Tracking Progress and Controlling Funds Concepts Bill Dorotinsky
Tracking Progress and Controlling Funds: Concepts Bill Dorotinsky, PRMPS The World Bank Budget Execution Course April 8 -9, 2003
Post Budget Stages • Release of Authority to Spend or 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 The World Bank 2
Financial commitment stages • • Encumbrance/pre-commitment/reservation Commitment/obligation Receipt of goods and services Invoice Verification Paid Cashed/cleared The World Bank 3
Commitments, agency activity, and cash outflow: time lags The World Bank 4
Budget classifications • • • Administrative Economic/object class/’inputs’ Functional Program Fund Line Item • (NOTE: GFS – a statistical reporting system, not classification system or chart of accounts) The World Bank 5
Budget classification - program • Program/organizational objectives – Ministry of Health • • Children’s Health Women’s Health HIV/AIDS Vaccination The World Bank 6
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…. The World Bank 7
Budget classification - functional • Functional – Health – Education – Public Order and Safety – Defense – Foreign Affairs – ………… The World Bank 8
Budget classification - economic • Economic/object class/’inputs’ – Personnel/personal services • Salaries • Benefits – Non-personal services • • • Supplies Contracts Utilities Equipment Printing Travel – Capital The World Bank 9
Classification Matrices Payroll Utilities Rent Ministry 100 20 10 Program 20 4 2 Activity 0. 2 0. 1 1 Etc…. …… The World Bank 10
Dimensions of Control • Time – Control (allocations) versus – Reporting & monitoring • Detail – classification matrix • Policy – time, detail – Accountable to • Executive • Legislative • Civil society The World Bank 11
Control Approaches Ex ante Ex Poste (to commitment) • Centralized commitment control (transaction approval) (to spending • Allocations (commitment limits) unit) • Warrants (cash limits) • Procurement procedures • Personnel/pay rules • “continuous auditing” • Disbursement rules External Internal • Ministry or spending unit transaction approval • Procedures to minimize risk (internal controls) • Transparency The World Bank • Central internal audit • External audit • Regular reporting, management intervention • Quarterly close-outs • Cash rationing • Ministry internal audit • Performance management 12
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/flexible application of resources The World Bank 13
General Tensions The World Bank 14
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 The World Bank 15
To manage well requires: • Monitoring/managing – Cash balances – Cash flow • Inflow • outflow – – – Commitments Arrears Contingent liabilities New legislation/mandates Off-budget activity The World Bank 16
Core Functions - internal control - program management - spending (commitments) - recording & reporting - payment orders - verification of receipt of goods/services - program/cash plans Financial Management is Everyone’s Responsibility The World Bank 17
- Slides: 17