LOCAL GOVERNMENT BUDGET AND FINANCIAL MANAGEMENT

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LOCAL GOVERNMENT BUDGET AND FINANCIAL MANAGEMENT Powered By Docstoc
					                                    STATEMENT OF WORK


                        TRAINERS-CURRICULUM DEVELOPERS IN


                  MUNICIPAL AUDITING (EXTERNAL AND INTERNAL)

                                                AND

                         MUNICIPAL BUDGET IMPLEMENTATION



                                           June 15, 2002


A.     Background

The U.S. Agency for International Development has contracted with Development Alternatives,
Inc. to implement the Serbia Local Government Reform Initiative Project (SLGRP). This project
builds on gains that DAI helped local governments make in Serbia from 1998 to 1999. The main
objective of the program is to help local governments become more effective, responsive, and
accountable. The project seeks to accomplish this objective through the following results:

     Increased citizen and civil society organization involvement and access to local government;
     Improved legal and financial sustainability;
     Increased local government influence at the national government level;
     Improved customer (citizen and CSO) focus and responsiveness.

To achieve these results, the project will provide 50 municipalities with extensive training and
technical assistance in financial management, municipal services and utilities management, and
information systems. In addition, the project will help strengthen the capacity of the Standing
Conference on Towns and Municipalities, provide technical assistance to the Government of the
Republic of Serbia in policy development on administrative and fiscal decentralization, and work to
increase citizen involvement in and access to local government.


B.     Overall Objectives:

The objective of this short-term assignment is to (a) develop training materials, (b) conduct training
of SLGRP Serbian financial management staff, and to (c) conduct training of municipal officials in
cooperation with SLGRP local staff at a Budget Execution training session in accordance with the
SLGRP Financial Management Team’s May-December 2002 Training Plan (Training Objective 4).
The Budget Execution training, with an introductory auditing unit, is expected to take place in Palic,
Serbia, September 17-19, 2002, with more intense controlling/auditing training in November, 2002.
        The STTA personnel selected for this task shall take part in a 5 day training planning and
preparation session to be held with the Financial Management in Vrjancka Banja, Serbia, about July
15-21. An interim deliverable shall be a revised training program and plan based upon deliberations
with the FM team staff.
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        The STTA for both specialties are expected to relieve SLGRP staff of the burden of
preparing training materials that they will be delivering in one-on-sessions with municipal clients,
cities and communal enterprises, after the group training session is completed.


C.     Specific Duties:

Municipal Audit Training Specialist: (September and November, 2002)

1.      The Municipal Audit Training Specialist shall prepare introductory-level training material
(and prepare for anticipated advanced training later) on auditing, both internal and external, of
municipal governments. The Budget Systems Law requires that municipalities and their direct
budget beneficiaries set up “Budgetary Inspection and Audit Services” of their own, in addition to
maintaining a system of internal financial controls. These Inspection and Audit Services are
anticipated to act as internal controllers and auditors within direct budget beneficiaries, and as
external auditors regarding indirect budget beneficiaries. The Republic of Serbia Finance Ministry
Budgetary Inspection and Audit Service is anticipated to act an external auditor of municipalities as
no independent State Audit Office has yet been set up for the Serbian Government.
        The Finance Ministry has not yet developed a set of rules and procedures for the municipal-
level inspection and audit services, so the STTA is expected to provide suggestions and options for
setting up such services on the local level in anticipation of Republic-level guidance yet to be
issued.
        The trainer shall collect materials provided by SLGRP local staff, and draw upon the
experience of other transition countries in the region. In addition to reviewing best regional and
international practices in municipal auditing, the specialist could follow the suggested outline for
the audit presentation(s) included below.


Types of Audits
 Internal and external audits
 Relationship of internal and external audits
 Types of external audits
 Internal controlling

Goals of Auditing Local Self-Government
 Rating the final budget report
 Monitoring performance
 Rating financial systems and situation
 Rating systems intended to prevent waste, fraud and abuse
 Legal compliance

Operating principles
 Independence, due diligence, professionalism, confidentiality etc.

Preparing for an internal or external audit in a Local Government
 Expectations
 Understanding the local government’s operating rules
 Examination of their management system and style
 Is their budget well-supported in a legal and technical sense?
 Rating their internal system of controls

Documenting an audit

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   Working papers
   Contents and formats
   Keeping track of working papers
   Rules of documentation
   Archiving of records, destruction of records

Methods and Techniques of Auditing
 Defining auditing risk and error
 Determining the appropriateness of internal controls
 Defining audit standards for legality, financial performance and efficiency
 Lessons learned from previous audits

Auditing Financial Systems
 Controls built into the system and their effectiveness
 Estimating financial risk
 Audit through analysis
 Using external information
 Testing for conformity with regulations
 The complete work cycle

Auditing IT Systems

Financial Performance Auditing
Defining the goal of financial performance auditing
The “three Es” (economy, efficiency, effectiveness)
Planning performance auditing

Auditing Fraud and Intentional Financial Crimes
    Recognizing fraud and financial crimes
    Corruption
    Actions to take based upon probable cause
    Information sharing
    Areas prone to fraud and corruption
    Preventing corruption and fraud

Writing the Audit Report
    Types of reports used
    Contents and structure


2.      The Municipal Audit Training Specialist shall be provided with country and program
information before arrival in Serbia. This includes, but is not limited to: 1/ Budget System Law, 2/
Local Government Law, 3/ List of Municipalities 4/ Chart of Accounts, 5/ sample municipal
budget, 6/ English-language training materials already prepared by SLGRP staff (for example, for
the budget law conference); 7/ Other related materials in order to speed up the process of adjusting
training materials into the local context, 8/ Materials and instructions provided by the US Treasury
advisor and by the ROS MOF related to preparation of the 2003 budget.

3.      LOE: Depending upon the availability of materials and the extent to which materials need
to be modified for use in Serbia. 19-26 Days. Detailed breakdown of LOE: Taking part in the
training, 2-3 days. Travel time, up to 2 days. Working at home station to prepare to work in Serbia,
5-8 days. Attending FM team training planning and discussion session July 15-21 in V. Banja.
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Consulting before training session with SLGRP FM Team and if necessary with Local Experts
reviewing and adjusting training materials; 2-3 days. An additional 3 days for the exit report and
follow up with SLGRP FM Team and review of evaluation results and making potential
modifications for future training by Serbian local staff in future project years. This LOE may be
increased depending on whether the Specialist will take part in both the September and November
training sessions.

4.     Qualifications:
           Accounting, controlling and auditing experience for public agencies and
              municipalities
           Relevant adult education, teaching and training experience
           Has done or supervised audits of municipal entities
           Has experience in supervising or setting up internal controls
           Minimum 10 years of professional experience
           Relevant degree
           Experience working in and familiarity with public sector accounting in advanced
              transition countries, as well as specific experience in Southeast Europe (Albania,
              Bulgaria, Romania) and/or the former Yugoslavia (Slovenia, Croatia, Bosnia-
              Herzegovina, Macedonia etc).




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Municipal Budget Implementation Training Specialist(s) (training expected in September, 2002)

1.      The Municipal Budget Implementation Training Specialist or Specialists shall enhance
introductory-level training material already prepared in part by the FM team consisting of the
following modules that are in full compliance with the 2002 Budget Systems Law: (a) Budget
Forms; (b) Budget Implementation (including procurement, personnel allocation and capital project
and equipment procedures); (c) Cash Flow Management; (d) Budget Monitoring. The trainer shall
collect materials provided by SLGRP local staff, and draw upon the experience of other transition
countries in the region. A suggested outline for the presentation(s) is included below.

       Development of budget expenditure proposals
       Preparation of current outflows request form, with explanation of narratives and guidelines
for indirect beneficiaries of a local self-government
       Preparation of additional funding request forms, with explanation of narratives, use of data
to support arguments, impact on operational budgets in the future
       Preparation of fixed assets request forms, with explanation of narratives and providing link
to future capital budgeting planning
       Preparation of the “estimate of financial effects of new laws and regulations”—the fiscal
note
       Budget monitoring and financial administration, to include:
                treasury consolidated accounting
                local treasury function
                selection of bank to manage CT account
                expenditure monitoring
                transfer of funds
                cost control
                position control (benchmarking)
                cash flow management—smooth financing of expenditures
                borrowing and temporary financing
                development and financing of new budget expenditure proposals


2.     The Municipal Budget Implementation Training Specialist(s) shall be provided with country
and program information before arrival in Serbia. This includes, but is not limited to: 1/ Budget
System Law, 2/ Local Government Law, 3/ List of Municipalities 4/ Chart of Accounts, 5/ sample
municipal budget, 6/ English-language training materials already prepared by SLGRP staff (for
example, for the budget law conference 7/ Other related materials in order to speed up the process
of adjusting training materials into the local context, 8/ Materials and instructions provided by the
US Treasury advisor and by the ROS MOF related to preparation of the 2003 budget.

3.      LOE: Depending upon the availability of materials and the extent to which materials need
to be modified for use in Serbia. 19-26 Days. Detailed breakdown of LOE: Taking part in the
training, 2-3 days. Travel time, up to 2 days. Working at home station to prepare to work in Serbia,
5-8 days. Attending FM team training planning and discussion session July 15-21 in V. Banja.
Consulting before training session with SLGRP FM Team and if necessary with Local Experts
reviewing and adjusting training materials; 2-3 days. An additional 3 days for the exit report and
follow up with SLGRP FM Team and review of evaluation results and making potential
modifications for future training by Serbian local staff in future project years. This LOE may be
increased depending on whether the Specialist will take part in both the September and November
training sessions.

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4.     Qualifications:
           Budget preparation, implementation and monitoring experience in public agencies
              and municipalities
           Relevant adult education, teaching and training experience
           Minimum 10 years of professional experience
           Relevant degree
           Experience working in and familiarity with public sector budgeting in advanced
              transition countries, as well as specific experience in Southeast Europe (Albania,
              Bulgaria, Romania) and/or the former Yugoslavia (Slovenia, Croatia, Bosnia-
              Herzegovina, Macedonia etc).



D.     Schedule:

The specialist(s) in both areas are expected to start work on/about July 1 and complete no later than
30 November 2002. Experts may have the option of an advance trip during the preparation phase of
their assignment.


E.      Deliverables:
        Deliverables of the assignment include: completion of training materials, delivery of staff
and target audience training, completion of an exit report and follow-up work as specified above, as
well as completing an exit report as described by SLGRP management.


F.     Supervision
       The contractor’s direct supervisor will be Mr. Steven Rosenberg, Chief of Party, or his
designee. Any direct communication with the client, USAID, must be cleared through the COP.


G.     Authorities
       The STTA retained under this SOW does not have the authority to make any financial or
performance commitments on behalf of SLGRP or USAID, and is to have no contact with USAID
without the permission of the Chief of Party or his designee.




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