Financial Management Reform in Guatemala

1
Financial Management Reform in Guatemala

• María Antonieta del Cid de Bonilla
• Minister of Public Finance
• May, 2006

2
Contents

• Origin of the Reform
• Implementation of the Reform
• Components of the Reform
• Reform Areas
• The reform of the municipal financial
  administration
• Covering of the System
• Assessment of the Financial Management in
  Guatemala (CFAA-CPAR / WB-IADB)
• Reform Challenges

3
Origin of the Reform

• The financial management reform in Guatemala
  began at the middle of the 90s, with two
  essential objectives
• Enhance the efficiency and transparency of the
  financial administration of the public sector
  and
• Improve the delivery of public services, through
  dis-concentration of the management of financial
  resources to the public entities.

4
Origin of the Reform

• Since the beginning, the process has counted with
  the World Banks assistance, and it started with
  an integral diagnosis and a conceptual design of
  the financial management system, worked out by
  international experts in budget, accounting,
  treasury, public credit, auditing and procurement
  fields.
• Guatemala Conceptual Design and Plan for the
  Development of a Governmental Financial
  Administration and Control System. E. Perez, E.
  Estrella, C. Fernandez, R. Jimenez, C. Lara, M.
  Pastor, D. Turman, J. Villalobos, 1994.

5
Origin of the Reform

• The main weaknesses were
• The governmental authorities didnt have
  accurate, timely and relevant financial
  information available to support them in the
  decision making process
• The Ministries in line lacked control and
  responsiblities on their financial operations
• Administrative defficiencies concerning the
  formulation and execution of the budget generated
  high costs in efficiency and accountability or
  transparency terms.

6
Implementation of the Reform

• The design and implementation of the reform han
  been supported by international experts in the
  different areas of financial management.
• But the implementation has mainly been in charge
  of national officials in the different public
  entities, fact that has generated conditions for
  its sustainability.

7
Components of the Reform

• Legal reform
• Function reorganization
• Procedure reform
• Information system
• Training

8
Legal Reform

• The financial management reform is based on a
  legal framework in agreement with its objectives.
• In 1997, a new Organic Law of the Budget was
  approved, which regulates the budget,
  governmental integrated accounting, treasury and
  public credit systems.

9
Legal Reform budgetary system

• The budgetary system is the group of principles,
  agencies, norms and procedures that govern the
  budgetary process of the public entities. The
  Ministry of Public Finance is the principal of
  the process and its main functions are
• To dictate the norms for the formulation,
  programming of the execution, modifications and
  evaluation of the budgets of the public entities.
  
• To develop the management control tools of the
  results linked to the fulfillment of the
  objectives and goals of the public sector.

10
Legal Reform accounting system

• The governmental system of accounting is the
  group of principles, agencies, norms and
  procedures that permit the registration of the
  facts that have effects on the budget and on the
  patrimony, and the flows of public funds.
• The Ministry of Public Finance is the principal
  of the system, and it is responsible for
  prescribing, to put and to maintain in operation
  the system in the whole non financial public
  sector.

11
Legal Reform treasury system

• The system of treasury is the group of
  principles, agencies, norms and procedures for
  the administration of the public resources and
  its use for the payment of the government
  obligations. The main attributions of the
  Ministry of Public Finances are
• To administrate the Common Fund.
• To formulate, execute, control and check the cash
  budget of the Central Government.
• To control and to guide the efficient use of
  availabe balance of cash of the checking acount
  of public entities, not incorporated to the
  common fund.

12
Legal Reform public credit system

• The system of public credit is the group of
  principles, agencies, rules and procedures with
  regard to celebration, execution and manage of
  debt business that the State do, with the object
  to obtain financial forms.
• The Ministry of Public Finance is the agency in
  charge of the public credit, with the function to
  guarantee the efficient programming, use and
  control of the financial forms that may be obtain
  by public credit operations.

13
Function Reorganization

• Under the principle of normative centralization
  and operative dis-concentration, the direct
  responsibility for the administration of the
  financial resources was transfered to the
  Ministries in line, which assumed more control
  over their budget.
• In each public entity, was created a Financial
  Administration Unity, with the purpose of
  carrying out the functions of budget, accounting
  and treasury that were concentrated in the
  Ministry of Public Finance.

14
Procedure Reform

• Procedure manuals and working standards were
  defined according to the best international
  practices to process, register and report the
  financial information of the public sector.
• In this way the procedures were simplified and
  bottlenecks were removed, which propitiated
  inefficiencies and lack of transparency in the
  execution of public resources.

15
Information System

• A modern integrated system of financial
  information is available, which operates through
  Internet and allows a more efficient execution
  and monitoring of the financial operations of the
  government, as it relies on a single database at
  the central level, which is capable to transmit
  automatically the data between the subsystems of
  the budget, accounting, treasury and public
  credit.

16
Training

• Capacity building is a core component of the
  reform. Continuously, staff of the public
  entities is trained in areas of the budget,
  accounting, treasury and public credit.
• The international experts, who have supported the
  reform, have been the main responsibles for the
  training, and at the present, also national
  experts that have been formed during the process,
  as well as international institutions in the
  areas to be innovated.

17
Reform Areas

• The financial administration areas that have been
  reformed are the following
• Budget
• Accounting
• Treasury
• Public Credit
• Governmental Control
• Procurement

18
Budget Reforms

• The public budgetary process has been reformed to
  incorporate the multi-annual expenditure
  programming and the assessment of the executions
  results. In 2005, a proccess to define
  performance indicators of public entities was
  started.
• Thus, the budget could be an accountability and
  social auditing instrument, of both, the
  financial aspects as well as the results of the
  public management.

19
Accounting Reforms

• The accounting records are performed
  automatically with the record of the budgetary
  execution, through one single bill. The basis of
  accounting records is the accrual system (goods
  and services already received and pending of
  payment).
• The programming of the budgetary execution is
  carried out annually, the commitment quotas are
  quarterly approved and accrual and payment
  quotas are monthly approved.

20
Treasury Reforms

• There is one single account of the Treasury,
  which applies for all entities of the Central
  Administration and for all financing sources,
  with the objective to avoid inefficiencies in the
  use of resources.
• The National Treasury performs the payments of
  the accrued expenses charging the common fund it
  maintains with the Central Bank, through
  electronic deposits to the bank accounts of the
  suppliers.

21
Public Credit Reforms

• A registration system for public credit
  operations is available, based on the system of
  financial analysis and debt administration
  (SIGADE) of the United Nations Conference on
  Trade and Development (UNCTAD) and with an
  automatic communication link for the updating of
  the budgetary execution and the accounting
  records.

22
Reforms in the governmental control

• In 2002, a new Organic Law of the Nations
  Comptrollership was approved, with the objective
  to modernize and strengthen the instruments and
  procedures of the governmental control.
• An Informatic System of Governmental Auditing is
  available, which interacts with the Information
  System of the Financial Administration, thus
  optimizing the auditing function.

23
Procurement Reforms

• There is an information system of public
  procurement, GUATECOMPRAS, the use of which is
  compulsory in all entities of the non financial
  public sector and the Municipalities.
• In the norms of budgetary execution of the year
  2006 was established that international or not
  governmental agencies that administer public
  funds, should publish their acquisitions with
  these funds in GUATECOMPRAS.

24
Procurement Reforms

• A draft bill on procurement han been elaborated
  which seeks to make the public administration
  more efficient and transparent, and which will be
  submitted to the Congress for approval.
• In the initiative of law it is proposed to
  establish in a permanent way the obligatory use
  of GUATECOMPRAS, for all public or private
  entities that administer public funds.

25
The reform of the municipal financial
administration

• In 2002 a new Municipal Code was approved, which
  defines the organization and functioning of the
  municipal governments and includes the integrated
  municipal financial administration, according to
  the guidelines established by the Ministry of
  Public Finance.
• At the present, the implementation of the
  Integrated System of Financial Administration is
  being executed in 33 of the municipal
  governments.

26
The reform of the municipal financial
administration

• In 2006, the General Comptrollership of the
  Nation approved the rules of technical character
  for accountability of the Municipalities of the
  Republic.
• These rules establish that the accounting
  information shall be generated by the SICOINWEB,
  SIAF-MUNI and/or SIAFITO-MUNI systems, which are
  the only ones recognized by the General
  Comptrollership of the Nation as official
  registration and control systems for the
  municipalities and their utilities.

27
Covering of the System

• The system covers at the present 100 of the
  agencies of the Central Administration, 77 of
  the decentralized and autonomous entities, and
  33 of the municipalities.
• For 2007, the target is to cover 100 of the
  decentralized and autonomous entities and 66 of
  the municipalities. This will allow the
  consolidation of fiscal accounts of the non
  financial public sector in an automatic manner,
  through the system.

28
Assessment of the Financial Administration in
Guatemala

• The implementation of the integrated financial
  management system (SIAF), built upon a good
  normative framework and facilitated by a modern
  technological platform, has contributed to
  efficiency in executing financial transactions
  and to the production of opportune information on
  most government finances .
• Guatemala Country Financial Accountability and
  Procurement Assessment Report . World Bank and
  Interamerican Development Bank, 2005.

29
Assessment of the Financial Administration in
Guatemala

• Effective controls of governments cash
  position, including an efficient common fund
  system and rather complete central government
  debt records, are in place. Both the annual
  budgets and financial reports provide
  considerable government financial data that is
  publicly available .
• Guatemala Country Financial Accountability and
  Procurement Assessment Report. World Bank and
  Interamerican Development Bank, 2005.

30
Reform Challenges

• To consolidate the integration between the
  planning, budget and procurement systems, in
  order that the budgetary programming fully
  responds to the governmental policies and the
  working plans of the entities.
• To consolidate the reform of the municipal
  financial administration, through the production
  of conditions that have allowed the systems
  sustainability at the Central Government.

31
Reform Challenges

• To support the strengthening of the capacities of
  the Nations Comptrollership, in order that it
  can control in an efficient way the public
  expenditure and to evaluate its quality,
  according to its constitutional law.
• To achieve that the decentralized and autonomous
  entities make public their financial information
  and their results of management through the
  financial management system, in order to
  facilitate the social auditing.

32
Financial Management Reform in Guatemala

• www.minfin.gob.gt
• www.guatecompras.gt
• Thanks for your attention