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2. Adding Value Through Innovation First time users Returning Users: Skip Intro Welcome to Periscope Consulting Limited’s Interactive IPSAS Study Pack – A document which sets out the principles of the International Public Sector Accounting Standard. If you are here for the first time, please click the icon below, or return to the contents page by clicking on the icon.

3. Adding Value Through Innovation This document details the Overview of Leading Public Financial Management (PFM) Reforms. It was developed by Periscope Consulting Limited (PCL) to improve the body of knowledge in the areas of PFM reforms in Nigeria. The purpose of this document is to:  Provide general information on public financial management in Nigeria;  Expose users to the various financial management reforms that have been undertaken in Nigeria The structure and format of this document allows for flexibility in the event that certain sections require modification.

4. Adding Value Through Innovation Overview of Leading PFM Reforms & Fundamentals of IPSAS - Document Structure 1. Introduction 3. PFM Reforms in Nigeria This section provides details of the various reforms that have been implemented in Nigeria. It also presents an update on their implementation status This chapter details the definition of PFM and misconceptions about the discipline 2. Fundamentals of PFM Reforms This section details the rudiments of performing PFM reforms, the challenges and the key success factors

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7. Adding Value Through Innovation Contents 1 Introduction 2 Fundamentals of PFM Reforms 3 PFM Reforms in Nigeria

8. Internal Audit Framework Introduction What is PFM? The PFM Circle Click Here Recent PFM Reforms Fundamentals of PFMReforms Introduction

9. Internal Audit Framework Introduction What is PFM? PFM Cycle Public Financial Management (PFM) describes the full gamut of resource generation, management and allocation in public sector entities, ranging from government budgeting, revenue generation and management, to government expenditure as well as other fiscal policies. PFM focuses on processes built around the circle of resource generation and utilization aimed at maximizing resource allocation impact in the public sector. “how governments manage …all aspects of resource mobilization and expenditure management …with a progressive extension to the medium-to-long-term implications and risks for public finances of today’s policy decisions” As the definition suggests, PFM is related to both process (‘how governments manage’) and results (‘medium to long term implications’) – Matt Andrews et al. The development of PFM processes is aimed at achieving the over-arching government policies and objectives as articulated in the strategic plans and programmes of the public sector entities. Introduction Fundamentals of PFMReforms Recent PFM Reforms

10. Internal Audit Framework Introduction What is PFM? PFM Cycle PFM covers areas such as: Strategic Planning – Medium Term Economic Framework Budget Preparation – Programme-Based Budgeting Resource Management – Cash Management; GIFMIS Internal Controls, Audit & Monitoring Accounting & Reporting - IPSAS Introduction Fundamentals of PFMReforms Recent PFM Reforms

11. Internal Audit Framework Introduction What is PFM? PFM Cycle Strategic Budgeting Budget Preparation Resource Management Internal Controls, Audit & Monitoring Accounting & Reporting External Audit PFM System The diagram below shows a simplified view of the PFM System as depicted by Matt Andrews et al Introduction Fundamentals of PFMReforms Recent PFM Reforms

12. Internal Audit Framework PFM Reforms Performing PFM Reforms PFM Reform Concerns Key Success Factors PFM Reforms are elaborate activities aimed at causing significant and structural changes to parts of an existing PFM system or introducing new aspects to compliments existing PFM systems. Such reforms include changes to processes, procedures, legislations and technologies of PFM systems that are intended to improve the efficiency and effectiveness of resource allocation decision-making processes, in line with leading global practices. Across the world, countries seek to remain relevant in the sphere of global developments and trends, as such countries continue to update their PFM practices, processes and policies to comply with leading trends and score high makes on global PFM assessment ratings, such as the Public Expenditure and Financial Accountability (PEFA) framework/ assessment – showing the performance of PFM systems. PFM reforms are generally aimed at improving the functionality of PFM systems while at the same time complying with leading global trends. Fundamentals of PFMReforms Introduction Recent PFM Reforms

13. Internal Audit Framework PFM Reforms Reforming PFM Reforms PFM Reform Concerns Key Success Factors Prudent Fiscal Decisions Credible Budgets Reliable & Resource Flows & Transactions Institutionalized Accountability 1.Affordability of Spending Decisions: Management of Deficit, Debt levels and payments 2.How seriously is Public Debt taken – Debt Servicing & Records 1.Actual Revenue Policies, Collection Performance and Forecasts 2.Actual Spending reflects Budgeted Promises 3.Ability to Finance Government Spending through revenue sources 1.Provision of agreed sum to Spending Agencies as agreed 2.Prompt Salary payments – with low or non existent arrears 3.Procurement of appropriate Goods & Services as planned 4.Prompt payment of Contracts – with low and nonexistent penalties 5.Availability of Financing for Capital Projects as agreed 6.Minimal Corruption and Non-performance losses 1.Ease of tracking fund flows to service delivery units 2.Quality of Financial Reports – comprehensive, timely, allow comparison and accessibility 3.Independent Assurance of funds collection, management & VFM 4.Transparent response to Audit concerns Reforms in Public Financial Management are aimed at improving the functionality of PFM systems, which is measured by the four (4) cardinal points elaborated in the figure across. These four (4) represent the objectives of an effective PFM System that is sought to be achieved through reforms Fundamentals of PFMReforms Introduction Recent PFM Reforms

14. Internal Audit Framework PFM Reforms Reforming PFM Reforms Key Success Factors PFM Reform Concerns Critical Success Factors for the effective implementation of PFM Reforms in a public sector environment include the following: Understanding of Reform Focus on Basics No ‘Copy & Paste’ Local Ownership Effective Change & Project Management Note: Mouse over each circle to reveal definition Fundamentals of PFMReforms Introduction Recent PFM Reforms

15. Internal Audit Framework PFM Reforms Reforming PFM Reforms Key Success Factors PFM Reform Concerns Other conditions for successful reform implementation include: 1.Efficient Coordination of Activities; 2.Adequate Funding (capital & recurrent); 3.Integration of Complimentary Reforms – Synergy; 4.Motivation of relevant Stakeholders – ‘What’s in it for me?’; 5.Functionality & Legitimacy Fundamentals of PFMReforms Introduction Recent PFM Reforms

16. Internal Audit Framework PFM Reforms MTEF Program-based Budgeting FIRS Reforms Treasury Single Account GIFMIS/SIFMIS IPPIS IPSAS Objectives Overview MTEF is part of the Strategic Budgeting Reform with the following objectives: To achieve macro-economic stability To spell out the priorities of the government showing how the available resources will be distributed amongst competing public needs. To provide a framework from which annual budgets shall be derived To ensure the adoption of a multi-year perspective in budgeting using a rolling basis over the medium-term. To tie the Executive Government’s political agenda to the strategies of Ministries, Departments and Agencies. To indicate planned strategies of the Executive which have been approved by the legislative arm of government. The Medium Term Economic Framework (MTEF) is designed to provide a 3- 5 year budgeting framework which will enunciate the sectorial priorities of the government. Go-live Date: 2007 Medium Term Expenditure Framework (MTEF) Status Implemented- at Federal and State Governments Recent PFM Reforms Fundamentals of PFMReforms Introduction

17. Internal Audit Framework PFM Reforms MTEF Program-based Budgeting FIRS Reforms Treasury Single Account GIFMIS/SIFMIS IPPIS IPSAS Objectives Overview Budget Classification forms a part of the Budget preparation reform, with the objectives of: Directly impacting on the transparency and coherence of the budget. Encouraging policy formulation and performance analysis; Allocating resources efficiently among sectors; Ensuring compliance with the budgetary resources approved by the legislative; Day-to-day administration of the budget; Promotes the principle of comprehensiveness by ensuring that the budget covers all government entities and institutions undertaking; Implementing Program-Based Budgeting, which seeks to ensure that every government expenditure is tired to overarching programs, policies and objectives A budget Classification is a system which determines the manner in which the budget is recorded, presented and reported. It targets attaining the Advanced Budget Classification. Go-live Date (PBB): 2015 Budget Classification/ Program-Based Budgeting Status Planning Stage – at Federal and State Governments Fundamentals of PFMReforms Introduction Recent PFM Reforms

18. Internal Audit Framework PFM Reforms Program-based Budgeting FIRS Reforms Treasury Single Account GIFMIS/SIFMIS IPPIS IPSAS MTEF Objectives Overview The reform forms part if the Revenue Management reforms and is aimed at achieving the following: Organizational restructuring of the Federal and State Authorities through the autonomy, which is aimed at improving efficiency and effectiveness of tax administration. The enactment of a National Tax Policy, funding reforms, legislation, taxpayer education, dispute resolution mechanism, taxpayer registration, human capacity building, automation of key processes, amongst others. Diversification of national income stream from a solely oil-based revenue regime to a more comprehensive revenue generation regime, with significant input from the tax contributions. Making the Inland Revenue Service a quasi-private sector organization that is target-driven. Recent tax administration reforms have been tied to the restructuring of the Federal Inland Revenue Service, with the granting of financial and administrative autonomy to the FIRS. Go-live Date: 2007 FIRS Reform Status Implemented – Federal & State Governments Fundamentals of PFMReforms Introduction Recent PFM Reforms

19. Internal Audit Framework PFM Reforms Program-based Budgeting FIRS Reforms Treasury Single Account GIFMIS/SIFMIS IPPIS IPSAS MTEF Objectives Overview The TSA is intended to achieve the following objectives: Promoting centralized government banking activities – which will encourage adequate monitor cash inflow and outflows Ensuring that all government banking activities are carried out with the Central Bank Improving the control and monitoring of funds utilization by the Ministries, Departments & Agencies Ascertaining the true liquidity position of the government and preventing a situation where the government ends up borrowing its own money from the commercial banks Minimizing transaction cost Ensuring the aggregate control of cash Minimizing Government’s Ways and Means (Overdraft) requirement from CBN Introduction of the Treasury Single Account (TSA) is an attempt to synchronize the banking activities (receipts and payments) of the government, through the operation of a single government account with the CBN Go-live Date: 2012 Treasury Single Account (TSA) Status Implemented –Federal Government Fundamentals of PFMReforms Introduction Recent PFM Reforms

20. Internal Audit Framework PFM Reforms Program-based Budgeting FIRS Reforms Treasury Single Account GIFMIS/SIFMIS IPPIS IPSAS MTEF Objectives Overview The GIFMIS, which is an underlining reform driving all other PFM reforms was conceived with the following objectives: Address weaknesses in outdated manual accounting systems Provide prompt and efficient access to financial data Provide strengthened financial controls during each stage of budget execution Improve efficiency and effectiveness of government financial management Promote accountability and transparency in public financial management Improve the efficiency and effectiveness of PFM processes Government Integrated Financial Management Information System is a government Enterprise Resource Planning (ERP) providing IT infrastructure to support the entire government financial processes Go-live Date: 2012 GIFMIS/ SIFMIS Status Implemented - Federal Government Planning Stage - State Government Fundamentals of PFMReforms Introduction Recent PFM Reforms

21. Internal Audit Framework PFM Reforms Program-based Budgeting FIRS Reforms Treasury Single Account GIFMIS/SIFMIS IPPIS IPSAS MTEF Objectives Overview IPPIS is a HRM reform aimed at: Creating a centralized database system for Nigerian Public Service with single, accurate source of Employee information that provides integration with other business applications Providing a centralized database to aid to aid Governments manpower planning and decision making Facilitating automation & storage of personnel records to support monitoring of staff emolument payments against budget Ensuring prompt payment of salaries directly to Employees Account with appropriate deductions and remittances of 3 rd party payment The Integrated Payroll & Personnel Information System (IPPIS) is a Human Resource Management & Payroll IT infrastructure that seeks to identify government staff and tie individuals to their payroll Go-live Date: 2012 Integrated Payroll & Personnel Information System Status Implemented – Federal Government & some States Fundamentals of PFMReforms Introduction Recent PFM Reforms

22. Internal Audit Framework PFM Reforms Program-based Budgeting FIRS Reforms Treasury Single Account GIFMIS/SIFMIS IPPIS IPSAS MTEF Objectives Overview IPSAS as a part of Accounting & Reporting PFM reform is implemented in Nigeria with the aim of: Encouraging Accountability in governance Improving transparency in Public Financial Management Promoting vertical (internal) and horizontal (external) comparison of financial activities Ensuring standardization and unification in the entire Public Financial Management practice Increasing global rating of the government’s financial reporting system in the comity of nations Increasing confidence of donor agencies and multilaterals in the government’s financial reporting Reinforcing the tenets of the Freedom of Information Act – through the encourage of full disclosure and publication of governments’ financial activities International Public Sector Accounting Standards (IPSAS) are a set of accounting standards for financial reporting in public sector entities developed by the IPSAS Board. Nigeria has adopted IPSAS alongside their private sector equivalent – the International Financial Reporting System Go-live Date: 2014 and 2016 International Public Sector Accounting Standards (IPSAS) Status Implementation Stage – Federal & State Governments Fundamentals of PFMReforms Introduction Recent PFM Reforms

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