LECTURE ONE

THE CONTEXT OF PUBLIC FINANCIAL

MANAGEMENT
 INTRODUCTION TO PUBLIC FINANCIAL MANAGEMENT
Overview:
PFM stands for Public Financial Management, and it is linked to how governments raise and
manage public resources and the immediate and medium-to-long-term effects of these
resources on the economy and citizens.

Definition:
It refers to the set of laws, rules, systems, and processes used by sovereign nations and
sub-national governments, to mobilize revenue, allocate public funds, undertake public
spending, account for funds, and audit results.

PFM deals with all aspects of resource mobilization and expenditure management in
the government
 Why PFM?

PFM policies vary by country and can cover issues related to tax law, budget management, debt
management, subsidies, and state-owned enterprises. A well-functioning PFM system is critical to ensuring
accountability and efficiency in the use of public financial resources, while a weak PFM system can result in
significant wastage of scarce resources (The figure above).
 Why PFM Cont.…

Promote National Savings

Financial Decision
Maintenance of aggregate fiscal discipline.
PFM ensures resources are allocated reasonably.
Ensures value for money (VFM)
Enhance easy access to information, & promote accountability

Note: The broad objective of Public Financial Management (PFM) is to achieve

budget credibility, improve allocation of resources, and efficient and effective
delivery of public services.
 Why do Parliamentarians need to understand the PFM cycle?
Parliamentarians, as elected officials representing their constituencies, play a critical
role throughout the PFM cycle. There are 5 main components of getting the basics
right in PFM:
• Strategic budgeting: translating broad plans and policy goals into concrete programs to benefit
citizens;

• Sustainability of the budget (including debt): The Ministry of Finance ensures allocative efficiency
among spending MDAs and keeps debt levels to a minimum;

• Robust conceptualization of capital expenditures: Capital expenditures (notably infrastructure) ought to

be conceptualized through the annual and medium-term budgeting processes;

• Program-based budgeting (PBB): Aligning planning and budgeting systems to ensure that outputs and
outcomes are associated with public policy objectives; and

• Prudent budget execution: Legislative oversight is integral to reviewing budget execution reports to
ensure public resources are used in the manner they were approved.
 The PFM cycle?

Strategic Budget
Budgeting Preparation

Legislative
External audit Debate

Accountability Enactment

Reporting & Resource

accounting management
Internal Control
& Audit
 What is the legislature’s role throughout the PFM cycle?
• Budget Formulation: The legislature plays a role in determining the
budget priorities in the medium- term.(approval of MTEFs, MTDS,
etc.);
• Budget Approval: During legislative debate of the executive’s
budget proposal, MPs scrutinize what is to be implemented taking
into account existing revenue and debt levels;
• Budget Execution: The scrutiny of budget execution reports by legislative
committees is essential to accountability;
• Budget Evaluation: Legislatures can also conduct post-hoc review of
budget execution by reviewing year-end reports, financial statements, and
external audit reports.
 History and Approaches to PFM
Traditional approach
This was the initial stage of Public financial management (1920 to 1950). This approach was
based on experience and the traditionally accepted methods. It was more focused on raising
funds and not too much on expenditure management and accountability.

Contemporary Approach
This approach looks at the whole system of PFM ranging from budgeting, right through
approval, execution, reporting, and auditing.
A lot of PFM reform strategies have been introduced to enhance the contemporary approach.
The first two decades of the twenty-first century have witnessed an influx of innovations and
reforms in public financial management. The current wave of reforms is markedly different
from those in the past, owing to the sheer number of innovations, their widespread adoption,
and the sense that they add up to a fundamental change in the way governments manage public
money
PUBLIC FINANCIAL MANAGEMENT REGULATIONS IN
SIERRA LEONE
Public Financial Management (PFM) refers to the set of laws, rules, organizations, systems,
and processes available to national or subnational governments to:
 Mobilize revenue,
 Allocate public funds,
 Implement public spending,
 Account for funds, and
 Have the results audited by an external entity

 The government provides a variety of services to citizens to improve quality of life and the
function of society, such as education, emergency services like firefighting, law
enforcement, and many others.

 Sources of revenues for public finance activities can include taxes, fees, and fines.,
 SOME PAST AND PRESENT PFM RELATED LAWS/REGULATIONS
 The Constitution of Sierra Leone 1991  Cap.173 of the Laws of Sierra Leone 1960
 The Public Budgeting and Accounting Act,  Parliamentary Act 1980
1992  Judges Conditions of Service Act 1983
 The Government Budgeting and
Accountability Act 2005  President and Vice President Retiring Benefits
Act 1986
 Financial Management Regulation 2007  State Salaries and Pensions Act 2003
 Public Financial Management Act 2016  National Commission for Social Action
 Financial Management Regulation 2018 (Amendment) Act 2015
 National Public Procurement Act 2016  NASSIT Act 2001
 Fiscal Management and Control Act 2017  The General Orders
 National Revenue Authority Act 2002  Civil Service Code, Rules and Regulations
 Finance Acts
 Some Relevant Terms of the PFM Act
 Accountable- means the requirement to record, report, explain, and justify actions as the case
may be to a superior officer
 Appropriation- means any authority under this or any law to make payment of public money
 Financial year- means a period of twelve months starting on 1st January and ending 31st
December of the same year
 Some Relevant Terms of the PFM Act Cont..
 General Government includes all entities included in the central government, local government, and
social security.

 Local government includes-

 Local councils
 Chiefdom Administrations and
 Other entities-
Which are controlled and mainly financed by local councils or chiefdom councils and
The competence of which is restricted to a district, town, or city.

 Minister-means the Minister of Finance

 Treasury Single Account- means an integrated system of bank accounts that enables public
money to be managed in a consolidated manner
 Public money- means all money in the custody or under the control of the state or a person acting
on behalf of the state
 RESPONSIBILITIES OF VARIOUS INSTITUTIONS TO ENSURE
SOUND PUBLIC FINANCIAL MANAGEMENT IN SIERRA LEONE

Responsibilities of Cabinet
• Approve the Fiscal Strategy Statements and the State budget to be laid before Parliament

• Monitor and review the execution of the State budget and the financial management of the
general government through review of the quarterly statement of the central government, the
annual financial statements of the Consolidated Fund, the annual financial statements of the
central government, and the audit reports of the Auditor-General;

• Approve a Bill to establish a new sub-vented agency, some other entity in the central
government, a social security fund, or a public enterprise;

• Approve a proposal to Parliament of acquisition of shares and ownership interest in a

company or other body corporate which causes the company or other body corporate to be a
public enterprise; and

• Approve proposals for Parliament to ratify external loans and grants.

Responsibilities of Parliament
 Approve the State budget, including the Supplementary Estimates;

 Review the annual financial statements of the Consolidated Fund, the annual
financial statements of the central government, and the audit reports of the
Auditor-General;

 Approve guarantees given by the Minister and loans provided by the Consolidated Fund;

 Ratify external loans contracted by the Government of Sierra Leone; and

 Ratify external grants received from development partners.

Responsibilities of the Ministry of Finance
 Develop the Government’s fiscal policy covering the general government through the preparation of the Fiscal Strategy
Statement and State budget documents including the medium-term budgetary framework.
 Prepare the State budget through control over the budget preparation process;
 Produce macroeconomic and fiscal forecasts underlying the Fiscal Strategy Statement and State budget documents
 Evaluate projects proposed by budgetary agencies
 Monitor and exercise control over the execution of the State budget
 Manage and control public money through the management of the Treasury Single Account and the planning and
forecasting of cash flow;
 Coordinate the management of external grants and loans made to the State
 Monitor and exercise control over the financial management of entities included in the general government and public
enterprises
 Ensure transparency in the execution of the State budgets, the management of public money, and the financial
management of entities included in the general government and public enterprises
 Formulate policies on, and exercise control over, the acquisition, management, and disposal of financial and other
assets held by entities included in the general government
 Monitor, and exercise control over, the management of extractive industries’ revenues in accordance with this Act;
 Preparing cash flow forecasts of public money in consultation with budgetary agencies and other entities included in
the central government
 Perform any other responsibilities conferred on him by any other law, or related to the responsibilities under previous
paragraphs
 Delegation by the Minister & Powers of the Financial Secretary

The minister may delegate in writing any of his functions to the Financial Secretary or any other
public officer in the ministry.
Subject to the Constitution and the PFM Act, it shall be the principal function of the Financial
Secretary to ensure the effective application of the Act, to advise the Minister, and to
supervise the staff of the Ministry in the performance of their duties under the general
direction and control of the Minister.

 Use of Green Pen

 Minister
 Auditor-General
 An officer or employee of the Auditor-General
 Person appointed by Auditor-General
Responsibilities of The Accountant General’s Department
 The Accountant General shall, in the performance of his duties under the PFM Act or any other enactment
act in accordance with the general or specific directions of the Minister
 There shall be an accounting class within the public service to which all accounting staff in the service shall
belong and of which the Accountant General shall be the head in addition to being head of the department
within the Ministry.
 The Accountant General may station in any department any person employed in his office to carry out his
functions under the PFM Act 2016 and such department shall provide the necessary office accommodation
for any person so stationed.
As the Government’s Chief accounting officer, the following are his other responsibilities:
 receiving all public money to be paid into the Consolidated Fund
 providing secure custody for such public money
 Making disbursement from the consolidated Fund
 Monitoring the operations of the Treasury Single Account
 Maintaining a register of general government and public enterprises
 Being the principal adviser to the Minister and the government on accounting matters
 Preparing and publishing the annual financial statements of the consolidated fund and central government
Responsibilities of The Accountant General’s Department Cont..
 Preparing and publishing the annual financial statements of the central government

 Compiling annually consolidated financial statistics covering the general government in

accordance with internationally accepted standards

 Being the principal adviser to the Minister and the Government on Accounting matters

 In consultation with ICASL specify internationally accepted accounting standards applicable to

any entities included in the general government

 Determining the chart of accounts of the central government and as he considers appropriate, the
charts of accounts of the local government and social security funds

 Issuing, as he considers appropriate instructions applicable to accounting practices and financial

reporting of budgetary agencies and other entities included in the general government.
 Responsibilities of The Internal Audit Department
The Director of the Internal Audit Department of the Ministry of Finance may require the
vote controller of:
 a budgetary agency
 subvented Agency
 other entities in the Central government
 local council
 social security fund or public enterprise
to establish or maintain an internal audit department, division, or unit.
An internal audit department, division, or unit of a budgetary
agency shall:
 Ensure strict adherence to all control procedures Monitor the execution of the
budget
 Make periodic reports on audits completed
 Review implementation of the Auditor General’s recommendation
 Review all contracts of the agency or entity for effective performance and
value for money

The division or unit shall report to the Audit Committee of the agency and the Director of Internal Audit,
Ministry of Finance.
 Auditee Preparation
o Ensure the participation of senior officers at both the opening and closing meetings

o Appoint appropriate staff to interface with and work with the audit team

o Establish an agenda and schedule for the audit together with the audit Team Leader

o Provide the audit Team Leader with documents needed by the audit team.
o Make appointments with appropriate management staff and ensure they are prepared for
the audit 
o Ensure that all relevant information is available for the audit team upon their arrival eg.
Maps of the facility, names, and numbers of key people
o Locate and collate all the requested records and documentation. Ensure that these are up-
to-date and readily available on the day of the audit

o Provide the auditors with a meeting room and access to areas of the facility that will
enable worker interviews to be undertaken in a confidential manner
 Responsibilities of The Vote Controllers of MDAs
According to PFM 2016, The vote controller of a budgetary agency shall be –the Permanent Secretary, if the budgetary
agency is a Government Ministry; and the Head/Executive Secretary, if the budgetary agency is a statutory body.
Responsibilities of the VC:
 Advise the head of the budgetary agency on its objectives, strategies and policies, budget proposals and preparation, and
management of the resources;
 Maintain efficient and effective systems of financial management and internal controls
 Maintain an effective internal audit function under the oversight of an audit committee
 Operate, and make commitments under, an open, competitive, and transparent procurement process
 Ensure proper evaluation of projects and monitor their implementation
 Certify payments of expenditures within the prescribed or agreed period
 Safeguard and manage assets and public money under the responsibilities of the budgetary agency
 Assist the National Revenue Authority to collect revenues of the budgetary agency promptly, efficiently, and
effectively;
 Where applicable, report promptly to the head of the budgetary agency, the Minister, the Auditor-General and
other authority specified by any other enactment the discovery of any illegal payment or loss or deficiency of
public money;
 Initiate the disciplinary process against any official or employee of the budgetary agency who contravenes this
Act or causes or permits an illegal payment or loss or deficiency of public money or commits an act to
undermine the financial management and internal controls of the budgetary agency;
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Preservation and Destruction of Accounting records
Accounting books and records shall generally be retained for the
following period:

Departmental copies of 3 years

receipts, licenses, payment
vouchers, cash books
Stores receipts and issue vouchers 3 years

Treasury copies of receipts, 7 years

receipts vouchers, licenses

Abstracts, subsidiary records, 7 years

stores ledgers, journals

Treasury main cash books, indefinitely

ledgers loan and investment
registers
Records required for indefinitely
officers pensions and
terminal benefits
Original Payment 7 years
vouchers
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