Tanzania: PEFAR 2008Building PFM systems and Reducing Fiduciary Risk
Presentation to the General Budget Support
Annual Review 2008
Ubungo Plaza, Dar es SalaamNovember 25, 2008
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1. Background2. Diagnostics3. Reducing Fiduciary Risk:
1. Systems2. Revenue 3. Expenditure4. Cash Management5. Fund Flows6. Procurement7. Internal Audit
4. Next Steps
Overview
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PEFA Scores 2006
0%
5%
10%
15%
20%
25%
30%
World 11% 5% 17% 13% 21% 17% 16%
Africa 6% 2% 18% 14% 24% 18% 19%
Tanzania 14% 4% 21% 25% 29% 4% 4%
Uganda 4% 0% 29% 18% 21% 11% 18%
A B+ B C+ C D+ D
Tanzania has consistently been ranked as having one of the best PFM systems in sub Saharan Africa.
Background
44
Background
Community of interest : Governments preferred aid modality is budget
support Wants to see greater use of country systems – Paris
Agenda Improved accountability to domestic institutions Build systems to reduce fiduciary risk
DP’s wish to provide budget support in situations where the level of risk is acceptable
Where there is a credible reform program underway Fiduciary challenges are being adequately addressed
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Platform 1
Fiscal Control
Platform 2
Modernisation of Systems
Platform 3
Operationalise Best Practice
Platform 4
Policy into Practice
Platform 5
Delivery Performance
Fiscal Discipline Allocative Efficiency Technical EfficiencyPFM
Start
PFM
Fnish
GoT PFMRP Platform Summary
Background
66
Background
77
The revised strategy for PFM Reforms was finalized in July 2008.
Diagnostics
88
Two reports reviewed fund flow arrangements.
Diagnostics
99
A Cash Management Study is underway.
Diagnostics
1010
PEFA assessment for 2008 is being finalized.
Diagnostics
1111
Diagnostics
Two reports looked at PFM systems.
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Fiduciary Issue 1: Systems
Core systems have significant weaknesses and are not adequately interlinked. Tax, HR, Procurement, Cash Management, Debt Management, Budget Preparation etc. are all stand alone programs.
MOFEA (Nov. 24, 2008): “…there are multiple uncoordinated IT initiatives across the Government and we believe this is the problem to sort out.”
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Fiduciary Issue 2: Revenue
There is no central revenue database. MOFEA cannot reconcile revenue collections in Line Ministries with amounts actually deposited in BoT. Revenue retention schemes complicate the situation.
MOFEA (Nov. 24, 2008): “Testing of the database is expected to start in March 2009”.
Vote Ministry/Department Retention %ge
28 Public Security and Safety 60 29 Home Affairs & Prison Services 60 34 Foreign Affairs 100 37 PMO - Government Printer 70 41 Justice - Adm Gen 85 46 Educational & Vocational Training 100 48 Lands 67 49 Water 70 51 Home Affairs 33 52 Health 100 58 Energy & Minerals 25 64 Commercial Court 50 96 Natural Resources Various 93 Immigration Services 52 94 Information, Culture & Sports 90 98 Infrastructure -Gvt Stores 85 98 Infrastructure –TAA 100 98 Infrastructure – Policy & Planning 50 99 Livestock Development 75
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Fiduciary Issue 2: Revenue
Budget execution of the development budget in 06/07 was 39%.
GoT: Development Expenditures: 06/07
0% 0%
2%
2% 2%
4%4%
3% 3%
1%
2%
15%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
July August September October November December January February March April May June
In 06/07 $202 m. of budget support from UK, Norway and Japan not recognized as revenue from August 06 to July 07.
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Fiduciary Issue 3: Expenditures
Some software components – such as the budget reallocation module continue to be dysfunctional after 10 years.
Bank reconciliation has been and remains a major challenge.
Just one account – 16:140 (Miscellaneous Deposits) had T.sh 1 trillion of outstanding reconciliations to process. (July 08)
Around 80% of monthly transactions between MOF and BoT are not reconciled through the auto reconciliation process.
MOFEA (Nov. 24, 2008): “From our point of view we recognize this as a fundamental problem to the operation of IFMS.”
1616
Government needs to gain control over its own cash from commercial banks.
Fiduciary Issue 4: Cash Management
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Drug Budget Releases to MSD
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2005/06 0% 0% 0% 23% 23% 30% 39% 43% 51% 51% 63% 71% 71%
2006/07 0% 0% 0% 0% 23% 23% 34% 44% 44% 44% 44% 67% 67%
2007/08 0% 0% 0% 5% 22% 26% 30% 43% 43% 43% 44% 46% 79%
July August September October November December January February March April May June July
Erratic fund flows result in the build up of arrears and adversely impact service delivery.
Fiduciary Issue 5: Fund Flows
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Fiduciary Issue 6: Procurement
Procurement remains a major area of concern. In FY 08 only 42% public bodies responded to PPRA’s request for information.
Of the ones that responded, average level of compliance for MDA’s was 45%.
1919
Fiduciary Issue 7: Internal Audit
Internal audit remains the weakest component of the control framework. It has consistently been rated “D” in PEFA assessments.
2020
Next Steps
PFM reforms require a dynamic team and dedicated leadership. PFMRP Phase III is to be launched on November 27,2008.
There is need to focus on improving the IFMS, revenue recording, bank reconciliation, cash management, fund flows, procurement and internal audit.
We look forward to supporting MOFEA to ensure that the program achieves its objective to improve systems and reduce fiduciary risk.
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Asanteni Sana