1. 1 ADB Grant 0133-CAM: Public Financial Management in Rural Development Ministries (Component 1) News and Developments of the Public Financial Management Reforms in MOWRAM March 26, 2010, SOKHA HOTEL

2. 2 Processes of Public Financial Management MULTI-YEAR PLANNING AND BUDGETING ANNUAL BUDGET ALLOCATION OF CASH TO MINISTRIES BUDGET EXECUTION: Internal control, Revenue Collection, Procurement, Expenditure Control ACCOUNTING BUDGETARY CONTROL REPORTING ANNUAL FINANCIAL STATEMENTS INTERNAL AUDIT – part of internal control EXTERNAL AUDIT – external opinion PERFORMANCE REPORTING: Achievement of objectives, value for money POLICY

3. 3 The Public Financial Management Reform Program Implemented since 2004. Designed as four ‘platforms’ of progressive improvement, with the following objectives: Platform 1: Making the budget more credible in terms of timely and effective delivery of funds to budget managers. Platform 2: Implementing effective financial accountability. Platform 3:Linking policy to the budget to create a fully affordable policy agenda. Platform 4: Integrating performance accountability and financial accountability. 3ADB Grant 0133-CAM: Component 19/21/2015

4. 4 PFM Reform Program in Cambodia 4 platforms of PFM development Platform 1 - More credible budget Platform 2 - Effective financial accountability Platform 3 – affordable and prioritized policy agenda Platform 4 – effective performance accountability

5. 5 The Public Financial Management Reform Program The first stage of PMFRP concentrated on Platform 1 and was mainly focused at Ministry of Economy and Finance. The target of achieving a more credible budget was achieved in 2006. 5ADB Grant 0133-CAM: Component 19/21/2015

6. 6 Budget Credibility – Platform 1 Since implementation of Platform 1 …. There is more certainty that resources for ministries will be: 1. Available as envisaged in the budget 2. Released on time to ministries

7. 7 Budget Credibility – Platform 1 Results achieved in Platform 1 …. Improvements have been made to: Law on State Budget System Budget classification / chart of accounts Macrofiscal discipline Budget preparation and management systems Debt management Tax revenue administration Commitments and payment request system Decreasing use of cash Closing unnecessary bank accounts and strengthening the Treasury Single Account

8. 8 Budget Credibility – Platform 1 Results achieved in Platform 1 …. Capacity has improved: short and long term training, etc Recruitment better linked to budget

9. 9 The Public Financial Management Reform Program We are now in Stage 2 of PFMRP which is mainly concerned with implementing Platform 2, that is improving the financial accountability of budget managers. This stage therefore involves managers in all ministries, departments and agencies of the Royal Government of Cambodia, at national and sub-national level. 9ADB Grant 0133-CAM: Component 19/21/2015

10. 10 Implementing stage 2 It is now possible to: Focus on those who are responsible for using the budget resources Enable a fairer emphasis on accountability for the use of resources Give greater empowerment to those using budget resources Have greater visibility and transparency on the use of resources

11. 11 The Public Financial Management Reform Program Main objective of financial accountability: Managers should be able to show how they have used the money they have been entrusted with. Systems needed: Good records of budgets and actual transactions, so that regular comparisons can be made and differences explained. Achieved by installing Financial Management Information System (FMIS). Installation of FMIS will require improvements to many work processes and controls in ministries. Planning: The master document for PFMRP Stage 2 is the Consolidated Action Plan (CAP 2). Based on this, ministries have produced their own Ministry Action Plans (MAP). 11ADB Grant 0133-CAM: Component 19/21/2015

12. 12 Platform 2 /CAP2 Core Areas 1.Continue P1 activities, including rollout to line ministries at central and provincial levels 2.Implement P2 activities 3.Advance work on activities for later platforms

13. 13 SUMMARY OF WORK UNDER PFMRP STAGE 2 – CAP2 Platform 1 – more credible budget Platform 3 – fully affordable policy agenda through policy budget linkage Platform 2 – effective financial accountability 4 OBJECTIVES FOR FURTHER - Revenue policy and administration STRENGTHENING: - Debt management - Cash and bank a/c management - Public procurement 8 OBJECTIVES BUILDING ON PLATFORM 1: - Roles, functions and responsibilities - Incentives and sanctions - Budget classification & chart of accounts - Budget execution and transactions - Accounting and financial reporting - Internal auditing / inspection - Fiscal decentralisation - Institutional capacity and motivation 2 OBJECTIVES FOR ADVANCE WORK: - Improve & extend program budgeting - Comprehensiveness and integration of budget

14. 14 Ministry Action Plan The MAP for MOWRAM follows the suggested structure given in the CAP2. There are five areas of reform activities. Revenue Administration and Policy: (not relevant): input to non fiscal revenue policy, Review of prices, and Improving capacity of revenue collectors. 1.Budget Preparation: This is a major area. Work includes: – defining the roles and responsibilities of budget managers – extending the budget classification – extending program budgeting – integrating the different budgets which are used at the moment (program budget, non-program budget, project budgets) – improving budget reporting. 14ADB Grant 0133-CAM: Component 19/21/2015

15. 15 Ministry Action Plan 2.Budget Implementation: Another major area Includes: – cash planning, – improvements to procurement, – streamlining the approval of payments, – improving the accounting and reporting system so that it is ready for transition to the FMIS. 3.Audit and Monitoring: This area covers the role and effective operation of internal audit, which is a vital part of the system to improve accountability. 15ADB Grant 0133-CAM: Component 19/21/2015

16. 16 Ministry Action Plan 4.Financial Management Information System: This is not just a ‘computer project’. Introduction of the FMIS will require proper documentation of existing systems and proposed new systems, changing of workflows, training and change management. It will affect the work of financial managers and line managers and provide them with greatly improved information. 5.Capacity Development: This area covers the functional review of the ministry, recruitment retention and job rotation policies, identification of skills gaps, training needs and plans, and motivation. 16ADB Grant 0133-CAM: Component 19/21/2015

17. 17 MOWRAM PFM Working Groups ??? e.g. MAFF has set up a PFM Working Group and five subgroups, as follows: 17ADB Grant 0133-CAM: Component 19/21/2015 Subgroup Number NameAreas of MAP covered Subgroup 1Strategic PolicyArea 2 Subgroup 2Setting up policies and income- expenditure management Areas 1 and 3 Subgroup 3Information policy managementArea 5 Subgroup 4Capacity building management and functional analysis Area 6 Subgroup 5Monitoring & Evaluation and AuditingArea 4 MOWRAM could ensure the PFM Working Group Structure by learning from MAFF or MRD.

18. 18

19. 19 Strategic Framework of the Royal Government of Cambodia STRATEGIC FRAMEWORK Government’s Rectangular Strategy (Stage II) National Strategic Development Plan (Ministry of Planning) Third Socioeconomic Development Plan (SEDPIII: 2005-2010) Sector Development Plans – (SDP) MAFF/MOWRAM/MRD External Development Partner programs (Example ADB /World Bank /EU) e.g. ADB’s 19ADB Grant 0133-CAM: Component 19/21/2015

20. 20 Strategic Framework of the Royal Government of Cambodia SECTOR: STRATEGIC DEVELOPMENT PLAN (SDP) How these are linked to the national plans? MOWRAM: – Foundation 1: RGC Rectangular Strategy Phase II; – Foundation 2: Sub-decree on the establishment of MOWRAM; – Foundation 3: National Policy on Water Resources Sector. 20ADB Grant 0133-CAM: Component 19/21/2015

21. 21 Strategic Framework of the Royal Government of Cambodia EXTERNAL DEVELOPMENT PARTNER PROGRAMS Asian Development Bank (ADB) – ADB country strategy and program 2005–2009 (i) intensifying agricultural productivity and diversifying livelihoods; (ii) supporting rural development policy and institutional arrangements to coordinate sector interventions (iii) promoting rural development through Tonle Sap (iv) strengthening water resources and integrated river basin management for sustainable natural resource management, (v) supporting PFM for rural development ministries (vi) sustaining rural livelihoods - sub-regional “new agriculture” solutions AusAID / Other bilateral organizations 21ADB Grant 0133-CAM: Component 19/21/2015

22. 22 Strategic Framework of the Royal Government of Cambodia EXTERNAL DEVELOPMENT PARTNER PROGRAMS World Bank (WB) – Microfinance – Garment Sector – Land Titling – Aid Coordination – Public Finances – Oil and Gas Revenue AusAID / Other bilateral organizations 22ADB Grant 0133-CAM: Component 19/21/2015

23. 23 Strategic Framework of the Royal Government of Cambodia EXTERNAL DEVELOPMENT PARTNER PROGRAMS AusAID – First, it supports research that aims to increase and secure the productivity of rice-based farming systems. – Second, it supports applied R&D that underpins agricultural diversification, particularly into non-rice field and horticultural crops and ruminant livestock. – A third thrust recognises the vulnerability due to climate variability and change. – Cambodia Agricultural Value Chain Program (CAVAC) 23ADB Grant 0133-CAM: Component 19/21/2015

24. 24 Strategic Development Plans MINISTRY OF WATER RESOURCES & METEOROLOGY 2009-2013 Elements: – Review of the 2004-2008 – Sector Analysis – Mission & Goals & Objectives – Strategy – Action Plan 24ADB Grant 0133-CAM: Component 19/21/2015

25. 25 Strategic Development Plans MINISTRY OF WATER RESOURCES & METEOROLOGY 2009-2013 Activities – Irrigation – Construction & Rehabilitation – Irrigation – Maintenance – Dams – Maintenance – Canals - Construction & Rehabilitation – Drought Intervention, flood mitigation & Management – Hydrology & Meteorology – Human Resource Development 25ADB Grant 0133-CAM: Component 19/21/2015

26. 26 Strategic Development Plans MINISTRY OF WATER RESOURCES & METEOROLOGY 2009-2013 Linkage with National Strategy – First: Rectangular Strategy Promoting agriculture sector Rehabilitation & construction of physical infrastructure Developing private sector & job creation Human resource development 26ADB Grant 0133-CAM: Component 19/21/2015

27. 27 Strategic Development Plans MINISTRY OF WATER RESOURCES & METEOROLOGY 2009-2013 Linkage with National Strategy – Second: Sub-decree of establishing MOWRAM Degree 58, June 30, 1999 – Mandate: – Define policies for the sector /prepare & implement law – Study water resources – Develop & conserve water resources – Manage water resources & mitigate risk – Provide meteorological & hydrology information 27ADB Grant 0133-CAM: Component 19/21/2015

28. 28 Strategic Development Plans MINISTRY OF WATER RESOURCES & METEOROLOGY 2009-2013 Linkage with National Strategy – Third: National Policy on Water Resources Vision: – Provision of safe water at reasonable price for all citizens – Supply sufficient water for agriculture, industry & economic activities – Respond to and minimize water related hazards – Keep water resources free from pollution {Note: MOWRAM cooperates closely with MAFF for water strategy} 28ADB Grant 0133-CAM: Component 19/21/2015

29. 29 Strategic Development Plans Linkage Tool: Logical Framework 29ADB Grant 0133-CAM: Component 19/21/2015

30. 30 Strategic Development Plans Linkage Tool: Logical Framework 30ADB Grant 0133-CAM: Component 19/21/2015 Goal: the higher order objective to which a development intervention is intended to contribute Outcome (or Purpose): the likely or achieved short- term and medium-term effects of an intervention’s output Outputs: the products, capital goods, and services which result from a development intervention; may also include changes resulting from the intervention which are relevant to the achievement of outcomes. Inputs: the financial, human and material resources used for the development intervention

31. 31 Strategic Development Plans Linkage Tool: Logical Framework 31ADB Grant 0133-CAM: Component 19/21/2015 What is the difference between outcome and outputs? Example: Goal: Everyone riding a motorbike must wear a helmet! Input: The number of police hours employed Outputs: The number of fines given to motorbikes stopped by the police Outcome: The number of motorbike riders wearing helmets increases The above illustrates that monitoring outcomes is the most definitive way of informing whether an objective is being realized.