1. Introduction

1. ENHANCING ACCOUNTABILITY THROUGH TRANSPARENT BUDGETING PROCESS AND PERFORMANCE REPORTING Tanzania Case Studyhon. John M. Cheyo, mpChairperson pac – tanzaniaSecretary General - SADCOPAC

2. 1. Introduction ‘Accountability’ - The heart of any Government system;“The General Public has the right and responsibility to have government leaders and officials explain fully what decisions and actions have been taken, and why”.- Accountability is a two-way relationship of power - the duty to be accountable in return for the delegation of a task, power or resource.

3. Introduction • Among other ways, accountability in management of public finances can be enhanced through Transparent Budgeting Process and Performance Reporting. • Accountability calls for the budget process to be transparent, participatory, frequently evaluated, and responsive to complaints. • Also, It can be enhanced through putting in place effective and efficient systems for performance reporting by all stakeholders in management of public finances (Parliament, CAG and Executive) • In Tanzania, accountability is a collective responsibility of the general public , the Executive, Parliament and Judiciary.

4. 2. Accountability enhancement through transparent budgeting process • KEY ACTORS IN THE BUDGET PROCESS • The Finance Ministry is responsible for coordinating and driving the budget process in accordance with schedule and Finance laws. • Spending departments are ultimately responsible for expenditures within their jurisdiction. • President/Prime Minister and Cabinet make fundamentally political decisions about tradeoffs.

5. key actors in the budget process • The role of the Parliament is to scrutinize and authorize revenues and expenditures. • The CAG audits government accounts for compliance and performance. • Other actors may include the media, civil society organizations, donors and international financial institutions.

6. The Budget Process

7. Drafting stage - Budget formulation • Concerned with compiling a draft budget that can be submitted to the Parliament for scrutiny and approval. • Mostly undertaken by the Executive. • The first step is to set fiscal policy and estimate available revenues based on macroeconomic projections in order to establish the total resource envelope. (Domestic revenue, Grants , Loans, GBS funds, Basket funds) • Ministry of Finance issues budget guidelines to spending departments (budget ceilings). • Submission of draft budget requests from spending departments to the MoF for scrutiny in April. • Then, MoF submits the budget estimates to Parliament via Parliamentary Sector Committees in May.

8. Legislative stage – Budget approval • Consideration of the main Budget by the Finance and Economic Affairs Committee., and subsequently the Sector Committees consider the Ministerial Budgets. All this process is done in camera. • The MOF incorporates recommendations made by the Parliamentary Committees into the final budget before it submits the budget to Parliament. • Reports by the Sector Committees and that of the Finance and Economic Affairs Committee are finally debated openly in Parliament during the June-August session. • Parliament may accepts, rejects or amends the final budget. • The approval of the main Budget is by a roll call of all present members. The Ministerial Budgets are approved by a simple acclamation.

9. implementation stage – Budget execution • Funds are apportioned to Government departments in order to implement activities. • MoF controls the flow funds to all spending units. • MoF can also request for the Parliament approval of supplementary budget if necessary. • Budget revisions can be made through virement (transfers within a given sub-vote) under the approval of the relevant Accounting Officer and reallocation warrants (transfers across sub-votes or votes) are approved by Parliament retrospectively.

10. implementation stage – Budget execution • Monitoring mechanisms in place are • IFMS which controls expenditure commitments, executes payments and generates financial reports • A poverty monitoring system which reports on the implementation of the Poverty Reduction Strategy (PRS) • MoF publishes quarterly Budget Execution Reports to maintain transparency.

11. Audit stage – Oversight and control • The Constitution and the Public Audit Act, 2008 requires the CAG to audit Government spending and report to Parliament via the President. The law also provides if the President fails in this responsibility the CAG is authorised to send the report direct to the Speaker. • The report of the CAG triggers the oversight function of Parliament through the PAC. • CAG determines and reports on whether the use of public funds by MDAs and LGAs complies with the relevant laws and has value for money. • The Oversight Committees (PAC, POAC and LAAC) are responsible for scrutinising audit reports through interviewing Accounting Officers and make recommendations accordingly. • The interviews are public.

12. Audit stage – Oversight and control • Typical results of the Budget execution are: • Recurrent expenditure is well funded • Development expenditure is under funded with an average release of 50% of the Budget .

13. BUDGETARY REFORMS MADE FOR ENHANCING TRANSPARENCY AND ACCOUNTABILITY • The Tanzanian Government through PFMRP has undertaken the following budgetary reforms to enhance transparency and accountability ; • The adoption of Integrated Financial Management System (IFMS) - to facilitate the transparent disbursement and tracking of public funds. • The adoption of a Cash Budgeting System for improving expenditure management. • The use Public Expenditure Reviews (PERs) for providing both the support to the budget process and budget management; and feedback on public expenditure and management issues through external evaluation. • The use of the Medium Term Expenditure Framework (MTEF) to link the budget process into the Poverty Reduction Strategy (PRS).

14. PARLIAMENT INVOLVEMENT IN THE BUDGET PROCESS • The Parliament approves the budget estimates submitted by the MoF on behalf of the Executive (June-August Session). • Parliamentary Sector Committees track budget performance after the budget resources have been appropriated to various Votes. • Parliamentary Oversight Committees examine audit reports submitted to Parliament by the CAG and give recommendations to the Parliament for adoption. • Government losses or proposed write off of losses or claims are submitted to Parliament for scrutiny before written off. • The Finance and Economic Affairs Committee holds meetings with government officials, studies the estimates and makes a report to the whole parliament, which is debated before Parliament approves the budget estimates. • However, despite recent developments in the budgeting process, the institution’s role in the process is still limited.

15. FACTORS CHALLENGING THE PARLIAMENT ROLE • Limited time and resources allocated for analysing and discussing important pieces of legislation like the budget. • Inadequate funds to run intensive capacity building programs for Staff, to facilitate frequent meeting of Parliamentary Committees and for the Committees to hold public hearings outside of Dodoma or Dar es Salaam. • Parliament lacks sufficient internal expertise (Staff) to allow it to conduct necessary research and follow up activities on budgetary issues. • Lack of follow up procedure on Parliamentary Committees’ recommendations.

16. Accountability enhancement through Performance Reporting • Enhancement of accountability through performance reporting is done through use of : • Annual reports of the respective parliamentary committees to give a clear picture of every Government portfolio activities in relation to Budget issues for accountability purposes. • A treasury notice prepared by the Ministry of Finance to provide feedback on the recommendations made by the Parliament concerning the financial performance of the MDA’s and Parastatals. • Annual audit reports of the CAG to report on the financial performance of the Central Government, Local Authorities and Parastatals.

17. Overall Challenges in enhancing accountability • Although accounting and financial reporting for Central government spending has improved enormously with the introduction of the IFMS, accounting at the local government level remains very weak with only 70 % of local governments have computerized accounts. • The unpredictability of aid flows poses several problems in expenditure management that cannot be effectively resolved under the cash budget system. • The PER process has often been criticised for being a donor-driven process. Since donors play key role in funding the studies and evaluations, the PER process appears to be donor-driven. As a result, despite having wide participation, government ownership is considerably reduced, implying low prospects for its sustainability

18. Overall Challenges in enhancing accountability • The current number of qualified Internal Auditors both in Central and Local Authorities is not sufficient. • Due to a large number LGAs implementing different programs at different levels and the Government’s implementation of decentralization by devolution system in the LGAs, ensuring proper Public Financial Management in such a highly decentralization set up is quite a challenging task. • There is also a high level of virement and budget re-allocation during budget execution, thus diminishing the role of Parliamentary debate and approval in guiding public spending allocations

19. Overall Challenges in enhancing accountability • There continue to be weaknesses in procurement processes, which are regularly reported in the reports of the CAG. • Non-responsiveness to CAG’s queries by some accounting officers which is partly due to lack of appropriate legal instruments for enforcement. • Little or no action taken on officers suspected of embezzlement. • Another critical challenge on the aspect of accountability through Budgeting process and performance reporting can be traced as the absence of the Budget Office in the normal frame work of the Legislative Body in Tanzania.

20. THE WAY FORWARD • Donors should front-load their assistance at the beginning of the fiscal year to avoid resource volatility, cash flow problems, non-completion of development projects and huge unspent balance at the end of fiscal year. Donors have to be requested to channel their support through General Budget Support for increasing transparency and accountability • The MTEF process should be made more comprehensive by extending its coverage to all sectors, not only those in the priority areas. • Donors who prefer to continue disbursing funds off-budget should be requested to feed information of their support to the Ministry of Finance external department including how the use of those funds can be tracked, monitored and accounted for in the government accounting processes.

21. THE WAY FORWARD • Strengthening the role of the Parliamentary Committees, particularly through the provision of legal powers to enforce follow-up actions in response to recommendations and through strengthening technical and administrative levels to remove the factors that constrain effective engagement of Parliamentary committees in the formulation, adoption, oversight and control of the budget. • Therefore, there is a strong need for increasing the time available for scrutiny; Providing more user-friendly information at an earlier stage of the budget cycle; Providing advisory, training and research support so as to improve the technical capacity of MPs.

22. THE WAY FORWARD • The Office of the CAG should be given greater independence from the Executive, in order to enhance its accountability functions • The government and donors should seek to be more transparent in the aid negotiation process. • The Government should reach a point where budget estimates for the next financial year can be approved by the Parliament a year or six months before. The current budget process approves the budget of the same particular year (Budget for 2011/2012 is approved in June-August 2011).

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