Introduction to Public Finance Management

Acknowledgement

This Module has been prepared for use in training Public Sector Accountancy
Professionals in Zimbabwe

through the facilitation of the Public Accountants and Auditors Board,

Zimbabwe

under the International Federation of Accountants (IFAC) accountancy capacity

building program

with funding provided by UK Aid from the UK Government,

Copyright © [April 2020] International Federation of Accountants (IFAC). All rights reserved.
Used with permission of IFAC.

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Table of Contents

PREFACE ...................................................................................................................................... xi

PURPOSE OF THE PUBLIC FINANCE MANAGEMENT MODULE ................................................... xi

BJECTIVE OF THE MODULE .......................................................................................................... xi

LEARNING OUTCOMES ............................................................................................................... xii

MODULE CONTENT ................................................................................................................... xiii

METHODS/STRATEGIES OF TEACHING ...................................................................................... xiv

STUDENT ASSESSMENT ............................................................................................................. xiv

SELECTED RESOURCES (REFERENCES) ........................................................................................ xv

ESSENTIAL READING ............................................................................................................... xv

Supplementary Reading ......................................................................................................... xv

E-Resources ............................................................................................................................ xv

SYLLABUS CONTENT ................................................................................................................... xv

LIST OF ACRONYMS ................................................................................................................. xviii

DEFINITION OF TERMS .............................................................................................................. xxi

UNIT 1: Introduction to Public Finance Management ............................................................... 1

1.0 Introduction........................................................................................................................... 1

1.1 What is Public Finance Management .................................................................................... 3

1.1.1 Similarities between Public and Private Finance ............................................................ 4

1.1.2 Differences between Public and Private Finance ........................................................... 4

1.2 The philosophy underpinning Public Finance Management ................................................ 6

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1.2.1 Libertarian Philosophy .................................................................................................... 8

1.2.2 Neo-liberal Philosophy ................................................................................................... 8

1.2.3 Collectivist Thinking ........................................................................................................ 8

1.2.4 Comparative analysis of Philosophies principles underpinning Public Finance ............. 8

1.3 The scope of the Public Sector ............................................................................................ 11

1.3.1 Central Government ..................................................................................................... 16

1.3.2 State Government ........................................................................................................ 16

1.3.3 Local Governments ....................................................................................................... 16

1.3.4 Social Security Funds .................................................................................................... 17

1.3.5 Public Corporations ...................................................................................................... 17

1.3.6 Constitutional provisions on the Public Sector in Zimbabwe ....................................... 18

1.4 Objectives of Public Finance and Justification for Public Sector Intervention in the
operations of the market .......................................................................................................... 18

1.4.1 Market externalities ..................................................................................................... 19

1.4.2 Public goods .................................................................................................................. 21

1.4.3 Social insurance ............................................................................................................ 21

1.4.4 Income distribution ...................................................................................................... 21

1.4.5 Risks of public sector intervention in the market ........................................................ 22

1.4.6 What forms should government intervention in the market take .............................. 22

1.5 Principles that must guide Public Finance Management in Zimbabwe .............................. 23

1.5.1 Transparency and accountability in financial matters ................................................. 24

1.5.2 Public finance system must be directed towards national development .................... 24

1.5.3 The burdens and benefits of the use of resources must be shared equitably between
present and future generations ............................................................................................ 25

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1.5.4 Public funds must be expended transparently, prudently, economically and effectively
............................................................................................................................................... 25

1.5.5 Financial management must be responsible, and fiscal reporting must be clear ....... 26

1.5.6 Public borrowing and all transactions involving the national debt must be carried out
transparently and in the best interests of Zimbabwe. .......................................................... 26

1.5.7 No taxes may be levied except under the specific authority of the Constitution or an
Act of Parliament ................................................................................................................... 26

1.6 The legal, regulatory and policy framework governing Public Finance Management ....... 28

1.6.1 Constitution .................................................................................................................. 29

1.6.2 Statutes ......................................................................................................................... 30

1.6.3 Subsidiary legislation/Regulations ............................................................................... 31

1.6.4 Instructions ................................................................................................................... 31

1.6.5 Circulars ........................................................................................................................ 32

1.6.6 Accounting Procedures/Finance and Administration Manuals.................................... 32

1.7 Constitutional guidance on Public Finance Management activities and transactions ....... 33

1.7.1Financial Management .................................................................................................. 34

1.7.2 Principles of public financial management .................................................................. 34

1.7.3 Parliamentary oversight of state revenues and expenditure ...................................... 34

1.7.4 Limits of state borrowings, public debt and state guarantees ..................................... 35

1.7.5 Allocation of revenues between provincial and local tiers of government ................. 36

1.7.6 The Consolidated Revenue Fund .................................................................................. 37

1.7.7 Authorisation of Expenditure from Consolidated Revenue Fund ................................ 40

1.7.8 Safeguarding of Public Funds and Property ................................................................. 45

1.7.9 Auditor-General ............................................................................................................ 47

1.7.10 General Provisions ...................................................................................................... 48

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1.8 Accountability relationships in Public Financial Management ........................................... 51

1.8.1 Legislature .................................................................................................................... 52

1.8.2 Financial Responsibilities of the Executive ................................................................... 53

1.8.3 Auditor General ............................................................................................................ 54

1.8.4 Treasury ........................................................................................................................ 54

1.8.5 Secretary for Finance .................................................................................................... 56

1.8.6 Accountant General ...................................................................................................... 56

1.8.7 Principal Director responsible for Debt Management ................................................. 57

1.8.8Accounting Officer ......................................................................................................... 59

1.8.9 Director for Finance ...................................................................................................... 61

1.8.10 Internal Audit .............................................................................................................. 61

1.8.11 Accountability Relationships in Local Authorities ...................................................... 62

1.9 End of Unit ummary ............................................................................................................ 65

UNIT 2: Public Sector Budgeting and Budgetary Control ........................................................ 68

Introduction to Public Sector Budgeting and Budgetary Control ............................................. 68

2.0 Introduction......................................................................................................................... 68

2.1 What is a Budget in the Public Sector Context ................................................................... 70

2.2 Objectives of public Sector Budgets.................................................................................... 74

2.3 Structure of Public Sector Budgets ..................................................................................... 77

2.3.1 Sources of Public Sector Revenue ................................................................................ 77

2.3.2 Purpose for which resources will be used .................................................................... 81

2.3.3 Decision with regard to Budget Deficit or Surplus ....................................................... 84

2.3.4 Financing the Budget Deficit ........................................................................................ 84

2.3.5 Public Sector Budget Classification .............................................................................. 85

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2.4 The Fiscal responsibilities of the Minister responsible for Finance .................................... 87

2.4.1 Medium Term Macroeconomic Forecast ..................................................................... 88

2.4.2 Medium-Term Fiscal Forecasts..................................................................................... 89

2.4.3 Fiscal Policy ................................................................................................................... 89

2.4.4 Medium Term Expenditure Framework (MTEF)........................................................... 90

2.4.5 Fiscal Risk Statement .................................................................................................... 90

2.4.6 Government economic and fiscal update and year-end report................................... 91

2.5 Public Sector Budgeting Techniques ................................................................................... 92

2.5.1 Incremental budgeting ................................................................................................. 92

2.5.2 Zero based budgeting ................................................................................................... 92

2.5.3 Activity based budgeting .............................................................................................. 92

2.5.4 Results Based Budgeting .............................................................................................. 93

2.5.5 Program based budgeting ............................................................................................ 95

2.6 Public Sector Budget Calendar ............................................................................................ 98

2.7 Budgeting Cycle ................................................................................................................... 99

2.7.1 Strategic Planning ....................................................................................................... 100

2.7.2 Budget Call for Estimates............................................................................................ 100

2.7.3 Budget Preparation Process ....................................................................................... 101

2.7.4 Budget Approval at Public Sector organisational level .............................................. 101

2.7.5 Budget Submission ..................................................................................................... 101

2.7.6 Budget Authorisation ................................................................................................. 102

2.7.7 Publication of Public Sector Budgets .......................................................................... 104

2.7.8 Budget Execution ........................................................................................................ 105

2.7.9 Monitoring Public Sector Budgets .............................................................................. 106

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2.7.10 Budget Variation ....................................................................................................... 107

2.7.11 Budget Amendments - Additional and supplementary estimates ........................... 108

2.7.12 Budget Reporting ...................................................................................................... 108

2.7.13 Auditing of Public Sector Budgets ............................................................................ 109

2.8 Gender Responsive Budgeting .......................................................................................... 110

2.8.1 What is Gender Responsive Budgeting ...................................................................... 110

2.8.2 Justification for GRB in Zimbabwe.............................................................................. 111

2.9 End of Unit Summary ........................................................................................................ 114

UNIT 3: Public Sector Business Processes ............................................................................. 116

3.0 Introduction to Public Sector Business Processes............................................................. 116

3.1 Revenue Management in the Public Sector ...................................................................... 118

3.1.1 Definition of Public Sector Revenue ........................................................................... 119

3.1.2 Sources of Public Sector Revenue .............................................................................. 120

3.1.3 Authority to levy fees and charges ............................................................................. 121

3.1.4 Responsibilities of Receivers of Revenue ................................................................... 121

3.1.5 Accounting Package for Public Sector Revenue management ...................................... 122

3.1.6 Methods of Receiving Revenue...................................................................................... 123

3.1.7 Acknowledging Receipt of Funds ................................................................................... 124

3.6 Acceptance of gifts, donations and sponsorships ............................................................. 125

3.1.8 Management of receivables........................................................................................... 126

3..1.9 Summary .................................................................................................................... 127

3.2 Procurement of Goods and Services ................................................................................. 129

3.2.1 Definition of Procurement in the Public Sector Context ............................................ 131

3.2.2 Public Procurement Legal and Policy Framework ...................................................... 131

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3.2.3 Organisational Structure for Public Sector Procurement........................................... 134

3.2.5 Public Sector Procurement Cycle ............................................................................... 136

3.2.6 Issuing Purchase orders and following them up ........................................................ 147

3.2.7 Procurement Process for Consultancy Services ......................................................... 148

3.2.8 Evaluation of Consultancy proposals and tender award ............................................ 151

3.2.9 Confidentiality in Procurement .................................................................................. 156

3.2.10 Receipt of goods, services, works and consultancy services ................................... 156

3.2.11 Management of Procurement Contracts ................................................................. 157

3.2.12 Payments relating to Contracts ................................................................................ 159

3.2.13 Summary ................................................................................................................... 159

3.3 Public Sector Expenditure Management .......................................................................... 162

3.3.1 Definition of Public Sector Expenditure ..................................................................... 163

3.3.2 The nature of Public Sector Expenditure.................................................................... 165

3.3.3 Overview of public sector policies and practices on expenditure management ....... 166

3.3.4 Policies on disallowances, recovery and adjustment of payments ............................ 174

3.3.5 Unauthorised, irregular, fruitless and wasteful expenditure ..................................... 175

3.3.6Summary...................................................................................................................... 176

3.4 Public Sector Cash Management ...................................................................................... 178

3.4.1 Defining Public sector cashflows ................................................................................ 179

3.4.2 Cash management policies and practices .................................................................. 179

3.4.3 Policies and practices on banking arrangements ....................................................... 180

3.4.4 Cash planning policies and practices .......................................................................... 182

3.4.5 Transfer of funds for making payments ..................................................................... 183

3.4.6 Cash management committee ................................................................................... 184

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3.4.7 Policy and practices on custody of public moneys ..................................................... 185

3.4.8 Investment of money in Consolidated Revenue Fund ............................................... 185

3.4.9 Imprest........................................................................................................................ 187

3.4.10 Summary ................................................................................................................... 187

3.5 Public Sector Asset Management ..................................................................................... 189

3.5.1 Defining Public Sector Assets ..................................................................................... 190

3.5.2 The nature of Public Sector Assets ............................................................................. 191

3.5.3 Asset Management Policies and Practices ................................................................. 192

3.5.4 Policies and practices on custody of assets ................................................................ 194

3.5.5 Disposal and leasing of State assets ........................................................................... 195

3.5.6 Compliance with ethical standards ............................................................................ 197

3.5.7 Avoiding abuse of asset management process .......................................................... 197

3.5.8 Summary ..................................................................................................................... 197

3.6 Public Sector Debt Management ...................................................................................... 199

3.6.1 Defining Public Debt ................................................................................................... 200

3.6.2 Responsibility for managing national Public Debt ..................................................... 201

3.6.3 Debt Management Strategy ....................................................................................... 201

3.6.4 Legal and policy framework on borrowing................................................................. 202

3.6.5 Loans, guarantees and other commitments .............................................................. 205

3.6.6 Policy on Raising Loans ............................................................................................... 205

3.6.7 Legal and policy framework on loan guarantees ....................................................... 206

3.6.8 Reporting public debt activities .................................................................................. 207

3.6.9 Establishment of Sinking Funds .................................................................................. 208

3.6.10 Summary ................................................................................................................... 208

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UNIT 4: Stakeholder Communication in Public Finance Management ................................. 209

4.0 Introduction to Stakeholder Communication in Public Finance Management ................ 209

4.1 Defining public finance management Stakeholders ......................................................... 210

4.2 Public finance management stakeholder mapping .......................................................... 210

4.2.1 Internal Stakeholders ................................................................................................. 212

4.2.2 External Stakeholder .................................................................................................. 214

4.3 The information needs and communication channels for public finance management
stakeholders ............................................................................................................................ 216

4.4 Developing appropriate communication channels for public finance management

stakeholders ............................................................................................................................ 219

4.5 End of Unit Summary ..................................................................................................... 220

References .................................................................................................................................. 222

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PREFACE

PURPOSE OF THE PUBLIC FINANCE MANAGEMENT MODULE

Public finances form an integral part of economic activities of any country. Good public finance
management systems are critical for achieving sustainable high economic growth rates;
improving the quality of public service delivery; and ensuring burdens and benefits of the use of
resources are shared equitably between present and future generations. The public sector
therefore needs public sector accountancy professionals with the requisite skills and competence
to make good quality decisions on financial management policy.

Public finance management laws, regulations, policies and practices govern the manner in which
public sector organisations’ resources are mobilised, spent, accounted for, reported and audited.
In addition, Public Sector organisations manage significant assets, liabilities, revenues and
expenses. There is need for every aspiring or practicing public sector accountancy professional
to understand the fundamentals of financial management in the public sector context.

The Public Finance Management Module is designed for students that need a detailed
understanding of how the finances of the State are managed at the various tiers of government
(namely national, subnational and local level) and in the various state controlled and funded
entities. The module is targeted at Public Sector Accountancy (PSA) Course students at Zimbabwe
Institute of Public Administration (ZIPAM) and Government Training Centres (GTCs). The module
makes a significant contribution to the development of a stronger Public Sector Accountancy
professional in central, provincial and local government; state entities, constitutional and other
commissions; and statutory funds.

BJECTIVE OF THE MODULE

The objectives of this module are to:

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a) Explain the meaning of public finance management and the philosophy underpinning
public finance;
b) Evaluate the objectives of public finance and the rationale for public sector
intervention in the market;
c) Assess the scope of the public sector;
d) Evaluate the principles that must guide public finance management in Zimbabwe;
e) Analyse the legal, regulatory and policy framework guiding public finance
management in Zimbabwe;
f) Explain the fiscal responsibilities of the Minister responsible for Finance;
g) Explain the purpose of a medium-term budget framework and how it links policy to
annual budgeting.
h) Analyse the systems used in budgeting, control and management of public financial
resources in Zimbabwe;
i) Evaluate and review the key business processes that underpin public service delivery;
j) Analyse the key accountability relationships within public finance management in
Zimbabwe; and
k) Evaluate the significance of stakeholder communication in Public Finance
management.

LEARNING OUTCOMES

On completion of this module students are expected to make evident the following:

a) Understanding of the basic principles, objectives and activities of Public Finance

Management with reference to the Zimbabwean Public Finance Management legal
framework.
b) Knowledge of the core components of business processes in the public sector context
including: revenue management; procurement management; expenditure; cash
management; asset management; and debt management.

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c) Demonstrable broad understanding of the role of annual budgeting process in public

sector as an instrument of accountability, planning and control;
d) Knowledge of the different approaches to annual budgeting in the public sector;
e) Understanding of the role of the legislature in monitoring budget execution and amending
the budget;
f) Demonstrable knowledge of the purpose of a medium-term budget framework and how
it links policy to annual budgeting; and
g) Application of effective communications skills in interpreting and reporting on all aspects
of financial and non-financial information for stakeholders and potential stakeholders.

MODULE CONTENT

The public finance management cycle is commonly conceived as a cycle of six phases namely,
policy design, budget formulation, budget approval, budget execution, accounting and external
audit (Lawson, 2015). The four fundamental pillars of financial management in the public sector
context are Budgeting, Accounting, Financial Reporting and Auditing. This Module concentrates
on the first pillar - Public Sector Budgeting. The other three pillars, namely Public Sector
Accounting, Financial Reporting and Auditing are covered in detail in other modules of the Public
Sector Accountancy Course.

This Module introduces public finance management; looks at public sector budgeting and
budgetary control; explains the key business processes underpinning budget execution (public
service delivery); and concludes by discussions on the importance of stakeholder communication
in public finance management.

The Content of the Module covers the following:

Unit A. Introduction to Public Finance

Unit B. Public Sector Budgeting and Budgetary Control
Unit C. Public Sector Business Processes
C1 Revenue Management

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C2 Procurement Management
C3 Expenditure Management
C4 Cash Management
C5 Asset Management
C6 Public Debt Management

Unit D. Stakeholder Communication in Public Finance Management.

METHODS/STRATEGIES OF TEACHING

This module is delivered though lectures; tutorials and case studies. The module comprises of 40
hours of interactive lectures and 20 hours of class discussions, tutorials and exercises. Students
are expected to allocate 120 hours of additional self-study.

STUDENT ASSESSMENT

The final assessment mark for each student is determined as follows:-

Assessment Methods Brief Description Weight

Group Assignment/Class Students are given a topic and should present
presentation their analysis in class
Individual assignment Students are given a topic and submit written
assignment
In Class tests These are open book tests that are held midway
and towards the end of the semester to assess
students’ learning outcome.
Final examination This is a close-book three (3) hour examination
that is held at the end of the semester.
Total

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SELECTED RESOURCES (REFERENCES)

There are a number of resources that students will rely on.

ESSENTIAL READING
• Introduction to Public Finance Management Student Manual;
• Constitution of Zimbabwe (Amendment number 20) Act of 2013;
• Public Finance Management (PFM) Act [Chapter 22:19];
• Public Finance Management Regulations(SI 135 of 2019)
• Public Procurement and Disposal of Public Assets Act (Chapter 22:23);
• Public Procurement and Disposal of Public Assets Regulations (SI No. 5 of 2018);
• Public Debt Management Act [Chapter 22:19];
• Urban Councils Act [Chapter 27:12];
• Rural District Councils Act [Chapter 29:13]; and
• International Monetary Fund Government Finance Statistics Handbook (2014).

Supplementary Reading

• International handbook on Public Finance Management

E-Resources

• Students are also encouraged to read relevant journals available in the E-Resources
library of ZIPAM and GTCs

SYLLABUS CONTENT

Unit 1: Introduction to Public Finance Management

a) Definition of Public Finance Management;

b) The philosophy underpinning Public Finance Management;

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c) The Scope of the Public Sector;

d) Justification for Public Sector Intervention in the operations of the market;
e) Principles that must guide Public Finance management in Zimbabwe;
f) The legal, regulatory and policy framework governing Public Finance Management;
g) Constitutional guidelines on Public Finance Management in Zimbabwe; and
h) Accountability relationships in Public Financial Management.

Unit 2: Budgeting and Budgetary Control

(a) Introduction to Budgeting in the Public Sector;

(b) Defining a Public Sector Budget;
(c) The objective of Budgets in the Public Sector;
(d) The structure of Public sector budgets;
(e) The fiscal responsibilities for the Minister responsible for Finance;
(f) Budgeting techniques in the Public Sector;
(g) Public Sector Budgeting cycle; and
(h) Gender Responsive Budgeting in the Public Sector.

Unit 3: Introduction to Public Sector Business Processes

C1 Revenue Management
a) Definition of revenue;
b) Sources of Revenue;
c) Authority to levy fees and charges;
d) Responsibilities of Receivers of Revenue;
e) Accounting Package for Revenue management;
f) Receipting and Recording of public moneys;
g) Gifts, donations and sponsorships; and
h) Management of receivables.

C2 Procurement

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a) Definition of Public Sector Procurement;

b) Legal and Policy Framework governing Public Sector Procurement;
c) Organisational Structure for Public Sector Procurement;
d) Public Sector Procurement Cycle;
e) Confidentiality in Procurement; and
f) Management of Procurement Contracts.

C3 Expenditure Management
a) Definition of Public Sector Expenditure;
b) The nature of Public Sector Expenditure;
c) Public sector policies and practices on expenditure management;
d) Disallowance, recovery and adjustment of payments; and
e) Unauthorised, irregular, fruitless and wasteful expenditure.

C4 Cash Management
a) Defining public sector cashflows;
b) Cash flow management policies and practices;
c) Policies and practices on banking arrangements;
d) Cash planning policies and practices;
e) Policy on transfer of funds for making payments;
f) Cash Management Committee;
g) Policies and practices on custody of public money; and
h) Investment of money in Consolidated Revenue Fund

C5 Asset Management
a) Defining public sector assets;
b) The nature of public sector assets;
c) Asset management policies and practices;
d) Policies and practices on custody of assets;
e) Policy on disposal and leasing of assets;

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f) Compliance with ethical standards; and

g) Safeguards for managing abuse of the asset management process.

C6 Public Debt Management

a) Defining Public Debt;
b) Responsibility for managing debt;
c) Debt management strategy;
d) Legal and policy framework for public sector borrowing;
e) Legal and policy framework for state loans and guarantees; and
f) Reporting public debt activities

UNIT 4: Stakeholder Communication in Public Finance Management

a) Defining public management stakeholders;

b) Public finance management Stakeholder Mapping;
c) The information needs of public finance management stakeholders;
d) Nature of public finance management Stakeholder Communication channels; and
e) Developing appropriate communication channels for public finance management
stakeholders.

LIST OF ACRONYMS

BSP Budget Strategy Paper

CRF Consolidated Revenue Fund

CSOs Community Service Organisations

EDDMC External and Domestic Debt Management Committee

EFT Electronic Funds Transfer

EOI Expressions of Interest

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GFS Government Finance Statistics

GoZ Government of Zimbabwe

GRN Goods Received Note

GTCs Government Training Centres

IFMS Integrated Financial Management System

IPSAS International Public Sector Accounting Standard

LCS Least Cost Selection

MDAs Ministry, Department and Agencies

NFC Near Field Communication

NDF National Development Fund

PDMO Public Debt Management Office

PFM Act Public Finance Management Act

PFM Regulations Public Financial Management Regulations

PFMS Public Financial Management System

PMU Procurement Management Unit

POS Point of Sale

PRAZ Procurement Regulatory Authority of Zimbabwe

PSA Public Sector Accountancy

QCBS Quality and cost based selection

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RFQ Requests for Quotations

RFP Request for Proposal

RTGS Real Time Gross Settlement

SAP System Application Products

SFB Selection under fixed budget

S.I Statutory Instrument

SIC Selection of Individual Consultant

SSS Single Source Selection

TOR Terms of Reference

TT Telegraphic Transfer

USD United States Dollar

ZIPAM Zimbabwe Institute of Public Administration and Management

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DEFINITION OF TERMS

Accounting Officer- the Accounting Officers referred in section 10 of the Public Finance
Management Act, the Town Clerk or Secretary of a local authority.

Appropriation- an authorisation made by law in an Appropriation Act permitting payment

out of the Consolidated Revenue Fund under specified conditions or for
specified purposes.

Bidder- An actual or potential party to a procurement contract with a procuring

entity.

Capital Expenditure- Expenditure on any project involving the acquisition of capital assets such
as land, buildings, plant, machinery, fixtures and fittings, whether such
acquisition is additional to, an improvement of or in replacement of capital
assets already held.

Commitment- entering into a contract or other binding arrangement which creates

future expenses and/or liabilities.

Conflict of Interest- a situation in which a public officer’s personal or family interests may
benefit, directly or indirectly, from any conduct on his or her part, or any
decision he or she may make, as a public officer.

Construction Work- All work associated with the construction, reconstruction, demolition,
repair or renovation of any building or infrastructure, and includes:
a) site preparation, excavation work, the installation of equipment or
materials, decoration and finishing; and
b) incidental services such as drilling, mapping, photography and
environmental and seismic investigation.

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Consultancy Services- Services which are of an intellectual and advisory nature.

Contingent Liabilities- Those obligations that may or may not become due, depending on
whether a particular event occurs.

Director of Finance- a person responsible for the financial affairs of a ministry, constitutional
entity or public entity who is directly accountable to the Accounting
Officer of that Ministry, constitutional entity or public entity.

Exchequer Account- means any account established with the Reserve Bank in terms of section
22 of the Public Finance Management Act [Chapter 22:19].

Fruitless And Wasteful Expenditure which was made in vain and would have been avoided had
Expenditure- reasonable care been taken.

Goods- Things of any kind and description including raw materials; products and
equipment; things in solid, liquid or gaseous form; electricity; and services
incidental to the supply of the goods, where the value of the services does
not exceed that of the goods themselves.

Impairment- To make or cause to become worse, diminish in ability, value, and

excellence.

Instructions- rules, manuals, directives, decrees, instructions or notifications.

In Writing- Communication in hand or machine written type and includes messages

by facsimile, e-mail and other electronic forms of communications.

Local Authority- a municipal council, town council, rural district council or local board.

Medium Term means three years and can extend to five years.

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Non-Consultancy Services consisting of physical job performance, usually by contracted

Services- labourers.

Outputs- Goods produced or services provided.

Paymaster General The account established with Reserve Bank in terms of section 22 of the
Account- Public Finance Management Act [Chapter 22:19].

Price- In relation to a procurement requirement or procurement contract,

means the price paid or to be paid by the procuring entity for the
procurement requirement, or the cost of the procurement
requirement to the procuring entity.

Procurement- The acquisition by any means of goods, construction work or services.

Procurement All stages or any stage of the procurement of goods, construction works
Proceedings” or or services conducted by a procuring entity from the pre-bid stage up
“Procurement Process”- to and including the award of the contract.

Public Asset- Any asset of whatever nature, whether corporeal or incorporeal,

belonging to or vested in the State or a procuring entity.

Public Debt- amounts owing under loans raised according to the Public Debt
Management Act and includes the arrears of all ministries and public
entities, in relation to payments that are overdue and not made by the
due date.

Public Officer- Any person:

a) in or under the employment of the State or a designated
corporate body under the Act; or

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b) whose salary is paid from a fund required to be audited by the

Auditor-General.

Public Resources All public money and State property.

Public Sector The entities defined in the International Monetary Fund Government
Finance Statistics Manual 2001 and documents that update or replace
it.

Responsive Bid- A bid that meets the requirements of the procuring entity.

Revenues- Means all taxes, fees and other income of the State from whatever
source (not being moneys which are required by the law to be paid into
a separate fund) including the proceeds of all loans raised by the State.

State Owned Enterprises- Public Entities which are either incorporated under any Act, or
partnerships, trusts, unincorporated joint ventures or similar
arrangements that are for profit entities in which the State has a
controlling interest and which sell goods and services in the market for
economically significant prices, a state owned enterprise is any one of
these entities.

Statutory Expenditure- Expenditure charged directly to the Government account by an Act of

the Parliament.

Strategic Objectives- The high level changes intended to be achieved.

Sub Vote- The second level of specification in the Annual Budget before the Vote
level.

Supplementary Budget- A budget the purpose of which is to alter or add to the authorities
already granted by an Annual Budget and Appropriation Act.

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Thresholds- The financial limits above or below which certain procurement

proceedings may be applied.

Treasury- The Treasury function in the Ministry of Finance.

Vote- The highest level of specification in the Annual Budget and is the main
unit of appropriation in the Appropriation Act.

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UNIT 1: Introduction to Public Finance Management

1.0 Introduction

Public finances form a fundamental part of economic activities of any country. There are two
main sectors in any economy, namely the public and private Sectors. The public sector refers to
the apparatus of the state, supplying goods and obligatory services to the public. The private
sector on the other hand, is made up of corporations and small businesses that also supply the
public with goods and services. A substantial part of the funding for operations for public sector
organisations comes from taxation of citizens and the private sector. The collection of funds from
the private sector and citizens; the spending of such funds; the accounting, reporting and audit
of the results achieved is governed by a number of laws that public officials have to observe and
comply with. Public finance laws assign, to a number of institutions and individuals in the public
finance management value chain, specific roles and responsibilities in the management of public
funds.

This Unit gives an overview of public finance management; the distinction between public finance
and private finance; the objectives of and justification for public sector intervention in the
operations of the market; the dominant philosophical principles underpinning public finance
management; and the principles that guide the conduct of public officials. The Unit discusses the
laws that govern and guide public finance management before providing an insight into the
accountability relationships in public finance management.

Learning Objectives

The Objectives of this Unit are to:

a) Explain the meaning of public finance management;

b) Analyse the distinction between public finance and private finance;

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c) Discuss the philosophical principles underpinning public finance and the justification for
public sector intervention in the market;
d) Describe the scope of the public sector;
e) Evaluate the legal and regulatory framework that governs public finance in Zimbabwe;
f) Discuss the principles underpinning public financial management in Zimbabwe;
g) Explain the Constitutional guidance on the public finance management in Zimbabwe; and
h) Evaluate the accountability relationships within public finance management in Zimbabwe.

Learning outcomes

After completing the Unit, students will be required to make evident the following:

a) Comprehensive knowledge of the basic principles of public finance management;

b) Good appreciation of the objectives of public finance management;
c) Understanding of the justification of public sector intervention in the economy;
d) Broad knowledge of the laws, regulations and policies governing public finance management
activities in Zimbabwe;
e) Understanding of the Constitutional guidance on public finance management in Zimbabwe;
and
f) Comprehensive knowledge of the accountability relationships of the key actors in the public
finance management value chain.

Unit Content

The Content of the Unit covers the following:

a) Definition of Public Finance Management

b) The philosophy underpinning Public Finance Management
c) The Scope of the Public Sector
d) The objectives and justification for Public Sector Intervention in the operations of the
market
e) Principles that must guide Public Finance management in Zimbabwe

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f) The legal, regulatory and policy framework governing Public Finance Management
g) Constitutional guidelines on Public Finance Management in Zimbabwe
h) Accountability relationships in Public Financial Management

1.1 What is Public Finance Management

Public finance is nothing else than a sophisticated discussion of the relationship

between the individual and the state…..

Former Czech Prime Minister Vaclav Klaus

Public Finance is the study of the goods and services provided through the public sector and their
financing (Greene, 2012). Hyman (2011) defines public finance as the field of economics that
studies government activities and the alternative means of financing government expenditures.
He further notes that modern public finance places emphasis on the relationships between
citizens and the government. According to Bailey (2004), public finance reflects the relationship
between the citizen and the state.

Allen, Hemming and Potter (2013) note that Public finance management is concerned with the
laws, organisations, systems and procedures available to governments wanting to secure and use
resources effectively, efficiently and transparently. They also note that public finance
management also encompasses taxes and other government revenue, borrowing and debt
management.

Bailey (2004) contends that public finance comprises of any revenue or expenditure passing
through state budgets, derived from whatever sources and however spent. He argues that for
money to qualify as public finance, the funds have to be accounted for within state budgets at
the three tiers of government (i.e. national, provincial and local level). Private finance on the
other hand, comprises any revenue or expenditures that is not accounted for through state
budgets irrespective of their source and however spent.

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1.1.1 Similarities between Public and Private Finance

There are a number of similarities between public and private finance. These relate to:

a) Satisfying human wants, with public finance addressing collective wants and private
finance satisfying personal wants.
b) Both pursue maximum satisfaction.
c) Both resort to borrowing where expenditure exceeds income.
d) Both face the challenge of unlimited wants yet the resources to fulfill them are scarce.

1.1.2 Differences between Public and Private Finance

A number of differences exist between public and private finance. These differences are centred
on business motives, the manner in which resources are mobilised, expenditure management
and budget deficits. The differences are presented in Table 1.1.

Table 1.1: Differences between Private and Public Finance

Factor Public Finance Private Finance

Resource The resources of the government are Resources are limited.

Availability not as limited as those of the private
companies; government can print
money or pass some laws that give
them access.

Business Pursues the public welfare. Pursues the profit motive.

Motive

Return on Pursue projects that are in the interest Pursue quick/immediate returns.
Investment of public welfare.

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Budget Publicity of budgets. Budgets are private.

Information

Methods of Government can use coercive Private companies cannot use force.
raising methods to obtain revenue.
revenue

Resources Determination of expenditure first, Considers income to be generated or

mobilisation then seeking the resources. targeted then focuses on the
expenditure to raise it.

Expenditure Most expenditures cannot be Some corporate expenditures can be

management postponed. postponed.

Equi- It is difficult to pursue the equi- Follows the principle equi-marginal

marginal marginal utility principles as the utility.
utility government control may not be as
flexible.

Budget deficit Can sustain prolonged budget deficits. Do not generally consider deficits as
options.

The distinction between public and private finance is not just based on accounting rules. Two key
decisions are also critical in determining whether to record revenue or expenditure in public
accounts. These relate to the following:

a) Whether citizens have rights to receive particular services deemed essential for their
livelihoods (e.g. access to health services or education); and
b) Whether the state is required to make financial provision in order for those rights to be
secured.

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In the event that citizens do not have rights (whether explicit or implicit), then no public finances
are required. Where such rights exist, public finance is required to secure those rights. The
amount required is determined by the options the state adopts for public service delivery. The
options are either through direct provision by the state or the state enables services to be
provided by the private or voluntary sectors. Ultimately whether an item of revenue or
expenditure enters public accounts, depends upon public policy decisions about citizen’s rights
to services and how access to those services should be enabled. These public policy decisions
reflect the dominant political philosophy within a country. It is for this reason that the study of
public finance should examine the philosophies underpinning public finance.

1.1 Self-assessment questions

a) Define public finance and public finance management.

b) What is it that differentiates public finance from private finance.

1.2 The philosophy underpinning Public Finance Management

The public sector is a necessity and state controlled organisations must provide public goods just
as other nations do. However, to enable the state to delivery efficient and effective public
services, Government has to mobilise resources (both financial and non-financial). The biblical
story contained in the First Book of Samuel Chapter 8 gives an account of how a nation that had
lived without the public sector requests their prophet to give them a king to rule over them and
to fight their battles. The prophet tries to discourage the nation by describing what life would be
under a king.

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Box 1.1 A Nation asks for a King

In about 1030 BC the Israelites have been living without a king. People asked the prophet
Samuel to “make us a king to judge us like all the other nations” (1 Samuel 8: Verses 11-18).
Samuel tries to discourage the Israelites by describing what life would be under a monarch.
11. "This is what the king who will reign over you will do: He will take your sons and appoint
them unto him, for his chariots and to be his horseman and they should run before his
chariots. 12. Some he will assign to be commanders of thousands and commanders of
fifties, and others to plow his ground and reap his harvest, and still others to make weapons
of war and equipment for his chariots. 13. He will take your daughters to be perfumers and
cooks and bakers. 14. He will take the best of your fields and vineyards and olive groves and
give them to his attendants. 15. He will take a tenth of your grain and of your vintage and
give it to his officials and attendants. 16. Your menservants and maidservants and the best
of your cattle and donkeys he will take for his own use. 17. He will take a tenth of your
flocks, and you yourselves will become his slaves. 18. When that day comes, you will cry out
for relief from the king you have chosen, and the LORD will not answer you in that day."

Source: Good News Bible(New International version)

The biblical story illustrates the old age mixed feelings about the role of government. Centuries
have passed but the mixed feelings about the State and its institutions remain. It is for this reason
that the discussions relating to public finance management focus on the relationship between
the state and society/the public. The relationship, according to Bailey (2004) reflects a dominant
political philosophy that also has a bearing on the nature and scope of public finance.

Public finance can variously be concerned with three categories of citizen-state relationship,
namely libertarian, neo-liberal and collectivist.

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1.2.1 Libertarian Philosophy

Developed in the eighteenth and nineteenth century by Hume, Smith, Bentham and Mill,
libertarian viewpoints are regarded as classical liberal theory. This philosophy advocates for
allowing autonomous citizens to exercise full individual responsibility for their own standard of
living whilst remaining totally free of state control. The argument is that government intervention
in the economy is counterproductive. The private sector, and private finance, should be relied
upon to provide citizens with the services they are willing and able to pay for. The state should
only intervene to protect citizens from coercion, interference and discrimination. Thus, there
must be minimal public finance as the state focuses on providing services to protect “negative
rights”, namely the system of justice and the associated law, order and protection services such
as the police, courts, prisons, probation, and rehabilitation services.

1.2.2 Neo-liberal Philosophy

Neo-liberal views were developed in the twentieth century and are regarded as modern liberal
theory. The viewpoint of the philosophy see the role of public finance as that of enabling
responsible citizens to have the potential to secure an adequate standard of living by affording
them equality of opportunity in the market place.

1.2.3 Collectivist Thinking

Developed by Marx in the twentieth century the collectivist thinking, synonymous with the
communist theory, was subsequently further advanced by neo-marxists. The philosophy
envisages the role of public finance as that of guaranteeing protected citizens adequate
standards of living through direct state control of their everyday lives in terms of access to and
outcomes from state provided services.

1.2.4 Comparative analysis of Philosophies principles underpinning Public Finance

Each philosophy has evolved over time and there are no clear categorical boundaries between
the three citizen-state relationship categories. What differentiates the philosophies are the

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defining features; beliefs; general implications; implications for the public sector; and
implications for public finance. Table 1.2 presents a summary of the comparative analysis of the
three citizen-state relationship categories.

Table 1. 2: A Simplified Taxonomy of Philosophical Principles for Public Finance

Libertarian Neo-liberal Collectivist Thinking

Classical liberal theory Modern liberal theory Civic theory

Defining • Autonomy of the individual • Primacy of the individual • Mutual dependence

features • Unregulated markets • Modified markets • Reject markets
• Negative rights only (freedom • Negative plus limited • Full positive rights
from coercion, interference, positive rights (social and economic
discrimination) rights)
• Laissez-faire state • Enabling state
• Capitalism1 • Mixed economy2 • Provider state
• Socialism3

• The state is corruptible • The state is a necessary evil • Benevolent state

• Taxation is confiscation • Taxation for efficiency • Taxes for social aims
Beliefs
• Moral hazard/dependency • Promote human capital • Build social capital
culture • Equality of opportunity • Equality of outcome
• No moral case for equality • Property rights reflect • Property is theft
• Private property rights are policy aims
inviolable

1
An economic system based on the private ownership of the means of production, distribution and exchange
2
An economic system in which the public and private sectors coexist side-by-side.
3
An economic system in which the means of production, distribution and exchange are owned collectively by the
community, usually through the state.

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• No such thing as society • Weak conception of • Society emphasised

• Private enterprise guarantees society • State confers rights
General
rights • Modified market rights • Citizens firstly
implications
• Individuals are consumers not • Individuals primarily
citizens consumers • State replaces charity
• Depend on charity and active
citizen • State supplements
charity/voluntary action
Implications • Minimal state • Heavily constrained state • Expansive state
for the • Enforces only negative rights • Some limited positive • Full positive rights
public (through system of justice: rights (to education, health (social justice)
sector police, courts, prison etc.) care, culture etc.) • Public sector
• Private sector provision of • Private or public sector provision
public services provision • Unconditional
• Minimal welfare state (‘safety • Conditional welfare state welfare
net’ only) (e.g. social security • Public insurance
• Private insurance payments only payable to
those in paid employment)
• Public plus private
insurance
Implications • Minimal public finance • Restrained public finance • Unrestrained public
for public • Private spending replaces • Seek additionality of public finance
finance public spending spending • Public replaces
• Minimise ‘burden of taxation’ • Tax ‘bads4’ not ‘goods5’ for private spending
• Regressive taxes efficiency • Redistributive taxes
• Proportional taxes for equity

4
Bads include polluting activities (e.g. driving a car and disposal of household waste);
5
‘Goods’ include economically and socially productive activities such as work and investment.

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• Borrowing and public debt • Borrowing/debt for • Progressive taxes

very limited efficiency purposes • Borrowing/debt for
welfare

Source: Bailey (2004)

1.2 Self-assessment Questions

a) From your experiences of the citizen-state relationship in Zimbabwe, which of the three
philosophies has been more influential on public finance?
b) What are the distinguishing features of the philosophical principles underpinning public
finance?

1.3 The scope of the Public Sector

The Institutes of Internal Auditors (IIA) (2012) notes that the Public Sector can exist at four levels:
international, national, regional and local. The international level relates to multi-state entities
or partnerships. The national level refers to independent state. Regional level relates to provinces
or states within a national independent state. Local level refers to municipal bodies such as cities
or counties. The public sector, according to the IIA guidance, generally consists of core
government, agencies and public enterprises. Figure 1.1 below presents the IIA description of the
public sector.

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Figure 1.1: IIA Definition of the Public Sector

Core government consists of a governing body with a defined territorial authority. Core
governments include all departments, ministries, or branches of the government that are integral
parts of the structure, and are accountable to and report directly to the central authority. The
authority for core government include the legislature, council, cabinet, or executive head.

Agencies consist of public organisations that are clearly a part of the government and deliver
public programs, goods, or services. These however exist as separate organisations in their own
right and possibly as legal entities. Another feature is that they operate with a partial degree of
operational independence. These agencies are often, but not necessarily, headed by a board of
directors, commission or other appointed body.

Public enterprises are agencies that deliver public programs, goods or services, but operate
independently of government and often have their own sources of revenue in addition to direct
public funding. Public enterprises may also compete in private markets and may make profits.

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One key feature is that in most cases the government is the major shareholder, and these
enterprises partly follow the acts and regulations that govern the core government.

The IIA also cite two types of organisations that might or might not be part of the public sector.
These are State businesses and Public contractors.

State businesses are government owned and controlled businesses that sell goods or services for
profit in the private market. Although they do not deliver what would be considered public
programs, goods, or services, they might be considered part of the public sector.

Public contractors are legally independent entities outside government that receive public
funding — under contract or agreement — to deliver public programs, goods, or services as their
primary business. Due primarily to their limited public control, these organisations usually would
be classified as not for-profit or private sector entities.

The IIA suggests criteria for determining whether an organisation falls within the public sector or
not. Listed in Box 1.2 below is the definition Criteria.

Box 1.2 Definition Criteria of whether an organisation is Public Sector or not

a) Does the organisation deliver programs, goods, or services that can be considered a public
good or that are established by government policy?

b) Is substantially all of the organisation’s funding provided by government or determined by

government policy?

c) Is the organisation accountable to, and does it report directly to government, including a
government department or agency, or a minister of government?

d) If the organisation has a board of directors, commission, or similar appointed body, does
government control a majority of appointments?

e) If the organisation has share capital, is government the majority shareholder?

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f) Are the organisation’s employees members of the public service, subject to public service
rules, and receiving public service benefits?

g) Overall, does government control, directly or indirectly, the organization’s policies,

operations, administration, or service delivery?

h) Is there a legislative requirement for the organisation to be audited by the government

auditor or supreme audit organization?

https://global.theiia.org/standards-
guidance/Public%20Documents/Public%20Sector%20Definition.pdf

The International Monetary Fund’s (IMF) Government Finance Statistics Manual (2014) places
the public sector into two categories, namely general government and public corporations. Figure
1.2 presents the IMF scope of the public sector.

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Figure 1.2: IMF Definition of Public Sector Source: International Monetary Fund Government
Statistics Manual, 2014

The general government sector consists of resident institutional units that perform the principal
economic functions of government. These include central, state, provincial, regional, local
government and social security funds.

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1.3.1 Central Government

The political authority of the central government, according to GFS Manual (2014) extends over
the entire territory of the country and has the authority to impose taxes. Its political
responsibilities include national defense, the maintenance of law and order and relations with
foreign governments. Central Government also seeks to ensure the efficient working of the social
and economic system by means of appropriate legislation and/or regulation. In addition, Central
Government is responsible for providing collective services for the benefit of the community as
a whole, and for this purpose incurs expenditure on defense, public administration, etc.
Furthermore, Central Government may incur expenditure on the provision of services, such as
education or health, primarily for the benefit of individual households and it may make transfers
to other institutional units, including other levels of government.

1.3.2 State Government

State governments are defined as the institutional units exercising some of the functions of
government at a level below that of central government and above that of local level. State
governments are distinguished by the fact that their fiscal authority extends over the largest
geographical areas into which the country as a whole may be divided for political or
administrative purposes. They are institutional units whose fiscal, legislative, and executive
authority extends only to individual “states” into which the country as a whole may be divided.
These states may be described by different names in different countries and the subsector may
consist of state, provincial, or regional governments.

1.3.3 Local Governments

Local governments are defined as those institutional units whose fiscal, legislative and executive
authority extends over the smallest geographical areas distinguished for administrative and
political purposes. The scope of their authority is generally much less than that of central
government or state governments, and they may, or may not, be entitled to levy taxes on

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institutional units resident in their areas. Local governments are often heavily dependent on
grants (transfers) from higher levels of government, and they may also act, to some extent, as
agents of central or regional governments. Local government should also be able to appoint their
own officers, independently of external administrative control. Even when local governments act
as agents of central or state governments to some extent, they can be treated as a separate level
of government, provided they are also able to raise and spend some funds on their own initiative
and own responsibility.

Local governments typically provide a wide range of services to local residents, some of which
may be financed out of grants (transfers) from other levels of government. They are also involved
in:

a) Educational establishments.
b) Hospitals and social welfare establishments, such as kindergartens, nurseries, and welfare
homes.
c) Public sanitation and related entities, such as water purification systems and plants,
refuse collection and disposal agencies, cemeteries and crematoria.
d) Culture, leisure, and sports facilities, such as theaters, concerts, music halls, museums,
art galleries, libraries, parks, and open spaces.

1.3.4 Social Security Funds

According to the GFS Manual (2014,) a social security fund is a particular kind of government unit
that is devoted to the operation of one or more social security schemes.

1.3.5 Public Corporations

Public corporations, according to the GFS Manual are often established to provide goods and
services in larger quantities than a private corporation would provide at the same selling price.
Even when the sales of public corporations may cover a large portion of their costs, one can
expect that they respond to market forces quite differently than would private corporations.

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Public corporations may be created to: generate profits for general government; protect key
resources; provide competition where barriers to entry may be large; and provide basic services
where costs are prohibitive. These public corporations are often large and/or numerous, and may
have a significant economic impact.

1.3.6 Constitutional provisions on the Public Sector in Zimbabwe

The Constitution of Zimbabwe (Amendment number 20) Act of 2013 (hereinafter referred to as
the Constitution) specifies the scope of the Public sector in section 299 when it assigns Parliament
the responsibility of monitoring and overseeing expenditure by the public sector. The public
sector specified in the Constitution include central government; all Commissions; state
institutions; government agencies; statutory bodies; government-controlled entities; provincial
and metropolitan councils; and local authorities.

1.3 Self-assessment Questions

a) Which institutions make up the public sector in Zimbabwe?

b) Discuss the criteria that are used in determining whether an organisation is Public
Sector or not?

1.4 Objectives of Public Finance and Justification for Public Sector Intervention in the
operations of the market

The importance of the public sector lies in the provision of basic needs such as healthcare,
education, peace and security. The main objective of the public sector is to provide services to
the public. Profit making is not the primary objective in this sector. Public sector goods and
services are usually made available to the public without any charge for their use. These goods

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are financed by compulsory payments (mainly taxes) that are levied on citizens and their
activities.

The broad objectives of the public sector’s intervention in the market include economic, social
and political goals. The justifications for setting up public sector enterprises include the following:

a) Market failure;
b) Management of the economy;
c) To help create necessary infrastructure for economic development;
d) To promote import substitutions while saving foreign currency earnings for the economy;
e) To promote redistribution of wealth and income; and
f) To earn a return on investment and utilise resources for development.

Seidman (2009) identifies a number of reasons that justify the need for government to intervene
in the operations of the private sector “free market”. These reasons include market externalities
(positive and negative), public goods, social insurance, health insurance, income distribution,
taxation and efficiency, education, and low income assistance. The preceding section gives a brief
explanation for these reasons.

1.4.1 Market externalities

A market is believed to operate efficiently when the consumers are allowed to choose the goods
that they want to consume, that is, the goods that produce more benefit than the cost incurred
(allocative efficiency) and when many firms are available to produce such goods such the
competition will result in reduced costs of production and efficiency (productive efficiency). Both
forms of efficiency are observable in the free market economy, an economy controlled and run
by the private entities and the market forces of demand and supply.

It is important to note that the scenario where market forces of demand and supply determine
the types of goods to be produced and the quantities thereof, as shown in Figure 1.3 ,is based on
an assumption.

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Price of Supply Curve (Marginal Cost Curve)

a good

Demand Curve (Marginal

Benefit Curve)

0
Quantity of a good

Figure 1.3: Market Forces of Demand and Supply

The assumption is that the supply curve (marginal cost curve) represents all the costs there are
to the production and consumption of this good to the company and the society, and that the
demand curve (marginal benefit curve) represents all the benefits there are to consumption of
the good to the consumers and the society. Where this holds the quantities produced and
consumed maximise society’s utility and this point represents the optimal point.

In most instances the assumption stated above is violated and eventually the free market fails to
optimise utility in an economy. In these circumstances, a third party is needed to level up the
ground and this is where the role of the government fits in. This requires the government to
possess financial resources in order to perform its mandate, hence the need for Public Finance.
The cost to the society for example of pollution resulting from the production of a specific good
may be significant to the effect that the total of corporate and social costs will require a
significant increase to the price and thus a reduction of the goods produced (negative
externality). The benefits to the community of a product may be great to the effect that the
community may actually need more of the resource than is being produced. For example,
education when evaluated from the perspective of the individual going to school is worth the
knowledge and the future cash flows that will emanate from it. However, from the community’s

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perspective the smart decisions made by the educated go way beyond the cash flows that will
accrue to the individual, hence the need to have more educated people.

1.4.2 Public goods

The “free market” or private sector economy thrives on producing goods and selling them to
individuals in order to make a profit. This means it thrives in a system where the beneficiary can
be isolated and has to pay for the good in order to derive some utility from the good. Such is not
the property of all the goods that utility can be derive from. There are goods where beneficiaries
cannot be isolated and charged separately which gives rise to the free rider problem, where some
parties can enjoy without having paid for the good. This removes the incentive to pay for the
good and eventually the attractiveness of the production of such (in relation to profitability).
Such types of goods have to be provided by the government as it is the only entity that has the
power to tap into everyone’s pocket through taxes. Such goods include military protection, public
lighting and law enforcement officers.

1.4.3 Social insurance

This relates to the address of the socially disadvantaged and includes old age insurance, health
insurance, unemployment insurance, disability insurance and workplace-injury insurance
(workers’ compensation). If left to the free market, such decisions may fail to be addressed as
they may prove to be associated with low profitability. The free market does venture into some
of these services but for profit making hence insurance services are availed but only to those who
can afford them.

1.4.4 Income distribution

The free market economy places emphasises on property rights which means that for those who
can afford they can own everything with others owning nothing despite the fact that they are all
citizens of the same nations with the national resources belonging to all. The government then

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has the role of addressing these gaps so that at least there is some redistribution of the national
cake.

1.4.5 Risks of public sector intervention in the market

Public sector intervention comes at a cost. Public sector intervention is funded from the taxation
of individuals and businesses. This effectively means allocating resources to government use
instead of allowing the private sector and households to use those resources.

There is a risk that public sector intervention may not result in any improvement and may actually
prove ineffective and detrimental. The raising of revenues for government through taxation
distorts markets, which makes them less efficient and has a deadweight cost. Public sector
intervention in the market is considered ineffective when no efficiency gains are made. It is also
considered detrimental when there are efficiency losses. There is therefore need for the public
sector to demonstrate that government intervention will make an improvement and the benefits
of intervention will exceed the costs.

The public sector should only intervene when there is a market failure and when Intervention
will lead to an improvement. This is most likely when the market failure is big (there is evidence
of a significant problem) and public sector intervention is effective. In addition, public sector
intervention is more likely to be effective when it addresses the cause of the market failure, and
where it seeks to improve the functioning of the market rather than supplanting it.

1.4.6 What forms should government intervention in the market take

Adam Smith, in his book “Wealth of Nations”, gave four reasons that justify state intervention in
market operations. The four reasons relate to the following:

a) provision of national defence that arises from the duty to protect the society from violence
and invasion from other independent states-;
b) policing service arising from the duty to protect every member of society from injustice,
overall maintaining law and order;
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c) the duty of establishing and maintaining public institution and public works which would not
be supplied adequately by private enterprise e.g. schools, roads; and
d) the duty of meeting state expenses for the support of its sovereignty.

1.4 Self-Assessment Question

a) Discuss the objectives of public finance involvement in the market

b) Which four reasons justify public finance intervention in the operations of
the market?

1.5 Principles that must guide Public Finance Management in Zimbabwe

The Constitution codifies the principles of public financial management that govern the conduct
of public officials. These principles include transparency and accountability in financial matters;
the need to direct the public finance system towards national development; the fair distribution
and sharing of the burden of taxation; the equitable sharing of revenue raised nationally between
the central government and provincial and local tiers of government; the need to make special
provision for marginalised groups and areas in the allocation of resources; the equitable sharing,
between present and future generations, of the burdens and benefits of the use of resources;
the need to expend public funds transparently, prudently, economically and effectively; the need
for clear and responsible financial management and fiscal reporting; and the need to ensure that
public borrowing and all transactions involving the national debt are carried out transparently
and in the best interests of Zimbabwe.

These principles prescribe the manner in which public sector accountancy personnel perform
their functions and provide guidance on whether certain practices are consistent with such
principles. They offer broad guidance on the allocation, distribution and handling of public funds.
Therefore, it is imperative for public sector accountancy personnel to understand the broad

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principles governing the mobilisation; allocation; distribution; utilisation; monitoring and

evaluation; and reporting on public finances.

1.5.1 Transparency and accountability in financial matters

Hood (2010) notes that transparency refers to the conduct of business in a fashion that makes
decisions, rules and other information visible from outside. The World Bank (2015) notes that
there are two distinct dimensions to transparency: first, access to information about the
processes and procedures by which the public sector takes and implements decisions; and
second, access to information generated, held and used by the public sector. Accountability is
associated with the requirement for public officers to give an account to the public and those in
authority of their decisions and actions.

Transparency and accountability are critical to good governance which is one of the founding
values of Zimbabwe. According to section 194(1)(h) of the Constitution, transparency must be
fostered by providing the public with timely, accessible and accurate information.

1.5.2 Public finance system must be directed towards national development

This principle underscores the values on equitable and geographical distribution of resources
between the central government and provincial and local tiers of government; that the burden
of taxation must be shared fairly; expenditure must be directed towards the development of
Zimbabwe; and special provision must be made for marginalised groups and areas.

Section 13 of the Constitution identifies national development as one of the national objectives
that informs it. Section 13(1) of the Constitution encourages the State and all institutions and
agencies of government at every level to adopt measures that facilitate rapid and equitable
development. The Constitution further urges all tiers of government to take measures to
promote private initiative and self-reliance; foster agricultural, commercial, industrial,
technological and scientific development; foster the development of industrial and commercial
enterprises in order to empower Zimbabwean citizens; and bring about balanced development

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of the different areas of Zimbabwe, in particular a proper balance in the development of rural
and urban areas.

This principle is also supported by Part 3 of the Constitution that elaborates on rights of various
vulnerable and marginalised groups. Sections 80 to 84 of the Constitution recognises the
importance of securing the rights of marginalised and vulnerable groups such as women,
children, elderly, persons with disabilities and veterans of the liberation struggle. In addition,
Section 14(1) of the Constitution urges the State and all institutions and agencies of government
at every level to facilitate and take measures aimed at empowering, all marginalised persons,
groups and communities in Zimbabwe through appropriate, transparent, fair and just affirmative
action. This means that public finance management has a role in securing the rights of some
groups in society that are not able to assert their own rights.

1.5.3 The burdens and benefits of the use of resources must be shared equitably between
present and future generations

This principle is informed by the concept of sustainable development which is defined as

“development that meets the needs of present without compromising the ability of future
generations to meet their own needs”. This means public finance systems must promote the
rights of present and future generations.

1.5.4 Public funds must be expended transparently, prudently, economically and effectively

Public funds, according to section 308 of the Constitution, include any money owned or held by
the State or any institution or agency of government, including provincial and local tiers of
government, statutory bodies and government-controlled entities.

This principle underscores the objectives that public financial management systems should
achieve with public funds. There are four objectives that public finance management systems
should accomplish. These relate to maintenance of aggregate fiscal discipline; allocative
efficiency; operational efficiency and transparency. Achievement of fiscal discipline entails

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ensuring that aggregate levels of tax collection and public spending are consistent with targets
for the fiscal deficit, and do not generate unsustainable levels of public borrowing. Attaining
allocative efficiency involves ensuring that public resources are allocated to agreed strategic
priorities. Operational efficiency entails ensuring achievement of maximum value for money in
the delivery of services. Achieving transparency entails following due process and being seen to
do so, with information publicly accessible, and by applying independent checks and balances to
ensure accountability.

1.5.5 Financial management must be responsible, and fiscal reporting must be clear

Responsible financial management is the hallmark of good public finance management systems.
In the private sector, financial management decisions on financing, investment and dividends are
all geared towards increasing shareholder value. With public finance, a key element of statehood
is the ability to tax fairly and efficiently and to spend responsibly. Underpinning the requirement
for clear fiscal reporting is the principle of accountability of the state to the key actors in the
public financial management cycle who rely on fiscal reports for key decision making processes.
These key actors include public officers, Parliament of Zimbabwe, ratepayers, civil society and
development partners.

1.5.6 Public borrowing and all transactions involving the national debt must be carried out
transparently and in the best interests of Zimbabwe.

This principle underscores the objective of maintenance of aggregate fiscal discipline.

1.5.7 No taxes may be levied except under the specific authority of the Constitution or an Act
of Parliament

The principle recognises that the responsibility for raising funds through taxation rests with
Parliament. In practice taxes are raised in accordance with the provisions of the Finance Act
[Chapter 23:04]. The purpose of the Finance Act is to make provisions for the revenues and public

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funds of Zimbabwe and to provide for matters connected therewith or incidental thereto. The
taxes that the Finance Act provides are as follows:

Taxation Act Type of tax levied

a) Income Tax Act [Chapter 23:06] Taxes on income and profits

b) Capital Gains Tax Act [Chapter 23:01] Taxes on income and profits

c) Value Added Tax Act [Chapter Taxes on goods and services

23:12]

d) Customs and Excise Act [Chapter Taxes on goods and services

23:02]

e) the Stamp Duties Act [Chapter 23:09] Stamp duty

The Finance Act also fixes the rates of royalties for the purposes of section 245 of the Mines and
Minerals Act [Chapter 21:05]. Section 276 of the Constitution permits the enactment of laws that
allow local authorities to levy taxes.

1.5 Self-Assessment Questions

a) The Accountability Now campaign is one of the initiatives being driven by the International
Federation of Accountants (IFAC). The Campaign’s focus areas include:
• High quality public sector financial reporting;
• More informed government decision making;
• Effective efficient public-sector spending;
• Better quality public services;
• Enhanced transparency and accountability; and
• Increased trust in government.

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To what extent are the principles that must guide public finance management in Zimbabwe
aligned to the focus areas of the IFAC campaign?

b) To what extend are the principles that guide public finance linked to the Bill of Rights in Chapter
4 of the Constitution of Zimbabwe

1.6 The legal, regulatory and policy framework governing Public Finance Management

Public Finance management practices and transactions are governed by public finance laws,
regulations, policies, instructions and by-laws. Figure 1. 4 presents that hierarchy of the laws,
rules, instructions and policies that guide public officials in mobilising revenue; allocating public
funds; undertaking public spending; accounting for funds; and auditing public finance
management results.

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Supreme source of law. Any

law, practice, custom or Constitution of Zimbabwe
conduct with regard to
public finance management Amendment (No. 20) Act, 2013
must be consistent with its
provisions.
Public Finance Public Debt Public Procurement
Statutes implemeting the Management Act Management Act and Disposal of
provisions of the [Chapter 22:19] [Chapter 22:21] Public Assets
constitution

Subsidiary legislation issued PFM Regulations Procurement

in terms of statutes inorder Public Debt Regulations
to provide for matters SI. 135 of 2019 Regulations
SI. 5 of 2018
prescribed in the relevant
Act of Parliament
Treasury
Issued in terms of Section 78 Instructions
of the Public Finance
SI. 144 of 2019
Management Act

Accounting
Procedures
Manual

Figure 1.4: Public finance management legal, regulatory and policy framework

1.6.1 Constitution

The Constitution is the supreme law of Zimbabwe and any law, practice, custom or conduct
inconsistent with constitutional provisions is invalid to the extent of the inconsistency. Chapter
17 of the Constitutions contains direct provisions on public finance management and forms the
basis on which all statutes, regulations, policies, procedures governing public finance should be
crafted. A number of statutes predate the existing Constitution as it was promulgated in 2013.
All provisions relating to public finance and contained in any statute must be aligned to Chapter
17 of the Constitution. In the event of any conflict between the Constitution and a statute, the
Constitutional instructions take precedence.

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1.6.2 Statutes
Statutes implement or give effect to Constitutional provisions. A number of statutes give effect
to constitutional provisions that have a direct effect on public finance as provided for in Chapter
17 of the Constitution. These include the following:

a) Finance Act [Chapter 23:04];

b) Public Finance Management Act [Chapter 22:19];
c) Public Debt Management Act [22:21];
d) Appropriation Act;
e) Public Procurement and Disposal of Public Assets Act [Chapter 22:23];
f) Audit Office Act [Chapter 22:18];
g) Public Entities Corporate Governance Act [Chapter 10:31];
h) Reserve Bank of Zimbabwe Act [Chapter 22:15];
i) Joint Venture Act [Chapter 22:22]; and
j) Companies and Other Business Entities Act [Chapter 24:31].

There are also statutes that give effect to constitutional provisions with indirect implications on
public finance management. An example is the provisions regarding local authority
administration. Section 276 of the Constitution permits Parliament to enact legislation that may
confer functions on local authorities that give them power to levy rates and taxes and generally
to raise sufficient revenue for them to carry out their objects and responsibilities. The Urban
Councils Act [Chapter 29:15] and Rural District Councils Act [Chapter 29:13] give effect to these
constitutional provisions. Section 284 to 307 of the Urban Councils Act and Section 117 to 138 of
the Rural District Councils Act provide for matters governing financial provisions, audit, loans and
accounts in urban and rural local authorities.

However, it is important to note the main statute on public finance management is the Public
Finance Management Act. In the event of any inconsistency between the Public Finance
Management Act and any other legislation, the provisions of the Public Finance Management Act
prevail.

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1.6.3 Subsidiary legislation/Regulations

Subsidiary legislation or regulations relate to statutory instruments (SIs) issued in terms of the
provisions of a specific Act of Parliament. The objectives of regulations are to prescribe all
matters that are required or permitted to be prescribed or which, in the opinion of the Minister
responsible for administering the relevant Act, are necessary or convenient to be prescribed for
carrying out or giving effect to the Act. Examples of subsidiary legislation that support statutes
governing public finance management include the following:

a) Public Finance Management (General) Regulations, (SI 135 of 2019);

b) Public Service Regulations (SI 1 of 2000, as amended); and
c) Public Procurement and Disposal of Public Assets Regulations (SI. 5 of 2018)

It is also important to note that Local authorities are permitted, with the authority of the
appropriate Minister, to issue subsidiary legislation in the form of by-laws.

1.6.4 Instructions

Instructions and policies are derived from both the statutes and regulations in order to provide
public officials with guidance on day to day operations. One of the key instructions in public
finance management is the Public Finance Management (Treasury Instructions) (SI 144, 2019).
These instructions are issued in pursuance of the provisions of sections 6 and 78 of the Public
Finance Management Act [Chapter 22:19]. The purpose of these instructions is to provide public
officials with guidance on public financial management matters relating to:

a) the collection, receipt, custody, control, issue or expenditure of public money;

b) the acquisition, receipt, custody, control, issue, sale, delivery, transfer or disposal of any
State property;
c) expenditure on any service involving a charge on the Consolidated Revenue Fund;
d) the operation of any statutory fund; and

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e) the acceptance, on behalf of the State, of any gift, donation, bequest or other grant of
moneys or other property which is made subject to a condition or is likely to involve a
charge on the Consolidated Revenue Fund.

1.6.5 Circulars

Treasury Circulars and Circular Minutes are issued by the Ministry responsible for Finance to
provide guidance and information; and to request financial information from state institutions.
Treasury Circulars and Circular Minutes may cover matters that are outside the scope of Treasury
Instructions. The circulars may also cover matters that are to take effect immediately (although
they would later be incorporated within Treasury Instructions as part of the Instructions’ update).
It is a requirement that Treasury Circulars or Circular Minutes be complied with in the same way
as Treasury Instructions.

1.6.6 Accounting Procedures/Finance and Administration Manuals

These are handbooks issued in pursuance of the provisions of section 6 (3) of the Public Finance
Act which empowers Treasury to direct Accounting Officers or Receiver of Revenue to issue
written departmental instructions that govern public finance management activities within their
Ministries or state institutions. All state institutions at every level are therefore required to issue
written instructions. These instructions are normally in the form of manuals designed for use by
public officers, particularly those in the public finance value chain, in their day to day duties.
These manuals contain detailed instructions on standard procedures; documentation;
maintenance of records; accounting; and report preparation. The manuals are reviewed, updated
and aligned to statutes and the Constitution on a regular basis.

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1.6 Self-Assessment Questions

a) The Constitution of Zimbabwe was enacted in 2013 when the Public Finance
Management Act had already been promulgated. This means that the Act may not
include matters included in the Constitution. Which guidance should public officers
use?
b) Discuss the relationship between Accounting Procedures manuals in State institutions
and the Constitution
c) Are local authorities obliged to abide by the provisions of the Public Finance
Management Act?

1.7 Constitutional guidance on Public Finance Management activities and transactions

The provisions contained in Chapter 17 give direct instructions and guidance on matters relating
to public finance management in state institutions. The matters that the Constitution directly
provides instructions and guidance relate to:

a) Financial Management;
b) Consolidated Revenue Fund6;
c) Authorisation of expenditure from Consolidated Revenue Fund;
d) Safeguarding of public funds and property;
e) Auditor-General;
f) Procurement and other governmental contracts;
g) Management of statutory bodies; and
h) Reserve Bank of Zimbabwe.

6A fund into which must be paid all fees, taxes and borrowings and all other revenues of the Government, whatever their source
unless an Act of Parliament requires or permits them to be paid into some other fund established for
a specific purpose; or (b) permits the authority that received them to retain them, or part of them, in order to meet the authority’s
expenses.

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1.7.1Financial Management

The guidance on financial management in the public sector covers the following areas:

a) principles of public financial management;

b) Parliamentary oversight of state revenues and expenditure;
c) limits of state borrowings, public debt and state guarantees; and
d) the allocation of revenues between provincial and local tiers of government.

1.7.2 Principles of public financial management

The principles that the Constitution advocates for public finance management have already been
discussed in paragraph 2.8 above.

1.7.3 Parliamentary oversight of state revenues and expenditure

Section 299 of the Constitution obliges Parliament to monitor and oversee state revenue and
expenses of the State; all commissions and institutions; agencies of government at every level;
statutory bodies; government-controlled entities; provincial and metropolitan councils; and local
authorities. The objective of the parliamentary oversight is to ensure that all revenue is
accounted for; all expenditure has been properly incurred; and any limits and conditions on
appropriations have been observed”.

In addition, the provisions of section 299(2) obliges Parliament to enact legislation that provides
the mechanisms for the Legislature to monitor and regulate revenue and expenditure by various
state institutions, commissions, agencies of government statutory bodies; government-
controlled entities; provincial and metropolitan councils; and local authorities. The Public Finance
Management Act [Chapter 22:19] gives effect to this provision. The objectives7 of the Public

7 Section 3 of the Public Finance Management Act [Chapter 22:19]

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Finance Management Act is to secure transparency, accountability and sound management of

the revenues, expenditure, assets and liabilities of all public sector organisations.

1.7.4 Limits of state borrowings, public debt and state guarantees

Section 300 of the Constitution requires Parliament to enact laws that restrict public debt;
compel the Minister responsible for Finance not to exceed limits on public debt without the
authority of Parliament; and to prescribe terms and conditions under which the Government may
guarantee loans. In addition, Section 300(3) makes it mandatory for the Minister responsible for
Finance to publish the terms of loan agreements or guarantees within sixty days after the
Government has concluded such loans and guarantees. Furthermore, section 300(4) obliges the
Minister responsible for Finance to undertake the following:

a) to report to Parliament, at least twice a year, on the performance of State loans and
guarantees; and
b) to table in Parliament a comprehensive statement of the public debt of Zimbabwe, at the
same time as the estimates of revenue and expenditure are laid before the National
Assembly.

The Public Debt Management Act [Chapter 22:21] gives effect to these constitutional
prescriptions. The objectives8 of Public Debt Management Act are to ensure that Government's
financing needs and its payment obligations are met at the lowest possible cost over the medium
to long term, with a prudent level of risk. It also aims at promoting the development of the
domestic debt market. The Act governs the management of public debt in Zimbabwe and it
provides guidance on the raising, administration and repayment of loans by the State as well as
the giving of guarantees in respect of loans. The Act plays a critical role in ensuring that Zimbabwe
does not have unsustainable levels of public borrowing.

8 Section 3 of the Public Debt Management Act [Chapter 22:21]

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1.7.5 Allocation of revenues between provincial and local tiers of government

The provisions in section 301(1) require Parliament to enact laws that promote equitable
allocation of capital grants between provincial and metropolitan councils and local authorities.
Section 301(2) provides guidance on some of the key variables that should be taken into account
in coming up with formulae for determining equitable sharing of national revenues. The variables
include the following:

a) the national interest;

b) any provision that must be made in respect of the national debt and other national
obligations;
c) the needs and interests of the central government, determined by objective criteria;
d) the need to provide basic services, including educational and health facilities, water,
roads, social amenities and electricity to marginalised areas;
e) the fiscal capacity and efficiency of provincial and metropolitan councils and local
authorities;
f) developmental and other needs of provincial and metropolitan councils and local
authorities; and
g) economic disparities within and between provinces.

Section 301(3) specifies that the percentage of national revenue that should be allocated to
provinces and local authorities annually should not be less than five per cent of the national
revenues raised in any financial year.

Although the existing Constitution was promulgated in 2013, the provisions of equitable
allocation of national resources are yet to be implemented. The Public Finance Management Act
is yet to incorporate the provisions that give guidance on the formula for allocating resources to
the provincial and local tiers of government.

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1.7.6 The Consolidated Revenue Fund

Constitutional guidance on the Consolidated Revenue Fund (CRF) is focused on the establishment
of a central fund; withdrawals; and charges upon the central fund.

a) Consolidated Revenue Fund

Section 302 of the Constitution establishes the Consolidated Revenue Fund (CRF) and directs that
all fees, taxes and borrowings and all other revenues of the Government, whatever their source
be paid into this fund.

The Public Finance Management Act implements these provisions and in practice the CRF
comprises of two Accounts, namely the Exchequer and the Paymaster General’s Account. All fees,
taxes and borrowings and all other revenues of the Government, whatever their source are
deposited into the Exchequer Account. All payments that are a proper charge to public funds are
made out of the Paymaster General’s Account. Likewise, central government ministries operate
Sub-Exchequer Accounts for the purpose of depositing public funds and maintaining Sub-
Paymaster General Accounts for effecting payments.

However, there are exceptions to the prescription on depositing all funds into the CRF. The
exceptions relate to cases where a statute permits funds to be paid into some other fund
established for a specific purpose or authorises the authority that receive funds to retain them,
or part of them, in order to meet the authority’s expenses. Examples of such cases are statutory
Funds as well as Retention Funds set up in terms of section 18 of the Public Finance Management
Act.

b) Withdrawals from the Consolidated Revenue Fund

Section 303 gives guidance on the control of expenditures and issues from the CRF. It specifies
that withdrawals from the CRF should be made only to meet expenditure authorised by the
Constitution or by an Act of Parliament. Some of the expenditure that is authorised directly by
the constitution relate to the following:

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Expenditure head Section in the Constitution

a) salaries and allowances of the President and Vice- 102 (2)

Presidents

b) remuneration of the Speaker and the President of 153 (1)

the Senate

c) the salaries, allowances and other benefits of 188 (3)

members of the judiciary

d) remuneration of the Prosecutor-General 259 (9)

e) remuneration of a traditional leader 284 (2)

f) remuneration of the Auditor-General 312 (2)

g) remuneration and allowances of members of 320 )

Commissions Section

The Public Finance Management Act gives effect to the guidance on control of expenditure and
withdrawals from the CRF. In addition, public finance management regulations; treasury
instructions; and accounting procedures/finance and administration manuals are designed in a
manner that ensures that only constitutional and statutory obligations as well as appropriated
expenditure are withdrawn from the CRF.

c) Control on Payments
The provisions of section 303 make it mandatory for money withdrawn from the CRF to be paid
only to the person to whom the payment is due. This provision underscores the importance of
systems of controls on cash disbursements and reinforces the principles of accountability and
responsible financial management.

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The Public Finance Management Act gives effect to the guidance in section 303. It is also
important to note that section 14 of the Public Finance Management Act provides public officials
with guidance on how to deal with Ministerial directives that have financial implications.

d) Withdrawal from the CRF, cash management and investments

The provisions of section 303 oblige Parliament to enact laws that prescribe the manner in which:
a) withdrawals are to be made from the CRF and any other public fund; and
b) money in the CRF and any other fund is to be held and invested.

The Public Finance Management Act contains specific provisions with regard to the manner in
which withdrawals are to be made from the CRF. The Public Finance Management Act appoints
Treasury to manage and control public resources. Treasury has in turn issued detailed
instructions regarding withdrawals from the CRF and other funds as well as the holding and
investment of public funds.

With regard to local authorities, both the Urban Councils Act [Chapter 29:15] and the Rural
District Act [29:13] contain specific provisions with regard to withdrawals of funds, cash
management and investment decision making. In addition, the statutes governing constitutional
commissions and state entities also incorporate provisions regarding expenditure, cash
management and investments of state funds.

e) Charges upon Consolidated Revenue Fund

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Section 304 provides guidance on the treatment of debt charges9 for which the State is liable. In
addition, it also gives directives with regard to the costs and expenses incurred in collecting and
managing the CRF. The guidance on debt charges require that they be charged upon the CRF.
The guidance also require that the costs incurred in collecting funds; making payments; and
maintaining bank accounts form the first charge on the CRF.

The statutes that should effect these provisions are the Public Debt Management Act and the
Public Finance Management Act. Section 31 of the Public Debt Management Act implements the
guidance on debt charges. The Public Finance Management Act is yet to incorporate provisions
on costs and expenses incurred in connection with collecting revenue; making payments; and
maintaining the Exchequer and Paymaster General’s Accounts as well as the several banking
accounts at the three levels of Government.

1.7.7 Authorisation of Expenditure from Consolidated Revenue Fund

Part 3 of Chapter 17 focuses on the measures and controls relating to appropriations from the
CRF, authorisation of expenditure in advance of appropriation and unauthorised expenditure.

1.7.7.1 Appropriations from the Consolidated Revenue Fund

The provisions governing appropriations from the CRF relate to the national budget; the timing
of the presentation of that budget; submission of separate budgets for specific entities;
procedure for approval of the budget; and submission of additional and supplementary
estimates.

a) Presentation of Estimates of Revenue and Expenditure

9Debt charges” includes interest, sinking fund charges, the repayment or amortisation of debt and all expenditure related to the
raising of loans on the security of the Consolidated Revenue Fund and the service and redemption of debt created by those loans.

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The guidance in section 305(1) makes it mandatory that every year the Minister responsible for
Finance present to the National Assembly a statement of the estimated revenues and
expenditures of the Government in the next financial year. In addition, the directive obliges the
Minister to present the estimates on a day on which the Assembly sits before or not later than
thirty days after the start of each financial year. In addition, the guidance require that if
Parliament is dissolved and it is impossible to lay estimates before the Assembly by that time,
then they must be laid before the Assembly within thirty days after the Assembly first meets
following the dissolution.

The Public Finance Management Act gives effect to this constitutional directive and it makes
specific provisions that focus on the national budget. The statutes governing local authorities
contain specific instructions on the preparation and presentation of estimates of revenue and
expenditure before Council. For example, section 288 of the Urban Councils Act and section 121
of the Rural District Councils Act provide guidance on how the finance committee should draw
up and present for the approval of the council, estimates of the income and expenditure on
revenue and capital accounts of the council for the next succeeding financial year.

(b) Separate Estimates of revenue and expenditure for specific institutions

The guidance in section 305 (3) requires the Minister responsible for Finance to submit separate
estimates of revenue and expenditure for the following state institutions:-

a) each Commission established by the Constitution;

b) the office of the Auditor-General;
c) the National Prosecuting Authority;
d) the Council of Chiefs; and
e) any other institution prescribed in an Act of Parliament.

Some of the Commissions for which separate estimates of revenue and expenditure are required
are those established in terms of Chapter 12 of the Constitution. For example, the following
commissions had separate estimates of revenue and expenditure in the fiscal year 2019:

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Commission Section in the Constitution

a) Anti-Corruption Commission 254 (1)

b) Gender Commission 245 (1)

c) Electoral Commission 238 (1)

d) Human Rights Commission 242 (1)

e) Land Commission 296 (1)

f) Media Commission 248 (1)

g) National Peace and Reconciliation Commission 251 (1)

It is also important to note that Section 325(2) of the Constitution permits commissions and other
institutions established by the Constitution to be given a reasonable opportunity to make
representations to a parliamentary committee with regard to the funds to be allocated to them
in each financial year.

The statute that should implement this guidance is the Public Finance Management Act. Whilst
the Act is yet to incorporate these provisions, the presentation of separate estimates for
commissions by the Appropriation Act promulgated for the fiscal 2019 are indicative of the
implementation of this guidance in practice.

(c) Appropriation Bill

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Section 305(4), gives guidance on the procedure the Minister responsible for Finance should
follow when the National Assembly has approved the estimates of expenditure for a financial
year, other than expenditure that is specifically charged on the CRF by the Constitution or an Act
of Parliament. The guidance obliges the Minister to cause an Appropriation Bill to be introduced
into the National Assembly. The said Appropriation Bill must:

a) provide for money to be issued from the CRF to meet the approved expenditure; and
b) appropriate the money to the purposes specified in the estimates, under separate votes
for the different heads of expenditure that have been approved.

The Public Finance Management gives effect to this guidance and it contains specific provisions
with regard to the Appropriation Bill and Appropriation Act.

The Appropriation Act is enacted by Parliament to apply a sum of money for the service of
Zimbabwe during a financial year. For Zimbabwe the financial year is the period 1st January to
31st December.

(d) Additional and Supplementary Estimates

The guidance in section 305(5) permits the Minister responsible for Finance to prepare and
present to the National Assembly additional or supplementary estimates. The circumstances
under which the Constitution permits additional and supplementary estimates is where the
money appropriated to a purpose under an Appropriation Act is insufficient or if expenditure is
needed for a purpose for which no money has been appropriated. If the National Assembly
approves the estimate the Minister responsible for Finance is required to cause an additional or
supplementary appropriation Bill to be introduced into the Assembly providing for the necessary
money to be issued from the CRF.

1.7.7.2 Authorisation of expenditure in advance of appropriation

Section 306 contains guidance on authorisation of expenditure prior to the promulgation of the
Appropriation Act; withdrawal of money from the CRF to meet expenditure which was

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unforeseen; dealing situations where Parliament is dissolved before adequate financial provision
have been made for carrying on the services of the Government.

(a) Withdrawals from the CRF for unforeseen expenditure

The guidance in Section 306 (1) permits the enactment of statues allowing the President to
authorise the withdrawal of money from the CRF to meet expenditure which was unforeseen or
whose extent was unforeseen and for which no provision has been made under any other law.
These withdrawals are also referred to as special warrants. The guidance further requires the
setting of limits on withdrawal of money for unforeseen expenditure. The Constitution states
that the amount withdrawn should not be in excess of one and one-half percent of the total
amount appropriated in the last main Appropriation Act.

The guidance also sets the procedure that must be followed with regard to moneys withdrawn
through special warrants. The provisions require that the funds withdrawn be included in
additional or supplementary estimates of expenditure. In addition, these must be laid before the
National Assembly without delay. If the National Assembly approves the estimates, the money
must be charged upon the CRF by an additional or supplementary Appropriation Act.

Section 24 of the Public Finance Management Act gives effect to these provisions.

(b) Issue of money to carry on government at beginning of each financial year

In the event that the Appropriation Act for a financial year has not come into operation by the
beginning of that financial year, the guidance in section 306 (2) permits the enactment of a
statute that allows the President to authorise the withdrawal of money from the CRF to meet
expenditure necessary to carry on the services of the Government for the first four months of
the financial year. The guidance requires that such withdrawals should not exceed one-third of
the amounts included in the estimates of expenditure for the previous financial year. The
guidance requires that the funds withdrawn for this purpose be included in an Appropriation Act
for the financial year concerned, under separate votes for the different heads of expenditure.
Section 26 of the Public Finance Management Act implements these provisions.

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(c) Issue of money to carry on government after dissolution of Parliament

In the event that Parliament is dissolved before adequate financial provision has been made for
carrying on the services of the Government, the provisions of section 306(3) require the
enactment of a statute, that allows the President to authorise the withdrawal of money from the
CRF to meet expenditure needed to carry on those services until three months after the National
Assembly first meets after the dissolution. The procedure for the money withdrawn for such
purposes is to include them in an Appropriation Act under separate votes for the different heads
of expenditure. The implementation of these provisions is dealt with in Section 27 of the Public
Finance Management Act.

1.7.7.3 Unauthorised expenditure

In circumstances where it is found that more money has been expended on a purpose than was
appropriated to it or that money has been expended on a purpose for which no money was
appropriated, the guidance in section 307 obliges the Minister responsible for Finance to
introduce a Bill into the National Assembly seeking condonation of the unauthorised
expenditure. The guidance further requires that the Bill be introduced into the National Assembly
without delay and in any event no later than sixty days after the extent of the unauthorised
expenditure has been established. Section 19 of the Public Finance Management Act gives effect
to this guidance.

1.7.8 Safeguarding of Public Funds and Property

Part 4 of Chapter 17 provides guidance on the duties of custodians of public funds and property
and their obligations in relation to safeguarding funds; controls over purpose and amounts
spend; and control of assets.

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1.7.8.1 Duty of stewardship and Control over public funds

The provisions of section 308(2) state that it is the duty of every person who is responsible for
the expenditure of public funds10 to safeguard the funds and ensure that they are spent only on
legally authorised purposes and in legally authorised amounts. These provisions give emphasis
to the importance of controllership by public officials with regard to public funds.

1.7.8.2 Duty of Care and control over public property

The provisions of section 308(3) state that it is the duty of every person who has custody or
control of public property11 to safeguard the property and ensure that it is not lost, destroyed,
damaged, misapplied or misused. The focus of these constitutional provisions is the efficient and
effective management of state assets. This also relates to the systems and processes that prevent
the loss, destruction, damage, misapplication and misuse of state assets.

1.7.8.3 Detection of breaches and the disciplining and punishment of persons responsible for
loss or destruction of public funds or public property

The guidance in section 308(4) requires the enactment of legislation that provides for the speedy
detection of breaches in relation to the safeguarding of public funds and public property. It also
requires the piece of legislation to provide for the disciplining and punishment of persons
responsible for any such breaches and, where appropriate, the recovery of misappropriated
funds or property. Section 12 of the PFM Act implements this guidance as it provides for the
disciplining and punishment of persons responsible for loss or destruction of or damage to State
property as well as the recovery thereof.

10
According to section 308 (1) public funds includes any money owned or held by the State or any institution or
agency of government, including provincial and local tiers of government, statutory bodies and government-
controlled entities.
11
According to section 308(1) public property means any property owned or held by the State or any institution or
agency of government, including provincial and local tiers of government, statutory bodies and government-
controlled entities.

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1.7.9 Auditor-General

The guidance in Part 5 of Chapter 17 focuses on the appointment of the Auditor General; his/her
functions; independence; remuneration; removal from office; and staff of the Audit Office.

Section 309 (1) establishes the office of the Auditor General and a public office but not forming
part of the Civil Service. Section 309(2) assigns the Auditor General the following functions:

a) to audit the accounts, financial systems and financial management of all departments,
institutions and agencies of government, all provincial and metropolitan councils and all
local authorities;
b) at the request of the Government, to carry out special audits of the accounts of any
statutory body or government-controlled entity;
c) to order the taking of measures to rectify any defects in the management and
safeguarding of public funds and public property; and
d) to exercise any other functions that may be conferred or imposed on him or her by or
under an Act of Parliament.

Section 309(3) compels public officers to comply with orders given to them by the Auditor-
General.

The implementation of these provisions are dealt with in the Audit Office Act [Chapter 22:18] as
well as the Public Finance Management Act.

In practice, the orders to take measures to rectify any defects in the management and
safeguarding of public funds and public property are contained in the Auditor General’s report
that is submitted to Parliament through the Public Accounts Committee. On the basis of the
Auditor General’s report, Parliament makes recommendations to each Accounting Officer.
Accounting Officers are then required to give responses to Treasury on measures taken to
implement the recommendations of Parliament in respect to the Report of the Auditor General.
Treasury, on the basis of the responses from Accounting Officers, is required to submit a
Memorandum to Parliament indicating measures taken by each Ministry to implement the

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recommendations of Parliament in respect to the report of the Auditor General of the preceding
financial year.

1.7.10 General Provisions

Part 6 of Chapter 17 contains guidance on procurement and other governmental contracts;

management of statutory bodies; and Reserve Bank of Zimbabwe

1.7.10.1 Procurement and other governmental contracts

The directives in this section focus on procurement of goods and services as well as state
contracts.

(a) Procurement of goods and services

The guidance in section 315(1) requires the enactment of a piece of legislation that must
prescribe procedures for the procurement of goods and services by the State and all institutions
and agencies of government at every level, so that procurement is effected in a manner that is
transparent, fair, honest, cost-effective and competitive. The Public Procurement and Disposal
of Public Assets Act [Chapter 22:23] implements these constitutional provisions. The objectives12
of the Act are:

a) to ensure that procurement is effected in a manner that is transparent, fair, honest, cost-
effective and competitive;
b) to promote competition among bidders;
c) to provide for the fair and equitable treatment of all bidders, leading to procurement
contracts that represent good value for money;
d) to promote the integrity of, and fairness and public confidence in, procurement
processes; and

12
Section 4 of the Public Procurement and Disposal of Public Assets Act

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e) to secure the implementation of any environmental, social, economic and other policy
that is authorised or required by any law to be taken into account by a procuring entity in
procurement proceedings.

It is instructive to note that supporting these provisions are the principles of transparency,
fairness, honesty, value for money and competition.

(b) State contracts

The guidance in section 315(2) compels Parliament to enact legislation that governs the
negotiation and performance of the following State contracts:

a) joint-venture contracts;
b) contracts for the construction and operation of infrastructure and facilities; and
c) concessions of mineral and other rights;

The aim of this provision is to ensure transparency, honesty, cost-effectiveness and

competitiveness. The guidance is implemented in separate statutes. The Joint Venture Act
[Chapter 22:22] was enacted to provide for the implementation of joint venture agreements
between contracting authorities and counterparties.

(c) Management of statutory bodies

The guidance in section 316 obliges Parliament to enact a statute that provides for the competent
and effective operation of statutory bodies. The provision places emphasis on the requirement
for Chief Executive Officers of statutory bodies to serve for limited periods and whose renewal is
dependent on the efficient performance of their duties. The provisions are informed by the basic
values and principles governing public administration and leadership as enshrined in Chapter 9
of the Constitution. They also underscore the requirement for abiding by generally accepted
standards of good corporate governance. The Public Entities Corporate Governance Act [Chapter
10:31] implements the guidance in section 316. Parliament enacted the Public Entities Corporate
Governance Act to provide for the governance of public entities in compliance with sections 194,

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195, 197, 198 and 316 of the Constitution; and to provide a uniform mechanism for regulating
the conditions of service of members of public entities and their senior employees.

(d) Reserve Bank of Zimbabwe

Section 317 of the Constitution establishes a central bank, which is known as the Reserve Bank
of Zimbabwe (RBZ). The objectives of the RBZ are:

a) to regulate the monetary system;

b) to protect the currency of Zimbabwe in the interest of balanced and sustainable economic
growth; and
c) to formulate and implement monetary policy.

The guidance obliges Parliament to enact a statute that provides for the structure and
organisation of the RBZ and confer or impose additional functions on it. The Reserve Bank of
Zimbabwe Act [Chapter 22:15] implements these provisions.

1.7 Self-Assessment Test

a) Evaluate the role of the Public Finance Management Act in the public sector in
Zimbabwe
b) Discuss the factors that should inform decision making on equitable distribution of
revenue raised nationally with the local tiers of government.
c) Explain the circumstances under which the President is allowed to authorise
withdrawal of money from the Consolidated Revenue Fund.

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1.8 Accountability relationships in Public Financial Management

To promote good governance and ensure value for money, transparency and accountability in
the use of public resources, public finance management laws provide for the roles and
responsibilities of public officers involved in the public finance management value chain. The
provisions in the various statutes specify, for each institution or individual, what they are
responsible for; the powers conferred on them; and limits to those powers.

Central to the establishment of well-functioning, efficient, transparent, sound and strong public
financial management systems are the following structures:

a) Parliament (Legislature);
b) The Executive;
c) Ministry of Finance (Treasury);
d) Accounting Officers; and
e) Auditors.

With the exception of Parliament and the Audit Office whose roles and responsibilities are
provided for by the Constitution, the others are appointed in terms of the Public Finance
Management Act and the Public Debt Management Act. Figure 1. 5 below illustrates the
accountability relationships at national government level.

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Legislature

Executive

Accounting Auditor
Treasury
Officers General

Accountant Public Debt Internal

General Management Audit

Figure 1. 5: Public Financial Management Structures at National Level

1.8.1 Legislature

The legislature is provided for in Chapter 1.5 of the Constitution. As already discussed in 1.7.3
above, the Constitution assigns Parliament an oversight role over the finances and expenditure
of Government. Parliament approves national budgets by passing two statutes, namely Finance
Act and Appropriation Act. They also exercise control over public debt through the Public Debt
Management Act.

In practice, the Parliament of Zimbabwe monitors public finances through nineteen (19)
Parliamentary Portfolio Committees. According to Parliament of Zimbabwe,13 the role of
Parliamentary Portfolio Committees is to examine the expenditure, administration and policy of
government departments and other matters falling under their jurisdictions as Parliament may
by resolution determine. These Committees perform both a pre-audit and post-audit functions.
For example, the Portfolio Committee on Budget, Finance and Economic Development
undertakes pre-audits and the Public Accounts Committee (PAC) carries out post audits.

13 https://www.parlzim.gov.zw/about-parliament/committee-system/portfolio-thematic-committies accessed 17/10/2019

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1.8.1.1 Public Accounts Committee

The Audit Office Act (Chapter 22:18) defines the PAC14 as “the committee established by
Parliament for the examination of public moneys appropriated by Parliament for the service of
the state”.

According to Parliament of Zimbabwe, the PAC fulfills the oversight function of Parliament by
looking at the financial accounts of Departments funded from public funds. The PAC is mandated
to examine the financial affairs and accounts of Government Departments, local authorities and
state owned enterprises. It also examines all reports of the Auditor General. The work of the
Committee is designed to ensure a critical examination of the stewardship functions of Ministries
and local authorities as highlighted in the Auditor General’s Report.

1.8.2 Financial Responsibilities of the Executive

The Executive is provided for in Chapter 5 of the Constitution. The Executive comprises of the
President, Vice Presidents, Ministers, Deputy Ministers and Cabinet. The roles and
responsibilities of a Minister in relation to the management and disbursement of public
resources, for the ministries and government controlled entities under their charge, are set out
in section 13 of the Public Finance Management Act.

Section 13(1) states that the management and disbursement of public resources allocated to a
Ministry by any Appropriation Act or other enactment should be undertaken by the Accounting
Officer in consultation with the Minister. In addition, the provisions of Sections 15(1); 33(2), 34(2)
and 35(11) gives a Minister responsibilities relating to submission of financial statements and
reports to the appropriate Parliamentary Portfolio Committee.

14
Section 2 of the Audit Office Act (Chapter 22:18)

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1.8.3 Auditor General

The Auditor General is the external auditor for all public sector organisations. The Auditor
General is the Supreme Audit Institution appointed by the Constitution. The functions and
powers have been discussed in 1.79 above. The provisions on external auditors contained in
section 81 of the Public Finance Management Act give the Auditor General flexibility to
contract out the audit of financial statements of all accounting officers, receivers of revenue,
statutory funds, designated or specified public entities and constitutional entities.

1.8.4 Treasury

Treasury, according to the Public Finance Management Act, is the Minister or any officer in the
Treasury authorised by the Minister in writing to act on behalf of the Treasury. Section 6 of the
PFM Act bestows the responsibility of managing and controlling public resources on Treasury.
Treasury has the power to:
a) manage the CRF;
b) determine the manner in which public resources should be accounted for; and
c) exercise a general direction and control over public resources.

Section 4 of the Public Debt Management Act (Chapter 22:21) gives Treasury the responsibility
for debt management operations.

Section 6 (1) of the Public Finance Regulations provides additional responsibilities for the Minister
responsible for Finance. These include:

a) acting as the Government’s budgeting adviser and managing the relations between the
Cabinet, Parliament, Ministries and Public Entities during the process to formulate the
Budget Strategy Paper and the Annual Budget;
b) implementing the budget process including preparing the Budget Strategy Paper and
Annual Budget;
c) coordinating the implementation of these regulations across Ministries, Public Entities
and sectors;
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d) contributing economic and financial advice to planning and budgeting processes;

e) promoting the Government’s budget and fiscal policies;
f) promoting and enforcing transparency and effective management in respect of revenue,
expenditure, assets and liabilities of Government entities;
g) promoting the achievement of value for money;
h) setting guidelines for public financial management systems and monitoring the
performance of such systems, including internal audit;
i) authorising Ministries, Public Entities and Constitutional Entities to incur expenditure
commitments up to specified levels;
j) mobilising resources including assistance from development partners and integrating
these funds into the planning, budgeting, reporting and accountability processes
prescribed by the Act and these regulations;
k) managing the Consolidated Revenue Fund accounts;
l) providing the accounting functions for the accounting of the whole of Government
position and leadership for the accounting function throughout Government;
m) providing oversight of the ownership interests in the State Owned Enterprises;
n) monitoring the financial and related performance of Ministries and Public Entities and the
financial performance of Constitutional Entities;
o) ensuring that at an operational level the financial system of the Government is reliable
and produces timely, comprehensive and accurate information;
p) implementing and maintaining Government financial reporting;
q) coordinating responses from Ministries, Constitutional Entities and Public Entities to audit
and other issue that are provided to Parliament;
r) producing financial reports and performance reports for the Government as a whole;
s) managing cash for the Government;
t) recording and monitoring financial and non-financial assets of the Government including
but not limited to interests in private sector entities;
u) through the Debt Management Office managing debt and other liabilities;
v) signing the annual accounts and attesting that they provide a true and fair view.

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1.8.5 Secretary for Finance

The duties and powers of the Secretary for Finance who should also be the Paymaster-General
are set out in section 8 of the Public Finance Management Act. The Secretary for Finance is
required to ensure that:-

a) There is established and operated an effective system for the collection of information to
ensure timely and effective preparation of the annual estimates of expenditure for
consideration and approval by the Minister and submission to Parliament; and
b) Such estimates are prepared in conjunction with any general or specific directions of the
Minister; and reflect, as can best be ascertained at the time, good value for money and
the effective use of public resources.

As Paymaster General, the Secretary controls the issue of public money to Ministries and
departments of the Government.

1.8.6 Accountant General

The Accountant General is appointed in terms of Section 9 of the PFM Act. The Accountant
General is appointed by the President on the recommendation of the Public Service Commission
for a term of five years. It is a requirement that the Accountant-General be a senior professional
accountant or auditor; and registered as a Public Accountant or Auditor in terms of the Public
Accountants and Auditors Act [Chapter 27:12] for a period of not less than five years.

Reporting to the Secretary for Finance, the Accountant-General is responsible for the compilation
and management of the public accounts and the custody and safety of public resources. Treasury
Instructions assigns the following responsibilities to the Accountant General:

a) Determining appropriate investment methods of moneys in the Consolidated Revenue

Fund in accordance with section 20 of the Public Finance Management Act.
b) Authorising of the establishment of all banking accounts.

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c) Issuing expenditure warrants authorising Accounting Officers to spend funds from the CRF
within the prescribed limits and subject to the conditions contained therein.
d) Preparing monthly, quarterly and annual consolidated financial statements and to submit
such statements to the respective offices as provided for by the Public Finance
Management Act.
e) Preparing and submitting Treasury Minutes explaining the action that has been taken on
recommendations for improvements in public financial management by the Select
Committee on Public Accounts and giving reasons for any recommendations not having
been implemented; and
f) Specifying for every Ministry, reporting unit or statutory fund, the basis of the accounting
system to be adopted and the classification system to be used, and ensure that a proper
system of accounts is established in each of them, and that all money received and paid
by the Government is brought promptly and properly.

1.8.7 Principal Director responsible for Debt Management

The Principal Director responsible for Debt Management is appointed in terms of Section 6 of the
Public Debt Management Act. Reporting to the Secretary for Finance, the Principal Director is
responsible for the control and management of the operations of the Public Debt Management
Office (PDMO). The functions of the PDMO are specified in Section 5 (2) of the Public Debt
Management Act. Treasury Instructions assign a number of responsibilities to the PDMO. Box 1.3
contains the list of functions of the PDMO.

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Box 1.3: Roles and Responsibilities of the Public Debt Management Office

a) preparing and publishing a Medium Term Debt Management Strategy in accordance with
section 8 of the Public Debt Management Act;
b) preparing and publishing an annual borrowing plan which includes a borrowing limit, and
participate in the preparation of an issuance calendar of Government securities in line with
the annual borrowing plan;
c) advising the Minister on all Government borrowings, and participating in all negotiations
with creditors on Government borrowings and guaranteed loans;
d) undertaking annual debt sustainability analysis;
e) assessing the risks in issuing any guarantees, including assessing the capacity of the
beneficiary of a guarantee to repay the loan, and to prepare reports on the method used
for each assessment and the results thereof for approval by the Minister;
f) preparing annual reports on outstanding guarantees, and facilitating the recovery of any
payments including interest and any other costs incurred by Government due to the
honouring of outstanding guarantees;
g) assessing the credit risk in any lending, and preparing reports on the method used for each
assessment and the results thereof for the attention of the Minister;
h) preparing reports on the debt of local authorities and public entities; as well as assessing,
monitoring and keeping track of debt levels of all local authorities and public entities;
i) storage of all original loan agreements and debt administration records in relation to the
public debt;
j) compilation, verification and reporting on all public debt arrears, especially Government
public debt arrears, and designing a strategy for the settlement of these;
k) keeping timely, comprehensive and accurate records of outstanding public debt,
guarantees and on-lending, in a computerised database and in particular—
(i) compiling data on all debt servicing obligations of the Government, local
authorities and public entities, and prepare and publish debt statistical bulletins in
relation thereto regularly, either globally or on a selective basis as required; and

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(ii) validating and reconciling debt data concerning creditors of the Government of
Zimbabwe;
l) preparing forecasts on Government debt servicing and disbursements as part of the yearly
budget preparations;
m) preparing balance of payments projections;
n) monitoring and evaluating projects funded or partly funded by public debt to ensure that
borrowed funds are used for their intended purposes;
o) preparing an annual report on Government debt management activities including the debt
stock position and related debt service projections, new borrowing, guarantees and
lending;
p) operating as the Secretariat to the External and Domestic Debt Management Committee
in accordance with section 7(3) of the Public Debt Management Act;
q) acting as the principal adviser in the development of domestic capital markets and
issuance of domestic and external debt securities on behalf of the Government of
Zimbabwe;
r) assessing, monitoring and reporting on any other implicit and explicit public sector
contingent liabilities and advising on their management;
s) maintaining and administering a secure computerised debt management information
system;
t) initiation, facilitation and monitoring of disbursements on borrowings and on-lending; and
u) analysing requests from local authorities and public entities for borrowings.

1.8.8Accounting Officer

This position refers to Accounting Officers appointed in terms of section 10 of the Public Finance
Management Act, the Town Clerk or Secretary of a local authority15. They are also prescribed in
accordance with the provisions of the Public Finance Management (Prescription of Accounting

15
Interpretation in Section 5 of the Public Finance Management Regulations (SI 135 of 2019)

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Officers and Receivers of Revenue) Regulations 2010. The specific responsibilities of an

Accounting Officer are set out in the Statutory Instrument in force at specific periods. The term
“Accounting Officer” must be distinguished from the term “accountant” which term is commonly
used to describe officers performing duties of a technical nature in connection with accounting.

Accounting Officers are obliged to control and be accountable for the expenditure of money
applied to their Vote by an Appropriation Act and for all revenues and other public money
received, held or disposed of, by or on account of their Ministry, reporting unit, public entity or
constitutional entity for which the Vote provides.

In performing their functions accounting officers are permitted by the provisions of section 10(2)
to delegate and define in writing the extent to which the powers and duties conferred and
imposed on them may be exercised or performed on their behalf by any officer under their
control. They are also allowed to give such directions as may be necessary to ensure the proper
exercise or performance of those powers and duties. However, such delegation does not
derogate from the personal accountability of the accounting officer.

The Public Finance Management Act obliges Accounting Officers to comply with laws and all
instructions that the Accountant-General give from time to time in respect of the custody and
handling of, and the accounting for:

a) public resources;
b) public stores; and
c) investments, securities or negotiable instruments, whether the property of the State or
on deposit with or entrusted to the State or to any officer or other person acting in his or
her official capacity.

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1.8.9 Director for Finance

The Public Finance Management Act defines the Director for Finance16 as a person responsible
for the financial affairs of a Ministry who is directly accountable to the accounting officer of that
Ministry. Directors of Finance therefore provide Accounting Officer with assistance in the
financial administration of Votes and Funds under their charge. Treasury Instructions state that
the Directors of Finance are answerable for:
a) The day-to-day running of their respective accounts offices;
b) The keeping of financial records and books of account;
c) The safe custody of the public moneys entrusted to them;
d) Putting in place systems of internal checks and control on financial administration;
e) The preparation and submission of all financial statements (monthly, quarterly and
annual), returns, other statutory reports and the accounts of other public moneys that
are the responsibility of the Accounting Officer;
f) Ensuring the accuracy of the accounts, and draw the Accounting Officer's attention to
all points of importance which arise in connexion with them;
g) Ensuring that the deadlines for preparation and submission of Financial Statements to
the Accounting Officer in their respective Ministry and to the Accountant-General are
met; and
h) ensuring responses to Audit observations are timely.

1.8.10 Internal Audit

Internal Auditors are appointed in terms of Section 80(1) of the Public Finance Management Act.
Although they work within line Ministries their role is to assist the Treasury in carrying out the
duties of controlling and managing public funds. According Section 80(2) of the Public Finance
Management Act, the functions of the internal audit unit is to:

16
Interpretation in section 2 of the Public Finance Management [Chapter 22:19]

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a) monitor the financial administration and procedures of the Ministry or reporting unit
concerned to ensure that:-
i) Proper accounting and bookkeeping transactions and procedures are carried out;
ii) Proper accounting records are maintained;
iii) Adequate internal checks and controls are observed;
iv) Assets under the control of the Ministry or reporting unit are properly accounted
for;
v) Instructions and directions issued by Treasury are complied with; and
vi) Generally, that the requirements of the Public Finance Management Act are being
observed;
b) Assess the cost-effectiveness of any projects undertaken by the Ministry or reporting unit
concerned; and
c) Perform any other function that may be assigned to the unit by the accounting officer of
the Ministry or reporting unit concerned.

The powers of internal auditors are set out in Section 80(3) and Section 80(4). In addition, the
provisions of Section 80(5) obliges internal auditors to prepare a report on the financial
administration and accounting system whenever they have completed any internal audit
programme. It is a requirement that the copies of Internal Audit reports, which may include any
instances of hindrance or obstruction they encountered in the discharge of their duties, be
transmitted to the accounting officer, the Treasury and the Auditor-General. The Accounting
officer and Treasury are expected to make use of these internal audit reports particularly with
regard to strengthening public finance management systems. The Auditor General is expected to
place reliance on some of the Internal Audit reports from public sector organisations.

1.8.11 Accountability Relationships in Local Authorities

Accountability relationships at the local authority level are presented in Figure 1. 6.

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(a) Council

The provisions in section 4(2) of the Public Finance Management Regulations, 2019 specify a local
authority as a public entity for the purpose of public finance management. Council provides an
oversight role with regard to the management of the finances of local authorities. This role is
effected through two committees, namely finance and audit committees. The provisions of
Section 96(2) of the Urban Councils Act and Section 55 of the Rural District Councils Act require
every council to appoint a finance committee which should be responsible for regulating the
financial affairs of the council in accordance with the standing orders and by-laws of the council.

Council

Accounting Officer/Town
clerk

Finance
Internal
Director or
Audit
Treasurer

Public Debt
Accounting Budgeting
Management

Figure 6: Accountability relationships in Local Authorities

Section 97 of the Urban Councils Act requires every council to appoint an audit committee, which
section 98(1) assigns the following functions:

a) to inquire into and report upon the manner in which the finances of the council, its assets
and human resources are being used;
b) to ascertain whether the funds and assets of the council are applied to the purposes
intended and are consistent with any regulations and standing orders issued by the
council, or the Minister, as the case may be;

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c) to call for information, explanations and evidence in respect of any matters in respect of
which the auditors have made observations;
d) to receive and consider reports of internal and external auditors and make appropriate
recommendations to the council; and
e) to recommend to the council appropriate methods of investment of moneys, and custody
of any other properties of the council.

(b) Town Clerk/Secretary

The provisions of section 5 of the PFM Regulations, 2019 describes the Town Clerk or Secretary
of a local authority as the Accounting Officer. The provisions of section 136 of the Urban Councils
Act assign the Town Clerk responsibilities for:

b) the proper administration of the council;

c) managing the operations and property of the council; and
d) supervising and controlling the activities of the employees of the council in the course of
their employment.

Treasury Function in Local Authorities

The Treasury function in local authorities is carried out by the Director of Finance or City
Treasurer or Chief Executive Officers. The provisions of section 120 of the Rural District Councils
Act require the Chief Executive Officer to keep the books and accounts of the Council and section
286(3) of the Urban Councils Act assigns these duties to the Treasurer.

The role of Internal Audit in Local Authorities

The Internal Audit function in local authorities performs the same role as those in central
government.

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Eternal Audit for local authorities

Section 309 (2) (a) of the Constitution appoints the Auditor General, to audit the accounts,
financial systems and financial management of all local authorities.

1.9 End of Unit ummary

Public Finance is the study of the goods and services provided through the public sector and their
financing. Public finance management is concerned with the laws, organisations, systems and
procedures available to governments wanting to secure and use resources effectively, efficiently
and transparently. What distinguishes public finance from private finance is the fact that public
funds are accounted for through stage budgets at all the tiers of government. Public policy
decisions about citizens’ rights to services and how access to those services should be enabled
determine the decision for allocating resources to government intervention in the operations of
the market. The public policy decisions reflect the dominant political philosophy underpinning
public finance management within a country, namely classical liberal, modern liberal and civic
theory. The justification for the involvement of public finance in market is premised on market
failure and the justifiable reason for intervention is when the intervention will lead to an
improvement. This is because the resources for public finance intervention in the market are
financed mainly from taxation of businesses and households.

The Constitution codifies the principles of public financial management that govern the conduct
of public officials. The principles offer broad guidance on the allocation, distribution and handling
of public funds. A number of statutes, regulations, policies, instructions and by-laws govern the
manner in which public officials mobilise revenue; allocate public funds; undertake public
expenditure transactions; account for funds; and audit the results. Chapter 17 of the Constitution
forms the basis on the laws, policies, instructions and by-laws are crafted. To promote good
governance and ensure value for money, transparency and accountability in the use of public
resources public finance management laws provide for the roles responsibilities of public officers
involved in the public finance management value chain. Key institutions and individuals that are
central to the establishment of well-functioning, efficient, transparent, sound and strong public

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financial management systems include the Legislature; Executive; Treasury; Accounting Officers;
Accountant General; Auditor General, Directors of Finance; Internal Audit; and Finance and Audit
Committees.

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End of Unit Questions

a) Evaluate the mechanisms that Parliament uses to oversee and monitor the revenues and
expenses of Government.
b) Discuss the circumstances under which the President of Zimbabwe is allowed to authorise
the withdrawal of funds from the CRF.
c) If you were asked to advise the Minister responsible for Finance on the equitable
distribution of resources to the 10 provinces of Zimbabwe, which variables would input
into the formula for sharing resources between national and local government?
d) If you were requested to help Treasury to review, update and align the Public Finance
Management Act to Chapter 17 of the Constitution, which new provisions would you
recommend?
e) Explain the circumstance in which additional and supplementary estimates are permitted.
f) In what way is the Accounting Officer’s role different from that of Treasury?

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UNIT 2: Public Sector Budgeting and Budgetary Control

Introduction to Public Sector Budgeting and Budgetary Control

2.0 Introduction

Every enterprise, regardless of size, complexity or sector, relies on budgets and budgetary systems
to drive and achieve strategic goals. The success and importance of budgeting relates to the
identification of organisational goals, allocation of responsibilities and resources for achieving
these goals, and consequently its execution (Shah, 2007; Robinson, 2007; Drake and Fabozzi,
2010).

Public sector organisations exist for a specific purpose with each Ministry, agency, state
institution, commission, local authority or statutory fund assigned a mandate in the public service
delivery value chain. The crafting of public sector budgets in Zimbabwehas to be consistent with
the objectives of the government’s strategic direction asdictated by the Transitional Stabilisation
Programme (TSP) and the aspirations of Vision 2030 wherein the country expects to be a middle
income economy.

The achievement of goals set in strategic plans and national development programs is dependent
on the Government’s abilityto raise sufficient resources. The public sector relies heavily on
taxation of businesses and citizens for resources to finance expenditure and ultimately the
achievement of their objectives. Government planning for resource mobilisation and spending
activities to be funded from the resources is informed by economic considerations especially the
need to avoid instability in the “free market’. It also relies on stakeholder consultations to get buy-
in from taxpayers and communities.

This Unit defines a budget in the public sector context; explains the objectives and structure of
public sector budgets; examines the fiscal responsibilities of the Minister responsible for Finance;

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describes public sector budgeting techniques/approaches; discusses the budgeting cycle; and
examines gender responsive budgeting and justification for the need to secure the rights of
specific groups in Zimbabwe.

Learning Objectives

The objectives of this Unit are to:

a) Define Public Sector budgets;

b) Discuss the objectives of public sector budgeting;
c) Explain the structure of public sector budgets;
d) Discuss the fiscal responsibilities of the Minister responsible for Finance;
e) Examine the objectives of a medium term budget framework and how it links policy to
annual budgeting in the public sector;
f) Discuss the different budgeting approaches adopted in the Public Sector;
g) Describe the budgeting cycle in Zimbabwe;
h) Discuss Gender Responsive Budgeting and its relevance to Zimbabwe;
i) Examine the role of the annual budgeting process in the public sector as an instrument of
accountability, planning and control; and
j) Examine the role of the legislature in monitoring budget execution and amending the
budget.

Learning Outcomes

At the end of this Unit students should be able to make evident the following:

a) Understanding of budgeting basics and objectives of public sector budgets;

b) Appreciation of the structure of Public Sector budgets;
c) Understanding of sources of revenue for Public sector organisations;
d) Appreciation of the type of budgets in the public sector;
e) Broad knowledge of the importance of the Medium Term Fiscal and Expenditure;
f) Frameworks and how they link policy to the annual national budgeting process ;

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g) Understanding of the fiscal responsibilities of the Minister responsible for Finance;

h) Comprehensive knowledge of public sector budgeting cycle;
i) Broad knowledge of the link between strategic planning and Public Sector budgeting
processes;
j) Appreciation of Gender Responsive Budgeting and justification for Gender responsive
budgeting in Zimbabwe;
k) Knowledge of the actors in public sector budgeting processes; their roles and powers in
budget approval, authorisation and budget variations; and
l) Understanding of the role of the legislature in monitoring budget execution and amending
the budget.

Unit Content

The Content of the Unit covers the following:

(i) Introduction to Budgeting in the Public Sector;

(j) Defining a Public Sector Budget;
(k) The objective of Budgets in the Public Sector;
(l) The structure of Public sector budgets;
(m) The fiscal responsibilities for the Minister responsible for Finance;
(n) Budgeting techniques in the Public Sector;
(o) Public Sector Budgeting cycle; and
(p) Gender Responsive Budgeting in the Public Sector.

2.1 What is a Budget in the Public Sector Context

The Oxford dictionary defines a budget as an estimate of income and expenditure for a set period
of time. For the public sector, a budget is the estimates of annual revenue and expenditure that
are laid before Parliament by the Minister of Finance. Campbell (1985) defines a budget as a
quantitative analysis prior to a defined period of time, of a policy to be pursued for that period
to attain a given objective.

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The provisions of public finance laws have a mandatory requirement for a national budget on the
estimates of the revenues, expenditure and financing requirements for the Government of
Zimbabwe for the next financial year. In addition, section 28 of the Public Finance Management
Act requires the national budget to attach, for each vote of expenditure a statement of the classes
of outputs expected to be provided from that vote during the year and the performance criteria
to be met in providing those outputs. In addition, section 288 of the Urban Councils Act requires
the finance committee to draw up and present for the approval of the Council estimates, in such
detail as the council may require, of the income and expenditure on revenue and capital accounts
of the Council for the next succeeding financial year. The timing for the submissions of the
estimates of revenue and expenditure is before the expiry of any financial year.

The deduction from the provisions in public finance laws is that a budget in the public sector is
an annual financial plan, for a future period, which expresses the state’s operational and
development priorities for the next twelve months. This futuristic financial plan also articulates
how public sector organisations propose to finance their proposed operational and development
plans within the confines of the law and taking into account the prevailing economic conditions.
In addition, a public sector budget is a tool that provides guidance to public sector organisations
on the outcomes and outputs of their activities. It also provides the basis on which the outcomes
and outputs of the activities of a public sector organisation are monitored and evaluated.

An assessment of the 2019 national budget, whose extract is presented in Tables 2.1, indicates
that a public sector budget represents a statement of resources which are available or will be
made available for specific purposes i.e. for planned future operations. The components of a
typical statement of resources are exemplified by the national budget for the Government of
Zimbabwe for the fiscal year 2019.

A budget can also be described as the mechanism through which resources are distributed to
public sector organisations for them to accomplish government goals. A key feature of the
national budget of a country is that it is made up of a collection of budgets from within the public
sector. The national budget for Zimbabwe consists of a number of appropriations or votes as well

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as transfers to local authorities and grant aided institutions. Each vote discloses the purpose and
maximum amount to be spent on those purposes.

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Table 2.1: The National Budget of Zimbabwe for Fiscal Year 2019

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2.1 Self-Assessment Questions

a) How would you define public sector budgets?

b) What differentiate a national budget from an organisational budget.

2.2 Objectives of public Sector Budgets

A budget is the product of a number of processes namely setting of a strategic direction; revenue
estimation; development of expenditure plans; and setting out the expected outputs and
outcomes of public services delivery from the proposed budget estimates.

In the private sector, budgets are more of targets than plans. They reflect what managers hope
to achieve. Budgeting and budgetary control in the public sector is critical to the achievement of
national development plans, programmes and goals in the public sector.

Budgeting in the public sector is a statutory requirement and all the levels of Government. It is
also an annual process that entails setting of aims and objectives and the allocation of resources
necessary to achieve the set objectives. The budgeting process serves as a mechanism for
evaluating progress towards achieving the set objectives and a tool for identifying flaws or
inadequacies within state institutions.

The budgeting process promotes coordination, cooperation and communication within state
institutions and among the various ministries and departments. It also promotes dialogue and
understanding by connecting Treasury, local authorities, various ministries and departments
together; thus ensuring the attainment of overall national objectives. It also nurtures
management control and facilitates integration of the diverse activities that are undertaken at
the various levels of government.

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For the public sector where the motive is not profit but public service delivery, budgets serve
both as a tool for planning, resource allocation and communication. The national budget also
serves as a tool for development and macro-economic management.

At the national level, the budget is an important policy document that gives insight on the state’s
strategic direction, fiscal policy objectives, medium term expenditure framework and
commitment to public service delivery and national development. One of the national objectives
enshrined in the Constitution is national development. Section 13 of the Constitution urges the
State and all institutions and agencies of government at every level to endeavour to facilitate
rapid and equitable development. The provisions urge the state to take measures to:

a) promote private initiative and self-reliance;

b) foster agricultural, commercial, industrial, technological and scientific development;
c) foster the development of industrial and commercial enterprises in order to empower
Zimbabwean citizens; and
d) bring about balanced development of the different areas of Zimbabwe, in particular a proper
balance in the development of rural and urban areas.

Section 13 also urges Government to ensure that local communities benefit from the resources
in their areas. At the local level, budgeting serves as a guide in the implementation of a selected
strategy. During budget execution, the budget serves as a management control device that helps
management to direct their efforts towards attainment of stated objectives.

To the Executive, the national budget is a central policy document of government, showing how
the state will prioritise and achieve its annual and multi-annual objectives. Apart from financing
new and existing programmes, the budget is the primary instrument for implementing fiscal
policy, and thereby influencing the economy as a whole (OECD). It also serves as the mechanism
for allocating resources between national and local government.

A budget serves as a tool for allocation of resources between departments and competing needs.
It also serves as the mechanism that ensure that resources are allocated in accordance with
organisational and national policy priorities. The national budget sets out the Government’s
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position on expenditure priorities and the identification of the resources that the state needs to
raise in order to achieve national development goals. For example, the national budget of the
Government of Zimbabwe, presented in Table 2.1 discloses the following information.

a) the proposed sources of revenue and borrowing for the next financial year and the
medium term;
b) the purposes for which money will be spent and the types of expenditures that will be
incurred in the next 12 months and proposals for the medium term; and
c) the total amounts proposed for the next financial year and proposals for the medium
term.

Public sector budgets are the tool through which the Executive communicate their commitment
to the efficient and effective use of public finances. A perusal of the national Budget of the
Government of Zimbabwe for the fiscal year 2019 reveals that more than half of the government
ministries particularly those in social services attach to their budget forecasts, statements on
output and outcomes as well as indicators for these parameters.

For the Legislature the budget is the tool through which they can enforce the principle of fair and
equitable distribution of available resources between national and local governments. It also
serves as the mechanism through which Parliament has the opportunity to influence and control
Government activities. The budget also serves as the mechanism through which Parliament and
council can hold the Executive to account for the delivery of national development goals and the
efficient utilisation of scarce public resources.

Public sector budgets also serve as a tool through which the State and its institutions can
communicate and demonstrate their commitment to securing the rights of specific vulnerable
groups as advocated for by the Constitution.

2.2 Self-Assessment Questions

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a) Discuss how the objectives of a budget at a school level may be different from that of
local authorities.

b) To what extent would objectives of budgets for the Legislature differ from that of the
Executive?

2.3 Structure of Public Sector Budgets

The layout of public sector budgets, as demonstrated by the extract of the national budget for
the Government of Zimbabwe in Table 2.1, is organiSed in a way that presents government’s total
revenue from own sources as well as international grants; the purpose for which the total
revenue resource will be used; the deficit or surplus; and if there is a deficit, the sources of
financing for that deficit.

2.3.1 Sources of Public Sector Revenue

Public sector organisations can mobilise revenue from a number of sources. For example, the
national budget for the Government of Zimbabwe specifies nine sources, with three of them
being tax based. The proposed sources of revenue are as follows:

Source of Revenue Total (in USD)

Taxes on income and profits 2 155 372 800

Taxes on goods and services 3 148 015 900

Miscellaneous taxes 734 004 400

Revenue from investments and property 40 771 000

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Fees: Departmental facilities and services 109 429 000

Retention Funds 417 637 000

Statutory Funds 484 340 000

Other 11 800 000

International Grants -

Total Revenue 7 101 370 100

The sources of revenue for the national budget for 2019 were both domestic and foreign.
However, there were no plans to mobilise resources from foreign sources for both the immediate
and medium term.

An analysis of the composition of the sources of revenue for the Government of Zimbabwe
presented in Figure 2.1 reveals the extent to which the national budget relies on taxing citizens
and businesses.

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Figure 2.1: Zimbabwe Government's forecasted sources of Revenue for the period 2019 to 2021
Source: Computed from figures in Table 2.1

With a total contribution of ninety 98 percent to Government finances, taxation forms the single
largest source of income for the national budget. The taxes are either direct (e.g., income tax,
PAYE) or indirect taxes (e.g., sales tax). Revenue from Investments and properties contributes 1
percent and so does fees for departmental facilities and services. Other sources account for 1
percent. The details of these sources of revenue are presented in Table 2.2. However, not all
public sector organisations rely on these sources. Taxes are found predominantly at the national
level.

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Table 2.2: Sources of Revenue for Public Sector in Zimbabwe

Source: Zimbabwe Government Blue Book, 2019

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2.3.2 Purpose for which resources will be used

The purpose for which public funds are spent is divided into four categories, namely recurrent
budget, capital expenditure, lending and repayment of borrowing. Presented in Table 2.3 is a
typical statement on how resources will be spent in Zimbabwe for the fiscal year 2019.

Table 2.3: Detailed Expenditure for the national budget in Zimbabwe

An evaluation of the composition of the expenses is presented in Table 2.4.

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Table2.4: Expenditure Proposals for 2019 National Budget

Amount as a %ntage of as a %ntage of
Expenditure Category
Proposed Total Expenditure Total Revenue
1 Recurrent Expenditure 6,176,563,000 54% 87%
a Goods and Services 4,003,045,500 35% 56%
Transfer to Provisional councils
b 310,000,000 3% 4%
and local authorities
c Current transfers - Domestic 1,811,605,500 16% 26%
d Current transfers - Foreign 51,912,000 0.5% 1%
2 Capital Expenditure 2,374,187,000 21% 33%
3 Lending 125,342,000 1% 2%
4 Repayment of Borrowing 2,707,351,000 24% 38%
a External 226,651,000 2% 3%
b Domestic 2,480,700,000 22% 35%
Total Expenditure 11,383,443,000
-
Total Revenue 7,101,370,100

The major areas for which funds mobilised for 2019 were expected to be spend are discussed
below.

Recurrent expenditure

This also referred to as the Recurrent budget and relates to expenditure for the day to day
operations and the benefit to the public sector organisations are short term. Accounting for fifty-
four (54) percent of the total expenditure and eighty-seven (87) percent of the total revenue, this
category comprises of salaries and wages; travel and subsistence; procurement of goods and
services; utility costs and office administration expenses.

Within recurrent expenditure are transfers to provisional councils and local authorities. The
budget line for transfers accounts for three (3) percent of the total expenditure and four (4)
percent of the national revenue. This budget line serves a number of purposes. First it supports
the State’s strategy on devolution (decentralisation) of power to provincial and local tiers of
government. Secondly, it serves as the mechanism through which the sharing resources raised
nationally with the local tiers of government. The allocation to provincial and local authorities

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falls short of the Constitutional provisions that state that at least five (5) percent of the national
revenues raised in any financial year must be allocated to provinces and local authorities as their
share in that year;

Within this category are also current transfers relating to interest on loans; grants to state aided
institutions; employment costs, pensions and operations. These constitute sixteen and half (16.5)
percent of total expenditure and twenty-seven (27) percent of total revenue.

Capital Expenditure

This is also referred to as a Capital budget. It relates to estimates for projects and programs of a
capital nature that usually span for more than one financial year. The capital budget estimates
for Zimbabwe, for the fiscal year 2019, accounted for approximately 21 percent of the total
expenditure and 33 percent of the total revenue. The major commitments for the capital budget
for 2019 are stated as capital transfers; acquisition of buildings; furniture and equipment;
vehicles, plant and mobile equipment; equity participation; breeding stock; feasibility studies and
intangible assets. The capital budget allocations fall short of the best practice thresholds of close
to 25%, required for promoting sustainable development.

Lending to local authorities and authorised entities whose estimates accounted for 1 percent of
total expenditure and 2 percent of total revenue.

Repayment of loans (both domestic and foreign)

The domestic component represented 22 percent of total expenditure and 35 percent of total
revenue. The foreign component accounted for 2 percent of the total expenditure and 3 percent
of total revenue.

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2.3.3 Decision with regard to Budget Deficit or Surplus

This position is a function of a government’s strategic priorities and fiscal policies. The fiscal
policies choices may entail a neutral, expansionary or contractionary standpoint.

Where the state adopts a neutral stance normally referred to as a balanced budget approach,
the budget will be fully funded by the revenue that is available. The effect of such fiscal policies
is that overall the budget outcome has a neutral effect on the level of economic activity in a
country.

Where the state adopts an expansionary stance, this entails a net increase in Government
spending. Spending more than the revenues that are available results in a budget deficit. The
budget outcome has an effect on the level of economic activity. The expansion of state
expenditure may result in economic growth but it may also negatively affect fundamental
macroeconomic variables such as inflation and interests rates. The Public Debt Management Act
limits public sector borrowing so that the country does not have unsustainable levels of public
borrowing. Section 47(3) of the Public Finance Management Act prohibits public entities from
budgeting for a deficit unless they have prior written approval from Treasury.

Where the state adopts a contractionary stance, this entails a net reduction in Government
spending. Spending less than the revenues that are available results in a budget surplus a position
many governments have failed to achieve. Section 47(3) of the Pubic Finance Management Act
prohibits public entities from budgeting for a surplus unless they have prior written approval
from Treasury. The budget outcome has a positive effect on the level of economic activity and
economies with public sector budget surplus attract foreign direct investment.

An examination of the national budget for Zimbabwe shows that the fiscal policy decision was to
spend more than the revenues that were available.

2.3.4 Financing the Budget Deficit

The projected budget deficit as presented in the Box below was approximately 1.574 billion. The
deficit was going to be funded by borrowing from domestic sources.
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Budget Line Global estimate for 2019 (in USD)

Revenue and International Aid Grants 7 101 370 100

Total Expenditure and Net Lending 8 676 092 000

(Deficit)/Surplus (1 574 721 900)

Net foreign financing (226 651 000)

Net Domestic financing 1 801 372 900

Total Financing 1 574 721 900

It is important to note that section 11(2) of the Public Debt Management Act limits public debt
as a percentage of Gross Domestic Product to less than 70 percent. In addition, Zimbabwe is party
to the SADC Finance and Investment Protocol that recommends that member states maintain
their public debt to GDP ratios within regional best practice threshold of under 60%.

2.3.5 Public Sector Budget Classification

Public sector budgets are classified in a numbered of ways. The classification can be by purpose;
economic; programme; or standard classification. A perusal of the national budget for the
Government of Zimbabwe for 2019 reveals that there is a mixture in use of economic and
programme classification. For example, the Ministry of Lands, Agriculture, Water, Climate and
Rural Resettlement, as shown in Table 2.5 uses both classification.

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Table2.5: Economic and Programme Budget Classification

Source: Government of Zimbabwe Blue Book, 2019

2.3 Self-Assessment Questions

a) The Pre-Budget Strategy Paper for 2018 contained the following statistics on the Debt to
GDP Ratio.

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b) If you were invited to a pre-budget stakeholder consultation meeting with Ministry of

Finance, which issues would you raise?

c) Are local authorities allowed to budget for a deficit?

2.4 The Fiscal responsibilities of the Minister responsible for Finance

Resources in any country are limited and will never be adequate for the developmental needs of
an organisation or a nation. The capacity of the budget to finance expenditure is reliant on the
revenue generation capacity of the economy. Public finance has an effect on any economy
because it relies substantially on taxation and borrowing. Public Finance Regulations require the
Minister responsible for Finance to develop a Budget Strategy paper to guide the development
of the national budget.

According to Ministry of Finance (2018), the Budget Strategy Paper seeks to achieve focused and
well thought-out budget proposals that address the Zimbabwean economic challenges in a
manner that is also responsive to the needs of the Zimbabwean people. The Minister responsible
for Finance, through the Budget Strategy Paper, provides an assessment of the economic
environment, the fiscal performances of the country and projected macroeconomic outlook for
the medium term. In addition, the Budget Strategy Paper provides public sector institutions, the
Executive, Parliament and the public the key economic parameters on projected economic
performance, and anticipated revenue outturns which is critical for guidance on expenditure
capacity for public sector organisations

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The Budget Strategy Paper that the Minister responsible for Finance produces contains a
Medium-term Macroeconomic Forecast; Medium-Term Fiscal Forecasts; Fiscal policy; Medium
Term Expenditure Framework; and a fiscal risk statement.

The role of the Medium-Term Expenditure Framework (MTEF) is to determine government

expenditure plans and priorities. The purpose of the Medium-Term Fiscal Framework (MTFF) is
to establish the resource envelope available over the three-year period of the Medium Term
Expenditure Framework. The fiscal risk statement highlights the risks, envisaged to arise during
implementation of the Budget and hence, require recognition and mitigatory preparedness and
measures. The budget resource envelopes given to government ministries by Treasury are
derived from the anticipated resources from taxes and other sources and what the country can
borrow from the market without destabilising the economy.

2.4.1 Medium Term Macroeconomic Forecast

The Medium Term Macroeconomic Forecast sets out actual, estimated and projected values of
specified economic variables. The period covered should be no less than the previous two years,
the current year and the next three years. The economic variables that the Budget Strategy paper
should address include the following:

(a) gross domestic product and its components;

(b) inflation;

(c) employment and unemployment;

(d) exchange rates with major trading partners;

(e) interest rates;

(f) money supply;

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(g) mineral prices, outputs, and sales; and

(h) agricultural prices, outputs and sales.

In addition, the MTMF is required to present the assumptions underpinning the forecasts; a
statement of the consistency or differences to forecasts from other sources; and information on
the longer term macroeconomic forecasts.

2.4.2 Medium-Term Fiscal Forecasts

The Medium Term Fiscal Forecasts sets out actual, estimated and projected values of specified
fiscal variables. The period covered should be for no less than the previous two years, the
current year, and the next three years. The fiscal variables include the following:
a) revenues by type;
b) aggregate expenditures by classifications;
c) budget balance for the consolidated budget; and
d) the level of public debt by external source, internal source and total;

In addition to the stated variables, the MTFF should also state the accounting principles and
methods used in the fiscal framework and key assumptions on which the figures on revenue,
expenditure and debt are based. It should also contain sensitivity analysis that takes into account
the possible changes in macroeconomic conditions. The MTFF is also expected to present
forecasts for the longer term that have been taken into account in formulating the fiscal policies.

2.4.3 Fiscal Policy

This part contains the fiscal policy for revenues, debt, deficit and expenditure (for the
forthcoming budget year and two subsequent years). A summary of measurable fiscal objectives
(for no less than the previous two years, the current year, and the next three years); information
on fiscal policies for the medium term; an assessment of the consistency of the planned fiscal

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policy, aggregates and measurable fiscal objectives with the fiscal responsibility principles and
the previous Budget Strategy Paper; and information on reasons for any deviations from the
fiscal responsibility principles and fiscal objectives in the previous Budget Strategy paper with a
summary of the plans to address any such deviations, and the expected time to achieve this.

2.4.4 Medium Term Expenditure Framework (MTEF)

The purpose of the MTEF is to state the government’s annual and medium-term expenditure
intentions including:
a) the aggregate expenditure ceiling to be used in the preparation of the Annual Budget and
the medium term;
b) a ceiling on total central Government expenditure in the budget year and the medium
term;
c) minimum indicative level of total central Government investment in the budget year and
the medium term;
d) the government’s annual and medium-term expenditure intentions;:
e) the aggregate expenditure ceiling to be used in the preparation of the Annual Budget and
the medium term;
f) a ceiling on total central Government expenditure in the budget year and the medium
term; and
g) minimum indicative level of total central Government investment in the budget year and
the medium term.

2.4.5 Fiscal Risk Statement

The fiscal risk statement should include:

a) contingent liabilities and any commitments not included in the fiscal forecasts;
b) all other circumstances which may have a material effect on the fiscal and economic forecasts
and which have not already been incorporated into the fiscal forecasts.

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Public Finance Management requires that fiscal risks be quantified where practicable.

2.4.6 Government economic and fiscal update and year-end report

The Minister responsible for Finance is required, for the period ending 30th June each year, to
produce an Economic and Fiscal Update for half of the financial year. The contents of Economic
and Fiscal update should include the following:
a) updated macroeconomic and fiscal forecasts with adequate information to show changes
from the forecasts in the BSP;
b) Explanation on how any changes in the forecasts or how actual fiscal performance for the
half year may affect compliance with the fiscal responsibility principles and achievement
of the fiscal objectives in the BSP; and
c) analysis of compliance with fiscal principles and fiscal objectives in the Budget Strategy
Paper and information on reasons for any deviations from the fiscal responsibility
principles and fiscal objectives, with plans to address any such deviations, and the
expected time to achieve this.

2.4 Self-Assessment Questions

a) Discuss how the Medium Term Fiscal Forecast is linked to the Medium Term
Expenditure Framework.
b) Evaluate the importance of the Budget Strategy Paper in the budgeting process in the
public sector.
c) Discuss the fiscal responsibilities of the Minister responsible for Finance.

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2.5 Public Sector Budgeting Techniques

The public Sector in Zimbabwe has made use of a number of budgeting techniques. These have
included incremental and zero based budgeting among other techniques. Government has also
adopted modern-day approaches to budgeting such as Results Based Budgeting (RBB) and
Program Based Budgeting (PPB). The attractiveness of these techniques lies in their focus on
achievement of results.

2.5.1 Incremental budgeting

This is a technique in which the basis for preparing a budget is the previous year’s figure. The
method entails using the previous year's budget figures as the starting point for setting the
coming year's budget estimates. Minimal adjustments are then made by taking into account such
changes as inflation and any other relevant changes in the macroeconomic environment. The
advantage is that the technique is simple to understand. The drawback is that it does not take
into account the activities to be performed nor the outputs expected from such activities. It is for
this reason that
2.5.2 Zero based budgeting

This is a technique where the previous year’s allocations have no influence on the current year’s
estimates as each potential activity is assessed on its own merit (zero base). The technique is also
easy to understand but it also fails to take into account the outputs and outcomes of the activities
that are being budgeted for.

2.5.3 Activity based budgeting

This is a budgeting technique that is based on activity framework and using cost driver data in
the crafting of the budget. The technique entails the following steps for each unit:

i. Identification of activities and their cost drivers

ii. Forecasting the number of units of cost driver for the required activity level
iii. Calculate cost driver rate
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This approach to budgeting provides greater transparency with regard to the intended uses for
public resources. The drawback of the technique lies in the fact that it overlooks the achievement
of results.

2.5.4 Results Based Budgeting

As a part of the budgeting process, the RBB approach obliges public sector entities to come up
with a financial plan that provides a statement of the mission, goals, and objectives of the
organisation and a regular assessment of their performance. As shown in Table 2.6, this creates
a linkage between the necessary inputs for the production of outputs, the implementation of the
organisation's strategic development plan and anticipated outcomes and impacts.

Table 2.6: Components of Results Base Budgeting

Component Meaning

Vision A compelling conceptual image of the desired future. It is a view of the future
which an organisation commits its energies and enthusiasm to achieving.

Mission The basic reason why a public sector organisation exists in the first place. The
mission is the mandated core business of a public sector organisation.
Key Results The specific aspects of an organisation’s performance that are of primary or
Areas (KRAs) critical concern to stakeholders and clients. They are aspects related to issues
of appropriateness, efficiency and economy and are linked to the clients’
needs and work objectives. KRAs also help the organisation to achieve the
goals (targets) set in the strategic plan.
Goals: These are specific, measurable results of a strategy to be achieved in the
future. They involve development of concrete action plans to achieve the
desired results. An example of a goal by a local authority would be: Improve
access to water from the current 30% to 70% by the year 2020.

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Objectives Relate to an assessment of the extent to which the results relate to stated
goals. Objectives should be SMART (specific, measureable, attainable, realistic
and time framed).
Inputs In RBB these are all the resources that contribute to the production and
delivery of outputs. Inputs are "what we use to do the work". They include
finances, personnel, equipment and buildings.
Strategies In RBB are the action statements of what is to be done to achieve the
objective. Strategies include due dates or deadline for completion.
Activities These entail the processes or actions that use a range of inputs to produce the
desired outputs and ultimately outcomes. In essence, activities describe "what
we do".
Outputs These relate to the final products, or goods and services produced for delivery.
Outputs may be defined as "what we produce or deliver".
Outcome These are the medium-term results for specific beneficiaries that are the
consequence of achieving specific outputs. Outcomes should relate clearly to
an institution's strategic goals and objectives set out in its plans. Outcomes are
"what we wish to achieve".
Impact Relate to the long-term developmental results that are the logical
consequence of achieving a combination of outcomes. Impact is often too
broad to measure directly.

2.5.4.1 Benefits of using results based budgeting

The benefits of results based budgeting are the following:

a) Improved resource allocation;

b) Improved value-for-money;
c) Increased accountability;
d) Improved results achievement;
e) More efficient and effective use of resources; and

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f) Improves management of programs, projects and activities

2.5.5 Program based budgeting

This is an integrated approach to planning, budgeting and performance management.

Programme Based Budgeting is aimed at improving resource allocation, decision-making,
promoting high quality and client-responsive public services, maximising value for money in
service delivery, and achieving the Government’s desired outcomes.

A public organisation’s annual estimates of expenditure would be based on programmes and sub-
programmes specifying the resources to be allocated and the outcomes to be achieved and
outputs to be delivered. The advantages of adopting this budgeting technique are:

a) Funds are allocated according to activity types or programs, thereby streamlining

resource allocation according to objectives of the Ministry.
b) The technique focuses on outputs and outcomes not inputs.
c) Program Based Budgeting bases expenditure solely on programs of work.

An evaluation of the national budget for the Government of Zimbabwe reveals Appropriation
budgets that are based on Programme based budgeting. Listed in Table 2.7 are the Votes
observed as having adopted the Program Based Budgeting.

Table2.7: Appropriation Votes on Programme Based Budgeting as at Fiscal Year 2019

1 Minister of Public Services, Labour and Social Welfare Vote 3

2 Minister of Industry and Commerce Vote 7

3 Minister of Lands, Agriculture, Water, Climate and Rural Resettlement Vote 8

4 Minister of Transport and Infrastructural Development Vote 11

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5 Minister of Local Government, Public Works and National Housing Vote 13

6 Minister of Health and Child Care Vote 14

7 Minister of Primary and Secondary Education Vote 15

8 Minister of Higher and Tertiary Education, Science and Technology Vote 16

Development

9 Minister of Women Affairs, Community, Small and Medium Enterprises Vote 17

Development

10 Minister of Justice, Legal and Parliamentary Affairs Vote 19

11 Minister of Youth, Sports, Arts and Recreation Vote 21

Social Welfare is one of the programmes that falls under the Ministry of Public Service, Labour
and Social Welfare. An example of the outputs and output Indicators developed for the Social
Welfare program are as follows:

Outcome Outcome Indicator 2017 2018 2019 2020 2021

Actual Target Target Target Target

% of orphaned and vulnerable 44% 44% 60% 80% 80%

Improved child care and
children reached
protection
% reduction in abused 20% 20% 40% 60% 80%
children(including child
marriages)

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% of institutions complying with 70% 80% 100% 100% 100%

national residential child care
standards

Improved access to % of vulnerable people with 42% 55% 70% 85% 100%
rehabilitation services disability supported to access
by vulnerable people rehabilitation services
with disability

Further to the outcomes and their indicators, the Ministry also developed output and output
indicators. For example the output and indicators developed for the outcome on improved
access to rehabilitation services by vulnerable people with disabilities are given as follows:

Output Output Indicator 2017 2018 2019 2020 2021

Actual Target Target Target Target

Number of people with 4989 3907 4000 4100 4200

disability accessing
People with disability
rehabilitation services
accessing rehabilitation
services Per capita and administrative 3850 3695 3800 3900 4000
grant

Enrollment in rehabilitation 462 212 250 300 350

centres

assisted with assistive 457 124 200 250 300

technology

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assisted with vocational 165 154 200 250 300

training fees

assisted with empowerment 55 9 50 100 150

loans

2.5 Self-Assessment Questions

a) Discuss the usefulness of Results Based Budgeting

b) Evaluate the usefulness of Programme based budgeting

2.6 Public Sector Budget Calendar

The provisions in section 11 of the Public Finance Management Regulations 2019 provide specific
guidelines and timelines for national budget preparation and approval process. Table 2.8
presents the Budget Calendar for the Government of Zimbabwe.

Table 2.8: Budget Calendar for Zimbabwe's national budgeting process

Phase Date Budget Activity

1 April and June Ministry of Finance prepares the Budget Strategy Paper (BSP).

2 1 May Ministries provide Ministry of Finance with inputs for the Budget
Strategy Paper including providing revised strategic priorities and
expenditure intentions.
3 Not later than 30 June Ministry of Finance submits the Budget Strategy Paper to Cabinet.

4 Not later than 15 July Cabinet Approves Budget Strategy Paper.

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5 Not later than 31 July Ministry of Finance submits Budget Strategy Paper to Parliament
for information and comment.
6 31 July Ministry of Finance issues the Budget Call Circular including
indicative budget expenditure ceilings for the following year

7 Not later than 15 Ministry of Finance provides Mid-year Fiscal Review to Cabinet
August
8 31 August Ministries provide budget submissions to Ministry of Finance

9 14 September Ministry of Finance updates the macroeconomic and fiscal

information and provides it to Cabinet.
10 16 September Ministry of Finance completes review of budget submissions

11 Sept-4. October Ministry of Finance and ministries hold budget discussions

12 20 October Ministry of Finance provides draft budget estimates to Cabinet.

13 30 Oct Cabinet completes consideration of draft budget estimates on.

14 1st Thursday of Minister of Finance presents Budget to Parliament

November
15 November The budget is debated and approved

2.7 Budgeting Cycle

The Budget timelines provided for in the Public Finance Regulations can be presented as a
budgeting cycle as depicted in Figure 2.2.

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Step 1
Strategic
Planning
Step 8
Audit and Step 2
Evaluation Budget Call
Circular

Step 7
Budget Step 3
Execution Budget
preparation

Step 6
Budget
Authorisation Step 4
Step 5
Budget Approval
Budget
Submission

Figure 2.2: Public Sector Budgeting Cycle

2.7.1 Strategic Planning

The guidance from Treasury that communicates the budget timetable to Accounting Officers
requires that Ministry carries out strategic planning meetings within the first three months of the
financial year. The focus of the strategic planning meetings is the Ministry’s vision, mission,
objectives, the review of previous year’s plans and projections for the future. The outcome of the
strategic planning meetings informs budgeting preparation for the Ministry and the budget
should fund the strategic priorities as stated in that Ministry’s annual plans.

2.7.2 Budget Call for Estimates

Treasury’s call for estimates of revenue and expenditure through the Budget Call Circular triggers
the budget preparation process of the Public Sector. Treasury circulates a budget timetable that
all public sector institutions must be made aware of.

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2.7.3 Budget Preparation Process

The responsibility for coordinating budget preparation in public sector organisations rests with
the Director for Finance. They are also responsible for providing guidance on resource availability
and consolidating their respective Ministry’s budget.

Public sector organisations can adopt a top-down; bottom up or negotiated approach when
developing the budgets. The bottom approach, which is also, referred to as participative, entails
the development of a budget at the lowest levels with the budgets being submitted to a central
office for review and consolidation. The top down approach entails a situation where top
management decides on the budget on their own and lower level management is only
responsible for the implementation of the budget. The negotiated approach is a combination of
the top down and bottom up approaches and it creates an environment where there is shared
responsibility for budget preparation.

The preparation of the national budget for example entails Treasury determining budget
parameters and resource envelops; and state institutions providing inputs into the budget for
Treasury review and consolidation. This suggests a negotiated approach to budgeting.

2.7.4 Budget Approval at Public Sector organisational level

Public Finance regulations and policies assign the responsibility for scrutinising and approving the
respective local authority or line ministry’s budget to the Accounting Officer. In executing this
role, Accounting Officers are required to ensure that their budget forecasts fully address the local
authority or Ministry’s mandate, goals, programmes and the priorities set in the national
economic blue prints, and any other policy pronouncements. In addition, Accounting officers are
obliged to ensure that the proposed budgetsare gender responsive.

2.7.5 Budget Submission

Accounting Officers from central government, local authorities and state entities are required to
submit to the Treasury, by such date and in such form as the Treasury may prescribe, draft
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estimates of revenue and expenditure, to be defrayed during the ensuing financial year from
budget and financial account for each Vote under their control.

Bids for capital budgets are required to be submitted to the appropriate Minister and, if
approved, the Accounting Officer then refers them to Treasury by such date and in such form as
the Treasury may require. The requirement is that bids for capital budgets include all
departments and statutory bodies for which a Ministry responsible. Treasury has the prerogative
to scrutinise, adjust and approve line Ministries’ Budgets after taking into account the Ministry’s
mandate, goals, programmes and priorities vis-à-vis national interest. The provisions of section
8(3)(b) of the Public Finance Management Act require the Secretary for Finance to ensure that
estimates of expenditure reflect as can best be ascertained at the time, good value for money
and the effective use of public resources.

2.7.6 Budget Authorisation

The responsibility for authorising budgets rests with the National Assembly which does so
through the promulgation of the Appropriation Act17 and the Finance Act18. For example, the
Appropriation Act for the 2019 national budget in 2019 makes the following provisions:

• It charges the Consolidated Revenue Fund to the tune of US$6 492 910 000;
• Charges Retention Funds to the tune US$406 927 000;
• States that the moneys appropriated should be applied to the services detailed and
specified in the Estimates of Expenditure;
• Empowers the Minister of Finance and Economic Development to authorise transfers
between Votes; and

17
An Act enacted to apply a sum of money for the service of Zimbabwe during the year ending on the 31st December
of any year.
18
An act promulgated to make provisions for the revenues and public funds of Zimbabwe.

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• Presents the Schedule of the Expenditure to be financed from Consolidated Revenue Fund
and Retention Fund.

It is important to note that the appropriation of money does not automatically permit line
Ministries to spend. The authority to spend is conveyed through the following warrants:

a) Paymaster-General;
b) Constitutional and Statutory provisions; and
c) Accountant-General

It is a requirement that all capital expenditure releases be covered by an Accountant-General’s

warrant.

The Budget authority given by Parliament for the incurring of expenditure on any service lapses
and cease to have any effect at the close of the financial year to which that Appropriation Act
relates. Any unexpended balance of any moneys withdrawn from the Consolidated Revenue Fund
should be repaid to the Consolidated Revenue Fund.

2.7.6.1 Budget Authorisation and Publication in Local Authorities

The budgets for local authorities are approved by council and once approved the budget is signed
by the mayor or chairman. The copies of the estimates are forthwith made available for
inspection by the public. Three copies of the estimates are forwarded within two months to the
Minister responsible for Local Government for his/her information.

Section 121(5) of the Rural District Council Act requires rural local authorities to forward a copy
of the approved budget, within two months, to the provincial development committee of the
provincial council established in terms of the Provincial Councils and Administration Act [Chapter
29:11], for the province within which the council area is.

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2.7.7 Publication of Public Sector Budgets

Section 11 (2) of the Public Finance Management Regulations makes it mandatory for the
Minister of Finance to publish the Annual Budget documents on the internet on the same day
the Annual Budget documents are presented to Parliament. The Minister is also required to make
the documents available to the public in printed form as soon as practicable. The documents are
listed in Box 2.1.

Box 2.1: National Budget Documents

a) revenue estimates for the next financial year with information on the current year revenue
estimates and the previous year actual;
b) financing estimates and finance Bill for the next financial year;
c) Appropriation Bill;
d) budget speech; and
e) annexes including:
f) summary of Local Authority budgets
a) summary of State Owned Enterprise financial positions;
b) information on the statutory expenditure for the forthcoming year, estimates for the current
year and actual for the previous year;
c) a report from the Ministry of Finance specifying the measures taken by the Government to
implement the audit recommendations from the previous year;
d) updated macroeconomic and fiscal forecasts and a statement of economic assumptions
including significant changes from the assumptions from the Budget Strategy Paper;
e) maximum upper limits for external, internal and total borrowing; for issuing guarantees; for
the value of public private partnership contracts; and for incurring other financial liabilities;
f) statement of multi-year commitments;
g) expected levels of donor funding;
h) statement of planned tax relief and exemptions.

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2.7.8 Budget Execution

Treasury has the responsibility of informing line Ministries of their authorised budgets. This
information is conveyed through a Paymaster-General’s Warrant in terms of section 23 (2) of the
Public Finance Management Act. Quarterly warrants may be issued should the cash forecasts so
justify. It is the responsibility of Treasury to ensure that the authorised budgets for line Ministries
are uploaded on the computerised Public Finance Management System or the Integrated
Financial Management System (IFMS).

For decentralised Government Units that have no access to the PFMS, the Accounting Officer is
required to ensure that the authorised budgets are managed through a commitment control
system. The information maintained in commitment control records are required to be captured
onto the PFMS or IFMS on a weekly basis.

To enable Treasury to adequately plan for future expenditure and prioritise government
requests, Accounting Officers Public Finance Management Regulations require Accounting
Officers to prepare monthly cash flow forecasts. The requirement is that the cash flow forecasts
submitted by Accounting Officers disclose the anticipated income from all sources and the
forecasted expenditure.

The Director of Finance is charged with the responsibility of ensuring that their respective
agencies or line Ministry’s cash planning is done in accordance with Treasury guidelines and cash
ceilings (expenditure target) given from time to time.

2.7.8.1 Budget classification and Chart of Accounts

Public Finance Management Regulations give the Accountant General, in consultation with the
Auditor General, the responsibility for prescribing and maintaining a uniform Chart of Accounts
(COA) applicable to public sector organisations in Zimbabwe. The COA is required to incorporate
standard terms and classifications for fiscal, budget, and performance information of the

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Government, including information on revenues, expenditures, and a suitable classification for

performance information.

Public Finance laws assigns the Accountant-General the task of prescribing and maintaining the
account codes for recording government transactions and ensuring consistency of the account
codes with the budget classification and government accounting standards. The Accountant
General is also required to ensure that the COA and standards or requirements issued by his/her
Office are compatible with the International Monetary Fund, Government Finance Statistics
Manual classifications and updates to such Manual.

The COA and budget classification forms the basis for identifying, aggregating and reporting
government transactions. Accounting Officers in public sector organisations are obliged to ensure
that all transactions are recorded, accounted for and reported in accordance with the prescribed
COA prescribed by the Accountant General.

2.7.9 Monitoring Public Sector Budgets

Public finance laws oblige Accounting Officers to monitor the performance of their organisations’
budgets regularly to ensure delivery of expected results and to address any deviations from the
targeted results. Treasury Instructions require that the monitoring of the budgets be carried out
at transaction level whereby each budget line is checked for availability of funds before
authorising expenditure. Public officers responsible for authorising expenditure are obliged do
so after viewing the budget on the PFMS or IFMS.

The Director of Finance in a local authority or central government is required to undertake budget
monitoring through variance analysis where the actual expenditure per budget line is compared
to the allocated budget and remedial action taken to address any deviations from set standards.

Treasury is empowered by the provisions of the Public Finance Management Act to monitor the
performance of the national budget and take remedial action on errant government agencies
and line Ministries. The Appropriation Act also allows to transfer funds between votes. Treasury
also has the authority to withhold from a Ministry any remaining funds appropriated for a specific
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function if that function is transferred to another Ministry or any other institution. Treasury
should allocate those remaining funds to the Ministry or institution to which the function has
been transferred.

Parliament has established Parliamentary Portfolio Committees whose role is to monitor budget
implementation and performance and budget outcomes.

Section 80 of the Public Finance Management Act, appoints internal Auditors to assist Treasury
in its role as manager of public funds. Two of the major roles of internal auditors are to monitor
the financial administration and procedures of the Ministry or reporting unit concerned; and to
assess the cost-effectiveness of any projects undertaken by the Ministry or reporting unit.

2.7.10 Budget Variation

Budget variations arise from a number of reasons. Section 17(5) of the Public Finance
Management Act permits Treasury to authorise the application of an expected saving on a vote
to meet an excess of expenditure on any existing subhead of that vote or expenditure on a new
subhead of that vote. This is normally referred to as Virementing.

Treasury has the authority to place restrictions on virementing from certain budget line items.
For example savings on employment costs are not permitted to be applied to meet excess
expenditure under any item or sub-head without prior Treasury authority. Savings on capital
expenditure or capital projects are not permitted to be viremented to recurrent expenditure
items. In addition, all transfers between capital expenditure projects should require Treasury
approval.

With the authority of Treasury, a saving on any sub-head may be applied to meet excess budget
requirements on another sub-head or a new sub-head within the same Vote. The power to
virement from one sub-vote to another or the creation of new sub-head rests only with Treasury.
Accounting Officers are authorised to virement funds within the same subhead without seeking
Treasury authority.

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The standard practice is to prohibit virements during the first six months of the financial year.
Accounting Officers are tasked with the responsibility of ensuring that public officers follow
proper virementing procedures and approvals are obtained in advance and not after the event.
Virementing funds between sub-votes without Treasury is an act of financial misconduct, as
defined by the Public Finance Management Act.

2.7.11 Budget Amendments - Additional and supplementary estimates

Budgets can only be amended with the authority of Parliament. The amendments arise from the
need for additional and supplementary estimates. As already discussed under Constitutional
guidance, the need for additional or supplementary estimates arise when a budget provision is
inadequate and an Accounting Officer is satisfied that no savings exist for a virement to meet the
additional expenditure. The need for amendments may also arise from unforeseen or whose
extent was unforeseen and for which no provision has been made under any other law.

Accounting Officers are required to approach Treasury for supplementary or additional

estimates as provided for in the Public Finance Management Act. Accounting Officers are also
required to notify Treasury in a timely manner, of any cases of inescapable expenditure. The
responsibility for dealing with line ministries’ requests for supplementary or additional funds
rests with Treasury.

Additional and Supplementary estimates for the national budget are only authorised by
Parliament as provided for in section 306 of the Constitution. For local authorities, the finance
committee is permitted to draw up supplementary estimates for income and expenditure not
provided for or inadequately provided for in the approved budgets. The supplementary estimates
are authorised by Council.

2.7.12 Budget Reporting

The Public Finance Management Act assigns the Director of Finance the responsibility for
preparing, for the Accounting Officer, monthly, quarterly and annual budget reports. These
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reports should compare budgeted to actual receipts and disbursements. The reports should also
provide explanatory notes on variances.

The provisions of section 83 of the Act require that annual reports submitted by the Accounting
Officer include a report on the activities, outputs and outcomes of the respective line Ministry.

The Minister of Finance, as part of his fiscal responsibilities, is also required to report on budget
performance biannually and annually.. The Minister is required to produce a half-year Budget
situation analysis report by 15th August of each financial year. The contents of the report include:

a) a summary of performance against the Budget for the half year;

b) half year actual figures for revenue, expenditure and financing compared to the revenue,
financing and expenditure estimates in the Annual Budget;
c) for expenditure this information should include budget execution for the half year
compared to the Annual figures;
d) Budget for votes and statutory expenditure with further information on significant
deviations; and
e) budget pressures and challenges and proposals for addressing these pressures and
challenges.

In addition, the Minister responsible for Finance is also tasked with the responsibility of preparing
an Economic and Fiscal Report for the financial year. Some of the budgetary issues addressed in
this report include updated macroeconomic and fiscal forecasts; and a summary of budget
execution compared to the appropriations.

2.7.13 Auditing of Public Sector Budgets

The responsibility of the audit of budgets in the public sector rests with internal and external
auditors. Internal Auditors in the Public Sector are appointed in terms of section 80 of the Public
Finance Management Act. The external auditor for all public sector organisations is the Supreme
Audit Office (the Auditor General).

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2.6 Self-Assessment Questions

a) Describe the public sector budgeting cycle in Zimbabwe

b) Discuss the role of Treasury in the Budgeting Cycle

2.8 Gender Responsive Budgeting

The Budget Call circular from Treasury urges Ministries to ensure that their budgets are gender
responsive. Advocates for Gender responsive Budgeting (GRB) argue that national budgets reveal
the budgetary priorities of a government and the discrepancies between what a government says
it is doing and the actual impact of their policies. The adoption of GRB therefore helps
governments to ensure there is greater consistency between economic goals and social
commitments as contained in economic blueprints and long-term national vision.

2.8.1 What is Gender Responsive Budgeting

The Council of Europe (2005) defines GRB as “an application of gender mainstreaming in the
budgetary process. It means a gender-based assessment of budgets, incorporating a gender
perspective at all levels of the budgetary process and restructuring revenues and expenditures
in order to promote gender equality."

GRB entails mainstreaming gender into the formulation and implementation of budgets. It does
not necessarily mean coming up with separate women’s or children’s budgets but those general
budgets include a gender perspective. What this means to a local authority for example is that
the target for crafting budgets would not be households but rather the basis of revenue-raising
and public spending used would be the differential needs and interests of women, children and
men. GRB, because it focuses on allocating money for activities that eliminate gender barriers to
public services, is considered a tool for social change.

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2.8.2 Justification for GRB in Zimbabwe

Apart from the Constitutional declaration on the rights of women and children, Zimbabwe is a
signatory to the Convention on the Elimination of All Forms of Discrimination against Women
(CEDAW) in which governments commit themselves to advancing women’s rights. Engendered
budgets are therefore critical to transforming rhetoric about women’s empowerment into
concrete reality.

GRB is the mechanism by which the Government is able to adjust national priorities and
reallocate resources to live up to the commitments to achieving gender equality and advancing
women’s rights as advocated by the Constitution.

The guidance in the provisions of Section 298(1) (b) (iii) of the Constitution requires that
expenditure be directed towards the development of Zimbabwe, and special provision be made
for marginalised groups and areas. Most marginalised women, men, girls and boys are not only
confronted by poverty and the consequent lack of incomes to invest in their economic and social
development but also a lack of access to education, services, and non-monetary resources,
thereby trapping them within the vicious cycle of poverty. Adopting GRB at all tiers of
Government will address the marginalisation of target groups by focusing both on increasing
incomes and improving access to resources and services.

Gender budgets also improve the effectiveness, efficiency, accountability, and transparency of
government budgets. It is important that the Ministry of Finance develops guidelines that could
be used in public sector budging processes. Listed in Table 2.9 are some of the tools that can be
used in the budgeting process.

Table 2.9: Examples of tools that have been developed Gender Responsive Budgeting
Budget Item Gender Tools Questions What about this section?

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Revenue Gender- How are women and men This gender tool tracks the impact
Estimates disaggregated affected differently by user fees have on women and
analysis of user user fees? men. Given that women generally
charges and earn less than men, these fees
fees can affect women differently
than men.
Expenditure Gender- How are women and men Comparison of public
Estimates disaggregated benefiting from expenditure for a given program
public expenditure on public to reveal the distribution of
expenditure services, e.g. social expenditure between women
incidence services? and men, girls and boys.
analysis.

Policies Gender- In what ways are the This gender tool tracks the impact
awareness policies and their of policy on women and men’s
policy appraisal associated resource needs and priorities.
allocations likely to reduce
or increase gender
inequalities? How do
policies and programmes
reflect women’s and
men’s different needs and
priorities? Are women’s
rights as stipulated in the
CEDAW and mentioned in
the country-specific
CEDAW recommendations
taken into account?

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Beneficiaries Gender- How are women and men Analysis tool to reveal the
disaggregated benefiting from distribution of expenditure
beneficiary expenditure on public between women and men, girls
assessments services, e.g. Social and boys
services?

Budget Gender-aware Does the public sector ?

Statement budget organisation provide
statement information on the actions
to reduce gender ine-
qualities in the annual
budget statements?

Examples of some of the GRB indicators a public sector organisation can use are presented in Box
2.2:

BOX 2.2: An Example of GRB Indicators for Budgets in Local Authorities

a) Share of total expenditure targeted to gender equality programmes;

b) Gender balance in the Local Authority’s employment costs;
c) Share of expenditure devoted to women’s priority needs from the local authority’
services;
d) Gender balance in procurement contracts; and
e) Gender balance in the Local authority’s training budgets.

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2.9 End of Unit Summary

Budgeting and budgetary control is critical to the achievement of national development plans,
programmes and goals in the public sector. For national government, a budget is the estimates
of annual revenue and expenditure that are laid before Parliament by the Minister of Finance
and within the time period specified by law. For local authorities, a budget is the estimates of the
income and expenditure on revenue and capital accounts of the Council for the next succeeding
financial year.

The crafting of public sector budgets in Zimbabwe has to be consistent with the objectives of the
strategic direction of government as dictated by the Transitional Stabilisation Programme (TSP)
and the aspirations of Vision 2030 wherein the country expects to be a middle income economy.
The Minister of Finance is required to develop a Budget Strategy Paper to guide budget
preparation for the nation. The Budget Strategy Paper outlines macro-economic and fiscal
objectives, targets and other projections, taking account of underlying macro-economic and fiscal
assumptions.

Budgets serve both as a tool for planning; resource allocation and communication. At
organisational level, a budget serves as a mechanism for allocating resources between competing
needs. To the Executive the national budget serves as a tool for development; macro-economic
management and a central policy document showing how the state will prioritise and achieve its
annual and multi-annual objectives. For the Legislature the budget is the tool through which they
can influence and control Government activities as well as enforce the principle of fair and
equitable distribution of available resources between national and local governments. The key
features of public sector budgets is that they present the resources available, the purposes for
which the resources will be spend and the financing decision for a budget deficit if the state’s
policy is to spend more than the revenues available. Public sector budgeting processes are
provided for in the statutes and the timelines depict a budgeting cycles.

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2.3: Self-Assessment Questions

a) Evaluate the justification for gender responsive budgeting in Zimbabwe.

b) Discuss the role of the National Budget in Zimbabwe.
c) Discuss the difference between recurrent and capital budgets.

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UNIT 3: Public Sector Business Processes

3.0 Introduction to Public Sector Business Processes

Lawson (2015) 19 regards public finance management as the set of laws, rules, systems and
processes used by sovereign nations (and sub-national governments), to mobilise revenue,
allocate public funds, undertake public spending, account for funds and audit results. Sound
public finance management systems are critical for achieving sustainable high economic growth
rates; improving the quality of public service delivery; and ensuring burdens and benefits of the
use of resources are shared equitably between present and future generations. The essence of a
good public financial management system lies in the ability of the state to collect adequate
resources from the citizen of a country; in a proper manner; allocating these resources equitably;
putting the resources to good use in an efficient and effective manner. Resource generation,
resource allocation, and expenditure management (resource utilization) are the essential
components of a public financial management system.

This unit discusses the processes used by the public sector institutions in Zimbabwe to mobilise
revenue, allocate public funds and undertake and monitor public spending. The Unit breaks the
processes into revenue management; procurement of goods and services; expenditure
management; asset management; cash management; and public debt management.

Learning Objectives
The objectives of this Unit are to:

a) Describe the business processes that underpin the management of public sector
revenues, procurement, expenditure, assets and liabilities.
b) Explain the systems, processes and practices guiding the following:

19
Lawson, A. (2015). Public Financial Management. GSDRC Professional Development Reading Pack no. 6.
Birmingham, UK: GSDRC, University of Birmingham.

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i. management of revenue and the custody of public funds;

ii. management of procurement;
iii. management of public expenditure;
iv. management of public sector procurement;
v. management of public assets;
vi. management of cash; and
vii. management of public debt

Learning Outcomes
On completion of the Unit, students are expected to demonstrate the following:

a) Broad knowledge of the core components of business processes in the public sector context
including:
i. Revenue management;
ii. Procurement management;
iii. Expenditure management;
iv. Cash management;
v. Asset management; and
vi. Public Debt Management

Unit Content
Unit 3 contains the following topics:

a) Revenue Management;
b) Public Procurement;
c) Expenditure Management;
d) Cash Management;
e) Asset management; and
f) Public Debt Management.

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3.1 Revenue Management in the Public Sector

Section 44 of the Public Finance Management Act requires accounting authorities to take
effective and appropriate steps to collect all revenue due to the public entity. The Third Schedule
issued in terms of Sections 102, 145(1), 227 and 232 of the Urban Councils’ Act, requires local
authorities’ by-laws to contain specific provisions that ensure the proper collection of income;
the proper custody and preservation of moneys; and procedures for the reporting of the loss or
destruction of money.

The Public Finance Management regulations require Accounting Officers to manage revenue
efficiently and effectively by developing and implementing appropriate processes that provide
for the identification, collection, recording, reconciliation and safeguarding of revenue and
information about revenue. Revenue is vulnerable to a number of risks. The potential risks in
revenue collection include:

a) Cash collected not brought into account

b) Accounting records falsified
c) Thefts of cash collected
d) Misuse of cash
e) Loss of cash through negligence
f) Failure to collect debts

The revenue management system in any local authority or public sector organisation should
therefore be designed in a manner that ensures that all funds received are receipted promptly,
deposited into the official banking account, properly recorded in the books of account, reconciled
and kept under adequate security.

Learning Objectives
This Unit seeks to:

a) Describe the types and sources of revenue for public sector organisations;
b) Explains the policies governing revenue management;
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c) Discusses the role of receivers of Revenue; and

d) Describes the systems and processes used in collecting and managing public sector revenue.

Learning Outcomes
After going through this unit students are expected to demonstrate the following:

a) Knowledge of the sources and types of revenues for public sector organisations;
b) Appreciation of the policies governing public sector revenue management;
c) Knowledge of the role of receivers of Revenue; and
d) Understanding of the methods used in collecting and managing revenue in the public sector

Content of Unit
The Content of the Unit covers the following:

a) Definition of revenue;
b) Sources of Revenue;
c) Authority to levy fees and charges;
d) Responsibilities of Receivers of Revenue;
e) Accounting Package for Revenue management;
f) Receipting and Recording of public moneys;
g) Gifts, donations and sponsorships; and
h) Management of receivables.

3.1.1 Definition of Public Sector Revenue

International Public Sector Accounting Standards (IPSASs) define revenue as the gross inflow of
economic benefits or service potential during the reporting period when those inflows result in
an increase in net assets/equity, other than increases relating to contributions from owners.

The International Monetary Fund Government Finance Statistics Manual (2014) defines revenue
as an increase in net worth resulting from a transaction. The Manual identifies four main
categories for revenue in general government, namely compulsory levies in the form of taxes and
certain types of social contributions; property income derived from the ownership of assets; sales
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of goods and services; and other transfers receivable from other units. The Manual notes that
Public corporations do not levy taxes. They derive their revenue from all the other sources with
property income and the sales of goods and services being the main sources of revenue.

Section 2 of the Public Finance Management Act defines revenue as “all taxes, fees and other
income of the State from whatever source arising (not being moneys which are required by law
to be paid into a separate fund), including the proceeds of all loans raised by the State.

3.1.2 Sources of Public Sector Revenue

The most likely sources of revenue for public sector organisations are receipts from:

a) taxation (both direct and indirect);

b) fees, fines, penalties and licenses;
c) exchange transactions including receipts from the sale of goods and services and user
charges;
d) external assistance grants and loans;
e) other grants, transfers and budget appropriations;
f) interest and dividends; and
g) gifts and donations.

The detailed sources of revenue are illustrated in the national budget estimates for the fiscal year
ending 2019 that is presented in Table 2.1 in Unit 2. 3.5.1.

3.1.2.1 Sources of Revenue for local authorities

Revenue inflows to local authorities arise from the following sources:

a) moneys paid to the local authority which have been appropriated by Parliament;
b) any levies, rates, special rates or rents paid to the local authorities;
c) charges paid to the council in respect of any services they would have provided;
d) revenue received from income generating activities;

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e) interest on moneys invested by the council; and

f) any grants, gifts, contributions, donations, advances, subscriptions or bequests

3.1.3 Authority to levy fees and charges

Section 13(1) of the Public Finance Management Regulations requires public sector organisations
to impose non-tax revenues to ensure that their fees and charges are set at a level no higher than
the cost of the most efficient method of providing the service.

The regulations encourage public officials to ensure that the fee or charge reflects the value of
the service to the person paying for it and not a wider group of beneficiaries who should
contribute to the costs of the service through specific or general taxes. In addition, the provisions
of this section require state institutions at every level to ensure that affected parties are
adequately consulted and provided with an opportunity to be heard on the imposition of new
fees or charges or significant increases to fees or charges.

3.1.4 Responsibilities of Receivers of Revenue

A receiver of revenue is any person who is prescribed to receive money by the Minister
responsible for Finance in terms of section 10 of the Public Finance Management Act. The
Minister of Finance prescribes an Accounting Officer for each vote or reporting entity. The
Accounting Officers are required to control and to be accountable for all revenues and other
public money received, held or disposed of by their vote or reporting entity. Section 15(2) of the
Public Finance Management Regulations states that every receiver of revenue should be
responsible for the proper collection, receipt, custody, issue and control of such public money
and should ensure that full and proper accounts are kept of all transactions related to public
money. The laws governing local authorities require Council to cause to be kept, such books of
account as may be necessary to maintain a true and proper record of all matters relating to the
financial transactions of the council, including all moneys received and paid, income earned or
accrued but not received, and expenditure incurred but not paid, and clearly showing the assets
and liabilities of the council.
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The Directors for Finance are tasked with the responsibility for supervising and enforcing the
punctual collection of funds due to the State; accounting; and reporting for public funds.

Public Finance Management Regulations oblige Public Sector organisations to develop and
implement appropriate processes that enable them to manage revenue efficiently and
effectively. Such systems should provide for the identification, collection, recording,
reconciliation and safeguarding of revenue and information about revenue. In addition, the
processes, procedures and practices should be consistent with guidelines provided by the
Ministry of Finance and adapted to the requirements of each specific entity.

Accounting Officers are obliged to issue detailed written instructions to public officers on the
revenue collection duties to be carried out by them. Such instructions must provide for
appropriate systems of internal checks and control in respect of all public funds from whatever
source to ensure such funds are safeguarded (from loss, fraud, theft, misappropriation,
misapplication etc.) and properly brought to account in accordance with the laws, regulations,
instructions or agreements relating thereto. The implications of these provisions are that the job
descriptions of the officers involved in revenue collection should reflect what they are
responsible for and the powers they can exercise in that role.

Section 14 of the Public Finance Management Act provides safeguards for dealing with ministerial
directives in relation to management of revenue. If a Receiver of Revenue is directed by a
Minister or Deputy Minister to refrain from collecting any public moneys which such Receiver of
Revenue believes he/she should collect; or to deal with public moneys in a manner which the
Receiver of Revenue is not authorised, he/she is required to deal with the matter in accordance
with the provisions section 14 of the Public Finance Management Act. Similarly if a public officer
is so directed by a superior officer, he/she should proceed in terms of the same section.

3.1.5 Accounting Package for Public Sector Revenue management

The Government of Zimbabwe uses the Systems Applications Products (SAP) integrated package
(Version EEC6 EHP7) that is referred to as the Public Financial Management System (PFMS) for

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all revenue related transactions. The PFMS is administered centrally by the Accountant-General’s
Department. The Accountant-General is responsible for the configuration of the PFMS, training
line ministries and public sector organisations personnel and providing technical assistance when
problems arise. Central Government has been transacting on the PFMS since 199920, whilst local
authorities and state entities have been using a range of accounting packages. Treasury faced
difficulties in reporting on consolidated central and local government revenues. To enhance
transparency and oversight on all public revenues, Treasury has instituted mechanisms to ensure
that all state organisations transact on the PFMS or its successor which Public Finance
Management Regulations (2019) refer to as the Integrated Financial Management Information
System (IFMS). For public sector organisations that have Treasury authority to run independent
systems, it is a requirement that these independent systems are compatible with the SAP system
requirements.

3.1.6 Methods of Receiving Revenue

Receipts in the public sector include currency, coins, electronic funds transfers, cheques, bank
drafts, money orders and any other method of receiving funds that is authorised by Treasury.
Electronic funds transfers include the following:
a) real time gross settlement (RTGS);
b) online bank transfer at point of sale;
c) use of payment card at point of sale (swipe cards (debit card or credit card); and
d) mobile based payment at point of sale.

It is the responsibility of Receivers of Revenue to ensure that:

a) revenues receipts are predominantly in cash and electronic funds transfers;

b) the electronic funds transfer methods chosen are secure, safe and obtained from reputable
sources:

20
Source: Ministry of Finance pre-Budget Strategy Paper for 2018.

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Provided that where mobile based payment systems are used, these should be supported by any
authorised commercial bank and under no circumstances should an individual’s mobile account
be used to receive funds on behalf of Government; and

c) the brand and type of electronic payment cards that are acceptable are those determined by
Treasury from time to time.

Receipts relating to point of sale swipe machines and mobile based transfers should only be
issued once the transaction has been successfully completed. Where practicable, officers
accepting electronic based payments are encouraged to recover any commission or bank charges
in respect of that payment. Bank charges which are not recovered in this manner should be
charged against the Vote of the Ministry or Department receiving the payment.

Receivers of revenue are allowed to exercise discretion with regard to the acceptance of cheques,
provided that where personal cheques are involved, they should be bank certified. Cheques,
money orders, or other negotiable instruments for the account of Government should be crossed
“not negotiable” as soon as they are received.

The guidance from Treasury instructions with regard to cash, cheques or other instruments
tendered or expressed in a foreign currency is that they be receipted using the conversion rates
provided by the PFMS or IFMS system on a daily basis.

3.1.7 Acknowledging Receipt of Funds

The preferred method of acknowledging receipt of funds is through electronic receipts. All
Receivers of Revenue are therefore required to issue electronically generated receipts from the
PFMS and in duplicate.

Manual receipts should only be issued when the PFMS is not operational or when the issuing
office does not have immediate access to the PFMS. It is the responsibility of Receivers of
Revenue to ensure that manually issued receipts are posted onto the PFMS as soon as the system
becomes available and within three (3) working days of issue of such receipt. Receivers of

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Revenue that do not have immediate access to the PFMS should ensure that manually issued
receipts are posted onto the system on a weekly basis. The failure to post manually generated
receipts within these time limits constitute an act of financial misconduct.

3.6 Acceptance of gifts, donations and sponsorships

Treasury Instructions define gifts, donations and acceptance as follows:

a) a gift is an item purchased for an individual or group of officials in recognition of an event

or performance;
b) a donation is a voluntary gift given in recognition of a worthy cause; and
c) acceptance is a voluntary receipt of cash, goods or service offered.

Treasury Instructions assign Ministry of Finance the responsibility for determining whether gifts
or donations should be accepted or not and how these should be disposed of.

Section 6(2)(e) of the Public Finance Management Act gives Treasury the power to issue
instructions or directions on matters relating the acceptance, on behalf of the State, of any gift,
donation, bequest or other grant of moneys or other property which is made subject to a
condition or is likely to involve a charge on the Consolidated Revenue Fund. Receivers of Revenue
are obliged to notify Treasury of gifts which are conditional or are likely to involve a charge on
the Consolidated Revenue Fund immediately on receipt of the gift or the offer of the gift. Where
the Accounting Officer is recommending rejection of an offer of a gift or donation, the reasons
should be clearly stated. Justifiable reasons include the following:
a) conflict of interest in accepting the gift;
b) acceptance of the gift is unlawful;
c) acceptance of the gift will obligate the ministry to an unbudgeted expenditure of funds;
and
d) if it is equipment, the operation of the equipment would not be practicable.

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Section 26 of the Public Finance Management Regulations requires that gifts and donations be
valued by a Committee. It also obliges public officers to comply with Treasury instructions that
give guidance on thresholds on values of the gifts and donations from time to time.

Public Officers are prohibited from soliciting for gifts. They are also prohibited from applying any
gift, donation or sponsorship to personal use. The breach of this provision is treated as an offence
under section 91 of the Public Finance Management Act.

Accounting Officers are required to include information on all gifts, donations and sponsorships
received during the financial year in the notes to the annual financial statements.

3.1.8 Management of receivables

Accounting Officers are obliged to take effective and appropriate steps to collect all money due
to their organisations in a timely manner. The steps to be taken include:
a) maintaining proper accounts and records for all debtors;
b) actively following up with debtors including issuing demands for payment; and
c) referring a debt to the Office of the Attorney-General for consideration for issuing legal
proceedings in a court of law.

The Public Finance Management Regulations permit Accounting Officers to recover debts owing
to the government by instalments at the discretion of the Ministry of Finance. Treasury guidelines
on amounts owing by officers is that they may be set-off against their salaries or wages. If the
setting-off of the whole amount in one lump sum will result in financial embarrassment to the
officers the Accounting Officer should, after consultation with the Department requiring them to
apply the set-off, deduct the total amount by such instalments as are approved by the Treasury
in terms of the Public Finance Management Act.

Accounting Officers are permitted, with the written authority of the Ministry of Finance, to write
off a debt owed to the government if all reasonable steps have been taken to recover the debt
and recovery of the debt would be uneconomical; or recovery would not be in the public interest.

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Accounting Officers are required to charge interest on debts to the government at the interest
rate determined by the Minister of Finance.

3..1.9 Summary

The Public Finance Management Act defines revenue as “all taxes, fees and other income of the
State from whatever source arising (not being moneys which are required by law to be paid into
a separate fund), including the proceeds of all loans raised by the State.

Receivers of Revenue are prescribed in terms of section 10 of the Public Finance Management
Act and are required to control and to be accountable for all revenues and other public money
received, held or disposed of by their vote or reporting entity. The source of revenue for national
government is mainly tax. Local authorities get part of their revenue from appropriations.

The preferred methods for receiving revenue are cash and electronic funds transfers. It is a
requirement that receivers of Revenue put in place internal check and internal control systems
to ensure that the systems in place are secure and comply with Treasury guidelines that are
issued from time to time. Where possible Receivers of Revenue are expected to transact through
the PFMS system and where they are permitted to operate independent systems, these should
be compatible with the PFMS or IFMS. Receivers of Revenue are also required to ensure that full
and proper accounts are kept of all transactions related to public money.

3.1 Self-Assessment Test

a) To what extend are the sources of revenue for local authorities different from those at
national level?
b) Evaluate the various authorised methods of receiving payments from customers. What
other methods would you recommend?
c) Discuss the controls on gifts, donations and sponsorships
d) Why it is important to use electronically generated instead of manual receipts?

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3.2 Procurement of Goods and Services

Public procurement of goods and services consumes a larger percentage of public funds in
Zimbabwe. The constitutional guidance requires that procurement activities within public sector
organisations be effected in a manner that is transparent, fair, honest, cost-effective and
competitive. In addition, section 195 of the Constitution requires that state controlled entities
establish transparent, open and competitive procurement systems. Furthermore, section 44 of
the Public Finance Management Act urges accounting authorities to ensure that their public
entities establish and maintain an appropriate procurement and provisioning system which is
fair, equitable, transparent, competitive and cost-effective. Procurement systems are vulnerable
to a number of risks and these include:
a) Failure to comply with laws and regulations;
b) Misinterpretation of the user’s needs;
c) Biased specifications;
d) Selecting inappropriate methods of procurement;
e) Failure to get responses from known and credible suppliers;
f) Fraud;
g) Conflict of interest;
h) Corruption;
i) Wasteful expenditure;
j) Selecting an inappropriate supplier;
k) Non-delivery of goods and services;
l) Substandard works; and
m) Failure to enforce contracts

This Unit defines procurement from the public sector context; describes the role of the
Procurement Management Unit; explains public procurement policy; discusses the public
procurement cycle; explains contract management and payments relating to procurement
contracts.

Learning Objectives
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The Unit seeks to:

a) Define procurement in the public sector context;

b) Examine the role of the Procurement Management Unit;
c) Explain public sector procurement laws, policies and procedures governing procurement
in Zimbabwe;
d) Explain the importance of public sector procurement planning;
e) Describe the public procurement cycle and public sector procurement methods;
f) Explain the importance of managing public procurement contracts; and
g) Explain the methods for payments related to procurement contracts.

Learning Outcomes

After going through the Unit, students are expected to demonstrate the following:

a) Knowledge of the regulatory framework governing procurement;

b) Awareness of the role of the Procurement Management Unit;
c) Appreciation of the importance of procurement planning;
d) Understanding of the key features of a transparent, competitive and cost effective
procurement system;
e) Appreciation of the procedures for procurement of goods, non-consultancy services and
works;
f) Appreciation of the procedures for procurement of consultancy services;
g) Knowledge on the importance of managing procurement contracts;
h) Understanding of the internal controls for receipt of goods and services; and
i) Understanding of the controls with regard to payments of contracts.

Unit Content

The Contents of the Unit covers the following:

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a) Definition of Public Sector Procurement;

b) Legal and Policy Framework governing Public Sector Procurement;
c) Organisational Structure for Public Sector Procurement;
d) Public Sector Procurement Cycle;
e) Confidentiality in Procurement; and
f) Management of Procurement Contracts.

3.2.1 Definition of Procurement in the Public Sector Context

Section 2 of the Public Procurement and Disposal of Public Assets Act defines procurement as the
acquisition by any means of goods, construction works or services (both consultancy and non-
consultancy services. Consultancy service is defined as a service of an intellectual and advisory
nature. Non-consultancy service is defined as a labouring or other service that is performed
physically. The Act defines goods as things of any kind or description, including: raw materials,
products and equipment; things in solid, liquid or gaseous form; electricity; and services
incidental to the supply of the goods, where the value of the services does not exceed that of the
goods themselves.

3.2.2 Public Procurement Legal and Policy Framework

The policy for public sector organisation is that no goods, services, works and consultancy
services should be procured using public funds except in accordance with the provisions of the
Public Procurement and Disposal of Assets Act (Chapter 22:14), Public Procurement and Disposal
of Public Assets Regulations (SI No. 5 of 2018) and any other instructions that may be issued from
time to time by the Minister responsible for administering the Procurement Act. The exception
to these instructions are the exemptions provided for by the Procurement Act and any
development partner funded procurements where it would have been agreed to follow specific
development partner procurement guidelines. Where there is departure from country specific
procurement guidelines, the procuring entity is expected to adhere to the specified procurement
guideline and to issue written instructions to guide staff on the related procurement activities.

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Accounting Officers can only dispense with or depart from the provisions of the Procurement Act
and regulations with the express authority of the PRAZ. The submission for the departure from
or dispensing with the Procurement Act and regulations must be in writing and copied to Treasury
and the Auditor General. The application for authority to depart from regulations should be done
in advance, not after the event and it is mandatory that the Accounting Office provides the
following information:

a) reason or justification,
b) the amount involved,
c) whether it is in the public interest, and
d) the period for which the departure is required.

Sections 21 and 22 of the Public Procurement and Disposal of Public Assets Act oblige Ministries
to prepare Annual Procurement Plans and to align these Plans to the authorised annual budgets.
Treasury Instructions require that all approved Annual Procurement Plans be uploaded on the
Public Finance Management System with assistance of Treasury. The implication is that requests
for procurement of goods, services, works or consultancy services, are based on the approved
annual procurement plan. It is a requirement that the annual procurement plans are prepared
using guidelines and templates prescribed by the PRAZ. Once approved, the annual procurement
plans should be uploaded on the PFMS with assistance of the Treasury.

It is a requirement that Internal Purchase Requests be authorised only when there are enough
uncommitted funds to meet the estimated costs on the purchase requisition. In addition,
Accounting Officers are required to issue detailed written instructions on the internal requisition
approval processes and to ensure that job functions and job descriptions are aligned to the
procurement responsibilities assigned to public officers.

It is mandatory that all requests for quotations (RFQ) and Request for Proposals (RFP) are
generated through the PFMS. The Accounting Officer should ensure that the system for
communicating and the delivery of requests for quotations (RFQ) to vendors is in writing and
guarantees honesty, transparency and fairness.

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Accounting Officers should ensure that the procurement function for goods, services, works and
consultancy services is separated from the payments function. In addition, officers authorising
internal purchase requisitions should not be allowed to authorise purchase orders.

It is mandatory that specifications for the procurement of goods, non-consultancy services and
works comply with procurement guidelines and meet best practice standards. The guidance form
procurement regulations is that specifications should be crafted in a manner that promotes
competition and prevents fruitless and wasteful expenditure. Specifications must not make
reference to a particular trademark or name, patent, design or type, specific original producer or
service provider, unless there is no other practical way of describing the procurement
requirements. In such situations terms such as “or equivalent” must be included in the
specifications.

The threshold or limits set by the PRAZ apply to the total value of goods, services works or
consultancy services to be obtained from a single supplier or consortium for a particular project
or contract. The splitting of tenders (artificial division of procurement) to avoid tender thresholds
is prohibited. The artificial division of procurement constitutes an act of misconduct that attracts
disciplinary measures in terms of the PFM regulations.

The PMU is required to use standard bidding documents produced and issued by the PRAZ and
in accordance with the provisions of the statute governing public procurement and Regulations
as well as guidelines issued from time to time. It is mandatory that Accounting Officers ensure
that all relevant bidding and pre-qualification documents provide objective descriptive
information that does not unnecessarily favour a particular bidder by stating the desired
performance or output requirements of the object of the procurement wherever possible rather
than design or descriptive characteristics. The bidding documents should also set out clearly the
detailed procurement requirements of a tender, with respect to quality and quantity, including
any certification, testing and test methods or other means for evaluating the conformity of the
performance of the contract to the procurement requirements.

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All requests for quotations (RFQ) should be generated through the PFMS. Manual RFQs should
only be issued on occasions where the PFMS is not operational or when the issuing office does
not have immediate access to the PFMS. It is the responsibility of the Accounting Officer to ensure
that the system for communicating and the delivery of requests for quotations (RFQ) to vendors
is in writing and guarantees honesty, transparency and fairness.

All benefits or rewards realised and gained by any public officer in the course of performing their
duties in purchasing of goods, services, works, or consultancy service should be declared and
transferred to the relevant procuring entity. Such benefits and rewards should be:

a) The property of the procuring entity; and

b) Applied as soon as is practical for the benefit of the procuring entity, such as to reduce
costs, but not for personal benefit of the individual staff.

3.2.3 Organisational Structure for Public Sector Procurement

Public procurement in Zimbabwe is regulated by the Procurement Regulatory Authority of

Zimbabwe (PRAZ). The provisions of section 17 (1) of the Public Procurement and Disposal of
Public Assets Act makes it mandatory for every procuring entity to establish a Procurement
Management Unit (PMU). A procuring entity according to the Procurement Act refers to:

a) Ministry, department or other division of the Government;

b) a corporate body established by or in terms of any Act for special purposes laid down in
that Act;
c) any company in which the State has a controlling interest, whether by virtue of holding
or controlling its shares or by virtue of a right of appointment of members to its
controlling body or otherwise, and includes any company which is a subsidiary, as
determined in accordance with section 143 of the Companies and Other Business Entities
Act [Chapter 24:31], of such a company;
d) a provincial or metropolitan council or a local authority; or

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e) any partnership or joint venture between the State and any person, which is prescribed
in terms of the Procurement Act or the Public Finance Management Act

Section 211(11) of the Urban Councils Act designates every municipal procurement board as the
“procuring entity” for the purposes of the Public Procurement and Disposal of Public Assets Act
[Chapter 22:23].

The PMU is headed by the Accounting Officer. Whilst the accounting officer for state owned
entities is the same as that for the parent ministries, the accounting officer for local authorities
is the Town Clerk or Secretary or Chief Executive. The Accounting Officer is supported by
procurement officers. The size, location, and structure of the PMU for each organisation should
be determined by procurement requirements and the availability of trained and experienced
officers. The functions of the PMU include:

a) planning the procurement activities of its procuring entity;

b) securing the adoption of the appropriate method of procurement;
c) preparing bidding documents in compliance with provisions of the Procurement Act with
regard to the design of contract specifications and the evaluation criteria;
d) preparing bid notices and short-lists;
e) managing bidding processes, including pre-bid meetings, clarifications and the receipt and
opening of bids;
f) managing the evaluation of bids and any post-qualification negotiations required;
g) supervising its procuring entity’s evaluation committee and—
i) ensuring that the committee has carried out its duties in accordance with the law; and
ii) receiving evaluation reports from the committee and ensuring that they are correct
and have been prepared in accordance with the provisions of the Procurement Act ;
h) preparing evaluation reports, including contract award recommendations, where the value
of the procurement is less than the prescribed threshold;
i) submitting all evaluations to its procuring entity’s accounting officer, with confirmation that
the procedure followed has complied with the law;
j) preparing contract documents and amendments;
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k) managing procurement contracts or overseeing their management; and

l) preparing such procurement reports as may be required by the procuring entity’s accounting
officer or PRAZ.

3.2.5 Public Sector Procurement Cycle

Regardless of the procurement method adopted, the procurement process for goods, non-
consultancy services and works requires the following documentation:

a) Authorised Internal Requisition;

b) Request for quotation (RFQ);
c) a purchase order;
d) Goods Received Note (GRN); and
e) A payment voucher.

The only exception is the procurement of public utilities and the payment of rentals where no
purchase order is raised. Utilities refer to communication, power and water.

The threshold values set in the Procurement Regulations from time to time; the value; potential
source; and nature and circumstances surrounding the procurement request for goods, non-
consultancy services and works determines the procurement method that Accounting Officers
should adopt.

The procurement process in the public sector is illustrated by Figure 3.1.

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8. Payment
1. Procurement
request

7. Invoice
Verification 2. Sources
determination

6. Goods receipt and

inventory 3.
management Vendor/supplier
selection

5. Order 4. Order
follow up processing

Figure 3.1: Public Sector Procurement Cycle

3.2.5.1 Procurement Requests

In practice, the responsibility for initiating the process of procuring goods, non-consultancy
services and works should be vested with user departments. The PMU should only procure goods,
services and works that have been requested by a specific user.

Before a purchase request is initiated the proposal should be reviewed against the approved plan
and the budget on the PFMS or IFMS system. Where the request is for the purchase of assets,
specifications should be aligned to the requirements of the Procurement Regulations and should
also take into account the useful life and subsequent disposal of the assets concerned. In
addition, all procurement requests from user departments should be justified as to the need, so
as to avoid fruitless and wasteful expenditure; surplus and unwanted goods; and redundant
assets.

Before initiating any procurement activity, users are required to carry out the following:

a) Inquire as to whether or not their requirements can be met by the transfer of goods from
another department;

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b) Ensure that an accurate estimate of the cost of the procurement including the cost of
contingencies that might reasonably be expected to arise has been prepared; and
c) Commit the amount of the estimate in accordance with the provisions of the approved
annual estimates enacted in the applicable Appropriation Act.

The approval of internal purchase requisitions raised by respective user departments should be
done at senior level. In approving internal purchase requests public officers should ensure that
the proposed purchase is in line with the procuring entity’s annual procurement plan and
available resources as reflected on the PFMS. Internal purchase requests should only be
authorised when there are enough uncommitted funds to meet the estimated costs on the
purchase requisition.

3.2.5.2 Sources Determination

Tenders, according to the Procurement Act, may be national or international. The PMU is
responsible for issuing all national and international tenders for the supply of goods, services,
works and consultancy services.

National tenders must be advertised in at least one national newspaper for a minimum of thirty
(30) days. Whenever possible, local tenders are also required to be advertised on a Government
website or broadcast over the radio or television or through other means as appropriate.

In addition to the requirement to advertise, all international tenders are required to be

advertised in at least two English language independent international newspapers of wide
circulation or on the Internet, and where appropriate, the notice may also be published in a
relevant trade publication or technical or professional journal. International tenders can also be
advertised on a Government website or through other means as are considered appropriate.

Where there is competition between local and foreign suppliers, the preference for domestic
companies should be exercised in accordance with the provisions and guidance provided in the
Procurement Act and procurement regulations. Accounting Officers are required to provide
guidelines regarding employees’ use of preferential procurement. The Accounting Officer should
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put in place systems that ensure that the selection of suppliers is in the procuring entity’s interest
and is not influenced by the availability or possibility of purchasing privileges to employees.

3.2.5.3 Procurement Methods

The value; potential source; nature; and circumstances surrounding the request determines the
procurement methods adopted.

a. Competitive bidding

The procurement of goods, works and non-consultancy services should be undertaken by means
of a single stage competitive bidding, advertised in accordance with the provisions of the statute
governing public procurement and in a manner that ensures equal access to all eligible and
qualified bidders without discrimination. The single stage competitive bidding entails asking
bidders to submit one envelope containing the technical proposal and the price proposal. The
envelope is opened in the presence of bidders’ representatives who choose to attend and the
total amount of each bid and any alternative bid, and other relevant details are read out and
recorded. The bid is evaluated and the award of contract is made to the lowest evaluated
substantially responsive bidder.

In the case of particularly high value or complex procurement; the Procurement Act requires
competitive bidding to be preceded by pre-qualification for the purposes of identifying, prior to
the submission of bids, those bidders that are qualified. Accounting Officers should ensure that
where competitive bidding is preceded by pre-qualification the PMU accepts all the companies
that meet the minimum thresholds.

When a procuring entity uses a method of procurement other than competitive bidding, the PMU
should ensure that a written justification of the decision to utilise the procurement method,
including the grounds for taking that decision is included in the record of the procurement
proceedings.

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In cases where the cost of procurement of goods, works or non-consultancy services exceeds the
estimated cost approved in the annual procurement plan, the PMU is required to advise the
Accounting Officer and justify why such procurement should be carried out at such cost.

b. Restricted Bidding

The restricted bidding method of procurement entails a process in which the bidders are limited
to those selected or invited by the procuring entity. It is the responsibility of Accounting Officers
to ensure that this method is only used in the following circumstances:

a) when the time and cost of considering a large number of bids is disproportionate to the
estimated value of the procurement requirement;

b) where urgency renders impracticable the time-limit prescribed for bidding period;

Provided that the urgency should not be due to the procuring entity’s unjustifiable
delay; and

c) for procurement contracts with an estimated value that does not exceed the threshold
prescribed by PRAZ.

The procuring entity adopting restricted bidding method should invite bids from a standing list
of qualified bidders established and maintained by the PMU.

c. Direct Procurement Method

The direct procurement method of procurement is one where procuring entities obtain their
requirements from one bidder or supplier without having received bids from other bidders. The
Procurement Act permits the adoption of this procurement method for following circumstances:

a) where no responsive bids have been submitted in response to a competitive bidding

procedure, on condition that the requirements of the initial bid are not substantially
modified;

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b) when, for technical or artistic reasons, or for reasons connected with protection of
exclusive rights, the contract may be performed only by a particular supplier and no
reasonable alternative or substitute exists;
c) for reasons of extreme urgency brought about by events not attributable to anything
foreseen by the procuring entity and the products or services cannot be obtained in time
by means of competitive bidding procedures;
d) for additional supplies of goods or services by a supplier, where a change of supplier
would cause problems of inter-changeability or incompatibility with existing equipment
or discontinuity of services, which would cause significant inconvenience or substantial
duplication of costs to the procuring entity;
e) where a procuring entity buys a prototype or a first product or service from a research
institute which is then developed at their request for a particular procurement contract
for research, experiment, study or original development;
f) when additional services which were not included in the initial contract but which were
within the objectives of the original bidding documents have, through unforeseen
circumstances, become necessary to complete the services described therein, provided
that the total value of contracts awarded for the additional services should not exceed
fifty (50) percent of the amount of the original contract;
g) for new services that repeat similar services provided under a procurement contract
awarded following the competitive bidding method of procurement, where the procuring
entity indicated in the original procurement notice that a direct procurement method
might be used in awarding contracts for such new services;
h) for acquisitions made under exceptionally advantageous conditions from unusual
disposals such as legal forfeitures, liquidation, insolvency, judicial sale in execution or
other forced sale or disposal;
i) for the procurement of immovable property; and
j) for the procurement of spare parts of a proprietary nature.

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d. Request for Quotations Method

The request for quotations method entails a process in which a procuring entity solicits at least
three competitive quotations for their purchasing requirement from reputable suppliers, and the
procurement requirement is below the threshold prescribed by PRAZ.

3.2.5.4 Vendor/Supplier Selection

Inviting Tenders

In competitive bidding procedures, bids should be invited as follows:

a) Through the publication of an announcement of bidding proceedings or from the list of

pre-qualified bidders where pre-qualification is used; or
b) From a shortlist of bidders in the case of restricted bidding.

Where a PMU considers it is necessary to ensure wide competition, the provisions of the
Procurement Act allow it to send the notice directly to potential bidders after the date of
publication of the notice. The Accounting officer should ensure that the PMU keeps a record of
any bidders to whom the notice is sent directly and this should form part of the procurement
record.

It is a requirement that all invitations to tender allow reasonable time for potential bidders to
respond. The bidding period should start on the date of the first publication of the announcement
and should end on the date of the bid submission deadline. The minimum bidding period for each
procurement method should be in accordance with guidelines set by the procurement regulatory
authority. In addition, all invitations to tender must contain sufficient information to enable
potential bidders to prepare tenders that are responsive to the needs of the procuring entity.
Where goods, non-consultancy services or works to be procured cannot be described in detail in
the advertisement, additional information must be readily available from the procuring entity or
a Government website. The invitation should include:

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(a) the evaluation criteria to be used;

(b) any requirement for a bid security;
(c) any requirement for a performance security;
(d) any requirement for after sales service; and
(e) the amount and essential terms of the insurance that the successful bidder may be
required to obtain.

It is important that the cancellation of procurement proceedings is avoided whenever possible

except in cases allowed by the provisions of the Procurement Act. In the event of cancellation,
the Accounting Officer should take the necessary action to inform all the potential bidders.

Late submissions should not be accepted and should be handled in accordance with provisions
of the Procurement Act and Regulations.

3.2.5.5 Receipt and opening of bids

The Accounting Officer or an Officer delegated by them should be responsible for receiving bids
from potential suppliers, contractors and consultants. Quotations collected from suppliers by
Officers within the PMU should bear the signature of the officer concerned and must be in sealed
envelopes. All bids should be deposited in a lockable tender box until tender opening. Bids
received through e-mail should be in PDF format and should be printed and deposited into the
lockable tender box. All bids should be deposited in a lockable tender box until tender opening..
The responsibility of opening and the security of the tender box lies with the PMU.

It is the responsibility of the Accounting Officer to manage the participation of bidders in

procurement proceedings in accordance with the provisions of the statutes, Regulations, any
pronouncement issued by PRAZ and other provisions of law. The PMU should keep a register,
whose copy should be made available to any bidder on request, of the attendance of bidders that
captures the following information for each opened bid:

(a) the name of the bidder;

(b) the total amount of the bid;
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(c) any discounts or alternatives offered by the bidder;

(d) whether or not bid security has been given, if required; and
(e) any essential supporting documents.

3.2.5.6 Tender Evaluation and Award

It is the responsibility of the PMU to adjudicate and recommend tenders for award. The selection
of providers of goods, non-consultancy services or works should be informed by the guidance
provided by the Procurement statute; Regulations; Procurement Guidelines; principles of gender
equality and non-discrimination; and any other pronouncements relating to procurement issued
from time to time.

The statute governing public procurement permits the Accounting Officers to appoint an
evaluation committee for each procurement above the threshold prescribed by PRAZ. The duties
of the evaluation committee should include:

a) receiving from the procurement unit the bid opening records and bids;
b) evaluating bids and preparing the bid evaluation report and recommendations for award
of a contract;
c) submitting its evaluation reports to the procurement management unit; and
d) exercising any other functions conferred or imposed on the committee or by the statute
governing public procurement or regulations.

The composition of the Evaluation Committee should promote the principle of gender balance
and equity, and the members should be appointed on merit. The composition of the committee
should include skills, knowledge and experience relevant to the procurement requirement, which
may include:

a) one member from the PMU;

b) at least three other members, including:

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(i) the person responsible for preparing the requirements and additionally, or
alternatively, the technical specifications for the procurement concerned, or a
person with equivalent technical expertise,

(ii) a financial officer of the procuring entity, and

(iii) one or more other members to provide technical, legal, financial or commercial
expertise, as appropriate.

In the exercise of its functions an evaluation committee is answerable to the PMU and the
Accounting Officer. The responsibility of the Evaluation Committee should not interfere with
administrative roles of the PMU. The PMU should act as the secretariat to the committee. The
representative of the PMU should attend as an adviser and should be a non-voting member.

If any public officer involved in procurement or a committee member has direct or indirect
interest in a tender or proposed tender, that person should as soon as practicable after relevant
facts have come to their knowledge, declare the nature of their interest to the Accounting Officer
and should be excluded from further evaluation or approval of that tender.

The purpose of the bid evaluation process is to determine which of the bids received are
responsive and thereafter compare the responsive bids against each other to select the lowest
evaluated bid. The overall evaluation criteria should be value for money, which may not
necessarily be the lowest cost response. Corrections, errors and omissions noted during bid
evaluations should be dealt with using guidelines provided in the Public Procurement and
Disposal of Public Assets Act and Regulations.

The Chairperson of the Evaluation Committee should be a senior individual who has thorough
knowledge and understanding of the procurement process and is independent of the
procurement and payment processes.

The decision of the PMU or committee, the basis for tender award, and the amount of award of
the approved supplier should be clearly stated on the comparative schedule and in the minutes.
All PMU and Evaluation Committee minutes should be filed for audit and future use.
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The Accounting Officer or a Senior Officer delegated by them should monitor and scrutinise the
decision of the PMU or Evaluation Committees to ensure transparency; gender responsiveness;
non–discrimination; and maximum value for money on all procurement activities.

Where a tender adjudication process has been carried out by an Evaluation Committee, it is the
responsibility of the PMU to keep a record of minutes of every meeting and compile a
comparative schedule for prices of goods and services tendered for. The minutes of Evaluation
Committee should be signed and numbered sequentially.

In the case of contracts awarded by way of competitive bidding, the PMU should formally inform
all tenderers of the outcome of the bid. The notice given to all should specify the name and
address of the proposed successful bidder and the price of the contract.

It is the responsibility of Accounting Officers to ensure that procurement records are kept for a
minimum period of six years following completion or termination of the contract or cancellation
of the procurement proceedings. The provisions of the Procurement Act obliges Accounting
Officers to provide the PRAZ with summaries of their procurement proceedings at such times and
in such form as the PRAZ may require.

3.2.5.7 Contract Award and Signing

The responsibility for signing procurement contracts rests with the Accounting Officers or
persons delegated by them in writing. Contracts should come into effect as stated in the Contract
Agreement. It is the responsibility of the Accounting Officers to ensure that procurement
contracts are awarded to the bidder who:-

a) submitted the lowest bid which meets the price and non-price criteria specified in the
bidding documents; or
b) offers the most economically advantageous tender.

Accounting Officers should request a performance security, where applicable, to secure the
contractor’s obligation to fulfill the contract. The requirement for a performance security should

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be set out in the contract and the contractor should be requested to provide such security prior
to contract signing. Procurement Regulations provide guidelines regarding requirements for
performance securities.

Procurement laws require that the Accounting Officer to ensure that the successful bidder is
notified, within the bid validity period and subject to any intervening complaints that may arise,
of the proposed award and the time within which the contract should be signed. In the event
that the successful bidder fails to sign a written contract when required to do so or fails to provide
any required security for the performance of the contract prior to the time for contract signature,
the Accounting Officer is permitted to accept the next ranked bidder from among the remaining
bids that are in force. However, in selecting the next ranked bidder, the Accounting Officer is
obliged to comply with the provisions of the statute governing public procurement.

3.2.6 Issuing Purchase orders and following them up

All purchase orders to suppliers should be generated through the PFMS. Only officers with
authorised access and profiles for purchasing should execute this function. In the event of the
system not working, Treasury Instructions allow purchasing officers to issue manual purchase
orders. It is mandatory that the manual purchase orders are entered into the PFMS system as
soon as the system starts working. Treasury instructions do not allow manual purchase orders to
remain outside the system for a period exceeding three days without reasonable cause. In
addition, no manual purchase order should be issued where there is no adequate budget
provision.

For offices with no immediate access to the PFMS system, Treasury Instructions permits the use
of manual purchase orders, but requires that they be captured on the PFMS within fourteen (14)
days. Having purchases that remain outside the PFMS system for a period exceeding fourteen
(14) days is an act of misconduct that attracts disciplinary action.

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The generation of a purchase order must be supported by sufficient documentation as proof that
the appropriate procurement regulations have been complied with. The documentary proof
should include:

a) Copies of written quotations;

b) The comparative schedule of prices in which the tender award and recommendations of
the procurement committee are made; and
c) Procurement committee minutes.

The officers responsible for placing orders should keep a register of all purchase orders issued,
to facilitate following up of orders.

3.2.7 Procurement Process for Consultancy Services

The PMU should use a request for proposal (RFP) for the procurement of consultancy services.
The RFP should be generated through the PFMS and should be used on shortlisted consultants
and for services that are within the financial thresholds prescribed by PRAZ from time to time.

Where the estimated value of the procurement exceeds the financial threshold prescribed in
Procurement Regulations, the PMU should seek expressions of interest (EOI) in order to come up
with a short-list of consultants. The EOI should be sought through publishing of notices in a local
or international newspaper of wide circulation or on the Internet and the procuring entity’s
website. Where appropriate, the notice may also be published in a relevant trade publication or
technical or professional journal.

For consultancy services whose value is lower than the financial threshold prescribed in the
Procurement Regulations, the short-list for consultants may be established from market
knowledge or other sources of information. As part of the pre-qualification procedures, procuring
entities should prepare a short-list of not fewer than three and not more than six firms which
they should provide the request for proposals for services. The short-list must be on the basis
that the firms:

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(a) are of the same category and similar capacity and business objectives; and

(b) have the capacity to perform the required services.

In the case of consultancy assignments which have an estimated value above the thresholds
prescribed in the Procurement Regulations, or are particularly complex, the PMU should utilise
advertisements as is the case with the procurement of goods and services.

The Accounting Officer should ensure that the RFPs send to shortlisted bidders have sufficient
information to enable them to participate in the procurement proceedings and to submit
proposals that are responsive to the needs of their procuring entity. The information provided to
shortlisted bidders should include:

(a) the name and address of the Ministry, Department or Agency;

(b) the nature, time-frame and location of the services to be provided;

(c) the consultant’s terms of reference (TOR) and the manner in which he or she is to provide
the services;

(d) criteria to be used in evaluating and comparing bids, and their relative weights as
compared to price;

(e) the terms of the procurement contract, and the manner in which it will enter into force;

(f) instructions for the preparation and submission of bids, and the deadline for their
submission;

(g) the procedure for the final selection of bids;

(h) notice of any rules, restrictions or precautions against conflicts of interest, fraud or
corruption, including potential debarring of persons who contravene those rules,
restrictions or precautions from participating in future procurements; and

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(i) any other information that may be prescribed or stated in standard bidding documents
issued by PRAZ.

3.2.7.1 Methods of selecting Consultancy and conditions for use

Procurement regulations require the PMU to adopt the methods listed in Table 13 when selecting
consultants. It is the responsibility of Accounting Officers to ensure that the PMU and procuring
entities promote the principles of gender equality, equity and non-discrimination when selecting
consultants.

Table 3.1 Selection Methods for Consultants

Selection Method Condition of Use

a) Quality and cost based Method used whenever practicable and appropriate
selection (QCBS)

b) Selection under fixed Method used where the consultancy service sought is
budget (SFB) simple and precisely defined and the budget is fixed.

c) Least Cost Selection (LCS) Method used where the consultancy service sought is of a
standard or routine nature and well- established practices
and standards exist, and in which the cost is small.

d) Quality based selection Method appropriate where the consultancy service

sought is of a highly technical nature.

e) Selection amongst Method used where the involvement and knowledge of

community service community needs, local issues and community
organisations (CSO) participation are important in the preparation,
implementation and operation of a community
development project.

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f) Single source selection (SSS) Method used:

(i) for services that continue a previous completed

assignment;

(ii) for very small assignments;

(iii) when only one consultant is qualified or has

experience of exceptional worth for the assignment;
and

(iv) where, owing to a catastrophic event, there is an

urgent need for the service sought.

g) Selection of individual This method should be used when:

consultants (SIC)
i) the qualification and experience of the individual are
the paramount requirement;
ii) teams of personnel are not required; and
iii) no outside professional support is required.

3.2.8 Evaluation of Consultancy proposals and tender award

The selection criteria for consultants must be in line with the provisions of the Public
Procurement Act. It is the responsibility of the Accounting Officer to make certain that the
evaluation process is transparent, fair, cost effective and competitive. Each evaluation method is
discussed in the proceeding section.

3.2.8.1 Quality and cost based selection

The QCBS method entails a competitive process among short-listed firms that takes into account
the quality of their bids and the price of the services they offer, the relative weight given to

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quality and price being determined for each case according to the nature of the service sought
by the procuring entity. Bidders are required to submit their technical bids and their financial
bids in separate sealed envelopes. The evaluation of proposals is carried out in two stages. The
technical bids are evaluated first as to the quality of the services offered, and then the financial
bids as to the price of the services. It is a requirement that evaluators of technical proposals
should not have access to the financial bids until the qualitative evaluation is completed.

In evaluating the technical bids, the PMU should take into account, in relation to each bid:

(a) the consultant’s relevant experience for the assignment;

(b) the manner in which the service is proposed to be provided, including any transfer of
knowledge if that is specified in the terms of reference in the request for proposals;

(c) the qualifications of the key personnel who will provide the services; and

(d) such other criteria as may be prescribed.

The procurement guidelines require the PMU to ensure that the weights used in an evaluation
are appropriate to the specific assignment and should be aligned with the weights specified in
the bidding documents for the particular assignment. Accounting Officers have the right to
consider a technical proposal unsuitable and should reject it at the first stage if it does not
respond to important aspects of the TOR or if it fails to achieve a minimum technical score
specified in the RFP. In the event that technical proposals do not meet the minimum qualifying
mark or are considered nonresponsive to the RFP and TOR, the PMU should notify the affected
consultants that their financial proposals will not be evaluated. The financial proposals should be
returned to the affected consultants unopened after contract signing.

Where consultancy technical proposals have secured the minimum qualifying mark, the PMU
should simultaneously notify the consultants on the date, time and place set for the opening of
the financial bids. The Accounting Officer should ensure that the determination of opening date
of the financial proposals allows sufficient time for consultants to make arrangements to attend
the opening.
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Accounting Officers should only consider the price of a proposal after the conclusion of the
technical evaluation. The PMU should open the financial proposals publicly in the presence of
representatives of the consultants who choose to attend. The Accounting Officer or the
procurement officer responsible for the opening of the financial bids should ensure that the
name of the firm, the quality score achieved by the bid, and the proposed price of the service, as
stated in the financial bid, is read aloud and recorded. In considering the financial bids, the PMU
should deal with correction of errors, conversion to single currency and methodology for scores
and weights in accordance with the conditions specified in the bidding documents as well as the
guidelines set out in the Procurement Act and Procurement Regulations.

After negotiations with the successful bidder, the Accounting Officer should promptly notify
other firms on the short-list that they were unsuccessful. The Accounting Officer should not sign
a procurement contract with the successful firm until at least fourteen days have elapsed
following the giving of that notice.

3.2.8.2 Selection under fixed budget (SFB)

The SFB method entails a process whereby procuring entities evaluate the bids submitted by
short-listed bidders:

a) first according to the quality of the services they offer, disregarding the price at which
they offer them;

b) then according to the price at which the bidders offer their services, rejecting all the bids
that exceed the proposed budget; and

c) then selecting from the remaining bids the one whose quality of service ranks highest.

Where a procuring entity chooses to adopt the SFB method, the Accounting Officer should ensure
that the RFP indicates the available budget and requests the firms to provide their technical and
financial proposals in separate envelopes and within the budget. The evaluation of the quality of
all technical bids submitted should be carried out in accordance with the QCBS method. The

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financial bids should be opened in public and read out and the Accounting Officer has the right
to reject any bids that exceed the budget stated in the RFP. It is the responsibility of the PMU to
select from the remaining bidders the technical bid that achieved the highest quality score and
to invite the bidder to negotiate a procurement contract.

3.2.8.3 Least Cost Selection (LCS)

The LCS method entails a process whereby the procuring entities establish minimum standards
for the quality of service required, and:

a) the bids which offer less than those minimum standards are rejected; and

b) of the remaining bids the one offering to provide the service at the lowest price is
accepted, so the bidders compete only on price.

When procuring entities choose to adopt the LCS method, the Head of PMU is required to make
certain that the minimum qualifying standards are specified in the RFP and bidders are requested
to provide their technical bids and their financial bids in separate envelopes. The opening and
evaluation of the quality of all technical bids submitted should be carried out first, and those that
fail to meet the minimum qualifying standards should be rejected. Following evaluation of the
technical bids, the financial bids of the remaining bidders should be opened and the Accounting
Officer should select the bidder offering to provide the service sought at the lowest price, and
should invite the bidder to negotiate a procurement contract.

3.2.8.4 Quality based selection method

The quality-based selection method entails a process whereby the procuring entities establish
the best technical offer regardless of cost, subject however to the Accounting Officer engaging in
negotiations around the issue of cost to achieve value for money.

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3.2.8.5 Selection amongst community service organisations (CSO)

The CSO method entails a process whereby all or most of the firms on the PMU’s short-list
consists of community service organisations because the service sought requires local
participation and knowledge of local issues and community needs. Under the CSO method,
technical bids submitted should be evaluated using criteria reflecting the unique qualifications of
community service organisations, such as voluntarism, non-profit status, local knowledge, scale
of operation and reputation.

3.2.8.6 Single-source selection

The SSS method entails a process whereby the Accounting Officer, without inviting competitive
bids, selects a firm to provide a service even though other firms are available to provide the
service. When the PMU decides to adopt this method, the Accounting Officer is obliged to cause
the PMU to undertake the following:

(a) prepare written terms of reference, and request from prospective firms information
regarding their qualifications, experience and competence;

(b) draw up a short-list of prospective firms;

(c) from the short-list, select the firm that the PMU considers has the most appropriate
qualifications, experience and competence;

(d) invite the selected firm to submit a combined technical and financial bid; and

(e) if the bid submitted by the selected firm is responsive and otherwise satisfactory,
negotiate a procurement contract with that firm.

3.2.8.7 Selection of individual consultants (SIC)

The SIC method entails a process whereby the Accounting Officer, without inviting competitive
bids, selects an individual person, rather than a firm that is an organisation or association, to

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provide a service even though other persons are available to provide the service. The procedure
to be followed when employing the SIC method should be the same as that for the SSS method
discussed above.

3.2.9 Confidentiality in Procurement

Procurement regulations require the Accounting Officer to ensure that Bidder debriefing is
carried out in accordance with the provisions of Procurement policies and procedures and in a
manner that is transparent, timely and non-discriminatory. Procurement regulations require that
procurement debriefs do not disclose details of any other bids, other than information that is
publicly available from bid openings or published notices. It is a requirement that Accounting
Officers promptly publish all procurement contract awards within one month from award in
accordance with guidelines issued by PRAZ. A copy of such notice should be sent to PRAZ for
publication.

It is the responsibility of Accounting Officers to ensure that the duties relating to recording,
preparation and disclosure of tender details are carried out in a manner that avoids exposure of
proprietary commercial information.

3.2.10 Receipt of goods, services, works and consultancy services

It is the responsibility of Accounting Officers to put in place systems for receiving and inspecting
goods, works and services being procured. It is the responsibility of Accounting Officers to ensure
that procuring entities carefully inspect and examine the compliance of goods, services, works or
consultancy services with the requirements set forth in procurement contracts. The statute
governing public procurement allows Accounting Officers to appoint an Inspection Committee
for the purposes of carrying out the inspection, as well as a special technical committee to inspect
and accept the performance of a bidder under a contract. In case of any inconsistency the
Accounting Officer should prepare a report on the problem and refrain from accepting contract
performance.

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It is the responsibility of the officers in administration or stores to receive goods or services. In

discharging these duties, receivers of goods and services should satisfy themselves that the goods
or services match the purchase order or contract and are in good order. They should sign the
goods received note or the delivery note to indicate their satisfaction with the goods or services
received. All items received should have a PFMS generated Goods Received Note (GRN). The GRN
should be raised only when goods have been received.

Any discrepancies between the goods or services ordered and those received, must be recorded
in a register. Each entry must be signed by the agent making the delivery. The supplier should be
notified immediately and in writing of the discrepancy. If goods delivered do not match the order,
in terms of description, specification, price, quantity, not in a good state or quality, they should
not be received but immediately returned to supplier. The officers responsible for receiving
goods should record the items in the goods received registers and file the goods received notes
in date order. The goods received register should contain information relating to the description
of items, supplier and serial numbers where appropriate.

Upon receipt of the suppliers’ invoice, prices must be matched with the contract or the purchase
orders. No price variations are allowed on delivery of goods and services. The exception is where
the variations arise from increases in costs such as statutory increases (duty, VAT or currency).
Price variations in such cases are paid only if approved by Treasury in writing.

The payment for goods and services delivered should be the responsibility of the Accounts Office.
Accounting Officers should ensure that the functions of ordering, receiving, accounting for and
paying for goods and services are appropriately segregated.

3.2.11 Management of Procurement Contracts

Accounting Officers are responsible for the administration of and for monitoring the general
performance of procurement contracts entered into by their procuring entities. Public Sector
organisations are required to adopt the contract models that are developed by PRAZ. Where no
appropriate model contract exists or the available document requires amendment to tailor it to

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the specific circumstances of the contract, Accounting Officers should seek guidance from the
Government Attorney.

The price of a procurement contract should be set either on the basis of a unit price applied to
the quantities actually delivered, or on a lump-sum basis, applied to the entirety or to a part of
the contract, irrespective of the actual quantity needed to be delivered in order to fulfill the
procurement contract. Accounting Officers should ensure that their ministries adopt pricing
approaches that comply with the provisions of Procurement Regulations.

Procurement contracts may include incentive clauses linked to improved delivery periods,
improved quality or cost reduction. Price adjustments are not permitted unless provided for in
the procurement contract. Where the procurement contract provides for the possibility of price
adjustment, it is the responsibility of the Accounting Officers to ensure that the contract
stipulates the conditions, under which price adjustment should be permitted and that such
conditions comply with the provisions of the procurement regulations.

Any contract modifications should comply with the provisions of the Public Procurement and
Disposal of Public Assets Act and Procurement Regulations. It is a requirement that Accounting
Officers ensure that procurement contracts with an allowance for price variations have a
provision to the effect that, when the application of price adjustment leads to a modification
exceeding a certain percentage (as provided by the Procurement Regulations) of the initial price
or the balance of the contract, the Accounting Officer will have the option of terminating the
contract. Accounting Officers should therefore ensure that contract modifications do not result
in a contract that is materially different to the original contract or significantly alter the nature or
scope of the contract.

Where a contract provides for after sale service, Accounting Officers should ensure that the
period of the contractor’s commitment in this regard should correspond to the average operating
life of the goods in question.

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3.2.12 Payments relating to Contracts

An advance payment should only be made pursuant to a written contract and after an advance
payment guarantee has been furnished covering the amount of the advance payment and
satisfies other terms set forth in the bidding documents. It is an act of financial misconduct to
make any advance payment that is not covered by an advance payment guarantee. Public officers
are required to ensure that the Conditions of a procurement contract are complied with and
applied consistently throughout the procurement cycle. There should be no variations on quality
of goods and service; delivery time; payment methods; and timing. Failure to uphold and comply
with the conditions of contract is an act of financial misconduct as defined in the Public Finance
Management Regulations.

Treasury guidelines require Accounting Officers to make sure that payments are made in a timely
manner in order to avoid unnecessary expenditure in terms of penalties. Where a procurement
contract provides for the disbursement of progress payments, these should be processed in
compliance with the provisions of the contract and within the guidelines set out in the Public
Procurement and Disposal of Public Assets Act and Procurement Regulations. Progress payment
certificates should be issued in accordance with the progress of performance of the procurement
contract. Unless otherwise stipulated in the procurement contract, an advance payment should
not be made unless an advance payment guarantee is furnished covering the amount of the
advance payment and satisfies other terms set forth in the bidding documents.

Procurement regulations require Accounting Officers to make certain that where procurement
contracts provide for advance payments, the total amount of advance payment made under the
procurement contract should not exceed the percentages permissible in the provisions set out in
the procurement regulations.

3.2.13 Summary

The procurement of goods and services consumes a larger percentage of public funds. Section 2
of the Public Procurement and Disposal of Public Assets Act defines procurement as the
acquisition by any means of goods, construction works or services (both consultancy and non-
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consultancy services). No goods, services, works and consultancy services should be procured
using public funds except in accordance with the provisions of the public procurement laws and
any other instructions that may be issued from time to time by the Minister responsible for
administering the Procurement Act. Every procuring entity is required to establish a Procurement
Management Unit (PMU) that is headed by the Accounting Officer.

The preferred mode for procurement of goods and services is competitive bidding. When a
procuring entity uses a method of procurement other than competitive bidding, there must be a
written justification of the decision, including the grounds for taking that decision. Accounting
Officers or senior officers delegated by them should monitor and scrutinise the decisions of the
PMU or Evaluation Committees to ensure transparency; gender responsiveness; non–
discrimination; and maximum value for money on all procurement activities. The responsibility
for signing procurement contracts; the administration of; and monitoring of the general
performance of procurement contracts entered into by procuring entities rests with Accounting
Officers or persons delegated by them in writing.

It is a requirement that all purchase orders to suppliers be generated through the PFMS and it is
the responsibility of the officers in administration or stores to receive goods or services. In
discharging these duties, receivers of goods and services should satisfy themselves that the goods
or services match the purchase order or contract and are in good order. Procurement regulations
require Accounting Officers to make certain that where procurement contracts provide for
advance payments, the total amount of advance payment made under the procurement contract
should not exceed the percentages permissible in the provisions set out in the procurement
regulations.

3.2 Self-Assessment Questions

a) A School Head in rural based boarding school advertised for suppliers of fruit and
vegetables in the national newspaper and on the school’s website. The majority of the
compliant bids are from businesses that are based in Harare, a distance of 450 kilometers

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from the Boarding School. The School Head has approached you for advice on how to
resolve this challenge. What steps should the School Head take to resolve the problem?
b) A local authority intends to hire a consultant to carry out a gender audit on the mining
activities in four communities under their jurisdiction. They have approached you for
advice on the procedures that they should undertake. What are the options available for
engaging the consultant?
c) Explain the justification for adopting competitive bidding in the procurement of goods and
services.
d) Discuss the exemptions that are permitted by the Public Procurement and Disposal of
Public Assets Act.
e) Discuss the controls that should be in place for the ordering, receipt and payment for the
procurement of goods and services.

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3.3 Public Sector Expenditure Management

Constitutional provisions on expenditure require public officers assigned expenditure

management duties to safeguard public funds and ensure that they are spent only on legally
authorised purposes and in legally authorised amounts. According to the provisions of Section 17
of the Public Finance Management Act no payment involving a charge upon the Consolidated
Revenue Fund should be made without the written authority of the Treasury; and no expenditure
of public moneys should be incurred on any service unless provision therefor has been made by
or in terms of the Public Finance Management Act or any other enactment.

Section 44 (b)(ii) of the Public Finance Management Act requires Accounting Officers to take
effective and appropriate steps to prevent irregular expenditure, fruitless and wasteful
expenditure, losses resulting from criminal conduct, and expenditure not complying with the
operational policies of the public entity. Some of the potential risks public sector organisations
face relate to:
a. Fraudulent payments
b. Overspending (Ministries exceeding limits set by Parliament or Donor)
c. Unauthorised withdrawals from the CRF
d. Fictitious supporting documentation ( e.g. with regard to travel and subsistence
expenses)
e. Penalties due to delayed payments
f. Fruitless and wasteful expenditure

The provisions in Public finance laws, regulations and policies are all aimed at ensuring that all
payments made are appropriately authorised, all transactions are accurate and complete and
there is adequate supporting documentation.

This Unit defines expenditure in the public sector context; describes the nature of public sector
expenses; examines policies and practices on expenditure controls; explains processing of
payments,

Learning Objectives
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The objectives of this Unit are to:

a) Define Expenditure in the public sector context;

b) Explain the nature of public sector expenditure;
c) Examine specific policies and practices on public sector expenditure management; and
d) Explain policies of disallowed, unauthorised, irregular, fruitless and wasteful expenditure.

Learning Outcomes

After completing the Unit, students should make evident the following:

a) Understanding of the definition of expenditure in the public sector context;

b) Appreciation of the nature of public sector expenditure; and
c) Broad knowledge of policies and practices relating to public sector expenditure
management.

Unit Content

The Content of the Unit covers the following:

a) Definition of Public Sector Expenditure;

b) The nature of Public Sector Expenditure;
c) Public sector policies and practices on expenditure management;
d) Disallowance, recovery and adjustment of payments; and
e) Unauthorised, irregular, fruitless and wasteful expenditure.

3.3.1 Definition of Public Sector Expenditure

International Public Sector Accounting Standards define expenditure define an expenses as a

decrease in economic benefits or service potential during the reporting period in the form of
outflows or consumption of assets or incurrences of liabilities that result in decreases in net
assets/equity, other than those relating to distributions to owners.

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The GFS Manual (2014) defines an expense as a decrease in net worth resulting from a
transaction. The GFS definition recognises that the general government has two main
responsibilities that it seek to fulfill through expense transactions. The two responsibilities relate
to provision of selected goods and services to the community; and the redistribution of income
and wealth by means of transfers. The expense transactions may be classified as functional or
economic. The functional grouping provides information on the purpose for which an expense
was incurred and examples include education, health, and environmental protection. The
economic classification recognises the types of expense incurred according to the economic
process involved. The examples cited for economic classification include compensation of
employees, use of goods and services, and consumption of fixed capital. Public Sector
expenditure in Zimbabwe is classified in accordance with the economic classification system of
the GFS Manual (2014). Table 3.2presents the economic classification in use for the 2019
financial year.

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Table 3.2: Economic Classification of Public Sector Expenses

Source: GFS Statistics Manual

3.3.2 The nature of Public Sector Expenditure

An examination of the composition of expenditure for the 2019 appropriations which is discussed
in paragraph 3.5.3 and presented in Table 2.3 indicates that substantial resources are channeled
towards the following expenditure heads:
a) payment of wages and salaries;
b) purchase of recurrent goods and services;
c) purchase of capital goods and services;

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d) transfers; and
e) subsidies.

The five expenditure heads are categorised into recurrent and capital expenditure. Recurrent
expenditure is consumptive in nature whereas capital expenditure is productive and
developmental. The Public Finance Management Act defines capital expenditure as expenditure
on any project involving the acquisition of capital assets such as land, buildings, plant, machinery,
fixtures and fittings; whether such acquisition is additional to, an improvement of or in
replacement of capital assets already held21.

In exercising his/her fiscal responsibilities, the Minister responsible for Finance provides
expenditure management guidance that places emphasis on the need for re-orientation of public
sector expenditures from consumptive spending to developmental priorities. Best practice
standard. For example, the 2018 pre-Budget Strategy Paper notes that the containment of
consumptive expenditures is critical for freeing resources towards capital investments, as well as
achieving desirable deficit targets.

3.3.3 Overview of public sector policies and practices on expenditure management

As discussed earlier, section 6 of the Act appoints Treasury to manage and control public
resources in compliance with constitutional provisions on the need to control expenditure from
the CRF. In exercising this role, Treasury has issued detailed guidelines on the management of
expenditure in public sector organisations. Section 10 of the Public Finance Management Act
gives Treasury the power to prescribe Accounting Officers whose role is to control and to be
accountable for the expenditure of money appropriated or authorised by Parliament.

Section 15(1) of the Public Finance Management Regulations require Accounting Officers to
ensure that internal procedures and internal control measures, conforming with the standards

21
Section 2 of the Public Finance Management Act [Chapter 22:19].

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and guidelines provided by the Ministry of Finance, are in place for payment approval and
processing. According to section 15(2) the internal controls would service the following purpose:

a) providing for segregation of responsibilities for purchase or appointment, payment

approval, and accounting;
b) providing reasonable assurance that all expenditure is necessary and appropriate;
c) ensuring that payments are effected promptly and any discounts for prompt payment are
obtained;
d) ensuring that as far as practicable, expenditures are spread evenly through the year;
e) ensuring that all expenditure is within the available budget; and
f) ensuring that payments are recorded and reported in accordance with the Act and these
regulations.

3.3.3.1 Approval of expenditure

The guidance in section 16(1) of the Public Finance prohibits public officers from spending or
committing public money without the approval of the Accounting Officer or an officially
delegated or authorised officer.

The provisions of Treasury Instructions stipulate that no payment should be made from Voted
moneys except for: services rendered; value received; amounts due to be payable in terms of the
Constitution or an enactment; and payments that have been authorised by the Treasury. In
addition, the instructions specify that no expenditure on public funds must be incurred on any
service unless it has been budgeted for; provisions have been made in the Appropriation Act; and
Treasury has indicated that funds are available. In urban local authorities, the mayor or chairman
of the council is permitted to authorise expenditure which has not been foreseen or provided
for; and in his opinion cannot, without detriment to the interests of the municipality or town, be
postponed. It is however a requirement that such expenditure is reported at the next meeting of
the finance committee.

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In the case of Funds set up in terms of Section 18 of the Public Finance Management Act, no
expenditure should be incurred in anticipation of receiving funds. Funds must be available before
any expenditure documentation can be processed.

3.3.3.2 Expenditure Commitment

The Government of Zimbabwe manages budget allocations through an expenditure commitment

control system. Section 16(1) of the Public Finance Management Regulations assigns the Minister
responsible for Finance the responsibility for prescribing requirements for recording and
processing commitments pertaining to payment of wages and salaries; purchase of recurrent
goods and services; purchase of capital goods and services; transfers; and subsidies.

The Regulations require public officers to obtain approval from their Accounting Officer before
making commitments against allocated budgets. Section 17(2) obliges every Accounting Officer
to have procedures in place that ensure:

a) commitments are within the available budget allocation;

b) the cash outflows conform to the cash plans provided to the Ministry of Finance;
c) procurement procedures in the Procurement Act and Regulations or other applicable
framework have been followed; and
d) approved commitments are recorded against the appropriate budget allocations.

Section 17(3) of the Public Finance Management Regulations requires the approval and recording
of commitments to be treated as obligating the budget allocation of the state institution. The
amount of the budget obligated by expenditure commitments should be used only for paying for
transactions related to the approved commitments.

Treasury Instructions require state institutions to record and process their expenditure
commitments through the PFMS or IFMS except in circumstances where the Accountant General
has authorised a departure from these instructions.

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3.3.3.3 Processing of Payments

The preferred method for disbursing funds to vendors, individuals and organisations is electronic
funds transfer systems that deposits funds directly into bank accounts, EFT or other EFT
compliant alternatives that are approved by Treasury from time to time. Accounting Officers are
required to ensure that their Ministries utilise electronic payment mechanisms to the fullest
extent possible.

It is the responsibility of Accounting Officers to ensure adequate safeguards on the electronic

payments systems that are used to disburse funds to various beneficiaries. Accounting Officers
should ensure that only authorised officers have access to the electronic payment systems.

It is also a requirement that state institutions transact through the PFMS or IFMS. The processing
of payments outside the PFMS is only permissible when the system is not operational or in cases
where state institutions do not have immediate access to the PFMS. Accounting Officers are
obliged to ensure that payment vouchers are posted onto the PFMS system once it becomes
operational and within 3 days of processing of the Payment Voucher. Accounting Officers that do
not have immediate access to the PFMS shall ensure that payment vouchers that are processed
outside the PFMS are posted onto the system on a weekly basis. The failure to post manually
generated payment vouchers within these time limits constitute an act of financial misconduct
as defined in the Public Finance Management Act.

3.3.3.4 Payment of salaries, wages and allowances

Section 18 of the Public Finance Management regulations require Treasury, in each annual
budget process and with the concurrence of the Public Service Commission or other relevant
authority, to determine the personnel establishment (level of staffing) of a Ministry. During the
annual budgeting process, Accounting Officers are not allowed to exceed or vary the staffing
levels established by Treasury without the approval of the Public Service Commission or such
other relevant authority and the Ministry of Finance.

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It is the responsibility of Accounting Officers to ensure that the costs related to the personnel
establishment for the state institutions under their charge are aligned to their budgetary
allocation. Where differences arise Accounting Officers are required to work with the Ministry of
Finance and Public Service Commission or other relevant authority to ensure the staff
establishments are aligned with the budget allocation for each ministry or state institution.

Public Finance Management regulations require Accounting Officers to observe the following
principles:

a) no public officer should be paid from budget allocations until the public officer’s
appointment and scale of pay have been authorised and no public officer should receive
an increment, allowance or increase in salary until such increment, allowance or increase
in salary has been authorised according to regulations issued by the Public Service
Commission or other relevant authority;
b) for entities that are required to use the Salary Service Bureau, the payment of salaries
and wages should be made in accordance with pay sheets compiled by the Salary Service
Bureau and endorsed by the Director of Finance of the relevant Ministry or other entity
and such pay sheets should show allowances and details of all deductions;
c) no deductions from the gross salaries, wages and allowances should be made except for
such purposes and under such conditions as approved by the Ministry of Finance; and
d) invoices for payment of salaries and allowances should be processed through the Ministry
of Finance and payments made electronically to the designated bank accounts of
Ministries or other entities.

The Public Finance Management regulations assign to the Minister of Finance, the responsibility
of ensuring that the deductions made from salaries are paid over to the recipients expeditiously.

The provisions further require the Minister to issue detailed instructions regarding the
calculation, payment dates, recording of and accounting for salaries, wages and allowances.
These detailed instructions are contained in Treasury Instructions and Accounting Procedures
Manuals.

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3.3.3.5 Payment for Goods and Services

Treasury guidelines require that as far as is possible, expenditure on goods and services be spread
evenly throughout the year. The guidelines urge state institutions to avoid peak periods at the
year-end. It also encourages Accounting Officers to ensure whenever possible that ministries and
agencies under their charge make timeous and prompt payment of bills to avoid additional
charges to the government that are frequently incurred due to late payments.

The policy guidelines in Section 19 of the Public Finance Regulations require public officers to
observe the following principles:

a) no payment is made before it is due and no expenditure on supplies or services should be

incurred in advance of the time when such supplies or services would normally be
obtained, whether for the purpose of utilising an expected saving or for any other reason,
without the prior written approval of the Ministry of Finance;
b) that deviations in cash flows resulting from delays in the procurement of goods and
services should be reflected in the in-year cash flow projections provided to the Ministry
of Finance as soon as such deviations are foreseen;
c) when dealing with payments or receipts for supplies or services to or by Government
respectively, the mode of settlement is in the form of acceptable currency and no
transactions should be settled in kind.

Section 14 of the Public Finance Management Act provides for safeguards, to both Accounting
officers and public officers, for dealing with directives relating to expenditure. If an Accounting
Officer or a public officer is directed by a Minister or Deputy Minister to order or commit a
payment which such officer believes they are not authorised to make in terms of any law, they
are required to proceed in accordance with the provisions of Section 14 of the Public Finance
Management Act.

(a) Domestic and Foreign Travelling and Subsistence Allowances

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The travel and subsidence allowances that public officers are entitled to are governed by the
provisions of Sections 21 to 26 of the Public Service Regulations, 2000 and circulars that are
issued with Treasury concurrence from time to time. It is the responsibility of Accounting Officers
to ensure that all officers entitled to travel and subsistence allowances comply with these
provisions.

Travelling advances should only be approved by the Accounting Officer or an Officer delegated
by them. Travelling advances should only be approved for an amount up to the estimated value
of the official entitlement. It is the responsibility of the authorising officers to ensure that there
are sufficient funds in the travel budget before approving trips.

Treasury Instructions permit penalties arising from cancellation of airline tickets and failure to
take up hotel accommodation to be paid only if the cause for the cancellation is in the best
interest of Government or was due to circumstances beyond the control of the person travelling.
Where the penalties are due to a public officer’s negligence, such charges should be recovered
from the members concerned.

Treasury Instructions require public officers to reimburse the CRF in full, if they fail to undertake
a trip for which they had been issued in advance. The bank charges relating to the reimbursement
of the advance should be met by Government if the member was not responsible for the
cancellation of the trip. If the trip was cancelled for the convenience of the public officer, Treasury
instructions require the officer concerned to pay the bank charges.

Treasury Instructions require travelling advances to be acquitted within thirty (30) working days
of the completion of travel by submission of travelling and subsistence claim voucher. In addition,
no advance in respect of subsistence and transport expenses should be made to a public officer
in any calendar month until such time as advances made in previous months have been
accounted for to the appropriate accountant

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3.3.3.6 Transfers and subsidies

The guidance in section 20 of the Public Finance Management regulations require Accounting
Officers to maintain appropriate measures to ensure that transfers and subsidies to entities are
applied for their intended purposes where such purposes are specified. The measures
recommended by the guidance include:

a) regular reporting procedures;

b) internal and external audit requirements and submission of audited statements;
c) regular monitoring procedures;
d) scheduled or unscheduled inspection visits or reviews of performance; and
e) other control measures an Accounting Officer considers necessary.

The regulations permit Accounting Officers, after consultation with Ministry of Finance, and
subject to the terms and conditions applying to the transfer or subsidy, to withhold or reduce the
transfer or subsidy to an entity if he or she is satisfied that:

a) financial assistance is no longer required;

b) the agreed goods or services have not been delivered or the performance has not been
attained; or
c) the transfer and subsidy does not provide value for money in relation to its purpose.

3.3.3.7 Management of Arrears in payments

This topic is explained in detail in the Public Sector Accounting Module.

Section 22 of the Public Finance Management Regulations mandates the Minister of Finance to
prescribe requirements for recognising arrears in payments including the following:

a) payment of wages and salaries;

b) purchase of recurrent goods and services;
c) purchase of capital goods and services;
d) transfers; and
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e) subsidies.

The guidance require public officers dealing with payments to ensure that all the invoices
received from suppliers and all payments pertaining to other government liabilities which
become due, are recorded in accordance with Ministry of Finance instructions.

Where payment arrears exist, these should be periodically reported to the Ministry of Finance in
accordance with requirements of Treasury instructions.

3.3.3.8 Charging of expenditure against a particular vote or sub-division of a vote

The provisions in Section 23 of the Public Finance Management Regulations provide for disputes
that arise over which vote or sub vote should be charged with any particular expenditure. The
regulations state that the Ministry of Finance should be responsible for settling such disputes and
determining the vote or sub vote against which the expenditure should be charged.

3.3.4 Policies on disallowances, recovery and adjustment of payments

Section 17(6) of the Public Finance Management Act states that, if prior to the closing of the
accounts of a financial year it is found that an amount has been improperly charged against an
appropriation or an authorised budgeted, the amount should be disallowed and the expenditure
recorded against the relevant appropriation. Alternatively the authorised budget should be
reduced by the amount so disallowed.

The guidance in section 24 of the Public Finance Management Regulations state that the amounts
charged to a vote or authorised budget that are recovered in the financial year in which payments
were made, should on or before the closing of books of that financial year, be allocated to the
expenditure line item that was originally debited.

As for amounts that are recovered after the closing of books of a financial year, the guidance
require that they be receipted and paid to the appropriate revenue item, provided that such

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amounts have not been allocated to a suspense account during the financial year in which
payment was made.

3.3.5 Unauthorised, irregular, fruitless and wasteful expenditure

Unauthorised expenditure according to public finance management laws is money spend on a

vote in excess of the amount appropriated or for a purpose for which no money has been voted
and appropriated. Section 2 of the Public Finance Management Act defines fruitless and wasteful
expenditure as expenditure which was made in vain and would have been avoided had
reasonable care been taken.

Accounting Officers or public officers who willfully or negligently make or permit unauthorised,
irregular expenditure or fruitless and wasteful expenditure are considered to have committed
acts of financial misconduct in terms of the provisions of sections 85 to 87 of the Public Finance
Management Act. Such misconducts attract disciplinary action as determined by Treasury
Regulations.

Section 25 of the Public Finance Management Regulations obliges Accounting Officers to exercise
all reasonable care to prevent and detect unauthorised, irregular, fruitless and wasteful
expenditure. The guidance also requires Accounting Officers to implement effective, efficient and
transparent processes of financial and risk management.

The provisions mandate public officer that discover unauthorised, irregular and wasteful
expenditure with the responsibility of reporting such expenditure to the Accounting Officer
immediately. Where irregular expenditure incurred a public sector organisation is in
contravention of procurement procedures, such violation should be brought to the notice of the
relevant procurement authority.

The Public Finance Management Regulations require Accounting Officers to report on

unauthorised, irregular and wasteful expenditure in accordance with the provisions of sections
32(3)(c), 34(1) and 49(2) of the Public Finance Management Act.

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Section 19 (2) of the Public Finance Management Act, permits the Minister of Finance to lay
before the House of Assembly, a statement of unauthorised expenditure and seek condonation
through a Financial Adjustments Bill. Unauthorised expenditure can only be condoned by
Parliament.

3.3.6Summary

Parliament, in exercising its role of ensuring that all expenditure has been accounted for, has
enacted laws that govern the management of expenditure in state institutions at all levels of
government. The Public Finance Management Act appoints Treasury as manager of Public funds
and requires that all expenditure be authorised by Treasury through the Paymaster General or
the Accountant General’s warrant. Treasury prescribes Accounting Officers who should control
and be accountable for the expenditure of money applied to votes by the Appropriation Act

Public Sector expenditure in Zimbabwe is classified in accordance with the economic

classification system of the GFS Manual (2014). The expenditure is also categorised into recurrent
and capital expenditure. Recurrent expenditure is consumptive in nature whereas capital
expenditure is productive and developmental. Treasury has been focusing on strategies that
would assist in the re-orientation of National Budget resources towards development
programmes.

Treasury Instructions stipulate that no payment should be made from Voted moneys except for:
services rendered; value received; amounts due to be payable in terms of the Constitution or an
enactment; and payments that have been authorised by the Treasury. The Government of
Zimbabwe makes use of an expenditure commitment control system as one of the expenditure
management tools.

The preferred method for disbursing funds to vendors, individuals and organisations is electronic
funds transfer systems that deposits funds directly into bank accounts, EFT or other EFT
compliant alternatives that are approved by Treasury from time to time. It is also a requirement
that all transactions are processed and recorded on the PFMS or IFMS. The authority to condone
unauthorised expenditure rests with Parliament.
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Accounting Officers or public officers who wilfully or negligently make or permit unauthorised,
irregular expenditure or fruitless and wasteful expenditure are considered to have committed
acts of financial misconduct in terms of the provisions of sections 85 to 87 of the Public Finance
Management Act. Such misconducts attract disciplinary action as determined by Treasury
Regulations.

3.3 Self-Assessment Questions

a) Discuss the role of Accounting officers in managing expenditure at organisational level

b) Discuss the nature of expenditure in the public sector in Zimbabwe
c) What differentiates unauthorised expenditure from fruitless and wasteful expenditure?

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3.4 Public Sector Cash Management

Cash is vital to the operations of any organisation be they private or public sector entities. Cash
is critical for the financing of day to day operations of an organisation as well as meeting the
organisation’s payment obligations when they fall due. It is therefore important that public sector
organisations put in place policies and strategies that are aimed at managing cash resources.
Section 44(2) of the Public Finance Management Act requires Accounting Authorities to take
effective and appropriate steps to manage available working capital efficiently and economically.
The provisions of section 27 of the PFM Regulations oblige the Minister of Finance to set
requirements for cash management and banking instructions and to ensure that the cash
management and banking arrangements for the government are efficient, effective and support
probity and the lawful use of public money.

Learning Objectives

The objectives of this unit are to:

a) Define public sector cashflows;

b) Examine the cash flow management policies and practices;
c) Explain public sector policies and practices on banking arrangements;
d) Describe public sector cash planning policies and practices;
e) Explain public sector policy on transfer of funds for making payments;
f) Explain the role of the Cash Management Committee; and
g) Describe policies and practices on custody of public money.

Learning Outcomes

After completing this Unit students are expected to make evident the following:

a) Appreciation of the meaning of cash flow in the public sector context;

b) Demonstrable knowledge of public sector cash management policies and practices;
c) Understanding of public sector policies and practices on banking arrangements;

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d) Appreciation of public sector cash planning policies and practices; and

e) Understanding of the link between cash planning and budget execution.

Unit Content

The Content of the Unit covers the following topics:

a) Defining public sector cashflows;

b) Cash flow management policies and practices;
c) Policies and practices on banking arrangements;
d) Cash planning policies and practices;
e) Policy on transfer of funds for making payments;
f) Cash Management Committee;
g) Policies and practices on custody of public money; and
h) Investment of money in Consolidated Revenue Fund.

3.4.1 Defining Public sector cashflows

International Public Sector Accounting Standards define cashflows as inflows and outflows of
cash and cash equivalents. Cash comprises of cash on hand and demand deposits; and cash
equivalents are short-term, highly liquid investments that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value. The GFS
Manual (2014) describes cash as currency (which consists of notes and coins) and deposits (all
claims represented by evidence of deposit). It is important to note that currency decisions in
Zimbabwe are made by the Central Bank and Government.

3.4.2 Cash management policies and practices

Section 27 of the Public Finance Regulation assigns Ministry of Finance the responsibility for the
effective and efficient management of the cashflows relating to the CRF. The provisions require
Treasury to:

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a) ensure that the CRF has sufficient resources to meet appropriated expenditure and direct
charges;
b) ensure immediate remittance of government revenues into the CRF;
c) make payments from the Fund, including transfers and subsidies, no earlier than
necessary; and
d) prescribe and implement efficient and effective cash management procedures which
optimise government debt and optimise returns from any idle cash balances held in the
Fund.

Accounting Officers are obliged to implement efficient and effective cash management
procedures that facilitate the following:

a) collecting revenue when it is due and banking it promptly;

b) making payments, including transfers and subsidies, no earlier than necessary, with due
regard for efficient, effective and economical service delivery, and the normal terms for
payments;
c) ensuring that discounts for early payment are reflected in the monthly cash flow
estimates;
d) pursuing debtors with appropriate sensitivity and rigour;
e) accurately forecasting cash flow requirements; and
f) recognising the time value of money.

3.4.3 Policies and practices on banking arrangements

Section 28 of the Public Finance Management Regulations requires the Ministry of Finance and
Accounting Officers to ensure that the CRF includes all cash balances of the Central Government.
It is Treasury responsibility to prescribe the arrangements for the custody and banking of Central
Government cash balances as well as their remittance to the CRF. The banking requirements
oblige Central Government entities to use the electronic clearing facilities of the banking system
to remit public money deposited in Sub-Exchequer Accounts to the main Exchequer Account

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within 24 hours. In cases where electronic clearing facilities are not available, Accounting Officers
are required to ensure that remittances are made at least once a week.

No Ministry, public sector, or constitutional entity is permitted to open bank accounts without
the written approval of the Minister of Finance or other competent authority. Section 22(3) of
the Public Finance Management Act permits the opening of official banking accounts, with the
written authority of the Accountant General.

Accounting Officers are not allowed to operate a bank account that has an overdraft facility for
a public sector organisation without the written approval of the Ministry of Finance. An account
should be deemed to be overdrawn when the cash book shows a credit balance.

All Public Officers charged with the collection of public money are required to deposit such
revenue and public money in bank accounts designated by the Ministry of finance or other
competent authority. It is a requirement that Public Officers ensure that all funds received are
banked intact into the official bank account regularly to reduce the risk of loss through theft or
other misfortunes.

It is a requirement that Public Officers effect all government payments electronically unless
otherwise approved by the Ministry of Finance or other competent authority. The payments are
made out of the Paymaster General’s Account.

As discussed earlier, the CRF consists of the Exchequer Account and the Paymaster General’s
Account. The Exchequer account is the Account into which all funds are deposited. The Paymaster
General’s Account is the account from which all payments are effected. It is the responsibility of
Ministry of Finance to carry out reconciliations of the inflows and outflows of cash in the CRF
with the remittance and payment transactions recorded in the Ministry of Finance ledgers.

Accounting Officers are required to assign to a public officer the responsibility for reconciling
remittance and payment transactions in the ledgers with the accounting records of the Ministry
of Finance for the account of the CRF.

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3.4.3.1 Banking arrangements in local authorities

The statutes governing local authorities permit councils to open banking accounts in their own
name with one or more commercial banks. The local authorities are required to deposit all their
revenues into these banking accounts and to meet all the expenses reflected in the council
estimates from the relevant banking account. The responsibility for monthly bank reconciliations
rests with the Director of Finance.

3.4.4 Cash planning policies and practices

The Government has put in place cash planning strategies that involve the Zimbabwe Revenue
Authority, Treasury and Accounting Officers.

3.4.4.1 Zimbabwe Revenue Authority (ZIMRA)

The provisions of Section 30 of the Public Finance Management Regulations oblige the Zimbabwe
Revenue Authority (ZIMRA) to implement measures to ensure that all taxes, levies, duties, fees
and other money due to and collected by the Authority are accounted for and deposited daily
into the relevant accounts. The provisions also require ZIMRA to provide weekly information to
Ministry of Finance on revenue deposits and presented by the standard revenue classifications.

The Public Finance Management Regulations require ZIMRA, immediately after the national
budget is approved, to supply the Ministry of Finance with an annual revenue projection
presented by the standard revenue classifications, and no later than two weeks before the start
of the financial year.

ZIMRA is also required to provide information about actual collections for the preceding month
and an updated monthly revenue projection for the remainder of the year. This information is
required to be presented by the standard revenue classification no later than the 15th working
day of each month. It is also a requirement that such information include separate line items for
actual and projected tax funds.

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3.4.4.2 Accounting Officers

With regard to Accounting Officer, the Public Finance Management Regulations require that
immediately after the budget has been approved each Accounting Officer submit to the Ministry
of Finance an annual cash plan. The Cash plan should be broken down by the standard
classification, including anticipated revenue and expenditure for each month of the first quarter
of the financial year and for each quarter of the rest of the financial year. The format for the cash
plan is prescribed by the Ministry of Finance.

The Accounting Officers are also required to provide a quarterly breakdown that is aligned to
classifications used in the Annual Budget for the annual appropriations. The deadline for
submission of these cash plans is no later than the 15th of December preceding the financial year
to which it relates.

Each Accounting Officer is required to submit to the Ministry of Finance, information relating to
the following:
a) the actual receipts and payments for the preceding month;
b) updated monthly revenue and expenditure projection for the subsequent quarter; and
c) updated quarterly revenue and expenditure projection for the rest of the year.

This information is required to be submitted no later than the 15th working day of each month.

According to section 30(9) of the Public Finance Management regulations an Accounting Officer’s
access to the Consolidated Revenue Fund should be determined by the monthly and quarterly
projections that have been approved and recorded by the Ministry of Finance and such approvals
may be updated by the Ministry of Finance during the year to reflect changing circumstances.

3.4.5 Transfer of funds for making payments

Section 8 (2)(5) of the Public Finance Management Act empowers the Secretary for Finance,
subject to the directions of Treasury, to control the issue of public money to Ministries and
departments of the Government.

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To enable their Ministries to meet in-year cash requirements, Accounting Officers are required
to submit requests to the Ministry of Finance for the transfer of appropriated funds to their sub-
accounts in the Consolidated Revenue Fund. Such requests are required to be submitted in
accordance with approved cash flow estimates for the period and at least five working days
before the end of the preceding period.

When transferring funds to a Ministry, Treasury is obliged to ensure that:

a) the requests have been approved by the appropriate officials in the Ministry;
b) the amount of the request is in conformity to the cash plan for the period;
c) all previous transfers have been expended and reconciled; and
d) the transfers are approved by the Cash Management Committee.

It is the responsibility of Accounting Officers to ensure that payments are effected after the
requested funds have been transferred to their bank accounts by the Ministry of Finance and
that there are no overdrafts on the bank accounts. The provisions state that Funds transferred
by the Ministry of Finance to meet in-year requests for expenditures should automatically lapse
on the last day of the financial year.

3.4.6 Cash management committee

The Public Finance Management Regulations22 provides for the setting up of a Cash Management
Committee whose role is to approve the transfer of funds to sub-accounts of Ministries. The
Committee is headed by the Accountant General and it comprises of representatives from the
Budgets Department, Debt Management Office, the Revenue Department, ZIMRA RBZ and major
line Ministries. The Cash Management Committee is required to meet at least once every month
to approve the transfer of funds to sub-accounts of Ministries. The Committee should take into
account the following factors:

a) cash forecasts;

22 Section 32(1) Public Finance Management Regulations

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b) requirements of monetary policy of the Reserve Bank of Zimbabwe;

c) the need for optimising debt;
d) the debt issue calendar;
e) arrears in payment, if any; and
f) other factors relevant for prudent cash management.

The provisions give each Accounting Officer the responsibility for establishing systems,
procedures, and processes to ensure their organisation have efficient and effective banking and
cash management arrangements. It also requires Accounting Officers to ensure that public
officers assigned to cash management and banking responsibilities have sufficient training.

3.4.7 Policy and practices on custody of public moneys

Except when required for immediate use, or when being temporarily stored in the course of
collection under the immediate control of the public officers handling funds, money should not
be left in cash-boxes or drawers even if locked. It is a requirement that loose cash and cash-boxes
be lodged in a safe or strong-room at every possible opportunity.

Public officers are prohibited from including any private moneys in an official banking account or
any public moneys in a private account. In addition, public officers should not permit any moneys
other than public funds to be kept in a Government cash-box, safe or strong-room.

Treasury Instructions require that any surplus of cash discovered be brought to account as
revenue - “Unclaimed and confiscated money or property” - and a receipt be issued accordingly.

3.4.8 Investment of money in Consolidated Revenue Fund

The provisions of section 20 of the Public Finance Management Act state that any sums standing
to the credit of the CRF may be kept in cash or in such accounts with a financial institution as the
Accountant General may from time to time determine. The money can also be invested with a
financial institution at call or subject to notice not exceeding twelve months, or in an investment

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authorised by law for the investment of trust funds and approved by the Minister responsible for
Finance.

3.4.8.1 Investment of Money in Local Authority banking accounts

Section 302 of the Urban Councils Act and section 131 Rural District Councils Act specify that if a
council has in any fund or account moneys which are not immediately required for the payment
of expenditure the council is permitted to hold such moneys as balances on current account with
a commercial bank. Councils are also permitted to invest them in one or more of the following
ways:

a) balances or deposits with, or bills issued by, any person registered in terms of the Banking
Act [Chapter 24:01];
b) Treasury bills;
c) locally registered securities which are issued by—
i. the State or a municipal council; or
ii. a statutory corporation established by or in terms of a law in force in Zimbabwe; or
which are guaranteed by the State;
d) deposits with the Post Office Savings Bank;
e) shares in or deposits with a building society registered in terms of the Building Societies
Act [Chapter 24:02];
f) savings certificates issued in terms of the Savings Certificates Act [Chapter 22:12];
g) temporary advances to a capital account for a purpose for which the council has
borrowing power, pending the raising of the necessary loan;
h) temporary advances to a consolidated loans fund operated by a municipal council in
terms of section two hundred and ninety-seven;
i) loans to other local authorities; and
j) such other manner as the Minister for Local Government and the Minister responsible for
Finance may approve.

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3.4.9 Imprest

The PFM Regulation in section 21 permits opening of an imprest account after obtaining approval
from the Ministry of Finance or other relevant authority. The regulations mandate Treasury and
relevant authorities to issue instructions to prescribe the criteria and procedures for
administering imprest accounts.

3.4.10 Summary

Section 27 of the Public Finance Regulation assigns Ministry of Finance the responsibility for the
effective and efficient management of the cashflows relating to the CRF. The Ministry of Finance
and Economic Development (MoFED) issues monthly expenditure targets (ceilings) to Accounting
Officers and the release of funds to Ministries is governed by cash availability and cash flow
forecasts that Ministries submit at intervals and in a format determined by Treasury.

No Ministry, public sector, or constitutional entity is permitted to open bank accounts without
the written approval of the Minister of Finance or other competent authority. Section 22(3) of
the Public Finance Management Act permits the opening of official banking accounts, with the
written authority of the Accountant General.

Public Finance laws permit the Ministry of Finance and local authorities to invest money that is
in banking accounts and not immediately required for the payment of expenditure.

3.4 Self-Assessment Questions

a) Discuss the link between cash management and budget execution?

b) How important is cash planning
c) Explain the role of the Cash Management Committee

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3.5 Public Sector Asset Management

Organisations, regardless of sector, depend on assets for effective service delivery. Private sector
organisations use assets to produce goods and services for the market. Public Assets are critical
to Government’s ability to produce goods and services for citizens and businesses.
Section 33 of the Public Finance Management Regulations urges Accounting Officers to establish
asset management systems and procedures that would enable their entities to meet their service
delivery requirements. Section 308 (3) of the Constitution exhorts custodians of public property
to safeguard the property and ensure that it is not lost, destroyed, damaged, misapplied or
misused. The potential risks that public assets are exposed to include theft; abuse;
misapplication; damages to and destruction; accidents and remaining unrecorded. The provisions
in statutes, regulations and Treasury Instructions are designed to ensure that public sector
organisations design asset management systems with adequate safeguards to protect public
property from fraud, waste and abuse.

Learning Objectives

The objective of this Unit are to:

a) Define public sector assets;

b) Explain the nature of public sector assets;
c) Describe asset management policies and practices;
d) Explain the policies and practices on custody of assets;
e) Examine policies on disposal and leasing of assets;
f) Explain importance of compliance with ethical standards; and
g) Discuss the safeguards for managing abuse of the asset management process.

Learning Outcomes

On completing this Unit students should make evident the following:

a) Understanding of the definition of public sector assets;

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b) Appreciations of the nature of public sector assets;

c) Knowledge of asset management policies and practices;
d) Knowledge of Policies and practices on custody of assets;
e) Knowledge on the disposal and leasing of public assets;
f) Understanding of the importance of compliance with ethical standards; and
g) Knowledge of the safeguards for managing abuse of the asset management process.

Unit Content

The content of the Unit covers the following:

a) Defining public sector assets;

b) The nature of public sector assets;
c) Asset management policies and practices;
d) Policies and practices on custody of assets;
e) Policy on disposal and leasing of assets;
f) Compliance with ethical standards; and
g) Safeguards for managing abuse of the asset management process.

3.5.1 Defining Public Sector Assets

IPSASs define assets as resources controlled by an entity as a result of past events and from which
future economic benefits or service potential are expected to flow to the entity.

The GFS manual (2014) defines assets as a store of value representing a benefit or series of
benefits accruing to the economic owner by holding or using the resource over a period of time.
Assets are a means of carrying forward value from one reporting period to another

Section 308 of the Constitution defines public property as any property owned or held by the
State or any institution or agency of government, including provincial and local tiers of
government, statutory bodies and government-controlled entities.

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3.5.2 The nature of Public Sector Assets

Public Sector assets are categorised in accordance with the classification codding system for the
GFS Manual (2014). The assets are placed into two broad categories of financial and nonfinancial
assets. Table 3.3 illustrates the nature of public sector assets in Zimbabwe.

Table 3.3: Nature of Government Assets

Source: Accountant Generals’ PFMS Chart of Accounts

The GFS Manual (2014) describes financial assets as consisting of financial claims and gold bullion
held by monetary authorities as a reserve asset.

According to GFS Manual (2014) nonfinancial assets are stores of value and provide benefits
either through their use in the production of goods and services or in the form of property
income. The main categories of nonfinancial assets are:

a) produced assets (such as fixed assets, inventories, and valuables); and

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b) nonproduced assets (such as natural resources, contracts, leases, and licenses, and
goodwill and marketing assets).

The GFS Manual (2014) notes similarity and difference between private sector and public sector
assets. There are public sector assets categories that are similar to those found in any
organisation irrespective of sector. In this category are such assets as schools, road-building
equipment, fire engines, office buildings, furniture, and computers.

However, governments also own assets that are unique to the public sector. There are assets
whose services are consumed directly by the general public and assets that need to be preserved
because of their historic or cultural importance.

In the category of assets consumed by the public are infrastructure assets. These are immovable
nonfinancial assets that generally do not have alternative uses and whose benefits accrue to the
community at large. The examples include streets, highways, lighting systems, bridges,
communication networks, and canals.

Assets that need to be preserved because of their historic or cultural importance are referred to
as heritage assets. These are assets a government intends to preserve indefinitely because they
have unique historic, cultural, educational, artistic, or architectural significance.

3.5.3 Asset Management Policies and Practices

The provisions of section 33 require Accounting Officers to establish asset management

procedures and systems designed to:

a) maximise the service potential of assets by ensuring that they are appropriately used and
maintained;
b) reduce the demand for new assets through demand management techniques;
c) achieve greater value for money in the acquisition, use and disposal of assets;
d) reduce unnecessary acquisition of assets through acquisition management techniques;
e) clearly define responsibility, accounting and reporting requirements; and

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f) support the effective, efficient, economical and transparent use of the institution’s assets.

In addition, Accounting Officers are obliged to ensure that the asset management plans, decisions
and activities of their organisations are integrated with the Government’s planning and
budgeting processes. The asset management procedures and systems must also comply with
Ministry of Finance or other relevant authority’s instructions.

3.5.3.1 Acquisition of Assets

State assets are acquired through a number of methods. These include:

a) Procurement from suppliers and contractors

b) Compulsory acquisition;
c) Donations;
d) Production (manufacture, cultivation, biological); and
e) Transfers from other departments.

Treasury Instructions require that Accounting Officers Accounting ensures that the procurement
of Government property satisfy the following conditions:

a) fair and transparent process;

b) purchases are made on the basis of need or to secure benefit to the public;
c) the intended purpose is the best use of the property;
d) the process should comply with the Government procurement guidelines; and
e) all relevant statutory requirements are observed.

3.5.3.2 Recording, valuation and reporting Public Assets

Section 34 of the PFM Regulations requires the Ministry of Finance or other relevant authority to
prescribe the following:

a) recognition and measurement principles for government assets;

b) uniform useful lives for different classes of assets;

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c) asset valuation principles and schedule for asset valuation;

d) criteria for establishing and managing public asset portfolios;
e) procedures for the recording, use, disposal and reporting of assets;
f) requirements for asset maintenance;
g) appropriate information systems for asset management; and
h) other matters relating to asset management.

Public sector organisations are obliged to maintain asset registers in accordance with asset
classification and recording procedures prescribed by the Ministry of Finance or other relevant
authority.

The regulation requires that such asset registers should capture the following information:

a) physical features of the assets including assets class, location, quantity, size, useful life
and value;
b) financial features of the assets including net book value and replacement cost;
c) legal features including the identification of asset owners, managers and users;
d) economic features including whether the assets are tradable or non-tradable and cost;
and
e) benefit estimations.

3.5.3.3 Insurance

Accounting Officers are required to insure against losses, including but not limited to motor
vehicle insurance and movable asset insurance, provided that the insurance and the premium
costs comply with Ministry of Finance instructions. In the absence of such instructions, written
approval of the Secretary for Finance would be required.

3.5.4 Policies and practices on custody of assets

The Regulations give Accounting Officers the responsibility of ensuring that proper internal
controls exist for the custody and use of assets. The internal controls should also ensure that:

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a) assets are acquired in accordance with provisions of the Procurement Act; Procurement
Regulations and Ministry of Finance instructions or other applicable framework;
b) preventive mechanisms are in place to eliminate theft, losses, wastage and misuse; and
c) stock levels are at an optimum and economical level

3.5.4.1 Physical Asset Verification

Accounting Officers should carry out physical asset counts regularly and at least twice a year to
establish existence, status and usability.

Not later than two months after the close of each financial year the Ministry should forward to
Treasury a certificate stating that the assets under the control of their Ministries have been
physically compared with the records at least once during the financial year and that the records
have been properly maintained in accordance with Treasury and Accounting Officers’
Instructions.

3.5.5 Disposal and leasing of State assets

Section 35 requires Accounting Officers to comply with Ministry of Finance instructions on the
disposal, depreciation, impairment, leasing, lending and other dealings with assets. It is the
responsibility of Accounting Officers to ensure that assets are disposed of, or leased or lent in a
manner that will maximise public benefit and best serve the public interest.

Treasury Instructions require Accounting Officers to dispose of public assets that are
unserviceable, obsolete or surplus in accordance with the provisions of the Public Procurement
and Disposal of Public Assets Act. The methods for disposing of the asset include:

a) transfer to another department with or without financial adjustment;

b) sale by public tender;
c) sale by public auction;
d) destruction, dumping or burying;

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e) trade-in; and
f) any other method that may be prescribed or recommended by PRAZ from time to time.

The guidance is that disposal of a movable asset should be at a market-related value or by way
of price quotations, competitive bids or auction; whichever is most advantageous to the State.
Any departure from these provisions must be with the written authority from Ministry of Finance.
Such approval should be noted in the asset register.

Accounting Officers are permitted, subject to Ministry of Finance approval, to transfer movable
assets free of charge to another public sector organisation. It is a requirement that the notes to
the Annual Report of the organisation that transferred the asset provide a statement of asset
transfers and receipts made during the year with the approval of the Ministry of Finance.

An Accounting Officer should ensure that any sale of immovable State property should be at
market-related value, by way of price quotations, competitive bids or auction, whichever is most
advantageous to the State, unless approved otherwise by the Ministry of Finance in consultation
with the appropriate line Ministry.

The Public Finance Management Regulation requires that the leasing of immovable State
property be at a market-related rent, unless approved otherwise by the Minister of Finance in
consultation with the appropriate line ministry. The reasons for deviating from prescribed leasing
principles and the particulars of the Minister of Finance’s approval for the deviation should be
recorded in the relevant asset register.

Accounting Officers are required to review, at least annually all fees, charges, rates, tariffs or
scales of fees or other charges relating to the leasing of State property to ensure compliance with
Ministry of Finance instructions and to contribute to sound financial planning and management.

Section 93 of the Public Procurement and Disposal of Public Assets Act places restrictions on
disposal of assets to a public sector organisation’s employees, members of the board or any of
its committees.

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3.5.6 Compliance with ethical standards

All public officers that are assigned the duties of managing assets are required to comply with
the highest ethical standards in order to promote:

a) mutual trust and respect between parties to any transactions;

b) credibility and respect from the public; and
c) an environment where business can be conducted with integrity and in a fair, reasonable
and lawful manner

Public Finance Management Regulations require public officers assigned the duties of managing
assets to:

a) disclose any conflict of interest that may arise;

b) treat all suppliers and potential suppliers equitably;
c) not use their position for private gain or to improperly benefit another person;
d) ensure that they do not compromise the credibility or integrity of the asset management
process through the acceptance of gifts or hospitality or any other act;
e) be scrupulous in their use of public property; and
f) assist Accounting Officers in combating corruption and fraud in asset management.

3.5.7 Avoiding abuse of asset management process

Public finance laws permit the Ministry of Finance to establish complaint management
arrangements that are designed to:

a) receive, consider and resolve complaints regarding alleged non-compliance with;

b) Acts, regulations, instructions or other irregularities regarding assets; and
take remedial actions if non-compliance with Acts, regulations, instructions or other irregularities
have occurred, including recommending cases for prosecution where there is suspected
corruption including fraud or other criminal offences.

3.5.8 Summary

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Public Assets are critical to Government’s ability to produce goods and services for citizens and
businesses. Section 308 of the Constitution defines public property as any property owned or
held by the State or any institution or agency of government, including provincial and local tiers
of government, statutory bodies and government-controlled entities.

There are public sector assets categories that are similar to those found in any organisation
irrespective of sector. Governments also owns assets that are unique to the public sector. There
are assets whose services are consumed directly by the general public and assets that need to be
preserved because of their historic or cultural importance.

Accounting Officers are obliged to ensure that the asset management plans, decisions and
activities of their organisations are integrated with the Government’s planning and budgeting
processes.

State assets are acquired through a number of methods and public sector organisations are
obliged to maintain asset registers in accordance with asset classification and recording
procedures prescribed by the Ministry of Finance or other relevant authority. The disposal of
public Assets is governed by the Public Procurement and Disposal of Assets Act.

3.5 Self-Assessment Questions

a) Discuss the methods adopted when disposing public assets

b) Group the following assets into their categories
c) Describe the information that should be captured in Asset Registers

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3.6 Public Sector Debt Management

Debt financing is an important source of funds for any organisation. The disadvantage of debt
financing is that apart from capital repayments, it also places debt servicing burden on internally
generated funds. Given the size of the public sector in any economy, public borrowing on the
domestic market may result in the crowding out of the private sector and this may cause
instability in the market. It is therefore important that public sector borrowing is kept within
sustainable limits for the benefit of the economy.
Parliament enacted the Public Debt Management Act to ensure that the financing needs and
payment obligations of the state and its entities are met at the lowest possible cost over the
medium to long term, with a prudent level of risk, and to promote development of the domestic
debt market.

This Unit defines public debt, examine the organisational structure for managing public debt;
discusses policies and practices for managing public debt and

Learning Objectives

The objectives of the Unit are to:

a) Define public debt;

b) Examine Zimbabwe’s Debt management strategy;
c) Discuss policies and practices relating to borrowing;
d) Discuss the requirements for publishing of loans and guarantees;
e) Explain reporting requirements for public debt activities;and
f) Explain the establishment of Sinking Funds;

Learning Outcomes

On completing this Unit, students must demonstrate the following:

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a) Appreciation of the definition of public debt

b) Understanding of Zimbabwe’s debt management strategy
c) Broad knowledge of legal and policy framework underpinning public sector borrowing.
d) Understanding of public debt reporting requirements

Unit Content

The content of the Unit covers the following:

g) Defining Public Debt;

h) Responsibility for managing debt;
i) Debt management strategy;
j) Legal and policy framework for public sector borrowing;
k) Legal and policy framework for state loans and guarantees; and
l) Reporting public debt activities

3.6.1 Defining Public Debt

According to Section 2 of the Public Debt Management Act public debt comprises domestic and
external-

a) Government debt, lending and guarantees;

b) local authority debt, lending and guarantees;
c) public entity debt, lending and guarantees; and includes the debt of any other entity as the
Minister may specify by notice in the Gazette.

The Public Finance Manage Regulations describe public debt as amounts owing under loans
raised according to the Public Debt Management Act and includes the arrears of all ministries
and public entities, in relation to payments that are overdue and not made by the due date.

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3.6.2 Responsibility for managing national Public Debt

The management of the national public debt in Zimbabwe is centralised and the responsibility
lies with the Public Debt Management Office within Treasury. The functions of the PDMO are
specified in Section 5(2) of the Public Debt Management Act.

The functions of the Public Debt Management Office are specified in Section 5(2) of the Public
Debt Management Act and are listed in Box 1.3 and discussed in paragraph 2.11.7.

3.6.2.1 Debt Management Committee

Section 7 of the Public Debt Management Act, establishes a Debt Management Committee that
reports to the Minister of Finance. The Committee, which is chaired by the Secretary for Finance,
comprises of the Governor of the Reserve Bank; the Attorney General and any other person
whose expertise the Committee may require.

The Committee meets at least once every calendar month and the Public Debt Management
Office acts as the secretariat to the Committee. The functions of the Committee are to:

a) make recommendations to the Minister on public debt management policy and strategy;
b) make recommendations to the Minister concerning all external borrowings, domestic
debt issuance and guarantees; and
c) advise the Minister on all policy matters relating to public debt management.

3.6.3 Debt Management Strategy

Section 8 of the Public Debt Management Act obliges the Minister of Finance to formulate a
Medium term Debt Management Strategy for managing the public debt. The development of the
Medium Term Debt Management Strategy is informed by the debt management objectives of
the Act and takes into account:

a) the existing public debt portfolio especially (but not exclusively) the Government
component of the public debt portfolio;
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b) the macroeconomic framework;

c) the future borrowing requirements of Government; and
d) domestic and international economic and financial conditions.

3.6.4 Legal and policy framework on borrowing

The authority to borrow money or issue a guarantee, indemnity or security or enter into any
other transaction that binds or may bind the Consolidated Revenue Fund to any future
commitment is solely vested with the Minister. No other person, local authority or public entity
should, without the prior and written approval of the Minister, raise any loan or issue any
guarantee, government security or take any other action which may in any way either directly or
indirectly result in a liability being incurred by Government.

Section 11(4) of the Public Debt Management Act gives the Minister of Finance, with the approval
of the President, the sole authority to borrow money on behalf of Government by concluding
loan agreements, issuing Government securities, or entering into supplier's credit agreements
and to issue Government guarantees, in Zimbabwe and in both local and foreign currencies.

Section 12 of the Public Debt Management Act states that local authorities can only borrow
within Zimbabwe. In addition, the Minister responsible for finance, after consultation with the
Minister responsible for Local Government is required to prescribe an annual borrowing limit for
each local authority based on its capacity to repay and such other considerations as the Minister
may determine.

3.6.4.1 Limits on Public Debt

The aggregate amounts that Treasury should borrow in any financial year must not exceed the
limit fixed by the National Assembly. It is a requirement that the limit is proposed by the Minister
to the National Assembly for approval by resolution or by means of a provision in a Finance Bill.
The External and Domestic Debt Management Committee is expected for each financial year to
set forth the recommended maximum amount of new Government borrowing and Government
guarantees which may be undertaken throughout the year. The Minister takes into account the
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Committee's recommendations when exercising his/her right on borrowing or making any

proposal to the National House of Assembly.

It is the responsibility of Treasury to ensure that the fixed limit does not result in the total
outstanding public and publicly-guaranteed debt, as a ratio of the gross domestic product at
current market prices, exceeding 70 per cent at the end of any fiscal year.

Borrowing limits can only be exceeded in situations where Treasury obtains a resolution of the
National Assembly to do so under one or more of the following conditions:

a) where there is an occurrence of natural disasters or other emergencies requiring

exceptional expenditure;
b) where a large investment project in the public sector is deemed by Cabinet to be timely
and prudential; and
c) in case of a general economic slow-down requiring fiscal and monetary stimulus.

The provisions of section 11(2) of the Public Debt Management Act [Chapter 22:21] call for the
capping of the total outstanding Public and Publicly Guaranteed Debt as a ratio of GDP. The
provisions state that the ratio should not exceed 70% at the end of any fiscal year.

(a) Borrowing by local authorities and public entities

According to the provisions of section 22 of the Management Act, a local authority or a public
entity may borrow funds only within Zimbabwe; only up to limits prescribed by the Minister of
Finance; and upon receiving a resolution of the governing body (council, board or other governing
body). The Minister of Finance is permitted, after consultation with the Minister responsible for
Local Government, to prescribe annual borrowing limit for each local authority based on local
authority’s capacity to repay and any other considerations as the Minister may determine. A local
authority intending to borrow above the prescribed threshold may, upon obtaining a resolution
of its governing board (council, board or other governing body), obtain prior approval from the
Minister of Finance through the Minister responsible for Local Government.

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All borrowings of a local authority or a public entity shall be subject to the prior approval of the
Minister and relevant Minister responsible for that particular local authority or public entity.

Local authorities and public entities are required to submit to the Public Debt Management
Office, no later than ten working days from the date of signing of a loan agreement or obtaining
an overdraft, a record of their borrowing. They should also submit monthly, quarterly and
annually on their total outstanding debt.

It is a requirement that local authorities and public entities that procure government guarantees
or on lending facilities submit to the Public Debt Management office, the annual accounts and
any reports and documents as may be required by the Office during the subsistence of such
guarantee or on lending.

3.6.4.2 Purpose for borrowing

The purposes for which the statute governing debt permit borrowing on behalf of Government
include the following:

(a) to finance national priority infrastructure and productive sector projects with high
economic and social impact provided debt should only be incurred on projects that can
generate sufficient revenues to repay the loan;

(b) to finance Government budget deficits;

(c) to maintain a credit balance on the Treasury main account at a level determined by the
Minister;

(d) to provide such Government loans or credits to local authorities, public entities and any
other entities as defined by legislation;

(e) to honour obligations arising under Government guarantees;

(f) to refinance outstanding debt or repay a loan prior to its date of repayment;

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(g) to immediately protect, mitigate or eliminate effects caused by a natural or

environmental disaster or any other national emergency;

(h) to replenish international reserves;

(i) to meet requests by the Reserve Bank to issue Government securities for the sole purpose
of supporting monetary policy objectives; and

(j) to fulfill any other purpose as the National Assembly may by resolution approve.

3.6.5 Loans, guarantees and other commitments

Accounting Officers are charged with the responsibility of ensuring that public officers in public
sector organisations under their charge do not borrow money on behalf of Government or issue
an unauthorised guarantee, security or indemnity or make any other unauthorised
commitments.

Accounting Officers are required to report on all known contingent liabilities. In addition,
Accounting Officers are required to put in place a risk management plan for fiscal risks including
contingent liabilities that are actively monitored by the Accounting Officer.

3.6.6 Policy on Raising Loans

Treasury is required to raise loans upon such terms and conditions as to interest, repayment or
otherwise as may be negotiated by the Minister responsible for Finance and in the manner
prescribed in the Public Debt Management Act.

The methods that are used for raising loans include:

a) loans; or
b) the issue of bonds or stock; or
c) the issue of Treasury bills; or
d) an advance or bank overdraft; or

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e) a combination of any of the above.

Prior to borrowing money, the Minister of Finance is obliged to:

a) ensure that it is in the public interest to do so;

b) ensure that it is consistent with Government economic and financial policies and the
Medium Term Debt Management Strategy;
c) satisfy himself or herself that the Government has or is likely to have on current
projections the financial ability to meet all the obligations under the loan, including future
loan payments;
d) consult with the Attorney-General and obtain in writing from the Attorney- General an
opinion approving the legal aspects of the loan agreement.

3.6.7 Legal and policy framework on loan guarantees

Treasury is required in such manner and upon such conditions as they think fit on advice of the
External and Domestic Debt Management Committee and the Public Debt Management Office,
to guarantee the repayment of the capital of, and the payment of expenses or charges incurred
on or in connection with any indebtedness or other financial obligation raised, incurred or
established, as the case may be, inside or outside Zimbabwe in accordance with the provisions
of Section 20 of the Public Debt Management Act.

Treasury should prescribe any fees that may be payable by a beneficiary of a Government loan
guarantee, including fees payable on the fulfillment of a guarantee.

Treasury should direct the manner in which the beneficiary of the loan guarantee must reimburse
or pay Government, as the case may be for:

a) all moneys paid by Government to fulfill the guarantee;

b) all expenses incurred by Government in relation to the guarantee;
c) interest on all moneys paid by Government to fulfill the guarantee; and
d) any fees prescribed by the Minister.

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Treasury is required to publish by notice in the Gazette, the terms of a loan or guarantee
agreement that Government has concluded, within sixty days of such agreement. Where a
guarantee is given the Minister is required to lay the guarantee before the National Assembly or
the Public Accounts Committee in accordance with the provisions of Section 29 of the Public Debt
Management Act.

Public entities or local authorities are required to submit to the PDMO a record of the public
entity or local authority’s borrowing no later than ten working days from the date of signing of a
loan agreement or obtaining an overdraft, as the case maybe.

3.6.8 Reporting public debt activities

Public entities or local authorities are required to submit to the PDMO monthly, quarterly and
annual accounts and reports together with any documents as may be requested, on their total
outstanding debt, government guarantees or on-lending facilities during the subsistence of such
guarantee or on-lending.

The PDMO is also required to prepare monthly, quarterly, and annual report on state loans and
guarantees and submit these reports to the Secretary for Finance and the Accountant General
within thirty days of the respective month, quarter or year concerned.

The contents of the report should disclose:

a) the loans obtained in the respective year and month;
b) the loans that have been repaid during that year and month; and
c) the total amount of loans outstanding at the end of that year or month.

Treasury is required, at least twice a year, to furnish Parliament with a report on Government
debt management activities, guarantees and lending. The report to Parliament should be
inclusive of the following:

a) information on how the debt management strategy has been implemented over the
course of the financial year;

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b) bi-annual reporting of debt management activities covering an evaluation of outcomes

against the debt management objectives;
c) a list of all guarantees issued by Government including a classification of guarantees
according to their probability of being called in; and
d) a list of all outstanding borrowings and related debt service projections including
classification of the loans by Government, public entities and local authorities.

3.6.9 Establishment of Sinking Funds

Section of 32 of the Public Debt Management Act permits Treasury to establish sinking funds for
the purpose of redeeming State loans unless they are satisfied that arrangements for the
repayment of the State loans are such as not to require the establishment of sinking funds.

Where a sinking fund has been established, the payments into such a fund should be made out
of the Consolidated Revenue Fund.

3.6.10 Summary

The management of the national public debt in Zimbabwe is centralised and the responsibility
lies with the Public Debt Management Office within Treasury. The Public Finance Management
Regulations describe public debt as amounts owing under loans raised according to the Public
Debt Management Act and includes the arrears of all ministries and public entities, in relation to
payments that are overdue and not made by the due date.

The authority to borrow money or issue a guarantee, indemnity or security or enter into any
other transaction that binds or may bind the Consolidated Revenue Fund to any future
commitment is solely vested with the Minister. Borrowing limits can only be exceeded in
situations where Treasury obtains a resolution of the National Assembly to do so.

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UNIT 4: Stakeholder Communication in Public Finance Management

4.0 Introduction to Stakeholder Communication in Public Finance Management

Public finance impacts on society, businesses, households and individuals. Lawson (2015) notes
that the public finance management cycle is commonly conceived as a cycle of six phases namely,
policy design, budget formulation, budget approval, budget execution, accounting and external
audit. Each phase impacts on and is influenced by different stakeholders. The information needs
and the communication requirements and channels also differ at each of these phases.

This Unit defines public finance management stakeholders, discusses the nature of public finance
management stakeholders, their information needs and best practice communication channels.

Learning Objectives

The objectives of the Unit are to:

a) Define Public Finance Management Stakeholders;

b) Discuss the nature of public finance management stakeholders;
c) Examine the information needs (both financial and nonfinancial) of public finance
management stakeholders;
d) Describe the communication channels appropriate for each group of stakeholders; and
e) Examine the power dynamics in stakeholder communication.

Learning Outcomes

After completing this Unit students should make evident the following:

a) Appreciation of the definition of public sector stakeholders;

b) Knowledge of information needs of public sector stakeholders;

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c) Understanding of the appropriate communication channels for public sector

stakeholders; and
d) Appreciation of the importance of stakeholder communication in public finance
management.

Unit Content

The Content of the Unit covers the following areas:

a) Defining of public management stakeholders;

b) Public finance management Stakeholder Mapping;
c) The information needs of public finance management stakeholders;
d) Nature of public finance management Stakeholder Communication channels; and
e) Developing appropriate communication channels for public finance management
stakeholders

4.1 Defining public finance management Stakeholders

A stakeholder is any person, group or organisation that has a claim on a state institution’s
attention, resources or output or is affected by that output. Stakeholders in public finance
management are the various interested parties. Each stakeholder impacts and influences the
public finance management cycle in a different way. The stakeholders do not share same
interests and the ways in which they interact between themselves or within the public finance
management process.

4.2 Public finance management stakeholder mapping

Public finance management activities by their nature affect the following groups:

a) Citizens and businesses from whom resources are collected and allocated;

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b) Authorities (both at local, provincial and national) who are assigned the responsibility of
managing the affairs of the citizens and businesses and to whom resources are allocated
for the delivery of services and achievement of national development objectives;
c) State employees who are responsible for public services delivery;
d) Politicians (both in power and opposition) who have the power to enact legislation to
oversee and monitor the activities of authorities; and
e) Development partners, particularly for developing countries who offer budgetary
support.

The key stakeholders in the public finance management cycle can fall into two categories, namely
internal and external. The internal stakeholders include some of the following groups:

a) the Head of State;

b) the government itself and in particular the cabinet;
c) the public service as a whole;
d) Reserve Bank;
e) ZIMRA;
f) Accountant General;
g) Accounting Officer;
h) Auditor General;
i) Professional Accountants in Business;
j) Internal Auditors; and
k) Finance and Audit Committees

The key external stakeholders include the following

a) the general public;

b) communities;
c) private sector (business/industry);
d) the legislature;
e) financial institutions;

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f) the media;
g) research institutions/academia,
h) International organisations operating in Zimbabwe;
i) Voluntary organisations;
j) Civic Society; and
k) Neighbouring countries.

The interests of each stakeholder group vary with each phase of the public finance management
cycle. Each group’s interests and influence is discussed below.

4.2.1 Internal Stakeholders

Internal stakeholders have responsibilities for the management of public resources. Their
influence and interests vary.

(a) The Head of State, Executive and Cabinet

The functions of the Executive and Cabinet are provided for in section 110 of the Constitution.
Section 307 assigns specific responsibility with regard special warrants. The Head of State is also
responsible for assenting to and signing Bills. Section 110 (3) of the Constitution assigns Cabinet
the responsibility of directing the operations of Government; preparing, initiating and
implementing national legislation; developing and implementing national policy; and advising
the President. The responsibility of the Executive with regard the public finance management
therefore includes planning, directing and controlling operations and reporting on financial
administration. Their stake in public finance management is high.

(b) The Reserve Bank of Zimbabwe

The Central Bank is responsible for maintaining the country’s monetary policy, issuing bank notes,
regulating and supporting the country’s principal systems for clearing and settling payments and

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acting as fiscal agent for the central government debt. Their influence and stake in the public
finance management cycle is high.

(c) Ministry of Finance and Accounting Officers

The Ministry of Finance is responsible for overall management and control of public expenditure,
government debt, fiscal policy and long-term financial planning. It is also responsible for deciding
what resources are necessary and how to distribute the resources.

The Ministry of Finance’s treasury function comprises two activities of setting policy and
physically handling funds. Responsibility for managing money is decentralised to line ministries
and departments, but they are ultimately answerable to the Secretary for Finance

The Treasury brings together and co-ordinates the data which is produced by each individual
ministry or department. Each ministry must work within the confines of the appropriate
government regulations and must produce accounts which, when submitted to the Secretary to
the Treasury, provide data for the preparation of the final government published accounts.

(d) Accountant General

The Accountant General, as the government’s principal accounting officer and adviser on
accounting policy, is responsible for regulating the receipt and disbursement of funds. He or she
is responsible for overseeing accounting policies and procedures and for introducing changes as
appropriate. The Accountant General is also responsible for controlling the centralised
computerised accounting system used by the public sector.

(e) ZIMRA

The Zimbabwe Revenue Authority is responsible for the collection of government revenues.
Revenue usually comprises taxes on the income of individuals (income tax), on the profits of
companies (corporation tax), on the gain in the value of capital assets (capital gains tax), on

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inherited wealth (inheritance tax) and on transfers of titles to assets (stamp duty). ZIMRA also
collects taxes on goods and services (value added tax), import and export duties (customs), and
duties on petrol, spirits, tobacco, betting and gaming.

(f) Auditor General

The Auditor General is responsible for auditing the accounts, financial systems and financial
management of all public sector organisations. The Auditor General, at the request of the
Government, can carry out special audits of the accounts and order the taking of measures to
rectify any defects in the management and safeguarding of public funds and public property.

(g) Public Servants

Public servants are responsible for undertaking government activities at every level. They are also
responsible for implementing and managing decentralised budgets. They need accurate and
timely information to make informed decisions and to prioritise limited and scarce public
resources.

4.2.2 External Stakeholder

External stakeholder interests vary and in certain instances their interest conflict.

i) The Public

The public has an interest in ensuring that public money is accounted for and spent wisely.
Citizens rarely have direct access to public sector financial records except in the form of published
government accounts. In practice these are seldom read by the general public, but citizens are,
or should be kept informed about them by means of the press and national political debate.

ii) Communities

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Communities are the beneficiaries of government programs and activities. Section 13 of the
Constitution also urges the State and its institutions at all levels to involve communities in the
formulation and implementation of development plans and programmes that affect them; and
to protect and enhance the rights of communities, particularly women, to equal opportunities in
development. Communities are therefore supposed to be kept informed of plans and progress
made. Local authorities publish their budgets but also require that communities buy such
documents.

iii) Private sector (Business/Industry and Civic Society)

Public finance management activities have an impact on business and society. Section 10(2) of
the Public Finance Management Regulations requires the Minister responsible for Finance to
consult with interest groups on fiscal policy including expenditure intentions. Treasury issues a
Budget Strategy Paper that it uses to initiate dialogue and to hold stakeholder workshops.
iv) Legislature

The legislature has responsibility for oversight over the mobilisation and use of financial
resources. It is also responsible for monitoring and evaluating the administration and use of the
same resources. The legislature sanctions the financial plan or budget and authorises the
executive to:
• incur expenditures;
• raise revenue through taxation, and borrowing;
• invest surplus funds; and
• administer programmes in accordance with any laws that may affect them.

The legislature also has the right and responsibility to hold the government and its institutions
accountable for the management of financial affairs and for the use of financial resources.

v) Media

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Section 62 of the Constitution promotes the right of access to any information held by the State
or by any institution or agency of government at every level, in so far as the information is
required in the interests of public accountability. The role of the media is to ensure that the
people of Zimbabwe have fair and wide access to information. Section 248 of the Constitution
appoints an Independent Media Commission to promote the right of access to information.

vi) International and bilateral aid agencies (Development Partners)

Although these agencies are not part of the formal constitutional arrangements for public sector
financial management, they are an important stakeholder in Zimbabwe. They provide funding in
the form of grants or loans for a large proportion of public sector projects in many countries in
the world. Examples of international bodies include the International Monetary Fund (IMF), the
World Bank, and the United Nations Development Programme (UNDP), and regional
development banks such as the African Development Bank (AfDB).

4.3 The information needs and communication channels for public finance management
stakeholders

Table 4.1 explores the information needs, existing communication channels and possible
effective methods of communication with both external and internal stakeholders respectively.

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Table 4.1 : Information needs and communication Channels for External Stakeholders

Stakeholder Group Key concerns Existing communication More effective communication Key messages
methods methods

Private sector – Taxation levels Budget Strategy Paper Publishing of Consolidated Financial Transparency and
business/industry Reports Accountability
Size of public National Budget
sector

Communities Programmes Meetings Exchange visits to areas with similar

and developmental programmes
Written communication Local socio-economic
Benefits development
Presentations at
workshops

Media Access to Meetings Press conferences and press Direct access to

accurate and up releases accurate information
News briefing
to date
Training
information

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Media tours

Politicians in power Resources Budget Strategy Paper Consolidated Financial Statements Access to accurate
available information
Estimates of Revenue and Regular public finance management
Laws governing Expenditure training Transparency and
resource use Accountability
Auditor General’s Report Treasury Minute

Meetings

Workshops

Civic Society Securing the Meetings Open forums Transparency

rights of specific
Seminars Presentations and meetings
groups
Written communication
Equitable
distribution of Social media
resources
Websites

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4.4 Developing appropriate communication channels for public finance management

stakeholders

The development of appropriate communication channels must be guided by an assessment of

the interest and influence of each stakeholder group. Figure 4.1 provides the quadrants that must
inform the process.

Figure4.1: Quadrant for Stakeholder Communication Adapted from

It is important to establish the quadrant in which each stakeholder lies so that appropriate
communication channels are used. Parliament, for example, has both high influence and a high
stake in the public finance management cycle. It is important that communication channels allow
them access to accurate, timely and simplified information on public finance management
activities.

Another example is budget holders, who in most cases are accounting officers or officers
delegated by them. Their influence and stake are both high. These officers are normally non-
finance personnel. The communication channels must consist of regular management reports,

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training on interpretation of financial statements as well up to date monitoring and evaluation

reports.

4.5 End of Unit Summary

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4.1 Self-Assessment Questions

a) Describe the key stakeholders for public finance management in local authorities?
b) Discuss the nature of key stakeholders in the public finance management cycle
c) Evaluate the importance of stakeholder communication with the following groups
i. Communities
ii. Budget holders
iii. Internal Auditors
iv. Media

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References

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