Public Financial Management (PFMx) Module 7

Transcription

1 Public Financial Management (PFMx) Module 7 Budget Execution and Control Processes This training material is the property of the International Monetary Fund (IMF) and is intended for use in IMF Fiscal Affairs Department (FAD) courses. Any reuse requires the permission of the IMF and FAD.

2 The Budget Cycle

3 Defining Budget Execution Budget Execution is the process by which financial resources are made available to, and used by the Executive based on an approved budget. Legislature Executive Approved Budget

4 Key Aspects of Budget Execution Legislature $ Executive Approved Budget $ Ministry of Finance/ Treasury Ministries, Departments, and Agencies

5 Key Aspects of Budget Execution $ Ministry of Finance/ Treasury Ministries, Departments, and Agencies $ $ $ Spend and Control Spend and Control Spend and Control

6 Key Aspects of Budget Execution $ Ministry of Finance/ Treasury Legal and Administrative Requirements Ministries, Departments, and Agencies $ $ $ Spend and Control Spend and Control Spend and Control

7 Budget Execution and Integrity of PFM Effective Budget Execution and Control Good Public Financial Management

8 Budget Execution Control : Assessments PEFA SCORES (For 85 countries) Arrears Size of arrears Budget credibility Accuracy of Expenditure forecasts Small Moderate Moderately Large Very Large Not reported Very Moderately Moderately Very Weak Weak Strong Strong Strength of Expenditure Control No Deviation Small Deviation Moderate Deviation Very Large Deviation Very Moderately Moderately Very Weak Weak Strong Strong Strength of Expenditure Control Source: ( Note. The ratings Strong, Moderately Strong, Moderately Weak, and Very Weak are aligned with the PEFA A through D scores.

9 Characteristics of a Government Budget Funded through compulsory taxation Executive Authorized by a law of Parliament/Legislature Approved Budget

10 Four Constraints imposed by Budget Law Administrative unit responsible to execute expenditure Allowed time period for expenditure Specific purpose of expenditure Limit on the amount of expenditure

11 7 Key Stages of the Budget Execution Cycle Authority and Intent to Spend 1. Authorization 2. Apportionment 3. Reservation Incurrence of Obligations 4. Commitment 5. Verification Clearance of Obligations 6. Payment Order 7. Payment

12 Authority and Intent to Spend 1. Authorization Legal spending authority Example: Budget Appropriation

13 Authority and Intent to Spend 1. Authorization 2. Apportionment Apportioned for specific time period, and/or spending units Example: Monthly allotment

14 Authority and Intent to Spend 1. Authorization 2. Apportionment 3. Reservation Funds reserved for spending before legal commitment Example: Spanish System

15 Incurrence of Obligations 4. Commitment Future obligation to pay Example: Supplier contract

16 Incurrence of Obligations 4. Commitment 5. Verification Confirmation of goods and services received, and recognition of liability Example: Record of stock

17 Clearance of Obligations 6. Payment Order Order to Pay a bill to clear the liability Example: Ordonnancement in French System

18 Clearance of Obligations 6. Payment Order 7. Payment Actual Payment to discharge liability Example: Check to supplier

19 7 Key Stages of the Budget Execution Cycle Authority and Intent to Spend 1. Authorization 2. Apportionment 3. Reservation Incurrence of Obligations 4. Commitment 5. Verification Clearance of Obligations 6. Payment Order 7. Payment

20 Risks to Budget Execution without Effective Control $ Ministry of Finance/ Treasury Budget overruns Arrears Bypass key stages Ministries, Departments, and Agencies $ $ $ Poor quality of data Lack of fiscal responsibility

21 Seven Budget Execution Controls

22 Budget Execution Controls: Appropriation

23 Budget Execution Controls: Commitment

24 Budget Execution Controls: Aggregate Cash

25 Budget Execution Controls: Verification s

26 Budget Execution Controls: Regularity

27 Budget Execution Controls: Accounting

28 Budget Execution Controls: Other

29 Seven Budget Execution Controls

30 Financial Management Information System (FMIS) FMIS Financial Management Information System GFMIS Government Financial Management Information System IFMIS Integrated Financial Management Information System FMIS defined: An IT based system supporting government financial management

31 Financial Management Information Systems (FMIS) A tool that: Performs financial management functions Provides timely and accurate financial information Strengthens expenditure controls Improves transparency and accountability

32 The Budget Cycle and FMIS Maintains approved budget Tracks budget execution steps Generates payment instructions Maintains accounts Enables some automatic controls

33 FMIS Core and Non-core Systems

34 Four Stages of the FMIS Development Process

35 The Budget Cycle

36 Function of Internal Audit

37 Internal Audit versus Internal Control

38 Internal Audit versus External Audit

39 Budget Execution and the Budget Cycle Spend Control Support Systems

40 Budget Execution Budget Execution is the process by which financial resources are made available to, and used by the Executive based on an approved budget.