Good governance through financial management

Transcription

1 Good governance through financial management Evolution of good governance through financial management at the Organization of American States (OAS) Presenters *: Javier Arnaiz, CGFM Diego Yrivarren, CGFM September 10 th, 2014 * The views expressed in this presentation do not necessarily reflect those of the Organization of American States. The views are strictly presented from a personal professional perspective by the presenters.

2 What is the OAS? Who we are What we do World s oldest regional organization, dating back to member states of the Americas 69 permanent observers states, as well as the European Union $167 million annual budget; 600+ staff members In brief, the OAS is mainly a political forum to promote democracy for peace, security, and development for the Americas It carries a wide array of programs: promotion of human rights, political dialogue, inclusiveness, cooperation, electoral observation missions, legal and follow-up instruments, demining activities

3 What is our reach? OAS is headquartered in Washington, DC with offices in most member states countries

4 What is good governance?

5 How do you achieve good governance?

6 1.Accountability Good governance is based on principles 4. Effectiveness and efficiency Good governance 2. Follows the rule of law 3. Transparency

7 Sound financial management helps promote good governance Good governance 1. Sound financial management 2. Results-based management 3. Risk management 1. Accountability 2. Transparency 3. Follows the rule of law 4. Effectiveness and efficiency

8 1.Accountability to deliver benefits to OAS is ultimately accountable to the People of the Americas Democracy and governance Multidimensional security Human rights Integral development Mandates aligned to 4 pillars the People of the Americas

9 1.Accountability 1. Member state quotas and miscellaneous income for general use 2. Voluntary contributions from member states and other donors for specific projects 3. Indirect cost recovery (ICR) from Specific Funds projects to cover overhead costs $83 m Regular Fund $79 m Specific Funds $5m ICR The OAS accomplishes its mandates through its annual programbudget Programbudget $167 m Approved by:

10 1.Accountability Sound financial execution of the OAS programbudget is supported by its governance structure Board of External Auditors Technical areas executing OAS programs in member states countries General Assembly Permanent Council Committee on Administrative and Budgetary Matters (CAAP) General Secretariat Finance Department Inspector General

11 1.Accountability The internal financial and administrative management structure provides support to technical areas Technical areas executing OAS programs in member states countries: - 4 main Secretariats (democracy, development, security, legal affairs) with their own departments - several other autonomous entities (human rights) One Administrative Management Support (AMS) section per main technical area: - Procure goods and services - Project budget formulation and execution General Secretariat Central administration - Finance (where today s presenters work at) - Human resources - Procurement - FAIRLY NEW - planning and evaluation (budget function) - IT - Other general services Admin under functional supervision of

12 OAS ensures financial conformance through an internal hierarchical regulatory framework 2. Follows the rule of law

13 2. Follows the rule of law Legally binding agreements with external parties complete a comprehensive regulatory framework Internal hierarchical OAS regulatory framework Agreements with external parties (donors, suppliers) Comprehensive regulatory framework

14 3. Transparency Relevant financial information is readily available to stakeholders year-round, in English and Spanish Main financial report(s) Main stakeholder(s) Frequency General purpose financial statements External audit of accounts Resource management and performance reports Project specific reports financed by voluntary contributions Management reports Real-time financial information on ERP system Member states, senior management Member states, donors, public Member states, senior management Donors Member states, senior management Project managers, admin units On-demand Monthly Quarterly Annually

15 4. Effectiveness and efficiency A case study from the financial reporting unit at OAS Financial operations - Cash management - Payroll - A/P, A/R Department of Financial and Administrative Management Services Case study Financial reporting

16 4. Effectiveness and efficiency # 2 # 1 Project support to technical areas The financial reporting unit has two main functions Regular accounting External audit publication and coordination General purpose financial statements Management financial reports 5. Financial reports and audits 1. Budget formulation Project business cycle 2. Review of donor agreements Financial and administrative policy 4. Execution 3. Grants setup

17 4. Effectiveness and efficiency A lower amount of funds does not equal less complexity in financial management 2,300+ mandates from member states for a $167 m budget 50+ offices with reach to 35 member countries = highly decentralized structure 500+ active donor agreements every year 150+ diverse donors to specific projects 400+ project budgets 300+ project financial reports

18 Output has increased exponentially over the last decade in the financial reporting unit 4. Effectiveness and efficiency # of quarterly management reports 0 # of management reports per month # of project budgets reviewed 0 # of project financial reports

19 4. Effectiveness and efficiency While resources have declined and technology remains virtually unchanged Headcount ERP virtually unchanged since 2002 Oracle Financials 11i Major challenges: Cash vs accrual Rely heavily on Excel

20 We focused on previously untapped potential within the team 4. Effectiveness and efficiency 1. Hard skills beyond accounting 2. Soft skills self-motivation 3. Maximize existing tech Visual Basic programming with MS Excel Self-reliant in process automation

21 4. Effectiveness and efficiency Example 1: business days to publish monthly management reports Example 2: average weekly hours Several productivity gains with process automation Better work/life balance

22 4. Effectiveness and efficiency Ideal model Harmonization of donor requirements through framework agreements Donor A Project X Same agreement, one budget Donor B Donor C

23 4. Effectiveness and efficiency Six years ago Our unit Functions Customers The structure was divided by function Financial reporting unit Project support Financial reports All All

24 4. Effectiveness and efficiency Now The new structure is oriented to customers and project support Our unit Financial reporting unit Customer oriented Security and development Democracy and human rights Functions 5. Financial reports and audits All 1. Budget formulation All 2. Review of donor agreements 4. Execution 3. Grants setup

25 4. Effectiveness and efficiency The new structure helped us built more effective, long-term client relationships Technical areas AMS General Secretariat Financial reporting unit 1. Cross-functional trainings 2. Admin prepares draft donor financial reports

26 4. Effectiveness and efficiency In summary, improvements in productivity came mostly from within the team Processes People Structure... Ultimate goal: better customer service

27 What are the opportunities moving forward for financial reporting? 4. Effectiveness and efficiency 1. Actively participate in change Upgrade or replace Oracle 11i? New accounting standards? IPSAS? 2. Keep learning Lean 6 sigma Alternative programming languages such as Java

28 Towards good governance New opportunities to continue towards good governance New administration in 2015 New OAS strategic vision Reforms to financial management

29 Thank you. Questions?

30 References AEXT/EXTMNAREGTOPGOVERNANCE/0,,contentMDK: ~pagepk: ~pipk: ~thesitepk:497024,00.html