1. 1 ADB Grant 0133-CAM: Public Financial Management in Rural Development Ministries (Component 1) Effective Budget Delegation February 08, 2010

2. 2 Feb-8-2010 Day 1: Content of Session 1 1.Definition of Segregation of Duties 2.General Principles of Delegation 3.Delegation in Cambodia –Delegation of Power –Governors 4.Public Accountants – International Accounting Standard – Different Types of Public Accountants – Common Problem 2ADB Grant 0133-CAM: Component 1

3. 3 1-Definition of Segregation of duties Having adequate separation of duties, also known as “segregation of duties,” in a financial process means properly assigning the handling of financial process control procedures among two or more competent and qualified individuals in a way that provides reasonable assurance that transactions processed will comply with process control standards 3ADB Grant 0133-CAM: Component 1

4. 4 1-Definition of Segregation of duties In a financial process having good separation of duties, it is expected that at least one individual involved in the process will identify and/or prevent a transaction processing error, misappropriation, or fraud from occurring. The individuals performing process control duties must be provided with adequate training, support, and authority in order to be successful. 4ADB Grant 0133-CAM: Component 1

5. 5 2-General Principles of Delegation Principles of Delegation and Accountability Administrative officials are charged with efficiently managing resources and risks to attain Government objectives while maintaining a sound financial condition and compliance with applicable laws and regulations. 5ADB Grant 0133-CAM: Component 1

6. 6 2-General Principles of Delegation Principles of Delegation and Accountability While administrative officials may delegate many responsibilities, they retain accountability for: – Compliance with applicable laws and regulations, government policies, terms and conditions of gifts, contracts, and grants; 6ADB Grant 0133-CAM: Component 1

7. 7 2-General Principles of Delegation Principles of Delegation and Accountability – Sound financial condition and good business practices; – A system of internal controls that identifies and manages risks; 7ADB Grant 0133-CAM: Component 1

8. 8 2-General Principles of Delegation Principles of Delegation and Accountability – Employee relations practices that ensure due process, nondiscrimination, and freedom from harassment and retaliation; and – The integrity of data and the administrative environment needed to support these accountabilities 8ADB Grant 0133-CAM: Component 1

9. 9 2-General Principles of Delegation Principles of Delegation and Accountability Government officials may be given the authority to re- delegate their decision-making authority and financial, administrative, and management responsibilities further, however: officials cannot delegate greater responsibility and decision-making authority than they have been delegated; and officials who delegate responsibilities and decision- making authority must do so in writing and ensure that the employees to whom they delegate are qualified and are properly fulfilling their responsibilities. 9ADB Grant 0133-CAM: Component 1

10. 10 3-Delegation in Cambodia SEGREGATION OF DUTIES This session will provide information about the important role good separation of duties plays in helping to establish a strong, effective financial control in the Cambodian government environment, and how to implement good separation of duties in financial processes. 10ADB Grant 0133-CAM: Component 1

11. 11 3-Delegation in Cambodia SEGREGATION OF DUTIES Ensuring that the positions involved in performing departmental financial processes do not have conflicting duties is critical to reducing the risk of errors, misappropriations, fraud, and maintaining a strong financial transaction control environment. 11ADB Grant 0133-CAM: Component 1

12. 12 3-Delegation in Cambodia SEGREGATION OF DUTIES We will give you an overview and understanding of effective budget delegation. Part of the PFMRP indicates that budget entities and budget holders will need to be identified in the line ministries – this training session will provide a back ground for implementing such requests from MEF should it eventuate. 12ADB Grant 0133-CAM: Component 1

13. 13 Sihanoukeville: Five reform areas that are ‘catalysts’ for change CAP2Activity 121.3 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.

14. 14 Sihanoukeville: Five reform areas that are ‘catalysts’ for change CAP2Activity 121.3 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

15. 15 3-Delegation in Cambodia SEGREGATION OF DUTIES Fundamental Principles in Cambodia Delegation of power Governors Segregation of duties Commitments Public Accountants Accountants of financial administration 15ADB Grant 0133-CAM: Component 111/17/2015

16. 16 Situation in Cambodia Delegation of Power Fundamental Principles in Cambodia – Law on Public Finance System May, 2008 King [His Majesty Norodom Sihanmoni] Prime Minister [His Excellency Hun Sen] Minister of Economy and Finance [His Excellency Keat Chhon] {Sub-decree No 82 of Council of Ministers November 16, 1995}. 16ADB Grant 0133-CAM: Component 111/17/2015

17. 17 Situation in Cambodia Budget Law May 2008: Article 63 17ADB Grant 0133-CAM: Component 111/17/2015

18. 18 Situation in Cambodia DELEGATION NOTE: An officer who delegates his power does not exercise it any longer, whereas one who has delegated his signature may continue to exercise his power in parallel to the delegated person. In Cambodia Government Officers are responsible and personally liable for their own actions – delegation is no defence!!! 18ADB Grant 0133-CAM: Component 111/17/2015

19. 19 Situation in Cambodia Sub-national Level: the Governor [2 hats] First, representative of the government in his constituency and has financial authority over provincial departments of ministries – thus he is the authorizing officer by delegation over the budgets of the central government Second, he is the Chief authorizing officer for the provincial governor’s budget for his constituency {The mayor is the same!} 19ADB Grant 0133-CAM: Component 111/17/2015

20. 20 4-Public Accountants Role of Public Accountants Financial Operations and public accounting at both the national and sub-national levels of administration shall be centralized at the national treasury and undertaken by public accountants (Budget Law 2008, chapter 5, article 73) 20ADB Grant 0133-CAM: Component 111/17/2015

21. 21 4-Public Accountants Role of Public Accountants The Public accounting system shall be consistent with international accounting standards (MEF Prakas determines accounting system) 21ADB Grant 0133-CAM: Component 111/17/2015

22. 22 4-Public Accountants -What are international accounting standards? The International Public Sector Accounting Standards Board (IPSASB) focuses on the accounting and financial reporting needs of national, regional and local governments, related governmental agencies, and the constituencies they serve.International Public Sector Accounting Standards Board 22ADB Grant 0133-CAM: Component 111/17/2015

23. 23 4-Public Accountants What are international accounting standards? The International Public Sector Accounting Standard (IPSAS) Financial Reporting under the Cash Basis of Accounting is currently being reviewed. There are no International Accounting Standards that can be applied to Cambodia right now! Cambodia has a cash based system!!! 23ADB Grant 0133-CAM: Component 111/17/2015

24. 24 -Different types of Public Accountants Cambodian Situation Senior accountant – one who implements orders for payment from a senior authorizing officer Treasury Accountant – same status as Senior Accountant and consolidates the information from Provincial Treasury Accountants Reporting Accountant – implements orders from authorizing officer by delegation 24ADB Grant 0133-CAM: Component 111/17/2015

25. 25 -Common Problems Cambodian Situation Requisition Accountant refuses to pay on requisition from Authorizing Officer …accountant reports to Minister of Finance …Minister of Finance refers requisition to National Audit Authority Accountant can refuse payment when: Unavailability of Budget Absence of Financial Controllers approval Absence of supporting documents Settlement not in full discharge 25ADB Grant 0133-CAM: Component 111/17/2015

26. 26 Common Problems Cambodian Situation Petty Cash Petty Cash management officers operate under the Authorizing Officer (Public accountants operate under Minister of Finance) who has authority to disburse and make payments. Thus the Public Accountant has little control over Petty Cash… 26ADB Grant 0133-CAM: Component 111/17/2015