1. Public Financial Management in Nigeria Chinedum Nwoko & Kelechi Anyanwu Policy Associates

2. Introduction Course Objectives What is Financial Management? Concept and Scope of the PFM System Legal and Institutional Framework for PFM and PFM Reform in FGN Basic Features & Rules of PFM Assessing Performance of the PFM System - PEFA PFM Measurement Framework Critical Dimensions of the Assessment Framework The Status of PEFA Assessments in Nigeria and Worldwide Outline The Nigerian Public Financial Management System & Rules 2Chinedum Nwoko & Kelechi Anyanwu

3. What is public financial management (PFM)? What are the main functions of public financial management? Why is PFM important in economic governance and development? What common principles govern public financial management worldwide? What are the institutions for public financial management in Nigeria? What is the PEFA PFM Performance Assessment Framework; what role does it place in anticorruption work? How many Nigerian governments have applied (are applying) the PEFA framework and how did they fare (are they faring)? Introduction The Nigerian Public Financial Management System & Rules 3Chinedum Nwoko & Kelechi Anyanwu

4. Define public financial management and explain its three primary objectives Identify the various institutions for PFM in Nigeria and their various roles Discuss 10 basic rules of financial management Explain the legal and regulatory framework for PFM in the government you serve Relate findings of PEFA PFM Performance assessment to corruption risks and vulnerabilities Course Objectives The Nigerian Public Financial Management System & Rules 4Chinedum Nwoko & Kelechi Anyanwu

5. Planning, organizing, directing, and controlling the financial activities of an entity, including its procurement and utilization of funds Basic objective - to manage the resources of the organization prudently to maximize returns for its owners (or stakeholders) Concerned with 3 types of decisions – Investment – how to create wealth or enhance future earning capacity for the owners/stakeholders – Financing – how to source or raise finances to fund the investment and other decisions – Dividend - how to distribute the ‘net profit/gain’ to the stakeholders What is Financial Management? The Nigerian Public Financial Management System & Rules 5Chinedum Nwoko & Kelechi Anyanwu

6. The Concept of PFM Objectives & Relevance of PFM What is the PFM System? The Nigerian Public Financial Management System & Rules 6Chinedum Nwoko & Kelechi Anyanwu Concept and Scope of the PFM System

7. PFM - the generation and administration of funds used to deliver public services PFM system – system for raising/controlling use of PF resources for effective and efficient public service delivery PFM process - planning and budgeting, accounting and reporting, internal controls, audit and external oversight, etc. The Concept of PFM The Nigerian Public Financial Management System & Rules 7Chinedum Nwoko & Kelechi Anyanwu

8. Supports responsible management to promote availability of benefits to the greatest number of citizens possible Supports good governance Facilitate attainment of the 3 budgetary goals of – Aggregate fiscal discipline – Effective allocation of resource allocation to priorities – Efficient service delivery services Objectives & Relevance of PFM The Nigerian Public Financial Management System & Rules 8Chinedum Nwoko & Kelechi Anyanwu

9. Comprises the legal and organizational framework for supervising all phases of the budget cycle – Planning Preparation of plans and strategies Fiscal projections and costing – Budget preparation - conception and formulation – Budget execution and implementation, including procurement – Budget monitoring and reporting, including recording and reporting – Internal controls, including internal audit – External scrutiny and oversight, including external audit – Legislative follow up on audit findings – Post implementation project evaluation What is the PFM System? … The Nigerian Public Financial Management System & Rules 9Chinedum Nwoko & Kelechi Anyanwu

10. PFM legal framework - binding and enforceable legislations and quasi/subsidiary legislations on all aspects of the budget cycle PFM Organizational framework - administrative structure, processes, workflows, and other arrangements in place to facilitate the budget process … What is the PFM System? The Nigerian Public Financial Management System & Rules 10Chinedum Nwoko & Kelechi Anyanwu

11. The Budget - ss 80 – 89 of the Constitution Audit - ss. 85 – 87 of the Constitution The PAC – ss. 88 – 89 Other PFM Laws and Regulations Relevant PFM Regulations The Nigerian Public Financial Management System & Rules 11Chinedum Nwoko & Kelechi Anyanwu Legal and Institutional Framework for PFM and PFM Reform in FGN

12. The NASS must authorize withdrawals from the CRF or any other public fund The annual budget or appropriation process is the process for withdrawing funds from the CRF President prepares and lays expenditure proposals for the coming financial year before the NASS – Appropriation Bill NASS approves by enacting Bill into an Appropriation Act, i.e., the budget law, authorizing the to withdraw and expend appropriated amount for purposes specified Note: Constitution does not specifically require presentation of revenue projections to the Legislature, but the Fiscal Responsibility Act does The Budget - ss 80 – 89 of the Constitution The Nigerian Public Financial Management System & Rules 12Chinedum Nwoko & Kelechi Anyanwu

13. Auditor General for the Federation – Audits all public accounts, offices, courts, etc. – Nominated by President, confirmed by Senate – Appointment to retirement age – Removal from office is also subject to legislative control - must be for specific reasons of infirmity of mind or body, misconduct, and inability to discharge functions of the office – Not subject to direction or control of any authority or person in exercise of constitutional functions. – Auditor general’s salary and emoluments guaranteed, paid from the CRF, i.e., with prior appropriation by either the executive or the legislature – but the budget (O & M expenditures) of Office not guaranteed – is subject to the annual budget approval and control process – Audit staff are civil servants, recruited and posted by the FCSC - capacity to weaken independence of the Office Audit - ss. 85 – 87 of the Constitution … The Nigerian Public Financial Management System & Rules 13Chinedum Nwoko & Kelechi Anyanwu

14. Auditor General for the Federation – Should submit audit to the NASS within 90 days of receipt of financial statement from the accountant general – Does not directly audit the accounts of government statutory corporations, commissions, authorities, agencies, etc., established by Law, but Provides them with list of qualified external auditors from which to choose Provides them with guidelines on fees to pay Comments on their accounts and auditor’s report thereon Conducting periodic checks of them.. Audit - ss. 85 – 87 of the Constitution The Nigerian Public Financial Management System & Rules 14Chinedum Nwoko & Kelechi Anyanwu

15. National Assembly has power to Conduct investigations into the public accounts of the federal government – Review audit reports – Hold hearings on them – Direct restitution and recovery of lost public funds The PAC – ss. 88 – 89 The Nigerian Public Financial Management System & Rules 15Chinedum Nwoko & Kelechi Anyanwu

16. Finance (Control & Management), Act 1958 – the organic finance law – Outdated, but attempts at replacement not materialized yet Fiscal Responsibility Act, (FRA) 2007, aiming to instill discipline into fiscal planning and management Public Procurement Act, (PPA) 2007 – regulates procurement with federal government funds Statistics Act, 2007 - seeks “to effectively advise all levels of government on matters related to statistical development, promote the use of statistical standards and methodologies as well as maintain a comprehensive national statistical databank” (s. 6) Freedom of Information Act (FoI), 2011 - aims to improve transparency and public accountability by providing for public access to non-sensitive official data Other PFM Laws and Regulations The Nigerian Public Financial Management System & Rules 16Chinedum Nwoko & Kelechi Anyanwu

17. The Financial Regulations (2009/e) - operational rules and guidelines for day-to-day management of financial activities – Delineate functions and responsibilities of government officers – Organize treasury functions – Explain authorities to incur expenditure – Provide guidance on budget preparation – Provide guidance on expenditure control, payments, collection and receipt of monies, remittances, advances and loans, custody of public funds, etc. Relevant PFM Regulations.. The Nigerian Public Financial Management System & Rules 17Chinedum Nwoko & Kelechi Anyanwu

18. The Federal Treasury Accounting Manual - a policy and procedure companion to the Financial Regulations and extant circular Federal Treasury Circulars (Dec. 2010) issued by the Office of the Accountant General over the years and compiled into a single volume The Procurement Procedures Manual issued by the Bureau of Public Procurement (BPP) to guide public procurement and amplify the PPA, 2007 – BPP has also issued several other guidelines on public procurement The Public Service Manual, 2008 - regulates procedures for conduct of public administration and FM, including codes of behaviour and disciplinary procedure The Civil Service Handbook explaining the structure and functioning of government.. Relevant PFM Regulations The Nigerian Public Financial Management System & Rules 18Chinedum Nwoko & Kelechi Anyanwu

19. Federal Ministry of Finance (FMF) and its agencies – Budget Office of the Federation (BoF) - provides the budget function and implements the budget and fiscal policies of the Federal Government of Nigeria – Office of the Accountant General of the Federation (OAGF) provides treasury and accounting services, including preparation of annual accounts and financial statements – Debt Management Office (DMO) coordinates the management of Nigeria’s debt – Federal Inland Revenue Service (FIRS) controls and administers the different federal and joint taxes – Nigeria Customs Service (NCS) - responsibility for border revenue collection and accounting for the same Institutional Framework for PFM.. The Nigerian Public Financial Management System & Rules 19Chinedum Nwoko & Kelechi Anyanwu

20. National Planning Commission (NPC) The Revenue Mobilization, Allocation, and Fiscal Commission Bureau of Public Procurement (BPP) The Office of the Auditor-General for the Federation The National Assembly Others – CBN, NNPC, DPR, National Petroleum Investment Management Services (NAPIMS), NEC, EMT, FEC (EXCoF), FAAC.. Institutional Framework for PFM The Nigerian Public Financial Management System & Rules 20Chinedum Nwoko & Kelechi Anyanwu

21. The Nigerian Public Financial Management System & Rules 21Chinedum Nwoko & Kelechi Anyanwu Basic Features & Rules of PFM

22. Integrity Professional staffing Clear delineation of functions Authorization of transactions Adequate recording Efficient procedures Physical security Effective internal audit External audit Basic Features & Rules of PFM The Nigerian Public Financial Management System & Rules 22Chinedum Nwoko & Kelechi Anyanwu

23. Brief Background of the PEFA Framework Overview of the PEFA Framework Embedding the PEFA Framework in the Government’s M & E System The Nigerian Public Financial Management System & Rules 23Chinedum Nwoko & Kelechi Anyanwu Assessing Performance of the PFM System – the PEFA PFM Measurement Framework

24. PEFA Program founded in 2001 as a partnership between 7 donor agencies: EC, French Ministry of Foreign and European Affairs, IMF, the Norwegian Ministry of Foreign Affairs, Swiss State Secretariat for Economic Affairs, DFID, and WB Objectives of PEFA Framework – Provide reliable information on the performance of PFM systems, processes and institutions over time – Contribute to government reform process by Determining extent to which reforms are yielding improved performance and Increasing ability to identify and learn from reform success – Facilitate harmonization of the dialogue on PFM performance, reform needs and donor support between government and donors around a common PFM performance assessment Contribute to reduction of transaction costs for country governments Brief Background of the PEFA Framework The Nigerian Public Financial Management System & Rules 24Chinedum Nwoko & Kelechi Anyanwu

25. A. PFM system out-turns – Capture immediate results or outputs of the PFM system – revenues and expenditures – Comparing them to the original approved budget – Budget variances and deviations provide good indication of how well the PFM system supports attainment of the three budgetary objectives, especially aggregate fiscal discipline B. Cross-cutting features of the PFM system – Capture comprehensiveness & transparency of the PFM system across the entire budget cycle – PFM system must be complete - capture all government transactions and activities – Transparency - disclose all necessary information to stakeholders – Completeness and transparency good governance C. Budget cycle – Capture the performance of the key systems, processes, and institutions within the budget cycle of the central government – They are the routine systems for budgeting, accounting, and scrutiny D. Donor practices capture elements of donor practices that affect the performance of country PFM system Overview of the PEFA Framework The Nigerian Public Financial Management System & Rules 25Chinedum Nwoko & Kelechi Anyanwu

26. Overview of the PEFA Framework.. The Nigerian Public Financial Management System & Rules 26Chinedum Nwoko & Kelechi Anyanwu

27. .. Overview of the PEFA Framework The Nigerian Public Financial Management System & Rules 27Chinedum Nwoko & Kelechi Anyanwu

28. The MoF can use PEFA assessments to measure PFM reform progress over time – Integrate the PEFA Framework into its M & E system for overall reform program – However, much of the PEFA Framework does not suit annual monitoring - information requirements are too many, too costly, and burdensome to obtain – Improvements in PFM performance tend to be gradual - PEFA assessments should only happen once every few years Between full assessments, monitoring of PFM performance may include – Annual monitoring of relatively easy to monitor PEFA indicators – Typically quantitative indicators/dimensions: PIs 1-3, PI 6, PI-9 (i), PI-10, PI-11 (iii), PI-16 (iii), PI-19 (i), PI-25 (i-ii), 26 (i-ii), PI 27 (iii) PI-28 (i) – Annual monitoring of indicators that relate to areas where Government focuses reform efforts where Progress may constitute “triggers” in the programs of development partners supporting PFM reform M & E systems are currently generally weak Embedding the PEFA Framework in the Government’s M & E System The Nigerian Public Financial Management System & Rules 28Chinedum Nwoko & Kelechi Anyanwu

29. Credibility of the budget Comprehensiveness and transparency Policy-based budgeting Predictability and control in budget execution Accounting, recording, and reporting External scrutiny and audit Critical Dimensions of the Assessment Framework The Nigerian Public Financial Management System & Rules 29Chinedum Nwoko & Kelechi Anyanwu

30. The Nigerian Public Financial Management System & Rules Chinedum Nwoko & Kelechi Anyanwu30

31. PI-1: aggregate expenditure out-turn compared to original budget PI-2: composition of expenditure out-turn compared to original approved budget PI-3: aggregate revenue out-turn compared to original approved budget PI-4: stock and monitoring of expenditure payment arrears PFM Outturn - Credibility of the Budget The Nigerian Public Financial Management System & Rules 31Chinedum Nwoko & Kelechi Anyanwu

32. – PI-5: classification of the budget – PI-6: comprehensiveness of information included in budget documentation – PI-7: extent of unreported government operations – PI-8: transparency of inter-governmental fiscal relations – PI-9: oversight of aggregate fiscal risk from other public sector entities – PI-10: public access to key fiscal information Crosscutting Issues - Comprehensiveness & Transparency The Nigerian Public Financial Management System & Rules 32Chinedum Nwoko & Kelechi Anyanwu

33. Policy based budgeting – PI-11: orderliness and participation in annual budget process – PI-12: multiyear perspective in fiscal planning, expenditure policy, and budgeting The Budget Cycle … The Nigerian Public Financial Management System & Rules 33Chinedum Nwoko & Kelechi Anyanwu

34. – Predictability and control in Budget Execution – PI-13: transparency of taxpayer obligations and liabilities – PI-14: effectiveness of measures fro taxpayer registration and tax assessment – PI-15: effectiveness in collection of tax payments – PI-16: predictability in the availability of funds for commitment expenditures – PI-17: recording and management of cash balances, debt, and guarantees – PI-18: effectiveness of payroll controls – PI-19: transparency, competition, and complaints Mechanism in Procurement – PI-20: effectiveness of internal controls for non-salary expenditure – PI-21: effectiveness of internal audit.. the Budget Cycle … The Nigerian Public Financial Management System & Rules 34Chinedum Nwoko & Kelechi Anyanwu

35. Accounting, Recording, and Reporting – PI-22: timeliness and regularity of accounts reconciliation – PI-23: availability of information on resources received by service delivery units – PI-24: quality and timeliness of in year budget reports – PI-25: quality and timeliness of annual financial statements.. the Budget Cycle … The Nigerian Public Financial Management System & Rules 35Chinedum Nwoko & Kelechi Anyanwu

36. External Audit & Scrutiny – PI-26: scope, nature, and follow up of external audit – PI-27: legislative scrutiny of annual budget proposal – PI-28: legislative scrutiny of external audit reports.. the Budget Cycle The Nigerian Public Financial Management System & Rules 36Chinedum Nwoko & Kelechi Anyanwu

37. Status of PEFA Assessments in Nigeria, 2007 - 2012 Common Weaknesses Revealed by PEFA Assessments in Nigeria and Their Significance The Nigerian Public Financial Management System & Rules 37Chinedum Nwoko & Kelechi Anyanwu The Status of PEFA Assessments in Nigeria and Worldwide

38. PEFA has become the most important tool for assessing and tracking performance of the PFM system since 2005 The Status of PEFA Assessments in Nigeria and Worldwide The Nigerian Public Financial Management System & Rules 38Chinedum Nwoko & Kelechi Anyanwu

39. The Nigerian Public Financial Management System & Rules Chinedum Nwoko & Kelechi Anyanwu39

40. Thanks. The Nigerian Public Financial Management System & Rules 40Chinedum Nwoko & Kelechi Anyanwu The end