Transcript How FAD is implementing the MTS

Liberia – Duke University Program
Legal Framework for PFM
Duncan Last
Public Financial Management Division
March 4, 2011
OUTLINE OF PRESENTATION
I. Features of the PFM legal framework
II. Typical timetable of an Integrated PFM
System
III. Liberia’s PFM Law
IV. Discussion
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I. Features of the PFM legal framework:
Main Elements of the PFM System
Macro-Fiscal
Policy
Accounting
& Audit
Roles,
Responsibilities
& Oversight
Treasury
Management
Budgeting
I. Features of the PFM legal framework:
Key documents
• An integrated PFM Law
– Key principles, processes and deadlines
– Coverage, roles and responsibilities
• Subsidiary/specialized laws
– Procurement, external audit
• Regulations
– Detailed processes and responsibilities
• Instructions/manuals …
– Specialized guidance for practitioners
• Sanctions and penal code
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I. Features of the PFM legal framework:
Outline of an Integrated PFM Law
Key Sections
Main Parts
I. Roles &
Responsibilities
II. Macro-Fiscal
Policy
III. Budgeting
IV. Treasury
Management
V. Accounting
& Audit
VI. Special
Provisions
VII. Sanctions &
Transition
a.
b.
c.
d.
e.
a.
b.
c.
d.
a.
b.
c.
d.
e.
a.
b.
c.
d.
a.
b.
c.
d.
a.
b.
c.
d.
a.
b.
Cabinet Secretary/Finance & Principal Secretary/Treasury
Accountant General, Accounting Officers, County Treasurers, Rev. Collectors
Internal Auditor General, Internal Auditors, Audit Committees
Auditor General & Controller of the Budget
Parliament, Parliamentary Budget Office, County Assemblies
Principles/rules: Stability, sustainability, responsibility
Content & presentation of fiscal strategy
Reporting of fiscal performance
Enforcement & escape clause
Principles: Comprehensiveness, annuality, specificity
Calendar for budget preparation & approval
Budget policy statement & budget documents
Unit of appropriation and virement & carryover rules
In year reporting, contingency reserve, supplementary & excess vote
Principles: Unity, efficiency, timeliness
Treasury Single Account, banking arrangements & cash management
Authority to commit & spend public funds
Borrowing, guarantees, lending, on-lending & sale of assets
Principles: Transparency, integrity, accountability
Coverage, standards & timetable for production of accounts
External audit & timetable for production of audit reports
Scrutiny, timetable for completion of scrutiny & follow-up
Local governments
SAGAs, AGAs, EBFs and fund accounts
State- & local government-owned enterprises
Other investments and PPPs
Sanctions & penalties
Transitional arrangements & laws to repeal
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I. Features of the PFM legal framework:
“Good Practice” in Macro-Fiscal Frameworks
Timing
Permanent
Element
Fiscal Rule
or FRL
Content
Principles of fiscal management
Fiscal rule (numerical / procedural)
Escape clause
FY - 6 mo
Medium-term
Fiscal Strategy
3-5 Year macroeconomic forecast
3-5 Year fiscal forecast
Fiscal risk analysis
Medium-term fiscal target
FY - 6 mo
Medium-term
Expenditure
Framework
3-Year expenditure ceiling
3-Year ministerial allocations
Contingency & planning margins
Performance indicators/targets
FY - 5 mo
Budget
Orientation
Debate
FY - 3 mo
Annual Budget
Scrutinize macro forecast
Vote MT fiscal target
Vote expenditure ceiling
Fiscal
Council
Updated 3-5 Year MTFS & MTEF
Explanation of changes from MTFS/MTEF
Detailed annual appropriations
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I. Features of the PFM legal framework:
Formulating and regulating the budget
Structure of the
budget
Key dates in the
Calendar
Budget
Documents
Supplementary
Budgets
Virements and
Contingencies
Regulating inyear spending
Budget Reviews
-
Budget classifications – chart of accounts
Comprehensiveness – inclusion of all revenues and donor funds
Unit of appropriation
For completing the annual performance review of the budget
For issuing the MTEF and budget preparation circulars
For submission of budget documents to Cabinet and the Legislature
For Parliament to adopt the budget
-
Fiscal policy/strategy documents
Estimates of revenue and expenditure
Annexes to the budget
Appropriation bill
- When and how often these can be done
- In-year responses to changed circumstances (e.g. higher revenues)
-
Limiting appropriation virements that can be done by the executive
Regulating levels of authority within virement limits
Allowing for a contingency reserve to cover shortfalls
Regulating ability to commit through allotments
Annual Work, Procurement and Cash Flow plans
Commitment control
Appropriation control
- Mid-year reviews – scope, purpose, and implications for
budget/appropriations
- Annual budget performance reviews
I. Features of the PFM legal framework:
“Good Practice” in treasury management
Objective: To facilitate the efficient execution of the budget
Timely
availability
of resources
through
Harmonized
cash & debt
management
supported by
Robust
budget
execution
• Annual cash flow plans based on line ministry work plans and
procurement plans, aligned to achievable revenue inflows
• In-year rolling cash flow plans with daily projections for next
month, aligned with macro-economic and fiscal conditions
• Minimized idle cash and optimized borrowing
• Annual deficit borrowing optimized against annual cash flow
plans and market conditions
• In-year liquidity borrowing and short-term investments of
surplus cash aligned with cash flow plans
• Mix of instruments for optimal liquidity management
• Comprehensive commitment control system which informs on
future spending and reserves funds
• Timely recording of invoices and standard payment terms
• Banking arrangements that support treasury control of cash
• Adequate and timely information on budget execution
Result: Credible Budget, Value for Money, Effective Service Delivery
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I. Features of the PFM legal framework:
Oversight of Borrowing and Guarantees
• Regulating borrowing
– Suitability of terms and conditions
– Limits on borrowing and guarantees:
• annual limits, borrowing for capital purposes only
– In-year Liquidity borrowing
• Procedures
– Approval process:
• Central government, local government, SOEs
– Forecasting debt
• Sustainability
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I. Features of the PFM legal framework:
Universal Principles in Accounting and Audit
• Fiscal Transparency
– Timeliness of reports
– Comprehensiveness of Coverage
– Access to published information
• Compliance to standards
– Credibility and integrity
• Accountability
– Subject to public scrutiny
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I. Features of the PFM legal framework:
The reporting entities
Public
Sector
General
Government
Public
Corporations
MDA1
National
Government
MDA2
MDAn
County
Governments
Non-Financial
State Owned
Enterprises
Financial
Corporations
County
Owned
Enterprises
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I. Features of the PFM legal framework:
Comprehensiveness of Reports
Reporting Entities
Transactions & Balances
• Accounting Offices (MDAs)
• Recurrent revenues and
expenditures
• Classified expenditures
• Funding inflows/outflows
• Donor transactions
• Financial assets & liabilities
• Fixed assets
• Contingent liabilities
• Special Funds
• Off-Budget transactions
– Revenue and expenditures
– Assets & liabilities
– Outputs
• Consolidated “whole of
national government”
• County governments
• Aggregated “whole of
general government”
• State/County owned
enterprises
– Financial corporations
– Non-financial corporations
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I. Features of the PFM legal framework:
Fiscal relations with county governments
• Common PFM system and procedures for
all governments
• Additional fiscal relations to be regulated
– Integrating counties within the common national
policy framework
– Managing the share of resources between levels
of government
– Controlling sub-national borrowing
– Reporting and consolidation
– Temporary financial arrangements in case of
problems within a county
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I. Features of the PFM legal framework:
Regulating Agencies and Funds
•
•
•
•
PFM legal framework to apply to them
However, some degree of autonomy
Harmonized fiscal years
Reporting to both MoF and parent
ministry
• Performance contracting
• Regular review of relevance of
institution to current policy
• No borrowing
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I. Features of the PFM legal framework:
SOEs – Degree of influence
Integration into fiscal management
Inclusion in
Fiscal
Statistics
Inclusion in
Fiscal Rules
Most
countries
UK & NZ
Monitoring
Contingent
liabilities in
Fiscal Risk
Statements
Control
Controls on
investment &
borrowing
Gains / losses
included in
Ministerial
budgets
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I. Features of the PFM legal framework:
Principles related to sanctions regime
The sanctions regime should provide for :
 Institutional (public agencies/entities) sanctions;
and
 Personal (public officials with specific public
financial management responsibilities) sanctions.
The regime should set forth different categories of
sanctions:
 Administrative and disciplinary
 Civil
 Criminal
 Political
The regime should include a credible institutional
framework for the enforcement of the applicable
sanctions
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II. Typical timetable of an integrated PFM system
Budget Exec.
& Treasury
Accounting, Audit, &
Oversight
June
Cash & Work Plans
Year End Circular
July
1st Qtr Budget Release
4th Qtr Exec Report
Month
Macro Framework
& Budget Preparation
Aug
Annual Budget Reviews
Sept
MTEF Guidelines issued
Oct
Update Strategic Plans
Budget Outlook Paper
Nov
County Inputs to fiscal
strategy including MTEF
Dec
Sector/County Hearings
Jan
Notes
Work, procurement, and cash plans before start of FY
Procurement starts based on approved FY Budget
1½ months to Prepare Annual Reports
2nd Qtr Budget Release
1st Qtr Exec Report
Annual Reports to
Auditor General
Accounting Officers reports at all levels (incl. Counties)
Consolidated Accounts
to Auditor General
Comptroller General 1 month to Consolidate Accounts
FY+1 budget outlook informed by FY-1 & FY 1st Qtr
outturns
Coordination with line ministries and national policy
Audited Accounts
MTEF Projections finalized & rd
3 Qtr Budget Release
included in Budget Policy
2nd Qtr Exec Report
Statement (BPS)
Audits of all entities as per Constitution/Law
Cabinet to adopt BPS end January
Feb
Budget Policy Statement to
Parliament
Budget Performance
Report on 1st Half of FY
Supplementary budget if required,
Parliament debates and adopts BPS for FY+1 by end Feb
Mar
Budget ceilings & circulars
issued
Legislatures review of
audited accounts
Firm ceilings for all budgets (incl. transfers to counties)
Parliament and County Assemblies complete reviews of
accounts of FY-1 – Budget debates are thus informed
Apr
Estimates to Parliament
County Budgets to County
Assemblies
May
June
4th Qtr Budget Release
3rd Qtr Exec Report
Estimates to Cabinet 1st half Apr, to Parliament 2nd half
Treasury Memo
Adoption of Budgets
Clear follow-up can be included in FY+1 budget execution
FY+1 Budget adopted before start FY
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III. The Legal Framework in Liberia
The PFM Act of 2009
I. General Provisions
S1-4)
II. Authorities and
III. Budget Preparation
Responsibilities for Budget and Approval (S8-19)
and Public Financial
Management (S5-7)
IV. Budget Execution
(S20-27)
V. Borrowing, Public Debt
and Guarantees (28-32)
VI. Cash Management and
Banking Arrangements
(S33-34)
VII. Accounting and
Reporting (S35-37)
VIII. Internal Control and
Internal Audit (S38)
IX. Autonomous Agencies
and Special Funds (S3942)
X. Specific Provisions
Relating State Owned
Enterprises (43-46)
XI. Sanctions (S47)
XII. Final and Transitional
Provisions (S48-49)
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III. The Legal Framework in Liberia
The accompanying regulations
24 parts and 329 regulations
PART A: General
Rules for the
Management of the
Consolidated.
Fund.
PART B:
Public Funds
and the
Consolidated
Fund.
PART C: authority
and
Responsibilities of
Public Officer in
Public Financial
Management.
PART D The
Budget
Preparation and
Approval
Process.
PART E:
Budget
Execution.
PART F:
Government
borrowing,
public debt and
guarantees
PART G: Aid
management
framework and
responsibilities of
non-governmental
organizations
PART H: Cash
management
and banking
arrangements
PART I: Accounting
and reporting
PART J:
Internal control
and internal
audit
PART K:
Monitoring
and oversight
PART L:
Autonomous
agencies and
special funds
PART M: Stateowned enterprises
PART N:
Offences and
penalties.
PART O:
Consolidated Fund
Receipts
PART P:
Consolidated
Payments
PART Q:
Imprest
PART R: Bank
and cash
transactions.
PART S: Custody
and security of
public funds
PART T:
Personnel
emoluments
PART U:
Government stores
and inventory
PART V: Asset
custody and
management
PART W:
Losses
Part X:
Transitional
provisions and
entry into force
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III. The Legal Framework in Liberia
Areas of on-going focus
• Implementing the Law
– For some areas, implementation expected over time MTEF, TSA, internal audit, coverage of SOEs…
• New institutional arrangements
– Integrated accounting function
• Strengthening implementation in line
ministries
– Capacities in planning, budgeting, procurement,
internal audit, and accounting
– Improved awareness of the legal framework
– Ministry and agency level accounting manuals
• Challenges
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IV. Discussion
What are your areas of concern within
the legal framework?
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