Albania 2017

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Aggregate expenditure outturn was between 95% and 105% of the approved aggregate budgeted expenditure in 2016 and 2014 and 94.5% in 2015.

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The composition variance between the expenditures outturn by function and the budgeted expenditure exceeds 20 percent in all the three years of assessment.

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Variance in expenditure composition by economic classification was less than 5% in 2014 and 2016. The variance in expenditure composition exceeds 5% in 2015.

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Actual expenditure charged to a contingency vote was on average at 0.1 % of the original budget.

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Actual revenue was between 97% and 106% of budgeted revenue in 2014 and 2016.

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Variance in revenue composition was less than 10% in 2014 and 2016.

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The budget classification and Chart of Accounts are based on every level of economic, administrative, and functional (and sub-functional) classification using GFS/COFOG standards and can produce information compatible with the GFS 2011 standards.

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For the BCG, Albania fulfills 10 elements, including every basic element (1–4) of the budget documentation.

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Information on expenditure outside financial reports is incomplete as it covers only 17 of 63 EBUs currently listed by INSTAT; while available evidence suggests that the total unreported amount is less than 5% of BCG expenditure, it cannot be confirmed.

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Revenues of active EBUs not reported cannot be confirmed.

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Active extra budgetary units do not provide regular financial reports to GoA.

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The horizontal allocation of unconditional and specific grants to subnational governments from central government is determined by transparent, rule based systems. These represent 60.8 percent of total transfers to LGUs. The criteria for allocation of conditional transfers exist, but they are not transparent and verifiable.

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By beginning of December each year, LGUs know the amounts of unconditional and specific transfers they are going to receive.

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Each program in the Ministries of Education and Health has specified objectives, output targets, and expenditure allocations for the medium-term, and these are reported quarterly and annually.

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Information on outputs produced is published annually for most Ministries.

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One large ministry (Education) has information on central government resources received by frontline service delivery units (schools), for salaries and other investment expenditures: however, other school expenditures are covered by local governments, so there is no comprehensive report.

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The SAI has undertaken ‘Performance Audits’, as follows: FY2014-7; FY2015-11; FY2016-13, and the reports are available on their website.

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The government makes available to the public seven elements, including five basic elements in accordance with specified timeframes

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Government receives financial reports from most public corporations within nine months of the end of the fiscal year.

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Financial statements for all subnational governments are published each month on a consolidated basis for all LG and quarterly on a unit level. Auditing of LGUs is conducted once in two years by the Supreme Audit.

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Central government entities and agencies quantify some significant contingent liabilities in their financial reports including the Debt Statistics, the Economic Reform Program, and the supplement to the budget proposal. However, there is no comprehensive report which includes all PPPs and concessions which may at the moment not have direct implications for the budget but may represent a contingent risk.

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Economic analyses are conducted to assess all major investment projects. However, no documented publication of the results of economic analysis of those major investment projects was provided to the assessment team.

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Prior to their inclusion in the budget, some of the major investment projects are prioritized by a central entity, although the proportion cannot be determined.

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Projections of the total capital cost of major investment projects, together with the capital costs over a three-year horizon, are included in the budget documents.

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The total cost and physical progress of major investment projects are monitored by the implementing government unit. Standard procedures and rules for project implementation are in place, and information on implementation of major investment projects is published annually.

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The government maintains a record of its holdings in major categories of financial assets.

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Performance is less than required for a C score.

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Procedures and rules for the transfer or disposal of nonfinancial assets are established. Information on transfers and disposals is included in budget documents, financial reports, or other reports.

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Domestic and foreign debt and guaranteed debt records are complete, accurate, and updated quarterly. Most information is reconciled quarterly. Comprehensive management and statistical reports covering debt service, stock, and operations are produced on a quarterly basis.

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Primary legislation grants authorization to borrow, issue new debt, and issue loan guarantees on behalf of the central government to a single responsible debt management entity. Documented policies and procedures provide guidance to borrow, issue new debt and undertake debt-related transactions, issue loan guarantees, and monitor debt management transactions by a single debt management entity. Annual borrowing must be approved by the government or legislature

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A current medium-term debt management strategy covering existing and projected government debt, with a horizon of at least three years, is publicly reported. The strategy includes target ranges for indicators such as interest rates, refinancing, and foreign currency risks. Annual reporting against debt management objectives is provided to the legislature. The government’s annual plan for borrowing is consistent with the approved strategy.

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The government prepares forecasts of key macroeconomic indicators, which, together with the underlying assumptions, are included in budget documentation submitted to the legislature. These forecasts are updated at least once a year usually formalized by a mid-year normative act. The forecasts cover the budget year and the two following fiscal years. The projections have been reviewed by the IMF as part of the IMF budget support for the period 2014-2017.

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The government prepares forecasts of the main fiscal indicators, including revenues by type, expenditure by type, and the budget balance, for the budget year and two following fiscal years. These forecasts, together with the underlying assumptions, are included in the macrofiscal framework which is approved by CoM decision and in the annexes of the budget law proposal submitted to the legislature and approved by parliament.

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The government prepares a range of fiscal forecast scenarios based on alternative macroeconomic assumptions, and these scenarios are published, together with its central forecast as part of the government’s Economic Reform Program.

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The government prepared estimates of the fiscal impact of all proposed changes in revenue and expenditure policy for the budget year and the two forthcoming years during the period of assessment 2014-2016. However, the impact of the policy changes regarding expenditures and some revenues were not articulated clearly in the budget proposals submitted to the Parliament. Policy changes adopted after the budget process are not consistently estimated and published

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The government has adopted, submitted to the legislature, and published a current fiscal strategy that includes explicit time-based quantitative fiscal goals and targets together with qualitative objectives for year 2016 and the following two fiscal years. These targets are included in the macro fiscal framework and in the annexes to the annual budget Law 2016. Albania has adopted a fiscal rule in 2016 which is consistent with the targets mentioned above.

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As part of the supplement to the Budget proposal for year 2017, the Ministry of Finance prepared an assessment of its achievements against stated fiscal objectives and targets as amended by the normative act in December 2016. The assessment includes an explanation of factors which led to deviations from the approved objectives such as revenue shortfalls, delays with public investments, and the resulting effect on the targets as well as proposed corrective actions. The report also sets out actions planned by the government to address any deviations, as prescribed in legislation.

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The MTBP for 2017-19, and the annual budget for 2017 include expenditure estimates for 2017, 2018, 2019 broken down by institution, program, function, and broad economic categories.

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Aggregate expenditures ceilings for 2017-19 MTBP were approved by the Government in January, before the first budget circular was issued in February. Ministry level expenditures ceilings for 2017 -19 MTBP were approved by the Government in March, after the first budget circular was issued in February.

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Medium-term strategic plans are prepared by some ministries. Some expenditure policy proposals in the annual budget estimates align with strategic plans

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Analysis of the deviations between the second year expenditures estimates from the past year and the first year of the current year is produced for internal purposes only and is not included in the budget documentation

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A clear budget calendar exists, but some deviations from it take place. In 2016, the budgetary units had about a month to prepare detailed MTBP submissions and about the same time to update them at the stage of preparation of the annual budget submission.

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The set of instructions used for MTBP and budget preparation is comprehensive, covers total budget expenditures for the full fiscal year, and provides clear guidance to budgetary units. In 2016, the final expenditure ceilings were approved by the Council of Ministers after the supplementary instruction for annual budget preparation was issued by the Ministry of Finance, but well before the deadline for annual budget submissions.

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The budget for 2014 was submitted to the National Assembly in the middle of December and therefore less than a month before the start of the fiscal year, the budgets for 2015 and 2016 were submitted to the National Assembly more than a month before the start of the fiscal year.

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The National Assembly scrutiny focuses on the annual budget aggregates and details of expenditures and revenue, not the medium-term fiscal forecasts and priorities

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The National Assembly has clear and well documented procedures for budget review embedded in its General Rules of Procedure. Internal organizational arrangements for the budget review are well developed and assign specific roles to the Assembly committees and technical staff. Formalized negotiation procedures are missing.

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The budgets for 2014, 2015 and 2016 were approved before the start of the respective fiscal years.

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Clear rules for budget adjustments by the executive exist, set strict limits on the extent and nature of amendments that could be undertaken without the National Assembly involvement, and are adhered to.

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GDT and GDC who are responsible for more than 90 percent of domestic revenue collection use 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

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GDT and GDC who are responsible for more than 90 percent of domestic revenue collection use approaches that are partly structured and systematic for assessing and prioritizing compliance risks for some revenue streams

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GDT and GDC who are responsible for more than 90 percent of domestic revenue collection undertake audits and fraud investigations using a compliance improvement plan and complete the majority of planned audits and investigations.

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Performance is less than required for a C score.

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MoF obtains revenue data at least monthly from both GDT and GDC who collect more than 90 percent of central government revenues. The Ministry of Finance (MoF) compiles a consolidated Fiscal Report covering revenue by type and the collection period

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GDT and GDC who are responsible for more than 90 percent of domestic revenue collection transfer the collection daily to the treasury.

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Both GDC and GDT who are responsible for more than 90 percent of domestic revenue collection undertake complete reconciliation of assessment, collection, arrears, and transfers to the treasury at least monthly.

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Balances on accounts outside TSA exceed TSA balance. Reports on the status of accounts outside TSA are collected monthly, however most of balances outside TSA are not consolidated

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Treasury Department prepares a cash flow forecast for the whole year and updates it based on actual cash flows and outflows upon receipt of the updated source information. One of important types of the source information – debt service schedule, is updated only quarterly, other types of information are updated more frequently.

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Budgetary units receive reliable information on monthly commitment ceilings for the whole year in January.

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Two significant budget adjustments took place in 2016 through budget rectifications approved by the National Assembly. One of the two episodes took place very close to the end of the fiscal year. The practice of end-of year adjustments is viewed by the line ministries as not fully transparent.

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The stock of expenditure arrears at the end of 2016 and 2015 was less than 6% of total actual expenditures for the respective years.

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The standard frequency of production of arrears monitoring reports is every four months. Annual monitoring report for 2016, including the stock and composition of expenditures arrears, was available on the MoF website at the time of the assessment.

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The payroll is supported by full documentation for all changes made to personnel records each month and checked against the previous month’s payroll data. Staff hiring and promotion is controlled by a list of approved staff positions. With personnel, payroll, and payment information in many separate systems, some automated and some manual, the level of integration is low and extensive manual reconciliations are required

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Required changes to the personnel records and payroll are updated at least monthly, generally in time for the following month’s payments. Retroactive adjustments are rare, and usually done within the next month payroll. However, the decentralized nature of payroll management means there could be considerable variations in performance across ministries and it was not possible to assess performance across the whole of government in this aspect.

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Sufficient controls exist to ensure integrity of the payroll data of greatest importance.

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Payroll audits have been undertaken within the last three completed fiscal years.

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Databases or records are maintained for all contracts including data on what has been procured, value of procurement and who has been awarded the contracts. Procurement Plans are published at the Public Procurement Agency’s (PPA) website and compare good to factual plans. E- procurement is mandatory for all procurement methods (except direct contracting) even for small value contracts.

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All agencies follow open competitive method by default as per the law. However, single source contracting (noncompetitive method) represents 30 % percent of the total value of all public contracts concluded in 2016 according to PPA report. The noncompetitive method is often used to fill the needs of contracting authorities before budget appropriation.

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The legal framework for procurement, procurement plan for 2017, realization of procurement operations for 2016 as well as bidding opportunities and contract awards are available on the PPA website in a timely manner. Information related to all complaints received by PPC are also published in PPC’s website within 48 hours from the moment of complaint being lodged.

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The procurement complaint system meets most criteria (5 out of 6) except of the timely issuing of the decisions. Frequent delays are reported, due to workload of PPC.

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Segregation of duties is prescribed throughout the expenditure process. More precise definition of important responsibilities may be needed.

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Expenditure commitment control procedures exist which provide partial coverage and are partially effective.

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All payments are compliant with regular payment procedures. All exceptions are properly authorized in advance and justified.

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The Internal Audit function is operational for all central government entities.

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The internal audit function still has no systematic or diagnostic nature in assessing the effectiveness of the internal control.

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Based on the CHU information during 2016, 90% percent of the audit plan has been implemented. In the organizations visited the all changes to the original audit plan have been approved by the head of the organization based on justification. Internal auditor submits their reports to the Minister and the head of the public entity audited.

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Management provides a partial response to audit recommendations for all entities audited within twelve months of the report being produced.

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Bank reconciliation for all active central government bank accounts takes place at least on monthly basis, at aggregate and detailed levels and usually within one week from the end of the month.

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Reconciliation of suspense accounts takes place at least monthly, within a month from the end of each month. Suspense accounts are cleared in a timely way, no later than the end of the fiscal year unless duly justified.

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Generally, advances are applied only in donor/IFI financed projects contracts, and there is a well-defined time schedule for the reconciliation and clearance compliant with contractual agreement. In general, this is performed on monthly basis, within a month, when invoices, summary reports and payments certificates are issued by the contractor and approved by the management of the unit.

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Access and changes to records is restricted and recorded, and results in audit trail.

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Coverage and classification of data does not allow direct comparison to original budget

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Budget execution reports are prepared monthly and issued within four weeks

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There are concerns about data accuracy. Expenditure is captured at payment stage.

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Annual financial reports are prepared but do not present a comparison between the original budget and actual execution.

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FY 2015 annual financial reports have been submitted for external audit within 6 months

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29.3 Accounting standards Dimension score C Accounting standards applied to all financial reports are consistent with the country’s legal framework and ensure consistency of reporting over time. The differences between the national and international standards are not disclosed.

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Financial statements of the central government entities representing between 75-85% of total expenditures and revenues have been audited using national auditing standards during the last three completed fiscal years.

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Audits reports have been submitted to the legislature within 6 months from receipt of financial reports for the last 3 years.

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Formal responses are made by the audited entities on audits for which follow up was expected during the last 3 completed years.

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The SAI operates independently from the executive with respect to procedures for appointment of the Chairman, planning of audit engagements, publicizing reports, and approval and execution of SAI’s budget. This independence is assured by law. The SAI has unrestricted and timely access to records, documentation, and information. However, the Law has a subjective criterion on the dismissal clause of the SAI Chairman.

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Scrutiny of audit reports on annual financial reports has been completed by the legislature within a month from receipt of the reports for the last 3 completed years.

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In depth hearings on key findings of audit reports take place regularly with SAI representatives and MoF officials only.

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The legislature issues recommendations on actions to be implemented, but there is no tracking system for following up on these recommendations.

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Hearings are conducted in public with a few exceptions (BoA) in addition to national security or similar sensitive discussions.