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Indicator 5a: Use of Country PFM Systems
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INTRODUCTION | ILLUSTRATIVE EXAMPLES
INTRODUCTION
Using a partner country’s own institutions and systems increases aid effectiveness by strengthening partners’ sustainable capacity to develop, implement and account for its policies to its citizens and parliament (PD §17). This indicator focuses on the use of partners’ public financial management (PFM) systems (national budget execution procedures, national financial reporting procedures, and national auditing procedures) when funding is provided to the government sector. It measures the volume of aid that uses a partner country PFM systems as a percent of total aid provided to the government sector. National systems for the management of funds are those established in the general legislation (and related regulations) of the country and implemented by the line management functions of the government.
ILLUSTRATIVE EXAMPLES
UKRAINE
SOCIAL INVESTMENT PROGRAMME
BUDGET EXECUTION
| Criteria 1. — Are your funds included in the annual budget approved by country legislature? (Y/N) |
Yes. Estimated annual project expenditures are included in the annual budget approved by the parliament. The project expenditures are included as a separate sub-account in the budget classification. |
| Criteria 2. — Are your funds subject to established country budget execution procedures? (Y/N) |
Yes. Project expenditures are committed, contracted, and paid according to country rules and procedures. Internal controls and internal audit arrangements established in the country apply to project expenditures. There are no additional internal control procedures required for project expenditures. |
| Criteria 3.— Are your funds processed (e.g. deposited & disbursed) through the established country treasury system? (Y/N) |
Yes. The treasury applies its established procedures for processing project expenditures. |
| Criteria 4. — You do NOT require the opening of separate bank accounts for your funds? (Y/N) |
Yes. Donor funds are transferred to the Bank account held and operated by the treasury. The Bank account forms part of the Treasury Single Account. |
FINANCIAL REPORTING
1. — You do NOT require maintenance of a separate accounting system to satisfy your own reporting requirements? (Y/N)
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Yes. Project expenditures are recorded and accounted in the government account system. Neither MoF nor the line ministry maintains separate accounting records for tracking project expenditures. However, separate sub-accounts in the budget helps to keep track of project expenditures. |
| 2. — You ONLY require financial reports prepared using country’s established financial reporting arrangements? (Y/N) |
Yes. Project financial statements are prepared using the government accounting system. For presentation purposes, the accounting reports prepared by the government accounting system are further ‘processed’ using Excel spreadsheets (not requiring any extensive recalculations or reconciliation). |
AUDITING PROCEDURES
| 1. — Are your funds subject to audit carried out under the responsibility of the Supreme Audit Institution? (Y/N) |
Yes. Project financial statements and audited by the SAI. Since the project expenditures form part of the budget approved by the legislature, the SAI is mandated to audit those in the normal course of their audit. |
| 2. — You do NOT under normal circumstances request additional audit arrangements ? (Y/N) |
Yes. Donors do not require additional audits (e.g. operational audits or performance audits) by private sector auditors. However, considering capacity constraints of SAI, twinning arrangements were agreed upon to strengthen technical capacity of the SAI. |
| 3. — You do NOT require audit standards different from those adopted by the Supreme Audit Institution? (Y/N) |
Yes. Audit of project financial statements are carried out by SAI using audit standards generally used by the SAI. Although the SAI audit standards were not fully converged with the INTOSAI or ISA standards, there was no additional requirement for the SAI to adopt INTOSAI or ISA for auditing project financial statements. |
| 4. — You do NOT require the SAI to change its audit cycle to audit your funds? (Y/N) |
No. The project financial statements were audited by SAI on an annual basis. The SAI generally audits budget programs only once in two/three years, so the annual audit requirement was an additional requirement. |
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