Tracking Progress and Controlling Funds

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Tracking Progress and Controlling Funds

• Bill Dorotinsky, PRMPS
• Budget Execution Course
• January 16-17, 2003

2
Post Budget Stages

• Release of Funds
• Notification of budget
• Commitment authority issued (if done)
• Financial plans
• Warrants issued (cash draw)
• Cash transfer (if done)
• In-year modifications
• Transfer authority across accounts
• Virements across ministries
• Supplemental Budgets

3
Financial commitment stages

• Encumbrance/pre-commitment/reservation
• Commitment/obligation
• Receipt of goods and services
• Invoice
• Verification
• Paid
• Cashed/cleared

4
Commitments, agency activity, and cash outflow
time lags
5
Budget classifications

• Administrative
• Economic/object class/inputs
• Functional
• Program
• Fund
• Line Item

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Budget classification - program

• Program/organizational objectives
• Ministry of Health
• Childrens Health
• Womens Health
• HIV/AIDS
• Vaccination

7
Budget classification -administrative

• Organization/administrative
• Ministry of Culture
• Ministry of Health
• Ministry of Social Welfare
• Ministry of Defense
• Ministry of Justice
• Parliament/legislature
• Chancellory/Prime Minister.

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Budget classification - functional

• Functional
• Health
• Education
• Public Order and Safety
• Defense
• Foreign Affairs

9
Budget classification - economic

• Economic/object class/inputs
• Personnel/personal services
• Salaries
• Benefits
• Non-personal services
• Supplies
• Contracts
• Utilities
• Equipment
• Printing
• Travel
• Capital

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Classification Matrices
Payroll Utilities Rent Etc.
Ministry 100 20 10
Program 20 4 2
Activity 1 0.2 0.1

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Dimensions of Control

• Time
• Control (allocations) versus
• Reporting monitoring
• Detail classification matrix
• Policy time, detail
• Executive
• Legislative
• Civil society

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Control Approaches
Ex ante (to commitment) Ex Poste
External (to spending unit) Centralized commitment control (transaction approval) Allocations (commitment limits) Warrants (cash limits) Procurement procedures Personnel/pay rules continuous auditing Disbursement rules Central internal audit External audit Regular reporting, management intervention Quarterly close-outs Cash rationing
Internal Ministry or spending unit transaction approval Procedures to minimize risk (internal controls) Transparency Ministry internal audit Performance management
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Central control versus Managerial Flexibility

• Tensions between needs of center to
• Control cash flow
• Control policy
• And agency need to manage programs
• Larger, less detailed allocations
• Longer time horizon
• Greater transfer authority

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General Tensions
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Essentials of Good FM

• Timely, accurate in-year reporting
• Internal controls, audit
• External audit
• Sufficient detail to identify sources of
  overspending
• Sufficiently regular reporting to allow timely
  management intervention
• Comprehensive system
• Accountability framework, control environment

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To manage well requires

• Monitoring/managing
• Cash balances
• Cash flow
• Inflow
• outflow
• Commitments
• Arrears
• Contingent liabilities
• New legislation/mandates
• Off-budget activity

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Core Functions
Financial Management is Everyones Responsibility