Description
There is an increasing focus on improving the quality of public financial management around the globe, with many countries in both the developed and developing world making important and impressive achievements in strengthening public financial management and governance.
ACCOUNTANTS FOR BUSINESS
Improving public sector ?nancial
management in developing countries
and emerging economies
20
This paper explores how public fnancial
management can be improved and
capacity strengthened in developing
countries and emerging economies.
It explores common issues, lessons learnt
and efective practice through a number
of case studies where ACCA has worked
with a range of governments, regulators
and stakeholders to improve public
fnancial management.
It draws upon specifc case studies from
Botswana, Pakistan, Vietnam, Zambia and
Zimbabwe.
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© The Association of Chartered Certifed Accountants,
2010
1 IMPROVING PUBLIC SECTOR FINANCIAL MANAGEMENT
IN DEVELOPING COUNTRIES AND EMERGING ECONOMIES
Introduction
There is an increasing focus on improving the quality of
public fnancial management around the globe, with many
countries in both the developed and developing world
making important and impressive achievements in
strengthening public fnancial management and
governance.
Nonetheless, much still remains to be done. The public
sector landscape is rapidly changing with an increasing
emphasis on fscal management and discipline,
prioritisation of expenditure and value for money. As a
result it is even more important that international donors,
governments, national and local institutions, including
regulators and professional accountancy bodies, work
together in partnership to achieve long-lasting
improvements, transparency and accountability in public
fnancial management.
This paper explores how public fnancial management can
be improved and capacity strengthened in developing
countries and emerging economies. It explores common
issues, lessons learnt and efective practice through a
number of case studies where ACCA has worked with a
range of governments, regulators and stakeholders to
improve public fnancial management. It also draws upon
specifc case studies from Botswana, Pakistan, Vietnam,
Zambia and Zimbabwe.
2
1. Why strong ?nancial management is important
Public fnancial management is absolutely critical to
improving the quality of public service outcomes. It afects
how funding is used to address national and local
priorities, the availability of resources for investment and
the cost-efectiveness of public services. Also, it is more
than likely that the general public will have greater trust in
public sector organisations if there is strong fnancial
stewardship, accountability and transparency in the use of
public funds. It is important for governments to get it right
because it impacts on a broad range of areas including:
aggregate fnancial management – fscal sustainability, •
resource mobilisation and allocation
operational management – performance, value-for- •
money and budget management
governance – transparency and accountability •
fduciary risk management – controls, compliance and •
oversight.
1
In addition, efective public fnancial management is
important for decision making. Accurate fnancial
information is often used as the mechanism to support
decisions and ensure efective resource allocations.
Good fnancial management is
responsible for not only protecting,
developing, using resources,
pushing and maintaining economic
growth and increasing income, but
also managing efectively and
efciently all national resources.
DR DANG THANG, PRESIDENT VIETNAM ASSOCIATION
OF ACCOUNTANTS AND AUDITORS
1. Michael Parry, The Four Dimensions of Public Financial Management,
March 2010.
In July 2009, the International Federation of Accountants
(IFAC) G20 Summit in London and the World Bank
emphasised the need to develop and strengthen the
fnance profession in developing and emerging economies
to achieve stable and stronger fnancial management. At
an Eastern and South African Association of Accountants
General (ESAAG) conference in February 2009, the need
to develop a professionalisation project for the public
sector in Africa was identifed as urgent and vital. Donors
and lending institutions such as the World Bank,
International Monetary Fund (IMF), Department of
International Development UK (DFID), European
Commission (EC) and Cultural Industries Development
Agency UK (CIDA) continue to make funds available to
build fnancial management capacity and curriculum
development in fnancial training in a number of
developing countries and emerging economies.
Additionally, accountancy bodies and organisations such
as the International Organisation of Supreme Audit
Institutions (INTOSAI) work collectively to develop both
professional skills in fnance and audit capacity, as well as
disseminating best practice. Most recently, an accord was
signed in October 2009 between INTOSAI and the donor
community to ensure that there is a strategic approach for
strengthening and developing supreme audit institutions
(SAIs). The key goals for these combined institutions are to
build sustainable fnancial capacity in public services and
improve accountability and transparency in the use of
public funds.
3 IMPROVING PUBLIC SECTOR FINANCIAL MANAGEMENT
IN DEVELOPING COUNTRIES AND EMERGING ECONOMIES
Both the developed and developing countries continue to
struggle with the increasing complexities of public fnancial
management and the pace of change. Not least, fnance
professionals working within the public sector are
concerned with improving fnancial management and
budgeting, responding to changes in fnancial reporting,
securing better regulation, strengthening institutions,
improving risk management and governance, and
eradicating fraud and corruption.
In addition, the spotlight is currently on public fnancial
management as governments across the world
increasingly struggle with achieving fscal sustainability
and managing fscal risk. New and more sophisticated
models and tools will be required to help governments
deal with fscal management. Also, there will be more than
ever a focus on achieving efective resource allocation,
particularly, in resource constrained environments.
Governments will have to become smarter to ensure
budgets are efectively linked to policy objectives and value
for money is secured.
As well as the increasingly complex fnancial management
landscape, the problems of the lack of strong leadership
and political support, staf shortages, training and
retention, poor reward systems and the lack of a public
fnancial management infrastructure mean that the issues
are more acutely felt in developing countries and emerging
economies. For example, China is reported to have about
130,000 qualifed accountants in the public and private
sectors, fewer than half the estimated 300,000 it needs to
support improvements in fnancial reporting and corporate
governance and increase the rate of growth in China.
2
2.http://www.accountancyage.com/accountancyage/news/2138619/
shortage-accountants-hinders
2. Why improving public ?nancial management can be so dif?cult
In Botswana historically the wheel
of change wields its way very
slowly. It has taken 25 years to look
within itself and to evolve by re-
engineering its delivery of public
services and processes.
Governments are conservative in
nature and don’t want to or rather
do not have the capacity to
implement change robustly. Ideally
systems and processes once
implemented should be reviewed
every 3–5 years to test their
efectiveness, efciency, relevance
to the market and whether quality
service standards are still being
met.
MR LETSHOLO, SENIOR AUDITOR GENERAL, OFFICE
OF THE AUDITOR GENERAL, BOTSWANA
4
A key driver for the public fnancial
management programme was the
need to free the country from the
status of least developed country
(LDC) by 2020. The government’s
strategy identifed the direction of
development and poverty reduction
as well as stressing the importance
of building public fnancial
management at all levels to deliver
better services for the poor. The
objective of the programme was to
promote a public fnancial
management system to assure
transparency and accountability
through strengthening public
fnancial management and
capacity-building workforces.
DR BOUASY LOVANXAY (PRESIDENT, SAI LAOS)
3
3. Dr Bouasy Lovanxay (president, SAI Laos), Public Finance Reform for
Enhancing the Efectiveness of Public Expenditures and the Role of Supreme
Audit Institution Laos, 2009.
3. Key drivers for change
It is not surprising that the key drivers for improving public
fnancial management vary from country to country,
because of political, legal, social and economic diferences.
The fve case studies discussed in this paper reveal some
common drivers for change and illuminate ways of
improving public fnancial management.
Key drivers for change
Public sector fnancial management reforms lagged
behind those in the private sector
Skills defcit and retention issues
Losses and waste in the public sector
The need to improve accountability and transparency
over public spending for the general public and tax
payer
Weak resource allocation
Serious defciencies in fnancial data and budget
reporting
Accounting and auditing systems were antiquated
There was a need to comply with internationally
accepted accounting practice
The need to strengthen governance in a developing
country
The need to improve efciencies and efectiveness in
service delivery
The legislative framework was weak.
Improving public fnancial management is not without its
difculties. The complexity of the issues, presence of
multiple stakeholders and degree of political appetite for
change mean that multifaceted approaches are needed. A
government project for improving fnancial reporting and
auditing in Pakistan, outlined in case study 1, shows why
change was required and the difculties that had to be
addressed to improve public fnancial reporting and
auditing.
5 IMPROVING PUBLIC SECTOR FINANCIAL MANAGEMENT
IN DEVELOPING COUNTRIES AND EMERGING ECONOMIES
CASE STUDY 1:
KEY DRIVERS FOR IMPROVING FINANCIAL REPORTING
AND AUDITING IN THE DEPARTMENT OF THE AUDITOR
GENERAL OF PAKISTAN
In the early 1990s, as the government of Pakistan pursued
its agenda of privatisation of state-owned entities and
deregulation of the economy, the government realised that
although private sector banking and business reforms
were needed to attract foreign investors, there was also an
urgent need to initiate fnancial management and
governance reforms in the public sector. Government
recognised that the efcient use of public funds depended
on the availability of timely and relevant fnancial
management information and the adoption of
internationally accepted fnancial reporting, accounting
and auditing principles, best practices and standards.
The accounting and auditing system and procedures of
federal, provincial and district governments, controller
general accounts and those of the auditor general of
Pakistan were antiquated and required a complete
overhaul. Serious defciencies in fnancial data, systems
and staf skills resulted in unreliable planning, budgeting
and reporting and inefective internal controls. Cash, asset
and debt positions were unreliable, there were unknown
commitments/obligations, and pensions and depreciation
records were not kept up to date, causing uneven resource
allocation in spending. This led to weak governance and
accountability.
Whereas the issue for the Pakistan government was the
need to improve fnancial reporting and auditing systems,
the challenge for Zimbabwe was that of dealing with an
acute shortage of qualifed professionals working within
the public sector. Botswana also had very similar issues to
those in Zimbabwe. Although a relatively wealthy country,
Botswana’s public sector was challenged by its failure to
match the rewards ofered to professional staf by the
private sector. Its civil service was dominated by
expatriates, whereas the locals moved to ‘greener
pastures’ in the private sector. In the case of Zambia, there
was no specifc programme for the public sector but it is
now making steady progress on public fnance reforms.
Zambia’s Vision 2030 and 5th National Development Plan
set out a clear vision for wealth creation and poverty
reduction; improving public fnancial management is
pivotal to this reform.
6
Strong leadership and the support and political will of
national governments are vital to the success of any
change programme for strengthening public fnancial
management. There is no ‘quick fx’, as many of the
improvements may require legislative, structural and
cultural changes, which take a signifcant amount of time
to implement and embed. They also require organisations
to work together efectively at a strategic level so that
optimum use is made of resources, skills and capacity.
This section illustrates some of the practicalities of
improving fnancial management, and outlines helpful
models for understanding how public sector organisations
Table 1: Key challenges and ?ndings from the case studies
Challenges Findings from the case studies: Botswana, Pakistan, Vietnam, Zambia and Zimbabwe
Strengthening the systems,
processes and infrastructure for
public fnancial management
The basic elements to support public fnancial management are sometimes non-existent or weak. Concerted efort
is required by national and international institutions to put the basic building blocks in place.
Improving fnancial qualifcations Improving fnancial qualifcations is a priority for public sector organisations. It is generally resource intensive and
a balance has to be struck between funding targeted curriculum development and building capacity within the
profession.
Equal attention has to be given to developing the accounting technician qualifcation together with professional
qualifcations.
Developing skills that fulfl the
basic job requirement
There is an acute shortage of qualifed fnance professionals working within the public sector in developing and
emerging economies.
The public sector is perceived by potential students as less attractive and less well rewarded than the private
sector.
Basic technical skills are often absent and continuing professional development and support are often not well
developed. Students have reported that they were unsupported, as employers had no formal training structure and
very few resources.
Developing public sector
accountants/auditors for the future
Public sector bodies do not always appreciate the diference between professional and academic qualifcations,
and as a result a professionally qualifed accountant is not given appropriate recognition in the salary and benefts
system and is therefore less likely to stay within the public sector.
Developing accountants for the future requires a concerted and sustained efort by employers, donors and
professional bodies to work in partnership to build structures and professional accountancy capacity.
Once a change programme is successful, it is likely that other partners and donors will become involved to take it
further.
Improving cooperation between
national governments and local
and international institutions, eg
state audit institutions,
accountancy bodies, INTOSAI
The challenge is for key stakeholders such as national governments, SAIs, the donor community and accountancy
bodies to work together efectively. The case studies illustrate that where there has been efective collaboration it is
more likely that that there will be proven results.
Improving competences through
support and development
Continuing professional development and support were often absent or not well developed.
Employers had little in the way of structured continuing professional development (CDP) programmes that fulflled
both employer and individual development needs.
4. Criteria for success
have instituted better public fnancial management over
time. It also draws lessons from the case studies. Both the
models and case studies highlight that efective public
fnancial management reforms can only be achieved
through proper planning, being realistic and keeping the
approach simple.
KEY CHALLENGES
A review of the case studies highlights a number of key
challenges that developing countries and emerging
economies face for improving public fnancial
management. These are outlined in Table 1.
7 IMPROVING PUBLIC SECTOR FINANCIAL MANAGEMENT
IN DEVELOPING COUNTRIES AND EMERGING ECONOMIES
CASE STUDY 2
A CHANGE PROGRAMME AND ACTIONS FOR
IMPROVING FINANCIAL REPORTING AND AUDITING
FOR THE PAKISTAN GOVERNMENT
The Department of the Auditor General Pakistan set
itself an ambitious agenda to improve the transparency of
public sector accounting and auditing outputs. The
change programme outlined below and actions taken
have helped it to improve, but it is widely recognised that
much still needs to be achieved.
Taking stock
Following a survey in government accounting carried out
by the International Monetary Fund (IMF) and a diagnostic
study sponsored by the World Bank, a sponsored project
to improve fnancial reporting and auditing (PIFRA) was
introduced in 1994. Project partners included DFID, Asian
Development Bank and IMF.
The overall vision of PIFRA was to ensure transparency in
spending both government and donor developmental
funds and to make improvements in the accountability of
government revenue and expenditure, strengthen decision-
making and budgeting processes, and provide reliable
information to the public. Overall, PIFRA was intended to
improve public sector accountability and institutional
capacity for economic policymaking and management.
Setting direction and getting started
PIFRA’s aim was to enhance public sector efciency and
efectiveness by modernising accounting and reporting
systems in line with best practices and standards of reporting,
and replacing manual accounting and auditing systems
with a computerised system. The desired results were:
the production of reliable, relevant and useful accounts •
improvement of government audit procedures by •
adoption of internationally accepted auditing standards
strengthening of fnancial management practices, and •
implementation of a governance and legal framework •
for an independent and efective audit function and
internal controls.
PIFRA was divided into two stages – PIFRA I and PIFRA II.
The desired outputs of PIFRA I were new fnancial rules
and regulations, a new accounting model (NAM) and chart
of accounts, improved accounting and auditing skills,
decision-making support systems and accountability
frameworks.
PIFRA I had the following fve components.
Developing accounting standards, reporting systems •
and fnancial procedures.
Improving government auditing systems and standards. •
Developing human resource management, organisation •
and systems development.
Provision of professional-level training and •
strengthening professional and specialist skills.
Development of management information systems to •
support information technology requirements.
PIFRA II was a follow-on project focused on increasing the
accuracy, completeness, reliability, and timeliness of
intra-year and year-end government fnancial reports in
Pakistan at the national, provincial, and district levels.
PIFRA II objectives included the following.
Strengthening the government’s fnancial management •
policy and capacity, including the role and the reach of
the controller general accounts ofce, internal controls,
and accounting skills requirements across the board.
Modernising the auditor general’s ofce and •
communication and change management to promote
transparency and increase stakeholder awareness and
ownership.
Developing new-accounting-model based systems. •
Capacity building by restructuring the controller •
general accounts and district accounts ofces,
establishing internal controls, improving internal audit
and strengthening research and development.
8
Making it happen
A number of lessons were learnt from PIFRA I. At the end
of implementation, the department of the auditor general
concluded that, as improved public sector accounting and
fnancial systems enhanced public sector accountability
and supported improved institutional capacity for
economic policymaking and management, PIFRA II would
be rolled out. Whereas PIFRA I’s scope included the
development of manuals and system implementation at a
few selected sites, PIFRA II focused on comprehensive
implementation of the automated system.
Obtaining human resources for change management and
especially to enable the move from a manual to an
automated system required extensive capacity building,
communication and stakeholder engagement throughout.
Linkages between budget development, planning, treasury,
tax and debt management needed to be developed.
PIFRA II faced a number of challenges, the most important
being a heavy human resources commitment to build
capacity in accounting and auditing knowledge and skills.
The success of PIFRA II depended on the understanding of
the new system, adopting new ofce routines and
processes, and acquiring new professional skills and
competences. A need emerged for more accounting and
auditing specialists and for a major realignment in the
structure of their career paths.
Key achievements have included the following.
A government fnance system for accounting has been •
developed and implemented.
Financial statements of the government are now •
compliant with the international public sector
accounting standard (IPSAS) for the cash basis.
SAP has been implemented for budgeting and •
accounting at all tiers of government.
Preparation of annual fnancial statements which •
previously took about nine months after close of the
fnancial year are now prepared within three months.
A risk-based audit methodology complying with •
international standards has been developed and
implemented.
Computer assisted audit techniques (CAATs) software •
has been acquired and is being successfully used for
audit at federal, provincial and district levels.
A nationwide integrated audit management system is •
being implemented to facilitate top down control,
macro level planning and standardisation of work and
information management.
Timelines for submission of audit reports to the •
legislature has reduced from 33 to 13 months of the
close of the fnancial year and for the current audit year
audit reports will be submitted within 8 months of the
close of the fnancial year.
ACCA worked in partnership with, and provided support to,
the auditor general’s ofce. Since adding the controller of
general accounts and the auditor general’s ofce to the list
of ACCA approved employers in 2007, around 46 ACCA
members and trainees have supported the implementation
of the accounting and auditing components of PIFRA II.
ACCA members have also helped with the streamlining of
audit functions in government ministries and institutions
and have taken a leading role in project management.
Despite the onerous challenges of change management,
new technology, human resources skills and a knowledge
gap, PIFRA has raised awareness of the importance of
fnancial reporting and auditing in the public sector. The
scale of PIFRA has been enormous. Its complete success
depends upon sustained long-term eforts and developing
a culture of awareness of the importance of reliable
accounting records and of having auditing tools aligned to
best practices.
By making it possible to provide
accurate, complete and timely
fnancial reports, I believe PIFRA
has morphed into a symbol of
excellence in public fnancial
management.
MASUD MUZZAFAR, CONTROLLER GENERAL OF
ACCOUNTS
9 IMPROVING PUBLIC SECTOR FINANCIAL MANAGEMENT
IN DEVELOPING COUNTRIES AND EMERGING ECONOMIES
CASE STUDY 3
PUBLIC FINANCIAL MANAGEMENT REFORM IN ZAMBIA
Taking stock
In the case of Zambia there has been no specifc fnancial
improvement programme for the public sector. Historically,
the public sector has faced capacity constraints
compounded by inadequate information processes and
systems. In addition, non-compliance with internal controls
had led to poor predictability of government expenditure
and a lack of analytical capacity. Similar to other African
countries, the public sector has also struggled to attract
qualifed professional accountants to the sector.
Setting direction and getting started
The former president of Zambia laid key foundations for
public sector reform through its Vision 2030 strategy and
5th National Development Plan. The government’s National
Development Plan priorities included a commitment to
good governance and three levels of accountability:
political accountability, administrative accountability and
fnancial and budgetary accountability.
In relation to fnancial and budgetary accountability,
Zambia is making steady progress on public fnancial
management reforms. It has amended the Public Finance
Act over a number of years, strengthened accountability
and signifcantly contributed to re-defning structures and
the functions of key government ofces, such as the
minister of fnance and auditor general.
The public fnancial management reforms have been
supported by the donor community through various
reform initiatives such as ‘public expenditure management
and fnancial accountability’ (PEMFA), a World Bank
fnancial management reform programme for the public
sector.
Making it happen
Further reforms are underway including the revamping of
internal control functions. Audit committees in line with
ministries are being set up as a new requirement
enshrined in the Public Finance Act 2004. Most recently,
the minister of fnance announced the introduction of the
single national treasury account and the supporting legal
framework is being actioned. This is one of a number of
reforms set out by the National Constitution Commission
(NCC) which is currently reviewing the country’s
constitution. Other changes have included increased
training and support to existing fnance staf, as well as a
review of structures, roles and responsibilities.
10
CASE STUDY 4
CHANGING PERFORMANCE AUDIT IN VIETNAM
One of a number of challenges for the state audit of
Vietnam was the need to introduce step-by-step change
to performance audit.
Taking stock
Over the last few years it would appear that performance
audit was not of much concern for state audit, as claimed
in a paper ‘Innovation in Administering Public Expenditure
and the Role of State Audit Vietnam’. Financial and
compliance audit have been given the most prominence at
the expense of knowing the socio-economic impacts of
public expenditure allocations. In other words, despite
legal compliance, the audit does not show whether there
has been an improvement in public goods or basic
services. Performance audit has been identifed as one of
the greatest challenges to the state audit ofce of Vietnam.
Setting strategic direction
It is recognised that to improve the quality and
performance of auditing the following requirements need
to be met.
A switch in focus to output-orientated budgeting as •
opposed to input-based budgeting.
The creation of a database and of norms for monitoring •
and evaluating expenditure.
Building capacity to enable analysis and study of the •
impact of policy and resource allocations on
benefciaries.
Meeting these requirements will require step-by-step •
change.
11 IMPROVING PUBLIC SECTOR FINANCIAL MANAGEMENT
IN DEVELOPING COUNTRIES AND EMERGING ECONOMIES
CASE STUDY 5
DEALING WITH THE ISSUE OF A SHORTAGE OF
QUALIFIED PROFESSIONALS IN ZIMBABWE
In Zimbabwe the issue was an acute shortage of qualifed
professionals working within the public sector. This case
shows how a strong partnership approach can help in
addressing issues that some people would consider
insurmountable.
Taking stock
The issue for the Zimbabwean government was an acute
shortage of qualifed professionals within the public sector.
This needed to be urgently addressed.
Setting direction and getting started
To improve the numbers of accounting and auditing
specialists, ACCA has worked in partnership with the
Public Services Commission (PSC) and the auditor
general’s ofce to increase capacity and address the skills
shortage. The partnership helped to support the auditor
general’s ofce in recruiting, training and retaining
professional staf.
Making it happen
ACCA worked with its partners on ways of using quality
training as a recruitment and retention tool, improving the
conditions of service for fnance professionals and training
support, and on introducing a system of mentoring for
trainees.
As a result, professional qualifcations such as ACCA’s
certifed accounting technician’s qualifcation (CAT) and
the diploma in fnancial management (DipFM) were given
appropriate recognition within the civil service salary and
benefts reward system. For the frst time, fnance
professionals were included in the technical categories
together with other professionals such as engineers and
doctors. This provided individuals with an increased sense
of value and status.
As part of the change programme, the auditor general (AG)
became an approved employer with the capacity to train
auditors. Mentoring for trainees was provided by his
qualifed staf as well as by the external audit frms that
undertook subcontracted work. To ensure that there was
adequate breadth and depth in the coverage of the audit
competences, the trainees were seconded to external audit
frms and given an opportunity to be seconded to other
regional AG ofces. Both the employer and the students
were also supported with regular guidance.
Public sector-specifc continuing professional development
(CPD) events were arranged to deal with the unique
requirements of public sector accounting and auditing,
such as the need to demonstrate value for money (VFM).
Funding was provided from the AG as well as by donors,
who paid for expenses and exam fees. In 2009, the African
Development Bank (ADB) paid for a range for initiatives to
support 48 members and students from the AG’s ofce to
increase accountancy and auditing capacity.
Keeping on track
These changes have led to an increasingly professionalised
civil service in which accountancy students and members
are supported, and to an increase in the numbers of
professional accountants working in government,
particularly in the auditor general’s ofce. There is a
general sense that the civil service is turning a corner in
the recruitment and retention of professional accountants.
As a result, it is likely that more partners and donors will
be prepared to support similar capacity-building initiatives
within the public sector.
12
CASE STUDY 6
PUBLIC FINANCIAL MANAGEMENT AND CAPACITY
BUILDING WITHIN BOTSWANA
Botswana had very similar issues to Zimbabwe in relation
to staf retention and capacity building. A number of
specifc public fnancial management challenges were
also identifed by the ofce of the auditor general (OAG).
Taking stock
Although Botswana is a relatively wealthy country, its
public sector had the challenge of matching the rewards
ofered by the private sector. Its civil service was
dominated by expatriates while the locals moved to more
rewarding careers in the private sector. Also, it faced a
number of public fnancial management challenges. These
were identifed by the OAG as:
a need to update legislation supporting public fnancial •
management
a need to strengthen the capacity of the ofces of the •
auditor general and accountant general
a lack of controls in the new computerised accounting •
and budgeting systems
accounting processes and ledgers which were not kept •
up to date
an inadequate cash accounting system used by •
government ministries and local authorities.
Setting direction and getting started
There was a strong political drive by the government to
improve service delivery to the public in all levels of
government ministries and local authorities. Public sector
fnancial management reforms lagged behind those in the
private sector and public expectations of the quality of
public services were not met.
The government agreed that a re-engineering of
government service delivery and performance
management was necessary to create operational
efciencies and to achieve service delivery improvements.
This was driven by its ‘Vision 2016’, which includes
objectives for:
an educated and informed nation •
a prosperous, productive and innovative nation •
an open, democratic and accountable nation •
a moral and tolerant nation. •
Strategic outcomes were established in line with the
National Development Plan and an operational plan was
drawn up. Workshops were held across ministries to
develop a framework for an integrated results based
management approach. This was accompanied by an
overhaul of the organisational structure and competencies
to link with strategic outcomes and service delivery.
Making it happen
A signifcant investment was made by the government in
ensuring the necessary skills and competencies were put
in place to achieve the outcomes set in its operational
plan. A consolidated fund was utilised for training public
servants under the direction of the Ministry of Education.
The OAG had entered into an institutional capacity building
co-operation with the Swedish National Audit Ofce
(SNAO) and the African Organisation of Supreme Audit
Institutions (AFROSAI-E). This allowed the OAG to learn
from good practice and strengthen its core auditing
services. SNAO interventions were aimed at:
improving fnancial management audits •
improving performance audits •
assessing organisational efectiveness. •
In addition, ACCA, in partnership with the auditor general
(AG), worked on a plan similar to that followed in
Zimbabwe. The AG became a registered employer with the
capacity to train auditors. Mentoring for trainees was
provided by his qualifed expatriate staf as well as by the
external audit frms that undertook subcontracted work.
13 IMPROVING PUBLIC SECTOR FINANCIAL MANAGEMENT
IN DEVELOPING COUNTRIES AND EMERGING ECONOMIES
A practical experience requirement (PER) that was
specifcally tailored to their type of work and the level of
progression within the exams was developed in
partnership with the AG. This was based on the
competence matrix used by the Big Four audit frms. It was
followed through with in-house training and coaching of
both trainees and their supervisors on how to implement
PER. This included sample reviews of PER records and
discussions on the lessons learnt. As a result of these
initiatives trainees tended to stay with the employer for
longer periods as they appreciated the structured
approach to their professional development.
Overall progress has been made on the specifc public
fnancial management challenges. A new computerised
budgeting system has been successfully implemented
across all ministries, internal controls were strengthened
which has facilitated improved budget planning and
control of expenditure and performance tools have been
introduced. As well as revisions to the Finance and Audit
Act there was a directive by the Ministry of Finance to
build fnancial capacity and capability.
Some successes have also included, the establishment of a
corruption prevention committee (CPC) in each ministry to
monitor and review reports and fraud cases and a public
procurement and assets disposals board to review the
awarding of government tenders for public expenditure on
medical equipment and roads. Although signifcant
progress has been made the government and the OAG are
realistic about what still needs to be achieved in terms of
continuing to retain the quality of trained fnance
professionals within the public sector and build on the
reforms to date.
A FRAMEWORK FOR BETTER FINANCIAL MANAGEMENT
A number of models have been developed for helping
organisations to improve and assess how well their public
fnancial management functions are performing. We have
outlined three models and diagnostics which can assist in
improving public fnancial management. There are many
more, but in our view these are perhaps the most helpful
and have had proven results.
The Audit Commission model
This model, developed by the Audit Commission in England,
uses the metaphor of a journey, in which one starts at one
place and wants to arrive at another. The model identifes
fve key improvement phases: taking stock, getting started,
setting strategic direction, making it happen and keeping
on track. This allows one to gain a better understanding of
how organisations have improved public fnancial
management over time.
As refected in the case studies and this model, public
sector organisations seeking to improve fnancial
management share some similar characteristics. Quite
simply put, there are four elements that have been applied
to organisations that have successfully improved public
fnancial management. These are:
clarity of purpose and strategic direction •
efective political and managerial leadership •
the basic building blocks for achieving change •
driving and sustaining change. •
Public sector organisations can measure their progress
against these four elements when embarking on a change
programme, as outlined in a slightly adapted version of the
Audit Commission’s model.
This model is helpful for public sector organisations in
assessing whether they are at an early stage on their
improvement journey or have made signifcant progress. It is
not the only model for improving public fnancial management,
but arguably it is one of the most efective. The model can
be used to complement those instruments for measuring
success that donor institutions, governments, national
institutes and regulators already use. It is particularly useful
for taking a strategic overview, prioritising and ensuring that
the focus is clearly on the issues that need to be addressed.
14
Table 2: Assessing progress towards strong public ?nancial management
Taking
stock
Setting
direction
Getting
started
Making it
happen
Keeping
on track
Clarity of
purpose
and
strategic
direction
Identify the reason for
current problems, for
example, a weak
legislative framework and
policies for public
fnancial management;
lack of compliance with
international accounting
standards; poor fnancial
management; serious
budget defciencies,
losses and waste; lack of
fnancial skills and
capacity, etc.
Key players clarify the
direction, allocate
resources to priorities and
set milestones.
Place an emphasis on
creating the frameworks,
structure and culture of
strong fnancial
management.
Avoid getting distracted
by too many priorities.
Political
and
managerial
leadership
Key players such as the
government, donors,
national institutes and
regulators consider what
the response should be.
A change programme is
developed covering a
specifed period with risks
and resources aligned to
it.
Strong leadership is
required together with
good communication.
Early successes should be
publicised to send
positive messages to
organisations and donors.
Leaders are more
self-aware and refect on
lessons learnt to deliver
and improve on public
fnancial management.
Basic
building
blocks
Key players assess the
current state of public
fnancial management.
The emphasis should be
on addressing the major
areas of concern and
attending to the risks.
Invest in building up
capacity and skills to
deliver the project. Stop
peripheral activities and
projects that detract from
the change programme.
Implement strong
performance
management and
partnership working at a
strategic level.
Driving
and
sustaining
change
Key players assess the
capacity, build critical
mass and judge the likely
pace of improvement.
Make an early investment
in improving capacity and
skills, but with emphasis
on building momentum.
A stronger organisation
builds infrastructure,
systems and processes
for public fnancial
management.
Institute regular reviews to
learn and consolidate
improvement.
Adapted from: Audit Commission, Improvement Through Better Financial Management, 2004.
15 IMPROVING PUBLIC SECTOR FINANCIAL MANAGEMENT
IN DEVELOPING COUNTRIES AND EMERGING ECONOMIES
Public ?nancial management measurement framework model
A second model is the public fnancial management (PFM)
measurement framework developed by the Public
Expenditure and Financial Accountability secretariat
(PEFA), the World Bank and IMF. This performance
measurement framework is mainly focused on
governments, but can be applied to other parts of the
public sector. The model sets out high level performance
indicators which can be used to assess performance.
There are six critical dimensions to the model as set out
below.
The advantages of using this model to assess performance
on improving public fnancial management are that it:
enables an integrated assessment of performance of •
PFM systems
demonstrates progress in PFM performance over time •
enables regular, rigorous, evidence-based monitoring •
by domestic and international stakeholders
provides a common information pool on PFM •
performance.
Six critical
dimensions of
PFM system
performance
Budget credibility
Is the budget realistic, and implemented
as intended?
Comprehensiveness and transparency
Are the budget and the fscal risk
oversight comprehensive, and is fscal
and budget information accessible to
the public?
Policy-based budgeting
Is the budget prepared with due regard
to government policy?
Predictability and control in
budget execution
Is the budget implemented in a
predictable manner and are control and
stewardship exercised in the collection
and use of public funds?
Accounting, recording and reporting
Are adequate records and information
produced, maintained and disseminated
to meet decision-making, control,
management and reporting purposes?
External scrutiny and audit
Are there efective arrangements for
scrutiny of public fnances and follow up
by the executive?
Source: PEFA, Public fnancial management (PFM) measurement framework
16
Ten steps to success
A third useful framework for improving fnancial
management was developed by HM Treasury Financial
Skills Advisory Panel (UK), ‘Doing the business: embedding
fnancial management skills in government’ (2008). It
reviewed the workings of the government department
board, business and fnance functions across government
departments. It outlined ten steps to success which
provided government departments with a benchmark
against which to measure their own performance.
Start taking active steps to develop 8.
stronger leadership skills within your business’s
?nance function.
The CFO must have a wide range of skills
including the ability to lead and develop a
fnance function which meets business needs
and to support the building of fnancial
management skills and capacity elsewhere in
the organisation.
Keep it simple. 9.
The key to success is being able to get things
done. The role of fnance and sound fnancial
principles must be easily understood and the
benefts clearly defned. Finance needs to be
seen as part of the solution not part of the
problem.
Temper ambition with realism. Recognise 10.
that becoming world-class takes time.
Aspiring to world-class performance is
commendable. But for most organisations it
represents a very challenging target. What is
more this type of transformational change is as
much about creating a diferent climate,
changing behaviours and culture as it is about
changing systems and processes. It requires
concerted action and sustained commitment
over an extended period.
Source: HM Treasury Skills Advisory Panel,
Doing the Business: Embedding Financial Skills
in Government, 2008.
Act now to kick-start good ?nancial 1.
management skills in your organisation.
It is never too soon to start. Whatever the
current level of fnancial management skills and
awareness in the organisation there will be
potential – almost certainly huge potential – to
improve. The drive needs to start at the top: it is
critical the Permanent Secretary and
departmental board and all of its executive and
non-executive members, want good fnancial
management to be at the heart of the business,
and are committed to it and are consistent in
promoting and supporting its application.
Ensure ?nance is at the heart of developing 2.
your vision and business strategy.
Without this commitment the board not only
runs the risk of fawed planning and poor
decision making but failure to embed sound
fnancial principles into the management of the
business as a whole.
Start rolling out and embedding good 3.
?nancial management across your business
today.
The principles of sound fnancial management
must be integrated into the professional
development and performance management of
all managers. This can be tackled through a
variety of means including awareness-raising
and training and development.
Invest in people development and training 4.
needs analysis.
Diferent fnancial skills and levels of acumen
and awareness are required in diferent parts of
the organisation. Identify the distinctive fnancial
competencies needed in diferent areas of the
business from Non-Executive Directors to
non-fnancial managers, from the Policy Unit to
operational front-line delivery, and tailor training,
development and support to address them.
Remember the importance of communication 5.
and engagement skills.
This is about a step change in the quality of
engagement between fnance and non-fnance
professionals. It includes skills in relationship
building, communication, listening and
infuencing.
Keep it fresh and current. 6.
This means regularly reviewing the skills and
competencies needed by and available to the
business. It means looking over the horizon to
anticipate tomorrow’s needs and planning (and
succession planning) to meet them. It means
scanning for new ideas and for better practice
and performance and using these resources to
improve the department.
Reward and celebrate good ?nancial 7.
management; tackle poor ?nancial management.
To attract and retain the best talent, government
will need to rethink its strategy in relation to pay
and conditions. It will need to ensure that senior
managers’ rewards refect in an appropriate way
their fnancial management skills and
performance. Equally importantly, managers
who perform poorly in this area by, for example,
failing to consider the fnancial implications of
diferent policy options, should be made aware
of their failings and of the imperative to remedy
their shortcomings in the future.
By following the ten steps to success it is hoped that
government departments in the UK will operate and do
business in a more efective way. A government
department board will have a stronger grip on the
business and will be more equipped to drive the change
agenda. Management will have a clear of view of what it
needs to deliver and the chief fnance ofcer and his
fnance team will be better placed to focus on delivering
value for money. Above all, the fnance department will be
fully engaged with the business at all levels and deliver the
best possible outputs and outcomes.
17 IMPROVING PUBLIC SECTOR FINANCIAL MANAGEMENT
IN DEVELOPING COUNTRIES AND EMERGING ECONOMIES
It is hoped that this paper has given an insight into the
scale and complexities of public fnancial management
issues that often need to be addressed in developing
countries and emerging economies. More importantly, it
has shown how some issues have been successfully
overcome and the lessons learnt and it provides useful
guidance for helping organisations to improve public
fnancial management. Key lessons learnt include the need
to be realistic about what can be achieved, and to set
priorities and time scales. Sustainable public fnancial
management requires strong leadership, a long-term
commitment and momentum, efective partnership
working and strong project management. There will be
some early successes and it is important that these are
communicated to facilitate long-lasting process and
cultural change for sustainable public fnancial
management.
As highlighted in this paper, ACCA is committed to working
in partnership with governments, accountancy bodies,
regulators and the donor community to help improve
public fnancial management in developing and emerging
economies.
To fnd out more about our work please contact
Gillian Fawcett, head of public sector.
[email protected]
5. Conclusion and lessons learnt
Useful signposts
Audit Commission, ‘Improvement through better
fnancial management’, 2004, .
Audit Commission, ‘Use of resources key lines of
enquiry’, 2009, .
DFID, A Platform to Improving Public Financial
Management, 2005, .
HM Treasury Financial Skills Advisory Panel, Doing
the Business: Embedding Financial Management
Skills in Government, 2008, .
Public Expenditure and Accountability (PEFA), Public
Financial Management; Performance Measurement
Framework, 2006, .
ACKNOWLEDGEMENTS
We would like to thank Afra Sajjad (ACCA), Daisy
Kopolo (ACCA), Hannah Jones (ACCA), Mukaba
Mukaba (ACCA), the Auditor General’s Ofce
Pakistan, the Auditor General’s Ofce Botswana and
Members of ACCA’s International Public Sector
Committee for their contributions.
TECH-AFB-IPSFM
ACCA 29 Lincoln’s Inn Fields London WC2A 3EE United Kingdom / tel: +44 (0)20 7059 5000 / www.accaglobal.com
doc_199207935.pdf
There is an increasing focus on improving the quality of public financial management around the globe, with many countries in both the developed and developing world making important and impressive achievements in strengthening public financial management and governance.
ACCOUNTANTS FOR BUSINESS
Improving public sector ?nancial
management in developing countries
and emerging economies
20
This paper explores how public fnancial
management can be improved and
capacity strengthened in developing
countries and emerging economies.
It explores common issues, lessons learnt
and efective practice through a number
of case studies where ACCA has worked
with a range of governments, regulators
and stakeholders to improve public
fnancial management.
It draws upon specifc case studies from
Botswana, Pakistan, Vietnam, Zambia and
Zimbabwe.
ABOUT ACCA
ACCA (the Association of Chartered Certifed
Accountants) is the global body for professional
accountants. We aim to ofer business-relevant,
frst-choice qualifcations to people of application,
ability and ambition around the world who seek a
rewarding career in accountancy, fnance and
management.
Founded in 1904, ACCA has consistently held unique
core values: opportunity, diversity, innovation, integrity
and accountability. We believe that accountants bring
value to economies at all stages of their development.
We seek to develop capacity in the profession and
encourage the adoption of global standards. Our
values are aligned to the needs of employers in all
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we prepare accountants for business. We seek to open
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students in 170 countries, helping them to develop
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high standards of employee learning and development.
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appropriate regulation of accounting and conduct
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grow in reputation and infuence.
ABOUT ACCOUNTANTS FOR BUSINESS
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champions the role of fnance professionals in all
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Through people, process and professionalism,
accountants are central to great performance. They
shape business strategy through a deep understanding
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term success. By focusing on the critical role
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www.accaglobal.com/accountants_business
© The Association of Chartered Certifed Accountants,
2010
1 IMPROVING PUBLIC SECTOR FINANCIAL MANAGEMENT
IN DEVELOPING COUNTRIES AND EMERGING ECONOMIES
Introduction
There is an increasing focus on improving the quality of
public fnancial management around the globe, with many
countries in both the developed and developing world
making important and impressive achievements in
strengthening public fnancial management and
governance.
Nonetheless, much still remains to be done. The public
sector landscape is rapidly changing with an increasing
emphasis on fscal management and discipline,
prioritisation of expenditure and value for money. As a
result it is even more important that international donors,
governments, national and local institutions, including
regulators and professional accountancy bodies, work
together in partnership to achieve long-lasting
improvements, transparency and accountability in public
fnancial management.
This paper explores how public fnancial management can
be improved and capacity strengthened in developing
countries and emerging economies. It explores common
issues, lessons learnt and efective practice through a
number of case studies where ACCA has worked with a
range of governments, regulators and stakeholders to
improve public fnancial management. It also draws upon
specifc case studies from Botswana, Pakistan, Vietnam,
Zambia and Zimbabwe.
2
1. Why strong ?nancial management is important
Public fnancial management is absolutely critical to
improving the quality of public service outcomes. It afects
how funding is used to address national and local
priorities, the availability of resources for investment and
the cost-efectiveness of public services. Also, it is more
than likely that the general public will have greater trust in
public sector organisations if there is strong fnancial
stewardship, accountability and transparency in the use of
public funds. It is important for governments to get it right
because it impacts on a broad range of areas including:
aggregate fnancial management – fscal sustainability, •
resource mobilisation and allocation
operational management – performance, value-for- •
money and budget management
governance – transparency and accountability •
fduciary risk management – controls, compliance and •
oversight.
1
In addition, efective public fnancial management is
important for decision making. Accurate fnancial
information is often used as the mechanism to support
decisions and ensure efective resource allocations.
Good fnancial management is
responsible for not only protecting,
developing, using resources,
pushing and maintaining economic
growth and increasing income, but
also managing efectively and
efciently all national resources.
DR DANG THANG, PRESIDENT VIETNAM ASSOCIATION
OF ACCOUNTANTS AND AUDITORS
1. Michael Parry, The Four Dimensions of Public Financial Management,
March 2010.
In July 2009, the International Federation of Accountants
(IFAC) G20 Summit in London and the World Bank
emphasised the need to develop and strengthen the
fnance profession in developing and emerging economies
to achieve stable and stronger fnancial management. At
an Eastern and South African Association of Accountants
General (ESAAG) conference in February 2009, the need
to develop a professionalisation project for the public
sector in Africa was identifed as urgent and vital. Donors
and lending institutions such as the World Bank,
International Monetary Fund (IMF), Department of
International Development UK (DFID), European
Commission (EC) and Cultural Industries Development
Agency UK (CIDA) continue to make funds available to
build fnancial management capacity and curriculum
development in fnancial training in a number of
developing countries and emerging economies.
Additionally, accountancy bodies and organisations such
as the International Organisation of Supreme Audit
Institutions (INTOSAI) work collectively to develop both
professional skills in fnance and audit capacity, as well as
disseminating best practice. Most recently, an accord was
signed in October 2009 between INTOSAI and the donor
community to ensure that there is a strategic approach for
strengthening and developing supreme audit institutions
(SAIs). The key goals for these combined institutions are to
build sustainable fnancial capacity in public services and
improve accountability and transparency in the use of
public funds.
3 IMPROVING PUBLIC SECTOR FINANCIAL MANAGEMENT
IN DEVELOPING COUNTRIES AND EMERGING ECONOMIES
Both the developed and developing countries continue to
struggle with the increasing complexities of public fnancial
management and the pace of change. Not least, fnance
professionals working within the public sector are
concerned with improving fnancial management and
budgeting, responding to changes in fnancial reporting,
securing better regulation, strengthening institutions,
improving risk management and governance, and
eradicating fraud and corruption.
In addition, the spotlight is currently on public fnancial
management as governments across the world
increasingly struggle with achieving fscal sustainability
and managing fscal risk. New and more sophisticated
models and tools will be required to help governments
deal with fscal management. Also, there will be more than
ever a focus on achieving efective resource allocation,
particularly, in resource constrained environments.
Governments will have to become smarter to ensure
budgets are efectively linked to policy objectives and value
for money is secured.
As well as the increasingly complex fnancial management
landscape, the problems of the lack of strong leadership
and political support, staf shortages, training and
retention, poor reward systems and the lack of a public
fnancial management infrastructure mean that the issues
are more acutely felt in developing countries and emerging
economies. For example, China is reported to have about
130,000 qualifed accountants in the public and private
sectors, fewer than half the estimated 300,000 it needs to
support improvements in fnancial reporting and corporate
governance and increase the rate of growth in China.
2
2.http://www.accountancyage.com/accountancyage/news/2138619/
shortage-accountants-hinders
2. Why improving public ?nancial management can be so dif?cult
In Botswana historically the wheel
of change wields its way very
slowly. It has taken 25 years to look
within itself and to evolve by re-
engineering its delivery of public
services and processes.
Governments are conservative in
nature and don’t want to or rather
do not have the capacity to
implement change robustly. Ideally
systems and processes once
implemented should be reviewed
every 3–5 years to test their
efectiveness, efciency, relevance
to the market and whether quality
service standards are still being
met.
MR LETSHOLO, SENIOR AUDITOR GENERAL, OFFICE
OF THE AUDITOR GENERAL, BOTSWANA
4
A key driver for the public fnancial
management programme was the
need to free the country from the
status of least developed country
(LDC) by 2020. The government’s
strategy identifed the direction of
development and poverty reduction
as well as stressing the importance
of building public fnancial
management at all levels to deliver
better services for the poor. The
objective of the programme was to
promote a public fnancial
management system to assure
transparency and accountability
through strengthening public
fnancial management and
capacity-building workforces.
DR BOUASY LOVANXAY (PRESIDENT, SAI LAOS)
3
3. Dr Bouasy Lovanxay (president, SAI Laos), Public Finance Reform for
Enhancing the Efectiveness of Public Expenditures and the Role of Supreme
Audit Institution Laos, 2009.
3. Key drivers for change
It is not surprising that the key drivers for improving public
fnancial management vary from country to country,
because of political, legal, social and economic diferences.
The fve case studies discussed in this paper reveal some
common drivers for change and illuminate ways of
improving public fnancial management.
Key drivers for change
Public sector fnancial management reforms lagged
behind those in the private sector
Skills defcit and retention issues
Losses and waste in the public sector
The need to improve accountability and transparency
over public spending for the general public and tax
payer
Weak resource allocation
Serious defciencies in fnancial data and budget
reporting
Accounting and auditing systems were antiquated
There was a need to comply with internationally
accepted accounting practice
The need to strengthen governance in a developing
country
The need to improve efciencies and efectiveness in
service delivery
The legislative framework was weak.
Improving public fnancial management is not without its
difculties. The complexity of the issues, presence of
multiple stakeholders and degree of political appetite for
change mean that multifaceted approaches are needed. A
government project for improving fnancial reporting and
auditing in Pakistan, outlined in case study 1, shows why
change was required and the difculties that had to be
addressed to improve public fnancial reporting and
auditing.
5 IMPROVING PUBLIC SECTOR FINANCIAL MANAGEMENT
IN DEVELOPING COUNTRIES AND EMERGING ECONOMIES
CASE STUDY 1:
KEY DRIVERS FOR IMPROVING FINANCIAL REPORTING
AND AUDITING IN THE DEPARTMENT OF THE AUDITOR
GENERAL OF PAKISTAN
In the early 1990s, as the government of Pakistan pursued
its agenda of privatisation of state-owned entities and
deregulation of the economy, the government realised that
although private sector banking and business reforms
were needed to attract foreign investors, there was also an
urgent need to initiate fnancial management and
governance reforms in the public sector. Government
recognised that the efcient use of public funds depended
on the availability of timely and relevant fnancial
management information and the adoption of
internationally accepted fnancial reporting, accounting
and auditing principles, best practices and standards.
The accounting and auditing system and procedures of
federal, provincial and district governments, controller
general accounts and those of the auditor general of
Pakistan were antiquated and required a complete
overhaul. Serious defciencies in fnancial data, systems
and staf skills resulted in unreliable planning, budgeting
and reporting and inefective internal controls. Cash, asset
and debt positions were unreliable, there were unknown
commitments/obligations, and pensions and depreciation
records were not kept up to date, causing uneven resource
allocation in spending. This led to weak governance and
accountability.
Whereas the issue for the Pakistan government was the
need to improve fnancial reporting and auditing systems,
the challenge for Zimbabwe was that of dealing with an
acute shortage of qualifed professionals working within
the public sector. Botswana also had very similar issues to
those in Zimbabwe. Although a relatively wealthy country,
Botswana’s public sector was challenged by its failure to
match the rewards ofered to professional staf by the
private sector. Its civil service was dominated by
expatriates, whereas the locals moved to ‘greener
pastures’ in the private sector. In the case of Zambia, there
was no specifc programme for the public sector but it is
now making steady progress on public fnance reforms.
Zambia’s Vision 2030 and 5th National Development Plan
set out a clear vision for wealth creation and poverty
reduction; improving public fnancial management is
pivotal to this reform.
6
Strong leadership and the support and political will of
national governments are vital to the success of any
change programme for strengthening public fnancial
management. There is no ‘quick fx’, as many of the
improvements may require legislative, structural and
cultural changes, which take a signifcant amount of time
to implement and embed. They also require organisations
to work together efectively at a strategic level so that
optimum use is made of resources, skills and capacity.
This section illustrates some of the practicalities of
improving fnancial management, and outlines helpful
models for understanding how public sector organisations
Table 1: Key challenges and ?ndings from the case studies
Challenges Findings from the case studies: Botswana, Pakistan, Vietnam, Zambia and Zimbabwe
Strengthening the systems,
processes and infrastructure for
public fnancial management
The basic elements to support public fnancial management are sometimes non-existent or weak. Concerted efort
is required by national and international institutions to put the basic building blocks in place.
Improving fnancial qualifcations Improving fnancial qualifcations is a priority for public sector organisations. It is generally resource intensive and
a balance has to be struck between funding targeted curriculum development and building capacity within the
profession.
Equal attention has to be given to developing the accounting technician qualifcation together with professional
qualifcations.
Developing skills that fulfl the
basic job requirement
There is an acute shortage of qualifed fnance professionals working within the public sector in developing and
emerging economies.
The public sector is perceived by potential students as less attractive and less well rewarded than the private
sector.
Basic technical skills are often absent and continuing professional development and support are often not well
developed. Students have reported that they were unsupported, as employers had no formal training structure and
very few resources.
Developing public sector
accountants/auditors for the future
Public sector bodies do not always appreciate the diference between professional and academic qualifcations,
and as a result a professionally qualifed accountant is not given appropriate recognition in the salary and benefts
system and is therefore less likely to stay within the public sector.
Developing accountants for the future requires a concerted and sustained efort by employers, donors and
professional bodies to work in partnership to build structures and professional accountancy capacity.
Once a change programme is successful, it is likely that other partners and donors will become involved to take it
further.
Improving cooperation between
national governments and local
and international institutions, eg
state audit institutions,
accountancy bodies, INTOSAI
The challenge is for key stakeholders such as national governments, SAIs, the donor community and accountancy
bodies to work together efectively. The case studies illustrate that where there has been efective collaboration it is
more likely that that there will be proven results.
Improving competences through
support and development
Continuing professional development and support were often absent or not well developed.
Employers had little in the way of structured continuing professional development (CDP) programmes that fulflled
both employer and individual development needs.
4. Criteria for success
have instituted better public fnancial management over
time. It also draws lessons from the case studies. Both the
models and case studies highlight that efective public
fnancial management reforms can only be achieved
through proper planning, being realistic and keeping the
approach simple.
KEY CHALLENGES
A review of the case studies highlights a number of key
challenges that developing countries and emerging
economies face for improving public fnancial
management. These are outlined in Table 1.
7 IMPROVING PUBLIC SECTOR FINANCIAL MANAGEMENT
IN DEVELOPING COUNTRIES AND EMERGING ECONOMIES
CASE STUDY 2
A CHANGE PROGRAMME AND ACTIONS FOR
IMPROVING FINANCIAL REPORTING AND AUDITING
FOR THE PAKISTAN GOVERNMENT
The Department of the Auditor General Pakistan set
itself an ambitious agenda to improve the transparency of
public sector accounting and auditing outputs. The
change programme outlined below and actions taken
have helped it to improve, but it is widely recognised that
much still needs to be achieved.
Taking stock
Following a survey in government accounting carried out
by the International Monetary Fund (IMF) and a diagnostic
study sponsored by the World Bank, a sponsored project
to improve fnancial reporting and auditing (PIFRA) was
introduced in 1994. Project partners included DFID, Asian
Development Bank and IMF.
The overall vision of PIFRA was to ensure transparency in
spending both government and donor developmental
funds and to make improvements in the accountability of
government revenue and expenditure, strengthen decision-
making and budgeting processes, and provide reliable
information to the public. Overall, PIFRA was intended to
improve public sector accountability and institutional
capacity for economic policymaking and management.
Setting direction and getting started
PIFRA’s aim was to enhance public sector efciency and
efectiveness by modernising accounting and reporting
systems in line with best practices and standards of reporting,
and replacing manual accounting and auditing systems
with a computerised system. The desired results were:
the production of reliable, relevant and useful accounts •
improvement of government audit procedures by •
adoption of internationally accepted auditing standards
strengthening of fnancial management practices, and •
implementation of a governance and legal framework •
for an independent and efective audit function and
internal controls.
PIFRA was divided into two stages – PIFRA I and PIFRA II.
The desired outputs of PIFRA I were new fnancial rules
and regulations, a new accounting model (NAM) and chart
of accounts, improved accounting and auditing skills,
decision-making support systems and accountability
frameworks.
PIFRA I had the following fve components.
Developing accounting standards, reporting systems •
and fnancial procedures.
Improving government auditing systems and standards. •
Developing human resource management, organisation •
and systems development.
Provision of professional-level training and •
strengthening professional and specialist skills.
Development of management information systems to •
support information technology requirements.
PIFRA II was a follow-on project focused on increasing the
accuracy, completeness, reliability, and timeliness of
intra-year and year-end government fnancial reports in
Pakistan at the national, provincial, and district levels.
PIFRA II objectives included the following.
Strengthening the government’s fnancial management •
policy and capacity, including the role and the reach of
the controller general accounts ofce, internal controls,
and accounting skills requirements across the board.
Modernising the auditor general’s ofce and •
communication and change management to promote
transparency and increase stakeholder awareness and
ownership.
Developing new-accounting-model based systems. •
Capacity building by restructuring the controller •
general accounts and district accounts ofces,
establishing internal controls, improving internal audit
and strengthening research and development.
8
Making it happen
A number of lessons were learnt from PIFRA I. At the end
of implementation, the department of the auditor general
concluded that, as improved public sector accounting and
fnancial systems enhanced public sector accountability
and supported improved institutional capacity for
economic policymaking and management, PIFRA II would
be rolled out. Whereas PIFRA I’s scope included the
development of manuals and system implementation at a
few selected sites, PIFRA II focused on comprehensive
implementation of the automated system.
Obtaining human resources for change management and
especially to enable the move from a manual to an
automated system required extensive capacity building,
communication and stakeholder engagement throughout.
Linkages between budget development, planning, treasury,
tax and debt management needed to be developed.
PIFRA II faced a number of challenges, the most important
being a heavy human resources commitment to build
capacity in accounting and auditing knowledge and skills.
The success of PIFRA II depended on the understanding of
the new system, adopting new ofce routines and
processes, and acquiring new professional skills and
competences. A need emerged for more accounting and
auditing specialists and for a major realignment in the
structure of their career paths.
Key achievements have included the following.
A government fnance system for accounting has been •
developed and implemented.
Financial statements of the government are now •
compliant with the international public sector
accounting standard (IPSAS) for the cash basis.
SAP has been implemented for budgeting and •
accounting at all tiers of government.
Preparation of annual fnancial statements which •
previously took about nine months after close of the
fnancial year are now prepared within three months.
A risk-based audit methodology complying with •
international standards has been developed and
implemented.
Computer assisted audit techniques (CAATs) software •
has been acquired and is being successfully used for
audit at federal, provincial and district levels.
A nationwide integrated audit management system is •
being implemented to facilitate top down control,
macro level planning and standardisation of work and
information management.
Timelines for submission of audit reports to the •
legislature has reduced from 33 to 13 months of the
close of the fnancial year and for the current audit year
audit reports will be submitted within 8 months of the
close of the fnancial year.
ACCA worked in partnership with, and provided support to,
the auditor general’s ofce. Since adding the controller of
general accounts and the auditor general’s ofce to the list
of ACCA approved employers in 2007, around 46 ACCA
members and trainees have supported the implementation
of the accounting and auditing components of PIFRA II.
ACCA members have also helped with the streamlining of
audit functions in government ministries and institutions
and have taken a leading role in project management.
Despite the onerous challenges of change management,
new technology, human resources skills and a knowledge
gap, PIFRA has raised awareness of the importance of
fnancial reporting and auditing in the public sector. The
scale of PIFRA has been enormous. Its complete success
depends upon sustained long-term eforts and developing
a culture of awareness of the importance of reliable
accounting records and of having auditing tools aligned to
best practices.
By making it possible to provide
accurate, complete and timely
fnancial reports, I believe PIFRA
has morphed into a symbol of
excellence in public fnancial
management.
MASUD MUZZAFAR, CONTROLLER GENERAL OF
ACCOUNTS
9 IMPROVING PUBLIC SECTOR FINANCIAL MANAGEMENT
IN DEVELOPING COUNTRIES AND EMERGING ECONOMIES
CASE STUDY 3
PUBLIC FINANCIAL MANAGEMENT REFORM IN ZAMBIA
Taking stock
In the case of Zambia there has been no specifc fnancial
improvement programme for the public sector. Historically,
the public sector has faced capacity constraints
compounded by inadequate information processes and
systems. In addition, non-compliance with internal controls
had led to poor predictability of government expenditure
and a lack of analytical capacity. Similar to other African
countries, the public sector has also struggled to attract
qualifed professional accountants to the sector.
Setting direction and getting started
The former president of Zambia laid key foundations for
public sector reform through its Vision 2030 strategy and
5th National Development Plan. The government’s National
Development Plan priorities included a commitment to
good governance and three levels of accountability:
political accountability, administrative accountability and
fnancial and budgetary accountability.
In relation to fnancial and budgetary accountability,
Zambia is making steady progress on public fnancial
management reforms. It has amended the Public Finance
Act over a number of years, strengthened accountability
and signifcantly contributed to re-defning structures and
the functions of key government ofces, such as the
minister of fnance and auditor general.
The public fnancial management reforms have been
supported by the donor community through various
reform initiatives such as ‘public expenditure management
and fnancial accountability’ (PEMFA), a World Bank
fnancial management reform programme for the public
sector.
Making it happen
Further reforms are underway including the revamping of
internal control functions. Audit committees in line with
ministries are being set up as a new requirement
enshrined in the Public Finance Act 2004. Most recently,
the minister of fnance announced the introduction of the
single national treasury account and the supporting legal
framework is being actioned. This is one of a number of
reforms set out by the National Constitution Commission
(NCC) which is currently reviewing the country’s
constitution. Other changes have included increased
training and support to existing fnance staf, as well as a
review of structures, roles and responsibilities.
10
CASE STUDY 4
CHANGING PERFORMANCE AUDIT IN VIETNAM
One of a number of challenges for the state audit of
Vietnam was the need to introduce step-by-step change
to performance audit.
Taking stock
Over the last few years it would appear that performance
audit was not of much concern for state audit, as claimed
in a paper ‘Innovation in Administering Public Expenditure
and the Role of State Audit Vietnam’. Financial and
compliance audit have been given the most prominence at
the expense of knowing the socio-economic impacts of
public expenditure allocations. In other words, despite
legal compliance, the audit does not show whether there
has been an improvement in public goods or basic
services. Performance audit has been identifed as one of
the greatest challenges to the state audit ofce of Vietnam.
Setting strategic direction
It is recognised that to improve the quality and
performance of auditing the following requirements need
to be met.
A switch in focus to output-orientated budgeting as •
opposed to input-based budgeting.
The creation of a database and of norms for monitoring •
and evaluating expenditure.
Building capacity to enable analysis and study of the •
impact of policy and resource allocations on
benefciaries.
Meeting these requirements will require step-by-step •
change.
11 IMPROVING PUBLIC SECTOR FINANCIAL MANAGEMENT
IN DEVELOPING COUNTRIES AND EMERGING ECONOMIES
CASE STUDY 5
DEALING WITH THE ISSUE OF A SHORTAGE OF
QUALIFIED PROFESSIONALS IN ZIMBABWE
In Zimbabwe the issue was an acute shortage of qualifed
professionals working within the public sector. This case
shows how a strong partnership approach can help in
addressing issues that some people would consider
insurmountable.
Taking stock
The issue for the Zimbabwean government was an acute
shortage of qualifed professionals within the public sector.
This needed to be urgently addressed.
Setting direction and getting started
To improve the numbers of accounting and auditing
specialists, ACCA has worked in partnership with the
Public Services Commission (PSC) and the auditor
general’s ofce to increase capacity and address the skills
shortage. The partnership helped to support the auditor
general’s ofce in recruiting, training and retaining
professional staf.
Making it happen
ACCA worked with its partners on ways of using quality
training as a recruitment and retention tool, improving the
conditions of service for fnance professionals and training
support, and on introducing a system of mentoring for
trainees.
As a result, professional qualifcations such as ACCA’s
certifed accounting technician’s qualifcation (CAT) and
the diploma in fnancial management (DipFM) were given
appropriate recognition within the civil service salary and
benefts reward system. For the frst time, fnance
professionals were included in the technical categories
together with other professionals such as engineers and
doctors. This provided individuals with an increased sense
of value and status.
As part of the change programme, the auditor general (AG)
became an approved employer with the capacity to train
auditors. Mentoring for trainees was provided by his
qualifed staf as well as by the external audit frms that
undertook subcontracted work. To ensure that there was
adequate breadth and depth in the coverage of the audit
competences, the trainees were seconded to external audit
frms and given an opportunity to be seconded to other
regional AG ofces. Both the employer and the students
were also supported with regular guidance.
Public sector-specifc continuing professional development
(CPD) events were arranged to deal with the unique
requirements of public sector accounting and auditing,
such as the need to demonstrate value for money (VFM).
Funding was provided from the AG as well as by donors,
who paid for expenses and exam fees. In 2009, the African
Development Bank (ADB) paid for a range for initiatives to
support 48 members and students from the AG’s ofce to
increase accountancy and auditing capacity.
Keeping on track
These changes have led to an increasingly professionalised
civil service in which accountancy students and members
are supported, and to an increase in the numbers of
professional accountants working in government,
particularly in the auditor general’s ofce. There is a
general sense that the civil service is turning a corner in
the recruitment and retention of professional accountants.
As a result, it is likely that more partners and donors will
be prepared to support similar capacity-building initiatives
within the public sector.
12
CASE STUDY 6
PUBLIC FINANCIAL MANAGEMENT AND CAPACITY
BUILDING WITHIN BOTSWANA
Botswana had very similar issues to Zimbabwe in relation
to staf retention and capacity building. A number of
specifc public fnancial management challenges were
also identifed by the ofce of the auditor general (OAG).
Taking stock
Although Botswana is a relatively wealthy country, its
public sector had the challenge of matching the rewards
ofered by the private sector. Its civil service was
dominated by expatriates while the locals moved to more
rewarding careers in the private sector. Also, it faced a
number of public fnancial management challenges. These
were identifed by the OAG as:
a need to update legislation supporting public fnancial •
management
a need to strengthen the capacity of the ofces of the •
auditor general and accountant general
a lack of controls in the new computerised accounting •
and budgeting systems
accounting processes and ledgers which were not kept •
up to date
an inadequate cash accounting system used by •
government ministries and local authorities.
Setting direction and getting started
There was a strong political drive by the government to
improve service delivery to the public in all levels of
government ministries and local authorities. Public sector
fnancial management reforms lagged behind those in the
private sector and public expectations of the quality of
public services were not met.
The government agreed that a re-engineering of
government service delivery and performance
management was necessary to create operational
efciencies and to achieve service delivery improvements.
This was driven by its ‘Vision 2016’, which includes
objectives for:
an educated and informed nation •
a prosperous, productive and innovative nation •
an open, democratic and accountable nation •
a moral and tolerant nation. •
Strategic outcomes were established in line with the
National Development Plan and an operational plan was
drawn up. Workshops were held across ministries to
develop a framework for an integrated results based
management approach. This was accompanied by an
overhaul of the organisational structure and competencies
to link with strategic outcomes and service delivery.
Making it happen
A signifcant investment was made by the government in
ensuring the necessary skills and competencies were put
in place to achieve the outcomes set in its operational
plan. A consolidated fund was utilised for training public
servants under the direction of the Ministry of Education.
The OAG had entered into an institutional capacity building
co-operation with the Swedish National Audit Ofce
(SNAO) and the African Organisation of Supreme Audit
Institutions (AFROSAI-E). This allowed the OAG to learn
from good practice and strengthen its core auditing
services. SNAO interventions were aimed at:
improving fnancial management audits •
improving performance audits •
assessing organisational efectiveness. •
In addition, ACCA, in partnership with the auditor general
(AG), worked on a plan similar to that followed in
Zimbabwe. The AG became a registered employer with the
capacity to train auditors. Mentoring for trainees was
provided by his qualifed expatriate staf as well as by the
external audit frms that undertook subcontracted work.
13 IMPROVING PUBLIC SECTOR FINANCIAL MANAGEMENT
IN DEVELOPING COUNTRIES AND EMERGING ECONOMIES
A practical experience requirement (PER) that was
specifcally tailored to their type of work and the level of
progression within the exams was developed in
partnership with the AG. This was based on the
competence matrix used by the Big Four audit frms. It was
followed through with in-house training and coaching of
both trainees and their supervisors on how to implement
PER. This included sample reviews of PER records and
discussions on the lessons learnt. As a result of these
initiatives trainees tended to stay with the employer for
longer periods as they appreciated the structured
approach to their professional development.
Overall progress has been made on the specifc public
fnancial management challenges. A new computerised
budgeting system has been successfully implemented
across all ministries, internal controls were strengthened
which has facilitated improved budget planning and
control of expenditure and performance tools have been
introduced. As well as revisions to the Finance and Audit
Act there was a directive by the Ministry of Finance to
build fnancial capacity and capability.
Some successes have also included, the establishment of a
corruption prevention committee (CPC) in each ministry to
monitor and review reports and fraud cases and a public
procurement and assets disposals board to review the
awarding of government tenders for public expenditure on
medical equipment and roads. Although signifcant
progress has been made the government and the OAG are
realistic about what still needs to be achieved in terms of
continuing to retain the quality of trained fnance
professionals within the public sector and build on the
reforms to date.
A FRAMEWORK FOR BETTER FINANCIAL MANAGEMENT
A number of models have been developed for helping
organisations to improve and assess how well their public
fnancial management functions are performing. We have
outlined three models and diagnostics which can assist in
improving public fnancial management. There are many
more, but in our view these are perhaps the most helpful
and have had proven results.
The Audit Commission model
This model, developed by the Audit Commission in England,
uses the metaphor of a journey, in which one starts at one
place and wants to arrive at another. The model identifes
fve key improvement phases: taking stock, getting started,
setting strategic direction, making it happen and keeping
on track. This allows one to gain a better understanding of
how organisations have improved public fnancial
management over time.
As refected in the case studies and this model, public
sector organisations seeking to improve fnancial
management share some similar characteristics. Quite
simply put, there are four elements that have been applied
to organisations that have successfully improved public
fnancial management. These are:
clarity of purpose and strategic direction •
efective political and managerial leadership •
the basic building blocks for achieving change •
driving and sustaining change. •
Public sector organisations can measure their progress
against these four elements when embarking on a change
programme, as outlined in a slightly adapted version of the
Audit Commission’s model.
This model is helpful for public sector organisations in
assessing whether they are at an early stage on their
improvement journey or have made signifcant progress. It is
not the only model for improving public fnancial management,
but arguably it is one of the most efective. The model can
be used to complement those instruments for measuring
success that donor institutions, governments, national
institutes and regulators already use. It is particularly useful
for taking a strategic overview, prioritising and ensuring that
the focus is clearly on the issues that need to be addressed.
14
Table 2: Assessing progress towards strong public ?nancial management
Taking
stock
Setting
direction
Getting
started
Making it
happen
Keeping
on track
Clarity of
purpose
and
strategic
direction
Identify the reason for
current problems, for
example, a weak
legislative framework and
policies for public
fnancial management;
lack of compliance with
international accounting
standards; poor fnancial
management; serious
budget defciencies,
losses and waste; lack of
fnancial skills and
capacity, etc.
Key players clarify the
direction, allocate
resources to priorities and
set milestones.
Place an emphasis on
creating the frameworks,
structure and culture of
strong fnancial
management.
Avoid getting distracted
by too many priorities.
Political
and
managerial
leadership
Key players such as the
government, donors,
national institutes and
regulators consider what
the response should be.
A change programme is
developed covering a
specifed period with risks
and resources aligned to
it.
Strong leadership is
required together with
good communication.
Early successes should be
publicised to send
positive messages to
organisations and donors.
Leaders are more
self-aware and refect on
lessons learnt to deliver
and improve on public
fnancial management.
Basic
building
blocks
Key players assess the
current state of public
fnancial management.
The emphasis should be
on addressing the major
areas of concern and
attending to the risks.
Invest in building up
capacity and skills to
deliver the project. Stop
peripheral activities and
projects that detract from
the change programme.
Implement strong
performance
management and
partnership working at a
strategic level.
Driving
and
sustaining
change
Key players assess the
capacity, build critical
mass and judge the likely
pace of improvement.
Make an early investment
in improving capacity and
skills, but with emphasis
on building momentum.
A stronger organisation
builds infrastructure,
systems and processes
for public fnancial
management.
Institute regular reviews to
learn and consolidate
improvement.
Adapted from: Audit Commission, Improvement Through Better Financial Management, 2004.
15 IMPROVING PUBLIC SECTOR FINANCIAL MANAGEMENT
IN DEVELOPING COUNTRIES AND EMERGING ECONOMIES
Public ?nancial management measurement framework model
A second model is the public fnancial management (PFM)
measurement framework developed by the Public
Expenditure and Financial Accountability secretariat
(PEFA), the World Bank and IMF. This performance
measurement framework is mainly focused on
governments, but can be applied to other parts of the
public sector. The model sets out high level performance
indicators which can be used to assess performance.
There are six critical dimensions to the model as set out
below.
The advantages of using this model to assess performance
on improving public fnancial management are that it:
enables an integrated assessment of performance of •
PFM systems
demonstrates progress in PFM performance over time •
enables regular, rigorous, evidence-based monitoring •
by domestic and international stakeholders
provides a common information pool on PFM •
performance.
Six critical
dimensions of
PFM system
performance
Budget credibility
Is the budget realistic, and implemented
as intended?
Comprehensiveness and transparency
Are the budget and the fscal risk
oversight comprehensive, and is fscal
and budget information accessible to
the public?
Policy-based budgeting
Is the budget prepared with due regard
to government policy?
Predictability and control in
budget execution
Is the budget implemented in a
predictable manner and are control and
stewardship exercised in the collection
and use of public funds?
Accounting, recording and reporting
Are adequate records and information
produced, maintained and disseminated
to meet decision-making, control,
management and reporting purposes?
External scrutiny and audit
Are there efective arrangements for
scrutiny of public fnances and follow up
by the executive?
Source: PEFA, Public fnancial management (PFM) measurement framework
16
Ten steps to success
A third useful framework for improving fnancial
management was developed by HM Treasury Financial
Skills Advisory Panel (UK), ‘Doing the business: embedding
fnancial management skills in government’ (2008). It
reviewed the workings of the government department
board, business and fnance functions across government
departments. It outlined ten steps to success which
provided government departments with a benchmark
against which to measure their own performance.
Start taking active steps to develop 8.
stronger leadership skills within your business’s
?nance function.
The CFO must have a wide range of skills
including the ability to lead and develop a
fnance function which meets business needs
and to support the building of fnancial
management skills and capacity elsewhere in
the organisation.
Keep it simple. 9.
The key to success is being able to get things
done. The role of fnance and sound fnancial
principles must be easily understood and the
benefts clearly defned. Finance needs to be
seen as part of the solution not part of the
problem.
Temper ambition with realism. Recognise 10.
that becoming world-class takes time.
Aspiring to world-class performance is
commendable. But for most organisations it
represents a very challenging target. What is
more this type of transformational change is as
much about creating a diferent climate,
changing behaviours and culture as it is about
changing systems and processes. It requires
concerted action and sustained commitment
over an extended period.
Source: HM Treasury Skills Advisory Panel,
Doing the Business: Embedding Financial Skills
in Government, 2008.
Act now to kick-start good ?nancial 1.
management skills in your organisation.
It is never too soon to start. Whatever the
current level of fnancial management skills and
awareness in the organisation there will be
potential – almost certainly huge potential – to
improve. The drive needs to start at the top: it is
critical the Permanent Secretary and
departmental board and all of its executive and
non-executive members, want good fnancial
management to be at the heart of the business,
and are committed to it and are consistent in
promoting and supporting its application.
Ensure ?nance is at the heart of developing 2.
your vision and business strategy.
Without this commitment the board not only
runs the risk of fawed planning and poor
decision making but failure to embed sound
fnancial principles into the management of the
business as a whole.
Start rolling out and embedding good 3.
?nancial management across your business
today.
The principles of sound fnancial management
must be integrated into the professional
development and performance management of
all managers. This can be tackled through a
variety of means including awareness-raising
and training and development.
Invest in people development and training 4.
needs analysis.
Diferent fnancial skills and levels of acumen
and awareness are required in diferent parts of
the organisation. Identify the distinctive fnancial
competencies needed in diferent areas of the
business from Non-Executive Directors to
non-fnancial managers, from the Policy Unit to
operational front-line delivery, and tailor training,
development and support to address them.
Remember the importance of communication 5.
and engagement skills.
This is about a step change in the quality of
engagement between fnance and non-fnance
professionals. It includes skills in relationship
building, communication, listening and
infuencing.
Keep it fresh and current. 6.
This means regularly reviewing the skills and
competencies needed by and available to the
business. It means looking over the horizon to
anticipate tomorrow’s needs and planning (and
succession planning) to meet them. It means
scanning for new ideas and for better practice
and performance and using these resources to
improve the department.
Reward and celebrate good ?nancial 7.
management; tackle poor ?nancial management.
To attract and retain the best talent, government
will need to rethink its strategy in relation to pay
and conditions. It will need to ensure that senior
managers’ rewards refect in an appropriate way
their fnancial management skills and
performance. Equally importantly, managers
who perform poorly in this area by, for example,
failing to consider the fnancial implications of
diferent policy options, should be made aware
of their failings and of the imperative to remedy
their shortcomings in the future.
By following the ten steps to success it is hoped that
government departments in the UK will operate and do
business in a more efective way. A government
department board will have a stronger grip on the
business and will be more equipped to drive the change
agenda. Management will have a clear of view of what it
needs to deliver and the chief fnance ofcer and his
fnance team will be better placed to focus on delivering
value for money. Above all, the fnance department will be
fully engaged with the business at all levels and deliver the
best possible outputs and outcomes.
17 IMPROVING PUBLIC SECTOR FINANCIAL MANAGEMENT
IN DEVELOPING COUNTRIES AND EMERGING ECONOMIES
It is hoped that this paper has given an insight into the
scale and complexities of public fnancial management
issues that often need to be addressed in developing
countries and emerging economies. More importantly, it
has shown how some issues have been successfully
overcome and the lessons learnt and it provides useful
guidance for helping organisations to improve public
fnancial management. Key lessons learnt include the need
to be realistic about what can be achieved, and to set
priorities and time scales. Sustainable public fnancial
management requires strong leadership, a long-term
commitment and momentum, efective partnership
working and strong project management. There will be
some early successes and it is important that these are
communicated to facilitate long-lasting process and
cultural change for sustainable public fnancial
management.
As highlighted in this paper, ACCA is committed to working
in partnership with governments, accountancy bodies,
regulators and the donor community to help improve
public fnancial management in developing and emerging
economies.
To fnd out more about our work please contact
Gillian Fawcett, head of public sector.
[email protected]
5. Conclusion and lessons learnt
Useful signposts
Audit Commission, ‘Improvement through better
fnancial management’, 2004, .
Audit Commission, ‘Use of resources key lines of
enquiry’, 2009, .
DFID, A Platform to Improving Public Financial
Management, 2005, .
HM Treasury Financial Skills Advisory Panel, Doing
the Business: Embedding Financial Management
Skills in Government, 2008, .
Public Expenditure and Accountability (PEFA), Public
Financial Management; Performance Measurement
Framework, 2006, .
ACKNOWLEDGEMENTS
We would like to thank Afra Sajjad (ACCA), Daisy
Kopolo (ACCA), Hannah Jones (ACCA), Mukaba
Mukaba (ACCA), the Auditor General’s Ofce
Pakistan, the Auditor General’s Ofce Botswana and
Members of ACCA’s International Public Sector
Committee for their contributions.
TECH-AFB-IPSFM
ACCA 29 Lincoln’s Inn Fields London WC2A 3EE United Kingdom / tel: +44 (0)20 7059 5000 / www.accaglobal.com
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