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

           

22

1. Background2. Diagnostics3. Reducing Fiduciary Risk:

1. Systems2. Revenue 3. Expenditure4. Cash Management5. Fund Flows6. Procurement7. Internal Audit

4. Next Steps

Overview

           

33

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

           

55

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.

           

1212

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.”

           

1313

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

           

1414

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.

           

1515

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

           

1717

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

           

1818

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.

           

2121

Asanteni Sana