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:
The deviations (in absolute terms) were 2.8%, 11.1% and 0.2% in 2006/07, 2007/08 and 2008/09 respectively. (P. 16)
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 is calculated on the basis of the sum of the absolute differences between actual allocations and budgeted expenditures of each regional government bureau/office/zonal administration in 2006/07, 2007/08 and 2008/09, as indicated in Annex A, using information provided by BOFED, extracted from IBEX. The excess of the variance over the total expenditure deviation exceeded 10 percent in two out of the last three years. The much smaller excess variance in 2007/08 reflects the much larger aggregate expenditure deviation that year. The large salary contingency may overstate the variance. (P. 18)
2.2 The average amount of expenditure actually charged to the contingency vote over the last three years
NU
Notes:
3. Aggregate revenue out-turn compared to original approved budget
A
Notes:
3.1 Actual domestic revenue collection compared to domestic revenue in the originally approved budget
A
Notes:
The figures, taken from revenue performance tables and trial balance sheets provided to the assessment team by BOFED Accounts Department. (P. 19)
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 ORG has a culture of paying accounts payables on time. Regional bureau and woreda government grace period payables (COA code 5001) at the end of 2008/09 amounted to 5.4 % of total domestically financed regional bureau expenditure and this proportion is likely lower for regional bureau grace period payables alone. Grace period payables were 0.2% of end-2008/09 expenditure at the end of August, 2009 (thus representing arrears) and were zero at the end of September. Other accounts payable amounted to 1.3% of expenditure at the end of 2008/09 and 1.6% of expenditure at the end of the first quarter of 2009/10, but the age profile is not known. (P. 21)
4.2 Availability of data for monitoring the stock of expenditure payment arrears
B
Notes:
Arrears are only defined in terms of the grace period payables (COA code 5001) that remain unpaid at the end of the 30 day grace period. The grace period relates to payments due for goods and services received before the end of the year but not yet paid for (perhaps because the invoice has not yet been received or there is a contractual dispute). The modified cash accounting system, associated double entry book-keeping system and the roll-out of IBEX to regional bureaus during 2008/09 and 2009/10 have strengthened the reliability and timeliness of data on grace period payables. The accounting system does not as yet permit the age profiling of accounts payables other than the grace period payables. But these payables are usually paid on time, due to the culture of compliance with regulations (and the threat of cut-off of utility services) and thus ad-hoc periodic assessments of the stock of arrears are not considered necessary by BOFED. (P. 21)
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:
The budget classification system (as described in the Federal Government’s budget manual and Chart of Accounts manual) is on an administrative basis, with spending based on administrative units, the economic classification under each administrative unit and with each administrative unit classified according to function (three functions) and subfunction. A bridging table has not yet been developed to match the functional and subfunctional codes with COFOG, but the the codes currently in use clearly reflect the intent of public expenditure. In response to the 2001 GFS manual, MOFED, with technical assistance support from donors, developed an application under IBEX a few years ago that would facilitate the preparing of a bridging table. An A rating may be justified, but there was not enough time for the team to review the application. (P. 23)
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:
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 Health Bureau does not provide information to BOFED on Global Fund operations in Oromia, but the Global Fund website indicates funding in Ethiopia of over $800 million over the last five years. Under the very rough assumption that this is spread over regions according to population size, ORG may be receiving about $40 million a year, constituting about 16 percent of total expenditure. This would indicate a D rating. By way of comparison, GF operations in Amhara (as reported to BOFED) are just over 10 percent of expenditure. There may also be other unreported EBOs under Channel 2 funding. (P. 29)
7.2 Income/expenditure information on donor-funded projects which is included in fiscal reports.
B
Notes:
Loans are not relevant here as regional governments do not borrow. Direct funding by donors to BOFED (Channel 1) is provided by UN ExCOM agencies, mainly UNICEF and WHO, amounting to ETB 47 million in the 2008/09 budget. Channel 2 and Channel 3 funding is not reported, but the Channel 1 funding is at least 50 percent of the total; the Channel 1 modality is increasingly being used by donors. (P. 29)
8. Transparency of inter-governmental fiscal relations
B+
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);
B
Notes:
The block grant from ORG to woreda governments in Oromia comprises the bulk of transfers to woredas and is determined in relation to a formula that is different from the formula used by the Federal Government: (i) use of the unit cost method in relation to determining the grant for recurrent expenditure; and (ii) use of the infrastructure deficit index method in relation to determining the grant for capital expenditure. Though the formula is rules-based, the method for deriving the formula is not fully transparent, and there are doubts as to the reliability of the underlying data. The doubts are reflected in complaints by woredas. (P. 32)
8.2 Timeliness of reliable information to SN governments on their allocations from central government for the coming year;
B
Notes:
The rating cannot be A, as the block grant allocation from the Federal Government to the regional government is not known with certainty until Parliament approves the Federal government budget at the end of June. There is still time for woreda governments to adjust their initial budget proposals. (P. 32)
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 budget preparation and reporting systems are the same at woreda level and regional level and (as noted under PI-5) is based on sectoral/functional categories. BOFED produces a consolidated regional/woreda government report on the estimated (unaudited) budget outturn within 10 months of the end of the fiscal year. The manual nature of PFM systems at woreda level holds up the preparation of reports. (P. 32)
9. Oversight of aggregate fiscal risk from other public sector entities.
A
Notes:
9.1 Extent of central government monitoring of AGAs and PEs.
A
Notes:
ORG owns only one enterprise –Waterworks Enterprise – , which submits periodic financial performance reports and annual audited accounts to its parent ministry and to BOFED. Keeping track of its fiscal position is straight forward. Pre-harvest loans provided by CBE to farmers’ cooperative unions and guaranteed by MOFED pose fiscal risk for ORG, but Agriculture and Resource Development Bureau monitors the situation. (P. 33)
9.2 Extent of central government monitoring of SN government's fiscal position
A
Notes:
Woreda governments are not permitted to borrow or enter into spending commitments that are not covered by the approved budget. As their resources derive mainly from the block grant, the delivery of which is predictable, the main risk of a shortfall comes from delays in receiving budgeted external assistance. ORG does not practise offsetting arrangements, so delays mainly result in delays in project implementation, rather than shortfalls of resources for recurrent expenditure. ORG’s contingency fund can be used to offset woreda resource shortfalls. Through the financial reporting system – facilitated by the Single Pool System -- zonal administrations are able to keep track of the financial position of woredas, though this may not be formalized into a consolidated overall fiscal risk report. (P. 34)
10. Public access to key fiscal information
C
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)
C
Notes:
III. Policy-Based Budgeting
Scores by Dimension
Overall Indicator Score
11. Orderliness and participation in the annual budget process
B+
Notes:
11.1 Existence of and adherence to a fixed budget calendar;
A
Notes:
The annual budget calendar is clearly laid out in the Federal Budget Manual. Preparation of initial budget estimates begins end-January following Budget Call issuance and these have to be submitted by mid-March. Following evaluation by BOFED of these requests during March-April, budget ceilings are sent out in mid-May to bureaus, which then have three weeks to prepare detailed estimates to fit within these ceilings and submit to BOFED; much of the estimation work has already been conducted during the initial phase of budget preparation. (P. 37)
11.2 Clarity/comprehensiveness of and political involvement in the guidance on the preparation of budget submissions (budget circular or equivalent);
A
Notes:
The Budget Call requires preparation of Budget Requests using standard formats, mainly on the basis of the estimated outturn for the current fiscal year, forecasts of spending next year under existing service levels, ongoing and committed capital projects and prioritized and welljustified proposals for new capital projects. Following discussion with BOFED and then within Cabinet, ceilings are sent to each bureau to guide the preparation of detailed estimates, which form the basis of the drafting of the budget proclamation. (P. 37)
11.3 Timely budget approval by the legislature or similarly mandated body (within the last three years);
C
Notes:
This is required by the Federal Financial Administration Law (both the 2003 law and the new 2009 law). In practice, due to the notification of the federal budget subsidy only at the end of the fiscal year, budget approval takes place 1-3 weeks after the end of the fiscal year. But this happens only because the financial years are the same for the federal and regional governments, thus approval by the Regional Council after the end of the financial year is not the fault of BOFED or the Council. (P. 37)
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:
Unlike at the Federal Government level, there is no formal medium term Macro-Economic and Fiscal Framework in place. (P. 39)
12.2 Scope and frequency of debt sustainability analysis
NA
Notes:
The Regional Government does not borrow and has no debt liabilities. (P. 39)
12.3 Existence of sector strategies with multi-year costing of recurrent and investment expenditure;
C
Notes:
The assessment team was informed that regional sector strategies are adapted from the federal government’s strategies. The team was unable to obtain copies of the regional sector strategies, so it reviewed the federal government’s education and health strategies. These are fully costed, but imply large increases in spending that are very unlikely to be feasible within the context of financial resources likely to be available and the overall spending ceiling derived from the macro-fiscal framework. Education and health sector spending comprise about 23 percent and 6 percent respectively of of total consolidated ONRS expenditure. (P. 39)
12.4 Linkages between investment budgets and forward expenditure estimates.
C
Notes:
Investment decisions are closely related to sector strategies, the costs of which include the recurrent cost implications of investments (at least in the case of education). .Budget Requests for new capital projects should (according to the Guidelines in the Federal Budget Manual) contain estimates of the future recurrent costs associated with such projects. BOFED emphasizes the need to prepare such estimates. But forward budget estimates are not currently prepared in Oromia. A rating of D would be too low, as budgeting for recurrent and capital expenditure are not separate processes. A B rating would be too high, this assumes forward budget estimates are prepared.. (P. 39)
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:
The assessment team reviewed the proclamations for the main taxes (listed above), including the sections concerning the powers of the authorities to exercise discretionary powers, and determined that an A rating was appropriate. (P. 43)
13.2 Taxpayer access to information on tax liabilities and administrative procedures.
B
Notes:
The ORB has prepared a number of explanatory brochures, uses the mass media to educate tax payers, and conducts tax payer education programmes, including in schools. This is still work in progress, and a B rating is warranted, rather than an A at this time. The Bureau is developing its own web-site; once functional this will further improve tax-payer access to information. An upward arrow is assigned, indicating progress being made. (P. 43)
13.3 Existence and functioning of a tax appeals mechanism.
A
Notes:
A tax appeals system is in place, provided for under the Tax Proclamation Laws, and includes the independent Tax Appeals Commission, members of which include people from outside the Government. The activities of the Commission are reported on by the Chairman. (P. 43)
14. Effectiveness of measures for taxpayer registration and tax assessment
B
Notes:
14.1 Controls in the taxpayer registration system.
B
Notes:
Any person or business with potential tax obligations are required to have a unique TIN. A major control point is the requirement of a TIN in order to obtain a business license or open a bank account. The introduction of biometric finger prints has facilitated the increased coverage of actual and potential taxpayers by the TIN. The requirement for all businesses, regardless of size, to have accredited sales machines electronically linked to the Revenue Bureau combined with checks by plain clothes tax inspectors has also helped to increase TIN coverage. Use of financial institutions as check points is likely to increase in the future. (P. 46)
14.3 Planning and monitoring of tax audit and fraud investigation programs.
C
Notes:
A system of audit plans based on risk assessment criteria was instituted in 2008/09, one of the results of the BPR. A B rating might be appropriate, but the system needs to “bed-down” first. (P. 46)
14.2 Effectiveness of penalties for non-compliance with registration and declaration obligations
B
Notes:
Substantive penalties, high enough to act as a deterrent, are listed in the tax proclamations. The evidence is not sufficient to demonstrate consistent administration. Capacity constraints may lead to inconsistent administration. The SIGTAS is making it easier to detect non-compliance. (P. 46)
15. Effectiveness in collection of tax payments
C+
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:
In the past, the instances of disputed presumptive tax assessments (Category C taxpayers, comprising the majority of tax payers) and the long period allowed for making payments complicated formal estimation of the amount of tax arrears at the end of each year. . The tax payer education campaigns combined with the expansion of coverage of SIGTAS are enabling much greater compliance with the tax laws and speedier resolution of disputes.. The Bureau pointed out that most taxpayers pay on time. The collection ratio of tax arrears averaged 94 percent over the last three fiscal years and tax arrears as a percentage of total collections averaged 1.4 percent. (P. 48)
15.2 Effectiveness of transfer of tax collections to the Treasury by the revenue administration.
C
Notes:
Revenues deposited in cash at ORB branches may not be transferred to ORB bank accounts until up to one month, depending on when the amount of cash reaches ETB 5,000. Deposits held in ORB bank accounts are transferred to BOFED’s Central Treasury Account every few days. (P. 48)
15.3 Frequency of complete accounts reconciliation between tax assessments, collections, arrears records and receipts by the Treasury.
B
Notes:
The strengthened compliance with tax registration and declaration obligations (partly due to the taxpayer education programmes) combined with the increasing coverage of SIGTAS is reducing the magnitude of tax arrears and, within these, the amounts of tax assessments in dispute. Complete accounts reconciliation is being facilitated accordingly. (P. 48)
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:
The cash flow forecasting framework, combined with the internal controls guarding against over commitments (PI-20), the favorable revenue situation (PI-3), and the ability to access the contingency budget or access temporary financing from MOFED in the event of unexpected cash shortfalls, enable commitment of expenditures within a medium term time horizon. (P. 50)
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 adjustments take place above the level of bureau management through: (i) transfers between bureaus authorized by BOFED Head; and (ii) supplementary budgets (increase in total spending ceiling) requiring prior approval of Regional Council. The Financial Administration Law, Financial Regulations and annual budget proclamations provide for a degree of transparency in making adjustments. (P. 51)
16.1 Extent to which cash flows are forecast and monitored
B
Notes:
Information provided by BOFED. The updating is supposed to be monthly, but in practice, due to capacity constraints, it is quarterly. (P. 50)
17. Recording and management of cash balances, debt and guarantees
B
Notes:
17.1 Quality of debt data recording and reporting
NA
Notes:
17.2 Extent of consolidation of the government’s cash balances
B
Notes:
About 70 percent of ORG’s bank balances are under the CTA/Z accounts, effectively the TSA; consolidation takes place by definition every day and balances are calculated daily. Bank balances outside this arrangement, such as donor project and extra-budgetary fund accounts, are calculated regularly but not consolidated with the TSA balances. (P. 52)
17.3 Systems for contracting loans and issuance of guarantees.
NA
Notes:
18. Effectiveness of payroll controls
B+
Notes:
18.1 Degree of integration and reconciliation between personnel records and payroll data.
B
Notes:
The linkages between the personnel records and the payroll are manual, but the decentralized nature of the payroll system facilitates close linkages. Each month, the Human Resources Department notifies the FAPMD of any changes to be made to the payroll (e.g. recruitment, changes in attendance – as indicated in signed attendance records). The Civil Service Agency also checks HRD personnel lists periodically in order to determine that staff positions are covered in the civil service establishment list.
18.2 Timeliness of changes to personnel records and the payroll
A
Notes:
The decentralized nature of the payroll management system supports timely changes to personnel records followed by timely changes to the payroll. Changes made to personnel records after the 24th of each month are reflected in a subsidiary payroll or next month’s payroll. (P. 54)
18.3 Internal controls of changes to personnel records and the payroll.
A
Notes:
The audit trail is reflected in the letters sent by Human Resources Management Department, signed (multiple signatures) forms approving the list of personnel and the monthly payroll prepared by lower level staff. Only one person has access to the Excel-based payroll system in FAPMD; formatting features in this system also guard against abuse. (P. 54)
18.4 Existence of payroll audits to identify control weaknesses and/or ghost workers.
B
Notes:
IADs in sector bureaus have been conducting payroll audits during the year, but the frequency and quality has been significantly strengthened since the beginning of 2009/10 through a large increase in staffing levels of the IAD (see PI-21) resulting from the BPR. The scope of ORAG’s annual audits of the major bureaus (such as Education Bureau) includes payroll audits. As indicated under PI-26, ORAG effectively audits every public body over a 3 year period (each year for the larger ministries) .(P. 54)
19. Transparency, competition and complaints mechanisms in procurement
C
Notes:
19.1 Transparency, comprehensiveness and competition in the legal and regulatory framework
Notes:
Procurement is in most cases the responsibility of procuring entities established within sector bureaus. These do not send procurement information to the procurement department in BOFED, because capacity constraints within the bureaus hinder the collation of information, and also, it seems, because BOFED does not request it (although the legislation provides for such requests). (P. 56)
19.2 Use of competitive procurement methods
Notes:
The procurement legislation indicates the criteria for using less competitive procurement methods above the threshold. BOFED collects only little information on justifications for using less competitive methods, but claims that the case for using less competitive methods is generally well-justified (the sector Bureau Head has to first approve the use of such methods). The IAD has a role in assessing whether justification has been demonstrated in terms of the criteria listed in the proclamation, but the internal audit function is still developing (P. 56)
19.3 Public access to complete, reliable and timely procurement information
Notes:
The procurement legislation provides for a complaints submission mechanism. This is operative. A procurement-specific external higher authority is not provided for in the legislation; complaints above the level of BOFED have to go through the court system. In practice, most complaints are resolved by the procurement entity itself. (P. 57)
19.4 Existence of an independent administrative procurement complaints system
NU
Notes:
20. Effectiveness of internal controls for non-salary expenditure
B
Notes:
20.1 Effectiveness of expenditure commitment controls.
B
Notes:
Commitments are authorized on the basis of the approved budget allocations (as specified in the legislation).. Good revenue performance (PI-3), strengthened cash flow forecasting and cash management systems (PIs 16 and 17) help to minimize the risk of cash unavailability at the time of actual payment. In addition, if there is a serious risk of a cash shortfall, managers try to find offsetting adjustments in other parts of the budget. (P. 58)
20.2 Comprehensiveness, relevance and understanding of other internal control rules/ procedures
B
Notes:
Financial and non-financial control systems are comprehensive, well documented and generally understood. The BPR exercises identified areas where controls could be streamlined, resulting in efficiency gains, partly taking into account the embedding of IBEX. Some streamlining has already taken place (e.g. reduction in the number of signatures required) but the process is not yet finished, and an A rating is probably premature. (P. 58)
20.3 Degree of compliance with rules for processing and recording transactions
B
Notes:
The annual report of ORAG for April 2007-March 2008 identified some areas of insufficient adherence to internal controls, particularly related to procurement. The Chairman of the Finance and Budgeting Committee (FBC) in the Oromia Regional Council confirmed this to the assessment team. (P. 59)
21. Effectiveness of internal audit
C+
Notes:
21.1 Coverage and quality of the internal audit function.
C
Notes:
On paper, the IA function is operational for all regional government entities, meets professional standards and focuses on systemic issues. In practice, insufficient numbers of positions (up until the end of 2008/09) and the time it takes for a pool of professional auditors to be established has resulted in the function only now beginning to be fully established. As a result of the BPR, the numbers of positions in IA departments has been sharply increased to 5-8 since the beginning of 2009/10 and the positions are gradually being filled. (P. 61)
21.2 Frequency and distribution of reports
A
Notes:
Up to 2009/10, IA departments prepared quarterly reports and submitted to the head of the bureau in which they are located and to ID in BOFED. Reports are provided to ORAG on request (the legislation does not provide for obligatory submission of reports to ORAG). (P. 61)
21.3 Extent of management response to internal audit findings.
C
Notes:
With the IA function and the perception of its importance still evolving, and IADs understaffed until only recently, a B rating would be too high. A rating of D would be too low; the culture in Ethiopia of following rules indicates that IAD recommendations would not be largely ignored. (P. 61)
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:
Reconciliation of the bank accounts held under CTA/Z accounts (representing about 70 percent of ORG deposits) with the ledger held in BOFED (in IBEX) takes place every month within 10 days of the end of the month. Reconciliation of other accounts (donor-supported programmes and funds) also takes place every month in most cases, though not necessarily at detailed level, with statements provided to BOFED. (P. 63)
22.2 Regularity of reconciliation and clearance of suspense accounts and advances.
A
Notes:
BOFED claims speedy clearance of advances (within 7 days for travel advances, as required by the financial regulations). Suspense accounts, mainly representing temporary deposit of revenues in bank accounts (B accounts) may be carried forward, but are normally transferred to CTA within a month, according to BOFED (also see PI-15). End-month and end-year trial balance sheets and those of subsequent months do not indicate an age profile. The assessment team’s rating is therefore based on BOFED’s verbal assurances that suspense accounts and advances are cleared rapidly. (P. 63)
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:
Information provided by the Oromia Education Bureau concerning the use of mass media and the posting of information outside service delivery units on resources received. It was not possible to meet the Oromia Health Bureau.. An upward pointing arrow is assigned to indicate progress being made. (P. 64)
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:
Detailed comparison is possible for revenues, recurrent expenditures, domestically-financed capital expenditure and some items (under Channel 1) of externally-financed capital expenditure for each public body (and sub-agency within the body) and by economic classification. Actual expenditure is shown, not expenditure commitments, though the semi-computerised information provided by sector bureaus to BOFEDs includes expenditure commitments. A higher rating requires that commitments are reported on. IBEX is currently being rolled out to sector bureaus, thus enabling the inclusion of expenditure commitments in reports. Thus an upward pointing arrow is assigned to the C rating. (P. 65)
24.2 Timeliness of the issue of reports
A
Notes:
Information provided by BOFED. Reports on regional bureau budget performance can be generated each month, within a few days of the end of the month. (P. 66)
24.3 Quality of information
B
Notes:
BOFED checks the information provided by sector bureaus. Checking in principle has been made easier by the introduction of double-entry book-keeping. Nevertheless, there is potential for making mistakes, for example, in selecting the correct contra-entries, particularly in the context of semi-manual recording methods still used (as IBEX is still being rolled out to sector bureaus). BOFED discusses accuracy issues with sector bureaus and usually resolves them. With IBEX being rolled out to sector bureaus, accuracy should increase. (P. 66)
25. Quality and timeliness of annual financial statements
C+
Notes:
25.1 Completeness of the financial statements
B
Notes:
Full information is not provided on donor-supported projects, programmes and funds, with the partial exception of those that use the Channel 1 funding modality and the government’s budget classification system.. (P. 68)
25.2 Timeliness of submission of the financial statements
B
Notes:
The statements for 2007/08 (EY 2000) and 2006/07 were submitted to ORAG in November 2008 and November 2007 respectively, within six months of the end of the financial year. Due to problems with IBEX, the accounts for 2008/09 were not closed until February 2010, and not submitted to ORAG until May 2010, 11 months after the end of the financial year.. On average, the submissions are within 10 months of the end of the financial year. (P. 68)
25.3 Accounting standards used
C
Notes:
The federal government standards are used, which meet Generally Accepted Accounting Practices (GAAP), which are not the same as IPSAS (required for a B rating). IPSAS on a cash basis requires information in the annual financial statements on expenditures of donor-funded projects, where these are included in the budget proclamations. However, as noted in t he text above, this is not the case. (P. 68)
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:
Out of 376 regional bureaus and woreda offices in Oromia, about 90 are audited every year on a rotating basis, except for the larger bureaus (in terms of their expenditure), which are audited every year. About 70 percent of ONRS domestically financed expenditure is covered each year. Full financial audits and compliance audits are conducted, broadly in compliance with INTOSAI standards (following OFAG), with the main focus on systemic issues. Audit reports are not published, in violation of one of the INTOSAI standards The limiting factor in rating this dimension is the scope of coverage, which is less than the 75 percent required for a B rating, and the non-publication of audit reports. (P. 72)
26.2 Timeliness of submission of audit reports to legislature.
A
Notes:
In the case of audit reports for each public body, ORAG starts the auditing process 3 months after the end of the fiscal year and takes up to 2 months to audit, thus five months in total from the end of the fiscal year (in relation to the last two completed fiscal years). In the case of the audit of the annual accounts, ORAG took 3-4 months to audit the 2006/07 accounts after their receipt from BOFED, and 3 months to audit the 2007/08 accounts. It expects to take about 3 months to audit the 2008/09 accounts, received from BOFED in May, 2010. Taking a simple average of the rating for the annual accounts and the audit reports as a whole, the score is A. (P. 72)
26.3 Evidence of follow up on audit recommendations
C
Notes:
Formal responses are made in a timely manner, as required under the ORAG proclamation. The assessment team was unable to obtain a copy of ORAG’s annual report, but, on the basis of the annual reports of the Amhara and SNNPR ORAGs, the formal responses tend to be provided in a timely manner, but evidence of systematic follow-up by management is limited. (P. 72)
27. Legislative scrutiny of the annual budget law
D+
Notes:
27.1 Scope of the legislature’s scrutiny.
C
Notes:
The documentation submitted to Budget and Finance Committee (BFC) consists only of the detailed revenue and spending estimates for the next financial year. (P. 74)
27.2 Extent to which the legislature’s procedures are well-established and respected.
C
Notes:
The procedures are simple (as explained in the narrative). With three out of the five members of BFC appointed on an ad-hoc basis and tending to live elsewhere in Oromia Region, the procedures are only partially respected. (P. 74)
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
D
Notes:
The budget calendar allows one month for the legislature to review the draft budget proclamation. However, in recent years, the Regional Cabinet has submitted the draft very late, allowing only one week for BFC to review (given that the draft proclamation is supposed to be approved prior to the end of the fiscal year). BFC says this is clearly insufficient time. (P. 74)
27.4 Rules for in-year amendments to the budget without ex-ante approval by the legislature.
D
Notes:
The rules are contained in the Financial Administrative Proclamation, which is based on the Federal Government equivalent. As indicated in PI-16 (iii), in-year reallocations between public bodies are permitted without ex-ante Regional Council approval as long as total spending does not increase. Such reallocations are extensive. Ex ante approval by the Regional Council is required for proposed supplementary budgets that result in increased total spending, but the approval tends to be ex post, at the end of the fiscal year, in apparent violation of the Financial Administration Act. Thus the requirement for ex-ante approval by the Regional Council is not respected. (P. 74)
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).
A
Notes:
Audit reports are reviewed by BFC/PAC on a quarterly basis. The Regional Council reviews the annual report prepared by ORAG and submitted to it near the end of the fiscal year. (P. 75)
28.2 Extent of hearings on key findings undertaken by the legislature.
C
Notes:
Hearings over the 18 months up to March 2010 have been less frequent than previously. The pace and depth of these hearings is expected to pick-up under the newly-established PAC. (P. 75)
28.3 Issuance of recommended actions by the legislature and implementation by the executive.
C
Notes:
The BFC/PAC has the power to issue recommendations and report on non-implementation of these to the Regional Cabinet. As referred to under (ii), this power was used less extensively during the 18 months up to March 2010. The extent of use of this power is expected to pick up under the newly established PAC. (P. 75)
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.
C
Notes:
The budget proclamations indicate donor assistance and loans in aggregate and according to the projects they finance. They incorporate loans and assistance from the five largest donors for which information is available (it is possible that other donors, such as Global Fund, are larger, but no information is available on its planned annual expenditures). Only ADB and World Bank use the government’s budget classification system. (P. 78)
D-2.2 Frequency and coverage of reporting by donors on actual donor flows for project support.
D
Notes:
Quarterly expenditure reports are only provided under the WASH programme. Annual expenditures under UNICEF and ADB funded projects (but not all ADB funded projects) are reflected in the end-year budget performance report and trial balance sheet. (P. 78)
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:
Donor-financed projects do not generally use the Government’s budget execution system, banking arrangements (project accounts are not part of the TSA), procurement systems and audit systems. Accounting and reporting systems are used, except by UN agencies, which use different COA. Even so, as not all donor projects are classified according to the Government’s budget classification system (only ADB and World Bank), expenditures under donor projects can’t be reported on, according to this classification. (P. 79)
