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Case study

An appropriate procedure to reduce current long time spent on the

payment process in government expenditures.

By Kim Heng MEAS

kimhengm@yahoo.com

@ Mars10th, 2010

1. Background

The present case study aims at assigning students in public policy or public administration

program to analyze critically current issues of government expenditures, especially payment

procedures in developing countries and discuss possible solutions to weaknesses of public

financial system of an observed country. This case study is written during the current hot debate

of public financial reform in Cambodia. In 2010, the Royal Government of Cambodia (RGC) is

comprised of 32 ministries-institutions1; all of them are involved in spending the national budget

to ensure the development of the country following their missions. In the context of public

expenditure, as a key player, the Ministry of Economy and Finance (MEF) is responsible for

controlling expenditures of all line ministries-institutions. In order to meet these missions, the

MEF has created at least four related organs including the General Department of National

Treasury, the Department of Financial Affairs, the Department of Investment and Cooperation,

and the Department of Public Procurement to control every sequence of the expenditure and

payment procedures. Since 1993, MEF has made many reforms on institutional structure and

public financial management. Recently, the MEF has been continuing its second platform of

public financial management reform program, in which the focus points include public

expenditure control and procurement and payment procedure, in order to respond to the

complaints of other line ministries-institutions about the long time spent on the payment

procedures, which have slowed down the implementation of development projects.

"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""1"Law"of"finance"2010""

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2. The Students’ Assignment

In this case study, student is assumed to be the Secretary General of the MEF. He is to read the

below case of billboard printing payment procedure and suggest an appropriate payment business

process by which the way that the time reduction on each sequence and slack steps to be erased

should be determined. Based on existing illustrated points of view from different stakeholders in

this case and additional research, the student must answer the following questions:

(a) What are the main problems of the current payment procedures?

(b) Which sequences of the payment procedures spend long time?

(c) How long the payment procedure should it spend?

(d) Which sequences of the payment procedure should be erased?

(e) What will be the reactions to the procedure changes from related stakeholders?

(f) Will you recommend amending some laws or sub-degrees? Why?

(g) In order to ensure the accountability and efficiency of good governance, what

departments are the most relevant to the payment procedures?

(h) In what countries isn’t there public procurement under the authority of ministry of

finance? Could this concept be applied in Cambodia, if yes, how? If not, why?

(i) What is the most appropriate payment procedure that should be used in Cambodia?

(j) How long will we spend to achieve the goal of reducing the time in the payment

procedures?

The student’s proposal should have at least these parts: an executive summary, an introduction, a

body, a conclusion with recommendations, an appendix and a bibliography. In the proposal, the

student has to give strong arguments with all possible aspects: legal, economic or best practices

in public administration from other countries.

3. Body of the case

A. Information on Cambodian Public Finance

After the first historical national assembly-mandatory election in 1993, RGC has speeded up her

administrative reforms in all levels of public administration. At the beginning of the second

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legislature in 1999, RGC set up the first Supreme Council of State Reform chaired by the Prime

Minister through the Royal Degree NS/RKT/0399/71 dated March 19th, 1999. The first Supreme

Council of State Reform was comprised of five councils: Council of Administration Reform,

Council of Army Reform, Council of Army Demobilization Reform, Council of Justice System

Reform and Council of Economic and Public Financial Reform.

The Public Financial Management Reform Program (PFMRP) was launched in December 2004

and has been fully implemented since February 2005. It is a long run and comprehensive reform

program aiming at transforming the public financial management system of RGC into a system

featuring what are generally accepted as the international standards by 2015. The PFMRP is

formed upon four sequenced platforms with four following objectives such as (1) “increasing

budget credibility to deliver reliable and predictable resource to budget managers”, (2)

“increasing effective financial accountability to improve internal control and hold managers

accountable”, (3) “increasing budget and policy linkages to improve linkage of priorities and

services targets to budget planning and implementation”, and (4) “increasing managers'

performance accountability to improve and built result based management”.

Strategically, the PFMRP has adopted a stage-by-stage approach. In each stage, there are sets of

highlighted activities to achieve sub-objectives of each platform and to prepare for future

platforms. The goal of the first platform (from 2004 to 2006) was to create the credibility of the

budget, which was to deal with previously chronic cash shortage in the National Treasury during

the payment to suppliers. In this platform, MEF has implemented over 200 actions of which 27

are prioritized. As a result, on 9-10 April 2007, in the 2006 annual review, the Minister

concluded that the objective of the first platform has been achieved. The year 2007 was

considered as a transitional year for moving from stage 1 to stage 2.

Since December 2008, the second platform of the PFMRP has been starting. In this platform,

there are at least 8 main sub-objectives to achieve such as “to improve accountability by

clarifying roles, functions and responsibilities between levels of government and within spending

institutions”, “to improve instruments to encourage responsible financial management and

enforce accountability”, “to further improve the implementation of new budget classification and

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new chart of account”, “to improve budget execution and transaction process, “to improve

accounting and financial reporting and transparency”, “to improve auditing and inspection and

response to/use of audit/inspection findings through internal audit planning, internal audit

methodologies and reporting, and internal audit capacity”, “to strengthen and develop fiscal

decentralization policy and strategy”, “to building institutional capacity and motivational

measures2”.

B. General issues concerning payment procedures

Now it is in the middle of the second platform reform period but complaints related to time spent

on payment process to goods and services suppliers still remain. Officials from other line

ministries-institutions usually said because of a long time spent on expenditure control through

procurement and payment process, some projects of their respective ministries cannot be

implemented and their budget cannot be executed completely. According to the Circular n° 004

MEF dated 25 December 2009 on the Execution of Law of Finance of the Year 2010, related to

the budget expenditure applied with the procurement, spending ministries have to request a

commitment from the MEF in order that they could implement their procurement procedure3. In

the circular, each ministry has to make its procurement plan for at least 6 months in advance of

their procurement.

The Minister of the MEF is worried not only about the present complaints but also the

impossibility of attaining the objective of the second platform of PFMRP within the time

scheduled. The Minister has, thus, appointed the Secretary General of the MEF to conduct an

analysis on the possible ways to lessen time spent on the payment process and to propose new

framework for discussion in an internal meeting with all relevant departments. Following this,

the Secretary General has started to examine payment duration of each goods and services case

"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""2"See more on the Public Financial Reform Management Reform I & II, and Document 1 on the Welcome Remarks and Progress Report by the Chairman of the Public Financial Management Reform Steering Committee, at Launching Ceremony of the Public Financial Management Reform Program - Stage 2 "3" See"Circular n° 004 mef dated 25 December 2009 on the Execution of law of Finance 2010, Document 2 on Expenditure context of budget 1996, Document 3 on Financial control context of budget 1996 and Document 3 on Procurement context of budget 1996 "

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by case. For his first study, the Secretary General has come up with a case of billboard printing

payment from Ministry of Commerce (MoC).

C. Brief story of a billboard printing payment procedure

On 12 April 2010, the General Department of Cambodia's Control of Import- Export & Fraud

Repression of MoC sent a letter to the Minister of MoC to request budget expenditure for

billboard printing. The General Department explains that the billboards are used to promote

information concerning impacts of population's choice of food product on their health and that

the billboards would be put in public areas such as stations, universities, and public parks, etc.

Enclosed with the letter, there was an estimated cost of billboard printing as following4:

Table 1: An estimated cost of billboard printing

N° Item Unit Quantity Estimated Value

Source Unit value Total value

01 Billboard (format 54*76) Sheet 4.300 11.600R00 49.880.000R00 Cambodia

Total 49.880.000R00

On 6 May 2010, MoC replied positively to the General Department of Cambodia's Control of

Import- Export & Fraud Repression and sent a letter to MEF for commitment by reiterating the

importance of the billboard printing for placing in public.

On 15 June 2010, the MEF authorized MoC to use budget expenditure at the amount of

47.300.000 Riel to print the billboards. The MEF also asked MoC to make a public procurement

and to attach related procurement documents back to MEF to request expenditure approval visa.

On 17 June 2010, MoC made an invitation for bid as for public procurement. On 05 July 2010,

there were three companies participating to the bid and set the price as below:

"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""4"All the prices cited in the case are not the correct values.

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Table 2: List of Bidders and Bidding Prices

Bidder

No.

Bidders Bidding Prices

Name Nationality USD RIEL

1 Ponloeu Pech Printing Company Cambodian 46.870.000R00

2 Sambath Printing Company Cambodian 54.180.000R00

3 Sunway Printing Company Cambodian 55.470.000R00

On 05 July 2010, the Procurement Committee (see table 3), jointly created by MoC and MEF,

reported to the Minister of the MoC that the Ponleu Pech Printing Company mostly met the

criteria of the committee. On 19 July 2010, the Minister of MoC sent a letter to the owner of

Ponloeu Pech Printing Company (supplier) to inform that MoC has selected his company to

supply billboards printing services to the General Department of Cambodia's Control of Import-

Export & Fraud Repression of MoC.

Table 3: Composition of the Procurement Committee

N° Name Function/Organization/Institution

1 N/A Director General of General Department of Administration and Finance, MoC

2 N/A Director of Department of Accounting and Finance, MoC

3 N/A Director of Department of Administration, MoC

4 N/A Director of Department of Dispute Settlement and General Policies, MoC

5 N/A Chef of Accounting Division, MOC

6 N/A Deputy Chef of Accounting Division, MOC

7 N/A Deputy Chef of First Product Division of Department of procurement, MEF

8 N/A Official of First Product Division of Department of procurement, MEF

On 20 July 2010, MoC represented by the Director of the Department of Depute Settlement and

General Policy signed a contract, attached with a quotation, with Ponleu Pech Printing Company

represented by the company’s owner.

On 11 August 2010, from 14h30mn to 15h30mn, there was a delivery-receipt meeting between

the Procurement Committee and the Ponleu Pech Printing Company. On this occasion, two

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documents that were signed by the company and the Procurement Committee include an invoice

of the company (see table 4) and receipt form of MoC.

Table 4: Invoice

N° Item Unit Quantity Price

Source Unit price Total price

1 Billboards (format 54*76) Sheet 4.300 10.900R00 46.870.000R00 Cambodia

Total 46.870.000R00

Attending the delivery-receipt meeting, there were 8 members of the procurement committee, in

which 4 members from MoC and 4 members from the MEF (table 5). There were 2 officials

from the Department of Procurement (MEF) and 2 officials from the Department of Financial

Affairs (MEF).

Table 5: Attendance sheet at the Delivery-Receipt Ceremony

N° Name &

Surname Organization/Institution

1 N/A Director General of General Department of Administration and Finance, MoC

2 N/A Director of Department of Accounting and Finance, MoC

3 N/A Director of Department of Administration, MoC

4 N/A Director of Department of Dispute Settlement and General Policies, MoC

5 N/A Deputy Chef of First Product Division of Department of procurement, MEF

6 N/A Official of First Product Division of Department of procurement, MEF

7 N/A Financial Controller of Department of Financial Affairs, MEF

8 N/A Financial Controller of Department of Financial Affairs, MEF

On 26 August 2010, the Minister of MoC sent a letter to MEF to request the budget expenditure

visa at the amount of 46.870.000R00 in order to pay to Ponloeu Pech Printing Company.

Attached with the letter, there were bid documents and relevant documents as following:

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(i) A letter dated 12 April 2010 from the General Department of Cambodia's Control

of Import- Export & Fraud Repression to MoC to request for expenditure in the

amount of 49,880,000.00R

(ii) A letter dated 06 May 2010 from MoC to MEF to request for a commitment in the

amount of 49,880,000.00R

(iii) A letter dated 15 June 2010 from MEF to MoC to authorize the expenditure in the

amount of 47,3000,000.00R

(iv) An estimated cost of the billboard printing

(v) A minute on bid opening dated 05 July 2010

(vi) A minute on Bid evaluation and Recommend contract award dated 05 July 2010

(vii) Formal letter and contract sent from MoC to Ponloeu Pech Printing Company,

dated 19 July 2010

(viii) An agreement contract between MoC and Ponloeu Pech Printing Company,

signed on 20 July 2010

(ix) A minute on delivery-receipt ceremony dated 11 August 2010

(x) A receipt form of Procurement Committee dated 11 August 2010

(xi) An invoice dated 11 August 2010

(xii) Bid documents related to printing service price

(xiii) Patent of the Ponloeu Pech Printing Company

(xiv) A budget expenditure registration and financial control form

(xv) A mandate of payment

(xvi) A legal order justifying documents and

(xvii) An order accompanying the mandate.

On 27 August 2010, a financial controller of MEF received the request for expenditure visa,

then, examined the mandate and verified the qualifications of the madator, finally, made

suggestion to an Undersecretary of State in charge to decide and provide authorization. On 13

September 2010, the Undersecretary of State in charge approved and delivered an approval visa

of budget expenditure to MoC. Official from MoC took the mandate to the General Department

of National Treasury (NT) to request the cash payment.

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On 15 September 2010, the mandate arrived at the NT. The Department of Expenditure and

Revenue of the NT checked and controlled the attached justifying documents. 10 days later, the

supplier company could receive a check with the amount of 46.870.000R00 from the NT and

could withdraw cash at the National Bank of Cambodia.

4. Analytical scope for the students

A. Points of views from various stakeholders

The key actors of the payment procedures of the present case on the billboard printing service are

Minister of MoC, called Mandator in public finance, Ponloeu Pech Printing Company

(contractor), Financial Controller of MEF, Procurement Committee (jointly created by MoC and

MEF) and National Treasury of MEF. In contribution to improving the public financial

management, relevant stakeholders of the expenditure have given their points of view5 as

following:

According the financial affairs department of the spending ministry, MEF should deliver a

receipt to spending agencies when they come to process documents at MEF. The receipt must

state the date to return the document to the spending ministry. On the other hand, the Financial

Management Information System (FMIS), which is on the way to be implemented in the coming

years, is a good tool to reduce bureaucracy in public financial management.

According to the financial controller of MEF, the reform program that has been being in

implementation is a good starting point for Cambodian public financial management. In order to

achieve the objectives of the PFMRP, the active implication from line ministries is crucial. The

reform would not be successful if MEF has done it alone because the whole sequences of public

expenditure are related to other stakeholders such as spending ministries.

"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""5""The points of view stated in the case are obtained from personal interviews conducted by the author with executive stakeholders involving the government expenditure and payment procedures. These interviews are used only for the purpose of academy such as that in this case study, and do not reflect the position of the related organizations or institutions.

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According to the public accountant of the National Treasury, in order to lessen time spent on

expenditure control and payment process, at least two measures should be taken into account.

First, the period of each sequences of expenditure procedure starting from spending agency to

NT should be clearly highlighted. Second, an index of average time spent on mandates payment

for each year should be calculated to find out the evolution of the duration of payment.

According to contractors, it is good news that the Government conducts the reform. They expect

that reform will bring positive change to the current procedures. But they underlined that thus

far, the current procedure remain as usual. Sometimes, the payment is fast and sometimes it is

slow. As suppliers to the government, they have to be flexible in their financial managements.

B. Overview of procurement system in neighboring countries

It is important to note that the long time spent on payment procedure is mostly related to an

expenditure that passes through public procurement. For this reason, we could say that

procurement is a supplementary sequence but necessary to payment procedures. Procurement is a

management tool that can both ensure and break the efficiency and effectiveness of good

governance if we badly use it. In some Asian countries under Anglo-Saxon system such as

Philippines and the Republic of Indonesia, their procurement units are autonomous or

independent.

In Philippines, the procurement unit which is called the Government Procurement Policy Board

(GPPB) is created in 2003 by virtue of Republic Act No. 9184 (R.A. 9184)6 as an independent

inter-agency body that is impartial, transparent and effective, with private sector representation.

In the Republic of Indonesia, there is an independent procurement unit, called: National Public

Procurement Agency (NPPA)7 or the Office of Government Procurement Policy, or Lembaga

Kebijakan Pengadaan Barang/ Jasa Pemerintah (LKPP) in Indonesian8, which was established by

the Presidential Degree 80/2003 as a national standard regulation. However, in Indonesia, the

"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""6"See"document"5"on"Republic"Act"No."9184"7"ADB,"November"2010,"Republic"of"Indonesia:"Strengthening"National"Public"Procurement"Process,"Technical"Assistance"Report,"page"2.""8"Read"more"at"http://www.lkpp.go.id/v2/""

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system does not work very well yet. Therefore, we cannot say which one is better and which one

is worse; the important is the efficiency and effectiveness of the management. In Cambodia, the

procurement unit is under the authority of the Minister of MEF9.

5. Concluding Paragraph

The payment procedures challenge both efficiency and regulations of a public administration.

Along the payment scenario highlighted in this case, both spending ministry and MEF would be

responsible for a long time spending during the payment processes. While analyzing the story of

the billboard printing payment procedures case, the Secretary General is convinced that the time

consumed in processing payment documents of the billboard printing was really long. But he

also remarks that all steps in the billboard printing payment case have followed to the procedures

inscribed in the currently valid Cambodian laws and sub-degrees10. In order to respond to the

reform necessity ordered by the Minister, the Secretary General examine all possible steps inside

both ministries and analyze impacts of his proposal.

6. Document/ References

A. Attached documents to this case

Document 1: Welcome Remarks and Progress Report by the Chairman of the Public Financial

Management Reform Steering Committee, at Launching Ceremony of the Public

Financial Management Reform Program - Stage 2, Government Palace, 3rd

December 2008

Document 2: Expenditure Context of Budget in Law of Finance 1996

Document 3: Financial Control Context of Budget in Law of Finance 1996

Document 4: Procurement Context of Budget in Law of Finance 1996

Document 5: Republic Act No. 9184 (See more at http://www.gppb.gov.ph)

"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""9""Article"70"of"the"Law"of"Public"Financial"System,"promulgated"in"2008.""10"See Sub-degree n° 81 ANKR.BK, dated 16 November 1995 on the financial control of budget expenditure of ministries- institutions, capital city, provinces, cities, autonomous cities, districts and public administrative establishments, Sub-degree n° 82 ANKR.BK dated 16 November 1995 on general orders of public accounting and Sub-degree n° 105 ANKR.BK dated 18 October 2006 on Public Procurement"

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B. References

ADB, November 2010, Republic of Indonesia: Strengthening National Public Procurement

Process, Technical Assistance Report

Hang Chun Naron (2010), Public Finance of Cambodia, Phnom Penh

Ministry of Economy and Finance (2004), Public Financial Reform Management Reform –

Platform 1 (Available at the library of Economic and Finance Institute, MEF)

Ministry of Economy and Finance (2008), Public Financial Reform Management Reform –

Platform 2 (Available at the library of Economic and Finance Institute, MEF)

Ministry of Economy and Finance (2005), Standard Operation Procedure for Externally

Financed Projects/Programs in Cambodia

(Available at http://www.mef.gov.kh/invest-cooperate.php )

Ministry of Economy and Finance (2010), Implementing Rules and Regulations Governing

Public Procurement, Phnom Penh

Ministry of Economy and Finance, Circular n° 004 MEF dated 25 December 2009 on the

Execution of law of Finance of the Year 2010

Royal Government of Cambodia (1995), Sub-degree n° 81 ANKR.BK, dated 16 November 1995

on the financial control of budget expenditure of ministries-institutions, capital

city, provinces, towns, autonomous towns, districts and public administrative

establishments.

Royal Government of Cambodia (1995), Sub-degree n° 82 ANKR.BK, dated 16 November

1995, on the general orders of public accounting

Royal Government of Cambodia (1995), Sub-degree n° 105 ANKR.BK dated 18 October 2006

on Public Procurement

(**All sub-degrees related to public finance are available in the annexes of the book of Dr. Hang

Chun Naron, 2010, Public Finance, Phnom Penh, and can be found in bookstores)

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Document 1:

Welcome Remarks and Progress Report

By Dr. Aun Porn Moniroth

Minister attached to the Prime Minister

Secretary of State of the Ministry of Economy and Finance

Chairman of the Public Financial Management Reform Steering Committee

At Launching Ceremony of the Public Financial Management Reform Program - Stage 2

Government Palace, 3rd December 2008

Samdech Akka Moha Sena Padei Techo Hun Sen, Prime Minister of the Kingdom of Cambodia,

Excellencies, Ladies and Gentlemen!

Today is a great day that we gather here to launch our the Public Financial Reform

Program (PFMRP) Stage 2, presided over by Samdech Akka Moha Sena Padei Techo Hun Sen,

the Prime Minister of the Kingdom of Cambodia. In my capacity as chairman of the Public

Financial Management Reform Steering Committee (PFMRSC), I would like to welcome and

sincerely thanks Samdech, Excellencies, Ladies and Gentlemen for taking your valuable time to

be at this launching ceremony.

PFMRP is one of the key elements within the core of “Rectangular Strategy”. The long

term vision of this reform program is to build an international standard for public financial

management system by 2015, through implementing long-term strategic plan consisted of four

platforms/stages: (1) building budget credibility, (2) improved financial accountability, (3)

improved budget-policy linkages, and (4) improved performance accountability.

We already knew that the PFMRP Stage 1 which aims to build “budget credibility” was

officially launched by Samdech Akka Moha Sena Padei Techo Hun Sen on the 5th of December

2004, six months right after the launch of the “Rectangular Strategy” for growth, employment,

equity, and efficiency. After more than three years of active implementing this reform program,

the Royal Government of Cambodia (RGC) and Development Partners (DPs) have unanimously

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agreed—at the Third Annual Review on 28-29 May 2008 which was also presided over by

Samdech Akka Moha Sena Padei Techo Hun Sen, the Prime Minister of the Kingdom of

Cambodia—that the PFMRP Stage 1 successfully completed, meaning that national budget is

fundamentally credible. Building upon achievements of the Stage 1, we have to prepare all

necessary conditions for implementing the Stage 2 of the reform program.

Respectfully Samdech Techo,

Excellencies Ladies and Gentlemen!

Taking this great opportunity, on behalf of the PFMRSC, allow me to report the meeting

on following key achievements from implementation of the PFMRP Stage 1, which can be

concluded that budget is credible:

First: Improved and strengthened revenue policy, forecasting, management and

collection. As the results, revenue increased around 26% per annum on average. At the same

time, Legal framework was also broaden, improved, and enhanced, including Law on Customs,

Law on taxation, Government order on Non-tax Revenue Management as well as the betterment

of sub-decree, Prakas, and other related regulations.

Second: Improved and strengthened budget preparation. As the results, budget is more

comprehensive, accurate and responsive to policies of the government through revising budget

preparation calendar, introducing budget strategic plan, introducing of new budget classification,

piloting program budgeting and introducing of systematic mid-year budget review and quarterly

revenue and expenditure plan. Most importantly, we have prepared and adopted “Public

Financial System Law”, which is a foundation law for public financial management of the

Kingdom. The key is that we need to timely prepare and adopt this law in order to ensure

consistency to the “Law on Administration of Capital City, Province, Township and

District/Khan”. This reflects dynamic progress of the key reforms, in which the RGC is also able

to ensure consistency, coherence, and smooth coordination, particular between PFMRP and

Decentralization and De-concentration Reform Program.

Third: Improved budget implementation and efficiency. As the results, budgetary control

is more simplified and effective, disbursements and payments are smoother and timely, and

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recording is more transparent and accurate. These can done through strengthening of cash

management, establishment of Treasury Single Account, introduction of new Chart of Accounts,

introduction of banking system payment, reduce budget execution processes and procedures,

including decentralizing financial inspection and procurement. In addition, internal control

system has been strengthened through establishment of internal audit body in all line ministries

and agencies.

Fourth: Skilled human capacity and institution have been enhanced through clearly

defining roles, functions, and responsibilities of individual and institution; transferring

knowledge and know-how from consultant/adviser through joint working; study tour; short term

and long term training; as well as providing appropriate incentive to skilled staff through

introducing Priority Mission Group (PMG) and Merit Based Pay Initiatives (MBPI).

In addition to the aforesaid four achievements, there is another indicator which is the

synergy of the four that I would like to report to Samdech Prime Minister and the meeting. We

should remember that when we began the implementation of PFMRP in late 2004, our national

budget was in serious difficulty. Salary payments to civil servants and arm forces were quite late.

The same is for budget disbursements to priority ministries, such as Ministry of Education,

Youth and Sport and Ministry of Health. The Priority Action Program (PAP) disbursement was

overdue and carried unpaid balance forward to one or two following years. National Treasury

was also sitting on around 600 to 700 Billion Riel of arrears. After implementation of PFMRP

especially since the last few years, the RGC has been able to clear overdue payments, to end

forwarding unpaid balance from year to year and to raise salaries and allowances for civil

servants and arm forces as well as increase investment spending on social-economic

infrastructure and improve public services deliveries for the benefit of our citizens. Moreover,

the huge amount of 600 to 700 Billion Riel arrears accumulated since 2004 was completely

cleared and around 1 trillion Riels cash balance is able to maintain. This achievement has made

Cambodian pubic finance situation deeply changed in quality from chronic cash shortage to cash

surplus, which is the key for budget credibility.

If we are asked about factors contributed to the success of the implementation of the

PMRP Stage 1, in short, I would say (1) the righteous vision, (2) strong political commitment,

(3) vibrant and proactive leadership, (4) active participation of all government officials and

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institutions, (5) strong supports of DPs with respect of RGC’s ownership and good coordination

under Sector Wide Approach, and (6) all activities are supported by change management and

comprehensive capacity training plan together with appropriate incentives for officials involved.

Therefore, in this auspicious occasion, on behalf of the PFMRSC, I would like to express

the deepest gratitude to Samdech Akka Moha Sena Padei Techo Hun Sen, Prime Minister of the

Kingdom of Cambodia for his visionary leadership and strong support of this PFMRP and

especially for Samdech’s firm commitment to adhere strict discipline in public finance

management. I would also like to express sincere gratitude to Deputy Prime Minister Keat

Chhon for his day to day and continuous leadership and encouragement to this PFMRP. I could

never forget to heartfully thank officials of the Ministry of Economy and Finance (MEF) and

Line Ministries (LMs) and DPs who have actively participated and supported in promoting

ownerships and responsibilities which are the key to the success of the PFMRP Stage 1.

Respectfully Samdech Techo,

Excellencies Ladies and Gentlemen!

To build Cambodian public financial management system towards the aforementioned

vision, we have designed a stage-by-stage strategic approach, of which allows us to prepare

necessary conditions for the Stage 2, while we were implementing the Stage 1. With this design,

we could sustain our reform program. Therefore, it is not surprise that we dubbed a slogan of the

Stage 2 as “Building on Budget Credibility towards Achieving Better Financial Accountability”.

Of course, while implementing action plan of Stage 1, we have started to prepare action plan for

the Stage 2, since after the Second Annual Review in April 2007 in Siem Riep. Preparation for

the stage 2 was also reviewed at the Third Annual Review in May 2008. So, we have spent more

than one year to prepare the Stage 2. I would like to report to Samdech Prime Minister and the

meeting on some important outputs of this preparation as follows:

First, Consolidated Action Plan (CAP) of the RGC is the Public Financial Management

Reform Program – Stage 2 that is about to launch today. This document is a foundation

document which defines long term vision and consolidated action plan of the RGC to guide the

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implementation which included Management and monitoring indicator frameworks as well as

clear indicators and targets.

Second, Departmental Action Plans (DAPs) of the MEF which includes activities cluster

and detailed actions of each Directorates, Departments, and entities of the MEF. These detailed

DAPs were developed and to be implemented by each Directorate, Department, and entity with

their ownerships and responsibilities and under direct and overall leadership and management of

the PFMRC of the MEF.

Third, Ministry Action Plans (MAPs) of LMs and Agencies in which all LMs and

agencies have to develop based on CAP and DAPs. At its meeting on 20 November 2008, the

PFMRSC has consolidated and evaluated 23 MAPs submitted. About half of these submitted

MAPs could start implementing with minor improvement, while the other half needs major

improvement.

Fourth, Leadership, management, and monitoring performance frameworks for Stage 2

were rearranged including the extension of EFPC roles to lead, manage, and coordinate at policy

and political level. The PFMRSC was established to lead, manage, and coordinate with all LMs

and agencies at a high technical level. Sub-committees, commission, and Public Financial

Management Reform Working Groups at all LMs and agencies were also established to lead,

manage, and coordinate within each specific area and among entities of their respective

ministries and agencies. At the same time, monthly, quarterly and annual Progress Monitoring

Framework with specific indicators and targets were also developed.

Respectfully Samdech Techo,

Excellencies Ladies and Gentlemen!

In sum, as we have attained substantial and encouraged achievements for stage 1, we

have also made a good and confident preparation for stage 2. However, based on implementation

experience in the Stage 1, we have to regard these action plans as the “Living Document”, which

should be flexible and can be improved and modified based on actual circumstances through our

mechanism and frameworks for PFM management. Therefore, the key to start implementing

PFMRP Stage 2 are in fact the sufficient synthesis of wills, commitments, and active

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participations of all players, especially management and staff at all ministries and agencies; the

enhancement of management, communication, and coordination of the institutional mechanism

that has been developed; and the development of human capacities and appropriate incentives

required for implementing the action plan. It is important to note that in contrast to the Stage 1

which MEF is a solo player implementing the reform, in the Stage 2, all ministries and agencies

are the key and active player. Therefore, ownerships, high responsibility and active participation

are the determined factors to ensure smooth, effective, and efficient implementation of the

PFMRP. If one part or one area cannot move as expected, the whole reform will fail. This is our

greatest challenge.

Once again, on behalf of FPMRSC, I would like to express my deepest gratitude to

Samdech Akka Moha Sena Padei Techo Hun Sen, Prime Minister of the Kingdom of Cambodia,

for taking his busiest and the most valuable time to be with us today to launch our the PFMRP

Stage 2. His present today reflects high attention and important of PFMRP to the RGC. We are

all cannot wait to listen and learn from the great recommendations and guidance of Samdech

Prime Minister in a spirit of definite success for implementing the PFMRP Stage 2.

Once again, I would like to sincerely thank and appreciate the efforts and willingness to

take challenge of Sub-committees, Commission, Directorates, Departments, Working Groups,

Secretariat, as well as the management and officials of MEF and LMs and our DPs who have

participated, cooperated, and supported the PFMRP from the start until now. I hope that the spirit

of ownership, active participation, cooperation, and support will continue to grow stronger and

wider in the Stage 2 and later stage.

Finally, I would like to wish Samdech Akka Moha Sena Padei Techo Hun Sen, Prime

Minister of the Kingdom of Cambodia, Excellencies, Ladies and Gentlemen healthy, liveliness,

and success in all duties for the causes of the nation, county and development.

Source: http://www.mef.gov.kh accessed on 17/11/2010

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7. Teaching Note

A. Case study

An appropriate procedure to reduce current long time spent on the payment process in

government expenditures.

B. Objective

The case aims to train government officials or future public civil servants on a better

understanding of the public finance in Cambodia. In order to reach this objective, students are

expected to conduct an in-depth research on government expenditure and payment procedure in

order to identify all the related stakeholders and steps of the process. Beyond the technical

understanding of the public finance, students are trained to play a role as policy markers of the

country by which they are invited to write a proposal of a new payment procedure or system that

shows an efficient administration of payment system. Understanding the hidden issues in the

public administration in less developed countries is crucial to analyze and make an effective

proposal.

The students’ handout is an important document which shows not only their capacity of

understanding of the Cambodian public finance but also their professionalism in writing and

decision making role in high level administration. These capacities can be assessed through the

presentation of their analysis, arguments and structure of the proposal.

C. Class activity & Proposal handout

The case study could be done individually or as a group, but preferably as a group of three

students in depending of the duration of assignment, because the case covers an understanding of

a half part of public finance, particularly in the expenditure side of the budget. In order to well

conduct the analysis of this case study, students may be allowed to have time from three weeks

to four weeks because unproductive time for documentation and interviews will be long.

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The students’ handouts must not just answer to the illustrated consecutive questions in the case.

What we need is a more likely professional proposal, which has good format answering to all

questions. Students are not required to follow the orders of the assigned questions. Some parts of

the proposal may contain a description while other parts must show critical analysis, which result

in providing possible solutions or recommendations. It is to note that the questions mentioned in

the case are just a guideline for students as hints for their reasoning.

D. Expected answers

Question (a)

There is no standard answer to this question. However, students are expected to share their

critical thinking related to the bureaucracy within each ministry. The students may highlight at

least the duration of each of the general five steps of payment such as an expenditure request of a

spending department to a spending ministry itself, a commitment request of the spending

ministry to MEF, procurement application, and visa request to MEF and payment to the National

Treasury. Improved understanding about these steps is very important for non-experimented civil

servants. This requires a hard work.

The main problems of a long time spent each step could be (1) a lack of skills in formal letter

writing of lower level officials, which need to be corrected many times by their superiors before

sending out (2) a new manager in position, who needs time to understand the case before make

decisions (3) a bad human resource management, for example, some managers or officials are

over work-loaded while other managers have nothing to do (4) a common problem of low

incentives (low salary), which cannot push officials to work hard (5) an circulation of letters

under a slow post system, for example: the distance from ministry to ministry.

Suggested recommendations could be the answers to the above-mentioned problems. But the

priority is to solve the problem of human resource management. Even if there are many critics on

bureaucracy of Cambodian public administration, it is just an artificial problem. Humans may be

the key players rather than the procedure itself. If officials are more productive and well

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managed then each step will be in order and the duration can be predictable. Microeconomic and

organizational analysis may be of the analytical tools for this question.

Question (b)

It is related to the question (a), after highlighting the different steps of the payment procedures

and problem of bureaucracy, students are expected to highlight for sequences of long time spent

such as an approval from the spending ministry itself, an approval on the commitment from

financial controller, procurement application and a payment registration at the National Treasury.

These sequences are usually criticized with different reasons. However, to identify clearly which

departments take long time to deliver an approval is not the main objective of the case study. The

objective is to make students understand that the four sequences of payment procedure take time,

and they are expected to be able to give arguments why those sequences take long. To score this

answer, trainers may identify their knowledge through the proposal that expose the

macroeconomic situation of the country and some internal problem of conflict of interest in

Cambodian administration and public management.

Question (c)

There is no standard answer to this question. But students must attempt to propose duration in

their proposal by calculating and set the minimum time requirement for each step. In order to do

so, students need to count all the possible steps in the procedure and they will see the steps they

can erase to answer to the next question. In this question, students will have some idea to share

recommendations in next question to improve the Cambodian administration and human

resource management. A suggested answer relevant to decentralization may be one of them.

Question (d)

The objective of this question is to encourage students to feel about their administration and to

advocate their points of view. The answer is free here but the important is their logical series of

thinking or arguments and their knowledge in management and good governance. Some steps of

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payment procedure may not be necessary to be erased but the structure of work organization or

task structure could be reformed. The citation about different theories of management, for

example, Henry Mintzberg, would be seen in the answer.

Question (e)

A restructuring of an organization is a challenging task and may lead to many conflicting

arguments because some positions will be erased. As a result of that, some officials will lose

their jobs. The reaction to the change or the restructuring would be the fact that different

ministries-institutions will fight to protect their jobs and their competencies. But everyone care

about good governance and the future of the country in the long run, it should be convincible. In

this case, the students would show their prepared solutions to this conflict.

Question (f)

When the students read all documents related to the public finance and conduct research, they

may make some interviews with professionals in the field, and they will know that some sub-

degrees and Prakas are out of date but still in use; out of date because they are not relevant to

some new laws or sub-degrees and still in use because there are no other sub-degrees or Prakas

to replace them yet. These sub-degrees are such as sub-degree no 81 ANKR.BK, dated 16

November 1995 on the financial control of budget expenditure of ministries-institutions, capital

city, provinces, cities, autonomous cities, districts and public administrative establishments, sub-

degree no 82 ANKR.BK dated 16 November 1995, on the general orders of public accounting.

Actually, a preparation of the law on public procurement is in progress, so it is one of the points

that should be quoted in the proposal of the students.

Question (g)

In this question, the students are expected to highlight the different components of good

governance based on which the students will identify the relevant departments directly involving

the payment procedures. Actually, the good governance is the core of the rectangular strategy of

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the Royal Government of Cambodia since 2003. It is a crosscutting practice of management

inside a public organization. According to UNESCAP11, good governance has 8 major

characteristics. It is participatory, consensus oriented, accountable, transparent, responsive,

effective and efficient, equitable and inclusive and follows the rule of law. To ensure the

efficiency and accountability, an analysis of job description or term of reference (TOR) of

related departments will be shown in the proposal.

Question (h)

The first of part of this question has already an answer in the conclusion of the case. The students

should answer by finding the possibility to apply the concept of an independent procurement of

other countries in Cambodia. Students may have free suggestion. However, we may not change

to apply the concept of independent procurement unit because amending the law of public

financial system in 2008 will be difficult. Students are expected to give more alternative choices

and strong and logical arguments for their recommendations.

Question (i)

The answer is free.

Question (j)

It could be 3 or no more than 5 years.

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