I. Credibility of the Budget
Scores by Dimension
Overall Indicator Score
1. Aggregate expenditure out-turn compared to original approved budget
B
Notes:
1.1 The difference between actual primary expenditure and the originally budgeted primary expenditure (i.e. excluding debt service charges, but also excluding externally financed project expenditure)
B
Notes:
Actual expenditure deviated in absolute terms from budgeted expenditure by 9.6%, 6.3%, and 10.6% in FY 2010/11, 2011/12, and 2012/13, respectively. Advances from the MDG Fund–financed payments to contractors, although accounts receivable in accounting terms, are treated as actual expenditures in terms of scoring this indicator
2. Composition of expenditure out-turn compared to original approved budget
D+
Notes:
2.1 Extent of the variance in expenditure composition during the last three years, excluding contingency items (the methodolodgy to rate this dimension is set out in the footnote of the PFM PMF booklet)
D
Notes:
Variance in expenditure composition exceeded 15% in at least two of the past three years. Variance was 60.7%, 18.7%, and 24.5% in EFYs 2003, 2004, and 2005, respectively.
2.2 The average amount of expenditure actually charged to the contingency vote over the last three years
A
Notes:
Expenditure charged to the contingency vote was less than 3% of the original budget. The budgeted contingency vote was zero in EFYs 2003–05.
3. Aggregate revenue out-turn compared to original approved budget
C
Notes:
3.1 Actual domestic revenue collection compared to domestic revenue in the originally approved budget
C
Notes:
Actual domestic revenue was between 92% and 116% of budgeted domestic revenue in at least two of the past three years.
4. Stock and monitoring of expenditure payment arrears
B+
Notes:
4.1 Stock of expenditure payment arrears (as a percentage of actual total expenditure for the corresponding fiscal year) and any recent change in the stock
A
Notes:
The stock of arrears constituted 1.4% of total ANRS expenditure at the end of 2012/13.
4.2 Availability of data for monitoring the stock of expenditure payment arrears
B
Notes:
Data on the stock of arrears is generated annually in the case of GPP, but may not be complete for recurrent expenditure payables. These are mainly paid the following month, but age profiles are not maintained for these.
II. Comprehensiveness and Transparency
Scores by Dimension
Overall Indicator Score
5. Classification of the budget
B
Notes:
5.1 The classification system used for formulation, execution and reporting of the central government's budget
B
Notes:
Budget formulation and execution is based on functional, sub-functional, administrative, and economic classifications, the sub-functional classification being similar to COGOG’s functional classification.
6. Comprehensiveness of information included in budget documentation
D
Notes:
6.1 Share of the listed information under PI-6 in the PFM PMF booklet in the budget documentation most recently issued by the central government (in order to count in the assessment, the full specification of the information benchmark must be met)
D
Notes:
Two of 8 applicable items are contained in the budget documentation
7. Extent of unreported government operations
D+
Notes:
7.1 The level of extra-budgetary expenditure (other than donor funded projects) which is unreported i.e. not included in fiscal reports.
A
Notes:
The level of unreported extra-budgetary expenditure is insignificant, below 1% of expenditure.
7.2 Income/expenditure information on donor-funded projects which is included in fiscal reports.
D
Notes:
Information on DP-funded projects and programs included in fiscal reports is seriously deficient.
8. Transparency of inter-governmental fiscal relations
A
Notes:
8.1 Transparent and rules based systems in the horizontal allocation among SN governments of unconditional and conditional transfers from central government (both budgeted and actual allocations);
A
Notes:
The horizontal allocation of most transfers from ARG to woreda governments (at least 90% of transfers) is determined by transparent and rules-based systems.
8.2 Timeliness of reliable information to SN governments on their allocations from central government for the coming year;
B
Notes:
Woredas and city administrations are provided reliable information on the allocations to be transferred to them ahead of completing their budget proposals, so that significant changes to the proposals are still possible.
8.3 Extent to which consolidated fiscal data (at least on revenue and expenditure) is collected and reported for general government according to sectoral categories.
A
Notes:
Fiscal information consistent with central government fiscal reporting is collected for 90% of woreda and town administration expenditure and consolidated into annual reports within 10 months of the end of the FY.
9. Oversight of aggregate fiscal risk from other public sector entities.
C+
Notes:
9.1 Extent of central government monitoring of AGAs and PEs.
C
Notes:
The public enterprises submit fiscal reports to their governing boards, but a consolidated overview is missing.
9.2 Extent of central government monitoring of SN government's fiscal position
A
Notes:
Woreda governments cannot generate fiscal liabilities for ARG, and in any case the fiscal position of subnational governments is continually monitored.
10. Public access to key fiscal information
B
Notes:
10.1 Number of the above listed elements of public access to information that is fulfilled (in order to count in the assessment, the full specification of the information benchmark must be met)
B
Notes:
Four of the six applicable elements are met.
III. Policy-Based Budgeting
Scores by Dimension
Overall Indicator Score
11. Orderliness and participation in the annual budget process
A
Notes:
11.1 Existence of and adherence to a fixed budget calendar;
A
Notes:
A clear annual budget calendar exists, is generally adhered to, and allows regional bureaus enough time (at least six weeks from receipt of the budget circular) to meaningfully complete their detailed estimates on time.
11.2 Clarity/comprehensiveness of and political involvement in the guidance on the preparation of budget submissions (budget circular or equivalent);
A
Notes:
A comprehensive and clear budget circular is issued to regional bureaus, which reflects ceilings approved by cabinet prior to the circular’s distribution to MDAs.
11.3 Timely budget approval by the legislature or similarly mandated body (within the last three years);
A
Notes:
Parliament approved the budget close to the start of the year for the past three years.
12. Multi-year perspective in fiscal planning, expenditure policy and budgeting
D+
Notes:
12.1 Preparation of multi -year fiscal forecasts and functional allocations
D
Notes:
No forward estimates of fiscal aggregates are undertaken.
12.2 Scope and frequency of debt sustainability analysis
NA
Notes:
Not applicable.
12.3 Existence of sector strategies with multi-year costing of recurrent and investment expenditure;
C
Notes:
A costed education sector strategy is in place, education expenditure comprising about 40 % of total expenditures. The previous sector strategy was inconsistent with aggregate fiscal forecasts. This is likely to still be the case, the Growth and Transformation Plan itself being fiscally unrealistic.
12.4 Linkages between investment budgets and forward expenditure estimates.
C
Notes:
Investment decisions are based on sector strategies. Recurrent cost implications are partly taken into account during annual budget preparation, but a system of forward budget estimates is not yet in place.
IV. Predictability and Control in Budget Execution
Scores by Dimension
Overall Indicator Score
13. Transparency of taxpayer obligations and liabilities
A
Notes:
13.1 Clarity and comprehensiveness of tax liabilities
A
Notes:
Legislation and procedures for all major taxes are comprehensive and clear, with strictly limited discretionary powers of the revenue authority
13.2 Taxpayer access to information on tax liabilities and administrative procedures.
A
Notes:
Taxpayers have easy access to comprehensive, user-friendly, and up-to-date information on tax liabilities and procedures, and the revenue authority supplements this with taxpayer education campaigns.
13.3 Existence and functioning of a tax appeals mechanism.
A
Notes:
A tax appeals system of transparent administrative procedures with appropriate checks and balances, and implemented through independent institutional functions, is in place.
14. Effectiveness of measures for taxpayer registration and tax assessment
B
Notes:
14.1 Controls in the taxpayer registration system.
B
Notes:
Taxpayers are registered in a complete database with some linkages to trade licensing and company registration systems.
14.3 Planning and monitoring of tax audit and fraud investigation programs.
C
Notes:
There is a continuous program of tax audits and fraud investigations, but audit programs are not based on clear risk assessment criteria.
14.2 Effectiveness of penalties for non-compliance with registration and declaration obligations
B
Notes:
Penalties for noncompliance exist for most relevant areas but are not always effective due to insufficient scale and inconsistent administration.
15. Effectiveness in collection of tax payments
D+
Notes:
15.1 Collection ratio for gross tax arrears, being the percentage of tax arrears at the beginning of a fiscal year, which was collected during that fiscal year (average of the last two fiscal years).
A
Notes:
The total amount of tax arrears is insignificant (i.e., less than 2% of total annual collections).
15.2 Effectiveness of transfer of tax collections to the Treasury by the revenue administration.
A
Notes:
Transfers to the treasury are made daily
15.3 Frequency of complete accounts reconciliation between tax assessments, collections, arrears records and receipts by the Treasury.
D
Notes:
Complete reconciliation of tax assessments, collections, arrears, and transfers to BoFED does not take place annually.
16. Predictability in the availability of funds for commitment of expenditures
C+
Notes:
16.2 Reliability and horizon of periodic in-year information to MDAs on ceilings for expenditure commitments
A
Notes:
BIs are provided reliable information on resource availability for commitment three months in advance, but can plan and commit expenditure for at least six months in advance according to their cash flow forecasts and budgeted appropriations.
16.3 Frequency and transparency of adjustments to budget allocations, which are decided above the level of management of MDAs.
C
Notes:
Significant in-year budget adjustments are frequent but are undertaken with some transparency through consultations between BoFED and BIs.
16.1 Extent to which cash flows are forecast and monitored
B
Notes:
A cash forecast is prepared for the year and updated quarterly. Monthly updating is possible, but quarterly updating is the practice.
17. Recording and management of cash balances, debt and guarantees
B+
Notes:
17.1 Quality of debt data recording and reporting
NA
Notes:
ARG does not borrow
17.2 Extent of consolidation of the government’s cash balances
B
Notes:
Most cash balances are calculated and consolidated at least weekly through the CTA/Z account system. About 30% of cash balances fall outside the system.
17.3 Systems for contracting loans and issuance of guarantees.
A
Notes:
The ARG does not borrow yet. There is a system of issuing loan guarantees as evidenced by the proclamations issued by the RC. BoFED has the sole responsibility for issuing guarantees.
18. Effectiveness of payroll controls
B+
Notes:
18.1 Degree of integration and reconciliation between personnel records and payroll data.
B
Notes:
Personnel data and payroll data are not directly linked, but the payroll is supported by full documentation for all changes to personnel records each month and checked against the previous month’s payroll data.
18.2 Timeliness of changes to personnel records and the payroll
A
Notes:
Required changes to personnel records and the payroll are made monthly, generally in time for the following month’s payment. Retroactive adjustments are rare.
18.3 Internal controls of changes to personnel records and the payroll.
A
Notes:
The control system on payroll is strong and the system provides an audit trail to review changes to personnel and payroll records.
18.4 Existence of payroll audits to identify control weaknesses and/or ghost workers.
B
Notes:
Payroll and personnel records audits are conducted separately but regularly by internal audit departments.
19. Transparency, competition and complaints mechanisms in procurement
D+
Notes:
19.1 Transparency, comprehensiveness and competition in the legal and regulatory framework
Notes:
Four of the six listed requirements are met.
19.2 Use of competitive procurement methods
Notes:
BIs are not yet providing the Public Procurement and Property Administration Core Process in BoFED with the information they should be providing under the proclamation that would enable the rating of this dimension. Based on meetings with three sector bureaus and ORAG, the use of open competition procurement methods is becoming the norm, thus implying a higher rating.
19.3 Public access to complete, reliable and timely procurement information
Notes:
Bidding opportunities and contract awards are made available.
19.4 Existence of an independent administrative procurement complaints system
D
Notes:
The complaints review system, located in BoFED, is not yet independent of the procurement process.
20. Effectiveness of internal controls for non-salary expenditure
B
Notes:
20.1 Effectiveness of expenditure commitment controls.
B
Notes:
The Financial Administration Proclamation (2011) prohibits entering into commitments without availability of unencumbered balance. The cash flow forecasts prepared by BIs on the basis of these forecasts, the cash plans agreed between BIs and BoFED on the basis of these forecasts, and the TSA-Z account system all help to guard against cash unavailability at the projected time of payment. In the event of a serious risk of a cash shortfall, managers try to find offsetting adjustments in other parts of the budget.
20.2 Comprehensiveness, relevance and understanding of other internal control rules/ procedures
B
Notes:
Internal control systems are comprehensive, well documented, and generally understood. Training programs are ongoing (through PBS program and BoFED’s PFM support teams). The BPR has streamlined processes, but these seem to be still excessive delays in some areas (e.g., contract authorizations)
20.3 Degree of compliance with rules for processing and recording transactions
B
Notes:
Compliance to rules and regulations is generally good. As reported by ORAG and ID, there are indications of noncompliance in certain areas by some BIs.
21. Effectiveness of internal audit
B+
Notes:
21.1 Coverage and quality of the internal audit function.
B
Notes:
Internal audit is operational for the majority of BIs and substantially meets professional standards, with a focus on systemic issues.
21.2 Frequency and distribution of reports
A
Notes:
Audit reports are regularly issued and submitted to BIs, BoFED, and ORAG.
21.3 Extent of management response to internal audit findings.
B
Notes:
Prompt and comprehensive action is taken by many, but not all, managers in response to the audit findings.
V. Accounting, Recording and Reporting
Scores by Dimension
Overall Indicator Score
22. Timeliness and regularity of accounts reconciliation
B
Notes:
22.1 Regularity of bank reconciliations
B
Notes:
Bank reconciliations for all ARG-managed bank accounts take place at least monthly within 4 weeks from the end of the month.
22.2 Regularity of reconciliation and clearance of suspense accounts and advances.
B
Notes:
Reconciliation and clearance of suspense accounts and advances take place at least annually within two months of the end of period. Some accounts have uncleared balances brought forward. Some advances, which are part of the petty cash float, are cleared within seven days. Some other types of suspense accounts and advances are cleared in less than six months. Others are cleared or reconciled within two months after the end of the fiscal year.
23. Availability of information on resources received by service delivery units
B
Notes:
23.1 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
B
Notes:
Routine data collection or accounting systems provide reliable information on all types of resources received in cash and in kind by both primary schools and primary health centers and posts. The information is compiled into reports at least annually.
24. Quality and timeliness of in-year budget reports
C+
Notes:
24.1 Scope of reports in terms of coverage and compatibility with budget estimates
C
Notes:
Classification of data allows direct comparison with the budget, but only at the accrual and payment stages, not at commitment stage.
24.2 Timeliness of the issue of reports
A
Notes:
Reports are prepared quarterly or more frequently and issued within 4 weeks of end-of-period.
24.3 Quality of information
B
Notes:
There are some concerns about data accuracy, but these do not undermine their overall consistency or usefulness.
25. Quality and timeliness of annual financial statements
C+
Notes:
25.1 Completeness of the financial statements
B
Notes:
Annual consolidated financial reports are prepared and include, with few exceptions, full information on expenditures, revenues, assets, and liabilities, and thus are not part of the financial reports.
25.2 Timeliness of submission of the financial statements
B
Notes:
The statements for FYs 2010/11, 2011/12, and 20012/13 were submitted to ORAG in about eight, eight, and seven months, respectively, from the end of the financial year.
25.3 Accounting standards used
C
Notes:
Financial statements are prepared on a modified cash basis of accounting but financial statements are not fully in line with IPSAS
VI. External Scrutiny and Audit
Scores by Dimension
Overall Indicator Score
26. Scope, nature and follow-up of external audit
C+
Notes:
26.1 Scope/nature of audit performed (incl. adherence to auditing standards).
C
Notes:
Regional Government entities representing at least 50% of total expenditure are audited annually.
26.2 Timeliness of submission of audit reports to legislature.
C
Notes:
26.3 Evidence of follow up on audit recommendations
B
Notes:
27. Legislative scrutiny of the annual budget law
C+
Notes:
27.1 Scope of the legislature’s scrutiny.
C
Notes:
The legislature’s review covers details of expenditure (including allocation of subsidies to woredas), but only at a stage where detailed proposals have been finalized.
27.2 Extent to which the legislature’s procedures are well-established and respected.
B
Notes:
Simple procedures exist for the legislature’s budget review and are respected.
27.3 Adequacy of time for the legislature to provide a response to budget proposals both the detailed estimates and, where applicable, for proposals on macro-fiscal aggregates earlier in the budget preparation cycyle (time allowed in practice for all stag
C
Notes:
In principle, one month is allowed for review.
27.4 Rules for in-year amendments to the budget without ex-ante approval by the legislature.
B
Notes:
Clear rules exist for in-year budget amendments by the executive and are usually respected, but they allow extensive administrative reallocations. The requirement for ex-ante approval by the RC of supplementary budgets is met.
28. Legislative scrutiny of external audit reports
A
Notes:
28.1 Timeliness of examination of audit reports by the legislature (for reports received within the last three years).
A
Notes:
Scrutiny of audit reports is usually completed by the legislature within three months from receipt of the reports.
28.2 Extent of hearings on key findings undertaken by the legislature.
A
Notes:
In-depth hearings on key findings take place consistently with responsible officers from all or most audited entities, which receive a qualified or adverse audit opinion.
28.3 Issuance of recommended actions by the legislature and implementation by the executive.
A
Notes:
The legislature usually issues recommendations on action to be implemented by the executive, and evidence exists that they are generally implemented.
Donor Practices
Scores by Dimension
Overall Indicator Score
D-1 Predictability of Direct Budget Support
NA
Notes:
D-1.1 Annual deviation of actual budget support from the forecast provided by the donor agencies at least six weeks prior to the government submitting its budget proposals to the legislature (or equivalent approving body).
NA
Notes:
D-1.2 In-year timeliness of donor disbursements (compliance with aggregate quarterly estimates)
NA
Notes:
D-2 Financial information provided by donors for budgeting and reporting on project and program aid
D+
Notes:
D-2.1 Completeness and timeliness of budget estimates by donors for project support.
D
Notes:
Not all major DPs provide budget estimates for disbursement of project aid at least for the government’s coming fiscal year and at least three months in advance. Estimates use DP codes that are not consistent with the government’s budget classification.
D-2.2 Frequency and coverage of reporting by donors on actual donor flows for project support.
C
Notes:
Donors provide quarterly reports within two months of end-of-quarter on all disbursements made for at least 50% of the externally financed projects in the budget. The information does not necessarily provide a breakdown consistent with the government budget classification.
D-3 Proportion of aid that is managed by use of national procedures
C
Notes:
D-3.1 Overall proportation of aid funds to central government that are managed through national procedures
C
Notes:
At least 50% of aid funds are managed through national procedures, due to the large amount of aid provided through PBS.
