11 adb grant 0133-cam: public financial management in rural development ministries (component 1)...

11

ADB Grant 0133-CAM: Public Financial Management in Rural Development

Ministries (Component 1)

Effective Budget Delegation Day 2February 09, 2010

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Feb-9-2010 Day 2: Content of Session 2

FINANCIAL CONTROL

2ADB Grant 0133-CAM: Component 1

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FINANCIAL CONTROL CONTENT

1. Approval of Commitments2. Payment Orders and Sub-decree3. Provisional Commitments4. Budget Transfer5. BookKeeping6. Financial Controller Advisory Roles7. Internal Control


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1-Approval of Commitments

Commitments:• Legal Commitment: is the act by the

government where it recognizes or creates an obligation whereby expenditure will be incurred

• Financial Commitment: Authorizing Officer requests funds under the budget item – Financial Controller then has to approve


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Commitments:• No public expenditure can be

committed, implemented or charged to the State's budget or to a Treasury special account (or to an adjunct budget) directly by senior authorizing officers or authorizing officers – even by delegation.


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Commitments: (Continue)• Authorizing officers have to make a

commitment proposal in writing, to which the approval stamp of the Financial Control shall be duly affixed, payment cannot take place until the proposal has been sent back to the authorizing officer. (Article 3 of Decree 81)


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Commitments: (Continue)• The financial controller shall

examine the propriety of the expenditure proposed and this check shall concern the following elements:


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Commitments: (Continue) Purpose of the expenditure Budget item to which the

expenditure is to be charged pursuant to the regulation enacted by the MEF in terms of expenditure classification, and according to the allocation of budget appropriations

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Commitments: (Continue) Accuracy of the expenditure estimate Availability of appropriations. Implementation of financial provisions,

laws, as well as decrees and regulations in force.

Compliance of the expenditure with budget preparatory work.

(Article 3 and 4 of Decree 81)9ADB Grant 0133-CAM: Component 1

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Commitments: (Continue)• Responsibility – The Financial Controller shall deliver

its opinion within 4 working days; on expiration of the time limit set, the opinion shall be considered as granted without consultation and the expenditure shall be declared enforceable


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Commitments: (Continue)• Responsibility (continue)

– The Financial Controller may ask for any further explanation, information or justification that it deems necessary; in this case, the deadline shall be suspended until the elements required are provided


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– There can be no side-stepping of the withholding of approval by the Financial Controller within the statutory time limit, except upon decision from the Ministry of Economy and Finance


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– This approval shall be directly granted by the Minister of Economy and Finance for expenditures exceeding a threshold that has been set by Order

(Article 7 and 10 of Sub-decree 81)13ADB Grant 0133-CAM: Component 1

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Commitments: (Continue)• Calculation of Deadlines – When a deadline is set in clear days, the

day considered as the day initiating the period shall not be included in the calculation; if the Financial Controller has received a commitment proposal on a Monday, the period shall be calculated from Tuesday and shall end on Friday.


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Commitments: (Continue)• Calculation of Deadlines (continue)

– The required procedure (commitment by tacit agreement) can be performed from the following day; [holidays (Saturdays, Sundays and public holidays) are not counted] in this example, the tacit agreement comes into force on Tuesday.


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– When the deadline is not in clear days, the required procedure (tacit agreement) is dated from the expiration day of the deadline, i.e. Friday in this case.


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– Deadline can also be set in calendar days (all days are counted) or in working days [Saturdays, Sundays and public holidays are not counted].


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Commitments: (Continue)• PFMRP contribution– To enable a smooth transition of the

commitments procedure and indeed for payments in general MEF have deployed accountants to the line ministries – this has helped the process enormously however it replies heavily on the personal relationship between the appointed officer and the line ministry staff.


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2-Payment Orders and Sub-Decree

2.1. Allocation of budget appropriation2.2. Advance payment account2.3. Block commitments2.4. Provisional commitments


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2.1. Allocation of budget appropriation• Appropriation allocation in the main

budget areas is voted by National Assembly as specified in the finance law. Once the finance law has been voted and ratified by the senate it is to be promulgated by a Royal Kram sign by His Majesty the King of Cambodia 20ADB Grant 0133-CAM: Component 1

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2.1. Allocation of budget appropriation• The detailed breakdown of the

Appropriation allocation in the budget is the responsibility of the government within a framework of budget allocation and sub-decrees.


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2.1. Allocation of budget appropriation• In 2007 the PFMRP introduced new

codes:– Classification by economic nature– Classification by activity centers– Classification by programs


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2.1. Allocation of budget appropriation• Economic Classifications:– Chapter 60: Purchase– Chapter 61: External charges for

services– Chapter 62: Other external charges for

services


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2.1. Allocation of budget appropriation• Economic Classifications:– Chapter 64: Personnel expenses– Chapter 65: Capital subsidy & social

welfare– Chapter 63: Taxes and duties


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2.1. Allocation of budget appropriation• Modifications: the government must

be able to react to inevitable uncertainties and event…– Transfers from one ministry or similar

public entity to another requires an amendment to the budget law


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be able to react to inevitable uncertainties and event…– However, transfers from one ministry or similar

public entity to another as a result of government or administrative restructuring only requires a sub-decree from the Prime Minister or recommendation of the Minister of MEF


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be able to react to inevitable uncertainties and event…– Transfers from Chapter to another with

he budget of one ministry or within a public entity to another only requires a decree signed by its ministry of head


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be able to react to inevitable uncertainties and event…– Cannot convert provision for capital

expenditure into current operating expenses


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2.2 (Article 57 of Decree 82)– A decree on Advance Payment beyond

budgetary allotments can be approved at council of ministers level on the recommendation of the Minister MEF – usually where there is a natural disaster or imperative need or national interest.

– However, advance payment accounts constitute an infringement of the principle of prior commitment on which Cambodia’s budget is based.


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2.3 Provisional appropriations• Block Commitments (covers

recurrent expenditures)– Wages and allowances– Rents– Operating funds for public administration

entities– Public debt – Contributions to international organizations– Force account 30ADB Grant 0133-CAM: Component 1

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2.4 Provisional appropriations• Provisional Commitments (requests

by authorizing officers)– Expenditures for material & administrative

Management– Expense reimbursement– Public intervention expenditures in the

economic, social and cultural fields¼ budget may be committed once without

supporting documentation!31ADB Grant 0133-CAM: Component 1

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3-Provisional Commitments

Provisional appropriations• Article 17 of the Law 93-01 December

28, 1993– Reserve funds are not allocated to any

ministries – only MEF– Provisional appropriations are provided

for those expenditures that cannot be accurately identified during the budget preparation


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4-Budget Transfer

• "Requests for transfer within budget subheadings or payments charged to contingent expenditure chapters shall be approved by Financial Control, prior to their examination by the departments of the Ministry of Economy and Finance ... " (Article 24 of Decree 81)


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5-Bookkeeping

1. Financial positions have to be drawn up each month for each Authorizing Officer against expenditure commitments

2. This is the responsibility of the Financial Controller

3. It is reconciled with the Treasury departments 34ADB Grant 0133-CAM: Component 1

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6-Financial Controller Advisory Role

• The Financial Controller is required to give, as far as finance is concerned, an opinion with grounds stated on draft laws, royal decrees and sub-decrees of the Council of Ministers, orders, contracts or regulatory decisions with financial implications." (Article 28 of Decree 81) 35ADB Grant 0133-CAM: Component 1

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• The Financial Controller shall take part in budget preparation work and in drawing up of the State's budget settlement law." (Article 23 of Decree 81)


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• The Financial Controller shall draw up an annual overall report on the budget of the last completed financial year, showing: – the outcomes of audit operations and the

proposals for improvement of budget implementation.

– This report shall be submitted MEF March 31 of the year following that for which it is drawn up." (Article 29 of Decree 81)


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• The Financial Controller should advise authorizing officers about the financial implications of choices and decisions in the light of financial and general laws and regulations.


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7-Internal Control

Principal: Management (Authorizing Officer) is responsible for maintaining and reviewing the control structures on a regular basis to ensure that all key controls are operating effectively and are appropriate.


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7-Internal Control

13 Elements of internal control:1)Competent Staff 2)Segregation of Duties

Major duty segregations should be differentiated to:• Authorize transactions;• Execute the transaction;• Record the transaction;


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7-Internal Control

13 Elements of internal control:2)Segregation of Duties (Continued)

The functions in relation to goods/services shall be appropriately segregated as:• Ordering• Receiving• Accounting for• Paying for

Persons reconciling the Bank Account are different to the persons making or approving payments.


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7-Internal Control

13 Elements of internal control:3)Separation of accountability from

custodianship 4)Sufficient records 5) Physical protection of assets


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7-Internal Control

13 Elements of internal control:6)Assignment of Authority and

Responsibility Integrity and prudence dictate the

need for an appropriate division of responsibility whereby the work of one employee independently checks the work of another.


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7-Internal Control

13 Elements of internal control:6)Assignment of Authority and

Responsibility Responsibility for looking after cash,

inventories, fixed assets, and other assets is delegated. Using accounting and other controls, independent check shall be imposed on those who have custodial responsibilities.


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7-Internal Control

13 Elements of internal control:6)Assignment of Authority and Responsibility Each higher level of the organization shall be

responsible for monitoring or evaluating the activities of its subordinates.

There shall be a hierarchy of approvals for payments and procurement and clear lines of reporting;

Approval signatory must be a different person to the preparer;

Employees take regular vacations and other employees then prepare their work.


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7-Internal Control

13 Elements of internal control:7)Principle of Financial Delegation 8)Internal and External Audit *9)Review of Internal Controls 10) Accounting Policies


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7-Internal Control

13 Elements of internal control:11)Accounting Records 12) Accounting Vouchers 13) Accounting System


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7-Internal Control

Audit:1)Inspectorate General of Finance2) Technical Inspection Departments3) Internal auditing departments4)National Audit Authority5)Parliament


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7-Internal Control

Audit:1)Inspectorate General of Finance– Decree No 4 January 20, 2000– The IGF is the first competent authority

regarding all accounting officers, MEF’s officers and authorizing officers in all ministries, agencies, provinces and municipalities


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7-Internal Control

Audit:2)Technical Inspection Departments– Each ministry has a TID which controls

the functioning of its services


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7-Internal Control

Audit:3)Internal auditing departments–Law No 10 March 2000–The internal auditing department

within each institution, ministry and state owned enterprise independently evaluates the effectiveness of the internal control system established.


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7-Internal Control

Audit:4) National Audit Authority

– Law No 10 March 2000– Independent entity– Separate budget– Responsible to the National Assembly– Budget settlement report is a public

document

Jurisdiction is vast and widespread! 52ADB Grant 0133-CAM: Component 1

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7-Internal Control

Audit:5)Parliament– Settlement Law Article 56, 1993–Finance Law 2007 – replaced Article 57

on Management System


11 adb grant 0133-cam: public financial management in rural development ministries (component 1)...

Documents

adb grant

approval stamp

withholding of approval

public expenditure

public financial management

adjunct budget

states budget

senior authorizing officers