CAPACITY DEVELOPMENT/BUILDING -Public Finance Management (PFM)

CAPACITY DEVELOPMENT/BUILDING IN THE PUBLIC SECTOR

Public Finance Management (PFM)

Building state capacity is understood as the efforts by governments to professionalise the public sector at the political and administrative levels. The NDP identifies critical interventions needed to build a professional public service and a state capable of playing transformative and developmental roles.

A capable state creates an efficient, effective, and development-oriented environment so that its public service can have a positive effect on the lives of all in the country. Having such a state in place should translate into poverty alleviation, reduced unemployment and inequality and an environment for inclusive economic growth.

Public sector institutions worldwide face a profound challenge. On the one hand, their budgets are under pressure as government finances face economic growth challenges and rising public debt. On the other hand, they are asked to deliver the same outputs and outcomes, and sometimes more, under these macro-economic conditions.

This raises the important question about how public sector institutions can maintain and develop their capacity to deliver services, and strengthen their resilience, when so much effort is being focused on reducing costs rather than building capacity. To survive in a climate of economic uncertainty, public sector institutions are constantly required to adapt to these changes.

In constantly adapting, a central question is whether an institution has the right cultural tools to adapt and to build capacity. A crucial element in government’s financial management reform agenda must therefore be to strengthen individual and institutional capacity in public institutions so that they can successfully carry out their service delivery mandates.

The concept of capacity development has evolved over the years from human resource development of individuals to a concept that encapsulates not only individuals but organisations and the wider society in which they function.

The Organisation for Economic Co-operation and Development (OECD) defines capacity as “the ability of people, organisations and society as a whole to manage their affairs successfully.” According to the United Nations Development Programme (UNDP), capacity development is the process through which individuals, organisations and societies obtain, strengthen, and maintain the capacity to set and achieve their own development objectives over time.

For an activity to meet the standard of capacity development as practised and promoted by the UNDP, it must bring about transformation that is generated and sustained over time from within. Transformation of this kind goes beyond performing tasks; rather, it is about changing mindsets and attitudes.

A report compiled for the United Nations Department of Economic and Social Affairs states that the term “capacity development” is preferred to that of “capacity building.” “Capacity development” starts from the premise that capacity exists and can be strengthened while “capacity building” can appear to assume that capacity does not exist.

State capacity is defined as the “degree of control that state agents exercise over persons, activities, and resources within their government’s territorial jurisdiction.”

For a democratic political system to be successful over time, a high-capacity state is critical. This applies also in the global context, where capable states are essential for the developments advocated in the Sustainable Development Goals (SDGs) and the African Agenda 2063. Without a capable state, these goals cannot be realised.

In South Africa, government has prioritised transformation of the public sector so that it can meet peoples’ needs through a developmental and transformational agenda resulting in inclusive economic growth.

The policy imperatives for building the capacity of the state in South Africa are clearly spelled out in the NDP 2030. They are geared towards enabling the state to respond to challenges and to manage public resources effectively and efficiently to deliver on its mandate to the people of South Africa.

Chapter 13 of the NDP, “Building a capable state”, identifies five key areas in which action is particularly important:

·???????Stabilising the political-administrative interface (MEC and HoD PFM leadership): a focus on highly skilled professionals at political and administrative level and on building a professional public service that is insulated from political patronage.

·???????Making the public service and local government careers of choice: South Africa needs to focus on building a skilled and professional public service at all levels. This means that, at junior levels, the state needs to focus on producing the skills and expertise necessary for future public service cohorts. At senior levels, recruitment and management should be based on experience and expertise.

·???????Developing technical and specialist professional skills: the state needs to reinvigorate its role in producing the specialised technical skills essential to fulfilling its core functions and must provide appropriate career paths for technical specialists.

·???????Improving relations between the three spheres of government: South Africa needs a shared vision across the three spheres of government. The state’s capacity deficit needs to be recognised at all levels of government and, where capacity exists, greater responsibility must be devolved in these areas while capacity in others is built.

·???????Effectively managing state-owned enterprises (SOEs): the major SOEs need effective governance structures that enable them to balance their economic and social objectives.

·???????In essence, to deal with the triple challenges (poverty, inequality, and unemployment) to its democracy, a capable South African state must have well-run institutions that consistently provide high quality services.

ACCA AND IFAC PROFESSIONALISATION JOURNEY

AFRICAN PROFESSIONALISATION INITIATIVE (API) PERSPECTIVE

What role will a local professional accountancy organisation and/or regulator play?

They can structure their learning programmes to respond to public sector learning needs and ensure that public sector content is integrated into their qualifications’ framework.

The PAO(Professional Accounting Organisations) should take responsibility for the development of public sector accountancy competencies in individuals, who work in or aspire to work in PFM roles. These competencies must be based on the actual needs of the public sector, and the API Competency Framework can assist in this regard. The PAO will need to perform a gap analysis by comparing the expectations of their role in the initiative and their current service offering. For example, their present qualifications may not sufficiently address public sector competencies. Adaptation of the PAO’s qualification framework may be required to ensure that accounting and auditing professionals are prepared for public sector roles.

It is advisable that the PAO aims to ensure that public sector accounting and auditing professionals carry a designation with equivalent prestige to their private sector counterparts. Nonetheless, there can be exit points that provide lower tier designations, such as that of an “accounting technician.” Each tier should, however, carry consistent amounts of prestige – irrespective of the sector that the professional will work in.

The PAO continues to play an important role after the awarding of qualifications and designations. This includes holding the professional accountable for their adherence to a code of ethics, for the quality of their work, and for their commitment to life-long learning. Where such professionals are filling PFM roles, public funds are more likely to be managed economically, efficiently, and effectively.

If a PAO has existing qualifications, it can incorporate public sector competencies through one or more of the following approaches:

Incorporating public sector competencies into qualification frameworks

Streaming: A stand-alone public sector qualification can be created. This would mean that aspiring professionals choose a private or public sector qualification at the stage of their initial application. The benefit is that the public sector qualification can be tailored to focus only on content relevant to a PFM role. The disadvantage is that it prevents mobility between sectors, and the public sector stream may be perceived by students to be less desirable than the private sector one.

Specialisation: A post-qualification specialisation in the public sector can be created. After obtaining the core professional qualification of the PAO, the accountant could enrol in a specialisation programme where they are exposed to content relevant to a PFM role. The advantage is that professionals can choose to specialise at any time in their career, and public sector content is treated as “specialised” – rather than a lower-tier option.

Bolt-on: Public sector subjects can be added to the existing qualification(s). This will ensure that all aspiring professionals are exposed to the public sector. The drawback is that if public sector content is delivered separately from other content, generic accountancy principles may not be understood in the context of the public sector.

Integrated: Public sector competencies can be integrated into the existing qualification(s). Instead of bolt-on subjects, public sector content and case studies will be an integral part of the formation of accountancy competencies in the learner. The disadvantage of this approach is that it may result in too great a workload for learners.

GOVERNMENTS ARE ENCOURAGED TO EMBARK ON A MULTI-PRONGED CAPACITY BUILDING INITIATIVE.

Private accountancy firms may contribute to this process by seconding senior staff into strategic PFM (Public Finance Management) positions. Such individuals – provided they receive in-depth training on the public sector context – can drive improvements in internal controls and other PFM processes. They can also mentor incumbents who are pursuing professional qualifications. Such secondments could form part of a public/private exchange programme where PFM officials are placed in private sector firms, in which they can receive support in developing their accountancy competencies from qualified accounting and auditing professionals.

An additional source of capacity may be from unemployed graduates. Tapping into this pool will not only enhance PFM but will also contribute to job creation. A government may also consider reaching out to professionals in their diaspora, who have an interest in returning home and contributing to the development of their country. It may also be appropriate to enter into twinning arrangements with other countries, whereby short-term capacity needs are partially provided by a country with experienced public sector accounting and auditing professionals. Foreign or international PAOs may also help provide immediate capacity.

With a multi-pronged capacity building approach, governments can address their short-term, medium-term, and long-term needs in a sustainable manner and can establish a secure talent pipeline.

The API has identified three main sources of capacity and is developing learning resources to support.

the development of public sector accountancy competencies in each:

Students who are aspiring to become accounting and auditing professionals should be exposed to public sector competencies and case studies throughout their initial professional development. They represent the long-term pipeline of talent that government can tap into.

Incumbents are those individuals currently employed in the public service in PFM roles, but who do not have a formal accountancy background. A local initiative can provide an accelerated learning programme to develop their knowledge and skills and to provide a pathway to a professional designation.

Accounting and auditing professionals who have an interest in accepting a role within the public sector, but who lack exposure to this environment. A programme can be offered to such individuals to provide them with specialised public sector competencies. This will allow them to participate in the professionalisation of a country’s PFM.

SOUTHERN AFRICAN INSTITUTE OF GOVERMENT AUDITORS(SAIGA) AND PUBLIC SECTOR PROFESSIONALISM

The Southern African Institute of Government Auditors (SAIGA) is operating on a non-profit basis to serve the public interest. Since its inception on 27 July 1988, the role, and functions of SAIGA has been to serve the public sector and society by advancing public accountability and auditing in its widest sense.

As a professional body, SAIGA represents a unique brand of professionals, the Registered Government Auditor (RGA) in the public sector and in academia. The RGA is considered the highest professional designation within the public sector auditing (previously known as government auditing).

We support the RGA professionals through Continuous Professional Development programmes, expert technical knowledge and advice, scientific research in accountability and accounting topics and other numerous programmes aimed at developing and advancing Competent public sector auditing and accounting professionals.

The Southern African Institute of Government Auditors has issued a draft competency framework for comments, which is based on the IFAC, API, Intosai Frameworks and incorporated public sector specific matters, and it includes the technological matters for the future of professionals in accountancy and auditing. This framework is first of kind for the public sector accountants and auditors.

“Our competency framework for the Registered Government Auditor (RGA) embraces the critical skills required by auditors and accountants to function in today's fast paced world. These include a combination of technical and ‘soft’ skills, as well as an ethical disposition. Our competency framework further acknowledges the impact of technology on the role of a professional accountant and incorporates IT and data management, data analytics, cybersecurity, and other similar areas, which although a professional accountant is not required to be an expert in, they are required to be able to navigate and understand.

These skills are also critical for fostering complex problem solving. We see this competency framework as an answer to the challenge of professionalisation in relation to the public financial management function, and it is our commitment to contribute to the advancement of both transparency and accountability in the public sector.”

https://www.saiga.co.za/saiga/wp-content/uploads/2023/06/SAIGA-Competency-Framework-2023.pdf for comments on the SAIGA framework send to [email protected]