good governance through financial managementthe oas accomplishes its mandates through its annual...

Good governance through financial managementEvolution of good governance through financial management at the Organization of American States (OAS)

Presenters *:

Javier Arnaiz, CGFMDiego Yrivarren, CGFM

September 10th, 2014

* The views expressed in this presentation do not necessarily reflect those of the Organization of American States. The views are strictly presented from a personal professional perspective by the presenters.

What is the OAS?

Who we are

World’s oldest regional organization, dating back to 1889

35 member states of the Americas

69 permanent observers states, as well as the European Union

$167 million annual budget; 600+ staff members

What we do

In brief, the OAS is mainly a political forum to promote “democracy for peace, security, and development” for the Americas

It carries a wide array of programs: promotion of human rights, political dialogue, inclusiveness, cooperation, electoral observation missions, legal and follow-up instruments, demining activities

What is our reach?

OAS is headquartered in Washington, DC with offices in most member states countries

What is good governance?

How do you achieve good governance?

Good governance is based on principles

Good governance

1.Accountability

2. Follows the rule of law

3. Transparency

4. Effectiveness and efficiency

Sound financial management helps promote good governance

Good

governance

1. Sound financial management

2. Results-based management

3. Risk management

1. Accountability

2. Transparency

3. Follows the rule of law

4. Effectiveness and efficiency

OAS is ultimately accountable to the People of the Americas

1.Accountability

Democracy and governance

Multidimensional security

Human rights

Integral development

… the People of the Americas

Mandates aligned to 4 pillars …

… to deliver benefits to …

The OAS accomplishes its mandates through its annual program-budget

$83 m

Regular Fund

$79 m

Specific Funds

$5m

ICR

Program-budget

$167 m

1.Accountability

1. Member state quotas and miscellaneous income for general use

2. Voluntary contributions from member states and other donors for specific projects

3. Indirect cost recovery (ICR) from Specific Funds projects to cover “overhead” costs

Approved by:

Sound financial execution of the OAS program-budget is supported by its governance structure

General

Assembly

Permanent Council

Board of External Auditors

Committee on Administrative and Budgetary Matters (CAAP)

General Secretariat

Technical areas executing OAS programs in member states’ countries

Finance Department

Inspector General

1.Accountability

The internal financial and administrative management structure provides support to technical areas

General Secretariat

Technical areas executing OAS programs in member states’ countries:

- 4 main Secretariats (democracy, development, security, legal affairs) with their own departments

- several other autonomous entities (human rights)

One Administrative Management Support (AMS) section per main technical area:

- Procure goods and services

- Project budget formulation and execution

Central administration

- Finance (where today’s presenters work at)

- Human resources

- Procurement

- FAIRLY NEW - planning and evaluation (budget function)

- IT

- Other general services

1.Accountability

Admin under functional

supervision of…

OAS ensures financial conformance through an internal hierarchical regulatory framework

2. Follows the rule of law

Legally binding agreements with external parties complete a comprehensive regulatory framework

2. Follows the rule of law

Internal hierarchical

OAS regulatory framework

Agreements with external

parties (donors,

suppliers)

Comprehensive regulatory framework

Relevant financial information is readily available to stakeholders year-round, in English and Spanish

Main financial report(s) Main stakeholder(s) Frequency

On-demand Monthly Quarterly Annually

General purpose financial statements

Member states, senior management

External audit of accounts Member states, donors, public

Resource management and performance reports

Member states, senior management

Project specific reports financed by voluntary contributions

Donors

Management reports Member states, senior management

Real-time financial information on ERP system

Project managers, admin units

3. Transparency

A case study from the financial reporting unit at OAS

4. Effectiveness and efficiency

Department of Financial and Administrative Management Services

Financial operations - Cash management

- Payroll

- A/P, A/R

Financial reporting

Case study

The financial reporting unit has two main functions

4. Effectiveness and efficiency

1. Budget formulation

2. Review of donor

agreements

3. Grants setup

4. Execution

5. Financial reports and

audits

# 1Regular accounting

• External audit publication and coordination

• General purpose financial statements

• Management financial reports

• Financial and administrative policy

Project business

cycle

# 2Project support to technical areas

A lower amount of funds does not equal less complexity in financial management

4. Effectiveness and efficiency

2,300+mandates from member states

for a $167 m budget

50+ offices

with reach to 35 member

countries = highly

decentralized structure

150+ diverse

donors to specific projects

500+active donor agreements every year

400+project

budgets

300+

project financial reports

Output has increased exponentially over the last decade in the financial reporting unit

4. Effectiveness and efficiency

4

11

# of management reports per month

2003 2014

100

300

# of project financial reports

2003 2014

0

400

# of project budgets reviewed

2003 2014

0

4

# of quarterly management reports

2003 2014

While resources have declined and technology remains virtually unchanged

4. Effectiveness and efficiency

12

8

Headcount

2003 2014

ERP virtually unchangedsince 2002

Oracle Financials 11i

Major challenges:Cash vs accrual

Rely heavily on Excel

We focused on previously untapped potential within the team

4. Effectiveness and efficiency

Self-reliant in process

automation

1. Hard skills –beyond accounting

2. Soft skills –self-motivation

3. Maximize existing tech

Visual Basicprogrammingwith MS Excel

Several productivity gains with process automation

4. Effectiveness and efficiency

20

3

Example 1: business days to publish monthly

management reports

2003 2014

50

40

Example 2: average weekly hours

2003 2014

Better work/life balance

Harmonization of donor requirements through framework agreements

4. Effectiveness and efficiency

Project X

Same agreement, one budget

Donor A

Donor B

Donor C

Ideal model

The structure was divided by function

4. Effectiveness and efficiency

CustomersFunctionsOur unit

Financial reporting

unit

Project support

All

Financial reports

All

Six years ago …

The new structure is oriented to customers and project support

4. Effectiveness and efficiency

FunctionsCustomer oriented

Our unit

Financial reporting

unit

Security and development

All

Democracy and human

rightsAll

Now

1. Budget formulation

2. Review of donor

agreements

3. Grants setup

4. Execution

5. Financial reports and

audits

The new structure helped us built more effective, long-term client relationships

4. Effectiveness and efficiency

General Secretariat

Technical areas

AMS

Financial reporting unit

1. Cross-functional trainings

2. Admin prepares draft donor financial reports

In summary, improvements in productivity came mostly from within the team

4. Effectiveness and efficiency

Ultimate goal: better customer service

Structure

Processes People

.

. .

What are the opportunities moving forward for financial reporting?

4. Effectiveness and efficiency

1. Actively participate in change

Upgrade or replace Oracle

11i?

New accounting standards?

IPSAS?

2. Keep learning

Lean6 sigma

Alternative programming

languages such as

Java

New opportunities to continue towards good governance

Towards good

governance

New administration

in 2015

New OAS strategic

vision

Reforms to financial

management

Thank you.

Questions?

References

www.oas.org

http://www.ifac.org/publications-resources/international-framework-good-governance-public-sector

http://www.goodgovernance.org.au/about-good-governance/what-is-good-governance/

http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/MENAEXT/EXTMNAREGTOPGOVERNANCE/0,,contentMDK:20513159~pagePK:34004173~piPK:34003707~theSitePK:497024,00.html