PFM REFORM PROGRAMME

The current Public Financial Management Reform Programme is a direct response to the need for strengthening and restoring the public’s confidence in the government’s financial management system. The purpose of this reform agenda is to transform Lesotho’s public finance management systems for attainment of long-term sustainable development. The 2012 PEFA Assessment financed by the European Union helped identify a host of key areas (components) in dire need for reform. Notwithstanding the current challenging fiscal state of affairs, the Government of Lesotho is fully committed to adopting a well-coordinated and sequenced PFM reform programme and will take essential measures to continually review and align the reforms to fit the country’s needs given the evolving nature of PFM. Our development partners have likewise pledged their commitment to the cause of successful implementation of the current PFMR agenda by providing funding and technical expertise across a range of PFM components listed below.

The PFM reform agenda runs concurrently with the implementation of the NSDP and vision 2020 and also strives to ensure achievement of the goals set-out by the NSDP and Vision 2020.

DEVELOPMENT PARTNER CONTRIBUTION
The European Union ------------------- EUR 4.2 Million
The World Bank --------------------------USD 5.5 Million
The African Development Bank------UA   2.6 Million

CONTACT DETAILS:
Mr. Tsolo Maoeng
PFMRP Coordinator, PFMR Secretariat
Ministry of Finance
P.O. Box 395
Maseru 100
Lesotho
Tel: (+266) 28324748
Fax: (+266) 22310281
Email: mrmaoeng.tsolo@gmail.com

COMPONENTS
  1. PFM Regulatory Framework Updated to Underpin PFM Reforms.

    One of Lesotho’s greatest challenges post-independence has been to restore public confidence in the government’s financial management system. In order to build public trust, the government has to amend or put in place, laws and governance institutions to address past weaknesses and build a stable foundation for future economic development. Key to these reforms has been the 2012 Public Financial Management Act to underpin the government’s efforts to rebuild credible systems for prudent and efficient management of public finances. There is still profound need however to review/ make provisions to this current legislation to make it a comprehensive PFM legislation covering the entire budgeting and accounting cycle consistent with best practice suitable for Lesotho’s economy. The law which provides sound and clear basis for the future development of PFM practices in Lesotho. Enacting provisions of this law will require implementation covering the short, medium, and long-term goals as covered by Component 1 (One) of the PFMR Action Plan; this includes:

    • Appraisal and endorsement of financial regulations
    • Adoption of standard PFM, policies, practices and procedures
    • Sensitization, awareness, capacity building and change management
    • Undertaking more sensitization and outreach programs in order to create more ownership
    • Strengthening coordination and ownership of the reforms between the MDAs executive and legislature
    • Empowerment of the Legislature through capacity building in order to exercise its oversight role better over the executive on PFM matters
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  2. Transparency and Effectiveness of Policy Measures Reflected in the Annual Budget.

    This component addresses the budgeting challenges posed at a national level and suggests some policy prescriptions to improve the functioning of the GoL public financial system. It focuses on the Macro-fiscal stability and budgeting framework. In this regard, the component highlights the need for a strategic and comprehensive review of the system as a whole and stresses the importance of a coordinated and phased approach for the overhaul of the various stages of the budgeting cycle. A set of tools and methods for reform aiming at a convergence with international best practices over the long run is presented by the PFMRAP component two (2) work plan:

    • Preparation of budgeting and accounting manuals, guidelines to facilitate interpretation and implementation of specific provisions of the budget cycle and reporting
    • Modernization of processes through computerization
    • Creating a critical mass of macro-fiscal forecasting, planning and budgeting technical skills within the MoF as the driver, custodian of the reforms process
    • Strengthened coordination between planning and finance ministries
    • Strengthened coordination between government and the development partners
    • Facilitation of well managed and updated development assistance database
    • Capacity building for improvement of critical skills sets covering project cycle management and monitoring and evaluation personnel government wide
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  3. Cash Flow Forecast a Major Determinant of Internal Debt and Financial Investment.

    Cash flow planning and forecasting synchronizes revenue estimates and spending plans. The budget is built in law, but the budget is different from the authority to spend, hence the need for a coordinated effort to make sure that resources are available when needed to properly execute the budget and meet the needs of a variety of budget stakeholders. Component three of the PFMRAP lays more claim that if a system is in place to control spending rates and is informed by cash flow forecasting then execution of the budget as formulated is likely to meet the budget stakeholders needs. Under this reform component a wide range of activities from the establishment of the cash management unit are documented. Briefly this component details:

    • Recruitment of key personnel and operating staff to ensure functionality of the CMU
    • Refine government banking arrangements and processes to provide platform for stock of government cash means
    • Capacity building for liquidity management to equip CMU technical personnel with forecasting know-how
    • Assistance in forecasting the government’s cash position to manage maturities and issuance of investments and debt
    • Census of all GoL’s bank accounts with a few of fulfilling all necessary PFM requirements for establishment of a Treasury Single Account
    • Undertaking capacity building programs in order to educate all relevant treasury personnel on the operations of TSA
    • Continuous advocacy and training on proper and timely bank reconciliation and forecasting techniques
    • Assessment and inclusion of TSA framework in the treasury regulations
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  4. The Internal Control Framework is Strengthened to Ensure Operational Efficiency and Effectiveness.

    In the continued sense of being accountable in its use of public money and in providing effective, efficient, and economical service delivery, the GoL recognises the importance of internal audit function within the Public Financial Management context. Internal audit therefore plays a valuable role by providing both assurance and consulting service to pick defects in the operations of the government. Component Four (4) of the PFMRAP details identified interventions needed to make the much desired impact by the internal audit function to the PFM spectrum.

    • Development of rules and procedural manuals and audit reports of the internal audit function
    • Capacity building of the IA charter to improve the quality of the audits performed
    • Establishment of an audit committee with appropriate personnel and a clear mandate
    • Advocacy for objectivity and make the IA function’s contribution to public financial management
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  5. Accounting and Fiscal Reporting Framework Fully Compliant with the Regulatory Framework and Accepted International Accounting Reporting Standards.

    There is a need to strengthen and secure the systems for budget preparation, cash management, budget execution and payroll, and respond to increasing demands for improved access to information and analysis of the budget and budgetary performance. These demands are strong drivers for a new and upgraded approach to IT systems for financial management in government. This component seeks to ensure stabilization of the current IFMIS platform and build towards an upgrade to Epicore 10 taking into account all user specific requirements and also addressing the change management targeting and implementation correctly.

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  6. Public Procurement Aligns with International Best Practice in Efficiency and Transparency.

    In the absence of any systematic collection of information, as prescribed by the PFMA Act, the degree of compliance to the procurement regulations is difficult to establish. Component 6 takes modest approach to assist in putting in place necessary legal frameworks and best performance indicators to complement public procurement procedures and strengthen openness and transparency in the process. A review of the current regulations and outreach activities to educate both public personnel and GoL clients about best practises in the public procurement will not directly and quickly lead to reduction in manipulation of the procurement and savings from "clean" procurement process but in the long-term this will be evident.

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  7. External Audit and Parliamentary Oversight and Scrutiny Activities are Compliant with INTOSAI standards (ISSAI) and Best International Practices for Parliamentary Oversight and Scrutiny Committees.

    The GoL echoes the international community sentiments on importance of improving external audit and oversightin ways that build on their objectivity and independence in carrying out their functions to best hold government MDAs accountable for all planned development initiatives for any financial year in question. GoL has shown commitment to this cause by accelerating preparation of audits reports during the past three years and reduced the back-log substantially. With the support of the PFMRP the OAG will get assistance to strengthen legislative issues that have been high on the agenda of the PFM reform discussion in Lesotho, the level of capacity constraints within the two (2) oversight institutions (OAG & PAC), recommend and implement solutions to challenges perceived to hamper effective PFM cycle functionality. At the end of the current PFMRP intervention expectation is that the two GoL oversight bodies will have addressed issues that emphasise their roles as central pillars of effective corporate governance and provision of effective oversight.

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  8. Governance and Institutional Management of PFM Reforms Improved to Facilitate Ownership, and Monitoring and Evaluation of Progress.

    The main objective of this component is re-engineering and strengthening institutional arrangements for implementation of PFM reforms across GoL. The focus is on capacity building in order to address the broader change management issues across all PFMRP components and ensure smooth transition into best and practically acceptable ways in PFM. It also provides support to the core structure- "Public Financial Management Reform Secretariat", which acts as the supporting structure for all components in terms of overall supervision of programme implementation, Monitoring and Evaluation, Procurement and Accounting functions to best execute the mandate of leading the reform process.

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PFMRP STRUCTURES
  1. PFM Improvement and Reform Steering Committee

    The PFM Improvement and Reform Steering Committee (IRSC) is the oversight committee with responsibility for directing and monitoring PFM reform activities. As the highest policy organ of the Government for PFM reforms it is chaired by the Minister of Finance, and its membership is as follows:

    1. PFM Development Partners
    2. Chairperson of the Parliamentary Public Accounts Committee and Economic Cluster
    3. Minister of Development Planning
    4. Minister of Public Service
    5. High-Level representatives from key Line Ministries, Departments and Agencies (Education, Health, Agriculture, MEMWA, DCEO)
    6. PFM Reform Secretariat (Secretary)


    IRSC meets at least three times a year.

    The composition of the committee embraces key intervention areas and includes major stakeholders. Its purpose is mainly linked to driving the reform process, to inform the relevant partners and raise support for the reform and to decide on critical conceptual issues and recommendations related to the reform. The PFM Reform Coordinator serves as its Secretary.

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  2. PFM Reform Technical Committee

    The PFM Reform Technical Committee (RTC) comprises all Component- and Sub-Component Leaders. It is chaired by the Principal Secretary, Ministry of Finance. The PFM Reform Coordinator will serve as its Secretary. It is a forum for coordinating all reform activities between Components as well as the Key Interventions and sharing experiences and for enhancing visibility of reforms, and ensuring change management activities are adequately rolled out to support the reforms at different levels. It is the role of this Committee to ensure strong ownership of the programme activities and enhance their sustainability after completion of the program implementation. Furthermore, decentralization of the program management and implementation (by key intervention) to agency/department level will reduce bureaucratic delays in implementation, and ensure that all technical assistance required and procured is directed to the appropriate area with close monitoring.

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  3. Planning Unit

    1. Director Planning Unit is responsible for the overall supervision of PFM Reform Implementation. As such fit to participate in all committee.
    2. Chairs the monthly PFMRP technical meetings, where component leaders present their progress reports.

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  4. PFM Reform Secretariat

    PFM REFORM COORDINATOR
    MONITORING AND EVALUATION, AND QUALITY CONTROL OFFICER
    PROCUREMENT OFFICER
    FINANCE MANAGER
    FINANCE OFFICER

    TECHNICAL ASSISTANCE SUPPORT.

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