Summary Report on the Proceedings International Conference on “Public Financial Management for Improving Programme Delivery”
A three day International Conference on “Public Financial Management for Improving Programme Delivery” was organised by the Controller General of Accounts from 20th to 22nd October, 2008. The Conference was held at Vigyan Bhawan, New Delhi and was inaugurated by the Minister of State for Finance, Shri Pawan Kumar Bansal. The Conference was conceived with the idea that most countries in the world face similar challenges in program delivery. The Conference was held with a view to provide a common platform to the Public Financial Managers and various stakeholders for learning, dissemination of information, and assimilation of the latest international experiences on the subject of Public Financial Management. Common themes from across the world on issues related to the latest developments around the world in PFM were addressed at the Conference. The Conference was attended by eminent experts in the field of public finance and participants from Governments, Banking Sector, Academicians, Consultants, Public servants, etc. Representatives from North America, Europe, Latin America, Asia, Africa, etc. shared their experiences over three days to arrive at the best possible solutions to the common issues. A total of 496 Participants registered for the Conference, apart from a few others who attended particular sessions during the Conference. The Conference focussed on three main themes related to improving Programme Delivery: • Strengthening Public Financial Management • Leveraging Banking and Information Technology • Strengthening Internal Controls A total of eleven sessions were conducted over three days. The main issues flagged and suggestions made by the various speakers during each session have been summarised in this report. The Inaugural session began with a welcome address by Shri V. N. Kaila, Controller General of Accounts. He highlighted the various achievements and
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reforms initiated in the financial management system of Government of India by the Indian Civil Accounts Organisation since the Departmentalisation of Accounts. Drawing attention to the possibilities of improvement in the existing programme delivery system, the importance of transparency and accountability and the now greater public scrutiny of government performance, he emphasised the need to assess the costs and benefits of various government programmes and the need to learn through cross country experiences. He mentioned that the theme of the Conference was carefully chosen to address these challenges and to recommend solutions. Smt Sushma Nath, Secretary, Department of Expenditure, in her address termed the theme of the Conference as topical and relevant for various developing countries to target and monitor spending for outputs and outcomes. One of the major concerns being to ensure that social objectives of programmes are actually achieved, she looked forward to hearing of the South American experiences in this area. Shri Vinod Rai, Comptroller and Auditor General of India, in his address observed that the core issues in programme delivery are proper management of public resources, the correct assessment of priorities, accountability of implementers, transparent systems and procedures, and focus on outcomes. He stressed that the concept of transfer of funds directly to implementing agencies and NGOs needs to be addressed since it amounts to keeping funds outside the Government of India accounts. He said that the need is for improving financial management and accountability in Central Sector Schemes to include issues related to flexibility in design to reflect local level realities, rationalization, and framework for flow of funds, mechanism for tracking funds to end use, better monitoring and evaluation. He flagged other issues for attention such as the distortion financial position wherein assets created with central funds and transferred to societies are not reflected either in the Union or the State Accounts; the integration between project planning and budgeting which will help avoid a situation where programme execution is hampered by the non availability of funds; Public Private Partnership projects which need sound risk management procedures since they entail the sharing of responsibility between Government and the private sector and the Government should achieve the benefits it seeks to achieve for public services. Therefore reforms in Financial Management Systems need serious attention for systematically improving delivery of Government programmes.
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In his inaugural address, Shri Pawan Kumar Bansal, Minister of State for Finance (EB&I) commended the CGA for organizing this Conference and appreciated the efforts made by the CGAs organization to be in tune with the latest developments in Public Financial Management (PFM) and CGAs excellent track record in this area. In his speech, the hon’ble Minister made some significant suggestions, which he urged should be addressed on a priority basis: a. The classification of Government Accounts needs to be rationalized since Plan-Non Plan and Capital-Revenue expenditure classifications make certain questionable assumptions, and are not very comprehensible. b. There is a need to look at alternative and innovative ways for implementing public outlays, since the desire to address the social problems at the Central Government’s level results in compromising on crucial details. c. Up-scalability and replicability of successful models in programme delivery should also be looked into positively, d. Independent evaluations of public programmes should be encouraged and institutionalized, so that a review of existing schemes with respect to outcomes determining their viability for continuation can be done. e. He further stressed upon the necessity of having a holistic view of Public Financial Management based on critical areas of formulation, analysis, tracking and evaluation and transparent reporting and accountability in the system. In his Keynote address, Shri Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission shared his perceptions from a policy maker’s point of view, stating that there is a need to look at outcomes in multiple ways, including the programme design because well designed programmes are crucial for the final outcome. He observed that India’s federal structure is an important factor in programme delivery, since the social sector areas are primarily with State Governments. The speed of transfer of funds from Centre to States is critical, since the allocations and utilization depend on the availability of funds. He also stressed that perhaps it is time to look at actual expenditure as against the releases, which is booked as expenditure in the accounts. He also emphasized on the need to bring plan/programme details in line with budgetary classification, which would mean looking at the accounts classification structure. Shri Ahluwalia mentioned that we cannot overemphasize on a greater need for transparency, which could be achieved through an increased use of Information Technology. Finally, he also
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commented on the need for a greater role for scheme evaluation and monitoring for improving programme delivery.
In the first technical session of the Conference, Shri Amarjit Sinha, Jt. Secretary, M/o H&FW shared his experiences on the working of the National Rural Health Mission (NRHM). Some of the points emphasized by him were the need for deepening a decentralized management of public systems and resources, capacity building for effective decentralization and service delivery, developing an accountability framework and strengthening the financial management system. NRHM has followed a different approach, and this may be seen in terms of forging partnerships at the local levels with communities, making room for innovation and autonomy. He praised the role of the Panchayati Raj Institutions, which worked on principles of community participation, which were facilitated through flexible financial support, improved management through capacity building, etc. He mentioned that forming financial management groups at the Centre, State and District levels, with an adequate emphasis from top management has resulted in improved financial monitoring parameters. Further, he claimed that the verticality of programmes has been eliminated through an emphasis on overall health systems rather than individual programmes. He suggested that it is possible to design credible public systems that meet peoples social development needs. Shri R. Venkatesan, State Project Director of Tamil Nadu, for Sarva Shikhsha Abhiyaan mentioned that physical monitoring of the scheme coupled with the financial monitoring has yielded excellent results in improved programme indicators. They have also involved the District Information System for Education which is a comprehensive database containing various indicators used to improve performance of the school system and to provide information for planning and budgeting. He mentioned some other important tools used for improving programme delivery included electronic fund transfers, monitoring of fund position through a web portal, community involvement in items such as civil works, monitoring teachers absenteeism, financial assistance and support to local management, etc. Bringing her vast experience of having worked in many countries, on programme delivery in public health, Ms Doris D’ Cruz-Grote of Germany brought out the experiences of Thailand in programme delivery in public healthn delivery, demonstrating Thailand’s success in meeting the Millennium Development Goal targets. The reform process included strengthening of public
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health infrastructure, making long term HR provisions, community participation, integration of public health programmes, preparation of an essential drugs list and establishment of drug procurement and logistic systems, collaboration between researchers and policy makers for evidence based reforms. Equally significant in the reform process were decentralization and Budget reallocation, and management and administrative reforms with a larger role for local government in administration. She mentioned that this also included dedicating 35% of public revenues to local government. The Thai experience shows that universal access to health for all is achievable in a lower- middle income country. She emphasised that an increased Government spending is necessary but not sufficient. An integrated multi sectoral approach is needed, along with health care reforms, as well as building partnerships with parastatals and international organisations to broaden the scope and onus of programme delivery beyond the Government. Ms. Rosani Cunha, Secretary to Government of Brazil detailed the Bolsa Familia Programme of Brazil which is a conditional income transfer programme for extremely poor families through which money is transferred to the family, in attempt to break the intergenerational cycle of poverty, and for family development. Poor families are identified by municipalities and registered in a single registry. Some of the conditionalities for cash transfer relate to school attendance, nutrition and vaccination monitoring of children, prenatal and postnatal monitoring. It has resulted in financial inclusion for Bolsa Familia families by their banking sector. The impact of the programme can be seen in terms of reduction in extreme poverty, promotion of food security, thus making the local economy dynamic, resulting in higher school attendance, reduction in malnutrition and infant mortality, and what she termed as the “no laziness” effect in the country. It might be mentioned here that Ms. Rosani Cunha passed away in a tragic road accident, shortly after returning from India after attending the Conference. In the Indian context, Shri N.C. Saxena made a case for direct cash transfer to poor families instead of transfer of funds from the Centre to States because of poor record for fund transfers. Citing several examples of poor programme delivery he stated that reasons for this could be poor utilisation of funds, poor allocation of support services, government machinery working in a sequential or linear manner, inadequate delegation of powers, poor coordination between various departments, insufficient monitoring at senior levels etc. Shri Saxena made some important suggestions for improving programme delivery:
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a) He advocated for a system ensuring greater accountability at organizational and individual levels through external assessment of organizations and policies, third party inspections by civil society and political parties, b) He emphasized that there should be an increased number of line functionaries and reduced staff positions, c) He said that face to face meetings with consumers/user groups should be facilitated at every stage of programme delivery. d) He also said that the Government could consider making a ‘Governance Index’ on the basis of IMR, immunization, literacy rate for women, safe drinking water, rural electrification, child sex ratio etc, and link a part of Central transfers to the concerned State with such an index. e) He also spoke of the need for activities to be performed in a parallel manner rather than doing them sequentially in order to cut down delays, and that expenditure budgets should remain valid for two years. Mr. Manuel Vargas of the World Bank discussed the financial controls in conditional cash transfer programmes, based on the experiences in Latin America and the Caribbean as studied by the World Bank. He mentioned that Conditional Cash Transfers (CCT) is a new idea in development programmes to alleviate poverty and foster human capital accumulation, especially among the young. However, CCT presents implementation challenges, and some of the risks include institutional responsibilities, identifying the target groups, eligibility certification, compliance and supervision of conditionalities etc. He mentioned that some the critical areas in financial management in CCTs are monitoring of payment processes, procurement risks, maintaining a functional MIS, cross checking of beneficiary enrollments, internal quality control and correction mechanism. He emphasized that there is a need to increase accountability through a proper complaint and appeal mechanism along with formal evaluation of the programme. Shri S K Kale, GM, NABARD focused on the subject of financial inclusion and the banking systems. He spoke of the four ‘A’s representing the fundamentals of financial inclusion – availability, affordability, accessibility and awareness, and emphasized their importance in programme delivery; that public expenditure should be marked by economy, efficiency and effectiveness. He mentioned the Financial Inclusion Fund and the Financial Inclusion Technology Fund. He talked about the Business Facilitator and Business Correspondent models. The issues faced by the banks and other agencies in
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financial inclusion are the allocation of villages among banks, sharing costs of IT infrastructure for financial inclusion between the banks and Government, standardization of technology across banks and Government, and the choice of delivery channels. Some of the technology solutions mentioned by him included smart cards, hand held terminals, central CPU, ATM, Point of Sale, Mobile Phones, SMS, PCO Connectivity, etc. One of the critical issues in effective programme delivery is the efficient transfer of funds for programmes. The need for an effective monitoring, evaluation and accounting systems for the large sums of money disbursed by the Central Government cannot be overemphasized, and this has led to the Central Plan Schemes Monitoring System (CPSMS). Smt. Archana Nigam, Jt. Controller General of Accounts described the CPSMS as a comprehensive Data Support System and Management Information System (DSS, and MIS). It is a significant attempt made by the office of the CGA and the Planning Commission to leverage recent technological innovations in e-governance and banking networks to develop efficient fund transfer mechanisms. CPSMS envisages using e-lekha, a web enabled portal developed for plan schemes in CGA’s office. The sanction ID module on this portal facilitate the mapping, tracking and consolidation of expenditure information for the entire 1258 central sector and centrally sponsored Plan schemes mapped so far.The system will reduce time taken to reach the funds to the ultimate beneficiary, reduce transaction costs, eliminate float in the pipeline and reduce leakage of funds. Some of the challenges faced in implementing this system include incentivising the banking system to transfer authorisations, lack of capacity in accounting and IT at the grassroots, change management for all stakeholders, etc. Professor Y.K.Alagh spoke on Economic Reforms for Inclusive Growth. During his address, he raised various issues such as declining agricultural growth, agricultural sector not being in conformity with the vast resources made available, and increasing land and water scarcity in rural areas. His suggestions for improving programme delivery included increased Public Private Partnerships, community participation, newer organizational models promoting decentralization, judicious land use policy, etc. He also emphasized on accrual accounting for increasing the transparency of available Government funds. Mr Doug Johnson of IFMR, Chennai presented the case for Financial Inclusion and delivery of Social Transfer Payments, based on an evaluation of several micro finance programmes on social transfer payments throughout India. He described Social transfer payments as cash payments to beneficiaries
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under Government programmes. Some of the issues highlighted by him were that financial inclusion among social transfer recipients is low, and there is very limited use of bank accounts by the beneficiaries. He emphasized that financial inclusion is key to the effective delivery of benefits from social sector schemes. He suggested that banks should be allowed to enlist the help of third party agents to conduct transactions, and they should be allowed to install more ATMs in rural areas, and that the Government should seek to establish a unique individual based National ID. Shri B.R.Nath and Sh. S.K.Mishra of the State Bank of India (SBI) spoke on Banking and Information Networks. SBI has significantly improved its banking and information networks, recognizing that Government business will be largely driven by volumes rather than by high margins. The issues raised in their presentation were the need to discard old business models in banking, adapting new technologies to transform services provided, building institutional capacities for change, and partnering with the Government to ensure better programme delivery. Shri Gagan Rai, CEO of NSDL presented the features of the Tax Information Network (TIN), benefits of which have accrued to the Government as well as the tax payer, in the form of higher receipts and transparency. He also discussed the concept of the Expenditure Information Network. Mr Johannes Siege, a consultant from Germany described the experience of Hessen, a state in Germany where ERP system was implemented successfully, which shows that quality cannot be measured by quantity, as more money spent does not translate into better outcomes/quality. He mentioned that the case study of Hessen also shows that IFMIS has to be implemented sector wise to get optimal results. Mr Tiago Maranhao Barreto Pereira presented the Brazilian experience of Integrated System of Financial Administration (SIAFI). His presentation tracked the evolution of financial administration in the pre-reform phase, marked by multiple bank accounts within Government, manual accounting resulting in delayed information flow and slow decision making. In contrast in the post-reform phase, with implementation of SIAFI, the financial administration moved to a Single Treasury involving auto control of payment vis-à-vis budget, auto-accounting and consolidation. The database of SIAFI provides reliable and relevant online information for financial decision making to the Government of Brazil, as well as to the common man, thus ensuring transparency and accountability.
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The presentation on IFMIS in Government of India on COMPACT and E-lekha was made by Dr. Sanjeev Mishra, Jt. Controller General of Accounts. He discussed the initiatives of the CGA’s organization in the implementation of a country wide IFMIS – through the COMPACT (distributed database) and elekha (centralized database). He also spoke about the integration of the core accounting and core banking solutions and its importance for the advanced financial management needs in Government. These have been extended to monitor disbursements under the flagship schemes at the Central level, through issue of a Sanction ID for each scheme. An important feature is the flexibility of the e-lekha portal to accommodate other accounting units, i.e. any agency can upload its accounts into e-lekha, without introducing many changes in their accounting software. Some of the agencies already using e-lekha are the Government of NCT of Delhi, and Government of Mizoram. He mentioned that the e-lekha portal is supporting many initiatives such as the monitoring of the flagship plan schemes which has a built in mechanism for budgetary management, capturing outcomes, modernization of financial management systems, facilitation of public expenditure tracking systems etc.
Prof M Govindrao of NIPFP emphasized that Public Financial Management needs to ensure that value for money is obtained for every unit of expenditure, by improving aggregate fiscal discipline, allocative priorities and allocative efficiencies (by suitable mix of revenue and capital expenditure). He mentioned that a comprehensive budget (with no off-budget items) should be prepared. He mentioned that some of the steps to be taken to improve programme delivery include reforming policy, processes, which must be preceded by a reform of political will. He also discussed calibration of market based reforms in pricing through the use of transparent and consultative redistribution. He mentioned designing of decentralised MTEF in departments, which add to a Centralised MTEF. He also advocated for stronger internal controls and information systems in the Government. Shri Tej Prakash, Head of the Fiscal Affairs Department (FAD) of the IMF, spoke about improving institutional mechanisms for programme delivery. In his presentation on the Institutional Framework and the Delivery of Public Services, he emphasised that institutions like the Parliament need to play a greater role in oversight of public finance. He also stressed that the executive need to be held individually accountable and conversely should have a greater freedom to manage public funds. He championed the cause of PRIs, and mentioned that these need to be empowered with powers to collect their own
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revenues, and in the effort serious capacity building is required. He again brought out the point regarding Plan and Non-Plan classification of expenditure need to be freed from turf issues to enable an integrated expenditure management. Ms Meira Kumar, hon’ble Minister for Social Justice and Empowerment pointed to the importance of Social Audit of development programmes. She talked about the need for evolving better mechanisms for monitoring of social sector schemes. She mentioned that CGA and the Civil Accounts Organisation can play a crucial role in evolving such mechanisms. Smt Aruna Roy spoke on Social Audit of Programmes, stressing upon the imperative to find convergence among various organizations and efforts, and she emphasized on the role of citizens in the process of governance. She mentioned that accounting and auditing crucial tools to ensure transparency in distribution of public funds. Citing her own examples and through a detailed documentary, she stressed that social audits could improve the implementation of programmes, and that the RTI Act can facilitate meaningful intervention by the stakeholders. Smt Sujata Prasad, Director, INGAF and Shri Harish Dua of the IIA spoke about strengthening Internal Audit and Internal Controls in the Government. Their presentation drew attention to the role of internal audit as being crucial for success of organizations. In particular, they highlighted the need to focus on Risk Based and Performance Audit techniques. They also suggested that audit techniques have to be linked with global standards. It was suggested that the CFE (Centre for Excellence) in CGA’s Office, and the Institute of Internal Audit should collaborate to establish MAP (Management Auditor Partnership) in the line ministries. The CFE should support internal audit activities in PPP projects and PRIs and that INGAF should lead the capacity building programmes through its Centres and facilitate periodic outreach activities in various States with the special emphasis on North-Eastern States. Ms Carman Lapointe, Auditor General of the World Bank addressed the issue of Capacity Development in Internal Audit for Improving Programme Delivery. She highlighted the importance of capacity development in the area of IA, making a business case for IA capacity development in organizations and how it can help the development of organization specific skills. She emphasised that an increasing professionalism in IA is critical for the development process in any country. She shared the Capability Maturity Model
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(CMM) to assess and develop public sector capacity. She also discussed the IA capacity development initiatives undertaken by the IAD in collaboration with IIA across many countries through the Capacity Development Outreach Program (CaDO) and the challenges associated with implementing it. Ms. Lapointe also mentioned that Internal Audit is not audit conducted by external auditors. Mr Wesley Alexandre Tavares of Brazil shared a Brazilian case study on audit of social development programmes. He covered the organizational structure of the Controller General’s office in Brazil, and focused on their medium term institutional plan. He talked of the methodology which included mapping policies and promoting hierarchies, signifying priorities of different government programs. The most interesting feature of the methodology was the randomized public selection of the spatial categories for audit of the programs. It was informed that the audit reports are routinely sent across different levels of the government, and how it helped in pointing out the deficiencies in program delivery and served the purposes of transparency and accountability through their portal – “Gateway of Transparency”. Shri Jayant Gokhale of the ICAI mentioned locating IA in the context of Public Sector as a tool for financial management. He differentiated between the audit conducted by the CAG and Ministries for donor funded projects, expenditure verification for schemes and for PSU as per the statutory requirements, and delineated the different nature and role of Statutory and Internal Audit. He pointed out that IA has been recognized as a cornerstone of good governance in the current regulatory framework issued by various important organizations such as SEBI, IRDA, FMC, RBI etc.
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