Albania Berat Municipality 2017

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Actual expenditure deviated from the originally budgeted estimates by 16.6%, 9.7% and 21.4% in 2013, 2014, and 2015, respectively.

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Variance in expenditure composition by functional classification is less than 15% in the last two years, at 3.7%; and 14.4% in 2014 and 2015 respectively. It was higher at 18.1% in 2013.

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Variance in expenditure composition by economic classification was lower than 10% in the last two years, at 8.8% and 9.2% respectively in 2014 and 2015. It was higher, at 11.7% in 2013.

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Actual expenditure charged to a contingency vote was on average 0.1% of the budget in the period 2013 – 2015

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Collection revenue (in relation to originally budgeted estimates) averaged 76%; 84% and 80% in 2013, 2014 and 2015, respectively.

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Variance in revenue composition was more than 15% in the past three years: 29% in 2013 and 2015, and 30% in 2014.

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The 2015 budget classification is based on economic, administrative and functional (and sub-functional) classification and is generally compatible with the GFS 2014 and COFOG standards.

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Only the requirements for two of the four basic elements are fulfilled and one of the additional eight requirements are fulfilled.

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Expenditure outside the municipality’s budgetary reports is estimated at 0% of total expenditure.

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Revenue outside the municipality’s budgetary reports is estimated at 0% of total expenditure.

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No extra-budgetary units were identified under Berat Municipality.

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Dimension not applicable for as there are no lower levels of government.

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Dimension not applicable for as there are no lower levels of government.

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Information is published annually, with a focus only on the mission and objectives of all service delivery programs. No quantifiable information is provided on the output and outcomes to be achieved for next budget year

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Information is not published on the activities performed with the respective output (and outcome) indicators for the majority of service programs and departments.

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An internal audit has been carried out for the past three fiscal years only for two major service delivery programs.

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Evaluations of the efficiency or effectiveness of main public service delivery services have not been carried out within the last three years.

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The Municipality makes available to the public none of five basic elements, and two of the additional information elements.

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There is a no consolidated report issued and monitored within the Municipality on the municipal entities’ financial outturn and net assets value. No audited financial statements had been issued and published for the Water and Sewerage Company and/or the FK Tomori Football Club in the past three years. HSC conducted only a special audit on the effectiveness of financial management and internal controls of the Company in 2015. There is no central finance function responsible in the Municipality for monitoring the two companies above and assessing the financial risks to the City on an annual basis. There is no evidence supporting the municipality received annual financial statements to assess and publish the financial performance and risks by the one largest of the two public corporations in the last completed FY.

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Not applicable. Not scored as there is no subnational level below municipalities.

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There is no consolidated financial report issued by the Municipality that assesses the overall significant risks and contingent liabilities within its service delivery operations and the public corporations under its control. The Water and Sewerage Company quantifies and consolidates some significant contingent liabilities such as pensions and insurance funds in their annual financial reports, according to the evidence WSC provided to the assessors. Loan guarantees issued by MOF are recorded in its financial reports. Other contingent liabilities such as fire or other calamity or emergency, or court litigations are not included.

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Economic analyses are not carried out to assess the feasibility of the major investment projects proposed for new year’s budget.

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Prior to their inclusion in the budget, most major investment projects with identified funding are prioritized internally by the Department of Public Works. These, however, are not selected on the basis of standard or clearly defined criteria for project selection following national or regional development priorities.

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Projections of capital cost of major investment projects, together with the capital costs for the forthcoming two fiscal years, are included in the budget documents.

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Only the capital expenditure aspects and physical progress of major investment projects is monitored and reported by the Public Works Department on an annual basis. Matters relating to operating and maintenance do not form part of the monitoring of project costs.

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There is no recorded value of the Municipality’s equity shares in the public corporations. Information on financial performance is prepared but not published annually.

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Fixed asset registry operating sub-optimally, with only partial information being collected on their usage, age, location, and net value.

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Partial information included in annual financial reports and submitted to the local council, not disclosed to the public.

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Debt owed to the Council of European Development Bank is not reported in the annual financial reports.

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Guaranteeing of municipal loans is controlled solely by MoF including approval, recording, and monitoring.

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This dimension is not used - as set out in the concept note.

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This dimension is not applicable to the Municipality- as set out in the concept note.

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During the two years before the last, the municipality has prepared forecasts of revenue and expenditure aggregates for the budget year and the following two years (with fiscal balance implicit but obvious). Explanation of estimates and underlying assumptions were included for recurrent and capital expenditure, and aggregate incomes from revenues. All of this information was included in the budget documentation for the 2014 and 2015 budget cycles. The Municipality did not prepare a medium term budget for 2016 due to the short time available in connection with TAR but has again prepared mid-term forecasts for the 2017-2019 planning cycle.

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This dimension is not applicable to the Municipality- as set out in the concept note.

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The municipality does not prepare estimates of the impact of revenue and expenditure policy changes but shows only estimates based on changed policy.

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The municipality does not have an overall fiscal strategy.

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No reporting can be done against a fiscal strategy as such a strategy does not exist.

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Three-year estimates of expenditure are presented in the budget for FY 2015, as the municipality did not prepare a medium term budget due to the limited time available after the territorial reform..

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No medium-term budget ceilings have been issued to the administrative/spending units during the past several years.

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There are no strategic medium-term development plans on which to base budget priorities and expenditure estimates

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This dimension is not rated as it would not be useful to compare the MTBP 2016-2018 for the new municipality with the estimates of the previous MTBP for the preTAR municipality.

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A clear budget calendar exists which allows budgetary units sufficient time to complete their estimates, but the calendar was generally not adhered to in 2015 due to the amalgamation of municipality and communes in the middle of the year. They were limited and did not follow usual standards as the budget preparation process during 2015 was disrupted by the transition arrangements of TAR

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Instructions for the preparation of the annual budget have been issued in 2015, but they do not include expenditure ceilings (as in the previous year) given that at the time information was limited on municipal expenditure assignment upon approval of new decentralisation law as well as liabilities inherited from former communes.

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In none of the last three years has the annual budget proposal been submitted to the Council at least a month before the start of the budget year.

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The Council’s review covers fiscal policies, mediumterm fiscal forecasts, medium term priorities and details of revenue and expenditure as all of these items are included in the budget proposals

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The Council has established simple procedures for budget review but they are only partially adhered to and insufficient for effective budget scrutiny.

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The Council has approved the budget before the 31st of December for both the FY2016 and FY2015 budgets. The FY2014 budget was approved almost two months after the start of the year.

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There are clear rules for the Mayor to amend the budget in-year without Council approval. They set strict limits for the Mayor’s powers and are always adhered to.

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Information on taxes and fee rates, including rights and redress procedures are not easily accessible for businesses nor households.

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The department of taxes has adopted a systematic approach for assessing and prioritising compliance risks for revenues from businesses; but it has not intensified efforts towards improved household compliance throughout the territory.

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A simple compliance improvement plan is prepared and followed on an annual and monthly basis, covering audits mainly for the business taxpayer segment. The household taxpayer segment is not covered systematically.

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The stock of revenue arrears at the end of 2015 constitutes 31% of outturn on own revenue collection. Almost 85% of that stock is older than one year.

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The stock of revenue arrears at the end of 2015 constitutes 31% of outturn on own revenue collection. Almost 85% of that stock is older than one year.

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Revenues collected by tax agents are only transferred monthly to the municipality’s Treasury account. All other revenue is directly paid to the treasury account.

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All entities in charge of collecting revenue for the local government undertake complete reconciliation monthly within two weeks of the end of the month.

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The cash and bank account balances controlled directly by the Finance Directorate are reported on a weekly basis.

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A cash flow forecast is prepared for the fiscal year but this is updated at least quarterly, though comprising current expenditures mainly, on the basis of actual cash inflows and outflows.

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Departments and Programs are provided reliable information on commitment ceilings only one month in advance.

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Significant in-year adjustments to budget allocations took place no more than twice in 2015 but these are not conducted in a fairly transparent way.

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Data for 2015 is not comparable to data for 2014 and 2013, as 2015 is based on consolidated data from municipality and communes, whereas 2013 and 2014 apparently excludes the communes.

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Data on the stock and composition of expenditure arrears has been generated for FY 2015, on an ad-hoc basis.

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The Municipality’s payroll is supported by full documentation for all changes to personnel records each month and checked against the previous month’s payroll data. Staff hiring and promotion is controlled on the basis of a pre-approved establishment list attached to an annual staffing plan and a spending limit for next budget ye

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. Personnel records and payroll are updated on a monthly basis, generally in time for the following payroll payment, and require only a few retroactive adjustments

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Authority and basis for changes to personnel records and the payroll are clear. Sufficient controls exist to ensure integrity of the payroll data, noticeably, there is no evidence of audit trails in the HRD control environment.

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Partial payroll audits have been undertaken within two of the last three completed fiscal years.

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Databases or records are maintained for contracts including data on what has been procured, value of procurement and who has been awarded contracts. HSC states there is no sufficient evidence suggesting all data uploaded in the central database are accurate, complete and timely for the majority of procurement methods for goods, services and works.

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The total value of contracts awarded through competitive methods in the last completed fiscal year represents 96% of total value of contracts.

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Three of the six key procurement information elements are complete and reliable for municipal units representing most procurement operations and are made available to the public in a timely manner.

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The procurement complaint system meets criterion (1) and three of the other criteria.

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Segregation of duties is prescribed throughout the municipality’s expenditure process. However, incompatible division of responsibilities still exist thus restraining the efforts to prevent fraud and malpractice within Berat’s municipal organization

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

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Most payments are compliant with regular payment procedures. The majority of exceptions are properly authorized and justified.

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Internal audit is operational for municipal departments and service programs representing only one third of total expenditures and none of the municipal entities collecting the majority of local own revenue.

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Internal audit activities are focused on evaluations of the adequacy and effectiveness of internal controls as well as irregular and wasteful expenditure. Audit activities meet professional standards in various high risk areas.

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An annual audit program was completed in its most part in the last completed fiscal year, as evidenced by the distribution of their reports to the audited municipal units.

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Management provided a partial response to audit recommendations for most municipal entities audited within twelve months of the report being produced.

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Bank reconciliation for Treasury-controlled local government bank accounts takes place at least monthly, usually within 4 weeks from the end of each month. Other bank accounts are reconciled on a monthly and quarterly basis away from the chief finance officer’s desk

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Suspense accounts are not used by Berat Municipality.

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Reconciliation of advance accounts takes place at least annually, within two months from the end of the year. Advance accounts relating to contractors are cleared in a timely way

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Access and changes to records is restricted and recorded, but major risks of asset loss exist on the absence of proper standards and procedures of data safety and protection.

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Coverage and classification of data does not allow direct comparison to the original budget for the main administrative headings.

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Budget execution reports are prepared monthly, and issued within four weeks from the end of each month. Analysis of changes in initial allocations between administrative headings is lacking.

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Concerns exist regarding data accuracy thus weakening the analysis of budget execution. Expenditure is captured at commitment stage only.

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Financial reports for municipal government are prepared annually. They do not compare the outturn with the original approved budget. They include information on revenue, expenditure, and cash balances.

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Financial reports for the Municipality are not submitted for external audit.

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Accounting standards applied to all financial reports are consistent within the existing financial instructions and ensure consistency of reporting over time. The national standards used in preparing annual financial reports are disclosed; these, however, do not generally conform to international public sector accounting standards (IPSAS) and differences are not explained.

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Financial reports of municipal departments and programs representing the majority of expenditures and a minor share of total revenues have been audited using national auditing standards during the period 2011-2013, which is the latest available completed fiscal years. The financial statements of the last three fiscal years never received an opinion by HSC. The audits have nonetheless been useful in highlighting relevant financial irregularity and wasteful expenditure and other material issues and systemic and control risks.

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There is no audit of financial reports specified in 29.1

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There is no audit of financial reports specified in 29.1

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A new Law regulates the functional and operational independence, mandate and organization of High State Control. It enables HSC to operate independently from the executive with respect to the procedures for appointment and removal of the Head of the HSC as well as the execution of its budget. It has unrestricted access to records and information but its mandate is dependent on the MoF for the planning and final allocation of the HSC’ budget.

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Audit reports are not submitted to the legislature.

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Audit reports are not submitted to the legislature.

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Audit reports are not submitted to the legislature.

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Audit reports are not submitted to the legislature.

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Aggregate transfers from the national government fell short the original estimates by only 0.03% in 2013, and exceeded by 46% and 16% in 2014 and 2015, respectively. Even though 2013 and 2014 represent the pre-TAR municipality and 2015 data is not comparable to data from earlier years due to TAR, the outturns are considered a proper reflection of the predictability of transfers.

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Actual earmarked grants fell short the original estimates by 0.2% in 2013, and exceeded by 81% and 29% in 2014 and 2015, respectively. As for HLG-1.1 these outturns are considered a proper reflection of the predictability of transfers.

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Transfer disbursements are timely and regular, in accordance with a pre-defined schedule. Delays occur in the transfer of the first tranche of the unconditional transfer but its weight is lower than 25% of actual disbursements.