Slide 1 GAC HOB Training Course - Essentials of Budget execution Addis Ababa, June

Slide 2 Expenditure cycle and budget execution systems Apportionment of appropriations/ Release of funds Commitment Acquisition/ verification Payment Systems - Procurement and contracts - Payroll - Cash management - Internal control - Internal, external audit - Accounting, reporting & monitoring

Slide 3 Cash management (PI-17,PI-16) Effective cash management achieves three (sometimes competing) objectives: - Controls aggregate spending, while - implementing budget efficiently, in a manner that - minimizes borrowing cost Includes : -Management of bank accounts -Making payments in timely manner -Receiving revenues collected and releasing funds -Cash flow planning, forecasting and monitoring

Slide 4 Treasury Single Account Keep number of balances to a minimum to avoid idle balances and ensure control Idle balances more borrowing than necessary and/or cash withheld from other agencies TSA one account or set of linked accounts through which all payments made. Different methods : TSA and centralized payment Passive TSA and one central account through which MDAs make payments Passive TSA with sub accounts with zero balance accounts and automatic sweeping

Slide 5 Integrated financial management information system – What is it? What does it cover ? (see handout) Accounting, budget execution and fiscal reporting are the core modules of the system – they perform essential day- to-day operations and capture core data. Other modules include - macro-forecasting, budget formulation, personnel information and payroll, cash management, debt management, revenue administration. Integration Connectivity between modules and sites Single data entry Sharing of data Coordinated development, common framework

Slide 6 Issues in IFMIS implementation cycle  Readiness  PFM preparation  ICT planning and design  Procurement  Implementation  M&E  Maintenance and sustainability (see handout)  Readiness  PFM preparation  ICT planning and design  Procurement  Implementation  M&E  Maintenance and sustainability (see handout)  Political  Organizational  Information communications technology  Change management and communication  Capacity  Cost  Data quality and system security  Quality assurance  Political  Organizational  Information communications technology  Change management and communication  Capacity  Cost  Data quality and system security  Quality assurance

Slide 7 Internal (management) control Organisations, policies and procedures Programmes achieve objectives Resources protected from waste, fraud and misuse Reliable and timely information that ensure Key performance dimensions (PI-20) Effectiveness of commitment controls Comprehensiveness, relevance and understanding of other internal control rules/ procedures. Degree of compliance with rules for processing and recording Bank reconciliations (PI-22) Different approaches : Centralized vs decentralized controls Controls exercised by MoF, eg. France, Spain, Portugal Decentralized responsibility to heads of MDAs eg. NL, UK

Slide 8 Internal audit PI-21 : Feedback to management on performance of internal control systems Coverage and quality of internal audit Frequency and distribution of reports Demand for internal audit, and extent of management response Institutional arrangements Responsibility centralized or decentralized Independence and reporting of internal auditors, incl audit committee Capacity and resourcing

Slide 9 Payroll A major category of expenditure made through payroll Core considerations (PI-18): Integration of the data in the payroll with personnel information Timeliness of updates Controls and audit trail for changes Payroll audits and census

Slide 10 Accounting and reporting Information on funds reaching service units (PI-23) In-year budgeting (PI-24) Scope and compatibility with budget Timeliness of issue Quality of information Year end financial statements (PI-25 Completeness, coverage Timeliness Financial reporting standards used (national, international) Publication of information is an important cross- cutting dimension (PI-10)

Slide 11 Accounting basis In all accounting systems commitment, verification and payment should be recorded and monitored BasisCapturesTiming of Recognition Modification CashFlows of cash When cash paid or received Books open after year end Commitment control AccrualStocks and flows When transaction or event takes place Various eg. only financial assets

Slide 12 Useful references Public Finance website (under Public Finance Tools- Handbooks and manuals) Managing Public Expenditure – a reference book for Transition countries, Ed. Richard Allen and Daniel Tommasi, OECD 2001 Public Expenditure Management Handbook, World Bank, June 1998 IMF Working Paper series, eg. A Comparison Between Two Public Expenditure Management Systems in Africa, Ian Lienert, January 2003