Financial Management Reform Output Management · Financial Management Reform Output Management This...

Financial Management

Branch, Treasury Div Accountability Transparency Integrity 1

Financial Management Reform Output Management

� This training project is in compliance with

a. Social and Economic Policy Framework 2005-2007 Pgs 24-25

i. Integrated Financial Management Information System (IFMIS)

ii. Output Management

b. Minister of Finance Call Circular No. 1 Dated March 22, 2005 paragraphs 8-10



Agenda

� The training is scheduled for three (3) half

day sessions

� 1st Session – Overview & Corporate Plans

� 2nd Session Business Plans – New Format of

Estimates

� 3rd Session – Costing Template



Review

By Minister of Finance Call Circular No. 2 Dated March 14, 2003 the Treasury Division undertook a series of training sessions in Output Management. The Output Management framework involves the preparation of:-

� Corporate Plans - 3 year expenditure framework which provides the link between the Social and Economic Policy Framework and the Business Plan

� Business Plans – New format of the Estimates



Review

� Divisions were required to establish

- Steering Committee – Permanent Secretaries/ Heads of Departments, Deputy PS, Heads of Divisions,Sr. Managers and Planning officers (chaired by PS/HOD)

- Working Group – Line Managers,Technical officers,Accountants/Budget and Internal Audit (chaired by Senior Manager) Composition of these committees are to be submitted to the PS Finance



Division of Responsibilities

Steering Committee functions –

� Responsible for developing the Corporate plan

� Responsible for guiding the working group in developing the Business plan

Working Group function –

� Responsible for developing the Business plan



Process 1st Stage

For submission to Budget and Treasury Divisions

�Corporate plan

�Identify – strategic priorities

�Mission

�Vision

�Strategic objectives



Process 2nd Stage

� Business Plan

�Identify outputs

�Set performance measures and targets



Process – Final Stages

Costing the outputs

�Review by Budgets and Treasury

Divisions

�Use 2006 proposed Estimates to

convert to the new format as a test

�2007 Estimates to be done in both

formats by April 2006



Government in a Dilemma

� Increasing expenditure –increasingly poor service delivery

� Increasing debt – where revenues cannot match expenditure growth explosion

� Demands by well articulated citizenry for services –health, education, law and order, food, housing

� Environment – high levels of inefficiency and corruption in the Public Sector and in the wider community -HIV, crime, drugs, rising food prices.

� Archaic management systems and practices



Government in a Dilemma

� Minister in the Ministry of Trade and Industry. Dianne Seukeran at the launch of the SWRHA gold standard of treatment for cancer patients, Gulf City Auditorium in May 2005 said ……

T&T is fed up of the delivery of service at every level of this country

we are committed to deliver to the people, and yet be accountable to the people for the spending of their money.



The Financial Management Package

IFMIS

Output

Management

Accrual

Accounting

Integrated

Management

Cycle

Macro Economic

Measures

Audit

Act

Financial

Act

Fiscal

ResponsibilityBudget

Honesty



Financial Management Reform

1. Mandate of the Ministry of Finance for


2. The premise for reform

3. The characteristics of good service

delivery




4. Ministry of Finance as a catalyst for Public

Sector Transformation

5. Change in the way we do business

6. Institutional relational landscape

7. Current Public Sector




8. Emerging Public Sector

9. Focus of Financial Management Reform

10. Objectives of Financial Management Reform



The Mandate for Financial Management Reform

� Treasury obtained approval for

- Financial Management Reform (FMR)

in the Public Service - Cabinet Minute

#1703 of 2000

- Action plan to implement FMR




� Embarked on a program of consultation.

� Budget Division

� Senior Managers in the Public Service- log frame

exercise-May 2002 Cascadia Hotel - inefficiencies

� Permanent Secretaries and Senior officials of the

Ministry of Finance-conference– Hilton Tobago July

2002- mandate for MoF-




� Budget Statement 2003 “ this Government also

intends to review and reengineer the public

service’s financial management, procurement,

record keeping and information management

processes”.

Presented by the Honourable Patrick Manning

Prime Minister and Minister of Finance -October

21 2002 .




� Minister in the Ministry of Finance at a conference entitled “ Appreciation and Future directions Program”- Hilton 7th January 2003.

� Need for the Ministry to:

� have a greater customer focus

� Deliver quality services

� To set new standards for delivery

� That the structure and resources of the Ministry is out of step with the current environment




� Minister’s Speech at the Regional Public Expenditure

Conference hosted by CARTAC – February 14-15, 2003

,Hilton Trinidad- “…As a consequence the re-engineering

our financial management system to become more

efficient, results oriented and customer driven has been

accorded the highest priority.”

� Increase in capacity at the Ministerial and Permanent

Secretary levels to support the reform process

� Minister of Finance Call Circular 2 of March 2003



Premise for Reform

� That the government of the day is ultimately

responsible for the timely delivery of

services to the community at the required

quality, quantity and in the most cost

effective and accountable manner.



Characteristics of Service Delivery

� It is delivered when its:-

� Timely-when and where needed-anticipating

and linking community needs with delivery

� with the required quality- assurance testing

� and quantity-proper target setting



Characteristics of Service Delivery

� In a cost effective financially efficient manner-

contestable environment -dollar reaches

farther

� In a planning horizon which extends beyond

the annual budget cycle- at least 3 years.

� In an environment of accountability and

transparency-legitimacy to the manner in

which the Government operates



Why- Financial systems as a Catalyst?

� The financial management framework

contains the systems, procedures, checks

and balances to provide the necessary

linkages to facilitate the implementation of

quality service delivery in an environment

of accountability, transparency and

integrity



Financial systems as the Link

Transparency

Strategic

Priorities

Departmental

Objectives

Outputs of

Service Delivery

Accountability

Integrity

Transparency



The Triangle in Action

Outputs

DepartmentalObjectives

GovtOutcomes

Safe Streets, Homes and

Workplaces

M/NS: Reduce the incidence

of violent crime in targeted

areas.

M/NS: Crime prevention and

public safety programs and

partnerships



Output Review Framework

Outputs

DepartmentalObjectives

GovtOutcomes

Are objectives

and outcomes

aligned?

Are

objectives

being

achieved?

Is the output mix

appropriate?

Are outputs

impacting on the

achievement of

objectives?

What is a fair

output price to

Alignment

Achievement

Impact

Appropriateness Price

How is this achieved?



Clarity of Responsibilities/Accountabilities

Output

Mgrs/CEOs

Outcomes

Outputs

Deliverables

Objectives

Parliament/

Public

Cabinet/

PAC

Permanent

Secretaries/

Perf.Appr

Govt/Ministers

Secretaries



Change in the way we do business

�Greater customer focus

�Highly collaborative

�Advantage of cross cutting issues

�Clear understanding of the respective roles

�Avoids duplication of resources

�Turf take over



Institutional Relational Landscape

�Catalyst for

Public Sector

Transformation

Driver and

Provider/expert of

Financial and

Accounting best

practices in the PS

Driver/provider and

expert of your specific

service DeliverablesMins/Dept

Policy planning

Implementation

Min.of Plan.

Human resource

Management

PA;CPO;DPA;PMCD

Legal frame-

work

AG; SS; CPC

Clients

Ngo’s;m/d

Ministry of

Finance

Financial

Management

Reform

Audit

Int /Ext



The Agencies in the Accountability Cycle - Going Holistic or Ballistic

The need for all to be involvedFinancial Management ReformMust transform all the AgenciesInvolved in the Accountability

Process- A package of reform isAbsolutely essential to achieve

The desired benefits

Cab/Parlt/PAC

BudgetDivision

Auditor General

Ministries/Departments

Pers/PMCDDepartment

TreasuryDivision

Output formatLink to services3year cycle

Better analysisComply with Acc.StdsFormal=Actual budget

Accrual Acct’gPer.measures

Law reviewSelect C’tteeClear Backlog

VFM AuditAudit StdsPre+ Post

Job DescriptionsRe-organization

DevelopmentConsultancyTraining

Monitoring

Consolidated Acct’sReview of LawsGeneral Ledger



Current Public Sector

� Emphasis on:

� Central power and control

� Cash expenditure

� Input focus

� Red tape

� Detailed Parliamentary appropriations

� Little change, little incentive



Emerging Public Sector

� Less control

� More accountability

� More focus on customers

� Output focus

� Link outputs to department objectives

� Full cost

� Managers manage

� Performance recognized



Focus of Financial Management Reform

� Focus public sector managers ‘service

providers’ on the need to plan over the

long term in order to deliver quality

services in a consistent manner and to take

advantage of new and emerging

technologies which reduce costs and

improve efficiencies.




� Seeks to focus public sector managers on the needs of the

Community-output focused

� as opposed to input driven,

� internally focused on maintenance

� where budget is non-discretionary

� annual in scope

� no links with previous years

� a broad medium term plan where any project can

qualify.




� Focus public sector managers on ensuring

that these services are delivered in a

financially efficient, resourceful and

accountable manner.

� Focus public sector managers on the

utilization of all resources-asset

management as against only cash




� Focus public sector managers on the need for regular reporting of output performance against pre-agreed targets- backbone of management accountability

� Focus public sector managers on the consequences of not achieving targets-reductions in appropriations.

� Conclusion: Financial management reform becomes the catalyst and driver of best practice in the Public Service



Objectives of Financial Management Reform

� To enable the Government to:

� Know what outputs it is funding departments to deliver-assess if output represents value for money

� Assess whether the agreed outputs are being delivered-performance measures provides the tools for assessment, accountability and continuous improvement

� Make better decisions when allocating resources




� To require Departments to be more responsive

and effective in service delivery by :

� Specifying clearly all outputs delivered and

demonstrate how they contribute to

Governments objectives

� Specifying output measures and set targets for

each output in terms of quantity, quality, cost

and timeliness as the basis for budget

submissions




� Determining and managing the full cost of

output delivery

� measuring performance against output

delivery



Deliverables

� A Review and Systemic overhaul of

financial and accounting systems,

practices and procedures

� Transition to an outcome based approach

to public expenditure

� Development of RFP for IFMIS



Deliverables – Ministry of Finance

Training

� Permanent Secretaries and Senior

Managers forum

� Accounting and Internal Audit staff

Developing and consolidating Strategic

and Business Plans of the Ministry of

Finance



Deliverables

� Assist Auditor General on its Draft Bill

� Produced a Green paper on Procurement

Reform

� Prepare White paper on Procurement Reform

for presentation to Parliament

� Approach Cabinet to create full time Unit to

oversee the development and implementation of

FMR



In summary – Financial Management

A framework for managing the State’s

resources:

� in line with the Government’s desired outcomes

� to meet the community’s expectations; and

� to ensure best value for money



In summary - Financial Management

Seeks to:

� Achieve savings in Public Expenditure

� Improve quality, efficiency and

effectiveness

� Give more control to the Government

� Let managers manage




How does it do these things?

� It clearly defines roles and relationships

� It clearly defines the rules of accountability

� It delegates authority to managers

� It focuses on results not process

� It promotes partnerships and co-operation




� Eliminates black box theory-knows what goes into a Department – not what comes out.

� Focuses Public Sector managers on service delivery

� Focuses the Government on the options regarding output choices

� Links Government objectives to departmental strategies and deliverables

� Mandates strong reporting systems/relationships to the highest level on a regular basis-pivotal

� Replaces perverse incentives – spend every last $



Eliminates black box theory

� We are aware of the costs going into a Ministry-what exactly is it producing? What are the priority outputs? Are you satisfied with the level of service? The quality,timeliness. Do you have early warning signals to flag when a project may derail-is monitoring confined to time consuming statutory and adhoc meetings with battery of senior officers

MinistryP.E

G&S

MEP

CTS

Services

?

outputs

Community

Government



End of Overview

� Questions/Discussion

�Break



Corporate Plans The Mandate

Minister of Finance Call Circular No: 1 dated

March 22, 2005 paragraph 9 states “For fiscal

year 2006, you are now required to submit

your Corporate Plan in the stipulated format

(i.e. showing service provided) together with

the estimates of expenditure in the normal

format.”



Corporate Plans the Rationale

� Corporate Plans - 3 year expenditure

framework which provides the link between

the Social and Economic Policy Framework

and the Business Plan

e.g. IFMIS/Output Management - SEPF

Pg 2 - Discuss content and compare with

estimates of expenditure



Corporate Plans the Rationale

SEPF(IFMIS,OM)

Corporate Plan

Estimates

Business Plan



Corporate Plans

� Development of Corporate Plans –why is this

approach different from past initiatives?

� Template- which simplifies the process

� Eliminates bulky documentation – arguments and

explanations

� Working papers - Auditing concept

� Standardizes format - facilitates completeness



Corporate Plans

� Removes stress of structure - how to organize

information - long hours of debate and looking at

other plans

� Enables completion before the plan period – not

struggling 2 years into the plan period to complete

� Facilitates easy use –information is classified by

sections



Corporate Plans

� Facilitates comparison and consolidation

� Corporate Plans can now be produced for the

whole of Government for the same period

� Clearer picture of Government’s expenditure over

the medium term

� Identify duplication of initiatives/programmes



Designing Corporate Plans

� Current status

� Expertise in strategic planning –planning

unit?

� Have you developed your strategic plans?




� Purpose of the guide – Pg 1

� To assist you in developing where appropriate

– strategic plans

� To provide information on the Central

Agencies requirements




� Results to be achieved – what are we going to do?

� The planning context – why are we doing it?

� How to achieve the objectives – how are going to

do it?

� The accountability structures for delivering results

– how will we know whether we were successful?




�What is planning - Page 2

�Why plan

� The planning framework- Page 4




� The distinction between Corporate and

Business Plans – Page 8

� Interrelationship of Corporate and

Business Plans – Page 9



Why are Both Plans Required

Corporate Plan Pg 11

� Verify that each Department’s goals and

objectives are consistent with whole of

Government policy

� Ensure, centrally, that goals and objectives of

all Department are consistent and do not

conflict with each other



Why are Both Plans Required

� Business Plan

Confirm that the output to be delivered are appropriate to the achievement of the goals and objectives

Assess the resources required

Enable rational allocation of resources across whole

of Government activities

Ensure that Government’s interest as owners are protected




� Identifies the relationship between the

Government and the Ministry – Purchaser

and Owner – Service delivery - Page 4

� Consider the impact on the organizational

structure.(Streamlining of business

processes)



Focuses the Government on the options regarding output choices

Defining the role of Government as Purchaser and Owner

Apparent contradiction of purpose –managed and brought into equilibrium

As Purchaser

� The Government is seeking the best value for its money by examining the best mix of services offered by Ministries/Departments to achieve the objectives of the Government.� the considerable skills and resources of the Ministries of Planning and Finance.



Defining the role of Government as Purchaser and Owner

Defining the role of Government as Owner

� The Government is concerned with the capacity of the institutions to deliver in terms of staffing, accommodation, equipment.

� The skills and resources of an independent PMCD

� Too much purchaser bias is exceedingly costly–many projects not being completed due to lack of capacity

� Financial resources tied up in projects which will not require it in the financial year



Government as Purchaser

3. Banker

Manager

1. Purchaser

2. Owner 4. Client

Output Specification

Purchaser

• Govt specifies goods and services (outputs) it wants Depts to deliver to clients

• Output price is fixed

• Govt pays the Dept when goods and services are delivered to specification

Department



Government as Purchaser/Banker

3. Banker

Manager

1. Purchaser

2. Owner 4. Client

Investment Capital

Banker

• Departments are 100% financed from Government’s Bank Account

• Department cash flows are managed by Treasury on behalf of Government

• Accrual Accounting

Department



Government as Purchaser o.b.o the Client

3. Banker

Manager

1. Purchaser

2. Owner 4. Client

Client

• Client is the 3rd party for whom outputs are intended

• May be member of public or other public sector entity.

• Government acts as purchasing agent for client

Department



Government as Owner

3. Banker

Manager

1. Purchaser

2. Owner

4. ClientProcess Regulation

Owner

• Govt acts as owner ofdepts

• Sets performance responsibilities

• Return on investment

• Productivity

• Viability

• Approves Asset Investment program

Department



Government and the Service Provider

3. Banker

Manager

1. Purchaser

2. Owner 4. Client

Manager

• Provides advice on alignment of departmental strategies and Government agenda

• Ensures outputs are delivered

• Ensures rules are followed

• Ensures that business is viable

Department




� The content of Corporate Plans-Pgs14-19

� Identifying strategic priorities – 4.1

� Policy objectives –4.2

� Core business – 4.3

� Identify customers – 4.4.1




� Identify stakeholders – 4.4.2

� Develop vision and mission – 4.5

� Environmental analysis – 4.6

� Critical success factors- 4.7

� Risk management strategies – 4.8

� Organizational capability and resources – 4.10




� Questions

�The End

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