The Controller and Auditor General (CAG) reports published in April 2024 revealed crucial insights into Tanzania’s financial health and its public sector performance for the year ended June 30th, 2023. These reports are pivotal in ensuring transparency, accountability, and the effective use of public resources.
Para 56 of the Tanzania Financial Reporting Standard (TFRS 1) requires all public sector entities and Public Interest Entities (PIEs) to publish on their websites the report by Those Charged with Governance alongside audited financial statements not later than 30 days after the approval of the audited financial statements.
Despite the standard requirement, several public sector entities have not yet published their 2022/23 reports on their websites. On the same note, the Ministry of Finance has not yet published the 2022/23 consolidated financial statements on the website.
IMF’s Fiscal Transparency Code states, among other things, 'Fiscal reports [Audited or final annual financial statements] should be published in a frequent, regular, and timely manner'. The timeliness of publishing financial statements after the end of the fiscal year helps to ensure the relevance of the information to users.
Maybe it’s time for the government to consider a practice of timely publishing of the consolidated financial statements and financial statements of other public entities in the spirit of improving information relevancy, adhering to transparency codes, and most importantly, complying with our reporting standard (TFRS 1).
This article will delve into the public sector highlights from the CAG's reports. Further updates may be made as and when the entities publish their financial statements.
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PART 1: Revenue Collection Performance
How much was collected?
One of the significant highlights of the financial statements is the overall revenue collection performance. Tanzania recorded a notable increase in revenue collection, achieving a 9% growth compared to the previous fiscal year (2021/22).
For 2022/23, the Government collected TZS 41.88 trillion, equivalent to 100.96% of the planned estimates of TZS 41.48 trillion. Therefore, there was an over-collection of TZS 400 billion, representing approximately 0.96% of the estimated collections.
Government Collections for the year 2022/23 (All amounts in TZS trillion)
Type of Revenue | Actual 2022/23 | Budget 2022/23 | Percentage vs Budget | Collection prior year | Annual Change % |
Tax Revenue | 22.583 | 23.652 | 95.48% | 20.945 | 7.82% |
Non-tax collections | 2.7095 | 3.352 | 80.83% | 2.709 | 0.02% |
LGAs’ Own Revenue | 1.222 | 1.012 | 120.75% | 0.892 | 37.00% |
Domestic Borrowings | 6.124 | 5.780 | 105.95% | 6.489 | -5.62% |
Grants | 0.759 | 1.101 | 68.94% | 1.305 | -41.84% |
External concessional Borrowings | 5.523 | 3.547 | 155.71% | 4.149 | 33.12% |
External non-concessional Borrowings | 2.959 | 3.034 | 97.53% | 1.809 | 63.57% |
TOTAL | 41.88 | 41.48 | 38.298 |
Revenue collected above planned estimates was mainly contributed by an over-collection of about TZS 2 trillion from External concessional Borrowings.
1.1 Distribution of sources of the collected revenue (TZS 41.88 trillion)
The main source of revenue collections came from tax (54%), followed by domestic borrowings (15%) and external concessional borrowings (13%).
See the chart below:
1.2 Deposit to the Government’s Consolidated Fund
Article 135 of the Constitution of Tanzania requires all government revenue to be deposited in the Consolidated Fund.
Out of TZS 41.88 trillion collected, TZS 38.447 trillion was deposited in the Consolidated Fund. The remaining TZS 3.433 trillion (equivalent to 8.2% of collections) was not deposited. The CAG further clarifies that despite the funds not being deposited into the Consolidated Fund, they were audited and reported through respective project reports.
1.3 Other Highlights of Revenue Collection Performance
a) In the recent five (5) years, Tanzania's tax yield (tax-to-GDP ratio) has remained lower than other East African countries (Kenya, Uganda, Rwanda, and Burundi). That means, compared with other EA countries, a smaller portion of the country's economic output is being collected as taxes. Tanzania's tax yield ranged from 11.70% to 12.80%; while Kenya (13.7% - 15.5%), Uganda (12.1% - 15.1%), Rwanda (15% - 16.3%), and Burundi (15.2% - 18%).
b) Taxes Amounting to TZS 10.489 Trillion are tied in the Appellant Machinery Pending Ruling due to several limiting reasons affecting appellant machineries. However, It was not explained whether the Tax Authority evaluated the probability of the court rulings to determine the percentage likelihood in favour of the Tanzania Government.
c) 49% of VAT-registered taxpayers in nine (9) tax regions did not file VAT returns.
d) Deficiencies in the management of non-tax revenues including, underperformance of services, uncollected house rents from government institutions and civil servants (4.8B), unbilled revenues (768M), uncollected revenues (61B), idle cash (4B), etc.
1.4 Revenue Management by Public Authorities
During 2022/23, CAG also conducted 215 audit engagements of public sector entities (PSEs). Below are some selected highlights of the issues noted regarding some PSEs’ revenue management:
i. 66 public sector entities out of 215 entities budgeted to collect revenue amounting to TZS 799.09 billion. TZS 514.39 billion (64%) was collected, resulting in a shortfall of TZS 284.71 billion (36%).
ii. 66 public entities had significant long outstanding receivables amounting to TZS 2.92 trillion, relating to services rendered to customers, but not paid for periods of more than 12 months. The top ten (10) entities with the highest long outstanding receivables are HESLB (808B), TPDC (475B), TANESCO (435B), MSD (366B), NHIF (208B), TTCL (107B), TPA (93B), TCRA (57B), TMDA (35B), and CDTF (34B).
iii. Water Supply and Sanitation Authorities lost water with revenue worth TZS 162.25 billion before reaching the customers. TZS 162.14 billion was lost in the prior year (2021/22).
According to EWURA, tolerable water loss (non-revenue water) should not exceed 20%; but the 30 water authorities had non-revenue water above 20%. Among them, eight (8) water authorities had water loss above 40%; which are Kyela-Kasumulu (41%), Dar-es-salaam (42%), Karatu (45%), Korogwe (45%), Arusha (46%), Mtwara (48%), Ngara (48%), and Kigoma (65%).
iv. There were inefficiencies in the recoverability of debts by Water Authorities. For example, DAWASA, Arusha, and Mtwara water authorities had customers with outstanding bills of TZS 10.87 billion, TZS 809.2 million, and TZS 1 billion respectively. The customers with outstanding bills were not disconnected from the service.
PART 2: Public Expenditure Management
How much was spent?
TZS 39.523 trillion was issued for expenditures from the Consolidated Fund as exchequer disbursements. The exchequer issues exceeded the revenue collections deposited by TZS 1.742 trillion (equivalent to 4.5%), resulting in an overdraft as of 30 June 2023.
2.1 Distribution of Exchequer Issues
Out of TZS 39.523 trillion issued from Consolidated Fund, TZS 31.917 trillion (80.8%) was disbursed to the Central Government Entities, and TZS 7.606 trillion (19.2%) was disbursed to the Local Government (PO-RALG, RAS and LGAs).
We understand that the disbursements to the Central Government Entities include the funds used to pay Public Debt. The exact amount was not mentioned in the CAG's general report. For the year ending 30th June 2022, the funds used for the public debt and general services was TZS 10.4 trillion. The table below shows the distribution of funds issued for expenditure.
Distribution of Funds issued (amounts in TZS trillion)
Funds issued to: | RECURRENT EXPENDITURE | DEVELOPMENT EXPENDITURE | TOTAL |
Central Government Entities | 20.99* | 10.927 | 31.917 |
Local Authorities | 5.206 | 2.4 | 7.606 |
TOTAL | 26.196 | 13.327 | 39.523 |
*The Central Government's recurrent expenditure might also include funds issued for Public Debt and General Services
How were the funds spent?
2.2 Expenditure by Central Government Entities
As explained earlier, Central Government Entities [i.e. Ministries, Agencies, Commissions, and Departments, including Public Debt Vote] received TZS 31.917 trillion, 80.8% of all funds issued from the consolidated fund.
From the funds received, central government entities spent TZS 31.823 trillion, which was 99.7% of the exchequer released; hence, TZS 94 billion was not spent and surrendered to the Pay Master General (PMG).
Below are some selected highlights of CAG's audit findings to the Central Government:
a) Four (4) government entities spent TZS 10.20 billion on recurrent and development activities outside their approved budgets.
b) 13 Government Entities Made Payments amounting to TZS 2.87 billion without Demanding EFD Receipts.
c) TZS 1.78 billion set aside for the Rehabilitation of Chancery for Tanzania's high commission in Uganda remained unused for five years from 4 July 2018 to 30 June 2023. On the other hand, the Permanent Mission of Tanzania to the UN in New York spent the guarantee deposit funds amounting to TZS 675 million without authorization because the Ministry did not release funds.
d) High Rental Expenses for Tanzania Missions Abroad - Annual rent of TZS 1.58 billion, TZS 1.42 billion, and TZS 1.19 billion were paid by Tanzania Embassies in Moscow, Abu Dhabi and Vienna, respectively. The missions seem to have no plans to reduce the costs.
e) The contract sum to rehabilitate the Tanzanian’s old chancery building in Washington DC, USA was double the Engineer's estimate. The engineer estimated TZS 5.98 billion, while the contract sum was TZS 11.57 billion.
In the same project, CAG observed the following:
The Contract Sum included USD 357,428.58 for services already covered by the Ministry in another contract with another consultant.
There was double pricing of Local Authorities’ Charges of USD 170,204.07.
The VAT rate in Washington is 6%, but the charged rate in the contract was 20%. TZS 153.99 million was already paid as VAT based on a 20% rate.
There were unapproved Additional Costs of USD 418,790
The shortlisted Firms for the tender were not evaluated for their Capability
The project was not in the approved Annual Procurement Plan.
f) TANROADS was charged an interest of TZS 34.82 billion during the financial year 2022/23 due to a delay in paying contractors and consultants for road construction projects.
g) An Arbitration Settlement amounting to USD 12 million has been unpaid since 2014, accumulating interest charges amounting to TZS 17.48 billion as of 30 June 2023.
h) RUWASA Awarded Tenders at Prices Seven (7) Times Higher Than the Approved Budget. The approved budget was TZS 45.3 billion and tenders were awarded for TZS 317.75 billion.
i) Agricultural Inputs Trust Fund (AGITF) anticipated a loss in loans issued amounting to TZS 20.43 billion, which is 80% of the outstanding loans (25.42B) as of 30 June 2023.
j) The Government has not reimbursed NSSF TZS 215 billion for the Construction of Nyerere Bridge (Kigamboni) as part of their contribution. Additional interest of TZS 26.88 billion was charged up to 30 June 2023.
k) Tanzania Police Force had Long Outstanding Liabilities in USD since 2015. Because of exchange rate fluctuations, the liabilities' value in TZS had increased by TZS 24.10 billion, an additional 10% of the original debt in TZS.
l) The drugs in 10 hospitals, worth TZS 1.99 billion, were found to have expired for up to 18 years but were not disposed of by the respective hospitals.
m) Oil Marketing Companies benefited from TZS 18.94 billion collected from the public. The funds were supposed to be paid to Oil Suppliers as Demurrage fees.
2.3 Expenditure by Local Government Authorities
As explained earlier, Local Authorities [i.e. PO-RALG, RAS, and LGA] received TZS 7.606 trillion, 19.2% of all funds issued from the consolidated fund.
The funds received were 86% of the expected exchequer receipts (8.82T) by the Local Authorities. The shortfall was experienced more in the Development Budget than the Recurrent Budget. The recurrent funds received were 94% of the budget, and the development funds received were 73% of the budget.
The shortfall in the development budget was highly felt in regions’ specific budgets. The Ministry itself (PO-RALG) received 99% of its development budget.
Regions which received above 75% of their development budget were Songwe (75%), Mwanza (75%), Pwani (78%), DSM (79%), and Geita (80%).
The regions which received less than 55% of their development budget were Lindi (55%), Singida (54%), and Dodoma (51%).
2.3.1 Funds Allocations to the Regions
89% of all exchequer issues allocated to Local Authorities were distributed to 26 regions of the Tanzania Mainland. The remaining 11% was issued directly to the Local Authorities Ministry (PO-RALG) mostly to finance Development Projects.
53% of the 'regions’ share' was allocated to 10 regions as follows: Dar-es-salaam (576B), Mwanza (444B), Morogoro (366B), Tanga (337B), Arusha (330B), Mbeya (326B), Kagera (308B), Pwani (308B), Kilimanjaro (293B), and Dodoma (290B).
10 regions which received the least share (25% of issued funds) were Mtwara (206B), Iringa (205B), Shinyanga (199B), Singida (189B), Simiyu (186B), Njombe (175B), Songwe (165B), Lindi (148B), Rukwa (131B), and Katavi (105B).
2.3.2 Comparison of Regions’ Collection Performance and Funds Allocation
According to data from the Tanzania Revenue Authority (TRA), the gross Domestic Revenue Collections from the regions during 2022/23 was TZS 5.3 trillion. Additionally, for the year 2022/23 LGAs’ reported their own-source collection of TZS 1.2 trillion, making total domestic collections from the regions TZS 6.5 trillion.
Apart from domestic collections, TRA also reported additional revenue of TZS 18.4 trillion from Customs and Large Taxpayers (i.e. TZS 9.35 trillion from customs and excise and TZS 9.05 trillion from Large Taxpayers). N.B: For tax administration reasons, the tax from the Large Taxpayers is not reported as part of regions’ tax collections (domestic revenue).
Compared with the total exchequer issues from the treasury to Local Authorities (TZS 7.606 trillion), the additional amount received by Local Authorities over and above their domestic collections was TZS 1.106 trillion. The additional amount is equivalent to 6% of the other tax revenue collected by TRA from Customs and Large taxpayers.
What’s could be the Implication?
The domestic tax collected from the large taxpayers (who are also located in different local authorities) was not directly returned to the respective local authorities, but was mainly used to finance the Central Government budget. Also, there is very minimal contribution of non-domestic (customs) tax collections to the local authorities’ budgets.
2.3.3 Other Highlights on Local Authorities Expenditures
Below are some selected highlights of CAG's audit findings to Local Authorities:
a) Projects’ funds amounting to TZS 7.73 billion in 25 LGAs were diverted to finance other projects and recurrent activities
b) Forgery in Mpimbwe District Council by submission of forged minutes for the finance, administration, and planning committee meeting. The forged document was used to reallocate the personal emoluments budget by adding TZS 2 billion.
Also, in the same district, payments totalling TZS 1.23 billion were made for various activities that were never carried out and failed to be detected by internal controls and the accounting system
c) Accumulated interest claims of TZS 2.23 billion for late payments of Contractors' interim certificates. Late payments were caused by a delay in the disbursement of project funds caused by the Ministry of Finance.
d) Nine (9) LGAs had procured building materials worth TZS 868.43 million above the required quantity for the particular projects, and thus the materials remained unutilized.
e) TZS 7.42 billion was paid by 65 LGAs to suppliers, contractors and other service providers, without demanding EFD receipts.
f) 23 LGAs paid a total amount of TZS 787.49 million for nugatory activities that were categorically in vain expenditure
g) LGAs made payments by cash amounting to TZS 1.44 billion. That is contrary to Para 6.7.3 of the Local Authorities Accounting Manual, 2019 which requires councils to make all payments electronically and direct to the bank accounts of the payee. Under no circumstances the councils are allowed to pay by cheque or cash.
h) 43 LGAs deducted withholding taxes from vendors amounting to TZS 1.74 billion, but did not remit the taxes to TRA.
i) Loan beneficiaries in 151 LGAs defaulted on loan payments totalling TZS 79.76 billion. Also, 46 LGAs had outstanding loans totalling TZS 5.70 billion from 1,334 groups that had already ceased to operate. Additionally, CAG could not confirm the existence of 850 groups in 18 LGAs that reportedly issued loans totalling TZS 2.6 billion.
2.4 Expenditure by Public Sector Entities
Below are some selected highlights of CAG's audit findings of Public Sector Entities:
a) At TPA, additional costs of TZS 808.85 million and Euro 4.84 million were caused by delays in the completion of contracts. TPA was unable to make the advance payment on time and to issue a letter of credit thereby delaying the commencement of the contract and causing an increase in the contract costs.
b) MSD incurred a loss of TZS 1.99 billion in the procurement of reagents which did not meet the technical specifications.
c) Interference in the procurement process by the Ministry of Natural Resources and Tourism led to an additional cost of TZS 702.68 million at Ngorongoro Conservation Area Authority (NCAA)
d) Fruitless and wasteful expenditures of TZS 72.36 billion to which the respective 17 entities obtained no value for money.
e) 11 entities made ineligible expenditures amounting to TZS 4.64 billion.
f) Fraudulent payments of TZS 58.94 million made through MUSE at the Institute of Rural Development and Planning
g) 16 out of 215 reviewed public sector entities (PSEs) did not submit various taxes amounting to TZS 33.45 billion to the Tanzania Revenue Authority (TRA) contrary to tax laws.
h) Nine (9) public sector entities made payments for goods and services amounting to TZS 2.17 billion which were not supported by EFD receipts.
PART 3: Public Sector Organizations’ Performances and Service Delivery
3.1 BANKS
CAG reviewed three (3) government commercial banks (TIB Development Bank, Azania Bank and Tanzania Commercial Bank (TCB)).
a) Two banks (TIB Development Bank and Azania Bank) exceeded the acceptable threshold of Non-Performing Loans (NPL) of 5% set by the Bank of Tanzania. The NPL ratio at TIB Development Bank was 21.50% (2022: 20.28%) while at Azania Bank was 7.44% (2022: 18.25%).
b) TCB issued loans above the limit of TZS 734.28 billion without the board’s approval.
3.2 PENSION FUNDS
a) PSSSF's level of funding is below the recommended level. That is according to the Actuarial Valuation for the Fund conducted. The level of funding was 22.30% which was below the recommended level of 40%.
CAG also reported inadequate management of pension funds’ Investments, such as:
b) Unsatisfactory collection of rentals from NSSF, PSSSF, and NIC investment properties TZS 47.10 billion
c) Unsatisfactory performance of Kilimanjaro Leather Industry Company Limited (KLICL)
d) Deficiencies in managing Mkulazi Holding Company Limited with capital invested TZS 312.98 billion
e) Uncertainty over the recoverability of rentals receivable by Ubungo Plaza Limited TZS 10.98 billion
3.3 EDUCATION
a) The University of Dodoma (UDOM) experience a serious water deficit of 1.1 million litres per-day, equivalent to 49% of estimated demand. UDOM has an average population of 38,203 comprising both staff members and students.
b) Inadequate library facilities at universities and other academic institutions
c) HESLB had matured loans amounting to TZS 2.10 trillion and managed to collect TZS 1.29 trillion (62% of total matured loans) from 2006/07 to 2022/23. This means that TZS 0.81 trillion (38%) of matured loans was not collected as of 30 June 2023.
3.4 HEALTH
a) NHIF rejected hospital bills worth TZS 20.77 billion.
NHIF rejected a total of TZS 11.83 billion equivalent to 15% of total claims of TZS 76.89 billion from four (4) Muhimbili Institutions (MNH-Mloganzila, MNH, MOI, and MUHAS). The major reasons for rejections are false claims and absence of justifiable basis on non-compliance with the rules or regulations pertaining to payment of claims, double claims, overutilization of services, non-adherence to NHIF pricing, services not indicated in the diagnosis, lack or invalidity of authorization numbers, missing details of claimed services after verification, absence or invalidity of patient signatures, services not within NHIF benefit package, calculation errors, overprescribing, and non-compliance with standard treatment guidelines.
NHIF also rejected claims of TZS 8.94 billion from 24 other Regional Referral Hospitals (RRH) due to various faults, such as invalid authorizations, improper disease codes, and non-compliance with the standard treatment guidelines. The rejected claims were 13% of all claims submitted by RRHs.
b) CAG mentioned four (4) factors that threaten the long-term viability of the NHIF, which are:
Outstanding Government Loans of TZS 208 billion
Unfunded Retiree Benefits whose annual average spending is TZS 84.70 billion
Rising costs associated with Non-Communicable Disease (NCD). The average annual spending on NCD is TZS 137.80 billion
The voluntary nature of membership, whereas individuals join only when they need expensive medical care.
3.5 OTHER AREAS
CAG observed the risk of failure of an Indigenous community resettlement project in the Ngorongoro Conservation Area. The risk is caused by the relocation budget (TZS 287 billion) that was not backed up by the consultant’s estimate.
One mentioned example was the relocation budget estimated cost of TZS 9.97 million per house, while the actual agreement with the contractor (SUMA JKT) was TZS 19.48 million per house (more than double the estimated cost).
CAG advised the government to develop and implement a comprehensive project implementation plan and a roadmap to ensure the resettlement project's successful completion.
3.6 PSEs’ GENERAL FINANCIAL PERFORMANCE OVERVIEW
3.6.1 Public Entities with Negative Equity Balances
Out of 215 Public Entities, 11 (5%) had a negative equity (i.e., More Liabilities than Assets).
The total negative equity for all 11 entities was TZS 503 billion, out of which 98.86% (TZS 497.2 billion) was contributed by four (4) entities shown in the table below (all amounts in TZS billion):
SN | Entity | Category | Assets | Liabilities | Net Assets |
1 | Tanzania Fertilizer Regulatory Authority | Non-commercial | 6.5 | 262.5 | -256 |
2 | Air Tanzania Company Limited | Commercial | 339.4 | 553.7 | -214.4 |
3 | Cotton Development Trust Fund | Non-commercial | 148.4 | 168.3 | -19.9 |
4 | STAMIGOLD Company | Commercial | 68 | 74.9 | -6.9 |
|
|
| 562.3 | 1059.4 | -497.2 |
3.6.2 Commercial Public Sector Entities (CPSEs) with Consecutive Losses
11 CPSE reported losses in consecutive years. The top 5 CPSE loss-making entities contributed to 97% of total losses by all 11 loss-making CPSEs. The entity list is provided below (all amounts in TZS billion):
SN | Entity Name | 2021/22 loss | 2022/23 loss |
1 | Tanzania Railway Corporation | 190 | 100.7 |
2 | TANOIL Investment Limited | 7.8 | 76.6 |
3 | Air Tanzania Company Limited | 35.2 | 56.6 |
4 | Kariakoo Market Corporation | 0.5 | 41.6 |
5 | Tanzania Biotech Products Limited | 3.9 | 6.1 |
|
|
| 281.6 |
3.6.3 Non-Commercial Public Sector Entities (NCPSEs) with Consecutive Deficit
23 NCPSE reported a deficit in consecutive years. The top 5 NCPSEs with a deficit contributed to 95.9% of the total deficit by all 23 NCPSEs with the deficit. The entity list is provided below (all amounts in TZS billion):
SN | Entity Name | 2021/22 deficit | 2022/23 deficit |
1 | National Health Insurance Fund | 206 | 156.8 |
2 | University of Dar es salaam | 15.3 | 12.6 |
3 | Mbeya Water Supply and Sanitation Authority | 0.06 | 3.2 |
4 | Petroleum Upstream Regulatory Authority | 0.4 | 2.2 |
5 | Tanzania Education Authority | 5.5 | 1.7 |
|
|
| 176.5 |
3.6.4 Highly Geared Public Sector Entities
Of 215 Public Sector Entities, 28 (13%) were financed by more debt than equity in their capital structures. Of the 28 entities, 10 were financed by debt by more than three times (3X) their equity.
The top highly geared entities ratio-wise were Tanzania Railway Corporation (82X), RU Built Environment Consulting Company Ltd (14X), Tanzania Fisheries Research Institute (14X), Arusha Water Supply and Sanitation (4X), MCB Company Limited (4X), Tanzania Revenue Appeals Board (4X), Watumishi Housing Investments (4X), National Bureau of Statistics (4X), Public Procurement Appeals Authority (3X), and Muhimbili Orthopedic Institute (3X).
Amount-wise, the following four (4) entities had the highest amounts of debts over and above their equities: Tanzania Railway Corporation (TZS 11.4 trillion), TANESCO (TZS 9.6 trillion), Tanzania Ports Authority (TZS 0.82 trillion), and Arusha Water Supply and Sanitation (TZS 0.37 trillion).
CAG clarified that; the highly geared entities rely largely on debts to finance their operations which become more susceptible to financial risk emanating from the high cost of debts.
PART 4: Is CAG's Report Relevant and Useful?
The International Standard - ISSAI 12, "The Value and Benefits of Supreme Audit Institutions – making a Difference to the Lives of Citizens," emphasizes that audit reports should be delivered in a timely manner to ensure their relevance and usefulness. It underscores that timely communication of audit results enables audited entities and stakeholders to take prompt corrective actions, thereby enhancing accountability and transparency. Likewise, ISSAI 3000 and ISSAI 3100 (Standards for Performance Auditing), both stress the significance of timeliness in reporting to ensure that the audit findings are relevant and can lead to effective decision-making and improvements. Timely financial reporting is crucial for informed decision-making and maintaining public trust.
Current Situation
In Tanzania, the financial year ends on 30th June. Public sector organizations have three months, until 30th September, to prepare and submit their financial statements to the Controller and Auditor General (CAG) for audit. The CAG is then given six months, until 31st March of the following year, to deliver audit reports to the president. Within one to two weeks, the president/government is required to table these reports in Parliament, making them public documents.
Following this, Parliament directs the government to prepare explanations, a process that takes about seven months (April to October). During the November parliamentary session, the CAG reports are discussed and the parliament may issue some directives. This process means it takes around 17 months from the end of the financial year for the audit findings to be discussed in Parliament. It also means that by the time CAG recommendations are discussed, the government may have already repeated the same mistakes for another elapsed year, diminishing the report's effectiveness in improving government operations.
Such a long timeline can diminish the relevance and impact of the CAG’s reports, as the issues identified may no longer be current or may have worsened without timely intervention. It hampers the ability of Parliament to hold public sector organizations accountable and could reduce the effectiveness of corrective actions. Timeliness in discussing audit findings is crucial for ensuring that recommendations are implemented promptly, maintaining public trust, and enhancing the overall transparency and accountability of public financial management.
What can be done?
To enhance the timeliness and effectiveness of audit reports in Tanzania, it is essential to streamline the current reporting process. Firstly, the timeframe for the Controller and Auditor General (CAG) to complete audits could be shortened by improving resource allocations, involving more public-practice firms, and leveraging technology to expedite audit procedures and processes.
Additionally, the period for the government to prepare explanations and responses can be further shortened to facilitate earlier parliamentary discussions. This is feasible because, during the audit process, the CAG already collects management responses for each audit finding, making the government's task of preparing responses primarily a matter of compilation.
By implementing these measures, the CAG could potentially submit the audit report to the president by 31st January, allowing it to be tabled in the February parliamentary session along with the government's responses. Consequently, the February parliamentary session could issue directives to the government; and the government will be required to provide an implementation report in the 'April – June' parliamentary session, all within the same financial year. The government's implementation report of the parliament's directives on the CAG Report will also be a crucial input to the budget approval processes conducted in the same session.
The illustration of the proposed timeline below shows the time taken for the audit findings to be discussed by parliament would be reduced from 17 months to 8 months. Additionally, within 10 months, the government's implementation report would be presented to parliament as input to the budget preparation process.
While the practicability of other factors and potential changes in laws and regulations play a crucial role, implementing these measures would greatly improve the relevance and usefulness of the CAG's audit reports in Tanzania. This, in turn, would enhance accountability, transparency, and public trust in government operations.
Disclaimer:
The information presented in this article is based on the CAG's report for the year 2022/23 and reflects the author's interpretation and analysis of the data. While efforts have been made to ensure the accuracy of the information, the author and publisher do not take any responsibility for any errors, omissions, or inaccuracies. Readers are advised to consult original reports and other official sources for detailed and accurate information. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of AGIM Consultants.
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