Allowances: Situational Analysis By GWG – August 2009

1. Allowances: SituationalAnalysisBy GWG – August 2009

2. Background General Budget Support: Core governance reforms (LGRP, PFMRP, LSRP, PSRP, BEST, etc.) as conditionality Civil Service Reform Programme 1994 – 1999 Cost containment thru improved wage bill control and management Rationalisation of job-grade and salary structure 1998: adoption of Public Service Medium Term Pay Policy, a major objective of which was to “minimize the use of non-salary benefits in the compensation of public servants in order to sustain the transparency and ensure the equity of the pay structure”. Public Service Reform Programme I 2000-2008 Gradually, steadily enhance pay to improve performance, service delivery and professionalism at core public service Public Service Reform Programme II 2008-2012 Pay reform as an integral component. Consultant’s report on the Review of the 1998 Public Service Medium Term Pay Policy issued April 2009 “to guide implementation of public service pay reform in the medium to long-term”.

3. Consultant’s Report Extensive situational analysis on Existing medium-term pay policy priorities and pay reform strategy implementation (Ch. 2) Assessment of trends in the growth and composition of employment allowances (Ch. 4) Options for incentives for public service personnel working in underserved areas (Ch. 6) Options for decentralized management of the payroll (Ch. 7)

4. PS Real Average Pay Trend Real average PS pay increased steadily, particularly after 2005, broadly in line with 1998 MTPP targets (Met at 95% on average) However, still a sizeable gap between PS pay levels and private sector comparators

5. 1998 MTPRS Projected and Actual WB/GDP Trends Government successful in controlling its wage bill Major achievement for the GOT and for pay reform, particularly since PS employment grew by 27% over the same period.

6. Trends in Recurrent Expenditure Components Recurrent expenditures = Wage Bill + Other Charges + Interest Payments Employment Allowances grew by 373%; other OC by 261% and Wage Bill by 192%. Allowances used for salary enhancement over and above 1998 MTPRS.

7. Some More Numbers Between 01/02 and 05/06: Clearly remunerative allowances (housing, utilities, sitting, honorarium) grew by 624%. Honorarium: eightfold increase Between 01/02 and 07/08: Sitting allowances from TSh 977,671,549 to TSh 11,450,947,673 Increased tendency towards over-spending in clearly remunerative allowances: 120% on average of what was budgeted In 05/06, consolidating and reallocating remunerative allowances to the PE budget would have led to TSh 56 billion being available for basic pay.

8. Consequences: A Battle of Wits Rationality and transparency of the PS compensation system is blurred with little direct relationship to job performance and productivity. Transparency of OC budget diminished: ex. honorarium are not counted as employment allowances but recorded as Sub-item 261106 Other Goods and Services Not Classified Above. Overly complex system of remuneration does not allow government to better plan and control wage bill expenditures. System induces and rewards counter-productive behaviour Proliferation of committees/seminars/workshops Increased scheduling of meetings away from duty station. Decision-making by committee delays process and increase bureaucratization. Employment allowances built into core reform work plans: inordinate amount of time spent scrutinizing workplans and budgets at the expense of meaningful dialogue.

9. Financial Times – 29 July 2009 “In Tanzania, one African country with a relatively well established if slow public sector, the problem is not simply corruption. It is a form of institutionalised, legal time-wasting that is endemic in the region – and an unwelcome global phenomenon legitimised by donors and international organisations alike. At its root is the culture of the “per diem”, the daily payment made to officials attending meetings and conferences that is nominally designed to cover the costs of travel, food and accommodation. The unintended consequence has been to stretch thinly resourced decision-making capacity well beyond its already limited ability to function”

10. Who’s to Blame? Longstanding concern expressed from many quarters. 2006 Presidential Commission on Pay recommended that Budget for and expenditures on allowances be significantly reduced, with savings transfered to the Wage Bill. Number of workshops, seminars funded from the budget be significantly reduced and that the Government’s vehicle fleet be significantly scaled back and the purchase of expensive vehicles restricted. Is there an interest in reforming current system? Unclear guidelines persist. DPs are in part to blame for proliferation of workshops and need to be held accountable for prioritization of workshops over duties of civil servants. How can DPs self-regulate? GoT regulations and ceilings need to be more strictly adhered to and monitored through existing GoT accountability mechanisms. Value added of workshops, travel and training requires stricter scrutiny and self regulation by reform programmes and MDAs.

11. Proposed Way Forward DPs have regularly brought forward the allowance issue in the dialogue process, however the problem persists. DPG should send a strong message to the Chief Secretary that GoT-approved regulations regarding allowances should be adhered to. Bring the severity of the current situation to the attention of the Controller and Auditor General. GoT instruct Accounting Officers to exercise stricter control GoT should issue special audit instructions to Accounting Officers. Standardise the financial manuals for basket funded projects. Continue dialogue with GoT over new proposed MTPP: Current MTPP draft proposes that growth in employment allowances be curtailed. DPs strongly support situational analysis recommendation that remunerative allowances should be consolidated into basic pay.