introduction to public finance management module 3.1 – special issues: payroll, procurement and it
TRANSCRIPT
INTRODUCTION TO PUBLIC FINANCE MANAGEMENT
Module 3.1 – Special issues: Payroll,
Procurement and IT.
Module map
• Fraud
• Corruption
Key Risks
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Payroll, Procurement and IT
• Payroll procedures, processes and risks
• Procurement methods and best practice
• Use of IT, challenges of large IT projects
Module Outline
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Payroll, Procurement and IT
• Payroll procedures, processes and risks
• Procurement methods and best practice
• Use of IT, challenges of large IT projects
Module Outline
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Payroll, Procurement and IT
Share of government spending
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% Payroll Goods & services
South Africa 35 28
Jamaica 32 21
Moldova 26 22
Payroll, Procurement and IT
• Effective control is achieved by segregation of three sets of data files:
• Personnel and payroll data is to be updated promptly & may be linked or one database
Payroll Management - 1
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Payroll procedures, processes and risks
funded posts - payroll
personnel database
Payroll Management - 2
• Personnel files are dynamic – starters, transfers, and terminations
• Restricted access to data, clear authorization
• Audit trails for all changes
• Controls over standing data on wage rates, taxation etc
• Payroll audits and checks undertaken regularly
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Payroll procedures, processes and risks
• Ministry of Establishments – controls the number and grades of posts and the personnel budget
• Public Service Commission – manages the appointment and promotion of staff (nominal roll)
Above two functions may be combined
• Central Payroll (Ministry ofFinance) – often decentralised
Personnel management
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Payroll procedures, processes and risks
• i) Degree of integration and reconciliation between personnel records and payroll data.
• (ii) Timeliness of changes to personnel records and the payroll
• (iii) Internal controls of changes to personnel records and the payroll.
• (iv) Existence of payroll audits to identify control weaknesses and/or ghost workers.
PEFA on Payroll
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Payroll procedures, processes and risks
• ActionAid study in 2006 showed that out of a sample of 41 countries with an IMF loan agreement, 18 had a ceiling on the wage bill
• largest group of public sector workers are teachers, the second largest are health workers
• “Wage bill ceilings have been used to protect macroeconomic stability and still may be needed in exceptional cases, but their use should become less frequent” (IMF Board 2007)
IMF public sector wage ceilings
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Payroll procedures, processes and risks
• Payroll procedures, processes and risks
• Procurement methods and best practice
• Use of IT, challenges of large IT projects
Module Outline
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Procurement is the process of:
• Identifying what is needed – procurement plan
• Determining who is the best person or company to supply this need – ordering/contracting
• Ensuring what is needed is delivered to the right place, at the right time, for the best price, and that all of this is done in a fair and open manner.
PROCUREMENT
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Procurement methods and best practice
Procurement Process
•procurement plan•specification/ bid documents
Procurement methods and best practice
• Standard list of suppliers• Written quotations• Formal tenders – pre-qualification
Exceptions:• Single source procurement
• Restricted tendering
Procurement approaches
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Procurement methods and best practice
• Integration of procurement into budget
• No initiation of procurement without available funds
• Segregation of duties.
• Transparency from the bidding stage to contract award (including bid prices)
• Effective Competition
Procurement management - 1
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Procurement methods and best practice
• Effective competition in the selection of the contractors:• Controls over contract slicing• Adequate advertising• Sealed bids• Tender specification of both compliance criteria as well as
evaluation criteria• Prompt evaluations• Adequate period for complaints/appeals after contract
award
Procurement management - 2
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Procurement methods and best practice
• Ministerial tender boards – letting contracts
• Central tender boards – letting larger contracts
• Public Procurement Authority – regulation, monitoring, complaints & training
• Central Purchasing Organisation
Institutional arrangements
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Procurement methods and best practice
• (i) Transparency, comprehensiveness and competition in the legal and regulatory framework.
• (ii) Use of competitive procurement methods. • (iii) Public access to complete, reliable and timely procurement
information. • (iv) Existence of an independent administrative procurement complaints
system.
PEFA on Procurement (PI 19)
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Procurement methods and best practice
Base-Line Indicators address four pillars :
• Existing legal framework that regulates procurement in the country
• Institutional architecture of the system
• Operation of the system and competitiveness of the national market
• Integrity of the procurement system.
OECD DAC – Methodology for Assessing Procurement Systems (MAPS)
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Procurement methods and best practice
Assessing Procurement Systems
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Procurement methods and best practice
• Payroll procedures, processes and risks
• Procurement methods and best practice
• Use of IT, challenges of large IT projects
Module Outline
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List your three key Advantages and disadvantages of IT
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Advantages disadvantages
Use of IT, challenges of large IT projects
We cannot move for computers!
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• Single integrated computer system for:
• all financial aspects: budgeting, general ledger, procurement payroll etc
• all governments: local, provincial and national
• May bring government into 21st century and facilitate other major changes, but:
• World Bank survey – only 21% successful; took seven years to complete and cost on average $12.3million
Integrated Financial Management Information System (IFMIS)
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Use of IT, challenges of large IT projects
Payables
Modules of an IFMIS
Purchasing
Receivables
General Ledger
Invoices/Payments
Revenue
tax & non-ta
x
Approved Budget Estimates
(e.g. MOH)
Fixed Assets
Comm
itmen
t
Contro
l
Cash & Debt Management
Reconciliation
Budget preparation
Salary payments
Payroll
Risks increase where:
• The project is more complex
• Capacity of local officials to critically assess all aspects of the project is limited
• The project is led or heavily influenced by external or foreign consultants
• Informed political support and the willingness to provide appropriate resources is not available
IFMIS can be a high risk approach to development
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Use of IT, challenges of large IT projects
• Payroll and procurement are risky areas for fraud and corruption
• Standard internal controls can reduce this
• International standards and guidance available
• Do not be seduced by IT – it is not always the answer
Key messages
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Use of IT, challenges of large IT projects