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ADB Grant 0133-CAM: Public Financial Management in Rural Development Ministries (Component 1)

ADB Grant 0133-CAM: Public Financial Management in Rural Development Ministries (Component 1). Advanced Accounting 2 – Existing Accounting Methodology in Line Ministries. Day 3: August 18, 2010: Bookkeeping operations. Day 3 Bookkeeping operations. Content.

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ADB Grant 0133-CAM: Public Financial Management in Rural Development Ministries (Component 1)

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  1. ADB Grant 0133-CAM: Public Financial Management in Rural Development Ministries (Component 1) Advanced Accounting 2 – Existing Accounting Methodology in Line Ministries Day 3: August 18, 2010: Bookkeeping operations ADB Grant No.0133-CAM/Component 1: PFMRD

  2. Day 3 Bookkeeping operations Content ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  3. Bookkeeping operations The stakeholders of the public expenditure chain, i.e. authorizing officers, financial controllers and accountants (and petty cash management officers), must care for the bookkeeping operations related to their transactions:  • Management bookkeeping operations of authorization officers. • Commitment and payment bookkeeping of financial controllers • Government bookkeeping operations for accountants, as well as revenue and advance payment officers. ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  4. 1. Administrative Bookkeeping by Authorizing Officers • The authorizing officer firstly needs to know the status of the appropriations that he manages in order to use them properly: That is the purpose of commitment bookkeeping operations, handled openly before Financial Control. • He must also be familiar with the payment orders that he has forwarded to the accounting officer for assumption and payment; besides, the Table of Government Financial Operations (TOFE) is drawn up based on the orders (issued and certified by the authorizing officer or assumed and certified by the accountant: the amount is to be the same in both sets of books.) ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  5. 1. Administrative Bookkeeping by Authorizing Officers • The difference between the commitments requested and commitments authorized is Unauthorized Committed Expenditures (Dépenses Engagées non Ordonnancées - DENO). • The difference between payment authorizations and payments corresponds to the accounts payable (Restes à Payer - RAP). • According to the IMF terminology, accounts payable exceeding three months are referred to as payment arrears. ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  6. 1. Administrative Bookkeeping by Authorizing Officers • The difference between issued (and assumed) receipt orders and the corresponding collections are the accounts receivable (Restes à recevoir - RAR). • Accounts payable and accounts receivable are collectively referred to as outstanding balances. • With integrated management (or automated) systems for public finance, each stakeholder (authorizing officer, financial controller, accountant) is able to know at any moment the status of a specific expenditure and the overall or detailed status of the appropriations. ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  7. 2. Bookkeeping operations of financial controllers • This point was dealt with on day 2 of this course 3. Bookkeeping operations of revenue and advance payment officers • This bookkeeping operation shows at any given time: •  For revenue accounts: the status of their cash on hand •  For advance payment accounts: the status of the advance received." (Article 101 of Sub-decree 82) ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  8. 4. Bookkeeping Operations of the Government • “The general bookkeeping operations of the government shall have trial of: • Budget operations. • Treasury operations • Operations conducted with third parties.” ( Article 98 of Sub-decree 82) • "The general bookkeeping operations of the government shall be handled pursuant to an accounting plan drawn up by the Minister of Finance .... Its nomenclature is to be in harmony with the general accounting plan." (Article 99 of Sub-decree 82) ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  9. Purchases through the Banking or National Treasury System • There are three cycle procedures for “current budget expenditure”: • Firstly, the amount to be spent must have been included in the approved budget; • Secondly, the ministry must obtain a “letter of commitment” from MEF prior to placing any orders or firm commitments; and • Thirdly, the ministry must obtain a Mandate from the MEF to actually spend the money. ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  10. Purchases through the Banking or National Treasury System Obtaining the Letter of Commitment from MEF • The process is started in the line department by an officer submitting a request for a purchase item to his superior officer (usually the Chief of Unit/ Division/ Section/ or Office) by submitting a letter and attaching invoices and three quotes with a recommendation of which quote to use. • The authorizing Officer submits a request to the accounting and planning section in his department by countersigning the letter and reviewing the invoices and quotes. This letter requesting a commitment to purchase is then forwarded under the signature of Chief of Planning and Accounting section and the Director of the Line Department to the Administration Department in the Ministry for the attention of the Director Department of Accounting and Finance. ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  11. Purchases through the Banking or National Treasury System Obtaining the Letter of Commitment from MEF • The Administration Department registers and forwards the commitment request to Department of Accounting and Finance. • Department of Accounting and Finance receives the commitment request and checks the total against the approved budget to ensure it was included. • Department of Accounting and Finance will then collate a series of letters from the same department for forwarding to the Minister for approval or if the request is sufficiently large it may go as an individual request. • After approval has been obtained from the Minister it is forwarded to the MEF Financial Controller in the Ministry. ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  12. Purchases through the Banking or National Treasury System Obtaining the Letter of Commitment from MEF • The request for a commitment proposal is sent to the Department of Administration at MEF. • The Department of Administration at MEF will register and forward the request to the Department of Financial Affairs, who in turn will process a request for commitment and send it to a Senior Minister for approval. • After the commitment letter has been signed it will be registered by the Department of Financial Affairs • After approval of the commitment documents, the documents will come back to Department of Accounting and Finance in the Ministry. • The Ministry can then start work on the purchase proposal. ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  13. Purchases through the Banking or National Treasury System Obtaining the Letter of Commitment from MEF Line Ministry MEF Department making the request Letter of Commitment Department of Accounting and Finance Minister Minister or General Director of MEF Financial Controller MEF DFA/Dept of Admin & Finance

  14. Purchases through the Banking or National Treasury System Obtaining a Mandate to spend the money • The mandate request and commitment documents will be presented to the Budget Department at MEF for approval by the Budget Manager (can be a Senior Minister, Secretary of State or Under Secretary of State). • After approval of the mandate documents by MEF, notification will be forwarded to the National Treasury or MEF will transfer money for the purchase to National Bank of Cambodia. • The appointed agent of Advance Manager of Department of Accounting and Finance in MAFF will go to the National Treasury or National Bank of Cambodia to withdraw the cash. ADB Grant No.0133-CAM/Component 1: PFMRD ADB Grant No.0133-CAM/Component 1: PFMRD

  15. Purchases through the Banking or National Treasury System Obtaining and cashing the Payment Mandate Line Ministry MEF NBC Department of Accounting and Finance Request for payment mandate Obtain cash payment Approved payment mandate General Director National Treasury Or transfer to National Bank of Cambodia Minister Approved payment mandate Financial Controller MEF Budget Department – Senior Minister

  16. Illustration of integrated commitment and payment control ADB Grant No.0133-CAM/Component 1: PFMRD

  17. Graphical representation ADB Grant No.0133-CAM/Component 1: PFMRD

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