2010年-世界发展银行全球_Armenia___Public_Financial_Management_Reform_Priorities_54页_832kb

Summary of Republic of Armenia Public Financial Management Reform Priorities

Core Content

This report outlines the priorities for reforming the public financial management (PFM) system in the Republic of Armenia, with a focus on improving the effectiveness and transparency of budget formulation, execution, and cross-cutting challenges. It is based on a World Bank mission conducted in early 2010 and aims to provide practical recommendations for the next phase of PFM reforms. The report also serves as a basis for informing a potential multi-donor facility to support the implementation of the reform strategy.

Main Views

The report identifies three key areas for reform: budget formulation, budget execution, and cross-cutting challenges. It emphasizes the need for a more integrated, transparent, and efficient PFM system that aligns with the government's long-term development goals.

1. Budget Formulation

• Government Objectives: Strengthen the medium-term fiscal and expenditure frameworks, enhance program budgeting, and improve investment assessment and management.
• Current Situation:
  • The legal framework is in place, and the MTEF has been developed.
  • Budget preparation is institutionalized and follows legislative requirements.
  • Program budgeting is being introduced, but its timeline and implementation need reassessment.
• Ongoing Reforms:
  • The government is working on improving investment assessment and management.
  • Efforts are underway to implement program-based budgeting.
• Recommendations:
  • Strengthen forecasting and initiate fiscal risk assessment.
  • Apply baseline presentation consistently across all functions.
  • Reassess the timeline for using program format in appropriation.
  • Improve investment assessment and management.

2. Budget Execution

• Government Objectives: Enhance internal financial control, improve accounting and reporting, and ensure the inclusion of non-commercial organizations (NCOs) in the overall budget execution process.
• Current Situation:
  • The treasury system is well-functioning but not comprehensive.
  • There is strong cash planning and management.
  • Payment processing is well-developed, but internal control and auditing are weak.
• Ongoing Reforms:
  • Efforts are being made to introduce risk-based audit plans.
  • There are ongoing initiatives to improve transparency and accountability.
• Recommendations:
  • Integrate program and activity classification into the chart of accounts.
  • Develop posting and reporting rules for the new classification.
  • Improve public sector accounting and reporting.
  • Include NCOs in the whole-of-government budget execution.
  • Enable line ministries to submit quarterly reports electronically.
  • Establish an internal audit charter and ensure functional independence of the internal audit unit.
  • Implement internal auditing in two to three agencies over a period of years.

3. Cross Cutting Challenges

• Key Challenges:
  • Integration of functional processes within the Ministry of Finance.
  • Enhancement of ICT systems and professionalization of financial management staff.
  • Capacity building across all government institutions.
• Recommendations:
  • Carefully assess existing cost estimates and develop an ICT strategy.
  • Decide between a standardized commercial-off-the-shelf (COTS) system or a bespoke approach.
  • Plan, procure, and implement a new system, as recommended by the IMF, SIGMA, and consultants.
  • Continue expanding skill-building across all functional areas.
  • Develop a training program for non-financial managers.

Reform Scenarios

The report outlines three reform scenarios, each adjusted to different levels of funding availability:

• Scenario 1: Comprehensive ICT-enabled business process reengineering. This scenario would fully implement the report's recommendations and is expected to take 5–6 years.
• Scenario 2: Intermediate ICT-enabled business process reengineering. This involves re-engineering business processes with a more limited and interim financial management system.
• Scenario 3: Deepening select reform activities. This scenario involves continuing the current approach of optimizing business processes within each functional area with limited "ad-on" ICT modules.

The main cost driver is ICT support, with Scenario 1 being the most resource-intensive and Scenario 3 the least. The benefits of each scenario vary accordingly.

Reform Strategy and Funding

• The reform strategy aims to improve coordination and prioritization of various reform elements.
• It is intended to inform donors and mobilize financial resources, including identifying investment needs for a PFM investment loan by the World Bank.
• The strategy is anchored in the Government's Annual Work Program for 2009 and supported by the World Bank's second Development Policy Operation for Armenia.

Key Recommendations

• Strengthen the medium-term fiscal and expenditure frameworks.
• Enhance program budgeting and align it with strategic priorities.
• Integrate NCOs into the budget execution process.
• Improve internal financial control and auditing.
• Develop a comprehensive ICT strategy and implement a new financial management information system.
• Expand capacity building and professionalize financial management staff.
• Ensure transparency and accountability in public spending.

Conclusion

The report underscores the importance of a sound PFM system for achieving Armenia's development objectives. It highlights the need for a structured, phased approach to reform that considers cost, funding availability, and the interdependencies between different reform elements. The recommendations aim to create a more efficient, transparent, and accountable public financial management system that supports sustainable development and economic growth.