Monitoring budget implementation

Chapters on ‘monitoring, audit and accountability’ from the publication titled ‘A Guide - The National Budget Making Process’ issued by the Ministry of Finance and Planning

This chapter sets out very briefly how the Government ensures the monitoring process.

- Project management and programme performance

- Cash-flow management including amortization and interest payments of debt.

- Revenue target and macro-economic target monitoring

Project management and programme performance

The Foreign Aid and Budget Monitoring Department (FABMD) is responsible for the monitoring and evaluation of aid utilization and project and programme performance. In line with the annual allocations made by the National Budget Department, the FABMD monitors financial progress made in relation to the related capital budget and recurrent budget of line Ministries, on a quarterly basis.

President Mahinda Rajapaksa, in his capacity as the Finance and Planning Minister, presenting the 2012 budget proposals in Parliament on Monday. Picture by Sudath Silva

Related information is collected through an online Integrated National Information Management System (INDIS), which the line Ministries are required to update on a quarterly basis. Line Ministry Secretaries are required to monitor performance of their Votes. The FABMD submits a quarterly progress report to the Secretary to the Treasury. In this endeavour, the FABMD monitors the progress of foreign and domestically funded development projects and programmes.

This ensures:

Regular monitoring of the financial and physical progress of such projects and programmes, and identifying issues affecting implementation and progress in relation to procurement plans so that timely remedial action could be taken.

While Financial Progress is reviewed by comparing the actual disbursement as against available financing, the Physical Progress is monitored against timelines and targeted deliverables. To enable the effective implementation of this monitoring process, the External Resources Department informs the FABMD, each time a new agreement is executed to give effect to a project or programme.

Evaluation Information System (EIS)

Further, on-going and ex-post evaluations are also carried out by the FABMD on selected development projects based on necessity and demand, along with lenders/ donors and line Ministries.

In this regard, an evaluation synthesis is placed in the Evaluation Information System (EIS) of the FABMD with a view to disseminate findings of such evaluations to concerned authorities and stakeholders to improve performance, accountability and also to enable such parties to note the ‘Lessons to be Learnt’. The National Planning Department is expected to take into account such ‘Lessons Learnt’, at the time of screening future project proposals of a similar nature, before they are approved.

Agency Results Framework (AFR)

In order to improve agency functions and ensure effective and efficient implementation of related capital budgets, all line Ministries have been required to prepare their Agency Results Framework (ARF). This ARF consists of the Vision, Mission, Thrust Areas, Goals and Key Performance Indicators (KPIs) identified at output and out come levels, with a baseline and targets for the medium term.

These ARFs are placed in the FABMD website to enable line Ministries to report their progress online. Line Ministries are required to report their achievements as against the targets on a bi-annual basis, which is evaluated to determine the success rate of projects and programmes. This helps the FABMD to take measures to assist in resolving any obstacles pertaining to such projects and programmes. The budgetary provisions for the ensuing year are made, based on the progress achieved.

The process to be followed to recognize expenditure in the budget

- Line Ministries and Government agencies are required to have prior clearance of the National Planing Department, to a Cost Benefit Analysis relating to any proposed Project or a Budget Proposal.

- Thereafter, an appropriate implementation sequence of such proposals is done by the National Planning Department.

- The External Resource Department undertakes an assessment to find foreign funding sources, taking into account the availability of resources and the benefits of foreign financing as opposed to domestic financing.

- The Central Bank of Sri Lanka and the Board of Investment, makes an analysis of the implications. The approval of the Monetary Board is required for such activity, by way of advice on Government Credit Operations (Section 114 of the MLA)

- Approval of the Cabinet of Ministers should be obtained to proceed

- Agreements are signed, having obtained the clearance of the Attorney General.

- Related procurements are carried out in line with applicable procurement guidelines, with the approval of the Cabinet of Ministers

Cash-flow management

The Treasury Operations Department executes and operationalizes the approved National Budget through the release of appropriate Imprest to spending agencies. In this exercise, it is the responsibility of the Treasury Operations Department to ensure that all revenue is remitted to the Consolidated Fund in a timely manner.

Similarly, the Treasury Operations Department also periodically estimates the borrowing requirements and informs the Public Debt Department of the Central Bank, which is in charge of the agency function for raising required debt, which is done within annual limits approved by the Parliament. Government debt amortization and interest payments are also the responsibility of the Treasury Operations Department.

Revenue targets and macro-economic targets

The Fiscal Policy Department prepares monthly revenue estimates based on related annual figures in the annual Budget, inter alia considering seasonalities, past trends etc. and such estimates, after having reached a consensus, are passed on to the Revenue Agencies to pursue collection.

The Fiscal Policy Department also monitors the monthly revenue collections, identify deviations and explore remedial measures with the related revenue agencies to minimize shortfalls, so as to ensure that estimated government revenue is collected. The macro targets such as inflation, interest rates, foreign reserves and money supply are monitored together with the Central Bank to ensure the stability of macroeconomic fundamentals.

Audit and Accountability

This chapter set out the mechanism through which audit and accountability is ensured by the government.

The Auditor General is required to audit the accounts of all departments of Government, the Office of the Cabinet of Ministers, the Judicial Service Commission, Public Service Commission, Parliamentary Commissioner for Administration, Secretary General of Parliament, Election Commission, local authorities, public corporations and business/other undertakings vested in the Government under any written law (Refer page 18 for further details).

Standing Orders of Parliament

The Standing Orders of Parliament are the source of Parliamentary procedure and have the status of rules under the Constitution. The Standing Orders of Parliament deal with aspects relating to meetings, public business, debates, bills, order, committees and finance. Committee on Public Accounts - Standing Order 125 and Committee on Public Enterprises. Standing Order 126 that are of relevance to the Budget Making Process are Committees for special purposes established in terms of Standing Orders of Parliament.

Committee on Public Accounts (COPA)

The task of COPA is to examine the managerial efficiency and financial discipline of the Government, its Ministries, Departments, Provincial Councils and local authorities. The Committee is established at the beginning of each Parliamentary Session under Standing Order 125. It reflects the party composition in Parliament and its quorum is four.

The duty of the COPA is to examine the sums voted by Parliament along with the report of the Auditor General.

The Committee obtains evidence from the Secretaries to the respective Ministries, who are the Chief Accounting officers, Heads of Departments and other responsible officers.

The Committee also regularly uses the services of the Treasury through the Heads of Department of Public Finance, State Accounts and National Budget or their nominated representatives.

The recommendations of the committee may contain directives to Government Departments and Ministries and such directives are deemed to be those of the Parliament.

Committee on Pubic Enterprises (COPE)

The Committee on Public Enterprises is expected to ensure observance of financial discipline in Public Corporations and other semi-governmental bodies in which the Government has a financial stake.

The Committee on Public Enterprises is established under Standing Order 126, at the beginning of each Parliamentary Session, the Chairman is elected by the Members of the Committee at its first session. Its quorum is four.

The duty of the Committee is to report to Parliament on accounts examined, budgets and estimates, financial procedures, performance and management of Corporations and other Government Owned Business Undertakings.

The accounts of these enterprises are audited by the Auditor General and form the basis of the investigations of the Committee. It has the power to summon officials and others as it thinks fit to obtain evidence and call for documents.

The Committee obtains services from Secretaries to the respective Ministries as Chief Accounting Officers, Chairman of Board of Directors and other responsible officers. The Committee regularly uses the services of the Treasury through the Public Enterprises Department Officials. The Committee reports to the Parliament and the recommendations contained in its reports are deemed to be directives to the respective Corporations or Statutory Boards for due compliance.

Financial Regulations directly relevant to Audit/Accountability

Treasury action on reports on COPA

The Treasury is required to take action on reports of the Committee on Public Accounts

(FR 131).

Minutes of Treasury

On receipt of a report of the COPA, the Treasury is required to issue under the hand of the Secretary to the Treasury on the instruction of the Minister of Finance, Minutes relating to matters dealt with in the Report. It is the duty of all Chief Accounting Officers and Accounting Officers to study the Report and the Treasury Minutes thereon, and be guided by them with regard to future financial operations (FR 153).

Internal Audit Units

For the purpose of discharging duties and responsibilities indicated in FR 128, to the effect that an Accounting Officer is responsible to the Chief Accounting Officer for the financial administration of his Department and the management of his Vote, all, particularly those of large Departments having sub offices, workshops, stores etc. and of Departments engaged in development work, are required to establish Internal Audit Units in their Departments to ensure internal controls (FR 133).

Independence of Internal Audit Units

Internal Audit Units should be independent of controls of those who are responsible for, or are actually carrying out the financial and accounting operations of the Department as well as those engaged in the execution of schemes and projects or performance of works and services rendered by the Department (FR 134).

Delegation of Financial Authority

Accounting Officers may place an accountant or such other officer in charge of financial operations of his Department and delegate to him the duty of organizing and supervising the details involved in accounting for the receipts, issues and payments of the department, the custody of cash, stores and other valuables and the authority to operate an official bank account which can in turn be delegated as provided in the Financial Regulations (FR 144). However, the principal will continue to remain responsible for the management as a whole (FR 146).

Auditor General and Additional Audits

The duties of audit are not exclusively the functions of the Auditor General. The Minister of Finance, to whom has been assigned the function of supervising the public administration of the country on its financial side has the right to authorize an additional audit by any other person or organization that he may choose.

Nevertheless, the functions of the Auditor General are imposed by the Constitution and it is the duty of the Chief Accounting officers to ensure that letters addressed to them by the Auditor General are dealt with promptly with complete answers. If a financial reply cannot be given immediately, an interim report should be made.

An Accounting officer should inspect the Audit Query Register that is required to be maintained, upon assuming office and at regular intervals thereafter, to ensure that, audit queries are promptly investigated and steps have been taken to correct any shortcomings.

The Chief Accounting officer should also personally inspect the Audit Query Register, from time to time as a part of his supervisory function.

Despite Auditor Generals’ examinations, the responsibility of accuracy and correctness is with the Accounting officer (FR 155).

Responsibility of public officers on losses

A public officer should be held personally responsible for any loss caused to the government by his own delay, negligence, fault or fraud, and is required to make good any such loss.

There is a similar responsibility, if an officer allows or directs any actions to be performed without proper authority, without complying with financial or other regulations or other appropriate instructions, without exercising reasonable care or fraudulently (FR 156).