Asian Development Bank

Guide Questions to Public Financial Management

Objective (for the whole section):

To assess how well the public financial management system (ranging in sequence from revenue administration to public expenditure management, to accounting, to auditing, and to inter-governmental fiscal relations) instills aggregate fiscal discipline, promotes allocative efficiency, and enhances operational efficiency of the government.

Overall Assessment (for the whole section):

• How sustainable is the government’s fiscal program over the next three to five years?
• To what extent is the PFM system capable of rationally keeping the deficit within sustainable levels?
• How well is the system geared to allocating budgetary resources to programs and projects that are best suited to meeting country’s strategic priorities?
• To what extent can the system promote the delivery of public services at a reasonable cost with an acceptable level of quality?
• How vulnerable is the system to leakage, either through corruption or plain inefficiency?
• How effective are on-going efforts to address weaknesses through reform programs
• Is there political commitment to reforms and if so which areas are the most promising?
• How can ADB contribute (or further contribute) to the design and implementation of the reform process?

Guide Questions:

A. Revenue Administration

1. Internal Revenue Administration
   • Are tax revenue projections undertaken and if so by whom and for how many fiscal years?
   • Are the projections contestable, i.e. are there alternative projections presented by different parties other than those of the Ministry of Finance, and is there a systematic process for reconciling the differences?
   • Over the past five years, how have actual tax revenue collections compared with the projections? If collections have been below projections, by how much (5% - 10%, 10% - 20%, more than 30%)?
   • What is ratio of tax revenue collections to GDP and how does this compare with countries in the same region and with countries at the same level of GDP per capita?
   • How stable has the ratio been over the last ten years?
   • Are there any surveys of businessmen that pertain to the efficiency of tax collection in the country? If so, what are their basic implications?
2. Customs/Excise Tax Administration
   • What is the ratio of trade taxes/fees collected to the sum of exports and imports and how does this compare with countries in the same region and with countries at the same level of GDP per capita?
   • How has the ratio varied over the last ten years?
   • From the time goods arrive at the port of entry, what is the average waiting time for the goods to be released by the Customs Bureau/Agency?

B. Public Expenditure Management

1. Budget Formulation
   • Is there a national development/economic plan that establishes the strategic priorities for the country over the medium term? If so is the budget linked systematically to the plan such that budgetary allocations are made to meet these priorities?
   • How reflective are these priorities of the underlying needs and demands of civil society?
   • Does the government set fiscal targets such as deficit to GDP and debt to GDP? If so are these targets met?
   • Are there credible hard budget constraints at the aggregate level? At the sectoral level?
   • Is the budget prepared on an annual basis or on a multi-year rolling basis? If the latter, are the budgets for the years beyond the first reasonably stable so that line agencies can be more or less certain about how much they will get in those years?
   • How much flexibility do line agencies have in determining the programs and projects to be funded over the medium term?
   • Does the government prepare a medium term public investment program and if so does the program incorporate the maintenance and operating expenses required to maintain and sustain proposed capital investments over the medium term?
   • Are ex-post evaluations of programs and projects undertaken and are the results of these evaluations used in preparing the budget? (For instance, if a program is found to be performing poorly because of a faulty design, is it scrapped and the budget planned for it re-allocated to other programs/projects).
   • Is the budget comprehensive or are there significant extra budgetary funds?
   • Does the budget reflect the possible cost to government of contingent liabilities that may become real?
   • Is the budget as prepared by the Executive published and made available to the public?
2. Budget Approval
   • Does the budget prepared by the Executive require approval by the Legislature?
   • How different is the budget approved by the Legislature from the one submitted by the Executive for approval?
   • Is the budget as approved by the Legislature published and made available to the public?
   • Does the Legislature conduct hearings to assess whether the budget has been used as approved? If so, do its findings influence the budget proposed for the following year?
3. Budget Execution:
   • Does the government have a general ledger? How about a Treasury single account?
   • How much flexibility do the line agencies have in managing their budgets?
   • How are they held accountable for the use of their budgets?
   • How does the Ministry of Finance or the Budget Agency (if separate from the MOF) manage the budget when there is a significant shortfall in revenue collections?
4. Procurement:
   • Is there a prime law that covers all public procurement – civil works, goods/supplies/materials, contractual services, and consulting services – including those under Build-Operate-Transfer projects and other public-private partnership arrangements?
   • Is there a professional cadre of procurement specialists in government? What kind of training is available for specialists and for procurement in general? Is procurement recognized in the civil service code in terms of career path. Promotion, and remuneration? Does the code make provisions for certification and sanction?
   • Is procurement centralized in one agency or do line agencies conduct their own procurement?
   • Is public, competitive bidding the main form of procurement? What are other forms and how often are they used?
   • How transparent and competitive is the bidding process? What are the requirements for advertising? For public bid opening? Are these requirements adhered to?
   • How long does it generally take to complete a public bidding (from the invitation to bid to the award of the contract) of the following: a civil works contract, purchase of goods/equipment, purchase of supplies/materials, consulting services.
   • Are the results of the bidding, i.e. who won the bid and at what price, made available to the public? If so, how soon after the bidding and in what form?
   • Is there a formal procedure for reviewing complaints of bidders/suppliers and if so is it administrative based or court based or both?
   • What are the requirements for classification, registration, licnesing of suppliers, contractors, and consultants? How is this administered? Does it apply to foreign firms as well as local firms? Are firms blacklisted if they are found to pay bribes and/or violate bidding regulations?
   • How much does it cost the government to procure a pencil (of a given type, say type 2) and how does it compare with the typical cost (of the same pencil) in a retail outlet?

C. Public Sector Accounting and Internal Control

• Does the budget classification system meet international standards, for instance, the fiscal transparency standards set by the IMF?
• Is there a central agency responsible for establishing accounting rules and guidelines and monitoring their appropriate use? Does the agency follow international standards?
• Is there an agency responsible for reconciling all the accounts of individual departments/ministries/agencies?
• Are the financial statements for individual departments available to the general public
• Is there a fundamental difference between the accounting system in the public sector from that typically used in the private sector?
• How are physical assets treated in the public sector accounts? What about inventories of goods and supplies?
• Is there a system in place to prevent and take action against irregularities and recover amounts?

D. Public Sector Auditing

• Is there an independent general auditor for the whole government (Supreme Audit Institution) and to whom is his office accountable to (Legislature, Executive branch, President, etc.)?
• Does this Office (SAI) have clear authority to audit all public and statutory funds, trust funds, resources, bodies and entities? Does it have unrestricted access to the record of all government agencies, entities, and funds
• What types of audit does his office undertake (financial, value for money, revenue, work, performance, procurement audits)?
• If a program is audited, how soon after its completion is this undertaken and how long does it take to complete the audit?
• Are audit reports prepared in a fair, factual and timely manner?
• Do audit findings, recommendations, and related audit reprots undergo quality assurance review within the SAI?
• Are audit reports made public or, if not, are they available upon request? How soon after the completion of the audit are they made available to the public?
• Does the SAI have the authority to formulate/review/update auditing standards? To what extent are internationally accepted auditing standards (INTOSAI) used?
• Is the work of the SAI effectively considered by Parliament (e.g. designated committees)? Does a system exist for following up on outstanding audit recommendations and reporting to Parliament or to whicever body to whom audit reports are sent?
• What proportion of audits result in findings of malfeaseance? What proportion of these audits lead to prosecution and of these what proportion result in convictions or significant penalties?
• Do individual ministries/departments have internal auditors?

E. Inter-Governmental Fiscal Relations

• Does the National Government make transfers to local government units and, if so, what criteria govern these transfers?
• Do local government units have the authority to borrow money to fund their operations or investments? If so, how are their borrowings monitored?
• What types of taxes and fees do local governments have the authority to collect?

F. Specific Anti-Corruption Efforts:

• Indicate if there are or have been any specific anti-corruption efforts, e.g. establishing an anti-corruption commissions and provide an assessment of their efficacy.