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ADB Grant 0133-CAM: Public Financial Management in Rural Development Ministries (Component 1)

ADB Grant 0133-CAM: Public Financial Management in Rural Development Ministries (Component 1). Advanced Accounting 2 – Existing Accounting Methodology in Line Ministries. Day 2: August 17, 2010: Financial control and treasury accounting. Day 2 Financial control and treasury accounting.

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ADB Grant 0133-CAM: Public Financial Management in Rural Development Ministries (Component 1)

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  1. ADB Grant 0133-CAM: Public Financial Management in Rural Development Ministries (Component 1) Advanced Accounting 2 – Existing Accounting Methodology in Line Ministries Day 2: August 17, 2010: Financial control and treasury accounting ADB Grant No.0133-CAM/Component 1: PFMRD

  2. Day 2 Financial control and treasury accounting Content ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  3. Financial control ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  4. Financial control • "Financial Control shall be exercised by a body of financial controllers placed, by decision of the Minister of Economy and Finance, in central government agencies and their external departments in the Provinces and Cities, and also in the administrative institutions under their supervision." (Article 2 of Decree 81) ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  5. Role of the Financial Controller • The role of the financial controller involves auditing and accounting commitments and payment orders, informing the Minister of Economy and Finance on the administrative management under his supervision and advising the authorizing officer on his financial management and the financial implications of his decisions. ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  6. Role of the Financial Controller ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  7. Role of the Financial Controller ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  8. Role of the Financial Controller “No public expenditure charged to the State's budget or to a Treasury special account (or to an adjunct budget) shall either be committed or implemented by senior authorizing officers or authorizing officers by delegation, unless such authorizing officers have made a commitment proposal in writing and provided that such proposal, to which the approval stamp of the Financial Control shall be duly affixed, has been sent back to the authorizing officer." (Article 3 of Decree 81) ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  9. Role of the Financial Controller: 1. A Priori control: 1.1. Approval of commitments "The financial controller shall examine the propriety of the expenditure proposed and this check shall concern the following elements: • Purpose of the expenditure • Budget item to which the expenditure is to be charged, pursuant to the regulation enacted by the Minister of Economy and Finance in terms of expenditure classification, and according to ... the allocation of budget appropriations. •  Accuracy of the expenditure estimate •  Availability of appropriations • Implementation of financial provisions, laws, as well as decrees and regulations in force. • Compliance of the expenditure with budget preparatory work." (Article 4 of Decree 81) ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  10. Role of the Financial Controller: 1. A Priori control: 1.1. Approval of commitments • "Financial Control shall deliver its opinion within 4 working days; on expiration of the time limit set, the opinion shall be considered as granted without consultation and the expenditure shall be declared enforceable." (Article 7 of Decree 81) • "However, Financial Control may ask for any further explanation, information or justification that it deems necessary; in this case, the deadline shall be suspended until the elements required are provided." (Article 7 of Decree 81) • "There can be no side-stepping of the withholding of approval by Financial Control within the statutory time limit, except upon decision from the Ministry of Economy and Finance." (Article 8 of Decree 81) • "This approval shall be directly granted by the Minister of Economy and Finance for expenditures exceeding a threshold that has been set by Order." (Article 10 of Decree 81) ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  11. Role of the Financial Controller "Payment orders and the sub-decreeon the allocation of budget appropriations are to be submitted to prior approval of the financial controller." (Article 55 of Sub-decree 82 on public accounting) This approval makes it possible to certify that Financial Control has duly received all necessary information for the bookkeeping of payment authorizations with regard to that of the commitments, and that the payment authorizations duly comply with the commitments that they are intended to cover in whole or in part. Sub-decree 81 on Financial Control has not elaborated on this point. ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  12. Role of the Financial Controller ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  13. Role of the Financial Controller Advance payment accounts have already been discussed on Day 1 of this course. ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  14. Role of the Financial Controller "Chief authorizing officers or officers by delegation may request block commitments for recurrent expenditures, either at the beginning or during the management process. The block commitment approval granted by Financial Control shall cover, without exceeding the amount concerned, all expenditures charged to the same budget item, and the authorizing officer is not required to submit partial commitments for each expenditure to Financial Control. (Article 12 of Sub-decree 18) ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  15. Role of the Financial Controller: 2. Exceptions to a priori control: 2.2. Block commitments “Theblock commitment procedure shall apply notably to the following expenditures: • Expenditures for wages and allowances. • Expenditures to be committed under previous decisions and of a recurrent nature, unless modified by a new amending provision. • Rents • Operating funds granted to public administrative institutions • Spending on public debt amortization • Contribution to international organizations. • Expenditures to be implemented, either within the framework of a public procurement, or within the framework of an estimated force account work quantity survey, which have received assent of the competent public procurement commissions, as well as the approval of the relevant government agencies." (Article 14 of Sub-decree 81) ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  16. Role of the Financial Controller • "Authorizing officers ... may require provisional commitments for ... : • Expenditure for material and administrative management • Expenditure reimbursement • Public intervention expenditures in the economic, social and cultural fields." (Article 15 of Sub-decree 81) ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  17. Role of the Financial Controller  " ... One quarter of the annual budget authorization concerned ... " may be committed once (Article 16 of Decree 81) "without the authorizing officer having to attach the supporting documents." "The following proposals must be accompanied by the supporting documents relating to the previous provisional commitments; such documents shall be approved within the limit of the amount specified therein." (Article 17 of Decree 81) ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  18. Role of the Financial Controller "Requests for transfer within budget subheadings or payments charged to contingent expenditure chapters shall be approved by Financial Control, prior to their examination by the departments of the Ministry of Economy and Finance ... " (Article 24 of Decree 81) ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  19. Role of the Financial Controller Article 22 of Decree 81: "Financial Control is empowered to verify, a posteriori and by all legal means that it deems necessary, the actual implementation of the object of the budget expenditure: provision of services, physical setting up of a project, acquisition of equipment ... ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  20. Role of the Financial Controller For that purpose, Financial Control officers have access, without any prior notice, upon assignment order issued by the Minister of Economy and Finance, to the departments that implement the expenditures of all central government agencies and their external departments in the Provinces and Cities, as well as the public administrative agencies under their supervision. They may request an accounting for all expenditure implementation details. ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  21. Role of the Financial Controller Financial Control shall draw up an audit report for the Minister of Economy and Finance on the actual condition of expenditure implementation. Irregularities that appear in this implementation and discrepancies noted between the bookkeeping entries and this implementation will result in action being taken by the Minister of Economy and Finance, after receiving the opinion of the Prime Minister, with a view to applying administrative penalties or, if appropriate, opening criminal prosecution." ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  22. Role of the Financial Controller "After auditing the spending departments of senior authorizing officers and authorizing officers by delegation, Financial Control shall keep accounts of expenditure commitments and ensure the follow up of credit consumption. Financial positions shall be drawn up each month and compared with the positions regarding commitments or payments drawn up by authorizing officers, and to those drawn up by Treasury departments for implemented payment orders." (Article 21 of Decree 81) Additional commitments and releases or cancellations are to be submitted to Financial Control and justified." (Article 19 of Decree 81) ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  23. Role of the Financial Controller "Financial Control is required to give, as far as finance is concerned, an opinion with grounds stated on draft laws, royal decrees and sub-decrees of the Council of Ministers, orders, contracts or regulatory decisions with financial implications." (Article 28 of Decree 81) "Financial Control shall take part in budget preparation work and in drawing up of the State's budget settlement law." (Article 23 of Decree 81) ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  24. Role of the Financial Controller "Financial Control shall draw up an annual overall report on the budget of the last completed financial year, showing the outcomes of audit operations and the proposals that it may formulate as regards improvement of budget implementation. This report shall be submitted to the Minister of Economy and Finance by March 31 of the year following that for which it is drawn up." (Article 29 of Decree 81) ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  25. Role of the Financial Controller Since he/ she is not involved in the daily concerns of the authorizing officer whom he is auditing, the Financial Controller should be able to advise him about the financial implications of his choices and decisions in the light of financial and general laws and regulations, of which he must have a thorough knowledge, in particular in matters where their accountability is called into question. ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  26. The Treasury ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  27. The Treasury • In Cambodia, the Treasury is composed of "all available credits held by public accountants in the form of cash on hand and deposits in one current account open at the National Bank of Cambodia." (Article 74 of Sub-decree 82) • "Public institutions are to deposit their funds at the Treasury, unless waivers have been granted by the Minister of Finance." (Article 71 of Sub-decree 82) • "The National Bank of Cambodia shall be the sole depositary of the funds held by the Treasury's direct accountants" (article 78 of Sub-decree 82) • "State public accountants only are authorized to handle Treasury funds." (Article 72 of Sub-decree 82) ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  28. The Treasury • "Authorizing officers and other State officers who do not have the capacity of public accountant cannot open an account in the banks or in public or private credit institutions. • However, the heads of the units in charge of the management of projects financed by foreign aid may open an account to meet the needs of the projects under the terms set by the agreements signed with the donors. The opening of these accounts shall be subject to prior authorization of the Minister of Finance." (Article 73 of Decree 82) • The opening of private accounts and the handling of funds through these accounts (or handling cash) are the "de facto management" situation previously referred to. • "State public accountants cannot have an account open in banks or credit institutions of private nature, unless a waiver has been granted by the Minister of Finance." (Article 77 of Decree 82). ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  29. The Treasury: 1. Treasury Operations • "Treasury operations refer to all flows of cash, cashable shares, deposit accounts, current accounts and transactions concerning short-term receipt and debt payable accounts." (Article 68 of Sub-decree 82) • "Treasury operations are described by nature for their entireamount and without any offsetting between them." (Article 69 of Sub-decree 82) • "Expenses and revenues resulting from treasury operations are to be charged to budget accounts". (Article 69 of Sub-decree 82) • "Except for cash flows required by cash payments made to or releases made by accounting officers, all settlements between public accountants shall be carried out through account transfers." (Article 80 of Sub-decree 82) ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  30. 2. Counterparts of the Treasury • "Treasury counterparts are bodies and individuals who, either pursuant to laws and regulations, or in accordance with agreements, deposit Treasury funds, on a mandatory or optional basis, or are authorized to carry out revenue or expenditure operations through Treasury accountants. • Unless an authorization has been granted by the Minister of Finance, only one account per counterpart can be open at the Treasury ... “(Article 81 of Sub-decree 82) • "Treasury accountants may be authorized by the Minister of Finance to set up a special fund deposit service." (Article 83 of Sub-decree 82) • "Accounts opened at the Treasury on behalf of counterparts shall not show any overdraft ... " (Article 84 of Decree 82) ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  31. 3. Cash management ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  32. 3. Cash management • Principles of improving cash management are covered in the EFI course “Cash Management” ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  33. Single Treasury Account • The Treasury Single Account (TSA) can be defined as "a system of National Treasury accounts that are linked together." • Single treasury account is the integration of government accounts, and the sweeping of overnight balances into a single account held by finance ministry at the central bank. • The objective of the TSA is to improve cash management by pooling all available cash resources to ensure its optimal utilization and minimizing idle cash balances. • Two principal characteristics of a contemporary TSA: • Fungibility – Treasury should be able to freely and expeditiously move resources between all bank accounts in the TSA; and • Operational control - The TSA operational control should rest exclusively in one institution-the National Treasury and Provincial Treasuries. ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  34. Single Treasury Account • The Treasury Single Account (TSA) consists of two principal accounts:0100­39.1211-T001, in Cambodian Riel, and 0102-35.1211-T023 in US dollars. • Tax and non-tax revenues collected in Riel and US dollars are credited into the Riel account, after conversion if required. The dollar account is used for debt servicing and specific disbursements. • The NT does not use commercial banks for its retail operations, except the use of ANZ Royal Bank for salary disbursements for senior officials. • Petty cash advances are received from the Treasury in cash and kept in the office safe. A high proportion of Treasury disbursements are in cash disbursed at the NBC, the NT or its provincial branches. As part of the PFM reform program, tax revenues collected by the TD and the CED are now deposited at the NBC by the taxpayers. These revenues pass through zero balance accounts at the NBC into the TSA. ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

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