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ACKNOWLEDGEMENT I would like to sincerely thank District party committee of Thuy Nguyen District People’s Committee for granting me a great opportunity to participate in Master Program of Public Management which jointly trained by Uppsala University of Sweden and University of Economics and Business - Vietnam National University; I am also deeply indebted to Dr Hans Blomkvist from Uppsala University (Sweden) and Dr Nguyen Phu Ha from University of Economics and Business - Vietnam National University for their enthusiastic supports and valuable suggestions during the study and completion of this thesis I gratefully acknowledge the experts and leaders of Thuy Nguyen district, district and commune departments, leaders of enterprises who supported me in the process of conducting research, survey and verification of information, as well as readily gave their time for joining the interview and provided me with necessary information to ful li ll all the steps of the thesis My deep gratitude to Uppsala University (Sweden) and University of liconomics and business - Vietnam National University and profi:ssors of the Master Prtigram of’ Public Management Council li›r giving me a chance to present this thesis and I would appreciate your comments that will help tiirther improve my thesis Respectliilly, Biii Anlt l"iién ABSTRACT Title:ANALYSIS OF THE CHARACTERISTICS OF PUBLIC FINANCIAL MANAGEMENT, COMP7\ RISON AND APPLICATION €1F PUBLIC FINANCIAL MANAGEMENT IN THE STATE MANAGEMENT OF THUY NGUYEN DISTRICT, HAI PHONG CITY Level: F inalassignment tor Master PrograminPublic Management Authors: Birt Anh Tuan Sweden Supervisor: PhD.Hans Blomkvist Loca lSupervisor: PhD.Nguyen Phfi H:i Time of completion: December 20 14 Objective:This research aims to improve the aggregate fiscal discipline, allocative efficiency and operational efficiency on the basis of enhanced transparency, accountabil ity, predictability and participation in public financial management of Fhuy Nguyen district, Hat Phong City Methodology: Based on the theoretical framework for good governance associated with the ohjectives o1’ public financial management, the thesis mainly used secondary data obtained from the documents reflecting the results ot" the state budget expenditure in Thuy Nguyen district in years from 20 I I to 20 13, compared with plan assigned to see the strengths and weaknesses in the state budget expenditure management in ’l huy Nguyen district The thesis also applied the the concept of’the “ladder of citizen participation” with eight levels developed by Sherry Arnstein ( 1969) to evaluate the levels of participation This model is considered a tool to identify levels of’ participation of organizations as well as citizens in three main categories: Non-participation, Degrees of tokcnism and Degrees of citizen power In addition, so that the causes of the weaknesses in the state budget expenditure management could be deeply analyzed the author conducted in-depth interviews with a number of leaders of district People’s Committee, and ofticials of division of planning and I mance, division ot’education, division of health at district level as well as some chairmen and accountants at commune level district construction debts increased by nearly times in comparison with the at located budget after three years District State Treasury has done well both in revenue control and cash — on hand forecast to timely serve spending needs Only at the end of the year, when demands for spending are too large, it suffers from shortage of money - Fhe participation of commune authorities in the district activities; of socio political organizations in the Party and government activities; of people in district government activities was at the same level of No power (compared with eightlevel ladder developed by Sherry Arnstein ( 1969) to describe the process of citizen participation) This shows that the "abolishmen t of district People's Council" has many shortcomings Some activities such as determination of socio-economic objectives and determination of budget allocation, etc., were not conducted in accordance with international good practices In terms of respect for people’s opinions, there was difference in situation between the district level and commune level Comparison between the two levels showed that the degree of citizen participation in the activities of commune level was between the “Df?bº CeS €tf toki:nism” and Degrees of power” in the - level ladder described by Sherry A rnstein ( 1969) while district level only reached “No power” It proved that commune People's Council has efficiently implemented its ftinct ion and power representing the will and aspirations ot’ local people Thereby, the level of responsibility of authorities for the settlement of citizens’ claims was higher at commune level than district level Some recommendations were made for the effective management of publ ic expenditure management namely: - Strengthening the monitoring and supervision of the implementation of financially transparent processes at all levels, especially commune level Public disclosure of tinancial performance should be clear, simple, understandable and timely - Strengthening the coordination and participation of stakeholders and citizens to identify key tasks and key investment projects in order to avoid spreading — out budget and limit power abuse, corruption and waste - €l ut put — based allocation will improve budget performance and accountability of budget users The output here is understood as the result of the activities performed by the organization as assigned - Improving self-responsibility of civil servants, contributing to saving state budget spending Specifying the responsibilities of each individual in the organization and enhance their self-responsibility will contribute to improving the efficiency of state budget spending Suggestions for future research: Expanding the research scope to other districts of Hat Phong City will provide a more objective perspective for assessment Contribution of the thesis: Strengthening public financial management towards openness, transparency, accountability and participation will help Thuy Nguyen effectively use its resources and to be a reliable place to receive investments from the higher levels and private sectors Key words: Abolishment ot’ People's Councils, public finance, publicity transparency, accountability, participation, prcdictabil ity and TABLE OF CONTENTS ACKNOWLEDGEMENT ABSTRACT TABLE OF CONTENTS LIST OF TABLES LIST OF FIGURES LIST OF CHARTS ABBREVIATIONS l INTRODUCTION l l Background l l Research objectives I Research questions TH EORY.TICAL FRAMEWORK .3 l Four pillars of good governance 2.2 Main Objectives of’Public Finance Management 2.3 Public expenditure management and good governance RESEARCH METHODOLOGY .9 I Outline of the research iiicthodology 3.2 flata collection methods .9 3.3 Methods of data processing 10 DATA ANALYSIS 1 Overview of budget management of Thuy Nguyen district I 4.2 Assessment of accountability in the management of the district budget 13 4.3 Assessment of the budget transparency 20 4.4 7tssessment of the budget predictability 28 4.5 Assessment of participation in budgeting process 32 CONCLUSIONS 39 RECOMMENDATIONS 41 l Recommendations 41 6.2 Suggestion for future research: 41 CON III BUTION OF THE THESIS 42 REFERENCES 43 APPENDICES 45 LIST OF TABLES Fable l Ob ject ives of Public Finance Management Fable Public expenditure management and good governance Fable Public expenditure management and good governance Table Actual budget expenditures vs estimates l l able Investment in capital construction in 20 I I -2913 and debts by 30/ I 2/20 13 14 Table Aggregation of capital expenditure in 2013 15 Table Total expenditure for land clearance in 20 11 16 Table Actual expenses vs estimates of the Division of Natural Resources and Environment .19 Table Assessment of performance of plans assigned of thc Division of Natural Resources and Environment 19 Table 10 General transfers, targeted transfers for district and commune governments 23 Table I I lludget settlement in 20 11-20 13 25 "l’ablc 12 Actual revenues vs estimated revenues 201 -20 13 2b Table 13 List of construction works with funding withdrawal was not in accordance with the recommendations of’ thc auditors 30 ABBREVIATIONS CPC Commune People’s Committee DPC District People’s Committee M& E Monitoring and Evaluation PEM Public Expenditure Management PFM Public Financial Management PPC Provincial People’s Committee VFF Vietnam Fatherland Front VND VSIP Vietnam dong Vietnam Singapore Industrial Park INTRODUCTION 1.1 Background Fhuy Nguyen is a northern district of Hat Phong city, located on important traffic routes connecting to Quang Ninh and Hat Duong In Hat Phong development strategy to 2020, Thuy Nguyen was identified as a dynamic economic region attracting foreign investment projects such as Vietnam Singapore Industrial Park(VSIP) of Singapore, key projects of the Government and of the city In recent years, Thuy Nguyen has applied the regulations of financial management towards saving and efficiency Especially the period 201 I -20 15 is considered as stable budget cycle, Thuy Nguyen is applying the regulations in accordance with the resolution of Haiphong city People’s Council, i e the city provides balancing subsidy for district level; the district sets spending limit for commune level "Fhuy Nguyen has nine departments in the political system of districts, 37 communes and towns are units of“ the state apparatus; There are 76 schools and one hospital which belong to public agencies Annual budget expenditure is from VNB 700 to 9110 billion Thus, in order to ensure economically and effectively budget spending, it is necessary to ensure transparency in the budget execution The unit which uses the state budget must improvc its accountabil ity The level of participation of people under the motto "people know, people discuss, people and people check" should also be promoted Predictability in budget planning should be improved to achieve scientitlcness and effectiveness "Fhe government of Vietnam has four levels: national, provincial district and commune levels Each level of government has an elected body to approve the budget and monitor budget execution Since 201 I , at the request of the Ministry of home A1’t airs, Thuy Nguyen district piloted the "abolishment of People ’s Council” model How it affects the objectives of aggregate fiscal discipline, allocative efficiency and operational efficiency in budget management needs to be studied with a view to identifying lessons learned 1.2 - Research objectives To review the implementation of following objectives: aggregate fiscal discipline, allocative efficiency and effective performance of public financial management of Thuy Nguyen in 20 l l -20 13 - To examine the degree of transparency, accountability and participation in the budget cycle in Thuy Nguyen district 1.3 Research questions Does Thuy Nguyen district’s management of budget expenditure ensure the aggregate r scal discipline, allocative efficiency and operational efficiency? - What are the levels of transparency, accountability and predictability in the budgeting process of Thuy Nguyen district? - What types of participation in which citizens engage at the district and commune budgeting process? 36 "l’hus, in consideration of the district VFF role as representative of people to participate in the District’s budgeting process, In comparison with the — lcvel ladder developed by Sherry Arnstein ( 1969) to describe the citizen participation process, participation level of district VFF is betwccn DCbºét2S Of tokenism” 4.5.5 Difference of district level and comninune level with regards to respect for people ’s opinions Commune level is considered toalways be “close to people” In a report of the People’s MobilisationCommittee of the District Commissioner in 2013, there was a paragraph: “one of the main solutions to quickly implement land clearance for project construction is that the commune should implement well the task of mobilizing the people, especially the government level The commune party provides the policy, and the CPC prepares a plan to implement with the participation of mass organizations The whole political system of the commune should coordinate with each other They should meet with people, provide them with sufficient informntion,- listen to people’s claims,• cltirify and explain to them iibtint p‹ilic-Yes and encourage them to accept the policy of land clearance so that the projects could be implemented” Vice Chairman ot’ I.ap Le CPC also shared that: “Literacy rate of people is higher and higher, goverment officials should listen to them and respect their opinions ” 37 VSIP industrial zone project As a local resident participarting directly in activities with other Party members the village cell secretary undestands clearly the wills and asipations of the Party members and of the publ ic I n addition to activities of the cell, he and other members in the people’s mobilisation group often go to households to mobilize and encourage them to strictly implement the policies and directions of the Party and State on supporting the deployment of large projects of the city In a short time, I 00°f» of households in clearance area in the village handed over their land for construction unit Many households, such as the Mr Nguyen Van Xoa’s household who had 7/8 perches of rice-field being revoked, after the explanation and mobilzation of the group members, accepted to hand over their land to construction unit Other cases as Xua Bridge historical place which was used to be occupied with illegal housing; after continous persuasion of mobilization group members, these households voluntarily broke down their houses and handed over land to the lc×:at authorities to upgrade the historical place Mr Bui Quang Trung the cell secretary cam head of An Binh village mobilization group said that to implement well the duties, responsibilities of organizations and mass organizations should be linked with people’s mobilisation Members of the group are divided into small groups to manage each residential area under the regular direction and operation of the cell secretary cum head of people’s mobilisation group Each group is responsible for regularly updating information on the shortcomings and changes of the residential area they are assi ;;ned to undertake and report periodically to head of group to find solutions Members in the group coordinate and mutually support to complete the local socio- economic targets as well as positively participate in the movements such as “people consolidate to protect national security”, “New rural development”, “Implementation of grassroots democracy” etc., focus on conciliation, disputes and claims settlement of citizens in order to reduce situation of claiming to higher level and retain stabi lity, security, social safety, and so on 38 ’I“herefore, t rom awareness of commune ofticials and via evaluation of the District, it shows that the commune government is really “close to people” and always respects and listens to their opinions 39 CONCLUSIONS ’I huy Nguyen has made continuous efforts to maintain fiscal discipl ine by following the norms for the allocation of district expenditures Allocative efficiency of recurrent expenditures is relatively high Although the actual expenses increased over the estimate, the increase level was quite low (at about 8.6%/ year), which was mainly due to an increase in expenditure from state budget for district administrative management Findings from in-depth analysis of each specific content showed that: + There was a sign of authority abuse when the budget allocated to district level by District government was more than budget allocation norms The budget expenditures increased but the level of socio-economic target achievement decreased The waste of budget was significant particularly the rate of loss in capital construction was deti ned as at least I 0%; not to mention fallow land since there has not been any comprehensive assessment to determine the exact level of waste + ’Fhc perliirmance of financial autonomy was poor Particularly, lack of’ funding for activities of the district departments and CPC is the direct reason of bullying and harassment caused by ofticia l s and civil servants; thus performance of state manageiiient was not high + "Fhe performance of transparency was forrnalistic and did not go into et’fect The budget allocations among goverrnent authorities at all l cvels were not transparent People were difficult to access tinancial information of the authorities, especially at district level Some information was only be used for internal purposes such as inspection and audit conclusions, expenditures which have exceeded estimates, the out-of- budget fiinds As such, Thuy Nguyen district’s budget does not meet the criteria of transparency according to international standards + Predictability of district budget was low The dit tercnce bctween the actual expenditure and budgeted was quite high at about 30%; Allocation norms of spending was irrational, which was mainly based on payroll and not taking into 40 account the nature and load of work of each sector as well as the operational efficiency of each unit The disttrict was irresolute in applying measures to postpone the deployment of construction works This led to the consequence that district construction debts increased by nearly times in comparison with the allocated budget after three years * District State Treasury has done well both in revenue control and cash — on — hand forecast to timely serve spending needs Only at the end of the year, when demands for spending are too large, it suffers from shortage of money + The participation of commune authorities in the district activities; of socio political organizations in the Party and government activities; of people in district government activities was at the same level of No power (compared with eight-level ladder developed by Sherry Arnstein (1969) to describe the process of’ citizen participation) This shows that the "abolishmen t of district People’s Council" has many shortcomings Some activities such as determination of socio-economic objectives and determination of budget allocation, etc were not conducted in accordance with international good practices In terms of respect for peoplc’s opinions, there was difference in situation between the district level and commune level Comparion between the two levels showed that the degrec of citizen participation in the activities of commune level was between the “Degrees of tokenism” and “Degrees of power” in the - level ladder described by Sherry A rnstein ( 1969) while district level only reached “No power” It proved that commune People's Council has efficiently implemented its function and power, representing the will and aspirations of local people Thereby, the level of responsibi lity of authorities for the settlement of citizes’ claims was higher at commune level than district level 4l RECOMMENDATIONS 6.1 Recommendations Some recommendations were made for the el li:ctive management of public expenditure management, namely: - Strengthening the monitoring and supervision of the implementation of financially transparent processes at all levels, especially commune level Public disclosure of financial pertonnance should be clear, simple, understandable and timely Strengthening the coordination and participation of stakeholders and citizens to identify key tasks and key investment projects in order to avoid spreading — out budget and limit power abuse, corruption and waste - Output — based allocation will improve budget performance and accountability of budget users The output here is understood as the result of the activities performed by the organization as assigned Improving sett-responsibility of civil servants, contributing to saving state hudget spentling Specifying the responsibilities of each individual in the organization and enhance their sel l-resp‹insi bility will contri butc to improving the efficiency of state budget spending 6.2 Suggestion for future research.Transparency is an essential requirement in budget management It is necessary to have further research to assess the level of transparency of Thuy Nguyen district budget based on international standards and there should be more specific recommendations to improve the pu hl ic transparency to be applied to the general re torm of Thuy Nguyen district Individual accountability in the process of budget execution needs liirther researches and applying international experience in order to make recommendations to improve policies and to clarify regulations on individual accountability to ensure budget saléty and minimize risks Expanding the research scope to other districts of flat Phong City should be done to provide a morc objcctive perspective for assessment 42 CONTRIBUTION OF THE THESIS With comprehensive public financial management, Fhuy Nguyen district will have chances to improve allocative efficiency and operational effectiveness It not only helps Fhuy Nguyen save its resources, but also be a reliable place to receive investments from the central, the city and other resources, contributing to the development of the district as a dynamic economic region of Hat Phong city 43 REFERENCES [I ] Arnstein, Sherry R ( 1969), A Ladder of Citizen Participation Jonvnal of the American Institute of Planners [2] A joint discussion paper by OA Canada and l’SS Canada(6 January 1998), Modernizing Accountability Practices in the Public Sector Also, Investing in the United Nations for a Stronger Organization Worldwide Accountability (A/60/846/Add.6), New York: UN, 2006, pp 5-6 [3] Lambert Commission ( 1979), Final Report of the Royal Commission on Financial Management and Accountability Ottawa: Minister ot’Supply and Services Canada, pp.369 [4] Plumptre, Timothy W (1988), Beyond the Bottom Line Management in Goveriimen?.I l ali lax, N.S.: Institute for Research on f'ublic Policy pp 182 [5] llepu blic of Singaporc ( 1992), Financial proceclure act [6 J Schick Allen ( 1998), A contemporary Approach to Public Expenditure Management Washington, DC: World Dank [7] Schiavo-Campo Salvatore; "I ommasi, Harriet ( 1999) Managing Cioverntnent E.xpenditure Asian l3evelopment Bank ? Wilson Report (1975), Report of the Independent Review Committee on the Ojfice of the Auditor Gener‹il ‹›f C’nn‹zd‹i.Ottawa: Information Canada, pp.9 [9] World Bank ( 1998), Public Expenditure Management ?/niidbriok.Chapter l , “Developments in budget practice linking policy planning and budgeting in a medium-term framework” Reports: [I ] State Audit, Audit conclusions on capital construction works in 2012 [2] Division of Finance, Revenue expense estimates in 201 I, 2012, 20 13 44 [3] Division of Finance, Revenue — expense settlement 20 I I , 201 2, 2013 [4] Division of Justice, Summary of handling petiti‹›ns of communes and towns 201 I , 20 12, 2013 [5] District State Inspection, Inspection conclusions in 201 I , 2012, 2013 [6] Thuy NguJ en dist ric People’s Committee, Per ti›nnance of socio-economic targets in 201 I , 2012, 2013 45 APPENDICES Appendix A List of people participated in in-depth interviews 46 15 Pham Van Tru6ng Thuy Nguyen district tax division 09 |2S28977 16 Doong th| Thap Chairman of district Women’s Union 0932245268 General Accountant of Nut Deo High School The delegate of Phu Ninh People's 19 Birt Thi Nu 20 Nguyen van Stung Chairman of Dong Son Fartherland Front Chairman of 4“an Duong CPC 0912424319 0904046989 01236962544 0904186658 47 Appendix B SURVEY QUESTIONNAIRES (Research on the budget execution of l huy Nguyen district) Ladies and gentlemen! I am conducting a research on the budget execution of Thuy Nguyen district, Hat Phong city, which is a mandatory requirement to complete the Master of Public Management program of the Uppsala University (Sweden) I would expect your cooperation in answering some questions below and your answers will be used solely for purposes of my research After reading the questions, please mark V on the option which you choose as your answer Each question may have one or more answers You are kindly requested to carefully read the questions before giving your answer f Please give your full name: Positi‹iri: JPon ptace fl FH Wlticti yeah iffdyoiir unit start implementing financial autonomy? -d Very good Not good Q Ctear Unclear Excessive 48 Sufficient O Insufficient D Increased Q Decreased Unchanged - You are trained: Yes No - You are provided with guidelines tor implementation Yes No l9oes your unit develop regulations on internal S[léRding? Yes No he compliance of regulations on internal spending Not good (Publicity offinancial estimates, publicity nffinancial settlement, etc) O At the ol“ticials meeting dissemination at key staff’ meeting Publicized on the bulletin board of Hie unit 49 O Not publicized Q Clear and adequate D Unclear and inadequate Only estimates are publicized Only financial settlement is publicized Other opinions Q Adequate information Accuracy, timeliness Easy to understand, easy to access O All of these criteria Q Not transparcnt O 4“ransparent If you chose “Not transparent” as your assessment for Thuy Nguyen district budget operation, please continue to answer the following questions: O Recurrent expenditure Assets purchase Q Capital construction Lack of information of budget among government levels Lack of participation of social organizations Lack ot’ discussions in budgct opcration process Lack ot’citizen’s participation Not yet Yes, but with no results Ye lind there have been changes 16 In your opinion, which of thefollowing agencies help promote transparency? O Higher- level financial agencies Inspection and audit agencies People’s Council of the same level Fatherland Front and mass organizations C3 Non-state institutions People ... modem public financial management with the application of modern public financial principles to assess budgeting operation The latter part of the thesis, Thuy Nguyen district’s management of budget... ohjectives o1’ public financial management, the thesis mainly used secondary data obtained from the documents reflecting the results ot" the state budget expenditure in Thuy Nguyen district in years... tiirther improve my thesis Respectliilly, Biii Anlt l"iién ABSTRACT Title :ANALYSIS OF THE CHARACTERISTICS OF PUBLIC FINANCIAL MANAGEMENT, COMP7 RISON AND APPLICATION €1F PUBLIC FINANCIAL MANAGEMENT
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