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 expenditure in one of the last three years deviated from budgeted expenditures by more than10% (P. 9)
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 overall deviation in primary expenditure by more than 10 percentage points in all of the three years (P. 9)
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:
Actual domestic revenue collection was 98% of budgeted domestic revenue in one of the three years, but exceeded the budget estimates in the other years. (P.10)
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 is low, below 2% of total expenditure. (P. 12)
4.2 Availability of data for monitoring the stock of expenditure payment arrears
B
Notes:
Data on grace period payables in relation to the payments due for procured goods and services is available, but the accounting system does not permit the recording of the age profile of other accounts payables. But the strong culture of compliance with financial regulations, as emphasized by the authorities, indicates that arrears on other payables would be minimal. (P. 12)
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 formulation and execution is based on an administrative and, under each administrative head, an economic classification basis, with administrative heads grouped under functional, sub-functional, programme and sub-programme codes (though programme budgeting is still being developed in Ethiopia). The functional codes can be bridged to match the 10 COFOG functional codes, but not at the sub-functional level. The score under the 2007 assessment should be B. (P. 14)
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:
Recent budget documentation presented to the regional council does not fulfill any of the 8 applicable information bench marks. The 2007 score appears incorrect. (P. 16)
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 level of unreported extra – budgetary expenditure other than donor funded projects is insignificant, apart from the operations of the Global Fund, which are not reported on at either federal or regional government level, even though the magnitudes involved are very large and the loan-funded housing development project, which is large relative to the approved budget, and for which reports appear not be prepared (see PI-17). (P. 18)
7.2 Income/expenditure information on donor-funded projects which is included in fiscal reports.
A
Notes:
Complete income expenditure information for 90% value of donor funded projects is included in fiscal reports. The C rating in the 2007 assessment is un-substantiated; the text indicates that there was insufficient evidence to score. Nevertheless, the expanded use of the Channel One funding modality in recent years indicates that the score might have been lower in 2007. (P. 18)
8. Transparency of inter-governmental fiscal relations
NA
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:
8.2 Timeliness of reliable information to SN governments on their allocations from central government for the coming year;
NA
Notes:
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.
NA
Notes:
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:
There is only one enterprise which does not receive subsidy and operates on its own budget. It is therefore, financially independent. However, it sends reports to BoFED which facilitates keeping track of its fiscal position. (P. 20)
9.2 Extent of central government monitoring of SN government's fiscal position
NA
Notes:
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:
The government makes available to the public one of the 6 listed types of information. (P. 21)
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:
A clear annual budget calendar exists, is generally adhered to and allows sector bureaus/offices and kebele administrations at least six weeks from receipt of the budget call to complete their budget proposal. (P. 23)
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 sector bureaus and kebele administrations. The circular does not provide ceilings but provides guidance on preparing the recurrent and capital budgets, including for new spending in priority areas. Following review by BOFED, ceilings are set for the finalization of the detailed estimates. (P. 23)
11.3 Timely budget approval by the legislature or similarly mandated body (within the last three years);
C
Notes:
The legislature has in three of the last three years approved the budget within two months of the start of the fiscal year. (P. 23)
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 the federal government, there is no Macro-economic and fiscal forecast (MEFF) on a rolling basis (P. 25)
12.2 Scope and frequency of debt sustainability analysis
D
Notes:
HRPG has borrowed once, in relation to its financing of a housing development project (see PI-17). There is no evidence of a debt sustainability analysis being carried out prior to the incurrence of the loan. (P. 25)
12.3 Existence of sector strategies with multi-year costing of recurrent and investment expenditure;
C
Notes:
The education and health sector development plans are fully costed. However, the forecasts are inconsistent with aggregate annual budgets. In F.Y 2001 the education and health sectors total spending comprised 40% of aggregate expenditure (P. 25)
12.4 Linkages between investment budgets and forward expenditure estimates.
C
Notes:
The majority of important investments (education and health) are selected on the basis of sector strategies but their recurrent cost estimates in the sector strategies are by far higher than the annual recurrent budget. (P. 25)
IV. Predictability and Control in Budget Execution
Scores by Dimension
Overall Indicator Score
13. Transparency of taxpayer obligations and liabilities
B+
Notes:
13.1 Clarity and comprehensiveness of tax liabilities
A
Notes:
Legislation and procedures for the main taxes are comprehensive and clear with fairly limited discretionary powers (P. 27)
13.2 Taxpayer access to information on tax liabilities and administrative procedures.
B
Notes:
The Revenue Authority has prepared brochures, uses the FM Radio to educate tax payers. There is also an information desk. According to the Chamber of Commerce, more work is required on awareness creation. (P. 27)
13.3 Existence and functioning of a tax appeals mechanism.
B
Notes:
A tax appeals system is set up and is functional with members from outside the Government including a member from the Harari Chamber of Commerce. However, issues relating to access, efficiency, fairness or effective follow-up on its decisions need to be addressed. (P. 27)
14. Effectiveness of measures for taxpayer registration and tax assessment
B
Notes:
14.1 Controls in the taxpayer registration system.
B
Notes:
Tax payers are required to have a TIN. They are registered in a data base system. Issuance and renewal of business license requires TIN. There is therefore linkage (not direct) with the Trade and Industry Bureau. (P. 29)
14.3 Planning and monitoring of tax audit and fraud investigation programs.
C
Notes:
There are few category A tax payers for whom risk based audit according to plan is undertaken. There is a capacity constraint. (P. 29)
14.2 Effectiveness of penalties for non-compliance with registration and declaration obligations
B
Notes:
High penalties for non-compliance are set in the Income tax proclamation. No information is available to assess its effective administration. (P. 29)
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:
No disaggregated data is available on assessment and arrears (P. 30)
15.2 Effectiveness of transfer of tax collections to the Treasury by the revenue administration.
B
Notes:
Revenue Collections are transferred to the treasury at least weekly (P. 30)
15.3 Frequency of complete accounts reconciliation between tax assessments, collections, arrears records and receipts by the Treasury.
D
Notes:
The reconciliation is only with bank statements and collection by the Authority. There is incomplete accounts reconciliation between assessment, collection, arrears and transfers. (P. 30)
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:
MDAs’ are able to plan and commit expenditures for at least six month in advance in accordance with the budgeted appropriations. (P. 31)
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 to budget allocations take place frequently in a year and are done in a transparent way. (P. 31)
16.1 Extent to which cash flows are forecast and monitored
B
Notes:
Cash-flow forecast is prepared on a quarterly basis. Performance has not deteriorated from the 2007 PEFA. It seemed that dimension (i) of this indicator should had been scored B not A. (P. 31)
17. Recording and management of cash balances, debt and guarantees
C+
Notes:
17.1 Quality of debt data recording and reporting
C
Notes:
The loan (the only borrowing by HPRG) for the housing project is recorded at BoFED and the Housing Development Agency. Loanrelated details are recorded, but reports for management appear not to be prepared. . (P. 33)
17.2 Extent of consolidation of the government’s cash balances
B
Notes:
Most of the government cash balances are consolidated on a weekly basis. Donor funds in bank accounts are not consolidated . (P. 33)
17.3 Systems for contracting loans and issuance of guarantees.
C
Notes:
The housing development loan was approved by the regional council. Fiscal targets and .overall ceilings were not taken into account at the time of decision. (P. 33)
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 each month (P. 34)
18.2 Timeliness of changes to personnel records and the payroll
A
Notes:
Required changes to the personnel records and payroll are updated monthly, generally in time for the following month’s payments. (P. 34)
18.3 Internal controls of changes to personnel records and the payroll.
B
Notes:
Authority to change records and payroll is restricted, but the audit trail is only partial. Changes made to the payroll record were evidenced by documents. (P. 34)
18.4 Existence of payroll audits to identify control weaknesses and/or ghost workers.
B
Notes:
Payroll audit is conducted by internal auditors on a quarterly basis26 ORAG also conduct payroll audits. (P. 34)
19. Transparency, competition and complaints mechanisms in procurement
C
Notes:
19.1 Transparency, comprehensiveness and competition in the legal and regulatory framework
Notes:
There is no compiled report on procurement activities (P. 36)
19.2 Use of competitive procurement methods
Notes:
Other less competitive methods used are some cases justified in accordance with the regulatory requirements. However in its EFY 2001 audit report ORAG has reported purchases by 14 public bodies that did not comply with the procurement directive (P. 36)
19.3 Public access to complete, reliable and timely procurement information
Notes:
A process (defined by legislation) for submission and timely resolution of procurement process complaints is operative, though only recently (2009/10). (P. 36)
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:
Comprehensive expenditure commitment controls are in place and effectively limit commitments to approved budget allocation for all expenditure. Good revenue performance, and strengthened cash flow forecasting and cash management help to minimize the risk of cash unavailability at the time of payment. (P. 38)
20.2 Comprehensiveness, relevance and understanding of other internal control rules/ procedures
B
Notes:
Other internal control rules and procedures are relevant and incorporate a comprehensive set of controls and the BPR exercise is looking into the overall cost effectiveness on the set of controls, which are widely understood and practiced There are few internal control weaknesses in certain areas (P. 38)
20.3 Degree of compliance with rules for processing and recording transactions
B
Notes:
Compliance with rules is fairly high, but simplified/emergency procedures are used occasionally without adequate justification as indicated in the report of the office Auditor General (P. 38)
21. Effectiveness of internal audit
C+
Notes:
21.1 Coverage and quality of the internal audit function.
C
Notes:
Internal audit function is operational in 9 out of the 12 sector bureaus. The emphasis of the audit function is no financial audits; systems auditing is not yet established due to capacity limitations. Kebeles are audited by IAPU. (P. 40)
21.2 Frequency and distribution of reports
B
Notes:
There is a fixed semi-annual report and no report is issued to ORAG (P. 40)
21.3 Extent of management response to internal audit findings.
C
Notes:
A fair degree of action taken by many managers on major issues but often with delays. The situation has improved in EFY 2002 (P. 40)
V. Accounting, Recording and Reporting
Scores by Dimension
Overall Indicator Score
22. Timeliness and regularity of accounts reconciliation
C+
Notes:
22.1 Regularity of bank reconciliations
B
Notes:
Bank reconciliation for all Treasury managed bank accounts take place at least monthly, usually within 4 weeks from end of month. (P. 41)
22.2 Regularity of reconciliation and clearance of suspense accounts and advances.
C
Notes:
Reconciliation and clearance of suspense accounts and advances take place annually in general, within two months of end of year. Unidentified deposits of RA were carried forward for subsequent years. (P. 41)
23. Availability of information on resources received by service delivery units
A
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
A
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 clinics across the region. The information is compiled into reports on a monthly and annual basis. (P. 42)
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 to the original budget. Information includes all items of budget estimates. Expenditure is covered at payment stages but not at commitment stage. (P. 43)
24.2 Timeliness of the issue of reports
A
Notes:
At BI level monthly reports are produced and issued to BoFED and at BoFED quarterly consolidated reports are prepared. (P. 43)
24.3 Quality of information
A
Notes:
There are no material concerns regarding data accuracy. Unlike the situation in other regions, Harari has not woreda governments and is also very small, thereby reducing the chances of data inaccuracy. (P. 43)
25. Quality and timeliness of annual financial statements
C+
Notes:
25.1 Completeness of the financial statements
B
Notes:
A consolidated financial statement of BoFED is presented annually. It includes information on revenues and expenditures, financial assets and liabilities but omits information concerning some donor funded projects. (P. 44)
25.2 Timeliness of submission of the financial statements
B
Notes:
The consolidated government statement is submitted for external audit within 10 months of the end of the fiscal year. (P. 44)
25.3 Accounting standards used
C
Notes:
Statements are presented in consistent format over time with some disclosure of accounting standards. (P. 44)
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:
Central government entities representing at least 50% of total expenditures are audited annually. Financial audits with focus on systemic issues, compliance and performance audits are carried out. INTOSAI standards are generally adhered to, with the critical exception that audit reports are not published; this is the limiting factor in terms of scoring this dimension. (P. 47)
26.2 Timeliness of submission of audit reports to legislature.
C
Notes:
Audited annual accounts are submitted to the legislature more than 12 months from the end of the period covered. For the EFY1999 and 2000, the delay was about 24 and 14 months respectively. Audit reports on public bodies are generally submitted within six months of the end of the financial year (C rating is a simple average) (P. 47)
26.3 Evidence of follow up on audit recommendations
C
Notes:
Follow-up on audit recommendations are made by ORAG and the finance and budget committee. Formal responses were made by some public bodies. In EFY 2000 12 PBs responded indicating the measures taken while in EF Y2001 8 PBs responded. The number of public bodies responding as a percentage of the total (32 public bodies) is small. (P. 47)
27. Legislative scrutiny of the annual budget law
D+
Notes:
27.1 Scope of the legislature’s scrutiny.
C
Notes:
The review is limited to the draft budget proclamation, details of revenue and expenditures (recurrent and capital) when detailed proposals are finalized. (P. 49)
27.2 Extent to which the legislature’s procedures are well-established and respected.
C
Notes:
There are rules but partially implemented (P. 49)
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 standing budget and finance committee has no more than three days to review the budget (P. 49)
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 and are respected but allow extensive administrative reallocations (P. 49)
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:
Scrutiny of audit reports is usually completed within one month from receipt of the audit report (P. 50)
28.2 Extent of hearings on key findings undertaken by the legislature.
C
Notes:
No in-depth hearings have been conducted by BFC, apart from 2 sessions during EFY2002. (P. 50)
28.3 Issuance of recommended actions by the legislature and implementation by the executive.
B
Notes:
The legislature issues recommendations on action to be implemented by the executive, and evidence exists that some are implemented. (P. 50)
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:
Reports are complete and there is a system where project supports are known in advance. However, the budget classifications of donor funds are not consistent with the government budget classifications. (P. 51)
D-2.2 Frequency and coverage of reporting by donors on actual donor flows for project support.
D
Notes:
Reporting is normally made up on accomplishment of activities. However, as a minimum, report has to be submitted within six months time from the date of transfer of the fund (P. 51)
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:
Less than 50% of aid funds to the regional government are managed through national procedures. Donor project accounts are not part of the zero-based balance account system; reports are not incorporated with the existing regional government reporting system and national procurement procedures are not used. (P. 52)
