Punjab Resource Management Program;Interventions in Finance Department Jean-Marc Lepain, Public Finance Specialist Crown Agents DFID – TAMA September 2010
Overall Strategy• To build on Phase 1 achievements• To build on the Strategic Vision already developed• To take a medium term view of what need to be achieved and to move forward that goal;• To aim at the maximum level of integration all the project components and deliverables• To consider systematically and in an integrated manner information flows, processes, systems and organization
Activities that need to be carried over• Implementation of SAP templates• Further developments and fine-tuning of the Revenue Forecasting Model;• Implementation of measures for the reduction of the number of supplementary grants;• SAP/R3 trainingIssues: How much technical assistance is neededfor these activities?
Reformulating Project Components and Areas of Intervention• Fiscal Sustainability and Resource Management• Budget Execution and Reporting• Organizational strengthening and capacity building
Objectives• To move in 3 to 5 years to a completely integrated suite of system and processes from MTBF to Debt Management• To move from fire fighting mode to proactive management of cash resources,• To improve budget credibility
Business Processes and Information FlowsFiscal Policy Revenue Forecasting CashManagement Cash Management Cash Management/ Borrowing Policy DebtManagement Debt Management Strategy
Revenue Forecasting• Must be disaggregated by month• Must integrate provincial revenues• Must be in line with the MTBF
Why Cash Management ?• To use cash management as the integrating factor of resource management;• To move from cash balance management to cash flow management to add predictability to budget execution;• To use cash management as a linking factor between fiscal policy and debt management through the borrowing policy;• To contribute to the smooth implementation of fiscal policy
StrategyCash Management must be developed in twophases:• Cash flow management based on budget, historical trends and data available from SAP/R3• Cash planning based on cash-plans prepared by line-departments (could be done on a pilot basis, or outside the project scope)
Deliverables• Annual cash plan prepared in advance of the fiscal year, setting out projected cash inflows and cash outflows month by month;• Three-month rolling projection revised month by month;• One month projection revised on a weekly basis including daily projection for the week.• Clear set of rules for prioritizing daily expenditures;• Linkage with commitment management.
Debt Management• Debt Management Strategy including strategy for managing overdraft;• System requirements• System implementation• Training
II. Internalization of the MTBFBudget Execution and Reporting
Two aspects of internalization • Downstream (after consolidation of sector MTBF) • Upstream (before consolidation of sector MTBF)
Down StreamMainly the responsibility of PGEIP• Introduction of sector ceilings• Fiscal Policy Paper• One single budget call circular• Porting the MTBF on SAP/R3 for reporting purpose
Upstream• Budget Execution Review Report (mid-year and end-of-the year) to detect misalignments and bottlenecks in previous budget;• Strengthening sector policy analysis including the development of ‘Sector Profile’ and ‘Sector Policy Review’ for benchmarking the sector MTBS and covering non-MTBF departments;• Checking credibility of sector MTBFs against Medium Term Development Plans and sector policies;• Using consolidation process of sector MTBFs for adjustments;• Using the MTBF for projecting different fiscal envelopes for new development schemes.• Drawing consequences of the introduction of new functions on the organizational structure and workflows.
Extension of SAP/R3 Reporting Capacity and internalization• A systematic gap analysis must be conducted to identify reporting limitations and negotiations must be started with PIFRA for customization;• Phase 1 templates must be implemented;• A clear IT strategy is required (SAP/R3 is not a budget preparation tool).
Commitment Management• Revision of the process for commitment management and commitment control appears necessary;• Role of SAP/R3 in commitment management must be expended;• Linkage with cash management must be established.
Disbursement Management• Introducing predictability• Streamlining control process while making them more efficient by integrating all stages of expenditure control;• Improving linkage with accounting, reporting, cash management through a better use of SAP/R3.