IFMIS assessment for investment lending projects Gert van der Linde AFTFM Fiduciary Forum 2008.

IFMIS assessment for investment lending projects

Gert van der LindeAFTFM

Fiduciary Forum 2008

The business of risk….

Transfer the risk…

Accept the risk

The business of risk….

Avoid the risk

Mitigate the impact

Reduce the risk…

Discussion outline Critical PFM dimensions PFM architecture and context Potential areas of difference Typical IFMIS configuration Key decisions to channel

investment lending projects through country PFM systems

IFMIS assessment issues Conclusion and discussion

Critical PFM dimensions (PEFA)

Credibility of the budget - The budget is realistic and is implemented as intended

Comprehensiveness and transparency - The budget and the fiscal risk oversight are comprehensive, and fiscal and budget information is accessible to the public.

Policy-based budgeting - The budget is prepared with due regard to government policy.

Predictability and control in budget execution - The budget is implemented in an orderly and predictable manner and there are arrangements for the exercise of control and stewardship in the use of public funds.

Accounting, recording and reporting – Adequate records and information are produced, maintained and disseminated to meet decision-making control, management and reporting purposes.

External scrutiny and audit - Arrangements for scrutiny of public finances and follow up by executive are operating.

ConsolidatedFund

Debt and Aid Management

CashManagement

Procurement/Purchasing

CommitmentManagement

Financial reporting

Budget Authorization

s

Budget Preparation

Policy Development and

Review

AssetManagement

Payments and Receipts

Payroll / HRManagement

Audit and Evaluation

PFM Architecture

PFM context Constitution normally requires all sources of

revenue to be deposited into the Consolidated Fund The use of all funds in the Consolidated Fund is

subject to the appropriation authority of Parliament, unless specifically excluded by an Act of Parliament

The government accounting system accounts (on a cash basis) for the use of funds as appropriated, as well as the financial position of the Consolidated Fund and additional information on financial assets and borrowings (“Public Accounts”)

Government controls and procurement rules apply The external audit system audits the ministerial

“appropriation accounts” and the “Public Accounts”, but also extends to other public entities and sources of funding

Potential areas of difference Budgeting

Projects (even though earmarked) to be included in annual budget for appropriation by Parliament

Accounting Earmarked project funding to be accounted for in

Government system Internal Controls

Government rules to apply, also for procurement Funds Flow

Projects subject to requirement to be channeled through the Consolidated Fund and government bank accounts

Financial Reporting Project revenue and expenditure to be included in

ministerial accounts and Public Accounts External audit

SAI responsible

MDAs / VotesTreasury single accountCentral databaseDecentralized data inputCentral processingGovernment staffGovernment rules & proceduresGovernment control systems

Other configurationsalso possible

Source: Treasury Reference Model

Key decisions to channel investmentlending projects through country PFM systems

1 Is project implementation the responsibility of an MDA who receives a vote in the annual Appropriation Act?

Ensure legal authority to exclude project funding from the Consolidated Fund and budget; ring-fence the funds flow, control systems, staffing, accounting and reporting arrangements for the project outside the country PFM system

NO

Key decisions to channel investmentlending projects through country PFM systems

Ring-fence outside of PFM system

2 Is co-mingling of project funds with Government funding acceptable to the Bank?

Is there a computerized (or manual) FM system that will effectively support the FM requirements of the project

Are the Government staff, rules, procedures, controls, documentation and audit trail acceptable to support project execution at a level of acceptable fiduciary risk?

B. Project on budget; integrated and complete use of the country IFMIS for funds flow, control systems, staffing, accounting and reporting arrangements; project reported in MDA financial statements

YesYes

Yes

No

No

No

Key decisions to channel investmentlending projects through country PFM systems

Ring-fence outside of PFM system

3 Co-mingling of funds not acceptable to the bank

Possible to set up a separate bank account, general ledger, cash book, etc. in the IFMIS, reporting project trans-actions reliably and timely using the most relevant accounting basis for the project?

Are the Government staff, rules, procedures, controls, documentation and audit trail acceptable to support project execution at a level of acceptable fiduciary risk?

C. Ensure legal authority to exclude project funding from the Consolidated Fund and budget, but use the Government’s IFMIS for ring-fenced funds flow, control systems, staffing, accounting and reporting arrangements

YesYes Yes

NoNo

IFMIS assessment issues No ring-fencing (MDA implement; funds can be

co-mingled) Does IFMIS effectively support the FM requirements of

the project? Are the Government staff, rules, procedures, controls,

documentation and audit trail acceptable to support project execution at a level of acceptable fiduciary risk?

Ring-fenced in IFMIS (MDA implement, but no co-mingling of funds)

Is it possible to set-up a separate bank account, general ledger, cash book , sub-ledgers for the project in the IFMIS?

Will IFMIS support reporting of financial transactions of the project reliably and timely using the most relevant accounting basis for the project?

Are the Government staff, rules, procedures, controls, documentation and audit trail acceptable to support project execution at a level of acceptable fiduciary risk?

No ring-fencing(MDA implement; funds can be co-mingled)

Does IFMIS effectively support the FM requirements of the project?

Project annual cash flow should be included in the appropriated budget – (i) Is this possible? (ii) Is the appropriated project funding safeguarded from virement procedures?

Is the project funding at risk of MoF not providing in-year authority to incur commitments or expenditure?

Is it possible to set-up a designated account for the project?

Can the project timely access cash in the government TSA or departmental bank account?

Accounting basis of MDA as supported by IFMIS acceptable for the project?

Timely and reliable in-year and annual MDA financial statements available?

Are the Government staff, rules, procedures, controls, documentation and audit trail acceptable to support project execution at a level of acceptable fiduciary risk?

Ring-fenced in IFMIS(MDA implement; no co-mingling of funds)

Is it possible to set-up a separate bank account, general ledger, cash book , sub-ledgers for the project in the IFMIS?

Can the IFMIS actually support budgeting and budget execution procedures appropriate for the project?

Is it possible to set-up a designated account for the project, also accounted for in the IFMIS?

Can the project timely access cash in the designated account and local currency account?

Can the IFMIS Chart of Accounts accommodate the information requirements of the project?

Will IFMIS support reporting of financial transactions of the project reliably and timely using the most relevant accounting basis for the project?

Are the Government staff, rules, procedures, controls, documentation and audit trail acceptable to support project execution at a level of acceptable fiduciary risk?

Conclusions In order to channel investment lending projects

substantially through country PFM systems- Project on budget and implementation to be

handled by MDA Bank position on co-mingling to be clear If not allowed: possibility to ring-fence project

within IFMIS to be assessed Are the Government staff, rules, procedures,

controls, documentation and audit trail as supported by IFMIS acceptable to support project execution at a level of acceptable fiduciary risk?

Thanks for your time!Questions?