WORKING PAPER

Annual Financial Reporting by Governments - what is good practice in sub-Saharan Africa?

Stephen Emasu, Mercy Nyangulu and Andy Wynne

January 2012

The African Capacity Building Foundation

Annual Financial Reporting by Governments - what is Africa’s best practice?

Stephen Emasu, Mercy Nyangulu and Andy Wynne

CONTENTS

EXECUTIVE SUMMARY

I. INTRODUCTION

II. METHODOLOGY

III. BROAD INDICATIVE CRITERIA

IV. TIMELINESS

V. UNDERSTANDABILITY

VI. OPENNESS

VII. CONSISTENCY

Appendix 1: Financial Reporting Survey and Database - ESAAGAppendix 2: Qualitative Characteristics of Financial Reporting (Cash Basis IPSAS)Appendix 3: Key points of the Cash Basis International Public Sector Accounting Standard (IPSAS)Appendix 4: Review of the Cash Basis International Public Sector Accounting Standard

– Report of the Task ForceAppendix 5: Crosswalk from PEFA Indicators to study characteristicsAppendix 6: Good Practice Exemplars

TanzaniaBurkina FasoBotswanaSierra LeoneUgandaMauritiusSouth AfricaNigeriaGhana

Appendix 7: Other financial reporting and openness1. Eight Key Documents Assessed by the Open Budget Survey2. Openness of procurement3. Asset and salary declarations for senior officials and politicians4. PETS – local reporting5. Publish What You Pay (PWYP)

Appendix 8: References

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EXECUTIVE SUMMARY

Along with the auditor’s report, a government’s annual financial statements provide the essential financial data necessary for accountability purposes. It is the prime document enabling parliaments and citizens to hold their governments to account for the effective management its financial resources.

This study aims to identify and collate existing good practice in terms of annual financial reporting by governments in sub-Saharan Africa. As such, it is a bottom-up study of annual financial statements as an aid to revising international accounting standards for governments in the Global South. There have been a range of studies on public financial management in sub-Saharan Africa in recent years, but few of these provide details of how governments report annually on their financial management.

The international accounting standard promoted for governments of sub-Saharan Africa is the Cash Basis IPSAS, but it is not necessarily based on actually existing good practice and, as a result, not a single government globally has actually been able to implement its key requirements. Similarly, in Africa at least 31 governments have tried to implement the standard, but none have actually implemented its key mandatory requirements (nearly nine years after the standard was issued). This standard is now planned to be revised and we hope that the results of this research will facilitate this process.

The financial statements of the following governments were reviewed to identify examples of good practice: Botswana, Ghana, Kenya, Mauritius, Nigeria, Rwanda, Sierra Leone, South Africa and Uganda. Broad Indicative Criteria were then developed based on the existing good practice identified in these financial statements. This was used, extended and refined as a result of consultants visiting Burkina Faso, Namibia and Tanzania to obtain further financial statements and to discuss the needs of the key uses of the government’s annual accounts in these counties.

This study builds on and complement the East and Southern African Association of Accountants General (ESAAG) study Financial Reporting Survey and Database (2006). This was based on assessments against the broad indicative criteria detailed in Appendix 1 to this guide.

Having reviewed the literature and the financial statements of these governments, we consider that the following are the key qualitative characteristics of public sector financial reporting:

timeliness – are the audited financial statements made public promptly after the end of the financial year to which they refer?

understandability – are the financial statements clear and are the key aspects and terms explained?

openness – is the key financial information of interest to politicians and the public made available?

consistency – is the information consistent from one year to the next, between accounts within the same financial statements and is it reliable and free from material error?

For each of these four qualitative characteristics of public sector financial reporting we identified elements from the financial statements we reviewed which demonstrated good practice and could be considered useful for the users of the financial statements. These are summarised below.

Timeliness - Are the audited financial statements made public promptly after the end of the financial year to which they refer?

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Basic good practice is that the audited financial statements are presented to parliament and published within 12 months of the end of the relevant accounting period. This is now achieved by most African governments. A refinement is for the accounts to be published within nine months of the end of the financial year so that they can be considered before the budget for the next financial year is agreed by parliament. This is currently being achieved by, for example, Mauritius, Tanzania, Uganda and South Africa.

Understandability - Are the financial statements clear and are the key aspects and terms explained?

Extra effort is needed to ensure that public sector financial statements are accessible, clear and understandable by their users. In many countries the Accountant General provides a commentary on the financial statements and this is complemented, in some countries, by the report of the Auditor General. These commentaries are made more understandable with the inclusion of graphs and charts. In addition, the inclusion of a glossary or explanation of key terms can assist users to understand the technical language which is used. A summary of the financial results for the last few years may also help to provide the context for the government’s financial statements.

The entities which are covered by the main accounts of the government are indicated or listed in many of the financial statements of governments of sub-Saharan Africa. However, none of these statements consolidate all controlled entities and government business enterprises are almost always excluded. Such a consolidation is a core requirement of the Cash Basis IPSAS.

The financial statements usually include reference to their legal basis and the formal opinion of the Auditor General.

The length of the financial statements varies greatly from nearly 2,500 pages in Kenya to only 30 pages for the main report in Sierra Leone. In a number of countries, the Auditor General provides an executive summary covering the main findings in their report, this includes Tanzania and Uganda. The provision of such an executive summary may significant increase the understandability and clarity of the financial statements.

Openness - Is the key financial information of interest to politicians and the public made available?

Comparisons of actual payments and receipts to the budget agreed by parliament are a key role for public sector financial statements and are provided by all the financial statements reviewed for this study. However, the level of detail varies from country to country and significant variances between the budget and the actual results are not necessarily clearly explained.

Details of government debt are provided in most of the financial statements we reviewed. This may include individual loans (Botswana), details of interest rates and the value in foreign currency of external debts (Mauritius) and changes over the year and the relevant exchange rates (Ghana).

Many countries provide details of arrears for revenue and this may be analysed by ministry, department and agency with a comparison with the previous year (Mauritius, Tanzania and Uganda). Fewer governments report on payment arrears and common definitions are not used, although these have been developed for those Francophone countries that are members of UMEOA (Monetary and Economic Union of West Africa).

Several governments provide details of losses, fruitless or wasteful expenditure. This may include individual cases (Botswana) or the total for each ministry, department and agency (Tanzania).

Proceeds of privatisation are reported by several governments and some include details of outstanding payments (Ghana). Similar details are often reported of outstanding loans, advances and imprests and may include details written off during the year. Listings are also

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usually provided of government investments. Details are provided of contingent liabilities by several governments, especially loan guarantees (Tanzania). These may include details of individual cases (Mauritius) or only summary amounts (South Africa).

Details of financial assistance received from individual donors are often reported and may include the amounts in the local currency and the currency of the donor (Rwanda). The figures are usually analysed into loans and grants. However, Mauritius is one of the few countries that provides details of most of its project or non-cash aid.

The Open Budget Survey (2010) indicates that in many countries little or no information is provided on spending on secret items, although this is less than three per cent of expenditure in Ghana, Namibia and South Africa.

Key users of government financial information (for example, journalists, trade unions and other NGOs) indicate that they would like to see further details of the salaries and other benefits paid to senior politicians and public officials. Only five countries publish the asset declarations of such individuals. Users would also be interested in the payments and receipts of primary service facilities including schools and health centres.

Consistency - Is the information consistent from one year to the next, between accounts within the same financial statements and is it reliable and free from material errors?

In some financial statements the figures are clearly consistent between the different statements (Nigeria and Sierra Leone). However, other governments may provide different figures, for example, for cash and cash equivalents in different parts of their financial statements.

Some governments have been able to report in a consistent format over the last five years (Mauritius and Sierra Leone). The Government of Tanzania provides a nearly 10-year history of quarterly budget out-turn reports on its website, but these are not clearly consistent with the relevant annual financial statements.

It is recognised that a number of pre-conditions will be necessary before the above good practice can be implemented; these will include an appropriate legal framework, the availability of staff with suitable experience and adequate capacity within the office of the Accountant General.

The details of good practice identified from each of the individual countries and the results of other analysis, for example, PEFA are included in appendices to this study.

An expert panel was established to advice and quality review the work of the study. The members of the expert panel were:

Reckford Kampanje – Auditor General of Malawi (and former Accountant General)

Maru Z Tjihumino – Accountant General of Namibia

Joseph Onumah – Head of Accounting Department, University of Ghana Business School, Legon

Michael Parry – Independent Consultant.

We hope that the results of this study can be used to improve the capacity of African governments to provide their parliaments, media, citizens and other stakeholders with timely, clear, reliable and relevant financial statements for all central government entities. Capacity building will be easier if it is based on a policy of further incremental or organic improvements to a government’s annual financial statements rather than trying to implement international standards which are not based on existing good practice. The study provides a starting point

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for identifying existing good practice in annual financial reporting by the governments of sub-Saharan Africa. However, the study would benefit from being extended to cover the financial statements of a larger range of governments, especially those of Francophone African countries.

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I. INTRODUCTION

Accountability, in a general sense, is a responsibility of stewards or agents to provide relevant and reliable information relating to resources under their control. For governments, accountability is the government’s responsibility to justify to its citizenry the raising of public revenues and to account for the use of those public resources. Accountability information can be used to support decision making, but it also fulfils the citizenry’s “right to know” how public resources have been spent (GASB 2005, page 5).

Fiscal transparency is propagated as part of a larger policy goal of good economic governance pursued to achieve poverty reduction and attain the Millennium Development Goals (MDGs). Indeed, on the African continent, the calls for more openness in the budget processes is part of a set of endeavours aimed at solving the paradox of copious natural resources and increasing donor magnanimity, on the one hand, and seemingly intractable abject poverty, on the other hand. It is also aimed at addressing corruption and theft of State resources and money laundering, among many (UNECA, 2005 page ix).

It is widely accepted that, along with the auditor’s report, a government’s annual financial statements provide the essential financial data necessary for accountability purposes. In a parliamentary democracy, parliament sets the annual budget to authorise the government to raise taxes and to spend money as indicated. The annual financial statements are a key way in which the government later accounts to parliament and its citizens for the taxes raised and the money spent on the provision of public services. The financial statements can also include important information on the cost of implementing the government’s policies, for example achievement of the Millennium Development Goals or poverty reduction. The financial statements show how public resources were actually allocated, for example how much was provided for health expenditure and how much was invested in public infrastructure. They also provide a vital mechanism for monitoring adherence to agreed fiscal goals, for example the level of budget deficit and the overall level of government debt.

For governments which are dependent on donors for a significant proportion of their revenue, their annual financial statements are also a key document to enable the donor community to monitor adherence to agreed policies. These may include, for example, poverty reduction strategies, the proportion of government expenditure to be allocated and actually spent on defined pro-poor expenditure (for example, primary health and education spending) and adherence to macro-fiscal targets.

In recent years there have been a range of studies of public financial management and budgeting by governments of sub-Saharan Africa, including, for example, studies by IDASA, country studies by the Open Budget Index and PEFA reports for many of the countries. However, these studies provide few details on the quality and content of the annual audited financial statements of these governments. As a result existing good practice in terms of government financial reporting in sub-Saharan African has not been documented. This study aims to provide comparative information in this area and so highlight existing good practice.

There is no internationally accepted and implemented ‘best practice’ for government financial reporting. All sub-Saharan African governments report on the modified cash basis, so the nearest appropriate international accounting standard would be the Cash Basis IPSAS, but although all 31 African countries which have been subject to PEFA have tried to adopt it (Andrews 2010) none has actually implemented the key mandatory requirements of the Standard (over nine years since the standard was issued).

This situation is replicated globally and so the top down Cash Basis IPSAS is not working effectively. Not a single country in the world has actually implemented key requirements of the standard and some have argued against aspects of it. For example, the Indian Government has argued against the requirement to report payments to third parties and to consolidate government business enterprises (GASB 2008).  The gap analysis undertaken by the Government of India in 2008 commented on the requirement for consolidation and concluded that it would not be appropriate (page 9):

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Though this is fundamental requirement of Cash IPSAS, it is likely to cause more distortion than bringing in clarity in the financial statements of government. In a country like India which a federation with unitary bias, it is very difficult to even distinguish whether State Governments and local bodies are independent entities or entities controlled by the Union Government. Much of the social sector expenditure flows from Union Government to States and Local bodies. Further, consolidating Government Companies accounts with that of Government will result in artificial inflation of cash inflows and outflows and is not likely result in any improved presentation of financial statements.

The International Public Sector Accounting Standards Board is planning to fundamentally revise the Cash Basis IPSAS, partly due to the low international take up (see Annex 4 to this study). Although this process appears to have stalled, the IPSAS Board has not considered this issue since its June 2010 meeting and no further progress has been made on revising the standard.

Many Francophone African countries are members of regional economic bodies which have issued fairly detailed directives on public sector financial reporting and related issues. This has increased the consistency and comparability of public sector financial statements between these states.

The objectives and requirements of government accounting are different from those for private sector organisations. The Government Accounting Standards Board in the US has considered these differences, saying that, “They have different purposes, processes of generating revenues, stakeholders, budgetary obligations, and propensity for longevity” (GASB 2006: 1). Private sector financial statements are primarily designed to report the level of profit which has been earned by a company. Public sector financial statements need to report on four aspects of financial management: budgetary control, receipt/payment control, cash control and money result reporting (Monsen 2009).

All sub-Saharan African governments currently display some aspects of good practice with their financial reporting – for example, the financial statements for Government A may not be very informative, but they may be produced within a few months of the financial year end and/or may be available on the Internet.

The aim of this study is to document examples of elements or attributes of financial reporting by African governments which represent actually existing good practice as a bottom up input to the revision of the Cash Basis IPSAS. The study identifies (and documents) elements or aspects of existing good practice by sub-Saharan African governments in the area of financial reporting and accountability.  These attributes are then collated to identify good existing practice in sub-Saharan Africa. If all or most governments in sub-Saharan Africa adopted all or most aspects of the good practices shown by some governments there would be a significant improvement in financial reporting by governments across sub-Saharan Africa.

The aim of the study was not to assess the quality of financial reporting by individual governments (this is already done through PEFA and other studies) neither was it to highlight poor practice.  In contrast, the aim of the study was to find examples or aspects of financial reporting by governments of sub-Saharan Africa which could be considered good practice (for example, providing relevant information on government debt or providing graphs and charts to help to explain the results). This good practice was then collated and so forms the basis of guidance on good practice in financial reporting by governments of sub-Saharan African.

The study reviewed current practices of government financial reporting, primarily focusing on central government entities in sub-Saharan Africa by carrying out an in-depth analysis of government financial reports in selected countries. Based on these financial reports, the study identified those individuals and organisations which actually use government financial statements, the purposes for which they are used and the actual information which the users require. It also reviewed the reports from the relevant Auditors General on the quality of their

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government’s financial statements. These findings were used to develop criteria against which to assess the usefulness of the form and content of government financial statements as well as to identify any implications for capacity building

It is hoped that the results of this study can be used to further improve the capacity of African governments to provide their parliaments, media, citizens and other stakeholders with timely, clear, reliable and relevant financial statements for all their central government entities. Capacity building will be easier if it is based on a policy of further incremental or organic improvements of a government’s annual financial statements rather than trying to implement international standards which are not based on existing good practice across the region. Implementing such good practice can best be achieved by peer review and joint working by regional officials rather than dependence on international consultants bring outside expertise, but lacking essential knowledge of local conditions, cultures and practices.

It is recognised that a number of pre-conditions will be necessary before the good practice outlined in this report can be widely implemented. These will include an appropriate legal framework (with supporting regulations, manuals and policies), the availability of staff with suitable experience and adequate capacity within the office of the Accountant General (including IT infrastructure).

II. METHODOLOGY

The first phase of the study involved obtaining the audited financial statements from a variety of sub-Saharan African countries for review and analysis. Broad Indicative Criteria were then developed which are documented in this study, including four key qualitative characteristics. In addition, reference is made to PEFA reports on individual countries, the ESAAG report (see Appendix 1 of this study), the 2010 Open Budget Index country reports and other relevant literature.

The study included consultations with, and participation of, regional capacity building organisations in Africa, including the East and Southern African Association of Accountants General (ESAAG) and a panel of experts. These experts reviewed the documentation, analysis and the draft version of this study. The also provide suggestions for improvement. The members of the expert panel were:

Reckford Kampanji – Auditor General of Malawi (and former Accountant General)

Maru Z Tjihumino – Accountant General of Namibia

Joseph Onumah – Head of Accounting Department, University of Ghana Business School, Legon

Michael Parry – Independent Consultant.

The geographical scope of the research was Anglophone and French speaking sub-Saharan African countries. The broad assessment criteria developed in phase I of the study were used to identify good practice by the study consultants who visited the following countries:

Burkina Faso in West Africa – Andy Wynne

Tanzania in East Africa – Andy Wynne

Namibia in Southern Africa – Mercy Nyangulu.

In addition, to the annual consolidated financial statements or accounts of the consolidated fund, consideration was given to the findings and availability of the annual report of the

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Auditor General. It is assumed that these two reports, from the Accountant General and the Auditor General, are essential for the quality of financial accountability of governments.

During the fieldwork, the consultants aimed to interview the following stakeholders (amongst others):

a) Accountants General and senior financial officials of other central government entities

b) Ministers of Finance and other cabinet ministers and advisors

c) Auditor Generals and their senior staff

d) Public Accounts Committees members and their advisors/officials

f) Financial correspondents of the media

e) Non-State Actors [Civil Society Groups].

The aim was to identify the information which users of government financial statements actually need, in addition to examples of good practice in financial reporting by governments.

III BROAD INDICATIVE CRITERIA

The financial statements of the following governments were reviewed to identify exemplars of good practice: Botswana, Ghana, Kenya, Mauritius, Nigeria, Rwanda, Sierra Leone, South Africa and Uganda. These countries provide a range of examples of existing good practice across sub-Saharan Africa, but as they are all Anglophone countries the financial statements are broadly similar. Consultants also visited Burkina Faso (Francophone), Namibia and Tanzania to obtain the financial statements of their governments and to discuss their needs with several uses of these accounts. The elements of good practice from these statements are noted below against each of the key qualitative characteristics we adopted.

The main financial statements provided by most of the Anglophone countries are as follows:

1. Consolidated Cash Flow Statement with comparison to previous years figures (Botswana, Mauritius, Nigeria, Sierra Leone, South Africa, Tanzania and Uganda)

2. Statement of financial assets and liabilities with comparison to previous years figures (Botswana, Mauritius, Nigeria, Rwanda, South Africa and Uganda)

3. Statement of recurrent receipts and payments with comparison with the budget – often statement of the Consolidated Revenue Fund (Botswana, Mauritius, Nigeria, Rwanda (no separate statement for capital), Sierra Leone, South Africa (no separate statement for capital, but disclosed in the single statement) Tanzania and Uganda (no separate statement for capital).

4. Statement of capital receipts and payments with comparison with the budget – often statement of the Capital Development Fund (Botswana, Mauritius, Nigeria, Sierra Leone and Tanzania).

This common approach is a reflection of the public financial management laws which were enacted soon after independence. As an example, section 26 of the Exchequer and Audit Ordinance No. 21 of 1961 of Tanzania required the Treasury to prepare and submit to the Controller and Auditor General accounts showing fully the financial position of the government at the end of the financial year, including:

Statement of Receipts and Payments for the year

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Summary statements of revenue receipts

A statement of receipts into and issues from the Exchequer Account during the year and a balance sheet of the Consolidated Fund

A summary of Appropriation Accounts

A statement of outstanding public debt

A consolidated statement of assets and liabilities

A statement of the amounts guaranteed by the Government at the year end

A statement of outstanding loans issued by the Government.

For the Francophone countries, the main financial statement is the annual budget out-turn (loi de règlement) which is presented to parliament. The draft annual budget out-turn law notes the final amounts of cash receipts and expenses that have been ordered during the year. If necessary, the law ratifies the new credits that were opened by decree (new budget lines agreed by the Council of Ministers) and approves any over-spending arising from special circumstances. It establishes the financial results for the year which include the:

deficit or surplus resulting from the net difference between the receipts and expenses for the general and annexed budgets;

losses or profits arising from special accounts; losses or profits resulting from the management of treasury operations.

The budget law authorises the transfer of the net results for the year to the permanent Treasury overdraft account

Having reviewed the literature and the financial statements of these twelve governments, we consider that the following are the key qualitative characteristics of public sector financial reporting:

timeliness – are the audited financial statements made public promptly after the end of the financial year to which they refer?

understandability – are the financial statements clear and are the key aspects and terms explained?

openness – is the key financial information of interest to politicians and the public made available?

consistency – is the information consistent from one year to the next, between accounts within the same financial statements and is it reliable and free from material errors?

Other criteria were also considered, for example, see those from the Cash Basis IPSAS detailed in Annex 2 of this guide. Appendix 5 to this report provides an analysis of the above four characteristics against the PEFA requirements.

Five examples of reasonably good (in different ways) financial statements are available on the Internet:

Burkina Faso – http://www.dgb.gov.bf/lg.php

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Mauritius – http://www.gov.mu/portal/site/treasurysite/menuitem.dc486ae98bb980d0553074b748a521ca/

Sierra Leone - www.mofed.gov.sl/index.php?option=com_content&task=view&id=84&Itemid=119

South Africa - http://www.treasury.gov.za/publications/annual%20reports/annual%20financial%20statements/default.aspx

Uganda - http://www.oag.go.ug/uploaded_files/1264592601CONSOLIDATED%20FINANCIAL%20STATEMENTS%202008.pdf

Each of the four key qualitative characteristics of financial reporting are considered below with examples of good practice from our exemplar countries. The details from each of the individual countries and the results of other analysis, for example, PEFA are included in appendices to this study.

IV TIMELINESS

Are the audited financial statements made public promptly after the end of the financial year to which they refer?

The basic requirement is that the audited financial statements should be submitted to the National Assembly and made public within 12 months of the end of the financial year to which they relate. This is now widely achieved by governments in sub-Saharan Africa.

Ideally the audited accounts should be submitted to the National Assembly before the budget for the following year is considered.   This will generally require the financial statements to be published within nine months of the year-end (this is now widely achieved by, for example, Burkina Faso, Mauritius, Tanzania, Uganda and South Africa). To publish the audited financial statements within nine months will usually require the financial statements to be submitted to the Auditor General within six months (which will score an A under a PEFA assessment) and the Auditor General to complete their work within a further three months (PEFA only requires four month to score an A).

In recent years in Ghana, the Report and Financial Statements on the Public Accounts of Ghana (Consolidated Fund) were submitted to the Auditor General three months after the close of the fiscal year.Uganda requires the Accountant General to submit their financial statements to the Auditor General within four months of the year-end and this has been achieved in recent years. In South Africa the government’s consolidated financial information is submitted to the Auditor General within five months of the year end and the audited financial statements are then submitted to parliament within six months of the year end.

In Nigeria the constitution requires the Auditor General to report within 90 days of receipt of the accounts from the Accountant General, this was achieved for the first time in 2009. For the last three years, the annual audit reports of the Government of Mauritius have been submitted to the National Assembly within a few weeks of receipt of the financial statement from the Auditor General and within 4-6 months of the end of the fiscal year. The statutory limit is 8 months and the Accountant General is required to submit the financial statements to the Auditor General within six months.

According to the Open Budget Survey country reports (2010) a year-end report that discusses the budget’s actual outcome for the year is published six months or less after the end of the fiscal year (South Africa, Uganda) or 12 months or less (but more than six months) after the end of the fiscal year (Ghana, Namibia).

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However, a number of governments are not achieving these targets, for example, the financial statements for the governments of Morocco and Tunisia are not issued until two years after the end of the financial year. Where governments do not submit their audited financial statements to the National Assembly within nine months of the end of the reporting financial year (or at the very least 12 months), then timeliness will be a priority in terms of improvements to the financial statements. A number of other Francophone countries have periodically suffered from issuing their financial statements late; for example, in 2003 – 2005 the National Assembly of Burkina Faso cleared the backlog of annual budget out-turn reports stretching back nearly 20 years. For the last five years the draft financial statements have been prepared and submitted to the National Assembly within six months of the end of the period when the payments are made. The annual report of the General State Inspectorate of Burkina Faso is made public in March or April of the following year and is provided to the State President, the Prime Minister, the President of the National Assembly and the donor community. It is then made available on the website of the Prime Minister.

V UNDERSTANDABILITY

Are the financial statements clear and are the key aspects and terms explained?

Many of the key users of government financial statements (the general public and their political representatives) are not financially literate and so extra effort is needed to make sure the financial statements are accessible, clear and understandable.

Commentary and explanations

In many countries the Accountant General provides a commentary on the financial statements and this may be complemented by the introduction to the annual report of the Auditor General. The Auditor General provides a summary and overview of the government’s financial position and budget out-turn in, for example, Kenya, Uganda and South Africa.

The Accountant General in Tanzania provides a two and a half page commentary on the financial statements. In Uganda there is a commentary on the Financial Statements by the Accountant General (five pages), comments are provided on the overall level of payments, receipts and balances. A six page overview is provided by the Accountant General (Mauritius). A seven page review of reforms and budget out-turns etc is provided by the Accountant General of Sierra Leone which includes three graphs (including a 7 year summary of revenue). In Ghana the Accountant General provides an overview of the financial statements of just over 20 pages which includes an explanation of many of the key terms. In addition five year trends are provided for revenue and expenditure and for the balance sheet. In South Africa an overview is provided by the Accountant General; this reviews the operating results (35 pages). It also shows trends over a six-year period. The financial statements for Burkina Faso provide extensive commentary explaining the results of the budget out-turn report.

Graphs may greatly help in the understanding of the financial position and trends in recent years. Charts showing five-year recurrent/capital revenue and expenditure with analysis are provided by the Accountant General of Mauritius. Graphs of total revenue and expenditure over the last five years are provided by the Accountant General of Ghana. The General Balance of the Treasury Accounts of Burkina Faso which complement the Government’s financial statements include 16 graphs and eight tables showing the overall finances of the State over the previous five years. The review of operating results in South Africa includes around 40 graphs.

The 2008 financial statements for Rwanda provided a page of explanations of the key terms. Many of the key terms are explained in the accounting policies for the Government of South Africa. According to the Open Budget Survey (2010), thorough non-technical definitions of terms used in the budget and other budget-related documents are provided in Ghana and

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South Africa and some definitions are provided in Namibia. These explanations can be important as many public sector accounting terms have a specific meaning in different countries; for example, advances, may mean loans to individual officials, for example, to purchase a car (an asset); money released to ministries, departments or agencies to undertake specific tasks (unaccounted for expenditure or an asset); or receipts received in advance of the service being provided by a ministry, department or agency (liability) or an unretired imprest (unaccounted for expenditure or an asset).

Consolidation approach

Many countries provide consolidated financial statements of one sort or another, but there is a need to be clear about what is meant by consolidation and which entities are included within the consolidation. However, the cost and usefulness of consolidating the accounts of parastatal organisations or sub-national government with those of national government ministries, department and agencies is not clear. The Accountant-General of an East African country said that it would be impossible to produce consolidated accounts. After further consideration, he accepted that it would be possible, but that the costs would be significantly greater than any benefits.

In South Africa full consolidation is not undertaken as inter-entity transactions are not necessarily eliminated (this is considered to be unnecessarily costly). As a result, the Government’s main financial report is termed Consolidated Financial Information (rather than consolidated financial statements). National Departments (ministries, departments and agencies) are consolidated separately from public entities (Public entities include constitutional institutions and national public entities) as the later use the accrual basis (South Africa). The provincial and local level entities are not included in these reports apart from transfers to provinces (South Africa). Uganda provides a clear statement on the types of entity which are included in the statements (not government business entities – except for dividends received and subventions provided). A clear statement is provided on the types of entity which are included in the statements and reference is made to lists in other documents, but no clear list is provided (South Africa).

Details are provided of significant entities controlled by the Government of Tanzania. This includes any subsidies provided for the current and previous years, the percentage of the government’s holding and its value at cost for the current and previous years. This includes subsidiaries (above 50%), associates (20-50%) and shareholdings of below 20%. The financial results of these entities are not consolidated within the main financial statements. Details are also provided of the balance at the year end (and for the previous year) of any funds operating within ministries, departments and agencies. These funds are also not consolidated within the main financial statements of the Government of Tanzania.

The governments of France the UK and the US have all faced significant problems in producing annual consolidated financial statements. The US Government Accountability Office has been unable to provide an opinion on the Government’s consolidated financial statements for the last 14 years. The Government of India considers that full consolidation of all public sector entities, “is likely to cause more distortion than bringing in clarity in the financial statements of government” and so it does not plan to consolidate its government business enterprises or sub-national governments.

Legal basis and Auditor General opinion

A statement is provided on the legal basis for the financial statements and the basis of accounting which is used (modified cash) in many countries, for example, Ghana, Mauritius, Rwanda, South Africa, Tanzania and Uganda.

The opinion of the Auditor General is provided by most governments in the same document and alongside the financial statements (Botswana, Mauritius, Nigeria, Sierra Leone, South Africa, Tanzania and Uganda).

Functional analysis

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A summary of total expenditure analysed by the standard 10 COFOG functions outlined in the Government Financial Statistics Manual (GFSM page 76) may assist in the understanding of the relative level of government spending in different areas. This is especially useful for international comparisons as the structure of ministries, departments and agencies is different in each country. However, this standard analysis is not usually provided by African governments in the financial statements. In 2009, only two African countries provided this analysis to the IMF (Mauritius and Seychelles) and the data for the later was at least two years out of date.

A functional summary of expenditure and net lending is provided, but this does not follow the IMF GFSM analysis (Botswana). A summary of expenditure analysed by most of the COFOG functions is provided (not including Social nor Environmental Protection which are combined with General Services in “Other”) (Sierra Leone). For South Africa government expenditure is analysed into five clusters (social, justice, central government, economic and finance (rather than a functional classification).

Brief reports with supporting details

Understanding and clarity may be enhanced with a short financial report, but the size of a government’s financial statements varies greatly from country to country: Botswana 605 pages; Kenya nearly 2,500 pages; Mauritius 217 pages; Nigeria 45 pages; Sierra Leone 30 pages and 30 pages of appendices; South Africa 179 pages (with 96 pages on “National Departments, the National Revenue Fund, State Debt and Tax & Loan Accounts”) and Tanzania 73 pages.

It may be that a short popular introductory document should be produced of 30 pages or less with supporting details available on the Internet for those that require it.

In a number of countries the Auditor General provides an executive summary covering the main findings in their report, this includes Tanzania and Uganda. In Ghana, the Auditor General provides an eight page summary of significant findings and recommendations. A summary of the report of the Court of Accounts which is sent to the National Assembly of Burkina Faso (including the declaration of consistency) is included in the annual public report of the Court of Accounts of Burkina Faso (including about 20 pages commentary on the budget).

Covering letters and responsibilities

Some financial statements include covering letters from the Minister of Finance and other senior officials. This demonstrates that the document is an official report from the government and may detail their respective responsibilities. The reports include statements from the Minister of Finance and the Secretary to the Treasury/ Permanent Secretary (most senior civil servant in the Ministry of Finance). The Secretary to the Treasury also signs the main statements with the Accountant General. (Uganda). A Statement of Responsibilities is provided – outlining the respective responsibilities of the Minister, Secretary to the Treasury and the Accountant General (Uganda). A preface to the financial statements is provided by the Ministry of Finance (Nigeria). A letter from Accountant General to the Financial Secretary is provided and another from the Financial Secretary to the Minister of Finance (Mauritius). The reports are signed by the Accountant General and the Director General (head civil servant of the ministry) (South Africa). The financial statements include a statement that the statements were authorised by the Ministry of Finance (Sierra Leone).

Other aspects

Details of development expenditure are provided by project compared to Total Estimated Cost (TEC) including previous years’ expenditure (Botswana). This shows the total costs to date of individual development or capital projects.

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The financial statements are produced in a well-presented and printed colour publication for Mauritius, Nigeria, Tanzania and South Africa. This may encourage wider readership of the financial statements.

VI OPENNESS

Is the key financial information of interest to politicians and the public made available?

Careful consideration needs to be given to the specific areas of interest and to providing the necessary information to the key users of government financial statements. For example, in some countries there may be concern on the level of pension arrears, in these cases appropriate information and explanations should be provided. Several countries (Ghana, Tanzania, Uganda and South Africa) provide separate audited financial statements for individual ministries, departments and agencies, so some of the detail may be provided in such accounts. Below we have only considered the contents of the central government financial statements.

Comparisons to budget

This appears to be a key role for government financial statements. Was the government’s budget implemented in the ways agreed by parliament and in line with Financial Regulations? Material over and under-spending should be reported and explained. The financial statements should be classified in the same form as the government’s annual budget and in accordance with the approved chart of accounts (Sierra Leone).

Actual receipts and payments are provided, compared to budget (adjusted appropriation) by department showing actual and percentage variance and appropriations in aid are also included in the summary provided in the Auditor General’s report (Kenya). Rwanda provides summary totals of internally generate revenue from types of organisations, for example, ministries, local governments etc. Details are also provided of recurrent revenue compared to budget (60 pages). Details are provided of recurrent expenditure compared to the budget and warrants (280 pages) (Botswana). Detailed line item reports are provided of budget out-turn of ministries, departments and agencies (122 pages) (Mauritius). A summary is provided by vote (for ministries, departments and agencies, embassies, hospitals and district councils) showing budget, releases and actual expenditure (Uganda).

Detailed comparisons with the budget could be excluded from the printed reports and just provided in reports on the Internet. This would reduce printing costs and so be more economic. This approach would mean that the cost of providing such information would be greatly reduced and so information could be provided on a detailed line item basis for individual front line service providers like primary schools and primary health centres.

According to the country reports of the Open Budget Survey (2010), the year-end budget report highlighting key differences between the enacted level of funds intended to benefit directly the country’s most impoverished populations and the actual outcome in Ghana and South Africa (but some details are excluded) and some explanations are presented, but they lack important details in Namibia and Uganda.

Key budget documents

The Open Budget Partnership has identified the following eight key budget documents which should be produced at the appropriate stages of the budget cycle:

Pre-budget statement In-year budget reports Executive’s budget proposal Mid-year budget review Enacted budget Year-end budget report

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Citizens budget Audit report

The governments of South Africa and Uganda publish all of these documents according to reports of the Open Budget Survey (2010). All of the documents are also published by at least one of the other countries we reviewed. The audit report is published by all the countries and the enacted budget by all but one. Interestingly, there are numerous instances in which these documents are produced, but not made publicly available. So governments could easily improve their level of openness by publishing these documents which are already available. More details are provided in Appendix 7 to this study.

Government debt

The overall level of government debt is of concern in many countries. This should be reported and any changes reconciled to the balance sheet and overall budget out-turn balance.

A statement of public debt is provided with a summary of foreign currency loans (in local and relevant foreign currencies (Botswana). Details are provided in appendices of external public debt of balance and payments made on a loan by loan basis (in local currency) and original loan in currency of provider (Sierra Leone). In Uganda, there is full disclosure in a Statement of Outstanding Public Debt which is consistent with the total liabilities in the Consolidated Statement of Financial Position (balance sheet). This analyses the debt by domestic and external debt of various types. Totals for loans from individual multi-lateral organisations are provided (Uganda). A detailed listing of public debt is provided with interest rates and value in foreign currency for external debts (Mauritius). It Includes a summary of total government debt analysed in to domestic and foreign debt for the last six years, also a reconciliation of the deficit per consolidation to the budget review (separate document) (South Africa). The Tanzanian financial statements provide details of individual loans provided to the Government including the provider, the debt stock in the relevant foreign exchange and Tanzanian shillings at the end of the year and for the previous year. This is analysed by main classes of provider of external assistance and types of domestic debt. The financial statements for Ghana provide a detailed analysis of domestic debt showing any changes over the year. They also provide details of foreign debt stock by donor and project showing the exchange rates and any changes during the year.

Details are provided of all issues of Treasury Bills and Bonds including interest rates (Sierra Leone).

Arrears

Arrears of government receipts and payments may also be of significant interest to users of government financial statements.

A summary is provided of arrears of revenues, further details are also provided for types of taxes and non-tax revenue, with the latter detailed by ministry, department and agency etc (Uganda). A statement of arrears of revenue is provided (Botswana). The National Accounting Principles for Mauritius require that revenue arrears should be reported, but not expenditure arrears. A statement of arrears of revenue by entity compared to the previous year is provided (Mauritius and Tanzania). Further details of these arrears are then provided in the financial statements of the individual ministries, departments and agencies, for example, the arrears for the Ministry of Health and Social Welfare were for training fees (Tanzania).

Payment arrears are an area of interest, at least for the donor community, and are covered in PI-4 of the PEFA framework. However, few governments appear to report on this aspect of their finances, although, for example, the Auditor General of Kenya does report on pending bills, or payments to suppliers which were outstanding at the year end for each ministry, department and agency. The definition of payment arrears is not necessarily clear. The Monetary and Economic Union of West Africa (UMEOA in French) does, however, define this (as does the Government of Ghana) as payments not made within 90 days of the receipt of the goods or services. In Sierra Leone the balance and change to domestic and other creditors is

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included. In Tanzania a statement of outstanding liabilities is disclosed and is analysed by the type of arrears (for example, “Supplies (good and services)” and “Salary arrears”) rather than ministry, department or agency.

In Uganda payment arrears are more than 10% of annual expenditure but not clearly reported on in the financial statements, although some information is included in the report of the Auditor General. The 2008 Consolidated Financial statements state that: “Whereas government is committed to minimizing creation of new domestic arrears through the implementation of the commitment control system, new arrears continue to emerge due to budgetary constraints. Government will continue to take all the necessary steps to ensure that domestic arrears are gradually paid off.” (page 8). Note 21 to these accounts does show details of domestic payables (“These comprise committed creditors [often referred to as “domestic arrears”] incurred by Accounting Officers, which have not been redeemed/cleared by the year-end.”) with the comparative figure for the previous year. The Auditor General report for 2008-09 provides totals for payment arrears for the last four years and the totals by ministry or department (Uganda). The 2009 consolidated financial information provides totals and a graph for current payables for the last six years showing increases of 50%, 67% and 25% over the last three years, but with no clear explanation. The level of current payables shows the total and those owed for more than 30 days.

Losses

Summaries are provided of reported losses and those written off or abandoned, with details by ministry, department and agency etc (Uganda). A Statement of Stores Losses is provided – showing losses in previous years and the current year (Mauritius). Details of loss of public money provided with date, particulars, loss, recovered/written off and state of the file (Botswana). The financial statements for the Government of South Africa disclose fruitless and wasteful expenditure as a note to the accounts. A statement of losses of public moneys, stores written off and claims abandoned are provided by vote (ministries, departments and agency) compared with the previous year in the financial statements of the Government of Tanzania, more details are then provided in the financial statements of individual ministries, departments and agencies. The financial statements for Ghana provide a schedule of doubtful debts by individual public board, corporation or company.

Proceeds from privatisation

The proceeds from privatisation of public enterprises are disclosed (Rwanda). The financial statements for Sierra Leone provide the amounts outstanding from privatisation. This includes amounts for specific companies and the payments received during the year. Similarly for Ghana, details are provided for any outstanding payments for privatised companies. This includes the name the company, the investor, year of privatisation, cost and amounts paid with the balance outstanding at start and end of the year with brief remarks.

Outstanding loans, advances, imprest etc

In some countries there may be an issue with outstanding or unpaid loans, this may also be a problem with advances, imprests and suspense accounts which are used to hide unauthorised payments.

Supporting statements are provided on advances and loans issued and investments held by the Government (Uganda). Statements are provided of loans outstanding and investments in commercial undertakings (Botswana). Details are provided of loans outstanding to individual public boards and corporations and to private companies (export credit guarantees) with changes over the year (Ghana).

Summaries of advances provided by ministry and directorate are provided (Botswana). The Ugandan accounts provide totals for “advances domestic” and “advances – deferred income”.

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The Auditor General’s report for 2008-09 provides details of advances by ministry or department in Uganda and says that these are not accounted for. Details of advances by ministry, department and agency and type of advance (cars, claims, dishonoured cheques etc) are provided (Mauritius). Totals of outstanding loans and advances provided to employees (and Members of The National Assembly) with the amount written off during the year are provided (Sierra Leone). Totals are provided by ministry, department and agency for advances for vehicles, special advances and salary advances indicating changes over the year (Ghana).

The financial statements for Burkina Faso include details of state loans, advances and repayments. This includes details of state loans to each company, the amount loaned and repaid, and the amount still to be recovered. It also provides details, in total, of loans provided to communes, provinces and members of the government and previous governments.

The Auditor General’s report for 2007-08 provides totals of funds reported in suspense and clearance accounts (Kenya). The Auditor General’s report for 2007-08 provides balances of imprests outstanding at the end of the year for each ministry or department (Kenya). The financial statements for Uganda show a figure for ‘Cash at hand- Imprest’ in total and for the previous year. The Nigerian accounts show a figure for the ‘outstanding imprest account’ for each ministry, department and agency and provide figures for the previous year. The Statement of Assets and Liabilities for Botswana shows a total figure for imprests and the report of the Auditor General provides some further details, but not by individual ministry, department and agency. The report also indicates a concern in this area expressed by the Public Accounts Committee.

Investments

Information is provided for all special funds including income/expenditure statement, balance sheet and investments (Botswana).

Details of cash balances, deposit and other bank accounts are provided (Botswana). Balances with various accounts in the Central Bank and totals for individual private banks provided which is consistent with the cash flow statement are provided (Sierra Leone). Balances are provided for the main types of cash and bank account showing the change over the year (Ghana).

Details are provided of investments in public boards and corporations, and private companies with any changes during the year (Ghana). Details are provided of significant controlled entities. This includes any subsidies provided for the current and previous years, the percentage of the government’s holding and its value at cost for the current and previous years (Tanzania).

Contingent liabilities

A summary of contingent liabilities showing the lender, nature, interest rate, repaid, maximum liability and current outstanding is provided (Botswana). Some details of contingent liabilities are provided – mainly totals in general and parastatal categories (Sierra Leone).

A summary of contingent liabilities is provided by type or organisation or liability, with a comparison to the previous year. A similar analysis is provided for commitments, with details of named ministries, departments and agencies etc (Uganda). Details of government guarantees (contingent liabilities) line by line with foreign currency details are provided (Mauritius). Summaries are provided of different types of contingent liabilities (South Africa). In Tanzania a statement of loan guarantees and export guarantees is provided giving details of the individual loans provided by the Government, the borrower, lender, size of loan and guaranteed amount. A statement is also provided of contingent liabilities (court cases against public sector entities), this includes the public sector entity, brief details of the cases and the possible value of the liabilities.

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Financial assistance

Details of budget support are provided by donor (including donor currency) compared to the budget and the previous year (Rwanda - for amounts received by the central Treasury and Sierra Leone). A statement of foreign aid received (cash) is provided – by donor and recipient entity (Mauritius). A statement of foreign aid received (not cash) is also provided – by donor and recipient entity (Mauritius). This includes that received and the balance outstanding with its purpose (Mauritius). A statement of loans, grants technical assistance for development projects is reported by donor (Rwanda). Details are provided of external assistance included in the budget and actually received by the Government of Tanzania, with figures for the previous year. This includes external assistance provided by individual multilateral bodies and bilateral donors. The financial statements for the Government of Ghana provide details of external assistance received during the year analysed into grants, loans and projects grants, showing the amounts received from each donor in the currency of Ghana.

The financial statements for Burkina Faso provide details of grants and loans (including some project finance) with details of the support provided by each donor (in FCFA, the regional currency). In addition, there is a separate report from the Director General of International Cooperation on the receipts from the international partners. This is a detailed annual report for the last ten years (250 pages for 2009 issued in June 2010). A summary is provided of all aid agreements showing their amounts in the currency of origin and local currency. A summary is also provided of all aid received by country and agency (for example, the three French aid agencies) in American dollars (Burkina Faso).

A major area that is always not considered in many of the public financial statements is accounting for government project funds (both loans and grants provided to fund government projects). Many countries do not bring these project funds (revenue and expenditure with resulting cash balances) into their financial statements and CABRI recognised this as a particular challenge (2009), although this is a requirement of the Cash Basis IPSAS. The financial statements for Tanzania do disclose details of some project aid and some is also reported by the Government of Burkina Faso.

According to the Open Budget Survey (2010), all sources of donor assistance are identified individually in the budget or supporting documents for Ghana and at least two-thirds of, but not all, sources of donor assistance, are identified individually in other countries (Namibia, South Africa, Tanzania, Uganda).

Extractive Industries Transparency Initiative

The following African countries are compliant with this initiative:

Central African Republic Ghana Liberia Niger Nigeria.

Secret expenditure

According to the Open Budget Survey (2010), one percent or less of expenditure is dedicated to secret items relating to, for instance, national security and military intelligence in South Africa. Three percent or less, but more than one percent, of expenditure is dedicated to secret items in Ghana and maybe, Namibia; and eight percent or less, but more than three percent, of expenditure is dedicated to secret items in Uganda.

The Open Budget Survey (2010) also found that detailed audit reports of the annual accounts of the security sector (military, police, intelligence services) and other secret programs are provided to the legislature (or relevant committee) in Ghana and South Africa. Legislators are provided with audit reports on secret items, but some details are excluded in Tanzania and

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legislators are provided audit reports on secret items, but they lack important details in Namibia and Uganda.

Other information of interest to citizens and the media

Based on interviews with journalists, a leader of a significant public sector trade union and other NGOs in Tanzania and Burkina Faso, the following are their priorities in terms of financial reporting by the Government:

the salaries and benefits of senior politicians and public officials should be made public

the assets of senior politicians and public officials should be published when they enter office and when they leave

the budgets, receipts and expenses of primary schools and primary health centres should be made public

the receipts and expenses of local authorities should be published

at least summaries of financial statements should be provided in local languages.

U4 (2008) reports that, in 2006, 28 of the 48 African countries required disclosure of income and assets by public officials. Of these, 23 countries require officials to declare their assets to an anti-corruption body or other government entity, while five publish the declarations (Cape Verde, Central Africa Republic, Liberia, Sao Tome/Principe and South Africa).

In South Africa disclosure of personal assets and financial interest is required from elected officials, senior public servants, members of the National Assembly and Cabinet. In Uganda, the declaration of assets law covers all top and middle ranking public officials. Kenya, Tanzania, Uganda, and Nigeria also require that public office holders declare the assets of their spouse and children in a separate declaration, to prevent dishonest officials from hiding their assets in their spouse or relatives’ names. Only separated spouses and married/independent children are usually excluded from such regimes.

Most countries make provisions for a yearly filing interval in addition to the initial declaration upon entry into office and after the end of the term.

The budgets, receipts and expenses of primary schools and primary health centres should be made public in local languages and understandable in other ways (was the case in Uganda).

Transfers to local governments may be published on the website of the Ministry of Finance in Nigeria and Tanzania.

In Burkina Faso, for the 2010 budget a 20 page explanation was provided in five local languages.

VII CONSISTENCY

Is the information consistent from one year to the next, between accounts within the same financial statements and is it reliable and free from material errors?

The final characteristic is consistency which complements understandability and openness. Financial statements should be consistent between the various statements, over time and ideally between countries. In addition, with the increasing publication of quarterly (or even monthly) budget out-turn reports, it is important that these are consistent with or at least

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reconciled with the annual financial statements.

Technical terms and the figures should be consistent between the different financial statements. This should include, for example, a consistent value and definition of government deficit. In the Nigerian financial statements the same figures are available in the Cash Flow and the Consolidated Revenue Fund for receipts and operational payments. And the same values in the Cash Flow Statement, for example, for cash also appear in the Balance Sheet. Similarly the three main statements provide consistent figures for Sierra Leone. A reconciliation is provided between the “Net surplus /(deficit) as per Statement of Financial Performance” and “Net cash flow generated by operating activities” in the cash flow statement (South Africa). But this reconciliation is not easy to understand and no explanation is provided. Different values are given for cash and cash equivalents in different parts of the financial statements, for example, Note 18 provides a value of Rand 105,156,062 whilst in the Cash flow statement a figure of Rand 101,432,127 is provided (South Africa).

There has been a consistent pattern of reporting by the Government of Mauritius for more than five years, except that statement AA (cash flow statement) is now part of the main accounts. There is also a consistent pattern of reporting over the last five years for the Government of Sierra Leone. Quarterly budget out-turn reports have been produced in the same format by the Government of Tanzania for the last decade. These reports provide a ten page commentary on the budget out-turn covering expenditure, domestic revenue, grants and financing. This report is issued regularly each quarter by the Government of Tanzania. It is published on the Government’s website (where ten years of reports are available): http://www.mof.go.tz/index.php?option=com_content&task=view&id=24&Itemid=38

In a number of countries the reports of the Auditor General suggest that the quality of the accounting records needs to be improved, for example, from the report for 2008-09 the following weaknesses were noted in one middle sized sub-Saharan African country:

poor and inadequately maintained accounting records including ledgers and trial balances

unanalysed balances for various below the line accounts

uncleared long outstanding balances in the statements of assets and liabilities and bank reconciliation statements

unreconciled cashbook balances

inaccurate brought forward balances in the statements of assets and liabilities and in various revenue statements

material book keeping errors resulting in exclusion of expenditure from the accounts.

In a number of sub-Saharan African countries these problems have existed since the economic problems of the 1980s. In 1991, a UN report noted the following inaccurate accounting weaknesses:

delay/failure to reconcile cash books with bank accounts

differences between the individual accounts kept by accounting units and the summary accounts held in the central accounting system

improperly kept accounts of budgetary expenditures (vote books)

carelessly or unskilfully prepared accounting reports from field officers

misclassified and wrongly coded transactions.

The annual report for the Auditor General of Uganda for 2008-09 provided the following

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summary of its financial audit work: “Out of 93 entities audited, 37 entities had unqualified opinions, 54 had qualified opinions, one disclaimer of opinion and one had an Adverse opinion”. Cash balances amounting to Shs.110,499,883,723 were not reported in the Consolidated Financial Statements (around 3% of total), hence understating cash position as at balance sheet date. It was also noted that internal controls to ensure proper custody and efficient utilization of government cash deposits are still inadequate (Uganda).

Clearly overcoming these fundamental weaknesses is a pre-condition for preparing high quality financial statements and may conflict with the need to produce the accounts on time.

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Appendix 1

Financial Reporting Survey and Database - ESAAG

East and Southern African Association of Accountants General (ESAAG) study Financial Reporting Survey and Database (2006). This was based on assessments against the following broad indicative criteria:

1. Stakeholder Support

Members of Parliament, of all political parties, understand and respect the importance of timely, clear, reliable and relevant financial statements.

The media and civil society take an active interest in financial reporting by the government.

The Auditor General is able to independently review the government’s financial statements and provide a timely report to Parliament on their quality and reliability. This is in addition to a report on the underlying financial management procedures and transactions.

The legislature (or a commission thereof) promptly reviews the financial statements and associated audit reports, it is able to question the relevant officials and makes appropriate recommendations to the Executive for corrective action.

The Executive promptly provides a Treasury Memorandum, or equivalent, to parliament outlining its proposed action on the findings of the Parliamentary Accounts Committee (or equivalent).

There is a system of follow-up to ensure that the observations and recommendations of the Auditor General, parliament and the executive have been properly addressed.

2. Legislative Framework Underpinning Financial Reporting

The legislative framework underpinning financial reporting facilitates compliance with appropriate standards, is supported by all the main political parties and is consistent with recent developments.

Other legal provisions regarding financial reporting require the publication of timely, clear, reliable and relevant financial statements for all central government entities including ministries, departments, agencies, parastatal organisations and other state owned enterprises.

The Auditor General is responsible for the audit of all central government entities and can follow public money by reviewing the implementation of partnerships and contracts with third parties. Where the audit of entities is undertaken by private sector audit firms the Auditor General has an oversight function to ensure the independence of such auditors and the quality of their work.

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Legal provisions cover the prompt submission of financial statements and associated audit reports of all central government entities to Parliament and their availability to the public.

3. Financial Reporting

Annual financial statements are submitted to parliament for all central government entities including ministries, departments, agencies, boards, parastatal organisations and other state owned enterprises.

Are “whole-of-government” or any form of consolidated accounts produced? Is the additional information they provide found to be useful?

The financial statements are published along with the associated report from the Auditor General within 9-12 months of the end of the financial year.

Financial statements for all central government entities are made available to the media and public through appropriate outlets including the entities themselves, bookshops, libraries and the Internet. Are any charges are kept to a minimum.

Financial statements are clear, reliable and relevant. The media and other interested parties are provided with adequate

notification of the publication of financial statements and suitable summaries of the main points of interest. They can also have appropriate access to relevant officials to raise points of clarification.

The annual financial statements include the information required by the actual users of the accounts, additional information is kept to a minimum and the accounts are not un-necessarily voluminous.

4. Credibility of Financial Statements

Each set of financial statements has an unqualified independent external audit report which is published along side the statements.

The audit report highlights key lapses in internal financial control, for example, lack of prompt bank reconciliations.

The format of the financial statements is consistent from one year to the next.

Appropriate action is taken to maintain basic financial controls and implement recommendations from the Auditor General, Parliamentary Accounts Committee and the Treasury Memorandum.

Appropriate information is published locally on the funds made available (appropriated) and actual receipts and payments for local service units, for example, schools and health centres.

Appropriately qualified professional staff are employed by the Accountant General, the Auditor General and the finance departments of each central government organisation.

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Appendix 2

Qualitative Characteristics of Financial Reporting (Cash Basis IPSAS)

Qualitative characteristics are the attributes that make the information provided in financial statements useful to users. They are applicable to financial statements, regardless of the basis of accounting used to prepare the financial statements. The four principal qualitative characteristics are understandability, relevance, reliability and comparability.

Understandability

Information is understandable when users might reasonably be expected to comprehend its meaning. For this purpose, users are assumed to have a reasonable knowledge of the entity’s activities and the environment in which it operates, and to be willing to study the information.

Information about complex matters should not be excluded from the financial statements merely on the grounds that it may be too difficult for certain users to understand.

Relevance

Information is relevant to users if it can be used to assist in evaluating past, present or future events or in confirming, or correcting, past evaluations. In order to be relevant, information must also be timely.

MaterialityThe relevance of information is affected by its nature and materiality. Information is material if its omission or misstatement could influence the decisions of users or assessments made on the basis of the financial statement. Materiality depends on the nature or size of the item or error judged in the particular circumstances of its omission or misstatement. Thus, materiality provides a threshold or cut-off point rather than being a primary qualitative characteristic which information must have if it is to be useful.

Reliability

Reliable information is free from material error and bias, and can be depended on by users to represent faithfully that which it purports to represent or could reasonably be expected to represent.

Faithful RepresentationFor information to represent faithfully transactions and other events, it should be presented in accordance with the substance of the transactions and other events, and not merely their legal form.

Substance Over FormIf information is to represent faithfully the transactions and other events that it purports to represent, it is necessary that they are accounted for and presented in accordance with their substance and economic reality and not merely their legal form. The substance of transactions or other events is not always consistent with their legal form.

NeutralityInformation is neutral if it is free from bias. Financial statements are not neutral if the information they contain has been selected or presented in a manner designed to influence the making of a decision or judgment in order to achieve a predetermined result or outcome.

PrudencePrudence is the inclusion of a degree of caution in the exercise of the judgments needed in making the estimates required under conditions of uncertainty, such that assets or revenue are not overstated and liabilities or expenses are not understated.

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CompletenessThe information in financial statements should be complete within the bounds of materiality and cost.

Comparability

Information in financial statements is comparable when users are able to identify similarities and differences between that information and information in other reports.

Comparability applies to the:• comparison of financial statements of different entities; and• comparison of the financial statements of the same entity over periods of time.

An important implication of the characteristic of comparability is that users need to be informed of the policies employed in the preparation of financial statements, changes to those policies and the effects of those changes.

Because users wish to compare the performance of an entity over time, it is important that the financial statements show corresponding information for preceding periods.

Constraints on Relevant and Reliable Information

TimelinessIf there is an undue delay in the reporting of information it may lose its relevance. To provide information on a timely basis it may often be necessary to report before all aspects of a transaction are known, thus impairing reliability. Conversely, if reporting is delayed until all aspects are known, the information may be highly reliable but of little use to users who have had to make decisions in the interim. In achieving a balance between relevance and reliability, the overriding consideration is how best to satisfy the decision-making needs of users.

Balance between Benefit and CostThe balance between benefit and cost is a pervasive constraint. The benefits derived from information should exceed the cost of providing it. The evaluation of benefits and costs is, however, substantially a matter of judgment. Furthermore, the costs do not always fall on those users who enjoy the benefits. Benefits may also be enjoyed by users other than those for whom the information was prepared. For these reasons, it is difficult to apply a benefit-cost test in any particular case. Nevertheless, standard setters, as well as those responsible for the preparation of financial statements and users of financial statements, should be aware of this constraint.

Balance between Qualitative CharacteristicsIn practice a balancing, or trade-off, between qualitative characteristics is often necessary. Generally the aim is to achieve an appropriate balance among the characteristics in order to meet the objectives of financial statements. The relative importance of the characteristics in different cases is a matter of professional judgment.

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Appendix 3

Key points of the Cash Basis International Public Sector Accounting Standard (IPSAS)

“Financial statements should not be described as complying with this Standard unless they comply with all the requirements in Part 1 of the Standard” (1.1.4).

“An entity should prepare and present general purpose financial statements which include the following components:

(a) a statement of cash receipts and payments which:(i) recognizes all cash receipts, cash payments and cash balances controlled by the entity; and(ii) separately identifies payments made by third parties on behalf of the entity; and

(b) accounting policies and explanatory notes

(c) when the entity makes publicly available its approved budget, a comparison of budget and actual amounts either as a separate additional financial statement or as a budget column in the statement of cash receipts and payments.” (1.3.4).

Consolidated financial statements should issued which consolidate all controlled entities, foreign and domestic (including government business enterprises and perhaps sub-national governments) (1.6.5).Control exists where the entity has the power to govern the financial and operating policies of another entity and also has the ability to benefit from the activities of the other entity (Appendix 5).

Government debt would not be included on the pure cash basis.

Comparative figures for the previous period are to be provided.

An entity should prepare and present:

• Total cash receipts & sub-classification

• Total cash payments & sub-classification

• Opening and closing cash balances (1.3.12).

The classification basis must be:“appropriate to the entity’s operations” (1.3.1.2(a)) and is thus a matter of professional judgement.

Payments made by third parties

One on the main innovations of this standard:Disclosure in separate column of all payments made by third parties for goods and services “for the benefit of the entity” (1.3.24). But only if formally advised.

May prepare additional statements

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Accounting policies and explanatory notes

The basis of the financial statements and the specific accounting policies.

Additional information necessary for a fair presentation (1.3.30)

Budget Reporting

“an entity… shall present a comparison of the budget amounts… and actualamounts… [including:]

a) The original and final budget amounts;

(b) The actual amounts on a comparable basis; and

(c) By way of note disclosure, an explanation of material differencesbetween the budget…and actual amounts (1.9.8)

Explanation of variances with original or final budget. But also explanation of whether changes from original to final budget are due to re-allocation or other factors (1.9.23).

An entity shall explain… the budgetary basis and classification basis adopted in the approved budget (1.9.33)

An entity shall identify… the entities included in the approved budget (1.9.39).

The disclosure of comparative [budget] information in respect of the previous Period… is not required (1.9.45).

Disclosure of External Assistance

Aid received (including indirectly) from “significant classes of providers” (1.10.8/10).

Amount as loans and grants (1.10.11).

Balance of undrawn aid (1.10.18)

Debt rescheduled or cancelled (1.10.23).

Non-compliance with significant terms and conditions (1.10.25).

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Appendix 4

Review of the Cash Basis International Public Sector Accounting Standard

– Report of the Task Force

At its June 2010 meeting, the International Public Sector Accounting Standards Board (IPSASB) received and considered the Report of the Task Force for the Review of the Cash Basis IPSAS. The IPSASB agreed that a Project Plan will be developed to revise the Cash Basis IPSAS. Further, the IPSASB also agreed that material should be developed to support and/or initiate projects with other partners interested in the Cash Basis IPSAS and potential implementation guidance that might be developed.

“The primary objectives of the review are to identify the major difficulties that public sector entities in developing economies have encountered in implementing the Cash Basis IPSAS, and to determine whether the IPSAS should be modified, or if further guidance should be provided, in light of those difficulties.” (page 1)

“Respondents confirmed that the Cash Basis IPSAS is not widely adopted. The most frequently identified obstacles to its adoption are application of a “pure” cash basis model and the requirement for full consolidation. Differences between the Cash Basis IPSAS and existing legislation and practice, and the need for additional training and support are also identified as significant obstacles to its adoption.” (page 3).

Thus the Task Force recognised that the Cash Basis Standard has not been widely adopted (indeed it is difficult to identify any government which has properly and fully implemented the Standard), even though it was first issued over seven years ago. The Task Force report identifies four main reasons for this:

the Standard refers to the cash basis, in contrast almost all governments use the modified cash basis (for example, reporting the level of government debt)

the Standard requires the full consolidation of all entities controlled by a government including government business enterprises (parastatal organisations), this is done by very few governments currently and would be a very complex operation

the Standard does not represent current practice which is enshrined in law in many countries and so cannot be easily changed

additional training would be required in many countries before the Standard could be implemented.

The Task Force went on to provide a dozen recommendations to revise the Standard which, when implemented, through the proposed project plan, should go some way to over coming these major challenges to its adoption. The recommendations are summarised below.

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Recommendations:

1. The (revised) Cash Basis Standard should be retained and its relationship with Study 14 on the implementation of the accrual basis should be clarified.

2. Guidance on modified cash/accrual should be developed with other entities.

3. The requirement to consolidate all controlled entities should be revisited, but may still require this after a 3 – 5 year implementation period.

4. The Standard should be reviewed on a regular basis.

5. The anticipated period for the issue of financial statements (six or three months) should not be amended.

6. The relationship between third party settlements and assistance in kind should be clarified.

7. Some disclosures on external assistance should be move to part I (from part II).

8. Consideration should be given to adding requirements on narrative and performance reporting.

9. The presentation of budget information should be reviewed.

10. Disclosures on financial instruments should not be added to the Standard.

11. Part II of the Standard should be deleted and a checklist developed on disclosure requirements.

12. Mechanisms should be developed to support education and training for the Standard in developing economies.

The full report is available from: http://www.ifac.org/PublicSector/Meeting-FileDL.php?FID=5595

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Appendix 5

Crosswalk from PEFA Indicators to Four Characteristics

PEFA Indicator PEFA requirements Four Characteristics in this report

PI-3

Aggregate revenue outturn compared to budget

Actual domestic revenue collection was below 97% of budgeted domestic revenue estimates in no more than one of the last three years

Openness - comparison of actual payments and receipts to the budget agreed by parliament

PI-4

Stock and monitoring of expenditure arrears

(i) The stock of arrears is low (i.e. is below 2% of total expenditure) (ii) Reliable and complete data on the stock of arrears is generated through routine procedures at least at the end of each fiscal year (and includes an age profile)

Openness – reporting of payment arrears is less common than revenue arrears

PI-25

Quality and timeliness of annual financial statements

Consolidated government statement is prepared annually and includes full information on revenue, expenditure and financial assets/liabilities. The statement is submitted for external audit within 6 months of the end of the fiscal yeaIPSAS or corresponding national standards are applied for all statements

Timeliness - Financial statements submitted to Parliament within 12 months of the year end and even better nine months

Understandability: Commentary & explanations Consolidation basis Legal basis & Auditor General

Opinion Functional analysis Brevity Covering letters

Openness Government debt Losses Proceeds from privatisation Outstanding loans, advances,

imprests Investments Contingent liabilities

Consistency

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PEFA Indicator PEFA requirements Four Characteristics in this report

D-2

Financial information provided by donors for budgeting and reporting on project and program aid

(i) All donors (with the possible exception of a few donors providing insignificant amounts) provide budget estimates for disbursement of project aid at stages consistent with the government’s budget calendar and with a breakdown consistent with the government’s budget classification. (ii) Donors provide quarterly reports within one month of end-of-quarter on all disbursements made for at least 85% of the externally financed project estimates in the budget, with a break-down consistent with the government budget classification

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Appendix 6Good Practice Exemplars

United Republic of Tanzania

Good practice in financial reporting by the Government of Tanzania

The Government of Tanzania exhibits a range of good practice in financial accountability to its citizens through the issue of two prime documents, the General Report of the Controller and Auditor General on the Audit of the Financial Statements of the Central Government and the Consolidated Financial Statements of the Government.

This existing good practice is summarised below against each of these two documents.

National Audit Office of Tanzania – A General Report of the Controller and Auditor General on the Audit of the Financial Statements of the Central Government for the year ended 30th June 2009 (sent to the State President 26th March 2010

1. The Controller and Auditor General’s report for central government (and other reports) is issued by end of March in the following year (so within 9 months of the end of the financial year). This is in line with the legal requirements. It is six months after the receipt of the financial statements from the individual ministries, departments and agencies.

2. Eleven page executive summary for the Controller and Auditor General’s report for central government. This covers the trends over the last two years in qualified reports (88% are now unqualified). Also major weaknesses noted during the audit, procurement irregularities, tax issues, weaknesses in payroll, review of key performance audit reports, for example, on the education and health sectors.

3. Main chapters of the report, amongst other aspects, provide a good explanation of audit opinions and their trends with a summary of the reasons for the qualifications, where relevant.

4. The end of the report provides six pages of key recommendations.

5. Good relationship with the Public Accounts Committee and its Chair.

Consolidated Financial Statements of the Government of the United Republic of Tanzania for the Year Ended 30 June 2009 (dated 30th October 2009)

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1. The financial statements start with a statement of responsibilities signed by the Accountant General, the Permanent Secretary in the Ministry for Finance and Economic Affairs and the Minster for Finance and Economic Affairs (page 1).

2. The Accountant General then provides a 2.5 page commentary on the financial statements of the Government for the year covering revenue, expenditure, external assistance, debt and contingent liabilities (page 4-6).

3. The Consolidated Financial Statements are produced in a well presented and printed publication of 73 pages. However, few copies are produced and they are not freely available.

4. The accounts were signed on 30th October 2009 (four months after the year end in line with the legal requirements – see Annex 1) and the report of the Controller and Auditor General is dated 26th March 2010 (five months after the receipt of the draft financial statements and within the legal limit of nine months after the end of the financial year).

5. The draft financial statements of the individual ministries, departments and agencies are sent to the Accountant General and the Controller and Auditor General within three months of the end of the financial year (statement by officials in the Office of the Accountant General).

6. Details are provided of external assistance included in the budget and actually received (Note 14, page 25) with figures for the previous year. This includes external assistance provided by individual multilateral bodies, bilateral donors and project aid.

7. Details are provided of loan repayments and interest paid including a comparison with the budget and the previous year (Note 21, page 34).

8. Year-end balances for the votes for each central government ministry, department and agency are provided compared to the previous year (Note 24, page 37 – 38). This provides an overview of the extent to which individual ministries, departments and agencies spent their agreed budgets during the financial year.

9. A statement of arrears of revenue for each central government ministry, department and agency is provided compared to the previous year (Note 29, page 39). Further details of these arrears are then provided in the financial statements of the individual ministries, departments and agencies, for example, the arrears for the Ministry of Health and Social Welfare were for training fees.

10. A statement of outstanding loans (excluding interest) is provided. This provides details of individual loans to named entities compared to the previous year (Note 33, page 44).

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11. A statement of outstanding liabilities is disclosed, this is analysed by the type of arrears (for example, “Supplies (good and services)” and “Salary arrears”) rather than ministry, department or agency (Note 34, page 44).

12. A statement of loan guarantees and export guarantees is provided giving details of the individual loans, the borrower, lender, size of loan and guaranteed amount (Note 35, page 45 - 46).

13. Details are provided of individual loans provided to the Government including the provider, the debt stock in the relevant foreign exchange and Tanzanian shillings at the end of the year and for the previous year (Note 36, pages 47-50). This is analysed as follows:

External public debt Multi-lateral creditorsParis Club membersNon-Paris Club membersFinancial and Commercial Institutions

Domestic DebtGovernment stocksBondsTreasury BillsOthers

14. A statement is provided of contingent liabilities (court cases against public sector entities) (Note 37, page 51). This includes the public sector entity, brief details of the cases and the possible value of the liabilities.

15. Details are provided of significant controlled entities (Note 38, page 52 -56). This includes any subsidies provided for the current and previous years, the percentage of the government’s holding and its value at cost for the current and previous years. This includes subsidiaries (above 50%), associates (20-50%) and shareholdings of below 20%. The financial results of these entities are not consolidated within the main financial statements.

16. Details are provided of the balance at the year end (and previous) of any funds operating within ministries, departments and agencies (Note 35, page 57). These funds are not consolidated within the main financial statements.

17. Some non-financial information is provided on, for example, natural resources, national parks, forests, heritage sites etc (Note 41, page 58-60).

18. A summary is provided of the appropriation account (page 61 and 62) with the following information provided for each of the votes for the individual ministries, departments and agencies (this includes project aid or payments by third parties):

a. Previous year actual

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b. Estimate – recurrent, development and totalc. Actual – recurrent, development and totald. Variance – actual (Tshillings) and percentage of estimate.

19. A statement is also provided for the vote account (appropriation account – summary of the previous pages – page 63) showing:

a. Original approved estimatesb. Issues during the yearc. Net expenditured. Unutilised issues (which is represented by outstanding imprests, advances and

Cash in hand with the Paymaster General (PMG).

20. A statement of losses of public moneys, stores written off and claims abandoned are provided by vote (ministries, departments and agency) compared with the previous year (page 72). More details are provided in the financial statements of individual ministries, departments and agencies.

21. The consolidated financial statements include an analysis of the significant financial risks faced by the government and a summary of how these are addressed (page 22). Further details are provided in the financial statements of individual ministries, departments and agencies.

22. Quarterly budget out-turn reports have been produced in the same format and provides a ten page commentary on the budget out-turn covering expenditure, domestic revenue, grants and financing. This report is issued regularly each quarter by the Government of Tanzania and was designed specifically for the donor community. It is published on the Government’s website (where nearly ten years of reports are available): http://www.mof.go.tz/index.php?option=com_content&task=view&id=24&Itemid=38

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Annex 1

The Public Finance Act, 2001, Act No. 6 of 2001

PART IV: PREPARATION AND EXAMINATION OF ACCOUNTS

(a) Submission of Accounts and Reports

Annual Accounts

25.-(1) The Accountant-General shall, within a period of six months or such longer period as the National Assembly may by resolution appoint after the end of each financial year, prepare and transmit to the Minister and to the Controller and Auditor-General-

(a) a balance sheet showing the assets and liabilities of the Consolidated Fund;

(b) a statement of the source and application of funds for the Consolidated Fund showing the revenues, expenditures and financing of the Fund for the year;

(c) a summary statement of revenue and expenditure, being a summary of all the statements signed by accounting officers under subsection (2) (a) and (2) (c) of this section;

(d) a statement of the amounts outstanding at the end of the year in respect of the Public Debt;

(e) a statement of the amounts guaranteed by the Government at the end of the financial year in respect of bank overdrafts, loans, public loan issues and other contingent liabilities;

(f) a statement of the amount outstanding at the end of the year in respect of loans issued by the Government

(g) a summary statement of Arrears of Revenue for each revenue Head being a summary of the Statements of Arrears of Revenue signed by accounting officers under subsection (2) (d) of this section;

(h) a summary statement of commitments outstanding for the supply of goods and services for each Vote at the end of the financial year being a summary of the amount included for such commitments in the statement signed by accounting officers under subsection (2)(b) of this section;

(i) a summary statement of stores and other assets for each Vote being a summary of the Statement of assets signed by accounting officers under subsection (2) (e) of this section;

(j) such other statements and in such form as the National Assembly may from time to time require.

(2) Each accounting officer shall, within a period of four months after the end of each financial year prepare and transmit to the Controller and Auditor-General in respect of the past financial year and in respect, of the votes, revenues and moneys for which he is responsible-

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(a) an Appropriation Account signed by the accounting officer showing the services for which the moneys expended were voted, the sums actually expended on each service, and the state of each vote compared with the amount appropriated for that vote by the National Assembly;

(b) a statement signed by the accounting officer and in such form as the Accountant-General may direct containing the amount of commitments outstanding for the supply and goods and services at the end of the financial year and such other information as the Minister may require;

(c) a statement of revenues received signed by the accounting officer and in such form as the Accountant-General may direct showing the amount contained in the estimates of revenue for each source of revenue and the amount actually collected, and containing an explanation, for any variation, between the revenues actually collected and the amount estimated;

(d) a statement of arrears of revenue signed by the accounting officer showing the amount outstanding at the end of the financial year for each source of revenue and containing such information and in such form as the Accountant-General may direct, a nil return should be submitted if appropriate;

(e) a statement of assets signed by the accounting officer containing details and values of all unallocated stores under his control at the end of the financial year together with the details and values of such other classes of assets under the control of the accounting officer as the Accountant-General may from time to time determine;

(f) a statement of performance in providing each class of outputs provided during the year signed by the accounting officer, being a statement that:-

(i) compares that performance with the forecast of the performance contained in the Estimates laid before the National Assembly pursuant to section (18) (1) (b); and

(ii) gives particulars of the extent to which the performance criteria specified in that Estimates in relation to the Provision of those outputs were satisfied.

(3) Any public officer administering a fund established or deemed to have been established under section 12, and any public officer administering any agency trust or other fund or account not provided for in this section, shall prepare, sign and transmit to the Controller and Auditor- General an account of that agency, fund or account in the form which the Accountant-General may from time to time direct.

(4) All accounts submitted under this section shall:

(a) be prepared in accordance with generally accepted accounting practice and in accordance with any instructions approved by the Permanent Secretary and issued by the Accountant-General; and

(b) state the basis of accounting used in their Preparation and identify any significant departures therefrom and the reason for that departure.

Burkina Faso

The financial statements of the Government of Burkina Faso

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Introduction

The official financial statements of the Government of Burkina Faso are the budget out-turn reports (loi de règlement). In addition, the following financial and audit reports are produced:

The General Balance of the Treasury Accounts (La Balance Générale des Comptes du Trésor)

Table of Financial Operations of the State - Tableau des operations financieres de l’Etat (TOFE)

Annual reports on aid from donors (Rapports sur la Coopération au Développement)

Annual reports from the Court of Accounts

Annual reports from the General State Inspectorate (ASCE)

The French approach is significantly different from the Anglophone Africa approach to financial reporting by governments. The main objective is formal control rather than providing information useful for the public or politicians. Two sets of accounts are produced. One by the officials who certify the orders (ordonnateurs) and an independent set by the public accountants who make the payments (and receive the income). The annual financial statements or budget out-turn reports (loi de règlement) provide details of the totals of receipts and payments and so the overall financial balance for the year. The Court of Accounts certifies the legality of the accounts of the public accountants and the consistency of these accounts with those of the officials who certify the orders (ordonnateurs).

Elements of good practice are highlighted in this report as follows:

In addition, for the 2010 budget a 20 page explanation was provided in five local languages.

Many Francophone countries are members of regional economic bodies which have issued fairly detailed directives on public sector financial reporting and related issues. This has increase consistency and comparability between these states. For example, the West African Economic and Monetary Union (UMEOA in French) consists of the following eight states: Benin, Burkina Faso, Cote d’Ivoire, Guinea Bissau, Mali, Niger, Senegal and Togo. In 2009 UMEOA issued the following revised directives:

Transparency:                             Directive no. 01/2009/CM/UEMOA; March 27, 2009.Law relating to annual budgets:   Directive no. 06/2009/CM/UEMOA; June 26, 2009Accounting regulation:                 Directive no. 07/2009/CM/UEMOA; June 26, 2009Budget classification:                  Directive no. 08/2009/CM/UEMOA; June 26, 2009Chart of accounts:                      Directive no. 09/2009/CM/UEMOA; June 26, 2009Fiscal summary table (“TOFE”):   Directive no. 10/2009/CM/UEMOA; June 26, 2009.

1. The Budget Out-Turn Report (Loi de règlement)

The draft budget out-turn law is sent to the National Assembly in September each year (PEFA 2010) before the budget for the following year is debated. The report of the Court of Accounts

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is sent in March of the following year and the budget out-turn report (Loi de règlement ) is agreed by the National Assembly after this (4 May for 2010). The law does not require the budget out-turn report to be sent to the National Assembly until the end of the year after the end of the financial year. In addition, there is no time limit on the report of the Court of Accounts on the budget out-turn report which is provided to the National Assembly.

Contents of the budget out-turn report

Article 42 of law number 006-2003 on the Annual Budget Laws requires that:

The draft annual budget out-turn law notes the final amounts of cash receipts and expenses that have been ordered during the year. If necessary, the law ratifies the new credits that were opened by decree (new budget lines agreed by the Council of Ministers) and approves any over-spending arising from special circumstances. It establishes the financial results for the year which include the:

- deficit or surplus resulting from the net difference between the receipts and expenses for the general and annexed budgets;

- losses or profits arising from special accounts;- losses or profits resulting from the management of treasury operations.

The budget law authorises the transfer of the net results for the year to the permanent Treasury overdraft account1.

The draft budget out-turn report and supporting financial statements for the year 2008 consisted of 140 pages. According to the PEFA report (2010) this includes:

a short introductory synthesis of the receipts, expenses and the overall deficit or surplus

the report of the Director General of the Budget, delegated official for the budget, on the execution of the Government budget and its annexes, comparing at a disaggregated level (ministers, institutions and major budget lines/votes of the general budget, special Treasury accounts and expenses of external financing) of the general budget the initial and final allocations with the actual amounts of receipts and payments

1 Aux termes des dispositions de l’article 42 de la loi n°006–2003/AN du24 janvier 2003 relative aux lois de finances, «

Le projet annuel de loi de règlement constate le montant définitif des encaissements de recettes et des ordonnancements de dépenses se rapportant à une même année, le cas échéant, il ratifie les ouvertures de crédits par décrets d’avances et approuve les dépassements de crédits résultant de circonstances de force majeure. Il établit le compte de résultat de l’année qui comprend :

- le déficit ou l’excédent résultant de la différence nette entre les recetteset les dépenses du budget général et des budgets annexes ;

- les pertes et les profits constatés dans l’exécution des comptesspéciaux ;

- les profits ou les pertes résultant éventuellement de la gestion desopérations de trésorerie.

Le projet de loi de règlement autorise enfin le transfert du résultat de l’année au compte permanent des découverts du Trésor.

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the report of the Director General of International Cooperation on the receipts from the international partners

a report of the three principal public accountants on the actual receipts for the year, the payment of expenses by vote and ministry, the determination of the special Treasury accounts, the balances of the external bank accounts, and the overall budgetary balance and annexes.

Annex 1 to this report includes the detailed contents of the Budget out-turn Report/Law (in French).

Other examples of good practice:

The budget out-turn report (loi de règlement) includes details on state loans, advances and repayments (see the last two pages of this report).

Donor grants and loans (including some project finance) are provided within revenue with details of the support provided by each donor (in FCFA).

The draft budget out-turn report for 2008 was 140 pages long and includes significant commentary explaining the results.

Calendar of the budget out-turn reports

On 4 May 2010 the National Assembly voted on the Budget Out-Turn Report for the year 2008 by 89 votes to seven against. This included recommendations to encourage the Government to continue with its work to improve public financial management. It also recommended that the Government take diligent measures to ensure that foreign loans are used promptly and commissions are minimised (CGD 2010).

In 2003 – 2005 the National Assembly cleared the backlog of annual budget out-turn reports stretching back nearly 20 years. In May 2003 it voted on the budget out-turn reports for all the years from 1985 to 2000, in October 2004 it agreed the budget out-turn report for the year 2002 and in April 2005 the budget out-turn report for 2003 was agreed. Since then the budget out-turn reports have been agreed in March or April, 15 months after the end of the financial year.

The draft budget out-turn reports (annual financial statements of the Government) are now issued to the National Assembly and the Court of Accounts in September each year. This is within nine months of the end of the financial year. However, payments may be made until the end of February, and in practice to the end of March. So the financial statements are prepared within six months of the end of the period when the payments are made.

Table 1: Calendar for the issue of financial statements and audit reports

2004 2005 2006 2007 2008 2009Draft law deposited with National Assembly (& Court of

June 2005 (received by Court of Accounts 19 September 2005

September 2006

September 2007

September 2008

September 2009

24 September 2010 (discussed by Council of Ministers 3 September)

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Accounts)Court of Accounts submits report to National Assembly

November 2005

December 2006(General Declaration of Conformity agreed 8 December 2006)

March 2008(General Declaration of Conformity agreed 22 February 2008)

February 2009 (General Declaration of Conformity agreed 18 December 2008)

(not in February 2010)

Court of Accounts public report issued

June 2006 (report for 2003/04) Agreed by Court 20 May 2005

Agreed December 2006 – on year 2004

Agreed 28 May 2008 – on year 2005

Agreed 31 July 2008 – on year 2006

December 2009 (agreed 12 October 2009) – on year 2007

January 2011 (planned) – for 2008

The budget out-turn report agreed by National Assembly

March 2006

20 March 2007

3 April 2008 2 April 2009 4 May 2010

2. The General Balance of the Treasury Accounts (La Balance Générale des Comptes du Trésor)

This is an annual report produced by the Director of Studies and Financial Legislation - Directeur des Etudes et de la Législation Financière (DELF). For the 2008 financial year it was produced in October 2009, but the report for 2009 was not produced until after the end of 2010. It is a summary of the accounts of the public accountants. It is produced to improve openness and accountability in line with the UEMOA directives. It also helps in the production of the annual TOFE (see next section).

The report includes 16 graphs and eight tables showing the overall finances of the State over the previous five years. It also provides some commentary.

The report also includes 10 pages of tables as an annex showing the overall debits, credits and balances for each of the 10 classes of budgetary classification.

This report is properly printed as an attractive colour publication.

3. Table of Financial Operations of the State - Tableau des operations financieres de l’Etat (TOFE)

A summary table produced each month, but not clearly made public. It is primarily for the technical and financial partners (donor community).

It provides details of the overall financial affairs of the state. Supporting tables provide details of a classification by major classes of receipts and expenses, for example, salaries for each ministry, agency etc.

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The TOFE and associated tables are produced by the Permanent Secretary for the Overview of Financial Policies and Programmes - Secrétariat Permanent pour le suivi des Politiques et Programmes Financiers, in the Treasury.

4. Annual report on aid from donors (Rapports sur la Coopération au Développement)

Detailed annual reports for the last ten years (250 pages for 2009 issued in June 2010) produced by the Director General of International Cooperation - Direction Générale de la Coopération.

Reports for the donor community rather than the citizens of Burkina Faso.

Information is provided for trends over the last five years and on aid from individual donors.

Donor income is very significant, being slightly more than the Government’s own income in 2009 or more than half of the total budget of the Government.

A summary is provided of all aid agreements showing their amounts in the currency of origin and local currency.

A summary is provided of all aid received by country and agency (for example, the three French aid agencies) in $USA. Also shows the type of aid provided and sector supported etc.

This report is properly printed as a colour publication.

5. The Reports of the Court of Accounts

A core role of the Court of Accounts is to provide a report which is sent with the budget out-turn report (financial statements - loi de règlement) of the Government to the National Assembly. This report may include some broad comments on the level of payments and receipts by the government compared to the budget for the relevant financial year and also a commentary of the general economic and financial environment of the country (Court of Accounts of Ivory Coast 2006a). This report also includes a formal opinion or certificate of conformity between the value of the payments orders raised by the officials with responsibility for raising orders (ordonnateurs) and the level of payment orders paid by the public accountants (Lienert 2003).

Article 43 of Law 006-2003 Concerning the Budget Laws states that when the financial statements are issued to the National Assembly they are sent with:

“ – a report of the Court of Accounts and the declaration of general consistency between the detailed accounts of the principal public accountants of the State and the accounts of the Ministry responsible for finance.”2

2 “- d’un rapport de la Cour des comptes et de la déclaration générale de conformité entre les comptes chiffrés des comptables principaux de l’Etat et la comptabilité du Ministre chargé des finances.”

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This is usual practice for Francophone countries. Thus, for example, in the Democratic Republic of the Congo, the first paragraph of article 52 of the Organic Law on State Finances requires that, “the draft budget out-turn report is accompanied by a report of the Court of Accounts and a general declaration of consistency between the administrative account [of the ordonnateurs] and the management account [of the public accountants] (Court of Accounts, Democratic Republic of the Congo, 2009).

A summary of the report of the Court of Accounts which is sent to the National Assembly (including the declaration of consistency) is included in the annual public report of the Court of Accounts of Burkina Faso (including about 20 pages commentary on the budget). But this is only made public two years after the end of the financial year.

The 2008 report of the Court of Accounts provides details of the previous recommendations and the extent to which they have been implemented.

This report is properly printed as a colour publication.

6. Annual Report of the General State Inspectorate (Autorité Supérieure de Contrôle d’Etat – ASCE)

The annual report of the General State Inspectorate is made public in March/April of the following year and is provided to the State President, the Prime Minister, the President of the National Assembly and the donor community. It is then made available on the website of the Prime Minister.

The report includes a follow-up of previous recommendations and summary of reports from technical inspectorate from each ministry (275) in 2009. But limited reports from Ministry of Defence and Security.

This report is properly printed as a colour publication.

7. Specific Information Demanded by the Media

This is based on an interview with a senior journalist on a major daily paper and a leader of a significant public sector trade union. Following are their detailed requirements in terms of financial reporting by the Government:

1. The salaries and benefits of senior officials should be made public.

2. The assets of ministers should be published when they enter office and when they leave.

3. The budgets, receipts and expenses of primary schools and primary health centres should be made public (they do not currently have their own budgets).

4. The receipts and expenses of local communes should be published.

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5. Neither the Court of Accounts nor the General State Inspectorate are independent of the State President or the Prime Minister. They will only publish what the executive is happy for them to publish.

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Financial statements and reports available on the Internet:

A wide range of financial information is available on different ministry websites:

Ministere de l’ Economie et des FinancesBudget for the current year: www.finances.gov.bf/SiteFinances/budget/budget-annee/index.html

TOFE (only to 2006):http://www.finances.gov.bf/SiteFinances/finances/tableau.html

La Direction Générale du Budgetwww.dgb.gov.bf/documents.php

Loi des finance :www.dgb.gov.bf/documents/Loi_06_2003.pdf

Le projet de budget pour 2011 et d'autres documents sont disponibles auprès de:http://www.dgb.gov.bf/pb.php

Tresor Public La Dette public (only to 2006)www.tresor.bf/pages/pres_chiffres5.htm

2003 law and organisation of the Tresor (T&Comptable public):http://www.tresor.bf/pages/lex_index.php

Laws and regulations on finance:http://www.tresor.bf/pages/decreta.htm

Rapports sur la Coopération au Développement (RCD)

Annual report on receipts and support from the donor community:http://www.dgcoop.gov.bf/rapports/rapport-sur-la-cooperation-au-developpement.html

African Peer Review mechanism papers :www.afrimap.org/report.php#Burkina%20Faso

Autorité Supérieure de Contrôle d’EtatAnnual reports of the General State Inspectorate:www.gouvernement.gov.bf/spip.php?article6

La Cour des Compteswww.cour-comptes.gov.bf

Annual reports for 2005, 2006 , and 2007http://www.cour-comptes.gov.bf/SiteCour-Comptes/infos-utiles/documents.html

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ANNEX 1Contents of the Loi de reglement for year 2008:

1- une synthèse introductive ;2- le rapport de l’ordonnateur ;

- l’exécution en recettes du budget général ; - l’exécution en dépenses du budget général ;

A- Dépenses courantes1- Titre 1 : Amortissement, charges de la dette publique, et lesdépenses en atténuation des recettes des gestions antérieures2- Titre 2 : Dépenses de personnel3- Titre 3 : Dépenses de fonctionnement4- Titre 4 : Dépenses de transferts courants

B- Dépenses en capital1- Titre 5 : Investissements exécutés par l’Etat2– Titre 6 : Transferts en capital

- l’exécution en recettes et en dépenses des comptes d’affectation spéciale.

A- Etat d’exécution en recettes des comptes d’affectation Spéciale B- Etat d’exécution en dépenses des comptes d’affectation spéciale

ANNEXE 1 : SITUATION DETAILLEE DES RECETTESBUDGET GENERALCOMPTES SPECIAUX DU TRESORANNEXE 2 : SITUATION DETAILLEE DES DEPENSESBUDGET GENERALCOMPTES SPECIAUX DU TRESORANNEXE 3 : SITUATION D’EXECUTION DES FINANCEMENTS EXTERIEURS DU BUDGET DE L’ETAT - GESTION 2008

I- SITUATION DES DECAISSEMENTS DES AIDES PROJETS1- Situation d’exécution des aides projets par section

le Ministère des Infrastructures et du Désenclavement (MID)le Ministère de l’Agriculture, de l’Hydraulique et des Ressources Halieutiques (MAHRH)le Ministère de l’Enseignement de Base et de l’Alphabétisation (MEBA)le Ministère de la Santé (MS)

2- Situation d’exécution des aides projets par nature de financement2.1- Situation d’exécution des prêts2.2- Situation d’exécution des subventions et des dons

II- SITUATION DES DECAISSEMENTS DES APPUIS BUDGETAIRES3- le rapport des comptables principaux de l’Etat ; (page 88)- l’exécution en recettes et en dépenses du budget général (I) ;- l’exécution en recettes et en dépenses des comptes spéciaux du Trésor (II) ; - la détermination des soldes des comptes spéciaux du Trésor de l’année (III) ;- la situation des comptes de disponibilités du Trésor de l’année (IV) ;- la détermination du résultat de la loi de finances- gestion 2008 (V).

4- l’état d’exécution des recommandation.

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Annex 2People seen in Burkina Faso:

Kaphalo Ségorbah SILWE, Centre pour la Gouvernance Démocratique

Augustin LOADA, Executive Director, Centre pour la Gouvernance Démocratique

Samuel T. KABORE, economist and public financial management consultant.

Malick SAWADOGO, Board Director, Centre d'Information, de Formation et d'Etudes sur le Budget (CIFOEB) -

Siméon BONTOGO, Director, CIFOEB

Boureima Pierre NÉBIÉ, Premier President, Court of Accounts

Henri Bruno BESSIN, Contrôleur Général d’Etat, Autorité supérieure de contrôle de l’Etat (ASCE)

Jean-Pierre SAWADOGO, École National de L´Administration et de la Magistrature (ENAREF)

Dakor DA, Directeur des Etudes et des Evaluations, ENAREF

François Xavier KONSEIBO Rapporteur général, Budget Committee of the National Assembly

Léa ZAGRE / RIMTOUMDA, Directrice du Suivi des Reformes, SP-PPF

Seydou BARROU, Secrétariat Technique du Comité de Pilotage du Budget et Programme de l'Etat, Ministère de l'Economie et des Finances

Vincent de Paul YAMEOGO, Secrètariat Technique du Comité de Pilotage du Budget Programme de l'Etat, Ministère de l'Economie et des Finances

Dramane SEBRE, Economist, EU Delegation, Ouagadougou

Philippe NK NION, Directeur des Etudes et de la Législation Financière (DELF), Treasury

Moussa NOMBO, Directeur de l’Ordonnancement et de la Comptabilté, DG Budget

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Republic of Botswana

Annual Statement of AccountsFor the Financial Year Ended 31st March 2006

Accountant General Ministry of Finance and Development Planning

Identified good practice:

1. Audit opinion dated 12 months after the year end (publication is 605 pages long).

2. A functional summary of expenditure and net lending is provided, but this does not follow the IMF GFS analysis.

3. Statement of public debt with a summary of foreign currency loans (in local and relevant foreign currencies.

4. Summary of contingent liabilities showing the lender, nature, interest rate, repaid, maximum liability and current outstanding.

5. Details of recurrent revenue compared to budget (60 pages – this could be included on internet).

6. Details of recurrent expenditure compared to budget and warrant (280 pages – this could be included on internet).

7. Details of development expenditure by project compared to Total Estimated Cost (TEC) with previous years expenditure.

8. Information provided for all special funds including income/expenditure statement, balance sheet and investments.

9. Statements are provided of loans outstanding and investments in commercial undertakings.

10. Details of cash balances, deposit and other bank accounts provided.

11. Summary of advances provided by ministry and directorate.

12. Statement of arrears of revenue provided.

13. Details of loss of public money provided with date, particulars, loss, recovered/written off and state of the file.

Main statements:

Audit Certificate

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Consolidated Cash Flow – with comparison to the previous year (not consistent with the balance sheet, revenue nor expenditure). Looks like an added statement.

1. Statement of Assets & Liabilities – funds represented by cash in hand & at banks, investments in special funds, advances, imprests and deposits. Public liabilities (debt & contingent liabilites) and public assets (financial) shown separately. Comparison to the previous year.

2. Statement of Recurrent Revenue – compared with the budget.

3. Statement of Recurrent Expenditure – compared with the budget and warranted provision.

4. Sources & Application of Development Fund - compared with the budget (for detailed supporting statements only).

PEFA (February 2009): PI-25 Quality and timeliness of annual financial statements

A consolidated central government financial statement is prepared annually that includes full information on revenues, expenditure and financial assets including revenue arrears. These annual statements however do not provide a full reporting on liabilities. They do not provide any information on expenditure arrears or accounts payable.

Under the cash accounting system the source document for accounting entries is the payment voucher coupled with the electronically generated cheque or other payment instruction. Entries are dated using the date on the payment instrument. The Accountant General makes all payments using the Consolidated Fund held with the Bank of Botswana and Treasury Accounts held with private commercial banks to facilitate financial transactions in the districts. .

The Accountant General prepares financial statements that are submitted to the Auditor General within 8 months of the close of the fiscal year. According to officials these deadlines were adhered to in the three years reviewed under this assessment. These statements are corroborated by the Auditor-General.

Financial Statements 2005/06 2006/07 2007/08Submitted to Auditor General November Novembe

rOctober

The financial statements adopt Generally Accepted Accounting Principles. At the present time no specific international accounting standards have been adopted however the financial statements are presented in a consistent format over time including some disclosure of accounting standards applied.

No. Accounting, recording andreporting

Score

Justification

PI-25 Quality and timeliness ofannual financial statements

C+

(i) Completeness of the financialstatements

B A consolidated government statement is prepared annually which includes all revenues, expenditures, and financial assets. Not all liabilities are reported on. Expenditure arrears are excluded.

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(ii) Timeliness of submission of the financial statements

B Final government statements are submitted to theAuditor General within 8 months of the close of thefiscal year.

(iii) Accounting standards used C At the present time no specific international accounting standards have been adopted however the financial statements are presented in a consistent format over time including some disclosure of accounting standards applied.

While the audited financial statements are submitted to the legislature within 5 months of receipt from the MFDP, the audit reports are not submitted to parliament till 13 months after the close of the fiscal year.

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Government of Sierra Leone

Report and Annual Statement of Public Accounts(Consolidated Fund)

For the Financial Year Ended 31st December 2007

Identified good practice:

1. A seven page review of reforms and budget out-turns etc is provided by the Accountant General which includes three graphs (including a 7 year summary of revenue).

2. A summary of expenditure analysed by most GFS functional classification is provided (not including Social nor Environmental Protection which are combined with General Services in “Other”).

3. Short publication of around 30 pages with additional 30 pages of appendices (excluded from on-line version). With three main statements. Unaudited statements are available on the web – said to be within three months of the year end. Audited financial statements for 2007 on website and unaudited ones for 2009. www.mofed.gov.sl/index.php?option=com_content&task=view&id=84&Itemid=119

4. Includes balance and change to domestic and other creditors.

5. Details provided in appendices of external public debt of balance and payments made on a loan by loan basis (in local currency) and original loan in currency of provider (Appendices I & J).

6. Details are provided of all issues of Treasury Bills and Bonds including interest and rate (Appendices K & L).

7. Some details of contingent liabilities are provided – mainly totals in general and parastatal categories.

8. Details of budget support are provided by donor (including donor currency) compared to the budget and the previous year (Appendices B).

Main statements:

The contents of the Report and Accounts are as follows (2007):

1. Report of the Accountant General 2. Statement of the Financial Assets and Liabilities of the Consolidated Fund (comparisons with prior year)3. Statement of Financial Performance (comparison with budget (monetary amount) and previous year (%))4. Cash Flow Statement – split into operating activities, investing activities and financing activities with cash and cash equivalents at beginning and end of the year.5. Notes of Explanations and Elaboration to the Public Accounts

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6. Appendices(a) Detailed Analysis of Domestic Revenue Collection(b) Summary Details of Programme Grants and Loans (Direct Budgetary Support)(c) Summary Details of Personnel Expenditure by Heads(d) Summary Details of Non-Salary, Non-Interest Recurrent Expenditure by Heads(e) Summary Details of Domestic Development Expenditure by Project(f) Statement of Payments by Program/Activities/Functions of Government- Functional Classification of Expenditure by Category(g) Summary Analysis of Bank Balances (not 2009)(h) Schedule of Government’s Investments in Public Enterprises (not 2009)(i) Statement of Outstanding Debt due External Creditors (on a loan basis) (j) Summary Analysis of Payments made to External Creditors (on a loan basis) (k) Statement of Movements in Treasury Bills (l) Statement of Movements in Treasury Bearer Bonds (m) Statement of the Contingent Liabilities of the Consolidated Fund (not 2009)

Republic of Sierra Leone: PFM Performance Assessment Report Final Draft 18 June 2007:

PI-25. Quality and timeliness of annual financial statements

(i) Completeness of the Financial Statements.

Financial Statements for 2003 and 2004 were finalised towards the end of the second PEFA mission. Despite the tardiness of these statements (and the Public Accounts), it now appears that AGD is not only clearing the backlog of accounting requirements, but also producing documents of good quality.

The financial statements include the results the financial operations of all its MDAs processed through the Treasury. Other public funds including some aspects of donor funds and government departments retained internally generated funds are not included in the financial statements as complete and accurate information could not be obtained for those items, or they are excluded from the treasury system.

Score C – The financial statements are purely a reflection of the Treasury Bank Account.

(ii) Timeliness of submission of the financial statements

The production of financial statements had fallen seriously behind the schedule outlined in the GBAA. Following the appointment of a new Accountant General in 2006, financial statements for 2002, 2003 and 2004 have now been prepared. Outstanding financial accounts are now being addressed.

Score D: The production of financial statements had fallen seriously behind schedule.

(iii) Accounting Standards Used

The requirements of Section 57 of the GBAA provide for the inclusion of all key revenue, expenditure and balance sheet items in the public accounts. In addition,

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the draft public accounts outline the basic accounting principles under which they have been prepared. These appear to have been consistently applied in the 2002 and 2003 draft public accounts, which were reviewed during the main PEFA mission. The 2004 Accounts were submitted after the mission. However, Sierra Leone is yet to develop national accounting standards for the public sector.

The National Accounts do not state that they meet IPSAS. To obtain a higher rating the Government would have to explicitly apply IPSAS or develop equivalent national standards. Many of the disclosure requirements in the IPSAS are currently met in the public accounts. The contents of the Report and Accounts are as follows:

1. Report of the Accountant General

2. Statement of the Financial Assets and Liabilities of the Consolidated Fund

3. Statement of Financial Performance

4. Cash Flow Statement

5. Notes of Explanations and Elaboration to the Public Accounts

6. Appendices

(a) Detailed Analysis of Domestic Revenue Collection

(b) Summary Details of Programme Grants and Loans (Direct Budgetary Support)

(c) Summary Details of Personnel Expenditure by Heads

(d) Summary Details of Non-Salary, Non-Interest Recurrent Expenditure by Heads

(e) Summary Details of Domestic Development Expenditure by Project

(f) Statement of Payments by Program/Activities/Functions of Government-

Functional Classification of Expenditure by Category

(g) Summary Analysis of Bank Balances

(h) Schedule of Government’s Investments in Public Enterprises

(i) Statement of Outstanding Debt due External Creditors (on a loan basis)

(j) Summary Analysis of Payments made to External Creditors (on a loan basis)

(k) Statement of Movements in Treasury Bills

(l) Statement of Movements in Treasury Bearer Bonds

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(m) Statement of the Contingent Liabilities of the Consolidated Fund.

Score C: Sierra Leone is yet to develop national accounting standards for the public sector.Government should explicitly apply IPSAS or develop equivalent national standards.

Overall Score: D+

• Dimension (i) Score: C. A consolidated government statement is prepared annually. Information on revenue, expenditure and bank account balances may not always be complete, but the omissions are not significant.

• Dimension (ii) Score: D. If financial statements are prepared, they are generally not submitted for external audit within 15 months of the end of the fiscal year.

• Dimension (iii) Score: C. Statements are presented in a consistent format over time with some disclosure of accounting standards.

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Government of the Republic of Uganda

Reports and Consolidated Financial Statements of the Government of the Republic of Uganda for the

year ended 30 June 2008

Identified good practice:

1. The reports include statements from the Minister of Finance and the Secretary to the Treasury/Permanent Secretary (most senior civil servant in the Ministry of Finance). The Secretary to the Treasury also signed the main statements with the Accountant General.

2. Statement of Responsibilities – outlining the respective responsibilities of the Minister, Secretary to the Treasury and the Accountant General.

3. Commentary on the Financial Statements by the Accountant General (five pages). Commenting on the overall level of payments, receipts and balances.

4. There is full disclosure in a Statement of Outstanding Public Debt which is consistent with the total liabilities in the Consolidated Statement of Financial Position (balance sheet). This analyses the debt by domestic and external debt of various types. Totals for loans from individual multi-lateral organisations are provided.

5. Supporting statements are provided on advances and loans issued and investments held by the Government.

6. A summary of contingent liabilities is provided by type or organisation or liability, with a comparison to the previous year. A similar analysis is made of commitments, with details of named ministries, departments and agencies etc.

7. Summaries are provided of reported losses and those written off or abandoned. Those abandoned are detailed by ministry, department and agency etc.

8. A summary is provided of arrears of revenues. Further details are provided for types of taxes and non-tax revenue. Non-tax revenue is detailed by ministry, department and agency etc.

9. A clear statement is provided on the types of entity which are included in the statements (not government business entities – except for dividends received and subventions provided).

10. A statement is provided of the legal basis for the financial statements and the basis of accounting which is used (modified cash).

11. A summary is provided by vote (for ministries, departments and agencies, embassies, hospitals and district councils) showing budget, releases and actual expenditure.

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12. Figures should be consistent (or explained) between different statements, for example, between the statement of financial performance, cash-flow and budget statement (estimates).

Contents of the report:

Statement of Responsibilities Statement from the Honorable Minister of Finance, Planning and Economic Development Statement from the Secretary to the Treasury Commentary on the Financial Statements by the Accountant General Statement of Financial Performance [by Nature] Consolidated Statement of Financial Position Statement of Changes in Equity [Net assets (liabilities)] Cash Flow Statement of the Consolidated Fund Statement of Outstanding Public Debt Statement of Outstanding Advances and Loans issued by the Government Statement of Investments held by the Government Summary Statement of Revenues and Expenditures [by Vote] Statement of Contingent Liabilities Statement of Outstanding Commitments Statement of losses of public moneys and stores written off, and claims abandoned Statement of losses of public moneys and stores reported Summary Statement of Arrears of Revenue Statement of stores and other assets Accounting policies & notes to the Financial Statements Supplementary Information Statement of Revenues and Expenditures [by Vote] Statement of Contingent Liabilities Statement of Outstanding Commitments Statement of losses of public moneys and stores written off, and claims abandoned Statement of losses of public moneys and stores reported Summary Statement of Arrears of Revenue Statement of stores and other assets

Total of 75 pages.

PEFA Report (2008)

PI-25 Quality and timeliness of annual financial statements

(i) Completeness of the financial statements. Score: C

A consolidated government statement is prepared annually. Information on revenue, expenditure and bank account balances may not always be complete, but the omissions are not significant.

(ii) Timeliness of submission of financial statements. Score: A

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Consolidated financial statements were submitted within the statutory 4 months after the end of the financial year, except for 2006/2007, when they were submitted one day late. Some ministries, departments and agencies have submitted their accounts late, but still within 6 months after the end of the financial year.

(iii) Accounting standards used. Score: C

Statements are presented in a consistent format over time. Though IPSAS are the standards aspired to, their requirements are not yet met in important respects

Consolidated financial statements are produced annually and cover all MDAs. They include assets and liabilities, revenue and expenditure, a consolidated cash flow statement, public debt, advances and loans, and commitments outstanding at year-end; in addition, they include a statement of revenue arrears, a statement of government investments in equity and securities, contingent liabilities, losses and a statement of physical assets.

However, both the 2005/06 and 2006/07 statements received qualified opinions by the OAG. The 2005/06 opinions related to incomplete reporting of government loans to private enterprises, investments and bank reconciliations. The 2006/07 opinion related to incomplete information on government bank accounts and unreliable figures reported for foreign debt, equity, and government bonds. Since then, the reliability of the investment ledger has improved, and the BoU has increased the information it provides the Accountant General on government bank accounts. The Statements for 2007/08 received an unqualified opinion from the Auditor General.

Timeliness of reporting is still a concern. Employee costs and other such items were found to be misstated (see PI-18). Reporting on externally financed projects and contingent liabilities is incomplete. All these issues have a direct impact on the reliability of the figures reported for revenue, expenditure, assets, and liabilities.

The MDAs are required to submit their final accounts within three months after the end of the fiscal year to the OAG and Accountant General. The consolidated government financial statements are then prepared by the Accountant General and submitted to the OAG within an additional month. For the last three years these were produced and submitted to the OAG within the statutory four-month period. As for the individual accounts, these were submitted late by several MDAs in both financial year 2005/06 and 2006/07. This raises doubts on the completeness of the consolidated statements, as some MDAs submitted their individual accounts after the consolidated accounts were issued.

The consolidated financial statements are prepared in accordance with the provisions of the 2003 Public Finance & Accountability Act, and with the following accounting policies: no depreciation (fixed assets are fully expensed at time of purchase) and advances, other receivables and investments are recorded at historical cost. These policies are appropriate and appear to have been consistently applied. In addition, the accounts state that they follow the modified cash basis of accounting: in the GoU case, the cash basis is followed for all items except for expenditure and tax revenue for which the accruals method is applied. As a result, end-of year adjustments are undertaken to include prepayments in assets, and exclude them from expenditure. Vice versa, invoices received but not paid at year-end are accrued. Tax revenue is also included in assets if the corresponding cash has not been received. The statements claim to be “largely in accordance with IPSAS”, and it is the intention to move from

57

the modified cash basis to full accrual IPSAS. At present the statements do not meet IPSAS cash-basis29 requirements in the following respects:

Accounts for all extra-budgetary bodies and parastatals are not presented (the IPSAS requires presentation of financial statements for all “controlled” entities);

External project assistance is not fully captured;

Contingent liabilities are significantly incomplete as they do not include guarantees on loans to parastatals or unverified arrears (see PI-4).

The current understanding of contingent liabilities and their treatment is inaccurate and is likely to add to the incompleteness of the statements in this respect. In the statement and the related notes, what are presented as contingent liabilities appear to be provisions, given that they all relate to present obligations from past events. The accounts do not cover the other case, namely, the probability of an outflow of economic resources. Such case, if a reliable estimate (more likely than not) can be made, under full accrual accounting should be recognized as a provision, otherwise simply disclosed as a contingent liability.

The approved estimates that are included in the statement of revenues and expenditure by vote refer to the last budget revision, rather than the approved budget, which entails that the under/over performance presented does not relate to the whole year, but to the last quarter only. This makes the information conveyed on budget performance misleading.

29 International Public Sector Accounting Standard, Cash Basis IPSAS-Financial Reporting Under the CashBasis of Accounting, issued January 2003, updated 2006 and 2007.

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Republic of Mauritius

Annual Report of the Accountant-General and the Accounts of the Republic of Mauritius for the Year ended

30 June 2008

Identified good practice:

1. The report is available on–line with separate files for ease of download.

2. Letter from Accountant General to the Financial Secretary. Then from the Financial Secretary to the Minister of Finance.

3. Audit report dated less than five months after the financial year end, but only sent to the Minister of Finance less than seven months after the end of the financial year.

4. Six page overview by the Accountant General.

5. Charts showing five year recurrent/capital revenue and expenditure with analysis.

6. Details of advances by ministry, department and agency and type of advance (cars, claims, dishonoured cheques etc).

7. Detailed line item report of budget out-turn of ministries, departments and agencies (122 pages).

8. Detailed statement of investments showing cost and market value at year-end.

9. Detailed listing of public debt with interest rates and value in foreign currency for external debts.

10. Details of government guarantees (contingent liabilities) line by line with foreign currency details.

11. Statement of arrears of revenue by entity compared to the previous year.

12. Statement of Stores Losses – showing losses in previous years and this year.

13. Statement of foreign aid received (not cash) – by donor and recipient entity.

14. Statement of foreign aid received (cash) – by donor and recipient entity. Received and balance outstanding with purpose.

15. Consistent pattern of reporting over the last five years. Except that statement AA (cash flow statement is now part of the main accounts)

Contents of the Report:

The Treasury: Audited  Accounts  2008 -2009

59

     

A Statement of Assets and Liabilities

Statement of Assets and Liabilities (Notes)

AA Statement of Receipts and Payments

B Abstract Account of Revenue of the Consolidated Fund

B Abstract Account of Expenditure of the Consolidated Fund

C Abstract Account of Revenue and Expenditure of the Capital Fund

D Detailed Statement of Revenue of the Consolidated Fund

D(1) Detailed Statement of Expenditure of the Consolidated Fund

DDA progress Report on Performance in Respect of Outcomes Achieved and Outputs Delivered 

F Statement of Investments

G Detailed Statement of Advances

H Statement of Special Funds deposited with Accountant-General

I Detailed Statement of Deposits

J Statement of Public Debt and Accumulated Sinking Funds

Annex (DOMESTIC & EXTERNAL GOVERNMENT DEBT)

  Annex 1 (DOMESTIC & EXTERNAL GOVERNMENT DEBT)

Annex2 (DOMESTIC & EXTERNAL GOVERNMENT DEBT)

LStatement of Contingent Liabilities including Details of Any Loans,Bank Overdrafts or Credit facilities Guaranteed by the Government

M Statement of all Outstanding Loans financed from Revenue

N Statement of Arrears of Revenue

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O Statement of Claims Abandoned

P Statement of Losses charged to Expenditure

Q Statement of Stores Losses

R Tabular Summary of Unallocated Stores – Ministry of Public Infrastructure

U Statement of Foreign Aid Received (1)

U(1) Statement of Cash Aid Received from Foreign Countries

http://www.gov.mu/portal/site/treasurysite/menuitem.dc486ae98bb980d0553074b748a521ca/?content_id=06eb6f999c41b210VgnVCM1000000a04a8c0RCRD

PEFA Report - June 2007

PI-25 Quality and timeliness of annual financial statements

The Government prepares a Consolidated Government Financial Statement (CGFS) in line with the requirements in the Constitution (1968 §§ 103-109) and the Finance and Audit Act (FaA 1973 §19:3). This means 'statements showing fully the financial position of Mauritius on the last day of a financial year' (FaA 19:1). That includes full information on revenue, expenditure and financial assets/liabilities related to the State Budget.

The use of cash accounting by the Government means that reporting on the value of fixed assets doesn’t feature. The CGFS includes what was spent, transfers or contributions to each specific entity, for all grant-aided institutions, parastatals and local councils and their liabilities and loans guaranteed by the Government. These institutions are labeled as segment one.

During the last years Government has met the statutory requirement to submit the financial statement on the State Budget Execution within 6 month of the end of the fiscal year to the NAO for certification. Since 2003/04, the consolidated government statement is submitted for external audit within 4-5 months of the end of the fiscal year. These statements are prepared according to international accounting standards for financial reporting on a cash basis (IPSAS 2003 and 2006 as well as GFS 1986).

Indicator Score Brief ExplanationPI-25. Quality and timeliness of annual financial statements

A

(i) Completeness of the financial statements

A Government Financial Statement is prepared annually, and includes budget estimates, full information on revenue, expenditure and financial assets/liabilities. The extra budgetary funds are represented by the grants and transfers given to them through the State Budget as well as in the reporting of contingent liabilities and loans guaranteed by the Government.

(ii) Timeliness of submission of the financial statements

A Since 2003/04, the consolidated government financial statement is submitted for external audit within 4-5 months of the end of the fiscal

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year during the last three years.(iii) Accounting standards used

A Government is using national standards which are based on international cash based financial reporting standards (IPSAS/GFS) for all financial statements.

During the last three years the annual audit reports have been submitted to the Assembly/PAC within a few weeks of receipt of financial statement and within 4-6 months of the end of the fiscal year. The statutory limit is 8 months.

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Republic of South Africa

Consolidated Financial InformationFor the year ended 31 March 2009

Identified good practice:

1. The report is available on–line (but only the last two years). 179 pages.

2. The reports are signed by the Accountant General and the Director General (head civil servant of the ministry).

3. National Departments (ministries, departments and agencies) are consolidated separately from public entities (Public entities include constitutional institutions, national public entities listed in the PFMA, the South African Reserve Bank and the Auditor-General (AG)) as the later use the accrual basis. Background is provided on this in the report. The provincial and local level entities are not included in these reports apart from transfers to provinces.

4. Over view by the Accountant General - review of the operating results (35 pages) with around 40 graphs. It shows trends over a six-year period. Expenditure is analysed into five clusters (social, justice, central government, economic and finance (rather than a functional classification).

5. Includes a summary of total government debt analysed into domestic and foreign debt for the last six years. Also a reconciliation of the deficit per consolidation to the budget review (separate document).

6. Actual to budget (adjusted appropriation) by department showing actual and percentage variance. Separate reports are provided and audited for each department.

7. Opinion of the Auditor General is provided.

8. Summaries are provided on different types of contingent liabilities.

9. A reconciliation is provided between the “Net surplus/(deficit) as per Statement of Financial Performance” and “Net cash flow generated by operating activities” in the cash flow statement. But not easy to understand and no explanation is provided. Cash and cash equivalents:Note 18 - 105,156,062 Cash flow statement 101,432,127

Contents of the Report:

Section A: Approval and Review of Consolidated Financial Information Accounting Officer’s Approval Accounting Officer’s Review

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Section B: Departments Consolidated Financial Statements Review of Operating Results Report of the Auditor-General – DepartmentsConsolidated Statement of Financial Performance Consolidated Statement of Financial Position Consolidated Statement of Changes in Net Assets Consolidated Cash Flow StatementAccounting PoliciesNotes to the Consolidated Financial StatementsDisclosure Notes to the Consolidated Financial StatementsSegment Reports Annexure: Names of Departments

Section C: Public Entities’ Consolidated Financial Information Review of Operating ResultsReport of the Auditor-General - Public Entities Annexures to the CFIConsolidated Statement of Financial Performance Consolidated Statement of Financial Position Consolidated Statement of Changes in Net Assets Consolidated Cash Flow StatementAccounting PoliciesNotes to the Consolidated Financial Statements

PEFA Report - September 2008

PI-25 Quality and timeliness of annual financial statements

The PFMA and the Treasury Regulations along with an extensive set of published accounting policy guidelines, accounting practice notes and accounting standards define the legal and regulatory framework for public accounting in South Africa. There is a strong tradition of accounting practice; however these are yet to be encoded into specific accounting regulations or an accounting manual. The PFMA authorises the constituting of the Accounting Standards Board (ASB) to set standards of Generally Recognised Accounting Practice (GRAP) for the public sector. In setting these standards the ASB takes into account both local and international best practice. The capacity of the relevant entities to comply with such standards is left to the discretion of the National Treasury.

All published financial statements include a detailed outline of the accounting policies applied in the preparation of the statements. The financial statements also take into account the disclosure requirements of the PFMA and the Treasury Regulations. Section 8 of the PFMA states that in respect of Departments “the National Treasury must prepare consolidated financial statements in accordance with generally recognised accounting practice for each financial year”. However, not all the processes or systems are in place to effectively facilitate full and complete consolidation. For this reason the consolidated financial reports are termed Consolidated Financial Information. While not strictly speaking consolidated financial statements the level and comprehensiveness of disclosure suggest that

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the process is well beyond a mere aggregation or summary of accounts. It would seem the main area of shortfall in the consolidation process would be with respect to the treatment of inter-Departmental transactions.

Under the cash accounting system the source document for accounting entries is the payment voucher coupled with the electronically generated cheque or other payment instruction. Entries are dated using the date on the payment instrument. A single paymaster general bank account, within the Treasury Single Account held with the South African Reserve Bank is used for making all Government funded payments out of the Treasury. In practice any open purchase orders (with unsupplied goods, works or services) are de-committed two weeks before the close of the fiscal year. Suspense accounts closely monitored and reconciled on a monthly basis are force closed as part of the end of year closing procedures. Financial statements encompass revenues, expenditures, liabilities including expenditure arrears and financial assets including tax arrears.

Each Department prepares stand alone financial statements that are completed within two months of the close of the fiscal year and submitted to the Auditor-General for audit. The audits of the Departmental Financial Statements are completed within one month and then submitted to the Office of the Accountant General for consolidation. The draft Consolidated Financial Information is submitted to the Auditor-General for Audit no later than mid August or less than five months after the close of the fiscal year. According to officials these deadlines were adhered to in the three years reviewed under this assessment. These statements are corroborated by the General Report of the Auditor-General for the financial year 2006-07 which indicates that 100% of the national departments met the legislated deadlines in respect of the timeliness of financial reporting.

No. Accounting, recording and reporting

Score

Justification

PI-25 Quality and timeliness of annual financial statements

A

(i) Completeness of the financial statements

A A consolidated government statement, termed consolidated financial information is prepared annually. It includes all revenues and expenditures, liabilities and financial assets.

(ii) Timeliness of submission ofthe financial statements

A While the Departmental financial statements are submitted to the Auditor-General within two months of the end of the fiscal year, the consolidated financial information was submitted within 5 months of the close of the fiscal year to the Auditor-General for each of the three years reviewed during this assessment.

(iii) Accounting standards used A The Accounting Standards Board of South Africa has been constituted to set and promulgate accounting standards. All financial statements disclose the accounting policies that have been employed.

The Auditor-General combines their audit of the institutions with the audit of their financial statements. As a result, audited financial statements are submitted to the legislature within three months of receipt of the financial statements by the Auditor-General. The Auditor-General’s reports are submitted to the legislature within five months of the fiscal year-end.

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Federal Republic of Nigeria

Audited Financial StatementsFor the year ended 31 December 2008

Identified good practice:

1. Financial statements include a covering letter from the Minister of Finance showing political support and responsibility.

2. Some financial reporting guidance has been developed - Report on Standardisation of Federal, States and Local Government Accounts in Nigeria (Federation Account Allocation Committee 2004).

3. Inclusion of audit certificate from the Auditor General.

4. Eight page introductory narrative by the Accountant General of the Federation including a graph and six tables.

5. Financial statements include the legal basis.

6. Inclusion of four basis financial statements (cashflow, balance sheet, payments/receipts for Consolidated Revenue Fund and Capital Development Fund) and consistency of main totals between them.

7. Inclusion of comprehensive set of notes and accounting policies, including outstanding imprests and advances.

8. Detailed schedules provided of internal and external loans (with $ amounts for external loans).

9. Details provided of subventions to parastatals by overseeing ministry, department and agency.

10. Consistency of financial statements from 2005 (when new formats introduced) to 2008.

11. Audit of financial statements brought up to date in last year.

12. Financial statements on the internet: http://oagfnig.org/download-r/Report%20of%20the%20AGF%20and%20Financial%20Statements%20for%202008.pdf

Contents of the Report:

Statements

Statement 1: Cash flowStatement 2: Assets and LiabilitiesStatement 3: Consolidated Revenue Fund

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Statement 4: Capital Development Fund

Notes to the Accounts 1. Accounting Policies 2. Other Funds of the Federal Government 3. Closing cash book balance held by Federal Pay Offices 4. Closing cash book balance held by Ministries, Depts and Agencies 5. Outstanding Imprest Account 6. Ministries of Finance Incorporated Assets (Investments) 7. Outstanding Advances 8. Revolving Loan Accounts 9. External Loans of the Federal Government 10. Internal Loans of the Federal Government 11. Development Loan Stock of the Federal Government 12. Deposit Accounts 13. Personnel Costs of the Federal Government 14. Overhead Costs of the Federal Government 15. Consolidated Revenue Fund Charges 16. Subvention to Parastatals

PEMFAR Report - 2007

Some progress was made in improving general accessibility of budget information.

Significant parts of federation account allocations remain outside of the regular budget process (although there are constitutional limitations for achieving full budget consolidation).

Efforts are under way to reduce the backlog, but the 2001 accounts are still the latest that were submitted to PAC.

Accounts for 2002, 2003 and 2004 have been submitted to the Auditor-General.

PAC meets on a regular basis and there is improved cooperation with Auditor General.

PI-25: Quality and Timeliness of Annual Financial Statements

Best Practice

For the purpose of the PEFA assessment best practice in generation of annual financial statements is defined as:

(i) A consolidated government statement is prepared annually and includes full information on revenue, expenditure and financial assets/liabilities.

(ii) The statement is submitted for external audit within 6 months of the end of the fiscal year.

(iii) IPSAS or corresponding national standards are applied for all government financial statements.

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Present situation

No full set of audited government financial statements have been presented to the National Assembly since 2001174, but an effort is underway to reduce a backlog of late accounts. The 2002 accounts were submitted to the Auditor General’s Office in April 2004 and resubmitted in September 2005 after errors pointed out by the Auditor-General were corrected. The 2003 and 2004 accounts could not be submitted until issues in regard to the 2002 accounts are sorted out, but it was subsequently reported that the 2004 accounts were submitted in June 2006.

The submission of the 2004 final accounts means that in the past 15 months, the Office of the Accountant General of the Federation has successfully prepared the accounts for both 2003 and 2004, an achievement made possible by the ATRRS deployment (IT package). The Office of the Accountant General of the Federation expects that the 2005 accounts could be ready by December 2006, and the 2006 accounts by April 2007.

Parastatals and independent agencies submit audited financial statements directly to the National Assembly but the Auditor-General’s Office gets copies of audited statements. The latter are used for two purposes: a) to monitor the use of budget subventions, and b) to determine how much of revenue parastatals have to turn over to the Exchequer.

Most of these financial statements are submitted within seven to eight months after the closing of the year.175

It is difficult to assess the quality of the consolidated statements. An indication of existing weaknesses may be the fact that Auditor-General had to send back the 2002 accounts to the OAGF because they still contained liabilities of parastatals that had been privatized and where the liabilities were handled over as a part of the privatization deal.

It is worth noting that the audits carried out by the Auditor-General are focused on compliance. No performance or value for money audits are carried out. An indication that the value for money of public spending leaves something to be desired is the fact that the Budget Monitoring and Price Intelligence Unit in its first year of operations was able to save US$674 million by renegotiating contracts already negotiated and agreed by the MDAs.

The team has not been in the position to evaluate the quality of the audited accounts from the parastatals.

174 The members of National Assembly claim that they did not receive the 2001 accounts either, but the meetings in the Office of Auditor General suggests that it is likely that it was finalized and submitted to the National Assembly. However, because the document is highly confidential and produced in a limited number of copies, it just may have gone missing.

175 What percentage of parastatals and independent agencies have submitted their 2004 accounts? Who are the major sinners?

Reforms underway

As indicated above, the government is now making a concerted effort to eliminate the backlog of consolidated accounts. The deployment of the ATRRS (IT packaged) is accelerating their production and by 2007 the Government ought to be able to respect the deadlines for its submission as set in the Constitution.

Assessment

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The members of National Assembly have vociferously complained about the non-submission of audited consolidated accounts. Despite this pro-active attitude of the legislature, it has taken considerable time after the return to democracy for the Government to get up to speed tackling the backlog.

At the same time, the Federal Ministry of Finance demonstrates somewhat lax attitude towards the laggard MDAs. Funds have been released without any reports having been produced. The moral hazard of this practice is obvious. In addition, failure to produce timely accounts and financial statements weakens the accountability nexus that is at the heart of PFM. However, as noted in PI-22 and 24, acting under a May 2006 Presidential directive, the Office of the Accountant General of the Federation and the Budget Office have started instilling reporting discipline by sanctioning defaulting MDAs through withholding further release of funds to them.

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Republic of Ghana

Report and financial Statements of the public Accounts on the Consolidated Fundof the Republic of Ghana for the Year Ended December 31, 2009

Identified good practice:

1. Financial statements

Submitted by 31 March (three months) by law.

The financial statements comprise: A Balance Sheet A Statement of Revenue and Expenditure Statement of Receipts and Payments A Cash Flow Statement Notes to the Accounts

The following statements are also included in the financial statements in line with the requirements of Regulation 191 of the Financial Administration Regulation:

Functional Classification of Expenditure by Items and Heads Summary of Expenditure by Items and Heads Summary Report on Poverty and HIPC Expenditure Analysis of the Position of:

i. Public Debtii. Grantsiii. Depositsiv. Advancesv. Loansvi. Investments

In compliance with Articles 175 and 176 of the Constitution of the Republic of Ghana, these financial statements known as the Public Accounts of Ghana are prepared on the Consolidated Fund only. They do not include other public funds established by or under Acts of Parliament and retained Internally Generated Funds

Narrative report by the Controller and Accountant General.

Balances are provided for the main types of cash and bank account showing the change over the year.

Staff advances by ministry – balance bf, new payments and balance cf Totals are provided by ministry, department and agency for advances for vehicles, special advances and salary advances indicating changes over the year.Loans receivable (from parastals etc and private company – export ECGD) – with any movementsDetails are provided of loans outstanding to individual public boards and corporations and to private companies (export credit guarantees) with changes over the year.

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Investments (international, public boards etc, companies) – with movementsDetails are provided of investments in public boards and corporations, and private companies with any changes during the year.Outstanding payments for privatized companiesDetails are provided for any outstanding payments for privatised companies. This names the company, the investor, year of privatisation, cost and amounts paid with balance at start and end of year with brief remarks.Public debt by category – domesticA detailed analysis of domestic debt showing any changes over the year. Public debt – external by loan showing interest rate and movementsDetails of foreign debt stock by donor and project showing the exchange rates and any changes during the year.Provision for doubtful debt by company etcA schedule of doubtful debts by individual public boards, corporations and companies.Five year trend on assets and liabilitiesFive year trend on revenue and expenditureFour graphsTotal expenditure by MDA (and then by Item 1-4 – PE, Admin, Service, Investment)Discretionary Expenditure by MDAs

Details of external assistance received during the year analysed into grants, loans and projects grants, showing the amounts received from each donor.

Auditor General Report:

Summary of Significant Findings and Recommendations (8 pages)

Follow-up of previous recommendations.

Opinion – except for four specific items:

1. Basis of my qualification:

a. The failure by the GML to submit supporting returns on Special

Collections to CAG,

b. MDAs non-certification of salary payment vouchers,

c. Public Accounts expenditure figures were not consistent with the

underlying information from the MDAs,

d. Failure to reconcile the treasury main accounts with the relevant bank

statements

PEFA Ghana (January 2010)

PI-25 Quality and timeliness of annual financial statements

The Financial Administration Act, 2003 (FAA) and the Financial Administration Regulations, 2004 along with the recently published Accounting Manual and circulars define the accounting standards and legal and regulatory framework for public accounting in Ghana. Article 41 of the FAA, 2003 requires the CAGD to account for all

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transactions out of the Consolidated Fund. The CAGD has adopted a narrow interpretation of the law and presents its figures on a net basis offsetting any funds not forming part of the Consolidated Fund. Budget estimates do not necessarily adopt the same basis and so hampers the direct comparison of outturns to budget estimates (see PI-1). Further, it obscures such aspects as the origins of excess funds for MDA discretionary expenditure over and beyond budgetary estimates. Each MDA also prepares stand alone financial statements that are completed within two months of the close of the fiscal year and submitted to the Auditor-General for audit. The audited stand alone MDA financial statements are also presented to Parliament.

Under the modified cash accounting system adopted the source document for accounting entries is the payment voucher. Financial statements encompass revenues, expenditures, liabilities and financial assets. Specifically they exclude retained IGF, expenditure arrears, revenue arrears, and donor financed projects and programs. Table 3.15 summarises the coverage of the financial reporting.

Table 3.15 Elements reported in the Financial StatementsReported

Reported in Financial StatementsRevenuesTax Revenues YesNon Tax Revenues YesLodged IGF YesRetained IGF Yes, in notes

ExpenditureConsolidated Fund YesRetained IGF NoGrants YesDonor Funded Investment No

Transfers and SubsidiesStatutory Funds Yes, in notesSubsidies Yes, in notes

AssetsRevenue Arrears NoAdvances YesInvestments YesLoans Yes

LiabilitiesDomestic Debt YesExternal Debt YesPayments Outstanding to Statutory Funds YesExpenditure Arrears No

For each of the three years under review the Report and Financial Statements on the Public Accounts of Ghana (Consolidated Fund) were submitted three months after the close of the fiscal year.

An accounting manual was published in 2009 based upon national public accounting standards that adopt standards in accordance with the International Public Sector Accounting Standards (IPSAS). The statements are presented in a consistent format from year to year. All published financial statements include a brief outline of the accounting policies applied in the preparation of the statements along with a full set of notes and schedules that provide some disclosure of the accounting standards adopted.

No. Accounting, recording and reporting

Score

Justification

PI-25

Quality and timeliness of annual financial statements

C+

(i) Completeness of the financial statements

C A consolidated government statement is prepared annually. It excludes revenues arrears, and retained IGF expenditures, expenditure arrears and donor financed projects and programmes.

(ii) Timeliness of submission of the financial statements

A For each of the three years under review the Report and Financial Statements on the Public Accounts of Ghana (Consolidated Fund) were submitted three months after the close of the fiscal year.

(iii) Accounting standards used C^ The CAGD has recently adopted national standards consistent with

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IPSAS. These standards are currently being implemented.

The timeliness of scrutiny of the audit reports that were issued in 2006, 2007 and 2008 was negatively impacted by the disputed legitimacy of the tenure of the Auditor General. The lawsuit gave rise to the Public Accounts Committee to freeze scrutiny of the AG-reports. As a consequence, the audit reports on the consolidated funds of 2006 and 2007 were tabled in 2009.

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PEFA Kenya (July 2006)

Quality and Timeliness of Annual Financial Statements

3.5.8. Annual financial statements are prepared from the ledger accounts and expenditure returns are compiled from the “vote-book” system which is a stand-alone system located in the Treasury and in all line ministries. The Accountant General’s department issues year-end closing procedures with specific deadlines and instructions to ensure smooth and consistent reporting on expenditure. Monthly cashbook and bank balances are submitted to the Accountant-General on a monthly basis for reconciliation.

3.5.9. The source document for accounting entries is the payment voucher. Entries are dated using the date on the cheque. These year-end closing procedures involve the creation of new accounts each year, and the freezing of the old accounts. The old accounts continue to be drawn upon by line ministries into the new-year and the accounts are kept open for six months after the close of year to ensure that all cheques issued against the old account can be honoured. One consequence of this is that when financial statements are prepared within three months of the close of the year, there is neither precise information on actual expenditure (expenditure figures are projected on the basis of a schedule of issued cheques rather than actual payments made) nor subsequently on the ministry bank balances to be returned to the Treasury. While such imprecision is acknowledged, it is argued that the differences remain insignificant.

3.5.10. The line ministries independently prepare financial statements for submission to the Accountant-General and also to the Auditor General. Officials report that this is being done within three months. The Accountant General summarises the accounts which are then signed off by the Permanent Secretary and submitted to the Auditor General within seven months of the close of the fiscal year. The account summary procedure does not force the reconciliation discipline that a complete consolidation of accounts would require. There is no reference to any suspense accounts or advances made in the summary statements. Further, the financial statements do not reflect separately the revenues from appropriations-in-aid.

3.5.11. The government employs a cash based accounting system and has adopted its own accounting standards for public service institutions. Standard and consistent formats have been adopted and are used across all line ministries.

Table 31: PI-25 Quality and Timeliness of Annual Financial Statements - Score Indicator Score Brief Explanation PI-25 Quality and timeliness of annual financial statements

D+

(i) Completeness of the financial statements

D A summarised government statement is prepared annually. Information on revenue, expenditure and bank account balances may not always be complete. Essential information may be missing from the financial statements or the financial records are too poor to audit.

(ii) Timeliness of submission of the financial statements

B The submission of financial statements by the line ministries and also from the Accountant General of the summarised financial statements to the Auditor General occurs within seven months. It should be noted though that this does not necessarily imply that the books are fully reconciled and closed.

(iii)Accounting standards used

C The accounting system employed is cash-based and adopts their own set of public sector accounting standards. Statements are presented in consistent format over time.

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Appendix 7

Other financial reporting and openness

1. Eight Key Documents Assessed by the Open Budget Survey

The Open Budget Survey assesses whether governments produce and disseminate to the public eight key budget documents throughout the fiscal year. A listing of these documents including good practices that they should follow is provided below: A Pre-Budget Statement should be issued at least one month before the executive submits the budget proposal to the legislature. It should present the assumptions used in developing the budget; expected revenue, expenditure, and debt levels; and the broad allocations between sectors.

The Executive’s Budget Proposal is the result of the formulation stage. It presents the government’s detailed declaration of the policies and priorities it wants to pursue in the upcoming budget year, including specific allocations to each ministry and agency. It should be submitted to the legislature at least three months prior to the start of the fiscal year to allow for proper review. The budget should be enacted prior to the start of the fiscal year.

The Enacted Budget should then be made publicly available, as it is the legal document that authorizes the executive to implement the policy measures the budget contains.

The budget is usually a lengthy, technical document. Thus governments should also publish a Citizens Budget, a simplified non-technical summary of the budget in languages and through media that are widely accessible to the public.

There are three documents that governments should publish during the course of budget execution. First, the executive should issue monthly or quarterly In-Year Reports on revenues collected, expenditures made, and debt incurred. These allow citizens to monitor whether the government is spending as much as promised on key sectors, as well as whether these funds are reaching the targeted institutions and beneficiaries.

Second, the executive should publish a Mid-Year Review to discuss any changes in economic assumptions that affect approved budget policies. For example, an unexpected change in the price of oil and gas can lead to huge revenue windfalls or shortfalls in resource-rich countries.

Third, the executive should issue a Year-End Report summarizing the situation at the end of the fiscal year. This compares the actual budget execution to the Enacted Budget. The Year-End Report should include an update on progress in achieving the policy goals in the Enacted Budget.

Best practice requires that a body that is independent from the executive issue an annual Audit Report. The supreme audit institution should report its findings annually to the legislature, as well as to the general public. Audit Reports should

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cover all activities undertaken by the executive. The Audit Report should be issued within 12 months of the end of the fiscal year.

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Availability of eight key budget documents in countries of East Africa

Source of data: The Open Budget Survey, 2010.

Interestingly, there are numerous instances in which documents are produced, but not made publicly available. Tanzania, for example, produces an Enacted Budget but unlike other countries in East Africa, fails to release it to the public. Similarly Rwanda and Sudan produce the Executive’s Budget proposal, but restrict its release to the Government.

Budget document:

Ghana South Africa

Namibia Burkina Faso

performance

Pre-budget statement

Not Produced

Published Not Produced

Produced not

published

4 out of 9

Executive’s Budget Proposal

Published Published Published Produced not

published

6 out of 9

Enacted budget Published Published Published Published 8 out of 9

Citizens budget Produced not

published

Published Not Produced

Not Produced

3 out of 9

In-year reports Not Produced

Published Published Produced not

published

5 out of 9

Mid-year review Published Published Not Produced

Produced not

published

3 out of 9

Year-end report Published Published Published Produced 6 out of 9

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not published

Audit report Published Published Published Published 9 out of 9

performance 5 out of 8 8 out of 8 5 out of 8 2 out of 8Source of data: The Open Budget Survey, 2010

Other good practice from the Open Budget Survey

Of the 26 African countries that were assessed for 2010 report: South Africa ranked first worldwide, ahead of New Zealand and the United

Kingdom; 13 out of the 26 African countries surveyed improved their scores in budget

transparency since the 2008 survey;  8 countries, Uganda, Ghana, Namibia, Botswana, Kenya, Egypt, Malawi and

Tanzania, scored in the middle group of countries that provided some information (an OBI score of 41–60).

Types of tax revenue reported7. Does the executive’s budget or any supporting budget documentation identify the different sources of tax revenue (such as income tax or VAT) for the budget year? a. All sources of tax revenue are identified individually (Ghana, Namibia, South Africa, Tanzania, Uganda).

27. Does the executive’s budget or any supporting budget documentation identify the different sources of tax revenue (such as income tax or VAT) for the year preceding the budget year (BY-1)? a. All tax revenues are identified individually for BY-1 (Ghana, Namibia, South Africa, Tanzania). b. Tax revenues amounting to at least two-thirds of, but not all, tax revenue for BY-1 are identified individually (Uganda).

Donor assistance44. Does the executive’s budget or any supporting budget documentation provide details on the sources of donor assistance, both financial and in-kind? a. All sources of donor assistance are identified individually (Ghana). b. At least two-thirds of, but not all, sources of donor assistance, are identified individually (Namibia, South Africa, Tanzania, Uganda).

Secret expenditure47. What percentage of expenditure in the budget year is dedicated to spending on secret items relating to, for instance, national security and military intelligence? a. One percent or less of expenditure is dedicated to secret items (South Africa). b. Three percent or less, but more than one percent, of expenditure is dedicated to secret items (Ghana – maybe, Namibia). c. Eight percent or less, but more than three percent, of expenditure is dedicated to secret items (Uganda).

123. Are audit reports of the annual accounts of the security sector (military, police, intelligence services) and other secret programs provided to the legislature (or relevant committee)? a. Yes, legislators are provided with detailed audit reports related to the security

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sector and other secret programs (Ghana and South Africa). b. Yes, legislators are provided audit reports on secret items, but some details are excluded (Tanzania). c. Yes, legislators are provided audit reports on secret items, but they lack important details (Namibia, Uganda).

Glossary62. Does the executive make available to the public non-technical definitions of terms used in the budget and other budget-related documents (for instance, in a glossary)? a. Yes, thorough definitions of budget terms are provided (Ghana – citizens budget page 61, South Africa). b. Yes, definitions are provided, but some details are excluded (Namibia).

Timeliness of year-end report101. How long after the end of the budget year does the executive release to the public a year-end report that discusses the budget’s actual outcome for the year? a. The report is released six months or less after the end of the fiscal year (South Africa, Uganda). b. The report is released 12 months or less (but more than six months) after the end of the fiscal year (Ghana, Namibia).

Pro-poor expenditure109. Does the year-end report explain the difference between the enacted level of funds intended to benefit directly the country’s most impoverished populations and the actual outcome? b. Yes, an explanation is presented, highlighting key differences, but some details are excluded (Ghana and South Africa). c. Yes, some explanation is presented, but it lacks important details (Namibia, Uganda).

2. Openness of procurement

The key aspect of good practice for procurement of significant contracts is that the following are clearly advertised in sufficient time in appropriate media:

All opportunities

Publish bids received

Publish award of contracts

OECD/DAC (2010) guidance provides the following recommendations:

sub-indicator 1(c) – Advertising rules and time limits This sub indicator assesses whether: a) the legal framework includes requirements to publish contract awards as a matter of public interest and to promote transparency; b) there is wide and easily accessible publication of business opportunities; and, c) there is adequate time provided between

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publication of opportunities and submission date, consistent with the method and complexity of the procurement, to prepare and submit proposals.

Time between publication of the invitation for prequalification applications, or for an open tender and the submission of proposals relates to the complexity of the procurement and the level of competition expected. If foreign bidders are expected to compete, this is a factor to consider. The law and regulations should establish the criteria for setting the minimum time between advertisement and submission of proposals.

Scoring Criteria ScoreThe legal framework meets the following conditions: (a) Requires that procurement opportunities other than sole source or price quotations be publicly advertised. (b) Publication of opportunities provides sufficient time, consistent with the method, nature and complexity of procurement, for potential bidders to obtain documents and respond to the advertisement. Such timeframes are extended when international competition is sought. (c) Publication of open tenders is mandated in at least a newspaper of wide national circulation or in a unique Internet official site, where all public procurement opportunities are posted, that is easily accessible. (d) Content of publication includes sufficient information to enable potential bidders to determine their ability and interest in bidding.

3

The legal framework meets the conditions of (a) and (b) plus one of the remaining conditions.

2

The legal framework meets the conditions of (a) plus one of the remaining conditions.

1

The legal framework only meets the conditions of (a) above. 0

sub-indicator 1(h) – Complaints The purpose of this indicator is to assess whether the legal framework establishes; a) the right to review, b) the matters that are subject to review; c) the timeframe for such reviews; and, d) the different steps in the review process. Confidence in a procurement system is a powerful incentive to competition. A fundamental part of this is the establishment of the right to review procurement decisions by an efficient and functionally independent process. Even though the first review is normally carried out by the procurement entity, there should be an administrative/judicial review body that is independent from the procuring agency. That is, has no direct interest in the procurement process and does not report to the procurement agency and ideally is a separate agency.

Scoring Criteria ScoreThe legal framework provides for the following: (a) The right to review for participants in a procurement process (b) Provisions to respond to a request for review at the procuring/agency level with administrative review by another body independent from the procuring agency that has the authority to grant remedies and includes the right for judicial review. (c) Establishes the matters that are subject to review (d) Establishes timeframes for issuance of decisions by the procuring agency and the administrative review body.

3

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The legal framework provides for (a) and (b) plus one of the remaining conditions.

2

The legal framework provides for (a) plus one of the remaining conditions.

1

The right for review of the proper application of the procurement process is not provided in the legal framework.

0

sub-indicator 10(d) – Decisions are published and made available to all interested parties and to the public

Decisions are public by law and posted in easily accessible places (preferably posted at a dedicated government procurement website in the Internet). Publication of decisions enables interested parties to be better informed as to the consistency and fairness of the process.

Scoring Criteria ScoreAll decisions are publicly posted in a government web site or another easily accessible place

3

All decisions are posted in a somewhat restricted access media (e.g. the official gazette of limited circulation).

2

Publication is not mandatory and publication is left to the discretion of the review bodies making access difficult.

1

Decisions are not published and access is restricted.

0

sub-indicator 11(a) – Information is published and distributed through available media with support from information technology when feasible.

Public access to procurement information is essential to transparency and creates a basis for social audit by interested stakeholders. Public information should be easy to find, comprehensive and user friendly providing information of relevance. The assessor should be able to verify easy access and the content of information made available to the public.

The system should also include provisions to protect the disclosure of proprietary, commercial, personal or financial information of a confidential or sensitive nature.

Information should be consolidated into a single place and when the technology is available in the country, a dedicated website should be created for this purpose. Commitment, backed by requirements in the legal/regulatory framework should ensure that agencies duly post the information required on a timely basis.

Scoring Criteria ScoreInformation on procurement is easily accessible in media of wide circulation and availability. The information provided is centralized at a common place. Information is relevant

3

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and complete. Information is helpful to interested parties to understand the procurement processes and requirements and to monitor outcomes, results and performance. Information is posted in media not readily and widely accessible or not user friendly for the public at large OR is difficult to understand to the average user OR essential information is lacking.

2

Information is difficult to get and very limited in content and availability.

1

There is no public information system as such and it is generally up the procuring entity to publish information.

0

3. Asset and salary declarations for senior officials and politicians

According to U4 (2008), in 2006 28 of 48 African countries required disclosure of income and assets by public officials. Of these, 23 countries require officials to declare assets to an anti-corruption body or other government entity, while 5 publish the declarations.

In South Africa disclosure of personal assets and financial interest is required from elected officials, senior public servants, Members of Parliament and Cabinet. In Uganda, the law covers all top and middle ranking public officials.

Kenya, Tanzania, Uganda, and Nigeria also require that public office holders declare the assets of their spouse and children in a separate declaration, to prevent dishonest officials from hiding their assets in their spouse or relatives’ names. Only separated spouses and married/independent children are usually excluded from such regimes.

Most countries make provisions for a yearly filing interval in addition to the initial declaration upon entry into office and after the end of the term.

In Ghana specified public office holders are required to submit a written asset declaration to the Auditor General. In Tanzania, declarations must be made to the Ethics Commissioner, who is given the formal responsibility for checking their accuracy and maintaining the record. In Uganda the declarations are submitted to the Inspector General of Government (IGG) who is responsible for verifying asset declarations and has the discretionary power to question public office holders. In the Gambia, declarations of assets are submitted to the Office of the Ombudsman, who is required to submit them to the Finance and Public Account Committees of the National Assembly.

In Kenya or Tanzania, an official who is convicted of submitting a false or misleading declaration is liable for fine and/or imprisonment. In Nigeria, any property or asset acquired by a public officer which is not fairly attributable to approved income, gift, or loan is considered to have been acquired illegally. In Uganda, false, misleading or insufficient declarations can lead to dismissal/removal of office.

African countries that require public declaration for some or all their top officials include South Africa, Liberia, Cape Verde, Sao Tome and Principe and the Central African Republic. In Uganda, declarations can be made public on application to the IGG office, which has the discretion to decide what information can be released.

African Union Convention on Preventing and Combating Corruption (AU Convention): adopted on 11 July 2003 and entered into force on 5 August 2006, the AU Convention addresses several aspects of corruption, including concealment of property by public officials and illicit enrichment. Article 7 of the Convention expressly establishes that: “In order to combat corruption and related offences in the public service, State Parties commit themselves to: 1. Require all or designated public officials to declare their assets at the time of assumption of office during and after their term of office in the public service. 2. Create an internal committee or a similar body mandated to establish a code of conduct and to monitor its implementation, and sensitize and train public officials on matters of ethics. 3. Develop disciplinary measures and investigation procedures

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in corruption and related offences with a view to keeping up with technology and increase the efficiency of those responsible in this regard.”

World Bank & UNDC (2009) Asset and Income Declaration Guide Concept Notehttp://siteresources.worldbank.org/INTSARI/Resources/AssetIncomeDeclarationGuide.pdf

Larbi, George (2007) Between Spin and Reality: Examining Disclosure Practices in Three African CountriesThis article, available for purchase, reviews practices in Ghana, Tanzania and Uganda by addressing questions of who must declare, what must be declared, where to declare and how often to declare. It argues that like all the other mechanisms for controlling corruption, its efficacy depends on enforcement and compliance. The three cases reviewed suggest that there is a significant gap between the rhetoric of declaration and the reality of effective monitoring and compliance to make the system work to ensure transparency and public trust. http://www3.interscience.wiley.com/cgibin/abstract/114282710/ABSTRACT?CRETRY=1&SRETRY=0

Part IV of the Public Officer Ethics Act (Kenya 2003) sets out the requirements for declarations of income, assets, and liabilities. The requirements demand that all public officials and employees declare their income, assets, and liabilities and those of their spouses and dependent children (less than 18). Officials must submit declarations when they join the public service, once every two years while they are in the public service, and when they leave the public service.

http://www.tikenya.org/documents/assetdeclaration.pdf

South AfricaSouth Africa has implemented a comprehensive conflict of interest policy, and has enacted a number of conflict of interest codes requiring disclosure of financial interests by public officials.  Elected officials and senior managers in the civil service, as well as their spouses and dependent children, must publicly disclose nearly all financial interests, including shares and interests in companies, land and property owned, paid outside employment, directorships and partnerships, consultancies, and gifts received from sources other than friends and family. Although limited portions of this information, such as the value of interests in companies and pensions, amounts of remuneration, and details of private residences and family financial interests, are kept confidential, the presumption in South Africa favors disclosure of assets.

http://right2info.org/information-of-high-public-interest/asset-declarations

Code of Conduct for Assembly and Permanent Council Members http://www.pmg.org.za/parlinfo/codeofconduct.htm

Public Service Regulations of 2001 chapter 3, available at http://www.info.gov.za/gazette/regulation/2001/21951.pdf

4. PETS – local reporting

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Uganda PEFA 2008

PI-23 Availability of information on resources received by service delivery units

Dimension to be assessed:

Collection and processing of information to demonstrate the resources that were actually received (in cash and kind) by the most common front-line service delivery units (focus on primary schools and primary health clinics) in relation to the overall resources made available to the sector(s), irrespective of which level of government is responsible for the operation and funding of those units.

Score B. For primary education, data on the reception and use of resources by districts and schools is compiled regularly and reported on a quarterly basis. For primary health clinics, little information is being collected on the reception and use of resources, and no survey has been conducted in the past three years.

In both health and education, funds are released to districts on a quarterly basis. The districts are then responsible to distribute them to primary health care clinics and primary schools. In both sectors, guidelines are in place to ensure that the service-delivery units compile data on the reception and use of resources on a quarterly basis. Also on a quarterly basis, districts are required to inspect the service-delivery units and report back on their findings as well as on their own resource allocation activity.

In the education sector, schools receive funding through the Capitation Grant, whereby per district funding is determined by the number of pupils in a district. USAID surveyed the Capitation Grant in 2006, revealing an average fund diversion of 20 percent in selected districts. Over 50 percent of schools were reporting on the use of resources, and over 50 percent of districts were satisfactorily accounting for their allocation activities. Since then, data by both schools and districts are being compiled routinely, also as a result of the Ministry of Education’s policy of not sending resources to noncompliant districts. As of November 2008, there were only 7 out of 93 districts not complying.

Moreover, the Ministry of Education performs inspection and assessment fieldtrips to districts and primary schools at least annually. For FY2007/08, it found that diversion of funds had been reduced to 5 percent, down from the 20 percent in 2006. This being said, schools are still reporting a delay in the disbursement of funds, which, for the schools in non-complying districts, is obviously further aggravated by the Ministry’s policy. Moreover, the Ministry is not reporting the findings of its inspections systematically and is slow in addressing the shortcomings stemming from the USAID survey and the data compiled at the service delivery level.

In the health sector, no mechanism is in place to ensure compliance with the abovementioned guidelines. So the majority of primary health care clinics and districts are not accounting for the resources received. As a result, and in the absence of a survey in the past three years, it is difficult to assess the level of resources received by service delivery units.

The little information that is available is in line with the most recent study in this area. The 2006 value-for-money audit by the OAG reported the following findings: there is no clear method of bookkeeping in districts or in primary health care units; districts do not use a systematic method to assign funds to primary health care units; and it is likely that a substantial amount of fund diversion is taking place, as some districts can account for only half of the resources designated for a given activity. The indicator is rated B on the primary school data alone.

Ghana 2009

PI-23 Availability of information on resources received by service delivery units

A Public Expenditure Tracking Survey (PETS) for the health and education sectors was undertaken in 2008 for 2007 expenditure by the Ghana Statistical Services (GSS), Ministry of Finance and Economic Planning (MoFEP), Ministry of Education, Sciences and Sports (MOESS), and Ministry of Health (MOH) with assistance from DFID and DANIDA. The objective was to determine efficiency of public spending at the facilities level and the quality and quantity of services delivery. The survey was carried out based upon national sampling.

The main findings were that excepting the Ghana Education Service (GES), there were systemic weaknesses in

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financial information recording. In the case of Education central government releases were relatively efficient between MoFEP and GES, and between the GES Headquarters and District Education Offices (DEO); but much less so between the DEOs and the schools. In the case of Health discrepancies and delays in the flow of funds were found to be important sources of inefficiencies in the delivery of health services.

The report concludes that the extensive delays in public expenditure releases from central ministries and agencies have repercussive effects on the whole system which contributes to inefficient resource utilization.

Accounting, recording and reporting

Score Justification

Availability of information on resources received by service delivery units

B A PETS was carried out for 2007 that demonstrates the level of resources received both in kind and in cash at the facilities level – i.e. the primary schools and primary health care centres.

South Africa 2008

PI-23 Availability of information on resources received by service delivery units

Reporting on the resources (in cash or in kind) disbursed to the front-line service delivery units is facilitated through the BAS financial information management system. The Provincial Governments (along with 5 major metropolitan authorities) are responsible for primary health and primary education service delivery. The administrative structure of the budget as reflected in BAS includes cost centres specified to the level of primary schools and health clinics.

The Provincial Governments provide financial reporting that indicates the resources received in aggregate by primary schools and primary health care clinics. This is possible because the expenditure by the front-line service delivery units is tracked by the transverse BAS accounting system. The front line service delivery units are managed by the nine provinces and five metropolitan authorities and their expenditure reported upon annually. The National Treasury compiles this data and presents it in a consolidated report: the Provincial Budgets and Expenditure Review.

Accounting, recording and reporting

Score Justification

Availability of information on resources received by service delivery units

A The front line service delivery units are managed by the nine provinces and five metropolitan authorities and their expenditure reported upon annually. The National Treasury compiles this data and presents it in a consolidated report: the Provincial Budgets and Expenditure Review

5. Publish What You Pay (PWYP)

The Publish What You Pay campaign aims to help citizens of resource-rich developing countries hold their governments accountable for the management of revenues from the oil, gas and mining industries. Natural resource revenues are an important source of income for governments of over 50 developing countries, including Angola, Indonesia, Kazakhstan, Nigeria and Venezuela.

When properly managed these revenues should serve as a basis for poverty reduction, economic growth and development rather than exacerbating corruption, conflict and social divisiveness.http://www.publishwhatyoupay.org/english/index.shtml

The EITI Criteria

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Implementation of EITI must be consistent with the criteria below:

1. Regular publication of all material oil, gas and mining payments by companies to governments (“payments”) and all material revenues received by governments from oil, gas and mining companies (“revenues”) to a wide audience in a publicly accessible, comprehensive and comprehensible manner.

2. Where such audits do not already exist, payments and revenues are the subject of a credible, independent audit, applying international auditing standards.

3. Payments and revenues are reconciled by a credible, independent administrator, applying international auditing standards and with publication of the administrator’s opinion regarding that reconciliation including discrepancies, should any be identified.

4. This approach is extended to all companies including state-owned enterprises.5. Civil society is actively engaged as a participant in the design, monitoring and evaluation of this

process and contributes towards public debate.6. A public, financially sustainable work plan for all the above is developed by the host

government, with assistance from the international financial institutions where required, including measurable targets, a timetable for implementation, and an assessment of potential capacity constraints.

http://eiti.org/countries/compliant

Status of EITI Implementation in Nigeria

Nigeria was accepted as an EITI Candidate country on 27 September 2007. Nigeria submitted its

final Validation report to the EITI Board on 29 June 2010.

Former President Olusegun Obasanjo committed to EITI in November 2003 and launched Nigeria EITI (NEITI) in February 2004. To give legal backing to the work of NEITI, a bill was introduced to the National Assembly in December 2004. This NEITI Act was passed into law on May 28, 2007. With this, Nigeria became the first EITI-implementing country with a statutory backing for implementing EITI. 

On 1 February 2011, NEITI published the 2006-2008 EITI Reconciliation report showing that total revenues for those years were US$45bn, US$43bn and US$59bn respectively. The report included useful observations and recommendations on improving the management of revenues from the extractive sector.

Status of EITI Implementation in Ghana - http://eiti.org/Ghana

The mining industry in Ghana is dominated by gold, diamond, bauxite, and manganese. These are important sources of export and government revenue. For example, gold represented 34% of the country’s exports (12% of GDP) in 2000-2003.In 2007 significant oil discoveries were made offshore of Ghana. Estimates of Ghana's oil reserves vary between 1bn and 1.5bn barrels. Commercial extraction will begin in 2011.  

The EITI Board designated Ghana as EITI Compliant on 19 October 2010.  In order to achieve compliant status, countries must complete a rigorous, independent assessment of their disclosure and reporting practices. Liberia is another sub-Saharan African country that is compliant. This status lasts for five years.

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Appendix 8References

Andrews, Matt (2010) How Far Have Public Financial Management Reforms Come in Africa? Cambridge, MA: Harvard Kennedy School of Governmenthttp://web.hks.harvard.edu/publications/getFile.aspx?Id=548

D Bouley, J Fournel… - 2002 How do treasury systems operate in sub-Saharan francophone Africa

Claassens, Marritt & van Zyl, Albert (2005) Budget Transparency and Participation: 9 African Case Studies, Cape Town: IDASAhttp://www.idasa.org.za/our_products/resources/output/budget_transparency_and_participation/

CABRI (2009) Putting Aid on Budget Good Practice Note: Using Country Budget Systems, Pretoria: CABRI

CABRI, AFROSAI & ATAF (2010) A Status Report on Good Financial Governance in Africa, CABRI, Pretoriahttp://www.cabri-sbo.org/images/documents/GFG/english/2.%20status%20report%20on%20good%20financial%20governance_eng.pdf

East and Southern African Association of Accountants General (ESAAG) (2006) Financial Reporting Survey and Database, Pretoria: ESAAG

Government Accounting Standards Advisory Board (2008) A Study on Gap Analysis of Indian Government Accounting with International Standards, New Delhi: GASAB Secretariatwww.gasab.gov.in/pdf/Gap_Analysis.pdf

Governmental Accounting Standards Board (2006) White Paper: Why Governmental Accounting and Financial Reporting Is—and Should Be—Different, Norwalk, CT: GASBhttp://www.gasb.org/white_paper_full.pdf

International Monetary Fund (2001) Government Finance Statistics Manual, Washington DC: IMFwww.imf.org/external/pubs/ft/gfs/manual/

I Lienert (2003) A comparison between two public expenditure management systems in Africa, Washington DC: IMF

Messick, Richard (2009) Income and Assets Declarations: Global Experience of Their Impact on Corruption, Washington DC: World Bank http://docs.docstoc.com/orig/5329092/dfefa4ba-0b09-4b73-ada4-e8e3a371ba34.pdf

Monsen, Norvald (2009) Enterprise Cameralistics, International Journal on Governmental Financial Management, Vol. IX, No. 1, 2009, Alexandria, VA: International Consortium on Governmental Financial Management

Y Moussa (2004) Public expenditure management in francophone Africa: a cross-country analysis

OBI (2010) Country Reports, Washington DC: OBIwww.internationalbudget.org/what-we-do/open-budget-survey/?fa=country-info

OECD/DAC (2010) Methodology for Assessing Procurement Systems (MAPS), February, Paris: OECDwww.oecd.org/document/40/0,3343,en_2649_3236398_37130152_1_1_1_1,00.html

PEFA reports for Botswana, Ghana, Kenya, Mauritius, Mozambique, Nigeria, Sierra Leone, South Africa, Uganda

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http://web.worldbank.org/WBSITE/EXTERNAL/PEFA/0,,contentMDK:22687152~menuPK:7313203~pagePK:7313176~piPK:7327442~theSitePK:7327438,00.html

U4 (2008) African experience of asset declarations, U4 Expert Answerwww.u4.no/pdf/?file=/helpdesk/helpdesk/queries/query114.pdf

United Nations Economic Commission For Africa (2005) Assessing Public Financial Management and Accountability in the Context of Budget Transparency in Africa, Addis Ababa: UNECAhttp://www.uneca.org/eca_resources/Publications/dpmd/Budget_transparency.pdf

United Nations (1991) Government Financial Management in Least Developed Countries, New York: United Nations

THE AFRICAN CAPACITY BUILDING FOUNDATION- January 2012 -

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