Reviewing the Controller and Auditor General’s reports for 2010/11

1. Reviewing the Controller and Auditor General’s reports for 2010/11 Guillaume Barraut Chair of the PFM Donor Group Based on summaries provided by Belgium, Denmark, CIDA and KFW

2. Outline • CAG reports and Response of PAC and Media • Key Audit Findings – All sectors • CAG Reports – specific allegations • Trends Indicated by the 2010-11Audits • The PFM RP Response – Key Areas of Focus

3. CAG ReportsResponse of PACs and the media Matters raised in CAG reports this year are mostly similar to last year PACs preliminary review of the CAG 2010/11 reports has prompted the debates that Media has reported on in April PACs just released their reports on the 2009/2010 CAG reports Media coverage continues to improve

4. PFM DPG notes • CAG reports continue to reflect the independence and autonomy enjoyed by the office - He continued to elevate important PFM matters • The president has welcomed the discussions on the CAG findings • The analysis and the discussions by the PACs of the 2009/10 audit reports were late but held good quality • CAG mandate stops here. Inquiries into the matters raised, included allegations, should be carried forward by the Executive in order to dissociate audit and corrective actions.

5. Key Audit Findings –All sectors • Failure to implement prior years audit recommendations • Weak compliance with Public accounting standards (IPSAS) • Dramatic Increase in Public Debt (38%) • Failure to meet Domestic Revenue Targets • increased tax exemptions, 18% of revenue • Procurement Management (41% of Budget) • Lack of qualified procurement personnel, records keeping , contract management, quality control • Control on Commitments / Liabilities/ Guarantees • Commitments Tshs 79 billion, liabilities Tshs 755 billion, guarantees over limit

6. Key Audit Findings –All sectors • Corporate Governance • (Range of issues related to management and oversight of PAOBs) • Improperly vouched expenditures • (MDAs Tshs 8.076 billion LGAs Tshs 6.748 billion) • Weak Internal control and Internal Audit Function • (payroll management, general compliance to standards and practices) • LGA Revenue Management • (LGA missing receipt books, Tshs 10.6 billion in uncollected revenues) • Cash management practices • (LGA bank reconciliations practices –dormant accounts)

7. CAG Reports – Specific Allegations • The CAG report on PA & OBs makes three specific allegations: Treasury Registrar and Minister of Finance - TShs 2.49 billion property sale , Allegation - influence peddling and possible embezzlement Minister of Finance – Tshs 964 million suspended property sale claim settlement - Allegation influence peddling Minister of Planning, Economy and Empowerment – Tshs 2.349 billion claim settlement – Allegation - influence peddling Note that none of the allegations involved financial dealings within the ministry or office under the control of the ministers in question. The Audits of all MDAs ranged from unqualified to qualified with matters of emphasis.

8. Trends indicated by 2010-11 Audits • The 2010-11 CAG reports do not contain any new or unexpected findings or areas of weakness (outside of the specific allegations). • There are modest positive trends evident in the distribution of MDA & PA OB audit opinions and improvement in some findings areas suggest that key PFM systems are gaining strength. • The trend evident in LGA audit opinions has been relatively flat over the last seven years although the auditor does note an improvement in LGA performance as a result of corrective action taken by the Government

9. Trends indicated by 2010-11 Audits • The major issues that have been highlighted are chronic in nature and correction will require changes in Government management practices as well as the continued development of HR and systemic capacity • It is generally acknowledged that the quality of audits and the report content have continued to improve. • However • Audit findings do not consistently provide the context, detail or supporting analysis that is required to properly assess materiality and risk. Further improvement in this area would add to the utility of the audit reports.

10. The PFMRP Phase IV ResponseKey Areas of Focus • The 2010-11 and earlier CAG reports, along with PEFA reports provide an excellent frame of reference for the assessment of PHASE IV of PFM reform program. • KRA 1 Revenue Management • policy development, projection, collection and administration • KRA 2- Budgeting and Planning • capacity development and systems enhancements.

11. The PFMRP Phase IV ResponseKey Areas of Focus • KRA 3 Budget Execution, Accountability and Transparency • cash management, debt management, transition to full accrual accounting, fixed asset management, procurement policy, management, and financial reporting. • KRA 4 Budget Control and Oversight. • Focus on Internal Audit Department, PPRA, CAG / NAO and the TRA. • KRA 5 Change Management • Utilization and Coordination of ICT systems , improved access to public information, management capacity, coordination and collaboration between PFM actors.

12. Conclusion • Domestic accountability is being strengthened and the utilization of public and donor funds is coming under increased domestic scrutiny. • The CAG reports continue to highlight serious weaknesses in PFM systems including mismanagement. • Correction will require sustained multi-year effort from all of the relevant GoT component managers and decision makers. • Progress needs to be followed and corrective actions should feature prominently in the GBS policy dialogue. • Monitoring tools include the PAF and the relevant sector/thematic monitoring frameworks including the PFM M&E.