The role of CAG in public financial management
Among the greatest issues of discussion in Tanzania from April 8, 2021 is the report by the Controller and Auditor General (CAG) which was submitted before Parliament and hence made public. Audit reports by CAG are among key documents on prudent public financial management. The CAG normally issues his report for a given fiscal year ending on 30th of June.
Constitutionally, the reports have to be presented to the President before every March 30. They normally contain extremely important issues patterning to public funds both revenues and expenditure.
Public funds
Public funds in Tanzania are raised from various internal and external sources.
Internal sources include tax and non-tax revenues. Taxes are of various categories.
They include but are not limited to value-added tax (VAT), pay as you earn personal income tax (Paye), corporate income tax (CIT), skills development levy (SDL), etc.
At the Local Government Authorities (LGAs) level, public funds include revenues from property tax, fees, cess and fines. Other sources of public funds include loans and aid.
Loans have to be repaid by taxpayers’ money and aid money is donor countries’ taxpayers’ money. All these are funds raised from the public for funding public goods and services.
Public goods and services include economic infrastructure such as roads, ports, airports and railways. These are hard infrastructure. Economic infrastructure include soft infrastructure as well including the Internet.
Public goods and services include water, education, health, security, etc.
Partly these funds are managed and accounted for through various legal, policy and regulatory frameworks as well as institutions.
One such institution is the National Audit Office (Naot) where the current CAG is Charles Kichere (pictured).
On CAG’s reports
CAG reports are results of wide and at times in-depth audit of public funds, systems, laws, regulations and practices related to public funds.
The audits aim at finding out the extent to which laid down laws, regulations and procedures on public financial management are followed. The CAG also audits internal systems in public institutions covering Ministries, Departments and Agencies (MDAs).
He also audits political parties as they are beneficiaries of public funds collected through taxation. His annual reports show public finance management (PFM) issues for a given year as well as for issues discovered in past years that were yet to be reported on. It also informs on compliance with earlier recommendations given by CAG and the Public Accounts Committee (PAC) of the Parliament.
Selected 2021 issues
The CAG has been issuing several reports of significant importance in the PFM space. The report issued on April 8, 2021 has a number of issues of concern in PFM. These issues are found in the central government, local government and parastatals. On revenue side they include issues of lost public funds for various reasons including procurement related ones; collected but not submitted funds; uncollected taxes; penalties, fines and interest charges that could be avoided; loss-making parastatals and much more along those lines.
On the expenditure side issues include expenditures that do not have value for money, overpayment for some public goods and services; payments for public goods and services without delivery of the same; expenditure on completed but not operating projects; expenditures without following laid down procedures for public funds including but not limited to adhering to budgets, procurement processes, issuing and receiving of acceptable receipt and much more along those lines.
Other issues relate to non-submission and inadequate submission of financial and other reports to be audited by the CAG as well as governance issues. On the latter, issues include lack of and inadequate board memberships including poor composition of boards and too many board meetings for some institutions. These are just some of the issues in the 99-page summary of the report.
CAG Report Discussion
CAG’s reports are normally discussed in various places including in the Parliament. This is very important for transparency and accountability in the context of PFM.
The discussions inside and outside the Parliament is supposed to be objective and critically constructive scrutiny that aims at fixing what is broken in PFM as reported by the CAG. Tax payers, donors and lenders of public funds have interest in knowing how their funds are used. This is the essence of accountability. Good discussions and acting on recommendations by the CAG is a positive score in the prudent PFM space.
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Ngowi is Associate Professor of Economics, Researcher and Consultant at Mzumbe University, and Principal of Mzumbe University (Dar es Salaam Campus).
