A framework for Reporting on Public Finance Management
When I assumed my new role as CEO at AFROSAI-E recently, a number of topical issues, amongst others Professionalisation; Public Finance Management (PFM) reforms; SAIs operating in fragile states and SDGs, sparked excitement and enthusiasm in me. I would like to share the process that AFROSAI-E and its member countries followed to develop the PFM reporting framework. This topic was discussed at the 2017 AFROSAI-E Governing Board meeting, being the strategic building blocks of Good Financial Governance (GFG) and how an effective and efficient public financial system will contribute towards GFG. There was consensus amongst the Governing Board members who agreed on the following:
- Auditing PFM systems – despite engagements on PFM, there is a lack of a holistic approach to auditing PFM systems. SAIs mostly have a compliance perspective on financial management, resulting from their various individual audit engagements but no institutionalized approach giving rise to a documented risk analysis or a systemic approach to the audit of PFM systems. The necessity of looking into the budgetary processes, the assumptions driving revenue targets, whether the overall budget is sustainable, and other elements of the PFM system was agreed.
- Reporting on PFM Systems – a need for a common reporting framework to be developed by AFROSAI-E being a simplified concept with guidance based on a common understanding of a PFM system that will categorize findings accordingly. It was emphasized that both individual reports on PFM systems as well as PFM chapters in Annual Reports would be useful information to emphasize the value and benefit of SAIs to the lives of citizens as per ISSAI 12.
- Stakeholder engagement – the outcome of this work will drive SAIs’ purposeful and impactful stakeholder engagements through creating awareness on the importance of PFM systems in promoting achievement of the SDGs and influencing Good Financial Governance in governments.
The objective of this process is twofold, namely:
1. Gather, assess and report on the effectiveness of PFM processes through consideration of two types of entities: (i) the Ministries, Departments and Agencies (MDAs) of central government; and (ii) Core PFM institutions such as the finance ministry, the revenue authority and Parliament. This information will enable SAIs to engage with the relevant MDAs, as well as the relevant core PFM institution, on their weaknesses and developmental areas and obtain an understanding of systemic issues relating to the interactions between institutions.
2. To consolidate the findings from the individual PFM assessments conducted at MDAs, which are, or may, impact on the whole of Government’s ability to:
– assess the macro-economic framework, assumptions and projections used in its overall policy direction to achieve the National Development Plan (NDP),
– ensure alignment with Sustainable Development Goals, Agenda 2063 and other international treaties / commitments
– implement policy decisions.
The following should be applied when performing the PFM assessment:
- Sufficient appropriate audit evidence should be obtained by using a combination of audit procedures throughout the audit of the MDA to support the accuracy and completeness of information being used for the PFM assessment, including the root causes.
- After obtaining the relevant accurate and complete PFM information, the auditor should assess the information and document the findings / key observations for each key output.
- The findings / key observations should be linked to one or more of the 5 institutional capacity areas below, namely(1) Policy and legal framework
(2) Organizational structure and Human resources
(3) Information Systems
(4) Governance & Oversight and
(5) Communication and Stakeholder Management.
Finally, the root cause(s) should be documented for each of the findings / key observations per key output.
AFROSAI-E combined efforts with SAIs in the region, and some of the partners, to develop a PFM reporting framework which is currently being piloted in the region. While we all had no idea of how this would turn out, attendance and participation at the developmental workshop was impressive. I will not deny that there was a lot of confusion, disagreements and back and forth, which at the end enriched the discussion and the final product. The results of the pilot will be presented to the Governing Board for them to consider adopting the use of the PFM reporting framework in the region.
This being my first assignment after joining the AFROSAI-E secretariat, demonstrated the level of passion, commitment and innovation that exists in team work. Sharing of experiences and methods in this area is welcome and encouraged in the broader community.