Artificial Intelligence in Philippine Local Governance: Challenges and Opport...
What is pfm df ppt aim v4 final
1. What is Public Financial
Management?
Reforms in Accounting, Auditing and Expenditure Management in the
Philippine Government
12 September 2014
Asian Institute of Management
2. What will we talk
about?
What is PFM?
Why are we doing it? (PEFA assessment)
What is the PFM Reform Roadmap?
PFM Reforms in Philippine Government
UACS, GIFMIS, PIB, TSA
PFM and Internal Controls
Budget Law
Moving forward: where we need to go
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3. Simple Definition of PFM
Public Financial Management (PFM) is the system
by which financial resources are planned, directed
and controlled to enable and influence the efficient
and effective delivery of public service goals.
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5. PFM Core Elements
PFM refers to how government addresses the performance of its
systems for:
budget preparation
budget execution and financial controls (including
procurement)
accounting and treasury management
financial and fiscal reporting
internal and external audit
debt management, and
other aspects related to the budgetary process
7. Benchmarks of a good PFM
• Credibility of the budget
• Comprehensiveness and
transparency
• Policy-based budgeting
• Predictability and control in budget
execution
• Accounting, recording and reporting
• External scrutiny and audit
8. Why are we doing it?
(PEFA assessment)
• Difficulty in fully assessing the government’s
ability to implement the budget given continuing
appropriations
• General weakness in reporting on budget
execution
• Delayed approval of GAA
• Lack of an information system capable of
capturing resource flows to service delivery units
on a timely basis
9. Why are we doing it?
(PEFA assessment)
• Limited role of Congress in budget
oversight and in reviewing/authorizing
in-year budget amendments
• Weak revenue administration, weak
monitoring and management of arrears
and weak oversight of contingent
liabilities and associated fiscal risks
• Weak financial accountability shown in
COA audit reports
10. Public Financial Management
Report Card
Indonesia Thailand Lao DPR Cambodia Vietnam
Philippines
2010 full 2014 rapid 2012 full 2009 full 2010 full 2011 full 2013 full
Selected PEFA Performance Indicators
PI 4 - Stock and Monitoring of Expenditure
Payment Arrears*
D+ D+ B+ A C+ C+ -
PI 5 - Classification of the Budget* D D A B C C D
PI 10 - Public Access to Key Fiscal
C B A B C C B
Information
PI 12 - Multi-Year Perspective in Fiscal
Planning, Expenditure Policy and
Budgeting*
D+ D+ C+ C D+ B C
PI 16 - Predictability in the Availability of
Funds for Commitment of Expenditure
D+ B C+ A B+ C+ B+
PI 22 - Timeliness and Regularity of
Accounts Reconciliation
D D B C+ C C B+
PI 24 - Quality and Timeliness of In-Year
Budget Reports
D D C+ B+ C+ C+ D+
Average Mark D D+ B B C C C
* Not included in the 2014 rapid assessment
11. Why do we need a sound PFM?
A working PFM system has three main objectives:
1. To ensure that our public spending is in line with available
resources;
2. Our allocation of resources to priority needs is effective, and
we can shift resources from poor to better performers; and
3. Our limited resources are used efficiently so that we can
achieve maximum value for money.
13. Where is the pressure coming from?
Greater expectations and rising aspirations of the people are placing
more demands on limited public resources.
People are also putting greater emphasis on transparency and
accountability, and greater value for money, thus making
effective, efficient and economic use of public resources
increasingly vital.
15. Who is responsible?
• Everyone in government has a role to play in
improving PFM in the Philippines.
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16. Who is responsible?
• PFM is the responsibility of all
public bodies and public employees
at all levels of government, whether it
is your department, or an elected
senator or congressman, or the smallest
of barangays.
• The leading actors in PFM reform in
the Philippines are the central
government agencies with
responsibility for the economy and
its financial aspects – DBM, DoF &
its bureaus, and COA, with NEDA and
OP as keen observers.
18. PFM Reform Roadmap
Master plan for modernizing the financial
management system of the government
Executive Order 55 (s. 2011) directs the
integration and automation of PFM systems
Improve efficiency, accountability and
transparency of public fund use
Contribute to good governance and fiscal
discipline as a strategy for inclusive growth
and poverty reduction
Jointly formulated and approved by fiscal
oversight agencies (COA, DBM, DOF-BTr)
from 2009 to 2011
For 2014 to 2016, updated roadmap design is
moving its focus from policy to
implementation
19. 19
PFM reforms support
Aquino Administration priorities
“Kung walang corrupt, walang mahirap”
Sector Goal Good Governance
Fiscal Discipline
5 Priority Areas
Societal Goal
PFM Goal
Inclusive Growth and Poverty Reduction
Anti-corruption/
Transparent,
Accountable &
Participatory
Governance
Poverty
Reduction
&
Empowerme
nt of the
Poor
Rapid,
Equitable
&
Sustained
Economic
Growth
Just,
Inclusive &
Lasting
Peace &
the Rule of
Law
Integrity of
the
Environment/
Climate
Change
Mitigation &
Adaptation
Improve efficiency, accountability and transparency of public fund
use to ensure direct, immediate and substantial delivery of public
services specially to the poor.
20. Creation of PFM Committee &
Governance Structure
Under EO 55, the Committee is tasked to:
Devise a 5-year plan for the development and installation of
the GIFMIS
Oversee the implementation of the PFM Reform Roadmap
Shepherd and champion the passage of supporting
legislation needed in Congress
Coordinate budgetary and donor funding
22. Reforms to PFM System
• UACS – Unified Accounts Code Structure
• GIFMIS – Government Integrated Financial Management Information System
• TSA – Treasury Single Account
• Budgeting – Outcomes vs. Outputs, Performance Informed Budgeting, Program
Budgeting
• Improvements to Internal Controls (of which Internal Audit is a component)
• Legal – improvements to the PFM legal and regulatory framework
24. The Unified Accounts Code Structure (UACS) is a government-wide
harmonized budgetary, treasury and accounting code classification structure
to enable timely and accurate financial and performance reporting.
As a coding framework for financial transactions, the UACS ensures:
that all government process from budgeting and cash management, to
accounting and audit—will follow a single classification system or
common language.
The new codes will make it easier to collect, aggregate, consolidate and
report financial transactions across government.
25.
26. The implementation of the UACS started
in 2013 with the preparation of the
FY2014 Budget using the Online
Submission of Budget Preparation
(OSBP).
To date, other PFM business processes and
systems are being reviewed to make these
UACS compliant.
28. Is an IT-based system for budget preparation, management, execution, accounting and
reporting.
It is designed to make use of modern information and communication technologies to
help the government to plan and use its financial resources more efficiently and
effectively.
Will make for easier data capture and organization of financial and performance
information that is accessible at one source, anytime and anywhere. The information
can then be used for analysis that will support policy decision-making.
Because it is considered the centerpiece of the PFM reforms, the GIFMIS provides a
strong foundation where other PFM initiatives can be anchored. It contributes to the
irreversibility of the PFM reform program because it will harmonize financial
procedures and processes across all government agencies, and institutionalize
financial management transparency.
29. GIFMIS Scope
29
Fiscal Simulation
(Macroeconomic
Forecasting)
Budget Preparation
Budget
Management
Accounting &
Fiscal Reporting
Debt Management
(ROSS, ADAPS & DMFAS)
HR Management
(GMIS/GHRIS)
Payments
Management
Payroll
Management
(NPS)
Receipts
Management
TSA
Operations at
Central Bank
(IT systems at
Central Bank)
Government
Servicing
Banks
(IT Systems
for recording
tax/revenue
collections)
Audit Mgmt
(IRRBAS)
Revenue Collections
(IT Systems at
BIR/BOC/NGAs)
Budget Execution
GIFMIS
Commitment
Management
Asset Management
Public Procurement
(PhilGEPS)
Cash Management
Commercial
Banks
(IT Systems
for recording
tax/revenue
collections)
Government Executive
Information
Management
(GEIS)
30. Changes with GIFMIS
• No more check or
cash payments
• Reduction of the
forms, documents,
signatures, stamps,
etc.
30
X
X
X
X
31. Economic Benefits
• Large interest savings due to the centralization of government
cash balances (such savings/costs can range from 0.1% to
0.7% of the public expenditures);
• More timely payments (total duration for the payment of
invoices and other expenses was reduced from 3 - 4 weeks,
to 1 - 3 days in most cases);
• Improved transparency, accountability and participation
(broader public access to budget and performance information
published from GIFMIS databases);
• Minimization of net borrowing costs, by both ensuring the
availability of cash and avoiding unnecessary idle cash
balances;
• Facilitates the central bank’s monetary policy task due to
lower volatility of the government’s cash balance;
• Possibility to target a low and stable TSA balance, which
should be remunerated; and
• To borrow only when needed. 31
32. The PIB is a budgeting approach that uses performance information to
assist in deciding where the Government’s funds will go.
Performance information—both financial and non-financial—are presented
in the appropriations document which provides the context for the
program, activities and projects pursued by the different agencies of the
government.
For budget preparations for FY 2015, the current PIB is further enhanced
with the shift to an outcome-based PIB.
The PIB differs from the traditional line item-based budgeting in that it
focuses more on outputs and outcomes and places less emphasis on the
inputs. It links funding to results, thus providing the framework for more
informed resource allocation and management.
33. PIB in FY2014
The introduction of
Performance Informed
Budgeting (PIB) in the
FY2014 budget cycle gave
the National Expenditure
Program and General
Appropriation Act (GAA) a
new face and stronger focus
– delivering results through
outputs and outcomes
towards improved public
service delivery
33
35. The TSA is a unified structure of government bank accounts that will consolidate and
optimize the use of Government cash resources.
An account maintained by the Bureau of the Treasury (BTr) and the Central Bank of the
Philippines, the TSA is an important initiative of the reform program that enables the
Government to consolidate cash resources on a daily basis and reduce borrowings that are
necessitated by perceived cash shortage arising from holding several bank accounts and a
fragmented system for handling receipts and payments.
To support the implementation of the TSA, a TSA Reporting and Monitoring System
(TRAMS) managed by the Land Bank of the Philippines was installed in January 2014.
The system provides the BTr up-to-date information on collections as well as reports
from the Bureau of Internal Revenue (BIR), the Bureau of Customs (BOC), and other
NGAs; tracks aggregate balances of the TSA on a daily basis; and supports Treasury cash
management activities.
36. Future Initiatives
• Future Enhancement of
TSA (2015)
– Possibility of including
LGU accounts, subject to
discussion with different
authorities
– Comprehensive study of
GOCC’s for inclusion
– BTr capacity building will
aid in improving the TSA
38. Rolling-Out Key PFM Reforms
Performance
Informed
Budgeting
Checkless
Payments
Expanded
MDPS
Treasury Single
Account
Government
Integrated Financial
Management System
In
2014:
Unified Account
Code Structure
GAA as
Release
Document
Towards:
Broader & Deeper Citizen’s
Engagement
(e.g. BPAs & Grassroots Budgeting)
39. Good Progress Achieved
Good progress achieved to date. Highlights
include:
UACS and
GIFMIS
revised
design
Chart of
completed;
Accounts
procurement
adopted
in process
TSA
designed
and
operationa
l for
revenue
Accounting and
audit standards
harmonised to
international
standards
Competency Framework designed
Substantial awareness-raising and training across all initiatives
39
Financial
reports
being
harmonise
d
40. PFM & Internal Controls
Can also be called Financial
Management & Internal Control
(FM&IC)
The system of FM&IC is the
responsibility of the head of the
Agency (PD 1445, AO 119-1989)
National Guidelines on Internal Control
Systems in place since 2008; Phil.
Govt. Internal Audit Manual 2011
COA invariably cites the lack, or
failure, of internal controls as a
reason for qualifying agency accounts
FM&IC not only refer to financial
transactions, but to all aspects of the
organization’s operations.
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41. Administrative Code
Book V, Subtitle B, Chapter 1, Sections 1&2
“All resources of the Government shall be managed,
expended or utilized in accordance with law and regulations
and safeguarded against loss or wastage through illegal or
improper disposition to ensure efficiency, economy and
effectiveness in the operations of Government.”
The responsibility to take care that such policy is
faithfully adhered to rests directly with the Chief or
Head of the Government Agency involved.
42. “Tone at the Top”
• Managerial Accountability is the
foundation for implementing a robust
financial management and internal
control system. • This is the expectation that senior managers across
government are responsible and accountable for:
Setting and meeting performance targets for their programmes
Controlling their costs
Mitigating adverse risks to their operations, and
Ensuring that programs are managed with integrity and in
compliance with applicable laws
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39
43. It allows us to….
• Stay focused on the department’s pursuit of its operations and
performance goals
• Operate within the confines of relevant laws (compliance), and
minimizing surprises (risk management) along the way.
• Enables the department to deal more effectively with
• changing economic and service environments,
• shifting priorities,
• leadership changes, and
• evolving practices.
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html?src=91R1W2/aN7zQnPiPeXBaiw-1-0
44. What does it mean in PRACTICE?
All managers in all government agencies
should be aware of their operational
objectives and should report on (a) their
achievement of these goals, and (b) on
their use of resources in achieving their
goals.
FM&IC is not limited to specialized
accounting or finance functions. It is a
comprehensive process that should be
integrated in the activities of each
government agency, and performed by
all management and staff of that
agency.
45. Components of FM&IC
There are 5 integrated components working together:
Risk Assessment – process for identifying and assessing risks to achieving objectives
Control Environment – set of standards, processes & structures
Control Activities – the actions established to mitigate risks and achieve objectives
Information & Communication – to deliver a clear message about internal control
activities
Monitoring Activities - e.g. Internal Audit, and other evaluation processes to provide
timely information
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47. What is Effective FM&IC?
• An effective system reduces - not
eliminates - the risk of not achieving the
agency’s objectives
• It provides reasonable assurance only - do
not look for perfect outcomes!!
• Each of the five components is present,
functioning and operating together
• For the design and implementation of the
IC system, judgment of its effectiveness
must be used within the boundaries of
regulations and standards.
48. Limitations of Internal Controls
• The system cannot prevent poor
decision making, bias or bad
judgment
• External events outside the
organization’s control can put a
policy off track
• Errors will occur – it’s called
human nature!
• Management can sometimes
override controls
• Even the best systems may not
detect collusion
49. The need for a Budget Framework Law
- There is a need to draft a framework or primary legislation
to provide the government with a legal basis for introducing
or reinforcing the various elements of FM&IC.
- Preparation of the primary and secondary legislation should
take place in Year 1. It is understood that it will take some
time to pass any laws through Congress, particularly as we
approach a presidential election year in 2016.
- However, a technical working group (TWG) can already be
identified and preparation of a draft PFM Law for
discussion can be completed by 2015.
50. What can the Budget Framework
Law do?
• Support a well functioning integrated management cycle for
public finances by:
- Establishing the fundamental requirements for the
integrated management cycle in the law
- Addressing issues in current laws
- Supporting the development of good PFM practices the
Philippines is developing or planning, in line with capacity
to implement changes
51. Planning, budgeting, management,
reporting and review
PROCESS OUTLINE
1
2
3
4
5
Cabinet sets fiscal
framework & policies by
approving Fiscal Strategy
Departments & agencies
propose realistic budgets
within spending limits,
provide annual plan for
delivering required
services, annual budget
prepared and adopted
Country leadership sets overall priorities
for government- development plans
Reporting,
monitoring, audit
review , sanctions
Departments, agencies
deliver services, perform
functions
52. Outline of Public Finance Framework
Law
52
Main parts Example Key Provisions
a. Congress including committees
b. President, Cabinet, Minister of Finance, Line Ministers
c. Permanent Secretaries, Boards, Councils, CEOs, CFO, Financial
officers
d. Special bodies e.g., planning bodies
e. Fiscal Councils or budget office
a. Fiscal principles/rules
b. Content and presentation of fiscal strategy
c. Deviations
d. Reporting
a. Unit of appropriation, reallocation, & carryover rules
b. Budget documentation
c. Procedures for budget preparation & approval
d. In year reporting, contingency reserve, supplementary & excess vote
a. Banking & cash management arrangements, collection, deposit of revenues
b. Issuance of loans, guarantees & sale of assets
c. Asset management
d. Internal audit
a. Coverage & standards for accounting
b. Timetable for preparation and submission of accounts
c. External audit of reports, performance audit, follow-up
I. Roles &
Responsibilities
II. Macro-Fiscal
Policy
III. Planning &
Budgeting
IV. Financial
Management
V. Accounting
& Audit
VI.
Oversight/entity
accountability
a. Local governments
b. State-owned enterprises
c. Extra-budgetary funds
d. Other bodies
Other parts preliminary, sanctions, transitional provisions, consequential amendments
53. Suggested draft contents for PF
Framework Law
• Preliminary
• Roles and responsibilities
• Fiscal policy and responsibility,
• Planning and budgeting
• Financial management
• Entity accountability
• Reporting, auditing, review
• Sanctions
• Final provisions: subsidiary legislation, transitional
arrangements, consequential amendments
54. What do the reforms mean
for the PFM workforce?
• Government changing = People changing
• People changing = Acquiring new
competencies
• Competencies more than task specific skills
• Learning to learn
55. PFM Capacity Building
PFM Competency
Framework
Awareness Briefings and
Consultations and Business Process
Reviews with Stakeholders
INPUT
LEARNING AND DEVELOPMENT
PROCESSES
Global
Better Practices
Reengineered
Business Processes
GIFMIS
Systems
Functional Users Training
• Reengineered Business
Processes
• GIFMIS Systems
IT Technical Users Training
• Reengineered Business
Processes
• GIFMIS System
Professional Development Courses
• Productivity Tools, Financial Analysis, Ethics
and Accountability,
PFM Competency Based Education
& Training leading to certification, diploma
or master’s degree in PFM
DESIRED
OUTPUT/OUTCOME
Informed and educated
PFM executives,
managers, employees,
public, CSO
stakeholders, etc.
Professional, competent
PFM workforce in
budgeting accounting,
internal audit, treasury
management, revenue
management, govt IT
audit, etc.
Transparent and
accountable PFM
systems, etc.
Monitoring and Evaluation
56. Moving forward: where we need to go
- There is a need to institutionalize the
reforms and ensure its sustainability and
irreversibility. It is important to ensure a
smooth transition process and get
government support to move to this
arrangement.
- While progress in embracing several of
the reform initiatives may be modestly
incremental, nonetheless, they are
anticipatory in nature. The full
transformative impact of the PFM
program is expected to be felt,
recognized, and appreciated beyond
2016.
57. To know more about PFM
reforms in Phil….
Like us on Facebook- Philippine Public
Financial Management
Follow us on Twitter- @PFMph
View us on You Tube
Visit our website www.pfm.gov.ph
Email: pmo@pfm.gov.ph
