Attachment_J.1_PFMRAF_-_Stage_2_Questionnaire.pdf

Questionnaire for the Public Financial Management Risk Assessment (PFMRAF Stage II)

FIRST CRITERION:

BUDGETARY SYSTEMS

Date of the assessment:

Author of the assessment:

FIRST CRITERION: BUDGETARY SYSTEMS

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment (i.e., based on inquiry, interview, observation or testing)

Reference to documents (copy attached)

Assessment of the Author

1. BUDGET CREDIBILITY

Does the entity have a budgeting procedural manual?

– When was it created?

– How often is it revised or amended?

– Does the budgeting procedural manual reflect the buy-in of the reviewed entity or the Ministry of Finance? Or any donor?

1.1 Budget vs. Actual Spending

Do aggregate outlays compare favorably with planned expenditures?

Does the entity analyze the variances?

1.2 Compliance with the Budget Calendar

How closely is the budget calendar followed?

Are there any problems of “bunching” of budgetary decisions?

For example, spending departments may rush to spend any unspent funds at the end of the FY so as to avoid “losing” that money in the next year. Such “bunching” may reflect poor planning or weak execution and can also affect the quality of budgetary outcomes

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment (i.e., based on inquiry, interview, observation or testing)

Reference to documents (copy attached)

Assessment of the Author

1.3 Extent of Budget Transfers, or “Virements”

Is transfer between budget categories allowed?

Is there a procedure specified for its control?

Are totals transferred and reprogrammed during the FY sufficiently large that the budget composition changes substantially from what was originally planned and approved?

Is there a limit on the amount to or from any one expenditure head? A reasonable benchmark is to limit transfers from one budget category to another to 10% or less.

1.4 Reasonable Revenue Projections

Is the annual difference between planned and actual revenues significant?

– If so, are there technical problems with forecasting and estimation capabilities?

– Or, is the problem institutional, i.e., valid estimates made and changed later for political reasons?

How is the expenditure estimates prepared?

– Are they based on reasonable revenue estimates?

– Is there a medium-term perspective?

– Or, is the process essentially incremental?

1.5 “Financing” the Budget with Payment Arrears

Is there evidence that the budget is partly financed by arrears, i.e., delayed payments to suppliers, contractors and/or civil servants?

If so, is the stock and flow of arrears measured and monitored?

How accurate are these measurements?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment (i.e., based on inquiry, interview, observation or testing)

Reference to documents (copy attached)

Assessment of the Author

2. BUDGET COMPREHENSIVENESS AND TRANSPARENCY

2.1 Budget Coverage

Does the budget cover all revenues?

Does the budget cover all expenditures?

Which institutions are excluded and why?

Which revenues/expenditures are excluded and why?

Consider, for example, extra-budgetary funds as well as loan guarantees and other contingent liabilities that may be off-budget.

Are these exceptions spelled out in the budget notes?

2.2 Capital Expenditures

What is the definition of capital expenditures?

Are recurrent and capital expenditures integrated in one budget?

Are the recurrent cost implications of capital expenditures calculated and forecasted?

– Where, and how?

How (if at all) are recurrent costs during construction treated?

Are the results incorporated into annual and multiyear budgets??

2.4 “Development” Expenditures

Are “development” expenditures treated separately?

If so, does the “development” budget include recurrent as well as capital costs?

Are the recurrent cost implications of “development” expenditures calculated and forecasted?

Are the results incorporated into annual and multiyear budgets?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment (i.e., based on inquiry, interview, observation or testing)

Reference to documents (copy attached)

Assessment of the Author

2.4 Earmarking

What is the extent of earmarking?

What would be the institutional and economic implications of curbing it?

Is earmarking authorized in the constitution or in laws/decrees that may be difficult to change?

2.5 Supplementary Budgets

Do financial regulations provide for additions to budgets during the year? If so:

– Is there a specified procedure?

– Is there a limit below which approval is not required?

2.6 Off-Budget Spending

What is the extent of extra-budgetary funds, special funds and separate or supplementary budgets?

Who benefits from them?

2.7 State-Owned Enterprise (SOE) Investments

Are SOE investments included as capital expenditures in the budget?

If not, what measures could be taken to improve coordination of these investments without full incorporation into the central government budget?

2.8 Autonomous agencies

What is the extent of spending by autonomous agencies?

What measures could be taken to improve coordination of autonomous agency investment without full incorporation into the central government budget?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment (i.e., based on inquiry, interview, observation or testing)

Reference to documents (copy attached)

Assessment of the Author

2.9 Reserves Requirements

Do financial regulations provide for inflation or other reserves?

If so, is there a procedure laid down for the control and allocation of the reserve?

2.10 Special Expenditure Categories

Do financial regulations provide for specific approval in addition to budget approval for certain expenditure categories?

Do financial regulations specify which categories of expenditure should be subject to the submission of a financial implications report?

Is a financial implications report on revenue costs required for proposed capital projects?

2.11 Budget Transparency and Access to Information

What is the degree of public access to key fiscal information?

– Is it limited to raw fiscal data on an official website?

– Does the government produce a ‘Citizens’ Guide’ to the

Budget?

Are there opportunities for the public to comment on and review budgets before they are formulated or approved?

3. POLICY-BASED BUDGETING

3.1 Medium-Term Planning

Does the government use a medium-term framework (e.g., MTFF, MTBF, MTEF) for planning?

Is there evidence that policy costs have been estimated and forecast properly for future years?

Are the figures consistent with those used in actual annual budgets?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment (i.e., based on inquiry, interview, observation or testing)

Reference to documents (copy attached)

Assessment of the Author

3.2 Intergovernmental fiscal relations

Does the national budget process consider policy objectives, priorities and financial plans of sub-national governments and/or decentralized units of the central government (e.g., for social assistance, education, health and agriculture spending)?

Have fiscal transfers been planned properly to support delivery of these policies?

3.3 Quality of the budget narrative

Does the budget document include a narrative that clearly articulates the government’s policy priorities and how they will be met?

Does the budget document describe and articulate policy changes as well as performance implications of those changes vis-à-vis the status quo?

Does the budget document include activity statistics and performance information on the effectiveness of existing policies?

4. BUDGETARY SYSTEMS AT THE SPENDING MINISTRY LEVEL

4.1 Budgetary Control

Have budget headings been agreed with the spending ministry?

Is each budget head the responsibility of one, and only one, budget header?

Is the spending ministry solely responsible for budgetary control?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment (i.e., based on inquiry, interview, observation or testing)

Reference to documents (copy attached)

Assessment of the Author

4.2 Communication w/MOF

Is the spending ministry solely responsible for budgetary control?

Are statements of expenditure against budget heads available to spending ministries for monitoring purposes?

Is the Ministry of Finance responsible for notifying spending ministries when:

– Actual expenditure approaches budget?

– Actual expenditure exceeds budget?

Is over/under spending reported to the responsible Minister?

If so, are those only above certain limits reported?

SECOND CRITERION:

BUDGET EXECUTION

SECOND CRITERION: BUDGET EXECUTION

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

1. PREDICTABILITY AND CONTROL IN BUDGET EXECUTION

1.1 Commitment controls

What degree of control does MOF exercise over commitments?

– Investigate and describe the procedures. Conduct tests if deemed necessary.

Who is exempt from this control and why?

To what extent are existing rules and procedures, even if adequate in theory, frequently bypassed in practice?

Why is this done?

1.2 Payment procedures and controls

Within the payments cycle, what are the procedures for ordering and controlling actual payments?

– Investigate and describe the procedures. Conduct tests if deemed necessary.

To what extent are existing rules and procedures, even if adequate in theory, frequently bypassed in practice?

– Why is this done?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

1.3 Information systems and technology

Is appropriate information technology in place?

Is there an appropriate information management system

(FMIS, or IFMIS) in place?

Are there measures to ensure the security of the FMIS and other electronic information systems?

Does the FMIS ensure real-time control over pay orders and payments approval?

Are control results accessible to all appropriate actors involved in the control chain?

Do the information and accounting systems allow timely financial reporting?

1.4 Control over allotments/apportionments

Investigate and describe the allotment/apportionment process.

To what extent does the MOF/central budget authority resort to delaying tactics (e.g. allotments and apportionment processes) to control global spending limits?

1.5 Flexibility/discretion in spending

What instruments are available to achieve flexibility in expenditures?

– Transfers (or “virements”)?

– Supplemental budgets?

– Other?

What degree of autonomy do line ministries and spending agencies have in the expenditure of earmarked funds?

If control mechanisms are adequate, what is the scope for allowing greater flexibility on the part of spending ministries to reallocate resources to sustain core activities and deliver key services?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

1.6 Supplemental budgets

How are supplementary budget requests processed?

Why are supplemental necessary?

– Initial underestimation?

– Unforeseen factors?

– Lack of flexibility in re-allocation of resources?

– Other?

1.7 Debt and incurrence of liabilities

Is there proper recording and reporting of government debt and guarantees?

What limits exist in practice over long-term borrowing?

What is the process for providing loan guarantees?

Are there contingent liability limits?

1.8 General controls

Are controls exercised by objects of expenditures or line-items, e.g. personnel?

Or, are they by broad budget category, such as recurrent expenditure?

Are they transactional or batch approval controls?

1.9 Payroll controls

For implementation control, are payroll and treasury payments linked in the FMIS to the establishment roster and attendance/workload system?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

1.10 Purchasing and procurement control

Are purchasing systems supported by approved requisition orders?

Are they included in the procurement plan?

Can the goods be traced to the warehouse and inventory?

Can vendor invoices be linked to purchase orders and receiving reports?

Does an internal audit unit regularly review this internal control system?

1.11 Asset and inventory management

Is there a registry of fixed public assets and is this kept up to date?

Does the registry serve as an asset inventory?

Does the inventory include a facilities condition review allowing classification of assets by degree of need for: repair, replacement or rehabilitation?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

1.12 Segregation of duties

Do rules and procedures provide for adequate segregation of duties?

Is there indication that segregation of duties is present between authorizing transactions, processing transactions, recording transactions, custody of assets, and reviewing transactions?

Are financial duties segregated for internal control purposes?

Is the fiduciary function of writing and signing checks separated from the asset custody function?

Is there an effective segregation between the function of authorizing officer (i.e. person having the mandate to authorize transactions from an operational and/or financial side) and the function of accounting officer (i.e. person having the authority to execute payments) or of the equivalent functions?

Are these two actors neither formally nor practically subordinated to each other?

– Check that there is no hierarchical relationship between them.

1.13 Internal audit function

Is the internal audit unit independent of the finance department?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

2. ACCOUNTING AND REPORTING — GENERAL

2.1 Accounting — General

Is the basis for each accounting entry (i.e. cash, modified accrual, accrual) clearly indicated in financial regulations and statements?

Is the meaning of these terms clear and consistent with GAAP, IPSAS or other international accounting standards?

Are the bases for accounting entries consistent across different governmental entities, e.g. autonomous enterprises, general fund agencies, local governments, special funds and city enterprises?

2.2 Basis of accounting

Under what basic principle are the financial statements of the entity prepared:

Accrual basis of accounting?

Cash basis of accounting?

Modified cash or modified accrual basis of accounting (i.e.

mixed)?

2.3 Do financial regulations or rules require specific

accounting on a fund, program or project basis?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

2.4 Periodic financial reports

Are accounting data regularly compiled into balance sheets, activity/income/operating statements and cash flow statements?

Are these reports regularly updated and available?

2.5 Financial statements

Are the financial statements set up with regular periodicity?

Are they set up at least annually?

How comprehensive and understandable are the financial statements?

2.6 Bank reconciliations

Are timely and frequent bank reconciliations performed, i.e.

reconciliation of accounting records with bank statements held by central and/or commercial banks?

Is there an effective process to investigate discrepancies between accounting and banking balances with subsequent follow-up by senior management?

2.7 General Ledger

Is there a clear link between general journal, subsidiary ledger and the general ledger (G/L)?

Are there clear controls over establishment of subsidiary ledgers?

Are subsidiary ledgers reconciled to the G/L and updated (e.g., daily, monthly, annually)?

2.8 Accounting system

Is there an FMIS or similar computerized treasury accounting/reporting system?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

If yes:

– Which modules are operative?

– Which are not, and why?

Describe the accounting system. Are there:

– Procedures to ensure the exhaustiveness of revenue?

– Checks that expenditure and revenue are not offset?

– A system for accepting and authorizing transactions, including amendment and deletion of data?

Describe the accounting process, including:

– The electronic processing of data

– Reporting procedures

– Uses made of accounting records and supporting documents

– System security and access control

– Back-up systems

Are the individuals responsible for the operation of the accounting systems suitably qualified?

Is there a system for ensuring that all changes to legal accounting requirements are implemented?

Are all changes to accounting systems and policies authorized by a designated person?

Is there a manual which records the:

– Details of the accounting systems?

– Balancing and reconciliation procedures?

Are accounting staff excluded from taking part in other finance-related operational tasks?

Are balances on subsidiary ledgers periodically reconciled to the general ledger?

Is input to the accounting system restricted to nominated

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author persons?

Do systems provide the information to enable source documents to be traced to financial statements and vice versa?

Are journal vouchers authorized and do they bear appropriate explanatory material?

Is there annual external verification of the status of the accounts in the Statement of Assets and Liabilities?

3. CASH MANAGEMENT AND THE TREASURY FUNCTION

3.1 General

– Are there written procedures governing cash collection, deposit, disbursement, forecasting and investment?

– Are they in force and up to date?

– Is there effective cash-flow planning, management and monitoring?

– Is there a daily calculation and consolidation of cash flow balances?

3.2 Managing cash shortfalls

How are short-term fiscal imbalances managed?

Are tax anticipation notes (TANs), or bond anticipation notes

(BANs) issued?

– Investigate the rules and procedures for these instruments, if applicable.

3.3 Reliability of cash forecasts

Is borrowing planned on the basis of reliable cash forecasts?

How accurate and timely are forecasts of anticipated revenues and expenditures?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

3.4 Cash accounting

Does the cash accounting system reflect daily cash balances by fund and account?

3.5 Cash plan

Is there an annual cash plan, updated regularly, setting out monthly cash inflows, cash outflows and borrowing requirements? How accurate has this been?

3.6 Integration of cash and budget plans

Does the annual budget implementation plan take into account the timing of payments and payment obligations arising from commitments during the year?

Is there an annual and updated cash plan that is consistent with the annual budget implementation plan?

3.7 Bank relations

Are procedures and methods in place for selecting banks?

Are there regular and effective cash management and investment relations between the government and commercial banks?

3.8 Managing short-term investments

Are timely records kept of each short-term investment transaction, including date, name of seller, amount, maturity, account number, duplicate copies, signature of authorizing officials, investment yields, prices and discount rates?

3.9 Reconciliation of investments with cash position

Are investments reconciled with cash balances and cash accounting records on at least a monthly basis?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

3.10 Availability of cash to cover obligations

Is there evidence that cash is made available to cover obligations, including, e.g., discounts for early payments?

What is the extent of current arrears?

3.11 Extent of cash rationing

Have cash limits or cash rationing been imposed?

3.12 Responding to cash flow problems

Are there sufficient reporting and accountability arrangements in force for proper management response to cash flow problems?

3.13 Cash Management Committee

Is there a whole-of-government Cash Management Committee in existence?

What representatives comprise this committee?

How effective has it been in practice?

3.14 Centralization of bank balances

- Is there a Treasury Single Account?

Describe the TSA arrangements.

Are all bank accounts, including commercial accounts, EBFs and central government accounts, controlled by MOF and/or Treasury?

Are all bank accounts centralized at the central bank?

What are the procedures for selecting commercial banks, if applicable?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

3.15 Cash management unit

Is there a cash management unit within MOF with assigned roles, responsibilities and duties?

Do they have sufficient technical capability for the tasks Is the cash management staff supported by adequate ICT?

3.16 Evaluating banking services

Can the cash management unit evaluate the effectiveness of standard banking services, e.g. deposits and direct deposits, and account reconciliations?

Can they also evaluate special services, such as:

concentration/zero-balance accounts to minimize idle balances?

Does the cash management unit review other special services such as:

– Collection (e.g. lockboxes and wire transfers)?

– Credit (e.g. note purchases, lease-purchase financing, long-term bond underwriting)?

– Safeguarding (e.g. safe deposit boxes)?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

4. RISK MANAGEMENT

4.1 Risk management process

Is there evidence that a risk management process exists and allows management to identify, assess and address existing or potential issues that may hamper the achievement of the entity’s objectives?

Has the entity prepared a description of its risk assessment processes?

How does the entity:

– Identify events and risks affecting the achievement of the objectives?

– Analyze the significance of risks and the likelihood of their occurrence?

– Determine the actions and follow-up mechanisms needed in response to the risks?

– Implement and modify controls to respond to changes in identified risks?

5. CONTROL ACTIVITIES

5.1 Policies and procedures

Are there adequate policies and procedures (e.g., sufficiently detailed financial regulations and rules, implementation guidelines, etc.) governing the control of the activities to ensure the correct application of internal rules and an effective fulfillment of objectives?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

5.2 Safeguarding of assets

Are there proper measures in place to adequately safeguard and value assets, for example:

– Is the access to assets separated from the other functions?

– Are adequate prevent controls in place? (for example a separate treasury function, double signature systems on the bank accounts, system of earmarked bank accounts for specific actions)

– Are the access rights to assets and funds restricted?

– Are assets regularly inventoried (e.g. physical inventory, confirmations)

– Is their value in the accounts regularly reviewed (e.g.

impairment of assets, provisions for irrecoverable credits, etc.)?

5.3 Verifications

Are appropriate procedures for verifications in place? For example:

– Verifications by the department heads of their officers?

– Verifications by an operational/financial supervisor?

– Systematic routine verification or verification on the basis of tests?

– Is there a distinction in verification procedures between own resources and mandated ones?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

5.4 Fraud

Are appropriate measures taken to prevent and detect fraud?

For example:

– How posts with risk of collusion are identified (e.g.

sensitive posts such as authorizing officer, financial verification, etc.)?

– Are mitigating measures taken in case of sensitive posts (rotation, additional controls, etc.)?

– Are there procedures to report improprieties and are they followed up?

– Is there a unit responsible for anti-fraud actions and investigations?

– Are there appropriate measures to prevent any conflict of interest?

5.5 Operating performance

Are there measures to review operating performance? For example:

– Are policies, programs and activities evaluated ex-ante, during implementation and ex-post?

– By whom are these evaluations performed?

– Who reviews and follows up on these evaluations?

What elements do these evaluations cover? For example:

– Achieved impact?

– Efficiency?

– Effectiveness?

– Alignment with objectives?

– Are these performed ex-ante, during the actions and/or ex-post?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

5.6 Reporting

Are there periodic assessments of the sound functioning of the control system?

Does the management need to provide an annual management assurance on the legality and regularity of underlying transactions?

If yes, does the entity agree to provide a certified copy of the annual management assurance on request?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

6. COMMUNICATION AND INFORMATION

6.1 Are there appropriate channels and means to communicate

and process information? For instance:

Is there sufficient communication with decentralized locations or satellite offices?

Does the entity maintain a comprehensive and up to date filing system which is accessible to all appropriate staff?

Audit trail: Is there a file created for each action/project in which all relevant documents are kept in such a way that it is possible to quickly put together the full file showing all stages?

Supporting documents comprise everything from the contract to the final payment and cover calls for proposals, evaluation records, the reasons for the selection or the award of the contract, all correspondence with third parties, records of meetings, cost statements, etc.

Does the entity use appropriate information technology? Does it have an appropriate information management system (ERP) in place? Are there measures to ensure the security of electronic information systems? Are control results accessible to all appropriate actors involved in the control chain?

Do the information and accounting systems allow timely financial reporting?

Are there procedures to request and grant exception to procedures and are they followed up?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

7. MONITORING

7.1 Is an ongoing monitoring/follow-up system established to

ensure the timely and effective implementation by management of the internal and external audit, control and evaluation findings? For example:

- Does management respond timely and appropriately to recommendations on internal control from internal and external auditors?

- Are there procedures to report internal control weaknesses?

- Are the reported internal control weaknesses followed up?

Is remedial action taken?

- Is the internal audit function well organized?

- Is there a periodic evaluation of the state of internal control? Does Management issue an annual report/declaration on its assessment of internal control?

- Are there procedures for handling and following up disputes and the recovery of funds?

7.2 How does the entity monitor and follow-up these audits?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

8. APPLICATION OF STANDARDS AT IMPLEMENTING

PARTNER/PROJECT LEVEL

8.1 Financial reporting requirements

Have guidelines been developed for implementing partners specifying the accounting and financial reporting requirements to be followed?

What are the key features of these guidelines?

For funds managed by implementing partners or granted to beneficiaries, does the entity require the partner or recipient to submit financial statements covering the program or project?

Are they specific purpose financial statements or general purpose financial statements?

8.2 Verifications

What kind of verifications are in place to assess the reliability, capacity and efficiency of organizations that implement projects on behalf of the entity?

8.3 Internal controls

Has the entity defined the minimum internal controls to be implemented by implementing partners and recipients while implementing the funds (e.g. manuals to implementing partners, procurement guidelines for implementing partners, etc.)?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

8.4 Implementing partner audits

Does a plan exist to audit the use of funds managed by implementing partners?

How is the scope set?

How is the plan adapted to findings?

Does the plan cover the financial, compliance and performance aspects? (see also the questions in the Audit pillar)

THIRD CRITERION:

EXTERNAL AUDIT

THIRD CRITERION: PROCUREMENT

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

1. EXTERNAL SCRUTINY AND AUDIT

1.1 National institution for independent, external auditing

Is the SAI independent of the executive?

What is its mandate?

Does it have its own fiscal database?

Does the scope of the external audit include all major public sector entities?

If no SAI exists, by whom (if at all) are external audits performed?

– External professional audit firms?

– Audit bodies from other organizations?

1.2 Periodicity/coverage of audits

What is the periodicity/targeted coverage of audits?

To what extent are audits carried out?

Are the annual financial statements regularly presented to an

SAI or similar body?

1.3 Review of internal controls

What types of audits are being performed?

– Financial audits?

– Compliance audits?

– Performance audits?

– Audits of specific subjects (e.g. audits of procurement procedures, IT audits, etc.)?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

1.4 Review of internal controls

How does the SAI review internal controls for potential corruption opportunities?

Does it focus on potential weaknesses on a transactional or systemic basis?

1.5 Audit follow-up

Is there an effective follow-up of external audit findings:

– By the MOF?

– By the legislature or parliament, e.g. public accounts committee?

Does the MOF have the capacity to review and respond to SAI findings?

Does the parliamentary committee have the capacity to review and respond to SAI findings?

2. AUDITING STANDARDS

2.1 Where audits are carried out, are they performed by

auditors who meet the basic ethical standards?

Independent, objective, impartial Possessing the necessary professional competence in the audit field Performing the audit work with due professional care

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

2.2 Where audits are carried out, do the documents evidence

that they are performed in accordance with the above audit standards? For example:

Auditing standards used Evidence of audit planning Clarity of audit scope Type and use of sampling techniques Consideration of a risk-based audit approach Consideration of internal controls Use of concept of materiality Type and quality of audit reports available

3. APPLICATION OF THE STANDARDS AT IMPLEMENTING

PARTNER/PROJECT LEVEL

3.1 Are there specific audit requirements for funds managed

by implementing partners or granted to recipients?

3.2 By whom are such audits performed?

Auditors appointed by the implementing partner?

Auditors appointed by the procuring entity?

Other?

3.3 Must the implementing partner or recipient submit audit

certificates for the program or project?

Has the implementing partner established terms of reference and specifications for such audits?

Are they required to be performed in accordance with internationally accepted auditing standards?

What are the periodicity/targeted coverage of such audits?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

3.4 Does the procuring entity perform audit verifications

(other than audit certificates) of the projects managed by partners?

By whom are such audits performed?

Has the implementing partner established terms of reference and specifications for such audits?

Are they required to be performed in accordance with internationally accepted auditing standards?

FOURTH CRITERION:

PROCUREMENT

FOURTH CRITERION: PROCUREMENT

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

1. LEGISLATIVE AND REGULATORY FRAMEWORK

1.1 Scope of application (BLIs)

Is the public procurement law accessible to the public?

Does the law apply to all public bodies, sub-national governments and MDAs when budget funds are used?

Does the law cover goods, works and services?

Have implementing regulations and sample documents been prepared to aid procuring entity compliance? (CPIs) Are spending MDAs and sub-entities familiar with (and generally compliant with) the law?

1.2 Procurement methods (BLIs)

Does the law clearly defines what procurement methods are permissible and under what circumstances?

Is open competitive procurement the default method? (CPIs) Check sample number large or indicative procurements in

MDAs of interest to see the extent of competition they use and whether exceptions are well justified in writing.

1.3 Advertising (BLIs)

Does the law require publication of business opportunities and contract awards?

Is adequate time provided for offerors to prepare and submit bids?.

1.4 Rules on participation (BLIs)

Does the law allow discrimination against firms for reasons other than lack of qualifications? For example, excessive preferences granted to local firms, how SOEs are treated, etc.

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

2. INSTITUTIONAL FRAMEWORK AND MANAGEMENT CAPACITY

2.1 Procurement integrated into public sector governance

(BLIs)

Does the procurement system have appropriate links with other institutions carrying out PFM and governance functions?

Is procurement planning coordinated with the budgetary process and done on a multi-year basis?

Do the budget law and financial procedures support timely procurement, contract execution and payment? (CPIs)

Check if procurement starts occasionally before budget is authorized and how long it takes suppliers, contractors and consultants to be paid.

2.2 Cooperation between procurement and PFM systems

(BLIs)

Are completion reports routinely prepared certifying budget execution and allowing reconciliation of contract deliverables with budget programming?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

2.3 Procurement oversight body (BLIs)

Is there a procurement oversight/regulatory body?

Is it given proper authority and independence in the legal framework?

Does it have the staff resources and budget to do everything if should be doing? (CPIs) Does it report on overall procurement results and trends to the government?

Does it have and maintain an ongoing dialogue about procurement results, procedures, future opportunities and upcoming reforms with:

– Civil society?

– The local business community?

2.4 System for collection/dissemination of procurement data

(BLIs)

Is detailed procurement information collected and disseminated? (CPIs)

Is this information accurate?

Is it comprehensive?

Is there a system for measuring achievement of value for money?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

2.5 Training (BLIs)

Does the government have a sustainable strategy for training staff to develop capacity? (CPIs)

What is the actual track record on training (i.e., how many trained and at what levels?) in the MDAs of interest?

Are staff recruited using competitive procedures?

Are there quality control standards given to procurement staff?

Are they used in staff performance evaluations?

3. PROCUREMENT OPERATIONS AND MARKET PRACTICES

3.1 Efficient procurement operations (BLIs)

Is the way public sector agencies carry out their procurement operations efficient? (CPIs)

Do staffs that play a role in procurement at all levels have the necessary skills and experience?

Are there enough of them to carry out the anticipated workload?

Do agencies have the right skills mix?

Is there an ongoing training program to address weaknesses in previous performance?

Are agencies structured in such a way that responsibilities are delegated down to the level that has the capacity to carry out the function in question?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

3.2 Recordkeeping (BLIs)

Are proper records and documents retained for a sufficiently long period relating to procurement transactions and contract performance during implementation? (CPIs) Check relevant MDAs to make sure that the following are kept:

– Notices of bidding opportunities

– Bidding documents and addenda,

– Bid opening records,

– Bid evaluation reports,

– Formal appeals by bidders and outcomes,

– Minutes of negotiations, final signed contracts, addenda and amendments,

– Claims and dispute resolution proceedings, and

– A record of all payments and disbursements.

3.3 Dialogue with market (BLIs)

Does the government have an ongoing dialogue with the business sector and seek its views on ways to improve procurement performance and results? (CPIs)

Are training sessions conducted for potential bidders on how to bid for public contracts in compliance with the procurement law?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

3.4 Market access to public sector opportunities (BLIs)

Are private sector institutions (SMEs in particular) well organized and able to access public sector opportunities?

(CPIs)

Check to see if systemic restraints exist that inhibit a good market response. For example:

– Difficulty gaining access to credit,

– Unfair contract conditions that place undue risk on the successful bidder, and

– Fair and prompt payment provisions.

Examine MDAs, or a sample of MDAs and determine the average number of bids they receive for their routine contract workload.

3.5 Contract administration provisions (BLIs)

Do contracts contain fair contract administration procedures, including balanced efficient dispute resolution provisions and a credible means to enforce decisions?

Do MDAs follow clearly defined procedures for managing contract performance, paying proper attention to quality control issues, handling of claims and processing of amendments? (CPIs)

Interview selected MDAs and asks to see a few example contracts, claims, amendments and records relating to inspections or tests.

Ask selected MDAs how they handle the supervision of civil works contracts

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

4. INTEGRITY AND TRANSPARENCY

4.1 Effectiveness of control and audit systems (BLIs)

Do the MDAs carrying out procurement operations have effective control and audit systems? (CPIs)

Interview MDAs of interest to obtain answers to the following:

– Are these controls and audits of appropriate quality, reliable and carried out in a timely fashion?

– Do they generate information quickly enough to enable management to take early corrective action?

– Is there a manual of internal controls detailed enough to permit auditors to carry out performance audits?

– Are auditor recommendations constructive and implemented promptly by the agencies audited?

4.2 Capabilities of auditors (BLIs)

Do the auditors carrying out procurement audits have the proper skills? (CPIs)

Are the auditors carrying out these audits selected by a screening process looking at their level of skill and experience with procurement operations?

Do they receive training in these matters?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

4.3 Efficiency and fairness of complaint mechanisms (BLIs)

Does the regulatory framework establish a complaint mechanism that is efficient and fair? (CPIs)

Are procuring MDAs staffed properly to handle initial complaints promptly when they are lodged?

Do complainants have the right to appeal?

If so, does the appeal review body have the legal authority to render decisions?

Is it independent?

Are its decisions based on a review of the available documentary evidence?

Do the procedures it follows provide for fairness and due process?

Are decisions published and made available to the interested parties and the public?

4.4 Transparency (BLIs)

Assess the quality, timeliness, relevance, ease of access and comprehensiveness of information the government makes available about public procurement. (CPIs)

Check the government’s procurement website or other ways of disseminating procurement information.

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

4.5 Effectiveness and reach of government’s anti-corruption

program (BLIs)

Does the legal framework (both the procurement law and the criminal or other codes) include anti-corruption provisions?

Do these cover corruption, fraud, coercion, conflicts of interest and other forms of unethical behavior, and do they set forth the actions that can be taken with regard to such behavior?

Does the government have an active anti-corruption program aimed at engaging all stakeholders and informing of their rights and duties? (CPIs)

Interview relevant MDAs to determine the following:

– Is there evidence that anticorruption laws are being enforced?

– Is there a secure mechanism for reporting corrupt, fraudulent or otherwise unethical behavior?

Do civil society and the business community support this program and wish that the procurement market would become known for integrity and ethical behavior?

4.6 Codes of conduct, ethics and conflicts of interest (BLIs)

Do procuring MDAs have a code of conduct or ethics in place that addresses corruption, fraud, coercion and conflicts of interest? (CPIs)

Review samples from selected MDAs to determine if coverage is adequate.

Are decision-makers required to declare if they have a conflict of interests and to comply with financial disclosure requirements?

FIFTH CRITERION:

SALARIES

FIFTH CRITERION: SALARIES

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

1. PROCEDURES

1.1 Is the authorizing of variations to the approved number of persons that can be employed subject to:

Standing Orders?

Financial Regulations?

1.2 Is there a designated person for overall control of the

systems for payment of salaries?

1.3 Is there a designated person for the management of the

day-today administration of these systems?

1.4 Are references required, and assessed before appointment

of accounting and similar staff?

1.5 Are staff issued with written instructions that define their duties and responsibilities?

1.6 Are the duties of payroll staff periodically rotated?

1.7 Is there a review of procedure specified for errors located both before and after payments? If so:

Is the person who performs this review not engaged in the preparation of this payroll?

Is a record of errors maintained and periodically examined by a senior member of staff?

Are manual alterations to payroll permitted? If so, are the circumstances specified?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

2. CONTROL OF AUTHORIZED NUMBER OF EMPLOYEES

2.1 Is there an approved number of employees? If so, is it

expressed as:

Number of full time staff?

Total number of allowed hours?

2.2 Are the approved numbers reviewed annually?

Are interim variations controlled?

2.3 Is the control of the approved numbers the responsibility of:

Service ministry staff?

Personnel staff?

Finance staff?

2.4 Are the names shown on the payroll verified by the

employing ministry at least once a year? Is this function carried out by someone independent of the preparation of payrolls?

2.5 Are there written authorities for the following:

New employees?

Retirements, transfers, resignations, dismissals and changes?

Gradings?

2.6 Are these authorities provided and/or held by persons

other than those who prepare the payroll?

2.7 Are these documents certified by authorized persons?

2.8 Are specimen signatures held by the salaries section?

Questions to evaluate the compliance with the criterion Observations of the author, based on the analysis of available documents and enquiry of the entity subject to assessment

Reference to documents (copy attached)

Assessment of the Author

2.9 Are ‘appointment forms’ used? If so:

Is their issue controlled?

Are the forms authorized by a responsible officer?

2.10 Do controls exist to show the salaries section that an

employee has been properly appointed?

Questions to evaluate the compliance with the criterion Observations of the author, based on the…