Reports on Observance of Standards and Codes

Cameroon and the IMF

Cameroon ROSC

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I.  Fiscal Transparency

Prepared by an IMF staff team from the International Monetary Fund on the basis of information provided by the Cameroonian authorities.

Prepared in September 1999 and reissued in May 2000

Fiscal Transparency Module for Cameroon1

1.  The purpose of this document is to evaluate Cameroon's fiscal management system in light of the requirements of the Code of Good Practices on Fiscal Transparency--Declaration on Principles, as prepared by the IMF. The first section describes the current situation on the basis of the Cameroon authorities' response to the questionnaire on fiscal transparency. IMF staff comments are provided in the second section.

A.  Description of Practice

2.  Clarity of roles and responsibilities: The demarcation between the government sector and the rest of the economy is clearly established in the Republic of Cameroon.

3.  With respect to the government sector, the August 17, 1995 ordonnance (setting forth the general regulations to govern public and parapublic sector enterprises) distinguishes administrative public entities (établissements publics administratifs--EPA) from other categories of enterprises, such as government-owned corporations (sociétés à capital public--SCP), and semipublic corporations (sociétés d'économie mixte--SEM), established with the aim of engaging (in the public interest) in industrial and commercial activities.

4.  Administrative public organizations are legal entities, they are financially autonomous, and they are subject to the rules of government accounting. The same rules apply to local governments (collectivités publiques locales). Government-owned corporations and semipublic corporations are governed by the rules of private accounting. The authorities intend to revise the August 17, 1995 ordonnance in 1999/2000 with a view to meeting the requirements of efficiency and fiscal transparency.

5.  Government accounting legislation requires the central government, local governments, and administrative public entities to produce their operating accounts each fiscal year. However, these accounts are prone to delays, and are insufficiently thorough (particularly the local governments' administrative accounts). In this regard, it is worth noting that no consolidated accounts have been prepared to date. The accounts tracking the operations of the social security system continue to be of poor quality. Government sector involvement in the rest of the economy is regulated by a consistent legal system that complies with the principles of the rule of law. However, the multiplicity and complexity of the legislation and cumbersome bureaucratic procedures account for repeated and undesirable government interventions.

6.  The delegation of powers is governed by the Constitution and the responsibilities of central and local governments are well-defined in procedural terms. However, the enforcement of regulations needs to be improved, particularly with respect to the financial relationships between local and central governments (e.g., transfer of the special municipal surtaxes--centimes additionnels communaux, proceeds from business license taxes--patentes, and local communities' share of forestry revenues). Furthermore, control over government financial operations ought to be improved and appropriate penalties imposed in cases of regulatory violations. In particular, expenditure control in connection with budgetary appropriations managed by local governments or delegated appropriations (crédits délégués) must be strengthened.

7.  Financial relations between the central government and the regional central bank (the BEAC) are clearly defined. However, those between the central government and the financial public enterprises, such as the social security company (CNPS), and nonfinancial public enterprises should be further rationalized and made more transparent. This would ensure that the autonomy of such enterprises is strengthened (e.g., the central government does not automatically pay back its contributions to the CNPS).

8.  The management of the public investment budget is characterized by delays in project execution and insufficient mobilization of external resources. This is attributable to institutional constraints, a lack of sectoral strategies (leading to poor project design), as well as cumbersome procedures.

9.  Overall, fiscal management is governed by a highly elaborate but complex legal framework set out in the February 7, 1962 ordonnance and predicated upon the principle of separation of functions between payment authorizing officer (ordonnateur) and government accounting officer (comptable). The various taxes and duties (as well as their collection mechanisms) are duly provided for in the laws. However, the tax authorities should conduct their operations judiciously and methodically and exercise judgment, with a view to preventing disputes. In this regard, the taxpayer's charter of rights is being prepared. Moreover, the civil service regulations prescribe the rights, benefits, and obligations of government employees.

10.  Public availability of information: Presentation of the budget is governed by the 1962 ordonnance which prescribes the principles of unity and universality in budget operations. The various revenue and expenditure items are in principle included in the budget law, off-budget accounts having been abolished since 1986. However, with a view to facilitating the financing of social sectors, administrative fees (recettes de service) collected by the entities overseeing these sectors are directly earmarked to cover their operating outlays. The management of these revenues remains weak, and their collection and monitoring need to be improved.

11.  The information available on the stock of domestic arrears is insufficient, and those arrears that are identified generally lack the documentation required by fiscal regulations. The authorities have accordingly undertaken a number of audits of these arrears. Moreover, the main tables annexed to the budget law as specified by the 1962 ordonnance are generated each year and submitted to parliament at the same time as the budget law. The economic and financial report, which aims at explaining fiscal policy in the context of the budget law, outlines central government financial developments. This report accordingly compares the initial estimates and budgets for the two preceding fiscal years with respect to the current year. Dissemination of government finance data is expected to show gradual improvement beginning in 1999/2000, particularly with reference to the priority sectors (see section 2).

12.  Open budget preparation, execution, and reporting: The draft budget law is accompanied by an economic and financial report explaining fiscal policy and summarizing the economic situation. However, to fulfill its specific function, this economic and financial report should endeavor to achieve a more effective presentation of the macroeconomic framework, with a view to better reflecting the medium-term economic outlook. In the budget presentation, new tax measures and budgetary allocations are clearly specified, and each budget law makes provision for using ordonnances to correct any fiscal risks.

13.  Revenues and expenditures are presented on a gross basis and are distinguished from financing operations. Expenditures are presented by administrative category; however, their economic and functional classifications are insufficient and overly broad. The only available financial balances are those of the central government (administration centrale), specifically, the overall balance and the primary balance; the primary balance is the key aggregate in the government's PRGF-supported program. An integrated and comprehensive accounting framework (including accrual basis accounting, distinguishing among operations by fiscal year, and identifying payment arrears) is being introduced with a view to recording and presenting central government financial operations. The authorities are committed to ensuring that government finance operations (including budgetary operations) are presented in the context of the above-mentioned integrated and comprehensive accounting framework. Steps have been taken in this direction in the context of the PRGF-supported program.

14.  Government procurement is regulated pursuant to decree (décret) No. 95/101 dated June 9, 1995 setting forth regulations with respect to government contracts. The procedures in place have been subject to an audit, the recommendations of which will be implemented.

15.  Expenditure execution is subject to a number of ex ante control procedures, the efficiency of which is in need of improvement. The establishment of an independent central audit agency (the Cour des Comptes) is envisaged by the January 26, 1996 Constitution. Overall, monitoring of budget execution needs to be improved. In this context, work has begun on producing the balances for the consolidated Treasury accounts for central government, notwithstanding the volume of operations to be regularized.

16.  For the present, central government financial operations are monitored in a monthly performance indicators table prepared for this purpose, although improvements for making the table more comprehensive have been identified and are under way. Lastly, the final budget execution law (loi de règlement) is produced each year and incorporated into the budget law to provide an account of revenue and expenditure performance under the previous budget. The final budget execution law will henceforth be obtained from the balance of consolidated Treasury accounts for the period.

17.  Independent assurances of integrity: Under the 1962 ordonnance, provision was made for verification of the transparency and thoroughness of government accounts by means of an independent central audit office (Cour des Comptes). The establishment of this office, as envisaged by the January 1996 Constitution, will be carried out gradually, in line with the fiscal reform timetable. Macroeconomic projections and financial assumptions are transmitted regularly to IMF staff. The statistics directorate currently reports to the Ministry of Economy and Finance; consideration is now being given to strengthening this directorate's staffing levels and enhancing its autonomy, pursuant to GDDS recommendations.

B.  IMF Staff Commentary

18.  While Cameroon has a legal framework that meets a number of transparency criteria, the complexity and cumbersomeness of the system (and enforcement thereof) are such that Cameroon is at present unable to fulfill the various principles set forth in the Code of Good Practices on Fiscal Transparency. Major efforts to achieve compliance have already been made, however. The authorities are aware of the existence of significant constraints in public expenditure management. These constraints have been demonstrated on numerous occasions, including by the FAD technical assistance mission which visited Yaoundé at the government's request in February 1998. In December 1998, on the occasion of the review of the second year of the PRGF program, the authorities adopted an action plan to improve expenditure management and governance, on the basis of recommendations contained in that mission's report. The Fiscal Affairs Department sent a resident expert to Yaoundé to assist in the preparation and implementation of the measures contained in the action plan. The progress achieved thus far has been encouraging:

  • Preliminary Treasury balances have been produced since July 1999, although improvements are needed to expand their coverage and enhance their accuracy; the expenditure execution system has been simplified; and new arrangements for the management of delegated appropriations have been prepared and will soon be implemented. Furthermore, an audit to determine the actual numbers of government employees is getting under way, and is expected to be completed by end-December 2000.

  • An audit of procurement procedures, as well as of the ten largest contracts awarded during 1998/99 (a performance criterion under the program), has been carried out. A new system will be put in place with the appointment of a special commission to run procurement activities.

  • A system for the periodic auditing of capital projects will be implemented during FY 1999/2000.

  • An annual audit of the Société nationale des hydrocarbures (SNH)--a major taxpayer--has been carried out by an independent firm since 1997/98. This will soon be followed by an operational audit to evaluate the technical and financial performance of SNH, and to enhance the transparency of its financial operations, specifically, the transfer to the Treasury of oil royalty revenues. In addition, as a first step to enhance transparency in its financial operations, SNH adopted international standards of accounting in May 2000.

  • A manual of procedures for safeguarding the collection of forestry revenues has been adopted with the aim of enhancing performance.

  • Those responsible for the management of budget appropriations are henceforth to be fully accountable and are increasingly shouldering responsibility for their operations.

  • A strategy for reforming the social security system is being devised, and will be implemented during 1999/2000.

19.  The authorities are committed to implementing the following measures for enhancing fiscal transparency in the context of the third year of the PRGF-supported program:

  • Publishing regular reports on the audits of financial operations and staffing levels of the main government agencies, in addition to having all major public enterprises undergo financial audits by independent firms.

  • Preparing quarterly reports by ten Ministries2 on the status of execution of their respective budgets, effective March 20003; midterm publication of information on delegated credit itemized by appropriation (education, health, and agriculture, respectively).

  • Involving an independent expert in the process of awarding forestry concessions, effective June 1999.

  • Exercising heightened supervision over managers of budget appropriations, and imposing penalties in cases of regulatory violations.

  • Strengthening the resources and authority of the Contrôle Supérieur de l'Etat and other inspection agencies, to enable them to carry out regular verification of the financial operations of government agencies and public enterprises.

20.  In conclusion, the authorities are determined to overcome the constraints observed in connection with fiscal management and transparency. The implementation of the adopted measures, particularly in the context of the PRGF-supported program, is expected to achieve significant improvements in this regard. However, to facilitate compliance with the principles of the Code, these efforts should be complemented with bold measures, designed inter alia to:

  • Simplify the legal framework and scale back the government's involvement in the economy.

  • Reorganize and clarify the financial relationships between the central government and the financial and nonfinancial public enterprises, as well as the social security agencies.

  • Disseminate fiscal information, particularly regarding budget laws and budget execution, and explain the macroeconomic assumptions underlying budget decisions.

  • Enhance budget execution and control procedures.

1Prepared by Mr. Abdoun and Mr. Katz (both AFR) and Mr. Toussaint (FAD), in consultation with the Cameroonian authorities.
2Education, Health, Agriculture, Justice, Economy and Finance, Social Affairs, Public Investments, Mines and Energy, Transportation, and Public Works.
3Preparation of reports by the Ministries of Education and Health started in October 1999.