framework guidelines revised and a table of PIs/dimensions with a clear identification of what has been revised and why. V. Inputs and Timeframe (i) The consultancy will commence in September, 2011 and is expected to be completed by April Phase 1 will run from September to mid November 2011 and Phase 2 from January to April A review of the recommendations of the consultants will take place between November 2011 and January 2012, before the scope of phase II is confirmed. (ii) The required consultancy input will be split among 2 consultants. (iii)the first phase will require approximately 40 consulting days (2x20). The input for the second phase will depend on the outcome of phase I. 5 Ideas could be drawn from already available tools e.g. tools and indicators to present and assess fiscal design and efficiency across levels of government. See OECD, Fiscal Design Across Levels of Government; Tax Policy Series, no 7, and Fiscal Efficiency Framework (paper, forthcoming) 6 Clarifications to the Framework, June 2005 (updated by the PEFA Secretariat in September 2008) aim at providing support for those who are applying the PFM Performance Indicators and the Performance Report in terms of additional guidance and interpretations. They are developed in response to questions received from teams applying the Framework at country level ( 3

4 (iv) The consultant team will have full access to all background material available at the PEFA Secretariat (PEFA SNG assessments, preliminary feedback from assessors, SNGs data base, etc). VI. Reporting and supervision arrangements (i) The consultants will be engaged on STC contracts with the World Bank. (ii) The tender process will be managed through the World Bank procedures. (iii)the consultant team will report to the Head of the PEFA Secretariat through the focal point at the PEFA Secretariat. (iv) Throughout the study the consultant team will liaise with the members of the SNG work group as needed, in order to share working progress and methodological issues. (v) The consultant team will debrief the Secretariat focal point as frequently as needed, at least bi-weekly. (vi) The consultants outputs will be reviewed by a SNG Work Group under the PEFA Program comprising SECO, AFD and the PEFA Secretariat. The final revised guidelines will be submitted to the PEFA Steering Committee for approval. VII. Qualifications and experience required 9. The study implementation requires the participation of two senior international experts with the following profile: (i) Both consultants should have extensive expertise in Public Financial Management, including intergovernmental fiscal relations and the context of PFM systems in developing countries. (ii) The team leader should be an expert in PEFA, i.e. having carried out PEFA assessments, and in particular SNG assessments. (iii)the second consultant should be an expert in Fiscal decentralization, ideally with some PEFA practice or knowledge. (iv) Strong knowledge of country PFM system in countries with different administrative heritage will be an advantage. (v) Fluency in English is required. At least one expert should have good command of French. Most documentation is available in English, but a range of material will be available only in French. (vi) The team members must be able to interact easily and frequently, both together and with the SNG Work Group. 4

5 10. The CV of the interested candidates should clearly show a background in PFM and, experience in PEFA (mandatory for the Team leader position) and background in PFM and experience in Fiscal decentralization (mandatory for the Fiscal Decentralization expert). 11. When applying, the candidates should make reference to which position they are applying: Team leader (1) or Fiscal Decentralization Expert (2). PEFA Secretariat August 22,