public expenditure and financial accountability review of local government in tanzania

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Tanzania: Local Government Fiduciary Assessment

Rakesh Rajani, PEFAR Team Member

(abbreviated version of presentation by

Parminder Brar, The World Bank)

Presented to LAAC, January 21, 2009

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ProcessJoint Assessment:

World Bank (Co-ordinator)AfritacCIDADFIDEmbassy of FinlandEmbassy of IrelandHakiElimuODIPolicy ForumTanzania Governance NoticeboardUNDPWateraid

Conducted with the full support and assistance of the Local Government Reform Program (LGRP) and their Zonal Reform Teams.

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Process

Seven councils chosen:• Arumeru• Rombo• Mwanza City • Muleba• Karatu• Bagamoyo• Mtwara Town

- Analysis primarily based on PEFA set of indicators - Councils selected on basis of criteria such as audit certificate, capacity,

eligibility for LGCDG, use of EPICOR, and dataset from 2003. - Teams visited each of the councils for 2 to 3 days. Discussions with

DED, DT, Departmental Heads, Councilors and other key stakeholders.

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LG PFM: Main Findings

• Message 1: Budget Credibility– The integrity of the budget formulation process is

undermined by Central Government level changes to ceilings for block grant transfers after the budget is approved by the Local Authority.

Month Activity

Jan Issuing of budget guidelines

Feb Call from proposals from sub-village – village – ward - district

March Council Management Team (CMT) prepares draft budget

April Draft budget submitted to regional secretariat, Council standing committees. After their approval it is then passed to the full council for approval. Subject to being passed by the full council the budget is then submitted to PMO-RALG and the MoF.

May Initial discussions with MoF to try to obtain revised sectoral ceilings

June Parliament discusses national budget including transfers to LGs

July - November Receipt of final ceilings for the sectors from the Ministry of Finance. This delay is what adversely impacts the LG budget process

Source: Local Councils

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• Message 1: Budget Credibility– Teams struggled to find the “right” budget figures

amongst competing statements in various reports.

Difference Between Budgeted 2005/06 Block Grants per MoF and Council Returns (Tsh) Council Budget per MoF Budget per LGA Difference Variation %

Shinyanga 6,692,265,600 9,105,847,198 -2,413,581,598 -36.1

Mwanza CC 6,585,874,600 4,586,451,540 1,999,423,060 30.4

Tarime 6,518,802,900 7,125,880,021 -607,077,121 -9.3

Sengerema 6,357,132,600 7,397,957,889 -1,040,825,289 -16.4

Musoma 4,838,163,200 4,077,943,673 760,219,527 15.7

Bunda 4,663,909,000 5,179,929,814 -516,020,814 -11.1

Bukombe 3,989,519,800 3,553,991,800 435,528,000 10.9

Musoma TC 2,002,271,400 3,397,621,924 -1,395,350,524 -69.7

Source: LGRP

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• Message 1: Budget Credibility– Carry forward of unspent balances impacts the

credibility of the budget. This is partly due to late releases by Central Government and donors.

– For example, in case of Arumeru below:

Arumeru District Council – Expenditure Trends for selected grants - FY 2004/05 (Percent compared to original budget)

July Aug. Sept. Oct. Nov. Dec Jan Feb Mar Apr May June

Education (MEM)

34 34 34 36 36 36 36 38 89 156 160

Subvention - Projects

17 17 28 35 80 84 87 103 124 176 284

Road Fund 11 11 17 30 44 52 54 57 63 78 117 129

PADEP 21 21 32 45 45 45 45 51 57 62 110 114

Source: Arumeru Local Council

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• Message 2: Planning– Bottom up planning processes do not connect

well with top down budget guidelines.– The multiplicity of planning, budgeting

requirements undermines the integrity of the whole budgeting/planning process and raises the question as to whether funds are being efficiently and effectively directed to local needs. (e.g. the LGCDF)

– Excessive donor and government reporting requirements drain limited planning capacity at Local Councils. (e.g. Karatu health)

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• Message 3: Cash Management– The lack of reliable data is a serious impediment

to project implementation. LGCDG Disbursements to 31/12/05

Disbursement figures as per Central Government

CDG Disbursed 1st

Quarter

CDG Disbursed

2nd Quarter

CBG Disbursed 2nd

Quarter Total

AMOUNTS SHOWN BY

LGA REGION NAME OF COUNCIL (LGA) (Tshs)

(Tshs) (Tshs) (Tshs) (Tshs)

Musoma Municipal Council 46,447,500 13,860,000 60,307,500 0

Bunda District Council 118,112,500 18,260,000 136,372,500 31,146,000

Musoma District Council 151,690,000 20,350,000 172,040,000 0

Serengeti District Council 16,940,000 16,940,000 0

MARA Tarime District Council 24,585,000 24,585,000 0

Mwanza City Council 79,817,801

208,422,500 23,815,000 312,055,301 59,621,000

Ukerewe District Council

18,150,000 18,150,000 0

Sengerema District Council 86,906,781

24,915,000 111,821,781 434,533,903

Geita District Council 31,020,000 31,020,000 119,085,800

Kwimba District Council 19,965,000 19,965,000 0

Magu District Council 22,660,000 22,660,000 0

MWANZA Misungwi District Council 18,260,000 18,260,000 43,028,600

Shinyanga Municipal Council 49,142,500 14,025,000 63,167,500 0

Shinyanga District Council 25,795,000 25,795,000 0

Maswa District Council 139,810,000 19,635,000 159,445,000 0

Bariadi District Council 28,270,000 28,270,000 0

Kahama District Council 27,995,000 27,995,000 0

Meatu District Council 48,989,306

121,852,500 18,535,000 189,376,806 48,989,306

SHINYANGA Bukombe District Council 191,785,000 22,825,000 214,610,000 0

Bukoba Municipal Council 10,998,542

29,067,500 12,815,000 52,881,042 0

Karagwe District Council 180,565,000 22,165,000 202,730,000 0

Biharamulo District Council 22,165,000 22,165,000 0

Muleba District Council 20,625,000 20,625,000 0

KAGERA

Bukoba District Council 165,467,500 21,230,000 186,697,500 0 Source: LGRP

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• Message 3: Cash Management– PE releases are made on time. Other releases are

erratic – partly due to delayed donor funds. This seriously impacts service delivery.

Cash Balance in Education Sector Account (Account No. 5)

0

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

1,400,000,000

July04

Aug.04

Sep.04

Oct.04

Nov.04

Dec04

Jan 05 Feb05

Mar05

Apr 05 May05

June05

July05

Aug05

Sept05

Oct 05 Nov05

Dec05

Jan 06

Arumeru District Council Rombo District CouncilSource: Local Councils

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• Message 3: Cash Management– Local Councils are cash constrained while retaining

large surpluses.Arumeru and Rombo Cash Balances

0

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

1,400,000,000

1,600,000,000

1,800,000,000

2,000,000,000

July04

Aug.04

Sep.04

Oct.04

Nov.04

Dec04

Jan 05 Feb05

Mar05

Apr 05 May05

June05

July05

Aug05

Sept05

Oct 05 Nov05

Dec05

Jan 06

Arumeru District Council Rombo District Council

Source: Local Councils

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• Message 3: Cash Management– Timely intimation of funds transfer is a real

problem.

Mwanza City Council : Bank Balances (Selected Accounts)

0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

Jan 2003 June 2003 Jan 2004 June 2004 Jan 2005 June 2005 Jan 2006

Ts.

Sh

.

General Fund Development Fund Misc. Deposit LGCDG Plot Sales Cash Account

Deposit II Cash Account Education Cash Account Health Cash Account Road Fund A/c

Source: Mwanza Local Council

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• Message 3: Cash Management– Local Councils are required to maintain between

25-40 separate bank accounts - almost all in silos.Rombo Local Council:

Cash Balances 2005 - 06

-

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

400,000,000

Gener

al Fun

d

Develo

pmen

t

Misc

Dep

osit

Area

Coord

inato

r

Wor

ks S

ervic

e

Health

Educa

tion

Wat

er

Road

Toll F

und

Land

Dev

elopm

ent

CESS Fun

d

Agricu

lture

Exte

nsion

Tanza

nia S

ocial

Acti

on F

und

Sensa

Wila

ya ya

Rom

bo

Wom

en a

nd Y

outh

Dev

elopm

ent

Rural

Financ

ial S

ervic

es P

rogr

amm

e

Lives

tock

Dev

elopm

ent

Agricu

lture

Dev

elopm

ent

Adult E

duca

tion

Aids P

rojec

t

Comm

unity

Hea

lth F

und

Distric

t Exe

cutiv

e Dire

ctor C

omm

unity

Distric

t Exe

cutiv

e Dire

ctor D

istric

t CA

Capita

l Dev

and

Buil

ding

Capac

ity G

rant

TZ

. Sh

.

JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER JANUARY

Source: Rombo Local Council

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• Message 3: Cash Management– There are between 500-1000 Bank accounts in

each local council.

Org No. of Bank A/C

LG 28x1= 28

Schools 214x2 = 428

Ward 31x0= 0

Villages 134x1= 134

Dispensaries and Health Centres

31x0= 31

Hospitals (DDH) 3x1= 3

TOTAL 624

Org No. of Bank A/C LG 24x1= 24 Schools 177x2 = 354 Ward 37x1= 37 Villages 144x3= 432 Dispensaries and Health Centres

41x1= 41

Health Rehab Centres 12x1= 12 Water user associations 62x1= 62 Agriculture (PADEP) 22x1= 22 Agriculture (AMSDP - IFAD)

12x1= 12

TOTAL 996

Rombo Local Council

Arumeru Local Council

Source: Rombo Local Council

Source: Arumeru Local Council

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• Message 4: Accounting quality– At several Local Councils there was a disconnect between

the ratings and the reality. In Arumeru cheques in excess of book balances were regularly issued this FY. In Muleba – the introduction of Epicor without adequate capacity building may have worsened FM and accountability.

Budget 05-Nov 05-Dec 06-Jan

IDARA YA FEDHAPosho ya Masaa ya Ziada 1200000 -1386000 941000 18000Posho ya kusafiri nje ya Nchi 3050000 1000000 240000 0Usafiri Likizoni 600000 450000 -450000 700000Gharama za matibabu 400000 213500 -213500 328000Vifaa vya Ofisi 6000000 -2500000 4924750 457950Majengo na Mazingira 0 -177150 0 266500Ukarimu wa Serikali 600000 -92800 15000 15000Gharama za Benki 480000 -57385.66 67614.34 147267.75Gharama za safari na Posho 600000 -669000 0 0Vifaa vya Ofisi 360000 -375000 0 0Gharama za simu 0 -166242.4 0 0Vifaa vya Ofisi 7000000 -4604735 5123800 82600Gharama za umeme 360000 -469707.85 281897.15 36547.85Gharama za maji 60000 0 24000 16000Gharama za simu 2100000 -114550.5 0 935210.01Samani za Ofisi 0 -1010500 0 0Diesel 7200000 -3813940 2511000 1847500Vipuri vya magari 0 -591600 0 1728000Majengo na mazingira 5600000 -4027815 4969350 557000Gharama za Computer 1000000 -1200000 0 0Matengenezo madogo madogo 0 -265000 0 0Ununuzi wa magari mapyaUkarimu wa serikali 2300000 -2555750 183300 467000Gharama ya uchapishaji vitabu 0 161350 -282000 0Kinua mgongo wah. Madiwani 32800000 0 0 0Ada 0 -270000 0 0

Source: Muleba and Arumeru Local Councils

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• Message 5: Internal Controls and Audit.– At 3 of the 7 local councils visited, there was no

internal auditor. Duplicative external audits and inspections seriously strain the limited capacity of Local Councils. Feeling of “continuously being audited”.

• National Audit Office does the overall audit of the Local Council;

• National Audit Office also does a separate audit for the Road Fund;

• PWC does the audit for the Health Basket;

• Deloitte does the audit for the education sector (PEDP)

• KPMG does the audit for the Local Government Reform Program;

• Donors commission multiple audits for their own programs;

• Central government ministries conduct their own inspections and have their own reporting requirements;

• The MOF Sub-Treasury also carries out regular inspections/audits.

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Main Conclusion

Ironically, actions to ensure accountability have led to enormously complex, multiple requirements. This makes it virtually impossible for local actors to manage the situation, to understand, plan, implements and report.

There is an urgent need for • Simplicity• Predictability• Clear reliable information• Reforms being driven from the needs of the local councils

rather than central ministries

public expenditure and financial accountability review of local government in tanzania

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