Prepared by Jean Pierre Nguenang
In francophone countries, two types of public expenditure execution procedures exist: normal procedures (subject to ordinary law) and waiver (or exceptional) procedures. The second differs from the former in that they are far less stringent. Spending, managed through the normal procedure, involves two major phases: the administrative phase and the accounting phase. The administrative phase comprises three successive expenditure execution stages: commitment, verification, authorization. The accounting phase deals with payments and bookkeeping. There are multiple waiver procedures that can derogate from normal procedures. These are discussed below in some detail. While the original rationale for such exceptional procedures may have been understandable – accelerating emergency expenditure – the practice has long become one of bypassing appropriate checks and balances. The practice undermines budget credibility and fiscal discipline, leads to misreporting of government expenditure, and provides scope for misappropriation and, in the worst case, misuse of government resources.
So what kinds of waivers are used?
1. Expenditures are made fully payable without prior authorization. The most well-known example is that of wages and salary payments, which, in many francophone countries are usually executed by the government accountant on the basis of verification data reviewed by the authorizing officers.
2. Expenditures are made payable on an interim basis without prior verification and authorization. Depending on the country, this category of expenditure may include: (i) external debt service payments , disbursed directly by Treasury accountants either to creditors through the central bank or, where they exist, or to a government debt management agency or Caisse Autonome d’Amortissement, which in turn execute the payment, sometimes through commercial banks; and (ii) others types of expenditures in the form of contract advances, imprest accounts, mission travel expenses, or expenses for supplies by diplomatic missions. In some countries these are referred to as prepayments (or PPA according to its French acronym). If used, the list of such expenditures should be drawn up by the Minister of Finance. However, often there is no clear list, or the list is exceptionally long and could be shortened.
3. Expenditures are made payable on an interim basis by the government’s banker, namely the central bank in the various countries, by direct debit of the amount due from the Treasury current account (TCA). Such transactions take the form of automatic debits: for example, interest payments, and commissions on debit transactions from the TCA, where applicable.
4. Expenditures are made against special funds. Such funds are created for and managed by specific entities outside of the normal budget process... They are made available to authorities such as the Presidency of the Republic and the Parliament.
Excessive recourse to waiver procedures, in particular those described in category 2 above, for executing expenditures that are categorized as urgent, but are in fact not eligible for an emergency procedure, has been noted in quite a number of francophone countries. This stems from several, often interrelated, factors, including: (i) resistance to transparency in expenditure execution; (ii) budgetary indiscipline, consisting in the circumvention of certain expenditure controls; (iii) rigidities in the expenditure chain, leading to numerous bottlenecks in the processing of expenditures, with the same file needing to be processed as many as thirty times in some countries, resulting in a time lag of more than three months between the initial expenditure request and final execution.
In general terms, expenditures corresponding to the first category of waiver procedures described above pose less problems, as such transactions are committed and verified before payment.
Payments made through the second category of waiver procedures are also subject to specific provisions, before being recorded in the government accounts. Thus, the respective payments must be regularized within specific and binding timeframes consistent with the following non-exhaustive list of special modalities.
• For advances on government contracts, through deduction from the amounts to be paid on future invoices.
• For imprest accounts and expenditures by diplomatic representations, by submission of supporting documentation.
• For external debt service payment in foreign currency, the transaction must be executed on the basis of a transfer authorization letter from the authorizing officer to the intermediary bank; regularization of the expenditure is performed upon receipt of notification of the exact amount debited, enabling the accountant to close the transit account.
Provisions for the ex-post authorization of expenditures carried out using waiver procedures exist in most of the countries, but are poorly implemented. In particular, in some countries the appropriations notification letters state that “no proposals for change in the distribution of appropriations coming from a ministry will be validated without prior verification of the regularization of prepaid expenditures, if any, executed on behalf of said ministry.” However, this measure is seldom applied, with visible consequences in terms of the incompleteness and unreliability of the fiscal accounts and the balance of accounts. In practice, suspense accounts carry uncleared amounts forward over several fiscal years.
In conclusion, the multiplicity of expenditure execution procedures in francophone countries increases the complexity of budget execution and poses recurring problems for designated accountants in respect of the regularization and clearance of suspense accounts. The use of certain expenditure waiver procedures weakens the control of budget execution and undermines the system of budget management and government accounting as a whole. Countries should take appropriate steps to bring them under control either by strengthening the existing measures or by putting new, more efficient measures in place, where there are none, and ensuring their strict application, with the imposition of sanctions for noncompliance.
Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.
