Punjab Resource Management Program;

Interventions in Finance Department

Jean-Marc Lepain, Public Finance Specialist Crown Agents DFID – TAMA

September 2010

Overall Strategy

• To build on Phase 1 achievements

• To build on the Strategic Vision already developed

• To take a medium term view of what need to be achieved and to move forward that goal;

• To aim at the maximum level of integration all the project components and deliverables

• To consider systematically and in an integrated manner information flows, processes, systems and organization

Activities that need to be carried over

• Implementation of SAP templates

• Further developments and fine-tuning of the Revenue Forecasting Model;

• Implementation of measures for the reduction of the number of supplementary grants;

• SAP/R3 training

Issues: How much technical assistance is needed for these activities?

Reformulating Project Components and Areas of Intervention

• Fiscal Sustainability and Resource Management

• Budget Execution and Reporting

• Organizational strengthening and capacity building

I. Fiscal Sustainability and

Debt Management

Objectives

• To move in 3 to 5 years to a completely integrated suite of system and processes from MTBF to Debt Management

• To move from fire fighting mode to proactive management of cash resources,

• To improve budget credibility

Revenue Forecasting Fiscal Policy

Cash Management Cash Management

Debt Management

Strategy Debt Management

Cash Management / Borrowing

Policy

Business Processes and Information Flows

Revenue Forecasting

• Must be disaggregated by month

• Must integrate provincial revenues

• Must be in line with the MTBF

Why Cash Management ?

• To use cash management as the integrating factor of resource management;

• To move from cash balance management to cash flow management to add predictability to budget execution;

• To use cash management as a linking factor between fiscal policy and debt management through the borrowing policy;

• To contribute to the smooth implementation of fiscal policy

Strategy

Cash Management must be developed in two phases:

• Cash flow management based on budget,

historical trends and data available from SAP/R3

• Cash planning based on cash-plans prepared by

line-departments (could be done on a pilot basis,

or outside the project scope)

Deliverables

• Annual cash plan prepared in advance of the fiscal year, setting out projected cash inflows and cash outflows month by month;

• Three-month rolling projection revised month by month;

• One month projection revised on a weekly basis including daily projection for the week.

• Clear set of rules for prioritizing daily expenditures;

• Linkage with commitment management.

Debt Management

• Debt Management Strategy including strategy for managing overdraft;

• System requirements

• System implementation

• Training

II. Internalization of the MTBF

Budget Execution and Reporting

Two aspects of internalization

• Downstream (after consolidation of sector MTBF)

• Upstream (before consolidation of sector MTBF)

Down Stream

Mainly the responsibility of PGEIP

• Introduction of sector ceilings

• Fiscal Policy Paper

• One single budget call circular

• Porting the MTBF on SAP/R3 for reporting purpose

Upstream • Budget Execution Review Report (mid-year and end-of-the year) to

detect misalignments and bottlenecks in previous budget;

• Strengthening sector policy analysis including the development of ‘Sector Profile’ and ‘Sector Policy Review’ for benchmarking the sector MTBS and covering non-MTBF departments;

• Checking credibility of sector MTBFs against Medium Term Development Plans and sector policies;

• Using consolidation process of sector MTBFs for adjustments;

• Using the MTBF for projecting different fiscal envelopes for new development schemes.

• Drawing consequences of the introduction of new functions on the organizational structure and workflows.

Extension of SAP/R3 Reporting Capacity and internalization

• A systematic gap analysis must be conducted to identify reporting limitations and negotiations must be started with PIFRA for customization;

• Phase 1 templates must be implemented;

• A clear IT strategy is required (SAP/R3 is not a budget preparation tool).

Commitment Management

• Revision of the process for commitment management and commitment control appears necessary;

• Role of SAP/R3 in commitment management must be expended;

• Linkage with cash management must be established.

Disbursement Management

• Introducing predictability

• Streamlining control process while making them more efficient by integrating all stages of expenditure control;

• Improving linkage with accounting, reporting, cash management through a better use of SAP/R3.

THANKS