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The Revolutionary Government of Zanzibar (Rgoz) PEFA Assessment, 2018

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The Revolutionary Government of Zanzibar (Rgoz) PEFA Assessment, 2018 The Revolutionary Government of Zanzibar (RGoZ) PEFA Assessment, 2018 Public Financial Management assessment following PEFA methodology for the RGoZ The PEFA Secretariat confirms that this report meets the PEFA quality assurance requirements and is hereby awarded the ‘PEFA CHECK’. PEFA Secretariat April 3, 2019 The Revolutionary Government of Zanzibar Public Expenditure and Financial Accountability (PEFA) Assessment, 2018 FINAL Report April 2019 2018 PEFA Assessment Final Report Revolutionary Government of Zanzibar Table of contents ABBREVIATIONS AND ACRONYMS .................................................................................................................... 4 EXECUTIVE SUMMARY ........................................................................................................................................ 5 Purpose and management of the assessment .............................................................................................. 5 Assessment management, coverage and timing ........................................................................................... 5 Impact of PFM Systems on the three main budgetary outcomes .................................................................. 6 Performance changes since last assessment ............................................................................................... 7 1. INTRODUCTION ........................................................................................................................................... 9 1.1 RATIONALE AND PURPOSE ...................................................................................................................... 9 1.2 ASSESSMENT MANAGEMENT AND QUALITY ASSURANCE ........................................................................... 9 1.3 ASSESSMENT METHODOLOGY .............................................................................................................. 10 2. COUNTRY BACKGROUND INFORMATION ............................................................................................. 11 2.1 COUNTRY ECONOMIC SITUATION ........................................................................................................... 11 2.2 FISCAL AND BUDGETARY TRENDS ......................................................................................................... 12 2.3 LEGAL AND REGULATORY ARRANGEMENTS FOR PFM ............................................................................ 13 2.4 INSTITUTIONAL ARRANGEMENTS FOR PFM ............................................................................................ 15 2.5 THE KEY FEATURES OF THE PFM SYSTEM ............................................................................................. 16 2.6 OTHER KEY FEATURES OF PFM AND ITS OPERATING ENVIRONMENT ....................................................... 17 3. ASSESSMENT OF PFM PERFORMANCE ................................................................................................ 18 PILLAR I. BUDGET RELIABILITY ............................................................................................................................ 18 PILLAR II. TRANSPARENCY OF PUBLIC FINANCES .................................................................................................. 21 PILLAR III. MANAGEMENT OF ASSETS AND LIABILITIES .......................................................................................... 29 PILLAR IV. POLICY-BASED FISCAL STRATEGY AND BUDGETING ............................................................................. 38 PILLAR V. PREDICTABILITY AND CONTROL IN BUDGET EXECUTION ......................................................................... 46 PILLAR VI. ACCOUNTING AND REPORTING ........................................................................................................... 63 PILLAR VII. EXTERNAL SCRUTINY AND AUDIT ....................................................................................................... 69 4. CONCLUSIONS OF THE ANALYSIS OF PFM SYSTEMS ........................................................................ 76 4.1 INTEGRATED ASSESSMENT OF PFM PERFORMANCE .............................................................................. 76 4.2 EFFECTIVENESS OF THE INTERNAL CONTROL FRAMEWORK .................................................................... 79 4.3 PFM STRENGTHS AND WEAKNESSES .................................................................................................... 80 4.4 PERFORMANCE CHANGES SINCE A PREVIOUS ASSESSMENT ................................................................... 81 5. GOVERNMENT PFM REFORM PROCESS ............................................................................................... 82 5.1 APPROACH TO PFM REFORMS ............................................................................................................. 82 5.2 RECENT AND ON-GOING REFORM ACTIONS ............................................................................................ 82 5.3 INSTITUTIONAL CONSIDERATIONS .......................................................................................................... 83 ANNEXES Annex 1: Performance indicator summary Annex 2: Summary of observations on the internal control framework Annex 3: Sources of information by indicator Annex 4: Tracking changes in performance based on previous versions of PEFA Annex 5A: Public Sector institutional table Annex 5B: People interviewed 2 | Page 2018 PEFA Assessment Final Report Revolutionary Government of Zanzibar Annex 5C: Documents reviewed Annex 6A: Calculation sheet for Performance indicators PI-1, PI-2.1 & PI-2.3 Annex 6B: Calculation sheet for Performance indicator PI-2.2 Financial year in Zanzibar = July to June Currency = Tanzanian shillings (TZS) Exchange rate = US$1 = TZS 2,300 at 1 October 2018 3 | Page 2018 PEFA Assessment Final Report Revolutionary Government of Zanzibar Abbreviations and acronyms ADB African Development Bank BoT Bank of Tanzania CAG Controller and Auditor General CIA Chief Internal Auditor CPO Central Payment Office (MoFP) CPS Central Payment System CSD Civil Service Department CS-DRMS Commonwealth Secretariat – Debt Recording and Management System DFID Department for International Development (United Kingdom) DPs Development Partners GAAP Generally Accepted Accounting Practice GBS General Budget Support GFS Government Finance Statistics (IMF system) GoT Government of Tanzania HBS Household Budget Survey HoR House of Representatives IAU Internal Audit Unit IFMS Integrated Financial Management System IMTC Inter Ministerial Technical Committee INTOSAI International Organisation of Supreme Audit Institutions IPSAS International Public Sector Accounting Standard LGAs Local Government Authority MDAs Ministries, Departments, and Agencies MoFP Ministry of Finance and Planning (Zanzibar) MKUZA Mkakati wa Kukuza Uchumi na Kupunguza Umaskini Zanzabar (Zanzibar Strategy for Growth and Reduction of Poverty: ZSGRP). MTEF Medium-term Expenditure Framework OCAG Office of the Controller and Auditor-General PAC Public Accounts Committee (HoR) PEFA Public Expenditure and Financial Accountability PFMA Public Finance Management Act, 2016 PFM-PR Public Financial Management – Performance Report (PEFA report) PFMRP Public Financial Management Reform Programme PSRP Public Sector Reform Programme RGZ Revolutionary Government of Zanzibar TAB Tax Appeals Board TAP Tax Administration Project TIN Taxpayer identification number TRA Tanzania Revenue Authority TZS Tanzania shilling VAT Value Added Tax VRN VAT registration number ZIFA Zanzibar Institute of Financial Administration ZRB Zanzibar Revenue Board ZSSF Zanzibar Social Security Fund ZSTC Zanzibar State Trading Corporation 4 | Page 2018 PEFA Assessment Final Report Revolutionary Government of Zanzibar Executive summary Purpose and management of the assessment The overall objective in preparing this document is to assess the public financial management (PFM) system operated by the Revolutionary Government of Zanzibar (RGoZ), using the 2016 PEFA Performance Measurement Framework. Since 2003/2004 the RGoZ has undertaken reforms in Public Financial Management (PFM) to address challenges in the management and control of public finances and to promoting good financial governance and accountability. These reforms have been undertaken under the PFM Program (supported by Norwegian Embassy between 2007/08 and 2011/12) and PFMRP in phases up to the present, and the following milestones have been achieved: 1. Improved budget, budget execution and accounting, following the implementation of the IFMIS; 2. An integrated Human Resource Management and Payroll system has been procured; 3 Human Resource Capacity has been strengthened, through a significant amount of training, including establishing internal audit units and PMUs in all MDAs; 4. Systems for budgeting and monitoring have been improved not uploaded directly to the IFMIS; 5. Aid management information systems and procedures have been installed. This “PEFA Assessment” (“Assessment”) provides an analysis of the current performance of all aspects of Zanzibar's PFM systems, and establishes a baseline against which future developments can be measured. Assessment management, coverage and timing The assessment was managed by an Oversight Team Chaired by the Principal Secretary and comprising senior staff of the Ministry of Finance and Planning. Beneath this team, a Task Force Secretariat was established, and an Assessment Manager appointed. The
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