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REPUBLIC OF THE GAMBIA

2009 COUNTRY FINANCIAL ACCOUNTABILITY ASSESSMENT

The World BankAfrica Region

AFTFM2009

69692

ABREVIATIONS AND ACRONYMS

AfDB African Development BankGBMAA Government Budget Management and Accountability (Act)CFAA Country Financial Accountability AssessmentCOSO Committee of Sponsoring OrganizationsDfID Department for International DevelopmentDNT Directorate of the National TreasuryDOSFEA Department of State for Finance and Economic AffairsFPAC Finance and Public Accounts CommitteeGDP Gross domestic productGFS Government Finance StatisticsGMD Gambian Dalasi (local currency)GRA Gambia Revenue AuthorityHIPC Highly Indebted Poor CountriesIDA International Development AssociationIFAC International Federation of AccountantsIFMIS Integrated Financial Management Information SystemIMF International Monetary FundINTOSAI International Organization of Supreme Audit InstitutionsIPSAS International Public Sector Accounting StandardsIT Information TechnologyLGA Local Government ActLGFA Local Government (Financial and Audit) ActMTEF Medium-term expenditure frameworkPEFA Public Expenditure and Financial AccountabilityPFM Public financial managementPI Performance indicatorPRSP Poverty Reduction Strategy PaperROSC Report on Observance of Standards and CodesSWAp Sectorwide approachTIN Taxpayer Identification Number

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Republic of The Gambia2009 Country Financial Accountability Assessment

Contents

EXECUTIVE SUMMARY........................................................................................................................................ v

INTRODUCTION..................................................................................................................................................... 1

SECTION 1. FINANCIAL PLANNING AND BUDGET PREPARATION.................................................41.1. The legislative framework.......................................................................................................................................................... 41.2. Budget preparation....................................................................................................................................................................... 41.3. Multi-year and strategic budget perspective...................................................................................................................... 61.4. Budget comprehensiveness and transparency................................................................................................................... 81.5. Assessment and Recommendations......................................................................................................................................... 8

SECTION 2. ACCOUNTING, FINANCIAL REPORTING, INTERNAL CONTROL, AND INTERNAL AUDIT .................................................................................................................................................... 10

2.1. Accounting system and IFMIS................................................................................................................................................. 102.2. Financial reporting...................................................................................................................................................................... 122.3. Internal controls and effectiveness of internal audit.................................................................................................... 132.4. Challenges and recommendations........................................................................................................................................ 14

SECTION 3. EXTERNAL AUDIT................................................................................................................ 173.1. National Audit Office: Constitutional and legal mandates.........................................................................................173.2. Resources and financial autonomy....................................................................................................................................... 183.3. Audit reports.................................................................................................................................................................................. 193.4. Assessment and recommendations....................................................................................................................................... 20

SECTION 4. LOCAL GOVERNMENT.........................................................................................................224.1. Legislation and regulation....................................................................................................................................................... 234.2. Budget planning and preparation........................................................................................................................................ 234.3. Accounting, reporting, and internal control..................................................................................................................... 244.4. Executive oversight...................................................................................................................................................................... 264.5. Assessment and recommendations....................................................................................................................................... 27

SECTION 5. STATE-OWNED (PUBLIC) ENTERPRISES......................................................................295.1. Legislative and institutional framework and corporate governance....................................................................295.2. Corporate governance................................................................................................................................................................ 305.3. Budget preparation..................................................................................................................................................................... 315.4. Accounting, internal control, reporting, and internal audit......................................................................................315.5. External audit and legislative oversight............................................................................................................................ 325.6. Assessment and recommendations....................................................................................................................................... 32

SECTION 6. LEGISLATIVE SCRUTINY, PUBLIC ACCESS TO INFORMATION, ETHICS AND INTEGRITY .................................................................................................................................................... 34

6.1. Legislature and its institutions............................................................................................................................................... 346.2. Legislative scrutiny of the annual budget law................................................................................................................. 356.3. Legislative scrutiny of external audit reports.................................................................................................................. 366.4. Capacity issues............................................................................................................................................................................... 366.5. Assessment and recommendations....................................................................................................................................... 37

SECTION 7. PROPOSED REFORM ACTION PLAN...............................................................................39

ANNEX A. PEFA PFM Performance Measurement Framework...........................................................41

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ANNEX B. Fiduciary Risk Analysis................................................................................................................ 83

ANNEX C. Calculation of Deviations by Budget Heads 2005-2007....................................................85

ANNEX D. Terms of Reference for PFM Reform Oversight Steering Committee and Sub-Committee............................................................................................................................................................ 91

ANNEX E. The Gambia Government’s Self Assessed Progress on PFM Reforms..........................................94

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PREFACE

The Country Financial Management Accountability Assessment (CFAA) for the Gambia was conducted between March and June 2008, culminating in the in-country mission over two weeks in March 2008 by a joint team of the Government officials, African Development Bank and World Bank staff. The exercise covered six modules set out in the initiating memorandum prepared and distributed in February 2008 to lay out the ground work and scope of this exercise. Areas covered are in the public sector at both national and local government level only.

It is against this backdrop that exercise was designed with a view to assess the reforms and progress made on the implementation of the 2003 CFAA recommendations, especially on key PFM reforms such as IFMIS. The assessment was also intended to identify areas of continued weaknesses that would require further effort and focused attention. The findings were of the CFAA were communicated in forma of draft CFAA report in June 2009 and subsequently validated at a workshop with key stakeholder facilitated by DOSFEA (now named as Ministry of Finance and Economic Affairs). Comments from the Government of The Gambia arising from the workshop and the draft CFAA have been incorporated in the final report.

The CFAA core team comprised of John Nyaga (Team Leader, AFTFM, HQ), Winston Cole (AFTFM, Nigeria), and Loxly M Epie (AfDB), with the assistance of consultants Ulrich Johnson (Local Government financial management) and Prof. James Ato Ghartey (Public Audit and Parliamentary Oversight). The team also benefited from regular consultations with Hoon Soh, Country Economist (AFTP4). The team also wishes to acknowledge the support provided by Oumou G. Hainikoye (Program Assistant, AFTFM) for which the team is very grateful.

Mr. McDonald Benjamin (Country Program Coordinator) and Edward Olowo-Okere (Regional Manager for Financial Management, AFTFM) ensured that appropriate quality assurance arrangements were in place. The peer reviewers were Fily Sissoko (Senior Financial Management Specialist, LCSFM), Joseph Kizito (Senior Financial Management Specialist, LCSFM), Gert Van der Linde, (Lead Financial Management Specialist, AFTFM), and Ivor Beazly (Sr. Financial Management Specialist, OPCFM). Valuable comments were also received from Parminder Brarr (Lead Financial Management Specialist, AFTFM).

ACKNOWLEDGMENTS

The assessment team is grateful for the commitment demonstrated by the former Secretary of State DOSFEA, Honorable Moussa Bala Gaye during the exercise. The team also appreciates the contributions made by Mr. Mod Secka. Permanent Secretary, DOSFEA; Mr. Abdoulie Jallow, Director of Budgets; Mr. Gabriel Mendy, Director of National Treasury; Mr. Baboucarr Sankareh, Auditor General; Honorable Fatoumatta J. Ceesay, The Speaker, National Assembly and members of the Finance and Public Accounts Committee, as well as the Quality Assurance Manager; IFMIS Project Manager (Capacity Building and Economic Management Project); and others. Mr. Badara Joof, Officer-in-Charge, World Bank Liaison Office, provided the team with useful guidance in conducting the assessment. Also, the administrative support by Ms. Yassin Saine Njie (Program Assistant, Banjul Liaison Office) was highly appreciated.

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The 2009 Country Financial Accountability Assessment for The Gambia. Page v

Republic of The Gambia2009 Country Financial Accountability Assessment

EXECUTIVE SUMMARY

The Country Financial Accountability Assessment (CFAA) is a diagnostic tool used to describe a country’s public financial management (PFM) and accountability arrangements. The main objectives of a CFAA are to identify systemic weaknesses in the use of public funds and suggest ways of mitigating risks to the achievement of the country’s development objectives. Financial accountability is critical because it is a reflection of the responsibility for the financial decisions taken, their implications and results measured against agreed outcomes and expectation. Generally, the fundamental fiduciary expectation is that public funds are used effectively, economically, and efficiently for the purposes intended.

A CFAA considers the strengths of the financial accountability processes in both the entire public sector. It is an assessment and not an audit; its findings cannot therefore provide complete assurance on the status of financial accountability processes, procedures or systems. This report focuses specifically on institutional arrangements and structural strengths and weaknesses in processes, procedures, and systems in the public sector in The Gambia.

A CFAA is a "snapshot" at a particular point in time. This report acknowledges that in The Gambia, there are ongoing PFM reforms which are at different stages of implementation. The CFAA is not intended to supersede any of these reforms, but rather to highlight those issues that are more directly associated with fiduciary risk.

A CFAA would therefore provide evidence-based assessment of issues, their diagnosis, and suggested advice on their likely resolution and level of their fiduciary risk. Conducting a CFAA or its equivalent is generally a necessary prerequisite for preparing the World Bank Country Assistance Strategy. Many bilateral and multilateral development partners use these tools as a basis for their programs, particularly in areas related to public financial management.

The CFAA in the Gambia

This draft CFAA for The Gambia updates the 2003 CFAA and is intended to inform the proposed jointly funded development policy operation of the critical fiduciary risks that need to be addressed.1 This development policy operation is intended to provide support to the government in implementing the second Poverty Reduction Strategy Paper (PRSP) 2007-2011. The World Bank Board of Directors discussed and approved the PRSP II along with the Joint

1 Development policy operation (budget support) under the name of ‘Public Sector Reform and Growth Grant’ was approved by the World Bank’s Board in 2009.

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Staff Advisory Note in July 2007. Subsequently, the second Joint Assistance Strategy that was prepared together with AfDB in support of the PRSP II was presented to the World Bank’s Board of Executive Directors and endorsed in February 2008. The Joint Assistance Strategy II has taken into account the various PFM reform actions implemented following the 2003 CFAA recommendations. Continuing development partner support is envisaged. Future plans include an IDA disbursement of a single-tranche US$7 million operation in FY09, in which disbursements from AfDB and the European Commission are expected to follow within the subsequent 6 and 12 months, respectively.

Since the 2003 CFAA, the World Bank, in partnership with multilateral and bilateral development partners has established a Public Expenditure and Financial Accountability (PEFA) framework. The PEFA approach uses a set of 28 high-level indicators of country PFM performance structured into 3 broad categories (plus 3 indicators of development partner practices) and a standard PFM performance report based on the indicator analysis to provide an assessment of PFM performance. This report, however, is structured as a CFAA not a PEFA report; it follows a similar format to the 2003 CFAA. The PEFA indicators, as applied in Annex ‘A’, support the CFAA fiduciary risk-oriented assessment, consolidate the factual database, and allow transition to the PEFA framework in the future if desired. The analyses are based on budget and financial statements for 2005-20072 reviewed by the assessment team, which conducted the fieldwork in Banjul in March 2008.

These complementary analytical perspectives are summarized in the annexes. In particular, Annex A provides a summary of the current status of the PFM system against PEFA indicators and Annex B summarizes progress achieved to date in relation to the fiduciary risk benchmarks identified in the 2003 CFAA.

Progress since the 2003 CFAA and Key PFM Risks that Remain

The authorities have implemented many of the recommendations made in the 2003 CFAA and subsequent supporting studies. Though much remains to be done, elements of the PFM framework have been significantly improved and fiduciary risk lessened in important respects. In particular, the legal and regulatory framework has been strengthened by the enactment of the Government Budget Management and Accountability Act (GBMAA) and issuance of revised Financial Instructions (for the Implementation of the Budget Management and Accountability Act) in 2004. Timeliness of financial reporting has also been improved significantly; the introduction of an Integrated Financial Management Information System (IFMIS) has helped achieve more timely and comprehensive within-year reports and facilitated preparation of the annual financial statements.

Together, these changes have given more scope for an orderly, policy-oriented central government budget process and help set a solid basis for further improvement. There are however many remaining weaknesses, and progress in many important PFM areas has been less rapid than advocated in the 2003 CFAA. The internal control system remains inadequate, lacking capacity and systems to follow-up on known weaknesses in reconciliation and clearing of

2 These were the most complete financial statements available at the time of the assessment. Substantial work subsequently to update the financial data as indicated in the Government’s Self Assessed Progress Note in Annex ‘E’.

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suspense balances and other internal control flaws identified by audit. The internal audit function remains relatively weak, unsupported, and ineffective. While efforts have been made to clear the backlog of audit reports to be considered by the Finance and Public Accounts Committee (FPAC) of the National Assembly (accounts covering the period 1992-1999 have now been reviewed by FPAC), remedial action on these reports is neither timely nor effective; executive response to these issues has been largely absent.

In order to realize the benefit of the positive changes that have occurred and to reduce overall fiduciary risk, the Gambian authorities, together with development partners, will need to intensify and sustain efforts in strategic areas of PFM reform. Current gains must be consolidated and the remaining gaps in PFM accountability addressed. Overall systemic fiduciary risks will remain high unless these issues are tackled in a sustained manner. Key points from the individual PFM sections of the CFAA analysis are summarized below.

Government financial planning and budgeting. The main areas of concern in this component of the PFM system are (a) to establish an orderly and policy-oriented budget process, and (b) to ensure that budget execution is effectively monitored and remains in line with the fiscal policies in the original budget. These conditions should apply both to management of domestic and external resources. Good progress has been made, particularly in establishing a more orderly budget process, as advocated in the 2003 CFAA. The enactment of the GBMAA Act has strengthened the institutional and legislative framework. Significant improvements have also been made to the budget classification/chart of accounts that now bring the classification broadly into line with IMF-formulated standards of Government Finance Statistics (GFS), as well as allowing activities to be linked to objectives and outputs. This latter feature of the classification has provided a basis for implementation of a medium-term expenditure framework (MTEF) now being put in place, consistent with the requirements of the GBMAA Act. Considerably more work is required to develop a comprehensive MTEF, to align expenditure programs with PRSP priorities and to improve review and adjustment of the budget during implementation. Many of the tools to do so are now in place.

Accounting, internal control and financial reporting. The 2003 CFAA recorded unsatisfactory performance on most aspects of the accounting, reporting, and control system, although it noted that work was underway to strengthen the legislation and introduce an IFMIS. Significant progress is now being made to remedy many of the weaknesses noted in the 2003 CFAA, including improvement in bank reconciliation and timeliness of financial reports. Internal controls however remain weak; and capacity for internal audit is still almost non-existent. It is suggested that the authorities should maintain vigilance in the reconciliation of bank accounts to ensure the credibility of financial reports. Challenges with respect to internal audits were noted in the 2003 CFAA, but little appears to have been done to address them. Many of the potential benefits now being put in place through the IFMIS and other control system improvements will be lost unless timely action is taken in this area. A major and sustained effort to establish internal audit processes that meet international standards is strongly emphasized in echoing the 2003 CFAA recommendation.

Local government. Local government administration and the decentralization process face a multitude of challenges. Councils are unable to acquire the material resources required for service delivery (e.g., waste disposal management) in view of their low revenue base. Local

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government salary structure is in accordance with the Central Government’s integrated pay scale structure, which is relatively uncompetitive when compared to the compensation framework available in the private sector, not-for-profit organizations, as well as in some of the state-owned (public) enterprises and donor agencies. While significant steps have been taken to improve the legislative framework for a more decentralized system of government, the overall environment for financial accountability of local councils has changed little since the 2003 CFAA. Many steps are underway, but a sustained and long-term effort will be needed to establish a satisfactory level of performance and reduce fiduciary risks in this area. This current CFAA recommends a long-term program to address these issues, focusing first on establishing the local government commission to provide an institutional basis for local councils to meet their mandate under the Local Government Act, (LGA), 2002. However, in view of the weak capacity in the Local Government across the board, it is appreciated that the recommendations may have to take a much longer time to implement unless Technical Assistance is provided.

State-owned (public) enterprises. Little has changed in the overall environment of state-owned enterprise (referred to as public enterprises in The Gambia) reporting and governance arrangements since the 2003 CFAA. The risks of quasi-fiscal indebtedness remain high—and this may possibly have increased in the current global financial environment. The framework for financial accountability of public enterprises will need to be radically transformed to reduce fiduciary risk from this perspective. The legislative framework under which public enterprises are operating needs to be updated to take account of the changes and realities of present-day challenges. The current legislation (the Public Enterprise Act and the Companies Act) need to be updated and made mutually consistent with regard to the treatment of public enterprises. An overarching public enterprise governance framework would be a desirable tool for the government to consider. All of these reforms will in reality take considerable time to be fully realized owing to the prevailing weak capacity to undertake the reform agenda in the sector. Consequently, this CFAA recommends that a high-level council guide the long-term program with technical assistance support from development partners.

External audit. Notable progress has been made in addressing the backlog of audit reports that needed to be submitted to the FPAC of the National Assembly. This is an important step, but few other substantive issues regarding quality of audit reports and responsiveness of the Executive branch to audit recommendations of the 2003 CFAA have not been fully and adequately addressed. Fundamental underlying weaknesses remain: on one hand, there is a lack of sufficient capacity in the Auditor General’s Office to produce high-quality reports on time while, on the other, accountability and compliance of the Executive agencies of government to implement audit recommendations are quite weak and ineffective. One of the central recommendations of this CFAA is that a high-priority program be initiated at the earliest time possible to establish a stronger legislative framework for the Auditor General and provide resources and training to ensure the National Audit Office has adequate capacity. Such an initiative would be a keystone of future PFM reform—and would be closely linked to programs to build up the capacity of the National Assembly and its FPAC to help ensure prompt and effective follow-up of the Auditor General’s observations, which brings us to the following point.

Legislative scrutiny, public access to information, and ethical oversight. Relative to the 2003 CFAA, improvements in both FPAC discussions of the Auditor General’s report and in the quality of budget information are having impact on the quality of National Assembly oversight

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and giving the public better access to PFM information. These steps are encouraging and demonstrate what can be achieved with well-directed efforts. The magnitude of the remaining task is very large however, and addressing it will require a sustained commitment from the Government and development partners. More work has yet to be done to provide the full range of quality information needed to inform the public on PFM performance; and many of the fundamental issues raised in the 2003 CFAA regarding FPAC consideration of the Auditor General’s reports are a continuing concern. A sustained program of support is recommended to establish a sound legal and institutional framework for the National Assembly and its key PFM-related committees and to promote better access to budget information by the public.

Applying PEFA Framework in this CFAA

This CFAA attempts to act as a bridging platform for transiting to the PEFA Financial Management Performance Measurement Framework by applying relevant performance indicators (PI) as appropriate. The scores for these performance indicators are indicated and discussed in Annex A. However, some of the indicators could not be scored because of either lack of or limited access to sufficient data and information for analysis. In particular, the following performance indicators were not scored: PI-4, Stock and Monitoring of Expenditure Payment Arrears; PI-15, Effectiveness in Collection of Tax Payments; PI-19, Competition, Value for Money and Controls in Procurement; and D1-3, Donor Practices related Indicators. The Government has just recently created a donor aid coordination unit in the Department of State for Finance and Economic Affairs (DOSFEA).3

Table 1 gives a summary of proposed activities (more fully discussed in chapter 8) for inclusion in the action plan in relation to strategic priorities and desirable timeframe. These activities have been drawn from the assessments and recommendations given in the PFM thematic sections. The bolded activities (in left column of Table 1) mark the critically important areas that should be given priority. The Government of The Gambia and development partners supporting the PFM reforms should review and agree upon this draft action plan. Full recognition has been taken into account of the progress and achievements already accomplished by the Government as well as those at an advance stage of completion since the CFAA fieldwork was undertaken. In addition, DOSFEA has documented its own self assessed progress made in some of key reforms which is presented in Annex E of this report.

3 DOSFEA, which recently changed its name to Ministry of Finance (MOF), will be used throughout this report.

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Table 1. Draft Action Plan and Strategic Priorities

Activity Description Timeframe

National Coordination and Oversight

1. Establish PFM Reform Oversight Steering Committee

Set up PFM-ROSC under chairmanship of DOSFEA Permanent Secretary and establish role, procedures, and agenda.

Short term

2. Establish thematic subcommittees

As part of activity 1, set up subcommittees to plan, monitor, review, and report on performance in each area.

Short term

3. Establish a PFM Monitoring and Evaluation Unit

Establish a technical monitoring and evaluation unit to prepare a framework for tracking and evaluating performance in compliance with agreed objectives and outcome targets.

Short term

Addressing Critical Institutional Weaknesses

4. Enact a National Audit Act

Develop a stand-alone National Audit Act, incorporating modern audit principles and strengthening independence and authority of the Auditor General to replace the outdated 1964 legislation.

Medium term

5. Build capacity in the National Audit Office

Develop comprehensive capacity-building and training programs for audit staff. This could include specific education and training for technician and terminal professional accounting qualifications, training on audit standards and practices, risk assessment techniques, and computer-assisted techniques. It could also include twinning arrangements and exchange programs.

Medium to long term

6. Establish an effective internal audit capacity in Central Government

This activity should include (a) a detailed functional review of the organizational structure of DOSFEA, the accounting functions of the line ministries, and current business processes; (b) strategy development for internal audit function throughout the Central Government; and (iii) develop guidelines for internal audit that will apply risk-based methods using the COSO framework and meeting the International Standards on Auditing (ISA) promulgated by the International Federation of Accountants (IFAC)

Earliest possible time start—progressive to long term

7. Develop the National Assembly Service to strengthen parliamentary review

Establish the National Assembly Service by an act of Parliament to provide support services to facilitate the work of the National Assembly.

Build capacity to support the National Assembly and the National Assembly Service to enhance their effectiveness and efficiency. This would include provision of study tours and logistical support.

Earliest possible time start —progressive to long term

8. Enhance budget transparency and public

A program that would (a) enhance technical standards of budget presentation in line with international standards; (b) open the sittings of the National Assembly and FPAC deliberations and

Short term to long term

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Activity Description Timeframe

access to budget and accounts information

reports to the public; and (c) campaign to raise awareness of the public’s right to PFM information, including: Publishing budget on Government websites and specifying

that monthly or quarterly in-year outturn reports should be published in the Government Gazette;

Annual accounts made public once presented in the National Assembly: placed in public libraries, colleges, and Government websites.

Consolidation of Successful Reform

9. Strengthening the budget formulation and thereafter consider the merits for establishing and adopting an effective MTEF

DOSFEA to focus on strengthening the budget formulation process by addressing existing weaknesses before moving forward to applying MTEF in the process. A comprehensive MTEF development program should include (a) an aggressive PFM capacity-building program both within DOSFEA and line ministries, departments, and agencies to train staff in program budgeting techniques and development of programs linked to national PRSP objectives; (b) development of the IFMIS platform to support program management; and (c) development of budget presentation to provide program performance information to the National Assembly and the public.

Medium to long term

10. Further improve reconciliation by clearing below-the-line account balances

Eliminate miscellaneous postings by proper classification of transactions. Clear outstanding balances on suspense and below-the-line accounts.

Latest feedback indicated this has been done

11. Improve reporting on externally funded programs

Review reporting on externally funded programs with donors and establish systemic improvements and mechanisms and sanctions to improve reporting performance. The newly created Donor Coordination Unit of DOSFEA will play a significant role in this issue

Earliest possible time

Long-term Reforms

12. Building a base for local government effectiveness and accountability

Establish a long-term program focused on (a) establishing the local government commission; (b) a scheme of service for local government; (c) a training and capacity-building program for local council financial management staff; (d) personnel audit of local councils; (e) resolution of the backlog of annual reports by councils; (f) drafting of a financial manual as required by the LGFA Act should be put in place; and (g) design and pilot implementation of an integrated accounting system with strong accounting controls.

Immediate start— long term

13. Public enterprise reform and governance program

A long-term program of reform to focus on the following critical issues: (a) monitoring and reporting on public enterprise financial positions, with particular emphasis on payment arrears or contingent liabilities that may give rise to future fiscal deficit increases; (b) high-level review of the legislative, institutional, and governance framework in which public enterprises operate; (c) drafting of relevant legislation and regulations, and governance frameworks; and (d) a capacity-building program for financial management in public enterprises.

Immediate start—long term

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INTRODUCTION

The Gambia is the smallest country on the African continental mainland, covering an area of just over 11,290 square kilometers. It is geographically surrounded by Senegal except for the 80 kilometer coastal line interrupted by the mouth of the River Gambia, where it empties into the Atlantic Ocean on the west coast of Africa. The Gambia acquired independence from the United Kingdom in 1965. It suffered severe economic crisis in the 1980s leading to a coup d’état in July 1994 that interrupted democratic processes. It was not until 1997 that the country resumed civil rule following an open national election. Since then, the ruling party has won a series of national elections. In January 2007, a new government under the ruling party (Alliance for Patriotic Reorientation and Construction Party of President of The Gambia, His Excellency Sheikh Professor Alhaji Dr. Yahya A. .J. J. Jammeh) was elected, ushering a renewed hope for good governance and the continuation of a working democracy.

Economic Performance in The Gambia

In 2003, The Gambia was ranked 160 out of 173 countries in the UN Human Development Index but improved to 155 out of 177 in the 2007 ranking. The Gambia has an estimated population of 1.6 million, with an average per capita GDP of US$320 (Atlas method, 2007). Given its small size, The Gambia is extremely vulnerable to external shocks. The country’s economy is relatively undiversified and limited by a small internal market. Liberal trade policies and an efficient port infrastructure have allowed the country to act as a regional re-export hub. Tourism is a key driver of the economy and the country’s most significant foreign exchange earner. Agriculture accounts for approximately one-third of GDP and more than 75 percent of employment in crops and livestock farming. Groundnut farming is the most important agricultural engagement in the country. Groundnuts account for approximately 60 percent of domestic exports, and 55 percent of rural households engage in groundnut production. However, groundnut farmers are among the poorest in the country, and the performance of the sector has been poor in recent years. There are small-scale manufacturing activity features in processing of peanuts, fish, and hides. Re-export trade normally constitutes a major segment of economic activity. Gambia has benefited substantially from a rebound in tourism in the last decade. However, the ongoing financial crisis and economic meltdown being experienced in the West and the European financial capitals is expected to have a serious impact by scaling down the number of tourists visiting The Gambia in the winter season. In turn, job loss for The Gambians in the hospitality industry is probably going to be the most significant shock.

The country’s economic performance in recent years has been relatively strong but growth is currently slowing down due to the global recession. The annual real GDP growth rate has averaged 6.2 percent in the previous 5 years, compared to the estimated annual population growth rate of approximately 2.8 percent. However, growth is expected to slow down to 4.6 percent in 2009 due to the impact of the global economic slowdown. Further downside risks remain given the unstable global climate. The country also remains quite vulnerable to exogenous shocks, including low rainfall and surface water shed on agriculture, and surging import prices. The country’s relatively low levels of integration with the international markets could protect it to a limited degree from the global economic slowdown. The tourism and construction sectors will be adversely impacted by expected drop in tourists, remittances, and

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foreign direct investment, but the performance of the agricultural sector is likely to be more influenced by domestic crop production as opposed to external factors.

The average inflation rate declined from a high of 17.0 percent in 2003 to 2.1 percent in 2006. Fiscal discipline, characterized by reduced government domestic borrowing, provided the basis for a significant slowdown of broad money growth. However, surging costs of consumer goods such as food, energy, and oil imports pushed the annual rate of inflation to 5.0 percent in 2007 and 5.1 in 2008. Inflationary pressures were contained by a tight monetary policy and the significant appreciation of the local currency due to strong inflow of remittances and reduced debt service payments.

In general, the macroeconomic impact of international price increases has been relatively modest, although the impact on the poor could have been significant. The Government responded to the food price increases by reducing the sales tax on rice imports from 15 percent to 5 percent in July 2007 and eliminating it altogether in May 2008.

Governance in The Gambia

The political system is characterized by a relatively weak opposition; and the media is equally weak, with limited public access to information. International observers, including Reporters without Borders, the International Bar Association, and Amnesty International, have cited the country’s shortcomings with freedom of the press and independence of the judiciary. Strengthened governance could enhance the transparency and accountability of the public sector and reduce the risk of policy slippages through greater country ownership.

The Government of The Gambia has been working with a range of development partners. In addition to IDA, the other large development partners are the African Development Bank (AfDB), European Union; Department for International Development of the United Kingdom (DfID), the IMF, and multiple agencies of the United Nations. The Gambia has developed a Poverty Reduction Strategy Paper (PRSP) for 2007-2011, which outlines a country strategy for pro-poor inclusive growth. The PRSP is organized into 5 pillars:

Macroeconomic stability and public sector reform; Promotion of pro-poor growth and employment through private sector development; Improved basic social services; Decentralization and strengthened local governance; and Multisectoral programs on gender, HIV/AIDS, environment, nutrition, and population.

The PRSP initiatives were chosen based on their contribution toward the achievement of the Millennium Development Goals. The PRSP was developed through a participatory and consultative process. Stakeholder consultative workshops and focus group discussions were held with representatives of the public and private sectors and civil society. Consultations reached into local communities. Participatory Poverty Assessments, Community Scorecards, and “budget games” were incorporated into the preparatory process. Nongovernmental organizations directly participated in the drafting of the PRSP document.

The IDA has been assisting The Gambia to establish a sound macroeconomic and sectoral environment that is conducive to economic growth, and to develop its economic and social


infrastructure and human resources. The IDA-financed portfolio is presently comprised of 5 operations adding up to US$55.9 million equivalent. In aggregate, IDA has approved a total of 31 operations for The Gambia since the country became a member of the World Bank Group. The current active portfolio is comprised of (a) Capacity Building for Economic Management (closed December 2008); (b) Gateway Project; (c) Third Education Project, Phase 2; (d) Community-Driven Development; and (e) The Gambia’s portion of a regional operation called Africa Emergency Locust Project. There are also 3 trust fund-supported operations of which 2 are associated with IDA-funded projects while the other is a stand-alone operation named Transformation of the Central Statistics Department into a Bureau of Statistics for The Gambia.

Public Financial Management Reform

Since the 2003 Country Financial Accountability Assessment (CFAA), significant gains in several areas have been noted. Foreign direct investments have averaged 12.9 percent of GDP. There has been notable improvement in domestic revenue averaged at 21 percent of GDP since 2004. Fiscal discipline has been improved, and this has brought domestic borrowing under control from a high of 38 percent of GDP in 2001 to about 28 percent in 2007. Sustained fiscal and monetary discipline has been complemented by significant improvements in public financial management. The PFM reforms have helped to enhance accountability and transparency in the use and management of public resources. This has resulted in shrinking the opportunities for official corruption and abuse of public resources in the public sector. These reforms, for example, have resulted in the establishment of the legislative framework that governs public expenditures and revenue management as well as public procurement management. This led to the creation of the Gambia Public Procurement Authority. Perhaps the most notable of the PFM reforms is the design and installation of an Integrated Financial Management Information System (IFMIS). The system is now operational in the Treasury, Department of State for Finance and Economic Affairs (DOSFEA), Department of Education, Personnel Management Office, National Audit Office, and Gambia Revenue Authority. This has had significant impact on the backlog of the government financial statements. Other noteworthy reforms that contributed in improving the public financial management are (a) strengthening the independence and supervision and control function of the Central Bank of The Gambia; and (b) improved debt management at both DOSFEA and the Central Bank.

The CFAA report continues in the following sections with a detailed analysis of the various components of the PFM system, reviewing progress since the 2003 CFAA and assessing current status. This CFAA has also attempted to apply the Public Expenditure and Financial Accountability (PEFA) Public Financial Management Performance Framework where appropriate and, by doing so, help to provide a bridging platform for transiting to full application of the PEFA framework in future diagnostic studies. The PEFA scores for the applicable Performance Indicators (PIs) are summarized in Annex A along with an accompanying analysis.


SECTION 1. FINANCIAL PLANNING AND BUDGET PREPARATION

The key conditions of the budget process emphasized by the CFAA are that (a) the rules governing the planning and resource allocation are clear and are implemented effectively; (b) the process is comprehensive and links allocations clearly and reliably to government policies; and (c) budget execution is effectively monitored and remains in line with the fiscal policies in the original budget. These conditions should apply to management of both domestic and external resources. Very similar requirements are specified under the PEFA framework.

Substantial improvement has taken place in the institutional and legislative framework for these processes since the 2003 CFAA as a result of the enactment of the Government Budget Management and Accountability (GBMAA) Act, 2004 and updating of Financial Instructions that support the implementation of the Act. Combined with the introduction of a revised and modernized chart of accounts, these changes are helping to establish a more orderly budget process. Detailed description of the changes and the CFAA assessment is discussed in this section.

Description of Performance

1.1. The legislative framework

The institutional and legislative framework in The Gambia now sets out norms that are broadly up to par with the international practice. The Constitution (1997) of The Gambia defines the principles and overall legal and institutional framework for the management of public resources. Section 102(b) empowers the National Assembly to review and approve proposals to raise revenue by the government. It also stipulates that all revenues mobilized for the government must be paid into the Consolidated Fund. The DOSFEA is mandated by the Constitution and the BMAA Act to prepare and present the Annual Government Budget to National Assembly, which in turn issues an Appropriation Act, authorizing the withdrawal of funds from the Consolidated Fund. The Secretary of State for Finance and Economic Affairs has the administrative responsibility to authorize withdrawal of public funds from the Consolidated Funds in accordance with the limits set out in the Appropriation Act. The Directorate of National Treasury is responsible for the preparation of the national accounts while the Auditor General has the constitutional mandate and responsibility of auditing the public accounts.

The BMAA Act (article 31) allows that where there are substantial changes in the economic and social conditions requiring larger expenditures than the original and revised budgets allow, the Secretary of DOSFEA shall submit a supplementary budget to the National Assembly, detailing the additional expenditures and sources of their financing. The revised and supplementary budgets shall be presented and documented in the same manner and format as the original Government Budget.

1.2. Budget preparation

As part of the implementation of the 2003 CFAA recommendation, the formulation of the budget has improved with the integration of the recurrent and development budget that was achieved


under the 2006 Budget. In addition, allocation resources have to some extent been based on broad, DOSFEA-issued policy guidelines. However, sector-specific policies do not seem to be reflected in the budgetary expenditures incurred, implying there is disconnect with the policy. The poverty programs developed by sectors to implement the PRSP initiatives are costed and included in their budget estimate submissions to the Directorate of National Treasury. However, these have not yet been included and adopted in overall government budget estimates in view of their variable quality. For the time being, the budget would continue to appropriate funds for a single year on basis of the size of the overall resource pot and broad policy framework. As capacity in sector departments improves over time, it is expected that the quality of future estimates will improve to a point that will allow these projections to be included to provide information on baseline costs of government programs in the medium term.

The most recent public expenditure reviews in education, health, agriculture and works, construction, and infrastructure sectors have shown weakness in the formulation of budgets implied by the weak linkages between expenditures and policies and unrealistic costing. This is an important aspect for future capacity development efforts to focus on before too much attention can be directed to the establishment of a MTEF in the budget management system.

The Secretary for DOSFEA draws up a detailed budget timetable, indicating the program and activities of the budget exercise in its entirety, 10 months (due in February) before the end of the financial year. The timetable is circulated to all Secretaries of State for various sector departments (in line ministries) for their information and guidance requesting compliance by March 31 each year. By the end of April each year, the Secretary for DOSFEA is required by law to submit a Budget Framework Paper to the Office of the President outlining the draft preliminary constraints (aggregate ceiling) and the outlook for the next fiscal period along with an analysis of the current year’s budget performance for review.

The main budget preparation process begins each June when the Secretary of DOSFEA issues the call circular to all sector departments and agencies. The call circular outlines the Government’s macro-economic policy statement and the economic forecast for the next financial year. It is against this backdrop that the budget ceilings are allocated to sector-specific departments for both recurrent and development expenditures within which to limit their annual budget estimates and expenditure proposals. All the departments are required to submit their budget proposal to DOSFEA. Budget meetings are scheduled for bilateral consultations and negotiations in defense of the proposals. The National Planning Commission plays a critical role in reviewing the budget during the bilateral discussions. Sectors and departments also defend their human resources budget proposals at the Personnel Management Office for approval of all newly created staff positions. However, these discussions do not appear to persuade DOSFEA to vary the set ceilings issued to sector departments. Subsequently, DOSFEA consolidates the proposals and develops the final draft budget for the following financial year. The Secretary of DOSFEA finally presents the draft final annual budget to the Cabinet for approval and subsequently to the National Assembly for approval at least 30 days before the end of the financial year. The entire budget process cycle, illustrated in Figure 1, shows the clockwise sequence of events and the approximate timeframe in the year when they take place.


Figure 1. The Gambia: Budget Preparation Process Calendar

Clear guidance is given to the departments on how to prepare the estimates. The sector departments in the IFMIS pilot use the Active Planner module to enter their estimates, while those that are not online as yet are provided with templates that are in turn entered at the data center in the budget office. Estimates for all departments are then consolidated to form the overall budget estimates. All Permanent Secretaries and Heads of departments are instructed to adhere to the budget preparation guidelines and observe the time by when their submissions are due.

The GBMAA Act, 2004, article 22 (1) requires the Secretary of State to observe section 152 of the Constitution (i.e., to prepare and lay before the National Assembly the Appropriation Bill documents, at least 30 days before the end of the financial year). The law is explicit in the manner and time of the presentation. The National Assembly is required to deliberate on the draft estimates within 14 days of their receipt. Subsequent to the budget approval by the National Assembly, an Appropriation Bill is laid before the Assembly and given due consideration before it is passed within 7 days of its presentation. For the past 3 years, this requirement has been met with the budget passed by the National Assembly before the start of the new financial year.

1.3. Multi-year and strategic budget perspective

The Government has completed its second Strategy for Poverty Alleviation and plans to implement it through a sectorwide approach (SWAp) and subsequently through the MTEF with strong focus on attaining the targets of the Millennium Development Goals, subject to strengthening its human resource and institutional capacity in the departments. As noted in the PRSP, detailed sector plans will need to be developed and consistency with the PRSP must be


ensured. However, to achieve this level of reform in the budget process, capacity must first be developed in DOSFEA on macro-economic analysis and forecasting. This also requires accurate statistics for the various fiscal and monetary variables. Key sector data will need to be collected and analyzed. All these actions will require time, commitment, and the support of the development partners.

The Gambia Bureau of Statistics has developed a strategic plan for 2008-2011 in which pillar two aims at “improving economic statistics for a better monitoring of program implementation towards a sustainable economic growth”. Within this pillar the objective of producing key economic indicators as well as other statistics through surveys will contribute to the preparation of Medium-Term Sector Strategies. This work will ultimately contribute to the development of the Medium-Term Expenditure Framework.

Since the introduction of IFMIS in DOSFEA, there has been gradual improvement in the management of public resources, greater transparency, and improved Government accountability. This has also resulted in timely financial reporting and imposition of controls to ensure that expenditure is within budget and the available cash. However, it has proved much more difficult to establish a strategic and policy-based budget formulation process from the traditional incremental process that builds on past patterns of spending rather than analysis of national policies and priorities. Despite there being the second PRSP (2008-2011) and a series of Public Expenditure Reviews that were completed in the last 5 years, there has been relatively little use for this information in influencing resource allocation and reflecting sectoral goals and policies that are consistent with the PRSP.

More effort is needed to embed PFM review and output information systematically in the budget process. The introduction of a GFS-based chart of accounts4 with the 2006 budget estimates has been a significant step toward the goal of integrating the recurrent and development budgets. The chart of accounts now permits allocations and analyses to be examined on a program basis and thus be related to outputs, outcomes, and objectives. The classification is made up of 30 alphanumeric characters divided into 4 segments; but the segment for MTEF, which captures outputs, outcomes, and objectives, is not yet being used.

Although the Government has also initiated the adoption of an MTEF from 2006, many issues remain to be resolved. For an MTEF to materialize fully, it will be necessary to have (a) a comprehensive macroeconomic framework, (b) clear sector goals that are embraced in the PRSP (c) realistic estimate of available resources for the medium term, and (d) an effective and efficient budget execution arrangement. Given this scenario, sectoral managers have little option but to continue to prepare incremental annual estimates. The Government however remains determined to adopt MTEF gradually over time when adequate capacity is developed. Continuing this commitment will be the basis for success in establishing clear medium-term linkages between PRSP priority outcomes and public expenditures programs.

4 This is based largely on the IMF GFS Manual (1986); the current GFS Manual (2001) has become the recognized international standard.


1.4. Budget comprehensiveness and transparency

Section 22 of the Government Budget Management and Accountability Act, 2004, expounds the provision of Section 152 of the Constitution, 1997, which require the Secretary for DOSFEA to prepare and lay before the National Assembly the Appropriation Bill documents at least 30 days before the end of the financial year. This should include the Government revenues and other receipts that include tax revenues such as tax on personal income, corporate tax that is charged on profits earned by the private companies, domestic taxes on goods and services (sales tax), tax on accrued international trade gains, etc. Also included are non-tax revenues that are usually levied on services rendered such as user charges, court fines, licenses, and proceeds from disposal of public assets. The Appropriation Bill also includes revenues arising from domestic and external grants, loans, and any other receipts paid to the Government.

Expected inflows from donors for development expenditure are captured in the budget framework as shown and discussed in Section 6 on public access to information. Procedures are not yet in place, however, to record actual expenditure in executing the projects. Donor-financed project bank accounts are held in commercial banks and outside the control of the Directorate of National Treasury. Steps are being taken to open ledgers for donor-assisted project bank accounts in IFMIS so that returns from the executing agencies can be captured and reported in IFMIS. Discussions are ongoing between the Government and the development partners with a view to upgrade and harmonize reporting of actual spending with the Government’s IFMIS through monthly and annual reports.

The budget is the main tool used to translate Government policy into practice. Therefore, it is important for the Executive to be able to execute the budget as passed by the Legislature and advise the Legislature promptly if economic and fiscal conditions change. A schedule of all changes to the budget is disclosed in the annual financial statements.

The budget is revised during the year but the aggregate does not change. A schedule of all the virements during the year is reported in the financial statements, and this provides an opportunity for Legislature to seek explanation for the virements. The changes in the composition of the budget across departments and economic classification means that the policy intent of the budget is not followed stringently during execution. For the past 3 years, deviation from approved budgets was more than 5 percent. These details are shown in Annex C. The credibility of the budget is undermined as a result of the deviations. This indicates weaknesses in budget planning, costing of activities, and procedures in expenditure control. Underlying these aggregate variations are substantial variations at budget head level. A detailed analysis of compositional variance between budget and actual is given in Performance Indicators 1 and 2 summarized in Annex A. The budget remains an unreliable indicator of out-turns, though (partly as a result of Public Expenditure Review efforts) aggregate deviations in expenditure have reduced in recent years.

1.5. Assessment and Recommendations

Good progress has been made in establishing an orderly financial planning and budget process, as advocated in the 2003 CFAA. The enactment of the GBMAA Act has strengthened the institutional and legislative framework. Significant improvements have also been made to the


budget classification/chart of accounts, bringing the classification broadly into line with IMF GFS standards, as well as allowing activities to be linked to objectives and outputs. This latter feature of the classification has provided a basis for the implementation of a medium-term expenditure framework being put in place, consistently with the requirements of the GBMAA Act. As a result of these changes, there is an integrated recurrent and development budget, even though linkages between policies and budgets remain weak especially in sector departments.

The improvements described in Section 1 have significantly enhanced the potential to link budget allocations effectively to policies over the medium term. However, additional work is required to develop a comprehensive medium-term framework to align expenditure programs with PRSP priorities and to improve review and adjustment of the budget during implementation. It is worthwhile to note that many of the tools to do this are now in place. While the revised classification and IFMIS provide valuable mechanisms that can help link expenditure programs to national PRSP objectives, staff training, a viable career path, and a continuing political and public interest in the process are essential for long-term success.

Recommendations:. The Government with the support of the development partners should support efforts to strengthen budget formulation and thereafter support a comprehensive MTEF development program that includes (a) a capacity-building program for both DOSFEA and sector departments with a view to train staff in program budgeting techniques and development of programs linked to national PRSP objectives; (b) further development of the IFMIS platform to support program management; and (c) improvement of budget presentation to provide program performance information to the National Assembly and the public.


SECTION 2. ACCOUNTING, FINANCIAL REPORTING, INTERNAL CONTROL, AND INTERNAL AUDIT

Both the PEFA and the CFAA frameworks place a strong emphasis on the establishment of a sound, effective, and comprehensive accounting system. Increasingly, such systems require a robust IFMIS as the basis for control, accounting, reporting, and analysis. The system should embody effective internal controls and timely, comprehensive, and reliable financial and fiscal reports both within-year and at year-end. An effective system of internal audit is an essential PFM component to provide financial managers with continuing oversight of the integrity of all aspects of the financial management system and beyond.

The 2003 CFAA recorded unsatisfactory performance on most aspects of the accounting, reporting, and control system, although it noted that work was underway to strengthen the legislation and introduce an IFMIS. Significant progress is now being made to remedy many of the weaknesses noted in the 2003 CFAA, including improvement in bank reconciliation and timeliness of financial reports. Internal controls however remain relatively weak, and capacity for internal audit is still almost non-existent. Details on progress and performance status in each area of the accounting, reporting, and control system is given in this section.

Description of Performance

2.1. Accounting system and IFMIS

Section 7(2) of the GBMAA Act enjoins the Head of the Directorate of National Treasury to perform their functions under the supervision of the Permanent Secretary in accordance with the Financial Instructions for the Implementation of the GBMAA Act. These Financial Instructions, which were issued in 2004, detail the processes and procedures for implementing, managing and accounting for government budget, and cash and bank account. It also details the duties and responsibilities of the Directorate of National Treasury, Vote Controllers, and other public officers. Regulation 59 enjoins the National Treasury with the approval of the Secretary of State and in consultation with the Auditor General to prepare an Accounting Procedures Manual from which departmental accounting instructions shall be derived.

Accounting policies are explicitly stated in the Annual Financial Statements of the Government of The Gambia. These policies state the accounting basis — cash basis as defined by International Public Sector Accounting Standards (IPSAS) — and principles of recognition of revenue, expenditure, and fixed assets. Further clarification in the policies in relationship to international standards, such as IPSAS and GFS 2001, will be required over time.

The Gambia, in line with most countries, has begun implementing a comprehensive IFMIS. The EPICOR5 software-based platform was initiated in January 2007 and is being piloted in the following departments and agencies:

5 EPICOR is off-the-shelf software that was configured to meet requirements of The Gambia and implemented as a turnkey contract, including with training and support. Upgrades are provided as part of the annual maintenance and support licenses.


Department of State for Finance and Economic Affairs, Directorate of National Treasury,

Department of Education,

Personnel Management Office,

National Audit Office,

Gambia Revenue Authority.

The Directorate of National Treasury maintains 4 types of bank accounts in the Gambia Central Bank. The Accounting Unit in the National Treasury is responsible for bank reconciliation. This Unit has 8 staff supervised by a principal accountant. The responsibility of this principal accountant to authorize checks before printing and also be responsible for the supervision and review of bank reconciliation reports goes against the key internal control principle of segregation of duties. However, the Directorate of National Treasury has been reorganized, and units are now headed by deputy directors and supported by principal or senior accountants in charge of various sections. The reconciliation and payment processing responsibilities have been separated from payments now handled by the Treasury Unit of the Directorate of National Treasury.

The Gambia Central Bank provides details of all transactions going through the government bank accounts on a daily basis in electronic format to the Directorate of National Treasury. The transactions are imported into the IFMIS for automated bank reconciliation. The automated system has greatly improved the timeliness and accuracy of bank reconciliation. [Note: The EPICOR software system had a technical problem that caused the bank reconciliation reports that the CFAA team reviewed not to balance. The Government has issued the certificate of final acceptance of the phase-1 IFMIS implementation indicating that the technical problems have now been resolved.]

Travel advances and operational imprest when issued should be accounted for before a subsequent one can be authorized. The accounting system has been configured so that a request for new advance or imprest on a budget line that has an outstanding balance cannot be processed.

Staff interest free loans based on a single month’s basic salary are given as an advance on salary to be repaid typically over a period of six months. A ledger tracks payment directly through the payroll system inputs, with reports showing outstanding loans for each employee and in total. An end date is stipulated that automatically stops repayment when the loan is fully recovered.

Significant amounts of transactions are recorded below the line (suspense account). This undermines the completeness of financial reports especially when they are not fully investigated and cleared when compiling the annual financial statements. In principle, all transactions should be identified either as revenue, expenditure, or financing to allow a clear picture of the overall fiscal position.


Although a number of significant systemic improvements have been put in place, further work is required to ensure that the system functionality is fully utilized. Through sustained effort by the authorities, the IFMIS implementation achieved final acceptance on February 1, 2009, and all outstanding functionalities, deliverables, and incidents had been delivered and resolved. The challenges, good practice, and lessons learned documented in the Phase-1 IFMIS post-implementation review should be used in rolling out the system and shared with other countries that are considering implementation of IFMIS.

2.2. Financial reporting

The Directorate of National Treasury operates a centralized payment system and is responsible for the production of consolidated annual accounts. Departments are required to submit returns for transactions on retained departmental revenues for consolidation by the National Treasury. The statutory deadlines are March 31 and June 30 of each year for the preparation and audit of government accounts for a financial year ending every December 31. Sub-section 41 (3) of the GBMAA Act enjoins DOSFEA, following the reconciliation of its own accounts with transactions of the Treasury main account, to consolidate and submit to the Auditor General the annual statement of government accounts not later than 3 months after the financial year-end. With IFMIS in place, the Directorate of National Treasury has been in a better position to improve on the timeliness of completing the annual accounts for audit. The DfID is providing technical support for the review of the controls and reporting capabilities of IFMIS to assess how much reliance can be placed on the IFMIS reports.

With the assistance and intervention of key development partners, notably the World Bank and DfID, in providing expatriate technical support to both the Directorate of National Treasury and the National Audit Office, the Government has prepared Annual Statements of Public Accounts covering the period 1992 to 2008 (at time of this CFAA). The accounts covering the period 1992 to 1999 have been prepared and audited and have also been subjected to scrutiny and review by the Finance and Public Accounts Committee (FPAC).

Accounts for the periods 2000-2004 have also been prepared and audited. The draft audit report, which was issued with a disclaimer opinion by the Auditor General because most of the shortcomings in the 1992-1999 accounts had not been remedied, was submitted to the Treasury in January 2008 for review and comments. The 2000-2004 audit reports were submitted to the National Assembly in January 2009.

The 2005 and 2006 accounts were also prepared and submitted to the Auditor General in August and September 2007, respectively. The 2007 accounts were independently prepared by the Directorate of National Treasury and were submitted to the National Audit Office on August 29, 2008 (i.e., 8 months after the year-end, which is a great achievement). The 2008 account was submitted within the statutory deadline on March 27, 2009. Government completely eliminated the backlog of accounts preparation.

The Government does not have a national accounting reporting standard. The GBMAA Act, 2004 (42), requires certain information to be disclosed in the financial statements. However, most of the required information is not disclosed. The annual financial statements for FY2005 and FY2006 basically show balance sheet for financial assets and a table of revenue and


financing statements supported by detailed schedules for departmental expense items for the approved and revised budget, expenses, and variances. With the introduction of IFMIS, significant improvements in the format of budget performance reports and annual financial statements were made and designed in the system. The 2007 annual financial statements follow the format of IPSAS 24, Presentation of Budget Information in Financial Statements. The accuracy and timeliness of the annual financial statements has also improved as a result of adopting a practice of preparing daily bank reconciliations.

Unreported extra-budgetary expenditure is relatively standard in public finance legislation to allow spending that is authorized outside the annual Appropriation Act. It is important however that all such expenditures or receipts be shown in the budget estimates and recorded in the annual accounts and monthly budget reports. The GBMAA Act, 8(2) provides the following:

Notwithstanding the provisions of subsection 8(1) (which establishes the principle of a single consolidated fund), an Act of the National Assembly may provide: (a) for the payment of particular revenue or other money into some other fund, which for the purpose of this Act is called extra-budgetary fund, established for a specific purpose; and (b) for the retention of revenue or other money by the budget agency that received it for the purpose of defraying expenses of that budget agency, which for the purpose of this Act is called departmental self-raised revenue.

Problems with recording and reporting such transactions commonly occur with respect to special accounts set up to handle development partner funds. Vote Controllers that are authorized to operate special bank accounts are required by GBMAA Act (40) to submit statements of revenue and expenditure to the Directorate of National Treasury within 5 days of the end of each month. However, this is not done by most of the departments; lack of reports makes it very difficult to ascertain the value of such unreported transactions.

The budget estimates provide details of inflows expected from the major multilaterals and some bilateral by economic classification. For FY2008, The Gambia Government is expected to receive GMD 1,444,520 for development projects in the form of grants and loans to support a total budget of GMD 5,873,114. This shows that 25 percent of the budget is donor funded, increasing the importance that the budget be disclosed in financial statements under legislative scrutiny.

2.3. Internal controls and effectiveness of internal audit

There are two main types of voucher processing for non-salary expenditure; the IFMIS pilot sites and the non-online sites. Segregation of duties and authorization controls are in place as explained in PI-20 (Annex A). In the absence of internal audit reports and surveys to track the rejection rate of payment vouchers for noncompliance with internal controls, it is difficult to ascertain if the controls are applied as intended.

The Internal Audit Unit has 5 staff members who mainly carry out audit/inspection of banking of revenue collections. Their internal audit work is not focused on system risk issues in the operations. The DOSFEA can apply the GBMAA Act section 4 2(a) and (b) to prescribe


appropriate standards for internal auditing by adopting the International Standards for the Professional Practice of Internal Auditing.

As noted in the 2003 CFAA, although the Internal Audit Unit reports directly to the Permanent Secretary of DOSFEA, all staff in the unit are seconded from the National Audit Office. Seconding of staff is based on the powers conferred by GBMAA Act, Article 160 (1) to the Auditor General to undertake pre-audit. There is no formal scheme of training in internal audit standards and practice. Often government staffs who receive training to tend leave the civil service for better prospects elsewhere. To exacerbate the matter, the sector departments and agencies do not have audit committees to direct and oversee an internal audit. The absence of an effective public sector internal audit function weakens the control framework and poses a high fiduciary risk to the use and accountability of public funds.

The Internal Audit Unit should be restructured in the short to medium term and change its approach to audit and redirect its focus on risk-based auditing by adopting the COSO Enterprise Risk Management Framework.6 The Unit should provide reasonable assurance regarding the achievement of objectives of government departments in the following categories:

Conformity to the organization’s strategy, Effectiveness and efficiency of operations, Reliability of financial reporting, Compliance with applicable laws and regulations.

2.4. Challenges and recommendations

Accounting: The introduction of IFMIS has greatly improved the accounting environment. The challenge now is to periodically review the controls and reporting capabilities of IFMIS to provide assurance that there are no security breaches and that reliance can continue to be placed on IFMIS-generated reports. This CFAA recommends the strengthening of the control framework that is appropriate for a computer-based environment. One option to explore is providing for a well-trained staff with computer-based auditing skills in the Internal Audit Unit that can focus on risk.

Financial reporting: It is important that all expenditures or receipts be shown in the budget estimates and recorded in the annual accounts and monthly budget reports. Significant progress has been made in improving the timeliness of presentation of year-end financial statements to the National Audit Office, and the format of 2007 financial statements represents a good step forward from those of previous years. Nonetheless, the challenge will be on the consolidation of this work and achievement of a satisfactory level of performance that meets international standards.

However, improvement of the quality of the accounts to enable the National Treasury to get a clean report from the Auditor General and the FPAC would depend on the prompt

6 Committee of Sponsoring Organizations of the Treadway Commission (COSO) is a U.S. private-sector initiative, formed in 1985. Its major objective is to identify the factors that cause fraudulent financial reporting and to make recommendations to reduce its incidence. COSO has established a common definition of internal controls, standards, and criteria against which companies and organizations can assess their control systems.


http://en.wikipedia.org/wiki/1985

http://en.wikipedia.org/wiki/U.S.

implementation of the outstanding recommendations (mainly to clear a number of longstanding items) of the Auditor General, the FPAC, and the CFAA, as well as other related observations and recommendations from other sources.

Reporting on donor funds, and more generally on extra-budgetary operations, remains a major challenge. The extent of the problem needs to be accurately determined and properly managed. It is recommended that the Directorate for Central Projects Management and Aid Coordination should take the lead on timely reporting on donor funds. Consultation with development partners will be necessary. In both cases, continuing monitoring and reporting on progress will be essential. This will ultimately enhance the quality of financial reporting that meets international standards.

Internal controls: The introduction of IFMIS promises to bring into play major reforms to internal control processes. It will be challenging for these controls to be consistently applied as IFMIS is deployed to other sector departments and agencies. In this regard, it is recommended that further work be undertaken to ensure that stronger controls are embedded in the IFMIS and these are fully understood and subjected to independent oversight or third party review from time to time.

As a consequence of improved bank reconciliation through IFMIS, reporting has become timelier. It is however recommended that further effort be made (a) to improve reconciliation and clearance of below-the-line (suspense) accounts; and (b) to address the continuing difficulties in getting timely reports on externally financed accounts. It is also recommended that improvements in bank reconciliation should be followed up with clearance of long outstanding items in suspense accounts (below-the-line accounts).

Internal audit - Unless operations, especially those transacted through IFMIS, are subjected to independent scrutiny, the reliability of reporting will be difficult to assure. Internal audit is a key PFM criterion but is not operational in The Gambia. The challenges and constraints noted with regard to internal audit in the 2003 CFAA remain unchanged in all respects. The Internal Audit Unit does not comply with International Standards for the Professional Practice of Internal Auditing as promulgated by the Institute of Internal Auditors. Capacity of the Internal Audit Unit is seriously under-resourced in terms of human capacity and skills as well as financial and logistical support.

Virtually no progress has been made in establishment of internal audit since the 2003 CFAA. Several fundamental institutional changes should be made to allow for a proper internal audit function that meets international standards. A clear environment of effective internal control should be established, and the Government should develop a clear strategy for establishing internal audit capacity as part of the management and control culture of its sector departments and agencies. Only clear progress in these areas will provide an environment in which internal audit can function effectively.

It is strongly recommended that the Government, with the assistance of development partners, examine the options for establishing a well-functioning Internal Audit Unit. The option selected should be guided by the strategy the Government is expected to prepare in the next 1 to 2 years, drawing from a concept note prepared in December 2006 for the strengthening of the internal


audit function. This is in line with the policy measure in the Public Sector Reform and Growth Grant to analyze and prepare options for establishing internal audit and control functions. To help the Government in this work, these are the suggested options for consideration:

Independent audit agency that will be set up by an Act of the National Assembly, Appropriate and comprehensive amendment in the GBMAA Act, An internal audit unit located within and reporting directly to each Department of State,

or A centralized Internal Audit Unit in DOSFEA providing a service to all other

departments.

The selected option will require legal backing and should be given due consideration in the Government’s plan to review GBMAA Act, 2004. Considering the size of the country and the limited number of qualified accountants in the public sector, a pragmatic way forward could be a centralized Internal Audit Unit within DOSFEA that is responsible for setting standards and monitoring compliance and able to provide an effective internal audit service for the whole Government. Director-level leadership would be desirable, similar to that in the Budget and Treasury, and with reporting to the Secretary of DOSFEA. The revised GBMAA Act should also provide for the setup of audit committees preferably on basis of sectors considering the size of the Government.


SECTION 3. EXTERNAL AUDIT

An effective National Audit Office that has the authority, capacity, and independence to carry out external audit of the Executive branch of Government is one of the most important elements of a fully operational PFM system. Its absence poses a high degree of fiduciary risk in terms of both potential misappropriation and likely failure to achieve public policy objectives. The 2003 CFAA highlighted the extremely limited resources available to the National Audit Office in The Gambia, the lack of a modern Finance and Audit Act, and the problematic consequence in meeting constitutional requirements on accounting, reporting, and auditing. Section 3 looks at the issues relating to the National Audit Office and its institutional framework.

Description of Performance and Assessment

3.1. National Audit Office: Constitutional and legal mandates

The Auditor General and the National Audit Office are dealt with under Part 2, Articles 158 to 160 of the Constitution. This also provides the manner of the appointment and removal of the Auditor General, Article 158 (2) states that the President shall appoint the Auditor General after consultation with the Public Service Commission. The President may terminate the Auditor General’s appointment, giving unconditional powers to the President generally regarded as impairing the independence of the external auditor.7 The Auditor General appoints the staff of the National Audit Office after consultation with the Public Services Commission. In the case of senior or professional staff, the appointments are as prescribed by Regulations of the Public Service Commission.

Article 160 (1c) of the Constitution enjoins the Auditor General to audit and report on the Government and public accounts of The Gambia at least once every year. The report is submitted to the National Assembly within 6 months of the end of the immediately preceding financial year to which each of the accounts relates. The report is to draw attention to any irregularities and any other matter that, in the Auditor Generals’ opinion, ought to be brought to the attention of the National Assembly [Article 160 (1d)]. Article 160 (1e) of the Constitution provides that after the National Assembly has discussed the report, the Auditor General shall have the report published for public information. It further provides that if there is any undue delay in the discussion of any such accounts in the National Assembly, the Auditor General may publish the report in advance of such discussion. However, it does not provide specific guidance on the threshold of such a delay. Finally, Article 161 (9) grants the FPAC with the prerogative to extend the 6-month period required by the Auditor General under Article 160 (1d) to report on the accounts to the National Assembly.8

7 Between 1994 and 2008, there have been only 2 Auditors General: one from 1994 to 2000 and the other from 2000 to present. This creates an appearance of reasonable stability of tenure. However, any changes that do occur, as noted, under the sole authority of the President, do raise questions regarding the independence of the Auditor General.8 Section 151 (3) of the Constitution appears to give unusual authority to the Auditor General over government spending. It states that “No money shall be withdrawn from the Consolidated Fund or any other public fund of The Gambia, including a withdrawal under subsection (4), unless the withdrawal has been approved by the Auditor-General or a member of the National Audit Office designated by him or her for the purpose and it is made in the manner prescribed by an Act of the National Assembly”. In practice, this provision does not appear to be operational.


Article 160 (2) provides the normal powers and protections granted to the Auditor General under the International Organization of Supreme Audit Institutions (INTOSAI). These include (a) not being subject to the direction or control of any other person or authority in the exercise of their functions; (b) having power to disallow any item of expenditure that is contrary to the law and to levy a surcharge;9 and (c) power to call for and to be provided access to all data and information required for the performance of their functions. Article 161 (8) states that nothing in the Constitution shall preclude the Auditor General, at the request of the head or governing body of any public body, corporation, or institution referred to in Article 160 (1c), or on their own initiative, from carrying out any special audit of such body, corporation, or institution. Where the Auditor General carries out such a special audit, it shall be reported to the FPAC.

The National Audit Office checks and verifies calculations for pension and gratuity payments for all civil servants. While this function is important because of the long-term nature of these payments, it is questionable whether it is properly assigned as a function of an external audit; normally it would be construed as an Executive responsibility, the effectiveness and propriety of which would be subject to audit. In recognition of this anomaly, there are future plans to transfer the payment of pensions and gratuities to the Social Security and Housing Finance Corporation.

3.2. Resources and financial autonomy

Subsection 159 (4) of the Constitution reinforces the Auditor General’s financial independence concept espoused in Article 152. The Auditor General is required to submit the annual estimates of expenditure for the National Audit Office for the following financial year for presentation to the National Assembly. The President shall cause the estimates to be placed before the National Assembly without amendment but may attach to them his or her comments and observations. In practice, the activities of the National Audit Office are constrained as a result of limited resource allocation since the budget of the National Audit Office is still subjected to ceilings from the Executive. The National Audit Office recognizes that it is not the only constitutional body, which also includes the Legislature and Judiciary, which has been accorded a constitutional protective financial shield, although it is actually not practiced. However, in 2007 the National Audit Office used only 60 percent of its budgeted GMD 7,163,000 because it lacked the technical capacity to undertake all its planned programs for the year.

The 1997 Constitution envisaged an autonomous audit service. An Act of the National Assembly to establish such an independent institution is required and should be followed by specific human resource policies and practices to attract and retain qualified professional auditors. The remuneration structure for the National Audit Office makes it difficult to attract qualified personnel. At the moment the National Audit Office has a staff compliment of 81, of whom 65 are in the professional cadre and 16 in administrative and support functions. Vacancies exist for 4 principal auditors and 9 senior auditors. In the absence of separate dedicated legislation to provide for the independence of the National Audit Office, recruitment of auditors is still processed though the Personnel Management Office; however, the National Audit Office is allowed to participate in the recruitment process and in the interview of candidates.

9 Under Section 45 of GBMAA Act, 2004, the Permanent Secretary of DOSFEA is also granted powers to surcharge and is required to notify the Auditor General and Vote Controller of any surcharges.


Because of this lack of capacity in the National Audit Office, the audit of most public enterprises is outsourced to private audit firms. The National Audit Office is centralized in Banjul with no physical presence in the regions making the audit of public enterprises in the regions irregular.

The National Audit Office has included in its strategy an objective for transforming itself into a modern Supreme Audit Institution. Work is progressing on a bill to establish the National Audit Office as articulated in the 1997 Constitution. A code of conduct that meets INTOSAI standard has been developed and should be signed by all National Audit Office staff. The code of conduct includes requirement for continuing professional development. However, since most National Audit staff are not members of any recognized professional accountancy bodies, it is difficult to implement continuing professional development in a structured manner.

Support for such reforms is also needed from the media and non-state actors to enable them to be in a position to analyze the budget and annual financial statements. However, because of the weak civil society and media in the country, it is unlikely to expect wide-spread public access to information on use of public finances any time soon.

The National Audit Office receives direct support from development partners and other sources. Also, the National Audit Office outsources some of its audit assignments, especially those of state-owned enterprises and local authorities, to private accounting/auditing firms. The audited body generally pays the fees. The National Audit Office continues to explore other avenues of financial and technical support to improve its effectiveness and efficiency.

Sub-section 159 (3) of the Constitution provides for the accounts of the National Audit Office to be audited by an appropriately qualified auditor or firm of auditors appointed by the FPAC. This provision has not been exploited.

3.3. Audit reports

In addition to exercising such other functions as may be conferred by an act of the National Assembly, Article 160 (1) of the Constitution outlines the functions of the Auditor General to include both pre- and post-compliance audit and specifies the requirements to audit and report on the public accounts of The Gambia at least once every year, and on the authorities, the courts, the National Assembly, and all public enterprises within 6 months of the end of the immediately preceding financial year to which each of the accounts relates.

After the Auditor General’s annual report on the accounts has been discussed in the National Assembly, the Auditor General is required have the report published for public information. Where there is any undue delay in the discussion of any such accounts or reports in the National Assembly, Article 160 (e) permits the Auditor General to publish the report in advance of such discussion. To complement this provision, Regulation 298 (2) of the Financial Instructions directs that copies of publications relating to finance for limited or restricted circulation shall be sent immediately upon publication to the DOSFEA library, the Department of Registry, and the National Archives.

Some progress is being made on clearing the backlog of Auditor General’s reports not yet submitted to the FPAC. The Audit Report of the Auditor General on the audited accounts of the


Government of The Gambia for the period July 1992 to December 1999 was submitted to the National Assembly in September 2005. The FPAC recommended the need to address several systemic issues.

The Audit Report raises two issues. First, technical accounting issues raised in the management letter are not always fully acted upon by the Directorate of National Treasury in a timely manner. Other issues raised concern the repetition of unresolved audit queries and findings year after year. These issues, for example the recovery of monies due to the Government from public officers, are referred to the FPAC, which then forwards to the Executive for a public response to any pertinent queries. Recommendations are then made to the Executive for action. Non-completion of audited accounts over the past 10 years means that accountability for such issues has not been established. As a consequence, many of the same issues are repeated each year in the audit reports.10

For the audit of the 2000-2004 accounts, the National Audit Office issued its draft report to the Executive (DOSFEA). After comments and feedback from the Executive, the National Audit Office will facilitate finalization and transmission of the report to the National Assembly. In its reporting, the National Audit Office noted that the shortcomings in previous reports are still recurring. The National Audit Office emphasized that it is critical for the Directorate of National Treasury to improve on the accounts for 2005 and 2006. This would enable the most accurate figures to be entered into IFMIS and give the most accurate opening balances for the beginning of January 2007 operations. The IFMIS has helped to improve timeliness of bank reconciliation at the Treasury and placed the Treasury in a better position to complete the annual statement of public accounts in a timely manner as required by law.

The manner of publishing the Director of National Treasury’s accounts and the Auditor General’s Annual Report for public information is not clearly articulated in the legislation. It is not clear whether the Directorate of National Treasury and the National Audit Office should publish its accounts and its audit opinion and report, respectively, or whether one set of audited financial statements comprising both should be published. If the report is to be published for public interest and promote and enhance accountability and transparency, then limited or restricted publication as defined in the Financial Instruction 298 (2) is not the answer. Publication through a website and other media avenues would provide the desired wide circulation.

3.4. Assessment and recommendations

Good progress has been made in addressing the backlog of audit reports that needed to be submitted to the FPAC for scrutiny. But, as reflected in PEFA PI-26 (Annex A), other substantive issues regarding scope and quality of audit reports and responsiveness of the Executive to audit recommendations should be addressed.

10 Issues on Treasury accounts by the Auditor General noted in the 2003 CFAA include limited internal controls and internal audit, noncompliance with financial legislation, regulations and instructions, non-responsiveness of Government agencies to audit queries, theft of funds, failure to collect revenue, missing revenue, lack of supporting documentation, failure to obtain competitive tenders, poor recordkeeping and accounting, failure to recover salary and imprest advances, failure to maintain inventories and inventory records, and lack of capacity or inadequate capacity.


Despite the measures taken to clear the backlog of accounts being submitted to the FPAC, fundamental underlying weaknesses remain. On the one hand, there is a lack of capacity in the Auditor General’s Office to produce high-quality reports on time. On the other hand, accountability and compliance of the Executive agencies with audit recommendations is almost non-existent. This situation is generally met by mutual attempts to shift responsibility: the inability of the Auditor General to meet statutory responsibilities is often attributed to the failure by the Directorate of National Treasury to present timely financial statements. In a counter response, the Directorate of National Treasury typically cites such things as lack of institutional and human resource capacity, lack of supporting documentation, missing records and documents resulting from commissions of inquiry in the mid-1990s, and other causes. What results a cyclic blame-passing game.

Recommendation: It is imperative that steps be taken to resolve the cycle of inaction. These steps should enjoy support and political goodwill from the highest level of the Government. One of the central recommendations of this CFAA is that a high-priority program be initiated immediately or in the short term with the aims of (a) establishing a stronger legislative framework for the Auditor General; and (b) providing resources and training to establish adequate capacity. In this regard, capacity building would likely depend initially on strong support from development partners and include twinning arrangements and exchange programs. Such an initiative would be a keystone of future PFM reform. It would also need to be closely linked to programs to build up the capacity of the National Assembly and its FPAC to help ensure prompt and effective follow-up to the Auditor General’s observations.


SECTION 4. LOCAL GOVERNMENT

The Local Government (LG) Act 2002 (Schedule 1, part 1) specifies 7 local authorities each subdivided into districts and wards for the election of council members. Eligible voters in the local government area elect the chairperson, and the wards elect the councilors. Additional non-voting members of the council include an alkalo or seyfo representative,11 a chief representative, a youth nominee, a woman nominee, and other nominated members of local interest groups. Each council is administratively headed by a chief executive officer who is responsible for the management of the affairs of the local council. Most chief executive officers have experience though few possess formal qualifications.

The legislative frameworks — LG Act, 2002 and the Local Government Finance and Audit (LGFA) Act, 2004 — have been enacted to facilitate local government reforms and decentralization programs. Following the adoption of the LG Act, election of all local councils was held. In all local government areas, such structures as village development committees ward development committees, and multi-disciplinary facilitation teams have also been established. The institutional reforms embodied in the LG Act and associated policies center on developing democratic and participatory processes and establishing community-level ownership of the development process. This requires both local-level development of an accountable process and increasing participation of local communities in public service decisions and delivery. Thus far the main emphasis has been on establishing an adequate legal framework and developing local administrative capacity.

The 2003 CFAA noted delays in promulgating the subsidiary legislation needed to implement the institutional reforms envisaged under the LG Act — notably, the LGFA Bill had not been enacted. As a consequence, local government budgetary controls and financial accountability were recorded as an area needing improvement. Some advances have been made, but PFM and accountability performance remains at a very low level in local government. The LG Act provides for the collaboration of state and non-state actors with local authorities in the implementation of the planning and development process. In Section 91, the LG Act states “technical departments operating within the area of jurisdiction of every council shall support the development process of the council through extension workers operating at ward and village levels”. For these provisions to be implemented effectively, it is essential that effective financial accountability mechanisms be established at local level. Addressing these issues is the key local government focus of this CFAA, as discussed in this section.

11 Alkalo (plural, alkalolu) means village headperson. Seyfo means a district chief, the chairperson of district authority comprising of all the alkalolu in the district.



4.1. Legislation and regulation

The LGFA Act was passed in 2004. Nonetheless, a backlog of needed supporting regulations, manuals, and instructions still remains. Continuing delays in providing such guidance has led to a considerable confusion over the roles and responsibilities of the local government executive, particularly in the area of financial accountability. For instance, the LGFA Act provides for the financial administration of all local authorities, but it does not prescribe what accounting records are to be kept. This task is left to the financial manual, which is provided for in the Act. However, the manual has yet to be formulated; once done, it would go before the National Assembly and approved to become effective. The accounting system that is currently being used is based on a 1985 financial memorandum for municipal and area councils.

4.2. Budget planning and preparation

As provided for in the LGFA Act, financial administration of the local authorities starts with the preparation and approval of the budget, which must be done by September for the following year after incorporating comments of the Secretary of State for Local Government. However, as yet, the form and content of the budget is not prescribed except that it shall reflect (a) all revenues to be collected or received and to be appropriated for each year and (b) take into account the approved 3-year development plan. Definition of the budget form is required to be included in the financial manual. The current practice is that the budget takes the form of a statement of income and expenditure for the general operations and management of the council’s affairs and for the performance of its functions.

The LGFA Act requires that a council allocates at least 60 percent of its budget for development activities, excluding the recurrent costs of those activities. The remaining 40 percent of budget shall fund recurrent costs, which include (a) emoluments and salaries of the council staff, (b) the operation of wards and village development committees, and (c) all allowances for any services rendered to councils as may be determined by the Secretary of State for Local Government.

Budgetary control in the councils is weak for the following reasons:

The budgets are not broken down into manageable cycles (e.g., monthly or quarterly) so as to identify the timing of the cash flow.

The assumptions surrounding the budget preparation are sometimes unrealistic due to incomplete financial information.

Budgeted revenues are consistently over-estimated with the effect that while recurrent administration costs are maintained, expenditure on the provision of services and development is cut to make up for budget shortfalls.

Expenditure is more or less dependent on the availability of cash rather than on budgetary constraints.

Not all council budgets are approved on time according to statutory provisions.

Although the LGFA Act provides 60 percent of council revenue to development activities and 40 percent to recurrent activities, these targets have not been achievable in practice. Realistically,


these targets are not feasible for area councils given their high administrative overheads and low revenue base. Furthermore, conditions vary between councils; municipal or town councils might spend a greater proportion of their budget on day-to-day services such as road maintenance, cleansing services, etc., while provincial councils might focus more on development aspects of the local community. At the moment, councils fund up to 45 to 50 percent of development expenditure. To ensure compliance with the legislation, councils are consequently forced to set unrealistic or unattainable budgets either by underestimating recurrent expenditure or overestimating revenues.

4.3. Accounting, reporting, and internal control

The LGFA Act and the financial manual are meant to specify the prescriptive rules and regulations for the accounting framework. The draft manual has not yet been approved by Parliament and is therefore not operational. The LGFA Act provides for accounts to be kept but does not prescribe what accounting records are to be maintained. Current practice is still based on the 1985 financial memorandum for municipal and area councils.

The accounting system in all but one council is maintained manually. Recordkeeping practices do not follow good practice. While cashbooks, ledgers, vouchers, and receipt books are maintained, other subsidiary books such as commitment control ledgers and vote books are not maintained to ensure proper budgetary control and accountability of funds.

The level of accounting and recordkeeping is generally inadequate due to factors such as the following:

Few skilled staff can be recruited; only a few councils have limited qualified personnel. Most revenue and expense transactions are performed using cash and are not immediately

recorded in the cashbook. This practice gives rise to opportunities for fraudulent operations.

Because of the limited number of staff, there is little segregation of duties between recordkeeping and authorization of expenditure (i.e., weak internal control environment).

Revenue collectors maintain separate cashbooks and issue receipts; this gives rise to cut-off errors arising from delays in submission of receipts to update the main cashbook. This further distorts reporting and complicates bank reconciliations.

Collection of monies is largely unsupervised and increases the risk of fraud across councils. Although some of the councils have introduced some solutions, there is no established best practice.

With the issuance of fixed value tickets for car parks, markets, canteens, and other fees, it is difficult to demonstrate that all tickets invoiced have been recorded in the counterfoil receipt register.

Subsidiary control ledgers are not reconciled to daybooks recording the totals of invoices and assessments raised or to the cashbook as means to reconcile collection of receipts recorded.

All councils do not have the ability to produce auditable financial statements. All councils have their accounting records on ‘paper based’ spreadsheets. This is not

recommended as the prime source of data recording in an accounting system because of the lack of audit trail and lack of security on spreadsheet-based systems.


The accounting procedures set out in the draft financial manual are not adequate to ensure that standard reporting requirements are met. The following omissions represent significant weaknesses:

The proposed manual provides for the maintenance of cashbooks to record all receipts; apart from that, it does not specify what subsidiary records are to be maintained.

The classification of payments makes no provision for the analysis of expenditure between development activities and other activities. It is therefore not possible to determine whether councils have complied with the requirement that at least 60 percent of the budget is allocated to development activities and not include recurrent costs of such activities.

The proposed manual specifies that expense payments are to be recorded in the cashbooks, but there is no requirement to maintain a commitment ledger or vote book.

The proposed manual provides no mechanism for the capture and reporting of expenditure made against general grant, grant-in-aid, and equalization grant (the 3 forms of central subvention to local government).

The proposed manual does not provide for differentiation of expenditure funded through donor contributions. Lack of such transparency fails to demonstrate to donors that their funds are properly and correctly applied — and as a consequence there will be less incentive for development partners to use the local government accounting system.

The proposed manual does not prescribe any procedure to reconcile the general ledger to the cashbook.

The proposed manual does not specify procedures to ensure that store’ ledgers or inventory are reconciled to the expenditure on stock purchases as recorded in the main accounting records nor to the revenue derived from disposal proceeds.

Beyond the pre-audit of expenditure outflows, internal controls are weak due to several factors — including lack of segregation of duties in the accounting function, limited substantive internal checks, failure to adequately specify many essential control procedures (as illustrated in the preceding bullet points) and lack of an effective internal audit function — and do not correspond to international good practice. It is evident also that there are inadequate reconciliation mechanisms or controls that are necessary to ensure completeness and accuracy of the accounting records.

Financial reporting is limited to the production of a trial balance only. A full set of financial statements, including the production of a balance sheet and revenue statement, are not produced by any of the councils.

With regard to the internal audit function, the LGFA Act specifies that the internal audit unit shall prepare and submit quarterly audit reports to the council and forward a copy to the Local Government Accounts Committee, the Auditor General, and the Secretary of State for Local Government. The Act does not specify the scope of the internal audit function in any greater detail. However, by observing the internal audit activities, it is evident that the unit’s work has been limited to the pre-audit of expenditures. The internal audit function does not extend to systems evaluation or internal controls evaluation, nor does it focus on risk management. Because of prevailing circumstances, any consideration to extend this service to village or ward


level would be unrealistic. Although the Act specifies the requirement for the creation of internal audit unit in each council, it remains silent on their technical and professional requirements as well as the need to set up appropriate policies, guidelines, and procedures.

4.4. Executive oversight

The Directorate of Local Governance is responsible for performance reporting and monitoring and evaluation of all local councils. This Directorate is under the responsibility of the Secretary of State for Local Government within the Department of Local Government. The Directorate supervises the overall administration of councils and assists them in budgetary and financial management in addition to general administrative matters. The internal audit unit of each council is expected to report quarterly to the Directorate of Local Governance on the financial administration of all councils. On receipt and study of these reports, the Directorate dispatches its inspectors to visit the councils for an on-site assessment of situation.

In addition, the LGFA Act establishes a Local Government Accounts Committee for all councils. The Committee is charged with examination of reports produced by the Auditor General and the internal audit unit(s). This Committee in turn reports to the Secretary of State for Local Government, the Secretary of State responsible for finance, and the Auditor General. The chairperson and the chief executive of the councils are required under the Act to implement the recommendations of the Local Government Accounts Committee. The Auditor General is required under the Act to incorporate the comments and recommendations of the Committee in his own report to the National Assembly.

The LGFA Act does not, however, prescribe any sanctions on councils for poorly administered council affairs, except that the LG Act provides that the Secretary of State for Local Government may institute a commission of inquiry with regard to occurrence of a grave misdemeanor. When the findings of the commission of inquiry confirm an offence has been committed, the Secretary of State refers the matter to the President for appropriate action. The President may, with the approval of a simple majority of the National Assembly, assume the executive powers of the local council.

The Directorate of Local Governance is leading efforts to build institutional capacity in local governments. Actions under way include the following:

Drafting legislation to establish the local government commission (this has been delayed).

Establishing a scheme of service for local government. Conducting personnel audits of local councils to streamline local government and address

the problem of excess staffing capacity. Investigating optimal staffing establishment for local councils. Identifying and attracting potential personnel to key positions in local government. Developing a financial manual for local government.

With respect to external audit, the LGFA Act provides that the Auditor General shall at least once a year have the accounts of the council audited and reported. The Act is silent about the type of audit that is required. The current practice is that the Auditor General carries out an audit


on a transactional basis, which does not extend to an effective review of operational controls or the provision of an opinion on councils’ financial statements. Local government councils do not produce and publish a full set of traditional financial statements in accordance with IPSAS.

Reports on audited council accounts produced by the Auditor General have limited usefulness since they are by their nature and structure basic management letters that are not backed up by financial statements, thus giving no disclosure about the financial resource base and capacity of the reporting entity. Furthermore, because of this limitation, there is neither an indication as to whether the audit carried out by the Auditor General is in accordance with International Standards on Auditing, nor is there any opinion given on the audit.


Local government councils are unable to acquire the material resources for service delivery (e.g., waste management disposal) because of their low revenue base. Local government salaries are in accordance with Central Government’s Integrated Pay Scales, which are highly uncompetitive when compared to rates paid in the private sector or by donor organizations. The combination of overstaffing, low salaries, and history of political interference in the appointment and dismissal of staff makes it impossible to attract and retain properly qualified personnel. In addition, there is no formal performance appraisal system to identify, encourage, and remunerate well-performing staff. Movement from one grade point to the next is automatic (within grade) annually. Promotion from one grade to the next depends on the recommendation by the respective head of the department.

These problems reflect directly with public financial management. Staff engaged in the finance function has limited professional accountancy and public finance qualifications. Only a few councils possess personnel with recognized accounting qualifications, and this general lack of qualified accounting personnel consequently impacts negatively on the quality, accuracy, and timeliness of financial recordkeeping and the production of financial statements.

By their nature, these problems will require long-term resolutions. The immediate emphasis should be to establish a sound basic institutional infrastructure and initiate a long-term program of capacity building. Key recommendations to improve financial accountability are as follows:

Ensure that legislation establishing the local government commission is passed to provide an institutional basis for local councils to meet their mandate under the LG Act.

Establish a scheme of service for local government that will govern appointments, promotions, discipline, and pay and reward to employees.

Initiate training and capacity-building programs for local council financial management staff.

Undertake personnel audit of local councils to streamline their staffing capacity. Initiate a process to resolve the backlog of annual reports by councils for FY2006 and

FY2007. The financial manual as required by the LGFA Act should be accepted and passed

legislatively and put in place so as to prescribe the requirements of the accounting records to be maintained by local authorities.


Design and initiate pilot implementation of an integrated accounting system with strong accounting controls (manual or computerized as appropriate).

While significant steps have been taken to improve the legislative framework for a more decentralized system of government in The Gambia, the overall environment for financial accountability of local councils has changed little since the 2003 CFAA. Many steps geared to this are underway, but a sustained and long-term effort will be needed to establish a satisfactory level of performance and reduce fiduciary risks in this area.

The PEFA analysis looks at sub-national government only to the extent that it affects the national fiscal aggregates. The main PEFA performance indicator of relevance, PI-8, Transparency of Inter-Governmental Relations, does not link directly to local government financial accountability. This indicator would have been more useful if service delivery functions were a responsibility of the local government. Functional devolution is yet to happen and fiscal transfers from the Central Government mainly cover administration expenses. Development of the capacity of the Directorate of Local Governance, sub-sectoral departments, and other Departments of State to assist the decentralization process is a key objective of the Public Sector Reform Sector Strategy Paper 2007-2011. However, in view of the weak capacity of the local government subsector, it is doubtful that this reform will be realized any time soon as initially envisaged.


SECTION 5. STATE-OWNED (PUBLIC) ENTERPRISES

With respect to state-owned enterprises, the main fiduciary risk and PFM management concerns are the extent to which the Central Government has a formal oversight role that enables it to monitor and manage fiscal risks with national-level implications arising from these entities. In The Gambian context, state-owned enterprises are generally referred to as public enterprises. The 2003 CFAA noted several national-level fiscal risks that could arise from public enterprises and many weaknesses in the institutional arrangements that are necessary to monitor and manage such risks. Progress in strengthening the public enterprise management framework is reviewed in this section.12


5.1. Legislative and institutional framework and corporate governance

The legislation and regulation framework governing the existence and operation of public enterprises is based on The Gambia Constitution, 1997. Key elements of supporting legislation are the Public Enterprise Act, 1990, and, to some extent, the Companies Act, 1955 as amended. In addition, there are the specific individual acts of the National Assembly creating respective public enterprises. Section 175 of the Constitution defines a public enterprise as a body corporate or other institution, wholly owned or controlled (i.e., at least 51 percent or more) by the Government. Section 175 also provides for the establishment of the board of directors or other governing body (commission or agency) of a public enterprise. It confers to the President of The Gambia the authority to appoint members of the board of directors, and also lays down the basic eligibility criteria for appointment to a public enterprise board.

Those appointed to the position of director should be citizens of The Gambia, even though the legal framework is not as explicit on this aspect. Out of necessity, the practice has required the appointees to be Gambian nationals of integrity, who are competent and mature enough to undertake the responsibility of the position. The Constitution has clearly excluded certain persons from qualifying to be directors of public enterprises by virtue of the position or responsibilities they hold at the time. The President appoints the chief executives of public enterprises in consultation with the board of directors or its equivalent body and the Public Service Commission. Although this procedure is the norm, there are rare exceptions to this practice. For example, the Secretary of State for DOSFEA is empowered to appoint the Board of Directors of The Gambia Divesture Agency under the same legislation that created the Agency. In a rare occurrence, this legislation is in conflict with the Constitution, which always prevails being the supreme law of The Gambia. As the rule, except for the chief executive of a public enterprise appointed by the President, the board of directors or equivalent governing body appoints every other staff person of a public enterprise.

12 Representatives interviewed for this assessment were visited at The Gambia Civil Aviation Authority, The Gambia Ports Authority, The Gambia Public Procurement Authority, The Gambia Revenue Authority, and The Gambia Divesture Agency.


Section 175 provides for establishment of a monitoring committee of the National Assembly. This committee has a mandate to prescribe the manner in which a public enterprise should be accountable to the National Assembly and should be able to monitor efficiency, transparency, and probity of public enterprise operations. The reality however is that, largely because of a lack of resources, the monitoring committee has never been set up. As a consequence, The Gambia Divesture Agency has taken on the de facto role of supervising the performance of public enterprises. The legal basis for such operations is dubious. The limited capacity of The Gambia Divesture Agency with only 4 staff makes it difficult to provide effective oversight of public enterprise performance. The last report on the performance of The Gambian public enterprises in 2006 covered two sections, one on enterprises with accounts and the other on enterprises without accounts. The analysis was simply a presentation of audit reports.

5.2. Corporate governance

The Public Enterprise Act and the Companies Act, complemented by the individual public enterprise acts, provide a corporate governance framework broadly in line with international benchmarks. The framework sets out the responsibilities of the board of directors, the rights of equity holders, and the requirement for full disclosure of financial information through annual financial plans and budgets and accurate and timely financial reporting. In theory, the National Assembly would provide an additional assurance of governance through its proposed monitoring committee if this measure becomes operational. In practice, implementation of governance practices has been inadequate.

A governance issue of concern is that the law is unspecific about the role of senior government officials who double in roles as ex officio board members of public enterprises. In such cases, Government could appear to be in breach of rules of conflict of interest by influencing Board decisions as well as Government enterprise policy. In addition, because government institutions are a major consumer of goods and services produced by public enterprises, these senior government officials could influence payment decisions by virtue of their official government position. Lack of clear articulation of this potential conflict of roles has been a major underlying concern in public enterprises that provide or supply services, such as utilities, to government institutions that have had long outstanding arrears.

The absence of the audit committees within the boards of some public enterprises exacerbates the inadequacy of governance in public enterprises, even though audit committees are not legally required. An effective audit committee can strengthen the oversight mechanisms and monitoring of how management implements auditors’ recommendations. An audit committee typically draws its membership from among the independent directors, one of whom would be a financial expert. An audit committee would watch against poor or fraudulent financial reporting, oversee the audit process and engagement of the auditor, assess the independence of the auditor, and scrutinize the financial reports and the auditor’s report and management letter. The audit committees facilitate discussion with the auditors on a whole array of issues ranging from accounting treatment to identification of risks and practical and effective ways of mitigating them.


5.3. Budget preparation

Public enterprises, by and large, define their source of funds as being (a) a DOSFEA subvention, (b) internally generated revenues, (c) legally authorized loans or grants as authorized by friendly countries and lending institutions, and (d) any other monies as may legally be received by or made available for the purpose of performing its functions. With these funds, a public enterprise is required to meet its day-to-day recurrent operating costs such as staff salaries, office rent, allowances to the board members, and capital costs used for expansion.

Public enterprises in The Gambia are required to prepare their budget estimates according to the same timetable as the ministries, departments, and agencies. This ensures that public enterprises, which receive substantial level of government subventions, have their budgetary needs included in the Government budget. Generally, public enterprises receive budget preparation guidelines from DOSFEA circulars reflecting the policy framework and national economic factors necessary to consider in preparing budgets. Public enterprises that require government subventions usually consult with DOSFEA on their budget proposals before agreement is reached with DOSFEA on the final budget. However, any cutbacks of requested subventions could mean a cutback in services — or an accumulation of unpaid debt. Some public enterprises have tried to augment their revenue base by increasing fee tariffs in consultation with the Government.13

5.4. Accounting, internal control, reporting, and internal audit

The Public Enterprise Act, the Companies Act, and individual enterprise acts together impose basic accountability and reporting requirements, including submission of annual reports and establishment of effective financial management structures and procedures. With regard to annual reports, public enterprises are required to prepare a report of their activities during the preceding year and submit by each April 30 to the Secretary of State of their respective parent ministries. The Secretary of State is obliged to table the report to the National Assembly.

Each of the public enterprises assessed for this CFAA was found to have the finance and accounting department headed by a senior-level manager who is a professionally qualified accountant. However, this will not be the case in every public enterprise finance and accounting department because of the few professionally qualified accountants in the country,. Most of the enterprises (except for the Gambia Revenue Authority that has a couple of professionally qualified accountants) struggle to retain the single accountant they have on staff. Staff development strategy among the public enterprises could help to reverse this trend in the next 10 years if special attention is paid to utilizing the training institutions for accountants in sub-regional countries such as Ghana, Nigeria, Kenya, and South Africa.

Most of the public enterprises assessed by the CFAA have documented their accounting procedures in manuals and folders of instructions. These procedures have established systems of

13 For example, the Gambia Public Procurement Authority receives a subvention for only part of its staff wage bill, which accounts for 50 percent of the total budget. The Authority is expected to close the wide gap with internally generated revenues from sale of tender documents and other services rendered to its clients, some of whom are ministries, departments, and agencies that have no funds for such a service.


internal control and set authorization limits for various levels of expenditures on the basis of budgets sanctioned by their respective board of directors.

Internal audit in most public enterprises in The Gambia is relatively weak. Only a few of the public enterprises have an internal audit unit that can claim to practice an effective modern internal audit function, primarily because they do not have the independence and capacity to meet international benchmarks. Even then, internal audit units are staffed with 1-3 persons, with maybe one who is a qualified accountant. This limited level of competence, capacity, and independence does not meet the required standards of an effective internal audit function in a large public enterprise such as The Gambia’s Revenue Authority and Ports Authority. It has also been shown that recommendations made by the internal auditors are in most cases not implemented. Under these limited circumstances, there is little use of an enforcement mechanism, such as an audit committee provides, to oversee the implementation of recommendations of both the internal and external auditors.

5.5. External audit and legislative oversight

Public enterprises are required to prepare and submit their annual financial statements (annual accounts) within 3 months following the end of the financial period (January to December) to the Auditor General who has the constitutional mandate to audit public enterprises. The audited annual financial statements of public enterprises and the Auditor General’s report are required to form part of the Auditor General’s overall annual report to the National Assembly.

Failure of the relevant committees of the National Assembly to consider reports of the Auditor General on public enterprises in a timely manner has been a long-standing issue. In late 2007, the FPAC met with the Public Enterprise Committee and jointly reviewed and interviewed chief executive officers and finance managers of 40 public enterprises and agencies on their financial reports for 2003/04. Continuation of this effort, together with an emphasis on follow-up by the relevant Secretaries of State, would help to improve governance and PFM performance in this area.


Little has changed in the overall environment of public enterprise reporting and governance since the 2003 CFAA. The risks of quasi-fiscal indebtedness remain high and have possibly increased in the current global environment especially as recessions in advanced economies triggered by the global financial crisis are adversely affecting The Gambia’s tourism receipts and remittances inflows. This has widened the current account deficit and the international reserves falling by nearly 2 months of imports and slower growth compared to the IMF projections in the third Poverty Reduction Growth Facility review. The decline in Government revenue would impact on subventions to public enterprises.

The environment for financial accountability of public enterprises should be radically transformed to reduce fiduciary risk from this source. The legislative framework under which public enterprises are operating should be updated to take account of the changes and realities of present day needs and competitiveness. Current legislation (the Public Enterprise Act and the Companies Act) should be updated and made mutually consistent with regard to the treatment of


public enterprises. An overarching need in this regard is the establishment of a public enterprise governance framework. All of these reforms will take considerable length of time to be completely put in place, but action should be urgently taken in order to reduce the potential fiscal risks that could arise from the mismanagement of public enterprises. The following are some of the key recommended actions:

The DOSFEA and specifically the Directorate of National Treasury should take a lead role in monitoring and reporting on public enterprise financial positions, with particular emphasis on payment of arrears or contingent liabilities that may give rise to future fiscal deficit increases.

A high-level public enterprise governance council should be established to review the legislative, institutional, and governance framework in which public enterprises operate. The proposed council should oversee drafting of relevant legislation and regulations, governance frameworks (including capacity and skills mix of board members, conflict of interest, internal audit arrangements, and establishment of audit committees).

A capacity-building program for financial management in public enterprises should be initiated.

Consideration should be given to the divestiture program for public enterprises and, if needed, a program that is realistic could be developed and implemented.


SECTION 6. LEGISLATIVE SCRUTINY, PUBLIC ACCESS TO INFORMATION, ETHICS AND INTEGRITY

Oversight of the Executive branch of government by the Legislature and, more generally, public access to information and participation in public decision-making are key factors in establishing sustainable accountability in PFM systems and tangentially averting corruption. The 2003 CFAA expressed concern that continuing lack of capacity in the National Assembly and limited access to information by the public would seriously endanger and threaten the entire public accountability system. This section reviews the current status of this element of PFM and progress in addressing the 2003 CFAA concerns.


6.1. Legislature and its institutions

The unicameral National Assembly consists of 53 members, of which 48 members are directly elected by the public citizenry while the remaining 5 are nominated by the President. Members serve a 5-year term. For the 2007-2012 National Assembly, there are 44 members in the majority side (39 elected and 5 Presidential nominees) and 9 minority members.

Article 100 of the Constitution empowers the National Assembly to exercise legislative power of The Gambia by passing bills to be assented by the President. Article 102 provides oversight functions and additional powers to the National Assembly. These include (a) review of reports on the activities of the Government and such other reports as are required to be made in accordance with the Constitution, (b) review and approval of proposals for raising revenue by the Government, (c) examination of the accounts and expenditure of the Government and other public bodies funded by public monies and the reports of the Auditor General thereon, and (d) advise the President on any matter which lies within his or her responsibility. In the exercise of its powers and performance of its functions, Article 108 grants absolute operational independence and immunity to the National Assembly from any court action.

Article 109 enjoins the National Assembly to appoint the following 4 standing committees —Public Appointments, Finance and Public Accounts, Privileges, and Defense and Security — and such other type committees that it considers necessary for the exercise of its functions. Article 109 vests all the trial powers, rights, and privileges in the High Court in each of the National Assembly Committees for the purpose of effectively performing their functions.

There are 33 standing committees of the National Assembly. The Speaker of the National Assembly chairs 12 of these committees. Except for the Privileges Committee, the Speaker chairs the 4 constitutionally mandatory standing committees. The Finance and Public Accounts Committee has 9 members, 3 of whom are from the opposition (i.e. the minority party). The FPAC is typically responsible for overseeing government expenditure and operations to ensure that they are efficient, effective, and honest. It is seen as a crucial mechanism for ensuring accountability and transparency in government financial operations and management. However,


the FPAC secretariat is incapable of providing well-researched technical analytic financial management input and advice of any value to the oversight process; its audit reports mainly cover findings from transaction audits and less on systems and performance management issues. Also, in The Gambia, the fact that the FPAC is chaired by the Speaker of the National Assembly with the Majority Leader as the Vice Chair appears unconventional relative to common practice in many countries. The conventional practice is to have a minority member chair the FPAC to provide for reasonable assurance of objectivity, and checks and balances.

The minority constitutes only 17 percent (9 out of 53) of the membership of the National Assembly. With this mix of membership, the most plausible decision-making process would appear to be through consensus building. This presents a strong argument for having someone other than the National Assembly Speaker serve as FPAC Chair due to the appearance of conflict of interest.

Article 111(1) provides for the establishment of a National Assembly Service to provide services and support for the National Assembly. The National Assembly Service has not been legislatively established as envisaged by the Constitution. Subsection (2) provides for the establishment of a National Assembly Authority with the Speaker as Chairman who appoints 4 other members to supervise the National Assembly Service. The Clerk of the National Assembly serves as Secretary of the National Assembly Service and the Administrative Head of the National Assembly.

6.2. Legislative scrutiny of the annual budget law

The budget documents submitted to the National Assembly do not contain detailed explanation of the fiscal policies and the medium-term fiscal framework, except for summary statements in the Budget Speech. For this reason, scrutiny of the budget mainly covers the revenue and expenditure estimates for Government programs.

After the DOSEFEA Secretary presents the proposed budget to the National Assembly by November, it is passed to the FPAC. In order for FPAC to perform its function effectively, GBMAA Act 2004, section 28, empowers the National Assembly to appoint technical staff to assist in gathering information, conducting research, and analyzing issues pertinent budget scrutiny. The National Assembly is constrained by lack of skilled staff required to provide the FPAC with technical support and therefore uses simple traditional procedures to scrutinize the budget estimates by calling Vote Controllers to defend their respective budgets.

According to section 152 (1A) of the Constitution, the National Assembly is required within 14 days of submission of the proposed budget to consider and approve the estimates. The estimates should be laid at least one month before the end of the preceding financial year. Once laid, the National Assembly is required within 7 days of the introduction of the Appropriation Bill to consider and pass the Bill [section 152 (3A) of the Constitution].

To meet these tight deadlines, Financial Instruction 75 requires the Secretary for DOSFEA to ensure that the budget estimates are submitted to the President not later than 60 days before the end of the current financial year. In effect, if the Executive lays the budget estimates according to the maximum time allowed (no later than November 30), The National Assembly has only 3


weeks to pass the budget. The National Assembly has over the past 3 years taken up to 3-4 weeks to pass the budget.

The GBMAA Act, 2004 allows for supplementary budgets to be submitted to the National Assembly when there are changes in economic circumstances warranting such an action. The revised and supplementary budgets would be presented and documented in the same manner and format as the original budget. The expenditure statements in the annual accounts show details of the approved budget, the revised budget, the actual expenditure for the reporting year, and the variance. This disclosure provides an opportunity for the National Assembly to ascertain whether the budget has been implemented as passed.

6.3. Legislative scrutiny of external audit reports

Section 160 of the Constitution provides that within 6 months of the end of the immediately preceding financial year, the Auditor General’s audit report is first discussed in open sessions by the FPAC that then submits a report to the National Assembly. It is only at this point that the audit report is generally made public. As noted in Section 5, the Auditor General submitted reports from 1992-1999 in September 2005 to begin tackling the backlog of overdue audit reports. The FPAC commenced deliberations on the said reports in October and November 2005. The FPAC reconvened in December 2006 to complete its deliberations and proceedings, and write its report for ratification and adoption by the National Assembly in December 2006. With the assistance of some senior members of the Gambia Association of Accountants and others, the FPAC made extremely useful, insightful, and professional observations and recommendations. The Auditor General’s reports raised 58 issues and queries. After its thorough review, the FPAC regrouped the issues into following thematic areas for policy guidance and necessary action:

Implications of the Auditor General’s disclaimer. Nonconformity/noncompliance of the Accountant General and Director of National

Treasury with the statutory reporting format and disclosure requirements. Backlog of accounts resulting in loss/misplacement of accounting records, payments

vouchers, other source documents, and institutional memory. Imbalance of over GMD 800 million accumulating from 1992 to 1999. Determining a cut-off point and restating the beginning/opening balances to continue

preparation of accounts from that point forward. Perennial, rampant, and widespread shortage of Revenue Collection Books (official

receipts) at the Directorate of National Treasury, sub-treasuries, and other revenue-collection departments and centers.

Implications for ‘IFMIS and the National Emergency Fiscal Committee.’ Functions and placement of public sector internal auditing. Non-settlement of bills by Government to quasi-government service providers.

6.4. Capacity issues

When there is a huge backlog of public accounts, there is difficulty in how to assess the extent to which audit recommendations will be pursued. However, the FPAC and the Public Enterprises Committee held joint committee sessions to review the accounts of 49 government agencies in


open public sessions for the first time in the Republic of The Gambia. As exemplified by this exercise in public participation and information sharing, the FPAC expressed desire to work more closely with the media and relevant civil societies. Past presidents of the Gambia Association of Accountants provided technical assistance to the National Assembly that enabled them to review 49 government agencies. The FPAC will follow this exercise with a report. The latest FPAC report available was in December 2006 on the annual accounts covering the periods 1991-1999.


Significant improvements have been introduced to the budget format and the quality of budget information available to the National Assembly and the public, largely because of the introduction of the IFMIS and introduction of a GFS-compliant chart of accounts. More work should be done to provide the full range of quality information needed to inform the public on PFM performance and enhance quality of public expenditure.

Basic procedures continue to be in place and are operational. No major progress has been made since the 2003 CFAA in strengthening the roles of National Assembly and the FPAC in reviewing the budget estimates.

While many of the fundamental issues in the 2003 CFAA regarding FPAC consideration of the Auditor General’s reports remain of concern, important steps have been taken to open public sessions and to clear some of the backlog of reports. In terms of PI-28, Legislative scrutiny of external audit reports, the score remains low (Annex A), but significant improvement now appears achievable in the next few years if the reforms are expedited and sustained.

As outlined above, reforms both in terms of FPAC discussion of Auditor General’s reports and improvements in the quality of budget information are having impact on the quality of National Assembly oversight and giving the public better access to PFM information. These steps are encouraging, and demonstrate what can be achieved with well-directed efforts. The magnitude of the remaining task remains large however, and addressing this will require a sustained commitment from the Government and development partners. Such a program would be an essential adjunct to the proposed program to develop the capacity and authority of the Auditor General.

Recommendations. The Government should improve the legal and institutional framework for the National Assembly. It should establish the National Assembly Service by an Act of Parliament, including provision of support services to facilitate the work of the Parliament. A major capacity-building program should be initiated to support the National Assembly and the National Assembly Service to enhance their effectiveness and efficiency. This program should include provision of study tours and logistical support. An Act to further strengthen the independence of the Auditor General is also needed.

Improvement of public access to budget information will be an important element of the capacity-building program. Part of this work would relate to further technical analysis and enhancement by DOSFEA to bring budget information more fully in line with international standards. Allied to this technical improvement, all sittings of the National Assembly and its key


PFM-related committees should be open to the public, budget and accounts data should be published on the Government website, and there should be a continuing campaign to raise public awareness of the availability of and rights to PFM information.


SECTION 7. PROPOSED REFORM ACTION PLAN

The review in this CFAA 2009 has established that many of the CFAA 2003 recommendations have not been fully implemented. The challenge of limited capacity and absence of a robust monitoring arrangement to ensure that the 2003-recommended action plan was implemented have been major factors contributing to the lack of progress. It will be important to build on any successful progress and to address the fundamental factors impeding further progress. In this regard, the proposed action plan for CFAA 2009 carries over the outstanding activities of CFAA 2003 that have not been implemented but are still relevant based on the current situation.

The proposed PFM reform action plan is aligned with the Pillar I of the Government’s PRSP that includes all aspects relating to economic management, including macroeconomic stability, public finance management, public debt management, divestiture, and civil service reforms.

The action plan requires full support of all stakeholders and should coordinate all ongoing PFM-oriented reforms in a comprehensive and monitorable framework. Some measures can be implemented in a relatively short timeframe; most will probably require sustained support over many years. First, it is critical that the overall strategy of reform should be clearly understood and, second, that the Government provides strong, committed, and continuing leadership for the reform program. The leadership role goes beyond taking ownership of the process, which has substantially improved since the 2003 CFAA.

Reform strategy: There are a number of elements to be balanced in the action plan to address the identified weaknesses and reduce PFM fiduciary risk. The following critical institutional weaknesses identified in the CFAA 2009 should be tackled immediately with a clear long-term commitment:

Ineffective internal audit function; Weak capacity, independence, and authority of external audit; and Weak legislative and public oversight.

Wider civil service reforms are needed to support and sustain the PFM improvements that have been registered thus far. If these relative issues are not tackled, technical improvements in PFM systems are unlikely to be sustained.

Consolidation of successful reforms: The gains made in Central Government management in terms of introduction of an IFMIS and modern chart of accounts must be translated as soon as possible into more effective policy-linked planning and control. And performance in these areas should be rigorously monitored.

Long-term institutional reform: The PFM successes in Central Government cannot be immediately transferred to other elements of general government (local government) or the public sector (public enterprises) because of capacity constraints and of the need for deeper policy development on reform of public enterprises. Only initial steps have been taken in each area; and in each, there is a need to map out a long-term strategy and corresponding long-term action plan for these components.


Timeframe and prioritization: The action plan must consider the ability of the Government to implement the reforms. For this reason, the action plan is divided between short-term (1-2 years) and medium-term (3-5 years) actionable items. As well, reform activities are prioritized and sequenced such that the critical issues are addressed in order to build a platform for future reforms. Quick wins can be achieved by addressing the critical issues first, build confidence, and capture the attention of all stakeholders to support the reform agenda.

Oversight: A PFM reform oversight steering committee under the chairmanship of the Permanent Secretary for DOSFEA and reporting to the Secretary for DOSFEA should be set up to provide oversight for the recommended reform activities of CFAA 2009. The CFAA 2003 lacked sufficient mechanism for monitoring and oversight of its recommendations. Development partners supporting the reforms should be co-opted in the committee. The oversight committee should have support of sub-committees with direct responsibility for implementing the thematic areas of the reform. The sub-committee could meet monthly under the leadership of a PFM Reform Coordinator who should be appointed or recruited. Quarterly implementation reports will then be submitted for review by the steering committee at quarterly meetings. The PFM Reform Coordinator will produce an annual report, and the Secretary for DOSFEA will present it at a public PFM Forum. (Annex D suggests terms of reference for the proposed steering committee).


ANNEX A. PEFA PFM Performance Measurement Framework

Summary of PEFA - PFM Performance Scores

A. PFM-OUT-TURNS: Credibility of the budget Scores

PI-1 Aggregate expenditure out-turn compared to original approved budget BPI-2 Composition of expenditure out-turn compared to original approved budget CPI-3 Aggregate revenue out-turn compared to original approved budget BPI-4 Stock and monitoring of expenditure payment arrears NSB. KEY CROSS-CUTTING ISSUES: Comprehensiveness and Transparency PI-5 Classification of the budget BPI-6 Comprehensiveness of information included in budget documentation BPI-7 Extent of unreported government operations D+PI-8 Transparency of inter-governmental fiscal relations DPI-9 Oversight of aggregate fiscal risk from other public sector entities. D+PI-10

Public access to key fiscal information D

C. BUDGET CYCLE C(i) Policy-Based Budgeting PI-11

Orderliness and participation in the annual budget process B

PI-12

Multi-year perspective in fiscal planning, expenditure policy and budgeting D+

C(ii) Predictability and Control in Budget Execution PI-13

Transparency of taxpayer obligations and liabilities C

PI-14

Effectiveness of measures for taxpayer registration and tax assessment C

PI-15

Effectiveness in collection of tax payments NS

PI-16

Predictability in the availability of funds for commitment of expenditures C

PI-17

Recording and management of cash balances, debt and guarantees B

PI-18

Effectiveness of payroll controls C+

PI-19

Competition, value for money and controls in procurement NS

PI-20

Effectiveness of internal controls for non-salary expenditure C+

PI-21

Effectiveness of internal audit D

C(iii) Accounting, Recording and Reporting PI-22

Timeliness and regularity of accounts reconciliation C

PI-23

Availability of information on resources received by service delivery units D

PI-24

Quality and timeliness of in-year budget reports B+

PI-25

Quality and timeliness of annual financial statements D+


C(iv) External Scrutiny and Audit PI-26

Scope, nature and follow-up of external audit D+

PI-27

Legislative scrutiny of the annual budget law C+

PI-28

Legislative scrutiny of external audit reports D+

D. DONOR PRACTICES D-1 Predictability of Direct Budget Support NSD-2 Financial information provided by donors for budgeting and reporting on

project and program aid NS

D-3 Proportion of aid that is managed by use of national procedures NSNS = Not Scored


Description of Legal Framework for PFM

1. The overriding legal framework for the management of public funds is the Constitution of the Republic of The Gambia 1997; chapter IX of the 1997 Constitution deals with finance and sections 158 to 160 provides for the existence of the Auditor General and the National Audit Office.

2. The Finance and Audit Act, 1964 has been revised and the Budget Management and Accountability (BMAA) Act, 2004 is now in place to provide for the control and management of public monies, for the powers and duties of the Legislature and Executive branch in the preparation, presentation, approval, execution, and reporting of Government budget and for matters connected therewith. At the local level, the Local Government Act, 2002 is supported by the Local Government (Finance and Audit) Act, 2002.3. The BMAA Act, 2004 provides for the establishment of the Directorate of the National Treasury (DNT) to replace the Accountant General's Department. The DNT head is required to perform his or her duties under the direct supervision of the Permanent Secretary in accordance with the Financial Instructions. The Financial Instructions (1989 Edition) has been replaced with a revised Financial Instruction dated 2004. An Accounting Procedures Manual was issued in October 2006 to provide detailed guidance for the business processes to be performed in using the EPICOR package that is used for the Integrated Financial Management Information System (IFMIS).

4. The Public Procurement Act inspired from the UNCITRAL Model Law was prepared in 2001 with technical assistance from the International Trade Center. The Law adopted by Parliament became effective July 2003 and established the Gambia Public Procurement Authority, which replaces the centralized Tender Board (Major and Minor Tender Boards). A key feature of the Act is that it puts in place mechanisms for the decentralization of procurement activities to Government entities. Implementing regulations and standard bidding documents were also prepared and issued during 2002-2003.

5. Gambia Revenue Authority Act, 2004 provides for the establishment of the Gambia Revenue Authority to administer, assess, and collect revenue, to provide for the efficient and effective administration of the revenue collecting system, and for matters connected therewith. 6. The Income and Sales Act, 2004 revises and consolidates the laws relating to income tax and sales tax and for matters connected therewith. This Act repealed The Income Tax and National Sales Tax Act.

Income Tax (rates for informal sector) Regulations, 2007 provides that the Commissioner General shall determine whether a business size is small, medium, or large for the purposes of the rate of tax payable based on the turnover of the business. The regulation has a schedule of the annual rate of tax for the informal sector.

Income Tax (Taxpayer Identification Number) Regulations, 2007 enjoins the Commissioner General to issue Taxpayer Identification Number (TIN) if satisfied with the documentary evidence that are required to be provided under the Regulation by (a)an individual (resident and non-resident)(b)a company (c)a partnership, society and trust, and (d) body of persons.

Description of Institutional Framework for PFM


7. The Department of State for Finance and Economic Affairs (DOSFEA) according to the 1997 Constitution and the BMAA Act, 2004 is primarily responsible for the control and management of public monies in a transparent and accountable manner.

8. To carry out this function effectively DOSFEA has established the following organizational units.

Directorate of National Treasury Budget Office Economic Management and Policy Unit Debt Management Directorate Internal Audit Department/Division – This exists in name only.

9. The National Planning Commission works closely with DOFSEA to ensure smooth implementation of the Governments Poverty Reduction Strategy.

10. Gambia operates a centralized PFM system, except for the IFMIS, that allows Departments to enter their transactions remotely to the DNT-maintained centralized database.

11. The Central Bank of Gambia maintains the Treasury Main Account for the Government as well as other departmental bank accounts. Bank accounts are also held at some commercial banks.

12. Key to improving policy formulation and monitoring and evaluation of budget implementation is availability of timely, reliable and accurate data. In this regard, Government has established the Gambia Bureau of Statistic as a semi-autonomous organization replacing the former Central Statistic Department. The Statistic Act was revised in 2005 and new organizational structures have been put in place to ensure that the institution operates more efficiently and effectively.

13. The National Planning Commission, Gambia Public Procurement Authority, and the Gambia Revenue Authority are other key PFM institutions that together with DOSFEA and the line departments ensure the smooth running of the PFM system.

14. To ensure oversight the National Audit Office has a constitutional mandate to audit all public funds. The Auditor General is appointed by the President after consultation with the Public Service Commission and is required by the Constitution to submit his audit report to the National Assembly within six months of the end of the immediately preceding financial year. The Finance and Public Accounts Committee (FPAC) of the National Assembly on receipt of the Auditor General’s report holds public hearings in which public officials are called to provide explanations for the various audit queries raised in the report. Recommendations and sanctions are then made for implementation by the Executive branch.

15. The Local Government Act, 2002 established the local governments with their responsibilities to perform key service delivery functions. At the moment this is not being done because capacity to perform these services is yet to be built at the local councils. The Central Government still maintains regional-level departments.

Integrated Assessment of PFM Systems

16. The following section describes an integrated assessment of the critical dimensions of performance of an open and orderly PFM system:

Credibility of the budget. The budget is realistic and is implemented as intended. Comprehensiveness and transparency. The budget and the fiscal risk oversight are comprehensive and fiscal and budget information is accessible to the public.


Policy-based budgeting. The budget is prepared with due regard to government policy. Predictability and control in budget execution. The budget is implemented in an orderly and predictable manner, and there are arrangements for the exercise of control and stewardship in the use of public funds. Accounting, recording and reporting. Adequate records and information are produced, maintained, and disseminated to meet decision making control, management, and reporting purposes. External scrutiny and audit. Arrangements for scrutiny of public finances and follow up by Executive branch are operating.

Budget credibility

PI-1. Aggregate expenditure out-turn compared to original approved budget

17. The budget is the main tool that is used to translate government’s policy into practice. Therefore, it is important for the Executive to be able to execute the budget as passed by the Legislature all other things been equal. This requires budget discipline by keeping planned expenditure within the Government’s ability to raise revenue or debt that is not prohibitively expensive.

18. Poor performance in 2005 and 2006 can be attributed to the shortfalls in collection of domestic revenue. In 2007, domestic revenue was marginally exceeded but this is overshadowed by the aggregate over-expenditure of 7 Percent.

Table A1. Comparison of Original Budgeted and Actual Expenditures, 2005-2007 2005 2006 2007

Budgeted primary expenditure (billion Dalasi) 1,689 1,855 2,392

Actual primary expenditure (billion Dalasi) 1,375 1,940 2,575

Difference between actual & budgeted primary expenditure (billion Dalasi) (314) 85 183

Difference as percentage of budgeted primary expenditure (18.6)% 4.5% 7.7%

PI-2. Composition of expenditure out-turn compared to original approved budget

19. In addition to respecting the budget aggregates, it is equally important for the composition of the budget either at administrative or functional level to be respected to allow the policy intent of the budget to be met.

20. The deviations in aggregate spending as reflected in PI-1 are further manifested at the administration level with expenditure composition exceeding overall deviation in primary expenditure by more than 5 percent in 2005, 2006, and 2007. Annex C further shows that key service delivery ministries such as Education, Health and Social Welfare, Works, and Justice have spent less than budgeted as opposed to Finance and Economic Affairs, Office of the President, Interior and Religious Affairs.


However, Education and Health and Social Welfare have continued over the period to be ranked amongst the top five spending ministries.

21. Miscellaneous budget mainly comprises payment for arrears and guarantees with some amounts for local travelling expenses and contingency other charges. The budget for miscellaneous expenses has increased from 6 percent in 2005 to 22 percent in 2007 and represents the highest budget for 2006 and 2007. This increase was due mainly to the comprehensive compilation of all domestic arrears, which were agreed upon with creditors to be paid over three years starting in 2006. Commitments resulting from hosting the African Union Summit in 2006 also caused some increase in miscellaneous expenditure. Such high allocation of resources to miscellaneous expenses crowds out allocation to service delivery expenditure.

PI-3 Aggregate revenue out-turn compared to original approved budget.

22. To ensure fiscal discipline it is important to accurately forecast domestic revenue to guide the allocation of funds for budget execution. The indicator shows that the Government is reasonably able to forecast and collect domestic revenue with collections only short by 3.6 percent and 5.2 percent in 2005 and 2006, respectively. Collection exceeded forecast by 10.2 percent in 2007.

Table A2. Comparison of Original Budgeted and Actual Domestic Revenue Receipts, 2005-20072005 2006 2007*

Budgeted receipts (GMD millions) 2,817.15 3,164.20 3,342.70

Actual receipts (GMD millions) 2,717.10 2,998.10 3,682.21

Difference between actual and budgeted receipts (GMD millions) (100.05) (166.10) 339.51

Difference as percentage of budgeted receipts (3.6)% (5.2%) 10.2%Source: Published budget estimates and actual collection reported in Directorate of National Treasury final accounts. *Draft as at end Dec 2007

23. The sum of GMD 4,202,200 is projected for 2008, representing 24.35 percent of nominal GDP.

PI-4. Stock and monitoring of expenditure payment arrears

24. A high level of arrears can indicate a number of different problems such as inadequate commitment controls, cash rationing, inadequate budgeting for contracts, under-budgeting of specific items, and lack of information.

25. The miscellaneous vote in the budget estimate is mainly made up of payment for arrears and guarantees. The 2006 and 2007 financial statements show details of payment of arrears of GMD236,326 and GMD548,537, respectively, but the 2005 financial statements does not disclose this information. The stock of expenditure payment arrears at the start of the year is not shown in the budget (See PI-6) to allow calculation of arrears paid as a percentage of actual total expenditure for the corresponding fiscal year and to assess changes in the stock of expenditure payment arrears.


26. Prior to the implementation of IFMIS in 2007, outstanding commitments were not disclosed in the annual financial statements. The 2008 financial statement has a Statement of Outstanding Commitments totaling GMD48.327million as submitted by Vote Controllers, from the various departments of state (ministries) as reflected in the Table below. The statement provides information on the outstanding commitments at the end of the financial year, which the Government has entered into for the supply of goods and services for each vote summarized and analyzed in terms of functions of government, and between operating and capital commitments.

27. There is no clear policy on the number of days required to pay suppliers invoices making it difficult to age outstanding payments. Salary payments are up to date.28. Arrears to suppliers as December 2006 was GMD 336,000 but corresponding figures for 2005 are not available as shown in the Table A3 extracted from Report on the Gambian National Debt Strategy and New Financing Analysis Workshop, February, 2007.


Table A3. December 2005 December 2006Amount

(GMD‘000)% Amount

(GMD‘000)%

A. Marketable Instrument91-Day Treasury bill 617.25 14 365.19 8182-Day Treasury bill 961.25 22 906.35 19364-Day Treasury bill 2,809.14 64 3,376.21 73

SUB-TOTAL 4,387.64 4,647.75

B. Non-MarketableGovernment bonds 250 250Treasury notes 535 535Central Bank loan 606 75Suppliers arrears - 336

SUB-TOTAL 1,391 1,196GRAND TOTAL 5,778.64 5,843.75

Sources: Central Bank of The Gambia and DOSFEA 2007

Indicator Score Brief explanation of status as at the reporting period

A. Credibility of the Budget

PI-1. Aggregate expenditure out-turn compared to original approved budget B

Based on domestically-financed primary discretionary expenditure (i.e. excluding debt service charges and donor funded project expenditure) deviations between original budget and outturns were: 2007: 7.7% 2006: 4.5% 2005: (18.6)%Actual expenditure deviated from budget by more than 10% in no more than one out of the 3 years

PI-2. Composition of expenditure out-turn compared to original approved budget C

Deviations between original budget and outturns were: 2007: 5.0% 2006: 19.0% 2005: 5.1 %Variance in expenditure composition exceeded overall deviation in primary expenditure by more than 10% only in 2006 out of the last three years.

PI-3. Aggregate revenue out-turn compared to original approved budget B

Actual revenue collections as a % of budgeted domestic revenue obtained from Ministry of Finance fiscal tables were:2007: 110.2% 2006: 94.8% 2005: 96.4 %

PI-4. Stock and monitoring of expenditure payment arrears

NS Data not available for dimension (i) to score this indicator.

(i) Stock of expenditure payment arrears (as a percentage of actual total expenditure for the corresponding fiscal year) and a recent change in the stock

NS Government has been paying off large amounts of arrears over the last few years but full details of the payments were not made available to the team to do the necessary calculation and assess changes in debt stock.

IFMIS became operational in 2007, and outstanding commitments are now disclosed in the annual financial statements.

(ii) Availability of data for monitoring the stock of expenditure payment arrears

C List of outstanding commitments are now available in IFMIS since 2007. However, the list does not show aged balances to categorize them into arrears.

Data on the stock of arrears is generated on an ad hoc basis as was done as part of the 2007 Gambian National Debt Strategy and New Financing Analysis Workshop

29. The indicators demonstrate some level of fiscal indiscipline. The effect is that the credibility of the budget is undermined since budget execution does not fully reflect its policy intent. Furthermore, ministries, departments, and agencies will lose trust that DOSFEA will make the necessary budgetary provisions to implement planned programs and the public will in turn also lose confidence that public services will be rendered efficiently.


Comprehensiveness and transparency

PI-5. Classification of the budget

30. The classification system (chart of accounts) must be robust to allow the tracking of spending on the following dimensions: administrative unit, economic, functional and program. Such chart of accounts will enable The Gambia to report expenditure in GFS format and align and track poverty-reducing expenditure in the poverty reduction strategy.

31. The chart of accounts is made up of 30 alphanumeric characters divided into four segments as follows.

Source: Accounting Procedures Manual dated 23/10/2006


32. The 2006 budget estimates were completely mapped to the new chart of accounts, and the 2007 budget estimates were produced using the new chart of accounts for IFMIS. Reporting by functions of Government is currently achieved through mapping tables. An overview of the functions of government at sub-functional level is provided in the budget estimates. The Directorate of National Treasury has produced draft formats for preparing financial statements that will include Classification of Functions of Government (COFOG) reports at sub-functional level. The level of detail for functional analysis in the budget is derived from the responsibility segment through mapping tables with the following sub-functional analysis:

GeneralGeneral public services Defense Public order and safety

SocialEducationHealthSocial security and welfareHousing and community amenitiesRecreational, cultural , and religious affairs

EconomicFuel and energyAgriculture, forestry, fishing, and huntingMining and mineral resources, and manufacturingTransportation and communicationOther economic affairs

OtherDebt interest


PI-5. Classification of the budget

B

The classification system is robust to prepare budgets by administrative unit, economic, functional and program. The Accounting Procedures Manual provides a detailed description of the chart of accounts and is widely understood by various users.

However, the MTEF segment of the chart of accounts is not utilized and there is room for improvement in ensuring that budget execution reports are classified at sub-functional level.

PI-6. Comprehensiveness of information included in budget documentation

33. It is important for especially the Legislature and other users to have the full picture of the budget. The underlying assumptions for the budget should also be


disclosed for better understanding of the estimates. Table A4 shows the elements that are contained in the budget.

Table A4. Elements of the BudgetAvailable

Macro-economic assumptions, including at least estimates of aggregate growth, inflation and exchange rate.

The macro-economic assumptions that underpin the preparation of the estimates are not explained in the budget. However, the Budget Speech talks about the expected growth rate in the real sector and monetary developments in exchange and interest rates. The impact of these on the budget estimates is not clearly explained.

Yes

Fiscal deficit, defined according to GFS or other internationally recognized standard.

Financing of the fiscal deficit is categorized in a table in the budget estimates.

Yes

Deficit financing, describing anticipated composition.

The composition of how the deficit will be financed is described in the budget.

Yes

Debt stock, including details at least for the beginning of the current year.

No

Financial assets, including details at least for the beginning of the current year.

Details of financial assets are not included in the budget.

No

Prior year’s budget outturn, presented in the same format as the budget proposal.

Provisional actual figures are presented for the prior year (2006)

Yes

Current year’s budget (either the revised budget or the estimated outturn), presented in the same format as the budget proposal.

Current year’s budget is included but without outturns to assess execution of the budget.

Yes (revised budget)


Gross Surplus /Deficit (-)

FinancingDomestic borrowing, domestic amortization, foreign amortization, payment of arrears, exceptional financing

Memorandum

GLF Expenditure + Foreign Amortization

Debt Service

Domestic Borrowing + Net Surplus/Deficit

Table A4. Elements of the BudgetAvailable

Summarized budget data for both revenue and expenditure according to the main heads of the classifications used (refer to PI-5), including data for the current and previous year.

Partly

Explanation of budget implications of new policy initiatives, with estimates of the budgetary impact of all major revenue policy changes and/or some major changes to expenditure programs.

No

34. For the budget and fiscal reports to be comprehensive it must cover all aspects of financial statements (revenue, expenditure, assets, and liabilities) for the various budgetary entities. The GBMAA Act, 2004 allows some entities to retain internally generated revenue, but these are not included as part of the budget estimates making it incomprehensive. 35. Some amount of information is available in the budget estimates for expected disbursements from development partners. This is far from comprehensive; and even for those that are captured in the budget, actual expenses are not included in out-turn reports.


PI-6. Comprehensiveness of information included in budget documentation

B Five out of the nine elements are included in the 2008 budget estimates.

PI-7. Extent of unreported government operations

36. Extra-budgetary funds and sources of external financing should be integrated into the budget and financial statement in order to provide a complete picture of public funds. Current transfers account for 15.5 percent (GMD 522,044) of recurrent expenditure (GMD 3,367,719). Fifty-two percent (GMD 273,496) of the transfers are to public authorities. Use of extra-budgetary funds can result in loss of aggregate expenditure control since they are outside the control of DOSFEA. Less transparency may also lead to inefficiency or misuse of funds.37. The GBMAA Act, 2004 (2) provides that “Notwithstanding the provisions of subsection (1), an Act of the National Assembly may provide: (a) for the payment of particular revenue or other money into some other fund, which for the purpose of this Act is called extra-budgetary fund, established for a specific purpose; and (b) for the retention of revenue or other money by the budget agency that received it for the purpose of defraying expenses of that budget agency, which for the purpose of this Act is called ‘departmental self-raised revenue’”.38. Vote Controllers that are authorized to operate special bank accounts are required to submit statements of revenue and expenditure to the Directorate of National Treasury within five days of the end of each month [GBMAA Act, 2004 (40)]. However, this is not done by most of the Departments; lack of reports makes it even more difficult to ascertain the value of such unreported transactions.


39. The budget estimates provide an overview of how expenditure will be funded by showing grant and loans expected from bi-laterals and multi-laterals development partners and the portion funded by the Government. For 2008, The Gambia Government expected to receive an amount of GMD 1,444,520 for development projects in the form of grants and loans to support a total budget of GMD 5,873,114. The provisional figures for 2006 in the budget estimate are not categorized by the economic classification because of lack of reports as stated above.40. Donor funds are managed through special bank accounts operated by the project implementation unit and approved by the Directorate of National Treasury. With the new chart of accounts, it is possible for donors to submit returns to the Directorate of National Treasury so that the transactions can be captured and reported in fiscal reports. However, this is not been done. The effect is that government programs are under-reported thus undermining government accountability for the use of these funds.41. The Ministry of Finance and Economic Affairs (previously the DOSFEA) has set up a Project Management and Aid Coordination Unit to improve coordination, monitoring, and comprehensive reporting of aid flows in the country. In consultation with all stakeholders, including the civil society organizations, the unit prepared the first Aid Coordination Report in 2009.

PI-8. Transparency of intergovernmental fiscal relations

42. There are three forms of central subvention to local governments (a) general grant; (b) grant-in-aid; and (c) equalization grant. The criteria for making these horizontal transfers to the seven councils are not clear. The Finance and Audit Act however provides that 60 percent of council’s revenue shall be



PI-7. Extent of unreported government operations D+

(i) Level of unreported extra-budgetary expenditure

C

Transfers to public authorities disclosed in the budget are 8% of total recurrent expenditure (GMD 273,496 out of GMD 3,367,719). However lack of returns from the public enterprises makes it difficult to ascertain the full value of extra-budgetary funds.

With strict cash management measures put in place in recent years and rationalization of bank accounts; Institutional and Governance Reviews are gradually being integrated in fiscal reports.

Reporting on donor funds, and more generally on extra-budgetary operations, remains unsatisfactory.

(ii) Income/expenditure information on donor-funded projects

D Grants and loans expected from donors are included in the budget estimates but actual expenditure during the year is not included in outturn reports – GMD 1,444,520 out of GMD 5,873,114 (i.e., 25%).

devoted to development activities and 40 percent to recurrent activities. Transfers from the Central Government are mainly to cover administration expenses. Functional devolution is yet to take place to make this indicator relevant.

43. According to the Finance and Audit Act, the preparation and approval of the budget must be done by September each year incorporating comments of the Secretary of State for Local Governments and Lands. This timeline is to ensure that the budgetary needs of the councils are factored in the Central Government budget. With delays in the preparation of council budgets, the Central Government uses its best judgment to estimate the budgetary needs of the councils. The effect of this is that reliable information on allocations is not available to the councils at the start of the year.

44. Despite the fact that Financial Instructions for the GBMAA Act, 2004 apply to councils; current practice is still based on the old Financial Memorandum for Municipal & Area Councils published in 1985. Financial reporting is limited to the production of a trial balance only. A full set of financial statements including the production of a balance sheet and income statement are not produced by any of the councils. This makes it impossible for fiscal reports for the councils to be consolidated and analyzed according to Central Government reporting format.

PI-9. Oversight of aggregate fiscal risk from other public sector entities


PI-8. Transparency of intergovernmental relations D

(i) Transparency and objectivity in the horizontal allocation among subnational governments.

D Apart from the high-level requirement that 60% of council’s revenue shall be devoted to development activities and 40% to recurrent activities, transfers to the councils are not based on a transparent rule based allocation formula.

(ii) Timeliness of reliable information to subnational governments on their allocations

D Transfers from the Central Government are mainly to cover administration expenses and functional devolution is yet to take place. Information on the expected transfers is not reliable in determining the budgets for the councils.

(iii) Extent of consolidation of fiscal data for general government according to sectoral categories

D No local government data is included in the national budget. Sectoral breakdown is not done. Most of sectoral spending is still under national ministries, departments, and agencies. Councils still use the 1985 Financial Memorandum for Municipal & Area Councils. The classification system and report format are different from that of the central government.

45. Public enterprises and the councils could create debt for the Central Government if their financial position is not closely monitored. In this regard, the Financial Instructions for the GBMAA Act apply to


(a) all departments and constitutional institutions; (b) the Gambian Revenue Authority; and (c) all subvented agencies.

46. The DOSFEA is represented on the board of all public enterprises and exercise oversight by reviewing the annual budgets and audited financial statements. However, a consolidated overview of public enterprise operations and possible aggregate risk to Central Government is not undertaken.

47. The Finance and Public Accounts Committee recently reviewed the annual audited accounts of public enterprises in joint open sessions with the Public Enterprises Committee of the National Assembly. The revitalization of the Committees in the National Assembly has created public interest in accountability by various public officials.


PI-9. Oversight of aggregate fiscal risk from other public sector entities D(i) Extent of monitoring public enterprises

DApart from recent discussion of audit reports by the FPAC and Public Enterprise Committee of National Assembly, little progress has been made on establishing basic reporting and accountability mechanisms since the 2003 CFAA

(ii) Extent of Central Government monitoring of subnational governments’ fiscal position. D

Limited progress has been made by Directorate of Local Governance to establish effective mechanisms of local government reporting and accountability. Unavailability of annual financial statement limits the scope to monitor the local government fiscal positions annually.

PI-10. Public Access to key fiscal information

48. Without transparency, there can be no accountability. For this reason, it is essential for Government to make key fiscal information available to the public in a timely manner. Elements of information made available by The Gambia Government to the public include:

Elements Available(i) Annual budget documentation. The public can obtain a complete set of

documents through appropriate means when the documents are submitted to the Legislature.

Partially

(ii) In-year budget execution reports. The reports are routinely made available to the public through appropriate means within one month of their completion.

No

(iii) Year-end financial statements. The statements are made available to the public through appropriate means within six months of completed audit.

No

(iv) External audit reports. All reports on Central Government consolidated operations are made available to the public through appropriate means within six months of completed audit.

No

(v) Contract awards. Award of all contracts with value above approximately No


US$100,000 equivalent are published at least quarterly through appropriate means.

(vi) Resources available to primary service units. Information is publicized through appropriate means at least annually, or available upon request, for primary service units with national coverage in at least two sectors (such as elementary schools or primary health clinics).

No

49. Although the annual budget estimate is printed by the Government Printer, it is not easily obtainable in the Government Bookshop nor is it posted on the DOSFEA website. The DOSFEA has a website (http://www.dosfea.gm/) but is not being effectively used to promote transparency and accountability by uploading key fiscal reports and policy papers.

50. In-year budget outturn reports are made available to the departments on a regular basis but such reports are not made public. Year-end financial statements have not been published for over 10 years. There was a huge backlog of preparation of annual accounts but the Directorate of National Treasury has now submitted accounts to the Auditor General’s Office up to 2006. These accounts are not made public until they are audited and the FPAC issues its report.

51. The FPAC has reviewed accounts up to 1999 but is yet to issue its report. The 2000-2004 accounts have been audited and await comments from the Executive before finalization and submission to the National Assembly.

52. Contract opportunities are made open in the national press, but awards are not published. Public Expenditure Tracking Surveys (PETS) are not performed annually.


PI-10. Public access to key fiscal information

D The budget estimates are printed by the Government Printer but are not readily available to the public.

Policy-based Budgeting

PI-11. Orderliness and participation in the annual budget process

53. Article 152 of the Constitution provides for Annual Estimates and Appropriations. Article 152 (1) enjoins the President to cause the Secretary of State responsible for finance to prepare and lay before the National Assembly, at least 30 days before the end of the financial year, estimates of the revenue and expenditure of The Gambia for the following financial year.

54. The estimates shall include estimates that under the Constitution are to be submitted directly to the President for presentation by the President to the National Assembly. These estimates include those of the National Assembly, the Judicature, National Audit Office, and the Independent Electoral Commission. The Chief Justice and any other authority that is entitled to draw up its own estimates for direct presentation by the President to the National Assembly shall provide the President with such estimates at least 90 days before the end of the previous financial year. The National Assembly is required to give consideration to and approve the estimates within 14 days of the estimates being laid before it. The National Assembly shall, within 7 days of the introduction of the Appropriation Bill, give consideration to and pass the Bill.

55. Budget call circulars are issued around June each year. Departments have 3 weeks to prepare for consultative workshops to ensure participation in the formulation process. About 3 months is given for


http://www.dosfea.gm/

the preparation of the budget before bi-lateral discussions are held with DOSFEA to review the budget for consistency with national policies in the PRSP. The National Planning Commission plays a critical role in reviewing the budget during the bilateral discussions.

56. All Departments of State are required to form a Budget Task Force headed by the Secretary of State and comprising Heads of departments (units) and stakeholders. The Budget Office is concerned about the quality and completeness of estimates received, thus doubting the existence or capability of the task force in certain sectors. The Budget Committee at DOSFEA only discusses a consolidated budget coming from the Permanent Secretary. Both recurrent and development budgets are integrated.

57. Ceilings for other charges, development, and personnel emoluments are issued with the budget call circular. At this stage the Cabinet is not formally involved in approving the ceilings. The Cabinet is involved in the process at the point when the budget is ready for submission to the National Assembly. However, each Secretary of State would have been involved in the preparation of his/her own budget. A holistic review of the ceilings by Cabinet would ensure that national policies are properly articulated in the budget and reflect Government’s priorities in the allocation of ceilings.

58. Revenue-generating departments are required to develop their revenue budgets using GDP growth, inflation figures, projected sales, strength of the work force, and other key variables. The macro-economic targets by the Gambian authorities in formulating the budget were for the next 3 years at a GDP growth rate of 4.5 percent, an average inflation level of 5.0 percent, and a fiscal deficit averaging 3.1 percent of GDP for the same time period. Sectoral ceilings were set with the above key macroeconomic variables in mind and based on the prevailing economic conditions of the country.

59. In developing estimates for personnel emoluments, departments are required to discuss their staffing needs with the Personnel Management Office. Employment of new staff that creates new posts is not allowed, although existing vacant positions can be filled. New Details of Establishment and Nominal Rolls are sent to the Department of State for Finance and Personnel Management Office.

60. Clear guidance is given to the Departments on how to prepare the estimates. The IFMIS pilot departments use the ‘Active Planner’ module to enter their estimates, and those that are not yet online are provided with templates that are entered at the Data Center in the Budget Office. Estimates for all departments are then consolidated to form the overall budget estimates.

61. All Permanent Secretaries and Heads of departments were urged to adhere to the 2008 budget preparation guidelines and the timely submission of their proposals as indicated in the timetable below.

Timetable for 2008 Budget Preparation

Activity Date Release of call circular June 6, 2007

National Consultative Workshop on Participatory Budgeting June 26, 2007

Deadline for submission of details of establishment and nominal rolls to DOSFEA

and Personnel Management Office August 14, 2007

Observed Bilateral Consultations Begins August 18, 2007

Bilateral Consultations To be released


62. The GBMAA Act, 2004, 22 (1) requires the Secretary of State in accordance with section 152 of the Constitution to prepare and lay before the National Assembly the Appropriation Bill documents, at least 30 days before the end of the financial year. For the past 3 years, this requirement has been met with the budget passed by the National Assembly before the start of the new financial year: FY2008, DOSFEA submitted on Nov. 20, 2007 and National Assembly passed on Dec. 24, 2007. FY2007, DOSFEA submitted on Nov.17, 2006 and National Assembly passed on Dec. 27, 2006. FY2006, DOSFEA submitted on Nov. 25, 2005 and National Assembly passed on Dec. 20, 2005.


C(i) Policy-Based Budgeting

PI-11. Orderliness and participation in the annual budget process B(i) Existence of and adherence to a fixed budget calendar

B Budget call circular is issued around June each year. Departments have about 2 months to prepare budgets before bilateral consultations start. However, capacity constraints undermine the quality and completeness of the budgets produced.

(ii) Guidance on the preparation of budget submissions

C Ceilings and clear instructions are given to the departments but the Cabinet as a whole only approves after departments have completed the budget.

(iii) Timely budget approval by the Legislature A

For 2006, 2007, and 2008 the budget has been passed by the National Assembly before the start of the new financial year, as stipulated in Section 22 (1) of the BMAA Act, 2004.

PI-12. Multi-year perspective in fiscal planning, expenditure policy and budgeting

63. Section 152 (4) of the Constitution of The Gambia states that “In addition to presenting the estimates for the following financial year, the President may cause to be prepared and presented to the National Assembly (a) fiscal and monetary programs and plans for economic and social development covering periods exceeding one year, and (b) estimates of revenue and expenditure in respect of such programs and plans”. Following this directive with its annual budget under preparation, the Government has completed its second Poverty Reduction Strategy Paper with its 5 pillars.

I. Improving the enabling policy environment to promote growth and poverty reduction.

II. Enhancing the capacity and output of productive sectors — agriculture, fisheries, industry, trade, tourism and infrastructure — with emphasis on productive capacities of the poor and vulnerable populations.


III. Improve coverage of the basic social services and social protection needs of the poor and vulnerable.

IV. Enhance governance systems and build the capacity of local communities and civil society organizations to play an active role in economic growth and poverty reduction.

V. Mainstreaming cross-cutting issues — gender, youths, population, HIV/AIDS, nutrition, and environment — into the development process.

64. The sectoral ceilings are divided into two categories: (a) poverty programs and (b) discretionary spending. Sectors are at liberty to re-allocate resources from discretionary spending to poverty programs but not vice versa. The reason for this being the fact that spending for poverty reduction purposes is classified as priority. The poverty programs that are planned to implement the PRSP initiatives are costed and included in the budget estimates.

65. Pillar I includes all aspects relating to economic management, including macroeconomic stability, public finance management, public debt management, divestiture, and civil service reforms.

66. The implementation strategy for the second PRSP will be through sector-wide approaches (SWAps) and the medium-term expenditure framework (MTEF) with strong focus on attaining targets of the Millennium Development Goals. As noted in the PRSP, detailed sector plans will need to be developed, and consistency with the PRSP must be ensured. To do this, capacity will first have to be developed in DOSFEA on macro-economic analysis and forecasting. This also requires accurate statistics for the various fiscal and monetary variables. Key sector data will need to be collected and analyzed.

67. The Gambia Bureau of Statistics has developed a strategic plan for 2008-2011; pillar two of the plan aims at “improving economic statistics for a better monitoring of programs implementation towards a sustainable economic growth”. Within this pillar the objective of producing key economic indicators as well as other statistics through surveys will contribute immensely in the preparation of meaningful medium-term strategies from which activities can be mapped out with costs to prepare medium-term expenditure budgets.

68. A move toward implementing medium-term expenditure budgets should be a gradual process starting with sensitization and capacity development across all sectors but more specifically within the National Planning Commission and DOSFEA. A properly sequenced activity plan for the introduction of medium-term expenditure budgets, targeting budget planners for the various sectors, will be needed.

69. The budget preparation process has evolved over the years with integration of the development and recurrent budgets. Estimates for donor-funded projects with details of the project and the donor agency are now included in the budget estimates with a summary overview of the funding broken down by Gambia local fund and grant and loans from listed development partners. This has improved the transparency of the funding source of the budget.

70. The Government conducted a debt sustainability analysis in 2007 for external and domestic debt.14 Staff of IMF in August 2008 issued the report, Update on Joint IMF/IDA Debt Sustainability Analysis.15 Tables A5 and A6 from the 2008 budget estimates show that debt payments for FY2008

14 Report on the Gambian National Debt Strategy and new financing analysis workshop organized by WAIFEM & DRI, February 12–22, 200715 The last DSA was presented to the Fund Executive Board on December 19, 2007 (IMF Country Report No. 08/109,Appendix I) and to the World Bank Executive Board on December 20, 2007 (Enhanced HIPC Completion Point Document


accounts for 21.06 percent of total expenditure compared to 26.39 percent in 2007 and 34.21 percent in 2006; this represents a reduction of 13.56 percent from 2006. Borrowing from the banking system has stopped since FY2007 though strict cash controls a situation made possible with IFMIS as the main tool. The budget over the 2006, 2007, and 2008 on average is about 75 percent funded by the Gambia Local Fund.

Table A5. Budget Estimates 2006 % 2007 % 2008 %

Recurrent 1,684,066 37.60 2,095,976 38.58 2,409,561 41.03

Development 1,262,828 28.19 1,902,772 35.02 2,226,558 37.91

Debt 1,532,598 34.21 1,433,909 26.39 1,236,995 21.06

Totals 4,479,491 100.00 5,432,657 100.00 5,873,114 100.00

Table A6. Overview of Debt ServiceGMD (thousand) %

2006 2007 2008

Provisional Approved Estimate

4 Debt interest 965,127 846,350 767,494 62.0540 Domestic interest 721,872 615,000 545,000 71.014001 Short-term T-bills and other government

677,727 615,000 545,000 100.00

4003 Loans from banking system 44,145 0 0 0

41 Foreign interest 243,255 231,350 222,494 28.994101 Foreign governments 78,246 81,303 66,620 29.94

4102 Multilateral organizations 165,010 150,047 155,874 70.06

9 Amortization 965,921 587,559 469,501 37.9590 Domestic amortization 541,429 0 0 0

9004 Loans from banking system 541,429 0 0 0

91 Foreign amortization 424,492 587,559 469,501 1009101 Foreign governments 138,857 201,366 152,358 32.45

9102 Multilateral organizations 285,635 386,193

and MDRI, Report No. 41413-GM).



PI-12. Multi-year perspective in fiscal planning, expenditure policy, and budgeting

D+

(i) Multi-year fiscal forecasts and functional allocations

D

The Government prepares an annual budget despite its constitutional requirement in Section 152 (4). Functional analysis is available in the budget estimates but in the absence of sector strategies for all budgeting entities allocation is based more on administrative basis.

(ii) Scope and frequency of debt sustainability analysis C Debt sustainability analysis for external and domestic debt

was undertaken in 2000 and updated in 2007.(iii) Existence of costed sector strategies

C

Statements of sector strategies for key Departments of Health and Agriculture were prepared for PRSP II but not fully costed.

Aggregate fiscal forecasts do not exist to ensure consistency.(iv) Linkages between investment budgets and forward expenditure estimates C

Efforts have been made to integrate the development and recurrent budget. The absence of MTEF budgets makes it difficult to plan properly the recurrent cost implications for major investments.

Predictability and control in budget execution

PI-13. Transparency of taxpayer obligations and liabilities

71. The Gambia Revenue Authority (GRA) Act, 2004, established the Gambia Revenue Authority that only started full operations in 2007 as it was going through its setup stages. Part 1, Article 149 of the Constitution makes imposition and approval of waiver or variation of tax the exclusive preserve of the National Assembly. Tax exemptions have been curtailed.

72. Tax rates and procedures are clearly displayed at collection points. The Income Tax (Rates for Informal Sector) Regulations, 2007 has broadened the tax base. The Regulations provides a schedule of the annual tax rates and the payable date. The GRA Commissioner General is responsible for determining the size (small, medium, or large) for the purpose of the rate of tax payable.

Tax appeals mechanism

73. The Income and Sales Tax Act, 2004, section 229 establishes the Tax Tribunal to hear appeal cases by taxpayers. Decisions of the Tax Tribunal can be appealed in a High Court that can make a final decision on the matter or remit the case to the Tribunal for reconsideration.

74. The Chief Justice appoints the President of the Tax Tribunal from the High Court, and the Secretary of State for Finance appoints the other members with consent of the Cabinet. Procedure guidelines for the Tribunal are being drafted, but at the time of the CFAA mission the President and members had not been appointed.



PI-13. Transparency of taxpayer obligations and liabilities C(i) Clarity and comprehensiveness of tax liabilities

B The tax laws and regulations are clear about tax liabilities. Discretions and tax exemptions have been curtailed.

(ii) Taxpayer access to information on tax liabilities and administrative procedures

C Taxpayers have access to some information on tax liabilities and administrative procedures. The GRA is in the process of actually putting most of the procedures into action.

(iii) Existence and functioning of a tax appeals mechanism

D The Income Tax and Sales Act makes provision for the Tax Tribunal but the Board has not been appointed.

PI-14. Effectiveness of measures for taxpayer registration and tax assessment

75. The Income Tax (Taxpayer Identification Number) Regulation 3 of 2007 brought into effect the Taxpayer’s Identification Number.

76. Extensive campaigns were done to educate the public about the Identification Number. The GRA requires the following documentation before processing an application for assigning the Taxpayer Identification Number: national ID card, passport, birth certificate, and business registration certificate. In the case of a partnership or trust, the identification number for each partner or trustee is required.

77. Banks and the Vehicle License Authority are now requiring taxpayer identification number before allowing individuals to open bank accounts and register vehicles.

78. The GAMTAXNET computer system is being developed for a comprehensive GRA database of all potential taxpayers. The taxpayer identification number for all government workers is gradually being captured in the payroll system. The ASYCUDA 2.7 application is being used by the Customs Department. The improved tax administration arising out of this reform initiative has contributed to average domestic tax revenue of 21 percent of GDP since 2004.

79. The Internal Audit Unit in GRA is not yet fully functional to assess the controls over the registration system and compliance in declaring obligations. A self-assessment system is being piloted with the first set of returns due at the end of March 2008 after extensive sensitization of the public.



PI-14. Effectiveness of measures for taxpayer registration and tax assessment

C

(i) Controls in taxpayer registration system

B The requirements for assigning taxpayer identification number are linked to other government registrations systems, such as national ID card and business registration, and also the banking system.

(ii) Effectiveness of penalties for noncompliance with registration and declaration obligations

C Penalties for noncompliance and declaration of obligations exist in the various tax laws and regulations, but the administrative arrangements for implementation are not yet in place.

(iii) Planning and monitoring of tax audit and fraud investigation programs

D The Internal Audit Unit in GRA is only now being set up.

PI-15. Effectiveness in collection of tax payment

80. Taxes and other sources of revenue are collected in cash. The Gambia Revenue Authority has transit accounts in Trust Bank Ltd. in the 4 regions of the country and the balances on these accounts are transferred to the Central Bank of Gambia every Tuesday and Thursday.

81. Burang immigration collection point receives cash directly from the public; the cash could be held for weeks before taking it to Sorma immigration post where the cash could again be held for a month before payment to a sub-treasury for subsequent payment to the Central Bank.

82. The current situation poses a serious risk by holding cash in mostly unsecured environments. Also, Government could be borrowing when in fact it has a lot of idle cash sitting outside the banking system. The collection process can be improved by involving commercial banks in the collection process. In all locations where commercial banks exist, tax collectors should be requested to pay all collections into holding bank accounts on the same or next day after collections. On a weekly basis, the commercials will in turn transfer the balance on the holding account to the Central Bank, and the commercial banks will be paid transfer charges that will be less than the cost of any borrowings.

83. The sub-treasuries will submit returns of all collections to the National Treasury, which will be matched with credit advice from the Central Bank to pass the relevant accounting entries.

84. The GRA Research Unit has been tasked to identify suitable tax districts.



PI-15. Effectiveness in collection of tax payments NS(i) Collection ratio for gross tax arrears, being percentage of tax arrears at the beginning of a fiscal year, which was collected during that fiscal year

NS Information on tax arrears is not complete and therefore difficult to calculate collection ratio.

(ii) Effectiveness of transfer of tax collections to the Treasury by the revenue administration

B GRA has regional bank accounts in Trust Bank Ltd., which transfers balance in those transit accounts every Tuesday and Thursday to the Central Bank of Gambia.

(iii) Frequency of complete accounts reconciliation between tax assessments, collections, arrears records and receipts by the Treasury

C Reconciliation of collections to receipts at the Treasury takes place weekly through the bank reconciliation but reconciliation to ensure that what is assessed is what is paid still remains weak.

PI-16. Predictability in the availability of funds for commitment of expenditures

85. Departments are required to submit annual cash plans based on their approved budgets. The cash plans are updated monthly and used by DOSFEA to make monthly cash allotments into sub-cash books. Commitment is controlled by availability of cash allocation rather than budget.

86. The GRA is not involved in the monthly cash allocation process. It expressed the need for its involvement to ensure that allocations are not only made based on current cash positions, but that forecasts for collections should also be considered.

87. Local purchase orders are printed from the system for supply of goods and services. Suppliers have been sensitized that payment can only be made for deliveries against local purchase orders printed from the system. This is a reliable process since the system has inbuilt controls to check for availability of cash from the requisition stage. Once a local purchase order is assigned to a request, cash is ‘tied’ for that transaction and does not form part of the cash that is reclaimed if unutilized at the end of the month.

88. Detailed budget execution reports showing available, budget, cash balance, and outstanding commitments to assist departments to monitor and plan budget execution are made available to the various departments. Cash allotments unutilized by departments at the end of each month are withdrawn and form part of the consolidated cash position used to make allocations based on current cash plans.

89. Votes for purchase of equipment and furniture are centralized at DOSFEA. Votes for individual departments are not ring-fenced, and there are instances in which departments are unable to purchase items such as computers or repair vehicles because the vote has been exhausted by the time they make a request. Accountability for expenses incurred under this vote is blurred since the vouchers and payments are authorized by DOSFEA, but another department used the asset.

90. Budget allocations are made but the main control mechanism for commitment is cash allocations. Cash allocations are adjusted frequently based on the overall cash balance in the Treasury Main Account. Ministries, departments, and agencies are not involved in the decision making process of cash allocations beyond the submission of their monthly cash plans.



PI-16 Predictability in the availability of funds for commitment of expenditures C(i) Extent to which cash flows are forecast and monitored

C Cash flow forecasts are prepared annually but the updates are simplistic. There is insufficient evidence of linkage of the cash plans with procurement plans.

(ii) Reliability and horizon of periodic in-year information to ministries, departments, and agencies on ceilings for expenditure and commitment

C Departments are given cash allocations on a monthly basis. Un-utilized cash is withdrawn and forms part of the total cash available for subsequent allocations. The main control for fiscal discipline in budget executions is based on availability of cash allocation rather than budget.

(iii) Frequency and transparency of adjustments to budget allocations, which are decided above the level of management of ministries, departments, and agencies

C Budget allocations are based on the approved budget and cash plans. There are significant in-year adjustments to the cash allocations by DOSFEA without dialogue with the departments. The criteria for the adjustments are not quite clear even though most of the Directors in DOSFEA are involved in the decision making process.

PI-17. Recording and management of cash balances, debt, and guarantees

91. Debt data recording and management is spread between the DOSFEA and Central Bank of The Gambia using CS-DRM 2000+ System. However, private debt, debt contracted by local governments and public enterprises and grants are not recorded for a comprehensive assessment and analysis of debt burden and formulation of aid strategy.16

92. The Gambia is at high risk of debt distress based on external debt burden indicators (Box A1). A priority fiscal policy has been the reduction of debt service and the stock of public debt in order to expand the fiscal space for PRSP-related expenditures. The country received substantial debt relief through HIPC completion point achieved in December 2007. As a result interest payment declined from a peak of 47 percent of recurrent expenditure in 2005 to 24 percent in 2008.

Box A1. Conclusion of Update on Joint IMF/IDA Debt Sustainability Analysis

The Gambia’s debt situation has improved since the last debt sustainability analysis due to an improvement in the overall fiscal balance in 2007 and a decline in new borrowing. But given continuing risks, it will be important for the authorities’ to finalize and implement the planned national debt strategy as soon as possible.

IMF/IDA staff recommendation is that new borrowing be on highly concessional terms and that the authorities exercise restraint in contracting new loans. The major risks to debt sustainability include lower than expected economic and/or export growth, higher than expected new borrowing, or a deterioration in fiscal performance.

16 Report on the Gambian National Debt Strategy and New Financing Analysis Workshop, February 2007.


93. All departmental bank accounts are maintained at the Central Bank of The Gambia. The GRA maintains transit revenue bank accounts in the regions at Trust Bank Limited that transfers proceeds in the accounts twice weekly. Some non-tax revenues are held at collecting points and sub-treasuries sometimes for more than a month before remitting to the Central Bank. Bank reconciliation is automated and done daily by the Directorate of National Treasury. The accounting system can consolidate cash balances held at the Central Bank. The consolidated balance will not show the true cash position of the government since there will be idle cash held at some sub-treasuries.

94. Section 155 of the Constitution of the Gambia, 1997, provides for the contracting of loans. Financing of the deficit is clearly explained in the budget as required by GBMAA Act, 2004 36 (1). The proceeds of any borrowing are credited to the consolidated fund from which all government payments are made.


PI-17. Recording and management of cash balances, debt and guarantees B

(i) Quality of debt data recording and reporting

C DOSFEA and Central Bank of The Gambia maintains data of debt at Central Government, but it is incomplete since debt by public enterprises and local councils is not included.

GBMAA, 2004, 39 (1) requires DOSFEA to maintain debt records.

(ii) Extent of consolidation of the government’s cash balances

B Cash balances held at Central Bank and the regions are consolidated twice a week. Extra-budgetary funds in public enterprises do not form part of the consolidation process.

(iii) System for contracting loans and issuance of guarantees.

B The budget estimates sets the limits for borrowings as required by GBMAA Act, 2004 36 (1).

Loans and issuance of guarantees are under the control of DOSFEA guided by the limits set in the budget estimates (Section 155 of the Constitution of The Gambia).

PI-18. Effectiveness of payroll controls

95. The payroll consists of three man categories: (a) civil servants; (b) uniformed officers (Departments of State); and (c) sub-vented agencies. A Civil Service Reform Study carried out by the World Bank and AfDB showed that the sectoral spread of the payroll is on the following order: general administration, 9 percent; uniform services, 31 percent; economic services, 6 percent; and social services, 54 percent. Salaries, wages, and other personnel expenditure account for 27.55 percent of recurrent and development expenditure for 2008 and 4.55 percent and 5.38 percent of GDP for 2007 and 2008, respectively. It is therefore important to have effective payroll controls in place.

96. Pay and benefits are spread across 12 grades for specified positions. There is a fixed grade for employees on special arrangements. There are instances in the payroll where the positions for some employees are not stated; these “unknown” positions account for about 10 percent of the payroll. This means that the correct grade cannot be ascertained. A decision went into effect March 2008 to suspend the pay of all employees without approved positions in the system. About 50 percent of the staff photographs have been captured in the system and follow-up is being made with Departments of State to capture the rest. This will make identification of employees in the system easier.


97. Each employee is assigned a unique Personal Identification Number, but these are not consistent in the system since the numbers used in the legacy system were transferred to the Human Integrated Technology System. With the establishment of the Gambia Revenue Authority, all employees are being assigned Taxpayer Identification Number (TIN). Seventy-five percent of the taxpayer identification numbers have been captured on the system and follow-up of missing numbers is being undertaken. The DOSFEA decided to implement a “No TIN No Pay” strategy at the end of March 2008. There are plans to later use the Taxpayer Identification Number as the key identifier in the system for all employees.

98. As part of the implementation of IFMIS, the Government has installed the Human Integrated Technology System. The modules purchased include the following.

Payroll Payroll history Change of status Leave administration Misconduct MS Office Integration General ledger integration Benefits management Email alerting

99. Once the IFMIS is stabilized, it will be useful to extend the Human Integrated Technology System to the Personnel Management Office to take advantage of functionalities in the following modules to improve on human resources management:

Attendance sheet Time keeping management Medical management Training administration Career path and succession planning Appraisal management Recruitment management

100. Changes to the system are controlled by use of various input forms with provision for authorization by the submitting department and the Directorate of National Treasury as follows:

Employee standing data form for new employees Permanent earnings/deductions Period earnings Cost center changes Employee left service Bank account details for salary transfer Employee pay point changes


101. After entry clerks input changes in the system, a proof list is printed for checking by a supervisor to confirm that the changes in the system reflect what is authorized in the change forms. The supervisor and the principal accountant are the designated officials with access privilege to ‘update payroll with profile data’. The payroll calculation is then run by the supervisor who prints a series of control reports to further check for consistency and accuracy.

102. The signature list used by employees to sign for their net pay only shows employee ID number, position/job, and the net pay with provision for the employee’s signature. Other pay details such as allowances, tax, and other deductions are not shown in the signature list. It is important for the signature list to show these details so that the employee can check before signing for his/her pay. Pay-slips can be generated from the system, but this is not regularly done. The pay-slip also does not show cumulative figures.

103. During budget preparation, human resource planning is done to establish the number employees for each position in the various departments. The details of establishment are listed in the budget estimate by showing the number of approved positions for the various units in the departments. However, the numbers can be exceeded since the payroll system does not restrict entry above the budgeted numbers. Exception reports can be produced from the system for further enquiry.

104. Amendments to the payroll are often delayed by two to three months mainly due to delays by the departments in completing and submitting the amendment forms to the Payroll Unit in the Directorate of National Treasury. The Payroll Unit should receive all amendment forms by the fifth day of every month. Amendment forms received late are processed the following month with retroactive adjustments. Late forms for deletions are however acted upon. The payroll is run by the twentieth day of every month to ensure that employees are paid on or before the end of the month.

105. Payroll audit is conducted annually. The Personnel Management Office conducted payroll audit in 2007 only for Gambia Public Transport Corporation, Gambia Ports Authority, and two local councils. The report is being finalized but the main findings included employees paid at wrong grades and cost centers and cases of employees that have retired or left the service but their names remain on the payroll. Before the implementation of the Human Integrated Technology System, the Personnel Management Office received payroll printouts from the Directorate of National Treasury for analytic review and assessment of vacant posts; these reports are now infrequent.

106. The authorities are taken steps to capture the human resource details of all employees in the system. This will ensure that changes in personnel details are immediately reflected in the payroll. The authority to change personnel details will be retained by Personnel Management Office.



PI-18. Effectiveness of payroll controls C+

(i) Degree of integration and reconciliation between personnel records and payroll data.

C The Human Resource Information System maintained by Personnel Management Office is incomplete. However, the Directorate of National Treasury periodically submits the complete payroll master files to Personnel Management Office for review. Steps are being taken to capture human resource details in IFMIS so that all personnel and pay records will be on a common database

(ii) Timeliness of changes to personnel records and the payroll

B Up to 2-3-months delay occurs in effecting changes to personnel records and the payroll for a minority of employees due to late submission of amendment forms. When received retroactive adjustments are made for the affected employees but this is not widespread.

(iii) Internal controls of changes to personnel records and the payroll.

C There is segregation of duties in the payroll unit. Clerks input changes based on authorized forms from the Departments of State and Supervisor in the payroll unit checks before the profile data is updated. All changes in the system create detailed audit trails. Payroll procedures are clearly articulated in the payroll manual.

Personnel details are not yet fully captured in the system and put under the control of the Personnel Management Office.

(iv) Existence of payroll audits to identify control weaknesses and/or ghost workers.

C Within the past 3 years only partial payroll audits were undertaken by conducting unannounced head counts by some Departments of State.

PI-19. Competition, value for money and controls in procurement17

17 The Country Procurement Issues Paper (CPIP) prepared in 2005. The government was in the process of initializing the implementation of an action plan based on CPIP findings. It was therefore considered premature to assess procurement indicator dimensions while the government was busy implementing CPIP recommendations.


Indicator Score Brief explanation

PI-19. Competition, value for money and controls in procurement

(i) Use of open competition for award of contracts that exceed the nationally established monetary threshold for small purchases

(ii) Justification for use of less competitive procurement methods

(iii) Existence and operation of a procurement complaints mechanism

PI-20. Effectiveness of internal controls for non-salary expenditure

107. It is the responsibility of DOSFEA to establish effective internal controls to ensure that only genuine payments are made in line with the approved budget and existing rules and regulations. It is also important to ensure that payment obligations remain within the limits of projected cash availability, thereby avoiding creation of expenditure arrears.

108. There are two main types of voucher processing for non-salary expenditure: the IFMIS pilot sites and the non-online sites. Processing for non-online sites is as follows:

Department of State prepares a request for purchase on a prescribed form that matches the IFMIS input screen. The request form is completed by cost centre and authorized by the Vote Controller. The request form is used to obtain quotations from potential vendors. The Department of State evaluates the quotations according to the existing procurement regulations and guidelines. After the award is made to the selected vendor, a request for purchase order is sent to the Directorate of National Treasury after authorization by the budget holder, head of accounts, and Vote Controller. The requests are received in the receiving unit of the Directorate of National Treasury where the signatures of the Vote Controller permitted to authorize payment vouchers and other accounting documents are checked, as per section 2.7.4.3 of the Accounting Procedures Manual dealing with ‘Authorizing Staff’. The Data Center in the Directorate of National Treasury enters the purchase order request in the IFMIS. The entry checks not only for approved budget availability but for sufficient cash budget. Cash availability is calculated as cash allocation less expenses to date and less outstanding commitments and obligations. If cash budget is not available, the request will be rejected. The supervisor in the Data Center checks the entry in the system and, if correct, approves the request and a system numbered purchase order is printed and sent to the Department of State for signature of the authorizing Vote Controller. The purchase order creates a commitment in the systems that will ring-fence funds for that particular purchase. The vendor then delivers supplies based on the purchase order. On receipt of the goods, the Department of State prepares a goods received note based on the vendor’s delivery note. A payment voucher that matches the payment voucher screen of the IFMIS is then prepared and


authorized by the designated officials and forwarded to the Directorate of National Treasury for payment. The Data Center captures details on the purchase voucher that will be checked by the supervisor before printing a system-generated voucher to be attached to the documents received from the Department of State. The set of documents are passed on to the Accounting Unit where a supervisor also independently checks the accuracy of vouchers for correct coding and adequacy of supporting documents; if all is found satisfactory, the supervisor approves check printing. There are 4 authorized signatories to the Treasury Main Account — the Director the Directorate of National Treasury and 3 principal accountant — and any 2 can sign. There is no delineation in amounts; this means that any 2 of the principal accountants can sign a check of any amount without the knowledge of the Director the Directorate of National Treasury. This is possible because at the moment there is no compensating control of ensuring that a list of all payments is sent to the Director at the end of the day.

109. Vendors are aware of the new system and warned not to accept any purchase order that is not generated from the IFMIS. The commitment system has improved confidence in the government payment system, which in the past could only receive supplies upon effecting the payment usually by check.

110. For pilot sites, since they are connected directly to the central database by wireless radio links, requests are made directly and the process does not proceed if funds are not available. All approvals takes place in the system at the pilot site that then sends a listing of all approved payments to the Directorate of National Treasury for check printing since a centralized payment system is in place. The signed checks are then dispatched to the Department of State for collection by the vendor. Transactions for sites not yet connected are processed centrally at the data centre in the Directorate of National Treasury.

111. The process could be made more efficient by using the Taxpayer Identification Numbers as vendor codes for suppliers and bank account details to make payments directly into the vendors’ bank accounts with remittance advice sent to the Department of State for collection by the vendor. The IFMIS system has functionality for electronic file transfer that will be implemented after vendors are made familiar with the process.

112. The Accounting Procedures Manual provides detailed business process descriptions for the various transactions and also month/year end procedures. It also lists the required data capture forms and explains the purposes. The types of reports (notification, listings and flash reports) to be produced by Vote Controllers are clearly spelled out. Familiarization and training workshops are held regularly, and key control procedures are displayed conspicuously in the National Treasury.

113. While the internal controls in the business process are widely understood, awareness of the provisions in the GBMAA Act, 2004, and the Financial Instructions is limited mainly to staff in the Directorate of National Treasury. However, the Directorate rejects few vouchers. Efforts are needed to disseminate and train public officers on the provisions of the Act and Financial Instructions. The training should be used as an opportunity to highlight issues that need amending based on initial experience in the implementation of IFMIS.



PI-20. Effectiveness of internal controls for non-salary expenditure C+(i) Effectiveness of expenditure commitment controls.

B IFMIS ensures that payment cannot be made without adequate ‘cash’ budget.The expenditure controls in place effectively limit commitments to actual cash availability and approved budget allocations except for external debt payment, which in any case is managed by the Central Bank of The Gambia.Outstanding commitments at the year-end are carried over and provided for in the next budget for payment. Payment terms are not yet fully developed to ascertain actual expenditure arrears.

IFMIS is not yet fully rolled-out, but transactions for sites not yet connected are processed centrally in the Directorate of National Treasury.

(ii) Comprehensiveness, relevance and understanding of other internal control rules/ procedures.

C The Accounting Procedures Manual provides detailed business process descriptions for the various transactions and other basic internal controls. Although the controls are widely understood, there is no functioning internal audit department to provide assurance that the controls are working as intended.

(iii) Degree of compliance with rules for processing and recording transactions.

C Only a limited number of vouchers are rejected for payment because of noncompliance with procedures. With the absence of a functioning internal audit department, internal audit reports or surveys are not available to ascertain compliance, and this poses serious concerns that significant controls could be breached.

PI-21. Effectiveness of internal audit

114. The Institute of Internal Auditors defines internal auditing as an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization to accomplish its objective by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. As an independent function reporting to an organization’s top management, internal audit is able to assess the internal control systems implemented by the organization and contribute to ongoing effectiveness. Internal audit often plays a significant monitoring role. In order to preserve its independence of judgment, COSO cautions that internal audit should not take any direct responsibility in designing, establishing, or maintaining controls it is supposed to evaluate. It may only advise on potential improvement to be made.

115. Public sector internal audit in The Gambia is not sufficiently elaborated in the GBMAA Act. 2004. Apart from Article 160 (1) of the Constitution, which assigns the pre-audit function to the Auditor General, only section 4(1d) specifically enjoins the DOSFEA to carry out budget execution and internal auditing.

116. The Internal Audit Unit has an establishment of 5 staff members (i.e., 1 principal internal auditor, 2 senior auditors, and 2 accounts trainees), all of whom completed high school as the highest level of education. Apparently none of them is a professionally qualified accountant nor possesses certification of the Institute of Internal Auditors. The current budget estimate has provision for 22 personnel for the Unit . There is no audit charter or manuals in place that lay down the Unit’s functional responsibilities. Such a charter would provide institutional structure for the internal audit function for government departments.


The DOSFEA can use section 4 2(a)(b) to prescribe appropriate standards for internal auditing by adopting the International Standards for the Professional Practice of Internal Auditing.

117. Prior to the implementation of IFMIS, the Internal Audit Unit was mainly involved in pre-checking of payment vouchers for budget availability before endorsing the payment. Checking for availability of funds is an in-built functionality of IFMIS, thus rendering the former role of the Internal Audit Unit redundant. The Unit now concentrates on inspection of revenue by checking that collections are banked intact on a regular basis. This falls far short of the updated roles and responsibilities expected of such a unit.

118. When the Internal Audit Unit is restructured in the short to medium term, it will need to change its approach and re-focus on modern risk-based auditing by adopting the COSO18 Enterprise Risk Management framework. The Unit will provide reasonable assurance regarding the achievement of objectives of government departments in the following categories:

Conformity to the government’s poverty reduction strategy and more specifically the Department of State strategy, Effectiveness and efficiency of operations, Reliability of financial reporting, Compliance with applicable laws and regulations.


PI-21. Effectiveness of internal audit

D(i) Coverage and quality of the internal audit function

D In the past, the internal audit staff performed pre-audit of all government payments. Since the implementation of IFMIS in 2007, the work of this Unit is now limited to revenue inspection with no internal audit focused on systems monitoring. The Unit is not staffed with professional auditors and internal audit standards are not in use.

(ii) Frequency and distribution of reports

D Reports are not regularly produced even on the inspection of revenue. The principal internal auditor is supposed to report to the Permanent Secretary DOSFEA but instead reports to Director of the Directorate of National Treasury.

(iii) Extent of management response to internal audit findings

D In the absence of internal audit reports there can be no follow-up on findings.

Accounting, Recording and Reporting

PI-22. Timeliness and regularity of accounts reconciliation

119. For financial information to be reliable, recorded information must be regularly verified through timely reconciliation to ascertain the authenticity and accuracy of recorded information. 18 Committee of Sponsoring Organizations of the Treadway Commission is a U.S. private-sector initiative, formed in 1985. Its major objective is to identify the factors that cause fraudulent financial reporting and to make recommendations to reduce its incidence. COSO has established a common definition of internal controls, standards, and criteria by which companies and organizations can assess their control systems


http://en.wikipedia.org/wiki/1985

http://en.wikipedia.org/wiki/U.S.

120. The Directorate of National Treasury maintains 4 types of bank accounts in the Gambia Central Bank:

Consolidated Revenue Fund Bank Account – each Department of State has an account to deposit revenue collected. The individual Department’s revenue bank account is transferred to the Treasury Main Account every other day. Treasury Main Account from which all payments out of the consolidated fund are made. Special Deposit Account holds special deposits such as court deposits. Special Project Accounts for donor-funded projects.

121. Bank reconciliation was done by the Accounting Unit in the Directorate of National Treasury, which has 8 staff supervised by a principal accountant who authorizes checks before printing. The responsibility of this principal accountant to authorize checks and also be responsible for the supervision and review of bank reconciliation reports goes against the key internal control principle of segregation of duties. As part of the new Directorate of National Treasury organizational structure, the reconciliation and payment processing responsibilities are separated with payments handled by the Treasury Unit of Directorate of National Treasury.

122. The National Audit Office and Gambia Revenue Authority, as autonomous government agencies, have separate bank accounts and are responsible for printing and signing their own checks. Cashbooks are maintained in the IFMIS for these bank accounts, but the agencies are responsible for reconciling their own bank accounts.123. The Gambia Central Bank provides details of all transactions going through the government bank accounts on a daily basis in electronic format to the Directorate of National Treasury. The transactions are imported into the IFMIS for automated bank reconciliation. The system of automated bank reconciliation has greatly improved the timeliness and accuracy of bank reconciliation. The EPICOR software had technical problems that caused the bank reconciliation reports not to balance. 124. The Government of The Gambia has rationalized the structure of its bank accounts, which are now being reconciled almost on real-time basis. Unresolved differences accumulated over the years (up to the end of 2006) for the old Treasury Main Account and the various below-the-line accounts (before rationalization) are being compiled to seek the necessary approval from the Auditor General to write-off the differences. Investigation and resolution of outstanding items are being actively pursued by a full-time staff of the Directorate of National Treasury. There are indications that this has been resolved but it is important going forward to verify that the bank reconciliation functionality is performing as intended to ensure the quality of reports produced from IFMIS.125. Travel advances and operational imprests when issued should be accounted for before a subsequent one can be authorized. The accounting system has been configured so that a request for new advance or imprest on a budget line that has an outstanding balance cannot be processed.126. Staff interest-free loans/advances based on a single month’s basic salary are given as an advance to be repaid, mostly over a period of 6 months. A ledger tracks payment directly through the payroll system inputs, with reports showing


outstanding loans for each employee and in total. An end date is stipulated that automatically stops repayment when the loan is fully recovered.127. Significant numbers of transactions are recorded within ‘below the line’ (suspense account) balances as shown in Table A7. This undermines the completeness of financial reports especially when they are not cleared in compiling the annual financial statements. In principle, all transactions should be identified as either revenue, expenditure, or financing to allow a clear picture of the overall fiscal position.

Table A7. Below-the-Line Balances for FY2004-06

FY2004 FY2005 FY2006 Below-the-line balances 90,979,868.17 176,471,176.21 244,779,170.47

Project and clearance accounts 35,982,013.76 77,907,603.36 51,380,331.60Deposit accounts -13,572,176.51 8,431,585.45 73,295,564.30Advance accounts 20,074,334.55 24,567,550.08 27,461,545.71Personal accounts 18,884,815.28 17,140,745.29 17,560,756.28Remittance accounts 29,610,881.09 48,423,692.03 75,080,972.58

128. Although significant systemic improvements have been put in place, further work was required to ensure that the system functionality is fully utilized. Through sustained effort by the authorities, the IFMIS implementation achieved final acceptance on February 1, 2009, and all outstanding functionalities, deliverables, and incidents had been delivered and resolved. A post Quality Assurance Review of the implementation will assist the Government to document the good practice adopted for this implementation in order to share experiences with other countries.


PI-22. Timeliness and regularity of accounts reconciliation C

(i) Regularity of bank reconciliations

C Bank reconciliation is done on a daily basis for Treasury- managed bank accounts based on electronic data received from the Central Bank, but the bank reconciliation reports show that unexplained differences since end 2007 remain unresolved for over 8 weeks after the year-end.

(ii) Regularity of reconciliation and clearance of suspense accounts and advances

C Reconciliation of suspense accounts takes place frequently, but not all items are cleared. Significant balances of over GMD 20 million on advances have been brought forward in FY06 (GMD 27.5 million), FY05 (GMD 24.6 million), and FY04 (GMD 20.1 million).

PI-23. Availability of information on resources received by service delivery units

129. Although there is a second tier of government, local councils are not yet given the responsibility for direct service delivery. Central Government


Departments maintain presence in the various regions to undertake service delivery. 130. The location segment of the chart of accounts could, but does not at the moment, capture expenditure to enable analysis of spending by regions or districts because the budget is not classified by regions or districts. The sub-sub-entity characters in the accountability and responsibility segment that could be used to identify service delivery facilities such as schools and public health centers are not yet operational. Such analysis would be useful in carrying out a Public Expenditure Tracking Survey. Generally, the Survey looks beyond financial reports by actually tracing expenditure to the point of use as service delivery centers such as schools and hospitals. In this regard as well as improving location based financial data through the IFMIS, it is important to establish linkages between Education Management Information Systems and Health Management Information Systems to cross-check services with financial transactions.131. No comprehensive data collection and analysis has been done to track expenditure to actual delivery of resources to service delivery centers within the past 3 years. Considerable and long-term efforts would be required to disaggregate the budget and produce financial reports at the service delivery and geographical location levels.


PI-23. Availability of information on resources received by service delivery units

DNo comprehensive data collection on resources to service delivery units in any major sector has been collected and processed within the last 3 years.

PI-24. Quality and timeliness of in-year budget reports

132. Timely and accurate financial reports are important for DOSFEA to monitor the overall budget performance and if necessary to identify new actions to get the budget back on track. Line ministries equally need to monitor their budgets to ensure that the affairs for which they are accountable are adequately resourced.133. Since the implementation of IFMIS centralized database, the DOSFEA now produces in-year budget reports covering both revenue and expenditure on a monthly basis and on request for the line Departments. The itemized commitment and expenditure report shows details of (a) the annual approved budget, (b) allocation to date, (c) expenditure for the month, (d) expenditure to date, (e) outstanding commitments, and (f) available balance. The report provides cost center sub-totals for the Departments. Actual revenue collected is also compared against the revenue estimates.134. Departments that are not yet connected online to the IFMIS still maintain Vote Charge Books. These Departments reconcile the IFMIS-generated reports with the Vote Charge Books and call the attention to any discrepancies to the attention of the Directorate of National Treasury for correction.



PI-24. Quality and timeliness of in-year budget reports B+

(i) Scope of reports in terms of coverage and compatibility with budget estimates

B In-year budget performance reports cover both revenue and expenditure. The commitment and expenditure report allows direct comparison to the original budget according to the chart of accounts at both commitment and payment stages.

(ii) Timeliness of the issue of reports

A The reports are prepared and issued on a monthly basis and also available on request.

(iii) Quality of information B There are some concerns on the accuracy of the reports because of unexplained differences in bank reconciliation reports, but they do not compromise the usefulness of the reports.

PI-25. Quality and timeliness of annual financial statements

135. Availability of timely and comprehensive financial statements that are prepared in accordance with acceptable accounting standards contribute to transparency and accountability in the use of public funds. 136. The Directorate of National Treasury operates a centralized payment system and is responsible for the production of consolidated annual accounts. Departments are only responsible to submit accounts for retained departmental revenues. 137. With the assistance and intervention of key development partners, notably the World Bank and DfID, in providing expatriate technical support to both the Directorate of the National Treasury and the National Audit Office, the Government has prepared the Annual Statements of Public Accounts covering the period 1992 to 2008. The Accounts covering the period 1992 to 1999 have been prepared, audited, and they have been subjected to FPAC scrutiny and review. 138. Accounts for the periods 2000-2004 have also been prepared and audited. The draft/tentative Audit Report issued with a disclaimer because most of the weaknesses had not been remedied —such as noncompliance with financial regulations, and lack of supporting records and documentation due to poor recordkeeping and accounting in the 1992-1999 accounts —was submitted to the Treasury by the Auditor General in January 2008 for Treasury’s review and comments. The 2000-2004 audit reports were submitted to the National Assembly in January 2009.139. The National Audit Office is still awaiting comments from the Treasury on the 2000 to 2004 report. Subject to receiving feedback from the Treasury and convincing arguments to the contrary, the Auditor General’s Disclaimer Opinion on these accounts will prevail. 140. The 2005 and 2006 accounts have also been prepared and submitted to the Auditor General in August and September 2007, respectively. The 2007 accounts


were independently prepared by the Directorate of National Treasury and submitted to the National Audit Office on August 29, 2008 (i.e., eight months after the year-end, which is a great achievement). Government has now eliminated the backlog in the preparation of the accounts. 141. The National Audit Office is auditing the 2005-06 financial statements in parallel with the audit of the 2007 financial statements. The National Audit Office targeted March 2009 for completion of the 2005-06 audits, but this will depend on how quickly the Government can respond to National Audit Office’s audit queries on the accounts. If this is successfully cleared, the audit report for the 2007 financial statements should be issued in September 2009. 142. The DfID is also providing technical support for review of the controls and reporting capabilities of IFMIS to assess how much reliance can be placed on the IFMIS reports.

Table A8. Timeline of Preparation, Audit, and Review of Public Accounts and Financial Statement

Financial yearDate submitted by

Treasury toAuditor General

Date Audit Report issued by Auditor General Date FPAC report issued

July 1992- December 1999

March 2003 September 2005 December 2006

2000-2004 Feb 2007 January 2008 - Draft report submitted and

awaiting Government comments.

Not issued

2005 Aug 2007 Not yet submitted Not issued

2006 Sep 2007 Not yet submitted Not issued

2007 August 2008 Not yet submitted2008 March 2009

143. The statutory deadlines for the preparation and audit of the 2007 accounts are March 31 and June 30, 2008, respectively. Subsection 41 (3) of the GBMAA Act enjoins DOSFEA, after reconciling its own accounts with the transactions of the Treasury Main Account, to consolidate and submit to the Auditor General the annual statement of Government accounts, not later than 3 months after the end of the financial year.

144. The Government does not have a national accounting reporting standard. The GBMAA Act, 2004 (42) requires information on at least the following to be disclosed:

Details of revenues and expenditures according to the appropriation structure. [NOT MET]


Balance sheet showing the assets and liabilities of the Consolidated Fund, with qualifying information on the significance of the figures shown. [NOT MET; figures available but no commentary provided.] Summary of statement of receipts into and payments from the Consolidated Fund, showing revenues, other receipts, expenditures, and financing of the Consolidated Fund for the financial year. [MET] Summary of outstanding public debt, both external and domestic, at the end of the financial year, shown in terms of debt instruments and debt holders. [NOT MET] Statement of amounts guaranteed by the Government at the end of the financial year with respect to loans and other contingent liabilities. [MET] Summary of outstanding loans issued by the Government at the end of the financial year. [NOT MET] Summary statement of revenue arrears to be collected by each budget agency. [NOT MET] Summary statement of expenditures re-allocated during the financial year from unallocated expenditures heading. [MET, list of virements shown] Summary statement of investments made from the Consolidated Fund. [NOT MET] Summary statement of unpaid commitments outstanding for the supply of goods and services for each vote at the end of the financial year. [NOT MET, but improvement since 2007] Summary statement of stores and other assets at the end of the financial year. [NOT MET]

145. The annual financial statements for FY2005 and 2006 basically show balance sheet for financial assets and a table of revenue and financing statements supported by detailed schedules for departmental expense items for the approved and revised budget, expenses, and variances. With the introduction of IFMIS, significant improvements in the format of budget performance reports and annual financial statements were made and designed in the system. The 2007 annual financial statements follow IPSAS 24, Presentation of Budget Information in Financial Statements. The accuracy and timeliness of the annual financial statements has also improved as a result of adopting a practice of preparing daily bank reconciliations.



PI-25. Quality and timeliness of annual financial statements

D+

(i) Completeness of the financial statements

C Accounts were not prepared annually. Bank account balances are not complete as there are substantial transactions recorded below the line with suspense accounts not cleared at year-end.

Auditor General issued a disclaimer because of such factors as noncompliance with financial regulations, lack of supporting records and documentation, and poor recordkeeping and accounting.

(ii) Timeliness of submission of the financial statements

B There is noncompliance with statutory reporting dates. Annual statements are generally not submitted for external audit within 15 months of the end of the fiscal year.1991-1999 accounts were submitted in Mar 2003.2000-2004 accounts were submitted in Feb 2007.2005 accounts were submitted Aug 2007.2006 accounts were submitted Sep 2007.2007 accounts were submitted Aug 2008.2008 accounts were submitted Mar 2009.* * a marked improvement in timeliness.

(iii) Accounting standards used D GBMAA Act recommends use of international standards. Financial statements up to 2006 are not prepared according to IAS, and the format is not consistent over time. The 2007 financial statements represented progress toward compliance with IPSAS.

External Scrutiny and Audit

PI-26. Scope, nature and follow-up of external audit

146. To promote transparency and accountability, high-quality audit reports, which include financial audits and some aspects of performance audit covering all public funds, should be made available to the public in a timely manner. It is important for the external auditor to be independent so that audit reports will be free from bias.147. In addition to exercising such other functions as may be conferred by an act of the National Assembly, Article 160 (1) of the Constitution outlines the functions of the Auditor General to include both pre- and post-compliance audit; and specifies the requirements to audit and report on the public accounts of The Gambia at least once in every year, and the Authorities, the Courts, the National Assembly, and all public enterprises within 6 months of the end of the immediately preceding financial year to which each of the accounts relates. With limited capacity in the National Audit Office, audit of most public enterprises are out-sourced to private audit firms.148. After the Auditor General’s annual report on the accounts has been discussed in the National Assembly, the Auditor General is required to cause the same to be


published for public information. Where there is any undue delay in the discussion of any such accounts or reports in the National Assembly, Article 160 (e) permits the Auditor General to publish his or her report in advance of such discussion. 149. Some progress is being made on clearing the backlog of Auditor General’s reports not yet submitted to the FPAC of the National Assembly. The Report of the Auditor General on the audited accounts of The Government of the Gambia for the period July 1992 to December 1999 was submitted to the National Assembly in September 2005. A clear emphasis was given by the FPAC on the need for a number of systemic issues to be addressed. 150. The audit report raises two issues: (a) Technical accounting queries in the management letter are not always fully acted upon by the Directorate of National Treasury in a timely manner; and (b) other issues raised concern the repetition of unresolved problems. These issues, such as the recovery of amounts 19owed to the Government by public officers, are referred to the FPAC, which then forwards to the Executive branch for a public response to any pertinent queries. Recommendations are then made to the Executive for action. Non-completion of audited accounts over the past 10 years means that accountability for such issues has not been established. As a consequence, many of the same issues are repeated each year in the audit reports.20

151. Audit of the accounts for 2000-2004 are nearing completion by the National Audit Office. The National Audit Office has issued its draft/tentative report to the Executive (DOSFEA). The National Audit Office is awaiting comments from the Executive for finalization and transmission to the National Assembly. Meanwhile, the National Audit Office noted that the shortcomings in the previous reports are still recurring. The National Audit Office emphasized that it is critical for the Directorate of National Treasury to improve on the accounts for 2005 and 2006. This would help to obtain accurate figures for IFMIS. The IFMIS has helped to improve timeliness of bank reconciliation at the Treasury and placed the Treasury in a better position to complete the annual statement of public accounts in a timely manner as required by law.

19 Travel Allowances and Imprest issued to public officers for official purposes that remain outstanding is an example.20 Issues on treasury accounts by the Auditor General noted in the 2003 CFAA include limited internal controls and internal audit, non compliance with financial legislation, regulations and instructions, non-responsiveness of Government agencies to audit queries, theft of funds, failure to collect revenue, missing revenue, lack of supporting documentation, failure to obtain competitive tenders, poor record keeping and accounting, failure to recover salary and imprest advances, failure to maintain inventories and inventory records, and lack of capacity or inadequate capacity.



PI-26 Scope, nature and follow-up of external audit

D+

(i) Scope/nature of audit performed

C Central government financial transactions are centralized. The financial statements produced by the Directorate of National Treasury covers all the Department of State and the audit by the Accountant General is predominantly transaction level testing mainly concerning adherence to the approved budget and compliance with the PFM Laws and regulations,

Significant issues are identified and reported in the management letter.

Audit standards used are disclosed to a limited extent. (ii) Timeliness of submission of audit reports to Legislature

D 1992 to 1999 accounts submitted by Treasury in March 2003. Audit report issued in September 2005.2000-2004 accounts submitted in Feb 2007. Draft report submitted to Treasury for review and comments in January 2008. Still working on 2005 and 2006 reports.

(iii) Evidence of follow-up on audit recommendations

D FPAC has reviewed 1992-1999 audit report and issued follow-up recommendations in December 2006. The recommendations have not been implemented.

PI-27. Legislative scrutiny of the annual budget law

152. No money can be withdrawn from the Consolidated Fund except if authorized by an Act passed by the National Assembly. 153. The budget documents submitted to the National Assembly do not contain detailed explanation of the fiscal policies and the medium-term fiscal framework, except for summary statements in the Budget Speech. For this reason, scrutiny of the budget mainly covers the revenue and expenditure estimates for Government programs. 154. The procedure for scrutiny of the budget by the National Assembly begins with it being presented to the Secretary for DOSFEA then passed to the FPAC. In order for FPAC to perform its function effectively, section 28 of the GBMAA Act, 2004, empowers the National Assembly to appoint technical staff to assist in gathering information, and conduct research and analysis of issues pertinent to its deliberations and resolutions on the budget. The National Assembly is constrained due to lack of skilled staff to provide the FPAC with technical support, and therefore uses simple traditional procedures to scrutinize the budget estimates by calling Vote Controllers to defend their respective budgets. 155. According to section 152 (1A) of the Constitution of The Gambia, the National Assembly is required, within 14 days of the estimates being laid before it, to give consideration to and approve the estimates. The estimates should be laid at least one month before the end of the preceding financial year. Once laid, the National Assembly is required within 7 days of the introduction of the Appropriation Bill to give consideration to and pass the Bill according to section 152 (3A) of the Constitution of The Gambia. 156. To meet these tight deadlines, Instruction number 75 of the Financial Instructions to implement the GBMAA Act, 2004, requires the Secretary for DOSFEA to ensure that the budget estimates are submitted to the President not later than


60 days before the end of the current financial year, including a consolidation of such estimates to be submitted directly to the President by the Chief Justice or any other authority, provided under the Constitution. 157. In effect if the Executive lays the budget estimates according to the maximum time allowed (November 30), the National Assembly has only 3 weeks to pass the budget as opposed to a minimum of 2 months to allow proper scrutiny. The National Assembly has over the past 3 years taken up to 3-4 weeks to pass the budget (refer to PI-11).158. The GBMAA Act, 2004, allows for supplementary budgets to be submitted to the National Assembly, where there are changes in economic circumstances warranting such an action. The revised and supplementary budgets are to be presented and documented in the same manner and format as the original budget. The expenditure statements in the annual accounts show details of the approved budget, the revised budget, the actual expenditure for the reporting year, and the variance. This disclosure provides an opportunity for the National Assembly to ascertain whether the budget has been implemented as passed. 159. As evidenced in PI-1 and PI-2, there are extensive instances of virement. In this respect, virement schedules are attached to the financial statements. (Box A2).

Box A2. Virement Allowance in The BMAA Act, 2004

Subsection (4). Virements are allowed:(a) among expenditure items of a budget agency up to a maximum of 75 percent of the appropriation of giving or receiving expenditure items, at the request of the budget agency and the approval of the Secretary of State; and(b) among budget agencies under the same supervising department, at the request of the supervising department and the approval of the Secretary of State, provided that the amount being vired does not exceed 50 percent of the total appropriations and the giving or receiving expenditure items of each budget agency.

Subsection 5. Where the amount to be vired exceeds the limits set under subsection (4), the approval of the Secretary of State is required.

Subsection 6. No virement is permitted between personal emoluments and other charges.



PI-27 Legislative scrutiny of the annual budget law

C+(i) Scope of the Legislature’s scrutiny

C Fiscal policies and medium-term fiscal framework are not detailed in the budget (see PI-6). Therefore, legislative scrutiny mainly involves review of revenue and expenditure estimates.

The National Assembly is not involved early in the preparation process and receives the budget after it has been finalized between DOSFEA and the Departments.

(ii) Extent to which the Legislature’s procedures are well established and respected

B On presentation of the budget to the National Assembly, the FPAC reviews the budget by calling Vote Controllers to defend their estimates by using simple procedures without technical/professional support.

(iii) Adequacy of time for the Legislature to provide a response to budget proposals both the detailed estimates and, where applicable, for proposals on macro-fiscal aggregates earlier in the budget preparation cycle (time allowed in practice for all stages combined)

C The budget is required by law to be submitted at least a month before the year-end and in practice has been submitted over the past 3 years 6 weeks before the year-end and passed 2 weeks before the start of the financial year to which it relates (see PI-11).Proposals on macro-fiscal aggregates are not debated by the Legislature early in the budget preparation cycle.

(iv) Rules for in-year amendments to the budget without ex ante approval by the Legislature

B The GBMAA Act, 2004, stipulates the circumstances in which a revised and supplementary budget can be submitted. Virement is also allowed within specified limits and categories. The Financial Instruction elaborates on the processes and approvals required for amendments and virements. Administrative reallocations take place across most budget lines but are reported in the virement memorandum.

PI-28. Legislative scrutiny of external audit reports

160. The Legislature has a key oversight role over the Executive in executing the approved budget. This role is performed through scrutiny of external audit reports and questioning of accounting officers. 161. Section 160 of the Constitution provides that within 6 months of the end of the immediately preceding financial year, the Auditor General shall report on the annual statement of public accounts to the National Assembly and draw attention to any irregularities in the accounts audited and to any other matter which, in his or her opinion, ought to be brought to the notice of the National Assembly. The FPAC may extend the time for submission of any audit report to the National Assembly. 162. The Auditor General’s report is first discussed in open sessions by the FPAC that then submits a report to the National Assembly. It is only at this point that the Audit Report is generally made public. The Auditor General submitted reports from 1992-1999 in September 2005 to begin tackling the backlog of overdue audit reports. The FPAC commenced deliberations on these reports in October and November 2005. The FPAC reconvened in December 2006 to complete its


deliberations and proceedings and write its report for ratification and adoption by the National Assembly in December 2006. With the assistance of some senior members of the Gambia Association of Accountants and others, the FPAC made extremely useful, insightful, and professional observations and recommendations. The Auditor General’s Reports raised 58 issues and queries. After its thorough review, the FPAC regrouped the issues into the following thematic areas for policy guidance and necessary action.

Implications of the Auditor General’s Disclaimer. Nonconformity/noncompliance of the Accountant General and Director of National Treasury with the statutory reporting format and disclosure requirements. Backlog of accounts resulting in loss/misplacement of accounting records, payments vouchers, other source documents, and institutional memory. Imbalance of over GMD 800 million accumulating from 1992 to 1999. Determining a cut-off point and restating the beginning/opening balances to continue preparation of accounts from that point forward. Perennial, rampant, and widespread shortage of Revenue Collection Books (official receipts) at the Directorate of National Treasury, sub-treasuries, and other revenue-collection departments and centers. Implications for IFMIS and the ‘National Emergency Fiscal Committee.’ Functions and Placement of Public Sector Internal Auditing. Non-settlement of Bills by Government to quasi-government service providers.

163. The FPAC and the Public Enterprises Committee held joint committee sessions to review the accounts of 49 government agencies in open public sessions for the first time in the Republic of The Gambia. Past presidents of the Gambia Association of Accountants provided technical assistance to the National Assembly to enable them to review the 49 agencies. The FPAC expressed desire to work more closely with the media and relevant civil societies.164. With the huge backlog of public accounts that have only recently being brought up to date, it is difficult to assess the extent to which audit recommendations are implemented



PI-28 Legislative scrutiny of external audit reports

D+(i) Timeliness of examination of audit reports by the Legislature (for reports received within the last 3 years)

D There was a huge backlog of accounts that have only recently been brought up to date. The latest FPAC report was issued in 2006 for annual accounts for 1991-1999.

(ii) Extent of hearings on key findings undertaken by the Legislature

C Open public sessions were held for the first time in the Republic of The Gambia. For its review of the 1991-1999 audit reports, 35 witnesses from a cross-section of the population were invited.

(iii) Issuance of recommended actions by the Legislature and implementation by the Executive

C Recommendations were issued in the review of the 49 public agency accounts. These accounts are so old that the relevance and accountability from the concerned individuals are questionable.There has been no white paper on the FPAC recommendations. Also, the recommendations have not been implemented.


ANNEX B. Fiduciary Risk Analysis

1. A fiduciary risk assessment aims to provide guidance on whether it is reasonable to expect that the resources allocated will be used for the intended purpose and that the expenditure will represent value for money. The CFAA and PEFA assessments provide data that can be applied to making broad fiduciary risk assessments that help meet several demands. First, there is a demand from the public for government transparency and accountability. Second, particularly following the 2005 Paris Declaration on Aid Effectiveness, development partners are increasingly aiming to work through government PFM systems. Third, the need for PFM reform is increasingly seen as a key development need in its own right. A fiduciary risk assessment helps identify priority areas for reform in country systems to meet these various demands.

2. This fiduciary risk summary considers 9 good practice principles and 18 benchmarks as a basis for assessing relative fiduciary risk in The Gambia PFM system. These principles and benchmarks are identical to those used in the 2003 CFAA.

Fiduciary Risk Summary

Good practice principles and benchmarks (in CFAA 2003) Status as at December 2008

1. A clear set of rules governs the budget process1.1. A budget law specifying fiscal

management responsibilities is in operation

1.2. Accounting policies and account code classification are published and applied

Weaknesses noted in the 2003 CFAA have been addressed, but impact in terms of clearly linking expenditure to policy so far has been limited. The GBMAA Act is in place and its requirements in terms of budget preparation are being followed. A comprehensive and robust classification is in place, broadly compliant with IMF GFS standards and embodying a program classification. This classification has improved fiscal reporting at the aggregate level and has helped initiate an MTEF. However weakness in budget formulation will persist unless capacity in program budgeting is developed and this jeopardizes full establishment of MTEF.

2. The budget is comprehensive2.1. All general government activities

are included in the budget2.2. Extra-budgetary expenditure is

not material

Some steps have been taken to address problems of below-the-line accounts, but little has been done to resolve problems of extra budgetary funds and special accounts for donor funds, particularly with regard to reporting. Local government spending is not included in general government reports.

3. The budget is aligned with national development strategy (supports pro-poor strategy)3.1. Budget allocations are broadly

aligned with any medium term expenditure plans for the sector or for the overall budget

The new chart of accounts facilitates linkage of expenditure to objectives, outputs, and outcomes. Preliminary work is underway to introduce MTEF and link expenditures to PRSP priorities, but progress so far has been limited.

4. The budget is a reliable guide to actual expenditure4.1. Budget out-turn shows a high

level of consistency with the budget

Regular overspending against original estimates indicates that budget estimates are still unrealistic. Potential indebtedness of public enterprises also poses a quasi-fiscal threat, which is not properly taken into account at either the budget formulation or reporting stage.

5. Expenditure within the year is controlled

The introduction of the IFMIS has significantly improved the possibility of applying effective controls and the timeliness of


Good practice principles and benchmarks (in CFAA 2003) Status as at December 2008

5.1. In-year reporting of actual expenditure is timely and reliable

5.2. Internal controls operate to prevent fraud and error

5.3. Systems operating to control virement, commitment, and arrears

reporting in comparison to the situation in 2003. Computerization also has the capacity to provide more reliable audit trails and opens the system to application of computer-aided audit techniques. Weakness in internal audit, as well as lack of capacity in external audit, and lack of follow-up by the National Assembly will put these gains at risk over the long term.

6. Government carries out procurement in line with principles of value for money and transparency6.1. Appropriate use of competitive

tendering rules6.2. Decision making is recorded and

auditable6.3. Effective action taken to identify

and eliminate corruption

The Country Procurement Issues Paper (CPIP) prepared in 2005 assessed the public procurement system and recommended that Gambia Public Procurement Authority should not carry out both the regulatory and operational control functions, procedures and documentation should be further streamlined and simplified, and the threshold for prior review should be reviewed and raised if necessary. The Government revisited these recommendations and now plans on preparing and implementing an action plan based on the CPIP findings.

7. Reporting of expenditure is timely and accurate7.1. Reconciliation of fiscal and bank

records is carried out routinely7.2. Audited accounts are submitted

to parliament within the statutory period

The IFMIS has permitted a significant improvement in bank reconciliation compared with the situation reported in 2003. It should also allow more timely submission of accounts to the Auditor General. Further action is required on clearance of below-the-line accounts. Audited accounts continue to experience delays in submission to parliament, but much of the previous backlog has now been submitted to the FPAC.

8. There is effective independent scrutiny of government expenditure8.1. Government accounts are

independently audited8.2. Government agencies are held to

account for mismanagement and criticisms and recommendations by the auditors are followed up.

The Auditor General’s Office lacks capacity, and its independence and authority continue to need strengthening. Action has yet to be taken on establishing an Audit Act. Despite reduction in the backlog of audited accounts considered by the FPAC, little action on follow-up to audit recommendations is evident.

9. The budget process is transparent9.1. Information on fiscal activities is

available in the public domain9.2. Information presented in a way

that facilitates policy analysis and promotes accountability

The GFS-compliant chart of accounts and IFMIS has permitted better and more comprehensive presentation of aggregate fiscal data with the budget and financial statements. These improvements have yet to be put fully into practice, and a great deal more needs to be done to provide adequate budget information to parliament and the public


ANNEX C. Calculation of Deviations by Budget Heads 2005-2007

Note: Data based on budget estimates from DOSFEA and Annual Financial Statements from Directorate of National Treasury. Methodology uses PEFA analytical framework for performance indicators PI-1 and PI-2 (see www.pefa.org).

Deviations for 2007Functional head Budget Actual Difference Absolute Percent15 Miscellaneous 522,956 561,588 38,632 38,632 7.4%20 DOS Education 288,943 285,976 -2,967 2,967 1.0%12 DOS Finance & Economic Affairs 285,799 351,440 65,641 65,641 23.0%21 DOS Health & Social Welfare 236,180 227,923 -8,257 8,257 3.5%10 DOS Foreign Affairs 144,446 178,703 34,257 34,257 23.7%08 DOS Interior & Religious Affairs 142,218 167,114 24,896 24,896 17.5%01 Office Of The President 137,557 169,571 32,014 32,014 23.3%07 DOS Defense 113,102 130,637 17,535 17,535 15.5%18 DOS Works, Construction & Infrastructure 109,996 105,275 -4,721 4,721 4.3%17 DOS Agriculture 86,193 99,886 13,693 13,693 15.9%13 Pensions And Gratuities 72,979 59,975 -13,004 13,004 17.8%27 DOS Tertiary & Higher Education 47,062 39,014 -8,048 8,048 17.1%16 DOS Local Government & Lands 36,053 29,138 -6,915 6,915 19.2%03 Judiciary 24,802 23,665 -1,137 1,137 4.6%19 DOS Trade, Industry & Employment 22,975 24,345 1,370 1,370 6.0%25 DOS Fisheries 22,483 34,015 11,532 11,532 51.3%02 National Assembly 19,156 17,474 -1,682 1,682 8.8%22 DOS Youth & Sports 16,790 19,013 2,223 2,223 13.2%11 DOS Justice 13,361 7,721 -5,640 5,640 42.2%23 DOS Water Resources, Forestry & Environment 10,284 9,365 -919 919 8.9%Sum of other Departments of State 29,166 24,047 -5,119 5,119 17.6%

Total expenditure 2,382,501 2,565,885 183,384 183,384 7.7%

Composition variance 2,382,501 2,565,885 300,202 12.6%


http://www.pefa.org/

Deviations for 2006Functional head Budget Actual Difference Absolute Percent15 Miscellaneous 452,840 393,596 -59,244 59,244 13.1%20 DOS Education 284,196 301,221 17,025 17,025 6.0%21 DOS Health & Social Welfare 207,684 169,173 -38,511 38,511 18.5%10 DOS Foreign Affairs 126,846 213,860 87,014 87,014 68.6%08 DOS Interior & Religious Affairs 118,523 141,995 23,472 23,472 19.8%12 DOS Finance & Economic Affairs 117,787 188,131 70,344 70,344 59.7%01 Office Of The President 103,407 133,846 30,439 30,439 29.4%17 DOS Agriculture 89,088 66,217 -22,871 22,871 25.7%07 DOS Defense 78,171 93,140 14,969 14,969 19.1%18 DOS Works, Construction & Infrastructure 75,583 43,158 -32,425 32,425 42.9%13 Pensions And Gratuities 47,385 47,221 -164 164 0.3%19 DOS Trade, Industry & Employment 24,603 18,837 -5,766 5,766 23.4%16 DOS Local Government & Lands 21,606 17,270 -4,336 4,336 20.1%25 DOS Fisheries 17,240 14,418 -2,822 2,822 16.4%03 Judiciary 15,513 13,482 -2,031 2,031 13.1%02 National Assembly 15,142 14,136 -1,006 1,006 6.6%22 DOS Youth & Sports 12,381 10,588 -1,793 1,793 14.5%11 DOS Justice 9,901 6,850 -3,051 3,051 30.8%24 DOS Communications, Information & Technology 9,342 9,077 -265 265 2.8%09 DOS Tourism & Culture 9,151 8,478 -673 673 7.4%sum of other Departments of State 19,045 34,980 15,935 15,935 83.7%

Total expenditure deviation 1,855,436 1,939,677 84,242 84,242 4.5%



Deviations for 2006Functional head Budget Actual Difference Absolute Percent20 DOS Education 279,726 271,120 -8,605 8,605 3.1%12 DOS Finance & Economic Affairs 234,760 171,295 -63,466 63,466 27.0%21 DOS Health & Social Welfare 234,201 147,034 -87,167 87,167 37.2%08 DOS Interior & Religious Affairs 129,736 121,146 -8,590 8,590 6.6%10 DOS Foreign Affairs 122,285 161,587 39,302 39,302 32.1%15 Miscellaneous 98,252 21,186 -77,066 77,066 78.4%18 DOS Works, Construction & Infrastructure 96,499 50,578 -45,921 45,921 47.6%01 Office Of The President 95,083 96,465 1,382 1,382 1.5%07 DOS Defense 84,054 86,029 1,975 1,975 2.3%17 DOS Agriculture 82,682 57,910 -24,772 24,772 30.0%13 Pensions And Gratuities 47,385 45,418 -1,967 1,967 4.2%19 DOS Trade, Industry & Employment 25,517 21,998 -3,520 3,520 13.8%16 DOS Local Government & Lands 22,680 16,520 -6,160 6,160 27.2%22 DOS Youth & Sports 20,469 18,432 -2,037 2,037 10.0%03 Judiciary 19,847 16,099 -3,748 3,748 18.9%23 DOS Water Resources, Forestry & Environment 19,533 11,849 -7,684 7,684 39.3%02 National Assembly 18,150 16,760 -1,390 1,390 7.7%09 DOS Tourism & Culture 14,179 9,099 -5,080 5,080 35.8%24 DOS Communications, Information & Technology 14,128 10,187 -3,941 3,941 27.9%11 DOS Justice 11,855 7,879 -3,976 3,976 33.5%Sum of other Departments of State 17,929 16,508 -1,421 1,421 7.9%

Total expenditure deviation 1,688,950 1,375,098 (313,852) 313,852 18.6%



ANNEX D. Terms of Reference for PFM Reform Oversight Steering Committee and Sub-Committee

Government of The Gambia

Background

The successful implementation of the PFM reform agenda is critical for the Government to achieve the objects of Pillar I of the PRSP with all aspects relating to economic management, including macroeconomic stability, public finance management, public debt management, divestiture, and civil service reforms.

The CFAA 2003 made several recommendations. Since its completion, most of the recommendations are yet to be fully implemented. The PFM Reform Oversight Steering Committee is needed to provide oversight for the implementation of the PFM action plan. A coordinating office that will be staffed with officials whose duties are dedicated toward the implementation of the reforms is necessary to ensure sustainable since change is continuous in such a dynamic environment.

A Steering Committee will provide a forum for better coordination between development partners and the Government. The comprehensive reform action plan also forms the basis for all development partners to converge in support of the Government’s reform agenda.

Mandate

The mandate of the PFM Reform Oversight Steering Committee is to monitor and coordinate the PFM reform program in the Government of The Gambia.

Membership

The PFM Reform Oversight Steering Committee will be chaired by the Permanent Secretary DOSFEA who will regularly update the Secretary for DOSFEA on the status of implementing the PFM reform action plan. The full membership of the Steering Committee will comprise the following:

Chairperson, Finance and Public Accounts Committee (National Assembly) Auditor General Permanent Secretary, Personnel Management Office Director of Budget Director of Treasury Director of Internal Audit Commission General, National Planning Commission Commissioner General, Gambia Revenue Authority (GRA) Representatives from development partners Representative from civil society PFM Reform Coordinator and Secretary of Steering Committee

Vote Controllers of State Departments will be required to attend meetings as the need arises.


Duties of the PFM Reform Oversight Steering Committee

The duties of the Steering Committee are as follows:

Identify and prioritize actions needed to improve public financial management by undertaking diagnostic studies;

Monitor the National Action Plan and targets and check that they are consistent, practicable, and realistic and will strengthen the Government in achieving its developmental goals;

Identify the institutions and individual officers who will report to the Steering Committee on progress in their respective actions;

Analyze reasons for delays or shortfalls in performance and make recommendations to the respective authorities for corrective actions;

Set up sub-committees (and/or recognize existing project steering committees) for more detailed progress monitoring and reporting to the main PFM Reform Oversight Steering Committee through the secretariat;

The Steering Committee will produce annual reports, copies of which will be made available to civil society organizations and nongovernmental organizations active in transparency and accountability to ensure that adequate voice is given to the electorate.

Meetings

The PFM Reform Oversight Steering Committee will meet on a quarterly basis. The PFM Reform Coordinator will ensure that the Technical Advisory Sub-Committees meet monthly to monitor progress of implementation.

The PFM Reform Coordinating Office

This is the Secretariat of the PFM Reform Oversight Steering Committee. The Reform Coordinator will be secretary of the Secretariat with responsibility for leading and coordinating the overall PFM reform agenda, and reviewing and updating the Action Plan by consolidating reports from the various sub-committees for the attention of the PFM Steering Committee.

Sub-Committees

The recommended sub-committees will cover the following topics:

Change management and capacity building, Planning and budgeting, Procurement, budget execution and payroll, Internal audit and records management Accounting, Recording and Reporting External Scrutiny and Audit Donor practices


The sub-committees will provide technical advisory services to the PFM Steering Committee; the members of the sub-committees will be drawn from the expertise of relevant Departments of State. The activities of the sub-committees will be coordinated by focal staff from the Secretariat, who will serve the role of secretary to the sub-committees. Roles and responsibilities of the sub-committees include the following:

Actively implement the activities in the Action Plan, Continuously review the business processes to identify areas for improvement; Identify resources needed to implement the Action Plan; Identify capacity-building needs; Obtain and document verifiable evidence of meeting the indicators in the Action Plan; Carry out any other activities that may be assigned by the PFM Steering Committee; and Submit progress report to the PFM Reform Coordinating Office.


ANNEX E. The Gambia Government’s Self Assessed Progress on PFM Reforms The Government’s Response on the Draft Report

The Gambia’s key development strategy is outlined in its second Poverty Reduction Strategy Program (PRSP) 2007-2011. The PRSP is underpinned by analytical and strategic studies, including the Country Financial Accountability Assessment (CFAA) of 2003. The Government of The Gambia has been pursuing strategic changes in its public financial management (PFM) systems aimed at improving efficiency, effectiveness, and quality of basic public goods and services with overall goal of poverty reduction through steady growth and a stable micro-economic environment.

1. Revision of the Legend and Regulatory Framework

With an objective of addressing shortcomings identified during the Public Expenditure Reviews, the Government replaced the old Finance and Audit Act, 1964 (amended in 1991) with the Government Budget Management and Accountability (GBMAA) Act, 2004. New Financial Instructions have been issued to support the implementation of the GBMAA Act.

The structure of the public accounts has been revised to meet generally acceptable accounting practices. With effect from 2007, the Government of The Gambia adopted the cash-based International Public Sector Accounting Standards (IPSAS) in the preparation of its accounts. New accounting procedures have also been developed to provide for the specific procedures and tasks required under the Act.

2. AID Coordination

The Ministry of Finance and Economic Affairs (MOFEA) has set up a Project Management and Aid Coordination Unit to improve coordination, monitoring, and comprehensive reporting of aid flows in the country. In consultation with all stakeholders including civil society organizations, the Unit prepared the first Aid Coordination Report in 2009. 3. Planning and Budgeting

The transformation of the budget into a more policy-oriented tool continues to be a major objective under the PFM reforms. In this regard, the Government is engaged in formulation a medium-term expenditure framework (MTEF), which would link the PRSP priority outputs and outcomes with public expenditure programs.

4. Debt Management

A priority fiscal policy has been the reduction of debt service and the stock of public debt in order to expand the fiscal space for PRSP-related expenditures. The primary balance has been maintained as a significant surplus and domestic borrowing constrained. The Gambia received substantial debt relief through HIPC completion point achieved in December 2007. As a result, interest payment declined from a peak of 47 percent of recurrent expenditure in 2005 to 24 percent in 2008. This has allowed the Government to reverse the decline in civil service compensation by raising salaries by 20 percent in 2008, with further increases envisaged in the future years. The MOFEA is now engaged in preparing a debt management strategy.

5. Revenue Mobilization


For efficient revenue collection, the Government enacted the Gambia Revenue Authority (GRA) Act in 2004 and created The Gambia Revenue Authority. This brought together the Customs and Excise Department and the Central Revenue Department into an independent and semi-autonomous body under the MOFEA. The Income and Sales Tax Act was revised in 2004 to enhance the revenue collection efforts. Furthermore, the two automated tax collecting systems, GAMTAX net (for domestic taxes) and ASTCUDA 2.7 (for Customs taxes) have been upgraded to improve tax administration and management. The introduction of the taxpayer identification numbers and tax self-assessments by firms are some of the tax initiatives introduced. The improved tax administration arising out of this reform initiative has contributed to average domestic tax revenue of 21 percent of GDP since 2004, one of the highest in the West African Region.

6. Public Procurement

A new Procurement Act was also enacted in 2001 and puts in place mechanisms for the decentralization of procurement activities of Government entities. The Government has set up the Gambia Public Procurement Authority, which replaces the centralized Tender Board, (Major and Minor Tender Boards).

7. Decentralization

In order to increase the efficiency to effectiveness of the local government reforms and the decentralization program, the Local Government Act, 2002 and the Local Finance and Audit Act, 2004 were enacted. The Finance and Audit Act, 2004 provides that:

Central Government will have to pay for the functions carried out by the councils on behalf of government. Local councils have the right to share a certain amount of resources mobilized by the Central Government from within the geographical jurisdiction of councils. Councils have legal sanctions to mobilize resources on their own to finance their own initiatives. The Act requires the Central Government to provide 25 percent of local councils’ development budgets and also general, conditional, and equalization grants. The operationalization of the decentralization framework and program remains in respect of human resources, institutional processes, and logistics.

8. Private Sector

To increase private sector development and reduce the fiscal burden of government as a result of its involvement in commercial activities, the Gambia Divestiture Agency was set up to help plan and to facilitate the divestiture of government assets. Some government holdings of private sector shares have been fully or partially sold. The privatization of state-owned (public) enterprises has been slow, although recent divestiture studies have been made in the area of housing and social security, transport, and telecommunication with a view of enhancing private sector development.

9. National Statistics

Key to the effective implementation of any reform is the availability of timely, reliable, and accurate data. In this regard, Government has established the Gambia Bureau of Statistics as a semi-autonomous organization replacing the former Central Statistic Department. The Statistics Act was revised in 2005, and new organizational structures have been put in place to ensure that the institution operates more efficiently and effectively. This reform is expected to result in the durability of timely and reliable


statistical data that will significantly improve policy planning and formulation together with effective and efficient resource allocations.

10. Expenditure Control and Automation of the Budgeting/ Accounting Systems

All payments for appropriated and statutory expenditures are subject to expenditure controls. Departments are issued cash allocations on a monthly basis. The total cash released is contingent upon the availability of domestic resources in the Consolidated Revenue Fund.

As a major reform, the Government has established an Integrated Financial Management Information System (IFMIS), which began operations in January 2007 and covers the entire Central Government, including embassies and sub-treasuries. New chart of accounts has been developed on the basis of International Accounting Standards and the IMF Government Finance Statistics (GFS). The new chart of accounts facilitates comprehensive reporting of financial transactions in terms of PRSP initiatives, debt services, and economic and functional classifications of the budget.

The IFMIS implementation has spurred an intensive capacity-building program in accounting and computer-technology training. The University of The Gambia, with government support, has introduced a 4-year Bachelor of Accountancy degree program with 17 out of 30 students enrolled from Government agencies. About 40 graduates have received computer-technology training in Taiwan, the Republic of China.

11. Oversight

Other PFM reforms include the setting up of an anti-corruption unit in 2005 under the Office of the President following recommendations of the Commission of Enquiry regarding management of state funds of public servants. Also there are institutional reforms for both Internal Audit Office and the National Audit Office. The focus is on improving capacity and legislative reforms to make the National Audit Office more independent in terms of its budget approval and appointment of the Auditor General.

12. Public Service Reforms

Closely linked to the PFM reforms are the public service reforms to improve the quality and delivery of the civil service. A comprehensive civil service reform is being undertaken with the technical assistance from UNDP. To ensure the availability of timely and accurate human resource information, the Government is putting in place a Human Resource Information System that will be integrated with IFMIS payroll and pension module. This will improve in the management of the government payroll and pension transfer.

13. Budget Planning and Monitoring

The IFMIS has helped to prepare more realistic budgets. Significant developments include:

Overview of the complete budget that summarizes the IMF fiscal tables; Expenditure budget funding overview that summarizes the sources of financing debt service, recurrent and development budgets; Economic overview that summarizes by category terms; Preparation of departmental expenditure classified by PRSP policy programs and sub-programs and poverty interventions.


14. Budget Execution and Monitoring

Although the analysis and monitoring of data improved since 2006, central control of departmental/ ministerial expenditure still remains an issue. The IFMIS project since 2007 has significantly improved fiscal discipline. The strategic allocation of available funds is established firmly as the responsibility of the spending departments.

15. Accounting and Reporting

With regard to the timeliness and reliability of accounting and reporting, the backlog of accounts was a major issue at the time of the CFAA 2003. The following initiatives were taken to clear the backlog:

1991-1999 accounts produced in 2003 with the assistance of the IMF, 2000-2004 accounts produced in 2007 by the Directorate of National Treasury, 2005-2006 accounts produced in 2008 with the assistance of DfID.

With IFMIS implementation, the 2007 and 2008 accounts have been prepared in accordance with the cash-based IPSAS and the provisions of the GBMAA Act, 2004 and its associated regulations.

The 2008 government accounts were submitted to the Auditor General on the March 27, 2009, thereby meeting the statutory timeline.


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