PUBLIC FINANCIAL MANAGEMENT REFORM PROGRAMME …

1 THE UNITED REPUBLIC OF TANZANIA. MINISTRY OF FINANCE. PUBLIC FINANCIAL MANAGEMENT REFORM . PROGRAMME strategy PHASE IV. 2012/13 - 2016/17. VOLUME I. JUNE, 2012. Table of Contents Table of ABBREVIATIONS AND ACRONYMS ..4. EXECUTIVE SUMMARY ..8. CHAPTER ONE ..13. INTRODUCTION ..13. Background ..13. Purpose of the PFMRP IV ..16. Main actors ..16. Implementation Period ..17. Financing of the PROGRAMME ..17. CHAPTER SITUATIONAL ANALYSIS ..18. Overview of current PFM ..18. PFM Reforms ..19. Revenue MANAGEMENT and Tax Administration .. 19. Planning and Budgeting .. 20. Budget Execution, Accountability and Transparency .. 21. Budget Control and Oversight .. 23. Change MANAGEMENT , PROGRAMME Monitoring and Communication .. 24. Other Core Reforms in Tanzania ..25. Strengths identified in the Tanzania PFM systems ..27. Challenges identified in the Tanzania PFM systems ..28. CHAPTER THREE ..30. PERSPECTIVES OF PFMRP IV.

2 30. Goal ..30. Main Objectives ..30. The PFM REFORM Key Result Areas ..30. Intermediate Results ..33. Key Drivers ..34. Enabling Realisation of Tanzania Development Vision 2025 .. 34. Facilitating Implementation of the Five Years National .. 34. Development 34. Facilitating Implementation of MKUKUTA/MKUZA II .. 35. Taxpayers Demands for Better Services .. 35. Enhancing Good Governance .. 35. Effective and Efficient PFM 36. Addressing PFM Challenges .. 36. 2. Anticipated Success Factors ..37. Capacity Building .. 37. Enabling Legal Framework .. 37. Effective Communication, Coordination and 37. Commitment of Top Leadership and Key 38. Effective and Functional M&E System .. 38. Interventions of PFMRP IV ..38. KRA 1: Revenue MANAGEMENT .. 38. KRA 2: Planning and Budgeting .. 39. KRA 3: Budget execution, accountability and transparency .. 40. KRA 4: Budget control and oversight .. 41. KRA 5: Change MANAGEMENT , PROGRAMME Monitoring and Communication43.

3 CHAPTER FOUR ..46. INSTITUTIONAL ARRANGEMENTS ..46. Internal PROGRAMME Implementation Arrangements ..46. PROGRAMME Governance Arrangements ..46. Joint Steering Committee (JSC) ..49. PROGRAMME MANAGEMENT Committee (PMC) ..49. Technical Working Group (TWG) ..49. PROGRAMME MANAGEMENT ..49. PFMRP and other core CHAPTER FIVE ..51. RESULT FRAMEWORK ..51. INTRODUCTION ..51. The Development Objective ..51. Link between PFMRP IV with other National Frameworks ..51. Result The Result Framework Matrix ..52. 3. ABBREVIATIONS AND ACRONYMS. ACGEN Accountant General AFROSAI African Organization of Supreme Audit Institutions AMP Aid MANAGEMENT Platform BoT Bank of Tanzania CAG Controller and Auditor General CB Commissioner for Budget COA Chart of Accounts CoFoG Classification of Functions of Government CPAD Commissioner for Policy Analysis Department CS Chief Secretary CS-DRMS Commonwealth Secretariat-Debt Recording MANAGEMENT System DAC Development Assistance Committee DFID Department for International Development DFMIS Director of FINANCIAL MANAGEMENT Information Systems DIA Department of Internal Audit DPs Development Partners DPD Director of Planning Division East-AFRITAC Eastern Africa Technical Assistance Centre EFT Electronic Funds Transfer EU European Union FEC Finance and Economic Committee GBS General Budget Support GDP Gross Domestic Product GFS Government FINANCIAL Statistics GoT Government of Tanzania HIPCs Highly

4 Indebted Poor Countries ICT Information and Communications Technology IDA International Development Association IEC Information, Education and Communication IFMS Integrated FINANCIAL MANAGEMENT System IMF International Monetary Fund IMTC Inter-Ministerial Technical Committee 4. IMF/FAD International Monetary Fund/Fiscal Affairs Department IPSAS International PUBLIC Sector Accounting Standards IRBM Integrated Results Based MANAGEMENT JAST Joint Assistance strategy for Tanzania JSC Joint Steering Committee JSM Joint Supervision Mission KRA Key Results Areas LGAs Local Government Authorities LAAC Local Authorities Accounts Committee LGRP Local Government REFORM PROGRAMME LSRP Legal Sector REFORM PROGRAMME MACMOD Macroeconomic Modelling Tool MDAs Ministries, Departments and Agencies MDGs Millennium Development Goals M&E Monitoring and Evaluation MoF Ministry of Finance MTEF Medium Term Expenditure Framework MTFF Medium Term Fiscal Framework MTSPBM Medium Term Strategic Planning and Budgeting Manual NAO National Audit Office OECD Organization for Economic Cooperation and Development PAC PUBLIC Accounts Committee PAOB PUBLIC Authorities and Other Bodies PC Planning Commission PBB Program-Based Budgeting PEFA PUBLIC Expenditure and FINANCIAL Accountability PFM PUBLIC FINANCIAL MANAGEMENT PFMRP PUBLIC FINANCIAL MANAGEMENT REFORM Program PEs Procuring Entities PER PUBLIC Expenditure Review PLANREP Planning and Reporting system PMIS Procurement MANAGEMENT Information System PMO-RALG Prime Minister's Office, Regional Administration and Local 5.

5 Government PO-PSM President Office - PUBLIC Service MANAGEMENT PPAA PUBLIC Procurement Appeal Authority PPP PUBLIC Private Partnership PPRA PUBLIC Procurement Regulatory Agency PPD Procurement Policy Division PSPTB Procurement and Supplies Professionals and Technicians Board RBBS Results-Based Budgeting System RCU REFORM Coordination Unit RSs Regional Secretariats SAI Supreme Audit Institution SBAS Strategic Budget Allocation System SP Strategic Plan TA Technical Assistance TISS Tanzania Inter-Bank Settlement System TR Treasury Registrar TRA Tanzania Revenue Authority TRIMS Treasury Registrar Investment MANAGEMENT System WB World Bank 6. 7. EXECUTIVE SUMMARY. The Strategic Plan for REFORM of PUBLIC FINANCIAL MANAGEMENT , Phase IV, is the result of a period of diagnostic analysis and consultations within Government and Development Partners. The need for deepening reforms of the PUBLIC finance MANAGEMENT is emphasized in MKUKUTA/MKUZA II and Vision 2025, as key elements for PFMRP to achieve: Fiscal sustainability and balance in the PUBLIC economy.

6 Restructuring and reallocations for growth and poverty alleviation; and Improved PUBLIC sector performance, efficiency and effectiveness in PUBLIC administration leading to improved service delivery and development results for Tanzanians. A number of underlying reforms have been initiated, for example, those related to an improved budget process along with simplified procedures, automated spending commitment controls, FINANCIAL reporting and other finance systems, legal reforms of FINANCIAL MANAGEMENT , ethics, procurement, introduction of modern audit methods and techniques. Some institutional reforms have been undertaken to promote good governance and fight against corruption. These initiatives have resulted in some improvements, as measured by international benchmarks and diagnostic reviews. However, there are indications that the reforms undertaken had not fully reached the desired end results.

7 External diagnosis coupled with the problem analysis carried out through specific audits, reviews, workshops and consultations to design Phase IV. indicate that many challenges still remain. In essence, the PFM system is still inadequate; a number of improvements are needed before it becomes an effective and efficient MANAGEMENT tool for improved PUBLIC service delivery. Efforts to mobilize PUBLIC FINANCIAL resources have encountered challenges relating to tax collection; accounting and reporting of non-tax revenues. There are still challenges to comprehend fully the costing of priorities into the Government budget allocations and the implementation and credibility of the recurrent and development budgets across key sectors. 8. The quality, accuracy and timeliness of FINANCIAL reports and accounting are generally good, but require improvement. As EPICOR was rolled out to Ministries, Departments and Agencies (MDAs) and are being rolled out to all Local Government Authorities (LGAs) it faces serious challenges related to ICT infrastructure and interfacing with other systems.

8 Efforts have been made to improve cash MANAGEMENT . The present cash based commitment system, which ensures commitment control on macro level, puts some challenges to cash MANAGEMENT as its side effect can distort execution of the budget especially when cash is not available on a timely manner. Over the coming REFORM period the Government will start the migration from Cash basis of accounting to Accrual accounting. This will further improve the integrity and content of the Governments FINANCIAL statements. The migration towards program based budgeting will increase the credibility of the budget to ensure that priorities are properly costed and attained. In addition, a centralization of the MANAGEMENT of PUBLIC debt will reduce the borrowing costs. Reforms in procurement are well underway and compliance rates have gone up and efforts will continue to ensure improvement and sustainability. In addition, support will be given to the Procurement Policy Division with the aim of ensuring value for money in PUBLIC procurement.

9 There is opportunity to further enhance the quality of FINANCIAL internal controls following the establishment of Internal Audit Department in the MoF, to further improve the timeliness and quality of audit reports and to ensure that audit recommendations are implemented. The Government is determined to step up reforms of the PUBLIC Finance MANAGEMENT system. The analysis of the current needs and lessons learned has led to the conclusion that the PFM REFORM shall be: Comprehensive, including all those various key reforms and activities in the PFM. system as well as the cross-cutting issues related to capacity building, service conditions, and the institutional policy legal and regulatory frameworks;. 9. Captured in a well defined Monitoring and Evaluation framework Sequenced, to manage priorities to ensure a more accurate cash forecasting and achievement of results;. Linked and inter-dependent with clear demarcation of responsibilities and accountability Better standardized and automated systems to ensure attainment of desired results in FINANCIAL recording and reporting.

10 Well managed, with effective institutional arrangement to support implementation of the PROGRAMME Focused, aiming at supporting agencies and initiatives which are likely to have a great cross cutting impact on the PFM system. This strategy is in line with the Five Year Development Plan (FYDP 2011/12-2015/16), MKUKUTA/MKUZA II and the Vision 2025 and aims for achieving the following: Economic growth and poverty reduction achieved through policy-based budget MANAGEMENT and resource mobilization and allocation, improved fiscal discipline and sustainable budget balance;. Service delivery improvement through the introduction of results-based MANAGEMENT , program based budgets, accountability and performance audits;. Good governance through improved transparency, accountability and efficient controls. The new phase is an enabler towards enhancing revenue mobilization, planning and budgeting, transparency, accountability, efficiency and effectiveness in the use of resources and implementation will be through 5 Key Result Areas (KRAs) of the PFM.