Key Issues on PFM at the Central and Local Govt Levels
BOT Conference Room
19-20 and 23-25 November, 2009
MINISTRY OF FINANCE AND ECONOMIC AFFAIRS
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 B/ground: Where we are coming
• PFMRP I, II, III
• Framework for dialogue on PFM in TZ
• Leadership & Mgt of PFMRP
• Recent Achievements on PFMR in TZ
 Key Issues & Actions Going
• Scope and Coverage of IFMS
• Cash Management
• Quality of Reporting
• Budget Execution
 Concluding
from
Forward
Remarks
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Phase I: 1998-June 2004 [Aggregate fiscal discipline]
• Focused on minimising resource leakage, strengthening
financial controls, enhancing accountability & introduction of a
computerized IFMS.
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Phase II: July 2004 – June 2008 [Allocative
efficiency]
• Focused on improving: Revenue forecasting, Debt mgt,
Expenditure f/work; External resources mgt; Budget mgt;
Treasury mgt & accounting; Procurement; use of IT; Investment
mgt; Admin. support services; External audit; and Leadership,
coordination and M&E of the programme.
• PFMRP basket fund was introduced.
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Phase III: July 2008 - Present
• Focus has been on enhancing predictability of resources to MDAs;
promoting effective service delivery; and strengthening
production of accurate/ timely accounts & results.
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PFM WG [Chair – DSPFM; DP Co-Chair] – forum for
technical discussions
PFM JSC (chaired by PST) for policy guidance
Supplementary forums
• Bilateral Meetings between PFMRP Component
Managers & DPs
• PFM DPG
• GBS Troika Plus: Current Chair – AfDB
• Other Meetings: MFEA & DPs; DPs & CS; PAC,
LAAC, POAC; Visiting Delegations
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 PFMR
champions/ Political leadership: H.E.
the President; Rt. Hon PM; MFEA
 MOFEA
as anchor – Appointment of DSPFM
 New
PFMRP Coordination Secretariat on
board from October 2009
 Energized Watchdogs:
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NAO
Parliamentary Committees
Media – albeit sensational/frenzy
NSA – e.g. PWC, Policy Forum
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TZ as a star performer on PFMR until 2007
Suddenly, concerns emerged that PFMR in TZ has
stalled cf. Bitz Report 2008; PEFA 2008; CAG report
2007/08 pointing to misappropriation of public
funds; Media frenzy on EPA, Richmond cases
Quality of AWPs for PFMRP & dialogue not as
hoped by DPs
Govt concerned by lack of mutually agreed
assessment criteria for performance of PFMRP
Under-funding of PFMRP vis-à-vis commitments by
both GOT and DPs
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Growing concerns on micro-mgt of PFMRP & high
transaction cost of meetings/ fluid demands by DPs
Lack of clarity on focus & scope of PFMRP vis-à-vis
PFMR /entire PFM system
Institutional memory seemingly lost with rotation
of embassy staff
Thus, our initial focus in 2009 was on revitalizing
dialogue on PFM. Hence more on process/finding
common ground. However, Significant progress
was also recorded on substantive issues.
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Adoption in 2007/08 of IPSAS (International Public Sector
Public Sector accounting Standards) - cash basis accounting.
This improved timeliness, content, quality & transparency of
the financial reports.
LGAs financial statements 2008/09 migrated from
International Financial Reporting Standards (IFRS) to IPSAS –
accrual basis, permitting uniformity in reporting of Govt
accounts. This is a major milestone and an excellent starting
point for improving financial reporting.

All sub-Treasuries connected to the IFMS database at HQ in
DSM.

76% - 99% of Govt transactions now automatically reconciled
within Epicor.
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 Public
Audit Act No.11 of 2008 enacted to
enhance operational independence of NAO.
 Decision
taken to establish the office of the
Internal Auditor General.
 Budget
economic classification upgraded
from GFS 1986 to GFS 2001.
 Section
established under the Budget Dept
to undertake expenditure monitoring &
tracking of funds.
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Compliance with PPA Cap 410 increased from
39% in 2007/08 to over 60% buttressed by
frequent procurement audits conducted by
PPRA & training.
Public Procurement Policy Directorate
established for policy formulation & devt of
procurement cadre.
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 Audited
accounts of RGZ for 2007/08
issued on time. Backlogs now history.
 Outstanding
performance/improved
operations of NAO (Mainland & Z’bar).
 Oversight
functions of PAC, POAC,
LAAC (URT Parliament and ZHR)
enhanced significantly through
PFMRP sponsored training
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Key Issues & Proposed Actions
Going Forward
GOT to undertake preparation of PFMRP IV (during 1st half of
2010), drawing lessons from implementation of PFMRP III;
forthcoming report on review of IFMS by NAO; recent external
evaluation of PFMRP etc.
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 Large
No. of unreconciled
transactions.
 Modules
which are not yet operational.
 Partial
integration of IFMS with SBAS,
HCMIS & cash/debt mgt systems.

Ltd functionality of IFMS at LG
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 Most
unreconciled transactions relate to
migration from Platinum to Epicor software.
 Automatically
reconciled transactions now
range from 76% - 99%. Reconciliation
adjustment module used to deal with the
remainder.
 Operationalisation
of modules partly
constrained by ltd capacity for
customisation & equipment - New server for
the data warehouse has been bought
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GoT to implement short term recommendations
from the NAO review of IFMS report expected end
December 2009.
Achieve complete reconciliation of transactions
between MOFEA & BOT (by June 2011).
Clearance of unreconciled transactions from 2000
to-date (by June 2010).
Operationalise asset module starting with 10
MDAs & the Data Warehouse. Will be done with TA
support and intensified systems training (by June
2010).
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 Establish
a Systems Steering
Committee to guide integration of
IFMS with other systems/budget tools
(by June 2010)
 Submit
for approval revisions of the
PFA 2001 to give ACGEN stronger
oversight over PFM & operations of
IFMS at LG level (by June 2010)
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 Large
no. of Govt accounts in
commercial banks
 Large
balances of cash which are not
fully utilised
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 36,406
accounts were initially identified in
2007.
 Main
source: MOUs requiring special
accounts to be opened for DFPs & programs
(24,000 accounts for PEDP alone)
 June
2009 update revealed a total of 43,406
accounts, o/w instructions have gone out to
close 31,441
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Finalise scrutinisation of remaining Govt bank
accounts to identify those to be closed & balances
transferred to BOT (by June 2011)
Future MOUs to exclude clauses that create
additional special accounts (by June 2010)
Revenue collected by line ministries transferred to
BOT by the end of the month & Govt balances in
commercial banks minimised (by June 2010).
Enhance autonomy of LGAs in the use of funds
within the approved budget (by June 2011)
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Electronic fund transfer not yet operational
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Low quality of cash flow plans
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Late/partial/uncertain funds flow (esp. OC) to
spending units/LGAs/SDUs
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Unequal distribution of funds to LGAs in per capita
terms & staff between councils
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Disclosure of unspent balances at the end of the
year in LGAs budgets
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Budget re-allocations leaves some councils with
less budget
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Preparations for EFT is quite advanced. Transfer of files from
ACGEN to BOT has been tested. Training staff of MOFEA,
PMO-RALG, Education, Agriculture, Infrastructure has been
done with EastAfritac support
Pending work on EFT includes completion of digital
signature, Connecting the TZ Inter-bank settlement system
(TISS) to the Central Bank system & preparation of operational
manual.
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Priority expenditures are given preference in monthly
ceilings to minimise uncertainties.
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Funds sent directly to accounts of LGAs from 2007/08
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Front-loading of GBS has eased flow of funds
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Uncertainty of funds flow partly reflects application of the
cash budget introduced since 1996 to instill fiscal discipline
Delays in release of Funds for LGDG contributes to delays in
the transfer of funds (no funds release to-date for 2009/10)
Allocations to LGAs not 100% formula based esp. PE (50% of
the budget).
Weights assigned to some parameters of the formula lead to
biased allocations.
In 2009/10 Additional funds Tshs.21.6bn allocated as devt
grants to 36 under-served areas (remote/inaccessible,
lagging in education, having special circumstances etc) to
attract staff.
Use of IPSAS obliges LGAs to disclose opening balance as a
source of income for the following year
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BOT to complete upgrade of systems to link up with ACGEN
software (by June 2011)
MOFEA to finalise review of PFA 2001 to provide for EFT and
appropriate safeguards and submit for Govt approval (by June
2010)
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Consolidate & scale-up capacity building/training of more
staff on cash forecasting (by June 2012)
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Review LGFA and share proposed changes with stakeholders
(by June 2011).
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Transfer of funds to LGAs to be completed within 7 working
days (by June 2010)
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Timed phase-out of project & basket fund modalities and shift
to GBS and LGDG as agreed in JAST (by June 2011)
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To review the formula based allocation system
in consultation with stakeholders (June 2011)
Continue & increase supplemental devt grants
to under-served LGAs based on clear criteria
(by June 2011)
Explore the possibility of enhancing
salaries/allowances for staff working in remote
LGAs (by June 2010)
ACGEN to monitor and ensure that end-year
balances of LGAs are disclosed and transferred
to the opening balances/revenue of the
subsequent year
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 Reporting
of revenue still not integrated.
TRA depts. still operate stand alone systems
(AYSCUDA++, ITAX 2000 etc.)
 Duplicative/multiple
LG level
reporting & audit at
 PLANREP
still not functional & the mgt of
other reporting systems (SBAS, RIMKU,
IFMS, LGMD, PIMA) under various
authorities do not talk to each other
 Non
availability of budget & expenditure
information to the public
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Non-tax revenue data base has been established & is in
process for operationalization.
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PLANREP exists but its use limited to planning &
budgeting
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Duplicative/multiple reporting and audit at LG level
arises out of clauses in the various MOUs
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Budget books/speeches are printed annually and posted
in public libraries/websites
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LGAs revenue & expenditure reports are made public
through village assembly meetings & notice boards
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Govt & NSA do prepare summaries/budget briefs for
public consumption
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Govt to commission a study to examine/recommend whether/how
various revenue collection systems could be integrated (by June
2010)
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DPs to shift to GBS and LGDG systems (by June 2010)
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MOFEA to lead the establishment of Systems Steering Committee to
oversee harmonisation of reporting systems (by June 2011)
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MOFEA & PO-PSM to sustain training on report writing using Govt
formats
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PMO-RALG to constantly update the website www.pmoralg.go.tz
where the information on budgets and expenditure of LGAs are
posted (by 2011)
MOFEA to review budget summaries for effectiveness and possible
simplification including devt of a simplified Swahili guide to the
budget (by June 2011)
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Long and complex procurement/ low procurement
capacity.
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Complex and non-uniform basket fund arrangements
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Budget allocations coming in July after approval of the
LGA budgets in April; Late revision of local priorities;
and late disbursement which lead to roll over of funds to
the subsequent year
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Financial leakages and cases of misappropriation of
funds
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Need for clear follow-up of findings of the 2007/08 CAG
report
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MTEF not a reliable guide for spending in future years
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PPRA rolled out checking & monitoring of
procurement performance & compliance to 316 out
of 364 PEs.
PPRA rolled out Procurement Management
Information System to 182 PEs and 113 are
connected
Review of PPA has been done and is at approval
stage
Complex & non-uniform basket funding
arrangements emanate partly from clauses in
MOUs
PMG report 2009 responded to issues raised in the
CAG report for 2007/08
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
GoT to develop & implement PPRA to complete roll out of the
system for checking and monitoring procurement to
remaining 48 procuring entities (by June 2011)
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Govt to prepare regulations after approval of the revised PPA
(by June 2012)
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Improve procurement compliance to 80% (by June 2010)
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Finalise review of LGFA & PFA to give more oversight powers
to the ACGEN over finances of LGAs including disciplinary
measures (by June 2011)
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Establish the Department of the Internal Auditor General
through the enabling legislation (by June 2011)
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GoT will continue to implement findings of CAG reports
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PFM encompasses effective:
 Management of revenue collection
 Debt management
 Planning & budgeting
 Budget implementation
 Accounting & reporting
 Procurement
 Internal & external oversight
M & E
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Building a strong & sound PFM system is a key priority of
GOT. We believe that a robust & credible PFM system is imperative
for TZ to develop/prosper
Budget practices & procedures in use have been shaped by:
 Administrative traditions, some going back to colonial times
 Past & present economic realities
 Ongoing reform effort
Developing a coherent PFM framework
 Is a continuous process
 Must take into account country circumstances & regional
/international trends
 Must be home-grown to max. impact & degree of success
 Must ensure PFMR goals are Specific, Measurable, Attainable,
Relevant & Time-bound [SMART].
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My humble plea to PFM stakeholders in TZ:
 Maintain communication – Regular, Transparent,
Candid but with Trust and Respect. Together we need to
build on and consolidate our achievements
 We need to avoid past mistakes: Among them – We need
to be very selective/focused in the design of AWPs; DPs
must give Govt the space & needed support (financial &
technical) to implement PFMR; Equally important, Govt
must deliver on mutually agreed indicators of progress.
 I also challenge the Academia /Research institutions in
TZ to be more proactive on PFMR agenda going forward.
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No. 1 priority on PFMR going forward
 My strongest single additional message to colleagues in
Govt and fellow citizens is 3 words: “Domestic Revenue
First”. We have to embark on a domestic revenue
revolution as a central pillar of the next phase of PFMR.
Making ‘DRF’ is the only reliable instrument that will
deliver on ‘Making Poverty History’ and make
Tanzanians proud.
 And to the True friends of TZ: “Direct the bulk of your
invaluable support to building the DRF pillar”.
 There is no magic bullet: All we need is determination to
face the challenges ahead of us. But will have to do so,
more selectively, more innovatively & boldly, without
loosing sight of the SMART criteria.
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