## Preface 3 — 1mozea2023005 ## Source details **Canonical URL:** [Preface 3 — 1mozea2023005](https://www.imf.org/-/media/files/publications/cr/2023/english/1mozea2023005.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2023/english/1mozea2023005.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2023/english/1mozea2023005.pdf.json) --- ### Mission scope and stakeholders - Mission of the Fiscal Affairs Department (FAD) visited the Republic of Mozambique from April 3 to 16, 2013, at the request of the Ministry of Finance (MF) and with financial assistance of the Danish Embassy in Mozambique. - Main objectives: - (i) assess establishment of SISTAFE (Public Sector Financial Management System) and respective action plan, and propose improvements; - (ii) evaluate implementation of the recommendations made by previous missions; - (iii) discuss with the authorities the effectiveness of the public management reforms, and support for establishment of the next phases of the reforms. - Mission team: Mr. Juan Ramón Ruiz (Mission Head, FAD), Ms. Margarida Azevedo, Messrs. Helio Tollini and Joseph Cavanagh (consultants), and Ms. Esther Palacio (Technical Assistance Coordinator in the IMF Office in Maputo). - Key Mozambican interlocutors and institutions met include Vice-Minister of Finance Pedro Couto; Director-General of CEDSIF Augusto Sumburane; National Director of the Treasury (DNT) Maria Isaltina Lucas; National Director of State Assets (DNPE) Albertina F. Ruquia; National Director of the Budget Amílcar Tivane; Inspector General of Finance (IGF) Carolina Pessane; National Director of Public Accounts (DNCP) Amélia Mutemba; National Director of Research and Economic Analysis Isabel Sumar; Administrative Tribunal, Ministry of Public Works and Housing (MOPH), Ministry of Women and Social Welfare (MMAS), Ministry of Planning and Development (MPD), Ministry of State Administration (MAE), IGEPE, District of Marracuene, Municipality of Matola. ### Main 2012 results and PFM reforms - Expansion and coverage: - Expansion of the system for salary payment. - Incorporation of new executing units (UGBs) within SISTAFE, surpassing the target set for the year. - Steady increase in coverage of the CUT (Single Treasury Account), with the closing of 146 accounts. - Electronic transfers of financial resources through the CUT for revenue collection and payment of expenditures. - Budgeting and planning: - Use of unified budget ceilings for the provinces, permitting greater autonomy in allocation of resources. - Budgets prepared at a more aggregate level of the economic classification of expenditure, reducing mismatches between budget allocations and commitments. - Possibility of incorporating into the budget funding generated by internal revenues over the course of the financial year. - Accounting, control and governance: - Approval of a law on public enterprises overseen by the MF. - Action Plan drawn up in October 2012 to implement accrual accounting (contabilidade patrimonial) in line with IPSAS. - Approval of a new conceptual model of internal control in October 2012. - Decentralization of CEDSIF to the provincial level, hiring two technical staff per province. ### Advances and outstanding issues in General Public Accounts (CGE) and accounting - DNCP analyzed discrepancies in charts and appendices to the CGE identified by the previous mission to improve presentation of CGE 2012. - Action Plan approved in October 2012 to implement accrual accounting in line with IPSAS. - Next step: drawing up of new regulations for public accounts to be sent to Parliament for approval prior to end-2013. - Internal control: new conceptual model approved in October 2012 to enhance internal audit coordination and methodology. ### Budget execution, recording, and cash management concerns - Need to develop a more effective strategy to ensure timely recording of expenditure execution phases: commitment, validation and payment. - Cash management improvements recommended: - Better cash planning through budget execution information, particularly from executing units regarding commitment and validation of expenditures. - Planning should progressively expand from monthly to quarterly basis. - Ministerial orders recommended to classify bank accounts and improve integrated management of CUT mechanisms for domestic and foreign currencies. - Continue increasing CUT coverage; impose penalties for accounts opened without meeting legal requirements. - Gradual incorporation of internal revenues and external financing funds into the CUT. - Pursue automation of daily transfer to the CUT of balances on revenue accounts. ### Key statistics and status highlights (selected) - e-Payroll coverage as of December 31, 2012: 33 percent (81,750 staff). - e-Payroll payment in 2012: public employees in 595 institutions. - e-SISTAFE implemented in 620 UGBs. - Direct-route execution of state budget reached 52.6% (2011: 42%). - SISTAFE rollout completion target: 2015, at 70 units per year; 2012 inclusion of 106 new UGBs. - In 2012, 146 accounts were closed and 68 accounts authorized. - External financing disbursements through CUT in 2012: 55% (2011: 56%); 45% remained outside CUT. - Out of total state functionaries and agents in 2012: 247,725; paid via e-Payroll in 2012: 81,750 (33%). - For the 2013 Budget, current expenditures absorb 87.5% of current revenues. - Current amount requiring prior TA approval (as reported): MZN 5 million; budget law ceiling referenced as seven million at present; Tribunal states ceiling remains at MZN 5 million. --- ### Medium-Term Expenditure Framework (MTEF) and program budgeting - Progress: - Advances each year in MTEF preparation. - New MTEF for 2014–2016 in final phase of preparation: will establish limits by sector and contain more targets and indicators for budgetary programs. - Remaining weaknesses: - Absence of alternative economic scenarios. - Lack of analysis of fiscal risks. - No increase in reserves to offset increased uncertainty. - Need to explain variations in ceilings observed within a fiscal year. - Program-based budgeting recommendations: - Set objectives and indicators in budget programs and connect national plans with the budget (requires coordination between MPD, MF and ministries). - Gradual implementation with pilot units; review concepts and reframe public expenditure within categories of “operations” and “investments”. - Review responsibilities of DNP and DNO so one is responsible for planning instruments and the other for the OE (government budget). ### Program targets, review, and outcome indicators - Recommendation: Include physical targets in the programs. - Unit responsible: MPD, DNO and line ministries. - Timetable: 2012. - Priority: Medium. - Current Situation: Under way; DNP/MPD working with line ministries to fill the gap where 70% of the programs fail to present a physical target or indicators. - Recommendation 3.3: Review district-level programs. - Unit responsible: DNO and MPD. - Timetable: 2015. - Priority: Medium. - Current Situation: Working group being formed. - Recommendation 3.4: Identification of outcome indicators in the programs. - Unit responsible: MPD, DNO and line ministries. - Timetable: 2012. - Priority: Medium. - Current Situation: Under way; outcome indicators being defined for missing programs in the 2014–2016 MTEF process. - Key statistic: 70% of the programs fail to present a physical target or indicators. --- ### SISTAFE rollout, system functionalities and budget execution (Section 4) - Recommendation 4.1: Timetable and scope of SISTAFE rollout prepared and implemented; expectation of completion in 2015 at 70 units per year. - Recommendation 4.2: NC (commitment note) number required in each contract; functionality developed in 2012, pilot expected in Q2 2013. - Recommendation 4.3: Monthly budgetary and financial programming based on appropriated and validated expenditure; under study with DNT for 2013 implementation plan. - Recommendation 4.4: Address payments before delivery and improper recording of commitment and validation phases; DNT to commence release of funds (quotas financeiras) unlinked from budget commitment limit starting 2013; activities to raise awareness of recording phases. - Recommendation 4.5: Include monies appropriated, validated and paid out by Ministry in REO; conditions created in 2012 so information can be included in REOE as from QI 2013. - Recommendation 4.6: Disseminate annual financial programming with monthly breakdown to line ministries; implementation in 2013 underway. - Recommendation 4.7: Define new strategy for e-SISTAFE rollout; e-SISTAFE implemented in 620 UGBs; direct-route execution 52.6% in 2012; CEDSIF hired two resident technical staff per province. Key statistics and milestones: - Completion target for SISTAFE rollout: 2015. - 2012 inclusion of 106 new UGBs. - e-SISTAFE implemented in 620 UGBs. - Direct-route execution of state budget: 52.6% (2011: 42%). --- ### Single Treasury Account — CUT (Section 5) - Account rationalization and CUT coverage: - Recommendation 5.1: Streamline use of bank accounts; classify off-CUT bank accounts; define strategy for closing off-CUT accounts; rules for exceptions (Timetable: 2014; Priority: High). - Recommendation 5.2: Increase scope of CUTs in foreign currency (CUT-ME) and domestic currency (CUT-MN); include resources of entities covered in the OE and operating in e-SISTAFE (Timetable: 2014; Priority: High). - Recommendation 5.3: Automate transfer of revenue account balances to the CUT so balances return to zero daily (Timetable: 2014; Priority: High). - Recommendation 5.4: Channel externally sourced funds from entities that execute in e-SISTAFE through CUT-ME and CUT-MN (Timetable: 2014; Priority: High). In 2012 disbursements passing through CUT: 55% (2011: 56%). - Recommendation 5.5: Ensure integrated management of CUT-MN and CUT-ME (Status: Completed in 2009; coordination under way). - Recommendation 5.6: Implement payment-abroad functionality through CUT-ME (Status: Completed and implemented by CUT-ME, with limited visibility due to FR 101 not yet going through CUT-ME). - Deficiencies and actions: - Thousands of off-CUT accounts remain; previous mission estimated off-CUT expenditure accounts roughly 4,300 and off-CUT revenue accounts with balances more than 2,000. - DNT closed 146 and authorized 68 expenditure accounts in 2012. - DNT lacks daily statements access from commercial banks, preventing daily consolidation of state financial availability. - Priority improvements include finalizing Ministerial Order for account classification, harmonization with BM Governor’s Notice, classifying off-CUT accounts by type, publish disciplinary rules for revenue accounts, automate daily transfers to CUT, and harmonize CUT procedures in national and foreign currency. Key statistics: - Off-CUT accounts estimates from previous mission: expenditure accounts roughly 4,300; revenue accounts with balances more than 2,000. - 2012: 146 accounts closed; 68 accounts authorized. - External financing disbursements via CUT in 2012: 55% (2011: 56%). --- ### Payroll and e-Payroll (Sections 7 and 55) - Recommendation 7.1: Gradually widen application of e-Payroll; use biometric control for staff verification. - Units: DNCP, DNT and CEDSIF. - Current Situation: Under way; expansion in 2012 but level of salaries paid via system remains low. - Universe of state functionaries and agents in 2012: 247,725. - Paid via e-Payroll in 2012: 81,750 (33%). - e-Payroll expanded to 595 more institutions in 2012: 6 at central level, 136 at provincial level, 104 at district level, plus 349 district-level schools. - From 2010 to date, e-Payroll expanded to 1035 new sectors: 122 at central level, 460 at provincial level, 104 district-level institutions, plus 349 district-level schools. - Fraud risk and system weaknesses: - Parallel legacy systems (SNV, SPS, SPAV) permit payments without e-CAF registration and via advance of funds, creating serious security weaknesses and enabling fraud (double payments). - Recommendation: conclude e-Payroll rollout and require payment via e-SISTAFE home banking by end-2013; update e-CAF to register all public employees by end-2013. - Action plan and deadlines (targets to be implemented by end-2013 and September 2013): 1. Update e-CAF and ensure full registration by end-2013. 2. Complete rollout of e-Payroll within institutions by September 2013, prioritizing payments via this system. 3. CEDSIF to develop functionality by September 2013 to enable salaries processed in SPS and SPAV to be paid through e-SISTAFE home banking; require all salaries paid this way by end-2013. 4. Once Activity 3 completed, payment by funds advance will cease. Monitoring: - Government to draw up quarterly reports highlighting gains, difficulties, potential solutions and readjustments; process to be supervised by IGF. --- ### Revenues and e-Taxation (Section 8 and 55) - Recommendation 8.1: Implement the unified document, Guide to the Collection of Public Revenue (GARE). - Units: TA, DNT, CEDSIF. - Timetable: 2012. - Current Situation: Under way. Guide to be implemented with VAT/ISPC Module of e-Taxation; pilot expected at end of 2013. - Recommendation 8.2: Implement network for electronic revenue collection directly through the banking system. - Units: TA, DNO, CEDSIF, BM. - Timetable: 2012/2014. - Current Situation: Under way. Business model drawn up; pilot expected in 2014. - e-Taxation status: - Based on Oracle’s ETPM; NUIT management module in production; no tax yet collected via e-Taxation. - Business models completed for VAT and ISPC; entry into production for VAT and ISPC foreseen end of 2013; broader e-Taxation entry into production expected in 2014. - Conceptual model and Business Model for GARE entered into production in 2012. - Recommendation: Assign maximum priority to development and rollout of e-Taxation and e-Payroll; IGF intervention recommended for internal control and reporting to Minister of Finance and pool fund. --- ### Accounting reform, CGE, and transition to IPSAS (Sections 9, 32, 47) - Action Plan and phased implementation (Ernst & Young timeline): - Phase 1 (2012–2013): Establish accounting standards and initial training. - Phase 2 (2014–2017): Adjust computer systems and pilot implementation; implement new chart of accounts within pilot institutions. - Phase 3 (2018 and subsequent years): Consolidation of implementation and gradual inclusion of all entities. - DNCP commitments: - Action plan drawn up, approved and being implemented; seminar held February 2013; DNCP, CEDSIF and Ernst & Young to produce new accounting standards prior to the end of June 2013 for approval by Parliament prior to end-2013. - DNCP confirmed improvements in treatment and explanation of differences among charts, tables and informational appendices of the 2012 CGE. - Testing of new CGE format with 2011 data showed mixed results: - Financial Performance statement reconciled; Budget Performance statement had errors due to Excel template formulas. - Opening balances differences between 2010 and 2011 Balance Sheet require explanation; 2011 CGE missing all explanatory notes. - Public debt differences due to foreign exchange treatment; recommendation to apply daily foreign exchange rate and reflect exchange-rate variations in designated columns or explain treatment in notes. - Large difference between Chart I and Chart I-3 due to exclusion of MZN 21.5 billion domestic debt disbursements and amortizations from Chart I; recommended inclusion or clear explanatory notes. - Recommendations on CGE and standards testing: - DNCP should improve presentation of 2012 CGE and test new account format using 2012 data, adjusting formats based on standards available by end of June. - Reform should be gradual with pilots and a census of entities, assets and liabilities to prioritize material items. --- ### Internal and external controls (Section 10 and 47) - Recommendation 10.1: Clarify and disseminate concepts, objectives and responsibilities of internal control, internal audit and external control; seminars held in 2010 and 2012. - Recommendation 10.2: Verify reliability of information included in the CGE and the budget (Timetable: 2012; Priority: High); completed. - Recommendation 10.3/10.6: Increase use of e-SISTAFE in internal and external control work; IGF created a laboratory; TA and TA users trained; several activities completed. - Recommendation 10.9: Certify quality of internal controls on public entities in accordance with Agreed Activity Plans (Timetable: 2014; Priority: Medium); not initiated. - TA developments: - Ceiling for prior TA approval of contracts currently reported as MZN 5 million; budget law ceiling referenced as seven million but Tribunal states ceiling remains MZN 5 million. - Approval deadline for contract prior approvals reduced to 45 days (was 90 days); past the deadline contracting may proceed without approval. - Tribunal maintains requirement for staff approvals in part due to errors and irregularities. --- ### Public-enterprise sector, other state entities and fiscal risks (Section 11 and 15) - Recommendation 11.3: Prepare and disseminate a financial position of the public enterprise sector covering public enterprises, publicly owned corporations, and equity holdings. - Units: DNT, DNCP and IGEPE. - Timetable: 2013. - Priority: Medium. - Current status: Not implemented. - Findings: - DNT monitors economic and financial status of each of the fourteen public enterprises. - IGEPE manages portfolio of equity holdings by the state, made up of 117 companies. - DEAE monitors PPPs and public concessions. - Overseeing bodies do not always receive necessary information in a timely fashion. - Central government does not yet consolidate fiscal risk issues into an annual report; information on fiscal risks and contingent liabilities is missing in the MTEF. - IGEPE developing a performance monitoring system with a pilot phase in five firms. - Recommendation 11.4: Strengthen regulatory framework for autonomous institutions; proposal under harmonization to be submitted to Council of Ministers before end of first half of year. - Recommendation 11.5: Assess decentralization risks and coordination mechanisms (Timetable: 2013); not implemented. - Public enterprises data highlights (selected entries from source table for 2011 and planned subsidies 2011–2013): - Electricidade de Moçambique — Total costs in 2011: 6,783,937,370; Total revenues in 2011: 7,352,388,971; Net profit/loss in 2011: 637,523,110; Deficit subsidy 2011–2013: 0 0 0. - Caminhos de Ferro de Moçambique — Total costs in 2011: 3,766,788,000; Total revenues in 2011: 4,780,879,000; Net profit/loss in 2011: 1,013,123,000; Deficit subsidy 2011–2013: 0 0 0. - Televisão de Moçambique — Total costs in 2011: 332,889,587; Total revenues in 2011: 120,439,036; Net profit/loss in 2011: 232,145; Deficit subsidy in 2011: 179,210,831; 2012: 258,345,298; 2013: 228,983,225. - Radio de Moçambique * (Dados previsionais) — Total costs in 2011: 443,367,666; Total revenues in 2011: 308,400,800; Net profit/loss in 2011: -71,812,601; Deficit subsidy 2011: 236,336,610; 2012: 266,830,520; 2013: 302,005,867. - Recommendations to improve supervision of aggregate fiscal risk: - Implement a monitoring system, consolidate financial statements, analyze fiscal risk in an annual government report, and include that risk in the MTEF. --- ### Information and Communication Technology, e-SISTAFE architecture and modules (Sections 12, 47, 55) - CEDSIF governance improvements: - Strategic and tactical IT plans under way (Timetable: 2012; Priority: High). - Adoption of IT governance practices advancing toward ITIL and CMMI; “Software Quality Plan” and Catalog of ICT Services drawn up. - e-SISTAFE architecture evolving to a Services-Oriented Architecture (SOA); MPE, CBSO and CEF referenced. - Logical Data Model under way; rules for inclusion and interoperability with e-SISTAFE completed. - No performance/security problems recorded with Exadata equipment; database administration completed. - Selected module statuses: - SNPO: Conceptual model completed. - MEO: Budget Preparation Module improved; supports “round” access for security. - MEX: Business model defined for accrual accounting; functionality for payment authorization officials; checklist and contract linkage functionality developed. - MPE (State Assets Module): Conceptual and business model completed; e-Inventory used by municipalities and public enterprises. - e-Payroll: Expanded coverage; business model for life cycle of pensioners defined; recommendation for legal establishment of application by decree. - SGRH: Conceptual model defined. - MGI / e-SISTAFE Portal: BI tool terms of reference defined; functionality for automatic extraction from management account developed. - e-Taxation: NUIT module in production; VAT and ISPC modules expected end-2013; full e-Taxation production entry forecast 2014. - JUE (Single Electronic Window): Production entry in Port of Maputo 2011; in 2012 collecting 70% of Customs fees at seven main Customs posts; 2013 target 90%. - GARE: Conceptual model and Business Model entered into production in 2012; pilot expected end-2013 with VAT and ISPC. - Recommendations: - Assign maximum priority to e-Taxation and e-Payroll; IGF to intervene in internal control of action plans. - Continue advancing IT governance at CEDSIF. - Prioritize entry into production of the public finance portal for transparency. --- ### Key explicit recommendations (selection) - Establish a formally agreed calendar of discussions between MPD and MF for a new program structure for PQG; consider hiring an outside facilitator. - Review framing of expenditure within “operations” and “investment” to align with international standards. - Alter responsibilities of DNP and DNO so one handles medium-term documents (PQG and MTEF) and the other prepares the OE exclusively. - Expand MTEF timeline to five fiscal years to cover a five-year PQG period; include expanding reserves and fiscal risk analysis. - Include more in-depth explanations in next MTEFs for changes in ceiling amounts within the same fiscal year. - Eliminate any non-automated file exchanges between MEO and MEX modules of e-SISTAFE. - Finalize Ministerial Order for classification of accounts, single Order for integrated management of CUT-ME and CUT-MN, and rules governing revenue accounts. - Automate transfers of revenue account balances to CUT to return accounts to zero daily. - Improve presentation and testing of the CGE in transition toward IPSAS, including phased pilots and systems adjustments. - Prioritize completion of e-Payroll, update e-CAF, require all salaries paid via e-SISTAFE home banking, and cease funds-advance salary payments. *Italic source: 1mozea2023005 - Preface 3 / Chapters and sections (IMF PDF)* ### Preface 3 ### Preface 3 ### Mission scope and stakeholders - Mission of the Fiscal Affairs Department (FAD) of the IMF visited the Republic of Mozambique from April 3 to 16, 2013, at the request of the Ministry of Finance (MF) and with financial assistance of the Danish Embassy in Mozambique. - Main objectives: - (i) assess establishment of SISTAFE (Public Sector Financial Management System) and respective action plan, and propose improvements; - (ii) evaluate implementation of the recommendations made by previous missions; - (iii) discuss with the authorities the effectiveness of the public management reforms, and support for establishment of the next phases of the reforms. - Mission team: Mr. Juan Ramón Ruiz (Mission Head, FAD), Ms. Margarida Azevedo, Messrs. Helio Tollini and Joseph Cavanagh (consultants), and Ms. Esther Palacio (Technical Assistance Coordinator in the IMF Office in Maputo). - Key Mozambican interlocutors and institutions met: Vice-Minister of Finance Pedro Couto; Director-General of CEDSIF Augusto Sumburane; National Director of the Treasury (DNT) Maria Isaltina Lucas; National Director of State Assets (DNPE) Albertina F. Ruquia; National Director of the Budget Amílcar Tivane; Inspector General of Finance (IGF) Carolina Pessane; National Director of Public Accounts (DNCP) Amélia Mutemba; National Director of Research and Economic Analysis Isabel Sumar; Administrative Tribunal, Ministry of Public Works and Housing (MOPH), Ministry of Women and Social Welfare (MMAS), Ministry of Planning and Development (MPD), Ministry of State Administration (MAE), IGEPE, District of Marracuene, Municipality of Matola. - Mission also met twice with the SISTAFE international partners group and was facilitated by Victor Lledo (Resident Representative, IMF) and Esther Palacio. ### Main 2012 results and reforms in Public Finance Management (PFM) - Expansion and coverage: - Expansion of the system for salary payment. - Incorporation of new executing units (UGBs) within SISTAFE, surpassing the target set for the year. - Steady increase in coverage of the CUT (Single Treasury Account), with the closing of 146 accounts. - Electronic transfers of financial resources through the CUT for revenue collection and payment of expenditures. - Budgeting and planning: - Use of unified budget ceilings for the provinces, permitting greater autonomy in allocation of resources. - Preparation of budgets at a more aggregate level of the system of economic classification of expenditure, preventing mismatches between budget allocations and commitments. - Possibility of incorporating into the budget funding generated by internal revenues over the course of the financial year, increasing yield from this source. - Accounting, control and governance: - Approval of a law on public enterprises overseen by the MF. - Drawing up of an Action Plan in October 2012 to implement accrual accounting (contabilidade patrimonial) in line with IPSAS. - Approval of a new conceptual model of internal control in October 2012 to improve coordination and methodology for internal audit. - Decentralization of CEDSIF to the provincial level, hiring two technical staff per province. ### Advances and outstanding issues in General Public Accounts (CGE) and accounting - DNCP analyzed discrepancies in charts and appendices to the CGE identified by the previous mission to improve presentation of CGE 2012. - Action Plan approved in October 2012 to implement accrual accounting in line with IPSAS. - Next step: drawing up of new regulations for public accounts to be sent to Parliament for approval prior to end-2013. - Internal control: new conceptual model approved in October 2012 to enhance internal audit coordination and methodology. ### Budget execution, recording, and cash management concerns - Need to develop a more effective strategy to ensure timely recording of expenditure execution phases: commitment, validation and payment. - Timely recording is essential for planning and oversight of budget execution by executing entities and for providing information to the DNT for cash planning. - Cash management improvements recommended: - Better cash planning through budget execution information, particularly from executing units regarding commitment and validation of expenditures. - Planning should progressively expand from monthly to quarterly basis. - Ministerial orders recommended to classify bank accounts and improve integrated management of CUT mechanisms for domestic and foreign currencies. - Continue increasing CUT coverage; impose penalties for accounts opened without meeting legal requirements. - Gradual incorporation of internal revenues of entities and funds from external financing into the CUT. - Pursue automation of daily transfer to the CUT of balances on revenue accounts. ### Medium-Term Expenditure Framework (MTEF) and program budgeting - Progress: - Advances each year in MTEF preparation. - New MTEF for 2014–2016 in final phase of preparation: will establish limits by sector and contain more targets and indicators for budgetary programs. - Remaining weaknesses: - Absence of alternative economic scenarios. - Lack of analysis of fiscal risks. - No increase in reserves to offset increased uncertainty. - Need for explanations in subsequent MTEFs of variations observed in ceilings within a fiscal year. - Program-based budgeting recommendations: - Set objectives and indicators in budget programs and connect national plans with the budget (requires coordination between MPD, MF and ministries). - Gradual implementation of program-based budgeting and execution with pilot units to adapt methodology to Mozambique’s capacity. - Review concepts and reframe public expenditure within categories of “operations” and “investments”. - Review responsibilities of DNP and DNO so one is responsible for planning instruments and the other for the OE (government budget). ### Salary payment system (e-Payroll) and staff registry - e-Payroll seen as effective and secure; expansion recommended. - Recent irregularities in salary payment within the Ministry of Education could have been avoided if e-Payroll were in operation. - 2012 expansion: payment of salaries for public employees in 595 institutions. - Coverage as of December 31, 2012: 33 percent (81,750 staff). - Recommendation: additional effort to update staff registry (e-CAF) and ensure that at the end of 2013 salaries of all public employees are paid by direct route to e-SISTAFE home banking. ### Information and Communication Technology (ICT) and CEDSIF governance - Significant increase in quantity and complexity of computer systems poses a challenge for CEDSIF. - CEDSIF developments: drawing up “Software Quality Plan” and “Regulation for Security of Information Systems”. - Recommendation: carry out a computer governance audit to improve knowledge concerning adherence to international standards and to structure ICT implementation according to best governance practices. ### Selected entries from Table 1 — Implementation status highlights - 1.1 Include operations of all government entities, including autonomous institutions and funds, in the budget - Unit responsible: DNO, DNT - Timetable: 2014 - Priority: High - Current situation: The state entities are all included in the OE. Firms with state stockholding appear in the OE when they pay dividends or receive subsidies, or there are increases in capital. Autonomous institutions appear as appendices to the OE, within the terms of the law. - 1.2 Include all own-generated and earmarked revenue in the budget - Unit responsible: DNO, DNT - Timetable: 2014 - Priority: High - Current situation: 2010 MF Circular made provision for collection of own-generated revenues with timing for classification, permitting registration within the OE during budget execution. DNP/DNO came to exclude internal revenue from the ceiling for sectoral programming. Significant increase in 2012 in collection of own-generated and earmarked revenues. Need for further actions to oversee units generating those revenues to ensure full collection in the CUT. e-Taxation module and a proposed Ministerial Order together with Bank of Mozambique Notice under review to prohibit transactions on accounts of a revenue nature for purposes other than collection for the CUT. - 1.3 Make a distinction between own-generated revenue and directly collected earmarked revenue - Unit responsible: DNO, DNT - Timetable: Completed in 2011 - Current situation: Distinction made in the regulation. - 1.5 Allow recording in the same financial year of any surplus collection of own-generated revenue - Unit responsible: DNO, DNT - Timetable: Completed - Current situation: Circular 1/MF/2010 (Article 14) permits recording of financial balances and surpluses from collection of revenue for the following fiscal year. - 2.1 Improve the MTEF and increase quality of macrofiscal projections, drawing up alternative scenarios, sensitivity analysis and assessment of fiscal risks - Unit responsible: DNO and MPD - Timetable: 2013 - Priority: High - Current situation: Under way. Allocation of overall limits has begun for the provincial level for Goods and Services and Investment. One no longer works with alternative scenarios because of tendency of the Council of Ministers to opt for the scenario with highest planning ceilings. - 2.5 Include information comparing operating expenditure with current revenue - Unit responsible: DNO - Timetable: Completed in 2011 - Current situation: For the 2013 Budget, current expenditures absorb 87.5% of current revenues. - 3.1 Improve the programming classification to make it consistent with government programs and integrated with the Plan - Unit responsible: MPD, DNO and line ministries - Timetable: 2013 - Priority: Medium - Current situation: Under way. In 2012 CEDSIF worked on a pilot for a new structure for program headings; results to be analyzed jointly by DNO and CEDSIF for possible extension to all line ministries and integration with the new PQG and the MTEF and OE. _Italic source: 1mozea2023005 - Preface 3 (IMF PDF)_ ### 3.2 Include physical targets in the ### 3.2 Include physical targets in the programs ### Program targets, review, and outcome indicators - Recommendation: Include physical targets in the programs. - Unit responsible: MPD, DNO and line ministries. - Timetable: 2012. - Priority: Medium. - Current Situation/Position of the Authorities: Under way. DNP/MPD is working along with the line ministries to try in the next MTEF to fill the current gap, in which 70% of the programs fail to present a physical target or indicators. - Recommendation 3.3: Review the district-level programs. - Unit responsible: DNO and MPD. - Timetable: 2015. - Priority: Medium. - Current Situation/Position of the Authorities: The creation is under way of a working group to include the MPD, DNO and CEDSIF, with the objective of reflecting on program review overall for the different levels of the administration. - Recommendation 3.4: Identification of outcome indicators in the programs. - Unit responsible: MPD, DNO and line ministries. - Timetable: 2012. - Priority: Medium. - Current Situation/Position of the Authorities: Under way. As new programs get inserted into the OE, their outcome indicators get created. Within the context of the drawing up of the 2014–2016 MTEF, work is being done with the line ministries toward defining outcome indicators for the missing programs. ### Key statistic - 70% of the programs fail to present a physical target or indicators. --- ### 4. Budget and Financial Execution ### SISTAFE rollout and system functionalities - Recommendation 4.1: Establish a timetable and give details of the scope of the SISTAFE rollout, with a date for completion. - Unit responsible: CEDSIF. - Status: Completed. Timeline prepared and being implemented, with the expectation of completion of the rollout in 2015, with this being 70 units per year. In 2012 the target was surpassed, with the inclusion of 106 new UGBs. - Recommendation 4.2: Require that the number of the commitment note (NC) be stated in each contract. - Unit responsible: DNT, CEDSIF. - Timetable: 2012. - Priority: High. - Current Situation: Under way. The functionality was developed in 2012, and its use is expected in the second quarter of 2013, as a pilot in the Debt area. - Recommendation 4.3: Carry out budgetary and financial programming, now on a monthly basis, based on the expenditure appropriated and validated, and taking in the entire fiscal year. - Unit responsible: DNT. - Timetable: 2013. - Priority: High. - Current Situation: Not implemented. Is under study with the DNT, where an implementation plan will be prepared for this recommendation. - Recommendation 4.4: Address payments made before delivery and improper recording of commitment and validation phases. - Unit responsible: DNT, CEDSIF. - Timetable: 2015. - Priority: High. - Current Situation: Starting from 2013, the DNT is to commence release of funds (quotas financeiras), unlinked from the budget commitment limit. The system has been altered, removing the constraint that impeded validation of the expenditure in the cases in which there was no release of funds by the Treasury. Activities are being undertaken to raise awareness of the units regarding recording of commitment, validation and payment when they occur. - Recommendation 4.5: Include information in the budget execution report (REO) on the monies appropriated, validated and paid out, by Ministry. - Units: DNCP, DNT, CEDSIF. - Timetable: 2012. - Priority: Medium. - Current Situation: In 2012 the conditions were created such that the information can be included in the REOE, as from QI 2013. - Recommendation 4.6: Disseminate to the line ministries the annual financial programming, with a monthly breakdown of execution. - Unit: DNT. - Timetable: 2012. - Priority: High. - Current Situation: Under way. In the process of dissemination. Implementation will be in 2013. - Recommendation 4.7: Define a new strategy for e-SISTAFE rollout. - Units: DNT, CEDSIF. - Timetable: 2012. - Priority: Medium. - Current Situation: e-SISTAFE has been installed in 106 more UGBs. At present it is implemented in 620 UGBs. Direct-route execution of the state budget reached 52.6% (in 2011 this level was 42%). Objective of completing e-SISTAFE rollout in 2015 is stated as entirely achievable. CEDSIF hired two resident technical staff for each province (one for hardware and one for software) to support decentralization and rollout. ### Key statistics and milestones - Completion target for SISTAFE rollout: 2015, at 70 units per year. - 2012 inclusion of 106 new UGBs. - e-SISTAFE implemented in 620 UGBs. - Direct-route execution of state budget reached 52.6% (2011: 42%). --- ### 5. Single Treasury Account – CUT ### Account rationalization and CUT coverage - Recommendation 5.1: Streamline use of bank accounts by entities covered in the budget and operating directly in e-SISTAFE; classify off-CUT bank accounts; define strategy for closing off-CUT accounts; establish rules for exceptions. - Units: DNT, CEDSIF and BM. - Timetable: 2014. - Priority: High. - Current Situation: Under way. Proposed Ministerial Order for classification of accounts being harmonized with BM, which is preparing a proposed Notice from the Governor. Commercial banks asked to inform all public accounts to filter accounts to be closed. Opening of accounts requires authorization from the DNT; closing may follow 60 days without transactions. In 2012, 146 accounts were closed and 68 accounts authorized. Attention needed for accounts created without DNT authorization. - Recommendation 5.2: Increase scope of CUTs in foreign currency (CUT-ME) and domestic currency (CUT-MN); include resources of entities covered in the OE and operating in e-SISTAFE, including own-generated revenue. - Units: DNT, CEDSIF and BM. - Timetable: 2014. - Priority: High. - Current Situation: Under way. Direct relationship between e-SISTAFE and e-Payroll rollout and reduction in number of ministry bank accounts. Despite efforts, off-CUT accounts have increased due to unauthorized openings. Important to transfer external financing resources to the CUT from decentralized units, classify typology of off-CUT accounts, and define rules for maintenance. - Recommendation 5.3: Automate transfer of revenue account balances to the CUT so balances return to zero daily. - Units: DNT, CEDSIF and BM. - Timetable: 2014. - Priority: High. - Current Situation: Under way. Advance with Single Electronic Window for foreign trade revenue. Many off-CUT revenue accounts transfer resources only after manual classification. Revenue Collection Module is being developed within e-Taxation to improve revenue classification procedures. - Recommendation 5.4: Channel through CUTs (CUT-ME and CUT-MN) externally sourced funds from entities that execute in e-SISTAFE. - Unit: DNT/CEDSIF. - Timetable: 2014. - Priority: High. - Current Situation: Under way. Disbursements of external financing received in 2012 for budget support, pool funds and projects that pass through CUT had a 55% share (as against 56% in 2011), with 45% outside of CUT. Need to continue raising partners' awareness to use CUT. - Recommendation 5.5: Ensure integrated management of CUT-MN and CUT-ME, and disseminate information on management mechanisms. - Units: DNT, BM, CEDSIF. - Status: Completed in 2009. Coordination is under way to unite the two CUT mechanisms; some procedures not harmonized (such as hard currency conversion starting from meticais). Important to approve a single legal order for integrated management and finalize computer system adjustments. - Recommendation 5.6: Implement the payment-abroad functionality, through the CUT-ME. - Units: DNT, CEDSIF and BM. - Status: Completed and implemented by CUT-ME, although with limited visibility because FR 101 still not going through CUT-ME and BM only permits automatic conversion from foreign currency to domestic currency up to a certain amount. Talks under way to overcome this problem. ### Key statistics - In 2012, 146 accounts were closed and 68 accounts authorized. - External financing disbursements through CUT in 2012: 55% (2011: 56%); 45% remained outside CUT. --- ### 6. Procurement and letting of contracts - Recommendation 6.1: Improve and make more flexible the procedures for the letting of public contracts. - Unit: DNPE. - Status: Completed. New legislation approved in 2009. - Recommendation 6.2: Approval of rules to complement implementation of the regulation for letting of contracts. - Unit: DNPE. - Status: Completed. New regulation approved in 2010. - Recommendation 6.3: Include in the contracts the number of the Commitment Note that gives budget coverage to the expenditure. - Units: DNCP, DNT, CEDSIF, DNPE. - Timetable: 2013. - Priority: High. - Current Situation: To be initiated. Interconnected with 4.2. --- ### 7. Payroll - Recommendation 7.1: Gradually widen application of e-Payroll to replace the four systems in which payroll is currently managed, and use biometric control for staff verification. - Units: DNCP, DNT and CEDSIF. - Current Situation/Position of the Authorities: Under way. Although expansion of e-Payroll has reached near-totality of central government institutions, the level of salaries paid via this system remains low. - Out of a universe of 247,725 state functionaries and agents in 2012, 81,750 were paid via e-Payroll, which is 33%. - e-Payroll expanded to 595 more institutions in 2012: 6 at central level, 136 at provincial level, 104 at district level, plus 349 district-level schools. - From 2010 to date, e-Payroll expanded to 1035 new sectors: 122 at central level, 460 at provincial level, 104 district-level institutions, plus 349 district-level schools. - Duplicate reporting noted: processing and payment expanded in 2012 with use of e-Payroll for 595 more institutions (breakdown as above). ### Key statistics - Total state functionaries and agents in 2012: 247,725. - Paid via e-Payroll in 2012: 81,750 (33%). - e-Payroll expansions: 595 more institutions in 2012; total expansion to 1035 new sectors since 2010. --- ### 8. Revenues - Recommendation 8.1: Implement the unified document, Guide to the Collection of Public Revenue (GARE). - Units: TA, DNT, CEDSIF. - Timetable: 2012. - Priority: High. - Current Situation: Under way. Guide will be implemented with the VAT/ISPC Module of the e-Taxation project; pilot expected at the end of the present year. Business model and model for common procedures prepared. Conceptual model for e-Taxation envisages one single guide (GARE) generated exclusively by e-SISTAFE Collection Network module. Guide respects principles of integrity, validity and security and will serve for collection of all public revenues. Business and Common Procedures Model in advanced development. Pilot expected in 2013 with production entry of VAT and ISPC modules; pilot expected at the end of the year 2013. - Recommendation 8.2: Implement the network for electronic revenue collection directly through the banking system. - Units: TA, DNO, CEDSIF, BM. - Timetable: 2012/2014. - Priority: High. - Current Situation: Under way. Business model being drawn up. Implementation will be through taxes according to TA timeline. First taxes to be collected in collection network will be VAT and ISPC. Revenue collection through bank network already implemented for taxes on foreign trade through the Single Electronic Window. Implementation for domestic taxes expected with full launch of VAT/ISPC Module. Interfaces to banks being prepared. Pilot expected in 2014. --- ### 9. Accounting - Recommendation 9.1: Prepare an action plan for implementation of the reform of public accounts. - Units: DNCP, DNT, DNO, DNPE, CEDSIF. - Timetable: Oct 2012. - Priority: High. - Current Situation: Action plan drawn up, approved and being implemented. In February 2013 an implementation seminar was held to present the implementation plan for adoption of the IPSAS. CEDSIF, DNCP and Ernst & Young are working to produce new accounting standards prior to the end of June 2013 for approval by Parliament prior to the end of 2013. - Recommendation 9.2: Implement phased accounting reform. - Units: DNCP, DNT, DNO, DNPE, CEDSIF. - Timetable: Medium- and long-term. - Priority: High. - Current Situation: Current Ernst & Young timeline phases: - Establishment of accounting standards, and initial training, in the years 2012–2013. - Implementation of the new chart of accounts within pilot institutions, over the years 2014–2017. - Overall implementation of the Plan through gradual inclusion of all entities, and consolidation in 2018 and subsequent years. - In the 2012 account, explanatory notes will be improved to clarify differences in charts, tables and informational appendices. - Recommendation 9.3: Amend/clarify legislation to eliminate bookkeeping on operations executed directly in e-SISTAFE. - Unit: DNCP, in coordination with IGF and TA. - Current Situation: Circular 02/MF/2011 of April 4 governs use of book-keeping in direct and indirect execution. The Tribunal confirmed it will accept the Circular in audits of fiscal year 2013. - Recommendation 9.4: Amend/clarify legislation regarding requirement for the “receipt” from suppliers in invoices for payment confirmation. - Unit: DNCP. - Timetable: 2014. - Priority: Low. - Current Situation: Not implemented. Authorities view elimination of the receipt as premature pending completion of e-Taxation. - Recommendation 9.5: Include two additional columns in the REO, with information on commitment and validation. - Unit: DNCP. - Timetable: 2012. - Priority: Medium. - Current Situation: The information will be presented in the REOE for Quarter I of 2013. It was not available at the time of this mission. --- ### 10. Internal and External Controls - Recommendation 10.1: Clarify and disseminate concepts, objectives and responsibilities of internal control, internal audit and external control. - Units: IGF and TA. - Current Situation: Seminars held in 2010 and 2012. - Recommendation 10.2: Verify reliability of information included in the CGE and the budget. - Units: IGF and DNCP. - Timetable: 2012. - Priority: High. - Current Situation: Completed. Requirement created for issuance of a report on the management account through e-SISTAFE. - Recommendation 10.3: Increase use of e-SISTAFE as a tool in support of internal control and audit work. - Units: IGF and sectoral inspectorates. - Timetable: 2014. - Priority: High. - Current Situation: Completed. IGF created a laboratory with terminals that access e-SISTAFE to obtain information for audits and is developing capacity of internal audit units. - Recommendation 10.4: Modify documentary requirement and include a checklist for improving internal controls. - Units: DNT, CEDSIF, IGF. - Timetable: 2013. - Priority: High. - Current Situation: Functionality developed in 2012; expected use in second quarter of 2013. - Recommendation 10.5: Coordinate audit work to be done by TA, IGF, and internal control units. - Units: IGF, OCI and TA. - Current Situation: Completed in 2011. TA and IGF routinely exchange audit plans and hold meetings on cooperation. - Recommendation 10.6: Increase use of e-SISTAFE as a tool to support external control work. - Current Situation: Completed in 2011. TA is using e-SISTAFE in audit work. - Recommendation 10.7: Increase training of TA auditors in use of e-SISTAFE. - Units: TA and CEDSIF. - Current Situation: Completed. Activity carried out in 2011. - Recommendation 10.8: Until e-Procurement and e-Assets modules implemented, develop simplified contract control in e-SISTAFE, providing for recording of prior TA approval. - Units: DNT, CEDSIF. - Timetable: 2013. - Priority: Medium. - Current Situation: Functionality developed in 2012; expected use in second quarter of 2013. - Recommendation 10.9: Certify quality of internal controls on public entities in accordance with Agreed Activity Plans. - Units: TA and IGF. - Timetable: 2014. - Priority: Medium. - Current Situation: Not initiated. New Conceptual Model for Internal Control: IGF will certify management accounts of each institution prior to accounts being sent to the Tribunal. - Recommendation 10.10: Include in legislation the amount below which prior TA approval of contracts is not required. - Units: TA and IGF. - Current Situation: Completed. Annual base amount defined in budget law above which prior approval from TA is needed. Current amount is MZN 5 million, supplier must be registered in single registry. Applies legal provisions bearing in mind ceiling established in budget law, which is seven million at present. The Tribunal informed the mission that the ceiling remains at MZN 5 million. - Recommendation 10.11: Eliminate requirement for prior approval from TA for hiring of staff. - Unit: TA. - Current Situation: Partial establishment. Approval no longer necessary for progression up the career ladder. Tribunal does not consider it the right time to relax requirement further due to concerns on quality of control and number of errors and irregularities. ### Key statistics - Current amount requiring prior TA approval (as reported): MZN 5 million. - Budget law ceiling referenced as seven million at present; Tribunal states ceiling remains at MZN 5 million. --- ### 11. Other State Entities - Recommendation 11.1: Strengthen regulatory framework of the public enterprise sector to clarify oversight by the Treasury. - Unit: DNT. - Current Situation: Completed. The law already defines oversight by the Treasury. Respective regulation being harmonized and will be submitted for approval by the Council of Ministers before end of first half of this year. - Recommendation 11.2: Draw up a manual for definition of the scope of the public sector balance sheet, in line with best practices. - Units: DNT, DNCP and IGEPE. - Timetable: 2013. - Priority: Medium. - Current Situation: Will be included in the reform of public accounts, which will consider components of the public sector to be consolidated. IGEPE is working to produce a consolidated account of the equity holdings of the state supervised by it. The Office of Research, Planning and International Cooperation is considering how to present and promote the state’s interests in collaborations with the private sector. *Source: 1mozea2023005 - 3.2 Include physical targets in the (IMF PDF chapter content provided).* ### 11.3 Prepare and disseminate a ### 1mozea2023005 - 11.3 Prepare and disseminate a ### Public-enterprise sector financial position (Recommendation 11.3) - Recommendation: Prepare and disseminate a financial position of the public enterprise sector, covering public enterprises, publicly owned corporations, and equity holdings by the state in private enterprises. - Responsible units: DNT, DNCP and IGEPE - Timetable: 2013 - Priority: Medium - Current status: Not implemented. - Findings: - The DNT monitors the economic and financial status of each one of the fourteen public enterprises. - The IGEPE manages the portfolio of equity holdings by the state, made up of 117 companies. - The DEAE undertakes monitoring of the public–private partnerships (PPPs) and public concessions. - Overseeing bodies do not always receive necessary information from the entities in a timely fashion. - The central government does not yet consolidate the fiscal risk issues into an annual report. - Information on fiscal risks and contingent liabilities is missing in the MTEF. - IGEPE is developing a system for monitoring and evaluation of performance, with a pilot phase in five firms with equity holdings by the state, which could be expanded to include the public enterprises. ### Strengthen regulatory framework for autonomous institutions (Recommendation 11.4) - Recommendation: Strengthen the regulatory framework for the institutions that are autonomous from the state, in order to clarify oversight by the Treasury. - Responsible units: DNT and IGEPE - Timetable: 2012 - Priority: Medium - Current status: Under way. - Findings: - A proposal is in the harmonization process for legislation on institutes and public funds. - The proposal will be submitted for the approval of the Council of Ministers, before the end of the first half of this year. ### Assess decentralization risks and coordination mechanisms (Recommendation 11.5) - Recommendation: Assess the risks of the decentralization process and coordination mechanisms. - Responsible units: MAE, MPD, MF and all of the line ministries - Timetable: 2013 - Priority: Medium - Current status: Not implemented. - Findings: - The government has shown interest in assessing risks from the decentralization process and the current coordination mechanisms. - The DNO will coordinate the process of contracting a consultancy. - ARITAC Sul has communicated that it could support in this process. ### Separation of responsibilities between DNO and DNP in budget preparation (Recommendation 11.6) - Recommendation: Strengthen the formal legal framework for specification of the separation of responsibilities between DNO and DNP for preparation of the budget. - Responsible units: DNO and DNP - Timetable: (no specific year listed) - Priority: (not specified) - Current status / Position: - Within the context of the drawing up of the MTEF, certain responsibilities were defined for each one of the parties, specifically in relation to operations and investment. - The mission recommends a full review as to the proper employment of economic expenditure headings, with the institution of a clear separation of responsibilities between DNP and DNO for the preparation of the planning and budget documents. ### Ongoing dissemination program on the budget cycle (Recommendation 11.7) - Recommendation: Create an ongoing dissemination program on the budget cycle, using various forms of teaching, including at a distance, for users who execute within e-SISTAFE, and public managers, donors and citizens. - Responsible units: DNT, DNO and CEDSIF - Timetable: 2011 - Priority: Medium - Current status: Under way. - Activities and findings: - Talks held at the Norwegian Embassy with partners from the SISTAFE Pool Fund and from the CTA, for journalists, the Office of the Attorney-General of the Republic (PGR), and the partners of the Ministry of Health (MISAU), to promote SISTAFE use. - A talk on the Large Suppliers functionality with representatives of Mozambique Telecommunications (TDM) and Mozambique Electricity (EDM) to promote that functionality and its advantages for identification and systematic obtaining of information from e-SISTAFE, enabling monitoring and oversight of payment for supplies. - A capacity-building activity on extraction of charts from the management account within e-SISTAFE was carried out, following a prior presentation made to the Administrative Tribunal. - e-Taxation training teams are already in the field, and synergies are expected to be favorable to e-SISTAFE as a whole. ### Sustainability and strengthening of e-SISTAFE (Section 12) - Section purpose: Recommendations to ensure sustainability and strengthen e-SISTAFE, with responsible unit CEDSIF for most actions. 12.1 Draw up a strategic plan for IT, aligned with “Vision for Public Finance, 2011–2025” - Responsible: CEDSIF - Timetable: 2012 - Priority: High - Status: Under way. - Note: No significant development recorded due to responsibilities of recently created committees within CEDSIF Rules of Procedure. 12.2 Prepare a tactical IT plan based on the strategic plan - Responsible: CEDSIF - Timetable: 2012 - Priority: High - Status: Under way. - Note: No significant development recorded; responsibility of recently created committees. 12.3 Adopt a best practices framework for IT governance; adhere to standards and rules - Responsible: CEDSIF - Timetable: 2013 - Priority: High - Status: Under way. - Findings: - Ongoing improvement in development and delivery of IT services (in-house) and certification of systems (outsourced). - Activities involve Quality and Certification Service (SQC), Operations Service (SO) and Development Service (SSD). - Governance practices within CEDSIF increasingly adhere to ITIL and CMMI reference models. - “Software Quality Plan” and Catalog of ICT Services have been drawn up. 12.4 Map all IT systems used by budget/financial execution and control entities; implement import/export functionality for e-SISTAFE - Responsible: CEDSIF, in coordination with the sectors - Timetable: 2013 - Priority: High - Status: Completed. - Finding: Development of e-SISTAFE architecture into a Services-Oriented Architecture (SOA) is moving along, with modules such as MPE (State Assets Module), CBSO (Catalog of Goods and Services) and CEF (Catalog of Companies and Suppliers) referenced. 12.5 Develop conceptual models of large systems represented by e-Payroll, e-Taxation, e-Assets, and SGRH (Human Resource Management System) - Responsible: CEDSIF - Status: Completed. - Finding: Conceptual models for the large systems that make up e-SISTAFE were developed in considerable detail. 12.6 Logical Data Model - Responsible: CEDSIF - Timetable: 2013 - Priority: High - Status: Under way. - Finding: Existence of this model and associated documentation provides assurance that the government knows where and how its data are stored, enabling autonomy for production of the Information Management module (BI - Business Intelligence). 12.7 Develop rules for inclusion within e-SISTAFE - Responsible: CEDSIF - Timetable: 2013 - Priority: High - Status: Completed. - Finding: Redesign of the e-SISTAFE architecture is progressing rapidly and smoothly. 12.8 Develop rules for interoperability with e-SISTAFE - Responsible: CEDSIF - Timetable: 2013 - Priority: High - Status: Completed. - Finding: Redesign of the e-SISTAFE architecture is happening at a good pace and without hiccups. 12.9 Undertake database administration to ensure performance and security - Responsible: CEDSIF - Status: Completed. - Findings: - No problems registered with performance and security with the coming into operation of the Exadata equipment. - Security of systems is assured at a good level by the Quality and Certification Service and by the Information Systems Security Service. ### Introduction and overarching monitoring purpose - Purpose of the report: Monitor implementation of the public finance reforms in Mozambique; several concepts from previous reports are not repeated and the 2010, 2011 and 2012 reports are recommended as main support documents. - Matrix of recommendations: Outlines recommendations made over the last three years that are still awaiting full or partial implementation; information on implemented recommendations retained for overall view. - Main recommendations: Discussed in detail with the authorities. ### Planning, programs and the Medium-Term Expenditure Framework (MTEF) - Planning context: - Multiple planning instruments exist: Vision 2025, Millennium Development Goals (MDGs), Five-Year Government Plan (PQG), Poverty Reduction Action Plan (PARPA), Medium-Term Expenditure Framework (MTEF) and Economic and Social Plan (PES), plus sectoral and local plans. - PQG in effect was drawn up in 2009 for the period from 2010 to 2014; it presents government objectives and a list of sectoral activities but does not adopt a program structure linking to the OE's organic classification. - New PQG 2015–2019: - Government intends to introduce a new program structure in the public service. - MPD proposes DNP and DNO initiate a joint discussion, sector by sector, to conceive new programs. - Programs/subprograms should make provision for operating and investment costs, and include physical targets and indicators of outcomes. - Recommendation for a schedule of meetings and consideration of hiring an outside facilitator to manage discussions. - Suggestion to align the new PQG, new MTEFs and OEs to the same program structure. - Suggestion to expand the MTEF timeline from three years to five fiscal years. - MTEF specifics: - Decree 23/2004 establishes MTEF as conditioning element in preparing State Budget and Economic and Social Plan; MTEF includes revenues and expenditures, fiscal result by fiscal year, and financing of deficit. - MTEF that is in effect for the period 2013–2015 establishes overall limits by sector (advancement compared to previous economic-only classification). - MTEF contains a reserve for general expenditures (e.g., elections in 2014). - The 2013–2015 MTEF adopts the hypothesis of real growth in revenue of five percent per year, in line with PQG target. - New MTEF for period 2014–2016 is in final preparatory phase and should be ready later in the month of May. - DNP helps line ministries to fill prevailing lack of program targets and indicators in the new MTEF. - For central level the 2014–2016 MTEF will have charts establishing ceilings by sector, disaggregating staff into two subceilings; provinces will have different limits for staff, operations, transfers and investments; districts will have one single aggregate limit. - The limits by Receiving Management Unit (UGB) for the first year will be defined by the DNP and sent to the DNO for incorporation into the system. - 2014–2016 MTEF will retain target of real growth in revenue of five percent per year despite recent failures to fulfill that target. - Shortcomings to be corrected: absence of physical targets or performance indicators in most programs (to be corrected starting with 2014–2016 MTEF); lack of alternative economic scenarios; MTEF does not present expanding reserves over the years nor analysis of fiscal risks threatening sustainability; explanations for changes in ceilings year-on-year are not yet present. ### Budget Preparation and e-SISTAFE (Budget Preparation Module, MEO) - MEO developments: - MEO of e-SISTAFE has been regularly refined with incorporation of new functionalities, making budget preparation less laborious. - Since 2008 the entry of sectoral proposals for revenues and expenses happens directly at e-SISTAFE terminals among UGBs countrywide; there is no paper process. - Users access the system at a particular point in time called a “round”, reflecting the budget preparation calendar for each user type, with access blocked to other users to avoid undue interference and to increase security of data entry. *Source: 1mozea2023005 - 11.3 Prepare and disseminate a* ### 15. Meanwhile, certain difficulties persist in regard to the exchange of information ### 15. Meanwhile, certain difficulties persist in regard to the exchange of information ### Exchange between MEO and MEX (e-SISTAFE) - Exchange of files between the MEO and the MEX does not occur in a fully automated way; it requires application of a conversion table (“from/to”) because of the coding processes adopted for the budgetary headings system. - Operational example: external financing received mid-fiscal year is registered by keying into the MEO, which generates a code for the project; project data are then printed and manually loaded into the MEX, requiring checking and exposing registration of a new heading in the OE to human keying error. - Recommendation (explicit): Find solutions to eliminate any and all exchange of files between the MEO and MEX modules of e-SISTAFE that does not occur in a totally automated way, with no human intervention. ### Budget ceilings, sectoral proposals, and classification aggregation - Sectoral proposals may not exceed the expenditure ceilings by group set out in the Budget Notice Circular. - The MEO allows line ministries to indicate requests exceeding the ceilings if accompanied by rationales; at central level ceilings are established by UGB. - Provincial ceilings: previously set by the DNP/DNO broken down by provincial organic unit; now established in a unified way, permitting greater autonomy in allocation. - Districts: resources distributed between districts based on a specific formula considering economic and social indicators; allocated in a single allotment at the district office. - Charts in the 2013 OE were drawn up at a more aggregate level of the economic classification of expenditure, ceasing the prior gap between budget allocation detail (previously generally up to level 5 or 6) and the phase of commitment (cabimentação) in MEX, which occurs at level 4 or 5. - This aggregation "partially remedies a distortion and fruitless planning effort" and suggests appendices to the Budget Law would more naturally be aggregated at a level higher than that used for commitment. ### Staff expenditure programming and "Priority Investment" - For the 2014 OE, the DNO seeks to break down the planning ceiling for staff expenditures of line ministries into two parts. - Current practice: sectoral proposals emphasize “Other Staff Expenses” at the detriment of programming for “Salaries and Remuneration”. - This practice, called “Priority Investment”, is justified by line ministries because budget shortfalls under “Salaries and Remuneration” are expected to be resolved by the MF during execution, given the rigid nature of that expenditure. ### Division of responsibilities: DNP and DNO; conceptual confusion - DNP and DNO teams have cooperated, but an inadequate division of tasks and responsibilities persists. - Apparent division: DNO handles “operational” expenditure and DNP the “investment” expenditure. - Conceptual confusion: “investment” appears to refer to projects; “operations” corresponds to activities. The Budget Execution Report shows significant capital expenditure under “operations” and significant current expenditure under “investments”. - Result: two parallel budgets are effectively developed (each with staff, other current, and capital expenditure), each overseen by one directorate, generating a fragmented vision of state needs. - Ideal division proposed: one directorate (DNP) to take sole care of preparation of the medium-term plans (PQG and MTEF) and the other (DNO) to be solely responsible for preparation of the OE. - Recommendation (explicit): Alter the responsibilities of the DNP and DNO so one takes full care of preparation of the medium-term documents (PQG and MTEF) while the other has exclusive responsibility in the preparation of the OE. - Recommendation (explicit): Review the current framing of expenditure within the headings of “operations” and “investment”, using conceptual definitions and framing in line with international standards. ### Own-generated revenues and earmarked revenues - MF Circular 1/2010 requires collection of all own-generated revenues by the organic units; one-off cases still exist of own-generated revenues outside the OE. - MF Circular 1/2010 stipulated collection with a certain time limit for classification of own-generated revenues and permitted recording in the OE during budget execution. - DNP/DNO excluded internal revenue from the ceiling for sectoral programming to avoid organic units hiding own-generated revenues to receive more state resources. - Effect: growth in recent years in collection of own-generated revenues, situated above average growth in other revenues. - Government measures to resolve own-generated revenue issues: - Introduction of the e-Taxation module in e-SISTAFE to permit collection of already-classified revenues directly from the taxpayer to the Single Treasury Account (CUT). - Approval of the Notice from the Governor of the Bank of Mozambique setting out regulations for the Ministerial Order on ownership of government bodies’ bank accounts, requiring commercial banks to prevent revenue-type accounts from being used for unrelated transactions. - Earmarked revenues: no plans to review or reduce/eliminate originating legislation; government intends to improve collection and monitoring, including introducing a submodule in e-SISTAFE linked to the MEO to allow UGBs to manage these resources more efficiently (while obeying legislative constraints). - DNT/DNO joint study found accrual balances on the CUT for earmarked revenues to be insignificant, but some earmarked resources are idle (example: transport sector receives an earmarked portion of the tax on fuels but fails to make full use of it). ### Repetition of OE and interim execution - SISTAFE Law (Article 27) determines repetition of the OE from the previous year if the OE proposal has not been approved by the beginning of the fiscal year; repetition involves foregoing OE with adjustments processed during the fiscal year and limits interim execution to monthly one-twelfth parts for all expenditure. - The mission will not recommend alterations in these procedures, leaving it to the government to find the practice best adapted to local realities. ### Explicit recommendations (from the source) - Establish a formally agreed calendar of discussions between the MPD and the MF for developing a new program structure for the upcoming PQG; contract an outside facilitator to aid the process. - Review the framing of expenditure within “operations” and “investment” to align with international standards. - Alter DNP and DNO responsibilities so one handles medium-term documents (PQG and MTEF) and the other prepares the OE exclusively. - Incorporate two more fiscal years into the timeline of the next MTEFs to fully cover a five-year PQG period and include expanding reserves over the years to compensate for increased uncertainty. - Include more in-depth explanations in the next MTEFs for reasons behind changes in ceiling amounts found in previous MTEFs for the same fiscal year. - Eliminate any non-automated file exchanges between MEO and MEX modules of e-SISTAFE. ### Budget and Financial Execution: rollout and system changes - 2012: incorporation of 106 new UGBs into e-SISTAFE, surpassing the SISTAFE Action Plan target for 2010–2015 of seventy UGBs per year. - Incorporation pattern followed endogenous requirements: minimum ten staff members (to permit segregation of duties) and budget at least double expected maintenance costs of the system. - Some newly incorporated UGBs acquired infrastructure with their own resources. - Following the Action Plan for SISTAFE Reform for 2010–2015: - Commitment and Validation Notes will incorporate information on the originating contracts (contract, legal framework, form of contracting, contract value, forms of payment) at commitment and validation times in MEX. - A new system for planning Treasury budget and financial execution is in implementation. - Previously, limits for commitment followed same one-month standard as payment financial quotas; the Action Plan is eliminating this brake to commitment (initially as pilots, then more widely), allowing UGBs, if MF deems pertinent, to appropriate the whole expected amount for the fiscal year. - Despite elimination of commitment constraints in e-SISTAFE, due to lack of dissemination UGBs continue to implement expenditure commitments within the old system. - A 2012 study on e-SISTAFE use quality found many budget and financial officers fail to adhere to the sequence and priority of expenditure phases; often commitment, validation, and payment occur almost simultaneously based on pro-forma invoices; invoices often not properly filed, making verification impossible. ### Rationale for commitment controls and information gaps - Commitment prior to payment is intended to allow the state to control expenditure when commitments are generated. - Limiting commitment to a one-month horizon prevents the state from seeing commitments made in advance by entities and withholds information essential for the Treasury to decide limits of commitment and payment; it also prevents precise knowledge of firm commitments accumulated at each moment of the fiscal year. - Such information could be used by DNP/DNO to identify sectors under pressure and to assess needs for supplementation during the fiscal year and for subsequent fiscal years. - The Budget Execution Report (REO) provides explanatory and numerical information but could be improved by including charts presenting phases of budget execution (commitment and validation); government indicated upcoming REO will include such columns for the first quarter of 2013. ### Financial Planning and Treasury: findings from AFRITAC Sul (August 2012) - Main findings: - Annual financial planning (Cash Budget) is undertaken by the DNT with minimal involvement of line ministries due to low capacity to draw up expenditure forecasts; this planning is undertaken outside e-SISTAFE and is not monitored throughout the year. - Financial planning during the fiscal year (Cash Plan) is carried out over a one-month time horizon: units record weekly timelines in e-SISTAFE for month N+1 at the end of month N; DNT authorizes one single budget allocation and payment limit, withdrawn if not used within the specified time, leading units to execute initial expenditure phases outside the system and with lower security. - Information on DNT’s weekly financial planning is passed to the BM but is of little utility for monetary policy management; despite a memorandum of understanding and an inter-market committee, neither DNT nor BM has precise information on scheduled government payments to foresee daily liquidity needs. - Vision and planned improvements: - Annual planning should be updated throughout the financial year with execution information and adjustments, integrated into e-SISTAFE, and contain more detailed information supported by unit proposals. - DNT initiated updating annual planning and, with CEDSIF, is developing functionality for annual financial planning converted to a monthly basis within e-SISTAFE. - Rolling monthly financial planning should progress and expand to a quarterly time frame; amounts from these instruments may establish financial quotas over the fiscal year, delinking moments in the expenditure phase and improving execution security. *Source: 1mozea2023005 - 15. Meanwhile, certain difficulties persist in regard to the exchange of information* ### 32. The financial planning for the financial year should contribute to monitoring of ### 32. The financial planning for the financial year should contribute to monitoring of ### Financial planning and government targets - Financial planning for the financial year should contribute to monitoring the government’s targets. - Targets to be monitored by means of the financial planning for the financial year should be defined clearly; examples given: - ensuring execution of the allotments of the budget law, - ensuring that there are no payables, - monitoring the impact of the budget on monetary policy. ### CUT (Conta Única do Tesouro) structure, operations, and deficiencies Findings: - The CUT is used in the effective electronic transfer of financial resources for revenue collection and payment of expenditures. - Transactions are made on the CUT by the UGEs; it is managed by the DNT and administrated by the BM. - Rules for making transactions on the CUT in each currency are clear and well known by the financial system; the rejection level is considered to be insignificant. - Only a few adjustments are lacking to ensure integrated management of the CUT in national and foreign currency (CUT-MN and CUT-ME). - Example deficiency: it hinders conversion via the CUT of hard currency from meticais, and obliges users to make payment for the servicing of the foreign debt by means of funds advanced via a management account. - Missing automation: transfer to the CUT of the balances on the revenue accounts so as to return the accounts to zero each day. - CUT contributes to increasing the level of security in payment operations through e-SISTAFE. - When payments are carried out by the direct route, the CUT is debited to credit the account of the final beneficiary without needing to transfer funds to an off-CUT account. - This permits automated controls that reinforce management quality. - Use of the direct route in payments has been increasing: 53 percent in relation to the total expenditure executed in 2012 (increase has been slower than initially planned). - External financing disbursements passing through the CUT in 2012: 55 percent (down slightly from 56 percent in the previous year). Deficiencies in bank accounts and consolidation: - There are still thousands of off-CUT accounts, complicating consolidation of the state’s financial availability. - Many off-CUT accounts are opened at the BM; others are at commercial banks. - Efforts to reduce off-CUT accounts aim to leave only those needed for revenue collection, administration of working capital funds, accounts of organs of state sovereignty and security, and projects with external financing. - Previous mission (April 2012) estimated: - off-CUT expenditure accounts at roughly 4,300, - off-CUT revenue accounts with balances at more than 2,000. - In the last year, the DNT closed 146 and authorized 68 expenditure accounts. - Despite efforts, there is an estimated increase in off-CUT accounts, due mainly to new accounts created by institutions without authorization and knowledge of the Treasury. - Daily consolidation of the state’s financial availability is currently impossible because the DNT has no access to daily statements of the accounts on the commercial banks. - Authorization is necessary from the DNT for the opening of any public account. - According to the legislation in effect, closing of the accounts may be carried out after a period of 60 days with no transactions. Priority improvements proposed for CUT: - Finalize the Ministerial Order for classification of the accounts (in preparation since last year). - Ensure harmonization with the BM so it can be complemented through a Governor’s Notice, making measures binding for commercial banks. - Classify off-CUT accounts by type, approve rules for exceptions, and identify a strategy for closing the remainder. - Publish disciplinary rules for revenue accounts. - Develop systems to automate transfer of balances to the CUT to return accounts to zero each day. - Harmonize CUT procedures in national and foreign currency. - Approve a single legal order for integrated management of CUT-ME and CUT-MN. - Finalize adjustment of computer systems. Actions to increase CUT coverage: - Continue efforts to increase coverage of the CUT. - Give particular attention to accounts created illegally by entities, applying sanctions to discourage the practice. - Request information from commercial banks on all public accounts (account holders, account balance, most recent transactions) to filter accounts to be closed. - Encourage transfers to the CUT of resources of decentralized management units and resources from external financing for entities that execute in e-SISTAFE. ### e-SISTAFE and performance indicators (Table 2 highlights) - Use of e-SISTAFE and CUT direct-route metrics and other indicators as reported for 2007–2012: - Number of executing units using e-SISTAFE for budget preparation and execution, out of a total of 983: - 2007: 12 - 2008: 301 - 2009: 320 - 2010: 438 - 2011: 504 - Percentage of expenditure executed directly through the CUT: - 2007: 11.49% - 2008: 23.61% - 2009: 31.40% - 2010: 37.55% - 2011: 42.22% - Number of bank accounts maintained by public entities outside the CUT: - 2007: 6,428 - 2008: 5,438 - 2009: 5,433 - 2010: 4,390 - 2011: 4,028 - Number of funds of donors making payments abroad through the CUT-ME: - 2007: 1 - 2008: 1 - 2010: 6 - 2011: 13 - Balance of the CUT at year-end (thousands of meticais): - 2007: 2,009,463 - 2008: 2,808,995 - 2009: 4,195,992 - 2010: 5,632,264 - 2011: 10,932,524.48 - Total value of treasury bills issued (90-day securities) in million MZN: - 2010: 20,000,000.00 - 2011: 21,500,000.00 - e-SISTAFE rollout: - Number of entities that completed the e-SISTAFE rollout: - 2007: 245 - 2008: 301 - 2009: 320 - 2010: 438 - 2011: 504 - Number of responses to e-SISTAFE users via service desk (per day): - 2007: 13 - 2008: 26 - 2009: 39 - 2010: 20 - 2011: NA - Number of active e-SISTAFE users: - 2007: 4,463 - 2008: 4,074 - 2009: 4,173 - 2010: 6,478 - 2011: 10,004 - Percentage of wage expenditure executed directly: - 2007: 2.73% - 2008: 2.75% - 2009: 3.47% - 2010: 8.60% - 2011: 15.77% - Percentage of pension expenditure executed directly: - 2007: 0% - 2008: 0.88% - 2009: 0.30% - 2010: 0.30% - 2011: 0.29% - Source of table: CEDSIF. ### Revenue management and exceptions - All revenues should be transferred to the CUT as soon as they have been classified. - Revenues from sale of equity holdings in extractive businesses should not be an exception, despite sums being high relative to the budget. - Current legislation provides rules allowing the executive to use surpluses from collection for addressing debt and investment expenditures, and the possibility of proposing a budget review to the legislature to authorize other expenditures. ### Public enterprises: oversight, performance, and consolidation Findings: - New regulatory framework clarifies financial oversight by the DNT. - Presently, fourteen public enterprises exist (with own capital or capital from other public entities), seven of which receive some financing from the OE. - In 2011, nine of the thirteen companies that existed at that time had negative returns. - Public enterprises have autonomy in administrative, financial, and asset terms, but require authorization from the MF to take on debt and are subject to financial oversight. - New legal framework strengthens management instruments: - creation of performance contracts, - obligation to provide management accounts by March 31 following financial year-end. - The law specifies reports and accounts required and obligations in auditing and publication, but does not mention specific time limits. - Law envisages consolidation by the Ministry of Finance of the financial statements of the whole of the public enterprises, but consolidation has not yet been done. - DNT monitors the economic and financial status of the fourteen public enterprises; IGEPE manages a state portfolio of 117 firms; DEAE monitors PPPs and public concessions. - Supervisory bodies do not always receive necessary information in a timely fashion. - Central government does not yet consolidate fiscal risk issues into an annual report. - Information is lacking in the MTEF on fiscal risks and contingent liabilities. - Regulation for approval this year of the new public enterprises law and regulatory framework of autonomous institutes and funds is in process. - IGEPE is developing a performance monitoring and evaluation system, with a pilot phase in five companies with state equity holdings, potentially expandable to public enterprises. Table 3 (public enterprises) summary (selected entries, as presented in source): - Electricidade de Moçambique: - Total costs in 2011: 6,783,937,370 - Total revenues in 2011: 7,352,388,971 - Net profit/loss in 2011: 637,523,110 - Deficit subsidy in 2011: 0 - Deficit subsidy in 2012: 0 - Deficit subsidy in 2013: 0 - Caminhos de Ferro de Moçambique: - Total costs in 2011: 3,766,788,000 - Total revenues in 2011: 4,780,879,000 - Net profit/loss in 2011: 1,013,123,000 - Deficit subsidies 2011–2013: 0 0 0 - Televisão de Moçambique: - Total costs in 2011: 332,889,587 - Total revenues in 2011: 120,439,036 - Net profit/loss in 2011: 232,145 - Deficit subsidy in 2011: 179,210,831 - Deficit subsidy in 2012: 258,345,298 - Deficit subsidy in 2013: 228,983,225 - Radio de Moçambique * (Dados previsionais): - Total costs in 2011: 443,367,666 - Total revenues in 2011: 308,400,800 - Net profit/loss in 2011: -71,812,601 - Deficit subsidy in 2011: 236,336,610 - Deficit subsidy in 2012: 266,830,520 - Deficit subsidy in 2013: 302,005,867 - Other enterprises listed with their 2011 costs, revenues, net results, and planned deficit subsidies for 2011–2013 in the source table. - Notes in table: - * - Dados previsionais - ** - Empresa criada em 2012 ### Financial decentralization - Since 2009, district powers have progressively increased, along with budget expenditure executed at that level. - Process has permitted greater district involvement in budget management but has raised issues: - shortfall in financial resources, - need for monitoring by central bodies, - need for additional training activities. - Recommendation to assess current situation of financial decentralization of revenues and expenses, coordination mechanisms, and risks to guide upcoming stages. ### Recommendations (explicit list from source) - Confirm inclusion within the REO of charts demonstrating full budget execution, including the phases of commitment and validation of the expenditure. - The DNP and DNO should get involved more in budget execution to obtain more exact information on sectors under pressure regarding budget limits and thus take more qualified decisions on budget planning ceilings for the subsequent year. - Ensure updating of the initial annual planning, and that to be covered in e-SISTAFE starting from 2014, with direct involvement of the executing units. - Approve the Ministerial Order for classification of the accounts, the single Order for integrated management of the two CUT mechanisms, and the rules governing the revenue accounts. - Carry on with actions to increase the coverage of the CUT, and automate transfer of the balances on the revenue accounts at the end of the day. - Finalize the regulatory framework for the public enterprises and autonomous institutes and funds during the financial year. - Improve supervision of the aggregate fiscal risk of the public sector agencies through: - implementation of a monitoring system, - consolidation of the financial statements, - analysis of the fiscal risk in an annual government report, - inclusion of that risk in the MTEF. - Assess the risks from the decentralization process and coordination mechanisms. ### Accounting reform: IPSAS transition, action plan, and testing of the CGE Reform plan and phases (from EY Action Plan): - Phase 1 (Short-term) — ESTABLISHMENT OF ACCOUNTING STANDARDS AND TRAINING (Expected period: 2012 and 2013) 1. Analysis of the current situation 2. Establishment of accounting standards 3. Initial training - Phase 2 (Medium-term) — ADAPTATION OF THE COMPUTER SYSTEMS AND PILOT IMPLEMENTATION (Expected period: 2014 to 2017) 4. Drawing up business models for the functionalities of computer systems, based on accounting standards 5. Adjustment of functionalities of existing computer systems, and development of new ones necessary for implementing accounting standards 6. Pilot implementation of the accounting standards - Phase 3 (Long-term) — CONSOLIDATION OF IMPLEMENTATION (Expected period: 2018 and subsequent years) 7. Pursuit of adjustments in functionalities of computer systems 8. Pursuit of implementation of application of the accounting standards 9. Consolidation of the public accounts - Source: Action Plan for Reform of the Budgetary Public Accounts for Accrual Accounting based on the IPSAS, Ernst & Young, October 2012. Testing of the new CGE format (findings and issues): - DNCP produced main statements with the new format using 2011 CGE data and explored causes of differences. - Mixed results from testing the new format with 2011 data: - 2011 financial performance statement was well done and reconciled with the 2010 CGE in the new format and with Chart I from the 2011 CGE. - 2011 Budget Performance statement had errors: some subtotals were inserted in the format without altering Excel template formulas, affecting totals and final deficit (“net cash movement”), which did not agree with the deficit according to the statement of Financial Performance. - Some opening balances in the 2011 Balance Sheet of Assets differ greatly from closing balances from the 2010 Balance Sheet (financial assets, equity) with no annotation or explanation for the changes. - The 2011 CGE in the new format was missing all explanatory notes. Discrepancies and suggested treatments: - Some discrepancies between 2010 and 2011 CGE remain and may be resolvable in the 2012 CGE. - Public debt differences persisted in 2011 CGE due to treatment of exchange rate variations: - DNCP applied the foreign exchange rate from December 31, 2011 to the December 2010 balances. - This treatment was not explained and is contrary to international accounting standards that advise using the daily foreign exchange rate. - Suggested improvements: - Apply the daily foreign exchange rate to ensure consistency between successive accounts. - Reflect exchange-rate variations (of initial stock and transactions over the year) in the sixth column (Cancellation, Relief and exchange-rate variation) from Chart I-3. - Divide that column to separate cancellation/relief and exchange-rate variation. - If DNCP does not adopt the corrected treatment, explain the current treatment in a note with explicit reconciliation between Chart I-3 and Chart I. - Large difference in debt data appeared between Chart I and Chart I-3 of the 2011 CGE: - Authorities excluded disbursements and amortizations of MZN 21.5 billion of domestic debt with “other banks and financial institutions” from Chart I, treating these as treasury operations and off budget. - Amounts appear in Chart I-3 but were excluded from Chart I and other charts. - Treatment is not accounting best practice (typically contrary to “net” treatments) nor transparent. - Recommended treatment: include these amounts in the charts and explain the facts in narrative commentary or explanatory notes. - Transfers to autonomous institutions differences: - Charts III and IV use economic classification where “transfer” includes funds for direct management of institutions, while Informational Appendix 1 includes amounts of other transfers (staff expenditures, goods and services, other expenditures). - Differences may be reconciled by detailed charts; future explanatory note recommended for clarity. - Transfers to municipalities: - Less difference noted in 2011 CGE; source appears to be an error in economic classification of expenditure used in one municipality that did not occur in 2010 and may be cleared in 2012 CGE. - Source: Comparison of the CGEs for 2010 (undertaken by the Fund) and 2011 (undertaken by the DNCP), in the new format. *Source: 1mozea2023005 - 32. The financial planning for the financial year should contribute to monitoring of* ### 47. The DNCP has already confirmed that the 2012 CGE will have improvements in ### 1mozea2023005 - 47. The DNCP has already confirmed that the 2012 CGE will have improvements in ### Improvements to the 2012 CGE and clarity of differences - The DNCP has confirmed it will undertake improvements in the treatment and explanation of differences among data present in charts, tables and informational appendices of the 2012 CGE. - Based on experience in the 2011 CGE and mission comments, DNCP will better clarify differences that exist amongst the data presented. ### Public accounts reform and transition to accrual accounting (work in 2013) - EY team composition and status: - Includes Mozambican accountants and Portuguese consultants with experience in public accounts reform. - At the time of the mission, EY was in the initial phase and discussions with DNCP and CEDSIF; no concrete outcomes yet beyond action plans and phase 1 implementation descriptions. - Results of consultants’ work expected to appear in June. - Intended timeline and objectives for 2013: - Determine the path for the future by the end of June. - Formalize new accounting standards and seek approval by Parliament prior to the end of 2013. - Key considerations and guidance discussed: - A reform of this kind could take many years; avoid overly ambitious plans and timelines. - Transition to an accrual system should be phased; introduction of accrual concepts should not wait for full computer systems or complete accounting data availability. - Gradual introduction can expand scope across three dimensions: kinds and number of entities to consolidate; class of assets and liabilities to be captured; valuation of assets and liabilities. - New financial statements format and contents will be guided by international accounting standards. - Public accounts standards supply a dynamic framework requiring interpretation; distinguish permanent aspects (to embed in law or decree) from dynamic aspects (to embed in administrative instruments such as circulars or accounting manuals). - Pilot projects and experiments are important before finalizing requirements and specifications. - A census of entities, assets and liabilities is necessary to plan a sequence that optimizes cost and information materiality; example: public pensions can be calculated with an actuarial estimate, while “accounts receivable” or “accounts payable” may be costly to calculate with limited value. - The cash rule provides a foundation during the transition from a cash-based to an accrual-based regime; Study 14 of the IPSASB, updated in January 2011, provides guidelines. - Systems changes will be required to support accrual accounting; e-SISTAFE already has some basic accrual functionalities but will need additional functionalities typical of other accounting systems. - Target system capabilities: capture and store double-entry accounting data from e-SISTAFE; accept summary data from other systems (public debt, tax management); accept manual entries for corrections; accept summary data from entities outside e-SISTAFE to produce consolidated accounts. ### Recommendations on CGE and standards testing - The DNCP should improve presentation of the 2012 CGE to avoid or clarify identified differences between charts of account. - The DNCP should test the new account format using data from the 2012 CGE, adjusting the format if necessary based on new standards available at the end of June; the test will help check the new standards prior to their approval at year-end. - Authorities and consultants should consider recommendations and guidance from prior missions and this mission; focus the reform on gradual development of financial statements through to a full accrual-based regime. ### Internal and external controls - General Finance Inspectorate (IGF) developments: - Number of auditors has grown and auditor training has increased. - Use of e-SISTAFE by auditors has grown. - Approval of a new conceptual model of internal control in October 2012; IGF and CEDSIF are working to establish and implement it. - Proposals include: IGF provincial offices; planning and coordination with sectoral inspectors; new standards and guidelines; skills training; inclusion of internal control processes in e-SISTAFE; development and experimentation in systems auditing and performance auditing; a system for managing audits and results. - During 2013 and beyond, IGF will provide or facilitate an opinion (as to reliability and compliance) on each management account prior to sending to the Tribunal, and likewise on the CGE prior to sending to the Tribunal. - IGF coverage target: around 67 percent of the budget in 2013 (the target was 47 percent in 2012). - Administrative Tribunal (TA) developments: - TA coordinates annual plans with IGF to coordinate entity audits. - TA will benefit from an IGF opinion on each management account and is helping train auditors in line ministries at provincial level and in individual institutions. - Decentralization continues; TA still must institute four more provincial courts and provide capacity-building. - Prior approvals of contracts: ceiling remains five million meticais; approval deadline reduced to 45 days (was 90 days); past the deadline contracting may proceed without approval. - TA considers staff approvals (hiring, progression) still necessary given volume of errors and irregularities. - Timeliness of CGE and TA opinion: - Opportunity exists to reduce time limit for sending CGE and TA opinion to Parliament. - Target: make the CGE and opinion available prior to the end of September (instead of end of November), an acceleration by two months which would give Parliament six more months to consider and approve the CGE. - Presently Assembly receives the opinion at the end of November; CGE and opinion are typically evaluated the following April. - Proposed reduction by two months could be divided between TA and DNCP (one month each). - Transparency and availability of institutional accounts: - Reform offers opportunity to modernize and publish accounts for each institution based on management accounts or instead of them. - Management accounts are internal accountability instruments and are not currently available to the public or Parliament in a unified, entity-specific format. - IPSAS may be applied at various public sector levels; management accounts could provide summary data published for each body, consistent and integrated with the new CGE, improving transparency. ### Information and Communication Technology: e-SISTAFE and related modules - Overall progress: - e-SISTAFE is implemented in 620 UGBs. - State budget execution via direct route reached 52.6 percent in 2012 (in 2011 this level was 42 percent). - Various e-SISTAFE modules are in different stages of development and implementation. - e-SISTAFE rollout objective: complete rollout in 2015 is considered entirely achievable. - To support rollout, CEDSIF contracted two resident technical staff for each province (one hardware, one software). - Selected module statuses and short-term trends: - SNPO: Conceptual model for the National Planning and Budgeting System completed. - MEO: Improvements introduced in the Module for Budget Preparation. - MEX (Budget Execution Module): - Business Model defined to operationalize accrual accounting methodology. - Functionality introduced for payment authorization officials of each UGE to confirm budget execution compliance. - Functionality allows inclusion in contracts of the number of the commitment note. - A checklist developed to be validated by the Expenditure Operator. - MPE (State Assets Module): - Conceptual model and business model completed and approved. - Interoperability with MEX enables automatic incorporation in MPE of assets subject to inventory. - Modular architecture ensures interoperability with Register of Suppliers and Contractors and Catalog of Goods, Materials and Reference Prices. - Municipalities and public enterprises used e-Inventory (preliminary MPE) for recording goods acquired in 2012 to complete the 2012 General Public Accounts. - Catalog of Goods and Services created and updated, with Reference Prices; contracting of consultancy supported definition of catalog structure; Database from the Catalog of Goods and Services of the State of Minas Gerais used to feed Mozambique catalog. - Catalog of Suppliers created and updated; information from the Revenue Authority on NUITs contributed to updating. - e-CAP / e-CAF / Modules for Register of Pensioners and Staff: - Possibility under study of implementing an Internet application for proof-of-life of pensioners. - e-Payroll: - Development to permit calculation of salaries and allowances for teachers and school and hospital staff. - Payment of salaries by e-Payroll expanded to 595 more institutions: six central-level, 136 provincial-level, 104 district-level, plus 349 schools at district level. - Business Model defined for the life cycle of pensioners (third quarter of 2012). - Rollout in education and health significantly impacted percentage execution of the OE by the direct route. - Out of 247,725 state functionaries and agents that existed in 2012, 81,750 were paid through e-Payroll (33%). - e-Payroll stage permits application to entire public administration; recommendation that application be established by law through decree with a very short timeframe. - SGRH (Human Resource Management Module): - Conceptual model defined (Appendix 3). - Business model in preparation (third quarter 2012). - Customizing of Oracle’s Human Capital Management (HCM); up-to-date information still remains to be collected. - MGI / e-SISTAFE Portal (Information Management Module): - Business Model under discussion (see Appendix 2). - Terms of reference defined for BI tool for report generation support (second quarter 2012). - Budget execution reports improved and provided in a timely fashion for incorporation into the Management Account, which will replace manual bookkeeping starting from the 2013 fiscal year (Circular 01/GM/MF/2013 of February 18, 2013). - Conceptual Model for the Information Management Subsystem defined – e-SISTAFE Portal. - Functionality developed permitting automatic extraction of information by the MGI from charts that make up the management account. - e-SISTAFE architecture evolved into an SOA (Services Oriented Architecture) ensuring modular structure and interoperability with other systems; trend toward a more Internet-based e-SISTAFE as a collateral effect of e-Taxation project. - e-Taxation: - Customizing of ETPM (Oracle’s Enterprise Taxation and Policy Management). - Design completed of the IRPC and e-IRPS modules. - Estimates updated for effort for e-Taxation; entry into production foreseen for 2014. - Conceptual model and business model for the collection network entered into production in 2012. - Conceptual model and business model for VAT, IRPC and IRPS in 2013. - Conceptual Model and Business Model for GARE entered into production in 2012. - Entry into production: VAT, ISPC at the end of 2013; remaining rates and taxes in 2014. - Interface with Single Electronic Window in January 2013. - NUIT: - NUIT taxpayer registration module developed and in production. - JUE (Single Electronic Window Module): - Entry into production in the Port of Maputo in 2011, operating with two banks. - In 2012 entered production at seven main Customs posts, collecting 70% of the Customs fees; in 2013 this amount is to rise to 90%. - GARE (unified collection document): - Establishment coordinated with Revenue Authority (TA) and National Treasury Directorate (DNT). - Conceptual model for e-Taxation envisages a single document (GARE) generated exclusively by e-SISTAFE Collection Network Module to collect all public revenues; respects principles of integrity, validity and security. - Business Model and Common Procedures Module already drawn up. - Guide to be implemented with entry into production of VAT and ISPC modules of e-Taxation; pilot expected at end of 2013. - e-SISTAFE development and rollout: - Architecture evolved into an SOA supporting modularity and interoperability. - e-SISTAFE installed in 106 more UGBs, implemented in 620 UGBs total. - Execution of the state budget by the direct route reached 52.6% in 2012 (42% in 2011). - Rollout completion target for 2015 considered achievable. *Source: 1mozea2023005 - 47. The DNCP has already confirmed that the 2012 CGE will have improvements in (PDF chapter/section).* ### 55. The SISTAFE regulation ### 55. The SISTAFE regulation ### e-SISTAFE regulation and single-system policy - Legislative Decree 23/2004 (Sub-paragraph 1 of Article 99) stipulates that e-SISTAFE is the only computer system supporting SISTAFE. - Government policy: hold integrated, comprehensive, national-scope information on state finances through a single technological solution to avoid proliferation of incompatible computer systems. - CEDSIF has been implementing these guidelines, performing with competence and assuming a determinant role as facilitator of PFM initiatives in Mozambique, with its role expected to be strengthened. - The existence of a single computer system implies generating and aggregating information from various sources (other subsidiary systems) and maintaining it always accessible, updated and reliable to ensure transparency and relevance. ### CEDSIF organizational upgrades and ICT governance - In 2012: - The Legislative Decree that created CEDSIF was amended. - CEDSIF’s organic statute was approved. - Proposal for CEDSIF’s rules of procedure was drawn up and subjected to review for approval by the Minister of Finance. - Contracting of resources with ICT responsibilities implies assignment to CEDSIF of a recruitment status of its own, as an exception to the general public service law (presently in the approval phase). - Improvements in processes for development and delivery of IT services and systems certification instituted, with Quality and Certification Service (SQC) and Operations Service (SO) intervening. - Governance practices advanced toward ITIL and CMMI reference models; “Software Quality Plan” and Catalog of ICT Services prepared. - Development of the e-SISTAFE architecture toward an SOA architecture is underway, with good results (see Appendix 1 references in source). ### e-Payroll rollout, coverage and functionality - Rollout status: - Out of the universe of 247,725 state functionaries and agents that existed in 2012, 81,750 were paid by way of e-Payroll, which is to say, 33 percent. - In 2012 e-Payroll was expanded to 595 more institutions: six central-level, 136 provincial-level and 104 district-level, plus 349 district-level schools. - e-Payroll combined with e-CAF and e-SISTAFE: - The combination (e-CAF+e-Payroll+e-SISTAFE) constitutes a robust software application for payment of salaries, allowing rigorous control of what gets paid and to whom. - Payment presupposes registration in e-CAF (with NUIT and bank account as attributes) and uses e-SISTAFE’s home banking — directly from the CUT to the employee’s bank account. - Payroll records from e-Payroll permit detailing of employee attributes and salary components. - e-Payroll implements an algorithm for calculation of salaries based on attributes of the employee’s professional career path and salary level, and days or hours of actual work. ### Remaining parallel systems and security weaknesses - Other systems still used: SNV (City and Province of Maputo, including central administration), SPS (organs of the centre), SPAV (organs of the north). - Identified weaknesses of SPS and SPAV: - They permit payment of salaries to employees without them being registered in e-CAF, and through advance of funds. - SPS and SPAV do not allow payment through e-SISTAFE’s home banking; payments via advance of funds occur without automatic reconciliation with e-CAF, constituting a serious security weakness. - SNV specifics: - SNV provides functionality to carry out payments by the direct route in e-SISTAFE, but some salaries are still paid via advance of funds due to lack of recording of employee’s NUIT and bank account. - Payroll records in SNV, SPS and SPAV indicate a total amount to be paid, with no breakdown by salary attributes to permit checking of monthly payment detail for each employee. ### Fraud risk and importance of full e-Payroll adoption - Recent discovery of frauds: double payments to some employees via funds advance for parallel payroll records. - If e-Payroll rollout had been concluded, automated controls in the (e-CAF+e-Payroll+e-SISTAFE) solution could have avoided these frauds. - Security in payment of salaries will increase considerably with full use of e-Payroll. ### Action plan, deadlines and priorities - Update the action plan by May 2013 to continue expansion of e-Payroll and establish payment by the direct route in the other three systems; analyze constraints to rollout and propose pragmatic solutions. - Identified immediate lines of action to be implemented by end-2013 and September 2013: 1. Additional effort to update e-CAF and ensure full and trustworthy registration of all public employees by the end of 2013. 2. Rollout of e-Payroll to be completed within institutions by September 2013, with priority to payment of salaries via this system; cases rejected in e-Payroll to be resolved gradually. 3. CEDSIF to develop functionality within e-SISTAFE, at the latest by September 2013, to enable salaries processed in SPS and SPAV to be paid through e-SISTAFE’s home banking, and to require that all salaries be paid in this way by end-2013. 4. Once Activity 3 is completed, payment of salaries by funds advance will cease; all salaries to be paid by the direct route to e-SISTAFE home banking. 5. Activities 1 to 3 are labor-intensive; execution time may be reduced depending on human resources and infrastructure allocated. 6. These activities (1 to 3) should be given high priority in allocation of human and financial resources; partners supporting public finance reforms should support these aspirations. - Medium term: - Rollout of e-Payroll should be completed and recording of e-CAF data automated. - Development expected of the National Human Resource Management System for greater security in salary payment; this will require partner financial support over a period of two to three years. - Monitoring and oversight: - Government should draw up quarterly reports highlighting gains, difficulties, potential solutions and readjustments. - Process should be supervised by the IGF in its capacity as internal control body, with results shared with partners supporting the public finance reform. ### e-Assets — State Assets Module (MPE) - Conceptual and business model for MPE completed and approved. - Interoperability of MPE with MEX (budget execution module) permits automatic incorporation into MPE of assets subject to inventory via e-SISTAFE’s SOA. - MPE relies on Register of Suppliers and Contractors and the Catalog of Goods, Materials and Reference Prices, Organic System of Headings and System of Expenditure Headings. - CEDSIF developed a simplified application e-Inventory to allow completion of general public accounts; municipalities and public enterprises used e-Inventory for recording goods acquired in 2012. - e-Inventory uses organic system of headings and system of asset headings; new functionality added to permit calculation of amortizations during the financial year (recommendation from previous mission). - Functionality designed in MEX for recording contract information, linked to legal framework, form of letting, contract value and forms of payment at the time of commitment and validation. - Catalogs: - Catalog of Goods and Services created and updated with Reference Prices (consultancy supported definition of structure; Database of Catalog of Goods and Services of the State of Minas Gerais used to feed Mozambique catalog). - Catalog of Suppliers created and updated; information from Revenue Authority on suppliers’ NUITs contributed to updating. - No advances recorded in development of the Public Finance Portal. - CEDSIF hired resident technical staff for each province (one for hardware and one for software) to support e-SISTAFE rollout and mitigate prolonged outages in institutions. - Technical sizing for MPE: - Expectation: around 3234 registered users, of which on average 100 will be logged on at any one same time. - MPE to be developed through three modules: MPE Module, CSBO Module (Catalog of Goods, Services and Works), and CEF Module (Register of Contractors and Suppliers). ### e-Taxation (Oracle ETPM) — progress and timelines - e-Taxation is based on customizing Oracle’s Enterprise Taxation and Policy Management software package (ETPM). - Implemented in partnership between the Revenue Authority and CEDSIF; intended for all taxes in effect in the Republic of Mozambique. - Complexity: - e-Taxation is the most complex and demanding module of e-SISTAFE. - Only the NUIT management module is in production at this time — in concrete terms, no tax is being collected via e-Taxation yet. - Rollout and staffing: - Project team initiated rollout throughout the country with training teams; PR team providing professional intervention. - CEDSIF leveraging synergies with e-SISTAFE, specifically for the Business Intelligence Unit (BI) of the Transparency Portal. - Conceptual model: - Completed and approved; detailed and advancing recommendations for the business model. - e-Taxation seeks to be taxpayer-friendly via Internet services (differs from e-SISTAFE which operates on a virtual private network). - Macro-process coverage: (i) management of the NUIT registry; (ii) management of public revenues; (iii) management of the collection network. - Interoperability planned with other e-SISTAFE modules: MEO (Budget Preparation) for revenue forecasting; MEX (Budget Execution) for up-to-date NUIT access and synchronous recording of revenue phases, classification and control of collection in the CUT. - e-Taxation’s conceptual model provides for mandatory use of the COR (Budgetary Revenue Cell) headings. - Once set up, a single System of Revenue Headings will replace the two current heading systems. - Status of work and timelines: - Tests completed for production entry of the NUIT module. - Business models being drawn up for each tax: - Business models completed for VAT and ISPC and delivered to CEDSIF for development. - For VAT, business models initially developed for critical cross-cutting processes (declaration, settlement, payment through the bank, management reports); this phase to be completed by the end of the year 2013. - Second phase to cover tax foreclosures, audit and litigation, and production of reports. - Estimates of effort for e-Taxation revised; e-Taxation expected to come into production in 2014. - Implementation of e-Taxation interface with the Single Electronic Window expected for the end of 2013. ### Recommendations (from the source) - Assign maximum priority to development and rollout of e-Taxation and e-Payroll. These projects are to be the object of very close control. An intervention by the IGF is recommended in the internal control of compliance with the respective action plan, with a report to the Minister of Finance and to the pool fund that supports the reform. - Continue advancing IT governance at CEDSIF despite significant improvements already recorded. - Prioritize entry into production of the public finance portal: although it does not require large resource allocation, it will have a big impact on the image of public finance in terms of transparency and merits additional efforts. *Source: 1mozea2023005 - 55. The SISTAFE regulation* --- _Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1mozea2023005.pdf_