1. The “Downstream Stages”: Budget Execution, Financing, and Control Training for Support PAC Staff Hilton Hotel, Windhoek, Namibia 10-12 May 2012

2. The Objectives of Budget Execution “Downstream” problems are inevitable if the budget is unrealistic in the first place. Three main objectives: – Compliance with the approved budget – Adaptability of budget execution systems – within specified parameters and limits – to any macroeconomic changes that will occur during the fiscal year – Sound management of the purchasing process and utilization of the resources for the ultimate purpose of delivering public services.

3. Providing Flexibility A formal budget amendment approved by the legislature is required in response to major changes in the budget due to changes in the macroeconomic situation. To respond to minor changes and improve service efficiency, budget managers must have some flexibility to shift the resources in the budget from one expenditure to another: “virements” – small virements that can be made by individual budget managers – more sizeable virements that require approval by the minister or head of the agency – virements between major budget categories, e.g. from operations and maintenance to salaries – virements between ministries normally require legislative approval or at least substantive consultation.

4. The Audit Cycle Parliament needs to be interested in issues concerning the financial and operational performance of government. Furthermore it needs to be aware of the audit reports and to have sufficient weight to introduce its recommendations in the political debate. Government needs to take the reports of the SAI enforced by Parliament seriously and to follow-up on their recommendations. – Government audit has been effective if government has followed up the recommendations and the management of the public sector institutions has implemented them. The effectiveness of government audit is enhanced if the contribution of each actor is made transparent to the media and the public.

5. External Audit Most important standards for effective external audit are: – Independence – Ability to require all needed information at any time and freedom to report publicly – Managerial and operational autonomy – Competence and professionalism – Procedures for follow up of audit reports by the executive and the legislature to ensure they are acted on

6. Group Task: Performance Report You are preparing a memo to the members of the PAC enclosing the audit report. – In your note, do you recommend that the PAC conduct a public hearing into the report? – If yes, what should be the focus of the Inquiry? Lines of enquiry/possible questions etc – [IF YOU HAVE TIME THINK ALSO ABOUT WHO YOU WOULD ASK TO SUBMIT ORAL AND/OR WRITTEN EVIDENCE]

7. The Audit Cycle Public Sector Institutions have to present their Annual Report in which they report about their financial and operational performance of the foregoing year – The timely preparation of the Annual Report is a crucial factor determining the effectiveness of government audit. The SAI audits the reliability of the Annual Report and reports on shortcomings in the financial and operational performance of government. – The quality of the audit reports is a crucial factor determining the effectiveness of government audit

8. Types of Audit Compliance (regularity) audits – the legal propriety of transactions, by verifying they have been conducted consistent with the appropriate budgetary authorizations and rules. Must be selective. Financial Audits, primarily of the annual report on budget execution and other major financial reports, to ascertain that the reports present the situation fairly and are complete, accurate and presented in accordance with the budget classification and other relevant provisions; Value for money (efficiency) audits identify areas of waste and mismanagement and recommend improvements in efficiency and effectiveness. – Must first have a strong and credible track record in respect of the basic compliance and financial audits of the budgetary operations of government.

9. External Audit In order to be credible and facilitate corrective action, the audit reports: – Must show clear findings based on convincing evidence – Make cost-effective recommendations – Allow the audited entity full opportunity to respond to and comment on draft – Be ready-friendly and disseminated appropriately, including to the media