Gert van der Linde World Bank 7 th Annual CABRI Seminar, Rwanda, 17-18 August 2011 1
Overview International experiences Key conceptual issues Accountability Budgeting Budget execution Accounting Reporting A few examples Incentives and enforcement Conclusion 2
Selected International Experience United States - accrual-based financial reports, but has not announced any plans to adopt accrual budgeting United Kingdom - implemented accrual accounting and reporting in executive agencies and subsequently adopted accrual accounting and budgeting for the central government France - adopting accrual accounting, but has not yet announced an intention to adopt accrual budgeting Australia - introduced annual accrual reporting, and a few years later adopted accrual budgeting New Zealand - introduced accrual reporting and budgeting simultaneously 3
Key conceptual issues Accountability Budgeting Budget execution Accounting Reporting 4
Accountability Relationship R Responsibility Trust R =? Answer Evaluation
Monitoring and evaluation The main purpose of evaluation is: to assess results against original expectations to learn form experience to verify that anticipated results occurred to determine why it did or did not occur as planned Results? Evaluation establishes accountability for results obtained Information is the currency of accountability
What should be evaluated? Private Sector, e.g.: Turnover Profit EPS ROI Liquidity Interest Cover Dividend Cover Gearing There is a bottom line Public Sector: What is our bottom line?
Information Requirement Economic Impact Performance Compliance State of Finances Stewardship
Where many countries are coming from Vote 26 - Transport Appropriation account for the year ended 31 March 1993 Original Adjustments Saving Estimate Vote 25 Estimate Voted Expenditure (Excess) 1992-93 1992-93 1992-93 1992-93 1992-93 1992-93 Main Divisions R'000 R'000 R'000 R'000 R'000 R'000 % 1 Administration 23 430 154 ( 210) 23 374 20 821 2 553 11 2 Civil Aviation 122 148 1 264 11 978 135 390 142 189 (6 799) ( 5)
Information one of the problems Economic Impact? Compliance Performance??? State of Finances Stewardship
Where countries are coming from Weak information Realities: Cash utilisation is the key measure of performance Focus on inputs and not on results Fragmented and unclear accountabilities and legal frameworks Poor quality and late information Poor compliance with existing legislation Weak financial management Wastefulness & inefficiency, fraud & theft In summary, Poor Accountability
Key conceptual issues Accountability Who is accountable for what? How will this be monitored and evaluated? Budgeting Coverage Appropriation law Link to accountability framework Support for and link to cash management Classification system requirements, including GFS, COFOG, IPSAS, management information requirements Level of control, and links to the accounting and reporting system 12
Key conceptual issues Budget execution Compliance to appropriation law Control over votes / programs / cost centres / type of expense Risk management coverage Revenue / Expenses / Liabilities / Assets Accounting Information and reporting requirements, including in-year and annual financial statements Accounting standards Standard chart of accounts Good basic accounting disciplines, including control over bank accounts, commitment controls, reconciliations 13
Key conceptual issues Reporting Against budget per vote / program / cost centre / objective / funding source / type of expense / recurrent / capital Financial performance Financial position Definition of reporting entity existence of ownership control as a basis for the accountability framework Consolidation Who is in or out and why Information needs Accounting standards Inter-entity transactions 14
Overview International experiences Key conceptual issues Accountability Budgeting Budget execution Accounting Reporting A few examples Conclusion 15
A framework pursued 16
A performance orientation in the budget How much? Quality? When? Cost? Vote structure - Ministries Departments Agencies Outcomes Outputs Programs = Budget Effectiveness REAL Performance Agreements Economy Efficiency Type of expense: Salaries Supplies & admin Capital 17
A few examples - 18
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Other improvements to the control, information and audit architectures Established control over the bank account configuration Established monthly reconciliation and reporting procedures, supported by good audit trails Introduced requirement for internal audit, under oversight of an audit committee, for all departments Introduced sanctions for financial misconduct Introduced concept of ownership control into legal framework and requirement to produce annual consolidated financial statements Legal recognition for accounting standards established Accounting Standards Board Introduced requirement for annual reports, reporting on performance Established Minister s responsibility for tabling of annual report and audited financial statements in Parliament Changed the external audit cycle now to be completed 5 months after year-end 33
Incentives and enforcement Incentives Spirit of Ubuntu: "I am what I am because of who we all are." Political leadership Let managers manage. Link with public service reform Enforcement Walk the talk..hold managers accountable Sensible and practical legal sanctions 34
Conclusions Get the basics right first Be clear on the reporting entity Align the legislative framework, the standards, the processes, the systems and data requirements with reporting needs and capacity Always maintain / protect the fundamentals Stake holder buy in, including Auditor-general Change management Show results 35
Questions? 36