I. Budget reliability
Scores by Dimension
Overall Indicator Score
1. Aggregate expenditure outturn
A
Notes:
1.1 Aggregate expenditure outturn
A
Notes:
Aggregate expenditure outturn was between 95% and 105% in at least two of the last three years (105.7% in 2015/2016, 101% in 2016/2017, and 98.9% in 2017/2018).
2. Expenditure composition outturn
D+
Notes:
2.1 Expenditure composition outturn by function
D
Notes:
Expenditure composition variance by function for all of the last three was more than 15% (25.9% in 2015/2016, 25.1% in 2016/2017, and 23.3% in 2017/2018).
2.2 Expenditure composition outturn by economic type
C
Notes:
Expenditure composition variance by economic type for all of the last three was less than 15% in two of the last three years (12.2% in 2015/2016, 18.6% in 2016/2017 and 7.2% in 2017/2018).
2.3 Expenditure from contingency reserves
A
Notes:
Average expenditure charged to contingency reserves for the last three years averaged 0.04% of the total expenditure.
Notes:
3.1 Aggregate revenue outturn
C
Notes:
Actual total revenue outturn for at least two of the last three years falls in the range of 92% to 116% (102.9% in 2015/2016, 93.7% in 2016/2017, and 93.8 in 2017/2018).
3.2 Revenue composition outturn
D
Notes:
Revenue composition variance for all the three years was more than 15% (21.1% in 2015/2016, 23.2% in 2016/2017, and 21.4% in 2017/2018).
II. Transparency of public finances
Scores by Dimension
Overall Indicator Score
4. Budget classification
B
Notes:
4.1 Budget classification
B
Notes:
Budget formulation, execution, and reporting are based on administrative, economic, and functional classification using GFS/COFOG standards or a classification that can produce information that is consistent with those standards.
Notes:
5.1 Budget documentation
C
Notes:
Budget Document fulfils at least three basic elements.
6. Central government operations outside financial reports
B
Notes:
6.1 Expenditure outside financial reports
B
Notes:
Expenditure outside Government Reports is less than 5% of total BCG expenditure.
6.2 Revenue outside financial reports
C
Notes:
Revenue outside Government Reports is less than 10% of total BCG revenue
6.3 Financial reports of extrabudgetary units
B
Notes:
Detailed financial reports of most EBUs are submitted to the government annually within six months of the end of the fiscal year.
7. Transfers to subnational governments
A
Notes:
7.1 System for allocating transfers
A
Notes:
The system for allocating horizontal transfers to regional governments is rule based and transparent. However, regional priorities may differ from federal government priorities, leading to poor resource allocation and inefficient service delivery.
7.2 Timeliness of information on transfers
A
Notes:
Regional governments receive reliable information on transfers more than two months before the beginning of the new fiscal year; this allows for sufficient time to prepare their annual budgets. The federal government budget timetable provides indicative ceilings by February.
8. Performance information for service delivery
B+
Notes:
8.1 Performance plans for service delivery
A
Notes:
Each year, the federal government publishes information on its policy objectives, performance indicators, outputs, and outcomes to be achieved in the next fiscal year. This information is disaggregated by program.
8.2 Performance achieved for service delivery
D
Notes:
The MoF consolidates program budget results into a report; this was the case in FY2017/2018. The report contains information on outputs and outcomes from all sectors, again disaggregated by program. However, this is not published. While the education sector (14% by value of federal government budget) publishes annual statistical abstract, the health sector does not.
8.3 Resources received by service delivery units
A
Notes:
Information on resources to the regional and woreda levels, where the service delivery units operate, is collected and recorded by the MoH and the MoE, disaggregated by source of funds. A report compiling the information is prepared at least annually.
8.4 Performance evaluation for service delivery
A
Notes:
The MoF conducts an annual evaluation of all sectors to assess the efficiency and effectiveness of government policy; the report is however not published. That said, there is also an annual joint evaluation (known as the JRIS) of the pro-poor sectors (education, health, water and sanitation, and agriculture—all together covering 100% of pro-poor and service delivery expenditure). The JRIS reports are published. The World Bank also published two PERs conducted in 2016 and 2017.
9. Public access to fiscal information
D
Notes:
9.1 Public access to fiscal information
D
Notes:
The government makes available to the public two basic elements and one additional element.
III. Management of assets and liabilities
Scores by Dimension
Overall Indicator Score
10. Fiscal risk reporting
D
Notes:
10.1 Monitoring of public corporations
D
Notes:
Monitoring of public corporations is weak; 99.6% (by value) of public corporations submit their annual financial statements to both the government and OFAG between two to five years after the end of the financial year. Only 0.4% (by value) submit their reports within six months after the end of the financial year.
10.2 Monitoring of subnational governments
D
Notes:
Regional governments submit annual financial statements to government; these reports are not published. There are significant delays of more than one year in publishing audited reports of regional governments.
10.3 Contingent liabilities and other fiscal risks
D
Notes:
The federal government does not prepare or publish a fiscal risk report. Also, it does not prepare and monitor both explicit and implicit contingent liabilities.
11. Public investment management
D+
Notes:
11.1 Economic analysis of investment proposals
D
Notes:
There is no independent economic analysis of all major capital investment projects. However, a few projects initiated by budget units undergo simple economic analysis.
11.2 Investment project selection
C
Notes:
Most capital investment projects are selected based on government priorities; selection is done at the level of the Council of Ministers.
11.3 Investment project costing
D
Notes:
Project costing is weak; only total capital investment cost if provided. There is no forward-linked recurrent expenditure framework.
11.4 Investment project monitoring
C
Notes:
At present, implementing budget units monitor projects through physical inspection and quarterly and annual financial progress reports. The M&E Directorate of the PDC does not effectively monitor and evaluate government investment projects.
12. Public asset management
D+
Notes:
12.1 Financial asset monitoring
C
Notes:
The federal government maintains records of its cash and bank balances; there are no records of other financial assets such as government equity shares in both public and private enterprises.
12.2 Nonfinancial asset monitoring
D
Notes:
The federal government does not maintain a comprehensive and consolidated register of its fixed assets. Presently, management of fixed assets is decentralised at the budget unit level. The asset registers maintained by these budget units do not provide information on the age and usage of assets.
12.3 Transparency of asset disposal
C
Notes:
Article 67 of the Federal Government Procurement and Property Administration Proclamation No. 649/2009, dated September 9, 2009, and Directive No. 9/2010 outline the legal and regulatory framework for disposal of fixed assets; there are no clear legal provisions for the disposal of financial assets. Proceeds from the sale of fixed assets and financial assets are disclosed in the financial reports; there is no disclosure of the new owner(s).
Notes:
13.1 Recording and reporting of debt and guarantees
B
Notes:
The Debt Management Directorate of the MoF uses Version 6 of DMFAS to record and manage public debt (both domestic and foreign) and guarantees. Debt reports are generated at least quarterly. At least 75% of debts are reconciled quarterly.
13.2 Approval of debt and guarantees
A
Notes:
Article 40 (2) of the 2017 Financial Administration Proclamation No. 648/2009[1] mandates the Minister of Finance as the sole government official authorized to contract loans and issue guarantees on behalf of the Government of Ethiopia. The HoPR approves all loans and guarantees.
13.3 Debt management strategy
A
Notes:
A current MTDS covering 2016–2020 has been prepared and published on the MoF website (mofed.gov.et). The strategy shows government refinancing plan foreign currency and interest rate risks. Government borrowing plan is consistent with the MTDS.
IV. Policy-based fiscal strategy and budgeting
Scores by Dimension
Overall Indicator Score
14. Macroeconomic and fiscal forecasting
B
Notes:
14.1 Macroeconomic forecasts
B
Notes:
The government prepares forecasts of key macroeconomic indicators, which, with the underlying assumptions, are included in the budget documentation submitted to the legislature. These forecasts are updated at least once a year. The forecasts cover the budget year and the two following fiscal years. The projections are not reviewed by a technical entity other than the preparing entity.
Notes:
The Fiscal Policy Directorate prepares, through the MEFF, forecasts of the main fiscal indicators, including revenue by type, aggregate expenditure, and the budget balance for the budget year and two following fiscal years. These forecasts, together with the underlying assumptions and the explanations of the main differences from the forecast made in the previous year’s budget, are included in the budget documentation submitted to Parliament.
14.3 Macrofiscal sensitivity analysis
C
Notes:
The macro-fiscal forecasts prepared by the government include a qualitative assessment of the impact of alternative macroeconomic assumptions.
Notes:
15.1 Fiscal impact of policy proposals
D
Notes:
The government does not prepare estimates of the fiscal impact of all proposed changes in revenue and expenditure policy for the budget year.
15.2 Fiscal strategy adoption
D
Notes:
The government does not prepare a current fiscal strategy that includes qualitative objectives for fiscal policy.
15.3 Reporting on fiscal outcomes
NA
Notes:
The government does not prepare an internal report on the progress made against its fiscal strategy.
16. Medium-term perspective in expenditure budgeting
D+
Notes:
16.1 Medium-term expenditure estimates
D
Notes:
The annual budget document presents estimates of expenditure by administrative function or program and economic type but for the budget year only.
16.2 Medium-term expenditure ceilings
D
Notes:
Aggregate and ministry-level expenditure ceilings for the budget are approved by the Council of Ministers after the BCC is issued to budgetary units.
16.3 Alignment of strategic plans and medium-term budgets
NA
Notes:
Only the MoE provided the sector strategy to the assessment team.
16.4 Consistency of budgets with previous year’s estimates
B
Notes:
The budget documents provide an explanation of 77% (that is, most) of the changes to expenditure estimates between the second year of the last medium-term budget and the present year of the current budget at the ministry level.
17. Budget preparation process
B
Notes:
Notes:
A clear annual budget calendar exists, is generally adhered to, and allows budgetary units six weeks from receipt of the circular to meaningfully complete their estimates on time.
17.2 Guidance on budget preparation
B
Notes:
A comprehensive budget circular is issued to budgetary units, which covers total budgetary expenditure for the full fiscal year. The budget reflects ministry ceilings submitted to the Council of Ministers. The Council’s approval took place after the distribution of the BCC to budgetary units but before budgetary units had completed their submissions.
17.3 Budget submission to the legislature
C
Notes:
The executive has submitted the annual budget proposal to the legislature at least one month before the start of the fiscal year in all three years.
18. Legislative scrutiny of budgets
B+
Notes:
18.1 Scope of budget scrutiny
B
Notes:
The legislature’s review covers fiscal policies and aggregates for the coming year, as well as the details of expenditure and revenue
18.2 Legislative procedures for budget scrutiny
A
Notes:
The legislature’s procedures to review budget proposals are approved by the legislature in advance of budget hearings and are adhered to. The procedures include arrangements for public consultation. The procedures include internal organizational arrangements, such as specialized review committees, technical support, and negotiation procedures.
18.3 Timing of budget approval
A
Notes:
The legislature has approved the annual budget before the start of the fiscal year in each of the last three years.
18.4 Rules for budget adjustment by the executive
B
Notes:
Clear rules exist for in-year budget amendments by the executive and are adhered to in most instances. Extensive administrative allocations are permitted.
V. Predictability and control in budget execution
Scores by Dimension
Overall Indicator Score
19. Revenue administration
C+
Notes:
19.1 Rights and obligations for revenue measures
B
Notes:
The ERCA uses multiple channels to provide payers with easy access to comprehensive and up-to-date information on the main revenue obligation areas and on rights including, as a minimum, redress processes and procedures.
19.2 Revenue risk management
C
Notes:
The ERCA uses partly structured and systematic approach for assessing and prioritizing compliance risks.
19.3 Revenue audit and investigation
A
Notes:
Aggregate tax audit completed exceeded target by 18.82%.
19.4 Revenue arrears monitoring
D*
Notes:
Complete information on tax arrears for FY2017/2018 is not available.
20. Accounting for revenue
C+
Notes:
20.1 Information on revenue collections
C
Notes:
The ERCA, which collects 81% of the federal government's domestic revenue, reports collections to the MoF on a monthly basis. The report classifies the taxes according to type.
20.2 Transfer of revenue collections
B
Notes:
Domestic tax revenue collections are transferred to the Treasury within 3 days; nontax revenues are deposited within 24 hours.
20.3 Revenue accounts reconciliation
C
Notes:
The monthly reconciliation does not include assessments and arrears; reconciliation only covers collections and transfers to the Treasury.
21. Predictability of in-year resource allocation
C+
Notes:
21.1 Consolidation of cash balances
C
Notes:
As shown in Table 3.19, at least 76% of government cash and bank balances are consolidated monthly.
21.2 Cash forecasting and monitoring
B
Notes:
Each year within the review period, BIs prepare and submit annual cash flow plans to the MoF, which are consolidated. The annual cash flow forecasts are updated quarterly based on actual inflow and outflow of cash.
21.3 Information on commitment ceilings
B
Notes:
The MoF provider’s quarterly ceilings for public bodies and public bodies are able to plan commitments for at least a quarter.
21.4 Significance of in-year budget adjustments
C
Notes:
Significant in-year adjustments to budget allocations take place frequently but they are done in a transparent way.
22. Expenditure arrears
C+
Notes:
22.1 Stock of expenditure arrears
A
Notes:
The stock of expenditure arrears for at least two of the three years was 0.34% and 0.8%, which is less than 2%.
22.2 Expenditure arrears monitoring
C
Notes:
Data on the stock and composition of expenditure arrears are generated annually at the end of each fiscal period.
Notes:
23.1 Integration of payroll and personnel records
B
Notes:
There is a direct link between personnel and payroll records for 44 BIs, through IFMIS. The 145 other government institutions use IBEX and have no direct link between personnel and payroll records. That said, all changes are fully supported by documentation as approved by authorized central government institution officials. Also, all hiring and promotion is done in accordance with approved staff posts.
23.2 Management of payroll changes
A
Notes:
Personnel records and payroll are updated at least monthly in a timely manner before the next month’s payroll, and retroactive adjustments are rare. While consolidated data on retroactive adjustments are not available, sampled evidence from the MoH and MoE show retroactive adjustments of less than 0.7%.
23.3 Internal control of payroll
B
Notes:
Authority and basis for changes to personnel records and the payroll are clear and adequate; these ensure data integrity. Whereas 44 BIs have stronger payroll controls due to IFMIS, resulting in electronic audit trail, other 145 institutions on IBEX may have weaker controls due to manual interface even though it results in manual audit trail.
Notes:
Partial payroll audits have been conducted by OFAG, internal audit units across central government institutions, and the Inspection Directorate of the MoF. This is done each year as part of the routine financial and compliance audits. A comprehensive payroll audit has not been conducted for all central government entities within the last three completed fiscal years.
Notes:
24.1 Procurement monitoring
D
Notes:
Most of the BIs do not maintain databases or records for contracts including data on what has been procured, the value of procurement, and who has been awarded contracts. They prepare the performance report directly from the source document at the end.
24.2 Procurement methods
A
Notes:
Available evidence from the FPPA suggests that 92.19% (by value) of contracts are awarded through open competitive method.
24.3 Public access to procurement information
D
Notes:
Only two of the key procurement criteria have been met.
24.4 Procurement complaints management
D
Notes:
Four of the six basic elements for procurement compliant management have been met but criterion (1) is not met.
25. Internal controls on nonsalary expenditure
B
Notes:
25.1 Segregation of duties
A
Notes:
The various financial management manuals indicate the segregation of duties between the various process in resource management including cash, supplies, fixed assets, payroll, procurement, and other related PFM functions.
25.2 Effectiveness of expenditure commitment controls
C
Notes:
Budgetary controls are generally effective and expenditures commitments generally are to the extent of projected cash availability. There are certain instances where BIs may not be able to pay committed expenditures to contractors due to unavailability of cash.
25.3 Compliance with payment rules and procedures
B
Notes:
Most of the payments are compliant with payment procedures. Most of the exceptions, though they are subject to noncompliance audit findings of internal auditors and OFAG, are authorized by the respective heads of BIs. Irregularities represent about 2% of the total expenditure.
Notes:
26.1 Coverage of internal audit
A
Notes:
Central government units including EBUs representing about 97% of the central government expenditure and close to 100% of central government revenue have internal audit units.
26.2 Nature of audits and standards applied
C
Notes:
Internal audit is mainly focused on compliance audit rather than systemic audit. All visited government institutions have submitted annual audit plans to the heads of their respective BIs and copies were shared with the Inspection Directorate of the MoF.
26.3 Implementation of internal audits and reporting
C
Notes:
Visited entities implemented between 75% and 100% of their plan. As evidenced by submitted audit reports from 85.7% of the entities, it can be deduced that majority of the programmed audits were implemented.
26.4 Response to internal audits
D
Notes:
Audited public bodies representing about 26% of the total central government expenditure responded on time.
VI. Accounting and reporting
Scores by Dimension
Overall Indicator Score
27. Financial data integrity
B
Notes:
27.1 Bank account reconciliation
B
Notes:
Treasury bank reconciliation is done on a monthly basis within four weeks by the Accounts Department at the MoF and likewise for budget units and extra-budgetary entities.
Notes:
There are no suspense accounts.
Notes:
In most cases, advance accounts reconciliations at the MoF are done on annual basis within two months of the end of the fiscal year while preparing the annual financial statements. Huge outstanding balances remain uncleared; in 2017/2018 they amounted to ETB 70.9 billion.
27.4 Financial data integrity processes
B
Notes:
In the case of IFMIS, the accounting software prompts for change of password periodically. However, IBEX (used by two-thirds of budget units) does not prompt for password change. However, audit trail exists in both systems.
28. In-year budget reports
D
Notes:
28.1 Coverage and comparability of reports
D
Notes:
Reports received from the sectors compare budget versus actual; however, there is no consolidated report prepared at central government level which compares budget versus actual.
28.2 Timing of in-year budget reports
D
Notes:
No consolidated budget execution reports are prepared at the federal level.
28.3 Accuracy of in-year budget reports
NA
Notes:
No consolidated budget execution reports are prepared at the federal level.
29. Annual financial reports
C+
Notes:
29.1 Completeness of annual financial reports
C
Notes:
The annual financial statements for the federal government for the last completed fiscal year 2016/2017 include information on budget, revenue, expenditure, cash balances, financial assets, and financial liabilities, including medium- and long-term obligations, and are supported by a reconciled cash flow statement.
29.2 Submission of reports for external audit
B
Notes:
The EFY 2009 financial statement was submitted to the auditors within six months after the end of the fiscal year.
29.3 Accounting standards
C
Notes:
No specific internationally accepted accounting standard is applied in the preparation of the public accounts of the federal government.
VII. External scrutiny and audit
Scores by Dimension
Overall Indicator Score
Notes:
30.1 Audit coverage and standards
B
Notes:
The financial audit covers 100% of federal government BIs. EBUs also have been audited during the last three fiscal years. The audit is conducted in accordance with ISSAI standards, and significant findings are highlighted.
30.2 Submission of audit reports to the legislature
B
Notes:
OFAG submitted consolidated audited annual financial statements of the Federal Government of Ethiopia within five months from the receipt of the reports from the MoF.
30.3 External audit follow-up
B
Notes:
Management response to audit findings is included in the audit report. The audited entity submits a comprehensive management letter, including evidence of action, as applicable
30.4 Supreme Audit Institution independence
C
Notes:
The SAI is independent in practice. The AG’s budget is determined by the MoF within a financial ceiling in the same way as other BIs. OFAG does not have a systematic audit recommendation follow-up system.
31. Legislative scrutiny of audit reports
B
Notes:
31.1 Timing of audit report scrutiny
A
Notes:
PAC scrutinizes the audit report within 4 to 20 days of the receipt of the audit report from OFAG within the last three completed fiscal years.
31.2 Hearings on audit findings
C
Notes:
In-depth hearing is conducted on audit reports of a few of the audited entities.
31.3 Recommendations on audit by the legislature
B
Notes:
As part of its follow-up mechanism, the PAC demands all central government audited entities with adverse audit findings to submit action plans with timelines on how these entities intend to address the audit findings from OFAG as well as recommendations issued by the PAC. It also receives at least biannual updates on progress made in terms of implementation of its recommendations.
31.4 Transparency of legislative scrutiny of audit reports
B
Notes:
The hearing is recorded and broadcasted by the national television except sensitive and high-level security issues that are held in camera. The PAC reports are tabled in the full chamber for debate and consideration. Brief summaries of the hearings are posted on the Facebook account of the HoPR. The full committee’s report, though not published on the website, is obtainable at the Parliament’s library.