1. INTRODUCTION TO PUBLIC FINANCE MANAGEMENT Module 3.1 – Special issues: Payroll, Procurement and IT.

2. 2.2 & 2.3 Planning and budgeting 3.1 The Budget Execution Cycle 5.2 Decentralisation 1.1 Introduction 2.1 Macroeconomics of the Budget 4.1 Revenue Administration 3.2 Payroll, Procurement & IT 1.3 Budget Classification 4.3 Accounting & Reporting 4.2 Treasury Management 1.2 The Budget 5.3 Assessing & Recapitulation 3.3 Internal Control & Audit 5.1 External Scrutiny & Oversight Module map

3. Fraud Corruption Key Risks 3 Payroll, Procurement and IT

4. Payroll procedures, processes and risks Procurement methods and best practice Use of IT, challenges of large IT projects Module Outline 4 Payroll, Procurement and IT

5. Payroll procedures, processes and risks Procurement methods and best practice Use of IT, challenges of large IT projects Module Outline 5 Payroll, Procurement and IT

6. Share of government spending 6 %PayrollGoods & services South Africa3528 Jamaica3221 Moldova2622 Payroll, Procurement and IT

7. Effective control is achieved by segregation of three sets of data files: Personnel and payroll data is to be updated promptly & may be linked or one database Payroll Management - 1 7 Payroll procedures, processes and risks funded posts - payroll personnel database

8. Payroll Management - 2 Personnel files are dynamic – starters, transfers, and terminations Restricted access to data, clear authorization Audit trails for all changes Controls over standing data on wage rates, taxation etc Payroll audits and checks undertaken regularly 8 Payroll procedures, processes and risks

9. Ministry of Establishments – controls the number and grades of posts and the personnel budget Public Service Commission – manages the appointment and promotion of staff (nominal roll) Above two functions may be combined Central Payroll (Ministry of Finance) – often decentralised Personnel management 9 Payroll procedures, processes and risks

10. i) Degree of integration and reconciliation between personnel records and payroll data. (ii) Timeliness of changes to personnel records and the payroll (iii) Internal controls of changes to personnel records and the payroll. (iv) Existence of payroll audits to identify control weaknesses and/or ghost workers. PEFA on Payroll 10 Payroll procedures, processes and risks

11. ActionAid study in 2006 showed that out of a sample of 41 countries with an IMF loan agreement, 18 had a ceiling on the wage bill largest group of public sector workers are teachers, the second largest are health workers “Wage bill ceilings have been used to protect macroeconomic stability and still may be needed in exceptional cases, but their use should become less frequent” (IMF Board 2007) IMF public sector wage ceilings 11 Payroll procedures, processes and risks

12. Procurement methods and best practice Use of IT, challenges of large IT projects Module Outline 12

13. Procurement is the process of: Identifying what is needed – procurement plan Determining who is the best person or company to supply this need – ordering/contracting Ensuring what is needed is delivered to the right place, at the right time, for the best price, and that all of this is done in a fair and open manner. PROCUREMENT 13 Procurement methods and best practice

14. Planning Tendering advertising opening tender evaluation Quality control check delivery to order estimate value of work done Payment certification of payment retention, mobilization fee Procurement Process procurement plan specification/ bid documents Procurement methods and best practice

15. Standard list of suppliers Written quotations Formal tenders – pre-qualification Exceptions: Single source procurement Restricted tendering Procurement approaches 15 Procurement methods and best practice

16. Integration of procurement into budget No initiation of procurement without available funds Segregation of duties. Transparency from the bidding stage to contract award (including bid prices) Effective Competition Procurement management - 1 16 Procurement methods and best practice

17. Effective competition in the selection of the contractors: Controls over contract slicing Adequate advertising Sealed bids Tender specification of both compliance criteria as well as evaluation criteria Prompt evaluations Adequate period for complaints/appeals after contract award Procurement management - 2 17 Procurement methods and best practice

18. Ministerial tender boards – letting contracts Central tender boards – letting larger contracts Public Procurement Authority – regulation, monitoring, complaints & training Central Purchasing Organisation Institutional arrangements 18 Procurement methods and best practice

19. ( i) Transparency, comprehensiveness and competition in the legal and regulatory framework. (ii) Use of competitive procurement methods. (iii) Public access to complete, reliable and timely procurement information. (iv) Existence of an independent administrative procurement complaints system. PEFA on Procurement (PI 19) 19 Procurement methods and best practice

20. Base-Line Indicators address four pillars : Existing legal framework that regulates procurement in the country Institutional architecture of the system Operation of the system and competitiveness of the national market Integrity of the procurement system. OECD DAC – Methodology for Assessing Procurement Systems (MAPS) 20 Procurement methods and best practice

21. Assessing Procurement Systems 21 Procurement methods and best practice

22. Payroll procedures, processes and risks Procurement methods and best practice Use of IT, challenges of large IT projects Module Outline 22

23. List your three key Advantages and disadvantages of IT 23 Advantagesdisadvantages Use of IT, challenges of large IT projects

24. We cannot move for computers! 24

25. Single integrated computer system for: all financial aspects: budgeting, general ledger, procurement payroll etc all governments: local, provincial and national May bring government into 21st century and facilitate other major changes, but: World Bank survey – only 21% successful; took seven years to complete and cost on average $12.3million Integrated Financial Management Information System (IFMIS) 25 Use of IT, challenges of large IT projects

26. Payables Modules of an IFMIS Purchasing Receivables General Ledger Invoices/Payments Revenue tax & non-tax Approved Budget Estimates (e.g. MOH) Fixed Assets Commitment Control Cash & Debt Management Reconciliation Budget preparation Salary payments Payroll

27. Risks increase where: The project is more complex Capacity of local officials to critically assess all aspects of the project is limited The project is led or heavily influenced by external or foreign consultants Informed political support and the willingness to provide appropriate resources is not available IFMIS can be a high risk approach to development 27 Use of IT, challenges of large IT projects

28. Payroll and procurement are risky areas for fraud and corruption Standard internal controls can reduce this International standards and guidance available Do not be seduced by IT – it is not always the answer Key messages 28 Use of IT, challenges of large IT projects