1 Sequencing of Activities in Stage 2 of PFMRP

2 The problem Stage 2 has many activities Some activities cannot happen until others are complete Sequencing of activities is needed Target some specific activities to be completed in 2010 The solution

3 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

4 Stage 2 PFMRP Strengthening Platform 1 Activities is a priority Platform 1 – more credible budget 4 OBJECTIVES FOR FURTHER - Revenue policy and administration STRENGTHENING: - Debt management - Cash and bank a/c management - Public procurement

5 Stage 2 PFMRP Advance work for platform 3 can continue but should not be a priority Platform 3 – fully affordable policy agenda through policy budget linkage 2 OBJECTIVES FOR ADVANCE WORK: - Improve & extend program budgeting - Comprehensiveness and integration of budget

6 Stage 2 PFMRP What about the work on Platform 2? Platform 2 – effective financial accountability 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 What should be done first?

7 Stage 2 PFMRP At the PFMRP conference in Sihanoukville on January 2010 the Chief Technical Adviser, Peter Brook, stated his opinion that immediate Platform 2 activities should focus on five reform areas that are ‘catalysts’ for all other changes.

8 Five reform areas that are ‘catalysts’ for change CAP2 Activity 121.3, 21.5  Define budget entities and budget entity managers , 22.2  Define freedoms and flexibilities for budget entities.  Define sanctions against inappropriate budget management , 24.2  Road map for further reforms to budget classification/chart of accounts.  Improve business processes, to prepare for FMIS  Identify accounting standards  Framework for internal audit reports and plans

9 Five reform areas that are ‘catalysts’ for change CAP2Activity and 21.5  Define and identify budget entities and budget entity managers. Outcomes Will create a framework for delegation within which line ministries can work. Will force a view on the extent of deconcentration that is acceptable now and in the future.

10 Five reform areas that are ‘catalysts’ for change CAP2Activity and 21.5  Define and identify budget entities and budget entity managers. Detailed work for line ministries: 21.3, 21.5  Identify full schedule of existing budget entities and budget managers  Receive manual and training from MEF on empowerment and responsibilities of budget entities and budget managers  Propose new schedule of budget entities and budget managers, new budget flows and new accountability arrangements, based on MEF guideline

11 Five reform areas that are ‘catalysts’ for change CAP2Activity and 22.1:  Establish a list of freedoms and flexibilities to be given to budget entities.  Establish clear sanctions for wrong, inappropriate and inefficient budget management. Outcomes Will identify what standards are expected of budget managers who are responsible for controls Will give a clear requirement to line ministries that they must develop internal control procedures.

12 Five reform areas that are ‘catalysts’ for change CAP2Activity  Establish a list of freedoms and flexibilities to be given to budget entities.  Establish clear sanctions for wrong, inappropriate and inefficient budget management. Detailed work for line ministries: 22.2:  Provide an input to MEF in defining powers that should be transferred to line ministries.

13 Outcomes Will enable the opportunity to computerise and streamline processes, and to introduce appropriate accounting analysis and controls. Will encourage a view on realigning the organisation to fit the business processes. Five reform areas that are ‘catalysts’ for change CAP2Activity and 24.2  Deepen reforms to budget classification /chart of accounts and produce a road map for further reforms.  Improve business processes for transaction processing to be implemented through FMIS system.

14 Detailed activities for line ministries Develop in-house training for the economic classification Comment to BD on problems with economic classification Provide input to BD on program and functional classification Compliance with chart of accounts and accounting rules Eliminate inappropriate use of advances Five reform areas that are ‘catalysts’ for change CAP2Activity and 24.2  Deepen reforms to budget classification /chart of accounts and produce a road map for further reforms.  Improve business processes for transaction processing to be implemented through FMIS system.

15 Five reform areas that are ‘catalysts’ for change CAP2Activity  Identify appropriate accounting standards to be implemented. Outcomes Will provide a clear roadmap for phased improvements in standards of financial reporting. Will ensure that introduction of FMIS is based on the first step within that framework, while enabling further steps at a later stage.

16 Five reform areas that are ‘catalysts’ for change CAP2Activity  Identify appropriate accounting standards to be implemented. Detailed activities for line ministries LMs respect the dateline to submit payment orders by 25 December of each year. (no other work is required from Line ministries at present)

17 Five reform areas that are ‘catalysts’ for change CAP2Activity  Develop a framework for internal audit annual reports and plans Outcomes Will provide the basis for terms of reference and recruitment of audit teams in the line ministries. Will give a clear requirement for line ministries to take action.

18 Five reform areas that are ‘catalysts’ for change CAP2Activity  Develop a framework for internal audit annual reports and plans Detailed work for line ministries Submit audit plan to MEF IAD for review. Attend MEF workshop Submit audit reports to MEF for review.

19 Five reform areas that are ‘catalysts’ for change Next steps Instructions on many of the priority areas for 2010 need to come from MEF. Meanwhile we will focus on awareness of the issues.