Report No. 36642-TZ United Republic of Tanzania Public Expenditure and Financial Accountability Review—FY05 June 2006 Operational Quality & Knowledge Services (AFTFM) and Poverty Reduction and Economic Management (AFTP2) Units Africa Region Document of the World Bank UNITED REPUBLIC OF TANZANIA PUBLIC EXPENDITURE AND FINANCIAL ACCOUNTABILITY REVIEW .FY05 Table o f Contents ACKNOWLEDGEMENTS ................................................................................................................... i EXECUTIVE SUMMARY .................................................................................................................. ... u 1 (FINDINGS AND RECOMMENDATIONS)..................................................................................... iii 1. INTRODUCTION........................................................................................................................ 1 PART I:CONTEXT............................................................................................................................. 3 2 . Recent Macroeconomic Performance ........................................................................................ 5 A. Real GDP Growth .......................................................................................................................... 5 B. General Price Developments .......................................................................................................... 8 C. Monetary and Financial Sector Performance ................................................................................. 8 D. The External Sector Performance .................................................................................................. 9 Trade and the Balance o f Payments ................................................................................................ 9 The Exchange Rate and Foreign Reserves .................................................................................... 11 External Debt Developments ........................................................................................................ 12 3. Accountability Framework For Central Government ........................................................... 13 A. Overview o f Legal Arrangements ................................................................................................ 13 B. Institutional Arrangements ........................................................................................................... 13 C. Human Resource Management .................................................................................................... 14 D. Integrated Financial Management System (IFMS) ...................................................................... 15 PART 11: ANNUAL REVIEW OF BUDGET PERFORMANCE ................................................. 17 4. Annual Review of Budget Performance................................................................................... 19 A. Aggregate Fiscal Performance ..................................................................................................... 19 Fiscal Deficit ................................................................................................................................. 19 Revenue Performance ................................................................................................................... 20 Government Expenditure ............................................................................................................. - 2 6 B. Strategic Resource Allocation ...................................................................................................... 28 C. Budget Consistency With Actual Expenditure ............................................................................ 33 D. Human.Resource Planning. Wage Bill Management and Pay Reform Issues ............................. 37 E . Leakage in the PEDP Financing and Expenditure Chain............................................................. 38 PART 111: PUBLIC RESOURCE MANAGEMENT AND ACCOUNTABILITY ............ 39 5. Aligning Resources With the NSGRP: Review of the FY05 Budget Guidelines .................41 A. Translating the NSGRP into Medium Term Budget Strategy ..................................................... 41 B. Overall Framework ...................................................................................................................... 42 C. Consolidated Views F r o m M D A S ............................................................................................... 42 PEFAR .FY05 United Republic of Tanzania D. Selected Areas for Development o f the Budget Guidelines ......................................................... 43 Expenditure classification issues .................................................................................................. 43 Decision making process: ............................................................................................................. 43 Sector PERs: ................................................................................................................................. 44 SBAS development ....................................................................................................................... 44 Cross cutting areas ........................................................................................................................ 45 Consultation .................................................................................................................................. 45 Linkage with other processes........................................................................................................ 46 6 . Financial Management Systems ............................................................................................... 47 A. Revenue Management .................................................................................................................. 47 Current revenue system................................................................................................................. 47 The Tanzania Revenue Authority ................................................................................................. 48 Current developments and progress at TRA ................................................................................. 48 Key recommendations.................................................................................................................. -49 B. Debt Management ........................................................................................................................ 50 Recent developments and current situation .................................................................................. 50 Major issues and opportunities ..................................................................................................... 51 Recommendations ......................................................................................................................... 52 C. External Resource Management and Aid Coordination ............................................................. -53 Current system and ongoing developments ................................................................................. -53 Managing and accounting o f donor funds ..................................................................................... 54 Aid harmonization issues .............................................................................................................. 55 Key recommendations.................................................................................................................. -55 D. Cash Management ........................................................................................................................ 56 Current system .............................................................................................................................. 56 Assessment o f the situation.......................................................................................................... -57 E. Public Procurement Management ................................................................................................ 57 Summary o f key findings and recommendations for central government .................................... 57 F. Payroll and Pension Management., .............................................................................................. 59 Payroll system ............................................................................................................................... 59 Pension system.............................................................................................................................. 60 Conclusion and key recommendations ......................................................................................... 61 7 . Accounting, Reporting, Monitoring and Control ................................................................... 62 A. Internal Controls .......................................................................................................................... 62 Current system o f internal control ................................................................................................ 62 Key recommendations................................................................................................................... 63 B. Data Integrity, Security, And IT Contingency Plans ................................................................... 64 Review o f current situation ........................................................................................................... 64 Key recommendations ................................................................................................................... 65 C. Management and Annual Financial Reporting ............................................................................ 66 Current Arrangements ................................................................................................................... 66 Conclusions and key recommendations ........................................................................................ 67 D. Internal Audit ............................................................................................................................... 68 Recent developments and the current situation............................................................................. 68 Major issues and opportunities ..................................................................................................... 69 Recommendations ......................................................................................................................... 70 8 . External Accountability and Oversight ................................................................................... 71 PEFAR .FY05 United Republic of Tanzania A. Introduction.................................................................................................................................. 71 B. External Audit .............................................................................................................................. 71 Recent developments and current situation .................................................................................. 71 Major issues and opportunities ..................................................................................................... 74 Recommendations ......................................................................................................................... 76 C. Legislative Scrutiny ..................................................................................................................... 76 Current committee structures and responsibilities ....................................................................... -76 Conclusion and recommendations ............................................................................................... -79 D. Ethics and Integrity Bodies .......................................................................................................... 80 Current situation and recent developments ................................................................................... 80 Conclusion and recommendations ................................................................................................ 82 E. Public Access and Demand for Information ................................................................................ 83 Access to and availability o f information on P F M ....................................................................... 83 Demand for and use o f information .............................................................................................. 84 Conclusion and recommendations ................................................................................................ 85 PART IV: ZANZIBAR ....................................................................................................................... 86 9 . Zanzibar: Taking Stock o f Public Expenditure Management and FinancialAccountability Issues ........................................................................................................................................... 88 A. Public Expenditure Management ................................................................................................. 88 B. Status o f Implementation o f PER 2002/03 Recommendations .................................................... 89 C. Financial Accountability .............................................................................................................. 92 Background ................................................................................................................................... 92 Status o f implementation o f 2003 C F A A action plan ................................................................... 92 Conclusion .................................................................................................................................... 95 PART V: LOCAL GOVERNMENT ................................................................................................ 96 10. Fiscal Issues at Local Government Level................................................................................. 98 A. Public Expenditure Management ................................................................................................. 98 B. Outstanding Issues ..................................................................................................................... 100 PART VI: A N N E X E S ........................................................................................................................ 102 Annex A: PEFA Performance Measurement Framework.................................................................... 103 Annex B: Human Resource Management o f the Accounting and Auditing Cadre .............................. 118 f the I F M S........................................................................................ Annex C: Structure and Status o 125 Annex D: Zanzibar - Status matrix of 2003 CFAA Action Plan......................................................... 130 Annex E: PEFAR Appendix Tables 05................................................................................................ 145 PEFAR .FYOS United Republic of Tanzania List o f Figures Figure: 1: The Trend o f Real GDP Growth. 1992-2004 (at constant 1992 prices) ................................ 5 Figure 2: Inflation Developments in Tanzania ....................................................................................... 7 Figure 3: Selected Time Deposits and Treasury Bills Rates (%) ............................................................ 8 Figure 4: Selected Interest and Inflation Rates (%) ................................................................................ 9 Figure 5: The Composition o f Traditional Exports (by end December, 2004) ..................................... 10 Figure 6: The Composition o f Non-Traditional Exports (by December, 2004) ................................... 10 Figure 7: DOD by Use o f Fund ............................................................................................................ 12 Figure 8: Trends in the Fiscal Deficit FY99 - F Y 0 4 ............................................................................ 20 Figure 9: Foreign Financing o f the Fiscal Deficit................................................................................. 20 Figure 10: M a i n Sources o f Revenue 2003/04 (% o f Total Revenue) .................................................. 22 Figure 11: Tax Structure Since 1999/00 (% o f GDP) ........................................................................... 22 Figure 12: Total Revenue by Regions 03/04 ......................................................................................... 23 Figure 13: Tanzania: Revenue Effort Vs Aid ....................................................................................... 24 Figure 14: Real and Nominal Effective Exchange Rate, 1990-2004 .................................................... 24 Figure 15: Total External Debt .............................................................................................................. 25 Figure 16: Foreign Grants and Financing .............................................................................................. 26 Figure 17: Development Expenditure by Sector 2003/04 ..................................................................... 32 Figure 18: Tanzania Mainland: Revenue Performance Against Targets .............................................. 48 Figure 19: Percentage o f Aid Flows by Modalities .............................................................................. 54 List o f Tables Table 1: Real Annual GDP Growth Rates (at constant 1992 prices). (%) ............................................... 6 Table 2: Sector Contribution to GDP (at current prices). (%) ................................................................ 7 Table 3 External Current Account Balance (Mil US$) .......................................................................... 11 Table 4 Fiscal Deficit and Financing, 1999/00 - 2003/04 (% o f GDP) ................................................ 19 Table 5: Summary o f Central Government Revenue FY99-FY05 (% o f GDP) .................................... 21 Table 6 Government Expenditure, 1999/00 - 2003/04 (% o f GDP) .................................................... 26 Table 7: Tanzania’s Fiscal Performance Compared to Ghana and Uganda .......................................... 28 Table 8: Composition o f Public Expenditure (as % o f GDP), FY00-FY05 .......................................... 29 Table 9: Functional Recurrent Expenditure (actual, as a % o f GDP), FY00-FY05 ............................. 29 Table 10: Social Sector Actual Recurrent Expenditure (% o f GDP) F Y O O - FY05 .............................. 30 Table 11: Sectoral Development Expenditures (actual, as a % o f GDP) ............................................... 30 Table 12: Recurrent Expenditure by sub vote (in bill. Tshs.) ................................................................ 34 Table 13: Recurrent Budget Deviation at Vote Level ........................................................................... 35 Table 14: Over-spenders and under-spenders ....................................................................................... 35 Table 15: Recurrent Budget Deviation at Sub vote Level ..................................................................... 36 Table 16: Revenue Performance (% o f GDP) 97/98 - 03/04 ................................................................ 47 Table 17: Tanzania - External Debt (30 June 2003 & 3 1 October 2004) in Millions o f US$ .............52 Table 18: Timeliness and M a i n Findings o f NAO reports .................................................................... 73 Table 19: Status o f PAC reports ............................................................................................................ 79 Table 20: Zanzibar - Selected Fiscal Indicators ................................................................................... 89 Table 21: Summary o f Local Government Revenue, 2001-2004/05 ..................................................... 99 Table 22: Accounting and Internal Audit Cadre Structures Illustration ............................................. 119 Table 23: Proposed Internal Audit Cadre Staff ................................................................................... 119 Table 24: External Audit Cadre Structure .......................................................................................... 120 Table 25: National Audit Office Staff ................................................................................................ 120 PEFAR .FY05 United Republic of Tanzania Table 26: Qualifications o f National Audit Staff and Numbers Studying.......................................... 121 Table 27: Summary o f Persons on M o F Sponsored Training .............................................................. 124 Table 28: Modules o f the IFMS........................................................................................................... 127 - PEFAR FY05 United Republic of Tanzania ACKNOWLEDGEMENTS CONTEXT Sound Economic Governance i s essential for the achievement o f the desired reduction in poverty levels and improvements in economic growth in Tanzania. Effective public expenditure management and good public financial management are important for efficient and equitable utilisation o f scarce national resources, whilst the extent to which policy makers are held accountable to their constituents i s an excellent indicator o f good governance. Accountability and transparency go hand in hand in developing open and participatory decision-making processes. Since 1997/98, Tanzania has conducted an annual Public Expenditure Review (PER) process aimed at (i) opening up the Government budget process to the public and thereby enhancing transparency and accountability in public expenditure, ( ii)providing an important forum for technical analysis and dialogue on fiscal issues at macro and sectoral level, (iii) enhancing analysis and monitoring o f public expenditure, (iv) improving the preparation o f annual budget guidelines, (v) improving sector dialogue, and (vi) improving aid coordination. The Tanzania PER Working Group comprising o f representatives o f the Government, the World Bank and other development partners, as well as non-government stakeholders determines the agenda for the annual PER process, guides and finances the implementation o f the agreed work program and peer- reviews all outputs. The PER component o f this report presents the findings o f a joint W o r l d B a n m i l a t e r a l donors/NGO external evaluation o f fiscal performance for 2003/04 and first h a l f o f 2004/05 carried out in MarcWApril 2005. The assessment also reviewed progress and lessons learnt from recent Government efforts to improve upon the Budget Guidelines to become a budget strategy document that translates the National Strategy for Growth and Reduction o f Poverty (NSGRP) in budget terms. The findings and recommendations were shared with Government, members o f the PER working group and a wider range o f external and domestic stakeholders at the annual PER consultative meeting held M a y 23, 2005, to feed into the finalization o f the 2006/07 budget. In 2001, a Country Financial Accountability Assessment (CFAA) was carried out and recommendations and an action plan made for improvements to the country’s financial management and accountability processes. The Government o f Tanzania (GOT)and Development Partners are keen to assess progress and learn from successes and failures and it was with this broad goal that the Development Partners (World Bank, UK Department for International Development (DFID), African Development Bank (AfDB), The Canadian Corporation Office (CCO), and the European Commission (EC)) and the GOTcommissioned follow up work on Financial Accountability issues during the first quarter o f 2005. However all stakeholders agreed as part o f improved harmonisation and co-ordination that it should be carried out as part o f a broader Public Expenditure and Financial Accountability Review (PEFAR) for Tanzania. The PEFAR aims at integrating two diagnostic exercises (Public Expenditure Review (PER) and CFAA) to facilitate a comprehensive assessment o f PFM. The overall purpose o f the PEFAR i s to provide GOT and Development Partners with a comprehensive, integrated and candid assessment o f Tanzania’s key fiduciary risks as reflected in i - PEFAR FY05 United Republic of Tanzania GOT’S resource allocation, resource management and control, resource utilisation and accountability processes, and to make recommendations for improving the PFM framework, institutional performance and capacity building. TEAMCOMPOSITION The PER mission team comprised Philip Mpango (mission leader, AFTP2), Allister Moon, Emmanuel Mungunasi, Mary-Anne Mwakangale (AFTP2), B e n Tarimo, Hamisi Mwinyimvua (Consultants). In the tradition o f partnership for the PER mission, the World Bank team was joined by Britta Oltmann (Kfw); John Piper, Carl Kalapesi (DfID), Nathalie Houlou (EC Delegation), and Rakesh Rajani (NGO Policy Forum). IMF staff led by Dr. Lelde Schmitz (Senior Resident Representative) and including A l a n Tuni, and Frank Mtosho also participated in the PER review. The assignment team for the Financial Accountability component consisted o f World Bank: Marius K o e n (Team leader, AFTFM), Patrick P. U m a h Tete (AFTFM, Uganda). Leah Mukuta (AFC04) and Andy Wynne (Consultant); AfDB: Charles Muthuthi; DFID: Carole Pretorius (Lead consultant); EC: Rino Schiavo- Campo (consultant); CCO: John White (consultant). The W o r l d Bank gratefully acknowledges the financial and other support provided by the Development Partners mentioned above. The work was completed with guidance o f the Country Director (Ms. Judy M. O’Connor). Permanent Secretary, Ministry o f Finance (Mr. Peniel Lyimo), The Sector Manager for AFTP2 (Ms. Kathie Krumm) and the Manager: Financial Management - Africa Region (Mr. Anthony M. Hegarty) provided technical guidance and was responsible for quality assurance arrangements. A panel o f peer- reviewers for the PEFAR have been appointed, including Anand Rajaram (PRMPS), R. Sudharshan Canagarajah (AFTP2), and Nicola Smithers (PRMPS). Direct quality support was provided by Allister M o o n (Lead Economist, AFTP2) and Gert van der Linde (Lead FM Specialist, AFTFM). The study was conducted during the first quarter o f 2005 through a combination o f questionnaires, written submissions, desk reviews and interviews with key personnel o f Government agencies and other organisations. The team would like t o express their sincere gratitude to all the individuals from both the public and private sectors that participated and submitted comments. An annual consultative meeting was held o n M a y 23, 2005 to discuss and consider the draft findings and salient recommendations, and to provide final inputs towards the finalisation o f this report. The workshop was attended by a representative group o f Government and Development Partner stakeholders who participated in and contributed to this process. Finally; the PEFAR team expresses i t s sincere gratitude for the assistance and courtesies extended by n particular we would want to mention the names o f Ms. all parties that participated in the exercise. I Blandina N y o n i and Mr. Joel Mwanza (Accountant General’s Department) and Mugisha Kamugisha (Policy Analysis Department) and Nashon Magambo (Budget Department) that spearheaded the client participation o n both components. Also our gratitude i s extended t o the team from the same office that supported the mission in collecting the PFM questionnaires and arranging appointments with counterparts. .. 11 PEFAR - FY05 United Republic of Tanzania EXECUTIVE SUMMARY (FINDINGS AND RECOMMENDATIONS) Since the discussion o f the gist o f this report in M a y 2005, there have been a number o f developments and progress in implementation o f i t s main recommendations. These will be highlighted in the next PEFAR report scheduled to be published by FY07. OVERALL F I S C A L PERFORMANCE Fiscal Deficit 1, Fiscal policy i s o n track: The record o n the level and financing o f the fiscal deficit indicates that the Government has continued to implement tight fiscal policy. During 2003/04 the fiscal deficit after grants amounted to 3.3% o f GDP which was below the PRGF program target o f 3.8% o f GDP. However, the fiscal deficit (before grants) has widened rather fast in the past two years, mainly on account o f increased spending o n the provision o f social services permitted by higher aid inflow. Revenue Performance 2. Revenue performance has been better than planned: Continued growth and improvements in T M ’ s tax administration systems and practices resulted in a rise in the revenue to GDP ratio from 12.1% in 2002/03 to 13% in 2003/04. Actual revenue collections exceeded budget estimates by 5%. This trend continued in 2004/05 with collections being above estimates by 3% for the first h a l f o f the fiscal year. 3. Although in aggregate aid flows seem to be almost on target, variations in composition indicate that external financing remains unpredictable: The composition o f grant flows during 2003/04 shows that basket funds, HIPC resources and foreign loans are unpredictable. Both basket grants and HIPC grants were about 25% below budget. Program loans were 50% higher than budgeted whilst basket loans were 97% lower than budgeted. Therefore, more attention i s needed to improve the predictability o f foreign aid. Government Expenditure 4. GOT spending increased from 19.8% o f GDP in 2002/03 to an estimated 22.5% o f GDP in 2003/04. This increase i s attributable to, inter-alia, a substantial increase in transfers to TANESCO to stabilize power supply, purchase o f the Government aircraft and replenishment o f the Strategic Grain reserves (SGR). Wages and salaries claimed 4.1 percent o f GDP in 2003/04 compared to 4.0% in the previous year. Compared to 2002/03, expenditure o n goods and services and transfers saw a significant increase by about 1.9 percentage points o f GDP. Development expenditure also increased from 5.0 percent o f GDP in 2002/03 to 5.7 percent in 2003/04. ... 111 PEFAR - FY05 United Republic of Tanzania 5. Expenditure on large public projects has been increasing but the quality o f such projects seem to be uncertain: There are a number o f proposedalready initiated big construction projects that could have adverse implications o n the fiscal framework. These include the new national stadium; new Parliament building; Songwe airport and Mwanza airport. An issue o f critical importance i s the need to ensure that Tanzania’s public investment program remains strategic, especially in terms o f its potential t o stimulate growth, while maintaining fiscal prudence. GOTi s urged to ascertain that there i s in place a robust screening process to safeguard quality o f such big public investment project. STRATEGIC RESOURCES ALLOCATION 6. Appropriation Accounts for 2002/03, 2003/04 and quarterly Budget Execution Reports (BERs) for the first h a l f o f 2004/05 show total expenditure to have increased from 18.5 percent o f GDP in 2002/03 to 2 1.6 percent o f GDP in 2003/04. Total expenditure was expected to increase further to 26.9 percent in 2004/05. M o s t o f the increase in recurrent expenditure in 2003/04 was for the MDAs compared to regions and districts. Recurrent expenditure (as a percent o f GDP) to the supply votes increased by 3.5% between 2002/03 and 2003/04. Over two-thirds o f the increase in supply votes spending went into funding the recurrent spending by MDAs while one-third funded recurrent spending by the regions and districts. Debt service increased slightly, by 0.1 percent o f GDP between 2002/03 and 2003/04. 7. Within the social sectors a major increase in recurrent expenditure during 2003/04 was o n health and allocations to regions, each o f which increased by 0.3 percent o f GDP. Allocation to higher education increased only marginally from 0.6 percent to 0.7 percent, while allocation to basic education remained stagnant at 0.4 percent and allocation to water declined from 0.2 percent to 0.1 percent o f GDP. Allocations to regions were directed mostly to funding the provision o f basic services. Recurrent allocations to social sectors were budgeted t o remain at 5.4 percent o f GDP in 2004/05. During the first h a l f o f 2004/05, PRS priority sectors as a group received about 51% o f the budget estimates for the full year. However, expenditure o n roads and H I V / A I D S amounted to only 39.6% and 40.2% o f their respective 2004/05 budget estimates. Expenditure o n water and on justice/ legal services was 48.8% and 42.8% respectively. 8. Development expenditure by sector recorded in the Appropriation Accounts show an increase from 4.5 percent in 2002/03 to 4.8 percent in 2003/04, partly due to a greater share o f donor-funding being captured in the appropriation accounts and also due to improvements in project implementation performance. Most o f the increase in development expenditure in 2003/04 occurred in social services followed by productive services and economic services. 9. Actual public expenditure pattern by region shows, among others, that there i s opportunity to improve on the growth and poverty impacts o f public expenditure through better regional targeting to address geographic disparities. While recurrent expenditure has been relatively more evenly distributed across the regions, development expenditure exhibits significant cross-regional variations. On average 71.6% o f annual regional development expenditure was spent in only 7 out o f the 20 regions. Government i s urged to ensure that the determination o f the regional budget takes into account not only investments in social and economic infrastructure existing in each region but also povery incidence. 10. In spite o f the recent increase in development expenditure, public outlays have been overly asymmetric toward social sectors. I n addition, the strategic basis for investments has been rather limited and public expenditures not quite in line with the growth focus o f NSGRP. This therefore calls iv - PEFAR FY05 United Republic of Tanzania for improvements in project evaluation, selection and approval as well as policy judgements on priorities. The W o r l d Development Report 2005 shows clearly that unreliable infrastructure (especially transport and power) i s one o f the key constraints to growth in Tanzania particularly as it impedes competitiveness. T h i s implies that the growth focus o f NSGRP requires a greater emphasis on infrastructure than currently. In particular, a clear bias toward more and quality-public spending on infrastructure (transport, power, communications, and irrigation) i s imperative for faster and sustained growth. However, the pattern o f development spending by sector during the 1990s has shown n o clear bias toward infrastructure. Instead, it has tended to be spread widely and thinly across the sectors. Furthermore, a preliminary assessment o f the extent to which these preconditions for scaling-up growth were dealt with in the Budget Guidelines (2006/07-2008/09) also shows n o major departure in favor o f infrastructure. 11. Recently, GOToutlined proposals o n financing options for supplementing public investment in infrastructure such as infrastructure bonds, and special infrastructure facility utilizing proceeds o f liquidity mopping-up operations by BOT. These options should be carefully examined in the context o f ongoing financial sector reforms that target financial deepening. Moreover, the financing strategy will need to be integrated into the macroeconomic framework. Other aspects that will need to be more clearly defined, include project selection, handling o f project risks and due diligence o f legal, regulatory and institutional frameworks. 12. Although the BG proposes to increase overall allocation t o agriculture by 46% compared to the previous year, the priority areas for public expenditure identified to be critical for turning-around agriculture remain a long wish-list (18 policy commitments). Besides, some o f the commitments (e.g. subsidizing targeted inputs) are not fully compatible with the objective to facilitate the development o f the market. GOTi s encouraged to ensure that targeted agriculture input subsidy i s accompanied by a clear program to rectify underlying problems that the subsidy i s compensating for especially poor infrastructure. Otherwise the demands o n the budget could grow rapidly. Overall, there i s need to re- assess the entire fiscal incentives framework for agriculture that are given through the different Acts. BUDGET CONSISTENCY WITH ACTUAL EXPENDITURE 13. The degree o f deviation between approved budgets and actual expenditure fluctuates substantially dependent o n the level o f aggregation o f the analysis, The overall budget deviation in 2003/04 for MDAs amounted to -10.2 % with a recurrent expenditure variance o f - 0.8% and a development expenditure variance o f - 32%. At functional level recurrent budget deviations fluctuate between - 25% (CFS) and +45% (economic services). 14. I n the past four years the following overall trends could be observed: ‘Defence and security’ tended to overspend their estimates slightly, while ‘economic services’ over-spent substantially (double-digit deviations). On the other hand, social services and productive sectors have under-spent to some extent since 2000/01. CFS spending generally was well below target, largely caused by under- spending o f debt services. A s to ‘administration’ n o discernable pattern o f systematic ovedunder- spending i s observed. 15. At vote level, the analysis covering FYO1-FY04 showed that votes 23 (Accountant General), 31 (Vice President’s Office), 32 (President’s Office-Public Service Management), 34 (Ministry o f Foreign Affairs & International Cooperation), 42 (Office o f the Speaker), 57 (Ministry o f Defence & National Service), 60 (Industrial Court), 61 (Electoral Commission), and 62 (Ministry o f Communications & Transport) are generally ‘over-spenders’ while others -votes 46 (Ministry o f Education & Culture), 50 (Ministry o f Finance), and 51 (Ministry o f Home Affairs) are ‘under- V PEFAR - FY05 United Republic of Tanzania spenders’. Turning to sub vote level, the trend outlined at vote level i s further exacerbated. I t i s clear from the above l i s t that with the exception o f communications and transport, over-spending ministries tend to be heavily leaning toward administration and much less directly toward growth and poverty reduction objectives. Paradoxically, the Ministry o f Education and culture turns out to be an under- spender in spite o f the existing large financing gap for the sector, which most likely points to existence o f procurement planning problems andor absorptive capacity constraints. 16. In general, although there could be some credible explanations behind a number o f the observed deviations, weaknesses in planning and budgeting remains one o f the main causal factors. All in all, improving budget formulation and management to decrease intra-year budget reallocations i s a critical step forward. Greater Parliamentary scrutiny o f the reallocations and enforcement o f expenditure controls i s also imperative. EXPENDITURE LEAKAGE 17. A summary o f the key findings o f a research done in 2003 by PCB o n implementation o f the PEDP covering five regions, points to corrupt practices in the PEDP funding chain. These include: cost ineffective purchases o f school materials (under instructions from District Education Officers and District Treasurers. Some o f the sources o f construction materials were owned by council officials and politicians) and construction o f class rooms. (ii)Some schools use money earmarked for the purchase o f school supplies for administrative costs such as allowances for school committee members; and (iii) In some LGAs, receipt and expenditure o f PEDP funds are not transparently displayed as required. GOTi s urged to scale up the exercise o f tracking leakage o f public resources covering more LGAs and the entire financing chain. Government i s also advised t o consider undertaking a review o f the entire grant transfer framework to get a better understanding o f the loopholes and root causes, including clarity o f instructions in the chain and institutional arrangements between MoF, PO-RALG, and M o E C in the process. HUMAN RESOURCE PLANNING, WAGE BILL MANAGEMENT AND PAY REFORM ISSUES 18. Civil service and related pay reform remains a critical issue for Tanzania. The transition to a market-based economy requires a transformed civil service to manage the economy in the era o f globalization and ensure efficient provision o f public services. K e y among the imperatives i s capacity to recruit and retain skilled staff, which implies a salary structure that i s in line with the existing labour market conditions. At the same time, it i s also critical to ensure that attempts t o raise the wage bill are sustainable and consistent with the macroeconomic and fiscal framework. 19. Although the Human Capital Management Information System (HCMIS) became operational in April 2000 under the joint management o f M o F and PO-PSM, the integration o f staffing levels and financial resource allocations remains rather weak. Typically, PO-PSM has not been able to come to closure on salary adjustmentdpay enhancement amounts, by the time the BG and budget proposals are finalized. GOT i s urged to move ahead in decentralizing the H C M I S to MDAs to improve o n establishment control and to ensure wage bill monitoring and planning in order to achieve higher levels o f compliance and accountability. GOT also needs to build capacity for human resources management in LGAs. 20. Recently, there has been a surge in expenditure on employment allowances which may be linked to exploitation o f allowances under other charges for remunerative purposes. The increased use o f vi PEFAR - FY05 United Republic of Tanzania allowances i s not only an inefficient way to alleviate the problem o f l o w pay in public service, but also that such allowances tend to compromise equity and skip the tax net. GOTi s encouraged to complete the review o f allowances and consider rationalizatiodconsolidation o f some o f the allowances with pay. In addition, GOT need to explore other pragmatic ways to address the pay issue, including carrying out a critical review o f the composition o f OC and consider the possibility o f moving resources out o f OC to PE. T R A N S L A T I N G N S G R P INTO MEDIUM TERM BUDGET S T R A T E G Y 2 1. During the last year Tanzania has developed a new National Strategy for Growth and Reduction o f Poverty (NSGRP) and made impressive efforts to enhance the link between policy and resource allocations by strengthening the formulation o f medium term budget strategy. However, there i s s t i l l need to develop the strategic nature o f the Budget Guidelines so that they become a more comprehensive instrument for guiding public finances over the medium term. In particular it would help to: (i) Establish projections for the appropriate level o f Government activity in the economy over the medium /long term given the particular policy focus presented within NSGRP and taking into account the absorptive capacity o f the economy. (ii) Develop funding scenarios over the medium term - domestic financing and foreign financing projections. Identify funding gaps and establish the macroeconomic implications o f the various scenarios. (iii)Given uncertainties with both domestic and foreign financing develop upper and lower funding scenarios and ceiling implications in the medium term. (iv) Integrate human resource issues and in particular the wage bill within the Budget. 22. Some suggested areas where the current Budget Guidelines process might be strengthened for the next cycle include: Expenditure classification issues: Prior to the next budget cycle, there i s an opportunity to carry out further reform o f the expenditure categories used in the link between NSGRP and MTEF. The MTEF categories in any case could benefit from rationalization to develop a simpler and more strategic approximation to a program classification. The opportunity presented by the challenge o f the NSGRP, and the related work in developing the NSGRP implementation plan, offer a key opportunity for ensuring greater coherence in the definition o f the key programs within the MTEF. Decision making process: Cabinet’s approval o f the BG comprised endorsement o f vote level ceilings, along with the aggregate allocation to NSGRP expenditure in each MDA. I t may be preferable in future to focus more on Cabinet deciding allocations at the vote level, with simplified MTEF / program allocations at sub-vote level being provided to Cabinet as background information on derivation o f the allocations by MDA. Sector PERs: MDAs emphasized that sector PERs were useful in BG preparation, but could have been more focused on the specific challenge o f reviewing past sector experience and contributing initial analytic input to the task o f developing BG submission. Sector PERs could vii PEFAR - FY05 United Republic of Tanzania be designed t o provide two types o f output (i) brief summary analysis o f recent developments or other updates needed annually (ii) more detailed analysis o f selected topics o f current relevance, contributing to a cumulative sector analysis over several cycles. In order to improve the quality o f sector PERs and the degree to which MDAs and other stakeholders make effective use o f the analysis, the sector PERs need to be (a) designed and commissioned with full involvement o f key sector staff and relevant stakeholders and, (b) established as a key input for the annual sector review, providing a critical forum for scrutiny o f i t s findings and demand for appropriate analysis. SBAS development: One o f the key contributions to strengthening the budget guidelines exercise has been MoF’s timely development o f the Strategic Budget Allocation System (SBAS) software. However there remains the challenge o f ensuring a smooth interface between SBAS and EPICOR - based Accounting and expenditure Control Sysyem, which currently constitutes the main part o f the IFMS. T o this end the budget preparation options within EPICOR might ensure greater coherence o f Government systems. Further development o f SBAS should also develop analysis o f activities in line with development o f the NSGRP implementation plan, establish links with the M&E framework and also address the need to incorporate human resource planning in preparation o f the BG next year. Cross cutting areas: While the NSGRP identifies many areas in which more coherent strategies require closer collaboration across agencies and across sectors, this has so far not led to major changes in institutions to address this challenge. The Government’s proposals for the NSGRP implementation plan have recognized this gap, but not so far identified priority cross cutting areas on which to focus. Similarly, the revised budget process has not so far led to stronger cross agency coordination, although most MDAs recognized this as a key gap. Therefore, strengthening the treatment o f areas spanning more than one MDA will be a key challenge for consolidation o f the revised budget process and i t s link with the NSGRP implementation. FINANCIAL ACCOUNTABILITY AND FIDUCIARY RISK I S S U E S 23. Financial accountability i s the obligation to demonstrate and take responsibility for the results o f the financial decisions against agreed expectations. I n general these expectations are that: (i) expenditure i s properly accounted for; ( ii)expenditure i s used for i t s intended purposes; and (iii) expenditure represents value for money. As shown in the following paragraphs, the progress, which the government has made in certain areas o f accounting and auditing, should be applauded. However these efforts n o w need to be translated into improved accountability. 24. Controls, compliance and sanctions: Generally Tanzania n o w has a sound system o f formal rules for financial management and extensive training has taken place on the application o f the financial rules and regulations. Most o f the recommendations contained in the 2001 Country Financial Accountability Assessment (CFAA) report have been implemented or are already included in the Public Financial Management Reform Programme (PFMRP). There has been an improvement o n controls over non-tax revenues collected and retained by ministries, departments and agencies (MDAs) that provide services, for example, secondary school and training college fees, hospital user fees, and water facility charges. Inbuilt controls in the Integrated Financial Management System (IFMS) also provide a greater degree o f assurance about the accuracy o f transactions. 25. Consequently, whilst there i s insufficient data to determine the error rates in financial transactions, levels o f compliance should be improving. However according to the Report o f the ... Vlll PEFAR - FY05 United Republic of Tanzania Controller and Auditor General (CAG) o f 2002/03, Tshs.50 billion (out o f a total o f Tshs.1,836 billion) had incomplete or n o documentary evidence to support the authenticity o f the expenditure incurred. I n addition, according t o the 2003 Country Procurement Assessment Report (CPAR), procurement weaknesses included non-compliance with contract award procedures and criteria, with rules and procedures for bid submission and opening often not followed. 26. Since the CFAA in 2001, many o f the regulatory, institutional, and programmatic measures on which to build an effective internal audit function have been put in place. In 2003 the Accountant General (ACGEN) carried out an assessment o f Internal Audit Units within MDAs, which indicated the need to restructure the function and also a need for capacity building. Internal Audit Units within MDAs, which takes into consideration the specific nature and needs o f various MDAs have been established. 27. Internal audit manuals and relevant training materials to support the planned training have been developed. Significant steps have been taken to transform the approach to internal audit from reviewing individual transactions to recommending improvements in control systems. MDA audit committees required by the Public Finance Act, 2001 have been established and have begun functioning. I t i s recognized however that the impact o f internal audit o n improved accountability will take a considerable time to develop. 28. The situation o f poor levels o f compliance i s exacerbated by the inaction by government to follow up and enforce rules and regulations. T o quote from the CAG report on FY03 (para.18): "Many Accounting Oficers pay little regard to matters reported upon, and issues that demand financial accountability continue to be ignored" Furthermore, the fact that five Public Accounts Committee (PAC) reports have not been debated on a timely basis by Parliament or action taken by the relevant bodies o n their recommendations seriously undermines the financial accountability cycle. 29. Between 2001 and 2004, the Prevention o f Corruption Bureau (PCB) investigated 6,378 cases but this resulted in only 20 convictions and the recovery o f a paltry Tshs.390 million'. T h i s l o w level o f convictions i s attributed partly to outdated legislation. Lack o f sanctions for the non-compliance and financial improprieties uncovered by the CAG could conceivably be excused on these grounds. However, the Public Finance A c t gives the Minister o f Finance clear authority to pursue personal restitution o f funds and the Public Service Act, 2002, provides for various administrative sanctions, including ternination o f employment. 30. Transparency and timeliness: Largely due to the efforts o f the ACGEN, late completion o f public accounts i s becoming a thing o f the past in Tanzania, at least at central government level. Audited financial statements are presented to the legislature and the delay in the completion o f the audit reports has reduced from 10 months in F YOO to an expected 3 months for FY04. The A C G E N made an immense improvement with the preparation o f the consolidated financial statement for F Y 0 4 by complying in all material respects with the requirements o f the Public Finance A c t and i t i s hoped that the CAG will issue one audit opinion o n these accounts. The A c t requires every Accounting Officer (AO) to submit to the CAG in respect o f their respective votes a set o f financial statements within three months o f the year-end. The CAG expresses separate audit opinions o n the financial statements submitted by each AO. GGCU, Tanzania's Third Phase Government Fight Against Corruption: Implementing the National Anti- corruption Strategy and Action Plans 2001-2004 ix PEFAR - FY05 United Republic of Tanzania 31. Monthly external debt reports are included in the Bank o f Tanzania (BOT)Monthly Economic Review (and the BOTwebsite), and quarterly reports are published o n the website o f the Ministry o f Finance (MoF), which also publishes monthly reports o n domestic debt. W h i l s t it i s evident that there has been an improvement in the availability o f certain reports o n the government’s websites, there remain concerns about the usefulness o f information on public funded activities. M a n y reports are not in a clear readable format and the media’s ability to access and interpret the information i s limited by i t s capacity to carry out sound investigative journalism and other constraints within the industry. The public and the media are generally not allowed access t o parliamentary committee meetings and even where access i s allowed, it i s s t i l l at the discretion o f committee members. 32. Tanzania does not have the kind o f legal framework that would facilitate and help to make public reporting o f corruption more effective, i.e. there i s n o Freedom o f Information, Whistleblower or QuiT a m legislation. Proposals to form a committee under the Tanzania Communication Regulatory Authority charged with evaluating and regulating media content would also potentially reduce transparency in government operations. 33. W h i l s t names o f the successful bidders in large contracts are available in newspapers, the basis for the selection o f e.g. the required three f i r m s under competitive quotations i s unclear and provides ample opportunity for abuse. For those tenders, which use the open competitive process, the notices are scattered in local and East Afr-ican papers and there i s n o central media for advertisement of tenders or awards. 34. Whilst there have been improvements in the supply o f information, demand for information by the public i s s t i l l weak. This i s considered to be partly due to the weak fiduciary contract between the government and public and as noted above, partly as a result o f the lack o f capacity o f the media. 35. External oversight: The timeliness o f C A G reports i s improving; however their usefulness to Parliament and other key stakeholders remains limited. In order to reduce fiduciary risk in Tanzania, it i s essential that the effectiveness and efficiency o f the external audit finction be strengthened. In particular, their ability to produce more useful and user friendly reports and to compile and monitor an inventory o f adverse audit findings and o f responses obtained, MDA by MDA. This must be combined with recognition o f the importance o f the PAC and other specialized oversight committees, whose work i s undermined by delays in parliamentary debate o f their reports and by lack o f sufficient financial and technical support. 36. The PAC n o w examines the audit reports and completes hearings within 12 months o f report issue. However, the time allowed for scrutiny i s only 60 days. The PAC finished the review o f the 2002/03 audit report in the November 2004 parliamentary session within three months o f receiving the report. However the technical-professional capacity o f committee members t o deal with the subject matter o f their remit i s generally recognized t o be weak and n o professional research support i s provided. The P A C reports for 2001/02 and 2002/03 plus three special reports (some dating back to 2002) have been produced but have not been debated by Parliament. 37. Although procurement legislation was updated in 2001, concerns in the CPAR about the dual regulatory and executive role o f the Central Tender Board led to a new Public Procurement Bill, which was approved by Parliamnent o n November 12, 2004 and received Presidential Assent o n February 8, 2005. The new A c t i s due to come into effect by mid April 2005. The establishment and practical empowerment o f the Procurement Regulatory Authority (PPRA) to regulate and monitor procurement activities i s very important in mitigating fiduciary risk. For example, the maintenance o f a comparative X - PEFAR FY05 United Republic of Tanzania database o n unit costs in public and private procurement would highlight instances where poor value for money i s being obtained. 38. Various organizations have been set up to ensure that high levels o f ethics and integrity are in place in the Tanzanian public service and a National Anti- Corruption Strategy and Action Plan i s in place. Over the last seven years the Transparency International Corruption Perception Index reports show an encouraging improvement in scoring for Tanzania - with an improvement from 1.9 in 1998 to 2.7 in 2004. However, Tanzania remains in the bottom quartile o f those countries assessed. Also, it has been excluded from receiving American Millennium Challenge Account funds because o f it corruption problems. Effectiveness o f the PCB i s limited partly by outdated legislation, whilst the effectiveness o f other ethics and integrity bodies i s hampered by financial, administrative and technical capacity constraints. 39. Technical capacity: Various measures are being taken to address the issue o f l o w technical capacity amongst key groups. For example, significant efforts have been made over the last four years by the A C G E N to improve the capacity o f technical accounting and internal auditing staff as well as AOs and audit committees. This has been through a range o f in service training courses for all levels o f staff as well as support for academic and professional qualificationsHowever the ability o f the government to recruit and retain suitably experienced personnel remains limited and necessitates the need for expensive continuous training programs. 40. L o w technical capacity limits the ability o f internal audit to carry out i t s monitoring role and means that external audit i s unable to use internal audit reports as a basis for their work. Lack o f technical capacity also limits the ability o f external audit to use modem computerized audit techniques and to produce high quality reports. The technical-professional capacity o f parliamentary committee members to deal with the subject matter o f their remit i s generally recognized to be weak and as noted above, in Tanzania unlike other countries, n o professional research support i s provided. 41. Lack o f capacity i s seen as one o f the major weaknesses o f the entire procurement system. The government has relied o n the Government Stores for i t s expertise in procurement but Government Stores has neither the funds nor the organizational capacity to do so. Procurement i s not recognized as an established profession within the public sector and does not present an attractive career path. 42, Predictability and data integrity: The Tanzania Revenue Authority (TRA) reports collections to the M o F who accrues revenue in the EPICOR-system manually, a situation that has not changed since the 2001 CFAA. An interface between TRA’s revenue collection and accounting systems and EPICOR would ensure that tax revenue data i s received faster by the MoF, as well as eliminate duplication o f data entry and any potential inaccuracies. 43. W h i l s t foreign debt i s recorded o n a computerized debt management system maintained at both ,BOTand MoF, there i s a good working relationship between the two bodies. M a j o r components o f domestic debt are s t i l l captured o n Excel spreadsheets. Debt sustainability analyses have been undertaken periodically and guarantees are n o w all approved by M o F . The challenge o f debt management i s primarily not one o f placement and maturity management, but one o f (i) negotiations vis-a-vis a number o f external entities and, equally important, ( ii)prudent scrutiny o f proposals for new borrowing to ensure that debt-servicing capacity would be increased by more than the cost o f borrowing. xi PEFAR - FY05 United Republic of Tanzania 44. The software used for the Integrated Human Resource and Payroll Management System (IHRPMS) i s generally considered to be robust. In addition to those ghost employees identified during the system implementation, existing controls n o w significantly reduce the possible incidence o f ghost employees. Payroll controls are supported by the nominal r o l l records. Some delays exist in processing changes to the nominal r o l l and the payroll database. Although the National Audit Office conducts an audit o f parts o f the payroll system, n o complete payroll audit has been undertaken and there i s n o regular procedure for checking the accuracy o f payroll data. Currently many employees do not receive their pay slips o n a timely basis, which makes it difficult for them to confirm the accuracy o f their salaries. Complete data o n the actual size o f personal emoluments or the remuneration o f individual positions i s difficult to obtain as all allowances are not paid through the IHRPMS and not all government employees are on the system. 45. Financial information i s provided by the Development Partners (DPs) for the majority o f the funddresources provided. Often, they do not provide complete information to the government o n all types o f aid assistance - reporting o n cross-sectoral issues, technical assistance and in kind aid flows are particularly difficult. For aid disbursements to projects and baskets in the budget estimates, 71% o f the forecasts (provided by DPs) were recorded as received through the exchequer system for 2003/04 - it increases to about 85% when general budget support i s included in this calculation. In response to the authorities’ strong request to channel support through the exchequer system about 45% o f foreign aid will be managed using national systems in 2004/052. However if it were assumed that basket funds do fully use national systems then the proportion using national procedures increases to about 66%. For example, health basket funds use national procedures. 46. It i s generally acknowledged that predictability o f resources for MDAs has improved with all MDAs having reliable information about the resources available /to be provided for at least a month and variations in non salary resources available on a month to month basis limited. Also priority sectors and protected votes n o w receive cash funds o n a quarterlyhemi-annual basis. However, whilst this cash rationing system has greatly enhanced fiscal discipline, monthly releases do adversely affect service delivery. Similarly differences between DP forecasts o f funds flow and disbursements, although significantly improved, reduce the predictability o f operations. Also, lack o f procurement planning by MDAs and the incorporation o f these requirements into their monthly cash flows undermines the MoF’s efforts t o provide a predictable flow o f funds to meet the service delivery needs. 47. The implementation o f the first stages o f the I F M S has improved the availability, timeliness and usefulness o f basic financial information considerably. It has enabled the enforcement o f greater control o n payment procedures and in particular compliance with cash limits. The current I F M S i s based on a modular3 accounting and planning package produced by EPICOR Software, which continues to be customized to meet the government’s needs. Interfaces with other n o n “core” systems such as debt management, payroll and tax revenue have not been implemented. Plans to integrate these systems and thus improve the quality o f financial reporting are included in the PFMRP. ’In FY 01/02 the ACGEN issued a circular outlining the accounting and reporting process. Subsequently training seminars for accounting officers o f relevant M D A s as w e l l as donor organizations were organized by the ACGEN’s Department. The following modules have been implemented: Accounts Payable, Accounts Receivable, Purchase Order Commitments, Active Planner (previously Budget Manager), Cash Management, General Ledger, and Report Generator. Several o f these have been partly utilised (Accounts Receivable and Active Planner). xii PEFAR - FY05 United Republic of Tanzania 48. The achievements made to date should not be underestimated, particularly given the general lack o f understanding and at times open resistance t o the developments. Since 2001, a significant amount o f time and effort has been devoted t o ensuring the long term sustainability o f the IFMS, the integrity and security o f the data, and to improving the understanding and technical s k i l l s at MDAs. An upgrade o f the system’s hardware and operating platform was undertaken between November 2003 and January 2004. Such efforts have not always resulted in visible improvements and there i s frustration amongst some users about access to, and the capability o f the system. A physical disaster recovery site has been identified and after contractual delays, systems connectivity and equipment should be functional by the end o f November 2005. Trial r u n s o f the disaster recovery systems should be completed by mid 2005. 49. Financial management reform process: Recent assessments o f the PFMRP have raised concerns about whether the implementation o f current management and co-ordination arrangements offers a credible basis for driving forward co-ordinated and sequenced Public Financial Management (PFM) reform. W h i l s t individual donor funded components are moving forward, this may not result in the most optimum solution for government. Particularly as there are clearly interdependencies within the PFMRP and linkages with other reform programs. 50. The mitigation o f fiduciary risk depends o n real progress in a number o f reform initiatives. Furthermore P F M i s relevant to all government bodies and encompasses the entire chain o f activities starting from the planning o f resources and expenditures through to the delivery o f services and payment for resources used and revenue collected. An additional challenge i s therefore that the PFMRP should not be seen purely as an initiative that i s for the benefit o f and co-terminus with the MoF. ZANZIBAR: PUBLIC EXPENDITURE MANAGEMENT AND FINANCIAL ACCOUNTABILITY I S S U E S 5 1. Public Expenditure Management: Overall, implementation o f the Zanzibar PER FY03 recommendations has been rather modest, partly on account o f lack o f resources to leverage difficult/politically sensitive reforms: Progress made so far are i s summarized below: (i) Framework for an institutionalized PER Process for Zanzibar has been set-up along the URT model. (ii) The Joint Finance Commission (JFC), though operational, i s s t i l l in the process o f establishing appropriate rules and regulations that will govern the URT-RGOZ fiscal relationship. (iii) RGOZ prepared a strategy paper for local government reform in December 2004 and from it a policy and action plan to eliminate duplication o f functions and positions at MDA, regional and district level. However, implementation i s s t i l l awaiting higher level government approval. (iv) On removal o f monopoly o f ZSTC in the purchase and export o f cloves and review o f the options for taxation o f a liberalized clove industry a study was commissioned in 2004 which proposed three options namely (i) streamlining the management team o f ZSTC, (ii) restructuring ZSTC and (iii) privatizing the entire clove industry. RGOZ i s yet to decide o n these options. (v) On privatization and restructuring o f remaining parastatals RGOZ has decided o n (i) divestiture o f the Zanzibar Insurance Corporation through joint venture, (ii) Zanzibar Ports Corporation as ... Xlll - PEFAR FY05 United Republic of Tanzania well as the Zanzibar State Fuel and Power Corporation to remain public but will be restructured and facilities improved, (iii) Zanzibar Shipping Corporation to be partially liberalized by leasing some o f i t s fleet, (iv) RGOZ prefers a joint venture for the Zanzibar Motor Trade Corporation, (vi), some business o f the Zanzibar Tourist Corporation have already been leased but the plan i s to privatize it eventually, (viii) The Mahonda sugar Industry i s in the process o f being privatized, and (ix) Bwawani Hotel i s to be restructured and improved before any proposal to privatize it. Finally, with respect to developing a strategy to deal with the negative net worth o f the People’s Bank o f Zanzibar, the government i s pursuing the option to recapitalize, restructure and finally privatize PBZ. Consultancies have already been commissioned on the privatization strategy, special audit and legal. RGOZ plans to issue recapitalization bonds to improve PBZ’s net worth. (vi) Some efforts have been made toward improving domestic revenue mobilization, including identifying weaknesses in tax administration and a strategy for reforming the Zanzibar Revenue Board. The envisaged strategy covers organizational reform; review o f the legislative framework; reviewing all procedures and systems; developing specific strategies to ensure registration, returns processing, payment and collection, and enforcement; invest in appropriate information technology; developing a corporate plan; and undertaking human resource development. T o address insignificant sources o f revenue, RGoZ commissioned a revenue base study that recommends the intensification o f exploitation o f the existing sources o f revenue. Development o f the private sector, economic growth, industrialization and better tapping o f the resources from the tourist sector are key areas for boosting revenue collection. (vii) On the review o f tax exemptions and clamp down on widespread tax evasion ZIPA, ZAFREZA and ZFPA are to be merged to be under one stop centre. ZRB and TR4 are working on modalities to exchange information on taxpayers and to jointly conduct inspection, auditing and valuation. (viii) In order to strengthen debt coordination and management capacity in MOFEA and also ensure adherence to debt contracting rules, MOFEA has established a Debt Department. A Debt Task Force has been established. The task force i s in the process o f reconciling debt numbers. (ix) Regarding budgeting for quasi-contingencies/arrears and other obligations, all arrears before 1997 have been cleared, but those for 1998 - Jan 2005 remain outstanding. The RGOZ has compiled information on outstanding arrears and liabilities as at January 2005. An actuarial evaluation o f ZSSF has been done. Settlement o f pension liabilities to ZSSF has continued and i s almost completed. (x) Pro-poor expenditures and alignment o f sectoral and intra-sectoral resource allocation with ZPRP has been attempted, with allocation o f about 60 percent o f budget allocation being directed to pro-poor sectors. (xi) Transparency in budgeting and spending has been enhanced through the adoption o f a Central Payments Office (CPO) system. The system is, however, s t i l l manually operated. (xii) Regarding public sector pay and employment reforms, the establishment o f the centralized payroll system revealed significant discrepancies between the number o f employees and salaries paid. The World Bank offered to support a comprehensive review o f the Zanzibar civil service. xiv - PEFAR FY05 United Republic of Tanzania Terms o f reference have been developed and approved by the Zanzibar Government. However, RGoZ has yet to make a specific request for funding the study. 52. Financial Accountability. I t i s encouraging to observe the increased levels o f collaboration and consultation between the mainland and Zanzibar. Given the somewhat ad hoc nature o f this collaboration, however, i t i s recommended that a more systematic and routine relationship i s established. The objective - perhaps not immediate - should be that Zanzibar will j o i n the mainland PFMRP and some o f the other reform programs. A review o f the status o f implementation o f the 2003 C F A A recommendations shows that most o f the areas have been strengthened but that the majority o f actions are still in an early stage o f implementation. Progress has been slow mainly because o f the lack o f technical capability, insufficient funding and coordination. FISCAL I S S U E S AT LOCAL GOVERNMENT LEVEL 53. Significant LG reform ground has been covered during the past two years. The reforms include: (a) adoption o f a formula-based system o f allocating grants. A LG capital grants system i s to be set up with Bank support and, donor financing but LGAs will only be able to access the funds upon fulfillment o f a minimum requirements to underpin good governance (b) Zonal centres established to assist LGAs with hands-on facilitation to improve financial management, (c) IFMS extended to a total o f 32 LGAs, (d) abolition o f development levy and other nuisance taxedfees in the 2002/03 budget and introduction o f a compensatory grant instead for the revenue lost. In addition, a study was commissioned to review and propose a more sustainable financing framework for LGAs, and (e) the fiscal year for central and local government synchronized to facilitate planning & reporting by LGAs. 54. However, reforms o f local government revenues led t o some concerns. These include: (i) inadequacy o f remaining LGA sources o f revenue, councils unable to transfer a share o f the compensation grants to villages, erosion o f the fiscal autonomy o f LGAs, and weakened drive to strengthen good governance ( iidelays and unpredictable f l o w o f the compensatory funds from MOF. ) (iii)Some LGAs invented mechanisms to cope with the abolition o f various levies. These included collecting more from certain lunds o f levies such as city service levy, property taxes, bill boards and shelving some projects forward. 55. I n spite o f the recommendation made in the previous PER external evaluation, there has been little progress in compiling actual expenditure data for the LGAs. The main reasons for slow o f progress seem to be weak capacity in LGAsPO-RALG and lack o f a standard reporting format. Overall, GOTi s urged to commit to compile and publish LGA expenditure data on a regular basis. xv PEFAR - FY05 United Republic of Tanzania 1. INTRODUCTION 1.1 2005 marks the seventh year since the institutionalization o f a participatory PER process in Tanzania. The method and approach to implementation o f the PER process in 2004/05 was akin to that pursued since the initiation o f participatory PERs in 1998/99 under strong Government leadership. The design o f the PER work program started in August 2004, and took into account the major concerns raised by stakeholders in the context o f the comprehensive review o f the first poverty reduction strategy and preparation o f the National Strategy for Growth and Reduction o f Poverty (NSGRP) or MKUKUTA and deliberations o f the sixth PER consultative meeting. I t also accommodated key issues from the PRBS/PRSC and PRGF reviews, PFMRP and other similar processes. The main concerns echoed included the need to (i) tailor the 2004/05 PER process to further strengthen the budget process and make it more consistent with policy, as well as make the Budget Guidelines outcome-oriented and more transparent to stakeholders, (ii) eliminate delays in delivering inputs (sector-specific PER reports and projections o f external support) for preparation o f the Budget Guidelines, and (iii) harmonize budget reviews and public financial management/fiduciary assessments. 1.2 The PER 2004/05 process therefore had two distinguishing features. First, sector analytic work needed to feed into the preparation o f the Budget Guidelines was suspended. Instead, sectors were required to pull out strategic issues and key recommendations that remain to be implemented from their previous sector PERs (2003/04) as well as from the then draft NSGRP. Additional sector work focused only o n adding value, except where it was felt there was real need to carry out a full sector PER or address a particular issue, such as the development o f a sustainable local government financing framework for Tanzania. T h i s approach was intended to enable more timely delivery o f inputs into the Budget Guidelines and MTEF 2005/06 - 2007/08. It was also agreed that technical discussions o n public expenditure management issues continue to be carried out under the PER Working Group framework, but making sure to bring in key issues from other consultative forums and related analytic work. The PER process continued to be fully anchored in Government, under the leadership o f the Permanent Secretary Ministry o f Finance, supported by a Secretariat drawn largely from the Budget Department. However, compared to previous years, the operation o f the PER Working Groups (WGs) during 2004/05 was less vigorous, WGs meetings were very fewhrregular and thereby also impacted o n the extent o f dialogue o n PEM issues. This weakening partly reflects high work pressure o n the part o f senior staff in M o F and other MDAs. Significant amount o f Government time was devoted t o the preparation o f NSGRP. Limited capacity o n the part o f NGOs was also apparent and constrained effective participation o f domestic stakeholders in the PER process. Therefore, the design o f the next PER cycle will need to critically re-examine not only the TORS,and composition o f the WGs but also the realism o f meeting schedules. I t will also be important to pay attention to enhancing capacity of watch-dog organizations/NGOS to be able to participate effectively in policy dialogue, and push for improved domestic accountability. This i s particularly important n o w that the PER process has become the overarching framework for review and dialogue o n public expenditure and financial managementhiduciary issues. In Zanzibar, a separate P E R M T E F process was implemented along the URT model and focused on supporting implementation o f the Zanzibar Poverty Reduction Plan (ZPRP). However, implementation o f the Zanzibar PERMTEF 2004/05 work program was constrained by resource constraints, both financial and human. Continuous support (from both the 1 PEFAR - FY05 United Republic of Tanzania URT Government and Development partners) to building capacity and financing o f analytic work in the Isles i s therefore imperative if the process i s to be improved and sustained. 1.3 Second, like previous years, the external (to Government) evaluation o f budget performance was retained as part o f the PER work program but broadened to include financial accountability/fiduciary issues. Toward the end o f December 2004, the Government expressed concern that in the past few years a wide range o f studies, namely Public Expenditure Management-Country Assessment and Action Plan (PEM-AAP) by IMF and W o r l d Bank, Fiduciary Risk Assessment (FRA) for Provision o f Direct Budget Support by DFID, Joint Evaluation o f General Budget Support by PRBS donors, and the PER External Evaluation) have been implemented t o assess progress in reforming public financial management. Given the objectives o f these studies, Government saw great opportunity for harmonization, and subsequently articulated preference to have ‘one process one assessment’ on public financial management issues carried out within the framework o f the annual PER external evaluation exercise. This is therefore the first integrated public expenditure and financial accountability review (PEFAR 2004/05) for Tanzania in line with Government’s expressed preference to harmonize all external reviews on budget, financial management systems/fiduciary risk assessment. T h i s i s a joint report by The W o r l d Bank working together with other development partners and non-government stakeholders. The determination o f focus as well as oversight o f the PEFAR external evaluation work, was mandated to the PER Macro group, chaired by MoF. Analogously, in order to further the objective o f harmonization o f processes and minimize duplication o f effort, it was agreed that starting 2004/05, information needed for the PRBS/PRSC budget reviews be provided for by the PER process, and key emerging issues discussed by the PER Working Group. 1.4 Focus And Coverage O f The External Evaluation: The external evaluation covered two broad areas. (i)Public Expenditure Review: included making an objective assessment o f Tanzania’s fiscal performance for 2003/04 and the first h a l f o f 2004/05; review o f progress and lessons learnt from the Government attempt to translate the National Strategy for Growth and Reduction o f Poverty (NSGRP) into a coherent and comprehensive budget strategy through the Budget Guidelines process. The exercise also reviewed the integrity and efficiency o f the budget management system and controls at central and local government levels and in Zanzibar, and (ii) Financial Accountability Assessment: This focused o n financial management system, accounting, reporting, monitoring and control, external accountability and oversight, and Zanzibar. In addition, the assessment also focused o n cross-cutting issues, namely human resources, legislative and institutional framework, and the use o f Information Technology (IT). 2 PEFAR - FY05 United Republic of Tanzania PART I:CONTEXT 3 - PEFAR FY05 United Republic of Tanzania 4 - PEFAR FY05 United Republic of Tanzania 2. RECENT MACROECONOMIC PERFORMANCE A. REALGDP GROWTH 2.1 Tanzania has recorded very good macroeconomic performance over the past decade. Whereas real GDP growth rate was at the level o f 3.6 percent in 1995, the rate improved gradually to a level o f 4.9 percent in 2000 and to a peak o f 6.2 percent in 2002. In spite o f recurring droughts, the economy maintained a fairly high degree o f resilience. The overall real GDP growth rate declined only marginally to 5.7 percent in 2003. Subsequently, the growth rate recovered to 6.7 percent in 2004 (Figure: 1).The economy i s projected to grow at rates o f over 7.0 percent in the medium to long term. Figure: 1: Real GDP Growth (at constant 1992 prices), (YO) 8 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Years 2.2 Conventional wisdom suggests that higher levels o f economic growth are sine qua non for poverty reduction and for meeting the Millennium Development Goals (MDGs). Therefore, given the Tanzania’s high population growth rate o f 2.9 percent, higher rates o f economic growth are necessary to sustain higher levels o f per capita economic growth so as to make a dent on the country’s poverty level. The 2000/01 Household Budget Survey (HBS) report shows that about 36 percent o f Tanzanians live below the poverty line, slightly down from the level o f about 38 percent in 1991/92. 5 - PEFAR FYOS United Republic of Tanzania Table 1: Real Annual GDP Growth Rates (at constant 1992 prices), (YO) 1999 2000 2001 2002 2003 2004 4.1 3.4 5.5 5.0 4.0 6.0 I I I 9.1 10.9 16.6 15.0 17.0 15.6 3.6 4.8 5.0 8.0 8.6 8.6 3.9 5.9 3.0 3.1 4.9 4.7 3.4 1.4 2.5 2.8 3.5 8.0 4.7 I 4.8 1 5.8 I 6.2 I 5.7 I 6.7 I Source: Economic Survey, 2004 2.3 Although the agricultural sector, which i s the main stay o f the economy, was hit hard by droughts, its growth rate only declined marginally from 5.5 percent in 2001 to 5.0 percent in 2002 and later to 4.0 in 2003. However, given good rains and the concomitant good harvest, the sector’s growth rate increased to 6.0 percent in 2004. As Table 2 shows, the sector contributes over 45 percent of GDP. In terms o f growth, the mining sector has been the best performer. It grew at the rate o f 16.6 percent in 2001, declined slightly to 15.0 percent in 2002 and recovered to 17.0 percent in 2003. I t s growth rate for 2004 was 15.6 percent. Other relatively good performers are the Construction industry, Manufacturing, and Tourism sectors which, in 2004, grew at the rates o f 11.O percent, 8.6 percent and 8.0 percent, respectively. (Table 1) summarizes sectoral growth performance while Table 2 shows the level o f sector contributions to the GDP. 6 PEFAR - FYOS United Republic of Tanzania Less: Financial -4.0 -4.0 -3.2 -2.7 -2.4 -2.3 -2.1 -2.9 2.0 2.1 Services Indirectly Measured GDP at Factor Cost 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 2.4 Even with the spectacular rates o f growth o f the mining sector, the sector's overall contribution to the GDP i s only around 2.5 percent, compared to over 45 percent for the agricultural sector. Apart from agriculture, the other major contributor to the GDP i s Trade and Tourism which accounted for about 12 percent o f the GDP in 2004. Figure 2: InflationDevelopments - Headline - - - - - .Food -Non-Food 9 8 I 6 + 5 $ 4 a 3 2 1 0 -1 7 PEFAR - FY05 United Republic of Tanzania B. PRICE DEVELOPMENTS GENERAL 2.5 During the past decade, Tanzania succeeded in reducing inflation remarkably moving from a high level o f 27.4 percent in 1995 to an annual average o f 4.5 percent in 2003. During 2004 inflation rate declined further to 4.4 percent (Figure 2). The national target i s an inflation rate that i s below 4.0 percent pari passu with i t s main trading partners. During 2004, the Government revised the composition o f the National Consumer Price Index (NCPI) in line with the 2000/01 HBS results. In the previous 1991/92 HBS results the weight o f the food basket was 7 1.2 percent while in the 2000/01 HBS results the weight o f food basket i s only 55.9 percent. c. AND FINANCIAL MONETARY SECTOR PERFORMANCE 2.6 The Bank o f Tanzania continued with i t s tight and contractionary monetary policy stance mainly to contain inflationary pressures. However, extended broad money (M3) which registered an annual growth rate o f 18.9 percent in 2003, increased slightly to 19.8 percent in 2004. Similarly, broad money supply (M2) registered an annual growth rate o f 19.8 percent in 2004 up from 14.6 percent o f the previous period. Regarding foreign currency deposits (FCD), i t s share to M 3 increased slightly from 29.1 percent to 29.4 percent, partly reflecting the depreciation o f the TZS exchange rate during this period. Figure 3: Selected Time Deposits and Treasury Bills Rates (YO) .Time deposit rate T-bills yield 8 .o 8.1 8.1 I-month 1 3-months I 6-months I %months I-month I 3-months 1 6-months I 12-months Apr-03 Apr-04 2.7 Commercial banks’ credit to the private sector increased to 35.7 percent in 2004 from the level o f 3 1.5 percent in 2003, Banks’ claims on Government declined slightly as the latter was increasing i t s deposits with the Bank o f Tanzania. The share o f credit to total deposits (private and government) o f the commercial banks, which also measures the degree o f financial intermediation, improved from 41.5 percent in 2003 to 42.6 percent in 2004. The weighted average interest rate on local currency savings deposits remained unchanged at 2.4 percent while the overall time deposit rate f e l l marginally from 4.1 percent in 2003 to 4.0 percent in 2004. In line with developments in Treasury bills yields, the 1-month time deposit rate rose slightly to 3.1 percent in 2004, compared with 3.0 percent 2003. The 12-month fixed deposit rate was 5.3 percent in 2004, down from 5.6 percent recorded in 2003. 8 PEFAR - FY05 United Republic of Tanzania Similarly, the average negotiated deposit rate for prime customers fell marginally from 7.9 percent to 7.8 percent (Figure 3). Given the current inflation rate o f 4.4 percent, savings deposit rates s t i l l remain negative in real terms, except for negotiated deposit rates that have remained marginally positive in real terms. Furthermore, yields o n Treasury Bills o f equal maturity with term deposits were all positive in real terms and significantly higher than the rates paid to fixed deposits. (Figure 4) below shows the - trend o f interest and inflation rates in Tanzania between 2001 and April 2004. Figure 4: Selected Interest and Inflation Rates (YO) - 12-month deposit rate 1-year lending -Inflation 364-day Tbills rate 25.0 1 1 5.0 2.8 During 2001-2004, lending rates exhibited mixed performance. Short-term loans o f up to 1-year were charged an average o f 14.8 percent, down from 15.6 percent, while 2-3 year loans were charged an average o f 11.4 percent up from 9.9 percent in the previous year. 3-5 year credit was charged 12.2 percent, down from 12.5 percent, while the charges for term loans o f over 5-year fell from 12.2 percent to 10.8 percent. Hence, the overall weighted average lending rate went down slightly from 13.5 percent in 2003 to 13.3 percent in 2004. However, some banks offered lending rates o f about 8.0 percent to prime customers. Thus, interest rate spread between the 12-months fixed deposits and 1- year lending rates narrowed slightly t o 9.4 percentage points as compared to 10.0 percentage points recorded in the preceding period. D. THEEXTERNAL SECTOR PERFORMANCE Trade and the Balance o f Payments 2.9 During the period under review, the trade account registered a deficit mainly due to a big increase in imports as compared to the marginal increase in exports. In particular, traditional exports performed fairly poorly. During 2004, traditional exports remained virtually unchanged at U S D 219.4 million compared to the previous year. With the exception o f tobacco and cloves that recorded a decline in unit prices, all other traditional exports recorded increases in unit prices as supply o f these commodities in the world market declined. During the year, cashew-nut exports amounted to U S D 9 PEFAR - FY05 United Republic of Tanzania 49.2 million, representing 22.4 percent o f the traditional exports, while tobacco and coffee exports amounted to USD 47.3 million and USD 42 million, respectively (Figure 5). Figure 5: Composition of Traditional Exports (by end December, 2004) \ Cloves 3.1% Coffee Cashewnuts 1 1 4 . 4 % 24.1% \ - Cotton 23.7% Tobacco 23.1% 7.9% 2.10 During 2004, non-traditional exports grew by 26.1 percent (USD 955.4 million compared to USD 757.7 million in 2003). Exports o f minerals increased substantially from USD 411.2 million recorded during 2002/03 to USD 611.6 million by June 2004, with gold exports alone recording an increase o f 55.2 percent. Likewise, exports o f manufactured goods increased by 52.4 to USD 107.9 million, largely due to additional exports emanating from new and privatized f i r m s (Figure 6). Figure 6: Composition of Non-TraditionalExports (by December, 2004) Fish and fish products 12.1% Other MineralsJ Edible &tables 5.6% 2.5% 10 PEFAR - FY05 United Republic of Tanzania 2.11 Gold exports amounted to USD 565.8 million and accounted for 48.2 percent o f exports o f goods during 2003/04. Diamond exports amounted to USD 23.6 million, while the remaining mineral export receipts contributed USD 22.2 million, Manufactured goods exports also improved significantly over the year, as annual export earnings increased to USD 107.9 million in June 2004 compared with USD 70.8 million recorded in June 2003. The improvement i s mainly attributed to an increase in garments and cigarettes exports. On the other hand, imports rose substantially by 27.5 percent. Most o f the increase was from capital, intermediate and consumer goods (Table 3). Table 3 External Current Account Balance (MilUS$) - % C lnge 2003 - 20 - Oct-04 NOV-03 Del nber - No :mber - - - -- - I P Nov Oct Nov VOV-04 NOV-04 2002103 2003104 % Change Goods Account (net) -29.3 -75.5 -75.2 -0.4 __ -770.7 -953.3 23.7 Exports 122.1 140.5 154.4 9.9 26.5 1,092.2 1,304.5 19.4 Imports 151.4 216.0 229.6 6.3 51.7 1,862.9 2,257.8 21.2 Services Account (net) -7.8 -27.7 -18.2 -34.4 -- -37.4 -153.3 -- Receipts 55.2 63.3 70.1 10.7 27.0 706.0 799.0 13.2 Payments 63.0 91.1 88.3 -3.0 40.2 743.4 952.3 28.1 Goods and services (net) -37.1 -103.3 -93.4 -9.5 __ -808.1 -1,106.5 36.9 Exports o f goods and services 177.3 203.8 224.5 10.1 26.6 1,798.2 2,103.6 17.0 Imports o f goods and services 214.4 307.1 317.9 3.5 48.3 2,606.3 3,210.1 23.2 Income Account (net) -1.7 -1.0 -0.5 -49.4 -70.1 -34.2 -49.8 45.4 Receipts 5.0 7.6 9.7 27.0 94.0 86.6 79.9 -7.7 Payments 6.7 8.7 10.2 18.0 52.1 120.8 129.6 7.3 -- 791.0 46.4 __ Current Transfers (net) 17.6 60.1 96.2 60.1 540.4 603.2 856.3 42.0 __ Inflows 22.6 65.2 101.5 55.7 olw General Government 16.6 59.3 95.5 61.0 534.9 786.9 47.1 outflows 5.0 5.1 5.3 3.9 6.7 62.8 65.3 4.0 Current Account Balance Source: Bank o f Tanzania --- 2.3 - -110.7 - -105.1 - -21.2 -44.2 -301.9 -365.3 21.0 2.12 However, even with the big external current account deficit, the overall balance o f payments improved slightly from a surplus o f US$ 265.2 million in 2003 to a surplus o f US$ 267.8 million in 2004 due to the huge external official transfers. The Exchange Rate and Foreign Reserves 2.13 The TZS continued to experience some minimal nominal depreciations between 2003 and 2004 mainly due to the l o w levels o f exports vis a" vis the import demand. However, the currency 11 - PEFAR FY05 United Republic of Tanzania appreciated, in real terms partly due to increased inflow o f external resources and inadequate sterilization mechanism. On the other hand, Tanzania’s external reserves increased quite substantially from US$ 1,500 million (6.8 months o f imports) in 2003 to over US$ 2,000 million (8.9 months o f imports) in 2004. External Debt Developments 2.14 By June 2004, total external debt stood at US$ 8,123.9 million. O f this, US$ 6,734.0 million had been disbursed-Disbursed Outstanding Debt (DOD) or 82.9 percent o f the total while the remaining US$ 1,389.9 million was yet to be disbursed. During this period, the stock o f debt increased by U S $ 7.0 million mainly due to some additional borrowing, the accumulation o f arrears coupled with the exchange rate fluctuations. The major creditors are the multilateral institutions (USD 4,554.8 million or 67.6 percent o f DOD). Bilateral creditors were owed USD 1,549.1 million (23.0 percent o f DOD). Commercial debt amounted to USD 396.5 million (5.9 percent o f DOD) while debt owed to export creditors was USD 233.7 million (or 3.5 percent o f DOD). The Government remains to be the largest borrower with USD 6,142.9 million or 91.2 percent o f the total debt. Private sector debt was USD 444.5 million or 6.6 percent o f the total debt, while parastatal debts stood at USD 146.6 million or 2.2 percent o f DOD. Figure 7:Disbursed Outstanding Debt by Use o f Fund Others Balance of 23.3% payment support Tourism 19.2% Finance and Insurance Transport & 1.3% Telecommunication 16.0% Social Welfare & Education Agriculture 5.0% 14.6% 5.3% Energy & Mining 13.9% 2.15 The bulk o f the external debt was used for balance o f payment support, which accounted for U S D 1,294.5 million, while transport sector accounted for USD 1,080.0 million. Agriculture absorbed U S D 983.0 million, energy U S D 937.8 million, industries U S D 358.8 million, education U S D 339.4 million, finance U S D 86.2 million, and tourism U S D 82.2 million. The remaining U S D 1,572.1 million was accounted for by other activities, including rural development, water supply and drainage, fisheries, and computer technology (Figure 7). 12 PEFAR - FY05 United Republic of Tanzania 3. ACCOUNTABILITY FRAMEWORK FOR CENTRAL GOVERNMENT4 A. OVERVIEWOF LEGAL ARRANGEMENTS 3.1 Chapter Seven o f the Constitution o f the United Republic o f Tanzania, 1977 outlines the legislative function and the role o f various bodies involved in the management o f public finances, specifically the National Assembly, the President and the Controller and Auditor General (CAG). The Constitution also establishes the Public Leaders’ Ethics Secretariat and the Permanent Commission o f Enquiry’, which have the power to inquire into the behaviour and conduct o f public leadershervants. 3.2 The Public Finance Act, 2001 and Public Finance Regulations, 2001 define in great detail the roles, functions and responsibilities in management o f government revenue and expenditure6. I n particular it sets out the role o f the Accounting Officers (AOs) who are appointed in writing by name and office by the Permanent Secretary (PS) o f Finance (in his role as Paymaster General) for each expenditure vote. Each A 0 i s legally and personally accountable for the control o f expenditure incurred and revenues received for that vote. Whilst, the Accountant General (ACGEN) i s responsible for the compilation and management o f the accounts and the custody and safety o f the public money and public property o f the government. 3.3 The Public Procurement Act, 2001, as amended in 2004, defines the public procurement system and procedures. The Loans, Grants and Guarantees Act, 1974, amended in 2003, defines roles, functions and responsibilities in public sector contracting o f loans, issue o f guarantees and receipt o f grants. Since 2000, new or revised legislation has also been enacted for the Ethics Secretariat and the Commission for Human Rights and Good Governance (CHRGG). However, despite the government’s focus o n anti-corruption, major revisions to the Prevention o f Corruption Act, 1971 are only n o w being considered. B. INSTITUTIONAL ARRANGEMENTS 3.4 The fiscal crisis o f the mid nineties in Tanzania led to the demand for a strong emphasis o n control and financial discipline. Consequently, the Ministry o f Finance (MoF) play a central role in the management o f public finances and financial discipline. However, in order to improve service delivery and meet the challenges o f the NSGRP, there i s an increasing demand for the empowerment o f Local government and parastatalslpublic corporations set up under the new Public Corporations Act 1992 are clearly excluded. For the purpose o f t h i s year’s financial accountability assessment, executive agencies established under the Executive Agencies Act o f 1997 and other s e m i autonomous government agencies such as research institutions, universities etc. are not included. The functions o f the Permanent Commission o f Enquiry have been taken over by the Commission for Human Rights and Good Governance. The legislation sets out in detail the roles and responsibilities o f the Minister o f Finance, the Paymaster General, the Accountant General, the Accounting Officers and Warrant Holders in MDAs as well as the Controller and Auditor General. 13 - PEFAR FY05 United Republic of Tanzania Ministries, Departments and Agencies (MDAs) to be more results oriented within an environment where resources will remain constrained in the medium term. The new procurement legislation also decentralises procurement responsibility to the MDAs giving regulatory and advisory authority to bodies under the MoF. 3.5 The organisations, which have the institutional responsibility for holding government to account for i t s performance, include the National Audit Office (NAO), which i s Tanzania’s supreme audit institution and has the critical oversight role, Prevention o f Corruption Bureau (PCB), the Ethics Secretariat, the CHRGG, Parliament and i t s committees. The Good Governance Co-ordinating Unit (GGCU) and the Ethics Division have a monitoring, co-ordinating and advisory role. Whilst the legal- judicial-penal system has an important role t o play in ensuring that the legislation described in section 3A i s upheld. 3.6 From a holistic perspective, improvements in public financial management (PFM) and accountability encompass not only the Public Financial Management Reform Programme (PFMRP) but also the National Anti-Corruption Strategy and Action Plan (NACSAP), the Legal Sector Reform Programme, the Local Government Reform Programme and as discussed in par. 3.7 The Public Services Reform Programme (PSRP). c. RESOURCE HUMAN MANAGEMENT 3.7 A motivated, professional and well-paid workforce i s essential for the achievement o f high standards o f PFM, accountability and integrity. The Government’s eleven year programme to reform the public service has been designed with the specific objectives o f enabling government to provide quality services to the public that are effective, efficient and economically delivered and at the same time ensure staff have the capacity, motivation and means to bring about the required changes. Improved standards o f PFM and accountability and the success o f the PFMRP are clearly linked with the progress and success o f the PSRP. A detailed review o f the management o f the accounting and auditing cadres i s included in Annex B : Human Resource Management o f the Accounting and Auditing Cadre the following paragraphs provide a brief summary o f the most pertinent issues. 3.8 Three years ago, the legislative framework for human resource management was fundamentally changed with the introduction o f the Public Service Act, 2002 and i t s subsidiary legislation. Within set guidelines and schemes o f service, the PSs o f MDAs now have delegated powers to appoint, discipline and dismiss the staff on their l i s t o f approved posts. This responsibility includes the hiring and firing o f accounting and internal audit staff though in the interests o f harmonization the A C G E N has, in this financial year 2004/2005, been given authority by the President’s Office - Public Service Management (PO-PSM) to continue with placements and transfers o f these staff in MDAs. 3.9 Appointments, including promotions, must n o w be advertised and made only on merit rather than seniority, with the minimum specified requirements for the post being met. An annual staff appraisal scheme, known as the Open Performance Appraisal System, which may lead to either rewards, enhanced increments, for acceptable performance or sanctions, withholding increments, for non-acceptable levels o f performance was also introduced in July, 2003. 3.10 Various measures are also being taken t o address the issue o f l o w technical capacity amongst key groups. In the Country Procurement Assessment Review (CPAR), 2003 lack o f technical capacity was seen as one o f the major weaknesses o f the entire procurement system. Significant efforts have been made over the last four years by the ACGEN to improve the capacity o f technical accounting and internal auditing staff as well as AOs and audit committees. This has been through a range o f in 14 - PEFAR FY05 United Republic of Tanzania service training courses for all levels o f staff as well as support for academic and professional qualifications. However, there i s still a large gap (approximately 30%) between the number o f posts specifying professional accounting qualifications and the number o f posts being occupied by professionally qualified staff. 3.1 1 The ability o f the government to recruit and retain suitably qualified personnel depends on both pay and working conditions. I n 1999 the Public Service Medium Term Pay Policy (MTPP) was introduced in order to rationalise allowances and significantly enhance public service pay. T o date this programme has not been fully implemented. Certain professional skills, such as Information Technology (IT), legal and accounting, which are in high demand outside the public service, can earn significantly higher salaries in the private sector. In order to attract, retain and motivate staff o f the required calibre, a Selected Accelerated Salary Enhancement Scheme (SASE), was designed whereby some senior professional staff receive salary enhancements. However, following a Cabinet decision, any extension o f the scheme to new officers has been suspended pending a review in MarcWApril 2005. D. INTEGRATED SYSTEM (IFMS) FINANCIALMANAGEMENT 3.12 Although not fully operational, the implementation o f the first stages o f an I F M S has improved the availability, timeliness and usefulness o f basic financial information considerably. I t has enabled the enforcement o f greater control on payment procedures and in particular compliance with cash limits. The achievements made to date should not be underestimated, particularly given the general lack o f understanding and at times open resistance to the developments. Complete, accurate and timely information provides the basis for sound PFM and accountability and the enhancement o f decision- making capabilities. W h i l s t the absence o f such information hinders the implementation o f other initiatives in public service reform such as results oriented management and performance related pay as these rely heavily on fairly sophisticated financial information for their success. 3.13 The ultimate goal o f the M o F i s an integrated system. The characteristics and status o f the government’s I F M S i s discussed in detail in Annex C: Structure and Status o f the IFMS. The following paragraphs highlight some o f the key issues. I F M S i s based o n a modular’ accounting and planning package produced by EPICOR Software, which continues to be customized to meet the government’s needs. The software continues t o be supported by Softech, who are the authorised agent. W h i l s t there are n o w Systems Development Units at the ACGEN’s Department to support users in both central and local government. 3.14 Since 2001, a significant amount of time and effort has been devoted to ensuring the long t e r n sustainability o f the system, the integrity and security o f the data, and to improving the understanding and technical skills at MDAs. An upgrade o f the system’s hardware and operating platform was undertaken between November 2003 and January 2004. Such efforts have not always resulted in visible improvements and there i s frustration amongst some users about access to, and the capability o f the system, particularly the active planner (previously known as the budget manager module). 3.15 In response to some o f these concerns, a module has been designed to act as a data warehouse and hold a copy o f the data maintained on IFMS. The purpose o f the data warehouse facility i s to share data with selected users, such as AOs, planning and policy analysis and others, and enable them to use ’The following modules have been implemented: Accounts Payable, Accounts Receivable, Purchase Order Commitments, Active Planner (previously Budget Manager), Cash Management, General Ledger, and Report Generator. Several o f these have been partly utilised (Accounts Receivable and Active Planner). 15 - PEFAR FY05 United Republic of Tanzania the data for further analysis without compromising the security and integrity o f the I F M S master files. Training has commenced o n the use o f the module but it i s clear that this powerful database i s still underutilized due to an apparent inability o f the prospective users and the keeper o f the database to map out the information and reporting needs. 3.16 A physical disaster recovery site has been identified and after contractual delays, systems connectivity and equipment should be functional by the end o f November 2005. Trial runs o f the disaster recovery systems should be completed by mid 2005. In Dar es Salaam I F M S uses a Wide Area Network (WAN) that connects MDAs to the central server at the ACGEN’s Department. Connectivity from outside o f the city has been subject to a number o f technical problems and financial constraints. The intention n o w i s for the regional sub-treasuries, Regional Administrative Secretariat, Parliament and the ministries based in Dodoma to use a Virtual Private Network with a target date for completion o f FY 05/06. 3.17 As discussed in paragraph 3.13, the current I F M S i s basically an accounting and budgeting system. Interfaces with other non “core” systems such as debt management, payroll and tax revenue’ have not been implemented. A new budget planning analysis tool i s also being introduced for FY 05/06 to compensate for some o f the inadequacies in the Active Planner module and to provide an interface capability. Plans to integrate these systems and thus improve the quality o f financial reporting are included in the PFMRP. * A wireless link exists with the tax revenue module but n o t a direct interface yet. 16 PEFAR - FY05 United Republic of Tanzania PART 11: ANNUAL REVIEW OF BUDGET PERFORMANCE 17 - PEFAR FY05 United Republic of Tanzania 18 - PEFAR FY05 United Republic of Tanzania 4. ANNUAL REVIEW OF BUDGET PERFORMANCE A. AGGREGATE FISCAL PERFORMANCE Fiscal Deficit 4.1 The record o n the level and financing o f the fiscal deficit (Table 4) indicates that the Government has continued to implement tight fiscal policy over the recent past, mainly by continuing the use o f the cash budget system to manage releases supported by front-loading o f budget support, while maintaining quarterly allocations to key spending areas as well as adherence to negative net domestic borrowing. During 2003/04 the fiscal deficit after grants amounted to 3.3% o f GDP which was below the PRGF program target o f 3.8% of GDP. Table 4 Fiscal Deficit and Financing, 1999/00 - 2003/04 (YOof GDP) Source: Tanzania Authorities 19 PEFAR - FY05 United Republic of Tanzania Figure 8: Trends in the Fiscal Deficit FY99 - FY04 FLtenl Deneit -9 -10 -efore grants -after grants 4.2 This reasonably good overall performance partly reflects respectable revenue achievement especially from VAT, income and petroleum taxes. However, it i s important to note that the fiscal deficit (before grants) has widened rather fast in the past two years (Figure 8) mainly on account o f increased spending o n the provision o f social services permitted by higher aid inflow (Figure 9). Although it may be desirable to increase spending to improve service delivery, there i s need to be rather cautious, and keep watching for possible macroeconomic effects o f large aid flows, directed mainly toward social sector expenditureshon-tradables. Figure 9: Foreign Financing of the Fiscal Deficit Revenue Performance 4.3 Government continued to implement tax administration reforms geared toward improving efficiency, as well as rationalization o f the tax structure. This included pursuit o f trade liberalization 20 PEFAR - FYOS United Republic of Tanzania and regional integration initiatives, aimed at molding the tax regime to better support growth by creating space for private sector to invest and operate, while at the same time expanding the tax base. 4.4 The continued improvements in TRA’s tax administration systems and practices have resulted in a rise in the revenue t o GDP ratio from 12.1% in 2002/03 to 13% in 2003/04. In nominal terms revenue increased 20% year-on-year to TShs. 1,459 billion in 2003/04. Actual revenue collections also exceeded budget estimates by 5%. Revenue collections in 2003/04 were T.Shs. 1,459 billion compared with a budgeted estimate o f Tsh.1,393 billion. This trend continued in 2004/05 with collections being above estimates by 3% for the first h a l f o f the fiscal year. 4.5 Annual increases in tax collection have been broadly spread across all sources o f revenue with income tax collections being the strongest performer. Income tax receipts in 2003/04 increased by 32% compared to 2002/03. Large increases in both PAYE (38% year-on-year increase) and corporate income taxes (40% year-on-year increase) reflect the expiry o f some tax holiday periods, reformed tax laws and better administration through the Large Tax Payers Department. Import duties also performed better in 2003/04 increasing almost 30% year-on-year. W h i l s t income tax grew faster than VAT in 2003/04, the latter continues to be the largest revenue source - making up 35% o f total collections. Income taxes n o w represent 25% o f total revenue. Excises account for 15% o f total revenue whilst import duties, non-tax revenues and other tax revenues contribute about 8% each. 4.6 Thus, the good progress made o n revenue mobilization suggests that tax administration reforms are paying-off. GOTi s urged to stay the course and move ahead with reforms envisaged in the TRA corporate plan and customs modernization plan. This i s particularly important for Tanzania to succeed in reducing high donor dependency over the medium t o long-term. However, some attention i s needed in the area o f non-tax revenue where revenue collection performance remains less impressive. Recent revelation o f significant loss o f visa fees (estimated at Tshs.l.5 billion per annum) collected by Tanzanian embassies abroad suggests r o o m for improved collection o f the non-tax revenue category. Efforts to reduce tax exemptions have also been considerably successful except for the mining sector. Table 5: Summary o f Central Government Revenue FY99-FY05 (YOo f GDP) l999/00 2000/01 2001/02 2002103 2003104 2004/05 Actual Actual Actual Actual Actual Proj. 12.1 11.3 12.0 12.1 13.0 14.0 Tax revenue 10.1 10.7 10.9 11.0 11.9 12.8 Import duties 1.3 1.2 1.0 1.1 1.2 1.1 VAT 3.3 3.9 4.1 4.2 4.5 4.9 VAT on domestic G&S I.6 I.6 1.7 1.7 2.1 2.1 VAT on imports 1.6 2.4 2.4 2.5 2.8 3.2 Excises 1.3 2.0 2.1 1.9 I.9 2.0 Excises on domestic G&S 1.0 0.9 0.8 0.8 0.8 0.8 Excises on imports 0.3 1.1 1.2 1.o 1.1 1.1 Income tax 3.0 2.5 2.6 2.7 3.2 3.7 PAYE 1.1 1.2 1.4 1.3 1.6 0.0 Corporate 0.7 0.6 0.7 0.8 I.o 0.0 Other taxes 1.3 1.1 1.1 1.1 1.1 1.1 Non-tar revenue 1.2 1.3 1.2 1.1 1.0 1.1 21 PEFAR - FY05 United Republic of Tanzania Figure 10: M a i n Sources of Revenue 2003/04 (YOof Total Revenue) lnwme Tax 25% Excises 15% Non-tax revenue 35% 4.7 With the exception o f the steady growth o f VAT, Tanzania’s tax structure has not changed significantly over the past five years (Figure 11) VAT, income tax, and excises have remained the dominant and growing sources o f revenue, averaging about 4%, 2.8% and 2% o f GDP respectively. Figure 11: Tax Structure since 1999/00 (YOo f GDP) 4.8 On average, over 80% o f total central government revenue i s collected in Dar es Salaam (Figure 12). Only four other regions provide 2% or more o f total central government revenue - Arusha (3.2%)’ Tanga (2.8%), Mwanza (2.4%) and Kilimanjaro (2.1%). However, the pattern o f regional shares i s changing gradually especially for income tax. For instance, Dar es Salaam region used to account for about 78% o f income tax revenue during the latter h a l f o f 1990s but n o w accounts for only about 68%. This development partly reflects the growth o f manufacturing in other regions, which in turn calls for increased collection effort outside Dar es Salaam. 22 PEFAR - FY05 United Republic of Tanzania Figure 12: Total Revenue by Regions 03/04 I Other 4.9 In spite o f the good progress made o n revenue mobilization, major challenges remain for the medium to long term. One key challenge relates to the fact that domestic revenue mobilization i s s t i l l substantially l o w relative to the huge expenditure needs (due to widespread poverty) leading to high donor dependency (41 percent o f the budget). Large aid-dependency i s r i s k y in the short-term if government-donor relations are fragile but also r i s k y in the long-term to the extent that such support leads to an increase in public spending o f a permanent nature, such as payment o f teacher salaries. Therefore, continued focus on expanding the tax base through the creation o f space for private sector to invest and operate i s imperative. 4.10 Precaution has also been voiced that the recent surge in grants and highly concessional loans could be crowding-out domestic revenue effort insofar as they are viewed by the government as free resources. Developments in the revenue effort since 1999/00 indicate that aid flows have been steep- chasing the domestic revenue effort. The wedge between domestic revenue effort and aid flows has narrowed markedly from about 6% to 3% o f GDP between 1999/00 and 2003/04 (Figure 13). However, evidence o f the expected effects o f large aid inflows (appreciation o f the real exchange rate, decline in exports and FDI, crowding out domestic savings, increase in demand for non-tradables,) in the recent past has been negligible. A 2004 study by the IMF indicates that the REER has depreciated since 2002 in parallel to the depreciation o f the NEER 4.1 1 (Figure 14) FDI has remained at about 15% o f gross fixed capital formation over the past three years, while exports increased to about 17.8% o f GDP in 2003 compared to 15.5% o f GDP in 2001. However, domestic savings declined from about 13% o f GDP in 2002 to 9.7% o f GDP in 2003. The risk o f increased aid flows resulting adverse macroeconomic effects, has probably been minimized by pursuit o f sound exchange rate management, constant Government-donor dialogue, and GOT commitment to the revenue targets agreed under the PRGF program. Nevertheless, Tanzania’s high donor-dependency remains an issue, given that currently, a large proportion o f aid goes t o non- tradables and that total external debt has been o n the upswing since 2001 increasing from US$6.8 billion to US$7.5 billion by December 2004 (Figure 15). 23 - PEFAR FY05 United Republic of Tanzania Figure 13: Tanzania: Revenue Effort Vs Aid -c-Grants &bans-to-GDP FYOO FYOl FYO2 FY03 FY04 Figure 14: Real and Nominal Effective Exchange Rate, 1990-2004 250% 230% 210% 190% 170% 150% 130% 110% 90% 70% 50% 1990 1992 1994 1996 1998 2000 2002 2004 1 +NEER +REER I 24 PEFAR - FYOS United Republic of Tanzania Figure 15: Total External Debt 8.2 8.0 7.8 7.6 0' .- 7.4 E 7.2 e e 7.0 v) 3 6.8 6.6 6.4 I 6.2 I G n I."I I ~~ 1998 ' 1999 ' 2000 ' 2001 ' 2002 ' 2003 2004 ' Source: World Bank LDB (2005) 4.12 Therefore, besides the absorption issue, the macroeconomic effects o f large aid flows will need to be managed carefully in the medium term. This implies that in addition to matching the demand side and supply response in order to avoid adverse impact o f large aid flows on competitiveness, it i s important to ascertain robust growth and higher domestic revenue mobilization for fiscal sustainability. It i s also imperative to develop the private sector by, inter-alia, ensuring that the private sector does participate as much as possible when aid funds are channeled through the public sector. 4.13 The composition o f grant flows during 2003/04 reveals that basket funds, HIPC resources and foreign loans are unpredictable. Grant assistance remained constant at 6.2% o f GDP whilst foreign net financing almost doubled from Tshs.200bn (2% o f GDP) to Tshs.434bn (3.9% o f GDP). The increase in foreign net financing was driven by a 74% r i s e in project loans, a 43% rise in program loans and a fall in amortization. However, grant assistance was 4% below budget in 2003/04 whilst net Foreign Financing was 5 1% above budget. Program and project grants were slightly above budget by 7% and 3% respectively, but both basket grants and HIPC grants were about 25% below budget. The education basket in particular was almost 50% below budget as a result o f utilization o f funds in 2003/04 from late 2002/03 disbursements. Program loans were 50% higher than budgeted whilst basket loans were 97% lower than budgeted Foreign amortization was 72% lower than budgeted. Therefore, more attention i s needed to improve the predictability o f foreign aid. 25 PEFAR - FY05 United Republic of Tanzania Figure 16: Foreign Grants and Financing 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.O% 0.0% -1.0% -2.0% 02OOZO3 Actuals W2003/04 Budget Estimate W 2003/04 Actuals Government Expenditure 4.14 Table 6 shows that GOT spending increased from 19.8% o f GDP in 2002/03 to an estimated 22.5% o f GDP in 2003/04. This increase i s attributable to, inter-alia, a substantial increase in transfers to TANESCO to stabilize power supply, purchase o f the Government aircraft and replenishment o f the Strategic Grain reserves (SGR). Wages and salaries claimed 4.1 percent o f GDP in 2003/04 compared to 4.0% in the previous year. Compared to 2002/03, expenditure o n goods and services and transfers saw a significant increase by about 1.9 percentage points o f GDP. Development expenditure also increased from 5.0 percent o f GDP in 2002103 to 5.7 percent in 2003/04. Table 6 Government Expenditure, 1999/00 - 2003/04 (YOo f GDP) Development expenditure and net lending 5.3% 3.7% 3.4% 5.0% 5.7% o/w Expenditure financed domestically 0.3% 0.5% 0.6% 1.0% 1.2% 26 PEFAR - FY05 United Republic of Tanzania 4.15 There are significant differences in expenditure data for the first h a l f o f 2004/005. While the BER for fiscal quarter 2 shows that total expenditure for the first six months was Tsh. 1641 billion, the Expenditure Flash report indicates total expenditure to have been Tsh.1119 billion. Taking a simple measure o f budget implementation as the ratio o f actual expenditure t o budget estimates, the two sources show a very significant difference. While BER for fiscal quarter 2 shows that for the first six months o f 2004/05 the ratio i s about 51.3 %, the Expenditure Flash report suggests only about 33.4%’. The BER also shows that the observed difference largely reflects a huge variation in actual development expenditure between the t w o sources. The BER for fiscal quarter 2 shows actual development expenditure o f Tsh.670.8 billion while the Expenditure Flash report shows Tsh. 160.6 billion. According to the BER, Tshs.552 billion or 82% o f actual development expenditure for the first h a l f o f 2004/05 was foreign-financed. Given that domestic financing o f the development budget was Tshs.118.8 billion, these numbers imply that the amount o f foreign financing o f the development budget captured in I F M S and reflected in the Expenditure Flash report at the end o f December 2004 was only Tshs.41.8 billion, which i s only about 7% o f the amount reported in the BER. Government i s encouraged to reconcile the two sources and continue with the efforts (together with Development Partners) to improve capturing o f donor support in E M S . 4.16 As is well known, public expenditure control has often turned intractable in pre-election years in many countries. It i s not uncommon for the central government budget to be used to attract voters. An attempt to track candidates for expenditure aberrations in the run-upt o October 2005 general elections shows a rather inconclusive picture at the moment. What i s clear i s that the common vehicles for expansionary fiscal policies around elections (i.e. immediately visible categories o f public expenditure) have exhibited more vitality recently. Examples include the large increase in development spending, settlement o f pension liabilities and teacher salaries, as well as other transfers such as fertilizer subsidy. However, much as these could be pointing to mounting pressure to increase spending to gain electoral advantage, it i s difficult to reach a definitive conclusion since they are within the expenditure program approved by Parliament. Nevertheless, the key message here i s that GOTi s encouraged to adhere t o the commitment control system in the run-up to the October general elections so as to maintain fiscal prudence. 4.17 There are a number o f proposedalready initiated big construction projects that could be r i s k y or have cumulatively adverse implications on the fiscal framework. These include the new national stadium (US$43 million); new Parliament building being constructed o n a build-lease-transfer model with the National Social Security Fund (NSSF); Songwe airport (US$17 million o f which about 68% i s to be financed by BADEA and OPEC); and Mwanza airport (US$15.3 million). The first three projects cited above are in the budget. Others that have been hinted include Kigamboni Bridge and the proposed Umoja Bridge to Mozambique. An issue o f critical importance i s the need to ensure that Tanzania’s public investment program remains strategic, especially in terms o f i t s potential to stimulate growth, while maintaining fiscal prudence. Even if potential liabilities to the Government as a result o f implementation o f some o f the proposed projects (e.g. Kigamboni bridge) could be minimized through the envisaged partnership between a public company (NSSF) and a private investor (Le. the private investor ensures that the investment i s secure and viable and presumably carries the business risk), GOTi s urged to ascertain that there i s in place a robust screening process to Ratio of Actual Expenditure July-Dec 2004 to Budget Estimates 2004105 Recurrent Development Total Expenditure EFR 0.42 0.15 0.33 BER 0.48 0.61 0.51 27 - PEFAR FY05 United Republic of Tanzania safeguard quality o f such big public investment projects, giving priority to those that are strategically important for scaling-up growth, while at the same time remaining conscious about possible fiscal risks in the medium to long term and that they have the potential to contribute significantly to economic growth. The likely medium to long term fiscal implications o f these big projects should be explored fully before embarking on implementation. 4.18 Compared to other l o w income countries in Sub-Saharan Africa with about the same GDP per capita level, Tanzania scores quite well in terms o f the l o w level o f fiscal deficit but lags behind in terms o f domestic revenue effort and capital spending: Specifically, compared to Ghana and Uganda, it i s clear that over the period 2001-2003, Tanzania did best in terms o f running lower fiscal deficits relative to her comparators. However, Tanzania s t i l l lags behind Ghana in terms o f revenue effort and even Uganda prior to 2004 (Table 7). I t also emerges that while GOTspends only about 2 1.4% o f total government expenditure on capital investment (including net lending); Ghana and Uganda spend much more (30.7% and 40.1% respectively). The data indicates that Tanzania also spends less on wages and salaries compared to Ghana. Table 7: Tanzania’s Fiscal Performance Compared to Ghana and Uganda Ghana Tanzania Uganda hotal Govt Exp & Net lending less repayment (% GDP) I 29.4 I 17.3 I 23.6 I boa expenditure: Other goods & services (%Total exp.) 1 9.2 I 31.0 1 29.4 I /Go@expenditure: wages & salaries (%Total exp.) I 26.7 I 21.4 I 20.8 I IO G ; expenditure: capital & net lending (%Total exp.) I 30.7 I 21.4 I 40.1 I beficit after grants (% GDP) I -3.2 I -1.7 I -4.7 I bovt Revenue (% GDP) 1 19.5 ] 11.2 1 11.7 I Indirect taxes (% Total revenue) 64.3 59.2 70.9 Taxes on International trade & transactions (% total revenue) 22.3 38.4 39.2 Source: Computed from African Development Indicators 2005, The World Bank B. STRATEGIC RESOURCE ALLOCATION 4.19 A review o f actual expenditures as per Appropriation Accounts for 2002103, 2003104 and quarterly BERs for the first half o f 2004105 show total expenditure to have increased from 18.5 percent o f GDP in 2002103 to 2 1.6 percent o f GDP in 2003104 (Table 8). Total expenditure i s expected to increase further to 26.9 percent in 2004105. 4.20 Most o f the increase in recurrent expenditure recorded in 2003104 was for the MDAs compared to regions and districts. Recurrent expenditure to the supply votes rose from 11.5 percent o f GDP in 2002103 to 14.0 percent in 2003104 (or a 3.5 percent increase). Over two-thirds o f the increase in supply votes spending (equal to 2.2 percent of GDP) went into funding the recurrent spending by MDAs while one-third (equal to 0.3 percent o f GDP) funded recurrent spending by the regions and districts. Debt service increased slightly, by 0.1 percent o f GDP between 2002103 and 2003104. 28 PEFAR - FY05 United Republic of Tanzania 4.2 1 Recurrent expenditure on all functions within the supply votes and on consolidated fund services (CFS) increased during the 2003/04. Table 8: Composition o f Public Expenditure (as YOo f GDP), FY00-FY05 VOTE 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2004/05* Actual Actual Actual Actual Actual Budget Actual * July - December 2004 ** Transfers from the central government to regions and local authorities Source: Appropriation Account (FYOO - FY04), Expenditure Flash Reports (FY05) 4.22 The major increase in expenditure for the supply votes was on administration (1.3 percent of GDP), followed by social services (0.7 percent) (Table 9 . Other increases are economic services (0.3 percent), productive services (0.2 percent) and defense (0.1 percent). Expenditure on CFS increased by only 0.1 percent o f GDP. Table 9: Functional Recurrent Expenditure (actual, as a YOo f GDP), FY00-FY05 VOTE 199910 2000101 2001102 2002103 2003104 2004105 0 - Source: Appropriation Account (FY97 FY04), Expenditure Flash Reports (FY05) 4.23 Within the social sectors a major increase in recurrent expenditure during 2003/04 was on health and allocations to regions, each o f which increased by 0.3 percent o f GDP. Allocation to higher education increased only marginally from 0.6 percent to 0.7 percent, while allocation to basic education remained stagnant at 0.4 percent and allocation to water declined from 0.2 percent to 0.1 percent o f GDP. Allocations to regions were directed mostly to funding the provision o f basic services (primary education and health). Recurrent allocations to social sectors are budgeted to remain at 5.4 percent o f GDP in 2004/05. 29 - PEFAR FY05 United Republic of Tanzania Table 10: Social Sector Actual Recurrent Expenditure (YOof GDP) FYOO - FY05 Source: Appropriation Account (FY97 - FY04), Expenditure Flash Reports (FY05) 4.24 During the first h a l f o f 2004/05 ppriority sectors as a group received about 51% o f the budget estimates for the full year. However, expenditure o n roads and HIV/AIDS amounted to only 39.6% and 40.2% o f their respective 2004/05 budget estimates. Expenditure o n water and o n justice and legal services was 48.8% and 42.8% respectively. 4.25 Development expenditure by sector recorded in the Appropriation Accounts show an increase from 4.5 percent in 2002103 to 4.8 percent in 2003/04, partly due to a greater share o f donor-funding being captured in the appropriation accounts and also due to improvements in project implementation performance. Most o f the increase in development expenditure in 2003/04 occurred in social services (increase o f 0.2 percent o f GDP) followed by productive services (0.1 percent), and economic services (0.lpercent). The budget for 2004/05 projects a significant jump in development spending to 8.8 percent o f GDP. As pointed out in previous PERs, development expenditure in Tanzania increaseddecreases with an increase/decrease in donor support since foreign aid finances about 90% of total development expenditure. The overall size o f development expenditure also remains small. Table 11: Sectoral Development Expenditures (actual, as a YOo f GDP) 4.26 Actual public expenditure pattern by region" shows, among others, that there i s opportunity to improve o n the growth and poverty impacts o f public expenditure through better regional targeting to IO This analysis gives only a partial picture since a significant amount o f recurrent and development expenditure in the regions goes through ministerial votes. Unfortunately the budget books do not permit disaggregation o f ministerial votes by region. 30 - PEFAR FY05 United Republic of Tanzania address geographic disparities. Data o n actual expenditure by region over the period 1999/00 - 2003/04 (Appendix Tables l a and lb) indicate that recurrent expenditure has been relatively more evenly distributed across the regions than development expenditure. 11 regions out o f 20 together claimed 64.6% with each o f these receiving between 5% and 7% o f actual annual recurrent expenditure by region. The highest beneficiary o f recurrent expenditure (Mwanza region) received an average o f 7% pea.while the least beneficiary (Lindi Region) got an average o f 3%. The recurrent expenditure for each region also seems to have been fairly stable. 4.27 By contrast, development expenditure exhibits significant cross-regional variations. On average 71.6% o f annual regional development expenditure was spent in only 7 out o f the 20 regions. The highest beneficiary (Kagera Region) received about 26.5% annually while the least beneficiary (Rukwa Region) got only 1.1%. It i s not quite apparent why Kagera Region has been getting over % o f total development expenditure by region. Each o f the seven highest beneficiaries got above 5%. I t i s also interesting to note that almost all the regions (6 out o f the 7) that were the major recipients o f development expenditure were also among the 11 top recipients o f recurrent expenditure. Even more important i s that, excluding Dar es Salaam and Kilimanjaro regions (which have relatively better infrastructure), it turns out that the regions that receive less than 2% each o f total annual development expenditure, these are also found to have the highest poverty rates. T h i s i s fairly consistent with findings o f a recent study o n Public Investment and Poverty Reduction in Tanzania (IFPRI, April 2005) which shows, among others, that there i s opportunity to improve o n the growth and poverty impacts o f public expenditure through better regional targeting". However, this should not be construed to suggest that development expenditure need to be even across regions or higher in regions with high poverty rates. 4.28 Alignment o f public expenditure to support the growth focus o f NSGRP needs to be sharpened. In particular, a clear bias toward more and quality-spending o n infrastructure (transport, power, communications, and irrigation) i s imperative for faster and sustained growth. One o f the key pillars that guided the preparation o f the new poverty reduction strategy (NSGRP) i s that a frontal and large- scale growth effort i s necessary if the national poverty reduction targets o f reducing poverty by 2010 are to be achieved. There are therefore, at least two preconditions for scaling-up and sustaining growth in Tanzania. First i s the need to scale-up interventions on infrastructure, covering transport, power and communications. However, given (i) that prior to NSGRP, expenditure on social sectors (education, health, water) has been the core o f Tanzania's poverty reduction strategy, and ( ii)the geographical spread out o f economic activity, then a better balance in effort and resource allocation becomes imperative. Second, given the primacy o f agriculture in the economy, the other pre-condition for growth i s to improve profitability o f agriculture including re-orienting the fiscal regime to support commercial and subsistence agriculture, as well as public investment in irrigation infrastructure. 4.29 The pattern o f development spending by sector during the 1990s has shown n o clear bias toward infrastructure. Instead, it has tended to be spread widely and thinly across the sectors as shown in the figure 7 below for 2003/04. Furthermore, a preliminary assessment o f the extent to which these preconditions for scaling-up growth were dealt with in the budget guidelines (2006/07-2008/09) also 11 Investments i n roads and agricultural research are found to have a large impact o n per capita incomes. I t i s estimated that Tshs. 1 m i l l i o n spent o n roads or agricultural research raises about 27 and 40 poor people out o f poverty respectively. U n l i k e education investments, roads and agricultural research have m u c h more diverse impacts across regions, with the impacts o f roads being more favorable i n the Southern Highlands and Central and Western Zones, while agricultural research is found t o be more advantageous in central and southern Tanzania. 31 PEFAR - FY05 United Republic of Tanzania shows n o major departure in favor o f infrastructure. Overall, our impression i s that GOTbegun well by apportioning 39% o f proposed total budgetary allocation for the growth and reduction o f income poverty cluster and another 43% for the improvement quality o f life and social well being cluster. Although the BG document i s not detailed enough to permit analysis at item level, there are indications that the proposed allocations for infrastructure do not square-up with the frontal growth effort envisaged under N S G W . For example, the proposed allocation to the roads sector for 2005/06 i s only 3% above the 2004/05 provision. Recently, there have been GOTinitiatives to explore various financing options for supplementing public investment in infrastructure such as infrastructure bonds, and special infrastructure facility utilizing proceeds o f liquidity mopping-up operations by BOT. These options should be carefully examined in the context o f ongoing financial sector reforms that target financial deepening. Moreover, the financing strategy will need to be integrated into the macroeconomic framework. Other aspects that will need to be more clearly defined, include project selection, handling o f project risks and due diligence o f legal, regulatory and institutional frameworks. Targeting local institutional investors (pension funds, insurance companies and financially strong LGAs) seem to have greatest potential, at least initially. 4.30 Although the BG proposes to increase overall allocation to agriculture by 46% compared t o the previous year, the priority areas for public expenditure identified to be critical for turning-around agriculture remain a long wish-list (18 policy commitments). Besides, some o f the commitments (e.g. subsidizing targeted inputs) are not fully compatible with the objective to facilitate the development o f the market. GOT i s encouraged to ensure that targeted input subsidy i s accompanied by a clear program to rectify underlying problems that the subsidy i s compensating for especially poor infrastructure. Otherwise the demands o n the budget could grow rapidly. Overall, there i s need to re- assess the entire fiscal incentives framework (allowances, remissions, exemptions) for agriculture that i s given through the different Acts. Figure 17: Development Expenditure by Sector 2003/04 GENERAL PUBLIC OTHERECONOMI PUBLIC ORDER AND EDUCATION TRANSPORTATION AND COMhKWICATION 17% HOUSING AND MMUNITY AMENITY MINING, MINERAL ,MANUFAClWIUNG AND CONSTRUCTION GRICULTURE, 19% TRY, FISHING AND HUNTING 7% 32 - PEFAR FY05 United Republic of Tanzania c CONSISTENCY W I T H ACTUAL BUDGET EXPENDITURE12 4.31 A key objective o f the last PER was t o make an assessment o f the consistency o f policy, planning, budgeting, and actual expenditures in Tanzania. With respect to budget execution and the budget, the findings pointed at t w o major weaknesses in 2002/03, namely (i) substantial deviations between the budgeted and actual amounts o f general budget support on the revenue side and (ii) funds retained for reallocations (mainly salary adjustments and contingencies) under vote 50 o n the expenditure side. At the same time, priority sectors were generally protected from expenditure cuts in the course o f budget execution. Deviation analysis at sub vote level showed substantial variances in the past and significant improvement in 2002/03 13. 4.32 There are many possible reasons for budget deviations. I n 2003/04 there were at least four main sources: The first cause refers to reallocation warrants which Government uses to make reallocations across votes if need be. Such reallocation requires Parliamentary approval and caters for things like increases in the world market prices for oil. The second relates to MDAs requests for intra-vote reallocation with approval by MoF. This category o f reallocations initially increased with the introduction o f MTEF when some MDAs could not budget properly. Subsequently MDAs training o n planning and budgeting has increased capacity in this respect. The third source o f budget deviation has been the provision for contingency, which i s a holding item under vote 50 (MoF) to cater for salary adjustments (including allowances) and other items which are not yet firmed up by the time the budget i s finalized for submission to the National Assembly. The fourth source o f deviation was the supplementary budget t o cater for drought-related expenditures, the abolition o f nuisance taxes at the local government level, as w e l l as other expenditure items as discussed below. Although budget deviations are inevitable, large and widening across-the-board variances indicate a lack o f budget predictability and realism, which undermines the public expenditure management systems and in tum has adverse effects o n spending managers when planning and implementing activities. 4.33 In 2003/04, the contingency component o f vote 50 (Ministry o f Finance) / sub vote 2001 came to Tshs.59.6bn or 3.7% o f the total recurrent budget as approved by Parliament. Compared t o 2002103 this translates into an absolute decrease by Tshs.lSbn. Actual expenditure o f sub-vote 2001 i s stated as merely Tshs.3.7bn (up from Tshs.2.9bn in 2002/03). However, it must be noted that the contingency funds were utilised for a wide array o f measures besides the main expenditure items identified in the 2003/04 supplementary budget (i.e. strategic grain reserve, energy sector, electoral commission, and government aircraft). I n this context, reallocations for suppliers’ debts stood out at almost Tshs.55bn. As in previous years, salary adjustments (including allowances) featured strongly. Part o f the reallocations were also used for the implementation o f the Anti Corruption Strategy. l2Source for recurrent budgets up t o 2003104 is MoF Budget Books (budgets as approved by Parliament). The Source for recurrent expenditures up to 2003/04 i s the IFMS The source for development budgets and expenditures up to 2003104 i s the Consolidated Appropriation Accounts l3The index o f budget deviation used i s the sum o f absolute differences between the approved budget and actual expenditure level expressed as a percentage o f the total budget 33 PEFAR - FY05 United Republic of Tanzania 4.34 I n the 2004105 budget the contingency amounts to Tshs.6l.lbn. thus, having increased by Tshs.5.4bn. or 9.7% compared to 2003104. The first reallocation warrant o f 2004/05 indicated reallocations from the contingency (vote 50 Isub vote 2001) amounting to Tshs.15.3bn. The largest part (Tshs.9.8bn) was allotted to the Ministry o f Foreign Affairs and International Cooperation (Vote 34) with Tshs.8.5bn earmarked for the rehabilitation o f buildings, followed by the Ministry o f Communication and Transport (vote 62) with Tshs.3.4bn assigned to the Tanzania Government Flight Agency. Tshs.0.9bn went towards the implementation o f the Anti Corruption Strategy. F r o m the reallocation warrants alone, it i s difficult t o come to a final conclusion. However, the items listed above do not seem to qualify as unforeseeable transactions. I t remains unclear why the major items listed above were not budgeted for in the first place. T h i s suggests need for proper budgeting to reduce provisions for the ‘contingency’ in vote 50 to cater for items that are not really ‘force majeur’ incidents: 4.35 Regarding the consistency between approved budgets and actual expenditure, the degree o f deviation fluctuates substantially dependent o n the level o f aggregation o f the analysis. According to Consolidated Appropriation Accounts the overall budget deviation in 2003/04 for MDAs amounted to -10.2 % (-Tshs.278bn.) with a recurrent expenditure variance o f - 0.8% (Tshs.16bn.) and a development expenditure variance o f - 32.6% (Tshs.262bn.). Recurrent expenditure data derived from the I F M S shows a budget deviation o f + 1.3% (Tshs.19bn.) compared to the approved budget. However, once the overall recurrent budget i s broken down to expenditure by function, a different picture emerges: 2oOo/Ol Zo(K)/01 2o(K)/Ol 2000/Ol 2OM)/Ol 2001/02 2001/02 2001/02 2002/03 2002103 200U03 2002/03 2003/04 2003104 ZW3/04 2003104 Budget Budget Budget Budget Approved Actual variance Approved Actual variance Approved Actual variance Approved Actual vm’ance Est. exp. diff (%) Est. exp. dim (%) Est. exp. diff (%) Est. exp. diff (%) Administration 219 196 -24 -10.8 241 278 37 15.2 345.9 246 -99.9 -28.9 414 466 52 12.6 Defence&securiry 159 163 4 2.7 174 182 9 5 211.2 195 -16.2 -7.7 255 262 8 3.1 Social service 120 117 -2 -2 142 128 -14 -9.8 181.6 182 0.4 02 240 229 -11 -4.6 Economic Service 59 74 15 25.8 67 87 20 30.8 115.8 113 -2.8 -2.4 112 162 50 446 Productive 28 27 -0.4 -1 6 32 32 -0.4 -1 3 47.9 50 2.1 4.4 64 83 19 29.7 CFS 294 263 -31 -10.5 333 276 -56 -17 323.5 266.34 -57.16 -17.7 409 309 -99 -24.2 GRANDTOTAL 879 841 -31 -4.3 988 984 -4 -05 1225.9 1052.34 -173.56 -14.2 1493 1512 19 13 Source: MoF Budget Books, IFMS, and own computation 4.36 Despite an overall variance o f merely 1% in 2003/04, at functional level recurrent budget deviations fluctuate between - 24% (CFS) and +45% (economic services). With the exception o f 2002/03, previous years were also affected by relatively wide ranges o f variances. In the past four years the following overall trends could be observed: ‘Defence and security’ tended to overspend their estimates slightly, while ‘economic services’ over-spent substantially (double-digit deviation^)'^. The exceptional budget deviation o f +30% for productive sectors in 2003104 resulted from the supplementary budget allocation for the strategic grain reserve. On the other hand, social services and productive sectors have under-spent to some extent since 2000/01. CFS spending generally was well below target, largely caused by under-spending o f debt services. As to ‘administration’ n o discernable pattern o f systematic ovedunder-spending i s observed. l4In 2003/04 the latter was predominantly caused by the purchase o f a government aircraft budgeted as recurrent expenditure (which raises questions about the validity o f budget classification). 34 PEFAR - FY05 United Republic of Tanzania 4.37 In 2003/04 budget deviations ranged from - 52% (vote 55 / Commission o f Human Rights and Good Governance) to + 1.011 % (vote 61 / Electoral Commission). While 35 votes (69% o f all votes) performed within a reasonable range o f -10% to +lo%, 16 votes (31% o f all votes) exhibited larger fluctuations. Even when discounting the votes which were significantly affected by the supplementary budget (agriculture / food security, electoral commission, communication / transport), 13 votes (25% o f all votes) showed substantial variances from their initially approved budgets. When applying the index o f budget deviation as the sum o f absolute differences between the approved budget and actual expenditure at vote level expressed as a percentage o f the total budget (with the budget as approved by Parliament not taking into account any reallocations subsequent to parliamentary approval), the following outcome (Table 13) emerges for 2000/01 to 2003/04. 20001 01 16.0% 200 1I 02 24.1% 20021 03 22.1% 20031 04 23.9% 20031 04 (excl. ‘force majeur’ items, namely 22.6% additional spending in votes 43lagriculture and 581energy) 4.38 The above deviations provide an indication about inter-vote reallocations. I n 2002/03 a significant improvement could be noted, which initially was attributed to the rationalization o f in-year reallocation processes. Even when discounting the drought-related expenditures o f the supplementary budget, the situation deteriorated substantially in 2003/04. 4.39 At vote level, the analysis covering the past four years implies that a number o f votes are generally ‘over-spenders’ while others are ‘under-spenders’ (Table 14) Table 14: Over-spenders and under-spenders -~ ‘Over-menders’ ‘Under-menders’ Vote 23 Accountant General” Vote 22 Public Debt Vote 3 1 Vice President Vote 46 Ministry o f Education Vote 32 President’s Office - Civil Service Vote 50 Ministry o f Finance Dept. Vote 34 Ministry o f Foreign Affairs Vote 5 1 Ministry o f Home Affairs Vote 42 Office o f the Speaker Vote 57 Defence & National Security Vote 60 Industrial Court o f Tanzania Vote 61 Electoral Commission Vote 62 Ministry o f Communication & Transport IsSee explanation o n p. 17. 35 PEFAR - FY05 United Republic of Tanzania 4.40 Turning to sub vote level, the trend outlined at vote level i s further exacerbated: While spending at individual sub vote / program level merits further scrutiny fi-om a sectoral perspective, an outlook o n overall budget implementation derived f r o m actual expenditures at a lower level o f aggregation appears to be more useful when addressing overall budget predictability. The index introduced during the 2003/04 PER and applied above at vote level i s shown in Table 15 for sub-vote level. 20001 01 22.6% 20011 02 26.3% 2002103 25.2% 20031 04 27.2% 20031 04 25.9% (excl. ‘force majeur’ items, namely additional spending in votes 4315002 and 5813001) 20031 04 21.6% (excl. add. suppl. budget spending in votes 6111001 and 6212001) 4.41 As at vote level, budget variances at sub-vote level substantially rose in 2003/04 even when discounting the spending o n non-drought related supplementary items (voters’ registry, government aircraft). Intra-vote reallocations significantly increased; hence, the management o f resources was probably less effective than in 2002/03. A s a consequence, some spending managers most likely faced serious problems when trying to implement their planned activities. T h i s development points to an expenditure programming problem. Analysis with respect to possible deviation patterns at sub-vote level i s ongoing; related findings will be presented in next year’s public expenditure review. 4.42 Intra-year budget reallocations have become widespread most likely because o f under-budgeting in some areas and at least to some extent due to some political spending pressures. Overruns in areas not covered by the 2003/04 supplementary budget were financed by cuts in others, which distorted the original budget intentions and weakened the public expenditure management systems. 4.43 As pointed out in previous PERs, the tendency for expenditures to be clustered in the fourth quarter was also observed in 2003104. This trend most likely reflects weaknesses in procurement planning o n the part o f MDAs (unrealistic cash flow plans) which in turn raises some doubts on the efficiency o f government spending. In an attempt to address this problem, M o F has issued a circular to the effect that MDAs will n o longer be able to carry forward their financial commitments for a particular financial year into the next. Furthermore, all funds for the fourth quarter of 2004/05 were issued by end-March, 2005. 4.44 In general, although there could be some credible explanations behind a number o f the observed deviations, weaknesses in planning and budgeting remains one o f the main causal factors. For example, the seeming over-spending in Vote 23 reflects in and out moneys put there for control purposes to cater for expenditures o n the Treasury Voucher system, payment o f utilities bills for entire government, settlement o f bank charges for all Government bank accounts, insurance, staff loans etc. As for vote 22, in principle data o n projected debt relief i s available. However, more effort i s needed t o utilize it in budgeting. All in all, improving budget formulation and management t o decrease intra- 36 PEFAR - FY05 United Republic of Tanzania year budget reallocations i s a critical step forward. Greater Parliamentary scrutiny o f the reallocations and enforcement o f expenditure controls i s also imperative. D. RESOURCE PLANNING, WAGE BILL MANAGEMENT HUMAN AND PAY REFORM ISSUES 4.45 C i v i l service and related pay reform remains a critical issue for Tanzania. The transition to a market-based economy requires a transformed civil service to manage the economy in the era o f globalization and ensure efficient provision o f public services. K e y among the imperatives i s capacity to recruit and retain skilled staff, which implies a salary structure that i s in line with the existing labor market conditions. At the same time, it i s also critical to ensure that attempts to raise the wage bill are sustainable and consistent with the macroeconomic and fiscal framework. The latter has been the main reason for Government being rather cautious to decentralize the human resource planning and wage bill management away from PO-PSM and MoF, leading t o a heavier burden on the two ministries. 4.46 Although the Human Capital Management Information System (HCMIS) became operational in April 2000 under the joint management o f M o F and PO-PSM, the integration o f staffing levels and financial resource allocations remains rather weak. Typically, PO-PSM has not been able to come to closure o n salary adjustments/pay enhancement amounts, by the time the BG and budget proposals are finalized. The ceiling for wages shown in the BG i s rather limited as it i s based on the existing employment situation. The main reasons for the inability to timely conclude on the salary increase for the subsequent fiscal year include, limited capacity particularly in LGAs to prepare well articulated human resource needs, which have to be verified by PO-PSM prior to negotiation with MoF. Human resource planning i s complicated partly by the high demand in the labor market for professionals such as paramedics and medical assistants compared to supply. Implementation o f the monthly cash budget system has also tended to limit staff recruitment. In practice M o F only reveals information on new salary increments around June. GOTi s urged to move ahead in decentralizing the H C M I S to MDAs to improve o n establishment control and to ensure wage bill monitoring and planning in order to achieve higher levels o f compliance and accountability. GOTalso needs to build capacity for human resources management in LGAs. 4.47 Recently, there has been a surge in expenditure o n employment allowances which may be linked to exploitation o f allowances under other charges for remunerative purposes. This development i s fraught with some dangers that potentially fragment the pay system and undermine sound wage bill management. Specifically, the increased use o f allowances i s not only an inefficient way to alleviate the problem o f l o w pay in public service, but also that such allowances tend to compromise equity and skip the tax net. The l i s t o f allowances i s long and includes more obvious duty facilitating allowances such as per diems to other employment allowances such as medical and dental refunds. A study o f allowances that was undertaken by Government in October 2004 analyzed the nature and extent o f the problem but did not lead to operational recommendations. GOTi s encouraged to complete the review o f allowances and consider rationalizatiodconsolidation o f some o f the allowances with pay. In addition, GOTneed to explore other pragmatic ways to address the pay issue, including carrying out a critical review o f the composition o f OC and consider the possibility o f moving resources out o f OC t o PE. This seems plausible to the extent that the observed clustering o f public expenditure o n O C at the end o f the fiscal year could be reflecting inefficient resource allocation. 37 PEFAR - FY05 United Republic of Tanzania E. I N THE PEDP FINANCING LEAKAGE AND EXPENDITURE CHAIN 4.48 A summary o f the key findings o f a research done in 2003 by PCB on implementation o f the PEDP covering Arusha, Coast, Mwanza, Mbeya and Tanga regions points to corrupt practices in the PEDP funding chain. These include: cost ineffective purchases o f school materials (under instructions from DEOs and District Treasurers. Some o f the sources o f construction materials were owned by council officials and politicians) and construction o f class rooms. (ii) Some schools use money earmarked for the purchase o f school supplies for administrative costs such as allowances for school committee members; and (iii) In some LGAs, receipt and expenditure o f PEDP funds are not transparently displayed as required PCB/Government i s commended for carrying out the research and taking follow-up action on similar cases, including arraigning the culprits before the court o f law as was the case for Musoma District Council officials who are facing charges o f embezzlement o f council funds to the tune o f over Tshs.lbn (The daily News, Saturday February 26,2005). PCB/GoT i s urged to scale up the exercise o f tracking leakage o f public resources covering more LGAs and the entire financing chain. Government i s also advised to consider undertaking a review o f the entire grant transfer framework to get a better understanding o f the loopholes and root causes, including clarity of instructions in the chain and institutional arrangements between MoF, PO-RALG, and MoEC in the process. The Daily News i s also commended for being at the forefront in publicizing such cases and urges other news media to follow suit. 38 - PEFAR FY05 United Republic of Tanzania PART 111: PUBLIC RESOURCE MANAGEMENT AND ACCOUNTABILITY 39 PEFAR - FY05 United Republic of Tanzania 40 PEFAR - FY05 United Republic of Tanzania 5. ALIGNING RESOURCES WITH THE NSGRP: REVIEW OF THE FY05 BUDGET GUIDELINES A. THE NSGRP INTO MEDIUM TRANSLATING TERMBUDGET STRATEGY 5.1 The 2004/05 PEFAR was undertaken in the context o f a comprehensive review o f the first poverty reduction strategy (PRS) that had been under implementation since 2000 and subsequent preparation o f a revised strategy - christened as the ‘National Strategy for Growth and Reduction o f Poverty (NSGRP)’ also known as MKUKUTA in i t s Kiswahili acronym. Unlike the f i r s t PRS which focused on a core o f six priority sectors, the MKUKUTA i s outcome-based and i s structured around three clusters o f growth and reduction o f income poverty, improvement o f quality o f life and social well being, and governance and accountability. As such, the alignment o f public expenditure to support and guide implementation o f the new strategy was considered necessary. An important focus o f this report i s therefore on h o w t o strengthen the budget process during the transition phase to a results-based approach, building o n initial thinking begun during the 2003/04 PER external evaluation. Particular focus i s o n the need to ensure consistency o f the budget process and mould the Budget Guidelines into a budget strategy document. The PEFAR report therefore documents and pre-appraises h o w GOTaddressed this concern especially in terms o f progress made and lessons learnt o n linking the budget with NSGRP, and alignment o f sector PERs with NSGRP. Furthermore, this report devotes attention on GOT’S initial attempt to align public expenditure to scale-up and sustain growth since one o f the key pillars o f NSGRP i s that a frontal and large-scale growth effort i s necessary if the national poverty reduction targets and related MDGs o f reducing poverty by 20 10 and 20 15 respectively, are to be achieved. 5.2 During the last year Tanzania has developed a new PRS and, in line with the focus o f last year’s PER external evaluation has made impressive efforts to enhance the link between policy and resource allocations by strengthening the formulation o f medium term budget strategy. 5.3 The development o f the National Strategy for Growth and Reduction o f Poverty (NSGRP) represents a shift away from the sector based prioritization used in the last PRS to a broader based strategy using an ‘outcomes-approach’ , The ‘outcomes-approach’ encourages an inter-sector approach toward achieving specific cluster outcomes o n growth, improved quality o f life, good governance and equity. 5.4 In the Budget Guidelines (BG) this year, Government has made significant efforts t o link the NSGRP and sector strategies more explicitly with budget allocations. T o do this GOThas developed and used a new Strategic Budget Allocation System (SBAS) to indicate the poverty cluster interventions (targets) and the respective actors (sectors) who will be required to collaborate during the implementation o f their activities. 41 PEFAR - FYO5 United Republic of Tanzania . 5.5 A review o f the achievements so far in this process covered three key aspects, relating to (1) the overall fiscal framework on which the BG i s based (2) observations on the budget process reform from a brief survey o f MDA’s experience (3) suggested areas for consolidation o f the reform. B. OVERALL FRAMEWORK 5.6 The following issues were noted regarding the overall macro framework: 5.7 In the short term there i s a need to more accurately match expenditure plans with available resources for the upcoming financial year. While domestic revenue projections are realistic and likely to be met this year’s external financing projections are overly optimistic. As a result the overall government expenditure plans for FY06 will need to be reduced by up to 1.9% o f GDP from 28.7% of GDP to around 26.8% o f GDP. This will mean the overall budget ceiling will need to be reduced by 6.7% with subsequent implications for all MDA’s. 5.8 There i s still need to develop the strategic nature o f the Budget Guidelines so that they become a more comprehensive instrument for guiding public finances over the medium term. In particular it would help to: (j) Establish projections for the appropriate level o f Government activity in the economy over the medium /long term given the particular policy focus presented within NSGRP and taking into account the absorptive capacity o f the economy. (ii) Develop funding scenarios over the medium term - domestic financing and foreign financing projections. Identify funding gaps and establish the macroeconomic implications o f the various scenarios. (iii)Given uncertainties with both domestic and foreign financing develop upper and lower funding scenarios and ceiling implications in the medium term. (iv) Integrate human resource issues and in particular the wage bill within the Budget. c. VIEWS FROM CONSOLIDATED MDAS 5.9 The main points which emerged from discussions with a number o f MDAs, (mostly with Directors o f Policy and Planning and staff) o n h o w the revised budget process was seen from sector level were the following: 5.10 MDAs viewed the reform positively: the process involved substantive consultation with MOF earlier in the cycle, (including an early review o f prior year’s experience) which allowed MDAs to make a more substantial input to preparation o f the Guidelines than in previous years. 5.1 1 MDAs appreciated the flexibility allowed to prepare their submissions against categories drawn from the MKUKUTA or the M D A ’ s own strategic plan. 5.12 While some MDAs faced difficulties in directly aligning with MKUKUTA cluster strategy categories, most found that categories from the MTEF formed an effective basis for linking to MKUKUTA. For some the exercise effectively amounted to a simplified f o r m o f MTEF preparation, earlier in the cycle. 42 PEFAR - FY05 United Republic of Tanzania 5.13 Several M D A s noted that while previous sector PER studies had been used to some degree, future PER work could be more useful by being more focused and timely. 5.14 While most MDAs found the process positive in translating their immediate strategy into resource plans, they noted weaknesses in dealing with crosscutting areas. The process identified strategies in which more than one agency had an input, but so far has not included means of developing the coherence o f combined inputs. Some felt that M o F could do more to assist this aspect o f the process; others recognized that other coordination processes might be needed. D. SELECTED AREAS GUIDELINES OF THE BUDGET FOR DEVELOPMENT 5.15 There are some suggested areas where the current process might be strengthened for the next cycle. The recommendations presented below are offered in part as preliminary suggestions to be taken further in Government’s own review o f the reforms later this year. In making these suggestions, it i s recognized that budget procedures have been subject t o many frequent changes in recent years. The main thrust o f further work should therefore focus o n consolidating the recent reforms, rather than major new directions. Expenditure classification issues 5.16 One o f the more ambitious aspects o f the BG exercise was the attempt to move directly from cluster strategies based on a system o f outcome classification in the NSGRP to a system o f expenditure classification which can be used for budget preparation. In most cases, MDA’s relied heavily o n the expenditure classification already used in the MTEF and attempted to link the NSGRP cluster strategies to these categories. I n sectors where the MTEF process i s longer established, developing a workable classification appeared to be an easier task. However, the resulting classification in the most detailed level o f the BG appears to be an uncomfortable mix o f outcome based categories, programs and activities, which most MDAs recognized stood in need o f further rationalization. 5.17 Prior to the next budget cycle, there i s n o w an opportunity to carry out further reform o f the expenditure categories used in the link between NSGRP and MTEF. The MTEF categories in any case could benefit from rationalization to develop a simpler and more strategic approximation to a program classification. The opportunity presented by the challenge o f the NSGRP, and the related work in developing the NSGRP implementation plan, offer a key opportunity for ensuring greater coherence in the definition o f the key programs within the MTEF. Decision making process: 5.18 I n principle, the revised budget process enabled Cabinet to decide the broad budget strategy early in the process, determining a binding framework for subsequent preparation o f the annual budget and more detailed development o f the MTEF. This remains a key objective for the reform, although this year, in practice, the questions remaining around the macro framework, noted above, will entail revision in the BG numbers at sector level prior to the budget. 5.19 Cabinet’s approval o f the BG comprised endorsement o f vote level ceilings, along with the aggregate allocation to NSGRP expenditure in each MDA. The estimates were built up from allocations at the level o f sub-vote, disaggregated by cluster strategy, but these were not reported in 43 PEFAR - FY05 United Republic of Tanzania the Cabinet paper. Instead, the paper emphasized allocations by the three broad clusters o f the NSGRP, although the rationale for allocations at this highly aggregated level i s not easily demonstrated. It may be preferable in future to focus more o n deciding allocations at the vote level, with simplified MTEF / program allocations being provided to Cabinet as background information on derivation o f the allocations by MDA. Sector PERs: 5.20 Revision o f the budget process and the challenge o f linking the NSGRP and budget raise new questions on the role o f sector PERs. MDAs emphasized that sector PERs were useful in BG preparation, but could have been more focused on the specific challenge o f reviewing past sector experience and contributing initial analytic input to the task o f developing BG submission. 5.21 On timing o f sector PERs, the WG decided to postpone further work last year in order to get new sector PERs better aligned with the BG cycle. Some have doubted whether sector PERs need to be repeated annually. However, if sector PERs are intended to be the base for the annual exercise o f BG preparation and an analytic platform for annual sector reviews, it may be better t o approach the design o f sector PERs with these requirements in mind, keeping them short and focused. L i k e the PER work at national level, they may be designed to provide two types o f output (1) b r i e f summary analysis o f recent developments or other updates needed annually (2) more detailed analysis o f selected topics o f current relevance, contributing to a cumulative sector analysis over several cycles 5.22 Sector PERs vary considerably in quality and in the degree to which MDAs and other stakeholders make effective use o f the analysis. The health sector PERs are widely recognized to be o f high quality and a key contribution t o effective sector review processes. Some o f the factors which may be responsible include the following. 0 Designed and commissioned with full involvement o f key sector staff and relevant stakeholders. In other sectors, groups responsible for PER design and implementation do not include key actors, may not coincide with the relevant sector group and may not cover all agencies relevant for the sector. 0 the PER i s established, over the course o f several years, as a key input for the annual health sector review, providing a critical forum for scrutiny o f i t s findings and vocal demand for appropriate analysis 5.23 The PER WG could address the opportunity that n o w exists to tighten the focus o f PER studies, perhaps by defining some generic requirements to be included in all PER TORS,linked to the demands o f the revised BG process, and the need t o support well informed sector review processes. The PER work program could also help on the difficulties o f handling cross cutting areas, either by requiring sector PERs to clearly identify key linkages and requirements/assumptions regarding programs outside the sector, or by commissioning specific cross sector studies. SBAS development 5.24 One o f the key contributions to strengthening the budget guidelines exercise has been MoF’s timely development o f relevant software, in the Strategic Budget Allocation System (SBAS). This achievement i s strongly appreciated, recognizing that in a matter o f a few months, MOF had succeeded in developing new software f i o m scratch, familiarizing a l l MDAs with i t s use and 44 PEFAR - FY05 United Republic of Tanzania implementing the revised BG procedure primarily through the micro and macro modules o f SBAS. However there i s the challenge o f ensuring interface between SBAS and the IFMS. T o this end the budget preparation options within EPICOR might ensure greater coherence o f Government systems. M o F i s well aware o f this issue and has taken steps to ensure full integration with EPICOR in the following cycle. 5.25 Installed in 2003 and ready to be used, is the Data Warehouse. I t i s a module designed to hold a copy o f data held o n IFMS. The objectives o f the system are to allow selected users, such as AOs, Planning and Policy Analysis Departments in the M o F and others, to draw o n I F M S information. While some users have already been trained, it i s clear that this powerful database i s until n o w not fully utilized. Government i s therefore urged to fully utilize this utility. 5.26 MOF also have plans to develop SBAS further during the next few months, to add two further levels to the existing resource allocation modules. Level 2 will develop analysis o f activities, in line with development o f the NSGRP implementation plan, while Level 3 i s intended to establish links with the M&E framework. These developments, which promise significant contributions to the accountability framework for NSGRP implementation, are welcome. Combining these developments with a careful review and rationalization o f the system o f classification used the BGMTEF (discussed above) will help to ensure a significant improvement in coherence. 5.27 Further development o f SBAS should also address the need t o incorporate human resource planning in preparation o f the BG next year. Cross cutting areas 5.28 While the NSGRP identifies many areas in which more coherent strategies require closer collaboration across agencies and across sectors, this has so far not led t o major changes in institutions to address this challenge. Government’s proposals for the NSGRP implementation plan have recognized this gap but not so far identified priority cross cutting areas o n which to focus. Similarly, the revised budget process has not so far led to stronger cross agency coordination, although most MDAs recognized this as a key gap. 5.29 The gap i s perhaps most obvious in the area o f growth, which was recognized as a central emphasis o f the NSGRP, an emphasis which i s far less evident in the allocations proposed in the BG. This i s apparent in the relatively l o w to the major infrastructure, especially the road sector, in the BG , the lack o f major increase in public investment and the lack o f articulation o f clear growth strategy and i t s implications for resource allocations, including options for infrastructure financing. It will be very important to address these gaps as far as possible and define the work program for a better treatment o f these issues in the next BG. 5.30 M o r e generally, strengthening the treatment o f cross cutting areas will be a key challenge for consolidation o f the revised budget process and i t s link with the NSGRP implementation. Consultation 5.3 1 Government has chosen to use the BG as the instrument for translating broad NSGRP objectives into specific prioritized programs consistent with available resources. Given the consultation process surrounding the NSGRP, this choice o f instrument increases the need to ensure that deliberation o n 45 PEFAR - FY05 United Republic of Tanzania budget strategy also takes place in a transparent manner with a similarly high level o f access and participation. Several points seem relevant here. 0 MDAs noted the widening o f involvement in the BG Committee this year, and welcomed a generally more open approach to the BG preparation within the executive. However, consultation within the PER WG was not very satisfactory. The Budget Guidelines (BG) has s t i l l not been formally discussed in the WG. 0 The PER WG group i s one means o f facilitating dialogue with c i v i l society and development partners, but given the key role o f the instrument it would be good to give attention t o other means of consultation, including dialogue with Parliament 0 Use o f the PER macro group: The PER macro group with i t s membership including BOT, TRA, MoF, PO-PP, Breton Woods, PRBS representatives and NGO's i s well placed to deal with many o f the issues where the BG needs improvement. In particular the group would be able to deal with domestic and external financing issues and many o f the strategic issues including the macroeconomic impacts o f aid and absorptive capacity issues. K e y element for success i s the development o f a work plan and regular ongoing discussions. Linkage with other processes 5.32 PRS/NSGRP: In the course o f developing a new PRS Government has evolved a distinctive approach to use o f the PRS instrument and the related processes, First Government has chosen to use the budget process, and specifically the BG exercise, as the primary means o f prioritizing NSGRP objectives. Second, regarding NSGRP implementation, Government appears to have decided t o use existing sector strategies as the building blocks o f NSGRP implementation, while intending to address some o f the gaps in crosscutting areas with further work. Third, the budget process also appears to be seen as a key means o f linking NSGRP, implementation plan and M&E framework, in part through the further development o f SBAS. 5.33 As an overall approach to fitting the PRS concept to domestic institutions, this proposal has considerable merit. Some cautions may be in order: 0 At present, i t has not been very clearly articulated (especially the second and third elements noted above): this i s n o w urgently needed, to ensure that all stakeholders are working t o the same script, In particular it will be very important to ensure that this perspective o n evolution o f Government institutions i s fully taken into account in the development o f the PRBS and the Joint Assistance Strategy. 0 One o f the risks in relying o n the budget process as an integrating mechanism will be that budget concerns dominate a broader policy perspective. The advantage o f using the budget process more aggressively to integrate policy, resource allocation and M&E i s that it provides a fixed annual cycle o f review and decision making around which other processes can work: it can provide an integrating backbone for other processes o f policy dialogue, consultation, etc. but should not replace them. 46 - PEFAR FY05 United Republic of Tanzania 6. FINANCIAL MANAGEMENT SYSTEMS A. REVENUE MANAGEMENT Current revenue system 6.1 Subject to the provisions o f Article 135 o f the Constitution, Section 11 o f the Public Finance Act, 200 1, requires that a l l revenues or monies raised for purposes o f the government be paid into the Consolidated Fund. Section 12 (l), however, provides that the Minister in charge o f Finance may establish by an order published in the Gazette, and tabled in the National Assembly a special fund that i s not part o f the Consolidated Fund, to receive funds for a specific purpose. The legislation covering the administration o f revenues i s set out in Sections 57-83 o f the Public Finance Regulations, 2001. Importantly, these Regulations, identifies AOs as responsible for ensuring that adequate controls are put in place for prompt collection and proper accounting o f government revenues. 6.2 The detailed analysis o f revenue performance i s contained in section 4. However, as (Table 16) below shows, tax revenue ranges between 10 - 12% o f GDP Table 16: Revenue Performance (YOof GDP) 97/98 - 03/04 Central Government Operations FY98 FYOO FY02 FY03 FY04 FY04 Actual Actual Actual Actual Budget. Proj. Tax Revenue 11.0 10.1 10.9 11.6 12.0 12.0 Non-tax Revenue - 1.0 - 1.2 - 1.2 - 1.2 - 1.1 -1.2 Total Revenue *12.0 11.3 12.1 12.8 13.1 13.2 Total Expenditure 15.7 *17.4 17.6 20.8 22.5 23.7 Balance before Grants -3.7 -6.1 -5.5 -8.0 -9.4 -10.5 Grants 3 .O 4.5 4.5 6.5 6.3 6.5 * N e t o f parastatal recapitalization Source: IMF and Tanzanian authorities 6.3 Non-tax revenues are not significant, being only 1% o f GDP. As in 2001, some o f these revenues continue to be collected by the individual MDAs and banked in a Pay Master General’s revenue account in the relevant MDA. The finds are then swept monthly into the exchequer revenue account. Later, revenue i s released t o these MDAs based on an agreed retention formulae whilst at other MDAs revenues are collected and retained by the institution providing services, for example, secondary school and training college fees, hospital user fees, and water facility charges. For these MDAs, the controls have improved since the 2001 CFAA as revenues are transferred to special accounts and to use the funds they must be transferred to the sub-treasury. 47 PEFAR - FY05 United Republic of Tanzania The Tanzania Revenue Authority 6.4 The Tanzania Revenue Authority (TRA) i s responsible for collecting tax revenues. I t deposits these revenues, to the exchequer revenue accounts through a series o f bank accounts from district to national level. TRA reports collections t o M o F through a monthly Tax Collection Report, together with copies o f bank reconciliations for the central TRA collection accounts. From the monthly reports the M o F accrues revenue in IFMS, manually, a situation that has not changed since the 2001 CFAA. An interface between TRA’s revenue collection and accounting systems and I F M S would ensure that tax revenue data i s received faster by the MoF, as well as eliminate duplication o f data entry by ensuring that data i s entered only once by TRA. 6.5 The Tanzania revenue Authority Act, No.11, 1995 gives TRA the mandate to assess, collect and account for government revenue as well as to administer effectively and efficiently, all tax revenue laws o f the central government. TRA’s Vision i s to be ‘A M o d e m Tax Administration’. In line with this vision, TRA has developed a Corporate Plan for the period 2003/04 - 2007/08 to guide it in implementing its mission. Figure 18: Tanzania Mainland: Revenue Performance against Targets 6.6 As illustrated in the figure, opposite, TRA’s revenue performance against targets has been commendable. During the FY 04/05 (period to February 2005), Income Tax, VAT, Customs and Excise, and Large Taxpayers Departments have either met or FYOl FY02 FY03 FY04 FY05(to surpassed their set Feb. 05) targets by attaining Financial Years 103.2%) 104.8%, 101.7%) and 99.9% respectively. Source: T U ’ S Annual Reports for FY’s 02/03 and 03/04 and its Tax Revenue Report for February 2005. Current developments and progress at TRA 6.7 The improved performance o f TRA i s expected to continue as it undertakes the major projects, set out in i t s Corporate Plan, to enhance i t s tax administration systems and practices. For example, in 2004/05, TRA aims to modernize i t s operations in Customs, integrate i t s operations to enhance performance, r o l l out the district One Stop Centres and M o t o r Vehicle Registration Centres and strengthen the Large Taxpayers Department. 6.8 The controls for tax revenues, as outlined by the T U management, have improved considerably. Revenue collection targets are monitored daily. These targets are front loaded, which 48 PEFAR - FYO5 United Republic of Tanzania provides a major incentive for revenue collections. Increased focus on audits, also, has allowed TRA to capture those previously evading or avoiding taxes. The implementation o f the Tanzania Inter-bank Settlement System at the Large Taxpayers Department has commenced. N e w procedure for payment o f taxes through banks was started in 2004/05 in 20 regions. The tax structure has been reviewed to lower the level o f tax evasion and avoidance and make tax exceptions more transparent. The new Income Tax Act, 2004 was passed in July 2004. A major step forward in reducing the impact o f exemptions was taken with the promulgation o f the regulations under this Act. These include new limits on the discretionary authority o f the Minister o f Finance to grant exemptions for income taxes. 6.9 In the area o f Customs, administration procedures such as Destination Inspections, Direct Trader Input, Management o f bonded warehouse and the Computerized Risk Systems are other initiatives that, once fully implemented, are expected to improve customs revenue administration. The implementation o f a WAN to link TRA headquarters to i t s operational centres and to support the implementation o f the planned migration to ASYCUDA++ i s a major unfinished business at the TRA. However, the rather l o w project implementation capacity - about 35% performance level16 - needs to be improved if benefits from these initiatives are t o be realized more rapidly. 6.10 As it continues, modernizing i t s operations TRA i s investing heavily in training i t s staff in modem tax administration best practices and i s in the process o f reviewing i t s employee remuneration scheme. As an executive agency which operates outside the boundaries o f public service pay regulations, it i s able t o attract and retain more competent staff. Key recommendations 6.11 As TRA, strives to increase the tax-revenue-to-GDP-ratio to between 15 to 16%", in the medium term, the existing system needs to be improved by implementing the following key recommendations which are consistent with the aims o f the TRA board: 0 To h l l y benefit from systems enhancement efforts in i t s Customs and Excise Department, as well as the planned migration to ASYCUDA++ it is important that the WAN that l i n k s TRA headquarters to i t s operational centres be implemented. Importantly, TRA should enhance its capacity to implement ongoing projects and prioritize the implementation o f initiatives. 0 TRA should develop a computerized automated interface to upload tax revenue data to IFMS. In addition, appropriate integration o f tax revenue collection systems within TRA and with other departments o f government, will be required as TRA pursues i t s objective o f expanding the tax base. 0 TRA should finalize the ongoing remuneration study and implement, where appropriate, recommendations arising thereon. Such efforts should go in tandem with enhancement o f existing staff performance system as w e l l as ongoing staff training initiatives. l6Quarterly Implementation Report for the Period Ending September, 2004 o f TRA's Corporate Plan, 200314 - 200718. "PER External Evaluation 2004. 49 - PEFAR FY05 United Republic of Tanzania B. DEBT MANAGEMENT Recent developments and current situation 6.12 Debt statistics. The responsibility for maintenance and updating o f public debt statistics normally rest in most countries with the MoF. I nTanzania in the late 1980s, owing to the weak capacity o f the M o F at that time, the government requested the Bank o f Tanzania (BOT)to remedy the chaotic state o f debt statistics, assemble the scattered loan documents, and create and maintain a database o f public and private debt, external and domestic. The BOTdid so, with assistance from the Commonwealth Secretariat, and has continued to maintain and update the debt database, which i s currently quite large, with over 3,000 loans using the Debt Recording & Management System (known as CS-DRMS 2000+). In 2002, with the issue o f the National Debt Strategy (NDS), the government decided to build the debt statistics and management capacity o f the MoF, in order to eventually transfer to it full responsibility. Accordingly, a debt database" was created in the ACGEN's Department, for purposes o f staff training but resting o n the same information collected by the BOT. 6.13 Monthly external debt reports are in the BOTMonthly Economic Review (and the BOTwebsite), and quarterly reports are published o n the website o f the MoF, which also publishes monthly reports on domestic debt. While some discrepancies e x k t between the information from BOTand MoF, they are not large and are mainly due to the different timing o f updating o f the information. I n October 2004, the government decided that the transfer o f responsibility to the M o F (ACGEN) would take place within three years, and efforts at capacity-building are currently being made t o that end. I n the interim, for prudential reasons, the BOTwill continue to maintain and update the debt database, until the government determines that the M o F has adequate capacity and safeguards. (The BOTwill, o f course, retain responsibility for private debt statistics.) Thus, while there are separate offices in the BOTand the MoF, the information base i s the same and coordination between the staff o f the two institutions i s close. At the level o f principals, such coordination i s assured by the National Debt Management Committee (NDMC), described below. 6.14 Debt strategy and management. Subsequent to publication o f the N D S in 2002, certain amendments to the 1974 Loans, Guarantees and Grants Act, were made and became effective in July 2003. The thrust o f these amendments was to raise the prudential quotient o f external borrowing, and giving exclusive borrowing authority to the MoF, but only (ii) to streamline accountability by (i) upon concurrence o f a NDMC. 6.15 The M o F may delegate loan signature authority, in case o f need, to authorities in Zanzibar (Zanzibar may receive directly foreign grants, but not loans, which must be on-lent by the Union Government) or to other Ministers or to Ambassadors. 6.16 The N D M C i s chaired by the PS o f Finance, and comprises the President's Office o f Planning and Privatization, the Attorney General, PMO, Foreign Affairs, the ACGENs for Tanzania and Zanzibar, and the Zanzibar PS o f Finance. The Technical Debt Analysis Committee o f the Policy All external debt i s captured by the ACGENs' Dept in the CS-DRMS. One component o f domestic debt, namely marketable instruments, i s also captured in this system. However, other major components o f domestic debt, being contingent liabilities, compensation for losses, pension liabilities and sundry domestic debt are s t i l l captured o n Excel spreadsheets. 50 - PEFAR FYOS United Republic of Tanzania Analysis Department o f the M o F acts as the NDMC Secretariat. After some initial delays, the NDMC has begun meeting regularly on the prescribed quarterly schedule. 6.17 While the MoF, in cooperation with the BOT,has been gradually putting in effect the National Strategy, it decided in late 2004 to take a more comprehensive approach to implementation. After an October 2004 workshop o f the key stakeholders (mainly the members o f the NDMC), the M o F began preparing a National Debt Strategy Implementation Action Plan, which, at the time o f drafting o f the present report, was nearing completion. Also nearing completion i s a second debt sustainability analysis, which was jointly done by the BOTand the MoF, with the assistance o f the Macro Economic and Financial Management Institute. Such analysis i s expected to be updated annually every March, as part of the broad background to the budget for the subsequent fiscal year. Major issues and opportunities 6.18 Debt statistics. The M o F capacity, once established, will need to be maintained, both in terms o f retaining s t a f f and in the need for periodic training in new systems. However, to date, staff retention has been a problem with some competent personnel leaving government service soon after they are adequately trained. 6.19 As noted, the issue in Tanzania’s debt statistics i s not inconsistency between different debt databases, but the divergent timing and disparate format o f information provided by donors. While estimates o f project aid disbursements are included in the budget documents, difficulties persist in accounting for such disbursements. Some discrepancies in this respect are common throughout the developing world, stemming f r o m the different definition o f “disbursement” from the donor’s and the recipient’s viewpoints. However, the issue has been especially problematic in Tanzania, indirectly owing to the disappearance o f a coherent public investment programming system and the lack o f the associated monitoring o f financial project execution. Since 2001, significant efforts have been made by the ACGEN to standardize reporting by donors, and improve the reliability and timeliness o f project aid disbursement data. As shown in section 6C the aid-reporting situation has improved, but the state o f affairs remains unsatisfactory. 6.20 Debt management. Actual debt service payments amount to less than one percent o f current government expenditure. Since 1999, the overall debt stock has been reduced as a result o f the Enhanced Highly Indebted Poor Countries (HIPC) Initiative - the cumulative debt relief provided by multilateral creditors amounted to U S 2 2 0 million as o f enddune 2004, 82% which was from IDA. The total cumulative relief provided by Paris CIub creditors as at the same date amounted to US$692 million. Additional debt relief by Non-Paris Club creditors had also been provided. Nevertheless, as the table below shows, total debt commitments total well over US$8 billion, o f which almost US$7 billion have been disbursed. Although the debt situation in Tanzania does not carry the same weight and urgency as in some other developing countries, the issues remain important and do require systematic attention. 51 PEFAR - FY05 United Republic of Tanzania Table 17: Tanzania - External Debt (30 June 2003 & 31 October 2004) in Millions of US$ Item June 2003 Oct 2004 Disbursed 6,233 6,834 Bilateral 1,814 1,742 Multilateral 4,088 4,694 Commercial 33 1 398 Undisbursed 1,374 1,491 TOTAL DEBT COMMITTED 7,607 8,325 Source: Bank o f Tanzania. 6.21 O f bilateral debt, after the latest Paris Club only the debt owed to Brazil and Japan needs to be finalized - but the amount i s a substantial US$1 billion. Also in need o f treatment and resolution i s the official debt owed to non-Paris Club members, primarily China and the Arab countries, totaling about another US$1 billion, and there i s a commercial debt overhang close to US$400 million. I n addition, the stock o f multilateral debt, n o w approaching US$5 billion, calls for constant attention. As mentioned earlier, a debt sustainability analysis i s to be produced annually by the M o F in time to feed into the budget for the next fiscal year. 6.22 The challenge o f debt management in Tanzania i s primarily not one o f placement and maturity management, but one o f (i) negotiations vis-&vis a number o f external entities and, equally important, (ii)prudent scrutiny o f proposals for new borrowing to ensure that debt-servicing capacity would be increased by more than the cost o f borrowing. This latter issue i s intimately linked to the weakness in government appraisal and approval procedure for new investment projects, and to the neglect o f the linkages between different sectors’ investment expenditure. 6.23 Contingent liabilities. The annual budget speech contains reference to the government borrowing policy, including policy on guaranteeing new loans. The latest budget speech, for 2004/05, enunciated clearly the policy o f not providing guarantees for any external borrowing, but o f considering the award o f selective guarantees for domestic borrowing (mostly by public enterprises). Also, at the end o f the fiscal year, the PS o f Finance, in his capacity as Paymaster General, compiles a l i s t o f all outstanding loan guarantees, and submits it under his signature to the CAG, who in turn reports o n it in his annual report to Parliament. The annual budget presented to the National Assembly, however, includes only the estimated aggregate amount o f new borrowing and loan guarantees. These practices do not adequately address the fiscal and governance risks typically associated with official loan guarantees. Also refer to sections 4 and section 6F in this regard. Recommendations 6.24 Concerning debt statistics, the utmost prudence will need to be exercised before teminating the BOTconcurrent maintenance o f the debt database. Also, the staff retention issue in the M o F calls for attention. Concerning debt management, the National Debt Strategy and the institutional arrangements for tightening up o n new borrowing appear o n target and are well under implementation. Indirectly, however, the actions taken in respect to new borrowing point to the need for revitalizing a medium- term public investment programming process that can provide the analytical foundation o n which to build a prudent and productive borrowing policy for Tanzania. Finally, significant tightening i s required in the budgetary treatment o f loan guarantees. 52 PEFAR - FY05 United Republic of Tanzania 0 Design a continuous training program t o b e put in place before the full transfer of responsibility for debt statistics t o the MoF, in order to assure that qualified staff will b e continuously available to replace leavers. 0 Include as an annex t o the annual budget documents, beginning with the budget for 2005/06, (i) a l i s t o f a l l outstanding l o a n guarantees (by beneficiary, amount, maturity and l o a n terms), and (ii) a statement o f the specific government criteria that will guide the award o f n e w l o a n guarantees during the fiscal year. Review and strengthen government procedures for investment project preparation and appraisal, preparatory to revitalizing a comprehensive medium-term investment program consistent with government p o l i c y priorities and available financing. 0 Compile data o n frequency and magnitude o f defaults o n past loan guarantees since 1995, with a v i e w t o quantifying the risk associated with different borrowers, and eventually provide an evolving basis f o r setting a budgetary reserve against the expected loss from the calling o f n e w guarantees. c. RESOURCE MANAGEMENT EXTERNAL AND AID COORDINATION Current system and ongoing developments 6.25 As discussed in the previous section, the legal and regulatory framework for the planning, obtaining and management o f external debt i s provided by the Constitution, Public Finance Act, 2001 and the Loans, Guarantees and Grants Act, 1974 (as amended) and the National Debt Strategy. Since the launch o f the Tanzania Assistance Strategy (TAS) in June 2002, information sharing between the government and DPs on the volume and nature o f aid has improved. This i s also facilitated through the PER and MTEF processes during which external aid priorities and needs are matched with commitments from DPs within the macro-economic policy framework. Also, the Poverty Reduction Strategy, now succeeded by the National Strategy for Growth and Reduction (in Kiswahili MKUKUTA), sets out the governments’ priorities. All foreign developmental assistance including loans, grants, aid in kind and technical assistance should be within the framework o f the MKUKUTA. A key perspective shared by the GOTi s that ten years from now Tanzania will be less dependent on external financing. This will demand concerted efforts by government in terms o f more effective management o f development assistance. 6.26 Tanzania receives development assistance from many bilateral and multilateral donors and Non- Governmental Organisations (NGOs). External resources account for about 45% o f the national budget. External aid coordination and the establishment o f a more conducive relationship between government, domestic stakeholders, and donors has been an important element o f Tanzania’s development agenda since 2002. This i s achieved through the joint TASlHarmonisation Group chaired by the MoF. Key elements for rationalizing donor assistance include the move towards sector development programs (already in place for education, health, and agriculture and under preparation for water and roads) and general budget support. These aid modalities are seen as appropriate mechanisms for increased donor coordination, better integration o f donor assistance into government systems and processes, enhanced ownership, and reduced transaction costs. The local Development Partners Group, established in 2003/04, i s the principal mechanism for ensuring overall coordination among DPs in support o f government programs. Sadly, very little has been achieved over the past few 53 PEFAR - FY05 United Republic of Tanzania years in strengthening the accountability o f external aid channelled through NGOs and Community Based Organisations through submission o f their annual accounts. 6.27 MoF’s External Finance Department i s responsible for the coordination o f aid resources and management o f a related database on Excel. I t prepares quarterly and annual reports while estimates o f project funds are included ex ante in the budget documents and throughout the budget process. The estimates o f inflows are integrated in the expenditure ceilings o f the annual Budget and MTEF. The data i s collected from DPs and verified with MDAs while discounting factors are applied to some projected project expenditures, based on the past trends in the aid disbursements. 6.28 There i s consensus that inclusion o f external resources in the government budget and annual accounts enhances effective implementation and monitoring o f the poverty reduction efforts. DPs’ increased trust in the PFM system i s reflected in the shift o f support from investment lending to budget support and basket funding as shown in the budgeted numbers in the figure below. Figure 19: Percentage of Aid Flows by Modalities 6.29 External grants and loans received as budget support as well as basket fundslg are fully 100 accounted for. In response to the authorities’ 80 strong request to channel support through the exchequer system’” some donors have converted 60 a significant share o f their annual funding to 40 either untied budget support or basket funds established for sector-specific activities. In 20 2004/05, this support, which excludes HIPC relief, i s expected to account for 55% o f the total 0 assistance (34% budget support + 21% basket 02/03 03104 04/05 funding), compared to 31% in 2001/02. Financial Year Consequently, reporting on donor funded activities has significantly improved during the period. Source: Tanzania Assistance Strategy: Annual Implementation Report FY 03/04 Managing and accounting of donor funds 6.30 While the total aid flows reflected in the government budget increased fiom Tshs.586,042 million in 2001/02 to Tshs.1,292,361 million in 2004/05, difficulties continue to persist in accounting for foreign financed components o f project spending. This i s mainly due to inadequate reporting by donors. Often, donors do not provide complete information to the government o n all types o f aid assistance and therefore reporting o n cross-sectoral benefits, technical assistance costs and in kind aid flows are particularly difficult. For aid disbursements to projects and baskets in the budget estimates, 19 A government programmme i s fbnded by more than one DP by way o f depositing their contributions to and disbursing payments from one bank account (pooling o f funds) rather than from bank accounts for individual donor finds. 2o In FY 01/02 the ACGEN issued a circular outlining the accounting and reporting process. Subsequently training seminars for accounting officers o f relevant MDAs as well as donor organizations were organized by the ACGEN’s Department. 54 PEFAR - FY05 United Republic of Tanzania 71% o f the forecast was recorded as received through the exchequer system for 2003/04. This percentage increases to about 85% when the influence o f general budget support i s included. 6.31 In addition, some donors continue to disburse funds directly from the project accounts under their control. In the past three years, however, the ACGEN has made significant efforts to facilitate the capture o f donor funded projects in the IFMS. As a result, there are n o current difficulties in recording projects that use the national system, or for projects that provide information in the format required by the ACGEN. However, despite these efforts, about 45% o f aid flows in 2004/05 are project funds with the bulk o f donor financed projects remaining outside the I F M S - an estimated 25 percent o f project expenditures were reported to the A C G E N in 2002/03. Taking this into account, the GOTestimated that potentially about 45% o f foreign aid will be managed using national procedures in 2004/05. However if it were assumed that basket funds do filly use national systems then the proportion using national procedures increases to about 66%. T h i s undermines the preparation o f a budget based on comprehensive resources and jeopardizes the efficacy o f public expenditures. As a result, the development budget estimates are incomplete. 6.32 As mentioned in the previous section, the ACGEN’s Department also keeps custody o f all loans, grants and guarantee agreements and maintains a register in accordance with the Public Finance Regulations, 2001. While external aid i s recorded in the CS-DRMS 2000+ system i t i s not yet interfaced with the IFMS. I t i s understood that efforts have been undertaken t o take this forward (refer to Annex C: Structure and Status o f the I F M S in this regard). Aid harmonizationissues 6.33 The timely receipt by DPs o f reliable audited accounts o f programmes/projects i s an important fiduciary objective that also enhances the harmonisation agenda. The reporting and monitoring systems are often designed to meet DPs’ specific needs rather than support the priorities o f partner countries. This i s often achieved by setting up o f “ring fenced” implementation units within MDAs. An additional problem i s that duplication o f reporting and monitoring systems i s making demands o n partner countries’ limited resources which impair their ability to rely o n useful and timely information for their own development strategies. 6.34 DPs therefore have a collective responsibility to enhance efforts to hannonise for example disbursement procedures and accrue the benefits associated with a simplification and standardisation. In addition there i s a need to harmonise accounting, recording and auditing requirements o f foreign assistance projects and programmes. This would for example do away with the need for separate sets o f accounts and separate audit opinions o n Statement o f Expenditures and bank balances as the practice o f issuing more than one audit report involves unnecessary duplication o f work. T o further this agenda, government’s audited accounts should follow the best practices outlined by the Organisation for Economic Co-operation and Development - Development Assistance Committee (known as OECD-DAC) Guidelines and Reference Series booklet entitled Harmonizing Donor Practices for Effective Aid Delivery. For example, the “whole o f government” accounts submitted to Parliament should have sufficient disclosure o f source o f all budget support/grants received. Key recommendations 6.35 While a number o f the main recommendations from the 2001 CFAA have beerdare being implemented, the following ones are suggested to complement the current actions included in the PFMRP: 55 PEFAR - FY05 United Republic of Tanzania 0 New investment projects should be managed within existing government systems and not allowed to set up “ring-fenced” implementation units. 0 DPs to ensure MoF i s fully informed o f disbursements o f loans and grants. 0 A C G E N to consider inclusion in the consolidated financial statements enhanced disclosures on external assistance in accordance with a proposed International Public Sector Accounting Standard (IPSAS) currently being developed by the International Federation o f Accountants. 0 DPs should increasingly hannonise disbursement, accounting recording and auditing requirements through simplification and standardization. D. CASH MANAGEMENT Current system 6.36 The Minister o f Finance’s 2004/5 Budget speech refers t o the need to maintain and improve the “cash budget system”. According to an earlier budget speech “the system o f cash budget has improved discipline in public finance management, and has reduced misuse o f funds which was rampant in the past”. N o w the modus operandi for cash releases i s for priority sectors and protected votes to be given cash funds o n a quarterly basis, and other sectors to receive funds o n a monthly basis, with indications o f likely availability o f funds in subsequent months. I t should be noted that the NAO i s the only vote that receives i t s cash releases semi-annually. Currently only about 15% o f votes are provided with quarterly releases, o f which just over h a l f are for priority sectors 6.37 MDAs prepare cash flow plans each year, which are submitted to MoF, who in theory then attempts to release funds according to these needs, rather than releasing l/lzth o f the annual budget each month. In practice recurrent funds tend to be released on the basis o f the payroll and one twelfth o f other charges as requested by the line ministries. Development funds are released following screening o f requests by the budget department o f the M o F . 6.38 The Budget Ceiling Committee i s scheduled to meet in the f i r s t week o f the month to discuss the allocation o f funds (both recurrent and development) and approve the ceiling. Allocations are based on approved budget. I n practice the ceiling committee meetings are often delayed to the second week o f the month with an associated delay in the receipt o f funds by the MDAs. 6.39 The consolidated cash position o f all government bank accounts i s provided on a daily basis by the BOT.Forecasts o f cash inflows and outflows are updated for the monthly budget ceiling meeting. This involves a review o f updated revenue forecasts and the progress o f budget implementation. These considerations also form the basis o f any domestic borrowing plans. 6.40 The Tanzanian government has been operating a single treasury account for a number o f years as part o f i t s centralised payment system. In addition to improvements in fiscal discipline associated with a central payment systemz1, the existence o f a single treasury account means that there are fewer bank accounts with idle balances, thus helping to minimise borrowing needs. However as discussed in 21 Ministries in Dodoma that are not connected on-line forms part o f the central payment system through the regional sub-treasury. 56 - PEFAR FYOS United Republic of Tanzania paragraph 7.4 separate bank accounts s t i l l exist for the Ministry o f Defence, the Prime Minister’s Office, and Office o f the President, NAO and the National Service22. W h i l s t other MDAs maintain a wide range o f other revenue and expenditure accounts including donor project accounts. Assessment of the situation 6.41 As noted in the CFAA 2001, the cash rationing system has been successful in bringing government expenditures in line with resource availability since it was introduced in 1996. As shown in section 2, in recent years deviations between allocations and outtums have been reduced and the predictability o f releases has improved significantly, particularly for the priority sectors. However, M o F i s aware that the monthly cash release system has undesirable consequences in terms o f predictability o f funding for the line ministries and thus their effectiveness, including for service delivery. 6.42 Solutions to this problem are to be found at three levels. Firstly, in continued use o f conservative resource forecasts so that budget appropriations can be fully financed during execution. Secondly, continued improvements in cash planning, both in M o F and in MDAs, starting with those MDAs that absorb a substantial share o f expenditure and have considerable fluctuations in their in- year spending patterns, so that expenditures are programmed, where possible, to fall during those periods o f the year when resources are available. Thirdly, earlier PER documents note that GOTcan only move away f r o m cash rationing if some form o f bridging finance i s made available which would smooth out variations in resource availability. GOT remain concerned about the cost o f the various options and the potential for financial indiscipline. Further discussion o f this issue i s contained in section 2. E. PUBLIC PROCUREMENT MANAGEMENT Summary o f key findings and recommendations for central government 6.43 The CPAR conducted in 2003 and further analysis carried out in the Fiduciary Risk Analysis in 2004 identified a number o f critical weaknesses in the procurement process that are discussed below. Studies in 2001 estimated that at the national level about 20 percent o f government expenditure o n procurement was lost through corruption, mainly through kick-backs and bogus investments that have to be written Considering that public procurement accounts for about 70 percent o f the entire government expenditure budget249 this translates to a loss o f Tshs.300 billion (US$ 300 million) per year. Clearly such a loss i s economically unsustainable. This section looks briefly at some o f the key issues raised by the various assessments and provides a brief update o n some o f the key actions that have recently been taken by the government to ensure that the procurement system provides value for money. Procurement issues relating to public access to information, ethics and corruption, records management and the role o f the C A G are discussed in more detail in the relevant sections. ’* O f these MDAs i t i s only the State House and Defence that are s t i l l using IFMS o n a stand-alone basis due to security considerations. The others are linked to the main server. 23 S.J. Chavda, Challenges and the way forward in combating corruption in the construction industry in Tanzania. Proceedings o f Ministry o f Works Workshop on Corruption Prevention i n Construction Industry - April 2001. 24 Tanzania’s total annual expenditure budget i s estimated at app. Tshs 2.0 trillion (equivalent to U S $ 2 billion). According to the NAO about Tshs 1,400 - 1,500 billion or just over 70% i s expended annually by the government through public procurement. 57 PEFAR - FYOS United Republic of Tanzania 6.44 The GOTi s fully aware that i t s public procurement i s still weak and needs t o be strengthened. In response to particular concerns in the CPAR about the dual regulatory and executive role o f the Central Tender Board, a new Public Procurement Bill was approved o n November 12, 2004 and received Presidential Assent o n February 8,2005. The new A c t i s due to come into effect by mid April 2005. The new Regulatory Authority will be empowered to carry out i t s monitoring and regulatory role, which will include maintaining a public register o f f i r m s and individuals who have been blacklisted for corrupt practices and the maintenance o f a comparative database o n unit costs in public and private procurement to ensure that value for money i s being achieved. The Regulatory Authority will be established o n the same date that the new Procurement A c t comes into effect. 6.45 Other weaknesses that were observed during the assessments included: lack o f procurement planning in government financed procurements; weaknesses in the advertisement o f tenders; non compliance o f contract award procedures and criteria; poor records management and a weak complaints and administrative review process. Choice o f procurement methods i s often at the discretion o f the A 0 and leads to the excessive use o f the restrictive competitive quotation or single source method, even for procurements with a value above the set thresholds. The basis for the selection o f the required three firms under competitive quotations i s unclear and provides ample opportunity for abuse. 6.46 For those tenders, which use the open competitive process, the notices are scattered in local and East African papers and there i s n o central media for advertisement o f tenders or awards. The CPAR team was also informed that the rules and procedures for bid submission and opening are often not adhered to. Instances reported include breaches o f confidentiality and collusion between the procuring entity and bidders, leading to competitors’ bids being revealed before the official opening and bidders being allowed to replace their bids based on this information. 6.47 Despite all these shortfalls in the system, bidders rarely complain, this i s evidently because the procedures for complaint are not well known, regulations are not enforced and there are inadequate n addition records management i s very poor and records o n tender evaluation are not sanctions. I systematically kept by the procuring entities; this limits the N A O ’ s ability t o audit the procurement process and for the PCB to have sufficient evidence for prosecution. 6.48 Lack o f capacity i s seen as one o f the major weaknesses o f the entire procurement system. Procurement i s handled, often improperly, by untrained, non-specialist staff. The government has relied on the Government Stores for i t s expertise in procurement but Government Stores has neither the funds nor the organizational capacity to do so. Procurement i s not recognized as an established profession within the public sector and does not present an attractive career path. Furthermore, there i s a need to develop in consultation with the National Board o f Materials Management which i s primarily concerned with supplies, a professional procurement body, which would promote procurement standards and professional integrity. 6.49 Improvement in procurement i s a key component o f the PFMRP and funds are being provided by the African Development Bank (AfDB) and World Bank to help address the main issues. The action plan for the procurement component includes the majority o f the recommendations contained in the CPAR. In addition funds are being provided through the Business Environment Strengthening Initiative to improve the capacity o f the Business Regulatory and Licensing Agency to maintain relevant details o n the ownership and management o f companies. W h i l s t as noted in section 7A, records management in government i s being addressed through the PSRP. 58 - PEFAR FY05 United Republic of Tanzania 6.50 The establishment and staffing o f the Regulatory Authority and the Public Procurement Appeals Authority are key activities in the procurement component o f the PFMRP as i s the establishment o f a procurement cadre. As discussed in section 1.3, the ability o f the government to carry these activities forward i s dependent o n i t s ability t o recruit and retain suitably qualified personnel. F. AND PENSION PAYROLL MANAGEMENT Payroll system 6.5 1 The computerized Integrated Human Resource and Payroll Management System (MRPMS) went live in 2000 but as indicated in the November 2004 joint PRBSPRSC review it was not fully operational until FY 03. The system i s n o w responsible for the management o f the monthly payroll for nearly 300,000 central and local government employees. Employees o f parastatals, executive agencies and other semi autonomous government agencies are not included in this employee database. MDAs have direct responsibility for originating payroll information, for checking the proposed payroll for their staff and for requesting cheques for payment through the appropriate bank. Three other bodies are also involved: 0 PO-PSM - managing the establishment and personnel records; some review o f the reasonableness o f the payments made; and management o f the computer system. 0 Computer Services, M o F - inputting amendments to the payroll data. 0 Government Budget, M o F - responsible for checking that budget provision and cash availability are appropriate for the needs o f the payroll. 6.52 The Human Resources and Payroll Group aims to support co-ordination between the government bodies involved and oversee medium term payroll reforms. In 2004 there were plans to pilot changes to the payroll system, whereby 5 ministries would enter payroll changes directly. However, there have been delays with the procurement process o f version 8 o f the M R P M S and upgrading o f equipment which was required to provide a more robust, secure and user friendly platform to support the rollout. Thirty months have passed since the procurement process was initiated. Failure to procure in envisaged time has n o w rendered the equipment that were targeted for upgrading to be outdated, and consequently new equipment will have to be procured. The initial pilot o f 5 MDAs i s expected to be in place by the end o f 2005 once the schedules for the procurement process and subsequent installation, configuration and conversion have been firmed up. Meanwhile, the installation o f high speed quality printers has already commenced and will help to support the pilot rollout process by enhancing the responsiveness o f data feedback to employees and to their employers. 6.53 Although identified as an activity within the PFMRP, links between the I F M S and the payroll system have not yet been achieved. This i s discussed in more detail in Annex C: Structure and Status o f the IFMS. Similarly plans to prepare and train staff o n payroll procedures have not been implemented, presumably awaiting the decentralised input o f payroll data. 6.54 Although n o technical audit o f the software has been carried out by the NAO, the software used for MRPMS i s generally considered to be robust. In addition to those ghost employees identified during the system implementation, existing controls n o w significantly reduce the possible incidence of ghost employees. Although the NAO conducts an audit o f parts o f the payroll system, n o complete 59 - PEFAR FYOS United Republic of Tanzania payroll audit has been undertaken and there i s n o regular procedure for checking the accuracy o f payroll data. 6.55 It i s recognised that there are some delays in processing amendments and even at the central government level it may take one or two months for new starters or staff transfers to be actioned on M R P M S . There are also significant salary arrears and the situation appears t o becoming worse over time, for example, in the Ministry o f Education the Chief Accountant estimated that there were arrears amounting to Tshs.10 million for promotions o f secondary school teachers over the last two years. However, in July 2004, cumulative government salary arrears since the early nineties were estimated to be around Tshs.20 to 30 billion. It i s understood The ACGEN also took control o f payment for teachers’ salaries by processing payments centrally and then distributing cheques directly to teachers in all regions. The National Microfinance Bank has been directed to cash the teacher cheques immediately. As a result Tshs.9 billion o f the Tshs.12 billion backlog in teachers pay has n o w been paid. A similar system i s being worked on for pensions. 6.56 MDAs have responsibility for reconciling the payroll figures for their staff from one month to the next by reviewing computer generated exception report generated for payroll changes. However, it i s understood that little evidence i s available that this control procedure i s followed. Plans t o conduct monthly numeric reconciliations o f the change in total pay from one month to the next to the authorised amendments have not yet commenced. MDAs do however check the payroll each month before the monies are sent to the relevant banks. Manual adjustments are made, as required, for example if staff have transferred, l e f i or died (additions cannot be made). Cheques are then raised through I F M S for the relevant banks based o n the adjusted payroll. The majority o f government employees in Dar es Salaam are paid through direct transfers into their bank accounts. However, countrywide around 80% o f government employees are s t i l l paid in cash by appointed banks or pay points. 6.57 Currently many employees do not receive their payslips on a timely basis, which makes it difficult for them to confirm the accuracy o f their salaries. Furthermore payslips for employees stationed outside Dar es Salaam have to be collected each month, which i s a costly and time consuming exercise. High capacity printers have been procured and recently delivered, which should go some way to reduce the time needed to print pay-slips from the current three weeks to five days. 6.58 An establishment listing was printed for each vote and sub-vote in November 2004; this informed the budget preparation for 2005/06. However, as noted in paragraph 6.51 all central government employees are not o n the system. Furthermore complete data on the actual size o f personal emoluments or the remuneration o f individual positions i s difficult to obtain as all allowances are not paid through the IHRPMS. Pension system 6.59 There are several acts which cover the provision o f public sector pensions including: (i) the Parastatal Pensions Act, 1978; (ii) the National Social Security Fund Act, 1997; (iii) the Political Service Retirement Benefits Act, 1999. There are two major types o f pension provision, funded and unfunded. For the funded pensions, there are five pension funds, as follows: (i) National Social Security Fund; (ii) Government Employees Provident Fund; ( iii)PPF (Parastatal Pensions Fund) Pensions Fund; (iv) Public Service Pension Fund; and (v) Local Authority Pension Fund. 6.60 The government retains the residual risk that these h n d s will not have adequate resources to meet all their pension obligations. In addition, the Consolidated Fund i s responsible for public sector 60 PEFAR - FY05 United Republic of Tanzania employees who retired before the year 2000; political leaders (presidents, ministers and Members of Parliament); and the army. In the first category, payments o f Tshs.15 billion were made for the first h a l f o f 2005. These pensioners were t o have been paid for only 10 years, but from January 2005 the government extended their pension provision to life. 6.61 As planned under a new initiative, GOTi s reviewing public sector pension provisions, including the need for a supervisory agency for the various pension funds, the need to facilitate transfer o f employees between post served by different funds (or from the private sector), reducing the number o f funds, introduce a periodic actuarial review o f each o f the pension funds and estimate the future pension commitments o f the Consolidated Fund. Conclusion and key recommendations 6.62 As planned under a new initiative, GOTi s reviewing public sector pension provisions, including the need for a supervisory agency for the various pension funds, the need to facilitate transfer o f employees between post served by different funds (or from the private sector), reducing the number of funds, introduce a periodic actuarial review o f each o f the pension funds and estimate the future pension commitments o f the Consolidated Fund 6.63 The introduction o f the M R P M S has significantly improved the management o f the payroll for the majority o f central and local government employees. A number o f planned reforms are described above and it i s recommended that these are actually implemented as soon as possible. Issues relating to pay policy are discussed elsewhere in the report. The following recommendations are intended to support the maintenance o f a high level o f data integrity and provide improved information for decision making purposes. 0 Improve the administration o f personnel and payroll to facilitate prompt amendments. 0 Review the design o f the data input forms to facilitate accurate and complete input. 0 On a twice yearly basis, require managers at each pay-station to confirm the employees which should be paid. 0 Increase proportion o f employees who are paid salaries direct into their bank accounts. 0 Pay more allowances, for example, housing and clothing allowances through the payroll. 61 PEFAR - FY05 United Republic of Tanzania 7. ACCOUNTING, REPORTING, MONITORING AND CONTROL A. INTERNAL CONTROLS Current system of internal control 7.1 Regulatory framework. The Public Finance Act, 2001 provides for AOs to be responsible for maintaining appropriate control over payments and receipts related to their vote. The Public Finance Regulations, 200 1 also require AOs to “establish and maintain an effective system o f internal control” -1 1(3)(d). In addition, occasional Treasury Circulars are issued as required. Training has been provided to finance staff o n the Public Finance Regulations. AOs have also received training o n the A c t and Regulations as well as procurement legislation. 7.2 Commitment Control. A commitment control system (CCS) was introduced in July 2001 under which a local purchase order (LPO) i s required for purchasing o f goods and services. Official LPOs are produced by entering the details in I F M S and so creating a commitment. The system restricts the production o f an LPO to financial codes with adequate funds available to pay for the goods or services. The LPO’s are issued only once the resources are released, thus making it virtually impossible for the arrears to a c c u m ~ l a t e Informal .~~ arrangements with suppliers identified in earlier PERs cannot be eliminated completely but i s being addressed by seeking information from the public on unpaid bills on a quarterly basis. 7.3 The major exception i s public utilities (water, electricity and telephones), which do not require an LPOZ6. However allocations, earmarked for the utility payments, are blocked from being diverted by MDAs to other uses. In the fiscal year 2002/03, a system o f quarterly monitoring o f the status o f payments for the utility services was also introduced. The reports summarize the value o f the utility bills outstanding by vote at the end o f each quarter. However, the reports fail to identify the age o f these bills. T o verify the information provided by the MDAs AOs on the utility bills outstanding, the ACGEN’s Department solicits information o n the status o f payments from the utility companies. M i n o r accumulations o f the utility arrears do occur occasionally, when the MDA’s allocations for the utility payments are exhausted and reallocations are required before further releases can be made. Generally the amounts are relatively small. However, the payment arrears for utilities for the Ministry o f Defense and National Service votes totaled Tshs.828 m i l l i o n at 3 1 December 2004. 7.4 Bank reconciliations. The various bank accounts monitored daily by the ACGEN, are reconciled each month. The reconciliation o f the. main recurrent account for the month ending 3 1 25 This applies equally t o those ministries which retain their own bank accounts, because their budget numbers are locked. Also the ACGEN periodically checks flash reports on budget execution for these ministries to ensure that line items are not overspent. 26 For ongoing service contracts an annual LPO i s prepared which has to be re-entered each year. F o r multiple order contracts an LPO i s created for each delivery. 62 - PEFAR FY05 United Republic of Tanzania December 2004 had been completed by mid-February 2005. The clearance o f reconciling items on the miscellaneous deposits accounts remains a challenge with some items dating back to June 2004. These bank reconciliations are reviewed by the A C G E N and then made available for external audit by the resident NAO staff in the M o F . Electronic bank statements and a facility on I F M S are used to facilitate the follow up and resolution o f reconciling items. 7.5 Even those MDAs, which are part o f the central payment system maintain there own bank accounts, for example, for donor funded projects or to collect internally generated revenue. Prior written permission has to be obtained from the ACGEN before a bank account i s opened - according to the ACGEN this requirement i s strictly complied with by the BOT and commercial banks throughout the country. These accounts are also reconciled each month and are usually reviewed by the relevant chief accountant. Copies o f these bank reconciliations are sent to the M o F (Policy and Analysis) and to the ACGEN. The latest available CAG report for 2002/03 comments o n the late reconciliation o f bank accounts by the Regional Administrative Secretariats and the associated sub- treasuries. This issue will be resolved once the connectivity through the envisaged Virtual Private Network i s established (also refer to paragraph 3.16). 7.6 Segregation o f Duties. Current procedures generally ensure adequate segregation o f duties between the authorization o f transactions, their recording and the custody o f the associated assets. In addition, each ministry has an examinations (or pre-audit) section within the finance department with responsibility to check each payment voucher prior to payment as part o f the normal internal control procedures. This i s a separate control and does not form part o f the regular work o f internal audit units which reports to the A 0 (see also section 7D). 7.7 Fixed Assets. The Public Finance Regulations require records o f all fixed assets to be maintained in addition to inventories o f each location. A contract i s currently being awarded for consultants to value Government assets and to advice o n a standard format for asset registers. While the Director Electrical and Mechanical in the Ministry o f Works maintains records o f all government vehicles it does not remove the responsibility of AOs to manage resource under their control in terms o f the Public Finance Act. 7.8 Records and Archives. Government records and archives are governed by the Records and Archives Management Act, 2002. The Records and Archives Section o f Public Service Management, in the Office o f the President develops and issues retention and disposal schedules o f each type o f official document. Improved records management i s a key component o f the PSRP and in 2004; visits were made to all M D A s to determine whether recommendations were being implemented. Public Finance Regulations specify the retention periods for accounting records (between three and seven years - 139 (2)), however, chief accountants generally consider that such records should be kept for at least five years. As noted in the CPAR and in the latest available CAG report, the importance o f ensuring that complete documentary evidence i s maintained for all payments in order to demonstrate proper accountability for public funds spent cannot be over emphasized. Key recommendations 7.9 Internal controls have improved since the CFAA 2001 and most o f the recommendations contained in the 2001 report have been implemented or are already included in the PFMRP. However, the fact that according t o the C A G in 2002/03 Tshs.50 billion (out o f a total o f Tshs.1,836 billion) had incomplete or no documentary evidence t o support the authenticity o f the expenditure incurred, shows the importance o f the PSRP initiative to improve filing and general records management. 63 - PEFAR FY05 United Republic of Tanzania 7.10 The following recommendations are intended to support the ongoing initiatives: 0 Further efforts should be taken to reduce payment arrears for public utilities, especially for the defence and national security votes. 0 Further efforts should be made to ensure that the bank reconciliations undertaken by the ACGEN’s Department are completed within one month o f the period end. 0 The process o f introducing effective asset management should include physical verification and review o f the condition and use o f assets. B. DATA INTEGRITY, SECURITY, AND I T CONTINGENCYPLANS Review o f current situation 7.11 The ACGEN, as part o f the Integrated Financial Management and Accountability Project (IFMAP)’’ has recently succeeded in bringing to fruition two major developments concerning data integrity, security and contingency plans for the IFMS. The first i s a draft Security Policies Document that i s in the final stages o f preparation and the second a Disaster Recovery Plan, which i s being implemented. 7.12 The draft Security Policies document and related procedures was developed in consultation with stakeholders in MDAs and covers the following main areas: 0 Environmental conditions for I T installations. 0 Controlling physical access. 0 Controlling logical and network access to information and systems2*. 0 Controls over systems operations and administration. 0 Security classification o f information and data. Security management o f data and information, back-up and recovery, archiving, control over documents and reports. 0 Disaster recovery and business continuity plans. 0 Maintaining commercial software, combating cyber crime. 0 Personnel issues, training and staff awareness. 0 Handling security weaknesses and incidents. 27 The IFMAP i s a Swedish fbnded project focusing on a number o f selected activities in the PFMRP. 28 Data integrity i s secured through, inter alia, protocol o f access which i s controlled by the ACGEN and audit trails o f all inputs. 64 - PEFAR FY05 United Republic of Tanzania 7.13 The next stage in this process i s an independent evaluation o f the security plans, which i s understood to be in hand. Once the security policies and procedures are finalised and formally adopted training o f users will be essential to ensure that the controls and verification o f compliance are implemented correctly and can be monitored. The objective i s to first test the policies in practice and then develop detailed procedures. These I F M S security policies and the related procedures are an essential element o f internal control, ensuring data integrity, and as such consideration should be given to them being included as part o f the Public Finance Regulations with separate procedures manuals. 7.14 With all computer installations it i s important to have contingency plans that will enable the systems to operate in the event o f breakdowns o f power, hardware and software as well as the main operational centre being destroyed by a major disaster. For I F M S the former are already in place but there has been n o formal plan for disaster recovery. Consequently, the ACGEN, as mentioned earlier, has recently initiated a plan for a disaster recovery site that will enable I F M S to continue to operate should the main servers and other equipment at the ACGEN’s Department suffer a major disaster. The consequences o f such a disaster would also be serious to MDAs as they have n o facility to process their data, only the ability to send and receive. It could take weeks or even months before new equipment i s procured, installed and made operational. 7.15 The standard solution to minimise the adverse impact o f a major disaster i s to set up a Disaster Recovery Site at a remote location. Site options are normally referred to as cold, warm and hot indicating the degree o f back-up immediately available. A cold site i s the minimal cost solution with minimum back-up whereas the other extreme i s a hot site fully equipped and ready t o run, with data continuously updated. After considering the various options it was decided that the intermediate “warm” level back-up would be most appropriate at a remote location from the main I F M S computer centre with data being updated daily from the main centre. Because o f the sensitivity and confidentiality o f some o f the information contained in I F M S it has been decided that government should own all i t s disaster recovery facilities rather than use the facilities o f a private sector service provider. 7.16 An important issue, which i s an integral part o f initiating recovery, should a major disaster occur, i s t o know exactly what to do. As part o f the draft I F M S Security Policies document there i s a need for specific sections dealing with disaster recovery and business continuity plans. Respectively, these plans are needed to describe h o w the Disaster Recovery Centre i s to be brought into operation and then the business o f h o w I F M S will be brought back to normal workmg conditions. I t i s understood that the contract for the supply o f the Disaster Recovery Centre equipment has been awarded and the target date for Centre operation i s November 2005. Key recommendations 7.17 T o ensure that the positive action taken by the ACGEN for more effective internal control for IFMS, i s built upon and properly implemented it i s recommended that: 0 As soon as the Security Policies document i s finalised, i t be made mandatory for all IFMS users to adopt i t and comply with i t s requirements. 0 The Security Policies document to be used as the basis for developing security procedures for all categories o f I F M S users and support staff and an ongoing training programme for users o f the Security Policies and Procedures i s established. 65 - PEFAR FY05 United Republic of Tanzania The Disaster Recovery Plan and the Business Continuity Plan be documented as part o f the Security Policy requirements with training given to key staff that has responsibility for implementing the plans. 0 The deadlock about the proper use o f the Data Warehouse as mentioned in Annex C: Structure and Status o f the IFMS should be resolved. c. AND ANNUAL MANAGEMENT FINANCIALREPORTING Current Arrangements 7.18 Government’s annual accounting and financial reporting requirements are regulated by the Public Finance Act, 2001 and the Public Finance Regulations, 2001 issued as subsidiary legislation. Accounting procedure manuals have been issued for ministries and sub-treasuries. 7.19 Government accounts are maintained o n a modified cash basis. Commitments are recognized during the year (see also paragraph 7.2) as an important expenditure control function and associated liabilities reported in the annual financial statements. I t should however be noted that these commitments exclude all development expenditure commitments that may arise as a result o f a supplier/contractor providing goods and services at a specific date (when the accompanying liability should be recognized), for which payment i s incurred by the DP or the government at a later date. 7.20 The Government does not currently adopt any specific accounting standards. However, the formats o f the financial statements are specified in the Public Finance Act, 2001 and Public Finance Regulations, 2001 and should include information that is classified on an economic and administrative basis. The IPSAS, Financial Reporting under the Cash Basis o f Accounting, issued by the International Federation o f Accountants, 2003 i s the most applicable international standard. ESAAG, the regional body for accountant generals, recently undertook a survey o n the extent o f preparedness by governments for the implementation o f this standard. The GOTwas considered t o be the second best in the region in this respect. 7.21 The I F M S has provided the GOTwith the capacity to produce timely central government fiscal reports with minimal delays. Also chief accountants in the MDAs in Dar es Salaam have access to the central database maintained by ACGEN and so can monitor their commitments and payments in real time. T w o standard reports are available to assist with this process. I n addition, expenditure reports are produced each month. A summary version provides information on the original and revised budgets for each vote, the funds which have been made available by the M o F and details o f cumulative payments. This report i s issued t o ministers, AOs, BOT,IMF and the W o r l d Bank. 7.22 The State House and Defense are s t i l l using I F M S o n a stand-alone basis due to security considerations. Also, as stated earlier in this report, regional sub-treasuries, the Regional Administrative Secretariat, Parliament and Ministries based in Dodoma are s t i l l unconnected with the main server. They all provide data to the ACGEN’s Department on diskettes which i s then merged on a spreadsheet with data from the other MDAs. As a result the reports are not produced until around two weeks after the end o f the month rather than three to five days which would be possible if all these entities were on-line. 7.23 Quarterly Budget Execution Reports are produced by the Policy and Analysis Department o f the MoF. These are issued to DPs and enable one common set o f financial statements t o be provided. 66 - PEFAR FY05 United Republic of Tanzania These reports have been produced each quarter for the last three years and are published o n the MoF’s website, usually within one or two months o f the quarter end. The reports include a commentary o n revenue received and payments made, an economic analysis o f payments and receipts, foreign grants and financing and a summary o f expenditure in the seven priority areas agreed in the Poverty Reduction Strategy Paper. 7.24 The annual consolidated financial statements o f the central government should be submitted to the Minister o f Finance and the CAG within the four months period required by the Public Finance Actz9. Section 25 (1) o f the A c t specifies the contents o f such a set o f accounts. The consolidated financial statements prepared by the ACGEN until the year ended 30 June 2003 have not fully complied with all the requirements o f the Act. As a result the CAG’s audit opinion was limited to the information submitted t o him and therefore incomplete - separate audit opinions were issued o n the individual components o f the accounts rather than one consolidated opinion. The ACGEN made an immense improvement with the preparation o f the consolidated financial statement for the year ending 30 June 2004. I t complies in all material respects with the requirements o f the A c t and it i s hoped that the C A G will issue one audit opinion o n these accounts. Section 25 (2) o f the A c t requires every A 0 to submit to the CAG in respect o f each vote, revenues and moneys for which he i s responsible a set o f financial statements within three months o f the year-end3’. The CAG raises any significant issues in his annual audit report to Parliament and expresses separate audit opinions o n the financial statements submitted by each AO. 7.25 The National Bureau o f Statistics provides estimates o f a functional analysis o f government expenditure in line with the requirements o f the IMF’s Government Financial Statistics (GFS) Manual. This information i s then published by the President’s Office o f Planning and Privatization as part o f the government’s annual Economic Survey. The Policy and Analysis Department o f the M o F collates the information for the IMF GFS returns. Conclusions and key recommendations 7.26 PFMRP includes a number o f activities relating to financial reporting including the need for AOs and their financial staff t o be trained on the accounting manuals by the National Board of Accountants and Auditors (NBAA). In addition in order to support improved financial reporting and financial accountability, the existing system needs to be improved by implementing over time the following key recommendations: 0 T h e financial statements should include economic, h n c t i o n a l and programmatic analyses. 0 Notes to the financial statements should explain the basis o f the accounts, any departures from applicable accounting standards and any significant variances from the annual budget. 0 MoF t o work with finance staff in l i n e ministries to develop h r t h e r standard reports to b e m a d e available from IFMS. 29The A c t was revised in 2003 t o reduce the time from six months to four. 30 For the year ended 30 June 2003 the CAG received 66 out o f 68 financial statements within the original statutory deadline o f four months. The A c t was revised in 2003 t o reduce the time for submission o f MDA accounts f r o m four to three months. 67 PEFAR - FYOS United Republic of Tanzania 0 Work towards p r o d u c i n g an annual reconciliation o f the fourth quarter budget execution report and the annual audited financial statements. 0 T h e Government's financial statements to include the following elements as required by the Public Finance Act, 2001: o a statement o f source and application o f funds for the Consolidated Fund o a summary statement o f stores and other assets for each Vote. D. INTERNAL AUDIT Recent developments and the current situation 7.27 The 2001 CFAA identified a number o f problems with the effectiveness o f internal audit, and primarily: the ambiguity o f the internal audit mandate, with the associated lack o f formal training; work programs limited to recurrent financial systems; and severe weakness in human resource ~apacity.~ ' Partly to compensate for these problems, the government had established in October 2000 a Technical Audit Unit (TAU), to carry out performance audits o n development projects, and a Stock Verification Unit ( S W ) , to verify and control all government property including stores. 7.28 These problems are in the process o f being addressed and significant steps have been taken to transform the approach to internal audit from reviewing individual transactions to recommending improvements in control systems. Thus, the Public Finance Regulations, 2001 define the role o f internal audit as independent appraisal o f the adequacy and effectiveness o f internal controls, and an Internal Audit Manual consistent with that definition was produced in 2004. 7.29 The ACGEN's Department has produced a scheme o f service for internal auditors, separate from accountants. The scheme, to be effective as o f July 2005, has been agreed with and created by the PO-PSM. I t allows for an eventual total o f 374 internal auditors across the MDAs and the Regional Administration, allocated to each partly o n the basis o f the respective volume o f transactions and geographic reach, and to be hired in each MDA when it deems necessary. Meanwhile, the quality o f staff i s being enhanced. About 50 o f the weaker internal audit staff have left the service and some more qualified staff has been recruited. In 2001 there were only four qualified accountants (Certified Public Accountants - CPAs) among internal auditors. There are n o w 14 and another five are in the final stages o f qualifying. Although n o internal auditor as such has so far been recruited, there have been a few transfers to fill gaps. All the current 70 internal audit staff has received training based on the Internal Audit Manual3*. 7.30 Finally, the departmental audit committees required by the 2001 Public Finance A c t have n o w been established in virtually all MDAs, pursuant to Treasury Circular No.9 o f 2003/04 (of 8 March 2004), and have begun functioning in most M D A s . Among their functions, the audit committees provide advice to the A 0 on internal audit matters and on tracking the departmental responses to concerns raised by the CAG. (As discussed in section 8B, lack o f responsiveness to C A G findings i s 3' Indeed, transfer o f staff t o internal audit was often viewed as a punitive measure, and internal audit thus came to be seen, fairly or unfairly, as a dumping ground for non-performers. 32 This included a five-day course in February 2005 for over 20 chief internal auditors. The PFMRP includes training for internal auditors o n IFMS. An electronic copy o f the Internal Audit Manual should be made available to all internal audit sections and relevant sections placed o n the MoF web-site. 68 PEFAR - FY05 United Republic of Tanzania the major obstacle to the effectiveness o f external audit in Tanzania.) The audit committees are composed o f 3-5 senior managers as members, one o f whom i s appointed by the PS o f Finance (who shall not be an employee o f the institution under audit) and the others by the AO. I n addition, the chief internal auditor and the chief accountant are expected to attend meetings but are not members, and the external auditor i s invited to attend but to present concerns rather than participate in discussions. 7.31 The A C G E N has contracted an institution t o provide training to all audit committees in 2004/2005. The minutes o f the audit committees are received and monitored by the ACGEN’s Department, with about 95% o f MDAs committees meeting quarterly. F r o m reviewing the minutes it i s evident at this early stage o f i t s establishment that there i s a large variance in quality, with some committees undertaking in depth follow up o f the audit queries, whereas others have been discussing the establishment and terms o f reference o f the committees. I n an attempt to strengthen the process o f sanctioning o f civil servants for financial mismanagement, government has prepared a draft set o f Public Finance (Surcharge and Penalties) Regulations which i s expected to be promulgated in 2005. 7.32 Accordingly, as o f early 2005, many o f the regulatory, institutional, and programmatic measures o n which to build an effective internal audit function had been put in place. In addition, the internal controls in the I F M S have been strengthened, as discussed in Annex C: Structure and Status o f the IFMS. Actual further progress will depend on actions yet to be taken, and will require clarification o f a number o f issues, mentioned next. Major issues and opportunities 7.33 Although the a i m o f internal audit i s to provide the individual A 0 with advice o n internal control systems and operational efficiency, the underlying institutional objective i s to strengthen the AO’s own accountability for resource protection, efficiency and effectiveness. Thus, as internal audit begins to function, the rationale for the ad hoc entities created t o compensate for i t s earlier weakness (the TAU and the S W ) will disappear and responsibility should rest directly with the A 0 concerned33. Also, the current responsibility o f the A C G E N as incubator for internal audit throughout the government should, in time, be moved up and out o f the ACGEN’s Department. 7.34 While the Public Finance Regulations, 2001 explicitly define internal audit as “ a service to the Head o f the unit involved.. ,by evaluating ...internal controls.. .and conducting operationalhalue for money audits ... ” (par. 33.), they also call o n the internal auditor to “report on the adequacy of action by management” (par. 34( 1) (g)), and give the ACGEN authority to “inspect the internal control and audit functions displayed by the Accounting Officers” (par -29 (2) (b). Such inspection authority i s limited to assuring that internal auditors are allowed to operate independently and without limitation o n their access to information (par. 29(3)). Nevertheless, there i s an inherent tension between the role o f internal auditors as advisors to the A 0 and their responsibilities to the government for overall internal control across MDAs, which will need to be carefully managed. 7.35 Rapid implementation o f current staffing plans would not be desirable - even if it were realistic. International experience shows that staff and other inputs must expand pari passu with institutional capacity, Le., with the evolution o f the “rules o f the game”, managerial attitudes, and the applicable incentive framework. I n particular, new s k i l l s received by the staff through training will degrade quickly unless they are actually used in the working environment. Accordingly, the government 33However, although the primary responsibility for protecting public assets rests with the respective MDA management, the maintenance o f a national asset registry i s a normal function o f the Ministry o f Finance. 69 PEFAR - FY05 United Republic of Tanzania intends that the implementation o f the formation o f internal audit units in each MDA will be gradual, depending on the needs o f the MDA. 7.36 Finally, the evolution o f internal audit should be coordinated with the formulation o f performance indicators in the sectoral MTEFs, and should interact positively with the CAG’s new value-for-money (VFM) audits (see 8B), to produce greater results-orientation within each MDA and in the P F M system as a whole. Without closing the public expenditure management loop with meaningful evaluation, progress in systems and efficiency cannot become continuous. MDAs in Tanzania currently lack any internal monitoring and evaluation (M&E) capacity. Thus, the initiative on internal audit could be combined with the creation o f a small M&E capacity. Recommendations 0 Take specific steps to end any residual involvement by internal auditors in the authorization o f expenditure. 0 Expand internal audit slowly, as and when justified by absorptive capacity in each MDA; consider appoint a single chief internal auditor with responsibility across several smaller bodies; and broaden entry requirements to accept degrees in other relevant disciplines, as well as experience in management. 0 Use the Internal Audit Manual sections on systems-based audit as the basis o f further training, with practical examples related to the specific MDA, and give to all new entrants orientation training, including the basics o f M&E. 0 As and when justified by the progress in internal audit, transfer the TAU and S V U staff to the appropriate MDA, and abolish the TAU and SVU . 0 As and when internal audit is firmly established, move the responsibility for internal audit and standards and oversight up and out o f the ACGEN’s Department. 70 PEFAR - FY05 United Republic of Tanzania 8. EXTERNALACCOUNTABILITY AND OVERSIGHT A. INTRODUCTION 8.1 A number o f organisations have the legal and institutional responsibility for holding government to account for i t s performance including the N A O , PCB, Parliament and i t s committees. The media and the public also have a critical role in overseeing the activities o f the government, whilst professional accounting and procurement bodies as well as the PO-PSM have an important role to play in ensuring the integrity o f the public service. 8.2 The credibility o f the various oversight bodies will ultimately be determined by their ability to enforce compliance with the relevant regulations and impose sanctions (or refer to the relevant prosecuting body) on those institutions and individuals who do not comply with the laws and regulations. 8.3 The credibility o f the government's efforts to improve financial accountability and mitigate fiduciary risk depends not just on the independence and capacity o f the oversight bodies but also the fairness and effectiveness o f the legal-judicial-penal system. There are therefore important linkages between the reform o f P F M and the Legal Sector Reform Programme as well as those discussed in section 3 between PFMRP and public service reform. B. AUDIT EXTERNAL Recent developments and current situation 8.4 External audit i s carried out in Tanzania by the NAO, led by the CAG34.N A O i s a member o f the International Organisation o f Supreme Audit Institutions - INTOSAI and the African Organisation o f Supreme Audit Institutions - AFROSAI. As a member o f INTOSAI, it i s expected to apply auditing standards promulgated by that body. As the lynchpin o f public financial accountability, external audit has received a lot o f internal and external attention in recent years, including from DFID, the EC, the IMF, SIDA, and the World Bank - as well as in the ongoing in-country dialogue through the PFMRP. This section provides a synthesis o f the key points o f consensus and an assessment o f the current ' situation, and advances a number o f recommendations which, although largely new, are consistent with the thrust o f earlier assessments. 8.5 Since 2001, the capacity o f the NAO has been somewhat strengthened, i t s authority and scope have expanded, and i t s functioning has improved to some extent, Responsiveness to N A O audit findings, however, has gotten worse. 8.6 Concerning capacity, an organizational restructuring in M a y 2002, followed by a major job evaluation exercise, led to recruiting additional staff into the redefined positions. The qualifications o f 34 The N A O sister institution, the Tanzania Audit Corporation, has been dissolved, and i t s functions o f auditing public enterprises were absorbed into the N A O in FY04/05. 71 PEFAR - FY05 United Republic of Tanzania NAO staff have thus been raised, with 33 o f the revised audit positions n o w filled by professionally- qualified accountants, although the target o f 101 staff (out o f the total 318) qualified as public accountants or equivalent (e.g. business degrees) by 2007 i s far from being met. The compensation structure, however, which i s part o f the overall government structure under the Public Service Act, 2002, continues to provide insufficient incentives for the best-qualified staff and managers. 8.7 Persistent problems with computerization remains. M o s t staff has only acquired s k i l l s on data capturing and word processing. While the ACGEN has provided training to the NAO staff on the EPICOR application to enhance their understanding o f the system, access to the I F M S from the NAO offices has not been established due to limitations inherent t o the infrastructure o f the building - this i s being addressed but will take some time. As a result the NAO staff i s not equipped nor trained to apply computer assisted audit techniques. Plans are underway to train four teams o f four members each in these techniques through a partnership agreement with one o f the big four audit firms35. I t i s envisaged that these teams will be deployed t o apply their newly acquired skills o n the TRA audit for FY05. Rather than training all NAO staff, the plan i s to establish a group o f specialists who will provide computer assisted audit support to the audit teams in the MDAs. The quality and effectiveness o f audit work will also be improved by applying modem audit techniques, including risk analysis, random sampling and system audits such as payroll and procurement. T h i s has finally begun to be addressed effectively in late 2004, with the assistance o f a SIDA-supported project, although time-consuming manual audits will have to continue through at least 2005. 8.8 Concerning the auditing o f the operations o f the NAO itself, the latest audit on the accounts for 2001/02, revealed only one adverse finding, i.e., the miscoding o f some expenditure items. Action has been taken to correct the mistake. The auditor for the accounts o f 2002/03 and 2003/04 has already been appointed and the audit i s t o be completed in the very near future. 8.9 Concerning the authority and scope o f NAO activity, the Public Finance Act, 2001 strengthened the independence and role o f the CAG, gave it greater control over i t s budget, and expanded the scope o f its activity to include VFM audits. The CAG i s responsible for auditing and reporting o n the accounts o f all MDAs, public authorities, other bodies and persons who receives money from the Consolidated Fund or for public purposes. I t i s understood that the CAG i s not limited in any way to access to classified information for purposes o f fulfilling his statutory obligations. The capacity to carry out VFM audits has only recently begun to be put in place. Combined with the groundwork laid to strengthen the internal audit fimction (see section 7D), and the attention given t o performance measures in the MTEF process, VFM audits could stimulate significantly the overall results- orientation o f the public expenditure management system in Tanzania. Care should be taken, however, lest this expansion o f activity detract attention from the still considerable problems o f compliance and financial integrity - which must remain at the core o f the CAG’s concerns. Accordingly, the current practice o f outsourcing many audits o f public enterprises, at their expense, ought to be followed also in respect o f VFM audits. The NAO should therefore strengthen i t s capacity to design, contract and monitor VFM audits conducted by private firms, rather than attempt to build all such capacity internally. D o i n g so will require some expansion in the NAO budget for the purpose o f financing VFM audits and special studies, and some tightening o f quality control procedure^^^. 8.10 Concerning thefunctioning o f the NAO, the above actions have been in part responsible for an improvement in audit timeliness and outcomes, as shown in the table below. ~~ 35 The teams will attend a two-weeks training course and then be deployed in the field to apply the newly acquired skills under supervision o f audit managers from the audit fm . 36 As in many other countries, the majority o f donor-funded projects are audited by private firms. 72 - PEFAR FY05 United Republic of Tanzania FYOl FY02 FY03 FY04 FY05 (expected (target) ) % o f central government accounts submitted 17 15 3 <3 <2 late* CAG Annual Report submission delay ** lomonths lomonths 7months 3months On time % o f MDAs with clean audit certificates 34 33 46 ... ... % o f MDAs with qualified audit certificates 39 49 53 ... ... . I . % o f MDAs with adverse opinions 27 17 1 . . I 8.11 The improvement in timeliness o f completion o f the NAO Annual Reports, and thus o f their submission to Parliament (through the Minister o f Finance) and the President3’, i s partly a result o f the decreased incidence o f late accounts, which after steadily declining for three years, dropped dramatically between F Y 0 2 and FY03. Largely due to the efforts o f the ACGEN, late completion o f public accounts i s becoming a thing o f the past in Tanzania, at least at central government level. As noted above, the application o f time-consuming manual and outdated audit techniques, that had hampered the timeliness o f NAO report completion, i s n o w starting to be resolved, with the help o f SIDA. Thus, the NAO states that it will complete i t s report for F Y 0 4 n o later than June 2005, three months after the due date (and within the HIPC-Assessment and Action Plan benchmark), and that it aims at completing before end-March 2006 the Report for FY05, and the subsequent ones. This w i l l be a test of the NAO resolve and readiness to make other audit improvements, because timeliness o f reporting is thejirst prerequisite for audit efectiveness. 8.12 Equally noteworthy i s the improvement in audit outcomes, with the number o f clean audit certificates rising in recent years to almost h a l f the total, and the percentage o f adverse opinions dropping steadily since FY2000, and sharply between F Y 0 2 and FY03, with all but one opinion upgraded to a qualified audit certificate. 8.13 However, the quality o f the audits themselves could be improved, especially in the direction o f better documentation o f audit files, more systematic training and supervision o f auditors, and, most important, a clearer focus o n major issues. The Annual Report in particular would benefit from a stronger treatment o f cross-cutting issues and key problems. The CAG has already begun to take action to improve audit quality. The current audit briefs t o the PAC n o w include an assessment o f the responses given on audit findings. The content and structure o f the report are being made more user- friendly, dealing with the major cross-cutting issues but also in sufficient detail to compare MDA financial performance over the years and against each other, and with executive summaries. Also, the management audit reports will include responses by auditees t o promote compliance. The intention i s to effect these changes beginning with the audit report for the 2004/2005 year. M u c h o f the qualitative improvement can be made without additional staff or other resources, and would not be constrained by the current salary structure, Other improvements, as recommended below, will call for targeted assistance. 37 As required by Article 143 o f the Constitution. 73 - PEFAR FY05 United Republic of Tanzania Major issues and opportunities 8.14 Regrettably, the progress in audit and accounting described above has not resulted in substantive improvements in accountability. It i s not acceptable that more than h a l f o f the Appropriation Accounts s t i l l cannot be awarded a clean audit certificate (Table 18). I t i s even less acceptable that the CAG observations are generally ignored - let alone answered satisfactorily - and that the same issues have to be raised in report after report without action or even recognition. T o quote from the CAG report o n FY03 (para. 18): "Many Accounting Officers pay little regard to matters reported upon, and issues that demand financial accountability continue to be ignored. Disciplinary action against offenders is largely ignored ...I have again reiterated on issues appearing in my previous reports, that have not been acted upon, to serve as a reminder that Accounting Offices have a duty to recti3 outstanding mattes raised in audit reports and during PAC hearings." It i s not surprising that some interlocutors relate that in recent years the traditional apprehensiveness o f external audit has given way to indifference. 8.15 N o r are the improprieties minor. Between 1999 and 2002, over TSh72 billion, or about TSh24 billion a year o n average, were lost through negligence, embezzlement and theft. This state o f affairs does not seem to have improved since then, with TShs.50 billion worth o f unvouched or improperly vouched expenditure in FY03 alone38. 8.16 The effectiveness o f external audit may be constrained either by structural limits to NAO independence, or by lax government enforcement o f the applicable regulations, or by weak legislative response to audit findings. The answer, not surprisingly, i s found in all three - although government responsibility for inaction i s by far the heaviest factor. 8.17 D e facto independence o f the CAG. Normally in most other countries o f the Anglo-Saxon administrative tradition, the head o f the supreme audit institution i s directly appointed by and i s directly responsible to the Parliament; receives i t s budget from Parliament; and has full operational autonomy. In Tanzania, the Constitution prescribes direct CAG appointment by the President (although nothing precludes the President from acting only upon recommendation by Parliament); the CAG reports to Parliament through the MoF; the NAO budget i s part o f the overall government budget; and NAO staff i s subject to the same conditions and terms o f service as government employees in general. Superficially, these provisions may appear to be inconsistent with an independent and robust external audit function. A closer look, however, yields a different conclusion. First, the constitutional procedure for removal o f a CAG, even for cause, i s detailed and complex enough to assure his or her effective independence, after initial appointment. The Minister o f Finance i s obliged by l a w to transmit the CAG annual report to the National Assembly within seven days o f the next sitting o f the Assembly, failing which, the CAG can do so directly; the provision, therefore, serves merely as an early warning o f major problems. Moreover, in practice, nothing prevents the CAG from sending other communications directly to the Speaker o f Parliament or the chairman o f the PAC. The Public Finance A c t provides for the NAO budget to be set by Parliament, albeit in consultation with the M o F and the PAC. Moreover, the NAO budget request i s routinely met, and the release o f the cash i s made semi-annually into a CAG-controlled account. Finally, and most telling, although NAO reports could certainly be improved in a variety o f ways, they show n o evidence o f timidity or "pulling punches". Thus, in actual fact, the only major limitation to the independence o f 38Moreover, expenditures can be vouchered properly even though the goods or works contracts may have been awarded improperly, and the sums involved could be much larger than those identified in the CAG reports. 74 - PEFAR FY05 United Republic of Tanzania CAG arises from i t s lack o f autonomy in personnel management and in compensation3’. Accordingly, the real constraints to audit effectiveness lie in the lax enforcement o f the existing laws and regulations rather than in the laws and regulations themselves. 8.18 Government inaction. As section 8 D discusses in detail, inefficiencies and delays in the judicial system are a factor hampering the fight against corruption. Lack o f sanction for the non- compliance and financial improprieties uncovered by the CAG could conceivably be excused o n those grounds. However, the Public Finance A c t gives the Minister o f Finance clear authority to pursue personal restitution o f funds, if he i s satisfied that the officer concerned i s responsible for the impropriety, based on an administrative (not judicial) proceeding. Moreover, the Public Service Act, 2002, provides for various administrative sanctions, including termination o f employment. Thus, there i s n o legitimate reason for lack o f vigorous follow-up and sanction by the government o f what i s a grave neglect o f basic duty - or worse. The functioning o f the departmental Audit Committees, described in section 7D, should help in the h t u r e to track the rate and sufficiency o f response to audit findings4’. Nonetheless, a major improvement in responsiveness to audit findings and thus in financial integrity will require fresh resolve from the top political leadership, and a link between such responsiveness and the career prospects o f the individuals concerned. 8.19 The role o f Parliament. The improvement in timeliness o f completion o f the CAG annual report, if i t continues, should give the Public Accounts Committee a better platform o n which to conduct hearings o n the report. However, as discussed in section B, a separate problem i s the reluctance or refusal o f the Speaker o f Parliament to allow parliamentary debate o n PAC reports. Moreover, steps are needed to bring forward the relevant audit findings - not only ex post after the conclusion o f the fiscal year, but ex ante, during the parliamentary debate o n the budget for the following fiscal year. Even then, the near total lack o f staff support for the P A C and the various budget committees will hamper parliamentary scrutiny o f the intended and actual use o f public funds. However, the need for technical staff i s relative to the length and technical nature o f the reports tabled. While legislative capacity i s being gradually built, the reader-friendliness o f C A G reports can be much improved. As discussed in paragraph 8.25 a simple change in standing rules and procedures of Parliament i s required to immediately open PAC hearings to the public and media, with individual exceptions in specific cases. 8.20 A more responsive and proactive NAO. There are a number o f practical initiatives the NAO itself can take to improve its reporting, raise the profile o f external audit, enhance transparency, and raise contestability o f government actions. Some are recommended below. As noted earlier, the NAO i s already taking action in this direction. 8.21 Aside from the improvements the NAO can itself make, the timing o f implementation o f the other recommendations to strengthen the external audit b c t i o n will o f course depend o n priorities and other commitments o f the government. The transition to a new presidential administration after October 2005 would provide a suitable occasion. 39 However, the physical placement o f external audit staff (resident auditors) within the MDAs i s anomalous and a source o f concern, as their independence requires arm’s-length relationship. While the space in the NAO building i s not sufficient t o accommodate a l l staff, it should however be noted that the supervision o f these teams i s performed by senior audit staff resident in the NAO building. 40 The participation t o those committees by the external audit staff, however, should b e handled very carefully. As mentioned i n section 7 A.D, while external audit staff may be invited t o attend meetings o f the audit committee, they should do so exc-lusively for the purpose o f presenting an issue o f concern and should thereafter excuse themselves from the discussion. 75 - PEFAR FY05 United Republic of Tanzania 8.22 Whether or not the government finds merit in the particular recommendations that follow, the external partners are uniformly o f the view that to reduce fiduciary risk in Tanzania, and hence buttress the case for budget support, demands that the effectiveness o f the external audit function be strengthened. None o f the recommendations below call for legislative or regulatory changes, and several do not require additional staff or other resources. I t i s likely that donor assistance can be obtained to allow implementing the remaining recommendations, but these initiatives should be to the maximum possible extent designed by NAO management and executed by existing staff. However, although all the recommendations are pertinent to the effectiveness o f the external audit function, some are beyond the capacity o f the NAO itself andor require action by other organs o f government. Recommendations NAO should cull from the management letters cross-cutting themes and major problems and submit ((advance reports)) before end-December o f each year, beginning in 2005, and attach to the Annual Report a short ((executive summary)) focussing o n the key issues and identifying the responsible MDAs - in plain English and Kiswahili suitable for non-technical readers including Members o f Parliament and the media. NAO should compile an inventory o f adverse audit findings and o f responses obtained, MDA by MDA, and thereafter regularly monitor the response rate to audit observations, with a summary assessment o f the responses - such information to be tracked as an indicator in donor programs and by the GGCU. All hearings o f the P A C should be opened to the public, with individual exceptions for specified reasons. Prepare ((audit briefs)) on each MDA, for the benefit o f Parliament during the debate on the budget for the subsequent year, beginning with the budget for FY07 Introduce as an item in the annual confidential evaluation o f Accounting Officers’ performance the adequacy o f their MDA responses to external audit observations, as assessed through the Minutes o f the respective Audit Committee. Adopt as formal practice by Presidential decision that Presidential appointments o f future CAGs will be made upon recommendation o f Parliament. Provide the P A C with the funds to hire at least two staff qualified in management, accounting, economics or other relevant subject. c. LEGISLATIVE SCRUTINY Current committee structures and responsibilities 8.23 In January 2001, the National Assembly amended the standing orders and created sectoral budget committees. The mandate o f sector committees i s to: (i) review budget proposals and budget performance o f their sector ministries; (ii) conduct a post-mortem review o f audited accounts; (iii) 76 PEFAR - FY05 United Republic of Tanzania review the performance o f relevant public institutions/ parastatals; and iv) oversee draft legislation. The Finance and Economic Affairs Committee acts as a sector committee for the M o F and President’s Office, Planning and Privatization. In addition, it reviews the annual consolidated government budget before submission to the National Assembly. 8.24 The rationale for the creation o f sectoral budget committees was to increase parliamentary participation in the budget formulation process. However involvement o f the parliamentary committees in the budget process s t i l l comes towards the end o f the process, usually a month before the June budget session. The Economic Outlook and Annual Plan and the Budget Speech are normally presented in the second week o f June. The process o f debating and approving the appropriations usually means that the budget i s approved two months after the beginning o f the financial year. 8.25 Parliamentary committees meetings are generally held in camera in accordance with section 88(7) o f the standing rules and procedures, but at the discretion o f committee members the public may be allowed t o attend special hearings. However, parliamentary sessions are generally open to the public. NGOs, c i v i l society organizations (CSOs), lobby groups and individuals may express their views to Parliament and contribute to policy formulation through the presentation o f papers. Minutes o f such meetings are recorded in Hansard and are available to the public. 8.26 Parliament receives a quarterly report o n budget execution from the MoF. These reports provide an overview o f macro-economic developments, together with summary tables o n monthly and quarterly revenue collection and expenditures, related to estimates for the period. 8.27 Three committees: the PAC, Investment and Public Corporations Committee (IPCC) and the Local Authorities Accounts Committee (LAAC) have special oversight roles. The 15 member P A C i s responsible for reviewing the CAG’s report for all central government accounts. The chairperson o f P A C has to be appointed from amongst members o f the opposition. One other member of the opposition, a specially elected Member o f Parliament i s o n the committee. 8.28 The PAC i s assigned 60 days for their work (14 days before a parliamentary session and 14 days after). Parliamentary committee members are not involved in the preparation o f their budget and are not generally aware o f the funds made available to the committee. Travel funds are generally not available outside Dodoma and Dar es Salaam. Considerable difficulties are experienced in obtaining funding to carry out special investigations, and funds were only made available by cutting down o n other work and through pressure from external stakeholders. 8.29 The technical-professional capacity o f committee members to deal with the subject matter o f their remit i s generally recognized by themselves to be weak and in Tanzania n o professional research SUPPOI? i s provided such as i t i s in other countries. The opposition pays for their o w n researcher who provides technical support to the chairman o f the PAC. The P A C i s assigned a clerk but this i s primarily clerical and administrative support. 8.30 Reports received by PAC include: Unaudited financial statements o f individual .MDAs and annual accounts of t h e ACGEN; 0 Detailed audit report from the CAG; and 0 Stock V e r i f i c a t i o n R e p o r t from MoF. 77 PEFAR - FY05 United Republic of Tanzania 8.3 1 As shown in the table below the PAC completed i t s review o f the 2002/03 CAG’s report during the November 2004 parliamentary session and has tabled i t s report with the Speaker. According to the chairman o f the PAC, the position with respect to the debate o f the other reports i s as set out below. 78 PEFAR - FY05 United Republic of Tanzania Table 19: Status of PAC reports 1 Report I Tabled with I Debated by I CommentdAction Parliament Parliament 200213 P A C report Yes No None 2001/2 PAC report Yes No None Special report o n Ministry of Yes (February 2004) No PAC chairman has advised the Energy and Minerals4’ Director General of the P C B that a report has been tabled42 Special report o n P M O (TVT)43 Yes (February 2004) No None Special report o n Ministry of Yes (January 2002) No None 8.32 The reason for the delay by the Speaker in allowing parliamentary debate o f the PAC reports i s not known. Furthermore, it i s understood that the PAC issues directives for actions to be taken by the relevant authorities but that relevant sectoral budget committees have not followed up o n the issues raised in these reports and n o action has been taken by any government body. As noted in section 8D, the PCB i s following up the findings o f the 2002/3 C A G report for Local Authorities so clearly there i s n o requirement for the reports to be debated by Parliament before action can be taken. 8.33 The chairman o f the PAC has written to the C A G requesting the status o f recommendations in the CAG’s earlier reports, but i s s t i l l awaiting a reply, The situation with respect to the reports o f the IPCC and the LAAC has not been reviewed. The need for an inventory o f outstanding queries i s discussed in more detail in the recommendations o f the prvious section. Conclusion and recommendations 8.34 Despite the introduction o f sectoral budget committees, parliamentary oversight in the budget process begins at a late stage, once estimates have been prepared, approved by the MoF and Cabinet. The ability o f Parliament to question or influence inter sectoral allocations and ensure that they follow sectoral policy i s therefore very limited 8.35 The work o f these sector committees appears to be somewhat confused and to a certain extent overlaps with that o f the PAC, as it i s understood that they concentrate on understanding and reviewing the financial and physical performance o f their relevant ministries based o n the financial statements provided by the relevant ministry. These committees are supposed to focus o n the physical performance and not a detailed discussion o f the annual accounts. 8.36 The fact that PAC reports have not been debated o n a timely basis or action taken by the relevant bodies o n their recommendations i s very serious. A recommendation on improving public access to committee meetings i s included in section 8E. The following recommendations are designed to ensure that the legislature’s role in scrutinizing government’s activities i s significantly improved: 0 PAC reports are debated within 30 days o f b e i n g tabled with Parliament. 41 This report looked in particular at Tansort a diamond selling company based in the UK. 42 I t i s claimed by relevant authorities, Police, PCB, line ministries, M o F that they cannot initiate any action until the PAC has issued directives t o take action. 43 TVT = National Television (Eelezisheni yu Tu@) Special investigation into a computer contract. 79 PEFAR - FY05 United Republic of Tanzania 0 Recommendations o f PAC reports should b e f o l l o w e d up immediately the report i s tabled and made public. Parliament o r i t s committees should b e i n v o l v e d in the budget process at a m u c h earlier stage and discuss resource allocations before setting expenditure ceilings in the Budget Guidelines. 0 The mandate o f the sectoral budget committees should b e clarified. 0 Funding should b e provided for technical research personnel t o support PAC and other committees. D. ETHICSAND INTEGRITY BODIES Current situation and recent developments 8.37 The Minister for Good Governance was appointed in 2000 to provide Cabinet level political leadership for anti corruption and good governance issues. The GGCU was established in July 2001 in the Office o f the President to support the Chief Secretary who was designated as the administrative leader and co-ordinator o f the various ministerial plans set out in the government’s national anticorruption strategy and action plan. The Unit comprising o f a co-ordinator and assistant co- ordinator produces a quarterly report, which captures high level indicators o f action being taken to combat corruption. The report i s submitted to the President, MDAs, c i v i l society and the public. Approximately 3,000 o f the reports are produced in English although there are plans to produce it in Kiswahili. T h e latest report i s for the period April to June 2004. 8.38 Following the enactment o f the Human Rights and Good Governance Act, 2001, the CHRGG was established in March 2002 under the Ministry o f Justice. I t took over the responsibilities o f the Permanent Commission o f Enquiry (PCE) with respect to official maladministration and was given the responsibility o f promoting human rights. Since i t s inauguration i t has received 10,322 complaints including 2,237 brought forward from PCE. I t has investigated and closed 4,050 and has 6,272 cases outstanding. T o date, complaints received have been predominantly in relation to official maladministration, primarily employment related, for example worker’s complaints about the privatization process. I t i s believed that this i s because o f general lack o f awareness o f human rights issues amongst the general public. Issues o f corruption are referred to the PCB. 8.39 Although the Commission has legal independence, in practice it has to adhere to government procedures and processes with respect to human resource and financial management. Currently, the Commission has 7 commissioners, 4 directors and approximately 20 investigators and support staff. The directors were not appointed until end 2004 and the human rights director has s t i l l not been recruited. Bureaucratic procedures have been blamed for the delays, although this i s refuted by the PO- PSM. The Commission i s now in the process o f employing 103 additional staff. 8.40 According to the Act, the jurisdiction o f the Commission i s both the mainland and Zanzibar, but as noted in the section on Zanzibar, the law has to be adopted by the House o f Representatives. The House o f Representatives has reviewed the Act and has agreed to adopt it only after alterations to the Union act. These changes have not been effected. (Note for section on Zanzibar, the Commission has an office in Zanzibar due to the fact that PCE had an office there, but no work i s done there). 80 PEFAR - FY05 United Republic of Tanzania 8.41 The mandate o f the Civil Service Ethics Secretariat i s to administer the public leadership code o f ethics for the five thousand plus public “leaders” specified in the legislation. M i n o r revisions in 2001 to the 1995 Public Leadership Code o f Ethics A c t allow greater access to the public to see the various declarations and for the Secretariat to initiate its own investigations. N o precise information was available on number o f complaints received, transferred or investigated, although it was noted that very few have ever reached tribunal stage. 8.42 Further revisions proposed by the L a w Reform Commission, which would require the publication o f public leaders’ assets were presented to the Minister o f Justice in February 2005 after extensive public consultations. As noted in 8.44 as it would be a revision o f existing legislation, i t i s understood that this could be fast tracked by the Minister o f Justice. T o date operations have been centered in Dar es Salaam with a staff o f 8 enquiry officers, plans for the establishment o f six zonal centers, three in FY 04/5 and three in FY05/6 are under way. Each centre i s to be staffed by one graduate and three support staff. 8.43 The PCB i s the government’s leading anti-conuption entity and i s responsible for investigating cases o f corruption o n the mainland and referring them to the courts for prosecution. As noted in the section on Zanzibar, PCB does not operate in Zanzibar because anti - corruption l a w i s not viewed as a union matter. The PCB i s under the Office o f the President and i s not a constitutionally recognized body. 8.44 The Director General o f the PCB i s appointed by the President and has n o security o f tenure. As noted in the previous CFAA, the primary legislation for the PCB i s the Prevention o f Corruption Act, 197 1. The PCB in close consultation with other interested stakeholders initiated a review and update o f i t s legislation to make the Bureau more effective. This was presented to the L a w Reform Commission. Following extensive public consultation, the recommendations o f the Commission have been presented to the Minister o f Justice and Constitutional Affairs. The final content o f their recommendations i s not widely known but, given that an update rather than new legislation i s proposed, i t i s within the mandate o f the Minister to “fast track” the tabling o f a bill comprising revised legislation to Parliament. If the relevant parties agreed, this could permit revised legislation to be enacted before the end o f the current session o f Parliament. 8.45 The PCB has offices in all 21 regions and in 116 districts. The Bureau has three operational directorates: investigations, public education, and research, control and statistics. It currently has 38 prosecutors and 730 investigators. The bureau i s active in following up some public reports such as the 2002/03 CAG report for local authorities, but the policy for selection o f the reports to be investigated further, i s not clear. In addition, there i s a hotline for the public to report cases o f corruption, but currently Tanzania does not have the kind o f legal framework that would facilitate and make public reporting o f corruption more effective, i.e., there i s n o Freedom o f Information, Whistleblower or Qui Tam legislation. 8.46 Between 1995 and June 20044s,the PCB received 10,319 reports o f corruption and investigated 9,507 o f them. O f the cases investigated, 357 were prosecuted, resulting in 48 convictions. As o f June 2004, 5,387 cases were pending with the PCB. Between 2001 and 2004, 6,378 cases were investigated resulting in 20 convictions and investigations recovered a paltry Tshs.390 million46. The PCB claims 45 According to statistics set out in the U S Department o f State - Country report o n human rights practices - 2004. 46 GGCU, Tanzania’s Third Phase Government Fight Against Corruption: Implementing the National Anti- Corruption Strategy and Action Plans 2001-2004 81 PEFAR - FY05 United Republic of Tanzania that this very l o w rate o f successful prosecution and conviction i s attributable in large measure to inadequacies and weaknesses in the current Prevention o f Corruption Act. 8.47 Since 2001, the Public Education Directorate has carried out extensive community education and awareness programs and produced a wide range o f radio and TV programs, radio dramas, advertisements and other publicity material. I t s a i m i s to involve the community in fighting corruption and consequently it works directly with the public, civil society, central and local government, schools and the private sector. I t has also adopted an initiative whereby teachers have become involved in preventive education. The success o f the overall program i s difficult t o quantify and n o local comparative research has been carried out to measure any changes in the incidence o f corrupt activities. There i s however the strong belief that corruption i s more widely acknowledged as a problem in Tanzania and that attitudes are slowly changing, particularly among the younger generation. 8.48 The Public Service Act, 2002 n o w gives the mandate to the PO-PSM to oversee public service ethics in MDAs by coordinating and monitoring ethical conduct at workplaces. The Ethics Division (formerly the Ethics Inspectorate Unit) continues to conduct public awareness initiatives and to provide training and guidance o n ethics and integrity to public servants. The revamped PSRP has a separate sub component on ethics and integrity, which i s designed to link closely with the NACSAP. 8.49 All ethics and integrity bodies develop their own budgets within ceilings provided by the MoF. None o f the bodies are treated as a high priority or protected sector so funds are received monthly. M o F screens requests for development funds, for example a request by CHRGG to open two zonal offices was rejected by Finance. Although human resource management i s being devolved, some c i v i l service rules and regulations such as the 60 day out-of-office constraint mean that the organization does not have complete flexibility in the management o f i t s operations. 8.50 Over the last seven years the Transparency International Corruption Perception Index (CPI) reports show an encouraging improvement in scoring for Tanzania. Tanzania’s CPI improved from 1.9 in 1998 to 2.7 in 2004 but Tanzania remains in the bottom quartile o f those countries assessed and have been excluded from receiving American Millennium Challenge Account funds because o f it corruption problems. As noted in the section o n procurement and in the CAG’s report corruption i s considered to be most prevalent in public procurement, revenue collection and financial management, in that order. According to the PCB, most corruption-related complaints involved mining; land matters, particularly title deed fraud; energy; and investment. The lack o f regulations for the government’s program to privatize parastatals was also a source o f corruption complaints. According to anti-corruption NGOs, most allegations o f corruption involved the TRA, and local government authorities. A special report on corruption within Tanzania has not been carried out since 200247. A comprehensive, empirical, diagnostic corruption survey that could report on corruption in all MDAs and at all levels o f government has never been conducted in Tanzania so there are n o benchmarks o n the basis o f which one could focus analysis, interventions and monitor change. Conclusion and recommendations 8.5 1 W h i l s t the government continually emphasizes i t s commitment to fighting corruption, the ability o f the PCB and other institutions to successfully investigate, prosecute and convict offenders remains limited by current legal constraints, availability o f experienced personnel and lack o f adequate 4’T h e State o f Conuption in Tanzania 2002 by the Economic and Social Research Foundation and Front against corrupt elements in Tanzania (FACEIT) 82 - PEFAR FY05 United Republic of Tanzania finances. Available resources are spread thinly across a number o f organizations and operational activities constrained by government procedures. In the 2004/5 budget Tshs.857 m i l l i o n has been placed in the special expenditure reserve for an anti corruption drive, but h o w this has been used i s not known. 8.52 The GGCU’s reports in earlier years have not always been complete, e.g., several sections in the table that provides for monitoring and controlling the financial accountability cycle have never been filled in. The GGCU i s only n o w finalizing the July - September 2004 report because o f delays in receiving information from ministries. N o information was received from either the NAO or the Ethics Secretariat for the April or July reports. Also information in the report does not provide the reader with any assurance that substantive action i s being taken against AOs or others who are responsible for financial mismanagement or other offences. 8.53 As noted in the anti corruption strategy, the biggest challenge i s to convince a cynical populace that the government’s strategies are honest and genuine. The extent o f government inaction described in paragraph 8.18 seriously undermines i t s credibility. The success o f the anti corruption program i s heavily dependent o n public perception o f the transparency and integrity o f all stakeholders in the process. The following recommendations are designed to enhance GOT’S efforts at combating corruption. Revised legislation which provides PCB and other legal, judicial agencies with more effective powers is enacted within the next six months. The GGCU quarterly reports are produced within 60 days o f the end o f the period and non reporting MDAs penalised. Government commence to use the GGCU’s quarterly reports as a basis for taking follow-up action (also refer to the recommendations in section 8B). Information collected by the G G C U should be reviewed and revised to ensure that stakeholders are provided with more detailed information on sanctions being applied. The feasibility o f sharing physical resources (buildings and support staff) at a zonal level by the different ethics and integrity bodies should be assessed. E. AND DEMAND PUBLIC ACCESS N FOR I FORMATO I N Access to and availability o f information on PFM 8.54 As noted in the CFAA 2001, according to article 18(1) o f the Constitution “every person has the right to freedom o f opinion and expression, and to seek, receive and impart or disseminate information and ideas through any media regardless o f national frontiers.. .” However, the “claw back clause”, “Without prejudice to the laws o f the land...” effectively dilutes the right to freedom. In addition, article 30 o f the Constitution proceeds to outline many exceptions to this b d a m e n t a l right. There i s n o Freedom o f Information A c t and Tanzania s t i l l has a number o f other legal barriers that potentially make it impossible or difficult for all Tanzanians to access information on matters relating to public sector financial management. As noted in the C F A A 2001, the major ones include: The National 83 PEFAR FYOS- United Republic of Tanzania Security Act, 1970; The Newspapers Act, 1976; C i v i l Service Regulations, Circulars and Standing Orders; and the Broadcasting Services Act, 1993. 8.55 According to recent media reports4* there are also proposals to form a committee under the Tanzania Communication Regulatory Authority, which will be charged with evaluating and regulating media content. This appears to contradict government statements o n improving the availability o f information and creating information officers in each ministry. Furthermore it potentially undermines the role o f the Media Council o f Tanzania, which i s tasked with helping t o safeguard and maintain the freedom o f the media as well as ensuring that journalists adhere to the highest professional and ethical standards. 8.56 Section 7C o n financial reporting sets out in detail the reports produced by the MoF. A number o f these reports including the Budget Speech and quarterly budget execution reports are available o n the ministry's website, although the latter i s only available in English. This has helped to alleviate the difficulties o f accessing information from outside Dar es Salaam and with the inadequate supplies o f hard copies o f reports and legislation. The section on the NAO discusses in detail the CAG's report; this report i s available to the public once i t has been tabled with Parliament. Currently the C A G does not provide a press release to the media on key issues raised in his report. 8.57 As noted in section 8E with the exception o f special public hearings the general public and the media are not free to attend parliamentary committee meetings and even with special hearings can only do so with the approval o f committee members. Committee reports have a restricted distribution until they have been tabled with Parliament, after which they are available to the public, although this fact does not appear to be widely known. 8.5 8 Some information on procurement i s made available including participants and winners. However information o n h o w participants have been chosen i s not always available and procurement advertisements are scattered through local and East African papers with n o central source of information on all available contracts. Availability o f information o n fund releases and user fees evidently varies between different service providers. Some information i s provided to local communities o n the amount o f funds released to local authorities. Demand for and use o f information 8.59 Enabling improved access to information i s only one part o f the equation. Equally important i s ensuring that the media are able to carry out their key role o f interpreting and disseminating information to the general public. GOTrecognises the importance o f the media's role in creating public awareness on corruption and this constitutes one o f the seven pillars o f NASCAP. It i s also widely recognised that the media can serve as an important watchdog in exposing the negative effects o f misconduct and corruption within procurement and can serve as an important partner in efforts to strengthen public awareness on procurement issues. 8 -60 Unfortunately, the Tanzanian media i s presently not fulfilling this watchdog role too effectively, and sound investigative journalism o n corruption and procurement i s very limited, although not n o n existent. There are a number o f reasons including lack o f training in investigative techniques, the structure o f the newspaper and media industry, including the fact that few journalists are salaried staff and constraints on editorial freedom. 48 The Citizen 10" March 2005. 84 PEFAR - FY05 United Republic of Tanzania 8.61 Demand for information by the public i s generally considered to be weak and there are numerous calls for increasing awareness amongst the public o f their role in holding the government to account. The effectiveness o f the public as watch dogs i s however clearly linked to the provision o f a service, by government for which the individual pays either directly by user fees or indirectly through the tax system. Tax collection and tax administration issues are discussed in detail in sections? According to the Fiduciary Risk Assessment (FRA) carried out in 2004, the public i s highly dissatisfied with the level o f service provided particularly at a local level. As this year’s financial accountability review has concentrated o n central government operations customer satisfaction has not been reviewed. However customer surveys do f o r m an important part o f the public services and local government reforms and should provide valuable information o n public perceptions o f service standards. Conclusion and recommendations 8.62 Without free access to information, it i s impossible for the public or the media to carry out their role o f holding the government to account. Any attempt to control or regulate media content i s therefore o f considerable concern. Although it i s equally important for the journalists to act in a responsible and professional manner. The following recommendations are therefore intended t o improve the ability o f the media and the public to carry out their watchdog role in the financial accountability cycle. Amend standing orders to allow the media and the public to attend parliamentary committee meetings. 0 Provide training for journalists in investigative journalism. 0 Introduce and implement a Freedom o f Information Act. 0 Ensure that government respects the important role o f the media in disseminating information to the public in a free and fair manner. 85 - PEFAR FY05 United Republic of Tanzania PART IV: ZANZIBAR 86 - PEFAR FY05 United Republic of Tanzania 87 PEFAR - FY05 United Republic of Tanzania 9. ZANZIBAR: TAKING STOCK OF PUBLIC EXPENDITURE MANAGEMENT AND FINANCIAL ACCOUNTABILITY ISSUES A. PUBLIC EXPENDITURE MANAGEMENT 9.1 The Zanzibar PER 2002/03 recommendations and the C F A A action plan were prepared in close collaboration between the Revolutionary Government o f Zanzibar (RGoZ), the World Bank, UNDP and DFID. I t s main objective was to shed some light on the fiscal stance and status o f financial management in Zanzibar which could then serve as the basis for (a) policy dialogue with the authorities and (b) decisions on future development assistance to Zanzibar. Since the preparation o f the Zanzibar PER, a number o f developments have taken place in the isles. This section presents a quick overview o f the macroeconomic developments since 2003, and then goes on to highlight the status o f implementation o f the recommendations o f the diagnostic Zanzibar PER and CFAA action plan o f 2003. Recent Macroeconomic Development in Zanzibar 9.2 The Zanzibar economy has been marked by the decline in GDP growth from 8% in 2002 to 5% in 2003 mainly due to poor performance in agriculture in 2003. Inflation increased significantly from 5.2% in 2002 to 9% in 2003, driven mainly by an increase in food prices as a result o f reduced domestic production o f food. All these translated into significant fiscal pressure. 9.3 Revenue and expenditure performance: Since 1999/00 domestic revenue collection has in general been declining and marked by year to year fluctuations. The decline in revenue i s mainly due to the decline in tax revenue from international trade, occasioned by a fall in imports into Zanzibar. Although consumption and income taxes registered an upward trend, these were not adequate to compensate for the fall in import duties. The decline in revenues in turn translated into a fall in total expenditures from 38 percent o f GDP in 1999/00 to less than 25 percent afterwards. Despite expenditure cuts, the gap between expenditures and revenue increased as indicated by widening fiscal deficit (-0.3 percent in 1999/00 to almost 7 percent by 2003/04). Part o f this gap was financed by external grants, which began to flow in again into Zanzibar in 2001/02. Grants increased from 3.5 percent in 2001/02 to 5.4 percent in 2003/04. 88 PEFAR - FY05 United Republic of Tanzania Table 20: Zanzibar - Selected Fiscal Indicators Wages and salaries 14.2 11.9 14.2 15.8 18.1 Other expenditures 23.4 10.4 6.6 6.7 6.3 Development expenditure 0.4 0.5 0.6 1.1 0.4 Overall deficit/surplus (excl. -0.3 -2.4 -2.2 -5.8 -6.8 Overall deficithurplus (incl. -0.3 -2.4 1.3 -1.8 -1.4 B. OF PER 2002/03 RECOMMENDATIONS STATUS OF IMPLEMENTATION 9.4 Overall, implementation o f the Zanzibar PER 2002/03 recommendations has been rather modest, partly on account o f lack o f resources to leverage difficultlpolitically sensitive reforms4': Progress made so far i s summarized below. (i) Framework for an institutionalized PER Process for Zanzibar has been set-up along the URT model: A PER workmg group, Macro- working group and sector working groups have already been formed. Terms o f reference for all the working groups have been formulated. (ii) Establishment o f clear rules guiding fiscal relations with Mainland: The Joint Finance Commission (JFC), which i s now operational, i s s t i l l in the process o f establishing appropriate rules and regulations that will govern the URT-RGOZ fiscal relationship, including review o f tax laws. JFC has commissioned studies to determine the cost o f running union matters as well as the debt obligations o f the two sides. Commissioned work i s also expected to commence during the fourth quarter o f 2004/05 to review intergovernmental fiscal relations under the Ministerial Tender Board. (iii) On duplication o f functions and positions at MDA, regional and district level: RGOZ prepared a strategy paper for local government reform in December 2004 and fkom it a policy and action plan. However, implementation i s still awaiting higher level government approval. (iv) Removal o f monopoly o f ZSTC in the purchase and export o f cloves and review of the ' optionsfor taxation of a liberalized clove industry: So far the government commissioned a 49 While the Joint Finance Commission s t i l l has a long way t o go, coordinated and sustained donor engagement in Zanzibar has remained rather limited. 89 PEFAR - FY05 United Republic of Tanzania study in 2004 which proposed three options namely (i) streamlining the management team o f ZSTC, (ii)restructure ZSTC and (iiiprivatize the entire clove industry. RGOZ i s yet to ) decide on these options. (v) Privatization and restructuring o f remaining parastatals: RGOZ has decided on the following (i) divestiture o f the Zanzibar Insurance Corporation through joint venture with a strategic partner, (ii)Zanzibar Ports Corporation to remain public but focus o n restructuring and improvement o f facilities, ( iii)Regarding the Zanzibar State Fuel and Power Corporation Government decided o n restructuring and improving i t s capacity, (iv) Zanzibar Shipping Corporation i s to be partially liberalized by leasing some o f i t s fleet, (v) RGOZ prefers a joint venture for the Zanzibar Motor Trade Corporation, (vi) With respect to the Zanzibar Tourist Corporation, some business has already been leased but the plan i s to privatize it eventually, (viii) The Mahonda sugar Industry i s in the process o f being privatized, and (ix) Bwawani Hotel i s to be restructured and improved before any proposal to privatize it. Finally, with respect to developing a strategy to deal with the negative net worth o f the People’s Bank o f Zanzibar, the government i s pursuing the option t o recapitalize, restructure and finally privatize PBZ. Consultancies have already been commissioned o n the privatization strategy, special audit and legal. RGOZ plans to issue recapitalization bonds t o improve PBZ’s net worth. (vi) Measures to improve domestic revenue mobilization: Some efforts have been made in terms o f identifying weaknesses in tax administration and a strategy for reforming the Zanzibar Revenue Boardso. The strategy suggests undertaking organizational reform involving moving to functional organization; reviewing the legislative framework; business re-engineering by reviewing all procedures and systems within the new organization; developing specific strategies to ensure registration, returns processing, payment and collection, and enforcement; invest in appropriate information technology; developing a corporate plan that will help achieve the vision and mission o f the organization; and undertaking human resource development. ZRB has prepared a budget but i s yet to start implementing this strategy for i t s reform and modernization because o f financial constraints”. Resources expected from the planned rolling out o f Tax Administration Program (TAP) to Zanzibar are yet to be realized because the rolling out plan, according to ZRB, has not been transparent. To address insignificant sources o f revenue, R G o Z commissioned a revenue base study5’. The study suggests the intensification o f exploitation o f the existing sources o f revenue because being agrarian and service oriented economy, Zanzibar seems not to have new bases o f revenue. Development o f the private sector, economic growth, industrialization and better tapping o f the resources from the tourist sector are key areas for boosting revenue collection. The study also noted major weaknesses in tax administration that culminate into revenue leakages and suggests strengthening tax administration as one o f the pre-requisites for increased revenue collection. T o increase revenue, R G o Z i s already planning to introduce property tax in 2005/06 and to adopt presumptive taxation after completing the registration o f informal taxpayers which i s currently in progress. Regarding the proposal that ZRB contracts TRA to collect local taxes 50 See, IMF (2004) “A Strategy for Reform o f the Zanzibar Revenue Board”, Fiscal Affairs Department, Washington, D.C. ’’The budget component on civil works has not been agreed by the IMF. ERE3 (2005), “A Study o f Government Revenue Base in Zanzibar”, Draft Report Submitted to RGoZ. 90 - PEFAR FY05 United Republic of Tanzania so as to strengthen tax administration in Zanzibar, it was observed that RGOZ i s s t i l l considering it. As for the recommendation to create a Large Taxpayers Department. It was argued that it i s not viable for Zanzibar because o f the very l o w corporate base. Finally on the recommendation to introduce VAT on petroleum products, Z RE3 believes that such a move will lead to less revenue collection and increased fuel prices for the consumers. However, this contention i s not backed by any empirical evidence. The current practice only adds more to revenue volatility to the government, which absorbs most o f price shocks in an attempt to keep fuel prices stable. (vii) Review o f tax exemptions and clamp down on widespread tax evasion: Exemptions related to investment, capital goods, NGOs, and faith groups remain. However, ZIPA, ZAFREZA and ZFPA are to be merged to be under one stop centre. The law to that effect has been assented. RGOZ also plans to review investor incentives. Powers to grant exemptions are s t i l l vested on the Minister for Finance Regarding curbing tax evasion; ZRE3 and TRA are working on modalities to exchange information on taxpayers and to jointly conduct inspection, auditing and valuation. (viii) Strengthening control over debt commitments: In order to strengthen debt coordination and management capacity in M O F E A and also ensure adherence to debt contracting rules MOFEA has established a Debt Department and begun initial consultations with BOTto re- start CS-RDMS. Zanzibar i s also represented in the National Debt Strategy committee. Although the mandate to contract multilateral debt i s vested with the Minister for Finance URT, M O F E A can legally contract debt from bilateral creditors on behalf o f RGOZ. A Debt Task Force has been established and draws members from MOFEA, BOT, JFC and MOF. The task force i s in the process o f reconciling debt (domestic and foreign) numbers through a consultancy service engaged by JFC. This work i s envisaged to be concluded by April 2004. MOFEA has also asked support from URT to prepare a debt strategy for Zanzibar for prudential debt management. Excess volatility o f revenues and hence expenditures: On the possibility o f establishing a Revenue Stability Fund (which could accumulate when revenues are high and be drawn down when revenues are low) RGoZ could not implement this recommendation because o f the all-through inadequacy o f revenue collection. Domestic revenue per annum i s estimated at TSHS.50.2 billion while Tshs.51.4 billion i s needed to cater for wages and salaries alone. M O F E A i s also working on a macro model to facilitate revenue forecasting, but would like to get assistance in this area. The IMF offered to contact AFRITAC for possible help. Budgeting for quasi-contingencies, arrears and other obligations: All arrears before 1997 have been cleared, but those for 1998 - Jan 2005 remain outstanding. The RGOZ has compiled information on outstanding arrears and liabilities as at January 2005. These include pensions and gratuities owed to governmentlparastatal employees and suppliers - credit. All arrears before 1997 have been cleared, but those for 1998 Jan 2005 are yet to be cleared. So are also suppliers’ credits. ACGEN-Zanzibar i s o f the opinion that it i s almost impossible to clear these arrears and outstanding liabilities without financial support from somewhere. As regards the plans for contingent liabilities and quantification o f government risks on guarantees, actuarial evaluation o f ZSSF has been done and quantification i s in progress. Meanwhile, settlement o f outstanding pension liabilities to ZSSF have continued and are about to be completed. Alignment o f expenditures with ZPRP priorities: Pro-poor expenditures and alignment o f sectoral and intra-sectoral resource allocation with ZPRP has been attempted, with allocation o f about 60 percent o f budget allocation being directed to pro-poor sectors. 91 PEFAR - FY05 United Republic of Tanzania However, out o f this the proportion between PE and O C i s unclear. I t i s also not clear how much foreign resources went directly to these sectors, since it has been difficult to capture donor resources, even with a recently established data base. T o h r t h e r improve budget planning and resource allocations, RGoZ has adopted a medium term expenditure framework (MTEF), which has helped to integrate recurrent and development budget processes and to prioritize resource allocation. (xii) RGOZ introduced a Central wage bill and Payroll system in 2004: Transparency in budgeting and spending has been enhanced through the adoption o f a Central Payments Office (CPO) system within ACGEN’s office. The system is, however, s t i l l manually operated. Technical support i s envisaged from the ACGEN-URT, to help computerize the financial management system. (xiii) Public sector pay and employment reforms: Establishment o f the centralized payroll system revealed significant discrepancies between the number o f employees and salaries paid. The Bank offered to support a comprehensive review o f the Zanzibar civil service. Terms o f reference have been developed and approved by the Zanzibar Government. However, RGoZ has yet to make a specific request for funding the study. c. FINANCIALACCOUNTABILITY Background 9.5 I n M a y 2002, the Zanzibar Poverty Reduction Plan (ZPRP) was launched, the three key objectives o f the accompanying conference were to: i) inform DPs about the political, economic and social situation; ii)inform all stakeholders o f the Government’s plans for reducing poverty and; i ii) restore DP confidence to facilitate their participation in the ZPRP’s implementation. T o support the implementation o f the ZPRP a number o f diagnostic studies had to be undertaken Five main studies were recommended and such work included a Country Economic Memorandum; a CFAA; PER diagnostic work, a MTEF; and a Strategic Plan on Good Governance. Another three follow-up studies were carried out, namely Zanzibar Clove Industry Study, Country Procurement Assessment Report and an Assessment o f Local Government Issues. 9.6 Three broad areas o f reform evolved from the findings and recommendations o f the diagnostic work, namely (i)Economic and Financial Reforms, (ii) Good Governance Reforms and ( iii) Institutional and Human Resource Reforms. Consequently three reform programmes were officially endorsed by the government and DPs during a Round Table Conference on ZPRPReforms held in M a y 2003. The many recommendations f r o m all the diagnostic studies were consolidated into these reform programmes for ease o f implementation and monitoring o f progress. Status o f implementation o f 2003 CFAA action plan 9.7 The recommendations and action plan made for improvements t o the country’s PFM and accountability processes were included in the final CFAA report that was published in 2003. This section serves as an update o n implementation and it briefly discusses progress made in the area o f PFM reforms since then. Also, a more detailed “status-matrix” o n the implementation o f the key recommendations i s provided in Annex D: Zanzibar - Status matrix o f 2003 CFAA Action Plan. While all o f these recommendations had n o w been captured in the three reform programmes it was agreed with M o F E A (Ministry o f Finance and Economic Affairs - Zanzibar) to track progress based o n how it was presented in the 2003 CFAA. 92 PEFAR - FYOS United Republic of Tanzania 9.8 UNION ISSUES A Joint Finance Commission53 was established in M a y 2003 and i s n o w operational. This will increase financial transparency between URT and RGOZ. Regular meetings o n financial matters are being held between URT MoF, RGOZ M o F E A and BOT.Awareness o f the Shellukindo report has increased but needs to be strengthened, although these recommendations may be subsequently considered and revised by the JFC. Capacity building o f the Department o f U n i o n Matters still needs to be implemented, but limited financial resources are available to this department and to meet its objectives. Although the relationship between the U n i o n S e ~ r e t a r i a t ~ ~ the Department for Union Matters has been clarified, concerns have been raised by RGOZ o f not having i t s members in the U n i o n Secretariat which would improve the operations o f the Union. The relationship between the Department o f U n i o n Matters and the Union Secretariat, together with their respective functions and capacities, i s not clear. 9.9 FINANCIAL PLAWING, BUDGETING AND BUDGET EXECUTION: While the budget planning process has been strengthened and the PER and MTEF exercises are being implemented there i s s t i l l much r o o m for improvement. The government has established a systematic service delivery and budget performance review exercise (PSDA) and has tested it in t w o districts in the Water and Education sectors. It needs to develop mechanisms to ensure that the planning process i s more consultative and informed by outputs o f the recently-introduced Poverty Monitoring System. In the area o f budget execution most o f the actions have been partially implemented. Government needs to strengthen this part o f the accountability cycle to enhance the quality o f information o n the execution o f the budget. Efforts are underway to eestablish and institutionalise a government-wide aid coordination system centrally, but MDAs also need to develop capacity to record external assistance. There i s significant scope for greater collaboration between Zanzibar and the mainland, where the latter has made marked progress in recent years. 9.10 GOVERNMENT ACCOUNTING, FINANCIAL REPORTING AND USE OF INFORMATION TECHNOLOGY: Controls over opening and closing o f bank accounts, bank reconciliations and unwarranted expenditure have been significantly strengthened. However, the majority o f actions are s t i l l in an early stage o f implementation. These include: i) the finalization o f draft legislation and the publication and implementation o f a comprehensive set o f financial regulations including issues such as recorddasset management; i i)the implementation o f sanctions for non compliance with the new Public Finance Act; i ii)the adoption o f appropriate accounting standards from those promulgated by the International Federation o f Accountants and NBAA; iv) the transfer o f the government’s foreign exchange account to BOT; v) strengthening o f payroll procedures; vi) the introduction o f regular physical verification o f assets and adoption o f sound stores procedures; vii) an actuarial valuation o f pre-1998 pension and gratuity and the establishment o f appropriate provisions for all pension liabilities in Government and; viii) the improvement o f the financial statement preparation process to ensure that accounts are finalized within the statutory time frame. 53 Chapter Seven (Sections 133 and 134) o f the Union Constitution provides for a Joint Finance Account and a Joint Finance Commission. According to the Constitution, up to seven members are to be appointed by the President to (i) analyse revenues/expenditures related to Union matters and to make recommendations concerning the net contribution o f each Government to the Joint Finance Account in the Union Consolidated Fund’ ( iiscrutinize fiscal relations between the two Governments, and ( ) iii) discharge other functions assigned by the President. 54 Day-to-day management o f Union Matters is, under Section 47 o f the 1977 Constitution, the responsibility o f the Vice President’s Office. On the recommendation o f the 1998 Shellukindo Commission, the Union Secretariat was established and tasked with managing relations o f mutual interest between the mainland and Zanzibar. 93 - PEFAR FY05 United Republic of Tanzania 9.1 1 The RGOZ recognizes that modem financial management software packages can significantly improve financial accountability and i s pursuing options for the implementation o f an I F M S to improve the availability o f basic financial information, enable the enforcement o f greater control o n payment procedures and, in particular, compliance with cash limits. Discussions are ongoing with the ACGEN o f mainland to secure funding through the PFMRP for the roll-out o f the I F M S on Zanzibar and, ideally, to ensure compatibility and an interface between the systems. Computerization o f the payroll i s completed - government focused more on the payroll system (to eliminate ghost workers) and to establish a central payment system. The process i s expected to be completed by June 2005.The M o F E A will set up the task force during the next financial year (2005/06) to pursue an application for the extension o f the EPICOR license to the RGOZ. 9.12 PUBLIC SECTOR AUDITING: External and internal audit still need to be strengthened t o minimize fiduciary risk. In the area o f external audit most o f the actions are in progress o f being implemented. An A c t to Establish an Office o f the CAG o f Zanzibar n o w regulates this function but the accompanying Audit Regulations are expected to be finalized by mid 2005. An audit manual has been developed and staff training i s in progress. A staff training needs assessment has been done and the NAO on the mainland i s supporting these training needs. Quality and timeliness o f C A G reports needs to be improved. Audit committees in ministries are yet to be established. In the area o f internal audit, four o f the five actions are in progress. An internal audit strategy i s in progress o f being developed and implemented by the ACGEN’s Office with guidance being provided by i t s counterpart on the mainland. The Public Finance Bill that sets up the internal audit function has been discussed by the House o f Representatives but not passed yet. The cadre needs to be plugged into the mainland professional training initiatives. A draft internal audit manual has been developed. A comprehensive training and capacity building program i s yet to be implemented. 9.13 LEGISLATIVE SCRUTIU, ETHICS AND INTEGRIm While some steps have been taken to enhance the function o f scrutiny, the challenge remains to capacitate and empower the members o f the House o f Representatives to fulfill this function more effectively. Also public access to some parliamentary committee meetings i s s t i l l under discussion. RGOZ i s attempting to mitigate the risks from corrupt and unethical behaviour by introducing draft legislation which i s currently being discussed with various stakeholders. Lack o f funding reduces the impact that public awareness initiatives may have. Practically, until the potential cost o f participating in corrupt activities i s greater than the benefit gained from participation, the mitigation o f risk will remain an uphill battle. 9.14 LOCAL GOVERNMENE A report on Zanzibar Local Government Reform (December 2004) was accepted by the government. Government continues to seek technical assistance for policy formulation and revision o f existing legislation. A draft Legislation Reform Policy will be ready by June 2005. Many recommendations related to planning and budgeting are dependent on the policy reforms and has therefore not been implemented. Progress has been slow in the area o f accounting and auditing mainly because o f the lack o f technical capability, insufficient funding as well as coordination between the M o R A L G and M o F E A . The latter has recently improved. 9.15 PUBLIC ENTERPRISES The Government has been gradually withdrawing from the participation in direct production activities so that it remains with the responsibility o f creating an environment conducive to private sector involvement as w e l l as developing the economic infrastructure. However, the legacy o f the past has left many Public Corporations in difficult financial circumstances. The 2003 CFAA made some recommendations to improve both the financial position o f the RGOZ and overall financial accountability as well as mitigate potentially high levels o f fiduciary risk. Most actions are in an early stage o f implementation while others are dependent on 94 - PEFAR FY05 United Republic of Tanzania regulations which are n o w in a draft format. None o f the actions had been fully implemented - the main challenge remains implementation o f what i s n o w on the “drawing board”. 9.16 ORGANISATIONALAND HUMAN RESOURCE CAPACITY ISSUES While some quick wins had been achieved, the key challenge remaining i s the introduction o f performance based staff appraisal procedures. The current ad hoc approach to institutional capacity development i s unlikely to prove sustainable. 9.17 ACCOUNTING AND AUDITING PROFESSION: Apparently n o progress has been achieved in this area. 9.18 REGISTRATION OF COMPANIESAND NGO’s: While four o f the five actions are indicated as “in progress” most o f them are in the early stage o f implementation. N o serious stumbling blocks in achievement o f the actions are envisaged given that there i s ownership o f the actions, most o f them are funded and capacity constraints are being addressed. The current lack o f up to date information o n companies and NGOs operating in Zanzibar, coupled with o l d or n o n existent legislation means that potentially publics’ funds remains at risk -however, mitigation measures are being taken. . 9.19 PUBLIC ACCESS TO INFORMATION ON PUBLIC SECTOR MANAGEMENT: Four legal barriers for public access to information were sighted by the 2003 CFAA, namely the National Security Act, Registration o f Newsagents, Newspapers and Books Act, Zanzibar Broadcasting Commission A c t and the Civil Service Government Orders. None o f these has been reviewed yet. While enthusiasm seems to exist to move ahead with the public awareness initiatives, limitations of funding and coordination seem to slow down implementation. This hampers the enhancement o f the basic right o f citizens to access and availability o f information o n transfer and use o f funds or goods to local authorities, district offices, ministries, departments and agencies. Conclusion 9.20 I t i s encouraging t o observe the increased levels o f collaboration and consultation between the mainland and Zanzibar. Given the somewhat ad hoc nature o f this collaboration, however, it i s recommended that a more systematic and routine relationship i s established. The objective - perhaps not immediate - should be that Zanzibar will j o i n the mainland PFMRP and some o f the other reform programs. The overall environment for this i s n o w favorable as the forthcoming Joint Assistance Strategy and the planned 2005 review o f the ZPRP will provide an opportunity to reflect on current arrangements for channeling development assistance, including to the reforms, to the isles. 95 - PEFAR FY05 United Republic of Tanzania PART V: LOCAL GOVERNMENT 96 PEFAR - FY05 United Republic of Tanzania 97 - PEFAR FY05 United Republic of Tanzania 10. FISCAL I S S U E S AT LOCAL GOVERNMENT LEVEL A. PUBLIC MANAGEMENT EXPENDITURE 10.1 Adoption o f a formula-based system o f allocating grants: The government adopted a fomula- based system o f allocating grants to cater for recurrent expenditure for primary education, health, roads, agriculture and water but actual implementation started with primary education and health. Going forward, what i s envisaged i s to extend the system t o other sectors and also give LGAs more discretion in PE/OC allocation. The government has also agreed with the W o r l d Bank and other donors to put in place a local government capital grants system and gradually phase-out bilateral donor financing. A common basket i s t o be set-up to cater for all area-based programs. 41 LGAs will be supported through the Bank financed credit while 71 LGAs will be supported through a common basket financed by bilateral donors. However, LGAs will only be able t o access the funds upon fulfillment o f minimum requirements to underpin good governance. For example, LGAs with an adverse audit report will not qualify for such financing but will be given training. For any LGA to qualify for such support it must also have an approved plan and budget. 10.2 LG Financial management reforms: The LGRP has established six zonal centers since 2001 to assist LGAs with hands-on facilitation to improve financial management. 13 additional financial management specialists have been recruited and posted to Regional Secretariats. I naddition, IFMS has been extended to a total o f 32 LGAs. These have been required to discontinue the use o f the manual accounting system by June 30; 2005. The IFMs i s planned to be rolled out to an additional 30 LGAs. The system has enabled L G A s operating on IFMS to enforce expenditure discipline by making all payments through the system. I t has also facilitated production o f produce financial statements in EPICOR and eased reconciliation o f financial statements. However, the coding system for development projects in IFMs needs to be improved. The infrastructure for IFMS i s also s t i l l inadequate. For instance there i s only 1 server for all the municipalities o f Dar es Salaam located at the Dar City Council. The three municipalities run into problems either because the server becomes very slow due to overload or in cases o f power problems in the city centre. LGAs also indicated need for further training o n IFMS especially o n the production o f reports. I t has not been possible to obtain consolidated actual expenditure data even for the LGAs currently using IFMS. I n addition, the internal audit function in the LGAs remains very weak and absent in some LGAs. 10.3 Reform o f LG revenue structure: The Government abolished development levy and other nuisance taxedfees in the 2002/03 budget and introduced a compensatory grant instead for the revenue lost. 10.4 Local Government Authorities (LGAs) own revenue fell in 2003 both in nominal terms and as a share o f total revenue for the LGAs (including central government transfers). In 2003 LGAs own source revenue was Tshs.48bn compared to Tshs.58bn in 2002 - a 16% reduction (primarily due to the abolition o f the development levy and some nuisance taxes). Total LGAs revenues (including grants) continued to rise f r o m Tshs.399bn t o Tshs.434bn in 2003. However LGAs own revenue has fallen as a share o f LGAs total resources from 18% in 2001 t o 11% in 2003. LGAs own revenue n o w constitutes less than 4% o f total government revenue (table 15). 98 PEFAR - FY05 United Republic of Tanzania Table 21: Summary o f Local Government Revenue, 2001-2004/05 2001 2002 2003 2004 (Jan-Jun) TSh M i l l i o n Local Govt Grants 238 34 1 386 224 Own Source Revenues 51 58 48 18 Total LG Grants and Revenue 289 399 434 242 Total Central Government Revenue 930 1,043 1,218 Percent o f local government resources Local Govt Grants 82% 86% 89% 93% Own Source Revenues 18% 14% 11% 7% Percent o f total government (central plus local) revenue O w n Source Revenues 5.2% 5.2% 3.8% NB: LG 2001 FY has been compared with 2000/01 CG FY, 2002 LG FY with 2001102 CG FY, 2003 LG FY with 10.5 However, the abolition o f nuisance taxes l e d to a number o f problems revolving around unsustainability o f the existing LG financing framework. A study i s n o w in progress to review and propose a more sustainable financing framework for LGAs in Tanzania. It i s expected that this study will address some o f the major concerns noted. These include, inadequacy o f remaining LGA sources o f revenue, councils unable to transfer a share o f the compensation grants to villages, erosion o f the fiscal autonomy o f LGAs, and weakened drive to strengthen good governance to the extent that people at the grass root level loose the confidence t o question poor governance and resource management at the council level if they are not paying taxes. I t was also noted that the f l o w o f the compensatory funds from MOF i s rather unpredictable. Sometimes MOF does not send instructions to distinguish between OC and the compensation amount. There are also delays in grants from M o F reaching LGAs. The money does not reach LGAs by the ideal 25* day o f each month. Moreover, the monthly f l o w o f the compensatory grant i s unpredictable even though the full amount will eventually be sent to the LGAs by the end o f the fiscal year. The grants also tend to be way out o f line with approved plans o f LGAs. Furthermore, in the case o f development funds (which go through R A S f r o m MoF) it was pointed out that typically the R A S takes a long time to prepare cheques t o the LGAs. At the same time LGAs are not notified when such monies are released by Treasury. I t was also indicated that there are errors in the payroll (wrong account numbers, salaries sent elsewhere etc) and rectification has tended to be slow, leading to delays in payment o f salaries for teachers and health workers. 10.6 Some LGAs have invented mechanisms to cope with the abolition o f various levies. These included collecting more f r o m certain kinds o f levies such as city service levy, property taxes, bill boards and shelving some projects forward. It was noted that in some isolated cases, LGAs are s t i l l levying taxedlevies already abolished by central government. However, some o f the complaints relate to leviedfees that were not in fact abolished, but people expected them to be abolished (e.g. slaughter fees in Temeke Municipality). In other cases, there were s t i l l road blocks mounted but those manning them were not aware that the levies had been abolished (e.g. along Manyoni - Chunya road) while others were simply crooks (e.g. in Kiteto district the collector at a road block was not even an employee o f the council although the receipts bared the stamp o f the District Commissioner). Therefore, the challenge to get the right information to the people at the grass root level regarding policy decisions/directives made by central government, as well as enforcement, requires collaborative 99 PEFAR - FY05 United Republic of Tanzania effort between the two layers o f government, as well as M P s doing more to inform their constituencies. The need for LGAs to have a predictable tax regime also remains a key issue. 10.7 The synchronization o f the fiscal year for the central and local government starting July 2004 was generally well received by LGAs. Councils feel that the move facilitated their planning, budgeting and reporting. However, a key outstanding challenge i s h o w t o bring LGAs budgets into the NSGRP framework (which articulates the desired focus o f government spending) without contradicting the fiscal decentralization drive, As such, more mileage remains to be covered in terms o f aligning LGA planning and budgeting with central government procedures B. OUTSTANDING I S SUES 10.8 In spite o f the recommendation made in the previous PER external evaluation, there has been little progress in compiling actual expenditure data for the LGAs. Available analysis o f the composition and trends in local government expenditures (e.g. Local Government Fiscal review 2004), i s only partial and based on sectoral grant transfers plus spending from LGAs own sources o f revenue on account o f absence o f better data. Obviously, actual spending could turn out to be very different from transfers. This i s likely t o be the case since there are indications o f significant resource leakage in the councils. By contrast, commendable efforts have been made by PO-RALG to compile and publish Revenue Statistics for LGAs for 2001-2003 and first h a l f o f 2004. 10.9 However, individual LGAs do prepare various financial reports (quarterly, semi-annually) and submit to the Council o n monthly basis and to PO-RALG quarterly. LGAs also prepare and submit reports on development projects to M S . Indeed, even the external audit by the NAO i s based o n the annual financial report o f each LGA which i s prepared following the LG financial memorandum, with details on funding by source and actual expenditures for every item. The reports do indicate budgeted compared to actual as well as explanations for any deviations. Yet such reports are only partially submitted to PO-RALG and end up unconsolidated. For example, for July-September 2004 only 35 out o f the 116 LGAs submitted their reports to PO-RALG while the corresponding number for October - December 2004 was only 15. However, n o action was taken against the LGAs that did not n addition, only few LGAs copied their reports to M o F as they are not submit their financial reports, I obliged to. Given the existence o f these reports, it should in principle be possible for LGAsPORALG to submithonsolidate actual expenditure reports. Although it i s envisaged that this problem highlighted above will eventually be solved with the development o f the planning and reporting (PLANREP) system, progress o n this fkont has been quite slow. The main reason for slow o f progress seems to be: 0 Weak capacity/organizational problems in L G A s P O - R A L G : Some mileage has been covered to resolve organizational problems in PO-RALG. For example, there i s n o w a newly approved structure for PO-RALG, with provisions for an Assistant Director who will be responsible for following-up LG financing issues. There will also be an inspectorate section to check upon and advise L G A s accordingly. Capacity constraints at the LGAs level were also highlighted, illustrated for example by LGAs spending resources on unintended purposes even when there were clear instructions on the correct expenditure items. For example, some District Treasurers still deducted payroll taxes and employee contributions to the Local Authorities Provident Fund (LAPF) even though these had already been deducted at source (MoF). 100 PEFAR - FY05 United Republic of Tanzania 0 Lack o f a standard reporting format: The formats and therefore content o f the financial reports prepared by LGAs differ a lot depending on the intended user. For example the monthly report to the Council differs from that destined to PO-RALG, with the former being simple/less technical so as to be comprehensible to the majority o f councilors who are not well educated. I t was also noted that there i s a separate accounting manual for basket funds which the LGAs must abide to but at the same time the L G A s also have their own accounting manual. Such duplication exacerbates problems in accounting and reporting. 10.10 Overall, GOTi s encouraged to commit to compile and publish LGA expenditure data o n a regular basis. The urgency o f the problem stems from the government’s own policy commitment t o decentralize and channel more public resources directly to the LGAs, as well as genuine concerns about weak financial management and control at LG level (as indicated by the significant magnitude o f improperly vouchered expenditures, questionable payments, store loses et cetera documented in the annual report by CAG). Analogously, LG basket fund donors are urged to explore the possibility o f using the LGA accounting manual only and do away with the separate accounting manual for the LG basket. 10.1 1 Anecdotal evidence indicates that it i s not uncommon for LGAs to be forced to absorb politically motivated spending pressures from central government. Such pressures take various forms such as contributions t o public functions, expenditure o n hospitality, as well as running and maintenance costs o f public vehicles used by district and regional authorities. These are typically lumped under LGAs’ administration expenditure. Government i s encouraged to exercise restraint in this regard particularly as the country approaches the general elections in October 2005. 101 B w 4 a U n 4 L, a c Y 0 > 0 00 m m 6 24 s 4 a m ru 0 + P 3 w 3 L, 4 3 3 ri N $1 3 P n I 3 3 od N 0 L 4 L, - PEFAR FY05 United Republic of Tanzania ANNEX B: HUMAN RESOURCE MANAGEMENT OF THE ACCOUNTING AND AUDITING CADRE LEGAL FRAMEWORK Legislation and administrativeinstructions As stated in Section 3C the legislative framework for human resource management i s the Constitution, the Public Service Act, 2002, and the principal subsidiary legislation related thereto, being the Public Service Regulations, 2003 and the Public Service Scheme, 2003 plus administrative circulars and instructions issued from time to time. The driving force in bringing t o fruition this A c t to replace the previous Civil Service A c t 1962 has been the ongoing P S W . The Public Service Act, 2002 includes the enabling legislation covering administration o f the public service, establishment o f the Public Service Commission, provisions relating to the functions o f the President, provisions concerning retirement, and special provisions that include giving power to the Minister responsible for the Public Service to make regulations. The Public Service Commission’s primary responsibility i s to regulate and monitor the management o f human resources in the government. This covers appointments, promotions and discipline, including dismissals ensuring that procedures are followed and that standards are maintained in all aspects o f human resources operations. It i s very much a monitoring role. Within set guidelines PSs o f MDAs have delegated powers to appoint, discipline and dismiss the staff o n their l i s t o f approved posts (Establishment) which i s reviewed each year with PO-PSM. Cadres and schemes o f service Accounting and audit staff are currently organized into two cadres. The accounting cadre i s planned to be split into separate cadres for accountants and internal auditors from July 2005. Whilst the responsibility for the accounting and internal audit staff i s devolved to MDAs, in certain circumstances these staff are still coordinated by the ACGEN. The external audit cadre i s the responsibility o f the CAG. On 1 July 2003, major changes took place concerning the operation o f the cadredschemes o f service for accounting and internal audit staff. The AOs, being the PSs o f MDAs, were given direct responsibility for hiring, promoting and firing accounting and internal audit staff. Before this the A C G E N administered and managed the cadre including staff placements. W h i l s t there may be some disadvantages, especially with the loss o f the ability to rotate staff and possible restrictions o n career progression, it i s a move that gives the A 0 direct responsibility for managing their staff resources for more effective financial management. When government schemes o f service were revised another objective was to stop appointments and promotions just being made o n a seniority basis. All MDAs are n o w required to make appointments and promotions o n the basis o f merit. MANAGEMENT OF ACCOUNTING AND INTERNAL AUDIT CADRES As mentioned earlier, currently the accounting and internal audit staff i s part o f one cadre that i s overseen and coordinated by the A C G E N but this will change from 1 July 2005 when a separate cadre 118 - PEFAR FY05 United ReiDublic of Tanzania and scheme o f service i s to be introduced for internal audit. It will have the same status for coordination, management and operation as the accounting cadre. Below i s an illustration o f post structure and related academic qualifications required at each level for these cadres: Table 22: Accounting and Internal Audit Cadre Structures Illustration STAFFING LEVELS For the financial year 2004/05 the MoF has a current staffing level o f 992 against an approved establishment level o f 1345. Of these over 600 are directly under the ACGEN whose approved n addition, establishment level i s currently around 726. The latter includes staff at sub-treasuries. I accounting and internal audit staff in the other MDAs i s estimated to number more than 2000. Summary statements o f the numbers posts at each level in MDAs were not available for the accounting staff. Also, the numbers holding qualifications had to be estimated. These figures were given as about 38 for CPAs and 15 holding Masters Degrees. The existing and proposed staffing levels o f the separate internal audit cadre posts are: Designation Actual Staff per Posting List as at 1 Expected Establishment October 2004 200512006 Chief Internal Auditor 30 66 Principal Internal Auditor I& I1 3 30 Senior Internal Auditor 4 96 Internal Auditor I & I1 37 182 Totals 74 374 O f the 30 Chief Internal Auditors in post, 14 are full CPAs, 5 are on Module E o f the CPA examinations, which i s the first stage o f a two part final and 11 have degrees, diplomas and lower qualifications. The majority o f internal auditors have the advanced diploma in accountancy or degree, which i s the minimum qualification for the entry level o f Internal Auditor. It i s emphasized that this i s the current situation, which i s about to change with the coming into operation o f new manning levels and the scheme o f service for internal audit fkom 1 July 2005. 119 - PEFAR FY05 United Republic of Tanzania OF EXTERNAL MANAGEMENT AUDIT CADRE The C A G has direct responsibility for managing and administering the external audit cadre that applies only to the NAO. The CAG has responsibility for hiring, promoting and firing all external audit staff, subject to public service regulations and schemes o f service, regardless o f the fact that some staff i s currently stationed in line ministries. Procedures for appointments, promotions, disciplinary matters and dismissals are standard throughout government and brief over-views are given in the appropriate sections below. The external audit cadre scheme o f service was brought onto operation in July 2003 in accordance with circular No. 2 issued by the PS o f PO-PSM. As for all schemes o f service, it i s published in Kiswahili to ensure i t i s more easily understood by staff at all levels. Below i s an illustration o f post structure and related academic qualifications required at each level: Table 24: External Audit Cadre Structure As shown below the external audit cadre has a current staffing level o f 309, according to the posting l i s t as at 1 October 2004 against an approved establishment level for FY 04/05 o f 425. Assistant Auditor I1 75 94 +19 Tntnlrl A25 309 116 O f the 34 Principal Auditors in post, 18 are CPAs and 13 have Masters Degrees. Pluses arise because o f the government’s re-categorization scheme where staff are not promoted unless they have the relevant qualifications - demonstrating the lack o f properly qualified staff at seniodmiddle 120 PEFAR FY05 - United Republic of Tanzania management levels. This demonstrates clearly the lack o f qualified staff to fill posts. The table below gives the position with regard to numbers o f qualified personnel in the NAO. Table 26: Qualifications of National Audit Staff and Numbers Studying The above tables show that the ratio o f posts requiring professional qualifications compared to the number o f staff possessing the appropriate qualifications i s about 3 to 1. This corresponds to recent findings o f the joint PRBSPRSC annual review in November 2004 that suitably qualified staff filled 30% o f financial management positions in M o F and MDAs Regarding in-service training, the policy i s to send staff on courses that are specifically related t o the job. PAY POLICY AND LEVELS Policy As mentioned earlier it i s n o w the policy o f government to ensure that appointments and promotions are made o n the basis o f merit. Earlier, many such appointments were influenced by seniority (the most senior person, in terms o f date o f first appointment, was appointed) rather than minimum academic qualifications specified for the post. When government schemes o f service were reviewed and changed in FY 03/04 positive action was taken to redress the situation o f many staff being in post but without the stated minimum qualification. Subsequently PO-PSM issued Circular, No. 1 o f 2004 giving instructions to Directors o f Administration and Personnel in MDAs on h o w to re-categorize all those in the cadres and schemes o f service, including accounting and internal audit so that their position i s related directly to the qualification held, e.g. a person previously appointed as Principal Accountant I but only holding the qualification for a Senior Accountant’s post would be re-designated as Senior Accountant. The salary being paid before re-designation i s retained o n a personal level. Applying this policy strictly could result in government loosing from the service some good experienced staff that i s not prepared to go back to college to obtain the necessary qualification. This could be detrimental to the service. Pay levels Pay levels, which most staff state are way below that outside o f the Civil Service, are governed by the Scheme o f Service applicable to the post. Some claim the difference i s often 3 to 4 times higher. This i s not proven but in terms o f distribution o f pay figures released in 2004 showed that only 5% of government staff has monthly wages above Tshs.200,000 and just 33% have monthly wages above Tshs.150,00059. In certain circumstances, staff may receive enhancements under SASE in order to 59 This may not include all allowances and may therefore not be a truly comparative figure. 121 - PEFAR FY05 United Republic of Tanzania attract, retain and motivate staff o f the required caliber. Supplements are generally between 50 to 75% o f basic salaries but can be considerably more or less. Cabinet decided to suspend SASE, other than to staff already receiving enhancements, and requested a review o f the scheme. This review i s expected to commence in MarcWApril 2005, In 1999 the Public Service M T P P was introduced in order to rationalize allowances and significantly enhance public service pay. T o date this program has not been fully implemented because o f the lack o f government revenues needed t o meet the costs. I t i s stated in the Guidelines for the current “Preparation o f the M e d i u m Term Plan and Budget” that implementation o f the MTPP would need the ratio o f the wage bill to GDP to increase from 4.4% to 4.8%. I t i s questionable whether full implementation o f the MTPP will bring the significant pay rises desired for as o f September 2004 it was found that actual salaries were already 83.78% o f their targeted values found in the MTPP. Staff performance appraisal Introduced in July 2003 was the annual Open Performance Appraisal System for all staff. This may lead to either reward, accelerated increments, for acceptable performance or sanctions, with-holding increments, for non-acceptable levels o f performance. This system i s s t i l l being rolled out to some MDAs even though the target date was September 2004. Delays have occurred because rollout was dependent on MDA’s strategic plans being in place because the appraisal system links operational plans, action plans, and training. STAFF APPOINTMENTS, PROMOTIONS AND DISCIPLINE(INCLUDING DISMISSALS) Appointments and promotions It i s n o w a rule that before action can be taken to filla vacancy the approval o f PO-PSM i s required. The procedure for the employing authority is: Obtain approval to fill vacancy from PS o f PO-PSM, for vacancies previously filled, or for new appointments, the Chief Secretary, President’s Office. 0 Advertise the post. 0 Short l i s t applicants. 0 Select interview committee. 0 Interview by the committee, including a representative from the Public Service Commission. 0 Select candidate on merit through open competition and issue appointment letter, with copy to PO-PSM. I n certain circumstances, e.g. when procedures have not been correctly followed, the appointment can be nullifiedby the PO-PSM. Apparently, if after interview two candidates are considered equal o n the merit basis, then if one i s a woman she should be employed and if they are o f the same sex then the younger should be offered the job. 122 - PEFAR FY05 United Republic of Tanzania Because o f the placements made in FY 04/05 by the ACGEN with the approval o f PO-PSM there i s s t i l l confusion in some MDAs as to who has the responsibility for appointing accounting staff. I t i s claimed that the appointment procedure i s administratively cumbersome, especially having to get permission even when funds have been approved. Consequently delays can occur and filling vacancies can take 3 to 6 months. Also there are problems in getting staff with the qualifications specified for the job. Discipline and dismissal With the coming into force o f the Public Service Act and the Regulations, the procedures for discipline and termination o f appointment are now fully documented, updated and operational. The whole process o f discipline for example, may include full investigation, interdiction (removal from office), suspension, and loss o f privileges, full inquiry including an inquiry committee and ultimately taking the appropriate action decided upon. It can be a long drawn out procedure which may be the reason why discipline and dismissal appear to occur infrequently. NAO) TRAINING (EXCLUDING Policy Training, including professional qualification studies, for the accounting and internal audit staff i s in some instances split between MDAs and the ACGEN. In some cases it was said that training, both local and overseas, i s dependent on MDAs availability o f financial resources whereas others claimed the ACGEN managed the arrangements for overseas scholarships. The actual position i s that the ACGEN has the responsibility and manages the process o f in-service training for accounting and internal audit staff but in practice some MDAs manage to access funding for additional training for their staff. I t should be noted that under the PFMRP formal training programs o f ongoing training for all levels o f staff involved in finance and accounting are to be established in accordance with a training needs assessment that links training, both desk-top and classroom, with the work being done Operational training M u c h training has already taking place and much more i s planned, by the ACGEN, in connection with the introduction o f the Financial Regulations and the subsidiary Accounting Procedures Manuals. I n addition the ACGEN has arranged training for MDA staff on the use o f the new Internal Audit Manual. The latter included training o f audit committee members. Because o f the nature o f this training i t i s usually directly related to the job and should, therefore, be on-going rather than ad hoc thus catering for both turnover o f staff and continuing professional development. It i s understood that the policy i s to make such training ongoing. In-service training for professional qualifications This i s under the control o f the ACGEN, though with the set up in MDAs o f A 0 being directly responsible for accounting and audit staff there are occasions when ministries organize ad hoc training in accounting. Such ad hoc training i s not always relevant to the needs o f the organization and, therefore should be discouraged. Under the training program instigated by the ACGEN, sponsored by the MoF, the numbers o f persons who have completed training and those still studying i s as set out in the table below: 123 - PEFAR FY05 United Republic of Tanzania Table 27: Summary of Persons on MoF Sponsored Training Qualification I Completed 2002 1 Completed 2003 I Completed I Currently Masters - United Kingdom (UK) I 2004 I Training 200412005 5 ~ . . _ PostgraduateD i p l o d C P A 39 19 136 97 Advanced Diploma in Accountancy 56 144 Totals 39 19 192 246 124 - PEFAR FY05 United Republic of Tanzania ANNEX C: STRUCTURE AND STATUS OF THE I F M S INTRODUCTION C.l Commencing January 1998 the ACGEN's Department started implementation o f a new Integrated Financial Management System - I F M S based o n the Platinum Accounting Software Package (now operated under the EPICOR license), This major development exercise involved the provision o f a real time Financial Management System to a l l MDAs in Dar es Salaam. The overall objective o f introducing a new I F M S into the GOThas been t o further strengthen Budget Management, Expenditure Control, Accountability, and Transparency including: 0 T h e introduction o f a u n i f i e d government budget based on the IMF GFS classification. M o r e efficient systems for C a s h Management, Procurement, C o m m i t m e n t Control, Payment & Expenditure Control, Inventory, Equipment and Asset Management. 0 I m p r o v e d i n t e g r i t y and transparency in the Accounting System (accuracy, reliability, comparability, completeness, reconciliation, etc.) with the introduction o f m o d i f i e d the A c c r u a l Accounting Basis w h e r e appropriate. 0 I m p r o v e d analysis and reporting (management and statutory) capability. C.2 A significant customized feature o f the I F M S i s the Cash Management (Budgeting) System whereby cashhommitment authorization and control i s exercised. Under these arrangements most MDAs obtain monthly funds releases (cash ceilings) depending on the revenue collections made by government. C.3 Effective 1'' July 1999 the system was installed in all MDAs with the exception o f the Ministry o f Defense and State House. Following negotiations to reconcile concerns about security these two entities have joined the system but are not yet linked on-line with the main server. In parallel to these developments the system has also been installed in the TRA, regional sub-treasuries, regional TRA Offices and a number o f District Councils. C.4 The I F M S i s progressively developing to the point where it may be defined as a generic system covering the entire public sector. This will mean the system will eventually be capable o f use: 0 At the Macro level to create and monitor the entire Revenue, Expenditure and financing Framework o f Government and 0 At the M i c r o level to support institutional accountability, financial management, performance management and audit. C.5 W h i l s t i t i s clear that substantial progress has been made i t i s also clear that considerable work remains before the government financial management & accounting system can be said to have been fully implemented. 125 - PEFAR FYO5 United Republic of Tanzania STRATEGIESAND POLICIES (2.6 Concerning IT strategies and policies, some progress has been made. In March 2003 a National Information and Communications Technologies Policy was issued by the Ministry o f Communications and Transport, with the broad objectives: 0 Provide a national framework that will enable Information and Communication Technologies to contribute towards achieving national development goals; 0 Transform Tanzania into a knowledge based society through the application o f Information and Communication Technologies; 0 Provide a national framework to accommodate the convergence o f information, communication and technology including multimedia. C.7 At the government level, under the co-ordination and direction o f the Ministry o f Communications and Transport, PSs o f each MDA, including the MoF, have been asked to produce their own IT strategy, using predetermined guidelines, paying particular attention to resources needed, a timeframe and allocation o f responsibility. Workshops are currently being held to facilitate this. C.8 Other than a statement made by the PS that the M o F will promote use o f IT in the Public Service there i s n o current government information systems technology strategy. C.9 The continuing development o f IFMS i s part o f the PFMRP. In this respect much o f this program’s communications and information component has either already been achieved by the ACGEN or i s in hand. The objectives o f this component are: 0 Optimise and deploy government Information and Communication Technologies in support o f efficiency, effective decision making and service delivery. 0 Expand network connectivity and integrated sharing o f information. 0 Secure government Management Information Systems with contingency plan and disaster recovery procedures. 0 Improved Management Information Systems for the MoF. IFMS C.10 The introduction o f IFMS and i t s subsequent development has certainly improved financial management throughout government. It has introduced stronger controls, especially over expenditure with commitment control, the centralized payment system and with timely financial and management reporting. C.11 In addition to meeting the accounting needs o f the ACGEN, IFMS i s a powerful tool for the A 0 to manage allocated funds. Consequently, it i s important that awareness o f i t s uses should be fully understood by users, an aspect that i s being addressed. However, there i s currently a lack o f integration o f some periphery systems with IFMS. Detailed information on this and action being taken i s contained in par. C. 18 below. Apart from the risk o f errors occurring when data i s re-keyed into the system, this means that the government reporting i s based on figures from a number o f sources, many o f which are outside the IFMS and therefore not subject to the system’s in-built controls. Also, re- 126 - PEFAR FYO5 United ReiDublic of Tanzania keying o f data often means that the detail which users would like to see in certain financial reports i s not there because only summary totals are posted. This i s the case with payroll. This lack o f integration can be a major risk that the robustness o f government accounts could be open to doubt. Government financial reports should be produced by a unified government accounting system, not f r o m memorandum records maintained outside it. Also, interface constraints mean that the comprehensive view o f the financial position either o f individual MDAs or for the Government as a whole i s not readily available. C. 12 The ultimate goal o f the M o F i s an I F M S but, though much has been done, further changes are needed t o achieve a fully integrated core budgeting and accounting system. C. 13 I F M S i s a networked computer system that facilitates Financial Management for the AOs in MDAs. In addition to being used in MDAs, it i s used by regional sub-treasuries making payments o n behalf o f Regional Administrative Secretaries who handle the regional financial needs o f MDAs. The sub-treasuries also carry out transactions for the Regional Administrative Secretaries as well as sometimes acting directly for MDAs. C.14 Over the past year, there has been improved functionality o f the system around commitment control and new server and generator in State House. The Army HQ and all camps in Dar es Salaam have also been computerized. In coming year the aim i s t o computerize 10 o f 38 remaining camps. The ACGEN i s n o w looking at how to computerize embassies abroad to run o n IFMS. Similarly, the A C G E N has begun working o n barcode system o f valuing government assets. C. 15 I F M S i s based o n the accounting and planning package produced by EPICOR software, which has been customized to meet the government’s needs. It runs o n a number o f modules. Those available and installed are summarized in the table below: Table 28: Modules o f the IFMS Modules Available Modules Installed Modules Used Accounts Payable Yes Yes customized Accounts Receivable Yes (partial) Yes customized for MDAs non-tax revenues Purchase Order Commitment Yes Yes customized Active Planner (formerly Budget Yes (partial) Yes customized Manager) Cash Management Yes Yes, monitoring bank balance General Ledger Yes Yes customized Report Generator Yes Yes customized Asset Management Being considered Inventory Being considered C.16 Also installed in 2003 and ready to be used, i s the Data Warehouse. It i s a module designed to hold a copy o f data held o n IFMS. It should be noted that this warehouse module i s not intended to be a government wide depository for all i t s computer systems. The objectives o f the system are to allow selected users, such as AOs, Planning and Policy Analysis Departments in the M o F and others, to draw o n I F M S i n f o m a t i o n without compromising the security and integrity o f the system’s master files. The data input part o f this module i s simply a program to take infomation into the database. While some users have already been trained, it i s clear that this powerful database i s underutilized. This situation has dragged o n for quite a long time n o w and it i s clear that a l o t o f frustrations exist amongst the prospective users and the ACGEN. The apparent reason for this situation seems to be that 127 - PEFAR FY05 United Republic of Tanzania prospective users are not providing their data and reporting needs in sufficient detail to the ACGEN’s Department in order to program selected “cuts” o f the data for purposes o f analysis. The situation i s exacerbated by the fact that prospective users perceive the accessibility to the Warehouse to be very restricted. Also, i t seems as if the accessibility o f prospective users i s complicated by the fact that they have not been trained in the application - in spite o f training opportunities that had been provided by the ACGEN’s Department. T h i s issue can be resolved if management in the M o F brings the parties to the table to resolve this issue for once and all. C. 17 The I F M S i s already rolled out t o 28 Local Councils. However, the system has not worked completely due to capacity problems and lack o f political support at higher levels o f local govt. The ACGEN Department i s n o w much more hands and eyes o n with this rollout, and has provided support by recruiting 25 support personnel (trained them for 8 months) and placed these in 5 zonal centres (Mbeya, DSM, Dodoma, Mwanza and Kilimanjaro). INTERFACES (2.18 Though I F M S i s installed in all MDAs, but not on-line with the State House, Ministry of Defense, Regional Sub-Treasuries, Regional Administrative Secretariat, Parliament and the Ministries based in Dodoma, there i s currently n o direct interface to up-load data from some o f the major periphery systems operating. In some cases action i s being taken to redress the position. Set out below i s a brief summary o f these systems and the action being taken: 0 An enhanced Budget and MTEF Model i s being introduced for 2005/06 as mentioned earlier in this report. Concurrently, M o F has developed and deployed the Strategic Budget Allocation System (SBAS) software to all MDAs. The SBAS has been used by the MDAs in preparing their resources requests, indicating requirements for direct NSGRP-related expenditure as well as for ‘other’ items. This new tool i s a bespoke database system maintained by the Policy Analysis Department and it i s n o w in the process o f being interfaced with the Active Planner module o f EPICOR. SBAS i s a resource allocation tool and produces budget data, used by M o F for scrutiny and finalisation o f budgets. Originally budget data had to be re-keyed into Active Planner for input to I F M S General Ledger. When the interface i s finalised, the budget data will be exported from SBAS directly into Active Planner and hence to the General Ledger,. The finalised budgets and their executed stutus versions will, in a reverse o f the initial route, be downloaded from EPICOR into SBAS for analysis and execution tracking. 0 Payroll, which i s a component o f the Lawson IHRPMS. The ACGEN i s currently looking at the possibility o f interfacing this system with EPICOR (at present data control figures only are keyed in). The target i s a solution by 2006 with the intention o f being able to drill down to detail transaction level. 0 The Debt Management Unit in the ACGEN’s Department uses a combination o f Excel and the CS-DRMS 200+ to capture data on domestic and external debt. The system i s not integrated with the I F M S but a study i s underway to interface these systems. While the BOT also uses CS-DRMS 2000+, differences exist between the data o f the ACGEN and the BOT (also refer to sections 6 B and 6C). 0 Tax Revenue which i s collected by the TRA has the EPICOR package o n its o w n server and maintains a separate database for revenues. A wireless link to TRA i s available but not operational. Activities are underway to improve the link bringing the TRA totally on-line. 128 - PEFAR FY05 United Republic of Tanzania C.19 A WAN connects MDAs to the central server at the ACGEN’s Department. However, the regional sub-treasuries, Regional Administrative Secretariat, Parliament and the ministries based in Dodoma have not been effectively connected so there i s n o direct transfer o f data. The intention i s to connect on-line using a Virtual Private Network. Centrally the infrastructure and servers have been set up and by using tapes the data i s loaded on to the central servers but there i s n o link to the General Ledger. Data i s being entered into General Ledger at the year end by MDAs. The ACGEN i s now looking at a routine to transfer the data to the General Ledger with the target for Virtual Private Network connectivity being FY 05/06. UPGRADES AND SERVICING C.20 During the period November 2003 to January 2004 an upgrade o f the hardware and operating platform was undertaken. Recent effort in the past year has been o n further improvement o f the system to keep up with important technical developments. Volatility o f electricity supply has been a problem. ACGEN has had discussions with TANESCO about the importance (for the functioning o f the entire government) o f a continued power supply t o the A C G E N Office which has resulted in much better supply. Standby generators have been purchased to cater for the main ACGEN building (which could actually power the whole area) as well as for the 20 regions. A large U P S was also purchased which can store power for ACGEN office for 12 hours. All servers have also been changed. The system n o w runs o n a cluster o f servers. 24 are application servers, 2 management servers, 1 data server and 1 new server for public debt management. Fire protection for ACGEN building has also been improved and water well dug for such an emergency. C.21 Any upgrades to EPICOR have to be awarded to Soft Tec as n o other firm i s licensed by the supplier to do this. This also means that training in EPICOR was also carried out by Softech. However, the ACGEN n o w has 30 staff in the support development unit in-house, who can handle most training needs. In 2004 a major change occurred with regard to the contracts for servicing hardware and software. Previously these were let separately but n o w there i s just one contract with Softech. I t was put out to tender as one contract because o f earlier problems o f having two split service contracts, whereby both companies would disclaim responsibility. OTHER DEVELOPMENTS (2.22 The issues o f I F M S integrity, security and disaster recovery requirements are dealt with fully in section 7B o f the main report under Data Integrity, Security and IT Contingency Plans. These do not cover payroll which i s part o f the M R P M S system maintained outside o f the ACGEN’s Department. C.23 Action i s being taken to computerize the Help Desk facility so as to give on-line support. The software has been procured and training for users will start shortly. CONCLUSION C.24 The A C G E N has made considerable progress in the implementation o f I F M S over the past 3 years but there i s s t i l l work to be done within the scope o f the PFMRP, especially on interfacing and connectivity o f IT-systems. I t i s appreciated that improvements to I F M S can only be made if resources and capacity are available, especially with human resources, to implement the changes that will improve the existing systems and the data available from IFMS. Moreover, the Ministry f Finance needs to review its information needs and develop a comprehensive IT Strategy that addresseses i t s growing planning, execution and analytical requirements. 129 0 m I v) a e, k a Y vi 3 m N rcl 0 .* 3 d rd h 0 Y m 3 0 s U n z” U v; \d W W i x 2 d 3 B m Bl m m 0 M BJ & k 0 L 4 A s m m El El g E E Q 8 3 s -8 i i 7 4 > I 4 m Q * E z" U I v) Eil k 9 PEFAR .FY05 United Republic of Tanzania ANNEX E: PEFAR APPENDIX TABLES 05 CONTENTS Table A l : Tanzania Macroeconomic Indicators ............................................................................. 146 Table A2: Balance o f Payments(in millions of U S dollars)........................................................... 147 Table A3a: Tanzania: Tanzania: Central Government Operations (in billions o f Tanzania shillings) .................................................................................................................................... 148 Table A3b: Tanzania: Central Government Operations (in percent) ........................................ 149 Table A4a: Budget Frame - Analytical (in Bill.Tsh.) .................................................................... 150 Table A4b: Budget Frame - Analytical (as YOo f GDP ................................................................... 151 Table A5a: Budget Frame Accounting (in Bill.Tsh.) ..................................................................... 152 Table A5b: Budget Frame - Accounting ( as YO of GDP)............................................................... 153 Table A6a: Sectoral - Recurrent Expenditure (in Bill. Tsh.) ........................................................ 154 Table A6b: Sectoral - Development Expenditure (in Bill.Tsh.) .................................................... 155 Table A6c: Sectoral - Total Expenditure (in Bill.Tsh.).................................................................. 157 Table A7a: Actual Recurrent Expenditure by Vote as the Share o f Total Actual Recurrent Expenditure .............................................................................................................................. 159 Table A7b: Actual Development Expenditure by Vote as the Share o f Total Actual Development Expenditure .............................................................................................................................. 160 Table A7c: Total Actual Expenditure by Vote as the Share of Total Actual Expenditure .........162 Table A8a: Actual Recurrent Expenditure as a Percentage of Budgeted Recurrent Expenditure by Vote ...................................................................................................................................... 163 Table ASb: Actual Development Expenditure as a Percentage of Budgeted Development Expenditure by Vote ................................................................................................................ 164 Table A8c: Actual Total Expenditure as a Percentage o f Budgeted Total Expenditure by Vote ................................................................................................................................................... 165 Table A9a: Recurrent Expenditure . Regions (in Bill.Tsh.) ......................................................... 166 Table A9b: Development Expenditure . Regions (in Bill.Tsh.) .................................................... 166 Table A9c: Total Expenditure . Regions (in Bill. Tsh.) .................................................................. 168 Table AlOa: Actual Recurrent Expenditure as a Percentage of Budgeted Recurrent Expenditure .Regions.................................................................................................................................... 168 Table AlOb: Actual Development Expenditure as a Percentage o f Budgeted Development Expenditure . Regions ............................................................................................................. 170 Table AlOc: Actual Total Expenditure as a Percentage o f Budgeted Total Expenditure . Regions ................................................................................................................................................... 170 Table A11: Ministerial - Recurrent Expenditure Variances (approved/original budget compared to actual expenditure in mil. Tsh.) ........................................................................ 172 145 PEFAR FY05 - United Remblic of Tanzania APPENDIX TABLES Table A1: Tanzania Macroeconomic Indicators Indicator Unlt 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004- Populatiod2 Millions 275 283 291 300 309 319 329 336 342 353 Per capita Incomd2 US$ 176.9 210.3 2356 2500 260.0 270.0 270.0 280 0 300.0 3200 GDP GrowthI2 % 3.6 4.2 33 40 4.7 4.9 5.7 62 5.6 67 Gross Domestic Savingdl (as a % of GDP) 9.1 10.7 77 54 5.3 9.9 10.2 14 1 13.3 12.1 Gross InvestmntdZ (as a % o f GDP) 19.7 16.5 147 162 15.5 17.6 17.0 19 2 21.2 21.0 Inflatiod2 (pcriod average) % 27.4 21.0 161 129 7.8 6.0 5.2 45 4.4 4.4 Exchange R a t d l (period average) TZSKJS$ 536.4 583.0 6183 666 1 745.0 800.4 876.3 963 2 1039.1 1091.4 External Sector Expons - Goods & Serviced2 Mil. US$ 1265.8 1419.8 1235.0 1127.3 1165.3 1307.1 1430.7 1568 4 1690.9 19605 Impom - Goods & Serviced2 Mil. US$ 2140.3 2028.5 1948.2 2370.9 2262.7 2063.9 2232.3 2226 2 2681.9 3038.2 Current Account Balancd2 Mil. US$ -646.4 -146.1 -403.5 -921.3 -855.8 -485.4 -500.3 -289 0 -378.6 -533.3 Balance ofpayments (Overall balanWUSS -391.4 -254 5 -199.7 -495.5 -113.3 56.9 -96.3 265 2 402.6 231.3 Foreign Reserved2 Mil US$ 255.0 240.0 461.0 502.0 605.0 752.0 983.0 1213 0 1670.0 1878.0 External DebtJl Bil. US$/I 7.4 7.4 7.2 7.7 8.1 72 6.8 73 75 75 Foreign Direct Investnuntl2 Mil. US$ I500 148.5 157.8 172.2 516.7 463.4 327.2 240 4 247.8 2602 Tourism Eamingd2 Mil. US$ 258 1 322.0 392.4 570.0 733.3 739.1 725.0 730 0 731 0 746.0 Monetary Sector Average Deposit Ratdl % 21.0 16.7 12.8 12.0 7.4 7.1 4.2 35 2.5 2.4 Average Lending R a t d l % 36.4 37.0 24 5 28.0 21.4 19.1 20.9 I48 16.4 15.7 Growth in Money Supply (M2)/1 % 26.1 14.4 21.8 5.0 7.9 15.1 14.9 21 3 169 19.1 Government Finance Total Domestic Revenudl (as a % o f GDP) 12,s 13.2 I3 5 12.0 11.5 11.3 12.0 12 I 12.1 12.7 Tax Revenudl (as a % of GDP) 11.3 11.3 11.9 11.0 10.3 10.1 10.7 10 9 110 11.7 Non-Tax Revenudl (as a % of GDP) 1.2 1.9 1.6 1.0 1.2 1.2 1.3 12 1.1 1.0 Total Expcnditurdl (as a % of GDP) 17.0 14.7 172 15.7 17.0 18.6 17.0 17 6 198 220 Recurrent Expcnditurdl (as a % of GDP) 14.5 13.8 14.3 11.0 11.0 11.8 12.8 13 6 14.8 16.4 Develooment Emenditurdl (as a % of GDP) 2.5 0.9 2.9 3.8 4.1 5.3 3.7 34 5.0 5.6 Grantdl (as a % o f GDP) 2.5 1.4 2.7 3.0 4.0 4.5 3.7 45 6.2 61 Fiscal Balancdl (as a % o f GDP) -4.6 -1.5 -3.7 -37 -5.5 -7.3 -5.0 -5.6 -7.7 -9.3 Note /IFiscal year is used, and it ends June 30th o f the mentioned year /2 Calendar year is used, and it ends in mentioned year Decemkr 3 I t h * Preliminary estimates Source. TanzaniaAuthorities (MoF, BOT, NBS, and PO-PP). 146 PEFAR- FY05 United Republic of Tanzania Table A2: Balance of Payments(in millions o f U S dollars). ~ ems 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004” W N T ACCOUNT -646 4 -146.1 403.5 -921.3 -855.8 -485.4 -500.3 -289 0 -378 6 -533 3 wds -657 6 -448.9 -395.4 -793.6 -872.1 -704.6 -786.3 -611 1 -9202 -9993 Exports (fob) 682 9 763.8 7526 588.5 543.3 663.3 776.4 902 6 9992 12119 Imports (fob) 1340 5 1212.6 1148.0 1382.1 1415.4 1367.9 15627 1513 7 19194 2211 2 mices -216 9 -159.9 -317.8 -450.0 -225.3 -52.2 -15.3 -46 7 -70 8 -784 Receipts 582 9 656.0 482.4 538.8 622.0 643.8 654.3 665 8 691 7 7486 Payments 799 8 815.9 800.2 988.8 847.3 696.0 669.6 712 5 7625 8270 come -1103 -72.0 -121.8 -105.0 -95 0 -120.5 -85.3 -51 7 -544 -49 5 Receipts 31 8 41.5 43.0 44.4 49.0 50.4 55.4 67 7 853 875 Payments 142 I 113.5 1648 149.4 144.0 170.9 140.7 1194 1397 1370 urrent transfers 338 4 534.7 431 5 427.3 336.6 391.9 386.6 420 5 6668 5939 Inflows 370 7 567.0 499.2 454.2 445 6 464.8 456.6 484 7 7069 6487 Government 236 0 432.2 433.6 421.0 411.4 429.9 405.5 434 5 6379 582 1 Private I34 7 134.8 65.6 33.2 34.2 34.9 51 1 50 2 690 666 outflows 32 3 32.3 67.7 26.9 109.0 72.9 70.0 64 2 40 1 54 8 APITAL ACCOUNT 191 0 191.0 270.9 252.4 270.6 330.4 365.2 277 5 3279 2872 apital transfers 191 0 191.0 270.9 252.4 270.6 330.4 365.2 277 5 3279 2872 Inflows 191 0 191.0 270.9 252.4 270.6 330.4 365.2 277 5 3279 00 2872 00 Outflows 00 00 0.0 0.0 0.0 00 0.0 00 cqusitiorddisposals of non-produced 00 0.0 0.0 0.0 0.0 0.0 0.0 00 00 00 on-financialasseb NANCIAL ACCOUNT 77 4 -2623 -67.1 173.4 471.9 211.9 38.9 276 7 4533 4774 uect investment I50 0 148.5 157.8 272.2 516.7 463.4 327.2 240 4 247 8 2602 Abroad 00 0.0 0.0 0.0 0.0 0.0 0.0 00 00 00 In Tanzania 150 0 148.5 157.8 272.2 516.7 463 4 327.2 240 4 247 8 2602 ntfolio investment 00 0.0 20.5 0.7 0.0 0.0 0.0 00 00 00 ther investment -10 5 182 2354 449 1457 -63 0 -60.0 469 2742 1444 Inflow of financialresources 437 4 2702 6735 6459 4458 265.2 383.3 I97 6 4888 3578 Disbursement of Government loans 244 1 2249 6248 621 4 4227 396.7 288.4 I77 0 473 1 371 7 Trade credit and other financial flows 141 9 286 -691 -185 148 -134.0 -76.7 29 -14 6 -470 Disbursement of loans to other sectors 51 4 167 1178 430 83 2.5 I71 6 17 7 303 33 1 Outflow of financialresources 447 9 2520 438 1 601 0 300 I 328.2 443.3 244 5 2146 2134 Repaymentof government loans 272 5 1524 3898 571 1 2358 261.3 395.9 135 1 1200 1107 Trade credit and other financial flows I62 6 378 363 80 139 16.7 -10.3 46 6 -102 13 7 Repaymentof loans by other sectors 12 8 618 120 219 504 50.2 57.7 62 8 1048 890 TOIS and omissions -62 2 -429.0 -480.8 -144.4 -190.5 -188 5 -228 3 83 2 -68 7 728 VERALL BALANCE -378 I -217.4 -199.7 -495.5 -113.3 56.9 -96.2 265 2 4026 231 3 NANCING 378 1 217.4 1997 495.5 113.3 -56 9 96.2 -265 2 -402 6 -231 3 et Reserve assets (- increase) 60 1 -165.3 -182.1 20.9 -175.4 -197.4 -186.4 -372 6 -428 0 -1975 se of Fund credit -4 0 -13.8 77.4 11.0 51.3 49.4 15.6 26 0 -29 -33 8 iceptional financing 322 0 396.5 304.4 463.6 237.4 91 I 267.0 81 4 283 00 Change in Arrears 269 4 312.2 77.1 96.9 152.8 81.1 135.6 81 4 28 3 0.0 Rescheduling 00 0.0 2273 366.7 84.6 10.0 131 4 00 0.0 0.0 emorandurnitems GDP(mp) in billionTZS 3020 5 37676 4703.5 5581.6 6432.9 72684 8274.6 9445.5 10692.4 11820.7 GDP(mp) in million USD 5631 1 6462.5 7607.1 8379.6 8634.8 9080.9 9442.7 9806.4 10290.1 10830.8 CAB/ GDP -11 5 -2.3 -5.3 -11.0 -9.9 -5.3 -5.3 -2.9 -3.7 -4.9 CABIGDP (excl. current official transfers) -17 5 -10.5 -11.0 -16.1 -13.8 -9.7 -9.4 -7.2 -10.2 -10.4 Gross Official Reserves (in million of USD) 255 0 240.0 461.0 502.0 605.0 752.0 983.0 1213.0 1670.0 1878.0 Months o f imports of GFNS 1.6 2.8 32 3.2 4.5 5.2 6.2 68 8.1 8.3 Preliminaryestimates Note: I/ Source: Bank of Tanzania. 147 PEFAR FY05 - United Republic of Tanzania Table A3a: Tanzania: Tanzania: Central Government Operations (in billions o f Tanzania shillings) 1997198 1998199 1999100 2000/01 2001102 2002103 2003104 2004/05 Actual Actual Actual Actual Actual Actual Actual Prel.Est 'otal revenue 619 690 772 930 1043 1218 1459 1751 Tax revenue 566 616 692 828 938 1106 1343 1629 Import duties 86 88 88 96 89 106 137 114 Value-added tax 138 208 224 302 352 424 504 675 Excises 101 84 89 155 I78 187 215 237 Income taxes 150 163 205 194 228 276 3 64 474 Other taxes 90 73 87 81 91 112 123 130 Nontax revenue 53 73 81 102 104 112 117 128 'otal expenditure 809 1022 1272 1315 1522 1990 2528 3236 Recurrent expenditure 568 657 808 987 1171 1489 1886 2358 Wages and salaries 219 220 285 308 342 398 463 551 Interest payments 116 96 127 128 121 100 109 166 Domestic 51 38 81 78 65 57 70 95 Foreign 65 58 46 50 57 43 38 71 Goods and services and transfers 233 341 395 550 708 99 1 1314 1640 Development expenditure 197 248 360 286 291 501 642 878 Domestically financed 24 19 19 35 50 96 133 234 Foreign financed 173 229 340 25 1 241 405 509 644 lversll Balance before Grant -190 -332 -499 -385 -479 -772 -1069 -1478 inancing 190 332 499 385 479 772 1069 1478 Grants 156 240 307 286 385 622 697 860 Program (including basket grants) 1/ 38 75 94 114 183 294 371 574 Project 118 166 208 124 140 256 248 219 HIPC grant relief 0 0 6 49 62 73 77 67 Foreign (net) 50 27 105 90 118 200 434 546 Foreign loans 106 98 191 173 187 301 479 656 Program (including basket loans) 11 66 35 58 45 86 151 218 23 1 Project 40 63 133 128 101 150 261 425 Amortization -56 -71 -86 -83 -69 -101 -45 -111 Domestic (net) -23 53 75 -1 8 -2 5 -50 -72 63 Bank financing -48 -2 -27 -19 -59 -10 -83 44 Nonbank financing 26 -8 36 16 37 -26 39 35 Privatization proceeds 7 12 12 27 0 0 10 10 I/Basket funds are sector-specific accounts establishedby the govemment for channeling donor support to fund specific activities in diffrrent sectors Source: Tanzania Authorities and the IMF. 148 PEFAR FY05 - United Republic of Tanzania Table A3b: Tanzania: Central Government Operations (in percent) 1997198 1998199 1999100 2000101 2001102 2002/03 2003104 2004105 'Actual Actual Actual Actual Actual Actual Actual Prel.Est. 'otal revenue 12.0 11.5 11.3 12.0 12.1 12.1 12.7 13.5 Tax revenue 11.0 10.3 10.1 10.7 10.9 11.0 11.7 12.5 Import duties 1.7 1.5 1.3 1.2 1.o 1.1 1.2 0.9 Value-added tax 2.7 3.5 3.3 3.9 4.1 4.2 4.4 5.2 Excises 2.0 1.4 1.3 2.0 2.1 1.9 1.9 1.8 Income taxes 2.9 2.7 3.0 2.5 2.6 2.7 3.2 3.6 Other taxes 1.8 1.2 1.3 1.1 1.1 1.1 1.1 1.o Nontax revenue 1.0 1.2 1.2 1.3 1.2 1.1 1.0 1 .o 'otal expenditure 15.7 17.0 18.6 17.0 17.6 19.8 22.0 24.9 Recurrent expenditure 11.0 11.0 11.8 12.8 13.6 14.8 16.4 18.1 Wages and salaries 4.3 3.7 4.2 4.0 4.0 4.0 4.0 4.2 Interest payments 2.3 1.6 1.9 1.7 1.4 1.o 0.9 1.3 Domestic 1.o 0.6 1.2 1.o 0.7 0.6 0.6 0.7 Foreign 1.3 1.o 0.7 0.7 0.7 0.4 0.3 0.5 Goods and services and transfers 4.5 5.7 5.8 7.1 8.2 9.8 11.4 12.6 Development expenditure 3.8 4.1 5.3 3.7 3.4 5.0 5.6 6.8 Domestically financed 0.5 0.3 0.3 0.5 0.6 1 .o 1.2 1.8 Foreign financed 3.4 3.8 5.0 3.3 2.8 4.0 4.4 5.0 )vera11Balance before Grant -3.7 -5.5 -7.3 -5.0 -5.6 -7.7 -9.3 -11.4 'inancing 3.8 a5 3.3 5.0 A6 T.7 83 1M Gm&xgam (including basket grants) 11 0.7 1.2 1.4 1.5 2.1 2.9 3.2 4.4 Project 2.3 2.8 3.0 1.6 1.6 2.5 2.2 1.7 HIPC grant relief 0.0 0.0 0.1 0.6 0.7 0.7 0.7 0.5 Foreign (net) 1.o 0.5 1.5 1.2 1.4 2.0 3.8 4.2 Foreign loans 2.1 1.6 2.8 2.2 2.2 3.0 4.2 5.1 Program (including basket loans) 11 1.3 0.6 0.8 0.6 1.o 1.5 1.9 1.8 Project 0.8 1.1 1.9 1.7 1.2 1.5 2.3 3.3 Amortization -1.1 -1.2 -1.3 -1.1 -0.8 -1.0 -0.4 -0.9 Domestic (net) -0.5 0.9 1.1 -0.2 -0.3 -0.5 -0.6 0.5 Bank financing -0.9 0.0 -0.4 -0.2 -0.7 -0.1 -0.7 0.3 Nonbank financing 0.5 -0.1 0.5 0.2 0.4 -0.3 0.3 0.3 Privatization proceeds 0.1 0.2 0.2 0.3 0.0 0.0 0.1 0.1 I I/Basket funds are sector-specific accounts establishedby the govemment for channeling donor suppal to fund specific activitiesin different sectors Source: Table 3a 149 PEFAR FYOS - United Republic of Tanzania - Table A4a: Budget Frame Analytical (in Bill. Tsh.) 1994195 I997198 1998199 1999100 2000101 2001102 2002103 2003104 2004105 2005106 Actual Actual Actual Actual Actual Actual Actual Actual Budget omestic revenue 619 689 778 930 1043 1218 1393 1739 2067 I /W Fuel Levy and Transit Fees 37 38 38 40 50 63 62 71 80 otal Expenditure 730 863 1180 1275 1463 1990 2418 3198 4035 Recurrent expenditure 544 680 820 989 Ill8 1326 1611 2107 2650 Intereston external debt 48 60 47 52 57 43 63 73 75 Intereston domestic debt 53 30 81 78 65 57 72 95 83 Wageslsalaries 219 232 285 308 342 398 464 55 1 682 Goods1servicesltransfers 224 358 406 55 1 655 828 1012 1387 1793 01w Fuel Levy and Transit Fee 17 38 38 55 50 56 62 71 80 Special exp. 44 42 0 37 0 0 18 30 43 CFS (Others) 23 23 56 62 80 102 85 163 212 Parastatal Wages 28 34 22 0 55 68 76 87 101 Retention Scheme 14 29 23 26 27 48 63 53 60 Other Charges 82 171 216 409 443 554 708 981 1297 Development expenditure 187 183 360 286 345 664 807 1092 1385 Projects 187 183 360 286 345 664 807 1092 1385 Local 24 19 19 35 50 96 140 234 255 Foreign 163 164 340 251 294 568 667 858 IO15 verall deficit (checks issued) -before grants -111 -173 -402 -345 -420 -772 -1025 -1459 -1968 lrants 119 170 292 293 383 612 728 808 1011 Budget support grants 2 69 73 114 183 196 260 266 345 olw MDFPRBS 0 70 71 84 143 170 234 266 345 Basket Funds 98 124 160 23 1 Project grants 11 118 101 208 124 140 353 241 306 341 HIPC interim relief-Multilateral 21 0 0 11 56 60 73 103 75 94 - verall deficit (checks issued) after grants 8 -4 -111 -75 -70 -150 -298 -65 1 -957 'vera11deflcit (checks cleared) 15 -49 -113 -79 -35 -163 -298 -651 -957 inaocing 15 49 113 79 35 163 298 651 957 Foreign (net) 64 27 105 87 118 200 287 426 585 P r o g a m e loans 80 37 55 40 33 86 145 168 271 Project loan 57 63 133 128 154 215 303 39 1 443 Amortization -72 -73 -82 -80 -69 -101 -161 -133 -129 Domestic (net) -50 21 8 -2 -24 -37 10 225 372 Bank (net) -24 8 8 -19 -59 -36 21 23 1 259 Non-bank (net) -26 13 0 16 37 0 0 0 0 Amortization -53 -3 8 -234 0 -2 0 -28 -16 -12 Privatisation Funds 0 7 0 27 0 0 17 10 10 emo: DPmp 4,929 5,532 6885 7703 8564 9549 10490 12567 14458 C for distribution 0 0 299 489 637 726 927 1224 1594 pimary Deficit(checks issued) -10 -83 -274 -216 -390 -672 -891 -1290 -1783 overnment Savindchecks issued) 75 9 -42 -59 -157 -108 -218 -367 -634 %of GDP 1.5% 0.2% -0.6% -0.8% -1.9% -1.1% -2.1% -2.9% -4.4% Note: I1 I t has been assumed that 80% ofproject grants pass via the exchequer 21 HIPC relief from M F , World Bank and AfDB Source: Ministry o f Finance 150 PEFAR FY05 - United Republic of Tanzania - Table A4b: Budget Frame Analytical (as YOo f GDP 1997/98 1998199 1999/00 2000/01 2001102 2002103 2003104 2004105 2005106 Actual Actual Actual Actual Actual Actual Actual yiE: Budget omestic revenue 12.6% 12.5% 11.3% 12.1% 12.2% 12.8% 13.3% 13.8% 14.3O 01w Road Fund 0.7% 0.7% 0.5% 0.5% 0.6% 0.7% 0.6% 0.6% 0.6O ,tal Expenditure 14.8% 15.6% 17.1% 16.6% 17.1% 20.8% 23.1% 25.4% 27.9O Recurrent expenditure 11.0% 12.3% 11.9% 12.8% 13.1% 13.9% 15.4% 16.8% 18.3O Interest on external debt 1.0% 1.1% 0.7% 0.7% 0.7% 0.4% 0.6% 0.6% 0.5O Interest on domestic debt 1.1% 0.5% 1.2% 1.0% 0.8% 0.6% 0.7% 0.8% 0.bo Wageslsalaries 4.4% 4.2% 4.1% 4.0% 4.0% 4.2% 4.4% 4.4% 4.70 Goods/services/transfers 4.5% 6.5% 5.9% 7.2% 7.6% 8.7% 9.6% 11.0% 12.4O 01w Road Fund 0.3% 0.7% 0.5% 0.7% 0.6% 0.6% 0.6% 0.6% 0.6O Special exp. 0.9% 0.8% 0.0% 0.5% 0.0% 0.0% 0.2% 0.2% 0.3O CFS (Others) 0.5% 0.4% 0.8% 0.8% 0.9% 1.1% 0.8% 1.3% 1.50 ParastatalWages 0.6% 0.6% 0.3% 0.0% 0.6% 0.7% 0.7% 0.7% 0.7O Retention Scheme 0.3% 0.5% 0.3% 0.3% 0.3% 0.5% 0.6% 0.4% 0.4O Other Charges 1.7% 3.1% 3.1% 5.3% 5.2% 5.8% 6.7% 7.8% 9.00 Development expenditure 3.8% 3.3% 5.2% 3.7% 4.0% 7.0% 7.7% 8.7% 9.6" Projects 3.8% 3.3% 5.2% 3.7% 4.0% 7.0% 7.7% 8.7% 9.6O Local 0.5% 0.3% 0.3% 0.5% 0.6% 1.O% 1.3% 1.9% 1.80 Foreign 3.3% 3.0% 4.9% 3.3% 3.4% 6.0% 6.4% 6.8% 7.0° serall deficit (checks issued) -before grants -2.3% -3.1% -5.8% -4.5% -4.9% -8.1% -9.8% -11.6% -13.6O rants 2.4% 3.1% 4.2% 3.8% 4.5% 6.5% 6.9% 6.4% 7.0° Programme grants 0.0% 1.3% 1.1% 1.5% 2.1% 2.1% 2.5% 2.1% 2.4O 01w PRBSiMDF 0.0% 1.3% 1.O% 1.1% 1.7% 1.8% 2.2% 2.1% 2.4' Project grants 2.4% 1.8% 3.0% 1.6% 1.6% 3.7% 2.3% 2.4% 2.4O HIPC interim relief 0.0% 0.0% 0.2% 0.7% 0.7% 0.8% 1.O% 0.6% 0.P - serall deficit (checks issued) after grants 0.2% -0.1% -1.6% -1.0% -0.8% -1.6% -2.8% -5.2% -6.6' verall deficit (checks cleared) 0.3% -0.9% -1.6% -1.0% -0.4% -1.7% -2.8% -5.2% -6Aa nancing 0.3% 0.9% 1.6% 1.O% 0.4% 1.7% 2.8% 5.2% 6.6O Foreign (net) 1.3% 0.5% 1.5% 1.1% 1.4% 2.1% 2.7% 3.4% 4.0' Programmesupport loans 1.6% 0.7% 0.8% 0.5% 0.4% 0.9% 1.4% 1.3% 1.90 Project loan 1.2% 1.1% 1.9% 1.7% 1.8% 2.3% 2.9% 3.1% 3.1° Amortization -1.5% -1.3% -1.2% -1.0% -0.8% -1.1% -1.5% -1.1% -0.90 Domestic (net) -1.0% 0.4% 0.1% 0.0% -0.3% -0.4% 0.1% 1.8% 2.bQ Bank (net) -0.5% 0.1% 0.1% -0.2% -0.7% -0.4% 0.2% 1.8% 1.80 Non-bank (net) -0.5% 0.2% 0.0% 0.2% 0.4% 0.0% 0.0% 0.0% 0.00 Amortization -1.1% -0.7% -3.4% 0.0% 0.0% 0.0% -0.3% -0.1% -0.10 PrivatisationFunds 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.00 emo: DPmp (BilL Tsh.) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0~ ,imary Deficit(chec!a issued) -0.2% -1.5% -4.0% -2.8% -4.6% -7.0% -8.5% -10.3% -12.3O overnment Saving(chec!a issued) 1.5% 0.2% -0.6% -0.8% -1.8% -1.1% -2.1% -2.9% -4.40 Source Table 4a 151 - PEFAR FYOS United Republic of Tanzania Table A5a: Budget Frame Accounting (in Bill. Tsh.) 1997198 1998199 1999100 2000101 2001/02 2002103 2003104 2004105 2005106 Revised Actual Actual Actual Actual Actaul Actual Actaul Budget Budget TOTAL RESOURCES 856 974 1,262 1,411 1,626 2,171 2,694 3,348 Domestic revenue 619 689 778 930 1,043 1,218 1,401 1,739 2,067 Programmeloans and grants 82 106 128 154 216 282 445 434 616 Project loans and grants 174 164 340 251 294 405 473 587 683 Basket Support Loans 66 124 110 101 Basket Support Grants 98 71 160 23 1 - HIPC Relief Multilateral IDA, IMF & AfDB 0 0 11 56 60 73 82 75 94 Non Bank Borrowing 27 45 0 16 37 0 0 0 0 Bank Borrowing -24 8 8 -19 -59 -36 83 23 1 259 PrivatisationFunds 0 7 0 27 0 0 17 10 10 I. TOTAL EXPENDITURE 856 974 1,262 1,411 1,626 2,171 2,694 3,348 4,176 RECURRENT EXPENDITURE 670 791 902 1,125 1,282 1,507 2,082 2,256 2,791 CFS 250 225 266 272 271 304 368 481 528 Debt service 227 202 211 210 192 201 270 318 316 Interest 101 91 128 130 121 100 135 168 175 Amortization 126 111 82 80 70 102 135 149 141 Others 23 23 56 62 80 102 98 163 212 Recurrent Exp.(excl. CFS) 420 566 63 6 82 1 917 1,123 1,523 1,775 2,263 01w Salaries & wages 219 232 285 308 342 398 464 551 682 Other Charges 82 171 269 409 506 726 1,041 1,193 1,538 DesignatedItems 11 119 163 135 145 133 0 18 30 43 DEVELOPMENT EXPENDITURE 187 183 360 286 345 664 803 1,092 Projects 187 183 360 286 345 664 803 1,092 1,3851 1,385 Local 24 19 19 35 50 96 136 234 255 Foreign 163 164 340 251 294 568 667 858 1,015 Note: 11Includes contingent expenditures that will be voted at a later stage Source : Ministry of Finance 152 PEFAR FY05 - United Republic of Tanzania Table A5b: Budget Frame Accounting ( as YO - o f GDP) 1994195 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003104 2004105 2004/06 Actual Revised Actual Actual Actual Actual Actual Actual Actual Budegt Budget TOTAL RESOURCES 11.4% 11.6% 18.3% 18.3% 19.0% 22.1% 25.1% 26.6% 28.9% Domestic revenue 12.6% 12.5% 11.3% 12.1% 12.2% 12.8% 13.4% 13.8% 14.3% Programme loan and grants 1.7% 1.9% 1.9% 2.0% 2.5% 3.0% 4.2% 3.5% 4.3% Project loans and grants 3.5% 3.0% 4.9% 3.3% 3.4% 4.2% 4.5% 4.7% 4.7% HIPC Interim Relief Multilateral 0.2% 0.7% 0.7% 0.8% 0.8% 0.6% 0.6% HIF'C interim relief-Paris Club 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Non Bank Borrowing 0.6% 0.8% 0.0% 0.2% 0.4% 0.0% 0.0% 0.0% 0.0% Bank Borrowing -0.5% 0.1% 0.1% -0.2% -0.7% -0.4% 0.8% 1.8% 1.8% Privatisation Funds 0.0% 0.1% 0.0% 0.3% 0.0% 0.0% 0.2% 0.1% 0.1% . TOTAL EXPENDITURE 11.4% 11.6% 18.3% 18.3% 19.0% 22.1% 25.1% 26.6% 28.9% 7ECURRENT EXPENDITURE 13.6% 14.3% 13.1% 14.6% 15.0% 15.8% 19.8% 18.0% 19.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% CFS 5.1% 4.1% 3.9% 3.5% 3.2% 3.2% 3.5% 3.8% 3.7% Debt service 4.6% 3.6% 3.1% 2.7% 2.2% 2.1% 2.6% 2.5% 2.2% Interest 2.1% 1.6% 1.9% 1.7% 1.4% 1.0% 1.3% 1.3% 1.2% Amortization 2.6% 2.0% 1.2% 1.0% 0.8% 1.1% 1.3% 1.2% 1.O% Others 0.5% 0.4% 0.8% 0.8% 0.9% 1.1% 0.9% 1.3% 1.5% Recurrent Exp.(excl. CFS) 8.5% 10.2% 9.2% 10.7% 10.7% 11.8% 14.5% 14.1% 15.7% olw Salaries & wages 4.4% 4.2% 4.1% 4.0% 4.0% 4.2% 4.4% 4.4% 4.7% Other Charges 1.7% 3.1% 3.9% 5.3% 5.9% 7.6% 9.9% 9.5% 10.6% Designated Items 2.4% 3.0% 2.0% 1.9% 1.6% 0.0% 0.2% 0.2% 0.3% DEVELOPMENT EXPENDITURE 3.8% 3.3% 5.2% 3.7% 4.0% 7.0% 7.7% 8.7% 9.6% Projects 3.8% 3.3% 5.2% 3.7% 4.0% 7.0% 7.7% 8.7% 9.6% Local 0.5% 0.3% 0.3% 0.5% 0.6% 1.0% 1.3% 1.9% 1.8% Foreign 3.3% 3.0% 4.9% 3.3% 3.4% 6.0% 6.4% 6.8% 7.0% Source : Table Sa 153 PEFAR FY05 - United Republic of Tanzania Table A6a: Sectoral - Recurrent Expenditure (in Bill. Tsh.) VOTE VOTE HOLDER 1998199 1998199 19991001999/00 2000101 2000101 2001102 2001/02 2002103 2002/03 20031042003/04 20041052004/05* Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual ADMLNISTRATION 23.0 Accountant General 0.0 00 0.0 0.0 22 5 22.4 98 7 90 3 24.3 22 1 120 6 1192 71.3 29 2 27.0 Registrar of Political Parties 2.6 26 2.7 1.3 28 2.7 39 38 8.0 80 87 87 8.7 30.0 PresidentsOffice & T h e Cabinet 15.7 15 5 19.6 19.3 24 7 24.7 31 1 31 1 40.4 40 3 49 3 49 3 58.4 : 3 6 & 31 Vice President 0.9 09 1.0 1.0 14 1.4 24 24 15.3 15 2 23 0 23 0 18.8 12 4 32.0 Civil Service Dept. 3.7 37 34 3.4 43 4.3 58 55 46 42 55 55 5.0 26 33 0 Ethics Secretariat 02 02 02 0.1 02 0.2 03 03 0.3 03 05 05 0.7 02 34.0 Foreign Affairs 18.3 19 4 17.1 16.6 20 5 24.5 29 3 27 8 33.8 34 6 44 0 44 0 33.6 31 3 35.0 P m n Comm Enq. 0.3 03 0.2 0.2 03 0.3 00 00 0.0 00 00 00 0.0 00 36.0 Civil Service Comm 0.2 02 0.2 0.2 05 0.5 06 05 0.6 06 07 07 0.0 00 5 & 37 Prime Ministers Office 14.1 60 4.7 4.7 50 5.0 II 1 82 14.4 I 42 I2 1 12 0 15.7 73 40 0 Judiciary 5.4 53 7.9 6.0 88 8.8 12 0 11 8 13.2 13 1 I69 I69 19.0 89 41.0 Justice & ConstitutionalAffairs 2.2 19 1.1 0.9 15 1.5 24 23 3.9 38 49 49 5.3 25 42.0 Office O f The Speaker 5.3 54 5.9 5.9 66 6.6 87 84 10.7 IO3 I60 I60 16.6 88 45.0 Exchequer and Audit 0.8 08 1.1 1.1 18 18 19 19 2.9 27 44 43 51 23 50.0 Finance 51.1 51 9 49.7 48.5 41 0 40.9 88 4 58 3 58.8 53 9 78 I 75 7 146.5 39 6 51.0 H o r n Affain 4.6 46 5.8 4.8 56 5.6 69 59 7.6 70 93 90 3.0 12 54.0 Radio Tanzania 1.2 11 1.2 1.2 16 1.2 17 14 3.2 29 38 38 0.0 00 55.0 Comm of Human Rights & G w d Gov. 09 07 1.0 07 19 I O 2.2 04 56 0 Regional Adm &Local Government 6.2 27 5.3 16.6 39 3.9 20 5 20 4 24.6 23 6 30 7 30 7 36.6 I34 57.0 Defence &National 4.5 31 2.3 23 41 41 34 34 3.9 39 52 52 5.0 24 59.0 Law Reform. Commi. 0. I 01 0. I 0.1 02 0.2 02 02 0.3 03 05 05 0.5 02 60.0 Industrial Court O f Tanzania. 0. I 01 0.2 0.1 03 0.3 03 03 0.4 04 04 04 05 02 61 0 ElectoralCommision 3.0 30 16.2 5.9 30 9 30.6 07 07 2.3 22 20 3 20 3 30.1 13 3 63 0 Local Govt Servi. Comm. 0.2 02 02 02 03 0.3 04 04 0.6 06 07 07 0.0 00 64.0 Commercial Court 05 05 0.8 06 07 07 0.6 03 66.0 Planning Commission 2.7 26 1.9 1.3 23 2.3 I40 I3 5 20.2 20 0 78 78 8.0 41 90.0 Land Court 0.4 04 05 04 0.5 02 91.0 Anti-Drug Commission 0.6 06 06 06 0.6 03 93.0 Immigration Department 7.3 27 94.0 Public Service Commission 6.4 22 Sub Total 143.1 131.4 148.1 142.0 168 5 171.6 346.0 300.0 296.8 286.5 467.1 461.8 506.0 221.7 DEFENCE AND SECURITY 28 0 Police Force 29.7 29 7 34.9 32.2 42 0 41.9 43 1 41 9 52.9 52 0 67 7 67 1 81 5 32 8 29.0 Prison Services 16.4 I64 19.4 16.2 20 9 20.8 23 4 23 1 29.3 29 2 36 9 36 7 39.6 I70 38.0 Defence 73 2 74 0 81.7 78.5 89 2 89.2 100 0 99 7 118.6 1179 130 0 I30 0 136 6 51 9 39.0 National Service 11.4 11 8 12.1 10.9 12 5 12.5 I64 I62 21.5 21 5 25 5 25 5 27 6 15 5 Sub Total 130.8 131.9 148.1 137.8 164.6 164.4 182.8 180.9 222.2 220.5 260.2 259.3 285.3 117.2 SOCIAL SERVICES 46.0 Education 19 6 19 5 21.0 20.7 28 7 28.6 37 4 36 0 40.9 39 8 51 6 49 7 52 8 28 7 49.0 Water 6.4 64 3.4 3.4 59 5.4 95 89 16.8 I60 I62 I62 19 6 70 52.0 Health 37.2 37 2 33.8 32.1 40 I 39.9 49 I 48 2 54 5 54 0 85 6 85 2 IO4 5 51 9 53.0 Comm Dev.Wome Aff. 1.8 18 2.3 1.5 20 2.0 29 29 3.4 33 41 41 41 17 65.0 Labour Youth Develop. 20 20 3.0 15 32 3.1 43 43 4.8 47 55 55 5.8 26 67 0 Teachers Service Comm. 0.1 01 02 02 I 5 1.5 18 17 1.9 19 21 21 0.0 00 68 0 Science, Tech.& H Ed 32.8 32 8 323 306 44 9 44.7 55 9 55 3 62.2 62 0 73 6 73 6 70 3 37 0 92 0 Tanzania Commission for AIDS 43 42 4.3 14 70.95 Regions 120.9 129 0 1686 1582 207 5 206.8 270 0 252 6 304.4 301 3 375 7 374 9 420.2 221 3 Sub Total 220.8 228.7 264.6 248.1 333.9 332.0 130.8 409.9 488.9 483.1 618.7 615.5 681.7 351.5 ECONOMIC SERVICES 47 0 Work 4.9 63 38.0 29.0 56 0 55.9 51 6 49 0 55.1 51 9 63 2 63 2 62.1 31 3 48 0 Land%Hous.,& Urb. Dev. 34 28 36 36 43 4.2 47 47 5.0 49 59 57 5.7 26 58.0 Energy and Minerals. 2.0 19 3.0 2.9 37 3.7 22 8 22 6 19.0 18 8 25 2 25 0 133.0 64 6 62.0 C o r n . & Trwport 13.4 13 0 10.7 11.9 IO5 10.4 12 0 II2 38.0 37 0 68 2 68 2 23.1 I62 Sub Total 23.7 24.0 55.3 47.4 74.4 74.2 91.1 87.4 117.1 112.6 162.5 162.1 223.9 114.8 PRODUCTIVE 24.0 Cooperatives &Marketing 55 54 6.3 61 71 71 7.3 23 43.0 Agriculture & Food Security 19.3 I83 12.3 7.4 12 I 12.1 96 87 16.2 15 7 41 5 41 2 35.0 I84 44.0 Industries and Trade 4.6 46 3.6 3.4 41 41 58 52 7.6 74 81 81 7.4 38 69.0 Tour., Nat Res. & Env. 7.9 80 8.7 7.4 13 5 11 6 14 8 14 I 20.5 20 2 26 3 26 3 28.2 13 0 Sub Total 31.9 30.9 24.7 18.2 29.7 27.8 35.7 3*4 50.6 49.3 83.0 827 77.8 37.4 CFS 20.0 State house 0.9 09 1.0 1.0 II 1.1 14 14 2.0 19 35 34 4.2 20 22.0 Public Debt 238 0 232 2 294.4 286.7 286 4 261.9 337.5 275 I 321.6 262 5 311.7 305.8 477.0 1139 Sub Total 238.9 233.1 295.3 281.7 287.5 163.0 338.9 276.5 323.6 164.4 315.2 309.2 481.2 115.9 GRAM) TOTAL 789.2 780.0 936.1 881.2 1058.6 1033.1 1425.3 1288.0 1499.2 1416.3 1906.7 1890.7 2255.9 958.5 . Note: * Data for FYO5 are from the Expenditure Flash Reports (July 2004 December 2004) Source: MoF (ConsolidatedAppropriations Accounts and ExpenditureFlash Report). 154 - PEFAR FY05 United Republic of Tanzania - Table A6b: Sectoral Development Expenditure (in Bill. Tsh.) 155 PEFAR- FY05 United Republic of Tanzania VOTE VOTE HOLDER 1998199 1998199 1999/00 1999100 2000101 2000101 2001/02 2001102 2002/03 2002103 2003104 2003/04 2004105 2004/054 Budget Actual Budget Actual Budget Actual Budeet Actual Budget Actual Budget Actual Budget Actua ADMINISTRATION 23.0 Accountant General 0.0 0.0 0.0 00 II 07 14 0.2 1.5 0.4 1.5 14 11 3 0 27.0 Registrar of Political Patties 0.0 0.0 0.0 00 00 00 00 00 0.0 0.0 0.0 00 00 0 30.0 PresidentsOffice & The Cabinet 0.0 0.0 3.6 36 104 52 91 7.2 12.3 28.6 35.0 28 6 34 3 0 5 & 31 Vice President 24 0.8 5.9 16 83 05 45 0.2 7.2 3.7 9.3 93 11 0 1 32.0 Civil Service Dept. 04 0.0 3.9 83 68 68 86 8.4 11.3 2.5 154 94 36 0 7 33 0 Ethics Secretariat 0.0 0.0 0.0 00 00 00 00 00 0.0 0.0 0.0 00 00 0 34.0 Foreign Affairs 0.0 0.0 0.0 00 00 00 00 0.0 0.0 0.0 0.0 00 00 0 35.0 Permanent C o r n o f Enquily 00 00 0.0 00 00 00 00 0.0 0.0 0.0 0.0 00 00 0 36.0 Civil Service Comm 00 0.0 00 00 00 00 00 0.0 0.0 0.0 0.0 00 00 0 37 0 Prime Minister'sOffice 0.1 0.1 34 30 42 04 22 0.4 5.9 5.0 4.2 41 I23 1 40.0 Judiciary 0.0 0.0 0.0 00 08 08 04 02 0.4 0.4 1.7 17 27 0 41.0 Justice & Constitutional Affairs 0.2 0.0 0.0 00 00 00 12 0.6 2.9 0.6 4.5 14 44 0 42.0 Office ofThe Speaker 0.0 0.0 0.0 00 05 05 00 0.0 0.0 0.0 4.5 45 19 0 45 0 Exchequer & Audit Department 0.0 0.0 0.0 00 06 01 I O 0I 0.8 0.2 1.6 02 16 0 50.0 Finance 174 00 6.4 16 98 15 349 1.3 27.7 9.1 21.3 15 5 16 5 0 51.0 Home Affairs 0.0 00 0.0 00 00 00 00 0.0 0.0 0.0 0.0 00 00 0 54.0 Radio Tanzania 0.0 0.0 04 03 03 03 03 0.3 0.3 0.3 0.3 03 00 0 55.0 Comm ofHuman Rights & Good Gov .. . .. 00 00 1.1 0.0 1.1 00 00 0 56.0 Regional Adminisstrationand Local Gov. .. . 17.4 00 271 131 703 58.3 109.7 74.2 IO6 1 45 7 141 3 4 57 0 Defence &National 1.0 0.0 1.0 00 I O 10 I O 1.0 9.1 9.1 24.0 24 0 45 0 16 59.0 Law Reform Comm. 0.0 00 0.0 00 00 00 05 0.1 0.2 0.2 0.2 02 00 0 60.0 Industries Court of Tanzania 0.0 0.0 0.0 00 00 00 00 0.0 0.0 0.0 00 00 03 0 61.0 ElectoralCommission 0.8 .. 0.8 00 00 00 00 00 0.0 0.0 0.0 00 63 0 63.0 Local Go- Servece Comm 0.0 00 0.0 00 00 00 00 0.0 0.0 0.0 00 00 00 0 64.0 Commercial Court .. .. ., 02 0.0 0.3 0.0 03 00 02 0 66 0 Planning Comm. 1.5 0.6 1.3 I S 25 22 27 0.4 15.9 9.2 16.7 72 14 7 0 90.0 Land Court .. 0.0 0.0 00 00 00 0 91 0 Drugs Control Commission .. 0.0 0.0 0.0 00 00 0 93.0 Immigration Department .n o . 0 94.0 Public Service Commission 00 0. Sub Total 23.8 1.5 44.2 20.0 12.2 32.9 138.2 78.7 206.7 143.5 247.8 153.7 339.9 34 DEFENCE AND SECURITY 28 0 Police Force 0.0 0.0 0.0 00 00 00 03 03 33 33 53 53 53 1 29.0 Prison Services 0.0 0.0 0.0 00 00 00 00 00 29 29 29 29 29 0 38.0Defence 0.0 0.0 0.0 00 00 00 00 00 00 00 00 00 00 0 39.0 National Snvice 0.0 0.0 0.0 00 00 00 00 00 00 00 00 00 00 0. Sub Totsl 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.3 6.2 6.2 8.2 8.1 8.2 2 SOCIAL SERVICES 46 0 Education 109 103 167 115 221 198 190 7.9 83.4 57.5 86 9 708 1056 64 49.0 Water 307 191 308 86 296 110 159 6.1 46.0 11.7 46 1 388 1046 5. 52.0 Health 215 116 232 102 342 255 425 30.1 62.8 62.4 447 439 91 2 4. 53.0 Comm. Dev & W 24 15 26 13 16 15 I S I5 2.7 02 14 07 09 0. 65.0 Labor Youth 17 04 21 06 30 03 17 1.7 3.1 0.1 81 47 553 0. 67.0 Teacher's Service Comm 00 00 00 00 00 00 00 0.0 0.0 0.0 00 00 00 0. 68.0 Science, Tech 47 20 51 16 42 42 42 3.3 11.1 10.1 IS 8 88 140 I. 92.0 Tanzania Commission for AIDS IO4 42 224 0 '0 - 95Regions 292 98 292 00 00 00 366 23.1 35.6 18.9 35 5 28 1 446 2. Sub Total 101.0 54.7 109.7 33.8 94.7 62.2 121.5 73.7 244.8 160.8 249.0 200.0 438.7 79. ECONOMIC SERVICES 47.0 Works & Trans 51 1 191 358 20.6 31.7 16.7 52.5 50.1 133.5 902 140.9 69.6 184.2 35 48.0 Lands, Housing 00 00 05 0.0 0.9 0.9 0.7 0.7 10.0 100 0.8 0.8 0.7 0. 58.0 Energy and Minerals 238 161 212 9.9 30 5 5.3 8.0 4.6 74.1 8.0 61 6 47.3 46.9 I. 62.0 Comm & Transport 92 92 I00 10.0 22.4 22.4 7.6 7.6 13.3 8.9 32.5 32.5 19.3 1. Sub Total 84.2 44.4 67.5 40.4 85.5 45.2 68.8 63.0 230.9 117.1 235.7 150.2 251.1 38. PRODUCTIVE 24.0 Cooperatives & Marketing 00 0.1 1.2 1.0 0.4 2.3 4.1 0. 43 0 Agriculture & Food Security 23.3 9.5 28.1 118 167 130 160 14.7 18.6 14.5 31.5 19.2 29.1 5. 44.0 Industries&Trade 0.3 0.1 12 03 04 02 I 2 1.2 08 0.3 1.8 0.2 1.6 0 69.0 Tou~ism, Nat. 77 0.1 3.7 00 55 51 44 3.9 10.9 5.3 28.9 7.9 19.0 0. Sub Totsl 31.2 9.7 33.0 12.1 22.6 18.4 21.5 19.9 31.5 21.1 62.7 29.6 53.7 6. CONSOLIDATED FUM) SERVICE 20 0 State House 00 00 00 0.0 0.0 0.0 0.0 00 00 00 00 00 00 0. 22 0 Public Service 00 00 00 0.0 0.0 0.0 0.0 00 00 00 00 00 00 0. Sub Total 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0. GRAND TOTAL 240.2 110.4 254.3 106.3 275.1 158.8 350.3 235.5 720.1 448.6 803.3 541.6 1091.6 160. Note * Data for FYO5 are from the Expenditure Flash Reports (July 2004 - Decemkr 2004) Source MoF (ConsolidatedAppropriations Accounts and ExpenditureFlash Report). 156 - PEFAR FY05 United Republic of Tanzania - Table A6c: Sectoral Total Expenditure (in Bill. Tsh.) 157 PEFAR - FY05 United Republic of Tanzania VOTEVOTE HOLDER 1998199 1998199 I999100 1999100 2000/01 20001012001102 20011022002103 2002103 2003104 2003/04 2004105 2004105' Budeet Actual Budget Actual Budget Actual B u d m Actual Budget Actual Budget Actual Budget Actua ADMINISTRATION 23 0 Accountant General 0.0 0.0 00 0.0 23.6 23.1 100 I 905 25 8 22.5 122 1 120.6 82.6 29 27.0 Registrar of Political Parties 26 2.6 27 1.3 2.8 2.7 39 38 80 8.0 8.7 8.7 8.7 4 30.0 Presidents Office 15.7 15.5 23 2 22.9 35 I 29.9 402 383 52 7 68.9 84.3 77 9 92.7 32 j & 31 Vice President 3.3 1.7 7.0 2.6 9.7 I.9 69 26 22 5 19.0 324 32.3 29.8 13 32.0 Civil Service Dept. 4.0 3.7 7.3 11.7 11.2 I11 144 139 15 9 6.7 20.9 15.0 41.0 10 33.0 Ethics Secretariat 0.2 0.2 02 0I 0.2 0.2 03 03 03 0.3 0.5 0.5 0.7 0 34.0 Foreign Affairs 18.3 19.4 17 1 16.6 20.5 24.5 293 27 8 33 8 34.6 440 44.0 336 31 3 5 . 0 P m . Comm. Enq 0.3 0.3 02 0.2 .. 0.3 00 00 00 0.0 0.0 0.0 0.0 0 36 0 Civil Sewice Comm 0.2 02 0.2 0.2 0.3 0.5 06 05 06 06 0.7 07 0.0 0 37.0 Prime MinistersOffice 14.2 6.1 8.1 7.7 9.2 5.4 133 86 20 3 19.3 16.3 16.1 280 8 40.0 Judiciary 5.4 53 7.9 6.0 9.6 9.6 124 120 I3 6 13.5 18.6 18.6 21.7 8 41.0 Justice 2.4 1.9 1.1 0.9 1,s 1.5 36 29 68 4.4 9.4 6.3 9.8 3 42.0 Office O f The Speaker 5.3 5.4 5.9 5.9 7.1 7.0 87 84 10 7 10.3 20.6 20.5 18.5 9 45.0 Exchequer and Audit 0.8 0.8 1.1 1.1 2.3 1.8 29 20 36 2.9 6.0 4.5 6.8 2 50.0 Finance 68.5 51.9 56.1 50.2 50.8 42.4 1233 596 86 5 62.9 99.4 91.3 163.0 40 51 0 H o w Affairs 4.6 4.6 5.8 4.8 5.6 5.6 69 59 76 7.0 9.3 9.0 3.0 I 54.0 Radio Tanzania I.2 1.1 1.6 1.4 1.9 1.5 20 17 35 3.2 4.1 41 0.0 0 55.0 Comm of HumanRights & Good GOY. .. , .. .. 09 07 21 07 3.0 1.0 2.2 0 56.0 Regional Adminisstration and Local GOY 6.2 27 22.7 16.7 31.0 17.0 908 787 134 2 97.8 136.9 76.5 177.9 18 57.0 Defence& National. 5,s 3.1 3.3 2.3 51 5.1 4.4 4.4 12.9 12.9 29.2 29.2 50.0 18 59.0 Law Reform Commi. 0.1 0.1 0.1 0.1 0.2 0.2 0.7 0.3 0.5 0.5 0.7 0.7 0.5 0 60.0 Industrial Court Of Tz. 0.1 01 0.2 0.1 0.3 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.8 0 61 .O ElectoralCommision 3.8 .. 17.0 5.9 309 30.6 0.7 0.7 23 2.2 20.3 20.3 36.5 13 63 0 Local Govt Servi. Comm 0.2 02 02 0.2 0.3 0.3 0.4 0.4 0.6 0.6 0.7 0.7 0.0 0 64 0 Commercial C o w .. . .. .. .. , 0.7 0.5 1.0 06 1.0 0.7 0.8 0 66.0 Planning Commission 4.1 3.2 3.2 2.9 4.8 4.5 16.6 13.9 36.1 29.2 24.5 15.0 22.7 4 90 0 Land Court 0.4 0.4 0.5 0.4 05 0 91 0 h g s Control Commission 0.6 06 0.6 0.6 0.6 0 93.0 Immigration Department 7.3 2 94 0 Public Service Commission 6.4 2 Sub Total 166.9 133.0 192.3 162.0 240.7 203.8 484.1 378.6 503.5 430.0 714.9 615.5 845.9 256 DEFENCE AND SECURITY 28.0 Police Force 29.1 29.7 34.9 32.2 42.0 41.9 43 4 42.2 56.2 55.3 73.0 72.4 86.8 34 29.0 Prison Services 16.4 16.4 19.4 16.2 20.9 20.8 23.4 23.1 32.2 32.1 39.8 396 42.5 17 38.0 Defence 73.2 .. 81.7 78 5 89.2 89.2 100.0 99.7 118.6 117.9 130.0 130.0 136.6 51 39.0 National Service 11.4 11.8 12.1 10.9 12.5 12.5 16.4 162 21.5 21.5 25.5 25.5 276 I5 Sub Total 130.8 131.9 148.1 137.8 164.6 164.4 183.1 181.2 228.4 226.1 268.4 267.5 293.5 119 SOCIAL SERVICES 46 0 Education 304 29.8 37.7 32.1 50.8 48.4 56.4 43.9 124.2 97.3 138.5 120 5 158.4 93 49 0 Water, 37.1 25.5 34.2 12.0 35.5 25.2 25.4 15.0 62.8 27.7 62.3 55 1 124.2 12 52.0 Health 58 7 48.7 57.0 42 2 74.3 65.4 91 6 78 3 117.3 116.4 130.3 129.0 1957 56 53.0 Comm. Dev.Wow. Aff, 41 3.4 4.9 2.8 3.6 35 4.4 4.4 6.2 3.5 5.4 4.8 5.0 I 65.0 Labour Youth Develop. 3.7 2.3 51 2.2 6.2 3.3 60 6.0 8.0 48 13.7 10.3 61.1 2 67 0 Teachers Service Comm. 01 0.1 0.2 0.2 15 5.7 1.8 17 1.9 1.9 2.1 2.1 0.0 0 68.0 Science, Tech & H Ed 37.5 348 37.4 32.2 49.1 44.7 60.1 58.6 73.4 72.1 89.4 824 84.3 38 92.0 Tanzania Commissionfor AIDS 147 8.4 26.8 I ' & 89Regions 150 1 138.8 197.8 158.2 207.5 206.8 306.6 275.7 340.0 320.2 411.3 403.0 464.9 224 Sub Total 321.8 283.5 374.3 281.9 428.6 394.2 552.3 483.6 733.7 643.9 867.1 815.5 1120.4 430 ECONOMIC SERVICES 47.0 Works 56.1 25.4 73.8 49.6 877 72.6 104.1 99.1 188.6 142.1 204.1 132.7 246.3 66 48.0 Lands, Hous.,& Urb. Dev. 3.4 2.8 4.1 3.6 5.2 5.1 5.4 5.4 15.0 14.9 6.6 6.5 6.4 2 58.0 Energy and Minerals. 25.8 18.0 24.2 12.7 34.1 8.9 30.8 27.2 93.1 26.7 86.8 72.4 179.9 65 62.0 Comm & Transport 22.6 22.2 20.7 21.9 32.8 32.8 19.6 18.8 51.3 45.9 100.7 100.7 42.3 17 Sub Total 107.9 68.4 122.8 87.9 159.9 119.5 159.9 150.4 348.0 229.6 398.2 312.3 475.0 152 PRODUCTIVE 24.0 Cooperatives &Marketing 5.5 5.5 7.5 7.0 7.5 9.5 11.4 2 43.0 Agriculture & Food Security 42.6 27.8 40.4 19.2 28.8 25.1 25.6 23.4 34.8 30.2 73.0 60.4 64.1 24 44.0 Industries and Trade 5.0 4.7 4.8 3.6 45 4.4 7.0 6.4 8.4 7.6 10.0 8.3 8.9 4 69 0 Tour., Nat. Res. & Env. 15.6 81 12.5 7.4 19.0 16.7 19.2 18.0 31.5 25.5 55.2 34.1 47.1 13 Sub Total 63.1 40.6 57.7 30.3 52.3 46.2 57.2 53.3 82.1 70.4 145.7 112.4 131.5 43. CONSOLIDATED WND SERVICE 20 0 State house 09 09 I O I O I 1 11 14 14 20 19 35 34 42 2 22 0 Public Debt 2380 232 2 2944 2867 2864 261 9 337 5 275 1 321 6 2625 3117 3058 4770 113 Sub Total 238.9 233.1 295.3 287.7 za1.5 2m.o 338.9 276.5 323.6 264.4 315.2 309.2 481.2 115. GRAND TOTAL 1029.5 890.4 1190.5 987.5 1333.7 1191.1 1775.6 1523.5 2219.3 1865.0 2710.0 2432.3 3347.5 1119.1 Note * Data for N O 5 are from the Expenditure Flash Reports (July 2004 .Decemkr 2004) Source MoF (ConsolidatedAppropriations Accounts and Expenditure Flash Report). 158 - PEFAR FY05 United Republic of Tanzania Table A7a: Actual Recurrent Expenditure by Vote as the Share o f Total Actual Recurrent Expenditure VOTEVOTE HOLDER 1998199 19991OC 2000101 2001/02 2002103 2003104 2004105 ADMINISTRATION 23.CAccountant General 0.00 0.oc 2.17 7.01 1.56 6.30 27.ORegistrar o f Political Parties 0.33 0.15 0.26 0.30 0.57 0.46 30.0Presidents Ofice 1.99 2.19 2.39 2.41 2.84 2.61 3 1.02nd Vice President 0.11 0.12 0.14 0.19 1.08 1.22 32.OCivil Service Dept. 0.47 0.38 0.42 0.43 0.29 0.29 33.0Ethics Secretariat 0.02 0.01 0.02 0.02 0.02 0.03 34.0Foreign Affairs 2.48 1.88 2.37 2.16 2.44 2.33 35.OPem C o r n . Enq. 0.03 0.02 0.03 0.00 0.oc 0.00 36.0Civil Service C o r n . 0.03 0.02 0.05 0.04 0.04 0.04 37.OPnme Ministers Ofice 0.77 0.53 0.49 0.64 1.01 0.63 40.0Judiciary 0.68 0.68 0.85 0.92 0.92 0.89 41.OJustice 0.25 0.lC 0.15 0.18 0.27 0.26 42.00fice O f The Speaker 0.69 0.67 0.64 0.65 0.73 0.85 45.0Exchequer and Audit 0.10 0.12 0.17 0.15 0.19 0.23 50.0Finance 6.65 5.51 3.96 4.53 3.8C 4.00 5 1.OHome Affairs 0.60 0.55 0.54 0.46 0.5C 0.48 54.0Radio Tanzania 0.14 0.13 0.11 0.11 0.2c 0.20 55.OComm o f Human Rights & Good Gov. 0.05 0.05 0.05 56.0Regional Adminisstration and Local Gov. 0.35 1.89 0.37 1.58 1.67 1.63 57.ODefence & National. 0.39 0.26 0.40 0.26 0.27 0.27 59.OLaw Reform Commi. 0.01 0.01 0.02 0.02 0.02 0.03 60.0Indusbial Court OfTz. 0.02 0.02 0.03 0.02 0.03 0.02 61.0Electoral Commision 0.38 0.65 2.96 0.05 0.16 1.08 63.OLocal Govt. Servi. C o r n . 0.02 0.02 0.02 0.03 0.04 0.04 64.0Commercial Court 0.04 0.04 0.04 66.0Planning Commission 0.33 0.15 0.22 1.05 1.41 0.41 90.0Land Court 0.03 0.02 91.OAnti-Drug Commission 0.04 0.03 93.0Immigration Department 94.OPublic Service Commission Sub Total 16.85 16.11 16.61 23.29 20.23 24.42 DEFENCE AND SECURITY 28.OPolice Force 3.81 3.65 4.05 3.25 3.67 3.55 29.OPrison Services 2.11 1.84 2.02 1.79 2.06 1.94 38.ODefence 9.48 8.91 8.63 7.74 8.32 6.88 39.0National Service 1.51 1.24 1.21 1.26 1.52 1.35 Sub Total 16.91 15.64 15.91 14.04 15.57 13.72 SOCIAL SERVICES 46.0Education 2.50 2.34 2.77 2.79 2.81 2.63 49.OWate1, 0.82 0.38 0.52 0.69 1.13 0.86 52.OHealth 4.76 3.64 3.86 3.74 3.81 4.51 53.0Comm Dev.Wome. Aff. 0.23 0.16 0.19 0.23 0.24 0.22 65.0Labour Youth Develop. 0.26 0.17 0.30 0.33 0.33 0.29 67.0Teachers Service C o r n . 0.01 0.03 0.15 0.13 0.13 0.11 68.OScience, Tech.& H Ed 4.20 3.45 4.33 4.29 4.38 3.89 92.CTanzania Commission for AIDS 0.22 - 70 89Regions 16.54 17.95 20.02 19.61 21.28 19.83 Sub Total 29.33 28.15 32.14 31.82 34.11 32.56 ECONOMIC SERVICES 47.0Works. 0.81 3.3c 5.42 3.80 3.66 3.34 48.OLands, Horn.,& Urb. Dev. 0.35 0.41 0.40 0.36 0.34 0.30 58.0Energy and Minerals. 0.25 0.33 0.35 1.75 1.33 1.32 62.0 Comm.& Transport 1.66 1.35 1.01 0.87 2.61 3.61 Sub Total 3.08 5.38 7.19 6.78 7.95 8.57 PRODUCTIVE 24.0Cooperatives& Marketing 0.42 0.43 0.38 43.0Agriculture & Food Security 2.35 0.84 1.17 0.68 1.11 2.18 44.0Indrntries and Trade 0.59 0.38 0.40 0.40 0.52 0.43 69.CTour., Nat. Res. & Env. 1.02 0.84 1.12 1.10 1.43 1.39 Sub Total 3.96 2.07 2.69 2.60 3.48 4.38 CONSOLIDATED FUND SERVICE 20.0State house 0.11 0.11 0.11 0.11 0.13 0.18 22,OPublicDebt 29.77 32.53 25.35 21.36 18.54 16.18 __ Total Suh - . ... .. 29.88 32.65 25.46 21.47 18.67 16.36 GRAND TOTAL ioo.oa ioo.oa ioo.oa ioo.oa ioo.oa 1oo.00 loo.oO( lource: Table A6a. 159 - PEFAR FYOS United Republic of Tanzania Table A7b: Actual Development Expenditure by Vote as the Share o f Total Actual Development Expenditure VOTEVOTE HOLDER 1998/99 1999100 2000/01 2001102 2002/03 2003104 2004/05 ADMINISTRATION 23.OAccountant General 0.00 0.00 0.42 0.08 0.08 0.26 27.ORegistrar o f Political Parties 0.00 0.00 0.00 0.00 0.00 0.00 30.0Presidents Ofice 0.00 3.39 3.28 3.06 6.38 5.29 3 1.02nd Vice President 0.74 1.51 0.30 0.08 0.83 1.72 32.0Civil Service Dept. 0.00 7.85 4.28 3.57 0.56 1.74 33.0Ethics Secretariat 0.00 0.00 0.00 0.00 0.00 0.00 34.0Foreign Affairs 0.00 0.00 0.00 0.00 0.00 0.00 35.OPerm. C o r n . Enq. 0.00 0.00 0.00 0.00 0.00 0.00 36.OCivil Service C o r n . 0.00 0.00 0.00 0.00 0.00 0.00 37.OPrime Ministers O f i c e 0.09 2.83 0.25 0.17 1.12 0.76 40.0Judiciary 0.00 0.00 0.50 0.08 0.09 0.31 41.OJustice 0.00 0.00 0.00 0.25 0.12 0.26 42.00fice O f The Speaker 0.00 0.00 0.30 0.00 0.00 0.83 45.0Exchequer and Audit 0.00 0.00 0.03 0.04 0.04 0.04 50.0Finance 0.00 1.53 0.94 0.54 2.02 2.87 51.OHome Affairs 0.00 0.00 0.00 0.00 0.00 0.00 54.ORadio Tanzania 0.00 0.25 0.19 0.13 0.07 0.06 55.0Comm o f Human Rights & Good Gov. 0.00 0.00 0.00 56.0Regional Adminisstration and Local Gov. 0.00 0.04 8.25 24.75 16.54 8.44 57.ODefence & National. 0.00 0.00 0.63 0.42 2.02 4.43 59.OLaw Reform. Commi. 0.00 0.00 0.00 0.04 0.04 0.04 60.0Industrial Court O f Tz. 0.00 0.00 0.00 0.00 0.00 0.00 61.0Electoral Commision 0.00 0.00 0.00 0.00 0.00 0.00 63.OLocal Govt. Servi. C o r n . 0.00 0.00 0.00 0.00 0.00 0.00 64.0Cornercial Court 0.00 0.00 0.00 0.00 66.OPlanning Commission 0.55 1.42 1.37 0.11 2.05 1.32 90.0Land Court 0.00 0.00 9 1.OAnti-Drug Commission 0.00 0.00 93.0Immigration Department 94.OPublic Service Commission Sub Total 1.39 18.82 20.74 33.40 31.98 28.37 DEFENCE AND SECURITY 28.CPolice Force 0.00 0.00 0.00 0.13 0.74 0.91 29.OPrison Services 0.00 0.00 0.00 0.00 0.65 0.53 38.ODefence 0.00 0.00 0.00 0.00 0.00 0.00 39.ONational Service 0.00 0.00 0.00 0.00 0.00 0.00 Sub Total 0.00 0.00 0.00 0.13 1.38 1.50 SOCIAL SERVICES 46.0Education 9.29 10.79 12.49 3.35 12.81 13.07 49.OWater, 17.32 8.07 6.91 2.59 2.61 7.17 52,OHealth 10.50 9.59 16.05 12.78 13.90 8.10 53.0Comm Dev.Wome. A& 1.39 1.26 0.92 0.64 0.04 0.13 65.OLabow Youth Develop. 0.32 0.61 0.16 0.72 0.03 0.88 67.0Teachers Service C o r n . 0.00 0.00 0.00 0.00 0.00 0.00 68.0Science, Tech.& H Ed 1.85 1.47 2.65 1.40 2.25 1.62 92.0TanzaniaCommission for AIDS 0.00 0.77 70 & 89Regions 8.91 0.00 0.00 9.81 4.21 5.19 Sub Total 49.59 31.78 39.19 31.29 35.84 36.92 ECONOMIC SERVICES 47.0Works. 17.31 19.38 10.50 21.21 20.11 12.85 48.OLands, How.,& Urb. Dev. 0.00 0.00 0.56 0.30 2.23 0.14 58.0Energy and Minerals. 14.56 9.27 3.34 1.95 1.77 8.74 62.0 C o r n . & Transport 8.33 9.41 14.10 3.23 1.98 6.00 Sub Total 40.21 38.06 28.50 26.75 26.10 27.73 PRODUCTIVE 24.0Cooperatives & Marketing 0.00 0.02 0.22 0.43 43.0Agriculture & Food Security 8.60 11.09 8.19 6.24 3.24 3.54 44.0Industries and Trade 0.11 0.26 0.15 0.51 0.06 0.04 69.OTow., Nat. Res. & Env. 0.10 0.00 3.22 1.66 1.18 1.46 Sub Total 8.81 11.35 11.57 8.43 4.70 5.47 CONSOLIDATED FUND SERVICE 20.0State house 0.00 0.00 0.00 0.00 0.00 0.00 22.OPublic Debt 0.00 0.00 0.00 0.00 0.00 0.00 Sub Total 0.00 0.00 0.00 0.00 0.00 0.00 GRAND TOTAL ioo.oa ioo.oa ioo.oa ioo.oa ioo.oa ioo.oa lOO.OO( 160 - PEFAR FY05 United Republic of Tanzania Source: Table A6b 161 PEFAR FY05 - United Republic of Tanzania Table A7c: Total Actual Expenditureby Vote as the Share of Total Actual Expenditure VOTE VOTE HOLDER 1998199 1999/00 2000/01 2001/02 2002i03 2003i04 2004/05 ADMINISTRATION 23.0 Accountant General 0.00 0.00 1.94 5.94 1.21 4.96 2.61 27.0 Registrar o f Political Parties 0.29 0.13 0.23 0.25 0.43 0.36 0.36 30.0 Presidents Office 1.74 2.32 2.51 2.51 3.69 3.20 2.90 31.0 2nd Vice President 0.19 0.27 0.16 0.17 1.02 1.33 1.24 32.0 Civil Service Dept. 0.41 1.19 0.93 0.91 0.36 0.61 0.92 33.0 Ethics Secretariat 0.02 0.01 0.02 0.02 0.01 0.02 0.02 34.0 Foreign Affairs 2.17 1.68 2.06 1.82 1.85 1.81 2.79 35.0 Perm. Comm. Enq. 0.03 0.02 0.03 0.00 0.00 0.00 0.00 36.0 Civil Service C o r n . 0.02 0.02 0.04 0.03 0.03 0.03 0.00 37.0 Prime Ministers Office 0.69 0.78 0.45 0.56 1.03 0.66 0.79 40.0 Judiciary 0.59 0.61 0.80 0.79 0.72 0.76 0.79 41.0 Justice 0.22 0.09 0.13 0.19 0.23 0.26 0.29 42.0 Office Of The Speaker 0.61 0.60 0.59 0.55 0.55 0.84 0.86 45.0 Exchequer and Audit 0.09 0.11 0.15 0.13 0.16 0.19 0.22 50.0 Finance 5.83 5.08 3.56 3.91 3.37 3.75 3.59 51.0 Home Affairs 0.52 0.49 0.47 0.39 0.38 0.37 0.11 54.0 Radio Tanzania 0.12 0.14 0.12 0.11 0.17 0.17 0.00 55.0 Comm o f Human Rights & Good Gov. 0.05 0.04 0.04 0.04 56.0 Regional Adminisstration and Local Gov. 0.31 1.69 1.42 5.17 5.25 3.14 1.64 57.0 Defence &National. 0.34 0.24 0.43 0.29 0.69 1.20 1.66 59.0 Law Reform. Commi. 0.01 0.01 0.02 0.02 0.02 0.03 0.02 60.0 Industrial Court O f Tz. 0.02 0.02 0.03 0.02 0.02 0.02 0.02 61.0 Electoral Commision 0.00 0.60 2.57 0.05 0.12 0.84 1.19 63.0 Local Govt Servi. Comm. 0.02 0.02 0.02 0.03 0.03 0.03 0.00 64.0 Commercial Court 0.03 0.03 0.03 0.02 66.0 Planning Commission 0.36 0.29 0.37 0.91 1.57 0.61 0.37 90.0 Land Court 0.02 0.02 0.02 91.0 Anti-Drug Commission 0.03 0.03 0.03 93.0 Immigration Department 0.24 94.0 Public Service Commission 0.19 Sub Total 14.93 16.40 17.11 24.85 23.05 25.30 22.92 DEFENCE AND SECURITY 28.0 Police Force 3.34 3.26 3.52 2.77 2.96 2.98 3.09 29.0 Prison Services 1.84 1.64 1.75 1.52 1.72 1.63 1.55 38.0 Defence 7.95 7.49 6.54 6.32 5.35 4.64 39.0 National Service 1.33 1.11 1.05 1.06 1.15 1.os 1.38 Sub Total 14.81 13.95 13.80 11.89 12.16 11.00 10.66 SOCIAL SERVICES 46.0 Education 3.35 3.25 4.07 2.88 5.21 4.95 8.35 49.0 Water, 2.87 1.21 2.12 0.98 1.49 2.26 1.12 52.0 Health 5.47 4.28 5.49 5.14 6.24 5.31 5.03 53.0 C o r n Dev.Wome. Aff. 0.38 0.28 0.29 0.29 0.19 0.20 0.15 65.0 Labour Youth Develop. 0.26 0.22 0.28 0.39 0.26 0.42 0.23 67.0 Teachers Service Comm. 0.01 0.02 0.48 0.1 1 0.10 0.09 0.00 68.0 Science, Tech.& H Ed 3.91 3.26 3.76 3.85 3.87 3.39 3.46 92.0 Tanzania Commission for AIDS 0.00 0.35 0.13 70 & 89 Regions 15.59 16.02 17.36 18.10 17.17 16.57 20.04 Sub Total 31.84 28.54 33.10 31.74 34.52 33.53 38.50 ECONOMIC SERVICES 47.0 Works. 2.86 5.03 6.10 6.50 7.62 5.46 5.96 48.0 Lands, How.,& Urb. Dev. 0.31 0.37 0.43 0.35 0.80 0.27 0.25 58.0 Energy and Minerals. 2.02 1.29 0.75 1.79 1.43 2.98 5.87 62.0 C o r n . & Transport 2.49 2.21 2.76 1.23 2.46 4.14 1.57 Sub Total 7.68 8.90 10.03 9.87 12.31 12.84 13.66 PRODUCTIVE 24.0 Cooperatives & Marketing 0.00 0.36 0.38 0.39 0.21 43.0 Agriculture & Food Security 3.12 1.94 2.11 1.54 1.62 2.48 2.14 44.0 Industries and Trade 0.53 0.37 0.37 0.42 0.41 0.34 0.35 69.0 Tour., Nat. Res. & Env. 0.91 0.75 1.40 1.18 1.37 1.40 1.21 Sub Total 4.56 3.07 3.88 3.50 3.78 4.62 3.91 CONSOLIDATED FUND SERVICE 20.0 State house 0.10 0.10 0.09 0.09 0.10 0.14 0.18 22.0 Public Debt 26.08 29.03 21.99 18.06 14.08 12.57 10.18 Sub Total 26.17 29.13 22.08 18.15 14.18 12.71 10.36 GRAND TOTAL 100.00 100.00 100.00 100.00 100.00 100.00 100.00 162 PEFAR FY05 - United Republic of Tanzania Source: Table A6c, Table ASa: Actual Recurrent Expenditure as a Percentage o f Budgeted Recurrent Expenditure by Vote VOTE VOTE HOLDER 1998/99 1999100 2000/01 2001102 2002/03 2003104 2004105 ADMINISTRATION 23.0 Accountant General 100 91 91 99 41 27.0 Registrar o f Political Parties 100 50 99 98 100 100 47 30.0 Presidents Ofice 99 99 100 100 100 100 54 31.0 2nd Vice President 100 100 100 100 100 100 66 32.0 Civil Service Dept. 100 100 100 95 91 100 51 33.0 Ethics Secretariat 98 83 100 113 97 100 31 34.0 Foreign Affairs 106 97 120 95 102 100 93 35.0 Perm. Comm. Enq. 99 95 100 36.0 Civil Service Comm. 100 100 150 90 100 100 37.0 Prime Ministers Ofice 43 100 100 74 99 99 46 40.0 Judiciary 99 75 100 99 99 100 47 41.0 Justice 90 86 99 96 99 IO0 47 42.0 Ofice O f The Speaker 101 100 100 97 97 100 53 45.0 Exchequer and Audit 97 100 99 100 96 99 45 50.0 Finance 102 98 100 66 92 97 27 51.0 Home Affairs 101 83 100 85 93 97 40 54.0 Radio Tanzania 93 96 74 82 90 100 55.0 Comm o f Human Rights & Good Gov. 78 73 52 19 56.0 Regional Adminisstration and Local Gov 44 315 100 99 96 100 37 57.0 Defence & National. 68 100 100 100 100 100 48 59.0 Law Reform. Commi. 99 94 99 115 98 98 43 60.0 Industrial Court O f Tz. 100 88 100 87 95 99 47 61.0 Electoral Commision 99 36 99 100 98 100 44 63.0 Local Govt. Servi. Comm. 100 99 97 112 100 100 64.0 Commercial Court 102 77 100 43 66.0 Planning Commission 96 70 100 96 99 100 52 90.0 Land Court 89 99 44 91.0 Anti-Drug Commission 98 99 44 93.0 Immigration Department 37 94.0 Public Service Commission 34 Sub Total 92 96 102 81 97 99 44 DEFENCE AND SECURITY 28.0 Police Force 100 92 100 97 98 99 40 29.0 Prison Services 100 83 100 99 100 99 43 38.0 Defence 101 96 100 100 99 100 38 39.0 National Service 103 90 100 99 IO0 100 56 Sub Total 101 93 100 99 99 100 41 SOCIAL SERVICES 46.0 Education 100 98 100 96 97 96 54 49.0 Water, 100 100 91 94 96 100 36 52.0 Health 100 95 99 98 99 100 50 53.0 C o r n Dev.Wome. A& 103 62 100 100 97 100 40 65.0 Labour Youth Develop. 102 51 96 99 97 100 45 67.0 Teachers Service Comm. 100 100 100 97 100 100 68.0 Science, Tech.& H Ed IO0 95 100 99 100 100 53 92.0 Tanzania Commission for AIDS 99 32 70 & 89 Regions 107 94 100 94 99 100 53 Sub Total 104 94 99 95 99 99 52 ECONOMIC SERVICES 47.0 Works, 128 76 100 95 94 100 50 48.0 Lands, How.,& Urb. Dev. 80 100 97 100 98 97 46 58.0 Energy and Minerals. 98 97 100 99 99 99 49 62.0 Comm.& Transport 97 111 100 93 97 100 70 Sub Total 101 86 100 96 96 100 51 PRODUCTIVE 24.0 Cooperatives & Marketing 98 97 100 31 43.0 Agriculture & Food Security 95 60 100 91 97 99 52 44.0 Industriesand Trade 99 93 100 89 97 100 51 69.0 Tour., Nat. Res. & Env. 101 85 86 96 99 100 46 Sub Total 97 74 94 94 98 100 48 CONSOLIDATED FUND SERVICE 20.0 State house IO0 100 100 100 94 97 49 163 PEFAR FY05 - United RePublic of Tanzania 22.0 Public Debt 98 97 91 82 82 98 24 Sub Total 98 97 91 82 82 98 24 GRAND TOTAL 99 94 98 90 94 99 42 Source: Table A6a Table ASb: Actual Development Expenditure as a Percentage o f Budgeted Development Expenditureby Vote VOTE VOTE HOLDER 1998199 1999/00 2000101 2001102 2002103 2003/04 2004105 ADMINISTRATION 23.0 Accountant General 62 14 24 94 0 27.0 Registrar of Political Parties 30.0 Presidents O f i c e 100 50 79 233 82 2 31.0 2nd Vice President 34 21 6 4 51 100 14 32.0 Civil Service Dept. 0 211 100 97 22 61 21 33.0 Ethics Secretariat 34.0 Foreign Affairs 35.0 Perm. Comm. Enq. 36.0 Civil Service C o r n . 37.0 Prime Ministers Office 100 87 9 18 85 98 13 40.0 Judiciary 100 50 100 100 0 41.0 Justice 2 52 19 32 16 42.0 Office O f The Speaker 99 99 45 45.0 Exchequer and Audit 9 10 26 13 6 50.0 Finance 0 25 15 4 33 73 3 51.0 Home Affairs 54.0 Radio Tanzania 68 99 101 100 100 55.0 Comm o f Human Rights & Good Gov. 0 0 56.0 Regional Adminisstration and Local Gov. 0 48 83 68 43 3 57.0 Defence &National. 0 0 100 100 100 100 36 59.0 L a w Reform. C o d . 20 89 99 60.0 Industrial Court Of Tz. 0 61.0 Electoral Commision 0 0 63.0 Local Govt. Servi. C o r n . 64.0 Commercial Court 0 0 0 0 66.0 Planning Commission 42 120 86 15 58 43 0 90.0 Land Court 91.0 Anti-Drug Commission 93.0 Immigration Department 94.0 Public Service Commission Sub Total 6 45 46 57 69 62 10 DEFENCE AND SECURITY 28.0 Police Force 100 100 99 32 29.0 Prison Services 100 100 12 38.0 Defence 39.0 National Service Sub Total 100 100 99 25 SOCIAL SERVICES 46.0 Education 94 69 90 42 69 81 61 49.0 Water, 62 28 37 38 25 84 5 52.0 Health 54 44 75 71 99 98 5 53.0 C o r n Dev.Wome. A& 65 51 90 98 6 51 0 65.0 Labour Youth Develop. 21 30 9 100 4 58 0 67.0 Teachers Service C o r n . 68.0 Science, Tech.& H E d 44 31 100 78 91 55 12 92.0 Tanzania Commission for AIDS 40 0 70 & 89 Regions 34 0 63 53 79 7 Sub Total 54 31 66 61 66 80 18 ECONOMIC SERVICES 47.0 Works. 37 58 53 95 68 49 19 48.0 Lands, How.,& Urb. Dev. 0 98 100 100 100 22 58.0 Energy and Minerals. 67 46 17 58 11 77 2 62.0 C o r n . & Transport 100 100 100 100 67 100 7 Sub Total 53 60 53 92 51 64 15 PRODUCTIVE 24.0 Cooperatives & Marketing 82 594 1 43.0 Agriculture & Food Security 41 42 78 92 78 61 19 44.0 Industries and Trade 37 24 65 102 35 11 13 69.0 Tour., Nat. Res. & Env. 1 0 93 89 48 27 2 Sub Total 31 37 81 92 61 47 12 164 PEFAR FY05 - United Republic of Tanzania CONSOLIDATEDFUND SERVICE 20.0 Statehouse 22.0 Public Debt Sub Total GRAND TOTAL 46 42 58 67 62 67 15 Source: Table A6b Table A8c: Actual Total Expenditure as a Percentage o f Budgeted Total Expenditure by Vote VOTE VOTE HOLDER 1998/99 1999/00 2000/01 2001/02 2002/03 2003104 2004/05 ADMINISTRATION 23.0 Accountant General 98 90 87 99 35 27.0 Registrar o f Political Parties 100 50 99 98 100 100 47 30.0 Presidents Office 99 99 85 95 131 92 35 31.0 2nd Vice President 51 38 19 38 84 100 47 32.0 Civil Service Dept. 91 160 100 96 42 71 25 33.0 Ethics Secretariat 98 83 100 113 97 100 31 34.0 Foreign Affairs 106 97 120 95 102 100 93 35.0 Perm. Comm. Enq. 99 95 36.0 Civil Service Comm. 100 100 150 90 100 100 37.0 Prime Ministers Office 43 95 59 64 95 99 31 40.0 Judiciary 99 75 100 97 99 100 41 41.0 Justice 81 86 99 82 65 68 33 42.0 Office O f The Speaker 101 100 100 97 97 100 52 45.0 Exchequer and Audit 97 100 78 70 81 75 36 50.0 Finance 76 89 83 48 73 92 25 51.0 Home Affairs 101 83 100 85 93 97 40 54.0 Radio Tanzania 93 89 78 85 91 100 55.0 Comm o f Human Rights & Good Gov. 78 34 32 19 56.0 Regional Adminisstration and Local Gov. 44 73 55 87 73 56 10 57.0 Defence & National. 56 70 100 100 100 100 37 59.0 Law Reform. C o d . 99 94 99 45 94 98 43 60.0 Industrial Court O f Tz. 100 88 100 87 95 99 31 61.0 Electoral Commision 35 99 100 98 100 36 63.0 Local Govt. Servi. Comm. 100 99 97 112 100 100 64.0 Commercial Court 72 58 74 34 66.0 Planning Commission 77 90 92 83 81 61 18 90.0 Land Court 89 99 44 91.0 Anti-Drug Commission 98 99 44 93.0 Immigration Department 37 94.0 Public Service Commission 34 Sub Total 80 84 85 78 85 86 30 DEFENCE AND SECURITY 28.0 Police Force 100 92 100 97 98 99 40 29.0 Prison Services 100 83 100 99 100 99 41 38.0 Defence 96 100 100 99 100 38 39.0 National Service 103 90 100 99 100 100 56 Sub Total 101 93 100 99 99 100 41 SOCIAL SERVICES 46.0 Education 98 85 95 78 78 87 59 49.0 Water, 69 35 71 59 44 88 10 52.0 Health 83 74 88 85 99 99 29 53.0 C o r n Dev.Wome. A& 81 56 96 99 57 88 33 65.0 Labour Youth Develop. 64 43 54 99 60 75 4 67.0 Teachers Service Comm. 100 100 377 97 100 100 68.0 Science, Tech.& H Ed 93 86 91 97 98 92 46 92.0 Tanzania Commission for AIDS 57 5 70 & 89 Regions 92 80 100 90 94 98 48 Sub Total 88 75 92 88 88 94 38 ECONOMIC SERVICES 47.0 Works. 45 67 83 95 75 65 27 48.0 Lands, How.,& Urb. Dev. 80 88 97 100 99 97 44 58.0 Energy and Minerals. 70 53 26 88 29 83 37 62.0 Comm.& Transport 98 106 100 96 89 100 42 Sub Total 63 72 75 94 66 78 32 PRODUCTIVE 24.0 Cooperatives & Marketing 99 94 126 20 43.0 Agriculture & Food Security 65 47 87 92 87 83 37 165 PEFAR FY05 - United Republic of Tanzania 44.0 Industries and Trade 95 76 97 91 91 84 44 69.0 Tour., Nat. Res. & Env. 52 59 88 94 81 62 29 Sub Total 64 52 88 93 86 77 33 CONSOLIDATED FUND SERVICE 20.0 Statehouse 100 100 100 100 94 97 49 22.0 Public Debt 98 97 91 82 82 98 24 Sub Total 98 97 91 82 82 98 24 GRAND TOTAL 86 83 89 86 84 90 33 Source: Table A6c Table A9a: Recurrent Expenditure Regions (in Bill. Tsh.) - VOTE VOTE HOLDER 1998199 1998199 1999100 I999100 ZOOO1Ol 2000101 2001102 2001102 2002103 2002103 2003104 2003104 2004105 2004105* Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual 70 0 Amha 77 84 122 117 151 15.1 18.2 18.1 12.4 11.3 15.6 15.5 17.8 9.4 71 0 coast 38 41 59 57 71 7.0 9.5 8.6 I13 93 13.0 13.0 14.3 7.9 72 0 Dodoma 61 65 89 89 I05 10.5 12.9 12.8 15.4 13.6 19.0 19.0 20.9 10.9 73 0 Iringa 68 73 73 23 114 11.3 13.7 13.6 169 15.8 20.6 20.6 224 12.4 74 0 Kigoma 47 49 51 64 79 79 98 9.8 11 0 9.8 13.2 13.2 16.4 9.0 75 0 Kilimanjaro 88 93 127 126 152 15.2 17.7 17.1 20.9 18.5 25.0 24.8 25.5 144 76 0 Lindi 36 39 51 51 64 6.3 78 7.8 91 7.4 11.1 11.1 12.1 63 77 0 Mara 61 67 86 86 110 11.0 13.6 13.4 15.6 13.4 17.3 17.3 19.5 10.2 78 0 82 85 115 114 134 13.3 16.3 16.3 19.5 17.3 24.5 24.5 30.2 15.0 *ya 79 0 Morogoro 68 74 99 99 115 11.5 13.8 13.8 16.2 14.5 20.2 20.2 21.8 12.1 80 0 Mtwara 44 47 64 64 77 7.7 9.2 9.0 10.7 9.5 13.9 13.9 16.6 7.9 81 0 Mwanza 84 92 123 122 139 13.9 17.7 17.6 20.9 18.6 27.3 27.1 29.4 14.0 82 0 Ruwma 52 56 76 76 88 8.8 11.5 11.5 12.3 11.1 15.3 15.3 16.8 8.8 83 0 Shinyanga 66 73 73 96 113 11.3 14.5 14.5 17.9 15.2 22.7 22.7 26.9 15.0 84 0 Singida 42 44 59 58 70 7.0 8.8 8.3 102 9.1 12.6 12.5 13.6 7.6 85 0 Tabra 53 55 71 71 84 84 10.9 10.9 12.9 11.6 159 15.9 18.9 8.6 86 0 Tanga 71 75 101 101 120 12.0 14.5 14.4 17.0 15.4 21.0 21.0 23.2 12.5 87 0 63 68 90 89 108 10.7 14.1 13.2 15.8 13.9 19.0 18.9 21.8 10.2 Kagaa 88 0 D'Salaam 67 68 100 27 115 11.4 27.4 13.6 18.9 18.0 24.1 24.1 24.3 13.9 89 0 Rukwa 40 41 56 55 64 6.4 8.1 8.1 97 8.6 12.2 12.2 14.0 7.7 95 0 Manyara .. 9.8 7.8 12.0 12 0 13.9 7.4 I Total 120.9 129.0 168.6 158.2 207.5 206.8 270.0 252.4 304.4 269.8 375.7 374.9 420.2 221.3 Note * Data for M O S are from the ExpenditureFlash Repons (July 2004 - December 2004) Source : MoF (ConsolidatedAppropriations Accounts and ExpenditureFlash Repon) Table A9b: Development Expenditure Regions (in Bill. Tsh.) - 166 PEFAR FY05 - United Republic of Tanzania VOTE VOTE HOLDEA)98/99 1998199 1999100 1999100 2000101 2000101 2001102 2001102 2002103 2002103 2003104 2003/04 2004105 2004105' Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual 70 0 Arusha 35 0.1 3.5 00 3.4 26 3.1 2.7 1.5 1.2 1.7 1.4 1.5 0.1 71 0 Coast 05 0.3 0.5 03 0.7 07 1.6 1.2 1.2 0.9 1.1 1.1 16 01 72 0 Dodoma 24 0.1 2.4 00 26 I O 0.3 0.3 0.3 0.3 1.2 0.5 1.4 0.2 73 0 Iringa 28 1.3 2.8 23 5.0 04 3.6 3.4 4.4 0.3 4.1 2.2 19 0.4 74 0 Kigoma 14 0.0 1.4 00 0.2 02 0.4 0.4 0.3 0.3 0.4 0.4 15 0.1 75 0 Kilimanjaro 03 0.0 0.3 00 0.4 04 0.4 0.4 1.0 0.5 1.0 0.4 1.5 01 76 0 Lindi 04 0. I 0.4 00 1.3 03 1.8 0.3 0.8 0.3 1.0 0.9 1.6 0. I 77 0 Mara 17 2.6 1.7 I 5 3.5 14 4.5 1.7 1.1 0.8 1.2 1.3 16 0.1 78 0 m y a 04 0. I 0.4 00 0.7 05 0.6 0.6 2.3 0.6 3.7 1.6 2.5 0.1 79 0 Morogom 06 0.1 0.6 00 3.2 03 3.3 0.3 3.3 3.3 3.6 3.6 3.5 01 80 0 Mtwara 06 0. I 0.6 00 1.3 03 1.3 0.5 1.4 04 1.6 1.5 1.8 0.1 81 0 Mwanza 18 0.8 1.8 06 2.2 22 2.9 2.3 5.0 0.4 2.1 1.4 5.1 0.1 82 0 Ruvuma 04 0.2 0.4 02 05 05 0.3 0.4 1.1 0.3 1.3 0.7 1.5 0.2 83 0 Shinyanga 03 0.0 0.3 00 0.3 03 0.4 0.4 0.4 0.4 0.5 0.5 1.9 0.1 84 0 Singida 04 0. I 0.4 00 0.9 04 0.8 0.6 1.8 0.6 1.1 1.1 1.4 0.0 85 0 Tabora 02 0. I 0.2 00 0.3 03 0.4 0.4 0.4 0.4 0.6 0.6 2.5 0.2 86 0 Tanga I 5 0. I 1.5 09 09 09 1.6 1.4 1.6 14 1.7 1.7 3.4 0.1 87 0 Kagma 56 3.5 5.6 38 9.3 77 8.4 49 52 4.6 5.4 3.1 2.5 0.0 88 0 D'Salaam 40 0. I 4.0 00 0.2 02 0.6 0.6 0. I 0.1 07 0.6 0.6 0.0 89 0 Rukwa 03 0.1 0.3 00 0.3 03 0.3 0.3 0.3 0.3 0.3 0.3 1.5 0. I 95 0 Manyara 2. I 1.4 3.1 3.1 3.8 1.0 Total 29.2 9.8 29.2 9.7 . 37.1 20.9 36.6 23.1 35.6 18.9 . 37.536 28.105 44.619 2.940 Note: * Data for FYO5 are from the Expenditure Flash Reports (July 2004. December 2004) Source: M o F (Consolidated Appropriations Accounts and Expenditure Flash Repon). 167 PEFAR FY05 - United Republic of Tanzania Table A9c: Total Expenditure Regions (in Bill. Tsh.) - VOTE VOTE HOLDER 1998199 1998199 1999100 1999100 200010l 2000101 2001/02 2001102 2002103 2002103 2003104 2003104 2004105 2004105 Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual 70 0 Awha 11 2 85 I5 7 11.7 18.6 17.8 21.3 20 8 13.9 12 6 I73 I69 19.2 9.5 71 0 coast 43 44 64 60 7.8 7.7 11.1 98 12.5 10 2 14 1 14 1 15.9 8.0 72 0 Dodoma 85 66 11 4 8.9 13 1 II 5 13.2 13 I 15 7 13 9 20 2 19 5 22.3 11.1 73 0 Iringa 96 87 IO I 4.6 16.4 11.7 17.3 I7 0 21.3 16 2 24 7 22 8 24.3 12.8 74 0 Kigoma 61 49 65 6.4 8.1 8.1 10.2 IO2 11.3 10 2 I3 6 13 6 17.9 9.1 75 0 Kilimanjaro 90 93 13 0 12 6 15.6 15.6 18.1 17 5 21.9 I8 9 26 0 25 2 27.1 14.4 76 0 Lindi 40 41 55 5.1 7.7 66 9.6 81 99 77 12 1 12 0 13.7 6.4 77 0 Mara 79 93 IO3 10.0 14.5 12.4 18.1 I5 1 16.7 I42 18 6 I85 21.1 10.3 78 0 a y a 87 86 11 9 11.4 14.1 13.7 16.9 I69 21.8 I79 28 2 26 1 32 7 15.1 79 0 Morogoro 74 75 IO6 9.9 14.7 11.8 17.1 14 1 19.5 17 9 23 8 23 8 25.3 12.2 80 0 Mtwara 50 48 70 6.4 9.0 8.0 10.5 95 12 1 99 15 6 15 4 18.4 7.9 81 0 Mwanza 10 2 100 I40 12.9 16.1 16.1 20.6 I99 25 9 I90 29 4 28 5 34 5 14.1 82 0 Ruvuma 56 58 80 7.7 9.3 9.3 11.8 11 9 13.4 11 4 16 6 16 I 18.3 9.0 83 0 Shinyanga 69 73 76 9.6 11.6 11.6 14.9 14 9 I8 2 15 5 23 3 23 3 28.8 I5 0 84 0 Singida 46 45 63 5.8 7.9 7.4 96 89 12.0 98 I3 6 13 6 15.0 7.6 85 0 Tabora 56 56 74 71 8.8 8.8 11.3 11 3 13.3 12 0 I6 5 I65 21.4 88 86 0 Tanga 85 76 11 6 11.0 12.9 12.9 16.1 15 8 18.6 I68 22 7 22 7 26.7 12.6 87 0 II 9 IO3 I46 12.6 20.1 I84 22.5 18 I 21.1 18 5 24 4 22 1 24 3 10.2 88 0 DSalaam IO7 69 I40 2.7 II7 11.6 28.0 14 2 19.1 18 1 24 8 24 7 24.9 13.9 89 0 Rukwa 43 42 59 55 66 6.6 8.4 84 10.0 88 12 5 12 5 15.5 7.8 95 0 Manyara 00 00 00 0.0 00 0.0 0.0 00 11.9 92 I5 2 15 1 17.7 8.5 Total 150 1 1388 1978 1678 2447 2277 3066 2755 3400 2887 4133 4030 464.8 124.2 Note * Data for FYO5 are from the Expenditure Flash Reports (July 2004 - December 2004) Source MoF (ConsolidatedAppropriations Accounts and Expenditure Flash Repon) Table AlOa: Actual Recurrent Expenditure as a Percentage of Budgeted Recurrent Expenditure Regions - VOTE VOTE HOLDER 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 70.0 Arusha 108% 96% 100% 99% 91% 99% 53% 71.0 Coast 108% 97% 99% 91% 82% 100% 55% 72.0 Dodoma 106% 100% 100% 99% 8 9% 100% 52% 73.0 Iringa 108% 32% 100% 99% 94% 100% 55% 74.0 Kigoma 104% 124% 100% 100% 90% 100% 55% 75.0 Kilimanjaro 106% 99% 100% 97% 88% 99% 56% 76.0 Lindi 109% 99% 99% 100% 82% 100% 53% 77.0 Mara 110% 100% 100% 99% 8 6% 100% 53% 78.0 Mbeya 104% 99% 99% 100% 89% 100% 50% 79.0 Morogoro 110% 99% 100% 100% 90% 100% 56% 80.0 Mtwara 105% 100% 100% 98% 8 9% 100% 47% 81.0 Mwanza 109% 100% 100% 99% 8 9% 99% 48% 82.0 Ruvuma 106% 99% 100% 100% 90% 100% 52% 83.0 Shinyanga 112% 132% 100% 100% 85% 100% 56% 84.0 Singida 106% 99% 99% 94% 90% 100% 56% 85.0 Tabora 102% 99% 100% 100% 90% 100% 46% 86.0 Tanga 106% 99% 100% 99% 90% 100% 54% 87.0 Kagera 109% 99% 99% 94% 88% 100% 47% 88.0 D'Salaam 101% 27% 99% 50% 95% 100% 57% 89.0 Rukwa 104% 98% 100% 100% 88% 100% 55% 95.0 Manyara 80% 100% 53% Total 107% 94% 100% 93% 89% 100% 53 Yo Source: Table 9a. 168 - PEFAR FY05 United Republic of Tanzania 169 PEFAR FY05- United Republic of Tanzania Table AlOb: Actual Development Expenditure as a Percentage of Budgeted Development Expenditure Regions - VOTE VOTE HOLDER 1998/99 1999/00 2000/01 2001/02 2002103 2003/04* 2003/04* 70.0 Arusha 3% 1% 77% 87% 81% 85% 6% 71.0 Coast 64% 56% 100% 73% 75% 98% 5% 72.0 Dodoma 4% 0% 39% 92% 98% 43% 12% 73.0 Iringa 47% 83% 7% 94% 8% 53% 21% 74.0 Kigoma 0% 100% 113% 100% 100% 7% 75.0 Kilimanjaro 2% 100% 102% 45% 43% 3% 76.0 Lindi 25% 2% 23% 17% 3 5% 94% 4% 77.0 Mara 149% 85% 40% 38% 74% 102% 3% 78.0 Mbeya 23% 9% 71% 101% 26% 42% 4% 79.0 Morogoro 17% 0% 10% 9% 100% 100% 2% 80.0 Mtwara 18% 1% 22% 37% 31% 92% 4% 81.0 Mwanza 46% 37% 100% 78% 9% 68% 1% 82.0 Ruvuma 58% 41% 100% 139% 23% 57% 10% 83.0 Shinyanga 0% 100% 106% 100% 97% 5% 84.0 Singida 25% 1% 50% 76% 35% 100% 0% 85.0 Tabora 44% 2% 100% 108% 100% 100% 6% 86.0 Tanga 7% 62% 100% 87% 91% 100% 2% 87.0 Kagera 62% 67% 83% 58% 88% 57% 2% 88.0 D'Salaam 2% 0% 100% 100% 100% 79% 6% 89.0 Rukwa 36% 2% 100% 98% 100% 100% 5% 95.0 Manyara 66% 100% 27% Total 34% 33% 56% 63 Yo 53% 75% 7y o Source Table 9b. Table AlOc: Actual Total Expenditure as a Percentage o f Budgeted Total Expenditure - Regions 170 PEFAR - FY05 United Republic of Tanzania VOTE VOTE HOLDER 1998199 1999100 2000101 2001/02 2002103 2003104 2004105 70.0 Arusha 75% 75% 96% 98% 90% 98% 49% 71 .O Coast 103% 93% 99% 88% 82% 100% 50% 72.0 Dodoma 77% 79% 88% 99% 89% 91% 50% 73.0 Iringa 90% 46% 71% 98% 76% 92% 53% 74.0 Kigoma 80% 97% 100% 100% 90% 100% 51% 75.0 Kilimanjaro 103% 97% 100% 97% 86% 97% 53% 76.0 Lindi 100% 91% 86% 85% 78% 99% 47% 77.0 Mara 118% 97% 86% 84% 85% 100% 49% 78.0 Mbeya 100% 96% 97% 100% 82% 92% 46% 79.0 Morogoro 102% 94% 80% 82% 92% 100% 48% 80.0 Mtwara 94% 91% 89% 90% 82% 99% 43% 81.0 Mwanza 98% 92% 100% 96% 73% 91% 41% 82.0 Ruvuma 103% 96% 100% 101% 84% 97% 49% 83.0 Shinyanga 106% 126% 100% 100% 85% 100% 52% 84.0 Singida 99% 92% 94% 93% 81% 100% 51% 85.0 Tabora 100% 96% 100% 100% 90% 100% 41% 86.0 Tanga 89% 95% 100% 98% 90% 100% 47% 87.0 Kagera 86% 87% 92% 80% 88% 90% 42% 88.0 D'Salaam 64% 19% 99% 51% 95% 99% 56% 89.0 Rukwa 99% 93% 100% 100% 89% 100% 50% 95.0 Manyara 78% 100% 48% Total 92% 85% 93% 90% 85% 98% 48% ource: Table 9c. 171 PEFAR - FY05 United Republic of Tanzania Table A1 1 : Ministerial - Recurrent Expenditure Variances (approved/original budget compared to actual expenditure in mil. Tsh.) VOTE VOTE HOLDER 2000101 2000101 2001102 2001102 2002103 2002103 2003104 2003104 diff abs. diff diff ahs diff diff abs diff diff abs diff ADMINISTRATION 23.0 Accountant General 6195.3 6195.3 70854.1 70854.1 -3716.0 3716.0 56701.1 56701.1 25.0 Prime Ministers Offce -9.0 9.0 -15.1 15.1 86.0 86.0 -65.8 65.8 26.0 Vice President 73.5 73.5 77.4 77.4 -274.0 274.0 -9.8 9.8 27.0 Regishar of Political Parties -33.4 33.4 -82.9 82.9 20.0 20.0 -26.0 26.0 30.0 Presidents Office & Cabinet 0.0 0.0 2839.9 2839.9 36433.0 36433.0 4545.4 4545.4 3 1 .O Vice President -230.5 230.5 846.2 846.2 -1549.0 1549.0 6465.5 6465.5 32.0 President's Office - Civil Service Dept 876.3 876.3 1672.9 1672.9 379.0 379.0 587.2 587.2 33.0 Ethics Secretariat -6.2 6.2 0.6 0.6 2.0 2.0 -12.3 12.3 34.0 Foreign Affairs 10284.2 10284.2 2284.5 2284.5 -6309.0 6309.0 11910.9 11910.9 35.0 Perm. Comm. Enq. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 36.0 Civil Service Comm. -18.6 18.6 -56.3 56.3 -5.0 5.0 33.6 33.6 37.0 Prime Ministers Office 544.2 544.2 -265.2 265.2 -1858.0 1858.0 -1478.1 1478.1 40.0 Judiciary 803.7 803.7 281.6 281.6 -674.0 674.0 588.6 588.6 41.0 Justice & Constitutional Affairs 132.7 132.7 836.7 836.7 -147.0 147.0 318.9 318.9 42.0 Office Of The Speaker 1486.4 1486.4 450.0 450.0 -30.0 30.0 4707.9 4707.9 45.0 Exchequer and Audit 99.0 99.0 -21.7 21.7 109.0 109.0 -61.4 61.4 50.0 Finance -33644.8 33644.8 -30476.6 30476.6 76742.0 76742.0 -47836.5 47836.5 5 1 .O Home Affairs -764.4 764.4 -1035.2 1035.2 1921.0 1921.0 -657.8 657.8 54.0 Radio Tanzania -397.3 397.3 -195.1 195.1 228.0 228.0 -140.3 140.3 55.0 Comm of Human Rights & Good Gov. 165.7 165.7 -722.0 722.0 273.0 273.0 - 1043.9 1043.9 56.0 President's Office Regional Adm. & Local Gov. -10254.6 10254.6 -131.7 131.7 801.0 801.0 -1588.6 1588.6 57.0 Defence &National. 1555.1 1555.1 531.8 531.8 -176.0 176.0 1104.6 1104.6 59.0 Law Reform. C o d . -29.1 29.1 1.2 1.2 5.0 5.0 7.5 7.5 60.0 Industrial Court Of Tanzania. 41.9 41.9 72.2 72.2 -26.0 26.0 343.4 343.4 61.O Electoral Commision 1478.2 1478.2 258.9 258.9 -538.0 538.0 18506.9 18506.9 63.0 Local Go*. Servi. Comm. -6.3 6.3 -0.4 0.4 -5.0 5.0 34.5 34.5 64.0 Commercial Court -280.0 280.0 462.6 462.6 179.0 179.0 143.6 143.6 66.0 President's Office - Planning & Privatization -1806.6 1806.6 -11779.1 11779.1 -2005.0 2005.0 -400.1 400.1 90.0 Land Court 0.0 0.0 0.0 0.0 46.0 46.0 -11.1 11.1 91.O Anti-Drug Commission -57.5 57.5 0.0 0.0 10.0 10.0 -40.4 40.4 92.0 Tanzania Commission for AIDS 0.0 0.0 0.0 0.0 0.0 0.0 -62.9 62.9 Sub Total -23802.2 71217.3 36689.2 126251.7 99922.0 134536.0 52564.8 159394.4 DEFENCE AND SECURITY 28.0 Police Force 2547.0 2547.0 2800.8 2800.8 -563.0 563.0 2092.8 2092.8 29.0 Prison Services -752.4 752.4 634.5 634.5 24423.0 24423.0 1058.2 1058.2 38.0 Defence 1879.3 1879.3 2948.6 2948.6 -6870.0 6870.0 4339.7 4339.7 39.0 National Service 627.5 627.5 2366.5 2366.5 -1033.0 1033.0 168.4 168.4 Sub Total 4301.4 5806.2 8750.4 8750.4 15957.0 32889.0 7659.2 7659.2 SOCIAL SERVICES 46.0 Education -3283.3 3283.3 -16943.1 16943.1 -975.0 975.0 -9663.3 9663.3 49.0 Water 1084.8 1084.8 -1046.2 1046.2 -17.0 17.0 193.1 193.1 52.0 Health -4072.2 4072.2 730.1 730.1 4142.0 4142.0 -5585.1 5585.1 53.0 Comm. Dev.Wome. Aff. -30.7 30.7 820.4 820.4 77.0 77.0 182.7 182.7 65.0 Labour, Youth Dev. & Sports -27.7 27.7 -49.3 49.3 19.0 19.0 87.5 87.5 67.0 Teachers Service Comm. -24.0 24.0 13.2 13.2 -83.0 83.0 -30.2 30.2 68.0 Science, Tech.& H Ed 3964.0 3964.0 2637.5 2637.5 -2920.0 2920.0 4054.6 4054.6 Sub Total -2389.0 12486.7 -13837.4 22239.9 243.0 8233.0 -10760.6 19796.6 ECONOMIC SERVICES 47.0 Works. 14486.5 14486.5 685.2 685.2 2240.0 2240.0 3475.6 3475.6 48.0 Lands, Hous.,& Urh. Dev. -360.4 360.4 15.0 15.0 -69.0 69.0 296.8 296.8 58.0 Energy and Minerals. 639.6 639.6 18998.7 18998.7 3118.0 3118.0 -329.1 329.1 62.0 Comm.& Transport 474.0 474.0 839.8 839.8 -2753.0 2753.0 46867.1 46867.1 Sub Total 15239.6 15960.4 20538.7 20538.7 2536.0 8180.0 50310.5 50968.7 PRODUCTIVE 24.0 Cooperatives & Marketing 1792.5 1792.5 -1640.2 1640.2 -346.0 346.0 285.2 285.2 43.0 Agriculture & Food Security 149.8 149.8 1558.7 1558.7 -1013.0 1013.0 18586 3 18586.3 44.0 Industries and Trade 28.9 28.9 132.3 132.3 -33.0 33.0 -222.3 222.3 69.0 Tour., Nat. Res. & Env. -2420.1 2420.1 -471.4 471.4 -209.0 209.0 -117.8 117.8 Sub Total -448.8 4391.4 -420.5 3802.6 -1601.0 1601.0 18531.4 19211.6 CFS 20.0 State house 0.0 0.0 -276.4 276.4 0.0 0.0 -1.5 1 .5 22.0 Public Debt -30721.7 30721.7 -56101.9 56101.9 -59115.2 591 15.2 -99274.4 99274.4 Sub Total .30721.7 30721.7 -56378.3 56378.3 -59115.2 59115.2 -99275.9 99275.9 GRAND TOTAL ,37820.7 140583.6 -4657.9 237961.7 57941.8 244554.2 19029.4 356306.4 Index of Budget Deviation 16.0% 24.1% 22.1% 23.9% Index of Budget Deviation excl. Votes 43 & 58 22.6% ote: For year 2003/04,votes 43 and 58 represents part of supplimentary budget to carter for drought related expenditures (i.e. Strategic Grain Reserve-SGR & TANESCO) Source: MoF, Budget Books and IFMS Reports 172