Liberia – Duke University Program - PowerPoint Presentation

Slide1

Liberia – Duke University ProgramLegal Framework for PFM

Duncan Last

Public

Financial Management

Division

March 4,

2011Slide2

OUTLINE OF PRESENTATIONFeatures of the PFM legal framework

Typical timetable

of an Integrated PFM System

Liberia’s PFM LawDiscussion

2Slide3

I. Features of the PFM legal framework: Main Elements of the PFM System

Macro-Fiscal Policy

Budgeting

Accounting

&

Audit

Treasury Management

Roles, Responsibilities& OversightSlide4

I. Features of the PFM legal framework: Key documentsAn integrated PFM LawKey principles, processes and deadlinesCoverage, roles and responsibilitiesSubsidiary/specialized laws

Procurement, external audit

Regulations

Detailed processes and responsibilitiesInstructions/manuals …Specialized guidance for practitionersSanctions and penal code4Slide5

I.

Features of the PFM legal

framework

: Outline of an Integrated PFM Law5

Principles/rules:

Stability, sustainability, responsibility

Content & presentation of fiscal strategy

Reporting of fiscal performanceEnforcement & escape clausePrinciples: Comprehensiveness,

annuality, specificityCalendar for budget preparation & approvalBudget policy statement & budget documentsUnit of appropriation and virement & carryover rulesIn year reporting, contingency reserve, supplementary & excess votePrinciples: Unity, efficiency, timelinessTreasury Single Account, banking arrangements & cash managementAuthority to commit & spend public fundsBorrowing, guarantees, lending, on-lending & sale of assets

Principles: Transparency, integrity, accountabilityCoverage, standards & timetable for production of accountsExternal audit & timetable for production of audit reportsScrutiny, timetable for completion of scrutiny & follow-upMain PartsKey Sections

Cabinet Secretary/Finance & Principal Secretary/TreasuryAccountant General, Accounting Officers, County Treasurers, Rev. Collectors

Internal Auditor General, Internal Auditors, Audit CommitteesAuditor General & Controller of the BudgetParliament, Parliamentary Budget Office, County Assemblies

II. Macro-Fiscal Policy

III. Budgeting

IV. Treasury Management

V. Accounting

&

Audit

I. Roles & Responsibilities

VI. Special Provisions

Local governments

SAGAs, AGAs, EBFs and fund accounts

State- & local government-owned enterprises

Other investments and PPPs

Sanctions & penalties

Transitional arrangements & laws to repeal

VII. Sanctions & TransitionSlide6

I.

Features of the PFM legal

framework

:

“Good Practice” in Macro-Fiscal Frameworks

6

Medium-term Fiscal Strategy

6

Principles of fiscal managementFiscal rule (numerical / procedural)Escape clause

3-5 Year macroeconomic forecast3-5 Year fiscal forecastFiscal risk analysisMedium-term fiscal target3-Year expenditure ceiling3-Year ministerial allocationsContingency & planning marginsPerformance indicators/targetsUpdated 3-5 Year MTFS & MTEFExplanation of changes from MTFS/MTEFDetailed annual appropriationsElement

Content

Medium-term Expenditure Framework

Annual Budget

Timing

Permanent

FY - 6 mo

FY - 6 mo

Budget

Orientation Debate

FY - 5 mo

FY - 3 mo

Scrutinize macro forecast

Vote MT fiscal target

Vote expenditure ceiling

Fiscal Council

Fiscal Rule

or

FRLSlide7

I. Features of the PFM legal framework: Formulating and regulating the budget

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 budgetAppropriation bill

When and how often these can be doneIn-year responses to changed circumstances (e.g. higher revenues)Limiting appropriation virements that can be done by the executiveRegulating levels of authority within virement limitsAllowing for a contingency reserve to cover shortfalls

Key dates in the Calendar

Budget Documents

Supplementary Budgets

Virements and Contingencies

Structure of the budget

Regulating in-year spending

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

Budget Reviews

Budget classifications – chart of accounts

Comprehensiveness – inclusion of all revenues and donor funds

Unit of appropriationSlide8

I. Features of the PFM legal framework: “Good Practice” in treasury management8

Objective:

To facilitate the efficient execution of the budget

Timely availability of resourcesResult: Credible Budget, Value for Money, Effective Service Delivery

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

Harmonized cash & debt managementAnnual deficit borrowing optimized against annual cash flow plans and market conditionsIn-year liquidity borrowing and short-term investments of surplus cash aligned with cash flow plansMix of instruments for optimal liquidity managementRobust budget execution

Comprehensive commitment control system which informs on future spending and reserves fundsTimely recording of invoices and standard payment termsBanking arrangements that support treasury control of cashAdequate and timely information on budget executionthroughsupported bySlide9

I. Features of the PFM legal framework: Oversight of Borrowing and GuaranteesRegulating borrowingSuitability of terms and conditionsLimits on borrowing and guarantees:annual limits, borrowing for capital purposes only

In-year Liquidity borrowing

Procedures

Approval process:Central government, local government, SOEsForecasting debtSustainability9Slide10

I. Features of the PFM legal framework: Universal Principles in Accounting and Audit

Fiscal Transparency

Timeliness of reports

Comprehensiveness of CoverageAccess to published informationCompliance to standardsCredibility and integrityAccountabilitySubject to public scrutiny10Slide11

I. Features of the PFM legal framework: The reporting entities11

General Government

Public Sector

National Government

County Governments

Public Corporations

Financial Corporations

Non-Financial State Owned

Enterprises

MDA1MDA2MDAn

County Owned EnterprisesSlide12

I. Features of the PFM legal framework: Comprehensiveness of Reports

Reporting Entities

Accounting Offices (MDAs)

Revenue and expendituresAssets & liabilitiesOutputsConsolidated “whole of national government”County governmentsAggregated “whole of general government”State/County owned enterprisesFinancial corporations Non-financial corporationsTransactions & BalancesRecurrent revenues and expendituresClassified expenditures

Funding inflows/outflows

Donor transactions

Financial assets & liabilitiesFixed assetsContingent liabilitiesSpecial FundsOff-Budget transactions12Slide13

I. Features of the PFM legal framework: Fiscal relations with county governmentsCommon PFM system and procedures for all governmentsAdditional fiscal relations to be regulatedIntegrating counties within the common national policy frameworkManaging the share of resources between levels of governmentControlling sub-national borrowing

Reporting and consolidation

Temporary financial arrangements in case of problems within a county

13Slide14

I. Features of the PFM legal framework: Regulating Agencies and FundsPFM legal framework to apply to themHowever, some degree of autonomyHarmonized fiscal yearsReporting to both MoF and parent ministryPerformance contractingRegular review of relevance of institution to current policy

No borrowing

14Slide15

I. Features of the PFM legal framework: SOEs – Degree of influenceIntegration into fiscal management

15

Monitoring

Control

Contingent liabilities in

Fiscal Risk Statements

Inclusion in

Fiscal StatisticsControls on investment & borrowingInclusion in Fiscal RulesGains / losses included in Ministerial budgetsMost countriesUK & NZSlide16

I. Features of the PFM legal framework: Principles related to sanctions regimeThe 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 disciplinaryCivil

Criminal

Political

The regime should include a credible institutional framework for the enforcement of the applicable sanctions16Slide17

II. Typical timetable of an integrated PFM system 17

Month

Macro Framework

& Budget Preparation

Budget Exec.

& Treasury

Accounting,

Audit, & OversightNotes

JuneCash & Work Plans

Year End CircularWork, procurement, and cash plans before start of FYJuly

1

st Qtr Budget Release

4th Qtr Exec Report

Procurement

starts based

on

approved

FY

Budget

Aug

Annual Budget

Reviews

1½ months to Prepare Annual Reports

Sept

MTEF

Guidelines issued

Annual Reports to Auditor General

Accounting Officers reports at all levels (incl. Counties

)

Oct

Update Strategic

Plans

Budget Outlook Paper

2

nd

Qtr Budget

Release

1st Qtr

Exec Report

Consolidated Accounts to Auditor General

Comptroller General 1 month to Consolidate Accounts

FY+1

budget outlook

informed by FY-1 & FY 1

st

Qtr outturns

Nov

County Inputs to fiscal strategy including MTEF

Coordination with line

ministries and

national policy

Dec

Sector/County Hearings

Audited Accounts

Audits of all entities as per

Constitution/Law

Jan

MTEF

Projections

finalized

& included in Budget Policy

Statement (BPS)

3

rd

Qtr Budget

Release

2

nd

Qtr

Exec Report

Cabinet

to adopt

BPS end

January

Feb

Budget Policy

Statement

to Parliament

Budget Performance Report

on 1

st

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

4

th

Qtr Budget

Release

3

rd

Qtr Exec Report

Estimates to Cabinet

1

st

half Apr, to Parliament 2

nd

half

May

Treasury Memo

Clear

follow-up can be included in FY+1 budget execution

June

Adoption

of Budgets

FY+1

Budget adopted before s

tart FYSlide18

III. The Legal Framework in LiberiaThe PFM Act of 2009 18

I. General

Provisions

S1-4)

II. Authorities and Responsibilities for Budget and Public Financial Management (S5-7)

III. Budget Preparation and Approval (S8-19)

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 (S39-42)X. Specific Provisions Relating State Owned Enterprises (43-46)

XI. Sanctions (S47)

XII. Final and Transitional Provisions (S48-49)Slide19

III. The Legal Framework in LiberiaThe accompanying regulations19

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 guaranteesPART G: Aid management framework and responsibilities of non-governmental organizations

PART H: Cash management and banking arrangementsPART 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

: State-owned 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

24 parts and 329 regulationsSlide20

III. The Legal Framework in LiberiaAreas of on-going focusImplementing the LawFor some areas, implementation expected over time - MTEF, TSA, internal audit, coverage of SOEs…New institutional arrangementsIntegrated accounting functionStrengthening implementation in line ministriesCapacities in planning, budgeting, procurement, internal audit, and accounting

Improved awareness of the legal framework

Ministry and agency level accounting manuals

Challenges20Slide21

IV. DiscussionWhat are your areas of concern within the legal framework?21