1. Public Finance Management A BASIS FOR BETTER UNDERSTANDING OF CORE CONCEPTS 2 DECEMBER 2014 – SOUTHERN SUN HOTEL, O.R INTERNATIONAL AIRPORT

2. Public Finance Management 1. Planning and Resource Allocation What public funds/resources are available to officials/service providers? How do they plan to use these services? 2. Expenditure Management How effectively are public funds spent? 3. Performance Management How do service providers perform in implementing their plans? Are quality public services delivered? 4. Public Integrity What mechanisms exist to prevent, and what corrective action is taken in response to, the misuse & abuse of public resources? 5. Oversight Are officials/service providers called to account by oversight bodies for their performance?

3. Common key terms  Appropriation  Accountability  Internal control deficiency  Material weakness  Audit opinion (financial audit), audit conclusion (VFM)  Unmodified/clean opinion  Modified opinion  Qualified  Disclaimer  Adverse

4. Appropriation  An appropriation is a credit to a government department or agency. An appropriation account is therefore the account pertaining to the government department or agency.

5. Accountability  ‘…accountability exists when there is a relationship where an individual or body, and the performance of tasks or functions by that individual or body, are subject to another’s oversight, direction or request that they provide information or justification for their actions.’ (Stapenhurst and O’Brien, unpublished)  ‘Accountability is the liability to give an account of what one has done, or not done, to another who has authority to assess the account and allocate praise or blame.’ (Jones and Stewart, 2008)  ‘…accountability denotes a relationship between a bearer of a right or a legitimate claim and the agents or agencies responsible for fulfilling or respecting that right. … It denotes the duty to be accountable in return for the delegation of a task, a power or a resource.’ (Lawson and Rakner, 2005)  ‘…the concept of accountability is … how those entrusted with the powers of the State are held responsible for their actions.’ (OECD, 2005)  ‘…accountability as a proactive process by which public officials inform about and justify their plans of action, their behaviour, and results and are sanctioned accordingly’ (Ackerman, 2005)

6. Internal control deficiency  A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis.

7. Material weakness  A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis.  Materiality – the magnitude of an amount such that its omission from a set of accounts will cause a change in the decisions made over those accounts.

8. Material Weaknesses - AGSA  Significant audit findings per the AGSA report:  Non-compliance with laws and regulations  Ineffective use of consultants in financial reporting  Irregular expenditure

9. Zimbabwe Key Findings

10. Recommended Mitigating Controls - AGSA  Introducing basic accounting and daily control disciplines.  Enforcing compliance with all legislation.  Employing staff in accounting and financial management positions with the required level of technical competence and experience.  Calling for information and reports regularly with a view to supervising implementation of financial management improvement plan.  Allowing the chief financial officer to be in charge of the financial records and report thereon to the municipal manager.  The council keeping the monitoring of the financial improvement plan on its quarterly meeting agenda.  The municipal manager reviewing management accounts with the chief financial officer every month.

11. Audit opinion  The primary objective of an audit is to express an opinion on the set of accounts audited  Unmodified/clean opinion – indicates that a set of accounts fairly present the financial position, performance and cash flows of an audited entity  Modified opinion – a modified opinion can either be:  Qualified – basis of qualification given  Disclaimer – auditor unable to express an opinion  Adverse – negative opinion expressed “…the accounts DO NOT fairly present…”

12. Other terms

13. Audit Process  Discuss how the audit process goes in your jurisdiction paying particular attention to the role of the following:  Accounting officer  Auditor general  Treasury (Ministry of finance)  General citizenry  Reporting deadlines and PFMA requirements  Current reporting status  Identify the different types of audit reports in place.  Who determines the nature of audit report?  What is the role of the PAC in this determination?