2003年-世界发展银行全球_Georgia___Country_Financial_Accountability_Assessment_74页_5mb

Georgia Country Financial Accountability Assessment Summary

Core Content of the Report

This report, titled Report No. 28941-GE, is a Country Financial Accountability Assessment (CFAA) conducted by the World Bank in 2003. It evaluates the financial accountability framework of Georgia, focusing on public financial management (PFM), internal controls, internal and external audit, legislative scrutiny, and capacity development in financial management and auditing.

The report is based on findings from a World Bank mission to Georgia in May 2002, followed by an update in February 2003. It outlines four priority areas for reform and 21 additional recommendations, emphasizing the need for a modern internal control framework, strengthened audit functions, and capacity building to mitigate fiduciary risks.

Key Information and Main Points

1. Country Background

• Location: Republic of Georgia, in the southwestern Caucasus region of western Asia.
• Political History: Part of the Russian Empire (early 19th century–1918), independent republic (1918–1920), part of the Soviet Union (1922–1991), and declared independence in 1991.
• Current Status: Still in political and economic transition; a presidential, parliamentary democracy with a unicameral Parliament.
• Economic Challenges: Suffered from a dramatic collapse after the Soviet Union's dissolution, with hyperinflation, currency depreciation, and depleting foreign exchange reserves.
• Recent Trends: Economic growth has resumed, with GDP growth at 5.4% in 2002. However, public expenditures on infrastructure and social sectors remain low, and fiscal sustainability is not yet established.

2. Financial Accountability Framework

2.1 Budget Formulation and Execution

• Legal Basis: Governed by the 2003 Budget Systems Law.
• Budget Composition: Central government (56%), extra-budgetary funds (EBFs) (17%), and local governments (27%).
• Budget Realism: Issues with revenue forecasting, large variances, and budget execution arrears (about 3% of GDP).
• Recommendations: Strengthen budget preparation cycle, improve budget realism, and reduce arrears.

2.2 Public Enterprises

• Current Arrangements: Public enterprises are outside the Government reporting entity and not integrated into the budget.
• Fiduciary Risk: Potential for large actual and contingent liabilities.
• Recommendations: Integrate public enterprises into the budget and improve financial reporting and oversight.

2.3 Accounting and Reporting

• Standards: Government does not follow International Public Sector Accounting Standards (IPSAS).
• Fiduciary Risk: Lack of reliable and consistent financial information.
• Recommendations: Implement IPSAS and improve the quality of financial reporting.

2.4 Internal Controls

• Weaknesses: Inadequate legislative base, weak internal audit function, and insufficient financial management capacity.
• Fiduciary Risk: High due to lack of effective internal controls.
• Recommendations: Develop a modern internal control framework aligned with the EU Public Internal Financial Control Systems (PIFCS), and strengthen internal audit.

2.5 Internal Audit

• Current Status: Only a nascent internal audit unit exists in the Ministry of Finance (MOF).
• Fiduciary Risk: High due to lack of independent audit information.
• Recommendations: Establish a strong internal audit function within MOF, develop audit policies, and provide training on international standards.

2.6 External Audit

• Chamber of Control (COC): Currently functions as an external audit institution but lacks an appropriate mandate.
• Fiduciary Risk: Moderate, but critical for supporting internal audit development.
• Recommendations: Align COC with INTOSAI standards, remove provisions that may conflict with its independence, and enhance its audit capacity.

2.7 Legislative Scrutiny and Public Accountability

• Role of Parliament: Needs to improve oversight of public financial management.
• Fiduciary Risk: Moderate to high due to weak legal and institutional frameworks.
• Recommendations: Strengthen the legal and regulatory framework to promote sound financial governance.

2.8 Fiduciary Considerations in Bank-Financed Projects

• Focus: Ensuring proper use of Bank funds and managing fiduciary risks in implementation.
• Recommendations: Improve procurement processes, strengthen auditing arrangements, and ensure transparency in fund flows.

Priority Recommendations

Priority 1: Implement a Sound Legal Foundation for Effective Financial Controls

• The Government should adopt the EU Public Internal Financial Control Systems (PIFCS) as the basis for its financial control framework.
• Develop a modern and effective legislative foundation for internal controls.
• Rationalize contradictory or incomplete legislation and build consensus among stakeholders.

Priority 2: Build the Internal Audit Function

• The Ministry of Finance (MOF) should lead the development of internal audit.
• Strengthen the Inspector General function and integrate it into MOF operations.
• Provide training for audit staff on international standards and best practices.
• Ensure independent audit of all government entities and develop internal audit policies and procedures.

Priority 3: Strengthen the External Audit Function

• The Chamber of Control (COC) should be aligned with INTOSAI standards.
• Remove provisions that allow COC to retain special revenues (e.g., 30% of fines).
• Enhance donor technical assistance to support the development of the COC.

Priority 4: Build Staff Capacities in Financial Management and Auditing

• Develop a human resource strategy to train financial managers, accountants, and auditors.
• Focus on international public sector accounting and auditing standards.
• Provide donor assistance for training programs and capacity development initiatives.

Fiduciary Risk Assessment

• The overall fiduciary risk of Georgia's public expenditure management framework is rated as HIGH.
• Key Risk Areas:
  • Public enterprises: Represent a high fiduciary risk due to lack of integration into the budget and poor financial reporting.
  • Local governments: Pose a moderate-high risk due to insufficient legal and operational frameworks.
  • Budgeting: Identified as a moderate-high risk due to poor revenue forecasting and budget execution arrears.
  • Accounting and Reporting: Rated as moderate risk due to non-compliance with IPSAS.
  • Internal Controls: Rated as high risk due to weak legal and institutional foundations, and lack of effective internal audit.

Conclusion

This CFAA report outlines a comprehensive assessment of Georgia's financial accountability framework and highlights the need for significant reforms in legal foundations, internal audit, external audit, and staff capacity development. The report emphasizes that internal controls are critical to reducing fiduciary risk and ensuring the proper use of public resources. The Government is urged to take immediate action in these priority areas to improve transparency, accountability, and the effective management of public finances.