Fostering decentralization of public financial management through capital and skills investment:
e-SISTAFE workshop for accountants in the rural districts of Tete 


In the last week of August 20 participants responsible for accountancy in the health sector in rural districts of Tete Province were brought together in the provincial capital Tete for a training financed by Enabel’s GTAF II project. The aim of the training was to provide the participants with a clear theoretical and practical knowledge on the Integrated Financial Management Information System, locally known as e-SISTAFE, the electronic system used for managing the expenditure of public sector administration.  

Enabel Mozambique and PFM
Since 2013, Enabel together with the Government of Flanders has been implementing this project with the aim to improve the Public Financial Management (PFM) in the Mozambican Ministry of Health with the engagement of a technical assistant to GTAF, the working group on audit and finances. This year the project has initiated its third phase and will focus mainly on promoting comprehensive dialogues in the health sector, supporting a sound financial management system in actual and future reforms and further strengthening PFM aspects with a main focus on linking financial input with service delivery, a link that is not clearly identifiable yet.

Ancient PFM regulations
The management of public finances in Mozambique was until 2002 regulated by ancient regulations dating back to the end of the 19th century (the “1881 Regulation on Public Accountancy”, as well as the “1901 Regulation on Treasury”). In the late 90’s it became clear that a reform and modernization of the financial administration was indispensable and therefore imminent. In 2002, a new “System of Financial Administration of the State” (SISTAFE) finally saw daylight through the Law of 9/2002 and the Decree of 23/2004, including a digital platform “e-SISTAFE”. This system aims to bring more transparency in the accountancy processes, to harmonize the rules and procedures, to bring together reliable information, to implement a sound internal control and audit system and to allow an efficient, adequate and correct financial-economic conduct of activities. The roll-out of e-SISTAFE is currently still ongoing and is supported by Enabel’s project.

Decentralization of PFM: from UGB to UGE
Since 2002, SISTAFE governs the way public institutions have to manage the expenditure and the roll out of e-SISTAFE is taking place in several waves: it started with institutions at central level and is expanding to all budget units. Budget units are “UGB” (Unidade Gestora Beneficiária). Yet if a UGB is also a “UGE” (Unidade Gestora Executória) it can execute its share of the budget independently. Otherwise, the UGB depends to its hierarchical UGE to execute its payments. Thus, the visibility in the budget, as well as procedures and categories of payments, differ according to whether the institution is an executive or a beneficiary public institution. The latter’s budget and expenditures depend on and is clustered with the UGE. If the District Services of the Health Sector (SDSMAS) is a UGB, it will have to rely on the District Secretariat (which is the UGE) for its payments. Yet, the District Secretariat is also in charge of other public services for that district (such as Service for Education – SDEJT – and for Public Infrastructure – SDPI). The government of Mozambique has undertaken several waves of decentralisation by creating the conditions for entrusting the financial management to the institutions responsible for one specific kind of service to be delivered. The Ministry of Health – with modest Enabel support – targeted few UGB that are or will soon be converted into UGE. From now on, they have to manage their own expenditure and execute payments themselves.

Practical example
Participants to the course were very positive about the decentralization process of PFM as it would make the payment process easier. They reported that currently, many of the payment orders were held pending by the UGE and therefore the Health UGB suffered delays in payments. Indeed, the release of funds to a UGE is linked to the expenditure performance: this implies that if one of the services is underperforming all the other services will take the burden. For the sake of clarity, let us suppose that in the month of March in Pandza District[1] there are two payments to be done, one for the Pandza Rural Hospital and one for the Pandza Primary School. Let us suppose that a supplier to the Pandza Primary School is not issuing the invoice for final liquidation of expenditure. The District Administration, that is the UGE, can neither execute that expenditure nor apply for new liquidity for the month of April, practically blocking all the payments of the entire UGE due in April and thus also the payments for the UGB Pandza Rural Hospital. As targeted institutions will soon become UGE, they will be shielded from problems with other UGBs. In addition, they will receive more responsibilities and more autonomy in relation to expenditures and budgeting.

Course content
In a first stage, the course provided the participants with a clear theoretical background of SISTAFE about its history, objectives, structure, financial regimes, budget planning, execution procedures, ethical questions (such as pre-payments), etc. In light of the decentralization process of PFM, the practical exercises were especially of importance to the participants. Although most of them indicated to have worked with the informatics platform e-SISTAFE in their daily work, the transformation from UGB to UGE has brought many more new proceedings to be executed by these financial accountants. The instructors showed them the different procedures they will be responsible for from now on and which steps they have to take for each one of them, as well as briefed them on the classifying codes and how to consult the different reports in e-SISTAFE.  The participants were very optimistic and stated that the course successfully tackled the gaps they were confronted with after the decentralization of PFM. They were confident that they now have sufficient knowledge to successfully process all payments, from beginning to end, through e-SISTAFE.

Skills and capital investment
The fostering of the decentralization process of public financial management by Enabel’s GTAF phase III project does not only consist of a skills development part through this e-SISTAFE course. It also includes a part linked to capital investment, through the installation of equipment in the targeted institutions. The equipment consists of 3 working stations (required for the segregation of the functions for authorising a payment) and a networking system so that the operator will work in real-time in the e-SISTAFE which in turn is linked to the Single Treasury Account. 

PFM... For service delivery
The full scope of Public Finance Management, however, is often forgotten. A sound PFM system ultimately aims at providing an instrument to better organise and manage the service delivery functions. Making the link between the former and the latter is a step too often neglected, limiting the PFM scope is to merely transparency and accounting.  Nevertheless, a meticulously filled out expense table where all expenditures are linked to functional and programmatic classifying codes will provide a wealth of information: (a) on how budget allocation are financing services and (b) on how to orient budget cuts (or budget scale up), which implies reducing the level of services (or increasing them), if the situation requires it. It would provide information to the management on what the consequences on other services would be and how budget policy decisions influence the delivery of public services, and vice versa how changes in public service delivery can be traced back to budget modifications.

All this information will allow for a more informed decision on budget planning and execution. Hence, the accounting system e-SISTAFE, has the potential to become a management tool, but for now it seems that there is either no demand or interest or awareness with managers and policymakers. An important role is assigned to the technical assistant of Enabel’s GTAF III project in raising awareness to correctly use e-SISTAFE not only as an accountancy tool, but also and foremost as a management tool for service delivery*.

- Article written by Damiano Stella and Anke Van de Velde

* For more technical information on PFM for service delivery, we would like to announce that a technical analytical paper is currently being written by the project, in order to better understand and deal with the link between PFM and service delivery.
[1] Pandza is a youth slang used to refer to Mozambique in general and originates in a popular song: https://www.youtube.com/watch?v=XIw1xDorB_w.