Public Expenditure And Financial Accountability (PEFA) Performance .
Royal Government of CambodiaSteering Committee of Public Financial Management ReformPublic Expenditure and Financial Accountability (PEFA)Performance Assessment Report 2021Based on PEFA 2016 MethodologyPrepared byGeneral Secretariat of Public Financial Management Reform Steering Committee
Royal Government of CambodiaPublic Expenditure and Financial Accountability (PEFA)Performance Assessment ReportThe quality assurance process followed in the production of the PEFA reportsatisfies all the requirements of the PEFA Secretariat and hence receives the ‘PEFACHECK’.PEFA Secretariat,June 14, 2021i
Table of contentsExecutive Summary . x1. Introduction . 11.1 Rationale and purpose . 11.2 Assessment management and quality assurance . 11.3 Assessment methodology . 32. Cambodia background information . 62.1 Country economic situation . 62.2 Fiscal and budgetary trends . 82.3 Legal and regulatory arrangements for PFM . 102.4 Institutional arrangements for PFM . 152.5 Other important features of PFM and its operating environment . 183. Assessment of PFM performance . 20PILLAR ONE: Budget reliability . 20PI-1. Aggregate expenditure outturn . 20PI-2. Expenditure composition outturn . 21PI-3. Revenue outturn . 24PILLAR TWO: Transparency of public finances . 28PI-4. Budget classification . 28PI-5. Budget documentation . 30PI-6. Central government operations outside financial reports . 32PI-7. Transfers to subnational administrations . 36PI-8. Performance information for service delivery . 41PI-9. Public access to fiscal information . 49PILLAR THREE: Public asset and liabilities . 52PI-10. Fiscal risk reporting . 52PI-11. Public investment management . 56PI-12. Public asset management . 64PI 13. Debt management . 68PILLAR FOUR: Policy-based fiscal strategy and budgeting . 72PI-14. Macroeconomic and fiscal forecasting . 72PI-15. Fiscal strategy . 74PI-16. Medium-term perspective in expenditure budget . 77PI-17. Budget preparation process . 82PI-18. Legislative scrutiny of budgets . 85PI-19. Revenue administration . 89PI-20. Accounting for revenues . 99PI-21. Predictability of in-year resource allocation . 101PI-22. Expenditure arrears . 105PI-23. Payroll control . 108PI-24. Procurement . 112PI-25. Internal control on nonsalary expenditure . 118PI-26. Internal audit . 121PILLAR SIX: Accounting and reporting . 126PI-27. Financial data integrity . 126ii
PI-28. In-year budget reports . 129PI-29. Annual financial reports . 131PILLAR SEVEN: External scrutiny and audit. 135PI-30. External audit . 135PI-31. Legislative scrutiny of audit reports . 1384. Conclusions of the analysis of PFM systems . 1414.1 Integrated assessment across the performance indicators . 1414.2 Effectiveness of the internal control framework . 1444.3 PFM strengths and weaknesses . 1464.4 Performance change since previous assessment . 1485. Government PFM reform process . 1545.1 Approach to PFM Reforms . 1545.2 Recent and ongoing reforms . 1565.3 Institutional considerations . 161Annex 1: Performance indicator summary . 168Annex 2: Summary of observations on the internal control framework . 179Annex 3: Sources of information. 186Annex 4: Tracking change in performance based on previous versions of PEFA . 196Annex 5: Calculation sheets for PI-1, PI-2, and PI-3 . 210Annex 6: List of Public Administration of Establishments . 219Annex 7: Structure of the MEF . 220iii
List of TableTable 0.1 : Key PFM Weaknesses identified in the 2021 PEFA Assessment . xvTable 0.2 : Overview of the scores of the PEFA indicators(based on the 2016 the PEFA methodology) . xviiTable 1.1 : The coverage and timeframe of the assessment . 3Table 1.2 : Timetable of the assessment November 2019 – July 2021 . 4Table 2.1 : Selected economic indicators 2015–2019. 8Table 2.2 : GDP and sectorial growth (in percent) 2015–2019 . 8Table 2.3 : Aggregate Fiscal data 2015-2019 (actuals). 9Table 2.4 : Actual budgetary allocations by economic classification(as a percentage of total expenditure) 2017-2019 . 10Table 2.5 : Budget allocation by sectors (main functions) 2015–2019 . 10Table 2.6 : summary of PFM responsibilities by key institutions of the nationaladministration in Cambodia . 17Table 2.7 : Structure of the public sector (number of entities and financial turn-over) . 18Table 2.8 : Financial structure of central government—budget estimates (Unit: KHR million) . 18Table 2.9 : Financial structure of central government—actual expenditure (Unit: KHR million) . 18Table 3.1 : Aggregate expenditure outturn and approved budget (actuals/estimates) . 20Table 3.2 : Score for PI-1 . 21Table 3.3 : Expenditure composition outturn by administrative classification . 22Table 3.4 : Expenditure composition outturn by economic classification variance . 23Table 3.5 : Percentage of actual expenditure charged to budgeted contingency vote . 24Table 3.6 : Scores for PI-2. 24Table 3.7 : Aggregate revenue outturn . 26Table 3.8 : Revenue composition outturn . 27Table 3.9 : Scores for PI-3. 27Table 3.10 : Overview of the classification of the 2019 Budget . 29Table 3.11 : Score for PI-4 . 30Table 3.12 : Presentation of elements in budget documentation for 2020 . 30Table 3.13 : Score for PI-5 . 32Table 3.14 : Size of expenditure outside financial reports in 2019 . 34Table 3.15 : Size of revenue outside financial report . 35Table 3.16 : Scores for PI-6. 36Table 3.17 : Composition of transfer of three levels of SNAs (KHR million) . 38Table 3.18 : Scores for PI-7. 41Table 3.19 : Performance data on achieved service delivery (2018) . 45Table 3.20 : Scores for PI-8. 49Table 3.21 : Elements of information and expected timeliness of the availability ofinformation to public access based on international good practices . 50Table 3.22 : Scores for PI-9. 51Table 3.23 : Financial reports of PEs (2019) . 53Table 3.24 : Scores for PI-10. 55Table 3.25 : List of investment projects funded by national budget in 2019 . 57Table 3.26 : Scores for PI-11. 63Table 3.27 : Asset information . 66Table 3.28 : Scores for PI-12. 67Table 3.29 : Debt indicators 2018-2020 . 70Table 3.30 : Scores for PI-13. 71Table 3.31 : Scores for PI-14. 74Table 3.32 : Scores for PI-15. 76Table 3.33 : Linking BSP to RS and NSDP 2019-2023 . 80Table 3.34 : Quality of BSP . 80Table 3.35 : BSP costing and financial projections . 80iv
Table 3.36 : Scores for PI-16. 81Table 3.37 : Budget calendar as per 2008 Public Finance law and actual dates in 2019 for 2020 budget . 83Table 3.38 : Timely budget submission to legislative body . 84Table 3.39 : Scores for PI-17. 85Table 3.40 : Scores for PI-18. 88Table 3.41 : Non-tax revenue collection entities (extract only main source of revenue) . 90Table 3.42 : Total of workshops and training courses . 92Table 3.43 : Taxpayer consultations in 2019 . 92Table 3.44 : Total tax disputes 2017-2019 . 94Table 3.45 : Classification of GDT registered large taxpayers according to risk assessment since 2017 . 94Table 3.46 : Audit progress of GDT in 2019 . 96Table 3.47 : Post clearance audits in 2019 . 96Table 3.48 : Tax revenue arrears . 97Table 3.49 : Stock of Non-tax revenue arrears . 98Table 3.50 : Scores for PI-19. 98Table 3.51 : Revenue kept in Temporary Accounts at the end of the fiscal year . 101Table 3.52 : Scores for PI-20. 101Table 3.53 : Scores for PI-21. 105Table 3.54 : Analysis of expenditure payment arrears . 107Table 3.55 : Scores for PI-22. 108Table 3.56 : Retroactive adjustments to civil servants’ payroll in 2017-2020 . 111Table 3.57 : Scores for PI-23. 112Table 3.58 : Procurement methods with thresholds . 115Table 3.59 : Procurement methods implementation . 115Table 3.60 : Key procurement information published in 2019 . 116Table 3.61 : Scores for PI-24. 117Table 3.62 : Scores for PI-25. 121Table 3.63 : Progress of implementing the audit recommendations in 2019 . 124Table 3.64 : Scores for PI-26. 124Table 3.65 : Scores for PI-27. 129Table 3.66 : Scores for PI-28. 131Table 3.67 : Timeline of submission financial reports . 132Table 3.68 : Financial statements compliant with IPSAS assessment . 133Table 3.69 : Scores for PI-29. 134Table 3.70 : Audit Coverage from 2016-2018 (KHR million) . 136Table 3.71 : Timeliness of the submission of the NAA reports to National Assembly . 137Table 3.72 : Scores for PI-30. 138Table 3.73 : Timeliness of scrutiny of NAA audit reports on annual financial report byNational Assembly . 139Table 3.74 : Scores for PI-31. 140Table 4.1 : Performance improvements for nine indicators since previous 2015 assessment . 148Table 5.1 : Key weaknesses of PFM systems. 158Table 5.2 : Inputs for structuring CAP3 2 . 160v
List of BoxBox 1.1 : Assessment management and quality assurance arrangements . 2Box 3.1 : Ongoing reform activities . 21Box 3.2 : Ongoing reform activities . 24Box 3.3 : Ongoing reform activities . 27Box 3.4 : Ongoing reform activities . 30Box 3.5 : Ongoing reform activities . 36Box 3.6 : Ongoing reform activities . 41Box 3.7 : Ongoing reform activities . 49Box 3.8 : Ongoing reform activities . 51Box 3.9 : Ongoing reform activities . 56Box 3.10 : Ongoing reform activities . 64Box 3.11 : Ongoing reform activities . 68Box 3.12 : Ongoing reform activities . 71Box 3.13 : Ongoing reform activities . 74Box 3.14 : Ongoing Reform Activities . 77Box 3.15 : Ongoing reform activities . 82Box 3.16 : Ongoing reform activities . 85Box 3.17 : Ongoing reform activities . 88Box 3.18 : Ongoing reform activities . 99Box 3.19 : Procedure of budget adjustment in program budget . 104Box 3.20 : Virement rules as defined in the Law on Public Finance System (2008) . 105Box 3.21 : Ongoing reform activities . 105Box 3.22 : Ongoing reform activities . 108Box 3.23 : Ongoing reform activities . 112Box 3.24 : Ongoing reform activities . 118Box 3.25 : Ongoing reform activities . 121Box 3.26 : Ongoing reform activities . 125Box 3.27 : Ongoing reform activities . 129Box 3.28 : Ongoing reform activities . 134Box 3.29 : Ongoing reform activities . 138List of DiagramDiagram 2.1Diagram 3.1Diagram 3.2Diagram 3.3Diagram 3.4Diagram 3.7Diagram 5.1Diagram 5.2: Subnational administrations structure . 12: Example of the structure of a PAE under MoH . 32: Summary budget approval process. 40: Public school budget transfer mechanism . 46: Public schools quarterly reporting . 46: Flow chart of payroll flow . 109: Structure of leadership and coordination mechanism of PFMRP . 155: Cambodia PFMRP- Sequence of platform . 158vi
List of Abbreviation and Authorised budget entityAnti-corruption UnitAsian Development BankAnnual operating planAgricultural and Rural Development BankAssociation of Southeast Asian NationsBSPBudget central governmentBudget system reform strategyControlling AuthorityConsolidated action planCouncil for the Development of CambodiaCash Management Technical CommitteeCentral governmentCambodian National Single WindowChart of accountsCouncil of MinistersClassification of the Functions of GovernmentCambodian Public Sector Accounting StandardCapital/provincesCapital/Provincial Departments of Economy and FinanceCapital and Provincial Department of Education Youth and SportCommunes/SangkatsDe‐concentration and DecentralizationDepartment of InvestmentDistrict/Municipality/KhanDebt Management Performance AssessmentDebt Management and Financial Analysis SystemDebt Sustainability AnalysisEverything but ArmsEconomic, Social, and Cultural CouncilElectricite du Cambodge (Electricity of Cambodia)Education Finance Management SystemEconomic and Financial Policy CommitteeElectronic fund transferEducation Strategic PlanEuropean UnionFinancial Affair DepartmentFinancial Management Information SystemFMIS Management Working GroupFiscal yearGovernment financial statisticsGeneral Department of BudgetGeneral Department of Customs and Excises of CambodiaDouble tax agreementGeneral Department of National TreasuryGeneral Department of Subnational Administration FinanceGeneral Department of Public ProcurementGeneral Department of Internal AuditGeneral Department of International Cooperation and Debt ManagementGeneral Department of Policy or Gross domestic productGeneral Department of State Property and Nontax Revenuevii
al Department of TaxationGovernment Financial StatisticsGeneral Inspectorate DepartmentGeneral Secretariat of Public Financial Management Reform Steering CommitteeHuman resource management information systemImplementing AgencyInternational Development AssociationInternational Monetary FundInternational Organization of Supreme Audit InstitutionInternational Public Sector Accounting StandardsInternational Standard of Supreme Audit InstitutionCambodian RielKey Performance IndicatorLine MinistryLaw on Cu
Royal Government of Cambodia Steering Committee of Public Financial Management Reform Public Expenditure and Financial Accountability (PEFA) Performance Assessment Report 2021 Based on PEFA 2016 Methodology Prepared by General Secretariat of Public Financial Management Reform Steering Committee
principles of taxation. PUBLIC FINANCE Public finance deals with the rising up of revenue and incurring expenditure by the public authorities. Dalton defines public finance as the science that is concerned with the income and expenditure of public authorities and the adjustment of one to
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