CREATION OF A SYSTEM from the best functioning systems

Human beings are considered the best functioning systems in the universe, with an immune system to defend themselves from bacteria, viruses, and other harmful pathogens and a lymphatic system to fight infections. The perfect functioning of our biological systems keeps us healthy to live our lives, and we have thoughts, feelings, and stored memories in“the brain” to generate our general perception of the world. While possessing the best functioning system, we create our own self-written systems to regulate society, protect people, enforce rights, solve conflicts, and run the ruling administration. We make a system segregated by statutory obligations with an administration to serve as a government, a parliament to represent the people to monitor the administration and make laws, and an independent judiciary. We elect a government for the rulers to govern within the boundaries of the law. We believed that the expected efficiency and effectiveness of the constitution allow the government to function to protect the lives and liberties of citizens without violating the rights of the people. The system is established to govern the citizens by accepted rules rather than arbitrary decisions.

If the biological system encounters a malfunction, his/her life gets complicated (depending on the scale of its failure). Similarly, if our self-written procedures are not followed as agreed, we may mislay our society's civilized nature.

Public finance management is considered the blood flow for the energetical public sector policy implementations in a public administration system. When citizenry pays tax to the state by expecting a return of quality public service and responsible financial management. They expect the governments to follow the statutory obligations on receiving, spending and accounting public money with a transparent and timely reporting mechanism defined in the law. Like most developing countries, the Maldives has a legal framework for public finance management (PFM), where each activity's timelines are defined. In this series of articles, we will highlight the legal obligations and applications for essential activities of the PFM circle; Budgeting, Executing, Reporting, and Auditing.

Centralization in Decentralized Environment

Just after the sunset, the beautiful blue sky transformed into shades of fire. Darkness caught the surroundings in few minutes, and lights from the passing resorts appeared dimly red and yellow. Our speed boat was traveling through a black garden with red roses and sunflowers. Despite the imaginary pictures from the view, my mind was very much bothered by the comments and complaints received from the local council members. I believed every word of the atoll council president who shared his grievances during the closing statements of today's LGA workshop 2012 (Thulusdhoo). Even another council president said that the government treats them as stepchildren, and most of the local councils are left idle without money to serve their citizenry. As I was there to represent the national budget of the Ministry of Finance and Treasury, I expected them to understand that an ordinary civil servant could only pass the message to the policymakers. Most of the problems they raised were regarding budget forecasting and management. The delay in local financing and insufficient budget allocation to these councils has made their local developmental plans stalled. Understandably, these elected councilors could be having many unfulfilled promises to their citizens, which is obstructed due to the insufficient administrative arrangements within the central government to harmonize.

As with the rapid growth of the world economy, Maldives' public sector failed to maintain pace with the twenty-first-century changes. While most developed countries used participatory planning and budgetary methods for the decentralized administrative regions (to include their local publics to voice their development), our island communities are still striving for such arrangements. They had hoped with the new constitution (2008), which gave the opportunity for decentralization. Decentralization means the transfer of power and authority from the central government to local councils to fulfill the needs of local citizens’ demands. Decentralization and the development of democratic local governance continue quietly to sweep the world from Bolivia to Bulgaria and from West Africa to South Asia; a wide variety of countries are increasing the authority of local governments and working to make them more responsive and effective. When the Decentralized Administration Act 7/2010 of Maldives was passed, the citizenry of the regions expected the administrative and financial arrangements would follow as stated in the constitution and law. Councilors were elected, regionalized decentralized administrations were established, but the administrative-developmental progress was very low-speed. Maybe the changes are too fast for the Maldives or the policymakers to be too slow on decision-making, or the public servants are too lazy to implement.  After establishing decentralized administrative areas in the Maldives, the central government did very little or hesitated on devolving the function stated in Act 7/2010. It is clearly stated in the law to redistribute authority, responsibility, and fiscal resources to provide municipal services and make development initiatives. Nearly two years of decentralized administrative arrangements have been passed. We cannot consider that the transfer of responsibility for planning, financing, and management of functions from the central government and its agencies to local councils is happening, leaving the local councils aside with the elected councilors and their unfulfilled pledges to their citizenry.

Many isolated areas kept the decentralized process at a halt while the financial and operational abilities of the councils are manacled.  Some of the issues are;

• -          Inadequate training and awareness for local administrations and councilors. 
• -          Insufficient Local Financing from  the central government

• -          Budget allocations not in accord with article 83 of Act 7/2010.

• -          Central government’s inability to finance for carried down debts

• -          Centralized banking and payment

• -          Inability to collect local revenues 

• -          undefined legal boundaries for the councils

• -          Lack of communication regarding centralized development projects and programs focused on local areas.

• -          Invalidated and disregarded Local development plans and financial plans.

There can be more problems which kept paralyzing the local services and the local councilors to serve. If the central government does not urgently attend to these issues, then the decentralized system in our democratic environment can crash soon. Or the people may lose faith in their elected councilors.  

    We understand that the transfer of power and devolving functions cannot be done quickly, or it won’t happen overnight. If the central government believed in the rights of its people, then the implementation is far from impossible. If they seize this moment to look beyond the differences and focus on the challenges that affect us all, they can make this right. It’s their choice.

By now, our speed boat has along sided to jetty number 4, and I rode home after another day’s work and hoping for better improvements in the future.

Accounting and Financial Management in Local Councils: Training Module

From the year 2012, Local Councils will be managing their own budgets, and the staffs working in council secretariats require training on local finance and accounting. The training module " Accounting and Financial Management in Local Councils" is compiled on request from CSTI (Civil Service Training Institute) and is in the final reviewing stage. It is intended to complete the module by mid-October and conduct its first training program on the last week of the month. The Module is based on illustrations and instructions for application by account officers in their day-to-day duties processing accounting information for decision making at various levels in Local Councils and related Institutions. Procedures covered in the module are related to budgeting, collecting revenue, expenditure, recording, summarizing, and preparing financial statements and reports. All instructions will be in accord with Public Finance Law 3/2006 and Law on Decentralized Administrations in Maldives 7/2010.

Training Materials consist of PowerPoint presentation (brief), Tutorial Text, and Working Papers. The contents of the module are developed for two levels of training;

• Level 1 - introductory level - duration 26 hours with 20% practical works.
• Level 2 - working level - duration 40 hours with 50% practical works.

The Module consists as below;

Accounting and Financial Management in Local Councils

Contents

1. Fiscal Responsibilities

1.1 Public Finance Law 3/2006

1.2 Law on Decentralized Administrations in Maldives 7/2010

2. Local Public Finance

2.1 Legal framework on Local Public Finance

2.2 Technical Approach to Local Public Finance

3. Accounting and Finance Management in Fiscal Decentralization

3.1 Revenue and Income

3.2 Local Budgeting

3.3 Public Expenditure

3.4 Asset Management

3.5 Fund Accounts

3.6 Debt Management

3.7 Payroll

3.8 Financial Statements and Reporting

Budgeting in Decentralized Administrations: Proper Training Needed

Change is constant in our lives, in politics, and in society. After the recent political changes of 2008, in the Maldives, all the categories of the public staff have the responsibility to adjust their working environment and adopt these changes. Decentralized Administrations are one of the toughest, and managing the change of Decentralized Fiscal Administration is vital.

After establishing decentralized administrations on February 26th, 2011, officials in the Ministry of Finance and the Local Councils had to work very hard to maintain order in local finance. In the absence of well equipped Local Government Authority, some local public institutes did their best to educate council staff and councilors on local finance.

Since Local Finance Administrations had to follow both the Decentralized Administrations Act (7/2010) and Public Finance Act (3/2006), it took a while to arrange the administration on proper interpretation. Local budgeting is one of the significant areas where adequate assistance and training have lacked.

LGA (Local Government Authority) and CSC (Civil Service Commission) have legal responsibilities on training local councils. Both institutions have to formulate a curriculum for the training they have to undertake. Otherwise, there will be budget duplication on training expenses for both institutions and confusion within the councils.

According to Decentralization Act (7/2010), chapter 12, article 130 (a), all administrative staffs in local councils are Civil Servants, and Civil Service Law should be applied to these staffs. According to Civil Service Act 5/2007, article 18 (m), CSC is responsible for training civil servants on management and administration. CSTI (Civil Service Training Institute) is the institution under CSC for this purpose.

According to Decentralization Law( 7/2010), chapter 6, article 61 (g), LGA should facilitate the training requirements and training for local councils.

Suppose we review both laws by understanding the importance of administrative flow from one institution to another. In that case, we can see that the responsibilities and tasks for both institutions are clearly written. As a person involved in some of the training conducted by CSC and other institutions, I realized that both CSTI and LGA had different views in interpreting the Law and kept their training information concealed. They performed their individual training, demanding it as their responsibility in accord with the law.

Local budgeting was one of the training which raised many questions. We should understand that the consequences of conducting different types of training on the same topic would result in inconsistent fiscal administrations in Local Councils. For the sake of public administrative best practices, we should compromise with each other and harmonize the training instead of the power fight, which would harm the infant local administration.

(This article contains general information from the writer's viewpoint only and is not intended to be comprehensive nor to provide specific accounting, financial, legal, or official advice. This article is not a substitute for such professional or official advice. It should not be acted on or relied upon, or used as a basis for any decision or action that may affect you or your organization. Before making any decision or taking any action that may affect you or your organization, you should consult your relevant authority. Whilst every effort has been made to ensure the accuracy of the information in this article, this cannot be guaranteed. Neither the writer nor any related entity shall have any liability to any person or entity that relies on the information contained in this article. Any such reliance is solely for the user's risk.)

from the article on www.zariyand.com

Need effort to be an Accountable Government

Performance-Based Budgeting in the Maldives

In the Past, Budgeting for the Public Sector was considered just to play the financial figures without proper planning for future scheduled activities, from the Finance Sections or Budgetary Sections of Public Offices. While passing these budgets from parliament, it was just politically motivated wordings rather than directly focused on the needs of the general public. The Maldives is a developing nation, and taxation is very near to be imposed. Taxpayers should be aware that they are paying tax to run an administration that should be more accountable and more focused on economic and social development.

When we heard the President’s Radio address on 17th September 2010, mentioning the forecasted budget 2011 as program budget, Public Organizations should be focusing on their programs rather than figures. He said that the purpose of a program budget is to determine the targets every government office wanted to achieve in upcoming years and identify the means to achieve those targets. The first thing that came to my mind was, “what the hell we were doing during past years, in the name of budgeting?” what was MPs checking while they passed past budgets?

When I recalled how it used to be in the past, I realized that the program budget was not a new thing for us, and the government introduced it during 2005. Those days it was just a list of activities, charged to budget line items like Economical Development, Social Development, etc.… Again many questions came to my mind:

1) What will happen to the expenditure that occurred in the name of programs after 11 November 2008?

2) Why those program budgeting functions failed?

Answers were clear;

1) Present Administration came to power with set promises to the general public, and all expenditures after 11 November 2008 should be focused on those promises, and Ministry of Finance and Treasury should check the past expenditure details, where they have to find out the bleeding areas (expenditures occurred outside those promises). Aline historical figures related to present activities and keep the records ready for the questions on the budget debate.

2) In the past, it was failed since nobody was checking the programmed activity after passing the budget. Government Ministries were misusing the activity budgets by using them for other administrative and luxury activities. Auditor General’s Office, who is legally responsible for performance audits of public offices, never checked the activities during the audits naming them as performance audits (published audit reports 2008-2010). It will repeatedly fail if we do not keep periodic monitoring of budgets from the Ministry of Finance and Treasury and annual performance audits (based on budgeted programs) from AGO.

Preparing a budget is just like dreaming of achieving something; the most immense responsibility is to implement the budget with accountability. We can give many names to budgets like Zero Based budget, Activity Budget, Performance-based budget, etc... but to use it faithfully and monitor it consistently is a challenge.