Report No. 46848-IN India The Role of the Integrated Financial Adviser in the Government of India February 5, 2008 Financial Management Unit South Asia Region Document of the World Bank CONTENTS ................................................................................................................................................................................................................................................................_ EXECUTIVESUMMARY 5 1 BACKGROUNDRESEARCHPAPER . ................................................................................................................................ FOR ................................................................................................... A Scopeof ResearchPaper .................................. 9 , , , . .. ....,.,,..,................................................ 9 10 11 HISTORICAL . B Methodology ................................................................................................................. .. PERSPECTIVEON THE ROLEOFFINANCIAL ADVISER ININDIA ................................. 12 A Development of Public FinancialManagement inIndia ...................................................... . 12 B. OriginandEvolution of the FinancialAdviser....., ...., ., .,, ...., ...............,....,,,,,..................... 15 111 CURRENTROLEOFFINANCIALADVISERSININDIA . 17 A The RoleandFunctions of the FinancialAdviser 19 B Accountability ofthe FinancialAdviser .. ..........,.....,,....,............................. ...,,...,,......,...............,......,....................... ....................................................................... , , , ..................... 27 C. Selection, Appointment and Career Development of the Financial Adviser ........................... 27 D. Organisation, Selection, andTrainingofFA Staff .......,......,.............................................. .ROLEOF 28 INTEGRATED FINANCIALADVISERS: INTERNATIONAL COMPARISON ............................ 29 A Cross-country Comparison ofFARoleinIndiaandOther Countries .................................. 29 v.INTERNATIONAL B KeyFeaturesofChief ExecutiveOfficer inSelectedCountries ........................................... .. 52 BEST ........................................................... A.Driversof ChangeinPublic Sector................................................................................... PRACTICESAND LESSONSINDIA FOR 71 71 B. Framework ofFinancialManagement inPublic Sector-Legislationand Guidelines ..............71 C Mandate o f the FinancialAdviser ................................ ,........................ ,.......................... 72 D Governance Systems....................................................................................................... .. 72 E.Review ofFinancialManagement...................................... ,.............................................. 72 F.Measurementof Performance........................................................................................... 72 G.Reporting...................................................................................................................... 72 H.ResponsibilityofFinancialAdviser ............................ , ......,.....................,........................ 72 I.RoleofFinancialAdviser ........................................... .......,.............................................. 73 J Selection Process of Financial Advisers . .,,.,.......,,...,,..,......,, ...............,.....,.,.,.................... , 73 K.Training .........,.,...................................................... ....,..,.............................................. 73 L.PerformanceEvaluationofFinancialAdvisers .................................................................. -74 M. Supportto FinancialAdvisers ......................................................................................... 74 VI OPTIONSFORTHE WAY FORWARD . .................................................................................................. 75 A. MainObservations andOptions ....................................................................................... 75 B.Conclusion .................................................................................................................... 77 ANNEXA OFFICE MEMORANDUM OF 1975 ............................................................................................. 78 ANNEX B CONCEPTNOTE: ROLEOF THE INTEGRATED FINANCIALADVISER .................................... 78 ANNEX c 84 ANNEXD LISTOF PEOPLE MET ANNEXE SELECTED WEBSITES ANNEX F GENERIC MODEL CHIEF FINANCIAL OFFICER DUTIESAND RESPONSIBILITES ... ...REDEFINED CHARTER FORFINANCIAL ADVISERS ININDIA, 2006 ........................................ FOR ......................................................................................................................102 ............................................................................................................ 100 110 2 Abbreviations andAcronyms AFTFM Africa Regions FinancialManagement C&AG Comptroller & Auditor General CA Controller o fAccounts CCA ChiefController o fAccounts CEO ChiefExecutiveOfficer CFO ChiefFinancialOfficer CFOA ChiefFinancialOfficers Act CG Comptroller General CGA Controller General of Accounts DFPR Delegation o f Financial Powers Rules DGPP General Director o fProgram & Budgeting(Mexico) DOE Department o f Expenditure EFC Expenditure Finance Committee (India) EU European Union FA FinancialAdvisor FD Finance Director (United Kingdom) FMAA FinancialManagement and Accountability Act (Australia) FMO Finance Minister's Orders (Australia) FRBMA FiscalResponsibilityand Budget Management Act (India) FY FinancialYear GAO Government Accountability Office GFR General FinancialRules (India) Go1 Government o fIndia GPRA Government Performance andResults Act (United States) ICAA Institute o f CharteredAccountants inAustralia IFA Integrated FinancialAdvisor IFAC International Federationo f Accountants IFD Integrated Finance Division IPFA Institute o f Public Finance and Auditing (South Africa) IT InformationTechnology MoF Ministry o f Finance MTBF MediumTermBudgetaryFramework (Pakistan) NGO Nongovernmental Organization NIFM National Institute of Financial Management (India) OCG Office o f Controller General OMB Office of Management andBudget (United States) PFM Public FinancialManagement PFMA Public Finance Management Act (South Africa) PIB Public Investment Board (India) UK UnitedKingdom us UnitedStates (of America) 3 ACJCNOWLEDGEMENTS This researchpaper was conducted during February to July 2007. The World Bank team was task led byMs.Priya Goel' underthe overall guidance o fMr.Robert J. Saum andMr.P.K.Subramanian (SARFM) with consulting support from Mr. Anthony Bennett and Ms. Asha Bhagat. Invaluable contributions from Dr. Sanjiv Misra (Secretary Expenditure); Mrs.Meena Agarwal (Joint Secretary Personnel, Department of Expenditure); Mr. Atanu Chakraborty (Secretary Tourism, Government of Gujarat); Mr. Manish Kumar (Deputy Secretary, Department o f Expenditure) and Mr. Manoj Sahay (Deputy Secretary, Department of Expenditure) guidedthe team at various stages inproviding information, analyzing it, and givingthe product its final shape and form. Inaddition, aninternational team-of WorldBank staff, Mr.AtulDeshpande,Mr.FurquanAhmed Salim (SARFM), Mr. Gert Van Der Lind (AFTFM) and Mr. Marius Koen (OPCFM); and consultants Mr. Vinod Sahgal (Canada), Mr. Antonio Huerta (Brazil and Mexico), Ms. Edward Hays (Australia); Ms. Nalini Aiyer (USA) and Mr. Richard Evans (Indonesia) - worked to contribute to the factual information to this report. We would like to register a vote o f thanks to the following: Dr. Sanjiv Misra (Secretary, Department o f Expenditure); Mrs. Asha Swaroop (Secretary, Department o f Information and Broadcasting); Mr.M.S. Srinivasan (Secretary, Ministry of Petroleum andNatural Gas); and Mr.Ani1 Razdan (Secretary, Ministry of Power); Ms. Manju Madhavan (Member Finance, Department of Telecommunications and Department of Telecom Services); Mr. Raghubir Singh (Additional Secretary & Financial Adviser, Ministry o f Health & Family Welfare); Mr. Vivek Mehrotra (Additional Secretary & Financial Adviser , Ministry o f Food, Consumer Affairs and Public Distribution); Mr. M. Deena Dayalan (Joint Secretary & Financial Adviser, Ministry o f Finance); Mr.Rajesh Sharma (Joint Secretary& FinancialAdviser, MinistryofPower); Mr.M.Sahoo (Joint Secretary & Financial Adviser, Ministry o f Power); Mr. S. K. Ray (Joint Secretary & Financial Adviser, Ministryo f Human Resource Development); and Mrs. Sushma Nath (Member Secretary, Sixth Central Pay Commission), Mr.Manoj Joshi (Advisor, Sixth Central Pay Commission) and Mr. M.Nagaraju (Director, Department of Economic Affairs, Ministryof Finance), who contributed to this product. Thanks are also due to Mr. Mohan Nagarajan (PREM), Mr. Rajeev Swami (Latin American and Caribbean Office of Financial Management), Mr. Michael John Jacobs (World Bank Consultant) and Mr. Vishwanath Alok (Indian Institute of Public Administration) for the peer review of the report and ensuring that all the research and analytical underpinnings were well thought out and presented. This report has been discussed with the Government of India; clearance has been obtainedfor publication, but does not necessarily bear their approval for the entire content including opinions, conclusion and policy recommendations. ' Forfurther information on the researchpaper contactPriya Goel at pgoel@worldbank.org 4 EXECUTIVE SUMMARY 1. Today's public sector organizations are expected to have the strategic capability to make policy choices and allocate resourcesaccording to public priorities, to ensure value for money in the delivery of services, to live within agreed fiscal ceilings, and to do so openly and transparently. India i s no exception. Four drivers are creating complexity and the need for greater capability from the finance function: expanding. Backgroundfor Research Paper 2. In India, financial management practices are under continuous scrutiny by the Ministry of Finance (MoF), which has overall executive responsibility for financial management, and by the media, think-tanks and (currently) by the Second Administrative Reforms Commission. At the center ofthis debate, the FinancialAdviser (or IntegratedFinancialAdviser) is the key figure, as the senior finance officer in each administrative ministry, the Financial Advisers feel that expectations from them are expanding, but that their capacity and influence within their ministries/departments have remained unchanged. There i s an awareness that, in some countries, the role of the Financial Adviser has expanded. In some countries, the Financial Adviser is more oftencalled Chief FinancialOfJicer (CFO). 3. The role of the Chief Financial Officer (Financial Adviser) i s commonly seen as having three parts: 0 Strategistand leader to the agency chiefexecutive officer andprogramme managers, providing objective advice having no vested interestsincompeting programmes or operations; and a keyplayer at the executive table as the department's financial planner, partner, and integrator. 0 Steward with responsibility for the risk and financial control framework; and the scorekeeper, providing performance and financial accounting andreporting that integrates financial andnon-financial information. 0 Treasurer with responsibility for mobilising funds andmeetingall payment obligations as they arise, maintaining liquidity o fthe agency at minimumcost. 4. In2006, the MinistryofFinance requestedthe World Bankto produce a researchpaper as inputto the internal debateon the role of Financial Advisers. The Ministrywanted amore in- depth look at the role o f the Financial Adviser, its responsibilities and accountability structure in the context of the growing maturity of the Indian economy, the demand for government performance and results, the greater emphasis on governance and transparency in India as highlighted by the Right to Information legislation and the Fiscal Responsibility and Budget Management Act, and the growth o f e-governance. This report i s submitted as an input to the debate. Scope and Methodology of Research 5. The research takes a closer look at the development o f the Financial Adviser and its counterparts inthe Ministries o f Finance o f other countries, how the position i s structured and how it functions in more industrialized countries and in developing countries, what are appropriate training and certification programmes for Financial Advisers and their key support staff, what are commensurate career development opportunities so that the position becomesmore attractive for Government officers andtalented applicants. The paper is limited to the Central Government o f the countries visited for the research. (Annex D lists the individuals andinstitutionsmet duringthe preparation o f this paper). 5 6. The methodology was developed in consultation with the Department o f Expenditure (DOE) within the Ministry o f Finance. The DOEofficials were kept informed on progress and consulted on several issues as they arose. In the first phase, interviews were held with a sample o f Financial Advisers in the Government o f India following a structured questionnaire. Discussions were heldalso with senior MoF officers and with the Sixth Central Pay Commission. A desk review o f documents and websites was undertaken. Websites associatedwith the topic are listed inAnnex E. 7. Inthe secondphase, consultantswere contractedto researchthe FArolewith interviewsand document reviews inAustralia, Canada, Indonesia, UnitedKingdom and the United States. A standardstructured questionnaire was developed to guide interviews, Document reviews were also conducted in Brazil, Mexico, Pakistan and South Africa as part of the comparison exercise. From this combined international experience, comparisons were made with Indian practice on the main issues, and options andrecommendations were developed. 8. The draft report and key recommendations have been discussed with the Department of Expenditure andtheir preliminary comments have beentaken into account. Key Observationsand Recommendations 9. Followingare the mainobservations and recommendations summarized from the research: Legislation on financial management. The mandate o f the Financial Adviser is by executive direction. A statutory mandate would enhance the status o f Financial Advisers and strengthen their role. As India has no central organic budget law, the FA mandate could be included ina comprehensivebudget law, including role of the ChiefAccounting Authority and Financial Adviser. A possible model is South Africa. Annex F shows a generic model o f CFO responsibilities Governance system. The United Kingdom, as do other countries, have management boards for decision making indepartments. The secretary i s chairperson o f the board and i s accountable for its decisions, which are considered to be o f a joint nature with other members o f the board. The finance director (in the UK context) takes collegiate responsibility as a member o f the board though the accounting officer (i.e., secretary) remains ultimately accountable for all decisions. Therefore, mandate ofboth the secretary as accounting officer, and that of the finance director as someone supporting himher are quite clear. Responsibilityof Financial Advisers. The current structure o f the FA role wherein they are mandated with supporting the secretaryand at the same time being the `eyes and ears' o f the Ministry o f Finance tends to lend itself to potential conflict. It is therefore important to ensurethat there is a supportive, rather than adversarial, relationship between the Financial Adviser and the respective secretary. There i s a need to define the FA responsibilities more clearly, particularly as a senior member o f the management team o f the administrative ministry, and one who supports the secretary in discharging responsibilities as the accounting officer. All information and reporting requirements o f the Ministryo f Finance should be addressed to secretaries, not to FinancialAdvisers. The secretaries shouldbe heldresponsible for meeting all laws, rules, andbudgets in terms of General Financial Rule 64. 6 0 Institutionalized system for capacity building based on training needs assessment. Training needs to be provided by a professional training institute whether a government or nongovernmental agency. Distance learning may also be considered. Training needs assessment (as inSouth Africa) and implementationof trainingshouldbe institutionalized as an ongoing and regular system. It should also have a built-insystem o f review o f the curriculum and methods o f training, so that training can be modified to cater to evolving needs o f finance staff inresponseto future developments inpublic financial management inIndia. Assessment of F A performance. Specific criteria and benchmarks need to be developed for assessment of performance o f Financial Advisers. These criteria should be linked to responsibilities o fthe FinancialAdvisers as per the 2006 Charter. Allocation of work to Financial Advisers. It i s important to assess the work profile of different ministries so that ministries where there is a larger workload could have dedicated (full-time) Financial Advisers. Ideally, larger ministries could have dedicated Financial Advisers. The research on other countries shows that there are dedicated Financial Advisers inministries/department. Responsibilitiesof Financial Advisers. Planning and formulation of schemes/projects. Written comments by Financial Adviser should be part o f submission for Expenditure Finance Committee and Public Investment Board, etc. Budgeting: - Financial Adviser shouldbe responsible for planbudget as well as non-plan budget, even ifits preparation is located outside the Integrated Finance Division. - The Charter should clarify specific responsibility of Financial Adviser for plan budget, non-plan budget, performance and outcome budget. Budget execution. Financial Advisers should prepare monthly cash flow forecasts based on approved estimates and releases to be based on pre-agreed cash flow patterns, rather thanacrosstheboardpercentages. Internal control: In consultation with management team, Financial Adviser should prepare annual report on risks facing the achievement o f departmental goals andmeasures to mitigate risks. Reporting to Ministry of Finance: Annual Finance Report and Annual Outcomes and SystemsReport mentioned inthe Charter should be institutionalized. Supportfor the FinancialAdviser. Chief controller of accountdcontroller of accounts: Role o f chief controller of accounts/controller of accounts (CCNCA) should have the same organizational scope as that o f the Financial Adviser (i-e., each Financial Adviser to have one chief controller of accounts/controller of accounts reporting to them) and FA and CCNCA responsibilities should be co-terminous (Le., if some Financial Advisers continue to have charge o f more than one ministry/department, the controller o f accounts reporting to the Financial Adviser should also hold the charge o f the same ministries/departments). Such an arrangement might lead to better planning and coordination o f work o f various ministries/departments. 7 Strengthening Integrated Finance Division: - A separate finance cadre from which staff for IFD can be drawn would be a significant step in long-term strengthening o f finance function and might also contribute to making the finance function more attractive to Government staff and new recruits. This will also facilitate more effective institutionalizationo f a system of training and retention of trained staff within the finance function. - Work study to assess number of staff and skills required in each IFD could be used as a tool to define both generic skills required for public sector financial management, as well as specific skills that are necessary for the work of IFD staff incertainministries, for instanceinproject appraisal. - The 2006 Charter mentions that an IFD manual will be developed. Apart from being a tool for training and orientation of new staff, such a manual canbeusehl in operationalizing the tasks to be performed by the Financial Adviser as per the Charter and as per General Financial Rules and Delegation o f Financial Power Rules. - Financial management skills o f IFD staff should be enhanced as per recommendations above. - Finance staff should be professionally skilled and qualified in the field of accounts1finance. - All departmentdministries should be encouragedto adopt StandardOrganizational Chart and Job Descriptions. 8 I.BACKGROUND FORRESEARCHPAPER 1. Inevery ministryofthe Government of India(GoI) aFinancial Adviser (FA)has a leading role in the ministry's finance function. The Financial Adviser is responsible to both the Ministry of Finance (MoF) and relevant administrative ministry as designated under the Delegation o f Financial Powers Rules, 1978.' The FA role was defined in 1975 in a MoF- issued Office Memorandum (reproduced in Annex A).2Outside the delegated powers, the Financial Adviser is responsible solely to the Ministryo f Finance and operates in accordance with its guidelines. 2. Inrecent years, there has been growing dissatisfaction with the dual FA responsibilities and the difficulties of maintaining a balance between obligations to Administrative Secretaries in assisting to achieve developmental objectives and obligations to the Ministry o f Finance to achieve fiscal and fiduciary objectives. Under the General Financial Rules (GFR) o f 2005, the Administrative Secretary, as Chief Accounting Authority, i s made fully responsible and accountable for financial management o f his or her ministry or de~artment.~As the post implies, the Financial Adviser i s strictly an adviser to the Secretary, frequently lacking power, and tending to be a figurehead who is often left out of the decision making loop. Yet, the Financial Adviser is required also to represent and report directly to the Ministry o f Finance, particularly on financial matters outside the delegatedpowers. 3. Approaching the World Bank in 2006, the Ministry o f Finance wanted input to the internal debate on the role o f Financial Advisers in the Government o f India. The Ministryrequested input that would examine the FArole, responsibilities, and accountability inthe context of the growing maturity o f the Indianeconomy, the demand for government performance andresults, the greater emphasis on governance and transparency in India as highlighted by the Right to Information legislation and the Fiscal Responsibility and Budget Management Act, and the growth o f e-governance. The Second Administrative Reforms Commission i s currently debating how financial management should be strengthened. The Ministry o f Finance also wanted a comparison o f the FA role in India to that o f other countries, particularly industrialized countries (Australia, the United Kingdom, and the United States among them) which have similar FA positions but often called Chief Financial OfJicer (CFO). Inthe United States the 2003 Sarbanes-Oxley Act put additional responsibilities for internal control onto private sector Chief Financial Officers. Central budget agencies in the United States and other industrialized countries have added equivalent responsibilities to the public sector Chief Financial Officers. The Concept Note and Terms o f Reference for the research paper are reproduced inAnnex B. A. Scope of Research Paper 4. The researchpaper compares the various thoughts and models o f the finance function in the Indian Central Government with those that exist worldwide, presents the analytical underpinnings o f why some aspects o f a particular model may be suitable to the Indian position, andprovides the Government of Indiawith options and courseso f action. ' Muthuswamy and Brinda, Delegation of Financial PowersRules, 231dedition; Chennai: Swamy Publishers. 2007. This edition incorporatesamendmentsto the original 1978rules upto September2006. Office MemorandumNo. 10(29) - E.Coord73 (Ministry of Finance, October 6, 1975) and subsequent instructions. GeneralFinancial Rule 64 (Ministry of Finance, Department of Expenditure, Report of the Task Force, 2005). 9 5. The paper offers historical and current perspective (Chapters I1and 111) on the development o f the role of Financial Adviser, comparative lessons from other countries on how they have structured this position (Chapter IV), suggestions on appropriate training and certification programmes for Financial Advisers and their key support staff and opportunities for commensuratecareer development that makes the FA position more attractive for Go1officers and talented applicants (Chapers V and VI). 6. This research paper is not intended to be prescriptive but i s limited in scope to presenting alternatives with their advantages and disadvantages. The paper was not required to address any o f the many technical issues arising in the present state o f financial management or the civil service inthe Central Government. These are outside the scope o f this assignment. 7. The draft report and key recommendations have been discussed with DOEofficials and any MoF comments have beentakennote of. B. Methodology 8. The methodology was developed in consultation with the Department o f Expenditure (DOE), within the Ministry o f Finance. DOEofficials were kept informed on progress and were consulted on several issues as they arose. Inthe initial phase o f the research, the Ministry o f Finance introduced in June 2006 a Redefined Charter for Financial Advisers (reproduced in Annex C). This Charter defines the following: 1. Role ofFinancial Advisers 2. Involvement inkeyprocesseso fthe ministry 3. Reportingsystem 4. Roles andresponsibilities of ChiefControllers o fAccounts 5. Interactionbetween Ministryof Finance and FinancialAdvisers 6. Capacity building 9. In the first phase, interviews were held with a MoF-selected sample of administrative secretaries and six Financial Advisers within the Government o f India following a structured questionnaire. The sample includeministries from the social and infrastructure sectors, and the Ministryof Communication and Information Technology, which has staff from the accounts cadre and where ministryprogrammes are more commercially oriented. Discussions were held also with senior MoF officers and with the Sixth Central Pay Commission. The principal people met inconjunction with the researchare listed inAnnex D. 10. Additionally, a desk review of Indian documents and websites was undertaken. The research for this paper was enhanced by the outcome o f workshops on the Role, Authority and Accountability o f Financial Advisers held by the National Institute o f Financial Management in September 1997 and May 2005. In addition to the workshop notes, background papers provided a wealth o f information andopinions whichthis paper was able to draw from. Office Memorandum,Schemeof `IntegratedFinancial Adviser', Ref: F.No. 5(6)/L&C/2006 (Ministry of Finance, Departmentof Expenditure New Delhi,June 1,2006. 10 11. Inthe secondphase, consultantswere contracted to researchthe FArole inAustralia, Canada, Indonesia, United Kingdom, and the United States. Using a standard structured questionnaire developed for this assignment, the consultants were able to conduct interviews with standard guidelines. The consultants also studied key documents and websites, interviewed a sample o f counterparts to IndianFinancial Advisers in the respective countries, anddrafted case studies. In Brazil, Mexico, Pakistan, and South Africa, desk research and selected interviews were undertaken. From all this international experience, comparisons were made with Indian practice on the main issues, and options and recommendations were developed. These comparisons are compiled inChapter IV. 12. All interviews were held on a confidential basis in which officers were encouraged to speak freely and so, no views are ascribed to individuals. The authors take responsibility for all the views and opinions expressedinthis paper. 11 11. HISTORICAL PERSPECTIVE ONTHE ROLE FINANCIAL OF ADVISERININDIA I 13. The role of Financial Advisers should be analyzed in the context o f the financial systems within which they work. The development of public financial management (PFM) systems provides the context inwhich the position of FinancialAdviser originated and developed. A. Developmentof PublicFinancialManagementinIndia 14. At India's Independencethe system of public financial managementwas based on the highly centralised pattern o f Treasury control inEnglandbefore World War I. new Constitution The laid down anelaborateprocedure for Parliamentary control o fpublic finance. 15. With the enormous expansion inthe role of the State after Independence,decentralisation was progressively introducedthrough a written delegation o f central powers5.The Comptroller and Auditor General6 (C&AG) in 1954, was of the view that devolution of authority to the administrative ministries should be matchedby devolution of responsibility for accounting and control of expenditure. He coined the term "departmentalisation of accounts" for the new ~ystem.~However, there was considerable resistance to the separation o f accounts and audit staff in the C&AG cadre and the devolution o f accounts staff to the ministries. The First Administrative Reform Commission (1966) reinforced objections by saying that "there i s no inherent conflict or disadvantageinthe combination o f the function o f compilation o f accounts with that o f audit"--a rather startling conclusion in light o f modem ideas about independence o f the audit fimction. 16. In accordancewith the Government of India (Allocation of Business) Rules, 1961, financial powers of the Government are vested in the departments o f the Ministry of Finance (MoF). The Department o f Expenditure (DOE)inthe Ministryo f Finance has the authority to delegate financial powers to various subordinate authorities o f the Government o f India (GoI). Financial powers o f the Government, which are not delegated to any subordinate authority, remain with the Ministry of Finance. The Department of Expenditure has the authority to prescribe financial rules andregulations necessaryto runthe affairs o fthe Government. 17. In India, as in most countries around the world, it is understood that accountability for expenditure is only one side of the coin. There has also been a growing demand for accountability for results. As far back as 1954, the Lok Sabha recommended performance budgeting in order to relate expenditure to real outputs and outcomes. In 1969, the Government o f India adopted the detailed recommendations o f the First Administrative Reforms Commission and issued Guidelines to all line ministries. The Ministry o f Finance structured the performance budget by function, programme, and activity. However, it was introduced as a separate document from the traditional input budget (the demand for grants), andbudget scrutiny continued to be input-based. On the basiso freportsby Ayyanger (1949), Gonvala(1951), Appleby (1953), Desmukh(1954), andthe Estimates Committee (1954) Shri A.K. Chanda R.Ramanathan,GovernmentAccounting: Principles andPractices,secondedition, 2005, p.14. This section draws heavily onthis document and onNIFM (2005) Evolution of the Role of Financial Advisers inthe Government of India. 12 18. In 1973, the Yardi Committee report recommended that responsibility for internal financial management and operational performance should be entirely that o f the administrative ministries. It reiterated the need for performance budgeting and management accounting, and for new cadres for finance, accounts, and internal audit appointed by the Union Public Service Commission. The report was approved andtwo ordinances were promulgated, one on Transfer of Personneland one on the Separationo f Accounts from Audit. With effect from the accounts for fiscal year 1978; the Comptroller and Auditor General (C&AG) was relieved o f the responsibility o f preparing the Go1 finance accounts. Accounting responsibilities were transferred to the ministries andthe Controller General o f Accounts (CGA). 19. As a check on the accounting and financial control responsibilities, the Ministryof Finance established the post o f integratedfinancial adviser (FA) in 1975 and issued the Delegation of Financial Powers Rules (DFPR) in 1978, specifying in great detail what ministries were allowed to do, what they were allowed to do only with the concurrence o f the Financial Adviser, andwhat they could do only with approval from the Ministryo fFinan~e.~ DFPR The are based on General Financial Rule (GFR) 48 and the MoF authority under the Rules o f Business. The DFPR made Financial Advisers representatives o f the Ministry o f Finance. Consequently, as decision makers on behalf o f the Ministry,this role cut across the FA role as adviser to the respective administrative secretary. Amendments and Go1decisions were added over the years to the DPFR-the edition updated to September 2006 contains 43 amendments, the last being a major extension of delegatedauthority in2003. 20. The GFR and DFPR are concerned almost wholly with traditional budget preparation and execution procedures. Performance budgeting and monitoring are not brought into the central body of rules." It i s scarcely surprising that performance budgeting faded away, and its benefits were not realised, nor were the benefits of greater decentralisation by means of performance-based accountability. Little progress was made in the 1980s and 1990s despite larger changes inthe managemento f the economy: Major initiatives taken in 1991 towarh deregulation, and liberalisation of the economy were not matched by corresponding reforms in the field of decentralisation of the administrative andfinancial system." 21. A Working Group ofFinancialAdvisers reported in2005: Despite three decades of perjiormance budgeting in India, the envisaged integration of perjiormance budget with the normal budget, ie., demand for grants, has not come about Perjiormance budgeting has receded into the background as a perjiunctoly ... formality,..it is aforgotten document.12 Fiscal year 1978 covered April 1, 1977 to March 31, 1978. Muthuswamy and Brinda, Delegation o f Financial Powers Rules, 231dedition; Chennai: SwamyPublishers. 2007. This edition incorporates amendments to the original 1978 rules upto September 2006. loGFR have a reference to performance budgets inAppendix 4 onthe compilationo f detailed demands for grants. Notes on Important Projects and Schemesare to be included where the ministry/department does not bring out a performance budget. Also GFR 64 on the responsibilities o f the Chief Accounting Authority includes the regular monitoring ofthe performance o f programmes and projects. I'NIFM (2005) Evolution o f the Role of Financial Advisers inthe Government of India, Paper preparedfor the Workshop o f May 2005, para. 5.2. l2NIFM (2005) Performance Budget: A Discussion Paper, paras. 10-11.All developing countries have faced, and are still facing, difficulties in moving from an incremental input budget process to a programme and performance-based budget. The Working Group made some excellent recommendations to pursue this 'unfinished agenda'. 13 22. During the National Institute o f Financial Management (NIFM) workshop in 2005 on integrated Financial Advisers, it was found that budget proposals continued to be unrealistic, that zero-based budgeting was not taken seriously and had become a routine and ineffective exercise, and that performance budgets were stand-alone documents that did not affect the allocationo f funds.'3 23. According to the Fiscal Policy Strategy Statement for FY08, the performance budget and the outcome budget, hitherto presented to Parliament separately by ministries/departments, are now merged and presentedina single document. Actual physical performance inthe preceding FY06, performance in the first nine months (up to December) o f FY07 and the targeted performance during FY08 are included inthe document. Guidelines have been issued detailing the manner in which the outcome budget has'to be prepared. By way o f comparison, Box 2.1 describes the Government Performance andResults Act inthe UnitedStates. Box 2.1. GovernmentPerformanceandResultsAct (United States), 1993 The Government Performance and Results Act (GPRA) represents an effort to move away from the traditional, financially driven budget process and shift to a performance-oriented management approach to help federal agencies focus on results, service quality, andpublic satisfaction. The GPRA provided for the establishment o f strategic planning and performance measurement in federal agencies, and directed the Office of Management and Budget (OMB) to create pilot projects. Agencies set strategic goals, measure their performance, and report to the President and Congress on the degree to which goals are met. 'Outcomes' are results expressed in terms o f the real difference federal programmes make inpeople's lives, such as the increase inreal wages earned by graduates o f anunemployment training program or a reduction inthe fatality and injuryrates inworkplaces or on highways. Taking several years to implement, this has required major changes in the way the US Government does business. The first trial performance reports were issued in 2000. In 2007, for the first time, all agenciesgovernment wide are requiredto report annually on their results inachieving their goals. The GPRA highlighted the rigidities in the US civil service system. The need to define necessary resources, to have the flexibility to direct them to strategic priorities, to measure progress towards objectives, and to link rewards to specified performance measures require a system capacity and personnelflexibility that the current civil service system does not support. There is difficulty in measuring the performance of a federal agency since its performance depends also on the actions of other agencies and the legislature. Despite good intentions, Congress can sometimes mandate goals but then not provide adequate funding levels in order to achieve them. Fundinglevels may be sacrificed for political expediency, and an agency cannot be held accountable for meeting statutorily imposed goals if it is not provided the resources to achieve them. Moreover, legislative mandates may be unclear and Congress, the Executive Branch, and other stakeholders may not agree on the goals an agency and its programs should be trying to achieve, the strategies for achieving those goals, and the ways to measure their success. Nevertheless, research shows that the GPRA has had a positiveimpact on the service quality o f each federal agency. 24. The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 and Rules, 2004 are intended to ensure intergenerational equity and long-term macroeconomic stability. They require the Minister o f Finance, among others, to submit various annual statements to Parliament and quarterly statementsofreceipts and payments againstbudget. l3 (2005) EvolutionoftheRoleofFinancialAdvisersintheGovernmentofIndia,PaperpreparedfortheWorkshop NIFM o f May 2005, FinancialAdviser para.5.3. It may be notedthat zero-basedbudgeting was tried for a time inthe United States but was replaced by more practical systems. 14 25. In2005, the SecondAdministrative Reforms Commissionwas established.Itsagendaincluded 13 subjects, one o f which, strengthening o f financial management systems, has not yet been reported on by the Commission. Also in 2005, the General Financial Rules were updated, replacing the 1963 General Financial Rules. Rules were introduced for alternative service delivery systems, developments in information technology, externally aided projects, government guarantees, engagement o f consultants, outsourcing o f services, and others. Obsolete and redundant rules were removed. All these PFM developments coincided with the MoF deliberations on re-examining the FArole. B. OriginandEvolutionofthe FinancialAdviser 26. Historically, the FA position is the outcome o f a long and uneven process o f decentralisation o f financial powers within the Government o f India. In 1955, Internal Financial Advisers were appointed in selected administrative ministries to represent the Ministry o f Finance and exercise the MoF-delegated powers. Each ministry had an Internal Financial Adviser and an associatedFinancialAdviser basedinthe MoF Department of Expenditure. 27. The 1974, the First Administrative Reforms Commission report introduced the concept o f Integrated Financial Adviser, which was implemented by the Office Memorandum o f 1975. Legally, the Office Memorandum was an executive instruction from the Ministryo f Finance,14 which has a mandate for financial control defined by the Government o f India (Allocation o f Business) Rules, 1961, as amended. 28, The Office Memorandum merged the posts o f Internal Financial Adviser in the separate administrative ministriesand DOEassociatedFinancial Adviser. The new post was seen as part o f each administrative ministrybut also accountable for certain functions to the Ministry o f Finance. It was expected that traditional accountability through the conventional (input) budget wouldbe supplementedby accountability for performance outputs. I t has been felt that the [Financial Adviser] should be associated with the Administrative Ministry in a larger measure than at present to enable him to play a more effective and constructive role in its developmental activities and should bring hisfinancial expertise to bear in assisting the Secretary of the Administrative Ministry and other senior officers in the planning, programming, budget monitoring and evaluationfunctions of the Ministry (Ministry of Finance communication, October 6, 1975). 29. After 1976, Central Government accounts were departmentalised. The secretary o f each administrative ministry was designated chief accounting authority with the authority to discharge all finance and accounting functions through and with the assistance o f the integrated financial adviser, who functioned for and on behalf o f the chief accounting authority. 30. The Eshwaran Committee proposed in 1996that the integrated Financial Advisersbe placed in full charge of financial management intheir administrative ministries under the leadership of the respective secretaries, and that Financial Advisers delegate their financial powers within the respective ministries. The Ministry o f Finance was advised to shift from micro-level management, considering individual cases, to macro-level management. The FA responsibilities were redefined extensively, particularly inproject management, andthree-year zero-based budgets were to be institutionalised. However, the recommendations were not accepted. And although not implemented as a whole, some recommended changes were added piecemeal, particularly inthe extension of delegatedpowers in2003. 14Memorandumcan be foundinAnnex A. 15 31. The FA responsibilities were indirectly increased by the passage o f the FRBM Act, 2003 and FRBMRules, 2004, which causedfiscal targets to be set for eachministry. Though the FRBMAct did not refer to Financial Advisers, by puttingadditional frnancial obligations on the Ministry of Finance and instituting quarterly and annual reporting o f receipts and payments fiom departments to the Ministry o f Finance and fiom the Ministry to Parliament, it reinforced the perception o f Financial Advisers as not only the eyes and ears o f the Ministry o f Finance, but in some cases its executive agents The Fiscal Policy and Strategy Statement for 2007108, for instance, required the Financial Advisers to take measures to avoid large unspent budget provisions. The Minister o f Finance has said that Financial Advisers are responsible for monitoring quarterlyfiscal targets. 16 111. CURRENTROLEOFFINANCIALADVISERSININDIA 32. The current official definition of the role of integrated Financial Adviser (FA) comes from the 2006 Charter. Financial Advisers have two sets o fresponsibilities: 0 Actions taken under powers delegated to administrative ministries by the Ministry o f Finance under GFR 23 and the Delegation of Financial Powers that must be taken only after consultation with the fiscal adviser, and Matters outside the delegated powers, which can be decided by the Financial Adviser subject to supervision by the Department o f Expenditure [GFR 3 (1) (e)]. 33. The GFR and DFPR mention financial advisersthrough the respective legislation, as shown in Box 3.1: Box 3.1. Mentionof FinancialAdvisers inthe GeneralFinancialRules(GFR) andthe Delegationof FinancialPowersRules(DFPR) GFR 3 (1) (e): Powersofthe FA onmattersoutsidethe delegatedpowers GFR 24: Draft memorandafor EFCPIB andCCENCabinet GFR 33 (2): Losses GFR 46 (5): Scrutinyofnon-planbudget estimates, andrevisedestimatesofplanandnon-planexpenditure GFR 49: MoF BudgetDivision meetings GFR 159(1): Advancepaymentsto suppliers GFR 184:Contractingwithout competitivebidding GFR 207: Requestsfor grants-in-aidto autonomous organisations GFR 209: Conditionson grants-in-aid GFR 246: Proposalsfor Go1guarantee GFR 249: Reviewofguarantees Appendix 3 (2) and(13): Detailednon-planexpenditureestimatesandplanexpenditureestimates DFPR 10:Reappropriationof funds DFPR 11: Proposedstaff expansion-needfor studyby StaffInspectionUnit DFPR 18: Expenditureon schemes andprojects DFPR24: Sale or dismantlingofpublicbuildings DFPR25: Communicationof sanctions to Audit Schedule V: Hire of taxis for internationalconferences, andpaymentofrewards,fees andbonuses ScheduleVI: Delegationof power to heads of departments Schedule VII: Quarterlystatements ofloss write-offs Appendix2: Items ofwork for FA(16 items are reproducedinthe 2006 Charter) Appendix 3: EconomyinAdministrationandNon-PlanExpenditure(aseries of Office Memorandadating backto 1979that mentionFA withregardto: Monitoring implementationofrecommendationsby Public Accounts Committee Enhancement ofpowersto departments Action ifFA advice is overruled Releaseof funds to autonomousbodies Monitoringprojectprogress Monitoring implementationof 5 percentcut innon-planexpenditureinFY2007 17 34. Under the DFPR, ministriesare expectedto follow the advice of the FinancialAdvisers. The overarching concept is that [Financial Advisers] are meant to assist in the achievement of objectives and goals of their ministries. Assisting administrative ministries in ensuring valuefor money would be a key objective for financial advisers (2006 Charter, para. 4). The 2006 Charter (para. 4) goes on to say that the Financial Advisers "represent the Ministly of Finance in regard to all financial matters." The Charter (para. 12) also allows that "in rare instances" administrative secretaries may overrule FA advice by an order in writing. 35. The Financial Adviser is assigned particular responsibilities under the 2006 Charter. These roles and functions listedbelow are discussedinthe following section: Budget formulation, including the Annual Financial Statement (Demand for Grants) and Outcome Budget for the coming year, and the Performance Budget for the current year at least upto December;" Preparation of disclosure statements and other material for MoF quarterly reviews to Parliament; Expenditure and cash management, with support o f Chief Controllers o f Accounts and Controllers of Accounts (CCNCA), including liaison with autonomous organisations receivingbudgetary support; Projectlprogramme formulation, appraisal, monitoring and evaluation (Administrative joint secretaries take the lead in formulation, while Financial Advisers ensure quality appraisal andevaluation); Screening o f all proposals that needto bereferredto Ministryo f Finance; Mobilising extra-budgetary resources (private sector investment, public/private partnerships, user charges and other non-tax receipts, etc); Monitoringtax exemptions, concessions andother tax expenditures; Monitoring asset andliability management, including guarantees; Monitoringthe state of departmental accounts and audit; Establishing systems for procurement and contract management, and project financial management; Preparation o f an Annual Financial Report on the financial operations o f the ministry, with recommendations, and an Annual Outcomes and Systems Report, both to Dep-ent o f Expenditure; As executive head of the Integrated Finance Division, the Financial Adviser has managementresponsibilities for leadership, supervision, anddevelopment o fhidher staff. Is Though this is called Performance `Budget', the Charter makes it clear that this is an ex post statement o f performance actually achieved inthe current year to date (Le. inthe financial year before the budget year). 18 36. The above list includes most o f the activities under the finance function o f an administrative ministry, except for treasury/paymaster activity (handling of receipts and payments), bookkeeping, financial reporting to Controller General of Accounts and internal audit. The treasury and bookkeepingheporting activities are CCNCC responsibility. The Charter (para. 8) states that the Financial Adviser would "in no case be assigned any routine administrative functions o f the ministry." This appears to relate only to the accounts and other records systems and to basic transaction processing and administration, such as relating to salaries. Over time, Financial Advisers are expected to delegate "purely routine financial activities" to the administrative divisions o f their ministries and take on a more active macro-management role (2006 Charter, para. 27). 37. Inorder to dischargethe role and functions (listed above), the FinancialAdviser has support staff and right o f access to all records that are available to the respective ministry (2006 Charter, para.11). Administrative ministries shall "invariably involve" the Financial Advisers in all the above-listed roles and functions (para.lO), and the Ministry of Finance will not entertain proposals having financial implications (and few proposals do not have financial implications) except through the FA channel and with hisher approval. 38. There are a few departmental variations to the FA scheme. Some ministries have their own professional cadre o f financial staff: Ministryof Railways (IndianRailway Accounts Service), MinistryofDefence (IndianDefence Accounts Service), and Ministryof Communication and Information Technology (Indian Post & Telecommunication Accounts & Finance Service). The Ministry o f Information Technology (Dept. o f Telecommunications) has a member finance who is o f the level o f secretary, while Railways has a financial commissioner. Their functions are similar to those in other ministries. This paper does not cover each o f these variations indetail. A. The Role and Functions of the FinancialAdviser GeneralRole 39. At present in 49 ministries inthe Government of India, there are 29 Financial Advisers, many o f whom have additional charge o f more than one ministry/department. The NIFMWorkshop, 2005, overwhelmingly agreed that there should be no multiple charges and every department should have its own full-time Financial Adviser, even if some departments are smaller and their Financial Adviser would not justify the same ranking as larger departments. Each Financial Adviser or deputy Financial Adviser should have one Chief Controller o f Accounts andtheir responsibilities should be coterminous.l6 40. The overarching concept in the MoF redefinition o f the FA role is that Financial Advisers assist in the achievement o f the approved goals o f their respective ministries and also act as representativeso f the Ministryo f Finance. Inthis, they are expectedto ensure value for money (i.e., achievement o f the goals at minimumcost). It is clear from the DFPR and GFR that it is the administrative secretaries as Chief Accounting Authorities who have the delegated powers and the responsibility for results, not the Financial Advisers. The FA role is to advise the Secretary on matters within hisher functional role. It appears that the advice i s usually taken. While the Secretarycan reject advice o f any member o f hisher team when he/she considers it necessary, within each functional area considerable authority i s delegated to the functional specialists. Within the finance area, Financial Advisers are de facto decision takers. They can approve proposals, or they can require fixther information or analysis o f options, or they can exercisean effective veto, subject only to rare overrule by the Secretary. l6 NIFMWorkshop2005, ConceptPaper,p.4 19 41. Inthe other FA role, they representthe Ministryof Finance inregard to all financial matters (2006 Charter, para. 4). Representation i s limited it does not extend to making decisions which bindthe Ministryo f Finance. FinancialAdvisers are expectedto use their powers under the GFR and DFPR and their professional authority to ensure that all financial rules are compliedwith, and that MoF approval is securedon all matters outside the delegated power^.'^ Ineffect, FinancialAdvisers are outpostedMoF officers, oftenacting as internalauditors. 42. The dual FA role i s difficult, being accountable to two ministry heads (both executive and political): At any given time and in any given situation the role of a Financial Adviser may not be a pleasant one, unless the recipient of the advice is extremely enlightened.In theface of this duality, the role becomes all the more delicate.18 One argument for dual reporting is that they should emphasize their MoF backing and retain their independenceo f the Administrative Secretary. The opposite argument i s that they should regard themselves as members o f the apex management team, and should change their attitude from that o f controllers and regulators to that of development financiers and managers.'' As the senior finance officer in each administrative ministry, many Financial Advisers feel that expectations are expanding, but that their capacity and influence within their ministries/departments have remained unchanged. In some countries, the role o f the Financial Adviser has expanded. The position of Financial Adviser in the Australia, the United States, South Africa is called Chief Financial OfJicer (CFO); inothers (like the United Kingdom) it is called Finance Director. The entities to which Chief Financial Officers/Financial Adviserdfinance directors are responsible in different countries i s summarized inBox 3.2. Box 3.2. To whom i s the FinancialAdviser (Chief FinanceOfficer, FinanceDirector) Responsible? Australia:Chief Financial Officer is responsible to the head of department andhas no accountability to Finance. Canada: the Senior Finance OfficerKFO is responsible to the DeputyHead(the chief executive officer ofthe department) andoperatesaccording to policies and standardslaid down by the Comptroller General (officer of the Treasury Board Secretariat). India: uniquely, the Financial Adviser is responsibleto boththe Secretaryhead of department andto the Ministryof Finance. Pakistan:by contrast, the Financial Adviser is appointedby the Ministry o f Finance andreports only to the Ministry. SouthAfrica: Chief Financial Officer is directly accountable to the head of department, and follows best practice guidelines from the National Treasury. UnitedKingdom: the Finance Director is responsible to the headof department as accounting officer and gets technical support from the Treasury. UnitedStates: the Chief Financial Officer is responsible only to the departmental secretary, with a functional relationship with the Office of Management and Budget. "AtameetingwithFinancialAdvisersinOctober2004,theMinisterofFinanceemphasisedthat"FAsarea ''artA. ofthe MoF." (NIFM Workshop 2005, p. 82). Prasad, NIFM Workshop (2005) paper on role o f financial adviser, pg 54. B.P. Mathur (1999)Budgetary Reforms and Expenditure Management inGovernment, based on anNIFM Workshop in September 1997,p. xvii. 20 43. Serving as a member o f the top management team, the dual role complicates andhampers the FA position. A quotation from the InternationalFederation of Accountants adds relevance to this issue: "The CEO andCFO should work as a team, butdemandsofregulators (who look to the CFO) will make this difficult".*' This is related to the perception o f FAs as bureaucratic blocks on development processes.21 Where Financial Advisers are consulted and are fully involved, they may be seen as holding up the business o f the department. A typical criticism follows: A specific item for enquiry for [Second Administrative Accounts Commission] could be the overarching role of the Finance Ministry in the governance of the country. Whether it is a speed-breaker or an enabler has much to do with the efficiency of the overall system. The scrutiny of minutiae by financial ministry advisers functioning in diyerent ministries has been alleged to be the cause of delay in government. The time has come to carryforward the ongoing reform under which each ministry is empowered to set up its own budget and implement it, subject only to the overall clearance by the Cabinet. Second-guessing by the Financial Advisers, given their loyalty to another ministry - who are not answerable for results - is counterproductive. The best practices of management in private and public sectors do not encourage such external mentoring in an executive organisation".22 44. A pertinent question is how should Financial Advisers be reporting to the Ministry of Finance specijkally on whether hisher recommendations arefollowed? DFPR states that "Ln the event o f being overruled, the FA would have the discretion to bring the matter to the notice o f state- owned enterprise^."^^ The administrative secretary is the chief accounting authority and is answerable directly to Parliament for the performance of hisher ministry, both physical and financial. The Secretary, as Chief Executive Officer, has to take into account all aspects of a decision-financial, developmental, personnel, environmental, political. The Financial Adviser has a narrower perspective, and advises only on financial aspects. At present, some Financial Advisers report to the Ministryo f Finance that their recommendations are not followed, while others are wary o f doing so for fear o f getting adverse comments from the Secretary o f the Administrative Department. It i s not difficult to imagine the reaction o f a Secretary who feels that hisher final decisions are not being supported byhisher own officers and that complaints are being made to outside authorities. The remedy proposed at the NIFM workshop was to make reporting compulsory. This would certainlyreinforce MoF control, however it would not promote team building and corporate responsibility in the ministry.If the direction o f change is towards greater assumption o f responsibility in the line ministries, external reporting o f differences o f opinion needs to be very carefully treated. 45. The relationship between Chief Financial Officers and the Comptroller General has been questioned by deputy heads [Chief Executives o f line ministries], who feel that the Chief Financial Officer needsto be a trusted member o f the executive team, not an "outsider" poised to discuss internal issues with the Center. The CFO effectiveness clearly depends on them having a relationship o f trust with senior executives, and this relationship will need to be continuously reinforced. Yet, as finance professionals with fiduciary duties beyond the organization, on rare occasions they may need to consult externally. Wise Chief Financial Officers will use carefuljudgment to balance both sides o fthe equation.24 2o The Role of the CFO in2010, (International Federation o f Accountants, 2002). p.37 2' See, for instance, Bhaskar Ghouse,The Bucks Stop Here'@ Hindu-onnet, July 14,2006). This former secretary believes that some Financial Advisers have becomebrakes on development, and that the term `adviser' i s a misnomer as they are in fact `controllers'. 22 S. Venkitaramanan, The Second Administrative Reforms Commission: Another Chance for Change (inThe HinduBusiness Line, April 18,2005). 23 Delegation o f FinancialRules, p. 140. 24 Strategy, Accountability and the New.Role ofthe CFO: Modernizing Financial Management inGovernment (Conference Board o f Canada, October 2006), p. 10 21 46. A final issue emerges from the rapid expansion o f FAresponsibilities. "A majority o f the FAs feel that the expectations from them, which had increased tremendously in the wake o f ' liberalization and globalization o f the Indian economy in the early 90s, have multiplied at an exponential rate inthe wake o f the recent fiscal reforms like passage o f the FRBMAct. They feel that neither their powers nor their sup ort systems have beenproportionately revamped to help them meet the growing challenges." There is a great desire for clarity. Their role needs to be rationalised and clarified, and support systems and capacity need to be developed based on that role. Policy formulation Role 47. Financial Advisers are supposed to support their secretaries in policy formulation by determining the financial implications o f alternative policies and making recommendations in accordance with departmental goals and objectives. For instance, draft memoranda for the Expenditure Finance Committee (EFC) and Public Investment Board (PIB) and Cabinet Committee on Economic Affairs should be discussed with Financial Advisers before they are finalised and issued (GFR 24). In fact, there i s considerable variation in practice from one department to another. It has been suggested that a brief should be prepared by the Financial Adviser and attached to each submission through the finance secretary. The mechanics o f ensuring FA inputs should always involve the written FA comments, as rules that the Financial Adviser should `discuss' or `be consulted on' or `associated with' proposals are too vague to be enforced. It is to be noted that the GFR 24 says that "a confirmation to this effect shall be included in the draft memorandum at the circulation stage." However, data gathered in this research indicates that there are instances when the Financial Advisers are either not consulted or left out of the decision loop in the early stages o f decision-making and are involved only when the substantive parts o f the decision have already beentaken. Project formulation Role 48. Financial Advisers are supposedto provide quality assuranceinproject/programme formulation by independently reviewing and appraising proposals and advising their secretaries [GFR 46(5)]. Since the 2003 extension o f delegated powers, schemes and projects can be sanctioned by the Department Standing Finance Committee up to a ceiling o fRs.15 crores. The Financial Adviser is a member o f the Department Standing Finance Committee. Non-plan projects over Rs15 crores go to the Committee on Non-Plan Expenditure, o f which the Integrated Finance Division o f the concerned department i s the secretariat. Any substantial alteration in the scope o f a scheme, as decided by the Secretary in consultation with the Financial Adviser, is subject to approval by the Committee onNon-Plan Expenditure (DFPR 18). 49* Ideally, Financial Advisers should be involved in formulation o f projects and schemes from concept stage so that their expertise can be brought to bear before the project gathers too much momentum (or personal ego investment by administrators or politicians) to make it resistant to change. For instance, government agencies often prefer to manage projects themselves without considering the options o f contracting out, public/private partnership, etc. The exclusion o f the Financial Adviser is an issue that could be resolved by requiring that no project or scheme can be granted approval in principle without written FA comments, as recommended for policy submissions above. The Financial Adviser can then ensure that all options are on the agenda and are fully evaluated. The NIFM concept paper provided to the May 2005 workshop suggested that FA consultation shouldbemandatory on specified subjects-the annual andfive-year plans andtheir mid-term reviews, in-principle approval o f schemes, policy formulation, and e-governance. It was further suggestedthat Planning Commission and Department of External Affairs should not accept proposals without FA endorsement.26 25NIFM (2005) Workshop, Evolution ofthe Role of Financial Adviser, para. 9.1. 26Concept Paper on Redefiningthe Duties, Responsibilitiesand Powersof Financial Advisers. (Department of Expenditure, Ministry of Finance, paper presentedat Workshop, May 2005) para.3. 22 50. FAs should associatethemselves with the evaluation o f schemes and projects and see that the evaluation findings are fedback into the planningcycle (Charter Annex 11, para. xii). Budget formulation Role 51. The June 2006 Charter says that Financial Advisers "continue to be responsible for budget formulation." The Government has a system each year for plan budgets and non-planbudgets, outcome budgets, and performance budgets:' and supplementary budgets. Appendix 3 o f the GFRmakes the Financial Adviser clearly responsible for the preparation o fboththe non-plan and plan budgets.28However, research for this paper indicated that practices in this regard differed between ministries. According to a FA group in 2005, "the FA has not really grown beyond a limited expenditure adviser and as an optional interlocutor with MoF, Planning Commission and Department o f Personnel and Training. The Ministries have assigned plan budgeting not to the FA but to another bureau head dealing with plan coordination. Even the decisions on planbudget allocations have gravitated to the PlanningCommis~ion".~~ 52. The Financial Adviser is also required by the Charter (Annex 11) to screen proposals for supplementary demands for grants. The same issues arise as previously discussed. Budget execution Role 53. Financial Advisers assist their ministries in setting up monitoring systems, and in monitoring implementation o f all budgets, both within their ministries and in public service undertakings and autonomous institutions inreceipt of transfers from the ministry. Financial Advisers are associatedwith quarterly progress reviews that have to be reported to the Ministryo f Finance. FinancialAdvisers also monitor timely receipt o futilisation certificates and control the release o f funds to projects and schemes. 54. InFY2007, non-planexpenditure hadto be cut by 5 percent. FinancialAdvisers were required to report to the secretary, administrative minister, and Department o f Expenditure on the implementation o f the cut (DFPR Appendix 3). Inorder to avoid large unspent provisions in Demands for Grants and acceleratedspending inthe last few months, FAs have beenrequested to study such cases and take appropriate measures. FAs also ensure proper maintenance o f registers o f liabilities and commitments. 55. Financial Advisers have responsibilities under the DFPR with regard to re-appropriation o f funds. DFPR 10 says that Financial Advisers should obtain approval of the state-owned enterprise for any re-appropriation more than 25 percent o f the budget or Rs5 crores, whichever i s more. To prevent unnecessarytravel, they are not to allow any re-appropriation to augment the provision for travel except with DOEapproval. Financial Advisers are requestedby DFPR 10 (6) 4 to ensure that all requests for re-appropriations are completed by March 1 of each year. 56. With regards to procurement andcontracts, the 2006 Charter says that "FAs would be required to set up strong internal systems to ensure due diligence and strict observance o f MoF guidelines inthis regard." 27Output and PerformanceBudgetsare mergedwith effect from the 2007/08 budget, and called `Output Budget', but this is still separatefrom the PlanBudgetandNon-PlanBudget. 28Also,GFR 49 refers to FA participationinbudget negotiationmeetingswith Ministry of Finance, and DFPR 11(11) refersto FA involvementindecisionson studies neededtojustify staffexpansion. 29ExtractfromWorking Group of FinancialAdvisers (2005) PerformanceBudget:A DiscussionPaper, NIFM, July (draft), paras. 11-12. 23 Resource Mobilization Responsibility 57. Financial Advisers assist their ministries in mobilizing private investment (e.g., through public-private partnerships) and formulating projects for external funding. 58. According to the 2006 Charter, Financial Advisers should also review the sources o f non-tax revenue and prepare the annual budget for non-tax revenues and other receipts (GFR Appendix 2), which has grown in importance since the passing o f the FRBM Act. Financial Advisers should ensure that user chargesreflect government policy, such as full cost recovery, and that they are duly collected. Dividends from public service undertakings are an important revenue item, and Financial Advisers are expected to monitor finances from public service undertakings and ensure that adequate dividends, including interim dividends, are paid to the Government. A minimum return o f 20 percent on equity is expected (DFPR Appendix 3). Financial Advisers also monitor tax expenditures (i.e., revenue foregone because of exemptions and concessions). It i s unclear how far Financial Advisers are able to fulfill their mandate on the revenue side since expenditure gets far more attention. Internal Control and RiskManagement 59. Financial Advisers are responsible for ensuring that General Financial Rules are followed, and that the ministry does not exceed its delegated financial powers. Files for all matters which have any financial implications are sent to the FinancialAdviser for hisher concurrence. 60. The Charter requires the FinancialAdviser to scrutinize proposals for re-delegation ofpowers to subordinate authorities. This is consonant with the greater focus on macro-level management at the FA level. DFPR Schedule VI requires delegation of power to heads of departments to incur miscellaneous expenditure to be made in consultation with the Financial Adviser. 61. The DFPR include detailed rules on incurring particular items o f expenditure. Some o f these such as rewards, fees and bonuses, and transport hire explicitly require FA consultation, (DFPR ScheduleV). 62. Ministries and departments in India are not required to undertake regular reviews o f risk to organizational goals. Risk management as a discipline is underdeveloped. Inthe United States and the United Kingdom, especially in the wake o f corporate governance reforms and the Sarbanes-Oxley Act (inthe US), there is an increasing emphasis on risk management. It i s understood that the Administrative Reforms Commission i s going to develop Risk Management Guidelines for Departments. This review would substantially impact how FinancialAdvisers dischargetheir duties with regardto risky operations. Accounting and FinancialReporting Responsibility 63. While chief controller of accounts/controller of accounts (CCNCA) maintain the financial accounts and submit monthly reports to the Controller General of Accounts (CGA), the Financial Advisers have supervisory powers to ensure that the quality and timeliness of accounts i s maintained andimproved. 24 64. StatedinDFPR Appendix 3 i s that Financial Advisers should monitor progress on all projects and report to their secretaries monthly, and include this in their monthly reports to the Department of Expenditure. At present, Financial Advisers are reporting to the Department with a quarterly report. The system of annual reporting (Annual Finance Report, Annual Outcomes and Systems Report, Disclosure Statements) i s yet to start. 65. There may also be verbal reporting by means o f meetings between Financial Advisers and state-owned enterprises. This depends on the state-owned enterprise. The general preference is for less formal Written reporting to the Ministry o f Finance, and more informal meetings and retreats by which the Ministry can keep appraised o f financial developments, and advise Financial Advisers on improvement o f financial systems and standards. Box 3.3 discussesthe role o f the chief financial officer inrelation with the US Governments Office o f Management andBudget. 66. Similarly, the Finance Minister may call meetings o f Financial Advisers. These also have a role to playto improve understanding at different levels. Box3.3. Relationship betweenChiefFinancialOfficersandOffice ofManagement and Budget(OMB)inthe UnitedStates The Chief Financial Officer reports to the Secretary o f the agency to which he is appointed and is also in constant communication with the OMB. The Office o f Federal Financial Management (OFFM) within the OMB establishes government-wide policies, monitors the establishment and operation of financial management systems and the execution o f the budget, and ensures that government has a highly qualified cadre of F M professionals. The Chief Financial Officer prepares and transmits an annual report to the agency head, copying OMB, on the status of fmancial management o f the agency, including the annual fmancial statements, the audit report, a summary o f the reports on internal accounting and administrative control systems submitted to the President and the Congress under the Federal Managers' Financial Integrity Act o f 1982, and other information the head of the agency considers appropriate to fully informthe President and the Congress about the financial management o f the agency. The main CFO-OMB interaction is through the CFO Council set up by the CFO Act, 1990. The Council was established as a mechanism for advising and coordinating the activities o f its member agencies on matters such as improved quality o f fmancial information, financial data and information standards, consolidation and modernization o f fmancial systems, internal controls, legislation affecting financial operationsand organisations, and other financial management efforts. The Council is ledby the Controller (head o f the OFFM), and all chief fmancial officer and Deputy chief fmancial officer are members. It is a community with a common professional interest, not (since 1993) an instrument for OMB to give instructions to chief financial officers. The Council meets quarterly but most of the work is done through six subcommittees. Council members set the meeting agenda, rather than OMB alone. 67. Under the Right to Information Act, data about staff has to be displayed on each ministry website. The Financial Adviser has been made responsible for ensuring that this i s done. Inthe absence of a Chief Information Officer, the Financial Adviser takes on this additional role though, in fact, this i s not part o f the financial function and should be met by the appropriate fbnctionalhead. 25 Audit 68. Chief Controllers o f Accounts have primary responsibility for internal audit, but Financial Advisers have a supervisory responsibility for reviewing internal audit programmes, reports, andaction taken on the reports. Internalaudit needs to be strengthenedinCentral Government ministries. It i s relevant to note that while international standards require independence o f internal auditors from the finance and accounting functions, in Indiathe Internal Audit Unit i s still part of the CCA responsibility and henceunder the Financial Adviser. 69. Financial Advisers are expected to coordinate and monitor the settlement o f external audit objections, inspection reports, draft audit paragraphs, and implementationo f recommendations from reports of Parliamentary Committees (Charter Annex 11, paras. xiii and xiv, and DFPR Appendix 3). Representation of the Department 70. Financial Advisers are often nominated by the Government as directors o f public sector undertakings. This practice is recommended since it gives Financial Advisers a channel o f informationto bemore effective when it comes to public service undertakings. 71. Financial Advisers assist their secretaries at hearings by the Public Accounts Committee, but are notthemselvesanswerable to the Committee.This is appropriateand consonantwith GFR 64. Powers of the FinancialAdviser 72. It is universallyrecognizedthat the FinancialAdviser should have free access to all books and records available to the agency in which he or she works, and be adequately equipped with legal powers,job description, staff, and skills to cany out hisher functions. Opinion differs on the extent of those functions and whether the Financial Adviser already has adequate powers. Inthe Ministryof Finance, it is generally thought that the Financial Adviser is insufficiently brought into the decisionmaking process; in fact the Financial Adviser i s often sidelined, or brought into the decisionmaking process too late, (e.g., after schemes have already been approved inprinciple).30 73. Conversely, in the administrative ministries, it is often said that the Financial Adviser has too much power or exercises it excessively and that this causes undue delays in getting schemes approved, etc31 This reflects a lack o f acceptance of the constructive role that Financial Advisers should play inthe decisionmaking processesand, possibly, lack of appropriate skills bythe FinancialAdvisers andtheir staffs. This latterpoint is addressedinSectionC. 74. While the 2006 Charter sets out the FA responsibilities comprehensively, these are not necessarily reflected to the same detail in the GFR or DPFR, where references to F A responsibilities are limited to particular items. A single document detailing the roles and responsibilities o f all key finance personnel-Finance Minister, Comptroller and Auditor General, Controller General of Accounts, DOESecretary, Financial Adviser, Chief Controller of Accounts, etc.-and consolidating all financial rules would be easier to understand and apply consistently. 30Minutesofthe Meetingofthe FinanceMinister with FinancialAdvisersonJanuary 11,2005. These Minutes were includedinthe NIFMpapers. 31 See, for instance, Evolution of Role of Financial Advisers inGovernmentof India, paper by NIFMpresented at the May 2005 Workshop, para.6.3. 26 B. Accountability ofthe FinancialAdviser 75. The main instrument o f accountability is the Annual Confidential Report. The FA's Annual Confidential Report is prepared by the administrative secretary, who is incharge o f practically 90 percent o f the FA's work. It is counter-signed by the DOESecretary who may or may not add any comments, and is finally approved at a higher level, but the initial assessment o f performance is coloredbythe Financial Adviser's own administrative secretary. 76. A t the NIFMworkshop inMay 2005, it was thought that Annual Confidential Reports should continue to be jointly written. If duality o f accountability were discontinued, the Annual Confidential Report would become a purely internal document. C. Selection, Appointment and Career Developmentof the FinancialAdviser 77. All FA appointments are made by the Cabinet on the recommendation o f the Department of Personnel & Training. It should be noted that while qualifications and background are considered in the FA appointment, these alone may not be necessary conditions preceding FA appointments. 78. The FA tenure is usually up to five years in a particular department. Any extension o f the term beyond five years is decided by the Cabinet secretary. 79* Since there is no separatecadre for Financial Advisers, there is no institutional arrangement for FA capacity building. Some courses are conducted at the National Institute o f Financial Management. The lack o fattentionto the technical andprofessional FAcapacity compares unfavourably with the heavy-often technical innature-responsibilities required o f them. A `background infinance' is sometimes cited as a usehl additional skill in FA selection, but even without that background, Financial Advisers are not provided with any special training for their particular responsibilities. One reason for this is that Financial Advisers are likely to be transferred into nonfinancial posts where such training would be wasted. 80. This generalist approach to the finance function contrasts with the situation inthe other countries, particularly those that have adopted accrual accounting, which are rapidly professionalizing their finance staff. Membership o f a professional institute o f accountants provides a guarantee, not only o f the specialized skills and knowledge required, but also adherence to ethlcal codes and schemes o f continuing professional development that keep the member abreast o f developments over the years. In Australia, the Chief Financial Officer should be professionally qualified and a full member o f a relevant professional body, such as the Institute o f Chartered Accountants inAustralia or CPA Australia, or their internationalequivalents, or have significantly demonstrated expertise in financial management. In the United Kingdom, the policy is for departments to recruit professionally qualified accountants with senior-level experience as Finance Directors. By December 2006,9 1percent o f all UK public expenditure was managed by a qualified accountant, andthis proportion is still rising.32 Inthe United States, the Chief Financial Officer is modeledon the private sector Chief Financial Officer. Though federal Chief Financial Officers are political appointees for which there is no formal requirement for professional qualification, recent developments ingovernance and inaccounting and reporting standards have made it increasingly likely that qualified accountantsfillboth CFO and deputyCFO posts. 81. Many developing countries suffer from public pay scales that do not attract qualified accountants who tend to go to the private sector. Inthis situation, finance cadres have been created and special public sector training programmes have been developed to provide training and accreditation at technician and professional levels. Schemes o f service are amended to require the professional diploma or equivalent as prerequisites to promotion to the top posts. 32Mary Keegan, The Modernisers(inAccountancy Magazine, UK, June 2007). 27 82. It must be mentioned that had there been a separate FA cadre, a system of incentives that linked skill development with career advancement would inany case have been operative. D. Organisation, Selection, and Training of FA Staff 83. A burning issue is the lack of sufficient specialists inthe IntegratedFinance Division (IFD) of each ministry.FinancialAdvisers appear to have no role inthe selection, nor their transfer out, o f appropriate officers to undertake highly specialised tasks for which the Financial Advisers are hnctionally responsible. In 1990 the La1 Committee on Departmentalisation o f Accounts said that financial administration could no longer be treated as a generalist hnction, but inappropriate persons are still being posted into Integrated Finance Divisions and trained officers are still liable to be transferred "It would be usehl for IFD staff to have a background in commerce and be able to understand financial statements," said a Financial Adviser. It would be useful to have a work study to check the number of staff and skills required.34This might vary from one department to another, but an established programme, including induction training, should meet all IFDtraining requirements. 84. A separate finance cadre would give a sense of identity to finance and accounts staff and set themupon a career path. Railways and Defence sectors are said to have immensely benefited from havingtheir own finance and accounts cadres.35 85. As the IFD head, the Financial Adviser has the usual line management responsibilities, including human resource development o f hisher staff. The 2006 Charter lays particular emphasis on this role. It identified the need for IFDand FA capacity building and put the onus onthe FinancialAdviser to review the IntegratedFinance Division at the start ofeachyear and prepare training and capacity-building needs analysis and action plans. Consultants may be hired if necessary with DOEapproval. The Department o f Expenditure undertook to organise suitable workshops and seminars on chosen topics (2006 Charter, para. 25). Ideally, IFD staff should not be posted inor out o f an Integrated Finance Division except with F A concurrence, otherwise it becomes impossible to manage the division. An IFD Manual i s to be prepared, presumably after the FACharter i s finally defined. This maybe the basis for preparing training materials in a series o f courses at different levels, which may be contracted out to a professional training institution. Distance learning may also be considered, so that working officers can fit their training onto their work schedule andprogressat their ownpace. 86. The Financial Adviser may have two or four Directors of Finance reporting to hidher. They also do not necessarily have experience and qualifications in finance. The next level o f staff includes Assistant Directors who are at the level o funder Secretary. 87. The Chief Controller of Accounts has three main functions-accounts, payments, and internal audit-and i s selected from the cadre o f Indian Civil Accounts Service and reports to the FinancialAdviser but at times maybe o f the same rank. The ChiefController of Accounts may report to two or three Financial Advisers in different departments. The Financial Adviser i s responsible also for supervision o f the accounts and internal audit functions and writes the Annual Confidential Report o f the chief Controller o f Accounts.36 Therefore the Financial Adviser needs to be concernedwith CCNCA selection and training as well as for their staff. 33A. Prasad, Role of Financial Adviser. (Paperpreparedfor the NIFM Workshop, May 2005). 34DOEStaffInspectionUnit has only 20 officers for the whole ofthe CentralGovernment. There is also a severe fiscal constraint on the creation o f more posts. 35NIFM Workshop, 2005, p.109. 36Internatjonal standardsrequire that internal audit be independent of bothaccounting and finance, as its role is to provide an independent check on them, as a service to the administrative secretary. However, internal audit i s relativelyundevelopedinIndia, and at present i s a unitreporting to the chief controller of accounts. 28 Iv.ROLEOFINTEGRATEDFINANCIAL ADVISERS: INTERNATIONALCOMPARISON 88. This chapter provides a cross-country comparison o f structure, mandates, roles, and responsibilities o f the role o f integrated Financial Adviser (FA) and its counterparts (Chief Financial Officer or Finance Director) inother countries. Summariesof interviews andreviews o f key documents that cover these roles inAustralia, Canada, Indonesia, UnitedKingdom, and the United States are inthe following tables; as well as summaries of desk reviews in Brazil, Mexico, Pakistan, and SouthAfrica. A. Cross-CountryComparisonof FA Role inIndiaandOtherCountries 89. The criteria for selection o f countries included (a) a sample o f industrialized countries which have made significant improvements in public financial management (PFM); (b) countries having some degree o f similarity to a system o f governance in India; (c) developing countries which are growing economies like India; and (d) countries from a range o f geographical areas: Africa, Australia, Europe, Latin America; NorthAmerica, South andEast Asia. 90. The tables compare the following aspects of the FA roles and the respective finance divisions ineachcountry, then gives somebestpractices fromeachcountrythat mightbenefit India: 1. FinancialAdviser: Rules, laws, reforms, andauthority 2. FinancialAdviser: Mandate, guidelines, powers androle 3. FinancialAdviser: Reporting, accountability, and assessment framework 4. Financial Adviser: Selection, eligibility criteria, incentive structure, tenure, and career development. 5. FinancialAdviser: Capacity buildingand ongoingprofessional development 6. Finance division: Structure, staffing, capacity building, manuals/guidelines andreports 7. Best practices inother countries. 1. FinancialAdviser: Rules,laws, reforms and authority What rulesand lawsexist for publicfinancial management? India Delegationof FinancialRules, 2006. GeneralFinancialRules, 2005. FiscalResDonsibility andBudgetManagementAct,' 2003. Guidelines on ExpenditureManagement, Deparmkt of Expenditure, September2004. United States Chief Financial Officer Act, 1990. Government Performance Results Act, 1993. Government Management Reform Act, 1994. Federal Financial Management Improvement Act, 1996. Information Technology Management Reform Act. Office of ManagementandBudgetcirculars. United Kingdom Treasury directives, such as the Government Accounting Manual. Government Financial Reporting Manual. Government Resources and Accounts Act, 2000, which introduced accrualaccounting. Canada FinancialAdministrationAct, 1996. FederalAccountabilityAct, 2006. Australia Financial Management and Accountability Act, 1997. Commonwealth Authorities and CompaniesAct, 1997. Charter of Budget Honesty Act, 1998. Finance Minister's Orders, 2006. Commonwealth Authorities and Companies Orders, 2005. Role of the CFOs- Guidance for CommonwealthAgencies, April 2003. Outputs and Outcomes Framework GuidanceDocument,November 2000. SouthAfrica Public Financial Management Act, 1999 & subordinate Treasury Regulations Guide for AccountingOfficers, PFMA Act, October 2000. Inter-governmentalFiscalRelationsAct. Brazil Budget Guideline Law, 2006. Budget Law, 2006. Public Service Law. Fiscal ResponsibilityLaw. Mexico National Constitution. NationalDevelopment Plan 2006-2012(PresidentialOffice). Budget & Fiscal Responsibility Federal Law. Organic Law of Public Administration. Public Service Income Manual. Guideline of Public Administration for Austerity & Discipline of Public Expenditure. Annual Expenditure Budget. Annual Income Law. Norms and Guidelines for Designing, Following up & Modifications of Budget Targets Calendar. Fiscal Sharing AgreementLaw. 29 What rules and laws exist for public financial management? Pakistan General Financial Rules. Fundamental Rules. Supplementary Rules. Federal Treasury Rules. Fiscal Responsibility and Debt Limitation Act, 2005. Finance Division Office MemorandumNo. F.3(2)Exp.III/2006. Indonesia State Finances (Law 17/2003). State Treasury (Law l/January 2004). Audit for State Finances (Law 1512004). Government Regulation (PP21/2004) Annual Work Plan Government Regulation (Financial reporting and performance of government agencies). RegionalGovernanceLaw (Law 32/2004). What are the notable reforms in public financial management? India Eshwaran Committee, 1996. Integrated Financial Adviser Scheme, 1975. Performance Budgeting. Revision of Delegation-ofFinancial Powers in2003. Fiscal Responsibility and BudgetManagement Act. Revision of General,FinancialRulesin2005. United States Chief Financial Officer Act, 1990. Government Performance Results Act, 1993. Government Management Reform Act, 1994. Federal Financial Management Improvement Act, 1996. Information Technology Management Reform Act. Office of Managementand Budget circulars. UnitedKingdom Public Spending Framework Government Resource Accounts Act, 2000. Whole of Government Accounts. Canada Appointment of Comptroller General in 2004, changes in role and qualifications of Chief Financial Oficers and in internal auditing processes in 2005, new funds allocated for financial training of all financial managers, etc.. Revised Executive Policy for Financial Management, forthcoming 2008. Australia National Audit Commission, 1996: adoption of accrual principle for budgeting, resource management and financial reporting. Financial Management and Accountability Act, 1997, devolvement of substantial authority and power to Chief Executive officer. Budget Estimates andFrameworkReview in2002. South Africa Introduction of 3-year budgeting in 1998 and Budget Decentralization. Public Financial ManagementAct. Municipal FinanceManagement Act. Debt Management Reform. Brazil Fiscal Responsibility Law (Lei de ResponsabilidadeFiscal, LRF)was implementedinMay 2000 to establish a responsible framework of federal government public finance. Disclosure& TransparencyLaw. Mexico Integral Process of Planning & Budget. Budget Programmatic Structure by Program. Budget Performance Evaluation. IntegratedManagement System (SIAFF). Performance Indicators for Procurement Public Expenditures & Financial Management. Disclosure & Transparency Law. Civil ServiceProgram. Pakistan Project for Improvement of Financial Reporting and Auditing introduced integrated financial management system in federal government. Medium Term Budgetary Framework (MTBF) is underway and a complete switch over is expected by fiscal year 2008-09. Financial management application, as part of MTBF, to assist budget preparation and automationof financial managementfunctions. Indonesia Financial Management: Laws 17/2003 and 1/2004. External Audit Law, 15/2004, greatly strengthened both the independence and role of the external auditor, BPK. Another law is in process to cover the management structure and accountability of the agency. Decentralization (1999, revised 2004), transfer of power and financial resources to some 470 regions which were controlled by centralgove&ment. Who i s the accounting authority of departments? India Secretary of Ministry,as per General Financial Rule64. United States Controller in the Office of Federal Financial Management is the accounting authority for federal government. Secretary is accounting authority for agency. Secretary of the Department is the head of departmenuagency and responsible for conduct of business of theDepartmentas awhole. UnitedKingdom Headof Departmentis Accounting Officer. Canada Deputy Head, as per Federal Accountability Act. Australia Head of the Department is Chief Accounting Authority is head of the department, per Section 44(1) of the Financial Management and Accounting Act: "A Chief Executive must manage the affairs of the Agency ina way that promotes proper use of the Commonwealth resources for which the Chief Executiveis responsible." SouthAfrica Head of Department. Brazil Accounting authority of each ministry is granted to the Under-secretary of Planning, Budget & Management (Subsecretaria de Planejamento, Orcamento, administraca`o), who 30 Who i s the accounting authority of departments? has the role ofFinancial Adviser at the federal governmentlevel. Mexico The accounting authority o f each ministry i s granted to the Financial Adviser office. The General Director of Program & Budgeting (DGPP) i s responsible for the accounting process inthe F A structure. Pakistan Secretary of Ministry/Division is Principal Accounting Officer, who is assisted by Chief Finance & Accounts Officer and Financial Adviser. Secretary i s personally accountable to Public Accounts Committee. Indonesia The Minister is formally classified as the Budget User and has responsibility for both applying for and spending budgets with official title Kuasa Pengguna Anggaran How are financial powers delegated to a ministry? India By Ministry of Finance to ministries. Beyond delegated powers, issues are referred to Ministry of Financethrough FinancialAdviser. United States As per section902 of ChiefFinancialOfficer Act. United Kingdom No commitment of resources can be made without Treasury approval. In practice, the Treasury delegates to departmentalauthority to commit and spend within the ambit of the appropriation and within defined financial limits for each transaction (GA 2.4.3) as part of its Medium-term Framework Document. No change in system of delegation in recent years. Canada By TreasuryBoard Secretariat to departments as per Financial Administration Act. Australia The Financial Managementand Accountability Act, 1997, enables the Minister for Finance to delegate power to an agency Chief Executive and for an agency Chief Executive to delegate powers to members of staff of the agency. Level of delegation is considered sufficient. Eachagency develops its own financial delegations to suit its operationalneeds. SouthAfrica Delegation of powersto Accounting Officer as per PFMA Act Brazil Financial power has been decentralized to ministries by an annual budget law, which i s approved by the National Congress. The Budget Law defines budget ceilings for each ministry annually. Mexico Financial power i s delegated from the Ministry of Financeto each Ministry. The financial power has been decentralized to the ministries by an annual Budget Law, which is approved by the National Congress. The Budget Law defines the budget ceilings for each ministry annually. Pakistan Powers are delegated to the principal accounting officer who may exercise powers without consulting the Financial Adviser. CFAO may be consultedbut his advice can be overruled by principal accounting office who may record reasons for the same. Financial powers delegated to ministrieddepartments may be further delegated by the administrative secretaries to offices subordinateto them without consulting the Financial Adviser. Indonesia State Finances Law (17/2003) defines authority to exercise national fiscal management which shall be vested with the President. This authority to be delegated to Minister of Finance, stateministers, heads of institutions, governors, rural district ChiefExecutives, mayors. 2. Financial Adviser: Mandate, guidelines, powers, and role How are Financial Advisers designated? What is the level of the FA post? India Financial Advisor and Additional Secretary or Financial Advisor and Joint Secretary. Member Finance in Department of Telecommunications and Department of Telecom Services; Financial Commissioner in Ministry of Railways; and Financial Adviser (Defence Secretary). All these posts are of the level of secretary. United States Chief financial officer. Cabinet-level position. UnitedKingdom FinanceDirector (formerly Principal Finance Officer). Most are at Managing Director level (member of the Board), but Finance Directors of smaller agenciesmay be at Director level (but still attendBoardmeetings). Canada Chief financial officer. Some are called Senior Financial Officers. Large departments:mostly at the level of Additional DeputyHead. Medium-sized departments: at level of Director General. Small departments: at the level of Director. Functional head of the "controllership" function of the federal government is the 31 How are FinancialAdvisers designated? What is the levelof the FA post? Controller General. Australia Chief financial officer. South Africa Chief financial officer as head o f Finance Division. Level o f seniority o f chief financial officer i s determined by Accounting Officer. Chief financial officers are appointed at senior management levels of Director, Chief director or deputy director general. Level o f seniority depends on size o f department. Brazil The Undersecretary of Planning, Budget, & Management i s appointed by the Ministry as a part o f the Presidential Cabinet. This is a political position, correlated to federal government political cycles. Mexico The Financial Adviser (Official Mayor) position was officially established after the MexicanRevolution in 1917. Pakistan Financial Advisor. Also post o f DeputyFinancialAdvisors. Indonesia Everycivil servant has an echelon (eselon) and a grade (golongan). The position o f Head o f Finance Bureau would have a rank similar to heads of other I s there adedicatedfinancialministerfor each ministry? India Some Financial Advisers have charge o f more than one departmenuministry. United States Yes. United Kingdom Yes. Canada Yes. Australia Most Agencies have a Chief Financial Officer. Insmall agencies the role o f Chief Financial Officer i s often combined with the head o f corporate. South Africa Dedicated FinancialAdviser for each department. Brazil The BrazilianFederal Government i s composed o f 23 ministries and each one has it own Financial Adviser. Mexico Every Ministry has it own Financial Adviser (Official Mayor). The federal governmental decentralized entities (such as oil, power state-owned companies) also have a CFO figure. Pakistan Financial Advisers and deputy Financial Advisers have more than one ministry/division under them. Financial Advisers are based in the respective ministries. In cases with responsibility lies with more than one ministry, the Financial Adviser sits on one o f the ministries and delegateshis deputy to each other ministry. Indonesia Each line ministrv has its own Finance Bureau. What is the mandateof the FinancialAdviser? India Executive mandate. United States Legislative mandate. United Kingdom Executive mandate. Canada Executive. No specific legislation for FinancialAdvisers. Australia Not derived directly from Constitution or statutes o f the country. South Africa Chief Financial Officers derive mandate from Treasury legislations which require them to assist accounting officer in discharging his or her financial management responsibility under PFMA Act. Brazil Mandate is derived from a Constitution law, the Organic Law o f Public Administration. Each ministry has its own internal guidelines that define responsibilities o f all senior positions, includingthe Financial Adviser. Fiscal Responsibility Law, includingthe operating manuals. Mexico Organic Law of Public Administration. Financial Advisers are members o f the President's cabinet. Pakistan Executive mandate. Indonesia Executive mandate. What are the guidelines or charterfor FinancialAdviser? India Redefined Charter June 2006. United States Guidelines issued by Office o f Management and Budge. UnitedKingdom The functions o f the financial director are set out in the Government Accounting Manual, 2000, Annex 4.2. 32 What are the guidelines or charter for Financial Adviser? Canada Policy on "controllership" issued by the Treasury Board Secretariat, Canada dated February22, 1996. Major overhaul taking place and a new policy statement is expected in FY2008. The move is clearly toward the private sector CFO model. Australia Not establishedby charter or act. Guidelines, developed by Finance: The role of the CFO - Guidancefor CommonwealthAgencies, April 2003. SouthAfrica National TreasuryGuide on CFO roles andresponsibilities.No Charter. Brazil InstructionManual of Budgeting Execution and FiscalTargets. InstructionManual of Fiscal Risk & Fiscal Policy. Fiscal Responsibility Law, including operatingmanuals. Summary of accomplishedfiscal targets. Public Service Law, which emphasizes public policy concepts such as planning, coordination, decentralization, delegation& control. Mexico Each ministry has its own internal guidelines that define responsibilities of all senior positions, includingtheFinancialAdviser. ImprovementManagementProgram. Manualof AdministrativeProcess. GeneralModel of FinancialAdvisors Structure Pakistan Office Memorandum No. F.3 (2) Exp.IW2006 of September 2006. This is only a modification of the arrangements originally designed in 1962 and the post of Section Officer (Finance & Accounts) / Finance & Accounts Officer then provided for in the ministriesandhasbeenupgradedwith more elaboratefunctions. Indonesia There is no Charter. Ministries may issue their own regulationsfor structure of Finance Bureauandforjob descriptions for its headandhisimmediatesubordinates. What financial powers are delegated to Financial Advisers? India Financial powers are delegated by Ministry of Finance to administrative ministries. FinancialAdviser advises the administrativeministriesto exercisedelegatedpowers within GeneralFinancialRules. Proposals beyond delegated powers are sent to Ministry of Finance for approval after obtainingFA concurrence. United States As per section902 of ChiefFinancialOfficer Act. United Kingdom Financialpowers are delegatedby Treasury to departmentsand financial director exercises this delegatedauthorityonlythroughtheheadofthe department. Canada Internaldelegationby deputyhead, not as per law. Delegation can vary between departments and agencies depending on size, complexity, degreeof autonomyetc. Generally delegation for: CommitmentAuthority, Certification of receipts of goods and services, andPaymentAuthority. Most likely to be delegatedexclusivelyto Chief FinancialOfficers (other finance officers) i s PaymentAuthority. Australia Financial delegations to the Chief Financial Officer generally cover: agency financial reporting and management aspects; collection, custody of public moneys; accounting, appropriations and payments, particularly approval of future spending proposals, entering into contracts etc.; borrowingandinvestment; control andmanagementof public property; reportingandaudit. SouthAfrica PFM Act also makes provision for the accounting officer (head of department) to delegate (in writing) to the Chief Financial Officer any of the powers entrustedor delegatedto the accounting officer in terms of the PFM Act or instruct Chief Financial Officer to perform any dutiesassignedby the accounting officer. Accounting officer normally delegates all his or her federal financial management responsibilitiesto ChiefFinancialOfficer. Brazil Financial Adviser is the Financial and Accounting Authority at the ministry. Activities include execute accounting process and develop financial statements; execute budget transfers under certain amount and within the same budget chapter; design the ministry's annualbudget; etc. FinancialAdviser has full power to approveand exercisethe ministry's expenditurebudget andprovideperiodicinformationto Ministry ofFinance. Financial Advisers have the right to veto any of the Ministry's management/financial initiativesthat are againstthe policy framework or surpass the Ministry'sbudgetceiling. Mexico Fullpower to approveandexercisethe Ministry'sexpenditurebudget. 33 What financial powersare delegatedto Financial Advisers? Power to negotiate next year's budget with Ministry o f Finance. Power to execute budget transfers, only under certain amount and also within the same budget chapter. Accounting process. Right to veto managemendfinancial initiatives which are against policy framework or above the budget ceiling. Pakistan Financial Adviser has full powers to approve expenditure proposals and to accept budget provisions, except cases of important issues of policy to be submitted to Additional Secretary (Expenditure). Indonesia Each line minister i s wholly responsible for the finances of their respective ministry. Inpractice the minister delegates this to head of Finance Bureau (KepaZaBiro Keuangan) butthe extent of suchdelegation is solely at minister's discretion. All lineministers appoint several specialist advisors (AhZi Menten'). They are notpart ofthe official organization and have no line management authority. Their authority and role are entirely at the discretion of the minister. In some case they may be given a role (usually short term) which would otherwise have been given to the head of Finance. What are key roles of the Financial Advisers? India Budget preparation and execution. Expenditure monitoring. FRBM-related tasks. Expenditure and cashmanagement. Projecdprogramme formulation, appraisal, monitoring and evaluation. Leveraging o f non-budgetary resources for sectoral development. Oversight o f quality o f accounts and internal audit etc. Review o f financial management of programmes/projects. Director on Board of Public Sector Undertakings United States Responsible for financial management activities and processes including preparation of annual financial statements, which are finally signed off by the Secretary. Active engagement with Office o fManagement and Budget duringbudget process. United Kingdom Monitoring and execution o f budget. Preparation o fresourceaccounts. Internalcontrols & riskmanagement. Cash management and asset management. External audit (statutory): coordinating replies to NationalAudit Office. Resourcegeneration strategies. Technological support for financial management systems. Financialdirector incharge of procurement. Financial director supports the Accounting Officer, who is solely accountable to the Public Accounts Committee. Canada Operational and financial planning and budgeting framework. Budget monitoring and execution. Maintenance of accounts. Coordination role for cashmanagement and asset management. Annual financial reports. Strategies for resource generation; ensuring technological support for financial management systems. Advice and challenge function for procurement. Chief Financial Officer supports head o f department to answer Public Accounts Committee. Australia Budget development. Monitoring financial management indicators. Accounting, cash management, liaison and link between internal and external audit, etc. South Africa Planning and budgeting. Revenueand expenditure management. Asset and liability management. Accounting and reporting. Inputsfor audit queries. Resource generation. Preparationo f strategic plan for the department. Risk assessments and implementation o f system o f risk management. 34 What are key roles of the FinancialAdvisers? SuDuortsheadof deoartmentinPublicAccounts Committeehearings. *. - Brazil Planning, budgeting, accounting, financial management, controlling budget execution, humanresources functions, informationtechnology, generalservices, etc. Financial Adviser is responsible to accomplish the link between the budget process and expenditureexecutionwith the nationalplans. Financial Adviser has a consultative role only in financial & administrative issues. Financial Advisers are not directly involved in the core or operating issues of each ministry. Mexico Planning,programmingandbudgeting. Executingexpenditureandexpenditurecontrol. Financialreporting. Measuringperformanceofplandprograms. Treasurymanagement. InternalAudits. Procurementprocess, evaluatingexpenditureprocess. Designingandimplementingoperatingmanuals. Humanresourceresponsibilities,IT improvements, managingpublic works. Pakistan Supports operations of ministries & provide advice to the principal accounting officer. Current expenditure: Approval of expenditure and budget provision, scrutinize proposals for supplementary grant, re-appropriationof funds, submit proposals for creationof posts and Contingent PaidStaffto Additional FinanceSecretary-Expenditure,write off of losses, representingFinanceDivision oncommittees, etc. Indonesia Treasury, including drafting guidelines for financial administration, monitoring and evaluation of adherence to policies and regulations and administering appointment of financial staff insatkers. Budgets and maximization of non-tax revenues, including facilitating approval of annual budget (DIPA). Note; Bureauof Financeis not responsiblefor annualplanningandbudgeting, which is the responsibility of another Bureau, Planning and Foreign Aid Cooperation (Perencanaan/KLN)). Verification and accounting, and preparation of budgetrealizationreports, balance sheets. Supervisionandtechnicaldevelopmentof state-ownedenterprises. What is the major review of F A role inrecent years? India EshwaranCommitteeReportonRoleofFinancialAdvisors, 1996. NIFM Workshop inJune2005 on RoleofFinancialAdvisors. RedefinedCharter issuedinJune 2006. United States AGA conductsannualsurvey. 2006 survey: too much emphasis and resources spent on annual financial statements and their audit, andneedto focus moreonanalysis andother value addedwork. 2005survey:focused oninternalcontrols. UnitedKingdom No. Canada Roleundermajorreviewandnew policy is expectedin2008. The Comptroller General conducts ongoingreviews of the function as an integral part of hisher roleinthe policy makingprocess. The Federal Accountability Act has enhanced the responsibilitiesof the deputy head for financialmanagement. The deputy head being the accounting officer of the department, the CFO policy i s evolvinginlinewith this new requirementunder FinancialAccountability Act. Study onModernizingFinancialManagementinGovernmentconductedby anNGO. Australia A benchmarking study, Beyond Bean Counting: Effective Financial Management in the Australia Public Service-1998 & Beyond, examines adoption of accrual accounting throughoutthe AustralianPublic Servicewas undertakenin 1997. Follow on study on benchmarkingin 1999. functioninCommonwealthorganisations-benchmarkingstudy. Auditor-General reported results of a study on analysis of the chief financial officer SouthAfrica Noreviewafter June 2000 when CFO positionwas established. Brazil Notapplicable. Mexico Budgetary GoalsFollow-up Program(Feb 2007). ManagementImprovementProgram. Manualof AdministrativeProcesses. GeneralModel ofFinancialAdvisors Structure. 35 What is the major review of FA role in recentyears? Pakistan There have been periodic revisions since 1962 in order to strengthen the financial control and budgeting setup o f the administrative ministries, and also there have been revisions o f delegated powers to the ministries. Except for foreign exchange budgeting and service regulations, Financial Adviser performs all other functions o f the Ministry o f Finance in relation to the assigned administrative ministry. Indonesia Major changes have taken place from 2004 to 2006, which have affected the role o f head o f Finance Bureau. While structural position o f this post within the line ministry has not been much affected, the structures and responsibilities o f the various sections he/she manages have been adjusted significantly with both consolidation and separation of roles. Most significant are the new financial systems and procedures which head o f Finance must ensure that they are followed by all financial staff inthe Ministry. Were there changes inthe key roles of FinancialAdviser in recent years? India Redefined Charter issuedinJune 2006. United States -do- United Kingdom No. Canada Trend in public sector to change the role in line with the role in private sector. And for Chief Financial Officers to provide long-term advice and contribute to business decisions. Australia Greater emphasis on financial management skills. Chief Financial Officers taking a more dominant role in and accountability for financial results. Chief Financial Officers are far more integrated into broader activities o f the agency now thanwhen the role was first established. South Africa No. Brazil Since August 2005, the Financial Adviser is obliged to have an internal affair department in hisher management structure. Use o f SIAFI budget and spending exercise control. Mexico In2000 the Federal Administration emphasized FA involvement inimproving management quality and administrative processes. In 2007 (New Presidential administration): link between expenditure process and social impacts, budgetary goals and expenditure efficiency. Pakistan Not material changes. 3. FinancialAdviser: Reporting,accountability,and assessment framework I s there any conflict in reportingby FinancialAdvisers? India Dual reportingto administrative ministry where Financial Adviser is posted and to Ministry o f Finance. United States Chief Financial Officer reports to the Secretary o f the agency and i s also in constant communication with OMB (while not "reporting" to them). As both the agency Secretary and Chief Financial Officer receive overall strategic directives and management guidelines from OMB, it i s expected that there will be minimum divergence of views in preparing budgets and once appropriations are passed, both functionaries work within the parameters of OMB guidelines. United Kingdom Apart from reporting to head of department`ministry, financial director reports to the Management Board o f hisher department, and subcommittees o f the Board (such as for audit, finance and risk).Head o f department as Accounting Officer takes responsibility for all outcomes o f Board decisions, so there can be no `conflict' with financial director. On spending decisions, the financial director takes a critical `challenging' role and argues the case against spending. Ifaccounting officer and financial director differ on questions of judgment, the financial director defers to the accounting officer. If accounting officer and financial director differ on questions of financial propriety or accounting policy, financial director can ask the Chairman of the Agency's Audit and Risk Committee or the Treasury to intercede. Canada Head of Department is the only reporting officer for Chief Financial Officer. Chief Financial Officer has a responsibility to respond to the Departmental Audit Committee. 36 I s there any conflict in reportingby FinancialAdvisers? Chief Financial Officer is indirectly accountable to Treasury Board Secretariat and comptroller general in discharging their mandates with respect to professionalism in financial management. Incase of CFO advicenotbeingacceptedbythe deputyhead, Chief Financial Officer must seek the opinion and advice of deputy comptroller general, failing which the Chief Financial Officer requests deputy head to seek the advice of comptroller general. Each deputy head defines reporting requirements for hisher department and it varies depending on size of complexity of the department. The job description of the Chief Financial Officer provides this information. Job Descriptions are not always public documents. Australia Chief FinancialOfficer i s accountable to the agency Chief Executive. Chief FinancialOfficer i s not placedinthe agency by Finance. Chief Financial Officer has a direct and accountable reporting line to the Chief Executive, however, administratively the Chief Financial Officer may be a direct report to another position inthe agency. Chief Financial Officer provides financial reports to many officials of an agency, however, therole reports to the ChiefExecutive or an agency programmanager. Inagencies, the role also reports to the senior executivemanagement group that, while not a `board,' advises the Chief Executive on organizational matters. For statutory bodies the Chief FinancialOfficer provides reportsto the board of directors. Under the FMA Act, finance orders and various guidelines, information, and reports are provided to Finance by the Chief Financial Officer. However, this information i s provided on behalf of the Chief Executive of the agency and not independently of the Chief Executive. Therefore conflicts, if they arise, are resolved within the agency before any reportsare providedto Finance. South Africa Chief Financial Officer is directly accountable to accounting officer while hehhe may report administratively to another incumbent. Chief Financial Officers do not report to another parent departments other than their own, but submit financial reports and other returns to the relevant treasury, as required in terms of legislation. Brazil FinancialAdvisers only reports to their own ministryand has a strong relationshipwith the ministrysince appointedby the ministry. Financial Advisers are not employees of Ministry of Finance, but have a major role of coordinating with the Ministry for annual budget proposal, execution of budget through SIAFI, etc. Mexico Dual reportingto own ministry and also to the Ministryof Finance. In recent years Financial Adviser is also required to report on performance against goals andobjectives to the Presidential Office. Pakistan Financial Advisers directly report to the additional finance secretary (Expenditure), Ministry of Finance and also participate in meetings called by the Finance Secretary and theFinanceMinister occasionally. Indonesia Reporting by Head of Bureau is direct through Secretary General to the Minister. Hehhe has no direct or functional responsibility to any agency outside the line ministry- such as Finance - other than to comply with the financial reporting systems which have been formally laid down. How are FinancialAdvisers made accountable? India Quarterly reports to and periodic interactions with Ministry of Finance. Preparationof regular reports on the financial performanceof the administrative ministry. United States Performance of both the departmental secretary and the Chief Financial Officer is indirectly evaluated by OMB through `balanced scorecard' method that uses financial indicators. The Secretary does not write the CFOperformanceappraisal separately. UnitedKingdom - By Annual Performance Review. This may include various agreed indicators of performance, such as financial break even (where this i s part of the agency's obligation), submissionof audited accounts to Parliamentbefore it goes into summer recess, clean audit reports, etc. Canada Formally: annual performance appraisal by the deputyhead. Ongoing accountability: audited financial statements, periodic reports prepared for central agencies, and performance/compliance audits conducted by the Auditor General, the InternalAuditors, etc. Australia Chief financial officers in agencies are on Australian Workplace Agreements which detail 37 How are FinancialAdvisers made accountable? their duties, responsibilities and accountabilities, and include performance assessments on a six-month basis. Poor performance can result in sanctions being applied. South Africa Through deliverables, as captured in the department's strategic plans, performance agreements, delegations o f authority and audit outcomes. Brazil Financial Advisers are required to submit a daily, monthly, quarterly, semester, & annual financial report to Ministry of Finance. Financial Adviser submits a performance report to ministry showing correlation between budget andexecution. Disclosure & Transparency Law oblige the Financial Advisers to provide any information related with their duty. Ethics Policy Law. Internal affair area has the authority to impose disciplinary measures on the Financial Adviser. Mexico Financialreport to administrative ministry every 15 days. Financial reporting to Ministry of Finance for each month, quarter, semester and year. Annual report to National Comptroller Bureau on performance against strategic goals. Report to Presidential Office for each quarter and year. Provision o f information under the Law o f Transparency and Disclosure of Public Information. Pakistan Financial Advisers are required to work according to their delegated powers and consult additional finance secretary (Expenditure) for cases beyond their own powers Indonesia The Head o f the Finance Bureau (Kepuh Biro Keuungun) i s accountable only to his Secretary Generalhlinister. There i s no system for accountability by, or assessment o f performance of, the Bureau, involving outside agencies such as Ministry o f Finance, other than the requirement to comply with all standard systems andprocedures. What is the system for review of F A work? India Redefined Charter mentions Annual Reports as well as Quarterly Reports. United States Performance o f both the departmental secretary and the Chief Financial Officer i s indirectly evaluated by OMB through `balanced scorecard' method that uses financial indicators. The Secretary does not write the CFO performance appraisal separately. UnitedKingdom Depends on the head o f department. Normally includes monthly out-turn reports and management accounting papers. Financial director reports to Management. Board o f Department and subcommittees o f the Board(audit, finance andrisk). Canada Deputy head does the annual performance review o f chief financial officer. Ongoing oversight of the Controller General. Australia All information and reports of an agency to Finance are subject to internal quality assuranceprocesseso f the agency. External reports prepared by finance group are subject to quality assurance by the head of Corporate or a deputy Chief Executive. South Africa Through quarterly reports to accounting officer on progress achieved against strategic plans and reasons for deviations. Brazil Budget execution according to the ministry's annual budget, avoiding budget deficit or under execution of the budget. Accurate and updated use of the Integrated Accounting Systems (SIAFI). Budget execution link with national programs & policies. Transparency & disclosure practices. Ongoing management activities, avoiding failures in procurement process, I T systems, union problems, etc. Mexico N o systematic review of FA performance. Inpractice, F A work is measuredbyproper execution ofbudget, avoidingmanagement and operational failure, avoiding corruption action reports from the National Comptroller Bureau directly to the FinancialAdviser or their staff. Pakistan Submission o f files/proposals by the Financial Adviser to Additional Finance Secretary (Expenditure), FA participation in the meetings, and feedback from the respective ministries form the basis for review o f F A work. Indonesia There is no formal review system, only normal day-to-day supervision. 38 What is the assessment framework? India Assessedas per framework applicableto governmentstaff. Annual Confidential Report is written by secretary of administrative ministry, countersigned by DOE(MoF) secretary, reviewed by Minister of Finance, and accepted by minister of the concernedministry. United States Performanceof both the departmental secretary and the Chief Financial Officer is indirectly evaluated by OMB through `balanced scorecard' method that uses financial indicators. The Secretary does not write the CFO performanceappraisalseparately. UnitedKingdom No assessment framework, only Annual PerformanceReport. The FD Annual PerformanceReport is preparedby the head of department or, sometimes by the financial director andreviewed by headof department. The financial director can ask for `stakeholder reports', Le., testimonials from other officers, including Treasury officers, withwhom hehhe has worked during the year. The Treasury has no formal input, and the Annual Performance Report does not go outside the agency. Normally all financial directorshavejob descriptions. Canada Accountability profileagreedbetweenthe deputy headand the Chief FinancialOfficer. Australia EachChief FinancialOfficer works under anAustralian Workplace Agreement, which details the assessment framework. This framework includes both performance bonuses, salary at risk, and sanctions for poor performance. A six-month performanceassessment is undertakenby the CFO direct report. Insome cases, dependingon the size of the agency, this assessment is undertakenby the Chief Executive of the agency. SouthAfrica Assessment framework includes annual conclusion of performance agreements, mid-year performancereviews and eventually performanceassessments. Annual performance agreements are contained in the performance agreement that the Chief FinancialOfficer enters into withthe accountingofficer. Performancereview i s written bythe accountingofficer. Brazil Financial Advisers do not have a performance review or competency assessments. Performance is measured by: Accurate functioning of the Integrated Accounting Systems (SIAFI). Achievement of national, sectoral, & regional plans and target. Timely consolidation of financialbalanceof theministry. Mexico Federalsystemdoes notprovidean assessment framework. Ministry of Finance can evaluate FA work according to quality and timing of financial reports. The Ministry evaluates the FA work according to hisher capacity to solve operational and financial problems, andalso whether FinancialAdviser strictly follows the legalframework. Pakistan Based on FA performance in day-to-day work, hisher Annual Confidential Report i s written by Additional Finance Secretary (Environment) and countersigned by Finance Secretaryminance Minister. Indonesia None. 4. Financial Adviser: Selection, eligibility criteria, incentive structure, tenure, and career development What i s the FA selection process? India List of empanelledofficers for the post ofjoint secretary i s reviewed by Minister of Finance and sent to respectivedepartmentalminister. After approval bythe minister, the list is sent to Cabinet Committee for Appointments. United States Cabinet-level position is appointedby Presidenton advice and consent of Senate, withrespect to agenciesdescribedunder CFO Act, subsection (b) (1). Chief Financial Officers in agencies as defined in CFO Act, sub-section (b) (2) are career appointees from the competitive service or the senior executive service, and are appointedby the head of the agency concerned. The US Chief Financial Officer is therefore a key political appointment with a strong legislative basis. The deputy Chief Financial Officer i s normally from a career civil service and is not a presidential appointee. UnitedKingdom Each agency (ministry, department, autonomous bodies) advertises and recruits as per central guidelines. The Treasury (Chief, Government Finance Profession) usually comments on the candidates 39 What is the FA selection process? and may be invitedto sit on interview panel ifthe agency needs further technical inputs. Canada Deputy head can appoint the Chief Financial Officer in consultation with the Comptroller General. Government o f Canada rules regarding fairness associated with hiring decisions are applicable. Candidates are subject to competition and can come from the private sector or elsewhere. Australia All positions are advertised (at least internally inthe agency) and, on occasion, externally and are subject to centrally established meritprocess. South Africa Position i s advertised in the media and a shortlist is compiled based on job requirement. Selection committee interviews and competency tests may be conducted. Reference checks, credit and criminal record, qualifications and security clearance may also form part of selection process. Selection committee makes recommendations to accounting officer/minister or delegated official for approval. Brazil Financial Adviser is appointed by the Ministry and is part o f the Presidential Cabinet. Ministry of Finance does not interfere inthe process. FA selection is not advertisedand is not based on interview process, competency exam, etc. Mexico Appointed by the Ministry o f Finance, and it i s a political position. N o explicit or public selection mechanism. Candidate is proposed by each ministry and final authorization is given by the Presidential Office. The Ministry o f Finance has a veto over the FA candidates, more as a common practice, not supported by law. Pakistan Financial Adviser i s a Joint Secretary o f Ministry o f Finance or o f other ministries or an officer o f equivalent rankbelonging to the Audit and Accounts Services who can be posted as an Financial Adviser. However, their academic background and relevant experience i s consideredbefore posting as FinancialAdviser. Indonesia Standard civil service selection procedures apply. The Bureau of Personnel (Biro Kepegawaian) in each line ministrymaintains records for all staff. This allows it to monitor their career progression and also enables it to assist in identifying suitable persons when vacancies arise. Inthis context. there is no difference between the treatment of finance sDecialists and other Are FinancialAdvisers part of the accountslfinancecadre of government? India Some FinancialAdvisers are selected from accounts cadre. United States Some Chief Financial Officers are selected from public sector. United Kingdom N o separate accounts/finance cadre. All financial directors arepart ofthe civil service structure. The Government Finance Profession i s a professional association, not a cadre. Canada In the past, they could come from the administrative cadres but increasingly the financial management stream i s becoming the dominant source. N o cadre per se, and most financial officers belong to a professional association o f government financial managers. Australia The Chief Financial Officer should be professionally qualified via a full membership o f a relevant recognized professional body, such as the Institute of Chartered Accountants in Australia (ICAA) or CPA Australia, or their international equivalents, or have significant , demonstrated expertise in financial management, whether through formal qualifications or practical experience. South Africa Chief Financial Officers are appointed head o f Finance Department and therefore form part o f accounts/finance cadre in government. Brazil Financial Advisers are part o f Finance Division o f each ministry, and therefore most o f the Financial Advisers are part of accounts & finance cadre. F A responsibilities also include other issues, such as human resources, IT, etc., so some Financial Advisers can also belong to other cadres, such as administrative or public policy. Mexico Most Financial Advisers belong to accounts/finance cadre. Some Financial Advisers belong to other cadres, such as engineering, public administration, etc. Financial Advisers inNavy & Army Ministriesmostly belong to military cadre. Pakistan Not exclusively. Indonesia No. Such `cadres' apply to all civil servants and will be grouped according to the line ministry/institutionto which they are attached. 40 I s there a uniform system of Financial Advisers in all ministries/departments (eligibility criteria, designation, etc.)? India Financial Advisers in some ministries (e,g., Member Finance in Telecom) are from accountshinancecadre. United States As per Section 901 of CFO Act the recruitmentsystem seems to be uniform with regard to eligibility, criteria etc. UnitedKingdom Eachministryfollows its own procedure. Central guidanceprescribes general principles of competition and fairness inrecruitment, not necessarily detailedrules. Civil Service Commission sets guidelines for the designation, selection process, etc. for the postof financial director. Canada Generally uniform principles apply. The agencies of the Government that are separate operating agencies have greater flexibility interms ofofferinghigher pay comparedto corelinedepartments. Australia Agency headshaverights, duties, andpowers of an employer and each agency has developed processesthat best meet its requirements. Overall processes must comply with a variety of legislative requirements, including the Public ServiceAct 1999. SouthAfrica Unifiedsystem ofrecruitment of ChiefFinancial Officersinall public sector departments. Brazil Eligibility criteria for FinancialAdvisers are consistent anduniformacross the ministries. Mexico No uniform criteriabut some uniformity inprofile. Selectiondepends on sound technical background,aproven reputation, andbelongingto the Ministry'spolitical group. Pakistan Interms of functions, yes. Even in Ministry of Defense, the system of Financial Adviser is similar to the non-Defenseside. Indonesia No. Eachministry makes its own appointments applying its own criteria. What is the qualification and experience required for the FA post? India While urevious exDerience in finance i s considered, candidates are selected form both finance and adhnistrative'backgrounds. UnitedStates CFO Act does not specify the exact qualifications required for the position. It states that the individual must have "extensive practical experience in financial management practices in large governmentalor business entities." UnitedKingdom Since 2003, it has been the norm for a financial director to be a qualified accountant, as well as be a university graduate. At December 2006, 91% of government expenditure fell within the purview of qualified accountants, andit is expectedthat this will soonrise to nearly 100%. Canada FA candidate should havea university degree and aprofessional qualification. Experienceinfinancial management of comparablesized organizations. An accounting/finance qualification i s increasingly an eligibility criteria. Chief Financial Officer must sign off the financial statements and increasingly provide assurance on the internalcontrol arrangements ofthe entity. Australia Chief Financial Officer should be professionally qualified via a full membership of a relevant recognized professional body, such as the Institute of Chartered Accountants in Australia (ICAA) or CPA Australia, or their international equivalents, or have significant demonstrated expertise in financial management, whether through formal qualifications or practical experience. SouthAfrica Recommended that Chief Financial Officers have qualifications of Bachelors in Commerce, Master of Business Administration, Chartered Accountant or Certified Management Accountant as the minimumprofessional qualifications. Appropriate experience also necessary. Brazil Not mentionedinlaw or manuals. Although not stated explicitly in law, the position requires a degree or a Master's degree in accounts, public finance or finance, or businessadministration; or a similar degree. Mexico No regulatory framework to definequalification or experience. Candidates do not haveto appear for exams. Most Financial Advisers have a high-level education, such as an under degree or degree. Inmost casesFinancialAdvisersarerotatedfrom oneministryto another. 41 What is the qualificationandexperience requiredfor the FA post? Pakistan Financial Adviser i s a Joint Secretary of Ministry o f Finance or of other ministries or an officer o f equivalent rankbelonging to the Audit and Accounts Services who can be posted as an Financial Adviser. However, their academic background and relevant experience is consideredbefore posting as Financial Adviser. Indonesia There are no guidelines or standard criteria on this subject. For example, the Ministry o f Public Works has appointed an engineer as Head o f the Finance Bureau. Are FinancialAdvisers selectedfromthe privateor publicsector? India Public sector. United States Both the public and private sectors, with a slight bias towards private sector; and there is a fair amount of two-way mobility. Almost all federal Chief FinancialOfficers have experienceof public sector andprivate sector. United Kingdom Most financial directors are recruited from the private sector. Public sector experience is "useful but not essential." Very few financial directors have beenpromoted from Civil Service. Canada Open to people withrequisite qualifications regardless o f sector. While there i s no finance cadre per se increasingly Chief Financial Officers are from financial management stream. Australia Open to applicants of bothprivate sector andpublic sector. South Africa Open to both public sector and private sector. Brazil Financial Advisers are mostly from public sector but recently there are more cases o f FinancialAdvisers from private sector. Mexico Mainly from public sector but inrecent years cases o f Financial Advisers joining from private sector are more often being observed. Pakistan Generally public sector background. Experience o f private sector can only be incidental. Indonesia All staff appointedto Finance Bureaupositions, includingHead of the Bureau, would be from public sector, i.e., promoted from another civil service position. What skill set is requiredfor the FAjob? India Experience in finance may be considered. United States Management accounting, budget formulation, performance auditing, and implementation of internal controls etc. United Kingdom Financialmanagement experience at a senior-level and ability to manage a team. Canada Financial management, accounting, auditing, and internal control, as these relate to comparable large organizations along with skills o f managing people. Australia Technical competence & comprehensive understanding o f governing legislative framework. Capacity to interpret, analyze, and present financial performance. South Africa Should be technically trained. Skills in financial accounting, management accounting, internal control; internal and external audit, information systems, economy, etc. Brazil Negotiations skill, management skills, communications skills, planning and budgeting, analytical skills, knowledge of information technology, and management. Mexico Skills of negotiation, management, communication, planning, budgeting, analysis, accounting, finance, management o f humanresources and information technology. Pakistan Expectedbackground in financial management. Indonesia There are no guidelines or standard criteria on this subject. For example, the Ministry o f Public Works has appointed an engineer as Head o f the Finance Bureau. What incentivestructureexists for the FA post? India As per grade for the post (joint secretary, assistant secretary or secretary). United States As per government rules. United Kingdom Determined by negotiation with the selected candidate. Canada Recognition for good performance is a value across Government and good performance is rewarded inmore than monetary term. Australia Performance Linked Remuneration. While each individual's performance plan i s unique, the reward system is standard across the public sector. South Africa As per standardized incentive structure for senior management in government, including granting o f annual increases and awarding o f performance bonuses. Brazil As per standardized incentive structure. 42 What incentive structureexists for the FA post? Mexico Financial Advisers have a fairly good income, fourth level of income after the Nation's President. Pakistan As per thepostofjoint secretary inthe government. Indonesia The head of Finance Bureau holds a position which is ranked as "Eselon 11" and enjoys the same statusbenefits as the holders of similar levelpositions outsidefinance. What is the stability of tenure inthe FA post? India Maximumof five years inone departmendministry. UnitedStates At the pleasure ofthe President. Inpracticethe averagetenure ofthe ChiefFinancialOfficer inafederal departmendagencyis about 18-24months. United Kingdom Tenure depends on the contract. No system of compulsory transfer after a fixed period but financial directors can apply for transfer. Canada Stable tenure but getting shorter due to pressure to replace unqualified Chief Financial Officers with qualified ones post Sarbanes-Oxley Act. Australia Auditor General's 2001benchmark study reported average years of service of Chief Financial Officer as one-and-three-quarter years. No compulsory transfer. South Africa Inmost cases, employedonpermanentbasis. Insome instancesChiefFinancial Officers appointedon contractualbasis for afixed period. Brazil The FinancialAdviser i s part of the Presidential Cabinet and i s likely to be removed after the Presidentialt m i s over. The position does not have astable tenure. Mexico Financial Adviser not p'art of the Civil Service Program Political position and hence, very fragile, as when the Minister i s removed or a new political party comes into power most FinancialAdvisers are removed. In the best scenario, Financial Adviser can last for a six-year period, which is the Federal Governmentperiod. Pakistan There is no fixed term, but generally the postingin one ministry may last 2 to 4 years. Indonesia All civil servants at any given grade enjoy the same degree of stability. Most civil servants spend their entire working lives in one ministry or institution. I t is most unusualto movefrom oneministryto another, except for appointmentsat a very senior level. What is the career development for the FAjob? India Financial Advisers may be promoted to the next level (e.g., from joint secretary to assistant secretary) or may move to a larger department as Financial Adviser or another non-finance position. United States No assuredcareer progression. Promotions andappointments to higher positions are through open competition. United Kingdom A financial director at director level can be promoted to managing director and can become permanent secretary inopen competition, or financial director ina larger agency. Canada Promotions couldbelateral or horizontal. Australia Movement by Chief Financial Officers can be both lateral and vertical. The decision rests withthe way inwhich aChiefFinancialOfficer wishes tomanagehisher career. South Afr-ica Opportunities exist to move as Chief Financial Officer to a larger departmentor a higher level of seniority. Chief FinancialOfficers wishing to move out of finance cadre may opt for higher positions out of finance stream. Brazil FinancialAdviser canbe appointedinsome other position at the same ministry, same position at a different ministry or canbemovedto Ministryof Finance. Most FinancialAdvisers remaininpublic sector. Some former Financial Advisers work in private sector, such as banks, consulting or accounting firms, or inacademic sector such as research organizationsor universities. Mexico Career developmentofFinancialAdviser is affectedby politicalcycles. FinancialAdviser may moveto same post inanother ministry, continue a political career as a federal or state congressman, become a staff member of a ministry or work in public service at federal or state level. Pakistan Same as any other joint secretary. Indonesia Career development for all civil servants i s almost always within the same ministry. They expect io move from one grade (golongan) to the next as their career develops. Promotion to the next Eselon however i s a major step achieved by only a few. (Eselon I i s 43 What is the career development for the F A job? director general, Eselon ZZ is director or head of a bureau). N o special arrangements or conditions for those infinance. How is the F A career stream managed inthe Civil Service? India As per rules of government service. United States No system of automatic promotion incivil service (federal) jobs. United Kingdom Civil Service Commission sets guidelines for designation, selection process etc. for the post o f financial director. Canada Career stream governed by Public Service Commission monitors compliance with public service norms/regulations. Australia Career planning i s primarily an individualresponsibility, but each organization, as part of the performance plan discussions, would work through career options with all agency staff. This is not limited to Chief Financial Officers. South Africa Depending on the current level o f Chief Financial Officers, the progression could be from director, chiefdirector, deputy director general and director general. Brazil Financial Advisers do not belongto Civil Service. Mexico Financial Advisers are not subject to Civil Service Program since this is a political position. Pakistan Managed within the Ministry of Finance. Indonesia Career development for all civil servants is almost always within the same ministry. They expect to move from one grade (golongan) to the next as their career develops. Promotion to the next Eselon however i s a major step achieved by only a few. (EselonZ i s director general, Eselon ZZ is director or head of a bureau). N o special arrangements or conditions for those in finance. 5. FinancialAdviser: Capacitybuildingand ongoingprofessionaldevelopment How are the F A training needs assessed? India Assessedby Ministryo f Finance. United States As per Section 302 o f CFO Act, Chief Financial Officers Council meets periodically. Sub-committees of the CFO Council may discuss training and capacity development needs o f Chief Financial Officers. United Kingdom Financial directors are qualified professionals, normally subject to schemes of continued professional development. Their skills are assessedinthe recruitment process. Canada Chief Financial Offcer i s responsible for determining hisher own needs. Professional development i s driven by the requirements o f their profession (chartered accountant, certified management accountant, certified general accountant, etc.) along with Government of Canada requirements for senior executives. On the job training via regular exchange o f information (Comptroller General providing the leadership) is also seen as vital for career development. Australia As part of the discussion to establish an annual performance plan for the Chief Financial Officer and finance group staff, development and training needs are discussed. The agreed training needs then form part o f the performance plan, and progress against the agreed plan i s discussed on a six-month basis. South Africa Normally highly qualified and experienced finance practitioners. Training needs identified during competency assessments and performance review appraisal process and development plans are developed, which form part o f their performance agreements and training interventions are identified. South African Management Development Institutei s charged withpublic sector training. Brazil Financial Advisers have high level of financial management skills and therefore their training needs are quite low. The National Public Administration School is responsible for designing training programs for FinancialAdvisers. Training internshipinSIAFI program. Update internship program o fbudget transfers. Training course inmanagement, budget, finance & procurement at federal level. Mexico No formal training program for Financial Advisers. Only formal training programs are given by the Ministry o f Finance for financial reporting and also by the Presidential Office, mainly for strategic planning. Financial Advisers are a very unified group. The group has frequent informal meetings 44 How are the FA training needs assessed? for exchange of experiences and good practices, which helps in standardization of practices. Pakistan There is an obligatory training in the Administrative Staff College for all joint secretaries. Financial Advisers are also sent for training courses abroad by Ministry o f Finance on a case-to-case basis. Indonesia Assessment throughout civil service is sole responsibility o f each line manager. Training courses covering general management and administration provided by a center incorporated ineach line ministry. Specific technical training for key financial staff in line ministries was provided by MinistryofFinance when new financial systems were introduced (2005/2006). What new areas have been identified in recent years for FA skill development? India As per documents of NIFM workshop in 2005, government accounting, commercial - - accounting, project appraisal, financial analysis, corporategovernance, etc. United States Linking performanceto accountability. Improvedinternalcontrols of Sarbanes-Oxley legislation. Cost accounting. Performanceauditing. Specialty accounting (for asset management, debt management, etc.). Acceleratedreporting. United Kingdom No new areas since introduction of Private Finance Initiative in 1992. But continuous developments intechnology require constant updating of skills. Canada Enterpriserisk management and internal control certification. Australia The emerging training issue i s the need to develop the `soft skills' necessary for an effective manager andleader ofpeople. The Australian Public Service Commission has developedan expansive programcovering the core criteria of effectiveleadership, andthese drive the training inthis area. South Africa In 2003 National Treasury identified areas for skill development for senior civil servants, including Chief Financial Officers: strategic planningandbudgeting, In-year management monitoring and reporting, Internal control and risk assessment, internal audit and audit committees. This led to roll out of 8 courses for 243 financial officers by training providers engagedby National Treasury. Brazil Information technology, program budgeting process, strategic planning, internal controls, budgettarget accomplishmentsystems. Mexico FA position is very conservative and activities have not changed for many years. In recent years trends in public policies have moved towards developing new skills information technology, expenditureefficiency, strategicplanning, transparency, anddisclosure. Pakistan Training infinancialmanagementis beingemphasizedmore andmore. Indonesia Implementation of new financial systems has demanded upgrading of skills for affected finance staff at all levelsof line ministries. Preparationof each ministry's reports - Budget realization, Balance sheet and cash flow as per standard formats, changes in payment procedures, and reconciliation of records of Ministry of . . Financeandline ministies. I s there a systemfor ongoing FA professionaldevelopment? India FinancialAdvisers attendone-off courses andworkshops, e.g., NIFM-conducted courses. UnitedStates Selfdirected. UnitedKingdom Within the Professional Skills for Governmentinitiative, financial directors are requiredto follow structured continuing professional development throughout their careers. Most professional bodies organize continuing professional development for their members. Severaltraininginstitutions,includingthe National School for Government. Canada Mainly selfdevelopment. Ofice of ControllerGeneralis the leader. No dedicatedagency. Forum for exchange of informationby Financial Advisers is meetings and conferencesorganized by the ComptrollerGeneral. Australia Eachagency is responsiblefor professionaldevelopmentof their own staff, although Financedoes take a `wholeof government' approach andprovidesopportunities for trainingon specific subjects, suchas new initiatives. 45 I s there a systemfor ongoingFA professionaldevelopment? South Africa Responsibility of accounting authority. Professional bodies such as Institute of Public Finance and Auditing (IPFA), South Afiican Institute of Chartered Accountants (SAICA), and Charted Institute of Management ' Accountants arrange seminars andworkshopsfor members. Brazil Every ministrqi i s responsible for design and implementation of an annual training program for senior staff, including the FinancialAdvisers. Ongoing professional system includes an evaluationmechanismof FA performance. Mexico The FA group has a non-official, self-training program in which they hire prestigious academic institutions to deliver training in fields such as finance, management, human resources, IT, regulatory framework, etc. Theseprogramsare not compulsory. Pakistan There are occasional training workshops both at home andabroad. Indonesia There are no nationallyprescribedsystems for developmentof skills of financial staff. 6. FinanceDivision: Structure, staffingcapacity building, anuals/guidelines and reports Who are key employeesof FinanceDepartmentreportingto the FinancialAdviser? What is the structureof the FinanceDivision? India Chief Controller of Capital Accounts or Controller of Accounts who may report to more than one FinancialAdviser. Integrated Finance Division of ministry/department usually has a director and assistant directors. There is a system of desk officers inIntegratedFinanceDivision. United States Generally headed by Chief Financial Officer, with a deputy Chief Financial Officer and several career finance staff. Structureof FinanceDivisionvaries in departments. UnitedKingdom Head of group accounts or chief accountant reports to financial director and may act in the absence of financial director. No standard structureand structurevaries a lot indepartments. Each department organizes its own FinanceDirectorate. Canada Large departments include a deputy Chief Financial Officer and director generals of each of various directorates within the CFO branch. Australia Activities of most finance groups are similar, but they are structured differently in terms of number andtitles of staff. SouthAfrica Recommended structurefor FinanceDivisionincludes 3 officials reportingto finance adviser: financial accounting; managementaccounting; and supply chainpractitioners. Smaller departments havecombinedthepositions of financial accountant andmanagement accountant. No deputy ChiefFinancialOfficer infinance department. Brazil GeneralCoordinator of Budget & Finance. GeneralCoordinator of HumanResources. GeneralCoordinator for Management & Innovation. General Coordinator of InformationTechnology. General Coordinator of Logistics & Infrastructure. The Manger of Budget Execution reportsto the General Coordinator of Budget & Finance. Mexico General Director of Programming & Budget (DGPP) responsible for all finance, budget, and accounting issues at the F A office. DGPP structure includes directors for programming & budget; expenditure control; payroll and pensions; accounting; financial analysis & public account; planning & institutional development; institutionalprocess & modernization; and informationtechnology. Pakistan Chief finance and accounts officer (CFAO) - rank of joint secretary or depufy secretary accountable to andreportsto principal accounting officer. CFAO coordinates with the Financial Adviser's organization. CFAO to have `such supporting officers and staff as necessary.' CFAO to tender adviceto the principal accounting officer inthe delegatedfield. Indonesia A typical ministry may have section heads for treasury, budgetshevenue maximization, verification and accounting and supervision of state-owned enterprises. At the next level down(e.g., director general) there is aFinanceSection. What is the professionalbackgroundqualificationsof key staff of the FinanceDivision? India CCNCA is from Indian Civil Accounts Servicebut other staff of IntegratedFinance Division 46 What is the professionalbackgroundqualificationsof key staff of the FinanceDivision? may or may not haveprofessional qualifications andbackground inaccounts/ Finance. UnitedStates Since they are required to be recruited through accounting/ finance stream, they are expected to build on their basic qualifications by acquiringfurther professional certification. UnitedKingdom No general policy, but qualified accountants are expected at two levels below financial director. Training dependson post. Financestaff are trained infinance, procurement staff are trained inprocurement,etc. Canada Not fixed. Determined at the time of staffing action and influenced by the priorities of the day. A professionalqualification is increasingly required. Australia No required professional qualifications for support staff. However, accounting qualifications are highly desirable. SouthAfrica Staffrequired to betrained infinance. It is recommendedthat finance staff have formal post matric (grade 12) qualifications in finance, such as National Diplomas or Bachelor's degree. Brazil Professionalbackgroundineconomics, accounting andpublic administration. Key FA staff haveaunder degree or degree. Staffpositions are subject to selectioncriteria for civil service. Mexico All F A staff, including the General Director of Programming & Budget, are part of Civil ServiceProgram and selectedcompetitively. Selection depends on proven experience and academic grades in areas such as public administration, finance, accounting, or informationtechnology. Pakistan CFAO is a `well trained and experienced' officer. Indonesia No national, standardcriteria are laid down. Eachministry decides relevant background. Most common qualification is a general bachelor degree and afew only haveabachelor degree infinance. What are FA linemanagement responsibilities? India Financial Adviser carries out line management responsibilities for officers reporting directly to himiher (e.g., Director of IntegratedFinancialDivision). United States With respect to Financial Management Group, responsible for organization of work and annual appraisals. United Kingdom Financial director i s a line manager, responsible for leadership and management of the FinanceDirectorate. Canada Varies in departments. Australia Chief Financial Officers are responsible for managing their staff, including recruitment, professionaldevelopmentandperformancemanagement. South Africa Chief Financial Officer is actively involved in recruitment of finance staff by screening applicationsandbeingon the interview panels. Brazil FA responsibilities for human resources include payroll, employee's career, union issues, civil serviceprogram, humanresourcesmanagement, pensions & training. Mexico FinancialAdviser is responsiblefor hiring and firing employees, implementingand follow up of Civil Service Program, capacity-building programs, and providing appropriate working environment for employees. Pakistan Dealing with day-teday issues of F A staff and deputy Financial Advisers. These include issues like granting leave and writing the Annual Confidential Reports of the subordinate staff. Indonesia What is the mechanismfor capacitybuildingof Financestaff? Inwhat key areasis trainingprovided? India One off training courses/workshops. United States As per section 503 of CFO Act, OMB deputy director is responsible for maintaining qualification standards for CFOs and Deputy CFOs; providing advice to agencies regarding qualifications, recruitment, performance and retention of other financial management personnel; assessing adequacy of professional qualifications and capabilities of financial management ingovernment; andmakesuggestions for improvements. Key Areas Performance measurement, balanced score card measurement internal controls, cost 47 What is the mechanismfor capacity buildingof Financestaff? Inwhat key areasis trainingprovided? accounting, budgetplanningand execution and IT capital investments. UnitedKingdom Management responsibility includes appraisal of immediate subordinates' performance and adviceon training needs and opportunities. Key Areas Training organizedfor whole range of FinanceDirectorate functions. Canada Professional accounting institutes and other private enterprise offer a broad spectrum of training opportunities. Canada School of Public Service and Canada Revenue Agency's Training and Learning Directorate within the humanresources branch o f a department offer other opportunities. Ongoing professional development requirements may emanate from respective professional institutes o f Chief Financial Officers. In addition, officers' direct supervisors may identify particular training needs. Australia The performance management system is mandated by the Australian Public Service Commission and is the mechanism for managing and monitoring capacity building within an agency andthe finance area. In 2005, Finance entered into arrangements with several external service providers to deliver training to agency staff on the following modules: Introducing the Financial Framework and the Budget; External reporting frameworks and the budget balances; Cost recovery-Australian Government Charging Policy; and a closer look at appropriations. SouthAfrica Human resource division prepares annual plans for Finance Division to which Chief Financial Officer contributes inrespect o f inputsfor hisher staff. Key Areas Government accounting; bank reconciliation; supply chain management; business writing skills; preparation o f financial statements; revenue management; expenditure management; asset management; and internal controls and risk assessments. Soft skill courses include managing diversity, customer care, team leadership, communication, and conflict management. Brazil Everyministryis responsiblefor designing an annual training program. Mexico Finance staff need to go through a certification process periodically by appearing for exams in areas such as finance, accounting, public administration, leadership, working in teams, computing systems, etc. Pakistan As per norms of civil service. Indonesia No formal mechanism for finance staff. Throughout Central Government, training needs of individuals are identified by line manager, assisted by records kept by Bureau of Personnel (Biro Kepeguwaian). To meet identified training needs, standard training courses are offered by the training center under each line minister (Pusdiklat). Many such courses concentrate on administration and bureaucracy, e.g., Adum - Administrasi umum or management (general). What is FA role in preparingtrainingplanfor financedepartment? India The 2006 Charter sDecifies that in future Financial Advisers will uraare annual ulan for strengthening of Integrated Financial Division, which should be formulated by June 30 of I . eachyear. UnitedStates Chief Human Capital Officer oversees training programs with inputs from Chief Financial Officer. UnitedKingdom For Finance Directorate, humanresource management unit may have a departmentalbudget for training but finance director usually has a trainingbudget for FinanceDirectorate. Canada Responsibility i s delegated to directors general andthemanagementteam reporting to them. Australia Chief Financial Officers are responsible for developing the training plans for their staff and haveabudget for thispurpose. SouthAfrica All departments have to prepare training and development plans for all staff. Plans are preparedby humanresource department inconsultation with head of departments. Brazil Not directly involved. Training of FinanceDepartment is delegatedto the general coordinator ofhumanresources and general coordinator of managementinnovationandboth entities report directly to the Financial Adviser. Mexico Financial Adviser is responsiblefor designingAnnual Training Planand sendquarterly report 48 What is FA rolein preparingtrainingplanfor financedepartment? onthe trainingplanto NationalComptrollerBureau. Pakistan None. Indonesia Headof FinanceBureau, like any other line manager. would monitorthe trainingneeds of his - staff(four sectionsheads) andpreparetrainingplansto meetthem. What manuals or guidelines exist for FA Role? India No separatemanual. United States CFO Act, as well as acts mentionedunder section 2(b) alongwithOMB circulars,the Federal Accounting Standard Board and CFO Council are bodies which issue guidelines. ChiefFinancialOfficer also has discretionary power insettingguidelines inhisher domain. UnitedKingdom GovernmentAccountingManual(issued2000, latestamendment 4/05). Canada Existfor all keyrolesandresponsibilities. Guide on Financial Administration is being substantially revisedin line with the new more strategic CFO concept. Australia Financial Adviser is responsible for providing the training program for the employee's certification of civil service program, which includes some areas such as management, leadership,team working andfinancial/accountingtechnicalknowledge. SouthAfrica Not specifically for Chief FinancialOfficers, but National Treasury has issuedbest practice guidelinesandframeworks onvarious issues relatedto financialmanagement. Brazil Mandate is derived from a Constitution law, the Organic Law of Public Administration. Each ministry has its own internal guidelines that define responsibilities of all senior positions, includingthe FinancialAdviser. FiscalResponsibilityLaw, includingthe operatingmanuals. Mexico Roleis not explicitly definedin asingle document. It must to be inferredfrom applicable laws and manuals (e.g., documentsreferredto section onPFMrules andlaws. Pakistan Series of office memoranda issued since 1962 and other financial rules and regulations referred to in these documents. The latest is office memorandum of September 2006, OM No. 3 (2) Exp. III/2006, GovernmentofPakistan. Indonesia No national guidelines for the FA role (i.e., no job description) produced by Ministry of Finance. Eachline ministry prepares its own. Guidelines for accountingandreportingsystems (as opposed to those which defineFA duties and those of subordinates) are always spelled out by Ministry of Finance though legislation andmanualsandare mandatoryfor all agencies. What manuals and guidelines exist for the FinanceDivision? India No separatemanual. UnitedStates -DO- United Kingdom Government AccountingManual. Canada The ChiefFinancialOfficer is expectedto develop andmaintainthese documentsand inmost departments are being revamped in line with the more modern CFO role. Policies, guidelines and procedures promulgated periodically by the Treasury Board, ComptrollerGeneral, andthe ReceiverGeneral. Australia -Do- SouthAfrica -Do- Brazil FiscalResponsibilityLaw. Civil ServiceProgram. Mexico Ministry's Policy Manual. InternalGuideline. Organic Law ofPublic Administration. GuidelineofPublicAdministrationfor Austerity & Discipline ofPublic Expenditure. Civil ServiceProgram. Pakistan GeneralFinancialRules, FundamentalRules, SupplementaryRules, andFederalTreasury Rules. FiscalResponsibilityandDebt LimitationAct, 2005. Office Memorandumof September 2006. Indonesia Ministry ofFinanceissues guidelines andmanualsfor the variousmandatoryaccounting systems. Some line ministriesanddirector generals (notablypublic works) regularly supplementthe _ _ - - _ _ MoF materialby issuingtheir ow- guidelines. 49 Are there regular reports by the FinancialAdviser on the Finance Division? What are the annual targets of work of Finance Division? India Quarterly Reports to Ministryo f Finance. Annual Finance Report and Annual Outcomes and Systems Report (as per 2006 Charter). United States Section 306 o f GMR Act requires a government corporation to submit Annual Management Report to the Congress no later than 180 days after the end o f financial year. United Kingdom No, unlessrequired by their departmentheads. In 2006, the Treasury reviewed the effectiveness of FM systems in 45 departments, and is following up through financial directors on action plans for improvement. Canada Yes. CFOs sign off: (a) Financial and related reports and disclosures of the department, including departmental financial statements which include Statement of Management Responsibility and Financial Statements Discussion and Analyses; and (b) annual CFO statement on internal control. Department must conduct reviews of financial management accountability on a regular basis. Australia Each agency has monitoring mechanisms for finance group, includingmonthly meetings with the head o f the corporate group, reports to the senior executive management against operational, business or corporate plans o f the agency and regular meetings. Finance has established targets for the preparation and completion o f the financial statements, to enable it to undertake its responsibilities to report at a `whole o f government' level. South Afr-ica Quarterly reports against deliverables as contained indepartment's strategic plans. Brazil Annual Budget Fiscal Targets. SZAFMonthly Report,:the Finance Division is obliged to provide a monthly report of the Ministry's financial performance to Ministryo f Finance. Moreover, budget execution i s updated on a daily basis. Mexico Annual Operating Program. Ministry's Budget Draft. Ministry's Annual Public Account. MidYear Financial PerformanceReport. Ministry's Financial Report. SIAF Monthly Report. Pakistan Monthly report on expenditure for ministry/department. Indonesia No formal reports on performance of Finance Bureau. Financial reports on ministry's activities, budget utilization, cash flow and balance sheet are preparedmonthly, quarterly, and annually. 7. Best practices inother countries Give examples of best practice. United States CFO Act and other legislations. OMB and its functions. Professionalization o fpost. System o f score cards for measuringperformance o f agencies. CFO Council. Regular reviews of PMF arrangements. United Kingdom Professionalization o f financial director post. Government accounting manual defines role of Financial Adviser and accounting officer. Job description includes performance indicators. Within the Professional Skills for Government initiative, financial directors are required to follow structured continuing professional development throughout their careers. Guidelines issuedby Treasury on training. System of Management Board and subcommittees on risk, internal audit, etc., and Report on Systems o f Internal Controls signed by accounting officer. Canada Organic Legislation for financial management and to establish appropriate role of Chief Financial Officer. Standard setter for financial management like the Comptroller General inCanada, possibly by broadening the role o f Controller General o f Accounts (CGA). Simplification o frules and more emphasis on standards and indicators. Strengthening and Controller General o f Accounts (CGA) in India CFO role similar to private sector with functional relationship with CG as necessary in the context of government and obtaining support of senior Indian Administrative Service officers. Increasing professionalism inthe rank of finance officers inIndia. 50 Give examples of best practice. Assessing capacity gap infinance officers, Chief Financial Officer signs off financial reports and annual CFO statement on internal controls. More interplay with private/external sector (e.g., institutes of management, institutes of chartered accountants, etc.) Australia Professionalization ofpost of financial director. Legislation for financial management. Benchmarking studies andregular review o f role of Chief FinancialOfficers. Performancemanagement system mandatedby the Australian Public Service Commission for capacitybuilding. From2006-07, Chief Executives are requiredto sign anAnnual Certificate of Compliance. Chief Executives will be requiredto certify compliance with all financial legislation, regulations, and official guidance issuedby Finance. Each agency is requiredto establishan Audit Committee consisting of representativesof the agencyandindependentmembers (section 46 of the FMAAct). The Chartero fBudgetHonesty Act 1998, section 18(1) requires the Treasurerto publicly release and table a final budget outcome report for eachfinancial year. Benchmarkshave beenestablished to monitor the performance o fmany functions within the finance group. Chief Executive signs Annual Certificate of Compliance. Requirementof quality assuranceo f all reports leavingthe agency, including financial reports. SouthAfrica Annual conclusion o fperformance agreements, mid-yearperformance reviews, andeventually performance assessments. After implementation of PFMA in2003, National Treasury commissionedthe Institute of Public Financeand Auditing (IPFA) to conduct a training needsanalysis. This culminatedina Framework for FutureTraining inGovernmental Financial Managementanddevelopmento f training materials andcourses. Best practice guidelines. Regular CFO Forumhostedby National Treasury for Chief FinancialOfficers innational and provincial spheresof government. Recommended structure for Financeunit indepartments and finance staff requiredto be trained in finance. Legislationfor financial management. Audit Committee indepartments. Written performance agreementbetween the executive authority andaccounting officer. Brazil Every ministry is responsible for designing and implementing an annual training program, including for the Financial Adviser. The National Public Administration School (Escola Nacional de AdmisnitraqGoPoblica ENAP) is responsiblefor designing FA training programs. FinancialAdviser has full power to approve and exercise the ministry's expenditure budget, which i s defined by National Congress. Mexico Group of Financial Advisers for exchange o f information and best practices. Training initiatives organized by the group for Financial Advisers. Inrecent years, FinancialAdvisers from privatesector are alsojoining this post. Finance Department o f each ministry has directors for key areas (Le., is well staffed).Certification program for finance staff. Financial Adviser has to report on the performance o f training program for respective ministryto National Comptroller Bureauona quarterly basis. Pakistan Detailed description o f responsib es o f Financial Adviser, CFAO and accounting officer andof delegation ofFA powers. System ofhavingdeputyFinancialAdvisers. Training infinancial management i s beingemphasizedmore andmore for Financial Advisers. Indonesia Legislations on various aspects o f public financial management. Detailed guidelines for finance staff. 51 B. KeyFeaturesof ChiefExecutiveOfficerinSelected Countries 91. This section takes a closer look at key features of the CFO position in Australia, Canada, South Afiica, UnitedKingdom, andUnitedStates, including: 0 Mandate 0 Governance andresponsibility 0 Appointment and career development 0 Functions 0 Performance evaluation andaccountability support 1. Australia 92. Mandate of Chief Financial Officer. Most Federal Commonwealth agencies have a Chief Financial Officer (CFO). In small agencies, the role of CFO is often combined with the head o f Corporate Services. The CFO role and responsibilities are not establishedby charter or act. The Department o f Finance and Administration (Finance) issued the publication, The Role of the CFO - Guidance for Commonwealth Agencies in April 2003, to promote greater consistencyinthe CFO role and strengthenCFO capacity to discharge their duties. 93* Their authority is derived from delegations issued mainly under the Financial Management and Accountability Act (FMAA), 1997, and Regulations 1997. Therefore, to the extent that the Minister for Finance has delegated powers to the chief executive who in turn has delegated those powers under the FMAA to the Chief FinancialOfficer, the CFO mandatehas legislative authority. In addition, Chief Executive Instructions, which establish the internal control framework o f an agency are issued pursuant to legislation and therefore have the force o f law. The CFO role may vary according to how the Chief Executive chooses to determine the CFO responsibilities. 94. The main purpose o f the FMAA was to provide a framework for the proper management of public money and public property and was founded on the recognition and acceptance o f the needto improve the professionalism o f the public sector. As a result, the philosophy o f `letting the managers manage' was introduced. Through the FMAA, substantial authority and power was devolved to Chief Executives who were then able to delegate their authority to other officers of the agency. 95. Other financial management laws include Commonwealth Authorities and Companies Act, 1997, and Regulations, 1997; Finance Minister's Orders, 2006 (FMO); and Commonwealth Authorities and Companies (Report of Operations) Orders, 2005; Schedule 1 to the Orders (FMO 2006) - Financial reporting requirements; Policy to the Financial Minister's Orders, including PRIMA; finance circulars; Guidance to the Financial Minister's Orders, including finance briefs, estimates memoranda, and financial management guidance; and PRIMA Illustrative financial statements. 96. Governance and responsibility. The FMAA vests financial management and accountability with the Minister for Finance and enables the Minister for Finance to delegate power to an agency Chief Executive who in turn can delegate powers to the Chief Financial Officer and other agency staff. 97. Each agency develops its own financial delegations to suit its operational needs, including financial delegations to program managers. Financial delegations to the Chief Financial Officer generally cover the following financial reporting andmanagementaspects: 52 Collection, custodyofpublic moneys; 0 Accounting, appropriationsandpayments, particularly approvalof future spending proposals,approvalof spendingproposals- officials, approvalto berecorded,and enteringinto contracts, etc.; 0 Borrowing andinvestment; 0 Control andmanagementofpublic property; and Reporting and audit. 98. Each CFO position has ajob description detailing roles, responsibilities, duties, and selection criteria and i s an employee o f the agency, not Finance. These job descriptions vary between agencies but generally cover the same roles, responsibilities, and duties. The Chief Financial Officer has a direct and accountable reporting line to the Chief Executive; however, administrativelythe ChiefFinancial Officer mayreport through another position inthe agency. 99. The Chief Financial Officer provides financial reports to many officials o f an agency; however, the post itself reports to the Chief Executive or the deputy Chief Executive or head o f Corporate Services. The Chief Financial Officer is generally a member (or at the very least a regular invited attendee) o f the agency's management committee or board (the senior executive management group) and reports to it. For statutory bodies, the Chief Financial Officer provides reports to the board o f directors. 100. Under the FMAA, Finance Orders and various guidelines, information, and reports are provided to Finance by the agency. This information i s provided on behalf o f the Chief Executive o f the agency and not independently by the Chief Financial Officer. Therefore conflicts, ifthey arise, are resolved within the agency before any reports are issued. Although delegation o f authority comes from the Chief Executive to the Chief Financial Officer, the ChiefExecutiveremains accountable for the activities o fthe agency. 101. All information and reports of an agency to Finance are subject to the normal internal quality assurance processes. Generally, external reports prepared by the finance group are subject to quality assurancebythe head o f Corporate Servicesor a Deputy ChiefExecutive. 102. Each agency is required to establish an audit committee consisting of representatives of the agency and independent members (FMAA, section 46). The responsibilities are to approve internal annual and strategic audit plans o f the agency; review all audit reports involving matters of concern to senior management o f the agency, including the identification and dissemination o f good practices; provide advice to the Chief Executive on action to be taken on matters raised in a report o f the internal auditors or the auditor general concerning the agency; as far as practicable, coordinate audit programmes conducted by internal auditors and by the Auditor-General; and provide advice to the Chief Executive on the preparation and review o f financial statementso fthe agency (Finance Minister's Order 2.1.2). 103. Appointment and career developmentof the Chief Financial Officer. TheRole of the CFO- Guidance for Commonwealth Agencies indicates that the Chief Financial Officer should desirably be professionally qualified, a member o f a professional body, or have significant demonstrated expertise in financial management, whether through formal qualifications or practical experience. The Chief Financial Officer should be technically competent and have a comprehensive understanding o f the governing legislative framework. The Chief Financial Officer should also have the capacity to operate effectively at the senior managementlevel and the capacity to interpret, analyse, and present financial and related information for use in solving complex problems or analysing complex options. 104. The Chief Financial Officers are selected on merit by the agency, in accordance with recruitment policies established centrally under the Public Service Act, 1999, after the positions are advertised, both internally andexternally. 53 105. Career planning i s primarily an individual responsibility. Each agency, as part of the performance plan discussions, works through career options with all staff. Movement by Chief Financial Officers can be both lateral and vertical. The decision rests with the way in which Chief Financial Officers wish to manage their careers. A study o f Chief Financial Officers (Australian Auditor-General, 2001, benchmark study) reported that the average period of service of Chief Financial Officers with their current employer was one-and-three-quarter years, with an average o f six years as Chief Financial Officer or equivalent with a previous employer. Previous experience of Chief Financial Officers included an accounting or finance role in the public sector (67 percent o f cases), an accounting or finance role in the private sector (60 percent); and/or anotherrole inthe public sector (53 percent). 106. A formal CFO networking group operates, sponsored by Finance. It meets monthly with a formal agenda covering areas such as financial statement preparation timetable adjustments, audit, legal, and staff issues. However, the more effective mechanism is the informalnetwork established 107. Functions of the Chief Financial Officer. Consistent with the strategic framework establishedbythe ChiefExecutive, the ChiefFinancialOfficer is responsible for: Assisting inthe development offuture strategic directions ofthe agency; Strategic and operational aspects of financial planning, management, record-keeping and financial reportingto enhancethe consistency, accuracy, andreliability o f information; Implementation of an appropriate financial management framework within the agency, including risk management, to minimize both the risk of errors in estimates and actual data, and fraud; Meeting the needs of ministers, agency executives, staff and suppliers on financial management issues; Monitoring and advising on the financial health ofthe agency; Managing financial and budget processes within the agency, and related reporting requirements; Monitoring the financial position o f small agencies within the portfolio as appropriate, consistent with the recommendations o f the Budget Estimates and Framework Review; and Control of the integrationof budgeting and accounting information to ensure consistency o f approachacross the agency and portfolio. 108. The budget cycle consists o f the preparation of budgets for the current year plus four out- years. The current budget plus one year forward are public documents. Agency budgets are reviewed every six months and the information i s included in a centralised budget system managed by Finance. Changes and variations to out-year budgets require justification and submission to Cabinet for endorsement where new policy proposals are proposed. The Chief Financial Officer i s responsible for the co-ordination o f the development o f the agency's budget.Development ofthebudget for eachoperational arearestswith the operational area. 109. The Chief Financial Officer is also responsible for reporting performance against budget for the agency to the senior executive managementgroup andto individual programme managers. Execution o f the budget is the responsibility o f programme managers. The Chief Executive protocols seek to ensure that the Chief Financial Officer is consulted by programme management on all significant financial and budgeting issues, particularly new budget initiatives. 54 110. Over recent years, agency governance has been strengthened, including establishing responsibilities for reporting against performance indicators. While the information may be provided by the Chief Financial Officer and operational groups, the governance group i s responsible for reporting the results. As part o f the senior executive management group, the Chief Financial Officer advises on appropriate performance indicators for individual programmes. However, it is the individual programme managers that are responsible for the development o f their performance indicators. In small agencies, the Chief Financial Officer mayundertake this collection andreportingrole. 111. Specifically, in respect to the accounting function, the Chief Financial Officer is generally responsible for: Providing monthly financial reports to the senior executive management group of the agency andto individualprogrammemanagers(thetiming ofthis variesbetweenagencies); Providing financial information to Finance on a monthly basis so that `whole of government' financial reportscanbeprepared; Managing and monitoring financial performance indicators, including budget variations, for the agency; and Preparingthe annual financial statements. 112. Managing risk is implicit under both section 44 of the FMAA and FMA Regulation 9. Over the last decade, government initiatives, legislation, and guidance indicate that there i s an expectation that agencies have applied appropriate frameworks to managerisks. Prior to these initiatives, risk management was a feature o f project management and was also raised as part o f the significant management reform programme that commenced in the early 1980s. In particular, this programme focused on improving management systems by applying a risk management strategy and achieving value for money. From 2006-07 Chief Executives are required to sign an annual Certificate o f Compliance with all financial legislation, regulations, andofficial guidance issuedbyFinance. 113. Responsibilityfor riskmanagement sits with all programme managers, but the coordination of riskmanagement across an agency has no one solution. It is generally not the ChiefFinancial Officer, but rather the governance group's responsibility. In small agencies, it is likely to be the Chief Financial Officer. Chief Financial Officers are generally responsible with the head of Corporate Services for the preparation of the Chief Executive Instructions that detail the internal control framework for the agency. 114. The Chief Financial Officer i s the liaison between internal and external audit on financial and internalcontrol matters. The ChiefFinancial Officer i s not responsible for internal audit. 115. Procurement requirements are established by Finance, not individual agencies. Agencies operate within an environment o f legislation and relevant policy. The legislation places responsibility with the Chief Executive for effective procurement actions. Authority is delegatedto other officials o f the agency through ChiefExecutive delegations, andprocedures are establishedthrough the Chief Executive Instructions. 116. The Chief Financial Officer maintains the records associated with all accounting transactions, including public-private partnerships and contingent liabilities. As part o f their growing strategic role, the Chief Financial Officers provide advice to programme managers on all new policy proposals and financial transactions. For example, Chief Financial Officers would provide advice concerning leasebuy options, public-private partnerships, revenue-generating options, and financial assessments as part o f tender evaluations. 55 117. Performance evaluation and accountabili& Eachagency i s expected to have a fair and open performance management system that covers all employees, guides salary movement and bonuses, is linkedto organisational and business goals and the maintenance o f values within the Australia Public Service, and provides each employee with a clear statement of performance expectations and an opportunity to comment on those expectations. This is achieved through individual performance managementplans. 118. Support to the Chief Financial Officer. The number of support staff and their titles vary significantly depending on the size and complexity of the agency's activities. There are no legislative requirements for professional qualifications for support staff; however, accounting qualifications are highly desirable and in most cases the second in charge i s a qualified accountant. 119. Chief Financial Officers are responsible for managing their staff, including recruitment, professional development and performance management. All support staff negotiate performance agreements that incorporate professional development activities including training, andprogress i s monitored every six months. Chief Financial Officers develop training plans for their staffandhave abudget for this purpose. ChiefFinancial Officers do not manage the training budget for the whole agency; each programme manager manages its own training budget. In most agencies a central training group manages corporate training on a cost recovery basis. 120. In2005, Finance entered into arrangementswith several external service providers to deliver training to agency staff on the Australian Government's budget processes and financial framework. The aim o f the programme is to help raise understandingo f the budget processes and financial framework among all finance employeesbecausefuture ChiefFinancial Officers were most likely to come from this group. A number o f agencies conducted skills assessments of their finance staff and developed courses to address the identified skills gaps. The Institute o f Technology Australia has also established a diploma in Government Financial Management. 2. Canada 121. Mandate of Chief Financial Officer. The chief financial officer is designatedhead of finance function in most government departments in Canada. Some Chief Financial Officers are still called "senior financial officers." The financial function is popularly called "controller~hip.~' The functional head o f the "controllership" function o f the federal government is the Comptroller General o f Canada (CG). The Comptroller General has the responsibility for developing and enunciating government policy for financial management on behalf o f the Treasury Board Secretariat o f Government o f Canada. Setting an environment for good financial management in departments, the Comptroller General sets internal control standards and conducts ongoingreviews o f the function as part ofpolicymaking process. 122. The CFO role and responsibilities are established in an Executive Policy on "controllership" issued by the Treasury Board o f Canada. The last policy document was dated February 22, 1996, but a major overhaul in the policy i s expected in financial year 2008. The move i s clearly towards the private sector CFO model. In Canada there i s no legislation defining the role o f the CFO and controllership i s the responsibility of the deputy head. The Federal Accountability (FA) Act specifies that the deputy head is the "accounting officer." The Financial Adviser Act has enhanced the responsibilities o f the deputy head for financial management, accounting, reporting, and control. As the deputy head is by law the "accounting officer" o f the department, the CFO policy is evolving in line with this new requirement to hold the deputy head accountable; the Chief Financial Officer would be expected to support the deputy head discharge his or her responsibilities under the Financial Adviser Act. The 56 deputy head i s free to organize the controllership function as deemed fit for the organization, but normally consults with the Comptroller General on high-level organizational issues. The CFO mandate depends on the deputy head's requirements as specified within the overall policy framework set by the Treasury Board Secretariat. The accountability profile of the Chief Financial Officer can vary between departments. Generally it covers all important aspects o f financial management, control, and reporting, including advice on the financial implications of program and policy decisions being advanced by the department. He or she interfaces with the Treasury Board Secretariat on all resource matters and acts as a chief negotiator with the Treasury Board Secretariat and Department o f Finance for resource requirements o f departmentlagency. 123. The internal delegation by the deputyhead forms the basis for setting the CFO responsibilities. This can vary between departments and agencies depending on size, complexity, degree of autonomy, etc. Guidelines exist for all key CFO roles and responsibilities. These are being fbrther developed. The Guide on Financial Administration i s being substantially revisedinline with the new more strategic CFO concept. There are pertinent policies, guidelines, and procedures promulgated periodically by the Treasury Board (for resource allocation), the Comptroller General (accounting policies and controls), and the Receiver General (accounting andreportingprocedures). 124. Governance and responsibiZiz'y. Within each department, a Departmental Audit Committee deals with issues such as internal audit, external audit, any problems detected in financial management, etc. The Committee has external representation (e.g., from private sector) and without it the Committee i s considered deficient. The Comptroller General plays a support role for the Departmental Audit Committee. 125. The head of Department is the only reporting officer for this CFO post. Chief Financial Officers do not report to aboard, but they have a responsibility to respond to the Departmental Audit Committee. Chief Financial Officers are indirectly responsible for corporate accountability to support the Treasury Board and the Comptroller General in discharging their mandates with respect to the professionalism o f public sector financial management. In this regard, they have a responsibility for ensuring the integrity o f all financial information providedbythe departmentto central agencies and other external stakeholders. 126. With regards to any possible conflict between the Chief Financial Officer (or senior financial officer) anddeputy headthere is provision inthe policy for involving the Comptroller General. Inthe event that a chief financial officer is convincedthat his or her deputy head is proposing an action that will create significant financial risk or will violate either the spirit or form of the financial requirements o f any legislation, regulation or government policy, the Chief Financial Officer must make every effort to persuade the deputy head to follow a different course and must seek the opinion and advice of the Deputy Comptroller General. Ifthe deputy head does not accept the advice offered by the chief financial officer, then the chief financial officer must request that the deputy head seek the advice o f the Comptroller General before taking a final decision. The deputyheadmust then discussthe matter with the Comptroller General. 127. The CFO role is mainly advisory with regards to program management, along with decisionmaking for day-to-day management o f in-house financial function. Chief Financial Officers are expectedto be involvedinthe decisionloop, for only then can they provide advice to the deputy head on the financial and reporting implications o f significant departmental decisions. The Chief Financial Officer is expected to be independent o f program management with main responsibility for providing strategic advice to the deputy head on issues with financial implications and issueso f day to day financial managemento f the department. 57 128. Appointment and career development of the Chief Financial Officer. Generally there is a dedicated Chief Financial Officer or equivalent in each department. In large departmentsthe CFO position i s mostly at the level o f additional deputy, in medium-sized departments at the level of director general, andinsmaller departmentsat the level o f director. 129. Minimumprofessional qualifications required for the CFO post include a university degree and a professional qualification. Experience in financial management of comparable-sized organizations is generally required. An accounting/finance qualification i s increasingly an eligibility criteria given the growing emphasis on the preparation of audited financial statements by each department. The Chief Financial Officer must sign off on financial statements and increasingly provide assurance on the internal control arrangements o f the entity. The skill set generally required for this post includes financial management, accounting, auditing, and internal control as they relate to comparable large organizations, along with peoples skills necessaryfor managing people. 130. The position is open to a person with requisite qualifications, regardless o f sector (private or public). Incase o fpublic sector entrants, the last post i s one grade lower (e.g., director general level for large departments). In the past Chief Financial Officers could be from the administrative cadres o f the government, but increasingly the financial management stream is becomingthe dominant source. 131. All departments usually follow a uniform system for recruitment for the CFO post, and generally the same principles apply. The Comptroller General i s normally consulted by the deputy head for CFO appointment (by convention, rather than by law). The government agenciesthat are separate operating agencies, such as Revenue Canada and the Canadian Food Agency, have greater flexibility in the application o f the principles and practices expected from core line departments, such as Health and Defence. For example, the pay scale for the post maybemore attractive in separate operating agencies. 132. The stability o f CFO tenure i s fairly good. However, tenure is getting shorter because o f increasing demand for qualified financial officers; since implementation of the Sarbanes- Oxley Act there is a shortage o f qualified Chief Financial Officers in Canada. There is no systemo f compulsory transfers o f ChiefFinancialOfficers after a fixed period. 133. When promoted, Chief Financial Officers move to a higher administrative position (as opposed to finance position) or move to a CFO role in a larger department. All vacancies are filled basedon meritand demand. Presentdemand for qualified professionals i s very high, and supply is not keeping up. There is no bar against a CFO promotion to deputy head. Each individual has to compete with others based onjob performance, and rules o f fairness apply. The Public Service Commission monitors the departments for compliance with public service normshegulations. 134. Functions of the Chief Financial Oflcer. The Chief Financial Officer i s often the primary official responsible for developing and implementing the corporate departmental operational and financial planning and budgeting framework, performance reporting models, policies, procedures, and guidelines and supporting instruments. The Chief Financial Officer provides financial services with respect to the development and submission o f the main estimates, report on plans and priorities, the departmental performance report, and supplementary estimates. The Chief Financial Officer is the key official responsible for monitoring the execution ofthe budgetandreporting thereon to the deputyhead. 58 135. The Chief Financial Officer provides the advice and challenge functions with respect to the financial implication o f new projects and i s involved in the formulation, appraisal and evaluation o f schemes. The Chief Financial Officer maintains the "general ledgers" and signs off on the annual financial statementsand related reports inrelation to internal control and any other management assertions provided to external auditors. The Chief Financial Officer has a coordinationrole for riskmanagementand internal controls. 136. The Chief Financial Officer i s not responsible for internal audit, as it i s a separate function under the purview o f the head o f Internal Audit, The head o f Internal Audit reports directly to the deputy head. If there is no internal audit (which i s very rare) then the Chief Financial Officer takes responsibility for coordination o f replies to external auditors, which would normally be the responsibility o f head o f Internal Audit. The Chief Financial Officer plays a proactive role in developing strategies for generating resources (e.g. under public-private partnerships). The Chief Financial Officer i s hlly responsible for all aspects o f financial systems under his or her direct purview. The monitoring o f the procurement function is not usually the responsibility o f the Chief Financial Officer but there can be exceptions based on departmental requirements, and some Chief Financial Officers are fully responsible for this function. The deputy head is the representing accounting officer at the Public Accounts Committee, andi s accompaniedbythe ChiefFinancial Officer. 137. Performance evaluation and accountabili@. The deputy head conducts the annual CFO performance review. Inaddition, most deputy heads informally consult with the Comptroller General before the annual performance review is concluded. The assessment fiamework is the accountability profile agreedbetween the deputy head andthe ChiefFinancial Officer. Thejob description, in some form or the other exists in all departments (e.g., it could be called an "accountability profile" or position description or an equivalent term). The reporting obligations o f the Chief Financial Officer to the department in which they are placed vary depending on the size and complexity o f the department. These need to be defined respectively by each deputy head. The CFO job description provides this information. These job descriptions are not always public documents. 138. During the year, oversight of CFO performance is ongoing given the direct reporting relationship o f the Chief Financial Officer with the deputy head. The added dimension i s the scrutiny o f the Departmental Audit Committee. Apart from annual performance appraisal there i s ongoing accountability o f the Chief Financial Officer by way o f audited financial statements, periodic reports prepared for central agencies, and performance/compliance audits conducted by the Auditor General, the Internal Auditors, etc. The ChiefFinancial Officers also have to prepare regular reports on the performance of Finance Division, new initiatives taken to strengthen financial managementsystems, etc. 139. Support to Chief Financial Officer. The structure o f the Integrated Finance Division o f a department is approvedby the deputy head. Officials o f Finance Divisionreporting directly to Chief Financial Officer may include a deputy Chief Financial Officer and director generals for each o f the various directorates within the CFO's branch. Inone o f the 8 largest departments the Chief Financial Officer i s one o f 18 positions reporting to the deputy head. The specific functions o f the positions reporting to the Chief Financial Officer are Director General Financial Operations, Director Resourcing Strategies, Director Financial Planning and Reporting, Director Transformation Financial Strategies, Deputy Chief Financial Officer, and Project ExecutiveFinancial SystemTransformation. 140. The required professional qualifications o f staff in Finance Division are not fixed. These are determined at the time o f staffing action and influenced by the priorities o f the day. A professional qualification is increasingly necessaryfor staff inFinance Division. 59 141. Interms ofassessmentofCFOtrainingneeds, there cannotbea single institutionalmechanism since Chief Financial Officers come from a strong professional background and their professional development i s driven by the requirements o f their profession (chartered accountant, certified management accountant, certified general accountant, etc), along with requirements o f Government o f Canada for senior executives to participate in training programs for executive development. On-the-job training via regular exchange o f information (with Comptroller General providing the leadership) is also seen as vital for career development. Each Chief Financial Officer i s responsible for determining his or her own needs and ongoing professional development. In recent years, new areas identified for CFO skill development include enterprise risk management and internal control certification. While no dedicated agency is responsible for ensuring ongoing professional CFO development, the Office o f Controller General (OCG) i s the leader. The OCG-organized meetings and conferences serve as a forum for regular exchange o f information among the Chief Financial Officers. 142. The ongoing professional development requirements for other finance staff in departments may emanate from their respective professional institutes. Officers' direct supervisors may identify particular training needs. In Canada, professional accounting institutes and other private enterprises offer a broad spectrum o f training opportunities. Inaddition, institutes such as the CanadaSchool o f Public Service offer training opportunities. 3. SouthAfrica 143. Mandate of Chief Financial Officer. The position o f Chief Financial Officer was formally established in June 2000. In South Africa public sector finances are regulated by the Public Finance Management Act (PFMA), 1999, and its subordinate Treasury Regulations (subordinate legislation). Chief financial officers o f government departments are required to assist in discharging the accounting officers' financial management responsibilities as contained in the PFMA, 1999, and its subordinate Treasury Regulations. The accounting officer, as the head o f department, can delegate to the Chief Financial Officer inwriting any o f the powers entrusted or delegated to the accounting officer in terms of the PFMA Act or instructhimor her to performany o f the duties assignedto the accounting officer. 144. The accounting officer normally delegates all general financial managementresponsibilities to the Chief Financial Officer which include the responsibility to implement effective, efficient and transparent systems of financial and risk management and internal control; implement a system of internal audit under the control and direction o f an audit committee; and implement and maintain appropriate procurement and provisioning systems, which are fair, equitable, transparent and cost effective. The accounting officer also delegates to the Chief Financial Officer budgetary responsibilities, including ensuring effective and appropriate steps are taken to prevent overspending of the department's resources, and reporting responsibilities, including monthly and annual financial reporting. 145. The National Treasury has issued several best practice guidelines and frameworks on various issues related to financial management, none o f which were compiled specifically for Chief Financial Officers. These guidelines are, however, intended to provide guidance to accounting officers, Chief Financial Officers, and other finance and non-finance practitioners on matters related to financial management. These guidelines include an Accounting Officers Guide to the PFMA; Treasury Guidelines for the Preparation of Budget Submissions, Internal Audit Framework, Risk Management Framework; and Guide for the Compilation o f Annual Reports and Financial Statements. 60 146. Governance and responsibilizy. PFMA Act (para. 77) mentions that departments should establish an Audit Committee that must consist o f at least three people, one o fwhich should be from outside the public service. The Committee must meet at least twice a year. Guide for Accounting Officers, issued byNational Treasury inOctober 2000, mentions the role o f Audit Committee as assisting management in discharging its accountability responsibilities to safeguard assets, operate adequate systems and controls, and prepare annual statements. The Guidelines mention that the Audit Committee should be advisory, not executive. Key duties of the Audit Committee include reviewing the scope o f audit and audit plan, reviewing effectiveness o f the organization's internal systems, monitoring management's responses to reported weaknesses andcontrols, andconsidering the quality o f financial information. 147. The head of department (accounting officer) is ultimately accountable to the legislature for the finances of his or her department. While the Chief Financial Officer as head o f finance i s directly accountable to the accounting officer, the Chief Financial Officer may report administratively to another incumbent. South African government departments do not have boards. Chief Financial Officers o f South African departments do not report to other parent departments other than their own. Chief Financial Officers are, however, required to submit financial reports and returns to the relevant treasury, as required in terms o f legislation. Chief Financial Officers are held accountable through their deliverables as captured in the department's strategic plans, performance agreements, delegations o f authority, and the audit outcomes. 148. As headofFinance Division, the ChiefFinancialOfficer has veto power as well as the duty to advise line managers on matters related to financial management. Veto power i s particularly exercised to ensure compliance with internal departmental policies and legal prescripts regulating financial management. The CFO role i s consultative and involves decisionmaking. The Chief Financial Officer i s also involved in the decision loop o f the department, especially duringthe processofstrategic planningandbudgeting. 149. Appointment and career development of the Chief Financial Officer. In all South African government departments a chief financial officer i s appointed as the head o f the Finance Division. Eachdepartment is requiredto appoint a dedicated ChiefFinancial Officer. The level o f seniority o f the Chief Financial Officer differs from department to department and is determined by the accounting officer (head o f department). The determination o f a CFO level o f seniority i s usually linkedto the size o fthe department's budget. Inessence, Chief Financial Officers are appointed at senior management levels of director, chief director or deputy director-general. 150. It i s recommended that Chief Financial Officers have a Bachelor's degree in commerce or Masters in business administration, or qualify as a chartered accountant or certified management accountant, as the minimum professional qualification for appointment. It is, however, necessarythat Chief Financial Officers also have appropriate experience in order to be considered for appointment. The position is open to appropriately qualified and experienced people from both the public and private sectors. The last public sector posts held by Chief Financial Officers li-om within government before joining their current positions vary from finance-related positions at the level o f deputy director, director, and chiefdirector. 151. The selection process followed for the appointment of Chief Financial Officers is similar to other posts in the departments. The CFO position is advertised in the media, a selection committee is convened and interviews and competency tests are done. Reference checks, credit and criminal records, qualifications and security clearance may also form part o f the selection process. The selection committee makes recommendations to the accounting officer, Minister, or delegated official for approval of the selected candidate. All public sector departmentsfollow auniform system o frecruitment o f ChiefFinancial Officers. 61 152. Against the background o fresponsibilities, it i s recommended that Chief Financial Officers be technically trained and proficient in such areas as strategic planning, business planning and design, performance measurement, financial accounting, management accounting, internal control, internal and external audit, information systems; economy, negotiation skills, communication skills, and analytical skills. 153. Inmost instances, Chief FinancialOfficers are employed on a permanent basis and enter into annual performance agreements with their accounting officers. There have, however, been instances where Chief Financial Officers were appointed on a contractual basis for a fixed period. 154. Career development and promotional opportunities are available within their departments and in other departments depending on the level of seniority. Chief Financial Officers wishing to move out of the finance cadre may be tempted to apply for higher positions out o f the finance stream. Chief Financial Officers wishing to remain within the finance cadre may be promoted to another positionas ChiefFinancialOfficer thought at ahigher levelina larger department. 155. Functions of the Chief Financial Officer. Chief Financial Officers ensure sound financial management in the department and manage the financiallprocurement function. The CFO functions under managementarrangements include acting as a businesspartner who is actively involved in strategic issues facing the department; compilation o f delegations o f authority for approval by the accounting officer; preparation o f strategic plan for the Finance Division; compilation of development plans for all finance posts; documentation o f all finance policies and procedures; conducting regular risk assessments to identify emerging risks; and implementation o f effective and efficient system o friskmanagementand internal controls. 156. The CFO functions under planning and budgeting include contributing towards financial aspect o f the strategic planning process by considering financial impact o f the department's outputs; assisting with formulation o f medium-term objectives, policies, and strategies in support o f the strategic and operational plans of the department; ensuring that measurable outputs are specified as per programme in the departmental budget; measuring programme performance; and establishing procedures to facilitate effective performance monitoring, evaluation, and corrective action. The Chief Financial Officer renders advice and support to divisional heads in preparation of budget, is responsible for consolidation o f budget, and ensures that the budget is consistent with the departmental strategic plan. The Chief Financial Officer also prepares adjustment budget. The Chief Financial Officers monitor expenditure against the budget and implementation of processes to track expenditure and commitments againstthe budget. 157. The Chief Financial Officer conducts regular examinations o f operations o f the department to identify new sources or potential sources o f revenue and regular reviews o f existing fees, tariffs relating to revenue accruing to the relevant revenue fund, as well as monitoring revenue collection on a regular basis. The Chief Financial Officer develops processes and procedures for effective and efficient management of the department's assets and is responsible for implementation o f systemfor evaluation of all major capital projects. 158. The Chief Financial Officer i s responsible for ensuringregular accounting in the department. The Chief Financial Officer has to ensure preparation and submission o f financial reports for the department, such as monthly finance report; annual financial statements that are compiled in accordance with PFMA requirements, the Treasury Regulations, and the relevant guideline documents; and the department's annual financial statements to the relevant treasury and the Auditor-General before the May 31yearly deadline. The ChiefFinancial Officer has to ensure submission of the department's annual report, financial statements, and audit report on those statements to the executive authority and the relevant treasury before the August 31 yearly deadline. 62 159. The Chief Financial Officer coordinates replies to external auditors. With respect to procurement, the ChiefFinancial Officer i s overall incharge of supply chain management and ensuring adherence to procurement procedures. The Chief Financial Officer establishes systems, procedures, processes, and training programmes related to cash management. The accounting officer, as head o f the department, represents the department at the Public Accounts Committee. Chief Financial Officers, however, normally accompany their accounting officers to these hearings in order to render their support on matters o f a technical nature that may arise. 160. In addition to their finance-related duties, Chief Financial Oficers are also involved in administrative functions that include matters related to staffing, performance management, leave administration, and training and development. 161. Performance evaluation and accountabili$ The CFO roles, responsibilities, and duties are captured in the job profile o f the position, the contents o f which also form part of the CFO performance agreement.The Chief Financial Officers are assessedinthe same manner as other line managers, in accordance with a Performance Management System. This assessment framework includes annual conclusion of performance agreements, mid-year performance reviews, and eventually performance assessments. Job descriptions are required to be drawn up for all occupational classes (including the Chief Financial Officer) and annual performance indicators are contained in the performance agreement that the Chief Financial Officer enters into with the accounting officer. In matters o f the Chief Financial Officer, the accounting officer writes his or her review since the Chief Financial Officer is directly accountable to the accounting officer. The performance assessment i s agreeduponbetween the accounting officer andthe ChiefFinancialOfficer who are bothsignatories to the assessment. 162. Chief Financial Officers are held accountable through their deliverables as captured in the department's strategic plans, performance agreements, delegations o f authority and the audit outcomes. 163. Support to the Chief Financial Officer. With the exception of requiring that the Chief Financial Officer reports directly to the accounting officer, no other prescription exists as to what a finance structure should look like ina department. Based onbest practices, the National Treasury has, however, recommended that Chief Financial Officers be supported by financial accountants, management accountants, and supply chain management practitioners, all o f whom report directly to the Chief Financial Officer, Most departments have implemented this structure with smaller departments combining the financial accountant and management accountant positions. These support managers also have subordinates reporting to them. The total numbero fpersonnel serving under the ChiefFinancial Officer will vary depending on the size o f the department. South African departments do not have deputy Chief Financial Officers. 164. Support staff are also required to be trained in finance. In this regard it is recommended that support staff have formal post matric (Grade 12) qualifications in the finance field, such as a National Diploma or Bachelor's Degree. 165. Soon after the PFMA was implemented in South Africa during 2000, the National Treasury commissioned the Institute o f Public Finance and Auditing (IPFA) to conduct a skills analysis o f public sector finance practitioners, including Chief Financial Officers. The survey focused on personnel serving in the senior, middle and lower levels of management. This skills analysis culminated inthe development o f a Framework for Future Training in Governmental Financial Management, which provided critical information as to the areas in which public sector finance practitioners needed training. Topics for which training was needed included strategic planning, budgeting and relatedmatters, revenue and expenditure management, assets 63 and liability management, banking and cash management, accounting and reporting requirements, and internal control and auditing. This led to the National Treasury engaging with training service providers to develop training material to roll out courses that were intended to address the noted capacity gaps. The National Treasury reviewed the contents o f all coursesto exercisequalitative control so as to ensure that trainees received value for money when attending coursespresentedby these training providers. 166. Chief Financial Officers are normally highly qualified and experienced finance practitioners. Their training needs are, however, identified during competency assessments and during the performance review appraisal processes. Development plans are then developed, which form part o f their performance agreements. Training interventions are identified to build personal capacity and effectiveness. During 2003, the National Treasury identified that Chief Financial Officers and other senior public servants required their skills to be developed in areas related to strategic planning and budgeting, in-year management, monitoring and reporting, internal control and risk assessment, and internal audit and audit committees. This led to National Treasury engaging training providers to roll out high-quality, short courses on the identified areas. Over 240 Chief Financial Officers and other senior public servants benefited from the roll out o f 8 new short courses. 167. The South African Management Development Institute, a national government department charged with public sector training, is also involved in a partnership with the University o f Pretoria for the roll out of managementprogrammes aimed at senior public servants, including Chief Financial Officers. The training and development o f public servants is the responsibility o f the respective accounting officers in whose departments these public servants and Chief Financial Officers serve. In South Africa, there are, however, professional bodies that cater to the needs o f public sector finance practitioners; these include the Institute o f Public Finance and Auditing (IPFA), the South African Institute of Government Auditors (SAIGA), the South Afr-ican Institute of Chartered Accountants (SAICA), and the Chartered Institute of Management Accountants. Chief Financial Officers usually attend seminars and workshops arrangedby these institutions to stay abreast on professional matters. 168. The National Treasury regularly hosts CFO forums for Chief Financial Officers serving inthe national and provincial spheres o f government. These forums are used to disseminate information to Chief Financial Officers and to discuss issues o f common interest which invariably assists with peer learning. 169. The Chief Financial Officers are responsible for ensuring that they have adequately trained staff serving. In this regard, Chief Financial Officers should regularly assess the training requirements of their personnel to be able to determine capacity-building initiatives and to ensure that these personnel attend these training initiatives. Training i s organized for support staff in such areas as introduction to government accounting, bankreconciliation, supply chain management, business writing skills, preparation of financial statements, revenue management, expenditure management, asset management, and internal controls and risk assessments. Other soft skills courses are also arranged which include managing diversity, customer care, team leadership, communication, and conflict management. 4. UnitedKingdom 170. Mandate of financial director. All agencies have a designated finance director (FD). The finance director has no legislative mandate: legislation refers only to the accounting officer. The mandate o f the fmance director i s by executive instruction. Treasury administrative instruction, Government Accounting 2000, para. 4.3.4, states that the accounting officer (permanent secretary o f a department) will invariably need a senior finance manager- normally a finance director-and sets out the specific responsibilities o f the finance director inGovernment Accounting Annex 4.2. 64 171. No commitment of resources can be made without Treasury approval. In practice, the Treasury delegates to a department the authority to commit and spend within defined limits (Government Accounting 2.4.3). The financial director exercises this delegated authority through the head o f department. Indirectly, posts are controlled through the part o f the departmental estimate to be spent on administration: this is considered inthe annual spending review. The control is on total administration cost rather than onposts. 172. Governance and responsibiliQ:. Each department has a management board for setting out long-term strategies, approving key investment decisions, and ensuring that the department's business planning and risk management is robust and sound. Most finance directors are at managing director level, which makes them members o f their management boards. Finance directors o f smaller agencies may be at director level, but still attend board meetings. The board i s chaired by the head o f department and consists o f four directors and three non- executive directors. The non-executive directors are experienced directors appointed from both government and the private sector. The managementboard meets monthly and has two reporting subcommittees, audit andremuneration. 173. As a member of the managementboard, the finance director takes collegiate responsibility for all decisions o f the board, though the accounting officer remains ultimately accountable for all decisions. Although having responsibilities, the finance director is subject to hisher line superior (departmental head), but within that framework has sufficient independence to carry out all responsibilities. 174. Appointment and career developmentoffnance director: Agency heads have all the rights, duties, andpowers o f an employer, so each agency has developed processesthat best meet its requirements. These processesand the resultant recruitment decisions must, however, comply with central guidelines (Recruitment Code) issued by the Civil Service Commission. The Civil Service Commission formally approves all appointments through external recruitment, andundertakes an audit of agency recruitment policies and practices. The guidelines include fakness and equal opportunity (e.g., with regard to age, disability, race and sex). Some departments use headhunter agencies. The Treasury is informed o f applicants and may make comments or may sit on the agency's interview panel to provide technical inputs. The finance director should be technically competent and have a comprehensive understanding of the governing legislative framework. The finance director should also be able to manage a team at the senior management level and have the capacity to interpret, analyse, and present financial and related information for use in solving complex problems or analysing complex options. Since 2003, it has been the norm for a finance director to be a professionally qualified accountant with senior-level finance experience, as well as a graduate degree. By December 2006, 91 percent o f all government expenditure was managed by qualified accountants.As the position is subject to merit selection, it is open to bothprivate and public sector applicants. Most finance directors are now recruited from the private sector. Public sector experience i s `'useful but not essential." Very few finance directors have been promotedfrom the civil service, though one has come from a localauthority. 175. There is no separate accounts/finance cadre. The Government Finance Profession (formerly called Government Accounting Service) is a professional association, not a cadre. All are part o f the civil service structure. Remuneration package i s determined by negotiation with the selected candidate. Typical salary i s f.120-150,000 per year. Tenure depends on the contract: most finance directors are on permanent tenure but can apply for transfer. A finance director at director level can be promoted to managing director and can become permanent secretary inopencompetition, or afinance director inalarger departmentor ministry. 176. Finance directors are qualified professionals, subject to schemes o f continued professional development managed by their professional institutes. Their skills are assessed in the recruitment process. Under the Professional Skills in Government Initiative, core F M 65 competencies have been agreed by the Civil Service Management Board for all senior civil servants. New entrants to the civil service receive induction training at the National School for Government (the former Civil Service College). New finance directors receive initial mentoring by another finance director ,in the same ministry. The Government Finance Profession (a unitinthe Treasury) runs quarterly meetings for finance directors; all 40 finance directors usually attend. There are several training institutions offering relevant courses, including the National School for Government. 177. Functions of thefinance director. The finance director supports the accounting officer in developing the department's aims and objectives; establishing the planning mechanisms; determining the allocation o f resources; assessing competing priorities; monitoring the outturn o f performance and resource consumption; achieving maximum value from the paybill; and ensuring that the department's staff take account o f accepted standards o f regularity and propriety and the need to secure value for money (Government Accounting 4.3.4). Finance directors are at the apex of the finance function of each department and are involvedinall decisions that have financial implications. 178. The specific responsibilities o f the finance director vary according to the department, and department-specific elements have to be set out in writing. The general elements o f the job description include coordination and quality control o f departmental expenditure proposals; coordination of planning; preparation o f estimates; control and monitoring o f delegated authorities; advice to accounting officer on the regularity and propriety o f expenditure; preparation o f resource accounts; maintenance o f costing systems; ensuring compliance with the Government Accounting Manual; keeping spending within plans and the estimates; reporting outturns promptly and accurately within the department and to the Treasury; ensuring that banking arrangements are secure and offer value for money; making payments and collecting receipts; ensuring that fees and charges are set and recovered in accordance with Treasury guidelines; ensuring that departmental managers obtain value for money; setting appropriate indicators and targets for financial performance; ensuring that procurement procedures are clearly understood and in compliance with EU directives and Treasury guidance; liaising with the external auditors (National Audit Office) and ensuring that the C&AG reports correctly reflect the department's position before the accounting officer agrees to publication; and ensuring that the department has systems for monitoring executive agencies, non-departmental public bodies, andpublic corporations sponsoredby the department (Government Accounting Annex 4.2). 179. The financial director's reporting depends on the head o f department, but normally includes monthly outturn reports and management accounting reports. These are submitted to the managementboard, and copied to the Treasury. The Treasury is encouraging finance directors to copy them on other reports, including managementreports that they submit to their boards. Generally, external reports prepared by the Finance Directorate are subject to quality assurance bythe head of Corporate Services or a deputy head o f department. 180. Usually in charge o f procurement, the finance director should ensure that procurement strategies, procedures and responsibilities are clearly set out and understood by all staff, and ensure compliance with EU directives and guidance from the Treasury and the Office of Government Commerce. The finance director is responsible for setting up systems to monitor adherenceto procurement procedures. 181. In developing strategies for generating resources through public-private partnership, finance directors take a lead role, though major proposals under the Private Finance Initiative commonly use outside advisers. 66 182. The accounting officer is responsible for maintaining a sound system of internal control (with assistancefrom the finance director) andmanaging risk.The accounting officer is requiredto make an annual Statement on Internal Control, which accompanies the accounts. The Statement on Internal Control is developed by the head o f Internal Audit and reviewed by the audit committee (and riskcommittee ifthere is one) as a service to the accounting officer. The finance director is responsible for the control system, while Internal Audit is responsible for independent review and reporting on it. The finance director is involved with Internal Audit only in connection with hisher responsibility for the budget: the finance director has to ensure sufficient resources are allocated to Internal Audit. Internal Audit queries are directed to the responsible officers within the department. Finance directors are also responsible for ensuring appropriate technological support for financial management information system in the department 183. The finance director is responsible for the department's relations with the National Audit Office that conducts external audits. The finance director receives management letters from the National Audit Office and coordinates the replies. 184. Performance evaluation and accountability. All civil servants are subject to n Annual Performance Report. The Annual Performance Report for financial directors is prepared by the head of department. The Treasury has no input. Finance directors can ask for feedback from the head of department. 185. Support to thefinance director. The finance director heads a Finance Directorate. This has no standardstructure: each department organizes its own Finance Directorate. The number o f support staff and their titles vary significantly depending on the size and complexity o f the agency. Below the finance director there is a head o f group accounts or chief accountant (there is no deputy finance director). The chief accountant may act in absence o f finance director. Qualified accountants are expected to fill posts at the two levels below finance director. Finance staff are trained in finance, procurement staff trained in procurement, etc. Finance directors are responsible for managing their staff, including recruitment, professional development, and performance management. They develop staff training plans and have a budget for this purpose. The finance director does not manage the training budget for the whole agency. The human resource management unit may have a departmental budget for training, but the finance director has a dedicatedbudget. 5. UnitedStates 186. Mandate of the Chief Financial Officer. In US Federal Government agencies, the Chief Financial Officer Act 1990 provides a legislative basis for the mandate o f Chief Financial Officers and defines their authority and functions. The Office o f Management and Budget (OMB), which comes under the President, provides the operational guidelines under which a Chief Financial Officer is expected to carry out their bctions. The Controller inthe Office of Federal Financial Management (part o f the OMB) i s the accounting authority for the Federal Government as a whole. 187. Other PFM legislation includes the Government Performance and Results Act, 1993; the Government Management Reform Act 1994; the Federal Financial Management Improvement Act, 1996; the Information Technology Management Reform (Clinger-Cohen) Act, 1996; and the Government Paperwork Elimination Act, 1998. The Government Performance and Results Act makes Federal agencies accountable for achieving programme results through the provision o f objective information on achieving statutory objectives and on the relativeeffectiveness and efficiency o fFederalprogrammes, as an aidto Congressional decisionmaking and improving the overall performance of government. The Government Management Reform Act expanded the CFO Act by requiring an audit o f agency financial statements and preparation of government-wide financial statements. The Federal Financial 67 Management Improvement Act requires agencies to provide uniform, reliable, and more useful financial information. The Information Technology Management Reform Act focuses on improving the acquisition, use and disposal o f IT resources. The Government Paperwork Elimination Act moves more citizen andbusiness transactions to the web (e-government). 188. Governance and responsibility. The secretary i s the head o f the department/agency and i s responsible for the conduct o f business o f the department as a whole. The Chief Financial Officer reports to the secretary o f the departmendagencyto which he i s appointed andi s also inconstantcommunication with the OMB (while not having any line responsibility to them). The role o f the ChiefFinancial Officer is advisory and supportive in nature. The departmental secretary makes the final decisions with regard to the work o f the department. The Chief Financial Officer nevertheless provides extensive input into all financial decisionmaking, especially that related to the budget process. Once the budget appropriations are passed, both the secretary and the Chief Financial Officer work within the parameters of the OMB guidelines. 189. The agency Chief Financial Officer has colleagues with overlapping roles such as the inspector general, the chief information officer, andthe chiefhumancapital officer, eachwith a legislative mandate. The inspector general is appointed bythe President andis confirmedby the Senate andreports to the secretary of the department andalso reports every six months to the Congress. The inspector general is responsible for independent oversight of the agency's functions. While the inspector general is responsible for the financial audit andcertification o f financial statements, the work i s often outsourced to external audit f m s . The inspector general also investigates any issues raised by the Government Accountability Office (GAO). The GAO i s an arm o f the Congress and conducts external audits and evaluations of departmental policies, programmes, and internal operations. It also conducts compliance assessments and fraud investigations, where necessary. The various Congressional committees review the reports o f both the GAO and the inspector general, and while the secretary testifies on policy and budget issues, the Chief Financial Officer certifies financial- related matters. Federal agencies have adopted the requirements on internal controls for private companies under the Sarbanes-Oxley Act through issue o f OMB circular A-123, and this is expectedto be an area o f interest for the inspector general. As o f now, the Secretaryo f the Department has to sign off on the agency financial statements as well as an internal controls document. 190. A Congressional Subcommittee on Government Efficiency and Financial Management, September 2004, found there was a need to reintegrate the CFO function with those o f the chief information officer, and chief human capital officer. The inspector general and Chief FinancialOfficer are completely independent of each other. 191. Appointment and career development of the Chief Financial OfBcer: The Chief Financial Officer i s a cabinet-level position and, like the Secretary, i s appointed by the President with the advice and consent o f the Senate (inrespect of those agencies described under subsection (b) (1) ofthe CFO Act). ChiefFinancialOfficers inagenciesdefined insub-section (b) (2) of the CFO Act are career appointees from the competitive service or the senior executive service, and are appointed by the head o f the agency concerned. While the CFO Act does not specify the exact qualifications required for the position, it states that the individual musthave "extensive practical experience in financial management practices in large governmental or business entities." Some o f the job skills prescribed for federal financial managers relate to management accounting, budget formulation, performance auditing, and implementation of internal controls. Federal Chief Financial Officers come from both the public and private sectors and there is a fair amount of two-way mobility. Often, Chief Financial Officers have relevant sectoral experience in the private sector beforejoining a particular department o f the Federal Government. The possibility o f a generalist administrator becoming Chief Financial Officer i s therefore slim. The CFO positions are not openly advertised, as they are political 68 appointments: instead they are known and circulated by word o f mouth. The department ChiefFinancial Officer is therefore akeypoliticalappointment with a strong legislative basis. 192. The tenure o f the Chief Financial Officer is at the pleasure of the President, and the department Chief Financial Officers generally change with the change o f President. It i s understood that in practice the average tenure o f a Chief Financial Officer in a federal departmentlagency i s about 18-24 months. Since the Chief Financial Officer heads the finance function in an agency, fiuther career advancement within the agency is unlikely, unless the incumbent is appointed secretary. Ingeneral, there is no defined systemo f assured career progression and promotions in the federal departments, and appointment to every higher position i s through open competition. All federal civil service positions are advertised and selections made depending on thejob description requirements and the availability of the required skill set. The deputy Chief Financial Officer in an agency is normally from the career civil service and is not apresidential appointee. 193. The Chief Financial Officer i s primarily responsible for identifying hisher own training needs. Mostly professional accountants, Chief Financial Officers are required by their professional bodies to continue professional development. There are several agencies that provide training. In addition, the CFO Council has six committees, including the Best Practices Committee and Financial Management and Policies Committee that help Chief Financial Officers assess as well as satisfy their needs for training and capacity development. Some of the new areas inwhich the ChiefFinancial Officer i s requiredbe knowledgeable are linking performance to accountability; improved internal controls in the wake of Sarbanes- Oxley legislation; cost accounting and management to increase efficiency o f programmes; performance auditing; specialty accounting (for asset management, debt management, etc.); and accelerated reporting (since Chief Financial Officers are required to provide timely financial reports andto close their books within 45 days o fthe fiscal year-end). 194. Functions of the Chief Financial Officer. The Chief Financial Officer is responsible for all financial management activities and processes including preparation of annual financial statements, which are finally signed off by the secretary. The Chief Financial Officer oversees all financial management activities relating to the programmes and operations o f the agency; develops and maintains an integrated agency accounting and financial management system, including financial reporting and internal controls, which comply with applicable accounting principles, standards andrequirements, and internal control standards. 195. Broadly speaking, the CFO functions are uniformly structured across all federal agencies. However the CFO Act is implemented with a slight difference across federal departments. There are Chief Financial Officers who are identified as having a "full service CFO role" and those that are not "full service.'' The former exercise all agency financial functions, including budget responsibilities, while the latter do not have any budget responsibilities. O f the 24 major federal deparhnentdagencies, 22 have "full service" ChiefFinancial Officers. 196. The US federal budget proposals are prepared by OMB and appropriations are passedby the Congress, following which OMB authorizes release o f funds to the department. Duringthis entire process, the Chief Financial Officer actively engages with the budget side o f OMB, through projecting agency requirements to them as also coordinating with OMB once the appropriations have been passed. The Chief Financial Officer also liaises both with the Government Accountability Office and the agency inspector general on audit and accountability matters. 197. Budgetary allocations in the US federal system are based on agency programmes and not on budget line items. It is the individual programme managers, and not the agency Chief Financial Officer, who are responsible for executing programme budgets once appropriations are approved. The programme managers also account for and report on the usage o f funds. 69 Any changes/reallocations to the appropriations or proposals for transfer of fbds from one programme to another within the agency require the prior approval o f the Senate Appropriations Committee. The ChiefFinancial Officer has a limitedpower o fmoving fbds between individual items under the category of "discretionary spending,'' but neither the ChiefFinancial Officer nor the secretary can alter the "mandatory spending" without approval of the Appropriations Committee. Once the appropriations have been passed, the management side o f OMB monitors the departmendagency spending as well as programme execution, andprovides appropriate strategic advice and guidance. Additionally, a regulatory group within OMB monitors departmental adherence to regulations and guidelines and programme performance. 198. Performance evaluation and accountability. There i s no individual performance appraisal of the Chief Financial Officer. Their performance is interpreted through the agency's financial performance as awhole. 199. The OMB evaluates the total agency performance basedon a balanced scorecardmethod that uses financial indicators, such as submission o f financial reports on time, no improper payments, compliance with various acts and obtaining clean audit reports (see Federal FinancialManagement Reports at www.whitehouse.gov/omb/financial).This continuous and transparent evaluation of the agency's performance is a key factor in ensuring good governance and financial management. The performance o f both the departmental secretary andthe ChiefFinancialOfficer is therefore indirectly evaluatedthrough this process. 200. Any difference of opinion between the departmental secretaryand the ChiefFinancial Officer over financial matters i s expected to be addressed while the budget requirements are being discussedwithinthe agency. Further on, discussionswith OMB provide an opportunity to the agency to lay out its work plan and provide justifications to OMB on budget requirements. The finalized appropriations are expected to provide full clarity on the programme allocations, and onmandatory and discretionary spending. 2011. Support to the Chief Financial Officer. The Chief Financial Officer is supported by a deputy Chief Financial Officer and several career finance staff managing distinct activities, such as cash management and asset management. For example, the US Department o f Labor has a Presidential-appointed ChiefFinancial Officer, and a deputy ChiefFinancial Officer and two associatedeputy Chief Financial Officers who are career senior executives o f the United States Civil Service. The number o f staff varies according to the size and activities of the agency. 202. The support staff should be trained in finance and are expected to have basic accounting and finance qualifications. Since they are recruitedthrough the accounting/finance career stream, they are expected to build on their basic qualifications by acquiring firther professional certification. The federal finance staff are expected to have basic degrees in accounting and finance, with advancedprofessional certification. Additionally, they are expected to acquire core competencies in financial and performance reporting in such areas as performance measurement, balanced scorecard measurement, internal controls, cost accounting, budget planning and execution, and IT capital investments. Training is provided by the individual agencies, by NGOs such as the Performance Institute, as well as through the various certification programmes offered by the American Institute of Certified Public Accountants and the Institute of Certified Management Accountants. The Chief Human Capital Officer oversees the training programmes with CFO inputs. One of the institutional mechanisms for ongoing capacity building is elaborated in Sec. 503 o f the CFO Act which defines the functions of deputy director for management (OMB). This includes developing and maintaining qualification standards for agency Chief Financial Officers and deputy Chief Financial Officers, and providing advice to agenciesregarding the qualifications, recruitment, performance, and retention of other financial management personnel. 70 v. INTERNATIONAL BEST PRACTICES AND LESSONSINDIA FOR 203. "One weakness in our governance i s the incapacity to institutionalize the best practices from our own country and elsewhere. A conscious effort not only to identify and document best practices but also build policy and create new structures and institutions to allow mass replication needs to be made" (Second Administrative Reforms Commission - Approach Paper, 2005). A. Drivers of Change inPublic Sector 204. Inrecentyear therole ofFinancialAdviser hasbeensignificantly influencedduebychanges inexternal environment ofpublic sector and corresponding responseof public sector to these changes. Today's public sector organizations are expected to have the strategic capability to make policy choices and allocate resources according to public priorities, to ensure value for money in the delivery o f services, to live within agreed fiscal ceilings, and to do so openly and transparently. Four drivers are creating complexity and the need for greater capability from the finance function: expanding responsibilities and policy challenges; more demanding regulatory and accountability requirements; changing technology; and evolving funding sources and strategies. Greater delegation of powers to departmentshas been accompanied by greater accountability. 205. Pressure on resources has focused more attention o f public sector mangers, including FinancialAdvisers, on resource mobilization and tighter fiscal management. The necessity o f increasing capacity to measure performance of public departments has resulted in development o f management systems focusing on performance-based budgeting. The change to accrual accounting system in some countries is a result o f the expectation from the public sector to measureits performance more accurately. The transition to accrual accounting was a major challenge for the government in such countries as Canada and the United Kingdom, a change that significantly affected staffing requirements in Finance Divisions in terms hiring andtraining skilled staff. B. Framework of Financial Management inPublic Sector -Legislation and Guidelines 206. The most significant outcome o f the need to strengthen financial management as a result o f challenges facing the public sector i s that most industrialised countries and such countries as South Africa have established financial management legislation. The legislative mandate has greatly enhancedthe role o f financial management inpublic sector and shaped development o f public finance management systems in these countries after passage o f the legislation. At the same time, this has increasedthe pressureofaccountability on accounting officers andkey officials supporting them, such as the Financial Advisers. 207. Inthe United States, the role of ChiefFinancial Officer was established under the CFO Act, 1990. It was followed by other pieces o f legislation that have had an impact on financial management inthe US Government departments. The Government Performance and Results Act of 1993 requires federal agencies to implement results-oriented management reforms, strategic planning, program goals, and transparent reporting. In South Afirica, PFMA Act and Treasury Regulations, which were issued after the PFMA Act, define the mandate for financial management. 208. Inmanycountries the role ofthe FAand function of Finance Divisions are well supportedby detailed guidelines covering key areas o f work, including emerging areas. The UK Good Practice Guidelines have been issued for managemento friskand as a handbook for the Audit Committee. 71 C. Mandateof the Financial Adviser Ir 209. Except inthe United States and South Affrica the mandate of the role o f Financial Adviser i s derivedfrom executive instruction. D. Governance Systems 210. Governments in many countries have responded to changes in the external environment by strengthening governance and accountability system, both within the departments and outside them. This includes Internal Systems o f Governance in each department (e.g., a Management Board in the United Kingdom; an Audit Committee in South Africa and Canada; and the inspector general inthe UnitedStates. 211. Canada, like other countries, has establishedinstitutions such as the Comptroller General that reports to the Treasury Board Secretariat and has the responsibility to strengthen financial managementacross government departmentsinCanada andi s the standardsetter for the same. The Comptroller General has oversight o f "controllership" function inthe government and i s normally consulted by the head o f the department while recruiting Financial Advisers and evaluating their performance. E. Review of FinancialManagement 212. Some industrialised countries have adopted the system o f periodic review o f financial management o f departments resulting in action plans for improvement (as in the United Kingdom). Results of such reviews have also been fed into development of whole o f government initiatives to develop core financial management competencies. Such a system significantly increasesFA responsibilityto assist the head o f the department to adhereto such action plans for improvement. F. Measurementof Performance 213. Most countries are trying to improve systems o f measuring effectiveness o f government departments. The emphasisi s onmoving away from control o f transactions to achievement o f objectives o f programs. The United States has a Balanced Scorecard System. All such evaluation systems directly influence the Financial Adviser in its role as the chief officer supporting the head of the department inmeeting its targets o f good financial management. G. G.Reporting 214. The requirements o f reporting by Finance Division in many sample countries has increased and Finance Divisions have to submit additional reports apart from regular expenditure monitoring reports (e.g., Annual Statement o f Internal Control, Report on Financial Management Arrangements in departments). Also, Financial Advisers are increasingly required to fulfill reporting requirements in much shorter time than in the past (e.g., finalization o f annual accounts within threemonths of financial year-end). H. Responsibility of Financial Adviser 215. Inthe sample countries, all except Indiahave a systemofunitary responsibilityby Financial Adviser to the head of the department. InPakistan, the Financial Adviser i s responsible to Ministryof Finance. The systemof dual responsibility of Financial Adviser to administrative ministry andto MinistryofFinance is uniqueto India. 72 I. RoleofFinancialAdviser 216. The role of head o f finance of a government department is key to strong financial management in public sector. In some countries, the FA role, more often called chief financial officer, has expanded, both as a custodian o f public resources and as a senior player at the management table, making significant inputs to strategic decisions. The FA role is evolving to becomemore strategic with lesser focus ontransaction processing. 217. The FinancialAdviser is requiredto be a good leader andmanagerwith a good understanding o f policy and programs o f the department. The key FA role is supporting the head o f department in discharging financial management responsibilities. In Canada, as in other industrialised countries, the role of chief financial officer is evolving along the same lines as the counter-position inprivate sector. 218. In all countries there is a dedicated post of head of finance, with some countries having position o f deputy FinancialAdvisers, as inPakistan. J. Selection Process of Financial Advisers 219. There i s a move towards greater professionalization of the FA post and to attract candidates from both within and outside the public sector. Inthe United Kingdom, by December 2006, 91 percent of government spending was managed by qualified finance directors, most of whom had been recruited from the private sector. In countries covered in this research, Financial Advisers are increasingly required to be qualified finance professionals and have experience of financialmanagement. 220. There is an increasing trend insome countries to cast a wider net for attracting candidates to apply for the FA job. Method of recruitment varies from internal advertising to external advertising (e.g., as in South Africa) to word o f mouth. This latter methodmay work best in the United States where Chief Financial Officer i s a political appointment. Inmost countries studied, candidates are selected from both public sector and private sector, with a slight bias towards private sector (as in the United States). The tenure o f the Financial Adviser is fairly stable inmost countries, ranging from 2 to 5 years (2 to 4 years in Pakistan). InCanada, as in other countries, the tenure i s getting shorter due to increasing demand for qualified Chief Financial Officers particularly after the passage of the Sarbanes-OxleyAct. K. Training 221. The need to build strong financial management skills inpublic sector has led to governments according high priority to building institutional systems for training needs assessment, in- service training, and continuing professional development o f finance staff, including FinancialAdvisers. 222. In other countries, apart from training initiatives of government, ongoing professional development o f Chief Financial Officers i s driven by the requirements o f their professional associations. New areas identified for training include enterprise risk management, internal control, risk assessment, project appraisal, financial analysis, and corporate governance. Even insome developing countries, training infinancial managementfor FinancialAdvisers is now considered quite important, as inPakistan. 223. IntheUnitedStates, the CFOCouncilmeetsperiodically. The Councilsubcommittees discuss training needs o f Chief Financial Officers. InCanada, the Officer o f Comptroller General is the leader inoverseeingdevelopment o f financial managementskills indepartments. 73 224. Inthe UnitedKingdomunder the Professional Skills of Government Initiative, core financial management competencies have been agreed by the Civil Service Management Board for all civil servants in senior service and at grade-7 level. This involves embedding financial management skills at all levels o f public sector alongside enhanced governance risk and reporting frameworks inorder to improve decision making and delivery o fplannedoutcomes. The UKgovernment also established gateway standardsand professional expertise for finance professionals in the departments. The website of Government Accountancy Service shares financial information and knowledge among finance staff (http://thegfp.treasury.gov.uk/). The National School o f Government inthe UnitedKingdomhas designed courses for Finance Professionals. 225. In South Afr-ica in 2003 the National Treasury identified areas for skill development for senior civil servants, including Chief Financial Officers, which led to roll-out o f 8 courses. Both in Australia and South Africa an agreedtraining plan i s part o f performance plan at the time of annual appraisal o f finance staff. In Australia a `whole of government' view is adopted in providing training opportunities to Chief Financial Officers, such as for new initiatives o fthe government. L. PerformanceEvaluationof Financial Advisers 226. Performance evaluation o f Financial Advisers in most industrialised countries and in South Africa, is based on annual conclusion o f performance agreements. Inthe United States, the ChiefFinancialOfficer i s evaluated indirectly through the system o f `balanced scorecard.' M. Supportto Financial Advisers 227. Adequately staffed Finance Divisions with staff trained in financial management is essential for effective discharge of the FA role. Financial Advisers in most countries are involved in managing staff, including recruitment, management, andprofessional development of staff. 228. The structure of finance department varies and is largely determined by its size and its functions. In most countries, the head o f department can organize the structure as per the requirements o f the department. In South Africa, there is a recommended structure o f a Finance Division, which includes financial accounting, management accounting, and supply chain practitioners. 74 VI. OPTIONS FORTHEWAY FORWARD 229. Inpresentingoptions for strengtheningtheFArole, itisnecessaryto examineissuesthat arise out o f the application o f this role to achieving overall sound financial management. The FA role, responsibility, and accountability should lend itself to good financial management practices and management principles so that budgetary objectives are achieved. Therefore, most options below follow from the examination o f aspects o f the FA role in countries that lend themselves to the overall achievement of sound public financial management. It is also necessaryto take note o f the fact that the FA role inIndia is uniquelystructured and does not necessarily follow from function or expectations o fthe function. A. MainObservations andOptions 230. Legislation onfinancial management. The mandate of the Financial Adviser is by executive direction. A statutory mandate would enhance the status of Financial Advisers and strengthen their role. As Indiahas no central organic budget law, the FA mandate could be included in a comprehensive budget law, including role o f chief accounting authority and Financial Adviser. A possible model is South Africa. Annex F shows a generic model of CFO responsibilities. 231. Governance system. The United Kingdom, as do other countries, have management boards for decision-making in departments. The secretary is chairperson o f the board and i s accountable for its decisions, which are considered to be o f ajoint nature with other members o f the board. The finance director (in the UK context) takes collegiate responsibility as a member o f the board though the accounting officer (i.e., secretary) remains ultimately accountable for all decisions. Therefore, mandate o f both the secretary as accounting officer, and that o fthe finance director as someone supporting himher are quite clear. 232. Responsibility of Financial Advisers. The current structure o f the FA role wherein they are mandated with supporting the secretary and at the same time being the `eyes and ears' o f the MinistryofFinance tends to lenditselfto potentialconflict. Itis therefore important to ensure that there is a supportive, rather than adversarial, relationship between the Financial Adviser and the respective secretary. There is a need to define the FA responsibilities more clearly, particularly as a senior member o f the management team o f the administrative ministry, and one who supports the secretary in discharging responsibilities as the accounting officer. All information and reporting requirements o f the Ministry o f Finance should be addressed to Secretaries, not to Financial Advisers. The secretaries should be held responsible for meeting all laws, rules, andbudgets interms o f General FinancialRule 64. 233. Institutionalized systemfor capacity building based on training needs assessment. Training needs to be provided by a professional training institute whether a government or nongovernmental agency. Distance learning may also be considered. Training needs assessment (as in South Afr-ica) and implementationo f training should be institutionalized as an ongoing and regular system. It should also have a built-in system o f review o f the curriculum and methods o f training, so that training can be modified to cater to evolving needs o f finance staff in response to future developments in public financial management in India. 234. Assessment of FA performance. Specific criteria and benchmarks need to be developed for assessment of performance o f Financial Advisers. These criteria should be linked to responsibilities o fthe FinancialAdvisers as per the 2006 Charter. 75 235. Allocation of work to Financial Advisers. It i s important to assess the work profile of different ministries so that ministries where there is a larger workload could have dedicated (full-time) Financial Advisers. Ideally, larger ministries could have dedicated Financial Advisers. The research on other countries shows that there are dedicated Financial Advisers inministries/department. 236. Responsibilitiesof Financial Advisers. Planning and formulation of schemes/projects: Written comments by Financial Adviser should be part o f submission for Expenditure Finance Committee and Public Investment Board, etc. Budgeting: 0 Financial Adviser should be responsible for plan budget as well as non-plan budget, even ifitspreparationis locatedoutsidethe IntegratedFinanceDivision. 0 The Charter should clarify specific responsibility of Financial Adviser for plan budget, non-planbudget, performance andoutcome budget. Budget execution: Financial Advisers should prepare monthly cash flow forecasts based on approved estimates and releases to be based on pre-agreed cash flow patterns, rather than across the boardpercentages. Internal controls: Inconsultation with management team, Financial Adviser should prepare annual report on risks facing the achievement o f departmental goals and measuresto mitigate risks. Reporting to Ministry of Finance: Annual Finance Report and Annual Outcomes and Systems Report mentioned inthe Charter shouldbe institutionalized. 237. Supportfor the Financial Adviser: Chief Controller of Accounts/Controller of Accounts. Role o f chief controller of accounts/controller o f accounts should have the same organizational scope as that o f the Financial Adviser (i.e., each Financial Adviser to have one chief controller o f accounts/controller o f accounts reporting to them) and FA and CCNCA responsibilities should be co-terminous (i-e., ifsome FinancialAdvisers continue to have charge of more than one ministqddepartment, the controller o f accounts reporting to the Financial Adviser should also hold the charge o f the same ministries/departments). Such an arrangement might lead to better planning and coordinationo fwork o fvarious ministries/departments. StrengtheningIntegrated Finance Division: 0 Separatefinance cadre: A separate finance cadre from which staff for IFD can be drawn will be a significant step in long-term strengthening o f finance function and might also contribute to making the finance function more attractive to Government staff and new recruits. This will also facilitate more effective institutionalization o f a system of training andretention oftrained staff within the finance function. Workstudy to assess number of staffand skills required in eachIFD: The work study can be used as a tool to define both generic skills required for public sector financial management, as well as specific skills that are necessary for the work of IFD staff in certain ministries, for instance inproject appraisal. 76 IFD Manual: The Charter mentions that an IFD manual will be developed. Apart from being a tool for training and orientation of new staff, such a manual can be useful in operationalizing the tasks to be performed by the Financial Adviser as per the Charter and as per General Financial Rules and Delegation o fFinancial Power Rules. Enhance financial management skills of IFDstaff as per recommendations above. 0 Finance staff should be professionally skilled and qualified in the field o f accountslfinance. All departmentslministries should be encouraged to adopt Standard Organizational Chart andJob Descriptions. B. Conclusion 238. Lessons learned from country studies clearly demonstrate that other countries studied have taken major steps inrecent years to increaseeffectiveness o f public sector interms o f greater accountability andtransparency; more emphasis on achieving value for money andgenerating resources; improving efficiency, management practices and internal controls; and at times greater commercial orientation in certain sectors. Strengthening financial management i s at the core o fthese changes and therefore relevant to public sector inIndia. 239. Options for strengthening the role of Financial Adviser in India could have various evolutionary paths. However, once the set o f options has been selected, the method and timetable o f implementation need to be carefully assessed. This implementation path will dependon the course and contours of change that various stakeholdersmay choose, including legislative changes that might require organic financial management laws, akin to similar laws inother countries. 240. The options listed in this section comprise changes that are essential to make the finance function more robust and with clearer responsibility and accountability. The ultimate challenge is to have in force a plan that i s more effective and accountable to the changes in public financial managementtaking place inIndiatoday. 77 ANNEXA. OFFICE MEMORANDUM OF 1975 F.No. 10(29)-E.Coord/73 Government of India Ministry of Finance Department of Expenditure ** New Delhi, the 6th October, 1975 Office Memorandum Subject: Scheme of `Integrated' FinancialAdviser Under the existing scheme of budgetary and financial control and delegation of powers, to Ministries as introduced vide thls Ministryk O M No.10(3)-E.Coord/67 dated 28th October, 1968, the Ministries have an Internal Financial Adviser, who is incharge o f their Budged and Accounts Section and is required to be consulted in all cases o f exercise o f delegated financial powers and an "associate" Financial Adviser based in the Department o f Expenditure, who is required to be consulted in matters falling outside the delegated field. The `associate` Financial Adviser is attached to a group o f Ministries. Inpursuance ofthe policy ofto delegateenhancedfinancial power the administrative Ministries to match their responsibilities and to improve their competence inthe field o f financial management by developing appropriate internal attitudes and skills, this question whether the functions o f the `associate' Financial Adviser andthe Internal Financial Adviser could, with advantage be integrated ina single official, forming part o f the administrative Ministry,has been under consideration. It has been felt that Ministryina larger measure than at present to enable him to play a more effective and constructive role in its developmental activities and should bring his financial expertise to bear in assisting the Secretary o f the administrative Ministry and other senior officers in the planning programming, budgeting, monitoring and.evaluation, finctions o f the Ministry. A scheme o f `Integrated' Financial Adviser has accordingly been drawn up in consultation with Department o f Personnel & Administrative Reforms, the salient features o f which are outlined inthe Annexure. 2. Inthe new scheme, the Financial Adviser will be responsible both to the administrative Ministry and to the Ministry of Finance. With the assistance, the administrative Ministry will be able to freely exercise the enhanced powers delegated under the Department o f Expenditure O M No.F.lO(13)- E.Coord75 dated 10th April, 1975 and outside the scope o f the delegations, he will function under the general guidance o f the Finance Ministry. H e will assist inbudget formulation, scrutiny o f projects and programmes for approval by the Ministry o f Finance and post-budget vigilance to ensure that there art neither considerable shortfalls in expenditure nor unforeseen excesses for which provision has not been made either inthe original budget or inthe revisedestimates. The close association o f Integrated Financial Adviser and his staff with the formulation and implementation o f all proposals involving expenditure should facilitate the more effective discharge o f he Financial Adviser's responsibility. It is cardinal to the working o f the new scheme that the Financial Adviser should be associated with the formulation o f schemes fiom the initial stages. The Financial Adviser will also be responsible for preparation o f the Ministry's performance budget and monitoring o f progress o f schemes against the budget. The maintenance o f an efficient accounting system i s necessaryfor thls purpose. 3. Inmatters involving any deviations from the budgeting and accounting procedures, consultations with the Budget Division o f the Department o f Economic Affairs, will continue to be obligatory. Similarly, inrespect of the formulation o f the Ministry's development plans, PlanFinance Division inthe Department o f Expenditure would have to be consulted. The Public Investment Board (PIB) and Expenditure Finance Committee (EFC) procedure would also continue to be applicable, the Integrated Financial Adviser taking on the role at present discharge by the Establishment Division and the Staff InspectionUnito f the Department o fExpenditure would also not be affected by the proposed changes. 78 4. Inthe first instance,the schemewill beintroducedinthe followingMinistries / Departments: i. Health&FamilyPlanning; ii.WorksandHousing; iii.ExternalAffairs iv. Educationand Social Welfare v. Information andBroadcasting vi. Science& Technology; and vii. Shipping & Transport (where the schemehas already, beenintroducedas anexperimental measure). 5. Itisproposedto extend the schemeto other MinistriesDepartments soonthereafter. 6. Pending further consideration o f the need for formation o f centralized or decentralized, single or multiple level cadre o f finance and accounts and scheme for absorption o f the present associate finance staff in such cadres, in the initial stage, the Financial Adviser, the officers and staff working in the associate Finance Divisions in the Department o f Expenditure will be transferred to the administrative Ministries as follows according to requirements - Officers o f services other than the Central Secretariat Service will be treated as on - deputation to the administrative Ministry insteado fto the Finance Ministry Officers o f the Central Secretariat Service including Grade Iand selection grade will be - treated as transferred to the administrative Ministry Members o f the decentralized cadres o f various grades o f CSS will be transferred on loan basis from their present cadre to the cadre o f the administrative Ministry on a purely temporary basis. 7. When the scheme is introduced, certain changes will be necessary inthe organization structure in the administrative Ministry and in the Department o f Expenditure. Creatiodabolition o f some posts will be involved. The details o f the revised organizational structure in the administrative Ministry out o f the posts and personnel to be transferred from the Department o f Expenditure to the administrative Ministry along withthe work will be communicated to the respective Ministries separately. 8. The new scheme will be introduced inthe MinistriesDepartments mentioned inpara 4 as soon as suitable officers to man the posts o f Integrated Financial Adviser become available. A separate communicationwill be sent to them inthis respect. 9. The a h s t r a t i v e MinistriesDepartments are also requestedto make necessary arrangements for housing the additional staff to be transferred from the associate Finance Divisions inthe same building, as such arrangementsare essential for the proper functioning o f the Scheme. Sdl- (NNKNair) Joint Secretary to the Govt. o fIndia To, All MinistriesDepartments o fthe Govt. o fIndia. 79 ANNEXB. CONCEPTNOTE: ROLEOFTHEINTEGRATEDFINANCIAL ADVISER Background The Government o f India (GoI) has requested the Bank to provide a Research Paper on the position o f Integrated Financial Adviser (IFA) as it exists inother countries. It is important to mention that the F A position exists in India and all ministries have a Financial Adviser who is responsible to both the Finance Ministryandto the relevant administrative ministryunder the existing schemeofBudgeting andFinancial Control and Delegation of Powers (outlined by Ministryo f Finance inOffice Memorandum No 10 (29) - E. Coord73 dated 6" Oct. 1975 and consequent instructions like the Redefined Charter for IFAs which was brought out in June 2006).. The IFAs exercise the powers delegated to them. Outside the scope o f delegated powers, the IFAs function under the guidelines o f Ministry o f Finance (MoF). However, in recent years, with the growth and maturity of the Indian economy there is a need to re-examine the role and associated responsibilities o f the IFA position. Indoing so, there would be value addition indrawing from the experiences o f other countries like USA, Australia and the UK etc. where the position o f IFA is considerably evolved. InIndia, the Ministryof Finance would like to examine the IFA role, responsibilities and accountability structure in the context of the development of the growing maturity o f the Indian economy, the great emphasison governance and disclosure inIndia as highlighted by the Right to InformationLegislation and inthe light of internationaldevelopments where the position of IFA is well developed inmany countries like the US where a similar position o f CFO exists. To initiate this review, the MoF has, (in June 2006) brought out a "Redefined Charter for Financial Advisers". This document defines the following: 1. Role o f Financial Advisers 2. Involvement inKey processeso fthe Ministry 3. Reporting System 4. Roles andResponsibilities o fChief Controllers o fAccounts 5. Interactionbetween MoF andFAs 6. Capacity Building However, the Ministry is planning to expand and revise the Charter o f June 2006 to reflect good practices and policy regarding the role o f IFA as it exists inother countries. This requirement is comes from certain dichotomies in the roles and responsibilities o f IFAs in the present scenario. IFAs work under great pressure as they are requiredto report to the Secretarieso fthe functional Ministries that they are placed in, but, inaddition to that, they have a dotted line of reporting to the Ministry of Finance (MoF). Inpractice, IFAs are required to ensure the effectiveness and efficiency of expenditure inthe functional departments onbehalf o f MoF; but, at the same time; they also have to ensure that the overall development outcomes of their hctional department are achieved. This effectively places them in a situation where they are required to `tow the line' and any advise or opinion which may be contrary to the thinking o f the Departmental Secretary can only find its legitimate place if it is escalatedto the level of a conflict through the MoF. This situation is exacerbated by the somewhat nebulous description o f the IFAs duties, responsibilities and accountability. Therefore, MoF would now like to develop a clear Charter which will provide IFAs with the required authority to take decisions and will structure their function much like that o f a "chief financial officer (CFO)" akin to the CFO roles that exist in some other countries (like the US). MoF would also like to elevate the status o f IFAs in the Departmentsand Ministries inwhich they are posted so that they are no longer figure heads and have no conflicts inreporting arrangements which undermine their powers. MoF envisages the working o f the Indian government's Departments and Ministries the lines o f `strategic business units' which are functionally efficient and financially prudent. In this regard, the MoF sees a crucial role for IFAs, and hence would like to strengthen their position, clarify their duties, responsibilities and accountability. 80 Hence, thls research paper is sought to develop the role o f IFAs, learn fkom more advanced countries in how they have structured this position, introduce appropriate training and certification programs for IFAs andfor their key support staff andprovide commensurate careerdevelopment opportunities so that the IFA position becomes an attractive one for officers o f Go1and is able to attract good talent. Inorder to help the Ministry revise and expand the Charter, the Bankhas been requested to produce a ResearchPaper which will record the organizational set up, roles and responsibilities o f the IFA or similar position in other countries. Purpose/ Objective The purpose o f the Bank's Concept Note would be to feed into the revision of the Ministryo f Finance's Charter for Integrated Financial Advisers (IFAs) based on the experiences in countries where the role of IFA is well developed. The Paper would be able to provide information on the principles, policies and practices and identify good practices prevalent in other countries that the Government o f India could consider for incorporation into the Charter inthe Indiancontext. Scope of Work The Bankwill conduct researchand assimilate experiences from other countries to set out how the position o f FA is structured and staffed. The proposed structure o f the paper will be as follows: 1. An Issues Section where broadly the mandate and role of IFAs (inIndia) as it stands will be set out. This will provide a descriptive background to the rest o f the paper and its relevance to the Indiancontext. 2. A cross country comparison of different facets o f the IFA role across a sample o f 8 to 10 countries. 3. A drill down into a selected sample o f 2 to 3 countries will be done. These would be countries which have set up (federal-state) similar to India. The countries wilIbe selectedconsultatively with MoF and other relevant stakeholders. MethodologyandOutput: The study will be conducted collaboratively with the Department o f Expenditure (DOE) o f the MOF. DOE will nominate a primary contact person for the Bankteam to interact with. The team will draw up an initialshort list o f countries which could form apart o f the sample. This shortlist will be sharedwith MoF and the final sample will be decidedjointly by the Bankand MoF. After the sample is selected, the team will prepare a list o f questions that the paper should specifically seek to answer. Included inthe questions would be specific questionnaires which will be administered to incumbent IFAs inIndia and inthe sample of countries that the paper seeks to learn fiom. All questionnaires andkey question lists will be sharedwith MoF and based on the final list o f questions the team will undertake research to provide answers. The indicative questions will be as follows: 1. Delegationof financial powers, roles, responsibilities, duties, andaccountability. 2. Do IFAs(or other persons occupying similar positions to IFAs) derive their mandate from the Constitution or other statues o f the relevant countries that they are in? Specifically, whether their mandate is executive or legislative, and which affords them greater autonomy and independen~e?~' 3. How independent is the position o f the IFA? Who do they report to? Are there any conflicts in their reporting relationships? Do they have Veto Power or simply anAdvisory Role?How are they made accountable? 37 Delegatedlegislation IFA has wider power than executive mandate. 81 4. Structure o f IFA within the Departments. What are their reporting obligations to the Departments that they are placed inand also to their parent departments?Infederal structures o f government, do IFAs at the federal and State belong to the same cadre? (e.g. in India, centre does have IFA, states do not have IFA). 5. How does work flow happen inother countries? What is the domain o f the IFAs? Are they involved indecision loop, ifso, what is the nature o ftheir engagement? 6. What is the involvement o f IFA inthe budgetary process? Are they at all concerned with the preparation o f the budget or are they simply concerned with budget execution? What sort o f control do they have over the whole money envelope for the department? 7. What is the stability of their tenure? 8. What is the incentive structure, assessment framework, professional requirements o f the cadre, career development opportunities etc.? 9. What sort o f support staff do IFAs in India have? Are the support staff professionally qualified, are they trained in finance? What are their reporting lines, are there any conflicts there? I s there a need for skill development o f the IFAs' support staff! Does Go1 have any initiatives which are doing this already? Ifso, how far have those initiatives been developed and what are the findings from those? What are the lessons from other countries? How do other countries structure the support for their CFO type positions? 10 What i s responsibility o f the IF0with regardto the Right to Information (RTI) legislation that has recently been enacted in India for on demand information and proactive (suo moto) disclosure? 11 What is the mandate of IFAs on the overall public financial accountability mandate o f the concerned department? Are they responsible for audit, or answering audit queries? Do they represent the Department inthe Public Accounts Committee? 12. What i s the roleo f the IFA inthe context o fDepartmental procurement? The output will be a research report describing the set up o f IFAs in selected countries highlighting the issuesand options applicable to the Indiancontext. The contents and format o f the report will be discussed and decided jointly with DOE. The draft report will also be discussed with relevant stakeholders in a workshop to be organizedbythe MoF. 82 Timeline Activity Completedby: Team Composition Manager: Robert J. Saum LeadSpecialist: P. K. Subramanian Task Leader: Priya Goel Key ContactPersoninDOE: Mr.AtanuChakraborty (Joint Secretary-Personnel) MrManishKumar (DeputySecretary) Task Team: AtulB.Deshpande Mohan Gopalakrishnan InternationalConsultant (Anthony Bennett) Local Consultant (Asha Bhagat) Peer Reviewers: Internal MohanNagarajan (PREM) Rajeev Kumar Swami (Latin American and Caribbean Office o f Financial Management) External MichaelJacobs (World Bank Consultant) Prof. VishwanathAlok (IndianInstitute o f Public Administration) Quality Assurance Apart fromreview bythe internalandexternal Peer Reviewers, the study will follow the SAR and IndiaCMUguidelines for quality assuranceo f sector work. 83 Annex C. RedefinedCharterfor FinancialAdvisers inIndia, 2006 F.No. 5(6)/L&C/2006 Government of India Ministry of Finance Department of Expenditure ** New Delhi, datedthe June 1,2006 OFFICEMEMORANDUM Subject: Scheme of 'Integrated FinancialAdviser' Under the existing scheme o f Budgetary and Financial Control and Delegation o f Powers outlined by this Ministry vide O M No.l0(29)-E.Coord/73 dated 6th October, 1975 and subsequent instructions in this regard, the Ministries have a Financial Adviser who is responsible both to the administrative Ministry and the Ministry o f Finance. With his assistance, administrative Ministries freely exercise 'the enhanced powers delegated to them and, outside the scope o f the delegations, he hctionsunder the guidelines of the Finance Ministry. 2. After the introductionof the scheme, the Indianeconomy has maturedand we are attempting to keep pace with the fast growing economies of the world. Therefore, it is imperative that our systems match the needs o f a fast growing economy. The role o f Financial Adviser assumes great importance in such a scenario and the scheme has been redefined in this context. The redefined Charter for Financial Adviser annexed to this memorandum outlines the features o f the Revised Scheme o f Integrated FinancialAdviser. 3. This comes into force with immediate effect. Sd- (Adarsh ashore) Finance Secretary and Secretary(Expenditure) To, I.CabinetSecretary 2. Principal Secretary to the PrimeMinister of India 3. All Secretariesto the Government o f India(By name) 4. All FAs (Byname) 5. All Heads o fPublic Sector Enterprises 84 ANNEX REDEFIXEDCHARTERFORFIKAYCIALADVISERS S. No. Contents PageNos. I Introduction 2-3 11. Role of FinancialAdvisers 4-10 111. Involvement inKey Processof Ministries 11-12 IV. ReportingSystem 13 V. ReportingSystem 14-15 VI. Interactionbetween MoF andFAs 16 VII. Capacity Building 17-18 ANNEX-I:Copy O MNo. 10(29)-E-Coord/73 dated6.10.1975 indicating the functions of IntegratedAdviser along with the modalities for functioning. ANNEX-11:Provisions under DFPR indicating duties and responsibilities of the FinancialAdviser. 85 Introduction The Scheme o f Integrated Financial Adviser currently operates in accordance with Office Memorandum No.10(29)-E-Coord/73 dated 6.10.1975 issued by the Department o f Expenditure, Ministry of Finance. The scheme provides that the Financial Adviser would be responsible both to the Administrative Ministry and to the Ministry o f Finance. The scheme also briefly indicates the functions of the Integrated FinancialAdviser along with the modalities for functioning. A copy of.the GMis appended(ANNEX-I). 2. The last thirty years since introduction o f this scheme have seen the Indianeconomy grow from a less developed stage to one o f the fastest growing economies o f the world. This growth has been the result o f well structured economic reforms and conscious policy decisions. The last two decades have witnessed a plethora o f reforms inmonetary and fiscal managemento f the country. We have now reached a stage from where further progress requires a renewed effort. The second- generation reforms are throwing up complex challenges which, inter alia, call for a re-look at some o f the institutionalized financial managementsystems. 3. The institution o f Financial Adviser (FA) occupies a unique position in the functioning o f Government o f India. Having servedwell till now, time has come for it to be brought insync with the fast changing socio-economic scenario and attendant attitudes, processes and systems in the Governmental functioning. It is necessary that the role, authority as well as accountability of the FinancialAdvisers be redefined and codified inunambiguous terms, andtheir capacity enhancedto meet the emerging challenges. Ministryo f Finance has internallyreviewedthe scheme inthis context, and the concept o f redefined the charter for the Financial Advisers, as outlined in the ensuing paragraphs. 4. The overarching concept In redefining the charter for Financial Advisers is that Financial Advisers are meant to assist inthe achievement of objectives/goals o f their respective Administrative Ministries, as approved by the competent authority; and that they must commit themselves to facilitate Implementation of the approved programmes, with due financial prudence, to ensure that monies allocated are spent on time, in the prescribed manner, to achieve the intended outcomes defined inmeasurable and monitorableterms. AssistingAdministrative Ministries inensuring `value for money' would be a key objective for Financial Advisers, with emphasis on improving the quality of expenditure and requisite systemic improvements / capacity building for this purpose. It may also bereiterated that FAsrepresentthe MinistryofFinance inregardto all financialmatters. 5. The more complex responsibilities envisaged for FAsmustbe accompanied by corresponding authority and capacity. It would, therefore, be necessaryto ensure that FAs are suitably empowered, and appropriate measures are taken for capacity building both institutionally and individually. The organizational resources, structure and processes themselves may need to be augmented / modified, and I.T. enabled systems, latest financial management practices, knowledge management structures etc. put inplace. 86 RoleofFinancialAdvisers 6. The role o f Financial Adviser is now conceived to be akinto the role o f the Chief Financial Officer in a corporate structure, with specific responsibilities for ensuring fiscal prudence and sound financial management. They would bring requisite financial expertise, and overall perspective o f financial management o f the Government, as enunciated by the Ministry o f Finance, in rendering professional advice to the Secretaries o f the Administrative Ministries on all matters which have financial implications. 7. The role of Financial Adviser will be crucial for successful planning and implementation o f various schemes and projects. Value for money will be the most important parameter in evaluating such schemes and projects. Therefore, it is imperative that outlay for a scheme i s intrinsically linked with the Outcome Budget and Performance Budget. 8. In rendering their advice, the Financial Advisers would be expected to accord priority to macro management with a view to help in achieving the outcomes set by the Ministries as goals for themselves. These macro issues could include schematic appraisal and concept functions, revenue management, subsidy management, fiscal resource transfer issues, defining and evaluating outcomes besides maintaining and safeguarding the budgetary integrity, etc. FAs would also be expected to look at the total picture of resources for the sectors in which they are functioning, and assist the Secretaries o f the Administrative Ministries in moving towards greater resource mobilization, including in terms o f enabling policy and regulatory framework to attract private sector funds. FAs would inno casebe assigned any routine administrative functions ofthe Ministry. 9. Appendix 2 o f DFPR is an indicator o f overall expanse o f duties and responsibilities of the Financial Adviser (ANNEX-11). However, following are some of the specific tasks which the FAs wouldberesponsible for: i. Budgetformulation:FAswouldcontinuetoberesponsibleforbudgetformulation. They would bring in more analytical inputs into the budget formulation process, for improved budgeting and facilitating moving from `itemized' to `budgetary' control o f expenditure. The present system relies largely on previous year's programme allocations and continuing commitments, without any real evaluation and expenditure analysis. FAs would now increasingly be required to assist the Administrative Ministries I Departments in moving towards zero based budgeting, and assist inbetter inter se programme prioritization I allocation within the indicated budgetary ceilings, based on analysis o f expenditure profiles o f each programme I sub-programme and information on cost centres I drivers; assessment o f output, outcome and performance; and status of the projects / programmes (e.g. priority to last mile projects). Chief Controllers o f Accounts / Controllers o f Accounts (CCAs I CM) will support them in this function. Such an analysis at the time o f initial budget formulation should, over a period of time, help in enforcing hard budget constraints and reducing reliance on supplementaries. As the FAs` internal budgetary exercise becomes more rigorous, their involvement inMOWSbudgetaryprocesses will increase. ii. OutcomeBudget:Administrative Ministries willnowberequiredtopreparetheir respective `outcome budgets' by late March each year, on the basis o f the `Annual Financial Statement' presented in the Parliament in February. The `outcome budget' would reflect the outlays interms o f outcomes, defined inmeasurable and monitorable terms. Reasonability o f budget estimates, vis-a-vis the intended outcomes, will be ensured through specific appreciation of the unit costs o f outcomes/delivery. Major schemes should have built-inprovision for their evaluation by independent agencies, which may be appointed by the Administrative Ministries and I or Planning 87 Commission I MoF. FAs would be actively involved in the preparation of outcome budgets. They would also assist the Administrative Ministries in clear definition of measurable and monitorable outcomes with specified deliverables; setting up appropriate appraisal, implementation I delivery, monitoring and evaluation systems; and ensuring actual achievemento f the intended outcomes. 11 .i.PerformanceBudget:AdministrativeMinistrieswillalsoberequiredtopreparetheir respective `performance budgets' by late March each year, indicating the `outcome' of the `Outcome Budget' of the previous fiscal year at least upto December end. Thus, while Annual Financial Statement and Outcome Budget would be for the ensuing financial year, the Performance Budget would present the picture o f actual achievements I performance for the financial year gone by. FAs would be actively involved in, and coordinate under the overall direction of the Secretariesconcerned, the preparation o f performance budgets for their respective Administrative Ministries. In essence, Budget Formulation, Outcome Budget and Performance Budget must link present, future andpast inan integratedmanner. iv. FRBMrelated tasks: The Fiscal Responsibility and Budget Management Act requires the Government to place disclosure - statements before Parliament along with the Annual Financial Statement and the Demands for Grants. CCAs I CASas heads o f the Accounts wing shall render their professional expertise in the functioning o f financial management system. FAs would be responsible for preparation of these statements in respect o f their MinistryI Department for incorporation inthe consolidated statements compiled by the Ministryof Finance for the Government as a whole. FAs would also provide requisite information and material as input for FM'S quarterly review of fiscal situation to bepresented to the Parliament. v. Expenditure and cash management: FAs would continue to be responsible for expenditure management and cashmanagement.MoF's initiatives for better expenditure management through sophisticated exchequer control mechanisms would also be supported by FAs with improved cash management, through monitoring o f monthly cash flows effectively inthe context o f cash expenditure I commitments to be agreedto mutually between the MoF and the Ministries / PSUs I Autonomous institutions. This would help tighten the system o f receipts and payments monitoring, and secure greater convergence of revenue inflow and expenditure outflows, so that borrowing and thus debt charges can be minimized. FAs would also ensure that release o f funds to State Governments I other agencies is linked to the scheme-wise I project-wise utilization certificate and audited expenditure o f previous years. Utilization certificates should reflect outcomes, or at least the physical outputs. FAs will also ensure that unspent balances with the State Governments and other agencies are not transferred to Public Accounts; and in case such transfer is permitted, these should be duly audited. The expenditure management function would also be closely linked to the `outcome budget'. CCAs / CASwill support FAsinthe discharge o f these responsibilities. vi. Project / programme formulation, appraisal, monitoring and evaluation: Rigorous I effective project I programme formulation, appraisal, monitoring and evaluation are vital for high quality investment decisions and successful I timely delivery o f intended outcomes. The Administrative Joint Secretaries have to take the lead role in project I programme formulation, implementation and monitoring. FAs should take the lead in ensuring high quality appraisal and evaluation with requisite rigour. MoF have issued clear guidelines inthis regard, which needto be adhered to scrupulously. vii. Screening of proposals: FAs would be responsible for examining and forwarding all proposals, which needto bereferred to any Department inthe Ministryof Finance. 88 viii. Leveraging of non-budgetary resources for sectoral development: FAswould assist the Administrative Ministries in evolving strategies for optimizing private sector investment and Public-Private Partnership in the sector, through enabling policies/schemes and appropriate regulatory framework, formulating projects for external funding, and taking innovative measures for leveraging o f non-budgetary resources for sectoral development. Inaddition, the present role o f FAs in assessment and leveraging of IEBRfor investment programmes of the Public Sector Undertakings will continue. ix. Non-tax receipts: Non-tax receipts have assumed greater significance inthe context o f the needto limit fiscal andrevenue deficits, as mandatedby the Fiscal Responsibility and Budget Management (FRBM) Act. An optimum non-tax receipt budget would, therefore, be prepared by FAs, inconsultation with the Administrative Divisions. FAs would, thereafter, periodically review the various non-tax revenue receipts under control o f the Ministry / Department to which they are assigned, in the context o f market trends and other sectoral developments. FAs would need to act as a catalyst in moving towards a regime inwhich the user charges recover the cost o f service fully or substantially, as per the Government policy in this regard, and in case of only partial recovery to ensure that the subsidy element is clearly quantified. In the case o f rent, licence fees, royalties, profit share and dividends, the duties of FAs would include conducting periodical reviews, and giving their considered comments and recommendations regarding the reasonableness of return to the Government on the deployed public resources. COAs / GASshall assist FAs in relation to estimation and flow of non-tax revenue receipts. x. Tax Expenditure: FAs would also monitor tax expenditures, i.e., the revenue foregone by Government on account of various exemptions and concessions. This is important since tax expenditure constitute a significant part o f overall Government spending. Within the administrative Ministry, such proposals should be routed through the FinancialAdvisers before finalization. xi. Monitoring of assets and liabilities: Each Ministrymusthave a comprehensive record o f its assets and liabilities. FAs would cause appropriate action for initial buildingup o f such records and their on-going updation, as also for the maintenance and optimum utilization of the assets. Government guarantees should also be monitored. FAs in Ministries with significant real estate assets/property (land, buildings etc.) will cause a critical analysis o f th'eir utilization, including review o f property encroached upon, property involved in disputes / court cases etc., and also be the catalyst to ensure necessary action for their availability and fullest utilization. The progress would be regularly reviewed, and corrective actiontaken on an on-going basis. xii. Accounts and Audit: FAs would be kept informed about the overall quality of maintenance o f departmental accountsby their respective CCAs / CAS. FAs would also regularly review the progress o finternal audit and action taken thereon, so as to make it an important tool for financial management. Action taken on audit paras may also be monitoredon aregular basis. xiii. Procurement and contracts: Significant amount o f monies are spent by Government on procurements and contracts. FAs wouldbe required to set up strong internal systems to ensure due diligence and strict observance o f MoF's guidelines in this regard. (The guidelines are beingrevised, andnew guidelines are expectedto be issued shortly). 89 xiv. Financial Management Systems: FAs would periodically review the financial management o f the various programmes / projects of the Ministry from the systems point o f view, and take appropriate action for making the financial management systemsmore effective. xv. Nominee Director on Boards of Public Sector Undertaking: Financial Advisers are often Government's nominee Directors on Boards o f Public Sector Undertakings (PSUs). This role assumes increasingly more important dimensions with the greater autonomy being granted to PSUs. FAswould needto bring strong requisiteexpertise to bear on all major issues considered by the Boards. Separate guidelines will be issued regarding the nomination and functioning of FAs as Directors o f Boards o f PSUs, in consultation with the Department of Public Enterprises. xvi. Use of technology: Increased use of technology as an advanced tool, especially communications and information technology, should be encouraged not only in his division but also in the domain o f Ministries / Departments with the view to ensure better utilization of resources available with the Government and improve delivery o f public services to achieve the intended results. Economy, efficiency and effectiveness would be the guidingprinciples. 90 Involvement inKev Processesof Ministries 10. It is important that FAs are hlly involved inthe key processes/ activities of Administrative Ministries which have clear economic and financial dimensions. Administrative Ministries shall, therefore, invariably involve FAs in all such activities and decision making processes which would, inter alia, include the followingbut may not be limitedto: 0 Formulation of annuaV5-year plans, and other important consultations with Planning Commissionlike mid-term appraisal. 0 Preparation of `outcome budget', `performance budget' and evaluation of actual outcomes. 0 All proposals for consideration of CNE / SEC / EFC / PIB / Cabinet / Cabinet Sub- Committees, or otherwise referredto the Ministryo f Finance. 0 Externally aided projects, and other strategies to encourage larger resource mobilization for the sector, including through Public Private Partnership (PPP), appropriate regulatory structures etc. 0 Policy / programme formulation and other major decisions, to facilitate proper appreciation o fthe consequential financial implications. 11. MinistryofFinancehas beenincreasingly movingtowards macro management ofissues, and delegating more powers to the Administrative Ministries. This delegation i s reviewed periodically and is suitably enhanced as and when required. As such, the Financial Advisers have adequate financial powers. Exercise o f these powers, and necessary financial analysis, may require the FAs to call for relevant records / reports / files relating to various decisions, contracts etc. FAs' involvement would, therefore, specifically include the right o f access to all records, reports, audits, reviews, documents, papers, recommendations or other material which are the property o f the Ministry/Department, or which are available to the Ministry/Department, and which relate to programmes and operations with respect to which that MinistryAIepartment calls for accounts, data and reports. 12. FAs would be consulted in all cases relating to the exercise o f the delegated financial powers. While normally FAs`advice would be expected to be adhered to, there could be instances / cases in which the Administrative Ministries feel that there are valid reasons for some modification / deviation. Insuch rare instances, Secretarieso f Administrative Ministries can exercise their power to overrule FAs`advice by an order inwriting. 91 Reportinp Svstems 13. FAs will be requiredto prepare an `Annual Finance Report', which would be a factual report Indicating the operational aspects o f financial management o f the Department / Ministry, including information on the resource requirement, pattern o f expenditure with reference to outlay / budget, opening andclosing unspentbalances, opening and closing position o f utilization certificates, position o f non-tax revenue (user charges, dividends etc.) with reference to previous year, FRBM related activities etc, and suggestions for improvement. 14. FAs would also be required to finish an `Annual Outcomes and Systems Report', which would give factual information regarding the outcomes achieved vis-a-vis intended (as per Outcome Budget), policy and systems changes / improvements and action-taken I results-achieved in regard to those aspects o f FA'Srole which are not included inthe Annual Financial Report. 15. `Annual Financial Report' and `Annual Outcomes and Systems Report' would be factual reports to be submitted to Secretary (Expenditure), through the Secretary o f the Administrative Ministry,byJune 30 ofthe next financial year. The `Annual Financial Report' wouldbe prepared on the basis o f the information contained in the provisional accounts releasedby the Controller General o fAccounts inthe month of May. The structure o f the reports will be intimatedseparately. 16. In addition to the above, FAs would be mandatorily required to send disclosure statements concurrently to the Secretary o f the Administrative Ministry and Secretary (Expenditure) whenever there are deviations from, or violation of, the provisions in paras 13-15 above. They may also be requiredto sendany other information/ reportperiodically, or as sought from time to time. 92 Roles and resDonsibilities of CCAsICA 17. As the overarching concept now adopted is that the Financial Advisers are meant to assist inthe achievement o f objectives I goals o f their resl3ectiVe administrative ministries it follows that the role o f Chief Controller o f Accounts (CCAS) I Controller o f Accounts (CAS) should undergo a parallel change as the basic accounting andfinancial inputs for the Financial Advisers come fiom the CCAs / CAS.Inthe last three decades the role o f CCAs / CAs has undergone subtle, unrecorded changes that need to be formally spelt out and institutionalized in precise and unambiguous terms. Not only do the accounts wings operating under CCAs I CASneed to catalyze changes in existing system protocols in order to synergise and integrate all interrelated aspects with the changing paradigm of financial management they in turn needto be strengthenedandempowered to effectively cope withthe changed demands made on them. 18. While the CCAs I CASas head o f the accounts wing, under overall superintendence and control o f Financial Advisers, discharge their duties and responsibilities within the ambit o f their respective administrative ministries lending their professional expertise to provide Accounting and Accountability support. 19. The spectrum o f work for which CCAs I CAs will beresponsible, inthe revised outcome driven financial andaccounting regime, are enumeratedbelow: (i) Receipts.PavmentsandAccounts: 0 Accurate and timely payments inconformity with prescribed rules andregulations. Timely realization o freceipts. Timely and accurate compilation andconsolidation o fmonthly and annual accounts. Efficient service delivery to the MinistryI Department bythe bankingsystem. Adherence to prescribed accounting standards, rules andprinciples. 0 Timely, accurate, comprehensive, relevant anduseful Financial Reporting. (ii) Internal Audit IPerformance Audit The Internal Audit Wings working under the control and supervision o f the CCAs I CAS shall assist the Financial Advisers in the appraisal, monitoring and evaluation o f individual schemes. Moving beyond the narrow myopic confines o f compliance I regulatory audit InternalAudit would focus on: 0 Assessment o f adequacy and effectiveness o f Internal controls in general , and soundness o f financial systems and reliability o f financial and accounting reports in particular; Identification and monitoring o f risk factors (including those contained inthe Outcome Budget); Critical assessment o f economy, efficiency, and effectiveness o f service delivery mechanism to ensurevalue for money; and 0 Providing aneffective monitoring systemto facilitate and course corrections. (iii)Otherfinancialmanagementactivities Budget formulation including the `Outcome' and `Performance Budget'. 0 Expenditure and Cash Management. Estimation and flow of non-tax revenue receipts. 0 Monitoring o fAssets and Liabilities. 0 Disclosure andreporting requirements under FRBMAct. 93 Interactionbetween MoF and FAs 20. The system o f interactionbetween the MoF and FAs would be institutionalized to facilitate better two way communication and development o f shared perspectives on financial issues. The Administrative Ministries would be clustered in three groups for this purpose, viz, economic / infrastructure sector, social sector andother Ministries. Secretary(Expenditure) would be meeting the FAs of each of these groups once in a quarter. These interactions will provide a forum to share the vision, priorities and concerns with the FAs who, in turn, would get an opportunity to apprise MoF about their activities, important developments andproblems. 21. The quarterly interactions between the FAs and Secretary (Expenditure) would inter alia, cover the following areas:- * Implementation/ compliance ofdecisionstaken inFM'squarterlymeetings. Discharge o f responsibilities detailed inthis charter, specifically the functions defined inpara 8 above. Initiatives taken as a catalyst for policy formulatiodreview and, systems' improvements inthe concernedMinistries. Identification o f points for action on emerging sectoral issues, including potential opportunities within the sector/Ministry. Major proposals / projects currently in different stages o f preparation / approval by the Administrative Ministries, for the consideration o f CNE / EFC / PIB / Cabinet / Cabinet Sub- committees. 22. The interactions could also be used for reviewing progress on MoF's specific priorities, as also those outlined in the Budget. Specific agenda items may also be developed for FM's quarterly meetings with FAs, on the basis o fthese monthly interactions. 94 Capacitv Building 23. The Integrated Finance Division may require strengthening in some Ministries for assisting the Financial Adviser in his redefined role. Such strengthening may include need for using information technology, setting up knowledge management structures, building requisite data bases, networking with relevant institutions / expert bodies etc. It may also require changes in the various decision making processes, conflict resolution, problem solving, programme/project formulation / appraisal, monitoring, evaluation etc., and delegation by FAs within their own divisions. The staff / officers would also require specialized training for rendering better professional advice. In addition, consultants maybe required for specific tasks from time to time. 24. At the beginning of each Financial Year, the Financial Advisers should review the existing expertise, structure and processes o f the Integrated Finance Division (1FD) under their respective charges, to assess / evaluate its strengths, weaknesses andpotential for development. Indoing so, the expertise available in the set-up o f CCAs / P&AOs would need to be fully taken into account. FAs would also needto clearly assess the expertise, knowledge, skills and equipment (computers / internet etc.) requiredfor effective functioning o f the IFD. On the basis of this analysis, FAswould formulate by June 30, each year, specific time bound Action Plans for such organizational strengthening and changes as may be required. They would also need to put inplace a strategy for further development o f requisite skills etc., through training o f existing staff and their replacement by suitably qualified personnel, wherever necessary. Creation o f posts may be avoided while strengthening / restructuring the 1FDs. Instead, proposals for engaging consultants for a limited time, under GFR 2005, may be sent for approval of Secretary (Expenditure), through the Secretary o f the Administrative Ministry, if considered absolutely essential. An `1FD Manual' would be prepared indue course, to facilitate more effective functioning o f the Integrated Finance Divisions. 25. An institutionalizedsystemwould be set up by the Department of Expenditure for organizing periodical workshops, seminars and training for Financial Advisers and their officers, and for helping FAs inpreparation o f induction material for different level of functionaries working under them. At the beginning o f each FinancialYear, not later than June 30, the Financial Advisers shouldindicate to the Department o f Expenditure, the training needs o f their respective IFDs, areas where they want opportunities for their own capacity development, and assistance required to facilitate meeting o f these needs. Basic skill upgradation areas could include Government accounting, commercial accounting, project appraisal, financial analysis, corporate governance etc. Policy related and sector- specific training could include public private partnership, contract management, negotiation, risk management, mergers and acquisitions etc. 26. FAs would be the nodal points within their respective Ministries for all activities relating to Plan, Budget and Programme / Project evaluations. As such, any units in the Ministry currently looking after the functions o f undertaking evaluations, preparing Annual / Five Year Plans etc. should fimction under the overall supervision and control o f the Financial Adviser. 27. Over a period o f time, the enhancedcapacity andexpertise o f IFDs, coupled with increased delegation of purely routine financial activities to the Administrative Divisions o f the Ministries, would enable FAs to take on a more active macro-management role. This will also significantly enhance FAs' role in, and value-addition to, the budgetary management and project / programme appraisal processes. FAs would also be expected to build-up an appropriate system o f networking with Financial Advisers o f autonomous organizations and institutions within their respective sectors, which are receivingbudgetary support, to ensureoptimum utilization o ftheir resources. 95 ANNEX-I F.No.10(29)-E.Coord/73 GovernmentofIndia MinistryofFinance Department of Expenditure ** New Delhi, the 6th October, 1975 Office Memorandum Subject: Scheme of `Integrated'FinancialAdviser Under the existing scheme o f budgetary and financial control and delegation o f powers , to Ministries as introduced vide this Ministry's OM No.10(3)-E.Coord/67 dated 28th October, 1968, the Ministries have an Internal Financial Adviser, who is incharge o f their Budgedand Accounts Section and is required to be consulted in all cases o f exercise o f delegated financial powers and an "associate" Financial Adviser based in the Department o f Expenditure, who is required to be consulted in matters falling outside the delegated field. The 'associate' Financial Adviser is attached to a group o f Ministries. Inpursuance ofthe policy ofto delegateenhancedfinancial power the administrative Ministries to match their responsibilities and to improve their competence inthe field o f financial management by developing appropriate internal attitudes and skills, this question whether the functions o f the `associate' Financial Adviser and the Internal Financial Adviser could, with advantagebe integrated ina single official, forming parto f the administrative Ministry,has beenunder consideration. Ithas been felt that Ministryina larger measure than at present to enable him to play a more effective and constructive role in its developmental activities and should bring his financial expertise to bear in assisting the Secretary o f the administrative Ministry and other senior officers in the planning programming, budgeting, monitoring and evaluation, functions o f the Ministry. A scheme o f `Integrated' Financial Adviser has accordingly been drawn up in consultation with Department o f Personnel & Administrative Reforms, the salient features o f which are outlined inthe Annexure. 2. Inthe new scheme, the Financial Adviser will be responsible both to the admhstrative Ministry and to the Ministry o f Finance. With the assistance, the a h s t r a t i v e Ministry will be able to fieely exercise the enhanced powers delegated under the Department o f Expenditure OM No.F.lO(13)- E.Coord75 dated 10th April, 1975 and outside the scope o f the delegations, he will function under the general guidance of the Finance Ministry. He will assist in budget formulation, scrutiny o f projects and programmes for approval by the Ministry o f Finance and post-budget vigilance to ensure that there art neither considerable shortfalls in expenditure nor unforeseen excesses for which provision has not been made either inthe original budget or inthe revised estimates. The close association o f IntegratedFinancial Adviser and his staff with the formulation and implementation o f all proposals involving expenditure should facilitate the more effective discharge o f he Financial Adviser's responsibility. It is cardinal to the working o f the new scheme that the Financial Adviser should be associated with the formulation o f schemes fiom the initial stages. The Financial Adviser will also be responsible for preparation o f the Ministry's performance budget and monitoring o f progress o f schemes against the budget. The maintenance o f an efficient accounting systemis necessary for this purpose. 3. Inmatters involving any deviations ftom the budgeting and accounting procedures, consultations with the Budget Division o f the Department o f Economic Affairs, will continue to be obligatory. Similarly, inrespect o f the formulation o f the Ministry's development plans, Plan Finance Division inthe Department o f Expenditure would have to be consulted. The Public Investment Board (PIB) and Expenditure Finance Committee (EFC) procedure would also continue to be applicable, the Integrated Financial Adviser taking on the role at present discharge by the Establishment Division and the Staff InspectionUnito f the Department o f Expenditurewould also not be affected bythe proposed changes. 96 4. Inthe first instance,the schemewillbeintroducedinthe following Ministries I Departments: i. Health&FamilyPlanning; ii. WorksandHousing; iii. ExternalAffairs iv. Educationand SocialWelfare v. Information andBroadcasting vi. Science & Technology; and vii. Shipping & Transport (where the schemehas already, been introduced as an experimental measure). 5. It is proposed to extend the schemeto other MinistriesDepartments soon thereafter. 6. Pending further consideration o f the need for formation o f centralized or decentralized, single or multiple level cadre o f finance and accounts and scheme for absorption o f the present associate finance staff in such cadres, in the initial stage, the Financial Adviser, the officers and staff working in the associate Finance Divisions in the Department o f Expenditure will be transferred to the administrative Ministries as follows according to requirements - Officers o f services other than the Central Secretariat Service will be treated as on deputation - to the administrative Ministry instead ofto the Finance Ministry Officers o f the Central Secretariat Service including Grade Iand selection grade will be - treated as transferred to the administrative Ministry Members of the decentralized cadres o f various grades o f CSS will be transferred on loan basis ftom their present cadre to the cadre o f the administrative Ministry on a purely temporary basis. 7. When the scheme is introduced, certain changes will be necessary inthe organization structure ih the administrative Ministry and in the Department o f Expenditure. Creatiodabolition o f some posts will be involved. The details o f the revised organizational structure in the admmstrative Ministryout o f the posts and personnel to be transferred from the Departmento f Expenditure to the administrative Ministry along withthe work will be communicated to the respective Ministries separately. 8. The new scheme will be introduced inthe MinistriesDepartments mentioned inpara4 as soon as suitable officers to man the posts o f Integrated Financial Adviser become available. A separate communication will be sent to them inthis respect. 9. The admmstrative MinistriesDepartments are also requestedto make necessary arrangements for housing the additional staff to be transferred from the associate Finance Divisions inthe same building, as such arrangementsare essentialfor the proper functioning ofthe Scheme. Sdl- (NNKNair) Joint Secretary to the Govt. o f India AllMinistriesDepartments ofthe Govt. ofIndia 97 ANNEX-I1 APPENDIX 2 ITEMSOFWORK TO BEHANDLEDBYINTERNALFINANCIALADVISERS The Internal Financial will be in overall charge o f Budget and Accounts in addition to the Internal Finance Section. Itwill be his duty - (i) To ensure that that the schedule for preparation o f budget is adhered to by the Ministry and the Budget is drawn up according to the instructions issued by Finance Ministry from time to time; (ii) To scrutinize budget proposalsthoroughly before sending them to Ministryo f Finance; (iii)To seethat complete departmentalaccountsaremaintainedinaccordancewiththe requirements under the General Financial Rules. It should, inparticular, be ensured that the Ministry not only maintains account of expenditure against the Grants or Appropriations `directly controlled by it but also obtains figures o f the expenditure incurred by the subordinate offices so that the Ministryhas a complete month to month picture o fthe entire expenditure fallingwithin itsjurisdiction; (iv) To watch and review the progress o f expenditure against sanctioned grants through maintenance of necessaryControl Registers andto issue timely warnings to Controlling Authorities where the progress o f expenditure i s not even; (v) To ensure the proper maintenance o f the Register o f Liabilities and commitments as requiredunder the GFRs to facilitate realistic preparation o fbudget estimates, watching o fbook debits and timely surrender o f anticipated savings; (vi) The screenthe proposals for supplementary demandsfor grants; (vii) To formulate-the foreign exchange budget for the Ministryand to process individual cases for release o f foreign exchange in accordance with the instructions issued by Department o f Economic Affairs from time to time; (viii) To advise the Administrative Ministry on all matters falling within the field of delegatedpowers. This includes all powers other than those devolving on a Ministryin its capacity as Heado f Office. It has to be ensuredby I.F.A.that the sanction issuedby Administrative Ministryinexercise o f delegatedpowers clearly indicates that they issue after consultation with 1.F.A; To identify, inparticular, specific savings incases o f creation of posts and to maintain a Register for this purpose; To scrutinize proposals for re-delegation ofpowers to subordinate authorities; To keep himself closely associated with the formulation of schemes and important expenditure proposals from their initial stages; To associatehimself with the evaluation o fprogresdperformance inthe case of projects and other continuing schemes and to see that the results of such evaluation studies are taken into account inthe budget formulation; 98 (xiii) To watch the settlement o faudit objections, Inspection Reports, draft audit paras, etc; (xiv) To ensure prompt action on Audit Reports and Appropriation Accounts, Reports o f Public Accounts Committee, Estimates Committee and Committee on Public Undertakings; (xv) To screen all expenditure proposals requiring to be referred to Finance Ministry for concurrence or comments; (xvi) To emure regular and timely submission to Finance Ministry o f quarterly staff statementsand other reports andreturns required by Finance. 99 ANNEXD. LISTOFPEOPLEMET India Ministry of PetroleumandNatural Gas 8. I Mr.M.S.Srinivasan I Secretary 9. Mr.Ani1Razdan Secretary 10. Mr.RajeshSharma Joint Secretary & Financial Advisor 11. Mr.M.Sahoo Joint Secretary & Financial Advisor IDepartment o fTelecommunications andDepartment of Telecom Services, Ministryo f I Communications and InformationTechnology 12. I Ms.ManjuMadhavan I Member Finance MinistryofHealth& FamilyWelfare 13. Mr.RaghubirSingh Additional Secretary &Financial Advisor 14. IIM r s . Aastha S. Khatwani 1IDirector (Finance) MinistryofFood, ConsumerAffairs andPublic Distribution 15. I Mr.Vivek Mehrotra I Additional Secretary &Financial Advisor MinistryofHumanResourceDeveloDment 16. Mr.S.K.Ray Joint Secretary & Financial Advisor 17. IIMrs.Burman IIChief Control of Accounts Sixth Central Pay Commission 18. Mrs. SushmaNath Member Secretary 19. IIMr.Manoj Joshi IIAdvisor Australia 20. Mr.Brett Kaufinann Division Manager,Financial Reporting and CashManagement Division, Departmentof FinanceandAdministration 21. Mr.Lewis Hawke SpecialAdvisor, Financial FrameworkDivision, Departmentof FinanceandAdministration 22. Ms.Anne Hazel1 First Assistant Secretary, People, Resourcesand Communications Division, Departmentof Prime Minister and Cabinet (previously Chief Financial Officer of a number of agencies) 23. Mr.JohnHawley Executive Director, ChiefFinancial Officer, Australian National Audit Office 100 Canada 24. Mr.MichaelHawkes Chief Financial Officer, Public Works and Government Services 25. Mr.KevinLindsay Chief Financial Officer, IndustryCanada 26. Mr.Jim Ralston Chief Financial Officer, Canada Revenue Agency 27. Ms. Anne -Marie Robinson Chief Financial Officer, Public Service Commission 28. Ms. Stacy Van Humbeck Treasury Boardo f Canada Secretariat, Office of the Comptroller General 29. Mr.Alan Winberg Treasury Board Secretariat 30. Mr.Andrew Lennox CGA - Office ofthe Auditor General of Canada 31. Mr. Jean-Pierre Plouffe CGA -Office o f the Auditor General of Canada 32. Mr.Clyde Maclellan Office ofthe Auditor General o f Canada 33. Ms. Janet Milne Conference Board of Canada 34. Ms.Jennifer MFultz Conference Board of Canada 35. Ir.IwanEddyPutranto Head o f Bureau of Finance (Kepala Biro Keuangan), Ministry o f Public Works 36. Puja Samedhi Secretariat - Head o f Finance Section (Kepala BagianKeuangan), DG Highways (DJ Bina Marga), Ministry o f Public Works 37. EliTamba SE.Ak., MM Head of Section - Accounting and Cash, DGTreasury, Directorate Accounting and Financial Reporting, Ministry o f Finance 38. Mr.Jose Levy Financial Advisor (Official Mayor) at the Ministry o f Agriculture o f the Mexican Government (Secretaria de Agricultura, Ganderia, Desarollo Rural, Pesca) 39. Adrian Franco General Director Federal Government Comptroller. (Former Manager Director o f a FA) (Secretaria de la Funci6nPhblica) 40. I Carlos Garza Ibarra, IIFormer General Director o f Program & Budget o f Presidential Office andformer staff ofUndersecretary ofExpenditure at Ministry of Finance 41. Luis Jaime Avila. HumanResources& Training, Ministry ofAgriculture (Secretaria de Amicultura. Ganderia. Desarollo Rural. Pesca) United Kingdom 42. h4r.DavidWatkins Head, Financial ReportingPolicy, UK Treasury 43. IIMr.MikeTimmis II Head of Finance, National School of Government United States of America 44. I Mr.Christophersen I Chief Financial Officer, Department of Agriculture 45. Mr. John W. Cox Chief Financial Officer, Department o f Housingand Urban I I/ IIDeveloDment I 101 ANNEXE. SELECTED WEBSITES INDIA Ministryof Finance http:/lfinmin.nic.in/ NationalInstitute of FinancialManagement http://www.nifm.ac.in` Second Administrative ReformsCommission,India http:llwww.arc.Pov.in/tor.htm FiscalResponsibilityandBudget ManagementAct, 2003 httu:l/finmin.nic.in/law/f?bmAct2OO3.vdf Reportofthe Task force on Implementationon FRBMAct, 2003 htta:l/finmin.nic.in/downloadslreuo~s/f?bmlsta~.htm Right to InformationAct, 2005 htta://persmin.nic.in/RTIlWelcomeRTI.htm Guidelineson expenditure management,fiscal prudenceand austerity http://finmin.nic.in/the ministryldept expenditure/ecoord/austerity.pdf Staff InspectionUnit httu:l/finmin.nic.in/the ministryldeut exuenditurelstaff insuection unit/index.html Controller GeneralofAccounts http://finmh.nic.idthe ministryldeat expenditurelcontroller general accounts Formulation,AppraisalandApprovalof PlanScheme Projects,Compendiumof ImportantCirculars, PlanFinanceI1Division,N,Ministryof Finance,September 2004 (to note FA'Srole) httv:llfinmin.nic.in/the ministryldeat exvenditure/notofication/Faavsrcomr,.vdf Rationalizationof Functions, Activities and Structure of Departmentof Expenditure http:llexpenditurereforms.nic.in/de1O.pdf FinancialManagementGroup http:llmohfw.nic.in/finman~oup.htm UNITED STATES CFO Act, 1990 http:llgovinfo.library,unt.eduinprllibrarylmisclcfo.html GovernmentAccountabilityOffice, USA http://www.gao.govl Office of CFO, Department of Labour,US Government http:llwww.dol.govlocfolresources.html The GovernmentFinanceOfficersAssociation(US) http://www.gfoa.ord CFO Act andFederalFinancialManagement:Endof the Beginning:Reportof ZBMBusiness Consulting Divtsion (May 2005) (on Lessons Learnt) http://www-935 .ibm.comlservicesluslimclpdflwv-cfo-act.pdf The EvolvingRoleof FederalCFOs: HearingBeforethe Sub-committee on GovernmentEfficiency and FinancialManagement,September 2004 http:/If?webgate.access. rno.gov/ The PerformanceInstitute http:llwww.performanceweb.orglCENTERS/FMlInnovatel FMCourses/Skills htta:/lwww.verformanceweb.ordCENTERSIFMIFMCenter FM Catalog.udf Office ofManagementand Budget, USGovernment http:/lwww.whitehouse.~ovlomblfinanciallindex.html Chief FinancialOfficersCouncil, US Government http:/lwww.c foc.gov/ Financial Systems IntegrationOffice, U S Government http://www.fsio.gov/fsio/fsiodatdfsio aboutshtml AdvancedGovernmentAccountability http:/lwww.agacgfm.ordaboutl Questionnairefor Associationof GovernmentAccountants2006 httu:llwww.agacgfm.ordresearchldownloadsl2OO6auestionnaireCFOs.pdf 102 2006 FederalCFO Survey: AdvancingFederalFinancialManagement:Measures, Systems andShared Service Centers http://www.agacgfm.ore/researchidownloads/CFOSurve~06.pdf 2005 CFO Survey: IntegratingInternalControlwith PerformanceManagement htt~://www.a~ac~fm.ore/researchidownloads/CFOAGASurve~2OO5 .pdf GovernmentFinancialManagementResources http://www.agacgfm.ore/tomorrow/resources.htm AGA Links http://www.a&!ac&!fm.ore/hks.aspx FederalAccountingStandardsBoard http:/Iwww.fasab.gov/ CircularNo. A 127: FinancialManagement Systems http:l/www.whitehouse.aovlomblcirculars/a127/a127.html Circular A-123: Management'sResponsibilityfor InternalControl http://www.whitehouse.gov/omblcirculars/a123/a123 rev.pdf FederalGovernment:Legislation http://www.hvDerion.com/solutionsIfederal division/leaislation.cfm CANADA The ConferenceBoardof Canada: Strategy, Accountability andNew Roleof CFOs http://www.conferenceboard.ca/documents.asD?mext=1791 Treasury Boardof Canada Secretariat: Reportof the IndependentReview Panelon Modernizationof Comptrollershipin the Government of Canada httD://w.tbs-scf.ac.ca/cmo mfclresources2/review Danel/rirDOl e.asD Government of Canada http://www.canada.gc.ca/main e.html Government of Canada-websites of department and agencies http://www.canada.gc.ca/depts/maior/deDind e.html Reportof the Auditor Generalof Canada: ManagingGovernment-FinancialInformation,2006 http://www.oag Reportof the Auditor Generalof Canada: ManagingGovernment-FinancialInformation,2005 http://www.oag Reportof the Auditor Generalof Canada: ManagingGovernment-FinancialInformation,March2004 httD://www.oaa-bvg.gc.ca/domino/re~orts.nsf~tm1/20040306ce. html Reportof the Auditor Generalof Canada: FinancialManagementand Controlin Government of Canada,December2002 http://www.oag-bv&!.&!c.ca/dom~no/re~orts.nsf/htm~~~~~ 1205ce.html Reportof the Auditor Generalof Canada: Assessmentof FinancialManagementCapabilitiesin Departments,October2000 http://www.oag-bvg.gc.ca/domino/reaorts.nsf/html/oo13ce.html FinancialManagementCapability Model htt~://www.oa~-bv~.gc.ca/domino/other.nsf/html/99cm 1 e.html#0.2.2Z 141Z1.WKP23M.RXB89F.4 FinancialAdministrationAct, Canada http://laws.iustice.ec.ca/en/F- 1l/index.html FederalAccountabilityAct 2006, Canada http://www.faa-1fi.gc.cdindex e.asD FederalAccountability Act 2006, Canada: CommitmentsandProposedAction http://wwW.faa-lfi.gC.Ca/dOCS/CDa-emD/CDa-emDe.aSD Departmentof Finance,Government of Canada http://www.fin.ec.ca/fin-en&!.html DPR 2005-06 Treasury Boardof Canada Secretariat http://www.tbs-sct.gc.ca/d~r-~/0506/TBS-SCT/tbs-sct02e.asp The Conference Boardof Canada: Strategy,Accountability andNew Role of CFOs, October 2006 http://sso.conferenceboard.ca/ Public Sector Financialleadership:Reinventingthe FinanceFunction http://www.conferenceboard.ca/documents.asD The Conference Boardof Canada: Strategy,Accountability andNew Role of CFOs http://www.conferenceboard.ca/documents.asp?mext=1791 103 BRAZIL Government of Brazil http://www.brasil.gov.br/ingles/ Programmesand Projects http://www.brasil.gov.bdingleslprogramsl Brazil Government http://www.brazil.org.uk/government/index.html Brazil Government http://www.brazilink,orgigovernment,asp The Keeleto South Americans Governments http://www.keele.ac.uk/depts/por/labase.htm#br Politicsof Brazil http:l/en.wikipedia.org/wiki/Politics_of-Brazil#External-links Brazil Government: ExecutiveBranch http://www.v-brazil.com/government/executive-branch/ Brazil Governmentsites (inSpanish) htto://www.~o~itica~resources.net/brazi~3.htm Ministry of Finance(inSpanish) http:l/www.fazenda.gov.br/ NationalTreasury http://www.stn.fazenda.gov.br/english/national_treasury/index.asp SIAFI - FinancialAdministrationSystem http://www.stn.fazenda.gov.br/endish/siafdindex.asp The BrazilianFiscalResponsibilityLaw, May 2000 http://www1.worldbank.orgipublicsector/pe/BudgetLaws/BRLRFEnglish.pdf Brazil: Country FinancialAccountabilityAssessment, 2002 http://www.countryanalyticwork.net/CAW/Cawdoclib,nsf The World Bank,Brazil: Fiscaland FinancialManagementTechnicalAssistanceLoan http://web.worldbank.org/external/projects/ Brazil: Presentationon Implementationof FiscalResponsibilityLaw, December2001 http://www.oecd.orgidataoecdl36/28/1825037.pdf FiscalResponsibilityRegime, presentationMarch 2002 http://www.unpan.org/projectslbrazil/docsluk3Irf.ppt#592,l ,Slide 1 E-governance:presentationMarch 2002 http://www.un~an.or~vroiectslbrazil/docs/uk4egov.upt#372.1Slide 1 FiscalFederalism:Reflections,presentation,March 2002 httu:l/www.unuan.org/proiects/brazil/docsllseuk.aot#793,l.Slide 1 Brazil: GeneralStructureof PublicAdministration htttxliunpan1.un.org/intrado~I~roups/public/documentsNN/UNPANOOO242.~df AUSTRALIA http:Nwww.finance.gov.aul AustralianGovernment:Dept. Of FinanceandAdministration FMA Legislation http://www.finance.gov.au/FinFrameworWfma_legislation.html FinancialFrameworkDivision http://www,finance,gov,au/finframework/ AustralianNationalAudit Office http://www.anao.gov.au/ AustralianPublic Service Commission http:l/www.apsc.gov.au/publications/index.html ChiefFinancialOfficer: RolesandResponsibilities:GoodPracticeGuide2004, Audit GeneralVictoria http://www.audit.vic.gov.au/reports_betterqractice/cfo_gpg01.pdf ReducingRedTape: DispellingSome MythsinAustralianGovernmentAdministration,Departmentof Finance andAdministration,Govt. of Australia, 2007 http:llwww.apsc.gov.au/finance/myths.pdf An Analysis of ChiefFinancialOfficer Functionin CommonwealthOrganizations BenchmarkingStudy, - AustralianNationalAudit Office, Audit ReportNo. 28,2001 http://www.anao.gov,au/uploads/documents/2001-02-Audit-Report28.pdf 104 ConnectingGovernment:Whole of GovernmentResponsesto Australia Priority Challenges http://www.apsc,gov,au/mac/connectinggovemment.htm The New CFO ofthe Future: FinanceFunctionsinthe Twenty FirstCentury, KPMG ConsultingLtd., The Institute of CharteredAccountants of Australia http://www.lmnconsulting.com,au/NewCFOofthefuture.pdf CFO 2010: EstablishingNew Frontiersfor the CFO, IBM BusinessConsultingServices, 2005 http://www-03 .ibm.com/services/calenibcs/cfo~2010.pdf CPA Australia: CFO News http://www.cpaaustralia.com.au/newsletters/CF0/20092006.htm The CFO Chameleon http://www.charteredaccountants.com.au/charter/charter archive/2004/november 2004 FinancialManagementand AccountabilityAct, 1997 http://www.comlaw.gov.au/ComLaw/Legislation/Act FinancialManagementandAccountabilityRegulations,1997 http://www.comlaw.gov.au/ComLaw/Legislation/ FinancialManagementand AccountabilityOrders 2005 http://www.comlaw.gov.au/ComLaw/Legislation/ AccountingPolicy:Introduction http://www. finance.gov.au/ace/ Foundationsof GovernmentinAustralian PublicService, 2005 http://www.apsc.gov.au/foundations/foundations.pdf SOUTH AFRICA NationalTreasury http://www.treasury.gov.za/ PublicFinancialManagementAct, 1999 http://www.treasury.gov.za/showpfma.htm PublicFinancialManagementAct, 1999 http://www.treasury.gov.za/legislation/acts/pfmdact .pdf SouthAfrica: Financialand Fiscal Commission http://www.ffc.co.za/ SouthAfrica: NationalTreasury http://www.finance.gov.za/ PublicFinancialManagementAct (1999): (Chapter 4 Accounting Officers) http://www.treasury.gov.za/showpfma.htm PublicFinancialManagementAct, 1999 (Amendmentsto Treasury Managementin Terms of Section 76, 15 March2005) (pages 7, 79,82 mention role of CFO) http://www.info.gov.za/gazette/regulatiord2005/27388.pdf FinancialManagementof ParliamentBill2005 http://www.info.gov.za/gazettelbills/2005/28166.pdf Guidelinefor LegislativeOversightthroughAnnual Reportshttp://www.treasurv.gov.zd NationalGovernmentDepartments http://www.info.gov.zdlinks/govt-dept.htm Detailsof CFOs at NationalDepartments http://www.treasury.gov.za/ SouthAfricanQualificationsAuthority: PFMA http://www.info.gov.za/gazette/notices/2OO5/273 86e.pdf FiscalResponsibilityin South Africa, http://siteresources.worldbank.org/INTINDIA/Resources/Ismailmomoniat.pdf UNITED KINGDOM GovernmentAccounting2000 (see chapters 1-6 and 8, Chapter 4 for Roleof AccountingOfficer (4.1) and FinanceDirector (4.2) http://www.govemment-accounting.gov.ukicames.htm AccountingOfficers andthe Treasury's Role(Introduction) http://www.hm- treasury.gov,uk/documents/financial_management/govemance~govemmen~a~~acco~tin~ole~index.cfm AccountingOfficer:ModelResourceAccountingOfficerAppointmentLetter http://www.hm-treasury.gov.uk/media/8FC/BA/resourceaccountappt~template03O 106.pdf 105 Finance Directors for Government Departments, December 2003 http://www.hm-treasury.gov.uk./newsroom~and~speeches/press/2003/press~124~03.cfm National School of Government, UK http://www.nationalschool.gov.uWnews_eventslstories/newgovemementdepartment.asp Openand tailored programs for finance and non-professionals 2006-2007, National School of Government http://www.nationalschool.gov.uWdownloads/financial_management.pdf Managing Resources: Strategic Approach to Finance Training http://www.hm- treasury.gov.uWmedial45D15/Strategic_approach_to_financialpaining-Pink-guide(302Kb).pdf HMTreasury: FinancialManagement http:llwww.hm-treasury.gov.uWdocuments/financial~management/financial~management~index.cfm FinancialManagement & Professionalism http://www.hm- treasury.gov.uWdocumentslfinancial~management/~nancial~management~rofessionalism/fmp~index.cfm ImplementingResource BasedManagement http://www.hm- treasury.gov.uWdocuments/financial~management/financial~management~rofessionalismipss~aud~rabmrfull.c fm Managing Resources: Implementing Resource BasedFinancialManagement, HMTreasury, September 2002 http://www.hm-treasury.gov.uWmedialCF2/2CIBlue%20second%20edition.pdf Better Decision Making inDepartments http:/lwww.hm-treasury.gov.u~m~dia/BBE~4F/man~resources~better~deci~3rd.pdf Managing Resources: Reporting to the Board http://www.hm-treasury.gov.ukimedia/5D3DE/Reporting~to~the~Board_Burgundy~Guide( 145.9Kb).pdf ManagingResources: Accountability http:/lwww.hm-treasury.gov.u~medial94836/Copy~of~%2OAccountability~Ch~olate.pdf Managing Resources: Faster Closing http://www.hm-treasury.gov.uWmedia/2048D/Faster~Closing~Mauve( 115,7Kb).pdf Managing Resources: Maximisingthe Benefits for Departments, June 2001 http://www.hm-treasury.gov.uWmedia/51097/Maximising-the-benefits-for-departrnents( 82Kb).pdf Managing resourcesto deliver better publicservices: Treasury minuteon the Twenty FifthReport from the Committee of Public Accounts 2003-04, July 2005 httu:/lwww.official-documents.gov.u~documen~cm65/6578~6578.vdf Financial Reporting Advisory Board http://www.hm-treasurv.gov.uk/documents/financialmanagement4inreo adboardvss aud rabindexxfm Financial Reporting Advisory Board: Report for April 2005- March 2006 htt~:/lwww.hm-treasurv.~ov.uWmedialAA0/92lfrab report ami1 2005 to march 2006.pdf 9th TheGovernment FinancialReporting Manual2006-2007, National Audit Office, November 2006 httr,://www.nao.org.uk/guidance/FAU nov 2006,~df Governance in Government http://www.hm-treasurv.gov.uWdocumentslfinancia1managementlgovernancegovernmentlgg indexxfm Good Practice: Financial Audit and Corporate Governance Guidance http:llwww.nao.org.uWguidance/wgalwga-index.htm Internal Audit: Quality AssessmentFramework http:llwww.hm-treasury.gov.uWmedial313117liaqaf.pdf Regularity, Propriety and Value for Money, Treasury officer of accounts, November 2004 (Report) http://www.hm-treasury.gov.uWmedia/28A/48/Reg~Prop~and~VfM-NovemberO4 .pdf Guideto Scrutiny of Public Expenditure: Introduction http://www.hm- treasury.gov.uWdocuments/financial-management/govemance_govemmen~scrutiny-of~ublic-expenditure.cfm NationalAudit Office http:/lwww.nao.org.uW National Audit Office Sitemap http:l/www.nao.org.ukisitemap.htm WGA Resources http:llwww.wga.gov.uWpages/resources.html Government FinancialReporting Manual http:l/www.financial-reporting.gov.uW 106 GovernmentFinancial ReportingManual(FReM) 2006-07 http:llwww.financial-reporting,gov.uW2006-07%2OFReM.pdf NationalAudit Office, Audit Committee, Self-AssessmentChecklist http://www.nao.org.u~guidance/checklists/AuditCommittee~Checklist~May2OO6.doc Introductionto Whole of GovernmentAccounts http:/lwww,wga.gov.uWpages/introduction.html Deliveringthe benefitsof accrualaccountingto the whole of governmentsector http://www.hm-treasury.gov.uk./pre~budget~report/prebudqbr05/other~docslprebudqbrO5~odaccounting.cfm Deliveringthe benefitsof accrualaccountingto the whole of governmentsector, ReportDecember 2005, HMTreasury http://www.hm-treasury.gov.uk./media/F59/87/pbr05~accounting~28 1.pdf Civil Service http://www.direct .gov.ukledGtg11/GuideToGovemment/Centra1GovernmentAndTheCivi1Service/DG~4003080 Directory: ServicesinNorthernIreland http://www,direct.gov.uWenIDll/Directories/DevolvedAdministrations/DG~4007268 NorthernIreland: Departmentof Finance& Personnel (Northern Ireland) http://www.dfpni.gov.uW Civil Service: Skills http://www,civilservice.eov,uWskills NationalSchool(Informationon TrainingCourses2006-07) http:/lwww.nationalschool.fzov.uk/ HMTreasury http:l/www.hm-treasurv.eov.uk/ Office of GovernmentCommerce (procurementguidelines) http://www.oec. eov.uW www.publicfinance.co.uk htta:l/www.intute.ac.uWsocialsciences/cei- Role and Involvement of Finance(Scotland) httD://www.scotland.gov.uWTopicslGovemment/Finance/safm/financeroles ScottishPublic Finance Manual http:/Iwww.scotland.crov.uWTopicslGovemment/Finance/spfm/Intro PAKISTAN About government http://www.pakistan.eov.pW MinistriesandDivisions http://www.pakistan.eov.vW FiscalResponsibilityand Debt LimitationAct, June 2005 http://www.finance.gov.pWfrdio.pdf Systemof FinancialControland Budgeting,September 2006 httv://www.finance,eov.~k/bud~etin~2006.~df FinanceDivisionYearbook 2005 (see page 1,4-5 (FD), 31-32(Public Sector CB Project, 33-34 (Civil Service Reform), 34 (PIFRA), 63-64 (FD Military), 65-69 (AG), 70-72 (CGA) http://www.finance,eov.pk/YearB0ok2005 06.adf FiscalPolicyStatement2006-07(see 1-2, 6-11, 22-26) httv://www.finance.gov.pkifiscalPolicy.pdf Ministryof Finance http://www.eakistan.eOv.pW MediumTerm BudgetaryFramework http://www.mtbfaakistan.gov.pkl FinancialManagementApplication http:l/www,mtbfpakistan.eov.pWfma. htm Roadmapof MediumTerm BudgetaryFramework (presentation),April 2005 http://www.mtbfpakistan.gov.pWdownloads/Roadmap.Dpt About MTBF http://www.mtbfpakistan.gov.pWabout mtbf.htm DFID, Status Report of MTBF inPakistan(2003-06), July 2006 http://www.mtbfpakistan.gov.pWpdfslStatus Report PwC MTBF 4 Julv06.pdf MTBF Guidelines2007-08 http://www.mtbfpakistan.gov.pWdownloadslDOCS 2006 09lBCClGUIDELINES 2007 08.adf 107 Capacity Buildingin Public Financialmanagement, World Bankpresentation,May 2005 httu://info.worldbank.org/etools/bsuan/PresentationView.aso?PID=1521&EID=740 Second Improvementto FinancialReportingand Auditing Project,PAD,August 2005 htts:/lwww- wds.worldbank.org/external/defaultDSContentServer/WDSPIIBI2005108/19/000090341 200508191021051R enderedPDFl331210PAK.udf PakistanPublic Sector Capacity BuildingProject,PAD, April 2004 httP://www- wds.worldbank.org/external/defaultWDSContentServer/WDSP/IB/2004/04/30/0000 12009 20040430112206/R enderedlPDFl28391.udf PublicFinancialAccountabilityinPakistan:Impactof PIFRA, Capacity EnhancementsBrief,The World Bank,April 2004 htta://info.worldbank.oreietoolsldocsllibrarv/82353/CEbrief-06 Aur04%20- %20Public%20Financia1%2OAccountability.~df INDONESIA Indonesia: Introductionon Budgetingand Accounting, Chapter 5 http://www.asosai.org/R~P~financial~accountability/chapter~5~indonesia.htm Chapter 6: Public Sector EnterprisesinIndonesia http://www.asosai.org/R~P~accountability~control/chapter_6indonesia.htm Indonesia: Capacity Buildingfor FinancialGovernance:CompletionReport,ADB, December2006 http://www.asiandevbank.org/Documents/PCRslIN0I31660-INO-PCR.pdf PublicFinancialManagementReform:Examplesfrom Indonesiaand China, presentation,The World Bank, BertHofman,March2006 http:llwww.mof.go.jp/j ouhodkokkidtyousd1803pfm- 1O.pdf GovernmentFinancialManagementand RevenueAdministrationProject,The World Bank, PAD, November2004 http://www- wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2004/12/09/000012009-2004 1209110238lR enderedlPDFl2991O.pdf DecentralizingIndonesia:World BankRegionalPublicExpenditureReviewReport http:l/siteresources.worldbank.org/INTINDONESIA/Resources/Publication/03-Publication/RPR-DecInd- June03.pdf Reformof Public FinancialManagementSystemin Indonesia,November2001 http:l/www.gtzsfdm.or.idldocuments/library/on~indiRefo~~PublicFinancialManagement~2OO 1.pdf IndonesiaDecentralization: Managingthe Risk http://www.internationalmonetaryfund.com/external/pubs/fseminar/2OOO/idn/expass.pdf MEXICO Mexico (see Government & Politics, Administrative Divisions) http://en.wikipedia.org/wiki/Mexico Ministryof Finance http://www,shcp.gob.mx/portada-english/ingles/zyx.html PublicCreditOffice http://www.apartados.hacienda.gob.mx/ucp/ingles/index-deuda.html Ministryof Financeand Public Office http://www.apartados.hacienda.gob.mxiucp/in~es/index-deuda.html Mexico: Office of Auditor General http://findarticles.com/p/~icles/mi~qa3662/is~200004/ai~n8882825 Mandatesof SupremeAudit Institutions http://www.nao.org.uMintosai/edp/mandates/mandateslMandatesl Mexico: PublicExpenditure Review,The World Bank,August 2004: Volume 1: Core Report,August 2004 (see pages I-15,39-42) http://www- wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2004/101191000112742-2004 1019165241/R enderediPDFlMXOPEROCore0Report.pdf Mexico: Public Expenditure Review,The World Bank,August 2004 http://www-wds.worldbank.orglexternall 108 Mexico: Improvingfiscaltransparencyand administrativeperformanceat the state level,The World Bank, September 2006 (not a federal level project, but some references to federal systems) http:/lwww-wds.worldbank.orglexterna1 Mexico: CountryFinancialAccountability Assessment,The World Bank, September 2003 Mexico: State Level TA to establish performanceindicatorsfor procurement,publicexpenditureand financial management, The World Bank, June 2006 http://web.worldbank.org GENERAL IBM GlobalCFO Study http:l/www-93 1.ibm.codbin/cp/driver.cgi http://www.tbs-sct.gc.cdmedidcgs-dcpi05 1020-e .asp LegislatureandBudgetProcess:An InternationalSurvey, NationalDemocratic Institutefor InternationalAffairs, 2003 http://www.accessdemocracy,orgllibrary/l651-gov-budget-093 103.pdf Managingfor DevelopmentResults: Second InternationalRoundtable,Marrakesh,February2004 http://www.mfdr.orglSeminarAgenda2.htm Country BudgetLaws: World Banksite http:l/wwwl .worldbank.org/publicsector/pe/countrybudgetlaws.cfm InternationalConsortiumon Government FinancialManagement http://www.icgfm.orgmissprogram.htm 109 ANNEXF. GENERIC MODEL FORCHIEF FINANCIALOFFICERDUTIESAND RESPONSIBILITIES 1. Unless directed otherwise by the [Department o f Expenditure], each [MinistryDepartment] shall have a finance officer (hereafter called the ChiefFinancial Officer) serving on the senior managementteam. 2. The [Department of Expenditure] i s responsible for determining the level o f qualification, skills, knowledge, and experience required by a Chief Financial Officer in a [Ministry/Department] . 3. The ChiefFinancial Officer is directly accountableto the [Chief Accounting Authority]. 4. Without limiting the right of the [Chief Accounting Authority] to assign specific responsibilities, the generalresponsibility o f the Chief Financial Officer is to assist the [Chief Accounting Authority] in discharging the duties prescribed in [General Financial Rule 641 which relate to the effective financial management of the MinistryDepartment including the exercise o f soundbudgeting andbudgetary control practices, the operation of internal controls andthe timely production of financial reports andinclude: supervising and coordinating the preparation of draft annual estimates and submitting them to the [Chief Accounting Authority] at the requireddates; ensuring that the authorised estimates o f expenditure o f the [Ministry/Department] are not exceeded; keeping watch on the expenditure o f votes controlledby other officers andwarn them if there is a danger of those votes being exceeded; informing the [Chief Accounting Authority] regularly o f the expenditure incurred or likely to be incurredunder each vote; preparing supplementary estimates for submission to the [Chief Accounting Authority] where necessary; ensuring that no expenditure i s incurredbefore it hasbeen authorised; establishing aproper system of accounting inaccordancewith these Regulations; supervising the prompt collection of all revenue due to the [Ministry/Department] and bringing promptly to account, under the proper [heads, sub-heads and object heads], all revenue or other receipts paid into the [MinistryDepartmentI's bank account or accounted for to him; supervising all officers entrusted with the receipt and expenditure o f the [Ministry/Department] 's funds and taking precautions, by the maintenance of frequent checks, including surprise audits, against the occurrence o f fraud, embezzlement or carelessness; supervising the expenditure and other disbursements o f the [Ministry/Department] and ensuring that no payment i s made without proper authority; and incase o f any apparent extravagancecalling this to the attention o fthe officer concerned andhis superiors; charging under the proper heads, sub-heads and object heads all disbursements o f the [MinistryDepartment]; supervising the preparation of the annual accounts o f the [MinistryDepartment] for audit and preparing financial statements and returns as required by [the General FinancialRules andapplicable laws]; making provision for the secure custody of all receipt books, tickets, licences and other accountable documents inthe manner provided for inthese Regulations; after consultation with the [Chief Accounting Authority], monitoring the [Ministry/Department] 's procedures for the procurement o f goods, services and works inaccordancewith the [General FinancialRules]. 110 (0) ensuring that proper provision i s made for the safe-keeping o f the [MinistryDepartment] 's moneys, securities, valuable documents and account books in accordance with these Regulations; (p) supervising the operation, maintenance and protection o f the [MinistryDepartment] 's accounting and data processing equipment including the provision o f dust and damp- flee accommodation and standbyfacilities inthe event o fbreakdown or power failure; (q) responsibility for the proper organisation o f his office, for a fair allocation o f duties amonghis staff and for their training; (r) ensuring that all officers with duties of a financial nature are conversant with and comply with these Regulations and any other financial directives; (s) instituting disciplinary or other action as he thinks necessary against officers contravening these Regulations and any other financial directives; (t) where necessary, taking action to secure the recovery o f losses, or their write-off in accordancewith the [General FinancialRules] andthese Regulations; and (u) implementing the policies and directives o f the [MinistryDepartment] as communicated to himby the [Chief Accounting Authority]; but that ifhe considers that any directive is not in accordance with the law and regulations governing financial matters, he shall prepare a written statement o f objection to the [Auditor-General] and copy it to the [Chief Accounting Authority] and the Minister o f the [Ministry/Department] . 111