Fixing the Budget Mess

Yesterday, I conducted a poll on twitter about the apparent mess which is the 2016 Budget. The results are below.

Poll Results

When the poll concluded today, I decided to discuss the results in a series of tweets which I will reproduce below in form of an article. If you want to read the original tweets you can follow the hashtag #BubusnDailyPoll.

I argue that the PMB approach of hiding in embarassment and deflecting responsibility for the current budget fiasco will amount to a missed opportunity for reform. The best approach will be to own up to the mess. Admit that the approach by previous administrations presented an unanticipated booby trap and order a revamp of budgeting process. This will be in line with

  1. The policy thrust of actually creating a budgeting and planning ministry
  2. The Implementation of the very successful TSA policy

First of all, let me start with what I know. I believe the context of what I know about civil service reforms will help readers understand better the feasibility of the proposals I have iterated below.

  1. The TSA is not a new idea. The Federal Government’s transition to a TSA regime was part of the civil service reforms initiated by the Obasanjo Administration in 2004. The TSA was actually designed to be driven by the Government Integrated Financial Management Information System (GIFMIS) – a government-wide technology platform for budget control, monitoring and accountability. Subsequent administrations, however, failed to effectively pursue the proposed reforms, stalling its implementation for more than 10 years. One of the problems with the budget (which will get worse if there is an attempt to execute it as is) is that there is a disconnect with the TSA regime. If you institute TSA, you must layer budget control to get the benefits.
  2. Budget control will include accounting for every cost center that is a source of budget expense – staff, assets, programmes etc and using the pre-approved policy rules to govern the allocation of cash. This is what we don’t have. The FG does not have an asset database. It does not have a complete employee directory and the MTEF isn’t codified to plug into the budget M&E framework.
  3. The infrastructure to take the next step already exists. I know this because I designed it, wrote the proposal for it and got it through BPP. It was my first proposal to get the approval of the Federal Executive Council (proud moment for me). The infrastructure was designed to link NIMC with about 32 other key government agencies lik OAGF, Pencom, Immigration, INEC, NCC, EFCC, Police HQ, NPopC, National Planning Commission etc to facilitate e-Government including GIFMIS. So, almost all key offices in Abuja needed to implement the proposals I set forth below are already linked by 96-core optical fiber cables. The network cost N690m to build and was approved by the Yar’Adua FEC in december 2008. Galaxy Backbone got funded to implement in January 2009.
  4. So, PMB just needs to give the instruction and mandate a timeline for compliance and watch magic happen.

In todays , 9 out of 10 respondents feel the budget is too messy to be debated and should be withdrawn. I agree. I believe the constitution allows the executive to spend a percentage of a proposed budget before it is passed into law. This means that the APC Change government still has time to do a better job of planning its expenditure and laying out a more transparent and accountability compliant budget. I think the presentation of the  “as is” goes against the TSA approach. It doesn’t tie budget allocations to policy guidelines in any measurable way. This will be messier when the budget is being executed as Ministry of Budget and Planning will be inundated with approved budget lines they will be forced to deny, especially if approval of cash from TSA is policy driven. As a result, the Ministry of Budget and Planning will become a bottleneck.

The budget controversy presents a huge opportunity for the APC government to reshape the way the FG manages its resources. It can make the case that it is reviving the reforms of government financial management systems and plugging leakages. Therefore, Instead of shirking responsibility. The President should accept blame and order a revamp of budgeting guidelines ASAP.

A proper budget guideline must insist that the budget is designed bottom up. For instance, every employee to be budgeted for in wages must be listed in a Government staff directory. The staff directory will have names, position, ext, email, employee level, wage details, bank details etc of each staff in the budget. Each MDA will own the responsibility of registering its staff on the database and there should be firm deadlines for this. Of course those affected by IPPIS are exempt.

Essentially, this approach will ensure that the wage bill is built “ground up” not by estimate. Everybody to be paid will be registered by their organization. Achieving this is easy. No new biometric registration is necessary. The NIMC database can be used to extract details of each staff to populate the database once their NIN is provided. If a staff is not registered with NIMC, they should go get captured. Every Nigerian should be registered in the NIMC database anyways, so that wouldn’t be an extra step. Given this approach, wages are aggregated using the payroll data of uniquely identifiable and trackable staff into the budget. No round figures.

Any projected growth in staff strength is justified and approved with the anticipated head count added into the budget. Provision for wages become “Actual + Projected” aggregated from ground up. If you do a verification with NIMC you will find that there are staff earning pay from 2 diff MDAs!

To check other recurring expenditure, the Ministry of Budget and Planning must mandate an enumeration of all assets. Particularly the ones that have maintenance provisions in the budget. If they are not in the FG asset database, you cannot budget maintenance for them. For example, We will not maintain a generator we do not know of on the asset database. Asset database will include chairs, tables, dustbins, books etc. Inventory auditing will be a thing. We’ll have rules about amortization so that we will know when they are due for replacement.

Asset tracking will also help protect the FG from fraudulent purchases. If you are buying new equipment, the only proof they have been delivered is if they are a complete entry in the FG asset database. If they are stolen, theft must be reported. If an entry in the asset database is not found during audit, there should be consequences.

This kind of approach will make budget defense more effective. Today, we defend budgets blind. You are defending a budget to buy 5 additional hilux vans, but we don’t know to ask you about the 40 you are supposed to have (asset DB). Any asset related expense should be justified either using existing known assets or an approved asset growth plan.

This takes care of detailed budgeting for wages and assets. Overheads, you can have guidelines and rules that relate projection to wages. These guidelines could be detailed as well, allowing fine control over how much MDAs can budget and spend on overheads.

The rest – capital expenditures will be governed by policy direction and will come with KPIs. So each MDA sees them as a policy-driven project grant. An M&E plan would be required for each policy related item in the budget to go with the procurement documents. The M&E becomes the “handle” that measures progress, determines milestone payments and helps tie the project to the policy goal it is supposed to support. The M&E framework will be the responsibility of the MDA requiring the money and will have to be approved by the Ministry of Budget and Planning before procurement can start.

If we put the previous points together, we can actually automate approval process to access money from the TSA. MDAs get automatic cash backing approvals for:

  1. Staff salaries for staff on approved budgeted list.
  2. Milestone payments for projects where M&E deliverables have been met
  3. Overhead expenses that conform to extant guidelines

Minimum human interference will be required in those cases, essentially ensuring that the TSA system can process 100s of thousands of transactions every week without becoming a bottle neck or relying on fuzziness or approximation.

Exceptions will require exceptional approval.

Any system implemented like this will improve accountability and facilitate executive and parliamentary oversight. Every budget item can be drilled down to its justifiable source – either a documented employee, a known essential asset or a policy. For example a typical budget defense discussion will be about: 1. Why are you growing staff by 20%? 2. Why all the new assets? 3. What is your policy focus and how does your budgeted project support the programme and the overarching policy? 4. How are you measuring results?

Bye bye, Budget Mafia!

It is time to get rid of the PDP excel template for budgeting. Time to start doing PLANNING and BUDGETING together.

If we take this approach, budget execution report will be an automated report we generate from a government wide software. You will have an immediate and instant snapshot of what budget items have been executed and which ones haven’t. etc.

When I joined Galaxy in 2007, I was made to understand that the current budget process was temporary. GIFMIS/TSA was to replace it as a permanent approach to fiscal management in governement. It never did. But now, President Buhari has the opportunity to nail the reforms OBJ failed to complete. He has done TSA, he needs to implement GIFMIS to run it!

This will not be hard at all. It will be chaotic at first, but we are already in chaos. Not doing it now will be an opportunity lost.

We have to introduce exactness into the culture of government. All the fuzziness makes it difficult to fight corruption.

Q&A 

Q: A lot of what you’ve said makes sense but this can’t be implemented for the 2016 budget. Perhaps for 2017.

A: Some of it can. Prepare new spreadsheet formats and send them around. It will be complete in a month. Use the details to create first release of TSA cash backing approval software. For 2016, use access to funds to force compliance. eg. You will not get generator maint for 2016 until that generator is listed on FG Assets DB. So essentially go to , register that generator, get the unique asset ID then come and apply for maintenance cash.

So e.g. Ministry of Budget & Planning can say, June is deadline, before you access TSA to pay your staff for july, you will give us a NIN tagged list of everyone you are paying

Q: How about people that register false assets?

A: Fake registrations can be caught by routine audits. By forcing registration, we have data to prosecute for false declaration. And there will be a count of fraud for each amount that you claim from TSA to service an asset that is fraudulently registered. 🙂

If you list a ghost employee, we will have records that you listed him/her. If NIMC determines that there is a problem with the identity, we will have record of NIMC report of the identity violation – evidence for prosecution.

Q: This here can be achieved very very very quickly, but guess who are the most unlikely to adopt this? The Civil Service.

A: I guess this is why Buhari was elected. To reform the corrupt civil service. This is where the rubber hits the road.

 

 

 

 

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One thought on “Fixing the Budget Mess

  1. Which civil service will use this system? I think the civil service lacks the capacity to implement this. They will resist and fight this with every thing in them, even your lawmakers and every one supporting change will not like it because they do not understand it.

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