The International Monetary Fund (IMF) reported in its 2002 Report on the Observance of Standards and Codes (ROSC) that Tanzania's reform efforts had yielded some enhancements to fiscal transparency. Chief among these were the newly introduced Integrated Financial Management System (IFMS) and the Public Expenditure Review, as well as several legal reforms. However, the 2002 ROSC found that more legislative reforms were needed to accompany the ongoing decentralization of political, administrative, and financial responsibilities. The government's 2005 Letter of Intent to the IMF acknowledged the need to improve its internal and external audits of public spending, and called for greater parliamentary oversight and a further strengthening of the National Audit Office. The 2007 IMF Article IV Consultations report notes that Tanzania has expanded participation in the IFMS to 87 out of the 122 local government agencies and has staff training programs on the use of the system in place. Tanzania does not subscribe to the IMF's Special Data Dissemination Standard but participates in the less rigorous General Data Dissemination System.
General Overview
In Appendix III of its 2007 Article IV Consultation report on Tanzania, the International Monetary Fund (IMF) stated that "Economic and financial statistics are adequate for surveillance and program monitoring purposes, but remain weak despite progress in some areas and considerable technical assistance" (p. 11). The report noted that Tanzania provides only a limited number of statistical publications, lacks a well-articulated publication policy, and offers only limited statistical reporting for Zanzibar. Writing for the International Budget Project, Open Budget Initiative, R. Rajani et al. reported that Tanzania achieved an Open Budget Index (OBI) score of 48%, which denotes "some" openness of the budget process. Of the seven budget documents tracked by the OBI, Tanzania produces four: the Pre-Budget Statement, Executive's Budget Proposal, In-Year Reports, and the Auditor's Report. All of these are available to the public. Tanzania does not produce a Citizens' Budget, Mid-Year Review, or Year-End Report, even for internal government consumption. The informational value of the Executive's Budget Proposal was rated as 57%, and the Audit Report contains no information as to whether or not the auditor's recommendations were implemented. Finally, Rajani et al. note that Tanzania does not hold public hearings as part of its budget process.
In its 2002 Report on the Observance of Standards and Codes (ROSC) on Fiscal Transparency, the IMF enumerated several reforms that had already been set in place to enhance transparency. A public expenditure review process was introduced, an integrated financial management system was implemented across all ministries and other government agencies and entities, a medium-term expenditure framework was developed, and new measures were created to improve control over government commitments and spending. In addition, Tanzania began holding "consultative group meetings" with its various stakeholders and drew up new legislation covering fiscal management and procurement. The ROSC added that additional reforms were in process. For instance, the government planned to require sub-national government entities to produce and make public quarterly revenue and expenditure reports and was drafting a Public Service Law that would elevate the level of accountability within the civil service. The ROSC noted that the government was already publishing quarterly reports on the execution of the budget in the area of central government operations.
In a June 14, 2005, Letter of Intent to the IMF, the Tanzanian government acknowledged the continuing need to improve procedures for the internal and external audit of public spending. The letter spoke of a greater oversight role for parliament regarding the reallocation of funds and spending controls. According to this document, the government planned to improve the National Audit Office's (NAO) capacity, strengthen its ability to access records, and to expedite the production of audited budget reports for parliament. The letter also addressed its budget objectives for the year, which it cited as "maintaining macroeconomic stability and translating the policies stipulated in the National Strategy for Growth and Reduction of Poverty [MKUKUTA in Kiswahili]... into the budget" (p. 8). In the letter, the government also committed itself to increasing the involvement of local government agencies in the execution of spending initiatives. To accomplish its goals, the government declared that MKUKUTA interventions would be more comprehensively costed and that a better budget-reporting system would be implemented in the case of MKUKUTA activities. The newly instituted Integrated Financial Management System (IFMS) would also be strengthened. Decentralization of expenditures would continue, with local government agencies becoming more fully integrated into the budget process at the preparations stage, so that their plans can be reconciled with both MKUKUTA and the central government's medium-term expenditure framework. Better monitoring of expenditures was also seen as necessary, and closer supervision of the local-level budget process was called for. For instance, local government agencies seeking additional funds would be required to submit detailed monthly reports of expenditures.
The 2007 IMF report noted that, for FY 2006-2007, the Tanzanian government had largely attained its fiscal targets, due to a robust economy and the implementation of administrative and policy reforms. Among these reforms, the report singled out the integration of the Tanzania Revenue Authority's operational integration and its adoption of computer technology. The report added that the promotion of transparency and accountability in public spending remains a primary focus. To this end, participation in the IFMS has now been extended to include 85 local government authorities (out of a total of 122). Training programs in the IFMS are in place at both the national and local levels of government. Full staffing is now in place for both the Public Procurement Regulatory Authority and the Public Procurement Appeals Authority, and adequate resources have been made available to them, according to the 2007 IMF report. Finally, the report noted that efforts to strengthen the NAO are ongoing, and added that, for the second year in a row, the NAO has successfully produced its reports on schedule.
According to the IMF's Special Data Dissemination Standard (SDDS) and General Data Dissemination System (GDDS) websites, Tanzania does not yet subscribe to the SDDS, but has participated in the less rigorous GDDS program since 2001. The 2004 IMF ROSC data module for Tanzania suggested that, with a concerted action plan, SDDS subscription for Tanzania might be possible by 2009. However, the "statistical issues" chapter of the 2007 IMF Article IV Consultation report on Tanzania makes no comment as to whether that goal remains within reach. Reporting to the IMF on central government income and expenditures is broadly consistent with the Government Finance Statistics Manual of 1986, but there are discrepancies in the treatment of loan and transfer payment data. Extra-budgetary fiscal data are not included in the reports submitted to the IMF, nor is information on the general government. The report adds that "despite improvements in the recording of government transactions, discrepancies remain between revenue and expenditure data, on the one hand, and financing data" (p. 13). These discrepancies are attributed to the lack of a "fully integrated set of accounts," as well as the fact that reporting agencies rely on disparate source data and follow different reporting schedules. In addition, the definition of government operations does not include Zanzibar, which has its own Ministry of Finance. Recent efforts to improve the situation include the establishment of a database of donor-funded initiatives, the computerization of the accounting system has been completed, and the Zanzibari MoF has created a fiscal reporting unit. Work remains to be done on extending the IFMS to cover extra-budgetary revenues and expenditures and to provide greater detail regarding donor-funded spending.
The IMF's 2002 ROSC reported that the Constitution of Tanzania provides for a clear separation among the roles of the executive, legislative, and judicial branches of the Tanzanian government. Per the Constitution, the executive and legislature share duties relating to fiscal matters. The law spells out the terms according to which public funds are to be appropriated and spent. Articles 137 and 138 of the Constitution assign the National Assembly the responsibility to approve the budget and to legislate taxes. Expenditures, which are made out of the Consolidated Fund, are covered in Article 139. The ROSC added that new Public Finance Act and Regulations took effect in July 2001. These separate out the different accounting responsibilities of the Ministry of Finance and spending units within the government. The ROSC goes on to report that the budget is formulated by a cabinet of ministers, and is then submitted to the National Assembly for approval.
The central and regional administrative operations are consolidated and are identifiable in the budget by their appropriations. Individual initiatives may receive funds from special-purpose sources, such as the Road Fund, comprising toll receipts and other earmarked funds. Such special operations do not form a part of the consolidated data. The ROSC noted, however, that they are subject to internal audit and National Assembly oversight. While government agencies and institutions may generate and retain their own revenues, they can avail themselves of funds from the central budget in the case of shortfalls. Local government accounts are not consolidated with the central and regional data, which the ROSC attributed to the fact that central and local governments follow a different fiscal year calendar. This problem is being addressed, and there are initiatives as well to fortify the subnational level procedures and practices of fiscal management. It is to the local level that responsibility falls for the delivery of education and health services, road building and maintenance, farm extension services, and the rural water supply. Funding sources are enumerated in the Local Government Finance Act, which calls for agreement between the MoF and the President's Office for Regional Administration and Local Governments (PORALG) prior to the imposition of any new taxes or fees. Unfortunately, the ROSC reported, such permission is too easily achieved, and fees and taxes have proliferated. PORALG is also empowered to authorize local governments to take out loans. However, the ROSC reported that, "to date, they have not borrowed from financial institutions, nor has a municipal credit market ever emerged. A local government loan board has provided very limited financing" (p. 7).
The1995 Bank of Tanzania Act clearly defines the relationship between the central government and the central bank. It confers independence upon the BoT in both the administrative and policy-making spheres. The Act also establishes the BoT as the government's fiscal agent and grants an overdraft facility. However, the 2002 ROSC noted that this right has not been employed by the government in recent years. Further, since the 1990s, the government has withdrawn its involvement in public financial institutions, which have been privatized. This has freed the BoT from the necessity of participating in quasi-fiscal activities.
By law, the Tanzania Revenue Authority (TRA), an autonomous agency, is authorized to collect the central government's taxes. The ROSC reported that the TRA reaches out to inform the public of the system of taxes through pamphlets and workshops. Crackdowns on tax evasion and smuggling are helping to improve compliance with the tax code, as has the introduction of a streamlined procedure for tax appeals. Tax officials are subject to a Code of Conduct. The government as a whole is also working to improve ethical standards. The ROSC noted that the President's Office created a good governance unit in 2001, following the 2000 appointment of a new Minister of State for Good Governance. The Civil Service Department has published a Code of Ethics and Conduct to which all civil service staff must comply. The individual ministries have adopted individual strategies to fight corruption. The ROSC argued that, with the trend toward delegating authority over political, financial, and administrative concerns to the regional and local governmental level, it was increasingly important that legal reforms be enacted that would clarify the relationships among the various levels of government (especially with regard to taxes). In addition, the ROSC called for new fiscal regulations geared toward enhancing medium-term sustainability and for the adoption of explicit requirements for transparency. The ROSC added that greater legislative oversight of the budget process could be achieved by introducing the fiscal policy and medium-term budget framework during the planning stages of the budget and by reviewing economic and budget performance at the mid-year point.
In a Letter of Intent to the IMF dated July 14, 2005, Tanzania acknowledged the need to improve its internal and external auditing of public spending and to enhance parliament's oversight role over budget reallocations and expenditures. The IMF's 2002 ROSC fiscal module found Tanzania's budget process to be "open and well structured" (p. 10) but stressed compliance over performance. The ROSC describes the budget process as beginning with a formal Public Expenditure Review, which yields budget guidelines that form the medium-term macroeconomic framework, budget priorities, resource allocation, and other budget-related guidance. Since the 1998-1999 budget year, Tanzania has adopted performance-based budgeting. However, the ROSC found that the preparation of the budget was not integrated, leading to less-than-rational allocation of resources and difficulty in identifying capital-project costs. The situation is not helped by the fact that the source of much of the development budget comes from external donors. The ROSC found that the introduction of sectoral budget committees in 2001 has helped to strengthen the legislature's budget oversight.
According to the ROSC, the budget speech must include a review of the prior year's budget implementation, plans to foster economic growth and reduce poverty, a statement of the current year's budget objectives and policies, and new proposals for revenues. The ROSC adds that "the speech document also contains data on selected economic indicators, including on fiscal performance for the past ten years" (p. 10). Other fiscal reporting is subject to rules. Budget execution results must be reported on a quarterly basis, and audited annual reports must be submitted to the national assembly in a timely manner. This last is stipulated in provisions of the 2001 Public Finance Act, and the long delays of past years have been shortened, to some extent, according to the 2002 ROSC,
While acknowledging improvements, the 2002 ROSC found that important deficiencies still needed to be addressed. Specifically, the ROSC identified the following: "recurrent and development expenditures are not based on the same accounting system, and comprehensive information on the execution of donor-financed projects is not available. Recurrent expenditure in five budgetary votes..., although recorded in the Integrated Financial Management System, is not integrated online with the central system; date are made available to the Accountant General... and then consolidated in a separate spreadsheet with date for other votes" (p. 13). The IMF's 2002 ROSC noted significant improvements in Tanzania's budget and accounts classifications, stating that they are now in line with the economic classification employed by the Government Finance Statistics. Another improvement can be seen in the adoption of a macroeconomic framework derived from the Public Expenditure Review process. The adoption of the Public Procurement Act and Regulations (2001) has led to improved procurement procedures, as well, and transparency has been introduced into the pay scales of civil servants. However, the ROSC states that "no sensitivity analysis of budget estimates to changes in macroeconomic variables is carried out" (p. 10) and notes that there has been no enhancement of the reliability of budget estimates.
The 2007 IMF report stated that the promotion of transparency and accountability in public spending remains a primary focus of the Tanzanian government. To this end, participation in the IFMS has now been extended to include 85 local government authorities (out of a total of 122). Training programs in the IFMS are in place at both the national and local levels of government. Full staffing is now in place for both the Public Procurement Regulatory Authority and the Public Procurement Appeals Authority, and adequate resources have been made available to them, according to the 2007 IMF report. Finally, the report notes that efforts to strengthen the NAO are ongoing, and reports that for the second year in a row, the NAO has successfully produced its reports on schedule.
The IMF's 2002 ROSC on fiscal transparency found Tanzania's coverage of central government fiscal operations to be adequate. The 2001 Public Finance Act requires the budget to include annual revenue and expenditure estimates, as well as estimate of upcoming financial requirements. The budget covers four separate topics: Ministries, Departments, Agencies, and Regions. The budget must also include estimates of funds to be allocated to urban and district councils, and must identify expenditures for defense. The ROSC added that the budget includes information relevant to the current fiscal year and the two years prior, but does not include forward projections. For the year just prior, the document includes the approved spending and revenue estimates, and for the year before that it includes the actual budget outcomes. Tanzania's Public Expenditure Review process, which constitutes the country's medium-term framework, is used to develop a broad sense of necessary resources for the upcoming two years, but these figures are not made a part of the budget document. The results of Public Expenditure Review studies are, however, published separately.
The ROSC found that budget coverage is generally quite comprehensive, but noted that there was incomplete coverage of donor fund disbursements handled by the Exchequer, as well as of in-kind grants (pharmaceuticals, services, vehicles, etc.). The budget also does not include mention of tax expenditures. Also omitted from the budget is data on contingent liabilities. There is a legal requirement that the Accountant General submit its annual accounts statement to the Controller and Auditor General. Such reports must include details on contingent liabilities, and they must be forwarded to the National Assembly for scrutiny. There is a monthly report on domestic debt, but the ROSC judged it to be insufficiently detailed. The MoF and BoT jointly maintain a database on Tanzania's external debt, and they regularly share information relevant to loans, disbursements, and debt service. The system in place at the time of the ROSC, however, was not capable of generating analytical data on the government's debt. The ROSC recommended that budget coverage should be expanded to include financial projections, government financial assets, public debt, and contingent liabilities, as well as an evaluation of the results achieved by major agencies that are the recipients of large budget transfers. In addition, the ROSC suggested that Tanzania begin to publish advance release calendars and stick to the published release schedule, inform the public of fiscal reforms, and create a grievance procedure at both central and local government levels whereby the public can bring their issues to the attention of the government.
The IMF GDDS and SDDS websites disclose that Tanzania does not subscribe to the IMF's SDDS, but has participated in the IMF GDDS since 2001. According to the 2004 IMF ROSC data module, with the implementation of a rigorous action plan, SDDS participation might be possible by the year 2009.
The Tanzanian government submitted a Letter of Intent to the IMF in 2005 in which it asserted that there was "a clear need to strengthen internal and external audit of public expenditure" (p. 10). Greater legislative oversight of funding reallocations was called for, along with stronger enforcement of spending limits. To do this, the government stated that it would enhance the NAO's capacity, especially in order to streamline the reporting process in order to get the audited budgets into the hands of parliament by their legal due date.
The IMF's 2002 ROSC on fiscal transparency reported that Tanzania has improved the reliability of its budget data, but that discrepancies do continue. The Medium-Term Expenditure Framework is credited with much of the observed improvements, along with the Public Expenditure Review. The use of supplementary budgets has been avoided recently, but there has been a reliance on in-year re-appropriations. In addition, regular account reconciliation has also helped to improve the quality of fiscal data, in part due to the introduction of the IFMS. The ROSC states that "external audit is legally independent of the executive branch" (p. 14). Per the Constitution, the Controller and Auditor General is appointed by the president. The autonomy of this office has been strengthened with the adoption of the Public Finance Act in 2001. The Controller and Auditor General audits the Accountant General's submitted accounts and is empowered to make recommendations regarding fund management to the MoF. The ROSC cautions, however, that the Controller and Auditor General has only limited ability to enforce compliance, and notes that his recommendations are not usually heeded. At the time of the ROSC, the newly introduced IFMS had yet to yield improvements in the quality of external audits.
The Constitution requires the Controller and Auditor General to review and approve all withdrawals from the Consolidated Fund, ascertain that withdrawals from the Fund are properly applied to the purposes for which they were intended, and audit and report at least once annually. According to the 2006 NAO report, these reports must cover "the accounts of all officers and authorities of the Government of the United Republic, the accounts of all courts of the United Republic (other than courts no part of the expenses of which are paid directly out of monies provided by Parliament) and the accounts of clerks of the National Assembly." Further, the Constitution assigns to the Controller and Auditor General other duties regarding the government's public accounts and the accounts of other public agencies, and confers on this officer the authority to require access to all information that he deems necessary to the performance of his audit function. In turn, the Constitution requires that he submit all reports to the president, and that they then be submitted to the National Assembly for scrutiny. Finally, the Constitution provides for four assistant auditor generals to assist the Controller and Auditor General in his tasks. Each of these assistants is given a particular area of responsibility: ministerial accounts, regional accounts, the Treasury, and development management and administration. There is also a performance audit unit and a pension audit unit, whose heads report to the Controller and Auditor General. However, the IMF's 2002 ROSC has pointed out that the Controller and Auditor General has been routinely understaffed and lacks the requisite technical skills. The ROSC recommended that Tanzania improve its audit procedures by establishing a training program in the computerized audit system, instituting measures to enforce regulatory compliance and disciplinary procedures for financial misdeeds, increasing resources for training and capacity building in the office of the Controller and Auditor General, and producing higher quality audit reports in a more timely fashion.
According to the NAO website, the legal mandate for the NAO is the Constitution (Article 143), while the duties of the Controller and Auditor General are set forth in the Public Finance Act of 2001 (revised 2004). The 2006 NAO report on the Mandates of its Supreme Audit Institution describes the auditing roles of the Controller and Auditor General, which are limited to government departments and ministries. Public enterprises are audited by the Tanzania Audit Corporation, which is itself subject to audit by the Controller and Auditor General. According to the 2007 IMF report, efforts to strengthen the NAO are ongoing and, for the second year in a row, the NAO has successfully produced its reports on schedule.
International Monetary Fund, "Report on the Observance of Standards and Codes - Fiscal Transparency Module," Country Report No. 02/59, Washington, D.C.: IMF, March 2002. Available from International Monetary Fund website. Accessed on November 26, 2007. (IMF 2002)
International Monetary Fund, "Tanzania - Letter of Intent and Memorandum of Economic and Financial Policies," July 14, 2005. Available from International Monetary Fund website. Accessed on November 26, 2007. (IMF 2005)
National Audit Office, "Tanzania - Mandates of the Supreme Audit Institutions," 2007. Available from National Audit Office of the United Kingdom website. Accessed on October 12, 2006. (NAO 2007)
Rajani, R. et al., "Tanzania - Open Budget Index 2006," International Budget Project Open Budget Initiative, 2007. Available from Open Budget Index website. Accessed on November 26, 2007. (Rajani et al. 2007)
International Monetary Fund, "United Republic of Tanzania: 2007 Article IV Consultation and First Review Under the Policy Support Instrument--Staff Report; Staff Supplement; Public Information Notice and Press Release on the Executive Board Discussion; and Statement by the Executive Director for the United Republic of Tanzania," Country Report No. 07/246, Washington, D.C.: IMF, July 2007. Available from International Monetary Fund website. Accessed on November 26, 2007. (IMF 2007)
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