OBJECTIVES OF THIS MANUAL

1 1 CHAPTER OBJECTIVES OF THIS MANUAL INTRODUCTION 1. The aim of this MANUAL is to provide the framework for effective financial management in the public service. It is designed to improve the quality of service provided by enhancing the ability of the public service to achieve its OBJECTIVES of implementing government policies and programmes economically, efficiently and effectively. 2. This MANUAL , which replaces the rules laid down in the Control of Public Expenditure Handbook, General Orders - Financial and General Orders -Stores, is divided into five volumes as follows:- 10) Basic Principles - the broad concepts and policies which form the basis for effective financial management in the public service. 20) General Financial Procedures - the general procedures to be adopted to implement the above broad principles. 30) Supplies Management - the principles and general procedures to be applied for the management and control of government supplies and stores.

2 40) Internal Control and Internal Audit Principles and Practice - the principles and procedures for establishing and maintaining an effective internal audit function. 50) Departmental Instructions - which convert the broad principles and general procedures into detailed practices and procedures specifically applicable to each Ministry/Department/Section. 3. The demand for public sector services and programmes is increasing steadily, but the resources available to provide these are limited. Thus, it is imperative to make proper arrangements to create the right climate, and for all managers in the public service to be conscious of the need for achieving value for money. It is the responsibility of management to establish sound systems to ensure that government policies and programmes are implemented and carried out economically, efficiently and effectively. 4. This volume sets out, in a number of chapters as outlined below, the basic principles and broad concepts of financial management.

3 The other volumes expand on these concepts by establishing general principles and lay down the detailed procedures to be adopted. SUMMARY OF VOLUME 10 5. Systems and Procedures - Chapter outlines the framework for financial accounting in government and the basic principles which apply throughout the public service for the incurring of expenditure and collection of revenue. 2 6. Legal Framework - Chapter sets out the principles of government s accountability framework and the legal and other provisions in relation to financial management in the public sector. 7. Staffing Structure and Responsibilities - Chapter defines the respective roles and responsibilities of the Ministry of Finance and its officers, other Ministries and accounting Officers. 8. Internal Control - Chapter outlines the requirements for internal control and introduces the concepts of modern internal auditing.

4 Internal check and internal audit are vital elements of good financial management. They ensure that appropriate procedures and practices are operating in order to prevent errors, waste and extravagance. 9. Revenue Management - Chapter outlines the purposes and principles of revenue or cash flow management, which is an important part of overall financial management, 10. Management accounting - Chapter introduces the principles of management accounting , in order to relate income and expenditure to the provision of services, and management information to plan, monitor and control the extent to which policy and programme OBJECTIVES are being achieved, 11. Project accounting and Management - Chapter outlines the essential features of the management of and accounting for capital projects. 12. Computerised accounting Systems - The introduction of computerised accounting systems is a significant part of this programme, and the framework for these and the principles of the required controls are set out in Chapter 3 CHAPTER SYSTEMS AND PROCEDURES INTRODUCTION 1.

5 This chapter outlines the basic principles of financial management to be applied by Ministries/Departments in their day to day operations. These basic principles provide a uniform framework which, together with other management controls, ensure that the financial transactions of Ministries/Departments are carried out on a consistent and acceptable basis, and are properly accounted for. 2. The principles are binding on all accounting Officers as they represent the safeguards that are necessary when dealing with PUBLIC FUNDS. Nonetheless, there is scope for flexibility in their detailed application through the development of Departmental Instructions. However, to ensure that such instructions comply with the established concepts and policies, they must be subject to approval by the Ministry of Finance.

6 3. The system of public finance in Mauritius provides for the raising of funds by government from the public, in the form of taxes, fees, levies, duties, etc. These are paid into the Consolidated Fund and appropriated for meeting recurrent public expenditure. Capital expenditure is met from the Capital Fund which is financed mainly by loans and grants. Disbursements are made mainly under Votes and Items, the responsibility for which rests with accounting Officers. In addition, disbursements may also be made in the form of Advances or refunds of amounts on deposit. RECEIPTS FRAMEWORK 4. Receipts take the form of revenue raised under the relevant Revenue Laws, grants received, loans raised or deposits. The various Revenue Laws define in specific terms the rate and scale of the relevant duty or tax leviable as well as the circumstances under which payments become due.

7 Revenue-collecting Departments are charged with the responsibility for assessment, claim, collection and accounting . Provisions generally exist for legal enforcement and for penalties to be imposed in case of non-payment. Abandonment and write off are allowed in specific circumstances where debts become irrecoverable or where it is uneconomical to pursue the matter. DISBURSEMENTS FRAMEWORK 5. Authority for disbursements is derived from the Estimates or Budgets, the contents of which endorse government Plans and proposals for employees to be remunerated (number of posts) the authorised rate (approved scales of salary), services to be met, charges for supplies, public debt, public service pensions and social security payments. The supreme body for sanctioning the appropriation of public funds is the Legislative Assembly.

8 The Budgeting procedure is spelt out in Chapter Additional Funds to meet urgent and unforeseen expenditure over and above originally budgeted funds are provided under the Contingencies Fund, the procedure for which is detailed in Chapter Disbursements may also take the form of Advances for which Warrants approved by the Financial Secretary are specifically signed, or the refund of amounts on deposits. These are explained in Chapter 4 accounting FRAMEWORK 6. The basis of the government accounting System can be summarised as follows:- (i) Accounts are maintained on a cash basis; thus they record only actual payments made and revenues received. No accruals, goods or services received but not yet paid for or revenues due but not yet received, are taken into account. (ii) Recurrent, annual revenue and expenditure are accounted for through the Consolidated Fund.

9 (iii) Capital revenue and expenditure are accounted for through the Capital Fund. (iv) Non budgeted items, classified as below the line accounts, accommodate items which are not proper to the Consolidated Fund or Capital Fund. These are mainly monies deposited with or advanced by government or for transactions of special funds. The balances on these accounts are shown in the final statement of balances (the government Balance Sheet) along with the CONSOLIDATED FUND (reflecting the matching of Recurrent Expenditure against Revenue), the CAPITAL FUND (reflecting the matching of Capital Expenditure and Capital Revenue) and cash balances. 7. Public accountability and stewardship require that expenditure incurred and revenues received be classified, accounted for and reported upon in the same way as they were initially authorised. This is achieved through the preparation of financial statements using the same classification and format as the Annual Estimates.

10 However, in addition, Management should be able to monitor actual performance, detect variations from plans, and take corrective action to achieve the intended results. This can only be achieved with the development and use of management accounting and management information (See Chapter ). SYSTEM FOR DISBURSEMENTS 8. Except for a few special accounts opened with Commercial Banks, government Funds are operated locally through the Bank of Mauritius and the State Commercial Bank. Drawings are made on the Bank of Mauritius by the Accountant-General to provide funds for accounts held at the State Commercial Bank. These accounts are used to meet: (i) Payment orders for settlement of claims on behalf of non self accounting departments to suppliers; (ii) Replenishment of self- accounting departments accounts from which payments are met at Ministry/Department level; and (iii) Issue of cheques to non self- accounting Ministries/Departments for enabling payments to be made at Ministry/Department level to officers.