## 1cafea2021001 ## Source details **Canonical URL:** [1cafea2021001](https://www.imf.org/-/media/files/publications/cr/2021/english/1cafea2021001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2021/english/1cafea2021001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2021/english/1cafea2021001.pdf.json) --- ### Preface — mission, methodology, scope - Joint FAD/LEG mission in Bangui from August 27 to September 6, 2019, at the request of the Prime Minister to report on status of good governance and analyze vulnerabilities to corruption. - Meetings with Prime Minister Firmin NGREBADA and Minister of Finance and the Budget Henri‑Marie DONDRA and senior civil servants; aide‑mémoire submitted at end of stay. - Methodology: used guidance from IMF governance policy revision (Annex I); scope concentrated on governance vulnerabilities with significant macroeconomic consequences. - Mission focus (aligned with SNLC, Annex II): (1) strengthen statutory and institutional framework; (2) strengthen tax administration and Customs to support revenue collection; (3) manage public expenditure to improve effectiveness and transparency. ### Overarching diagnostic and strategic priorities - Diagnostic findings: - Return to peace promises stronger growth but security remains vulnerable; economy in reconstruction with weak administrative capacities. - Governance problems and vulnerability to corruption rooted in weak capacities and sometimes inadequate resource allocations and uses. - Government emphasized implementing the National Strategy to Fight Corruption based on five pillars: strengthen legal/judicial framework; transparency; digitize administration processes; invest in human capacities; strengthen supervision of government agencies. - Short‑to‑medium term strategic priorities and high‑impact actions: - Adopt a multisectoral transparency policy covering access to legal documents, tax and Customs transparency, and fiscal management procedures, with priority on internet publication. - Align juridical‑statutory framework with FATF, UNCAC, and EITI standards. - Strengthen reporting of financial assets by senior officials and internet disclosure (jurisprudence, professional conduct frameworks). - Digitize and automate tax administration and fiscal management processes. - Strengthen supervisory entities (IGE, Inspection of Finances), publish findings, and equip HABG with resources and authority to pursue prosecutions and sanctions. ### Quantified potential gains from improved governance (revenue) - Solving governance issues in revenue collection could generate roughly CFAF 135 billion (10½ percent of GDP). - CFAF 30 billion from the corporate income tax. - CFAF 105 billion from the VAT. - Estimates based on the “Revenue Assessment Tool” and WEO data for 2018 (equivalent to about 10 percent of GDP). - Raising CAR’s tax productivity to the median in Sub‑Saharan Africa would: - double collection of the corporate tax; - quadruple collection of the VAT. - Revenue gains could push revenue above the threshold of about 12−13 percent of GDP associated with substantially accelerated growth and development. - Comparative impacts noted: - potential gains would triple investment spending executed in 2018; - multiply investment in national resources by a factor of 14. ### Selected time‑bound priority actions (highlights) - Publish on government website: Constitutional Court information, list of those subject to declaring assets, and compliance status. - Prioritization: High; Indicative Timeline: 2020; Unit in Charge: Constitutional Court and government. - Adopt law providing sanctions for failure or untruthful asset reporting. - Prioritization: High; Indicative Timeline: 2020; Unit in Charge: Government. - Systematically publish all court decisions beginning with Constitutional Court, Court of Cassation, Courts of Appeals, Council of State and administrative appeals. - Prioritization: High; Indicative Timeline: 2020; Unit in Charge: Constitutional Court, Court of Cassation and Council of State. - Adopt and implement a new anti‑corruption law based on items in Section III. - Prioritization: High; Indicative Timeline: 2021; Unit in Charge: Government and Parliament. - Digitize/automate tax, Customs and budgetary processes; conduct independent audit of ASYCUDA; deploy remote procedures and mobile payment for SMEs. - Prioritization: Medium–High; Indicative Timeline: 2020–Ongoing; Units in Charge: Customs, Parliament, Ministry of Finance and the Budget. ### Transparency, law enforcement, and legal framework — key findings - Transparency gaps: - Official Gazette of CAR not available online; public difficulty accessing laws and decrees. - Court decisions are not published; many supervisory agency reports are not public or not easily accessible. - Some Accounting Office reports submitted to National Assembly but not made public contrary to article 43 of the law on transparency. - CAR joined EITI in 2010; membership suspended in 2013; publication of mining contracts and production/revenue data needed for readmission. - Law enforcement weaknesses: - Laws often lack implementing regulations; laws enacted without secondary texts. - Inconsistent enforcement (training gaps for civil servants/judges; lack of public awareness and means). - Asset reporting exists in the Constitution but lacks penalties for noncompliance (Article 39 requires a law identifying sanctions; such a law not drafted). - Agencies reporting corruption often see no sanctions imposed. - Anti‑corruption legal framework and institutions: - CAR ratified UNCAC on October 6, 2006. - 2010 penal code (Law No. 10.001 of January 6, 2010) includes corruption offenses but UNCAC implementation review identified gaps (technical definitions, lack of statistics, lack of reported cases, gaps in criminalization). - HABG mandate broad but resources limited; HABG can require information and unjustified refusal penalized by penal code; HABG should prioritize high‑risk areas and be resourced. - Perception indicators: - 2006 UNDP/Transparency International survey: 94 percent believe corruption is a problem in police and gendarmerie, 93 percent in Customs, 90 percent in the courts. - Transparency International 2019: CAR score 25 out of 100 for corruption perceptions. - WGI places CAR among the lowest for controlling corruption; slight recent improvement but not to pre‑crisis levels. ### Transparency and law enforcement — prioritized recommendations - Systematically publish laws, implementing regulations, decrees, and court decisions on government websites; publish annually counts and follow‑up on corruption proceedings and seizures. - Set administrative sanctions for failing to publish legally required information. - Create anonymous reporting system with a toll‑free telephone line for citizens to report poor governance or corruption to HABG and IGE. - Adopt a new anti‑corruption law consistent with UNCAC; strengthen asset declaration system to include sanctions, expanded coverage (high‑risk professions and close relatives), clarify reporting forms (including foreign holdings), and implement verification via crosschecks with tax administration data. - Make Ministry of Justice publish twice a year a table showing referrals received (from HABG, ANIF, other control entities), number investigated, number of proceedings, number of sentencings for corruption. ### Tax and Customs governance — structural vulnerabilities and recommendations - Main vulnerabilities lowering revenue: - complex and generous tax system undermined by multiple parafiscal taxes; - weaknesses in human resources management and exemplarity framework; - outdated, nontransparent, and only partially computerized procedures; - lack of sanctions after internal controls or audits, promoting impunity and favoritism. - Parafiscal taxes and exemptions: - January 2017 FAD mission: "no fewer than 75 different withholdings on economic operators, with 22 special allocation accounts for a total estimated amount of 1.7 points of GDP." - Exceptional exemptions rose from CFAF 36 billion in 2017 to CFAF 47 billion in 2018. - Mission proposal: abolish the Exemption Management Fee (RGE) unconditionally. - Tax code and dispute resolution: - CGI contains redundant provisions and poorly arranged penalties promoting discretion. - CGI settlement mechanism (Art. 388 et seq.) allows revision of audit results by Minister of Finance, increasing discretionary authority. - Joint Tax Commission exists but "has never been operational"; recommend reactivating it and creating independent appeal mechanisms. - Autonomy and HR: - DGID and DGDDI have limited management autonomy; hiring mismatches skills; senior officials not appointed for fixed terms; disciplinary actions limited (directors general can only issue warnings; Minister implements sanctions). - Recommended HR measures: require senior officials to report assets; hire qualified personnel; ongoing training; limit vulnerable positions to no more than four years; equitable distribution of employee advantages; transparent performance measurement. - Digitization: - Time burdens: a business uses one full‑time employee for one and a half months per year to complete tax returns; a declarant takes two weeks to prepare documents to clear Customs. - SYSTEMIF 4.0 lacks functionality for data tabulation, risk management, time and case management, performance management and automatic production of management indicators, but mandatory use of SYSTEMIF was instructed. ### ASYCUDA and SYSTEMIF — integrity findings and measures - Beloko Customs sample (July–August 2019): - 91 percent of declarations were introduced by Customs officers (contrary to statutes). - 92 percent of NIF used were anonymous NIFs [P999999P]. - 91 percent of declarations were submitted as simplified declarations (DS4). - Sample of 859 declarations (July 4–August 30, 2019) — summary totals: - Total declarations: 859 - Anonymous NIF P999999P: 768 - Simplified declaration DS4: 784 - Detailed declaration IM4: 75 - Recommendations for ASYCUDA and SYSTEMIF: - Conduct independent audit of SYSTEMIF 4 and ASYCUDA++. - Secure ASYCUDA use: disable employee codes who introduce declarations, interconnect Douala Facility with Bangui over dedicated line, close fast‑track clearance units, improve authorizations, interconnect regional offices, require inspection certificate use, interconnect ASYCUDA with SYSTEMIF, adopt computer charter, migrate to ASYCUDA World. - Make permanent efforts to eliminate temporary NIFs and prohibit Customs officers from submitting declarations on behalf of declarants. - Interconnect tax and Customs administrations with main partners (treasury, budget, commercial bank, telephone companies, electrical utilities) for data reliability and integrity. - Publish more information on administrations’ websites: vision/strategic plans, grievance boxes, performance statistics, sector fraud statistics, taxpayer lists and status, statutes, codes of conduct, job directories, signature authorities. ### Key public financial management findings and statistics - GESCO (implemented 2004) stabilized but limited: could not produce Treasury accounts in 2016; stabilized until 2018 but fails to provide traceability of the expenditure chain; payment and budget modules do not communicate; summary reports require manual reprocessing. - SIM−BA acquisition justified by new CEMAC fiscal management directives; January 1, 2021 deployment schedule may be ambitious. - Public finance status highlights (selected entries): - Organic Law 18‑013 of July 13, 2018: Multiyear budget (implementing regulations still to be drafted). - Program budget: Scheduled for 2021. - Balance sheet and accrual basis accounting: Gradual implementation by 2024. - TOFE overhaul: by 2024. - Recommendation: Stabilize GESCO for 2–3 years during transition; finalize information systems master plan; synchronize SIM−BA deployment with the new management framework; implement rigorous acceptance testing and cross‑cutting project management. ### Expenditure execution, procurement, TSA and arrears — findings and exact figures - Arrears and exceptional expenditures (Table 6: Stocks in billions of CFAF; Jan. 31, 2017 | Jan. 31, 2018 | Jan 31, 2019): - Wage arrears: 64.89 | 56.93 | 22.43 - Trade arrears: 9.30 | 8.80 | (not separately reported for 2019 in table extract) - Arrears excluding the plan: 115 - Exceptional expenditures (% of expenditure excluding debt and wages): 26% | 17% | 7% - Procurement procedures (Table 7: In value (billions of CFAF), 2019 figures): - Invitations to bid: 43.73 - Procedures without competition or avenants: 8.12 - Invitations to bid (% of total): 84.34% - TSA liquidity gaps (Table 8: Gaps between Monetary Survey and Net Treasury Position; In billions of CFAF; End‑2017 | End‑2018): - Net government position (BEAC): 40.36 | 32.38 - Net Treasury position (Treasury cash flow): 34.46 | 30.22 - Gaps: 5.90 | 2.15 - Gaps as a % of budgetary revenue: 3.83% | 1.02% - Recommendations: - Continue clearing domestic arrears and normalizing expenditure procedures; synchronize cash flow with commitment and debt issuance plans; discontinue exceptional deposit accounts and reduce exceptional procedures. - Revise procurement management framework: cost‑benefit analyses for investments above a threshold, publish assessments, require publication of invitations to bid on government website with penalties for noncompliance, publish selection criteria; medium‑term: develop procurement portal and management application. - Consolidate and expand TSA to all legal entities subject to public law (government, EPAs, local governments); strengthen Treasury staff capacities. ### Oversight, audits, decentralization and civil service capacity - Supervision and audit issues: - Accounting Office functional but organic law adoption recommended and some reports not public. - Internal control entities (IGE, IGF) have limited capacities and few auditors; follow‑up on recommendations weak; few restitution orders issued. - Recommendation: improve coordination of internal control entities (IGF/IGE), publish audit reports, strengthen Accounting Office by enacting organic law, and strengthen audit capacity via external funding and training. - Decentralization and supervision of parapublic sector: - Law on supervision of public enterprises and establishments enacted late 2019; implementing regulations needed; roadmap for decentralization begun in 2017. - Recommendations: deconcentrate resources needed for public services as government regains authority; evaluate local governments’ own resources and capacities; design medium‑term decentralization roadmap with capacity strengthening and good governance measures. - Civil service capacity gaps and reforms: - Weak human capacities; hiring by title rather than competitive testing; centralized management; low salaries and weak sanctioning system. - Recommendations: assess civil service management system; revitalize curriculum for public finance/accounting training (ENAM Bangui); strengthen government finance function via professional development and MFB coordination; disseminate and enforce professional conduct charter with commitment documents and sanctions. ### AML/CFT — findings and recommendations - AML/CFT risks: - POROUS borders, large informal sector, illegal mining, and domestic real property sector identified as key money‑laundering area. - ANIF created 2004 faces substantial resource constraints; CAR assessed in 2010 with significant weaknesses; another follow‑up report due in 2020. - No prosecutions for money laundering to date; COBAC surveillance inadequate; requirements for politically exposed persons and beneficial owners incorrectly covered and not implemented. - Designated nonfinancial businesses and professions not correctly regulated or supervised. - Recommendations: - Quantify ANIF material and financial needs; encourage financial information sharing and consider Egmont Group membership; require beneficial owner information in articles of incorporation and commercial register; intensify training for police, gendarmerie, prosecutors and judiciary in financial crimes. *Source: IMF staff (from the preface and summary material of the mission report).* ### PREFACE _________________________________________________________________________________________ 6 ### PREFACE ### Mission context and activities - A joint FAD/LEG mission was in Bangui from August 27 to September 6, 2019, at the request of the Prime Minister, Head of the Government of the Central African Republic, to report on the status of good governance and to analyze vulnerabilities to corruption that could jeopardize the nation’s development objectives or efforts to restore lasting peace. - The recommendations were finalized during a meeting in Washington DC, held alongside the October 2019 IMF Annual Meetings, and additional input from the authorities was received. - During its stay the mission met with the Prime Minister, Head of the Government, Mr. Firmin NGREBADA, and the Minister of Finance and the Budget, Mr. Henri-Marie DONDRA, accompanied by senior civil servants from the various institutions with key roles in implementing good governance. - At the end of its stay, the mission submitted an aide-mémoire to the Prime Minister and to the Minister of Finance and the Budget. - The mission expressed particular thanks to Mr. Augustin Feigouto, Coordinator of the Unit in charge of Monitoring Economic and Financial Reforms (CS-REF), and to Mr. Olivier Benon, Resident Representative of the IMF in Bangui, and Mr. Patrick Zoungarani, Economist at the resident mission, for their support. ### Methodology and scope - IMF staff used guidance identified when the IMF governance policy was revised (Annex I). - The fundamental criterion for the scope of work was to concentrate on governance vulnerabilities with significant macroeconomic consequences. - The mission focused on three major themes aligned with the National Strategy to Fight Corruption (SNLC, Annex II): (1) strengthen the statutory and institutional framework; (2) strengthen the tax administration and Customs to support revenue collection; and (3) manage public expenditure to improve effectiveness and transparency. --- ### SUMMARY − KEY RECOMMENDATIONS ### Overarching diagnostic - The gradual return to peace in the Central African Republic (CAR) promises stronger and more equitable growth, but the security situation remains vulnerable and the economy is in reconstruction with weak government administrative capacities. - Governance problems and greater vulnerability to corruption exist, rooted in weak capacities and resulting in sometimes inadequate resource allocations and uses. - The government, reshuffled in February/March 2019 after a peace agreement with armed groups, emphasized implementing the National Strategy to Fight Corruption based on five essential pillars: strengthen the legal and judicial framework; transparency; digitize administration processes; invest in human capacities; and strengthen supervision of government agencies. ### Strategic priorities (short-to-medium term) - Adopt a multisectoral policy for improving transparency covering: - access to legal documents (laws, jurisprudence), - transparency in tax and Customs administrations, - transparency in fiscal management procedures. - Priority on internet publications where desirable. - Solidify legal foundations of anti-corruption efforts by aligning the juridical-statutive framework with international standards identified by FATF, UNCAC, and EITI. - Strengthen human capacities and integrity: - focus on reporting of financial assets of senior officials and disclosing essential information via the internet (e.g., jurisprudence, professional conduct frameworks). - Strengthen digitization and automation of processes in tax administration and fiscal management to prevent corruption and improve public activity effectiveness. - Strengthen government supervisory entities (Office of General Government Inspection—IGE and Inspection of Finances), ensure publication of findings, and equip anti-corruption institutions (High Authority for Good Governance—HABG) with resources and authority to pursue prosecutions and sanctions. ### Quantified potential gains from improved governance in revenue collection - Solving governance issues in revenue collection could generate gains of roughly CFAF 135 billion (10½ percent of GDP). - Of this, about CFAF 30 billion for the corporate income tax. - About CFAF 105 billion for the VAT. - These estimates are based on the “Revenue Assessment Tool” and WEO data for 2018 (equivalent to about 10 percent of GDP). - Raising CAR’s tax productivity to the median observed in Sub-Saharan Africa would: - double collection of the corporate tax, - quadruple collection of the VAT. - Such revenue gains could make revenue surpass the threshold estimated at about 12−13 percent of GDP, above which countries can substantially accelerate growth and development. - As a comparison, these potential gains would: - triple investment spending executed in 2018, - multiply investment in national resources by a factor of 14. --- ### SELECTED KEY RECOMMENDATIONS AND TIMELINES (Table 1 highlights) - Establish a transparency and exemplarity pact to improve governance (Section III) - Publish on the government website a webpage dedicated to information supplied by the Constitutional Court, the list of those subject to declaring assets, and those current with their obligation. - Prioritization: High - Indicative Timeline: 2020 - Unit in Charge: Constitutional Court and government - Adopt and implement a law that provides for sanctions and penalties if the asset reporting requirement is not met or for untruthful declarations. - Prioritization: High - Indicative Timeline: 2020 - Unit in Charge: Government - Systematically publish all court decisions on the website of the institutions concerned starting with Constitutional Court, Court of Cassation, Courts of Appeals, Council of State and Courts of Administrative Appeals. - Prioritization: High - Indicative Timeline: 2020 - Unit in Charge: Constitutional Court, Court of Cassation and Council of State - Adopt the organic law that creates the Accounting Office. - Prioritization: Medium - Indicative Timeline: 2020 - Unit in Charge: Government - Revise bylaws of controlling units (IGE, Accounting Office) so they can publish their reports on the internet once finalized, and ensure HABG exercises its power of self-referral to submit files to the prosecutor’s office without prior authorization from other institutions. - Prioritization: High - Indicative Timeline: 2020 - Unit in Charge: Government - Adopt and implement a new anti-corruption law based on items in Section III. - Prioritization: High - Indicative Timeline: 2021 - Unit in Charge: Government and Parliament - Reinvest in Human Resources (Sections IV and V) - Promote leadership by example of senior officials who submit asset declarations and extend them gradually to all employees. - Prioritization: High - Indicative Timeline: 2020 - Unit in Charge: Tax and Customs Administration - Digitize and automate the budgetary, tax and Customs processes (Sections IV and V) - Conduct an independent audit of the use of ASYCUDA. - Prioritization: Medium - Indicative Timeline: 2020 - Unit in Charge: Customs - Activate plans to deploy remote procedures for large and medium-sized enterprises and mobile payment procedures for taxes owed by small enterprises. - Prioritization: High - Indicative Timeline: 2020 - Unit in Charge: Parliament - Stabilize the GESCO information system dedicated to management of government expenditure to expand its use if needed for 2 to 3 more years if there are unforeseen delays in making SIM-BA operational. - Prioritization: High - Indicative Timeline: Ongoing - Unit in Charge: Ministry of Finance and the Budget - Synchronize the gradual deployment of SIM−BA with that of the new fiscal management framework. - Prioritization: High - Indicative Timeline: 2021 - Unit in Charge: Ministry of Finance and the Budget - Strengthen governance in the tax and Customs administrations (Section IV) - Reactivate the joint “Tax Commission” to settle disputes. - Prioritization: Medium - Indicative Timeline: 2020 - Unit in Charge: Ministry of Finance and the Budget - Publish quarterly an online list of names of all de jure or de facto exemptions with the revenue losses they generate. - Prioritization: High - Indicative Timeline: 2020 - Unit in Charge: Ministry of Finance and the Budget - Abolish the Interministerial Committee in charge of Tax and Customs Exemptions (CICEFD). - Prioritization: High - Indicative Timeline: 2021 - Unit in Charge: Ministry of Finance and the Budget - Continue abolishing parafiscal taxes with no relevant economic justification. - Prioritization: High - Indicative Timeline: 2020 - Unit in Charge: Ministry of Finance and the Budget - Adopt a program to promote integrity and a plan to fight corruption and strengthen transparency in tax and Customs administrations. - Prioritization: High - Indicative Timeline: 2020 - Unit in Charge: Tax and Customs Administration - Restore confidence in the State signature (Section V) - Review the legal and institutional framework for procurement. - Prioritization: High - Indicative Timeline: 2020 - Unit in Charge: Government - Develop a portal for government procurement in CAR, accessible to all citizens and all economic operators. - Prioritization: Medium - Indicative Timeline: 2020 - Unit in Charge: Ministry of Finance and the Budget - Prepare implementing regulations for the law on public establishments. - Prioritization: High - Indicative Timeline: 2020 - Unit in Charge: Ministry of Finance and the Budget - Begin deconcentrating resources necessary to provide public services to spending ministries and government deconcentrated entities in the short term. - Prioritization: Medium - Indicative Timeline: 2020 - Unit in Charge: Government - Design and implement a roadmap to decentralize resources necessary for local governments, identifying delegation of authorities with civil servant support rather than only elected officials. - Prioritization: High - Indicative Timeline: 2021 - Unit in Charge: Government --- ### I. GOOD GOVERNANCE: A KEY COMPONENT OF THE NATION’S DEVELOPMENT OBJECTIVES - Despite improvement in per capita income since the return to peace, considerable development issues remain; per capita GDP in constant dollars (adjusted by purchasing power parity) remains well below pre-crisis levels and institutions are fragile. - Improving governance and fighting corruption are major challenges for development; corruption is perceived as affecting most government functions and is generally associated with lower economic growth. - Corruption undermines private sector development, which continues to face an unfavorable business environment. - Estimated macroeconomic impact of governance improvements in revenue: - Solving governance issues in revenue collection could generate roughly CFAF 135 billion (10½ percent of GDP). - CFAF 30 billion from corporate income tax. - CFAF 105 billion from VAT. - Productivity measure: revenue collected as a percentage of GDP divided by representative taxation rate; CAR’s productivity for corporate tax and VAT is well below the median in Sub-Saharan Africa. - Raising productivity to the median would double corporate tax collection and quadruple VAT collection. - Revenue gains could push revenue above the threshold of about 12−13 percent of GDP associated with substantially accelerated growth and development. - Comparative impact: potential gains would triple investment spending executed in 2018 and multiply investment in national resources by a factor of 14. - Approach and sequencing: - Many vulnerabilities were identified but weak capacities require a gradual approach. - Most urgent, relatively swift improvements concern: (i) improving the statutory framework; and (ii) using transparency as a strategic instrument to fight corruption. - Short-term actions include publishing jurisprudence and strengthening the framework for reporting financial assets of senior officials. - Medium-term and longer-term actions include training judges and developing human capacities in revenue administrations and expenditure management. *Source: IMF staff (from the preface and summary material of the mission report).* ### 3. Governance vulnerabilities constrain the effectiveness of public spending. To ### 3. Governance vulnerabilities constrain the effectiveness of public spending. To ### Effectiveness of public spending - Public spending in education and health in CAR shows low impact on quantitative indicators (enrollment rate and life expectancy in good health) because resources are quite modest. - Compared to other countries with modest resources, CAR scores well below most other countries in Sub-Saharan Africa on measures of spending effectiveness. - Improving spending effectiveness has two objectives: - Mobilize more resources to meet development needs. - Strengthen spending governance to maximize impact. - Figures and charts reproduced in the source reference: - Source: IMF FAD Revenue Assessment Tool (RAT). - Source: IMF FAD Expenditure Assessment Tool (EAT). - Source: World Bank. ### Transparency and exemplarity to support good governance - Transparency and exemplarity in managing government are seen as important, high-impact tools that do not significantly strain administrative capacity. - Five pillars addressed for governance improvement: - (i) the legal framework for fighting corruption; - (ii) the legal framework for promoting transparency; - (iii) the fight against impunity due to noncompliance with laws; - (iv) rules of law that affect the business environment; - (v) anti-money laundering and the financing of terrorism (AML/CFT). - Strengthening governance across these pillars would raise budgetary revenue and attract private investment. ### Transparency: findings - The RCPCA recognizes improving transparency as essential for building government legitimacy in a context where a small elite historically controlled political and economic power. - The statutory framework for fiscal transparency is addressed by the law of December 2017 (No. 17.023), supplemented by CEMAC Directive No. 06/11-UEAC-190-CM-22, but implementation improvements are required. - Significant transparency gaps: - Difficulty for the public to access texts of laws and decrees; the Official Gazette of CAR is not available online. - Court decisions are not published. - Reports produced by official agencies, including supervisory bodies, are not made public or are not easily accessible. - Some Accounting Office reports have been submitted to the National Assembly but not made public, contrary to article 43 of the law in respect of transparency. - Although some laws were published on the National Assembly website, they are not comprehensive and do not cover the period before 2017. - Transparency in natural resource management: - CAR joined the Extractive Industries Transparency Initiative (EITI) in 2010; membership was suspended in 2013. - Authorities have taken measures to publish mining contracts on the Ministry of Finance and the Budget website; continued improvement and publication of production and revenue data are essential until readmission to EITI. ### Transparency: recommendations to disseminate information on the internet - Systematically publish all new laws, their implementing regulations, decrees and orders on the government website; include existing laws and decrees that remain in effect. - Systematically publish all court decisions on the website of the applicable institutions (or, for the transition, on a government website such as the site of the Ministry of Finance), beginning with the decisions of the Constitutional Court; the Court of Cassation and the Courts of Appeals, the Council of State and the administrative courts of appeals. - Initiate an awareness campaign for civil servants on the rights and obligations found in the law in respect of transparency. - Set up a system of administrative sanctions for failing to publish information required by law. - Publish all information that is required to be published under the law in respect of transparency on the government website. - Support readmission to EITI by using the government website to publish all contracts that provide licensing rights for natural resources and basic data on production and revenue allocated to the budget. ### Law enforcement: findings - Law enforcement must be strengthened: laws are occasionally misunderstood and not systematically followed by necessary implementing regulations. - Once enacted by the National Assembly, laws do not always have the secondary texts needed to implement them. - Law enforcement in practice is sometimes inconsistent with current legal texts, explained in part by the need for training among civil servants (including judges and clerks) and by lack of public awareness or means. - Failure to enforce laws in trade disputes deters investment due to perceived judicial uncertainty. - Structural problem: government authority is not fully restored in a large part of the country, fostering a culture of noncompliance with laws and regulations. - Agencies that have reported acts of corruption or presumed poor governance sometimes see no sanctions imposed. - Asset reporting exists in the Constitution but lacks penalties for noncompliance, contributing to a culture of impunity. - The absence of enforcement and sanctions undermines government authority and public confidence. ### Law enforcement: recommendations to curtail impunity - Publish the list of all laws that have no implementing regulations and prepare a proper timeline to publish said regulations. - For each law and regulation that is enacted, publish the new law or regulation on the government website no later than two weeks after it is enacted. - Each year count and publish on the government website the number of court proceedings brought for acts of corruption, the court status of their follow-up, information on property seized as proceeds from crime, and the number of sentences issued. - For civil servants, strengthen their knowledge of the laws through: - (i) awareness campaigns; and - (ii) strictly applying administrative sanctions against civil servants who fail to comply with the relevant laws and regulations. - Issue a decree making it mandatory to publish on the government website all internal control investigations and, for cases of corruption, those that are submitted to the prosecutor’s office. - Create an anonymous reporting system with a toll-free telephone line for citizens to report issues of poor governance or corruption to the HABG and the IGE. ### Legal framework and anti-corruption: findings - CAR is considered particularly vulnerable to corruption; indicators and stakeholders indicate corruption is a major problem and government control is poor. - Related survey and perception data: - A 2006 UNDP and Transparency International survey found that 94 percent of those questioned believe corruption is a problem in the police and gendarmerie, 93 percent in Customs, and 90 percent in the courts. - According to Transparency International’s 2019 report, CAR obtained a score of 25 out of 100 for corruption perceptions. - The World Governance Indicator (WGI) places CAR among the lowest countries in the world for controlling corruption, with a slight recent improvement but not to pre-crisis levels. - Many objectives of the 2012 national strategy to fight corruption remain unachieved; the strategy should be reviewed. The March 30, 2016 Constitution created the High Authority for Good Governance (HABG). - Legal toolkit improvements: - CAR ratified the United Nations Convention Against Corruption (UNCAC) on October 6, 2006. - The 2010 penal code (Law No. 10.001 of January 6, 2010) includes various offenses related to corruption. - The UNCAC implementation review identified gaps: technical definitions of offenses, lack of statistics on investigations and proceedings, lack of reported cases, and persistent major gaps in criminalization of certain offenses covered by UNCAC. - Anecdotal evidence indicates corruption proceedings are extremely rare. ### HABG, judicial system, and asset reporting - HABG mandate and constraints: - HABG has a very wide-ranging mandate: protect minority rights, evenly distribute profits from natural resources, raise awareness of corruption risks, foster cooperation among institutions, and strengthen government institutions’ ability to deal with corruption risks. - HABG can require any administration, institution or person to submit necessary information; unjustified refusal is penalized by the penal code. - Resources for HABG are currently limited; it should prioritize activities and concentrate on high-risk corruption areas. - Judicial system weaknesses affect corruption prosecution: - Lack of access to basic legal documents for judges in some regions. - No statistics on corruption cases prosecuted. - Lack of published rulings undermines legal security and guidance across jurisdictions. - Asset reporting: - Asset reporting was introduced in the 2015 Constitution for political officials and senior civil servants; two reports are to be filed (before taking office and after leaving office). - Procedures vary by person, causing implementation confusion. Declarations are filed with the Constitutional Court, which makes them public. - Article 39 of the Constitution provides that a law must identify the nature of applicable sanctions and penalties if no declaration is submitted or if the declaration is inaccurate; such a law has not been drafted. - Most required persons published assets, but noncompliance persists and reinforces perceptions of impunity. - HABG has authority to evaluate provided financial information. - Reforms recommended by good international practices include increasing coverage to high-risk professions and close relatives/partners, clarifying the nature of assets to be disclosed (tangible and intangible assets and interests held or held in real property in CAR or abroad), and envisaging a verification system. *Source: IMF FAD Revenue Assessment Tool (RAT).* ### 20. A targeted and realistic strategy to fight corruption should be able to attack the ### 1cafea2021001 - 20. A targeted and realistic strategy to fight corruption should be able to attack the ### Anti-corruption strategy: findings - The HABG is in charge of developing and disseminating CAR anti-corruption strategy and must have the resources needed to perform its mandate. - Strengthening formal punishment of corruption is central to attacking the culture of impunity. - Bolstering the legal framework requires new legislation to modify identified areas for improvement and strengthening capacities of the prosecutor and the judiciary for prosecuting and punishing corruption. - Publishing court rulings on corruption and producing baseline data on court proceedings would better measure the fight against corruption. - Financial disclosure reforms should align the regime with best international practices, given the multifaceted role of financial disclosure. ### Recommendations to strengthen the general anti-corruption framework - Make it mandatory for the Ministry of Justice to publish a table twice a year that indicates: - (i) the number of referrals it received from the HABG, the National Finance Investigation Agency (ANIF), and other control entities; - (ii) the number of cases that were investigated; - (iii) the number of proceedings brought; and - (iv) the number of sentencings for corruption. - Adopt a new anti-corruption law consistent with UNCAC provisions, and in particular with regard to the incrimination of corruption offenses. This new law should be based on the evaluation of the first cycle of the review for implementing the UNCAC. - Strengthen the system of asset declarations with a law that provides for: - (i) sanctions and penalties if the requirement to submit the declaration is not met, or in the event of an untruthful declaration; - (ii) expand the coverage of persons who must declare their assets and include high-risk professions not mentioned in the Constitution; - (iii) clarify the form for reporting assets (including foreign holdings); and - (iv) expand the asset declaration to include the closest family members and associates. - Evaluate the implementation of the 2012 national anti-corruption strategy and update it, taking prudent measures by order of priority and taking into account the country’s capacity and resources. The new strategy should focus on the main risks of corruption in CAR. - Monitor the truthfulness of information submitted in asset declarations, mainly by crosschecking information with the information the tax administration has. - Give the HABG the human and financial resources it needs for its mission. Revise the bylaws of agencies in charge of supervising public activities, such as the IGF and the IGE, so that they are able to submit their documentation when the HABG requests it. This will enable the HABG to use its right of self-referral to submit the files for which court proceedings are recommended to the prosecutor’s office. ### Improve the Rule of Law: findings - Quantitative indicators show major challenges for the rule of law in CAR. Doing Business evaluates: (i) contract enforcement; and (ii) resolving insolvency. - CAR's Doing Business score for resolving insolvency in Doing Business 2019 was 28.1. CAR’s score for implementing contracts was 31.4. - CAR’s assessment in the Worldwide Governance Indicators (rule of law) is in the decile below the world scale. - The World Bank Country Policy and Institution Assessment (EPIP) score for CAR is 2.0 since 2017 (EPIP scores vary from 1.0 to 6.0). - Judicial insecurity and delays make court processes vulnerable and increase costs. It can take up to eight long years to process applications brought before the courts. - Lack of official data on judicial performance, absence of published court decisions, insufficient administrative capacity, and lack of specialized training exacerbate problems. - Courts are not functioning in a number of regions due to the current situation. - Protection of property rights is weakened because notarized transfers of real property are not compulsory despite Constitution provisions (Constitution, Article 18). Private transactions introduce uncertainty, increase lawsuits over ownership, and affect the accuracy of the property register. ### Improve the Rule of Law: recommendations - Have the Ministry of Justice publish data once a year, court by court, on: - (i) the number of new cases settled during the year; - (ii) the total number of cases brought before the courts; and - (iii) the average amount of time it takes for the courts to process a case. - Initially ensure that all judges have access to basic legal documents. Next, schedule specialized training sessions for commercial court judges. - Review how to strengthen the statutory requirement of the 1958 law under which transfers of real property require notarized documents in order to decrease the number of private transactions. - Provide for administrative sanctions for judges who would render rulings contrary to the law. ### Strengthen Market Regulation: findings - The statutory and regulatory framework for markets is perceived as inadequate. - Worldwide Governance Indicators quality of regulation for CAR is −1.48. - Doing Business indicators on starting businesses place CAR in the lowest decile in the world. - Dismissals deemed “wrongful” can lead to compensation that can amount to several decades of salaries. - Authorities have taken measures including streamlining parafiscal taxes; establishing a one-stop shop for the tax administration; digitization of tax, Customs and spending procedures; and a revision of the labor code to limit compensation for wrongful dismissals. - Starting a business requires ten individual steps with a timeline for implementation estimated at 22 days. In practice, additional steps are required and the Bangui Chamber of Commerce records are on paper, not accessible online, and lack information on beneficial owners. ### Strengthen Market Regulation: recommendations - Finalize the audit of all parafiscal taxes and abolish those with no relevant economic justification. - Strengthen the one-stop shop for starting companies and provide support to taxpayers. - Establish a register of legally founded businesses that the public is able to access online. ### AML/CFT: findings - CAR is exposed to serious AML/CFT risks: porous borders, high level of the informal sector, economic nature of the economy, illegal mining of natural resources. The domestic real property sector was identified as a key area in which there is money laundering. - The CEMAC community directive/regulation is the main source of AML/CFT legislation in CAR. CAR is a member of the Task Force on Money Laundering in Central Africa (GABAC). - An assessment of CAR’s money laundering and financing of terrorism regime was conducted in 2010 and indicated significant weaknesses. There were six follow-up reports evaluating measures taken. Another follow-up report should be produced in 2020. - The ANIF, created by a decree in 2004, is the key stakeholder in AML/CFT but faces substantial obstacles including lack of sufficient material and human resources, including secure office space. - CAR could consider applying to join the Egmont group (about 164 financial investigation agencies) to assist with information sharing. - Cooperation among stakeholders (Customs, tax administration, police, judiciary) is necessary; as of today, no one in CAR has been prosecuted for money laundering crimes. - COBAC surveillance of financial institutions for AML/CFT is inadequate; compliance is poor. Requirements for politically exposed persons (PPE) and beneficial owners are incorrectly covered in the CEMAC legal framework and not implemented. - Designated businesses and professions are not correctly regulated or supervised. No risk-based supervision, inadequate ownership-change verification, and ineffective sanctions prevail. - Foreign exchange houses, brokerage companies, insurance companies and companies that transfer funds are not subject to AML/CFT requirements nor supervised. Designated nonfinancial businesses and professions are not regulated or supervised. - Lack of availability of information on final beneficiaries of legal entities causes governance problems; OHADA uniform laws require basic information but in practice information is manual, hard to access, and real ownership information is not available in timely manner. ### AML/CFT: recommendations - Quantify and detail the material and financial needs of the ANIF in order to improve its effectiveness. - Encourage the sharing of financial information among jurisdictions. Consider applying to join the Egmont group. - Require including information on beneficial owners in the articles of incorporation of companies and include it in the commercial register. - Intensify training in financial crimes for the police, gendarmerie, the prosecutor’s office and the judiciary to improve the ability of the judicial system to prosecute perpetrators of financial crimes. ### Strengthen the governance of the tax and Customs administrations: findings - Fundamental vulnerabilities in CAR Customs and tax systems weaken governance and development objectives. - Raising more tax and Customs resources would give authorities budgetary leeway for priority public spending and major investments. - Low revenue results from: - (i) a complex and generous tax system undermined by multiple parafiscal taxes; - (ii) vulnerabilities in human resources management with an exemplarity framework needing strengthening; - (iii) procedures that are not updated, not transparent and only slightly computerized; - (iv) lack of sanctions after internal controls or audits, promoting impunity and favoritism. - Figure 4 (Comparative Trend of Revenue) signals that the level of revenue raised is very low in CAR compared to sub-region peers. *Source: 1cafea2021001 - 20.* ### 38. The process of adopting tax and Customs statutes or statutes that require ### 1cafea2021001 - 38. The process of adopting tax and Customs statutes or statutes that require ### Civil society and private sector participation in tax and Customs lawmaking - The process of adopting tax and Customs statutes (or statutes that require withholding) "suffers from a lack of civil society participation." - Legal requirement: the Economic and Social Council should be consulted, but "in practice it is in fact excluded from the process of adopting the budget law." - The private sector "is not always informed of new tax and Customs provisions in the draft budget law before it is submitted to Parliament." - Consequences: climate of uncertainty for businesses; lobbying to pass often specific parliamentary amendments. - Recommended process improvements: - (i) be managed by the tax and Customs administrations; and - (ii) provide a reasonable amount of time for consultation by the private sector and the Economic and Social Council. ### Complexity of the Central African tax and Customs system; parafiscal taxes - The Central African ordinary law tax system is described as "cumbersome and complex." - Numerous cases of double taxation (turnover, salaries and compensation). - Customs: mission found "no fewer than 15 revenue items that were allocated and validated" in addition to main duties and taxes (indirect customs duties—DDI, specific customs duties—DDS, VAT, DA—excise taxes and the income tax/corporate tax). - The January 2017 FAD tax policy mission found "no fewer than 75 different withholdings on economic operators, with 22 special allocation accounts for a total estimated amount of 1.7 points of GDP." - Authorities should accelerate implementation of the action plan that seeks to abolish inefficient parafiscal taxes earmarked for special allocation accounts (SAC) and often taken outside the budget law. - Noted progress: "Considerable work has been done as part of the 2019 budget. FAD assisted the Office of the Inspector General of Finance (IGF) in identifying 10 agencies and 36 parafiscal taxes to be abolished." ### Tax exemptions, favoritism, and the Interministerial Committee (CICEFD) - Large number of exemptions weakens the business environment and increases vulnerability to corruption. - Exceptional exemptions increased for imports from "CFAF 36 billion in 2017 to 47 billion in 2018." - Many exemptions are granted individually (contrary to statutory exemptions), causing revenue losses and distortions. - Favorable tax regimes granted individually "outside any statutory framework" generate unfair competition and favoritism. - In 2017 authorities established the Interministerial Committee in charge of Tax and Customs Exemptions (CICEFD) to process exemption requests. - The report notes: given efforts to reduce exceptional exemptions, "the very existence of the CICEFD, which actually processes exemption applications that are not provided for by current statutes, should no longer have to be justified." - Good practice recommended: have exemptions or eligibility for tax/Customs advantages processed solely by the tax or Customs units with jurisdiction in the DGID and DGDDI. ### Exemption Management Fee (RGE): legal and policy assessment - The Exemption Management Fee (RGE) is "not consistent with the principles issued by the World Trade Organization (WTO)," "fails to recognize the initial objectives of statutory exemptions," and "perpetuates rent-seeking in the administrations." - Legal origin: RGE based on Order No. 93-006 of May 5, 1993 (1993 budget) and subsequent budget law amendments. - Current RGE rates: - 5 percent on "exempt" goods that are: (i) imported for administrations, local governments, public enterprises or government-owned corporations; (ii) imported as part of procurement; (ii i) suspended from payment or exempt from duties by Customs tariffs or regulations (except goods of CEMAC origin that pay only the VAT); or (iv) imported as part of establishment conventions signed by the government and some companies; - 15 percent for imports of businesses licensed under the investment code regime and the preferential regime as established by law No. 88-014 for Central African SMEs and SMIs. - Conflicts identified: - WTO rules (WTO Trade Facilitation Agreement Art. 6 2) require fees to be for services actually rendered and allow lump-sum amounts rather than proportional rates—thus RGE proportional rates (5 and 15 percent) conflict with WTO principles. - RGE rates are often higher than normal taxation rates provided by CEMAC Customs tariffs (5 percent for essential goods and 10 percent for raw materials and capital goods). - The allocation of RGE receipts is not clearly defined, creating arbitrariness and discretionary collection. - Mission proposal: "abolishing it unconditionally." ### Tax code complexity, discretionary audits, and settlement mechanism - The General Tax Code (CGI) contains many redundant provisions and poorly arranged penalties, fines, and sanctions, which hinders voluntary compliance and promotes discretionary behavior. - Consequences: - Ad hoc negotiations by taxpayers who lack understanding and prefer to "buy the benevolence of an employee." - Tax audits lack objective or updated risk analysis; auditing often based on officer discretion—some enterprises audited each year while higher-risk ones are almost never audited. - CGI provides a "settlement" mechanism (Art. 388 et seq.) allowing revision of audit results downward by decision of the Minister of Finance; mechanism increases discretionary authority and uncertainty. - Tax dispute resolution: - The CGI provided for a joint "Tax Commission" with equal private sector and administration representatives, but "it has never been operational." - Current complaint processing allows direct committal by the Minister of Finance, who has three months to render a decision, and provides only two decision-making levels for tax relief (less than CFAF 5 million for the Director General of Taxes and directly for the Minister of Finance for larger amounts). ### Recommendations to improve equity, dispute resolution, and transparency - Reorganize the administrative and judicial phases of disputes based on good practices that safeguard taxpayer rights. - Reactivate the joint "Tax Commission" as soon as possible; establish an independent right of appeal for Customs matters. - Final stage: a review by a higher court of appeals to settle pending disputes on the facts and on legal interpretation. - Publish online each quarter the list of names of beneficiaries of all de jure or de facto exemptions with the losses of revenue they generate for the government coffers. - Measures to re-establish confidence in the tax system: - (i) abolish the Interministerial Committee in charge of Tax and Customs Exemptions (CICEFD); - (ii) strengthen monitoring of usage and the final destination of exempt goods and services; - (iii) repeal statutory provisions that put the Exemption Management Fee (RGE) in place. ### Autonomy, leadership, and human resources in tax and Customs administrations - Observations on limited autonomy: - Despite reorganized charts, DGID and DGDDI have limited management autonomy and restricted leeway over their own resources (e.g., information system fee). - Hiring does not always match required skills; government employees without tax/Customs qualifications (military, primary school teachers) are sometimes placed in Customs or Taxes. - Senior officials are not appointed for fixed terms and lack stability; they do not always choose their associates. - Directors general can only issue a warning as disciplinary action; the Minister of Finance alone implements sanctions provided by statute. - Consequences: increased vulnerability to corruption, incentives for advances collected from taxpayers, clientelism in high-revenue entities, inability to issue disciplinary sanctions fosters rent-seeking and impunity. - Recommendations to promote autonomy and strengthen HR management: - Promote leadership by example, including a requirement for senior officials to report their assets. - Implement a real HR strategy incorporated into the multiyear strategy of the two administrations with principles: - (i) hire personnel with required qualifications and ethics; - (ii) provide ongoing training and ensure impartial promotion and assignment decisions; - (iii) limit term in vulnerable positions to no more than four years; - (iv) equitably distribute advantages due to tax and Customs employees using timelines (refund of contributions, share of penalties, costs of proceedings, overtime [travail extra légal], and income generated by disputes). - Implement a reliable, objective and transparent system to measure performance and compliance with ethics: - In DGDDI, create job descriptions and procedures manuals in ASYCUDA. - Update DGID materials to reflect latest developments in SYSTEMIF 4.0. - Ensure reliability of system extractions for employee performance indicators. Box 1. A Manager’s Commitments to Develop Strong Leadership (IMF staff) - Periodic reporting of income and assets as the statutes provide; - Gradual delegation of authority for decisions and signatures; - Pledge to not intervene in the hiring or assignment process; - Lower the means and “lifestyle” of the General Directorate; - Develop prevention activities with organizations that promote integrity; - Support the work of entities in charge of investigating abnormal conduct; - Disseminate the organization’s values and objectives through intensive internal communication; - Hold internal workshops on awareness of the fight against corruption; - Attend conferences in conjunction with organizations that support integrity; - Have their close associates of all ranks arrange their own evaluation. ### Digitization of tax and Customs procedures - Rationale: more digitization would support revenue collection and reduce corruption risk. - Time-use findings: - "On the average, a business uses one full-time employee for one and a half months per year to complete tax returns." - "It takes a declarant two weeks to prepare the documents necessary to clear Customs for his client’s goods." - Authorities' digitization strategy (three pillars): - (i) create an online remote reporting platform for large and medium-sized enterprises; - (ii) implement remote payment by connecting the public treasury’s information system to the SYGMA and SYSTAC payment systems in the BEAC; - (iii) launch the test phase for payment of the single comprehensive tax owed by micro- and small enterprises in Bangui. - SYSTEMIF 4.0 deployment: - Current SYSTEMIF 4.0 architecture "does not meet the DGID’s needs"—it lacks functionality for data tabulation, analysis and risk management, time and case management, performance management and automatic production of management indicators. - Nonetheless, using SYSTEMIF to digitize all documents and procedures that impact users (reminders, audits and collection) is essential to improve transparency, protect taxpayer rights, and facilitate performance monitoring. - Authorities issued instructions making the use of SYSTEMIF mandatory and making documents not generated by SYSTEMIF unenforceable against users. *Source: 1cafea2021001 - 38.* ### 51. Recommendations in favor of the tax and Customs administration information ### 51. Recommendations in favor of the tax and Customs administration information systems ### Recommendations for tax and Customs information systems - Conduct an independent audit of the performances, administration and use of SYSTEMIF 4 and ASYCUDA++. - Secure the use of ASYCUDA to restore user confidence (Table 2). - Make permanent the efforts made to eliminate temporary tax identification numbers by issuing an instruction abolishing the fast-track Customs clearance units [unités banalisées de dédouanement], and by prohibiting Customs officers from submitting declarations on behalf of declarants. - Use a specialized link with the central server to interconnect the Central African Transit Facility in Douala and the Customs clearance offices in Beloko, Berberarti, Mongoumba and Gamboula. - Accelerate the work of the Steering Committee for the project to design and implement remote tax procedures, created by order No. 0279/MFB/DIR-CAB of March 21, 2019, and expand its work to the study of paying taxes using mobile terminals. - Replace the IT hardware in the DFGE and DFME, which are the main suppliers of DGID revenue (soon they are to implement remote procedures). - Interconnect among them the tax and Customs administrations with the main partners (public treasury, budget, commercial bank, telephone companies, electrical utilities, etc.) to ensure data reliability and integrity. These interconnections will check some taxpayer information (address, status, activity level, etc.) and thus they will manage the proper management of tax and Customs documentation. - Enhance transparency and give the users tools by making more information available on the websites of the administrations. Currently, the tax administration’s website is still inaccessible, and the latest update of the Customs administration website goes back to April 2018. - Ensure discretionary powers are transparent and managed so users have: (i) a high degree of certainty and predictability; and (ii) uniform and consistent application of rules. ### Table 2: Measures to curtail corruption linked to ASYCUDA (measures and priorities) - Disable the codes of employees who introduce declarations or T1s - Impact: Discontinue interactions between employees and declarants. Ensure the integrity of decisions and define responsibilities. Enhance transparency and improve the monitoring of goods. - Priority: High - Interconnect the Douala Facility with Bangui over a dedicated line - Impact: Make pre-assessment data available in real time. Ensure the integrity of decisions and define responsibilities. Enhance transparency and improve the monitoring of goods. - Priority: High - Close the fast-track Customs clearance units - Impact: Discontinue interactions between employees and Customs declarants and hold declarants and their clients accountable. - Priority: Medium - Improve authorizations in ASYCUDA - Impact: Hold the employees accountable and enhance transparency. Curb cases of data manipulation in ASYCUDA. - Priority: Medium - Interconnect the offices of Mongoumba, Berberati and Gamboula to the central network - Impact: Make pre-assessment data available in real time. Ensure the integrity of decisions and define responsibilities. Enhance transparency and improve the monitoring of goods. - Priority: Medium - Make the use of the inspection certificate mandatory - Impact: Hold the employees accountable and enhance transparency. Trace violations that are found and the amounts paid. - Priority: Medium - Systematically use the values submitted by the supplier in charge of checking declared Customs values - Impact: Enhance transparency and improve the valuation of goods. - Priority: Medium - Interconnect ASYCUDA with SYSTEMIF to the DGID - Impact: Share data of a tax nature and ensure transparency. Discontinue employee use of the P999999P numbers. - Priority: Low - Computer charter for using ASYCUDA - Impact: Describe the positions, authorizations, procedures used, responsibilities and the data protection protocol. - Priority: Low - Migrate the current system to ASYCUDA World - Impact: Improve system security and data integrity. - Priority: Low ### Information to publish on tax and Customs websites (Table 3) — examples and frequencies - Vision and strategic plan of the tax and Customs administrations - Impacts: Restore the confidence of the public in general and of businesses in particular - Frequency: Annual - Forum and electronic grievance boxes on the social networks - Impacts: Support the detection and prevention of unethical behaviors - Frequency: Ongoing - Performance statistics for tax and Customs revenue - Impacts: Restore the confidence of businesses; Improve the accountability of the administrations; Ensure that an administration is neutral and that the tax system is fair and not discretionary - Frequency: Quarterly - Statistics on fighting fraud by business sector - Frequency: Monthly - Lists of taxpayers with Tax ID numbers, tax liability status, location and up-to-date status - Impacts: Facilitate meeting tax or Customs obligations for users; Public surveillance of inveterate fraudsters - Frequency: Monthly - Statutes related to taxes or Customs (CGI, Customs Code, etc.) - Impacts: Facilitate meeting tax or Customs obligations for users - Frequency: Ongoing - Code of Professional Conduct for DGID and DGDDI staff - Frequency: Ongoing - Clientele service charters and standards for performing tasks - Impacts: Strengthen the rights of tax and Customs administrations users - Frequency: Ongoing - Procedures manual and functional job descriptions - Impacts: Facilitate meeting tax or Customs obligations for users; Support the detection and prevention of unethical behaviors - Frequency: Ongoing - Practical user guide for SYSTEMIF and ASYCUDA - Frequency: Ongoing - Organization chart and employee job directory - Impacts: Make civil servants responsible; Increase transparency in the administration; Protect users against arbitrary decisions; Guarantee user rights - Frequency: Ongoing - Signature authority and authority for decisions and delegations - Frequency: Ongoing ### Integrity, system dysfunctions, and empirical findings - Identified dysfunctions in Beloko Customs clearance office (July–August 2019 sample): - 91 percent of declarations were introduced by Customs officers, contrary to current statutes. - 92 percent of tax identification numbers (NIF) used were anonymous NIFs [NIF banalisés] (P999999P) that fail to identify the real recipients of goods. - 91 percent of declarations were submitted as simplified declarations (DS4), and regularizing them remains hypothetical because they are introduced exclusively by Customs officers with anonymous NIFs. - Sample analysis of 859 declarations at Beloko (July 4–August 30, 2019) — summary counts: - Commissioner: Number individual with NIF: 2; Legal entity with NIF: 9; Anonymous NIF P999999P: 4; Simplified declaration DS4: 62; Detailed declaration IM4: 0; Total: 75 - Customs: Number individual with NIF: - ; Legal entity with NIF: 72; Anonymous NIF P999999P: 6; Simplified declaration DS4: 706; Detailed declaration IM4: 784; Total: 784 - Total: Number individual with NIF: 81; Legal entity with NIF: 10; Anonymous NIF P999999P: 768; Simplified declaration DS4: 784; Detailed declaration IM4: 75; Total: 859 ### Corrective measures for ASYCUDA administration and use - Implement a stricter access authorization policy. - Establish an ASYCUDA usage charter. - Conduct more frequent audits of system benchmarking and use. - Streamline procedures for issuing NIFs. ### Promoting integrity and administrative sanctions - The tax and Customs administrations currently lack a comprehensive strategy to promote integrity; DGDDI has a code of professional conduct and related tools based on the revised Arusha (1993) and Maputo (2002) declarations. - Unit Inspections were reinstated by Decree No. 19-149 of May 20, 2019, but the decree provides little information on Inspection Units’ responsibilities, overlaps with the Office of the Inspector General of Finance (IGF), and sets the number of unit inspectors per general directorate at five — a number assessed as insufficient. ### Recommendations to develop staff integrity - Strengthen the capacities of the two offices of the two-unit inspection entities responsible for internal control and audit programs; balance positive ethics promotion with sanctions to punish proven corruption via disciplinary procedures or court proceedings. - Encourage staff, users and the public to report corrupt and unethical conduct or failures to implement ordered sanctions; public monitoring by civil society will help ensure sanctions are applied. - Conduct external audits in cases of serious and prevalent issues; when appropriate, enlist the Office of the Inspector General of Finance (IGF) or the National General Inspection Office (IGE) for comprehensive investigations and publish general points and results to strengthen public confidence. - Adopt a program to foster integrity and a plan to fight corruption and strengthen transparency in the tax and Customs administrations. ### Government financial management information systems: GESCO and SIM−BA - GESCO (implemented 2004) history and issues: - Implementation was incremental with modules added over time; essential specifications and technical design documentation were not prepared. - Situation in 2016: system incapable of producing Treasury accounts; trial balances unbalanced and required manual reprocessing; did not produce budgetary execution reports or quarterly management accounts. - Action taken: multidisciplinary team provided functional and IT support; GESCO stabilized until 2018. - Situation as of end-2018: GESCO operational for central government expenditures but fails to provide good traceability of the expenditure chain; not benchmarked to validation data (liquidations); payment and budget modules do not communicate; summary budgetary statements and expenditure execution reports require manual reprocessing; GESCO budget module does not adjust budgetary commitments for payment orders to update temporary posting accounts. - Acquisition of a new government fiscal management information system (SIM−BA): - Justified by the prospect that statutes derived from CEMAC fiscal management directives will come into effect. - The January 1, 2021 deployment schedule, after a trial period in 2020, may be ambitious and carries risks, including the need for formal adoption of the new CEMAC legal framework and stakeholder learning of new budgetary and accounting management concepts. - Public expenditure management framework status highlights (Table 5 entries preserved): - Organic Law 18-013 of July 13, 2018: Multiyear budget (implementing regulations still to be drafted); In progress: Medium term budgetary framework. - Program budget: Scheduled for 2021. - Deconcentration of management: In progress. Trials in 7 ministries. - Cash management: Functional Treasury Single Account; room for improvement in cash flow plan. - Execution procedures: Decree 19.091 of March 27, 2019; Normalization in progress. - Government Chart of Accounts: Decree by Decree 19.093 of March 27, 2019; Chart of accounts now being prepared; Balance sheet and accrual basis accounting: Gradual implementation by 2024. - Government Budget Classification: Decree No. 19.094 of March 27, 2019; Program classification in progress. - Table of Government Operations (TOFE): Decree 19.092 of March 27, 2019; TOFE completely overhauled by 2024. - Procurement: 2008 Code creating the DGMP and ARMP; Institutions in place, assessment scheduled in 2019, overhaul 2020. - External audit: 2008 Organic Law; Law apparently obsolete, but the Accounting Office is functional and relatively independent (see INTOSAI criteria). *Source: IMF staff.* ### 61. Recommendations to prepare for a more gradual deployment of SIM−BA ### 61. Recommendations to prepare for a more gradual deployment of SIM−BA ### SIM−BA deployment and information systems - Stabilize the GESCO system to extend its useful life for two or three more years. Despite GESCO’s weaknesses, it should be kept for a transition period that will necessarily be longer. To do so, the IT managers must be encouraged to finalize the technical adaptation work to correct the deficiencies in GESCO and to maintain user support in order to continue to standardize the management processes. - Finalize the information systems master plan to provide for an interface among the various information systems that assist in managing public finances. The new SIM−BA system should be the backbone of budget execution and thus be incorporated into an updated master plan. The administrative and technical processes must be in place in order to facilitate information sharing between SIM−BA, the revenue applications (now under development), and the balance management and debt management applications. This will also require, among other things, interfaces between SIM−BA and the other relevant information systems. - Synchronize the gradual deployment of SIM−BA with the deployment of the new management framework. Effective governance is needed for implementing the project and there should be rigorous acceptance testing phases, cross-cutting project management and effective communication in order to include all the stakeholders in the reform (mainly and especially the users). ### Recommendations to prepare for deployment (implicit) - Ensure administrative and technical processes and interfaces among SIM−BA and revenue, balance management, and debt management applications. - Implement rigorous acceptance testing phases, cross-cutting project management, and effective stakeholder communication, with special attention to users. ### Strengthen the Expenditure Execution Procedures — context and findings - Civil conflict effect: From 2013 to 2015, the government attempted to pay the essential expenses except for two months of wages and two quarters of pensions, contracting massive loans. As of end-2015, more than 50 percent of the public debt was external arrears (18 percent of GDP) and domestic arrears (17 percent of GDP). - Confidence and business environment: Confidence in the government as payer was seriously altered; only a handful of suppliers agreed to be paid after service, and there were very few local and foreign investors. - Arrears clearance plan: A comprehensive plan to clear domestic arrears (supplier debts) was adopted with a schedule and firm guarantees including quarterly progress reports by an international auditor. Periodic external auditor reports confirm implementation and application of the rule. Some reimbursements initially scheduled in 2019 were delayed due to strict control and identification requirements. Additional amounts were identified as placed in deposit accounts that created claims not yet paid and were added to the existing stock; another payment plan was to be prepared for them, in theory in 2020. - Monitoring deficiencies: The intra-annual monitoring system does not provide an alert on the establishment of new stocks. Payment timelines are computed starting on the date the expense is accepted instead of the validation date, so stocks of trade arrears validated but without payment authorization or acceptance by the accounting officer are not taken into account in the administrative phase. Authorities acknowledge these arrears but are unable to estimate the volume. Accounting arrears are not monitored in the course of the year based on regulatory payment deadlines—not to exceed three months as required by community directives and OHADA. Key statistics (Table 6: Stocks in billions of CFAF; Jan. 31, 2017 | Jan. 31, 2018 | Jan 31, 2019) - Wage arrears: 64.89 | 56.93 | 22.43 - Trade arrears: 9.30 | 8.80 - Arrears excluding the plan: 115 - Exceptional expenditures (% of expenditure excluding debt and wages): 26% | 17% | 7% ### Expenditure procedures and procurement findings - The Ministry of Finance and the Budget is normalizing expenditure by curtailing the use of exceptional procedures. The program supported by the Extended Credit Facility (ECF) set a goal of lowering exceptional expenditures to less than 5 percent of central government spending, excluding balances and debt. - Procurement vulnerabilities: Procurement procedures, especially for investment projects, are particularly vulnerable to corruption (commissions or secret kickbacks [rétro commissions]) and handling of public funds creates temptations for misappropriation. Revenue and Treasury units have automated cash transactions to reduce human intervention. - Procurement practice: Authorities intend to use competitive procedures in all cases. Use of noncompetitive procedures (private and direct contracts, or contracts with inappropriate clauses) are on the decline but remain considerable and contribute to public perception of collusion. Two factors: lengthiness and complexity of procurement procedures; poor competitiveness in some sectors due to limited market diversification. Authorities plan a status update in 2020 and an assessment of public investment and procurement procedures with World Bank support. Key statistics (Table 7: Procurement Procedures by Category; In value (billions of CFAF)) - Invitations to bid: Not reported | Not reported | 43.73 - Procedures without competition or avenants: Not reported | Not reported | 8.12 - Invitations to bid (% of total): Not reported | Not reported | 84.34% ### Treasury Single Account (TSA) and liquidity management findings - TSA: Despite work to put a TSA in place, coverage is partial and information on liquidity remains limited. Donor funds are deposited in TSA sub-accounts and subject to fungibility rules. Public administrative establishments (EPA) and associated agencies kept accounts in commercial banks; some officials consider these entities financially autonomous, a view conflicting with CEMAC directives and the organic budget law. - Financial information quality: In 2018, statements submitted by the Central Accounting Agency—Treasury (ACCT) show dissimilar amounts; daily and monthly extrabudgetary cash statements cannot be verified as they relate to accounting entries. Reconciliation between the monetary survey and the net Treasury position is incomplete. - Risks: Approximations in liquidity management make it impossible to check whether revenue was fully deposited in the TSA (and not embezzled), and whether all disbursements were recorded. Funds unduly held by de facto managers escape automatic audits by the Accounting Office and internal control. Key statistics (Table 8: Gaps Found Between the Monetary Survey and the Net Treasury Position; In billions of CFAF; End-2017 | End-2018) - Net government position (see BEAC): 40.36 | 32.38 - Net Treasury position (see Treasury cash flow): 34.46 | 30.22 - Gaps: 5.90 | 2.15 - Gaps as a % of budgetary revenue: 3.83% | 1.02% ### Recommendations: expenditure execution, procurement, and TSA consolidation - Continue clearing domestic arrears and normalizing expenditure procedures. Paying government liabilities on the correct date is essential for restoring government credibility and ensuring the return to the normal procedure. In this respect, the execution of the clearing plan, now in progress, should be completed. To prevent the formation of new stocks of arrears, take the following measures: - (i) continue improving Treasury cash flow and its synchronization with the consolidated commitment plan and the plan for issuing debt securities; - (ii) discontinue the exceptional practice of deposit accounts; and - (iii) continue to reduce the volume of transactions carried out using exceptional procedures. - Revise the procurement management framework to include: - (i) a requirement to perform cost-benefit analyses for government investments above a threshold (to be determined based on capacities and amounts considered); this will require support from donors initially; - (ii) publication of these assessments; - (iii) the statutory requirement − along with penalties for noncompliance − to publish invitations to bid on the government website; and - (iv) publication of the criteria for selecting businesses. - In the medium term, the DGMP should strive to develop a management application backed by a procurement portal to ensure that government procurement is entirely transparent. - Continue to consolidate the TSA and make the accounting data reliable. Expand the perimeter of the TSA to all legal entities subject to public law: the government, public administrative establishments and local governments. Raise awareness among stakeholders in advance and strengthen Treasury staff capacities to provide integrated management of government funds. ### Strengthen Fiscal Transparency — findings - IMF Fiscal Transparency Code: four pillars (I) fiscal reporting; (II) fiscal forecasting and budgeting; (III) fiscal risk analysis and management; and (IV) natural resource management. - Accounting improvements: ACCT established in 2015; a data entry center reconstructed missing accounting data for 2012–2015. A general balance of accounts prepared in 2016 and 2017 but quality was poor; improvements followed. 2016 financial statements submitted to and approved by the National Assembly. 2017 and 2018 draft budget review laws submitted to the office of the assembly and being reviewed by the Accounting Office. Internal control unit set up in 2019 with gradually increasing capacities. - Remaining vulnerabilities: Scope of accounting operations limited; only recently began to include entities in the specific budget (agencies, special funds, special allocation accounts). Management accounts in the specific budget and special Treasury accounts were submitted late; accounts of agencies, funds and other decentralized budget agencies [démembrements budgétaires] are not included—this represents more than 20 percent of the budget not monitored and a potential source of major fiscal risks. Fiscal accounting is improving but remains not fully transparent; quarterly execution reports are factual with no assessment of the fiscal situation. ### Fiscal transparency recommendations - Continue to improve accounting quality. Continue efforts by Treasury units to improve accounting quality, set up internal control and prepare for the changeover to the new CEMAC standards. Implement more modern general accounting as a medium-term goal using a roadmap involving all accounting stakeholders, including the Accounting Office and the payment authorization officer. - Organize institutional communication on budgetary operations. Improve dissemination of budget execution reports and communicate more actively on the year’s fiscal data. Consider joining the open budget initiative. - Develop a procurement portal in CAR to support improved transparency in procurement procedures. Implement a procurement management application organized as a workflow to trace manager operations in real time (purchasing units, the DGMP and the ARMP) and publish contracts on a procurement portal from bidding to completion. Models exist in Sub-Saharan Africa so exorbitant costs are not needed. ### Expand Financial Governance to the Entire Public Sector - Public sector governance is poor. Public establishments and enterprises obtain allocated parafiscal taxes; they submit income statements sometimes with delays but seldom balance sheets indicating assets and liabilities. Government supervision needs strengthening through a public sector management strategy. ### Streamline the Parapublic Sector Supervision — actions and findings - Government commitments: statutes for public sector entities (52 agencies and offices) and parafiscal taxes were surveyed and published on the MFB website. All known parafiscal taxes were entered in the 2019 budget law in the amount of CFAF 13 billion, with a counterpart of CFAF 8 billion (about 60 percent) for transfers to public entities that do not have these taxes. The action plan for streamlining parafiscal taxes was updated to include new recommendations and address major delays. Audit of public agencies and offices is ongoing. *Source: IMF staff report (section 61).* ### 76. The law in respect of the supervision of public enterprises and establishments was ### 1cafea2021001 - 76. The law in respect of the supervision of public enterprises and establishments was ### Law on supervision of public enterprises and establishments (enacted late 2019) - Enacted in late 2019 and based on principles of good management. - Clarifies that: - The mode of normal management of public entities is the public administration. - The mode of management of a public service by a parapublic sector entity is an exception. - Frames creation or modification of a parapublic sector entity and illustrates the close relationship between the public and parapublic sectors. - Identifies governance of establishments, enterprises and semi-public companies and specifies budgetary execution procedures. - Distinguishes technical and financial supervision and strengthens financial supervision. ### Implementing regulations (Table 9: Central African Republic: Implementing Regulations for the Law in Respect of Public Sector Supervision) - Article 64 — Level: A decree — Purpose: Statute on the operation and financial regime of public establishments and enterprises, with possible exemptions to corporate law. - Articles 5, 19, 28, 34, 50, 79, 83 — Level: One decree per entity involved — Purpose: Modify the charters of public enterprises and establishments. This law establishes the following according to entity: composition of the board of directors and of entities represented on the board, and the conditions for appointing directors. For public establishments: procedures for governance of the establishment, procedures for managing resources and limitations on the establishment’s autonomy. - Article 56 — Level: MFB order annexed to the budget law — Purpose: List of public enterprises, public establishments and government interests. - Article 61 — Level: Circular — Purpose: Application for grants, to be completed by the sectoral ministries for public enterprises, with an analysis of the costs and justification of the activities to which the grant is to be given. The form used for the application should be established by MFB circular or in a framework letter. - MFB decision — Level: MFB decision — Purpose: Allocation decision that establishes the procedures and timelines for transferring grants. - Implementation note: Provisions should be made for implementing the law so that it does not remain a dead letter. A number of implementing regulations should be prepared as soon as Parliament adopts the law. Suggestion: prepare drafts without waiting in order to save precious time for implementation. ### Roadmap for successful budgetary decentralization — process and objectives - Thought process began in 2017 on modifying the local government code to increase decentralization (creating additional local levels beyond provincial and communal, increasing local budgets, transferring powers from central government, and implementing new decentralized administrative structures). - Decentralization objectives: - Preserve unity and deal with diversity. - Optimize economic development in sectors where community-based management is a source of efficiency. - Consolidate the authority of citizens to manage the community in the best interests of its members. - Risks identified: - Higher number and scattering of means and stakeholders, making it harder to harness and control public activity. - Insufficient capacity of local governments to fulfill new responsibilities, leading to suboptimal allocation or inefficient distribution of resources. - Need for appropriate resources, primarily a sufficient number of qualified employees, and a robust and effective governance system. ### Recommendations for decentralization (paragraph 82) - Deconcentrate the resources necessary for delivering public services as the central government regains authority in the regions; prerequisite: restoration of public order and civil peace and resumption of government services. - Evaluate the own resources of local governments and their administrative capacities. Review and streamline the tax and local fee system to foster taxation aligned with economic activity and tailored to local needs. - Identify the authority of the various levels of local governments (example approach: assign management of local services to communes; crosscutting infrastructure and local economic development to other levels). - Design and implement a judicious roadmap to decentralize in the medium term those resources local governments need to exercise authority; include strengthening capacities and implementing a system of good governance. ### Strengthen surveillance of budgetary institutions — corruption control framework - Two essential factors to fight fraud and corruption: the system of accountability and proper management of human resources. - Empirical insight: amount of a bribe needed to influence an employee correlates with material perspectives (salary and career prospects) and the risk of detection (reference to Box 3). - Policy levers: a dissuasive internal and external control framework; an incentivizing human resources policy with decent compensation and stable careers. Box 3 (Philippine “Bureau of Internal Revenue” 1975−80) - Managerial policy used two key levers: - Salary incentives and career prospects. - Stronger controls and sanctions against proven cases of fraud. - Outcome: policy reduced corruption significantly and substantially increased revenue collection. After policy abandonment in 1980, the share of taxes in GDP fell sharply. ### Strengthen internal and external reviews — institutional capacity and gaps - Parliament and the Accounting Office are increasing capacity to exercise constitutional review; since 2016 capacity has been enhanced but resources remain lessened and the Senate (lower house created by the Constitution) is not yet in place. - Accounting Office: established in 1996, began operating in 2006; has had difficulty preparing final reports and apparently never issued a restitution order against a government account. Since 2016, capacity enhanced to review government accounts and conduct investigations at request of Parliament or the executive. - Executive inspection toolkit exists but capacities are poor: - National General Inspection Office (IGE), founded in 1980, under direct authority of the Head of State. - Office of the Inspector General of Finance (IGF), part of the Ministry of Finance and the Budget, with interministerial authority; inspects entities and audits administrations, assists with management advice and training; plays an essential role in clearing arrears and updating financial regulation. - Sectoral ministries have inspection offices cooperating with IGE and IGF. - Office of General Parapublic Sector Review, under the prime minister, ensures governance of establishments, enterprises and semi-public companies and reviews budgets and accounts. - Financial supervision deconcentration experiment to seven priority departments is in progress; supervisors are permanently placed in all public establishments and enterprises. - Capacity shortfalls: - Supervisory entities have limited capacities: newly established headquarters for the Office has no auditors and only a few inspectors; auditors’ expertise is diverse; visited entities reported low budgetary resources. - No follow-up on recommendations made by supervisory entities, including those with legal or judicial consequences. - Audits fail to deter: few reports are submitted to the prosecutor’s office; it seems no restitution orders have been issued against accounting officers; budgetary and financial discipline office is not operational. - Court processing of corruption cases is slow or nonexistent; economic operators involved in corruption matters are rarely prosecuted; enforcement of administrative sanctions against bidders and contractors is weak or nonexistent. ### Recommendations to improve audit, oversight and transparency (paragraph 91) - Improve coordination of internal control entities for fiscal management. Put in place a control program with quality control of audit reports, investigation methods and follow-up of recommendations. Coordination could be assigned to the IGF in conjunction with the IGE and could evolve into a strategy to modernize internal control. - Make audits transparent by publishing reports; strengthen institutional communication on the government and Accounting Office websites (the latter is still nonexistent). - Continue to strengthen the Accounting Office by enacting an organic law that creates it. - Strengthen capacities in auditing entities through external funding and targeted training. Main needs: digitization, institutional communication, and techniques of analysis and investigation. ### Strengthen the government’s administrative capacities — diagnosis and recommendations - Observed weaknesses: - Weak human capacities across the Central African government. - Hiring based on titles instead of competitive testing; scarce guarantee of qualified hires. - Centralized civil service management dissatisfies managers of entities and financial institutions. - Some academic courses (public finance and markets) have become nonexistent. - Sanctioning system difficult to implement and few levels; civil servant salaries unattractive and in some cases insufficient, creating incentives for second compensated positions and conflicts of interest or absenteeism. - Impact: weaknesses affect the government finance function, which should be an interconnected whole across MFB and sectoral ministries; sectoral units are natural extensions of MFB units. Recommendations (paragraph 96) - Assess the civil service management system: review procedures for training, hiring and compensating civil servants; review safeguards or incentives to restore integrity and instill ethics and professional conduct. - Revitalize curriculum for initial training in the government finance function: base on a status update of education in accounting and administration courses (ENAM Bangui) and administration specifications to determine curriculum needs; enlist development partners. - Strengthen capacities of the government finance function through professional development provided by the MFB: develop MFB coordination role, provide periodic communication, conduct targeted training, share experience; networked directorates (Treasury, Financial Supervision, Budget) to disseminate best practices; institutional communication by the MFB cabinet is necessary; creation of a professional development center is continuing in the MFB. - Disseminate the professional conduct charter in each administration for ownership: formalize individual commitment via a “commitment document” signed by each employee; accompany dissemination with awareness and training; levy sanctions if rules not observed; post the charter where administration users are present; conduct an extensive communication campaign on charter content. *Source: Draft law in respect of the organization of the legal and financial institutional framework applicable to public enterprises and establishments; Roadmap for Successful Budgetary Decentralization; Annex I. Definitions of Governance and Corruption According to the 2017 IMF Policy.* ### 2. Governance refers to the institutions, mechanisms and practices through which ### 1cafea2021001 - 2. Governance refers to the institutions, mechanisms and practices through which ### Definitions and scope of governance - Governance: "the institutions, mechanisms and practices through which governmental power is exercised, including for the management of public resources and the regulation of the economy." This includes processes at the country level and institution-level structural arrangements. - Governance is presented as an "inherently neutral term" describing the framework for exercising authority without illustrating results. - Good governance: a "more normative concept" recognizing that the quality of governance can impact its effectiveness and efficiency in achieving desired outcomes. - The Guidance Note encompasses governance and "good governance," but a single review cannot examine the Fund’s work across these broader areas because the Fund’s work to promote good economic governance has grown tremendously and is assessed through dedicated policy reviews (surveillance, use of Fund resources, capacity development). - This stocktaking focuses specifically on the Fund’s involvement related to analyzing and providing advice on corruption issues, not the broader governance agenda. ### Corruption: definition and boundaries - Corruption: "the abuse of public office for private gain." This definition: - Has been adopted by a variety of organizations and is consistent with the provisions of the United Nations Convention against Corruption (UNCAC). - Focuses on abuse by public stakeholders; fraudulent acts perpetrated exclusively by private citizens are not covered, except where they relate to proceeds of corruption. - Recognizes that corruption is often facilitated—or initiated—by private stakeholders (for example, offering a bribe), so anti-corruption strategy needs to address private-sector conduct as well. - Emphasizes that an act can be corrupt even if it does not result in direct financial gain (for example, political interference that causes an official to abuse public office). - UNCAC reference: Article 19 provides that each State Party shall consider establishing as a criminal offence, when committed intentionally, the abuse of functions or position for the purpose of obtaining an undue advantage for oneself or another person or entity. (UN General Assembly, 2003.) ### Systemic corruption and its economic implications - Systemic corruption: defined in the May 2016 IMF Staff Discussion Note “Corruption: Costs and Mitigating Strategies” (SDN / 16/05) as circumstances in which "corruption is no longer a deviation from the norm but is manifested in a pattern of behavior... omnipresent and organized, affecting a variety of levels of government and practiced by bureaucrats and politicians in nearly every ministry." - The review and IMFC guidance premise: systemic corruption has a particularly pernicious effect on economic performance. - Effective anti-corruption strategies must be comprehensive and encompass broader governance improvements (transparency, accountability, appropriately balanced regulation, effective institutions). - Promoting good governance is the most durable way of addressing systemic corruption. ### Examples of governance weaknesses and anti-corruption pillars (Annex II: Presentations of the Essential Pillars of the SNLC) - Strengthen the legal and judicial framework - Finding: Sentiment of impunity linked to incomplete laws (e.g., statutory requirement to report assets lacks sanctions and is enforced only partially). - Example: According to the 2017 annual activity report of the High Authority for Good Governance, "The decree in respect of assets for categories of senior civil servants is not implemented." - Need: Strengthened legal framework for combating corruption and more efficient judicial operation (reduce excessively long wait times for issuing judgments; publish judgments). - Coverage in report: Chapter III (transparency, strengthen the legal framework for combating corruption, market regulation and protection of investor rights, and anti-money laundering). - Active transparency policy and public awareness - Finding: CAR has complementary institutions (National General Inspection Office – IGE; Office of the Inspector General of Finance – IGF; the Accounting Office – CDC; National Committee to Control Corruption in Central Africa – CNLCCC; High Authority for Good Governance - HAGB) involved in developing transparency policy consistent with UN and OECD principles. - Outcome: More government contracts now use invitations to bid, but vulnerabilities persist; more systematic dissemination of decisions (court rulings, invitations to bid) would boost confidence. - Coverage in report: Chapter III.A (in the legal field), and Chapter V.C (fiscal transparency). - Digitize and automate budgetary and tax administration processes - Finding: Substantial efforts to upgrade digitization in tax and Customs administrations and public expenditure management, but significant vulnerabilities remain (tax and Customs information system is permeable to unauthorized interventions). - Coverage in report: Chapter IV.C (digitize the tax administration), and Chapter V.A (digitize public finance). - Human investment in the civil service - Finding: Lack of material resources (computer hardware) and human resources (staff and skills) in most institutions visited; judicial system needs training for judges and specialized magistrates. - Coverage in report: Chapter IV.B (Human resources management in the tax and Customs administrations) and Chapter V.E (Human Resources Management in Public Finance). - Strengthen supervisory structures for public agencies and decentralization - Finding: Reports from oversight bodies (Accounting Office, National Government Inspection Office) are not systematically followed up by judicial action; need to develop supervisory structure and progress in deconcentrating decisions. - Coverage in report: Chapter V.D (supervision of public agencies and decentralization). *Source: CAR authorities and IMF staff.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1cafea2021001.pdf_