Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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PUBLIC FINANCIAL MANAGEMENT SYSTEMSSYSTEMS
Dr. Salman ShahLahore
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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Role of public sectorRole of public sector
•Government is the largest organized activity in Pakistan•Recent budgets of the provincial and federal governments amounted to•Recent budgets of the provincial and federal governments amounted to around $ 45 billion•Every penny is resourced and disbursed through the civil bureaucracy•The budgetary process involves ministries attached departments approved byThe budgetary process involves ministries, attached departments approved by parliament•Auditor general reports to parliament
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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Federal Government
Tiers of Government
Provincial
Ministries
Provincial Government
Service ProvidersProviders
Departments
Local GovernmentService
Providers Service idProviders
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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Resource Distribution
Federal Government $ 30 BillionDebt servicing 13 BillionDefense 6 BillionDefense 6 BillionSubsidies/inefficiency 6 BillionOther 5 Billion (PSDP)
Provincial Governments $ 15 Billionof which Local Government ?Government ?
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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Effective Accountability•Public sector organizations credibility with the public depends on effective system of:
•Reporting their performanceepo g e pe o a ce•Explain their actions•Provide transparency to their processes•Clear lines of responsibilities•Clear lines of responsibilities•Well understood objectives•Robust systems of measuring performance•System of responsibility and accountability
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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Role of audit in accountability
•Financial Audit traces spending in line with budget•Economy audit deals with cost of input vs planned•Economy audit deals with cost of input vs planned•Efficiency audit: lowest cost process followed•Effectiveness audit: results/output as planned•Sustainability audit: programs continuity over time
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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Public Policy implementation and Reporting
Policy Direction
ResourcingPolicy Objectives
Accounting Evaluating and
Budgets
Delivering the
reporting
gpublic good
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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Comprehensive Approach To Public Financial p ppManagement (PFM) Reforms
The PFM Performance Measurement Frameworkis one of the elements of a strengthened approach to supporting PFM reforms.to supporting PFM reforms.
It is designed to measure PFM performance of countries across a wide range of development over time. g pThe Performance Measurement Framework includes a set of high level indicators,
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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Public Expenditures and Financial Accountability (PEFA)The PFM Performance Measurement Framework is an integrated monitoring frameworkthat allows measurement of country PFM performance over time.
It has been developed by the PEFA partners, in collaboration with the World Bank/ OECD/DAC Joint Venture on PFM as a tool that would provide reliable information on the performance of PFMtool that would provide reliable information on the performance of PFM systems, processes and institutions over time.
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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The set of high level performance indicators The selected 28 indicators for the country’s PFM system are structured into three categories:
A. PFM system out‐turns: these capture the immediate results of the PFM system in terms of actual expenditures and revenues by comparing h h l d b d ll l l f d hthem to the original approved budget, as well as level of and changes in expenditure arrears.
B Cross cutting features of the PFM system: these capture theB. Cross‐cutting features of the PFM system: these capture the comprehensiveness and transparency of the PFM system across the whole of the budget cycle.
C. Budget cycle: these capture the performance of the key systems, processes and institutions within the budget cycle of the central government. g
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
MEASURING WHAT PERFORMANCE ?______________________________________________________________________________
Budget Realism:Is the budget realistic, and implemented as
The questions the PFM performance indicators seek to answer Accountability and
Transparency :and implemented as intended in a
predictable manner?
g p
Are effective external financial accountability
and transparency arrangements in place?
Six PFM S tComprehensive, Policy‐
based, budget:Does the budget capture
all relevant fiscal transactions, and is the
i i d
Control :Is effective control and
System Aspects
process, giving regard to government policy?
stewardship exercised in the use of public funds?
Comprehensive Fiscal oversight:Are the aggregate fiscal position and risks are monitored and
managed?
Information:Is adequate fiscal, revenue and expenditure
information produced and disseminated to meet decision‐making and management purposes?
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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Structure of the indicator set C B d C l
STRUCTURE AND CONTENT OF THE INDICATORS
A. PFM Out‐turns
Policy-based
budgeting
C. Budget Cycle
B. Key cross‐cutting features
d
budgeting
CredibilityComprehensiveness
Transparency
featuresExternal Scrutiny
and AuditBudget
Execution
Accounting and Reporting
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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THE CURRENT STANDARD SET OF HIGH‐LEVEL INDICATORS
A. PFM OUT‐TURNS
INDICATORS
PI‐1 Aggregate expenditure out‐turn compared to original approvedbudget
PI‐2 Composition of expenditure out‐turn compared to original approvedp p p g ppbudget
PI‐3 Aggregate revenue out‐turn compared to original approved budget
PI 4 Stock and monitoring of expenditure payment arrearsPI‐4 Stock and monitoring of expenditure payment arrears
PEFA JUNE 2012
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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PI‐1 Aggregate expenditure out‐turn compared t i i l d b d tto original approved budget
•Deviation of actual expenditure from original budget was greater than 10% inDeviation of actual expenditure from original budget was greater than 10% in only one of the last three years. •Grade B
PI 2 Composition of expenditure out turn
•Variance in expenditure composition exceeded 15 % in one of the last three
PI‐2 Composition of expenditure out‐turn compared to original approved budget
years. •Grade C
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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PI‐3 Aggregate revenue out‐turn compared to original approved budgetoriginal approved budget
•Actual revenue collection is within 94%‐112% of budgeted revenue during two of the last three years. •Grade B
PI‐4 Stock and monitoring of expenditure payment arrears
•There is no reliable data on the stock of arrears from the last two years.
p p y
Commitment accounting has been introduced but is still in nascent stages. •Grade D
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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THE CURRENT STANDARD SET OF HIGH‐LEVEL INDICATORS
B. KEY CROSS‐CUTTING FEATURES : COMPREHENSIVENESS AND TRANSPARENCY
INDICATORS
PI‐5 Classification of the budget
PI‐6 Comprehensiveness of information included in budget documentation
PI‐7 Extent of unreported government operations
PI‐8 Transparency of inter‐governmental fiscal relations
PI 9 O i ht f t fi l i k f th bli t titiPI‐9 Oversight of aggregate fiscal risk from other public sector entities
PI‐10 Public access to key fiscal information
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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PI‐5 Classification of the budgetg
•The budget formulation and execution is based on administrative economic•The budget formulation and execution is based on administrative, economic and sub‐functional classification, using GFS/COFOG standards with some gaps, but consistent documentation in accordance with GFS standards is produced.produced. •Grade A•United Nations Classification of Functions of Government (COFOG)
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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PI‐6 Comprehensiveness of information included in budget documentationbudget docu e tat o
•The budget information includes 8 of 9 required elements. •Grade A•Grade A
PI‐7 Extent of unreported government operations
•Fiscal reports as generated by AGPR on income and expenditure lack inclusion of all information, even for loan financed projects. •Grade D+
government operations
•Grade D+
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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PI‐8 Transparency of inter‐governmental fiscal p y grelations
•Transfers from federal government to provincial government are transparent and governed by rules settled under the Constitutionand governed by rules settled under the Constitution. •Grade A
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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PI‐9 Oversight of aggregate fiscal risk from other public sector entitiessector entities
•A systematic procedure for monitoring consolidated overview of the fiscal risk caused by PSE/AGA is lacking. •There is no practice of consolidating fiscal risk arising out of all AGAs andThere is no practice of consolidating fiscal risk arising out of all AGAs and PEs. •Grade C
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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PI‐10 Public access to key fiscal informationPI 10 Public access to key fiscal information
•Public access criteria are presently met in 3 of the 6 essential areas •No. Reports on budget execution are prepared by the AGPR •PPRA requires award of all contracts above Pak Rs. 50 million to be published
it b it Th i id f f ll li b MDAon its website. There is no evidence of full compliance by MDAs •Grade B
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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THE CURRENT STANDARD SET OF HIGH‐LEVEL INDICATORSC. BUDGET CYCLE
INDICATORS
i. Policy‐Based Budgeting
PI‐11 Orderliness and participation in the annual budget process
PI‐12 Multi‐year perspective in fiscal planning, expenditure policy and budgeting
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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PI 11 Orderliness and participation in the annualPI‐11 Orderliness and participation in the annual budget process
•A clear annual budget calendar exists, is adhered to and allows MDAs enough time to complete their detailed estimates on timeenough time to complete their detailed estimates on time. •Grade A
MDAs: Ministries, departments and agencies
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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PI‐12 Multi‐year perspective in fiscal planning, expenditure policy and budgeting
Links between multi‐year estimates as per MTBF and subsequent annual budgetary ceilings are not strong Grade B+Grade B+
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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C. BUDGET CYCLE
ii P di bili d C l i B d E i
THE CURRENT STANDARD SET OF HIGH‐LEVEL INDICATORS
ii. Predictability and Control in Budget Execution
PI‐13 Transparency of taxpayer obligations and liabilities PI‐14 Effectiveness of measures for taxpayer registration and tax
assessmentPI‐15 Effectiveness in collection of tax payments PI‐16 Predictability in the availability of funds for commitment of
expendituresd d f h b l d b dPI‐17 Recording and management of cash balances, debt and
guaranteesPI‐18 Effectiveness of payroll controlsPI‐19 Competition, value for
money and controls in procurementPI‐20 Effectiveness of
internal controls for non‐salary expenditure and assetsmanagement
PI‐21 Effectiveness of internal audit
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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PI‐13 Transparency of Taxpayer Obligations and b lLiabilities
•No substantial curtailment of discretionary powers during last three years was made. •tax appeals system needs improvement to work fairly transparently and•tax appeals system needs improvement to work fairly, transparently and effectively •Grade B
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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PI‐14 Effectiveness of measures for taxpayer i t ti d t tregistration and tax assessment
•A data base of taxpayers is maintained for individual taxes. Linkages with other registration authorities are weak and currently there are no provisions for conducting surveys of potential taxpayers •Grade C+
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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PI‐15 Effectiveness in collection of tax payments
•total amount of tax arrears is significant•The current practices have different gaps in recording, reporting and reconciliation of tax paid and tax self‐assessed under USAS •Reconciling differences between AGPR, FBR and SBP remain unresolved. g ,•Grade D+
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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PI‐16 Predictability in availability of funds for commitment of expenditures
•In‐year adjustments, usually budget cuts, are made as per rules and regulations but may not be predictable as these are mostly driven by resource constraints. •Grade C+
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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PI‐17 Recording and management of cash b l d bt d tbalances, debt and guarantees
•debt are properly recorded, reconciled and reported by SBP, MoF and EAD respectively, however reconciliation differences exist between AGPR and EAD for third party payments •Government cash balances is consolidated and reported on daily basis by SBP. However, balances for exempt entities and revolving fund accounts are not included •Grade B+
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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PI‐18 Effectiveness of payroll controlsp y
•Payroll is backed by personnel files• containing all information Ci il ll i t bj t t ifi ll dit•Civil payroll is not subject to specific payroll audit
•monthly list of employees to PAOs are sufficient to identify ghost employees •Grade B+
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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PI‐19 Transparency, competition and complaints mechanisms in procurementmechanisms in procurement
A dit b ti hi hli ht f th th titi th d f•Audit observations highlight use of other than competitive method of bidding without proper justification. •Complete and reliable data is not available for 3 out of 4 key information setssets. •PPRA complaint cell does not include members from civil society and private sector. •framework meets four of the six listed requirementsframework meets four of the six listed requirements •Grade D
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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PI‐20 Effectiveness of internal controls for non‐PI‐20 Effectiveness of internal controls for non‐salary expenditure
•Procedures to address risk of error and fraud tend to create duplication of approvals causing inefficient use of personnelapprovals causing inefficient use of personnel •Audit Reports for past 3 years contain several observations on internal control weaknesses. •Grade C+•Grade C+
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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PI‐21 Effectiveness of internal auditPI‐21 Effectiveness of internal audit
•Internal Audit is not yet developed effectively in most ministries.•There is no evidence suggesting that Internal Audit reports are issued regularly for most GoP entities. •As an operational internal audit function with regular reporting is not•As an operational internal audit function with regular reporting is not implemented, follow up management actions becomes non‐existent As an operational internal audit function with regular reporting is not implemented, follow up management actions becomes non‐existent •Grade DGrade D
Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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Pakistan Urban Forum ‐ Karachi January 10‐12, 2014
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