Strengthening the ‘Last Mile’ of Public Finance with the New SAFMA Assessment Tool

Over the past 2 decades, many countries have undertaken public financial management (PFM) reforms and diagnostic exercises. These studies are crucial but are usually conducted at the national level and focus on legal frameworks and central government systems. PFM is truly tested at the agency and subnational level where

• roads are planned, procured, built, and maintained;
• irrigation offices collect tariffs and maintain infrastructure assets; and
• municipalities administer grants, manage local revenues, and oversee service contracts.

At this level, corruption and inefficiency often surface: weak internal controls, opaque commitment and disbursement processes, poor procurement practices, or recurring audit findings that remain unresolved. Yet, this is precisely where most country-level diagnostics stop short.

Figure 1: SAFMA Links National PFM Reforms with Agencies that Deliver Public Services

PEFA = Public Expenditure and Financial Accountability; PIMA = Public Investment Management Assessment; SOE = State-Owned Enterprises.
Source: Asian Development Bank.

The Sector and Agency Financial Management Assessment (SAFMA) is designed to fill this gap. It focuses on sectors and agencies, including state-owned enterprises and subnational governments that implement projects and deliver services. Instead of asking only whether national systems are sound, it examines how those systems are applied inside and by the institutions that manage day-to-day public spending.

The SAFMA framework helps practitioners

• benchmark sector and agency financial management systems against international standards and good practices;
• identify systemic gaps and weaknesses in policies, procedures, and capacity; and
• propose concrete, time-bound measures to strengthen systems, and increase their reliability for use in ADB (or other donors)-financed operations.

It differs from traditional diagnostics in four key ways:

1. Implementation focus. The new framework looks at how entities actually plan, spend, record, and report.
2. Operational orientation. It is built to inform project financial management assessments, FM action plans, and design and monitoring frameworks, so diagnostic findings quickly feed into project design and risk mitigation.
3. On-demand deployment. It can be used whenever there is high portfolio concentration in a sector or emerging fiduciary concerns at agency level.
4. Sector-wide view. Where several agencies operate in the same sector, the SAFMA allows individual assessments to be consolidated into a sector profile, exposing common bottlenecks and shared reform priorities.

More than 65% of SDG-related services—health, education, water and sanitation, resilient infrastructure, climate adaptation—are delivered by line agencies and local governments, not by central ministries of finance. However, many frontline institutions operate with outdated internal control manuals, fragmented or manual accounting systems, limited internal audit capacity, and recurring external audit findings with limited follow-up.

Weak "plumbing" clogs channels due to inefficiency and causes leaks due to corruption, as invoices are paid without proper verification, commitments made without budget, ghost assets never verified, and audit recommendations repeatedly ignored.

The SAFMA was not developed to identify fraud or corruption directly. It helps identify the gaps and design actions to ensure those institutions have the financial "plumbing" they need to deliver. It maps the systemic conditions that make corruption and waste more or less likely—for example, whether segregation of duties works in practice, whether commitment controls function, whether integrated financial management systems are effectively used, and whether external audit findings lead to corrective action.

Each identified weakness is linked to short-, medium-, and long-term strengthening pathways, strengthening internal controls, improving audit trails, institutionalizing risk-based internal audit, integrating project reporting into core systems, and systematically budgeting for operations and maintenance. In this way, SAFMA helps build the PFM backbone that allows SDG investments to translate into sustained, reliable services.

The SAFMA tool is structured to mirror the full financial management cycle from the perspective of an agency or sector. It groups the common PFM building blocks into 10 indicators and 22 sub-indicators covering four core areas: 1) accounting and financial reporting; 2) internal control and funds management (including commitment control, treasury arrangements, and bank reconciliation); 3) internal audit; and 4) external oversight.

Each sub-indicator is scored from 0 (with significant gaps) as the lowest to 2 (good alignment with international norms) as the highest. These scores are aggregated into overall ratings of high, medium, or low reliability, which guide decisions on where ADB and development partners can rely on agency systems “in principle” and where parallel arrangements (such as project-specific FM support, ring-fenced bank accounts, or additional reporting) are needed until reforms take effect.

The implications are directly visible. Weak scores in areas such as internal control can mean poor maintenance, missing inventories, and delayed services. In contrast, stronger audit and oversight functions make it harder for leakages and corrupt practices to persist and increase the chances that budgets translate into real, reliable services.

Before a new SAFMA is undertaken in the same sector or agency, teams are expected to review what has been implemented and how systems have evolved. This creates a feedback loop in which assessments inform reforms, progress is tracked, and future assessments measure results. Over time, sectors and agencies can move from low or medium reliability, where ADB relies heavily on parallel arrangements, to high reliability, where country systems can be safely and confidently used.

The framework is structured around agencies that implement or plan to implement ADB-financed projects and is inherently scalable. It can be applied to central ministries, sectors with multiple agencies and state-owned enterprises, specialized implementing agencies, and subnational governments. This scalability is particularly important in decentralized contexts, where local governments are responsible for water, sanitation, primary health, education, or local roads, all central to the SDGs.

Citizens rarely see a chart of accounts or an internal audit plan. What they see are buses that arrive on time, clinics that have medicines, and schools that maintain their buildings.

Tools like SAFMA work behind the scenes, but their impact is felt in these very visible outcomes. By helping identify and fix systemic FM weaknesses in the agencies that deliver services—at both central and subnational levels—the tool supports cleaner, more efficient, and more sustainable use of public funds.

The SAFMA is a practical approach that can be used by a wide range of practitioners. The challenge is to use it across sectors, across levels of government, and across portfolios, so that the “plumbing” of public finance stops being the invisible cause of clogs and leakages and becomes one of its greatest strengths.

Asian Development Bank. eLearn: Financial Management.

ADB. eLearn: Financial Management in ADB-Financed Sovereign Operations for Executing/Implementing Agencies.