I. Credibility of the Budget
Scores by Dimension
Overall Indicator Score
1. Aggregate expenditure out-turn compared to original approved budget
C
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)
C
Notes:
In no more than one of the last three years has actual expenditure deviated from budgeted expenditure by more than the amount equivalent to 15 percent of budgeted expenditure (actual expenditure deviated from budgeted expenditure by more than 10 percent for two of the last three years). (p. 24)
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:
The variance in expenditure composition exceeded 15 percent in two of the last three fiscal years. (p. 26)
2.2 The average amount of expenditure actually charged to the contingency vote over the last three years
A
Notes:
No expenditure was charged to the contingency vote during any of the last three years. (p. 27)
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 93 percent and 113 percent of budgeted domestic revenue during the last three years. (p. 30)
4. Stock and monitoring of expenditure payment arrears
C+
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 is very low (by end-SY1391 0.08 percent of total expenditure). (p. 33)
4.2 Availability of data for monitoring the stock of expenditure payment arrears
C
Notes:
The MoF has for the past two fiscal years collected data on expenditure payment arrears based on ministry-level surveys that covered the operating budget of all primary budgetary units. (p. 33)
II. Comprehensiveness and Transparency
Scores by Dimension
Overall Indicator Score
5. Classification of the budget
C
Notes:
5.1 The classification system used for formulation, execution and reporting of the central government's budget
C
Notes:
Budget formulation and presentation use administrative, economic and program classifications, while functional classification shows ANDS sectors only, not COFOG. Budget execution (accounting) is based on, or can produce using bridge tables, all classifications. Reporting is done with administrative, economic and functional (COFOG) classifications. The classifications applied for formulation, presentation, execution and reporting thus differ between the different processes. (p. 35)
6. Comprehensiveness of information included in budget documentation
C
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)
C
Notes:
The SY1392 (2013) budget documentation fulfils four of nine information benchmarks (macro-economic assumptions, fiscal deficit, debt stock, and explanation of budget implications of new policy initiatives). (p. 37)
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.
D*
Notes:
The dimension cannot be rated because expenditure data related to the Telecommunications Development Fund (TDF) is not (publically) available. (p. 39)
7.2 Income/expenditure information on donor-funded projects which is included in fiscal reports.
A
Notes:
All funds channeled through the core budget are on-budget and managed using the GoA’s PFM system, including for budgeting, accounting and reporting. (p. 39)
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);
NA
Notes:
Afghanistan does not have an inter-governmental fiscal transfer system. (p. 42)
8.2 Timeliness of reliable information to SN governments on their allocations from central government for the coming year;
NA
Notes:
Afghanistan does not have an inter-governmental fiscal transfer system. (p. 42)
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:
The MoF Treasury Department every year collects fiscal data – budgeted and actual revenues and expenditures – from all major municipalities (estimated more than 90 percent in terms of value). The data is consolidated and included in the annual IMF GFS statistical report and for a chapter on municipal finance in the annual Budget Statement (enacted budget). (p. 42)
9. Oversight of aggregate fiscal risk from other public sector entities.
D+
Notes:
9.1 Extent of central government monitoring of AGAs and PEs.
D
Notes:
The GoA’s monitoring of public enterprises is significantly incomplete. SOEs submit annual balance sheets to the MoF SOE Department, but audits are only done irregularly and audited accounts are not available with the MoF. No reporting on SOE fiscal risks is undertaken. The SOE Department receives no information from and has no interaction with state corporations, and no central GoA entity monitors these in terms of fiscal risks. (p. 45)
9.2 Extent of central government monitoring of SN government's fiscal position
A
Notes:
Municipalities cannot generate fiscal liabilities for the GoA. (p. 45)
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:
The GoA makes available to the public four of the six listed types of information. (p. 50)
III. Policy-Based Budgeting
Scores by Dimension
Overall Indicator Score
11. Orderliness and participation in the annual budget process
C+
Notes:
11.1 Existence of and adherence to a fixed budget calendar;
B
Notes:
A clear annual budget calendar exists, but some delays are experienced in its implementation. The calendar allows ministries reasonable time (four weeks) to complete their detailed estimates on time. (p. 53)
11.2 Clarity/comprehensiveness of and political involvement in the guidance on the preparation of budget submissions (budget circular or equivalent);
C
Notes:
Clear and comprehensive Budget Circulars (BCs) were issued to ministries for the SY1392 (2013) budget process. However, BC2 did not include budget ceilings, which were formally approved by the Cabinet only six weeks after the ministries had submitted their budgets to the MoF. (p. 53)
11.3 Timely budget approval by the legislature or similarly mandated body (within the last three years);
C
Notes:
Parliament has in the last three years approved the budget within two months of the start of the fiscal year. (p. 53)
12. Multi-year perspective in fiscal planning, expenditure policy and budgeting
C+
Notes:
12.1 Preparation of multi -year fiscal forecasts and functional allocations
C
Notes:
Forecasts of fiscal aggregates (on the basis of the main categories of economic classification) are prepared for at least two years on a rolling annual basis. But the link to subsequent settings of the annual budgets is unclear. (p. 56)
12.2 Scope and frequency of debt sustainability analysis
A
Notes:
DSA for external debt is undertaken annually. (p. 56)
12.3 Existence of sector strategies with multi-year costing of recurrent and investment expenditure;
C
Notes:
Costed sector (cluster) strategies exist only for a limited set of NPPs – 17 percent based on SY1391 (2012) actual expenditure – and lack consistency vis-à-vis aggregate fiscal forecasts. (p. 56)
12.4 Linkages between investment budgets and forward expenditure estimates.
D
Notes:
Budgeting for investment and recurrent expenditures are separate processes with no recurrent cost estimates being calculated from investment projects. (p. 56)
IV. Predictability and Control in Budget Execution
Scores by Dimension
Overall Indicator Score
13. Transparency of taxpayer obligations and liabilities
C+
Notes:
13.1 Clarity and comprehensiveness of tax liabilities
C
Notes:
Legislation and procedures for major taxes are comprehensive and clear. However, there is no uniformity in the applied rules on the issuance of tax clearance certificates required for the annual business licenses hence there is too much discretion by officials over the taxpayers at this stage. (p. 60)
13.2 Taxpayer access to information on tax liabilities and administrative procedures.
B
Notes:
Significant efforts and investment have been made to improve taxpayers’ access to information on tax liabilities through both mass media campaigns and more directly-targeted campaigns in Kabul and provinces, as well as through new special information desks. Taxpayers also have easy access to information through brochures and the ARD and ACD websites. (p. 60)
13.3 Existence and functioning of a tax appeals mechanism.
C
Notes:
The mechanism for appeals which is provided for in the Income Tax Law and the Customs Act has been set up and the process is transparent. However, it is not effective, as the limited recourse to this mechanism suggests that taxpayers are unaware of it or do not consider it a worthwhile recourse. (p. 60)
14. Effectiveness of measures for taxpayer registration and tax assessment
C+
Notes:
14.1 Controls in the taxpayer registration system.
B
Notes:
The coverage of registered taxpayers continues to increase and since 2008 this has been reinforced by linkages with other systems. Such linkages ensure that there are not many businesses or individuals who are liable for tax that can operate without tax numbers, with the exception of fixed taxpayers who have been allowed to make tax payments without a tax number. (p. 62)
14.3 Planning and monitoring of tax audit and fraud investigation programs.
C
Notes:
There is a continuous program of audits for income taxes based on clear risk assessment criteria, but only for LTO and MTO. The ARD is inadequately resourced to apply the risk-based approach effectively to the rest of the income taxpayer base. (p. 63)
14.2 Effectiveness of penalties for non-compliance with registration and declaration obligations
C
Notes:
The Income Tax Law is clear on penalties. Failure to register with the tax authorities, however, carries only a modest penalty and there is poor compliance as many small business which pay fixed taxes do not register. Tax penalties came to 1.1 percent of income taxes in SY1391 (2012). Nevertheless, compliance continues to be an issue with 16 percent non-compliance with medium sized firms and an undetermined proportion of small firms and individuals not filing on time. (p. 63)
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).
D*
Notes:
There is insufficient information to calculate the ratio of collection to gross arrears for the aggregate. (p. 65)
15.2 Effectiveness of transfer of tax collections to the Treasury by the revenue administration.
A
Notes:
Taxes and customs duties are paid by taxpayers and importers directly into designated revenue accounts (separately for income taxes and customs) at the DAB branches located in Kabul, in provincial capitals and at border crossings. (p. 65)
15.3 Frequency of complete accounts reconciliation between tax assessments, collections, arrears records and receipts by the Treasury.
D
Notes:
While there is a good reconciliation of collections to receipts in the Treasury Department there is no reconciliation between assessments less collections to give arrears in aggregate. (p. 66)
16. Predictability in the availability of funds for commitment of expenditures
B+
Notes:
16.2 Reliability and horizon of periodic in-year information to MDAs on ceilings for expenditure commitments
B
Notes:
Budget units of MDAs are able to plan and commit expenditures at least quarterly in advance in line with the budgeted appropriations. (p. 67)
16.3 Frequency and transparency of adjustments to budget allocations, which are decided above the level of management of MDAs.
B
Notes:
Significant in-year budget adjustments to budget allocations took place only once or twice during SY1391 (2012), and in a transparent manner. (p. 67)
16.1 Extent to which cash flows are forecast and monitored
A
Notes:
Cash flows are prepared at the beginning of each fiscal year and are updated at least fortnightly on the basis of actual cash movement. (p. 67)
17. Recording and management of cash balances, debt and guarantees
B+
Notes:
17.1 Quality of debt data recording and reporting
A
Notes:
Debt records are maintained in a computerized system and are complete, updated, reconciled on a monthly basis, and data is of high integrity. Comprehensive management and statistical reports are produced quarterly and are published on the website of the Treasury Department. (p. 70)
17.2 Extent of consolidation of the government’s cash balances
B
Notes:
Daily cash balances are calculated and consolidated by the Treasury Department, and are available to the management. However, some extra-budgetary funds and the Special Fund ledger sub-accounts remain outside of the arrangement. (p. 70)
17.3 Systems for contracting loans and issuance of guarantees.
B
Notes:
Contracting of loans and guarantees is within the authority given to the MoF, but set by limits established in the budget documents. (p. 70)
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 made to personnel records. (p. 72)
18.2 Timeliness of changes to personnel records and the payroll
B
Notes:
Required changes to personnel records and payroll are updated, but this may take up to 3 months although affecting only a minority of changes. (p. 72)
18.3 Internal controls of changes to personnel records and the payroll.
B
Notes:
Authority and basis for changes to personnel records and payroll are clear. (p. 72)
18.4 Existence of payroll audits to identify control weaknesses and/or ghost workers.
B
Notes:
Payrolls audits, in stages, have been effected on all central government entities at once in the last three years. (p. 72)
19. Transparency, competition and complaints mechanisms in procurement
B+
Notes:
19.1 Transparency, comprehensiveness and competition in the legal and regulatory framework
A
Notes:
Afghanistan has a well-structured procurement law, supported by implementing regulations and standard bidding documents. (p. 75)
19.2 Use of competitive procurement methods
B
Notes:
Open Competition is the default method of procurement under the procurement law, with justification being required in all cases where direct contracting or single source selection are used. (p. 75)
19.3 Public access to complete, reliable and timely procurement information
A
Notes:
All procurement opportunities are advertised widely. (p. 75)
19.4 Existence of an independent administrative procurement complaints system
B
Notes:
There is an independent procurement system under the procurement law. (p. 75)
20. Effectiveness of internal controls for non-salary expenditure
C+
Notes:
20.1 Effectiveness of expenditure commitment controls.
A
Notes:
Comprehensive commitment controls are in place, between the budget unit and the centralized systems, to limit commitments to cash availability and appropriations. (p. 78)
20.2 Comprehensiveness, relevance and understanding of other internal control rules/ procedures
B
Notes:
Internal control rules and procedures for non-salary expenditure incorporate a comprehensive set of controls, which are widely understood, but may in some areas be excessive (e.g., through duplication in approvals) and lead to inefficiency in staff use and unnecessary delays. (p. 78)
20.3 Degree of compliance with rules for processing and recording transactions
C
Notes:
Rules are complied with in a significant majority of transactions, but exceptions are still a concern. (p. 78)
21. Effectiveness of internal audit
C
Notes:
21.1 Coverage and quality of the internal audit function.
C
Notes:
The IA function within MoF is operational, undertakes some systemic reviews and meets recognized professional standards. It carried out system reviews in 10 line ministries in the last two fiscal years. While the function is operational in some key central government entities, there is little or no systemic review and the work does not meet recognized professional standards. (p. 81)
21.2 Frequency and distribution of reports
C
Notes:
Reports are issued regularly for all audited entities/departments, but not necessarily submitted to the MoF and SAO. (p. 81)
21.3 Extent of management response to internal audit findings.
C
Notes:
A reasonable degree of corrective action is taken by many managers on major issues, but often with delay. (p. 81)
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 reconciliation for all treasury bank accounts take place at least monthly, usually within four weeks from the end of the month. (p. 83)
22.2 Regularity of reconciliation and clearance of suspense accounts and advances.
B
Notes:
Reconciliation and clearance of advances takes place at least annually within two months of end of period, with some un-cleared balances brought forward. (p. 83)
23. Availability of information on resources received by service delivery units
C
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
C
Notes:
The MoPH (GCMU) collects data regularly on operating expenditures (salaries, O&M, capital projects) from health care facilities in most provinces (31 of 34), but the information is not compiled into reports. The MoE does not budget at the level of schools, and school-level resource data is not collected or calculated by the MoE. (p. 84)
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:
The GoA’s in-year budget execution reports are generated from AFMIS every month in the same structure as the budget, giving high quality information at all levels of the budget. Non-recording of expenditure at commitment level by MDAs remains a major deficiency to improve score. (p. 86)
24.2 Timeliness of the issue of reports
A
Notes:
Reports are produced every month from AFMIS within four weeks. Information is available to all financial managers of primary budgetary units on-line as transactions occur. (p. 86)
24.3 Quality of information
A
Notes:
The GoA’s in-year budget reports are generated from AFMIS every month, giving detailed information of budget and actual spending. Data is considered credible and accurate and is confirmed by periodic reconciliation by line ministries. (p. 86)
25. Quality and timeliness of annual financial statements
C+
Notes:
25.1 Completeness of the financial statements
A
Notes:
The annual financial statements are comprehensive of all revenue and expenditures under the budget and information on financial assets and liabilities is provided. (p. 87)
25.2 Timeliness of submission of the financial statements
A
Notes:
The year-end financial statements are published on the website of the Treasury Department within six months of year-end. Separately, the budget reconciliation statement is submitted for audit and sent to Parliament within six months of year-end. (p. 87)
25.3 Accounting standards used
C
Notes:
The annual financial statements are presented in a consistent format over time and basis of accounting is disclosed. (p. 88)
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:
All GoA entities, including provincial budgetary agencies and Kabul municipality, are covered by the financial audit. SAO’s audit coverage is at least 75 percent,92 and covers revenue and expenditures. SAO applies the ISSAI Level 3 principles, but not the Level 4 standards that translate the principles into more specific, detailed and operational guidelines that could be used in the day-to-day conduct of auditing tasks. While compliance audits are done, performance audit is still at a nascent stage and no performance audits were conducted in SY1390 (2011/12) and SY1391 (2012). (p. 89)
26.2 Timeliness of submission of audit reports to legislature.
B
Notes:
The financial audit report is submitted to the legislature within six months from the end of the audit period. (p. 89)
26.3 Evidence of follow up on audit recommendations
C
Notes:
Although the number of entities that respond timeously and effectively to audit observations have significantly improved over the years, there are still some entities that do not respond on time and/or do not implement all recommendations. This results in some issues recurring in the following year’s audit. It is also noted that on compliance audit, not all recommendations are implemented by the management. (p. 89)
27. Legislative scrutiny of the annual budget law
B+
Notes:
27.1 Scope of the legislature’s scrutiny.
B
Notes:
The legislature’s review covers details of expenditures and revenue and the fiscal policies. Although the MTFF is included in the budget document submitted to the Parliament, this is not discussed. The discussion predominantly focuses on the year in question. (p. 91)
27.2 Extent to which the legislature’s procedures are well-established and respected.
A
Notes:
Procedures exist for the legislature’s budget review and are respected. The procedures are comprehensive and are mandated in the internal ToR of the Parliament. Specialized committees and joint committees also exist for review. (p. 91)
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
B
Notes:
As per the Constitution and the PFEM Law, 45 days are provided to the legislature for review. (p. 91)
27.4 Rules for in-year amendments to the budget without ex-ante approval by the legislature.
B
Notes:
Clear rules exist for the in-year budget amendments by the Executive and are usually respected, but they allow extensive administrative reallocations. (p. 91)
28. Legislative scrutiny of external audit reports
C+
Notes:
28.1 Timeliness of examination of audit reports by the legislature (for reports received within the last three years).
C
Notes:
The legislature usually takes about four months to review. However, for SY1390 (2011/12), the legislature took more than six months to review the audit reports. (p. 93)
28.2 Extent of hearings on key findings undertaken by the legislature.
C
Notes:
There is in-depth review and the extent of hearings has been exhaustive for SY1390 (2011/12). The members of the Executive have been asked to respond to key findings. (p. 93)
28.3 Issuance of recommended actions by the legislature and implementation by the executive.
B
Notes:
The audit report on the budget execution statement (Qatia) will not be accepted by the legislature unless recommendations for correction to the accounts are acted upon. However, not all recommended actions in this audit report are implemented in a consistent manner. (p. 93)
Donor Practices
Scores by Dimension
Overall Indicator Score
D-1 Predictability of Direct Budget Support
B+
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).
B
Notes:
Donors provide estimates of budgetary support at least six weeks before budget approval budget. Support fell between 90 percent and 95 percent of the forecast in two of the last three fiscal years. (p. 95)
D-1.2 In-year timeliness of donor disbursements (compliance with aggregate quarterly estimates)
A
Notes:
Quarterly/monthly disbursement estimates are agreed with donors, which are substantially complied with. (p. 95)
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.
A
Notes:
Donors provide significant information to the MoF on development assistance through ad hoc discussions but also in the annual donor consultation meetings as part of budget preparations whereby individual donors meet in person with the AMD of the MoF on their plans for the coming year. Following analysis and agreements, this information is stored in an ad hoc data base and used as reference against the individual line ministry submissions. Effectively, all on-budget project funding is dealt with and reflected in the data base and rolled up in the annual budget. (p. 96)
D-2.2 Frequency and coverage of reporting by donors on actual donor flows for project support.
D
Notes:
While there are periodic donor financial reviews and there are agreements with three donors to provide information quarterly, the reporting on disbursements within two months of each quarter-end is made for less that 50 percent of the estimates so the rating on this dimension is D. (p. 96)
D-3 Proportion of aid that is managed by use of national procedures
D
Notes:
D-3.1 Overall proportation of aid funds to central government that are managed through national procedures
D
Notes:
Total on-budget aid receipts in the nine months to December 20, 2012 (truncated year or SY1391) came to US$2.03 billion which is less that 50 percent of estimated total assistance. (p. 97)
