THE UNITED REPUBLIC OF TANZANIA MINISTRY OF FINANCE AND PLANNING

Transcription

1 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF FINANCE AND PLANNING TRAINING MANUAL ON THE BUDGET ACT NO. 11 OF 2015 GOVERNMENT BUDGET DIVISION SEPTEMBER 2016

2 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF FINANCE AND PLANNING TRAINING MANUAL ON THE BUDGET ACT NO. 11 OF 2015 Ministry of Finance and Planning P.O.Box 9111 DAR ES SALAAM, TANZANIA Office Tel: Fax: Website-

3 Ministry of Finance and Planning P.O. Box 9111, Dar es Salaam TANZANIA Ministry of Finance and Planning, 2016 ISBN First Edition, 2016 All rights reserved. No part of this publication may be reproduced, stored in any retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of The Ministry of Finance and Planning.

4 TABLE OF CONTENTS LIST OF APPENDICES... viii GUIDANCE ON EFFECTIVE USE OF THE MANUAL... ix ACRONYMS... x FOREWORD... xi ACKNOWLEDGEMENT... xii KEY CONCEPTS AND TERMINOLOGIES... xiii CHAPTER ONE... 1 INTRODUCTION AND BACKGROUND INFORMATION TO THE MANUAL BRIEF OVERVIEW OF THE BUDGET ACT Need for the Training Manual Target Beneficiaries Objectives of the Manual Coverage of the Manual The Need for Budget Act... 3 CHAPTER TWO... 8 MACRO ECONOMIC AND FISCAL FRAMEWORK INTRODUCTION Principles of Fiscal Responsibility Fiscal policy objective Macroeconomic and Fiscal forecast Coordination with National Development Plan iii

5 CHAPTER THREE MANAGEMENT OF THE BUDGET PROCESS INTRODUCTION Responsibilities of the National Assembly Parliamentary Budget Committee Powers and Functions of the Minister Responsibilities of the Minister Responsible for Planning Powers and Functions of the Permanent Secretary and Pay Master General Powers and Functions of the Planning Commission Responsibility of the Commissioner for Budget Powers, Functions and Responsibilities of the National Plan and Budget Guidelines Committee Responsibilities of the Commissioner for Policy Analysis Powers and Functions of Treasury Registrar Powers and Functions of Accounting Officers CHAPTER FOUR BUDGET PREPARATION AND APPROVAL PROCESS INTRODUCTION Stages in the Budget Process The National Development Plan The Plan and Budget Guideline Budget of Public Entities iv

6 4.5 Submission of Budget Estimates and Related Document for Approval Approval of National Budget by National Assembly Expenditure Appropriation Where Appropriation Act is not yet in Force Appropriation to Lapse at the end of Financial Year Duration of Appropriations and Warrants Submission of Budget Policy Highlights Submission of the Finance Bill Withholding of Approval Government Deviation from Financial Objectives Sources of Contingency Fund Administration of Contingency Fund Advances from Contingency Fund Parliamentary Approval for Payments Made from Contingency Fund Financial Statements in Respect of Contingency Fund Accruals and Investments Reallocation of Funds Excess Revenue Submission of Supplementary Budget CHAPTER FIVE BUDGET EXECUTION, MONITORING, EVALUATION AND REPORTING. 42 v

7 5.0 INTRODUCTION Commitment of Approved Budget Authorities for Expenditure Grants of Credit Withdrawal from the Consolidated Fund Disbursement of Funds to the National Assembly and Judiciary Fund ACGEN s Warrants Assumption of Commitments Multi Annual Commitments Commitment Control System Report on Expenditure Commitments Development Project Contracts In Year Reporting Compliance Report Quarterly Statements of the Government CHAPTER SIX MANAGEMENT OF REVENUES INTRODUCTION Principles for Management of Revenues Responsibility in Revenue Collection and Management CHAPTER SEVEN vi

8 OVERSIGHT OF PUBLIC ENTITIES AND EXTRA- BUDGETARY AGENCIES INTRODUCTION Budgetary and Financial Management of Local Government Authority Financial Management of Extra Budgetary Agencies CHAPTER EIGHT GENERAL PROVISIONS INTRODUCTION Extension of Time Liability on Failure to Meet Requirements of the Act Corrective Measures against Entities included in the Government and Public Entities Indemnity of Public Officers Overriding Effect of the Act Transitional Provisions APPENDICES BIBLIOGRAPHY vii

9 LIST OF APPENDICES Appendix I: Arrangement of Sections in the Budget Act Appendix II: Arrangement of Sections in the Regulations of the Budget Act Appendix III: Recommended Training Exercise viii

10 GUIDANCE ON EFFECTIVE USE OF THE MANUAL This Manual is mainly intended for all relevant stakeholders involved in the National Budget Management Process. The General Public is strongly encouraged to read and understand, as the national budget is an important tool towards attaining National Development. ix

11 ACRONYMS ACGEN AO BA CAG CB CF CFS CPAD FPWG FY GDP LGAs MAC NAO NDP PBC PBG PE PER PIM-OM PMG PS PST TR VAT Accountant General Accounting Officer Budget Act Controller and Auditor General Commissioner of Budget Contingency Fund Consolidated Fund Services Commissioner of Policy Analysis Department Financial Programming Working Group Financial Year Gross Domestic Product Local Government Authorities Multi Annual Commitment National Audit Office National Development Plan Parliamentary Budget Committee Plan and Budget Guidelines Personal Emolument Public Expenditure Review Public Investment and Management - Operation Manual Paymaster General Permanent Secretary Permanent Secretary Treasury Treasury Registrar Value Added Tax x

12 FOREWORD It has always been the concern of the Ministry Of Finance and Planning to ensure that Government Budget is prepared to the levels that are acceptable nationally and internationally. In order to achieve this objective the Ministry has been undertaking capacing buildingprogrammes to Government Offices to ensure that prepared budgets are able give results towards attaining National Development. It is gratifying to note that the National Team of Facilitators on Planning and Budgeting has been able to come up with this manual to assist in such training particularly on the Budget Act. This document provides useful information for training on the Budget Act and it is my hope that it will significantly contribute towards better understanding of this important law in the whole aspects of budget management. On behalf of the Ministry and Planning and on my own behalf, I take this opportunity to encourage readers to make good use of the manual for better understanding of the Budget Act. Readers are also encouraged to read the Budget Act and its Regulations. A separate pulication in Swahili has been prepared tilted IJUE SHERIA YA BAJETI so that we can all effectively participate in National Development agendas. Doto M. James Permanent Secretary to the Treasury and Paymaster General September, 2016 xi

13 ACKNOWLEDGEMENT This manual is a product of strong teamwork and commitment of the Ministry of Finance and Planning under Government Budget Management Division whose Commissioner John M. Cheyo provided general guidance and focus. The overall preparation and management was coordinated by Assistant Budget Commissioners Charles A. Mwamwaja and Pius M. Mponzi. The team members led by Joseph Kiraiya, Assistant Director, Central Ministries Section Department of Coordination of Government Business Prime Minister s Office, comprised of the following from the Ministry of Finance and Planning: Rahel Ntiga, Edwin Ninde, Samwel Kiondo, Adric Adrian, Bahati Mgongolwa, Frank Mtyama, Prosper Fivawo, Ruduga Ndenza, Boniphace Kilindimo, Roman Macha, Adam Ndoro, Suzan Kabogo, Prisca Kimario, Evodius Kanyamyoga, Shadrack Onani, Cosmas Nshenye and Mustapha Sabuni. The technical team was also assisted by the supporting staff, namely Regina Ntahondi, Tuly Swai, Benard Lupokela, Athumani Kimwaki, Farida Hussein and Happy Ndagala. We thank them all for producing this important document. xii

14 KEY CONCEPTS AND TERMINOLOGIES Appropriation This is an authorization made by Parliament under an appropriation Act allowing payment to be made out of the Consolidated Fund or out of any other public fund established by any written law under specific condition or purpose. Budget This is the annual estimates of the revenues and other receipts the expenditures of the Government, including estimates of the National Assembly, Judiciary, grants to Local Government Authorities submitted for approval of Parliament. Budget Act No. 11 of 2015 Budget Cycle This refers to a number of legislative measures enacted to standardize the process by which the government establishes and manages the national budget. It covers the whole budget process and the amendments can be made from time to time. This is the series of activities and timeframes involved in the budget process from preparation, approval, and execution, monitoring and reporting. Compliance report This is one of the several reports submitted to the National Assembly by the Minister under xiii

15 Consolidated Fund section 56. According to the Constitution of the United Republic of Tanzania of 1977 Article 135(1) Consolidated Fund refers to all revenue derived from various sources for the use of the Government of the United Republic except revenue which has been specified by law to be used for a specified purpose or to be paid into another fund for special use. Constitution Means the constitution of the United Republic of Tanzania. Devolving funds to local Government This shall include recurrent block grants composed of specific allocations for Other Charges, subventions including basket funds and development grants including local and foreign. Domestic Revenues This includes tax revenues and non-tax revenues. Domestic borrowing This refers to borrowing from domestic sources including the issuance of government securities. Extra - Budgetary Agency This is the agency which operates outside the government budget system. xiv

16 Financial year This is defined in relation to the government period of twelve months ending on 30th June of each year of a public authority or other body, the period specified by or under relevant law or instrument relating to that authority or body or as determined by the competent authority of that authority or body. Formula This refers to the criteria for allocation of resources to local government authorities and includes but not limited to population, size of the area, road network, number of villages and number of poor residents. Gross Domestic Product This is the total value of goods and services produced by residents of a country to a given period of time normally in one year. Government Refers to ministries, independent departments, regional secretariat, local government authorities and public entities. Macro -Economic Assumptions These include stability of the economic variables such as Gross Domestic Product and inflation, good weather, peace and harmony of the country and the neighboring countries. Minister This refers to the Minister responsible for finance and planning. xv

17 Money Bills Next financial year This is the finance bill, the Appropriation Bill or any other bill which is providing for financial matters. This is the period commencing on the 1st July of the next calendar year and ending on 30th June of the next following calendar year. Non tax revenue Refers to the recurring income earned by the government from sources other than taxes such as fines, penalties and fees. Paymaster - General Refers to an officer who is vested with power to control the issue of public money to accounting officers and who, in that capacity and subject to the directions of the Minister, controls the issue of public moneys to ministries and departments of the Government, and perform such other functions as the minister may by regulations prescribed. Permanent Secretary Plan and Budget Guidelines Refers to Permanent Secretary to the Treasury. This refers to plan and budget guidelines referred under the Budget Act. Principles of fiscal responsibilities These are principles of public finance provided for the Public Finance Act and those referred to under section 4 of the Act. xvi

18 Public Entities Public Expenditure Review These are the public institutions including Parastatals, government agencies, local government authorities and public social security schemes. This is the consultative process between government and stakeholders where allocation and management of public spending is analyzed. Public Finance Act This refers to an Act to repeal the Exchequer and Audit Ordinance in order to make better provisions for the more effective control, management, and regulation of the collection and use of the finances of the United Republic and for enhancing Parliamentary control and supervision of public funds and resources, and for related matters Public Investment and Management Operation Manual This refers to the guideline for selection of a new project that shall be included in the next financial year budget. Public moneys These include: the public revenues of the United Republic; and any trust or other money held, whether temporarily or otherwise, by an officer in his official capacity either alone or jointly with any other person, whether an officer or not. xvii

19 Regional Economic Blocks This include: East African Community, Southern Africa Development Committee and Common Market for Eastern and Southern Africa and such others economic blocks. Sectors These include real, fiscal, external and monetary sectors. Supplementary appropriation Act This refers to any Act, the purpose of which is to supplement the appropriation already granted by an appropriation Act. Tax revenue Treasury Registrar Is the income that is gained by the government through taxation such as corporation tax, income tax, custom duties, excise taxes, Value Added Tax and Withholding tax This has the same meaning ascribed to it in the Treasury Registrar (Power and Functions) Act. xviii

20 CHAPTER ONE INTRODUCTION AND BACKGROUND INFORMATION TO THE MANUAL 1.0 BRIEF OVERVIEW OF THE BUDGET ACT The Budget Act Bill in Tanzania was first tabled in November, 2014 and eventually passed in the National Assembly in March 28, The implementation of the Act started on 1st July, 2015 and it is applicable to Mainland Tanzania. The Act comprises of 9 parts with 75 sections. The Budget Act No. 11 of 2015 has clarified roles and responsibilities of key stakeholders in the budget process and strengthens collaboration in the whole process of budget management. It has put in place, recognized and appreciated into legal text the budget important pillars:-planning, Revenue and Expenditure. Plans for the medium and long term as well as Vision 2025 are recognized by the Budget Act and no projects should be financed unless listed in approved plans. Considering this fact, the budget in the current year will be prepared by considering the Annual Development Plan and investment will be made in development projects that are approved by Parliament. Specific time to prepare plan and budget guidelines has been set and is annually communicated to Accounting Officers in order to facilitate the preparation of the plan and budget. Other clarifications of the Budget Act include: recognition of the Budget process throughout its various stages and stakeholders; establishment and recognition of the Parliamentary Budget Office, Parliamentary Budget Committee and Sectoral Committees; recognition of the roles and functions of the Budget Committee and harmonization of the various existing Laws related to budget matters. 1

21 Implementation of the Budget Act No. 11 of 2015 and its Regulations will provide effectiveness, transparency and oversight of all matters regarding National budgeting process so as to attain economic growth and improvement of standard of living of citizens. 1.1 Need for the Training Manual (i) The training on the Budget Act No.11 of 2015 is very crucial and it has to be understood by each implementing agent to ensure efficient and effective management of the budget process. (ii) To ensure each relevant actor has the right information in respect of the implementation of Budget Act No. 11 of 2015 and its Regulations. (iii) There is high demand of training on Budget Act No. 11 of 2015 and its Regulations from the implementers which cannot be easily met by conducting formal training alone. 1.2 Target Beneficiaries The Training Manual is addressed to those responsible for implementation of the Budget Act No. 11 of 2015 and its Regulation. These include Ministries, Extra Budgetary Agencies, Local Government Authorities, Members of Parliaments and the General Public as a whole. 1.3 Objectives of the Manual The overall objective of the Manual is to improve efficiency, professionalism, effectiveness, transparency in all matters regarding National budgeting process. The specific objectives of the Manual are: (i) To create awareness to all stakeholders and Public at large on matters related to National Budget. 2

22 (ii) To build Capacity to key players on the Budget Act No.11 of 2015 with the aim of attaining effectiveness in the national budget process for better management of Public resources. 1.4 Coverage of the Manual The Manual consists of eight chapters and it will be focusing mainly on eight parts of the Budget Act and its regulations. Chapter one is the introduction and background to the manual. Chapter two concerns with Macro-economic and Fiscal Framework, Chapter three is about the Management of Budget Process, Chapter four deals with the Budget Preparation and Approval Process, Chapter five clarifies the Budget Execution, Monitoring, Evaluation and Reporting Chapter Six explain about Management of Revenue, Chapter seven talks about Oversight of Public Entities and Extra-Budgetary Agencies and Chapter eight illustrates about General Provisions. 1.5 The Need for Budget Act It is always worthy noting that, Government Budget is an important administrative and accountability tool in ensuring the implementation of plans and policies, better use of resources, effective management of tasks and responsibilities of government. The budget provides a guide to the intentions and attitude of the Government in its endeavors to implement its obligations in the short, medium and long-term, resource allocation, priority areas, revenue and expenditure as well as management of strategies and plans of the Government in general for development. Given the importance of the Government Budget it is significantly important to have the law specifically to manage the entire system, 3

23 identify key players and their roles, recognizing important issues to consider in the budget and the measures to be taken if they are not observed. Some important issues that led to the enactment of the law include: (i) Budget cycle is recognized by law: Budget Preparation, approval, implementation, monitoring of expenditure and reporting processes are now legally recognized. (ii)the need to clarifying roles and responsibilities: Budget System in Tanzania is governed by the Constitution of the United Republic of Tanzania as well as various other laws. The laws include the Public Finance Act, Cap 348, the Local Government Finance Act, Cap 290, and the annual Appropriation Act. These laws and others govern various aspects about finances in general and remaining silence on the areas of planning, revenue and expenditure that are essential in the budget process. The roles and responsibilities of different key actors have now been harmonized in the BA. Historically the budget process was governed by the National Committee for the preparation of the Plan and Budget Guidelines which prepared guidelines and thereafter approved by the Cabinet. Votes prepared budget in line with those guidelines discussed by the Parliamentary Sectoral Committees and finally submitted to Parliament which discussed and approved ready to be implemented. However, this whole task lacked legal backing. (iii) Improvement of the Budget Credibility: Low credibility of the Budget caused by the presence of the not clearly regulated 4

24 reallocations of funds. The aspect also needed to be tackled, misuse of funds, accumulation of arrears, insufficient revenue compared to available opportunities. In addition, Private Sector involvement had to be considered in the financing and implementation of large-scale development projects and therefore reducing reliance on Government and Development Partners to finance those projects. In terms of Parliament, Parliamentary Sectoral Committees discuss, analyze and give recommendations on budget estimates presented. In addition to those Sectoral Committees, the Parliament had introduced the Parliamentary Budget Committee. This committee was involved in various aspects of the budget in accordance with the Standing Orders as well as to discuss and review the Government's budget and make recommendations to Parliament, discuss and make recommendations on the budgets of various votes, provide guidelines to Parliament and direction of the budget to Parliament Committees, to assess and provide advice on sources of income as well as other issues pertaining to the Budget. BA now recognizes these important functions of the committee. (iv) Putting in place specific legislation on budget matters: The Constitution of the United Republic of Tanzania of 1977, in Article 137 (1) laid the foundation which governs budget process. The Constitution provides that: ''The President shall give directives to persons concerned to prepare and submit to the National Assembly in each Government financial year estimates of the revenue and 5

25 expenditure of the Government of the United Republic for the next financial year."in addition, the Constitution also continued to direct and to lay the foundation for approval of the Government through the use of Article 137 (2). In Article 99 (1) of the Constitution establishes a mechanism to legislate on matters of finances and laid the foundation of separating the responsibilities of Government and Parliament to redirect that: The National Assembly shall not deal with any of the matters to which this Article relates except if the President has proposed that the matter be dealt with by the National Assembly and the proposal has been submitted to the National Assembly by a Minister The details on the effective implementation of this article are now found in the BA. (v) Emphasizing the link between planning, revenue and expenditure: Likewise, the budget execution focused on the expenditure side and less focus in planning and revenue. The BA has now addressed the aforesaid challenge by linking the three pillars. (vi) Putting in place mechanism for efficient management of fund: CAG reports have been demonstrating the existence of inefficient utilization of funds in various votes. There had been a major challenge for some public offices to have a poor utilization of funds, failure to report expenditure accurately, failure to maintain proper records of the public assets and money received lack of proper information on debt and many other shortcomings. 6

26 Basically, those factors significantly affected the implementation of the objectives of the Government through its various offices. These facts are now the focus of the BA. 7

27 CHAPTER TWO MACRO ECONOMIC AND FISCAL FRAMEWORK 2.0 INTRODUCTION In this area short and medium term macro economic and fiscal framework are prepared. In preparing this, the main concern is on the macro economic development and outlook in that particular period of time. As regard to this, analysis is made on GDP growth rate and sectors contributed to that growth, assessment of performance of key productive sectors (agriculture, tourism, manufacturing building and construction and infrastructure), price movements (inflation, exchange rate and interest rate). Other analysis is made on the followings: labor market, fiscal performance such as revenue to GDP ratio, domestic resource mobilization against expenditure, budget credibility, procurement procedures against financial regulations and funding for priority investment, external sector performance ( ratio of export to GDP, trade balance, costs of trading, value chain) and financing issues such as debt sustainability analysis, national debt stock, debt services and comparative analysis on level of Tanzania debt against other countries. Preparation of Macro economic and fiscal Framework has been recognized by the Budget Act No. 11 of 2015 as it has been elaborated in this chapter. The chapter consists of four parts. Part one is about Principles of fiscal policies and management; part two concerns Fiscal policy objectives; part three is Macro economic and fiscal forecast and the last part concerns Coordination with National Development Plan. 8

28 2.1 Principles of Fiscal Responsibility Section 4 Sub section (1and 2) of the Budget Act No. 11 of 2015 clarifies that, during preparation of policy objectives, the Government and Public entities shall adhere to the following principles of fiscal responsibilities: (i) Borrowing policy which ensures that public debt is sustainable. That is borrowing conforms to the National Debt Management Policy, Medium Term Debt Management Strategy and the Loans, Guarantees and Grant Act. [Regulation 3 (2) (a)]. (ii) Fiscal policy that conforms to Plan and Budget Guidelines and Five Year Development Plan. It means that we need fiscal policies which promote investments and growth [(Regulaton3 (2) (b)]. (iii) Minimization of fiscal risk in respect of guaranteed loans, pension obligations and pending bills. That is guaranteed loans, pension obligations and pending bills conform to the National Debt Management Policy, Medium Term Debt Management Strategy and Loans, Guarantees and Grants Act, 1974 (as revised on 2004). [Regulation 3 (2) (c)]. (iv) A wage policy that is sustainable and attractive. Wage bill shall be covered in the recurrent expenditure and financed by domestic revenues. [Regulation 3 (2) (d)]. (v) A national budget and budgetary process that promotes transparency, accountability and effective management of the economy and public sector. The budget preparation and execution process shall be participatory involving key stakeholders with the aim of increasing transparency and accountability. [Regulation 3 (2) (e)]. (vi) Policies that ensure a reasonable degree of future predictability about the level and stability in tax rates. 9

29 (vii) Prioritization of productive expenditures rather than consumption expenditures. (viii) Observance of the doctrine of separation of powers by ensuring that National Assembly only gets involved in the management of public resources in the instances that set out by the Constitution and any other written laws. 2.2 Fiscal policy objective Section 5 of the Budget Act No. 11 of 2015 describes that the Plan and Budget Guidelines shall set out fiscal objectives based on the following criteria: (i) Promote sustainable macroeconomic stability and noninflationary and inclusive economic growth; (ii) Establish and maintain sustainable and low risk debt budget financing mechanism; (iii) Maintaining a ceiling on fiscal deficit including grants; (iv) Maintain sufficient level of gross official reserves to cover for imports of goods and services; and (v) Sustain monetary and financial stability. 2.3 Macroeconomic and Fiscal forecast Section 6 of the Budget Act No. 11 of 2015 and regulation 5 of the Act enlightens that, the National Financial Programming Working Group shall be responsible for financial programming and macroeconomic modeling used quarterly as an input for preparation of the macroeconomic framework, Plan and Budget Guideline shall involve: (i) Assessing the world economic dynamics and its impact on the national economy; 10

30 (ii) (iii) (iv) (v) Preparing macroeconomic assumptions and outlook for the coming fiscal year; Preparing medium term macroeconomic framework that is used for preparation of PBG; Preparing requirements relating to the macroeconomic and fiscal forecasts underlying the PBG and national budget documents; and Specifying Minister s responsibility to produce macroeconomic and fiscal forecasts over a medium term time horizon. Regulation 5(1 and 2) elaborates that the Minister shall form the National Financial Programming Working Group which shall be responsible for financial programming and macroeconomic modeling. The National Financial Programming Working Group shall comprise of representative from: the Ministry of Finance and Planning who shall be the Chairman; the Bank of Tanzania; the Tanzania Revenue Authority; and National Bureau of Statistics. The Minister may co-opt any person who may be of assistance during deliberations of the National Financial Programming Working Group. Furthermore, regulation 4(1 to 3) describes that the Minister may deviate from principles of prudent fiscal management where events of force majeure occur and when cannot be funded from the Contingency Fund or other funding mechanism provided for under the Act. Event constituting force majeure shall include: world economic slump; unfavorable climatic conditions; state of emergency, including war; natural calamities such as earth quake and outbreak of diseases. The Minister shall publish a report on any deviation and present to the next session of the National Assembly. 11

31 2.4 Coordination with National Development Plan For purpose of having proper coordination with the National Development the Act provides the followings: (i) Section 7 subsection (1) of the Budget Act No. 11 of 2015 requires the Government and public entities to prepare annual budget based on the approved medium and long term plan; (ii) Section 7 subsection (2 and 3) of the Budget Act No. 11 of 2015, Budget estimates of development projects should include only projects listed in the National Development Plan. (iii) Section 7 subsection (4)(a-k) of the Budget Act No. 11 of 2015, the Government and public entities shall ensure that:- (a) (b) (c) Financial resources are consistent with ceilings set in PBG. Development projects implemented in the order of priority. Development Projects should be approved by Ministry of Finance and Planning before being included in the budget. (d) Involvement of private sector in financing major development projects through PPPs. (e) Grading of LGAs is made for Planning and allocation of resources. In addition, Regulation 6 (1) to (7) describes that, coordination of the national development plan shall be as stipulated under section 7 of the Act on assumption that the operation of development and recurrent budgets are based on the following criteria: commitments for expenditures and payment are made as per approved budget; disbursements of public moneys for development and recurrent budget depends on monthly revenue collection. Furthermore, regulations insists the submission of quarterly expenditure performance reports to the Ministry responsible for finance and 12

32 planning by 15 th day of every next month which shall be a basis for disbursement of funds for next quarter; payment of personnel emoluments is made directly to employee s bank accounts; procurement of goods and services comply with the National Procurement Policy and the Public Procurement Act to ensure quality and value for money. The regulation expounds further that: Ministry of Finance and Planning shall scrutinize, analyze and approve new development projects prior to their inclusion in the budget and the criteria for new projects shall be: aligned to the national plan s priorities as stipulated in the PIMOM; strategic outcomes of the project based on specific strategic goals such as equity and regional development, skills and technological gains. Additionally, the private sector shall be involved in financing and implementing major development projects through PPP as stipulated under the PPP Policy and PPP Act; allocation of funds to the Local Government Authorities shall be based on the followings: approved LGAs Strategic Plan; formula based allocation criteria for other charges and development budget and annual performance assessment of local government including reports from the Controller and Auditor General; all LGAs shall be graded for purpose of planning and allocation of resources; and Priority for allocating public moneys for investing in the development projects shall base on the following criteria and strategic nature of the project: ongoing projects and sector wise approach and basket funds received from Development Partners. 13

33 CHAPTER THREE MANAGEMENT OF THE BUDGET PROCESS 3.0 INTRODUCTION This chapter covers part three of the Budget Act No.11 of The chapter summarizes responsibilities, functions and powers of the key actors who are responsible for the management of the Budget process. The chapter covers the following sections of the Budget Act No. 11 of 2015: Section 8 which explains about the responsibilities of thenational Assembly; Section 9 clarifies functions of Parliamentary Budget Committee; Section 10 describe Powers and Functions of the Minister; Section 11 explains responsibilities of the Minister responsible for planning; Section 12 expounds powers and functions of the PST and PMG; Section 13 clarifies powers and functions of Planning Commission; Section 14 describes responsibilities of the Commissioner for Budget; Section 15 explains Powers, Functions and Responsibilities of the National Plan and Budget Guideline Committee; Section 16 is about the responsibilities of the Commissioner for Policy Analysis; Section 17 describes powers and functions of Treasury Registrar and Section 18 is about the powers and functions of Accounting Officers. 3.1 Responsibilities of the National Assembly Section 8 of the BA clarifies that the National Assembly will be responsible on the following issues: (i) To consider the budget estimates, macro economic planand programs; (ii) Discuss and review thepbg and budget estimates; 14

34 (iii) To monitor all budgetary matters within their competence under this Act; and (iv) To examine and make recommendations on financial statements, money bills and fiscal prudence on budgetary matters. 3.2 Parliamentary Budget Committee Section 9 of the BA elaborates that the Parliamentary Budget Committee will be responsible on the following issues: (i) To discuss and review the PBG,Budget estimates and make recommendations to thenational Assembly; (ii) Scrutinize the budget estimates of NAO, Judiciary and the NationalAssembly; (iii) To provide general direction to the National Assembly and Parliamentary Standing Committees on budgetary matters; (iv) To examine financial statements and other documents and make recommendations for improving the management and accountability of public finance; (v) To conduct periodical study on the performance trend of the budget; and (vi) To monitor adherence by the Government to the principles of the public finance set out constitution and the other laws in force. 3.3 Powers and Functions of the Minister Section 10 of the BA explains powers and functions of the Minister to be:- (i) To prepare revenue and expenditure estimates and financing (ii) requirements for Government; To control and supervise the preparation, execution and monitoring of the budget including any adjustments; 15

35 (iii) (iv) (v) (vi) To ensure that all stakeholders are able to participate and are informed on the decision taken on the budget. This has been elaborated further by regulation 7 (1 to 2) which clarifies that: first, the Minister shall ensure that members of public participate in the national budget process through the following fora: the Public Expenditure and Task Force Tax Reforms. Second, the objective of the Public Expenditure Review forum shall be to analyze the extent to which policy priorities are practically implemented through budget allocation in order to increase the effectiveness and efficiency of public spending. To publish the progress of budget execution on quarterly basis; To manage and control Government financial resources, assets and liabilities;and To promote and enforce transparency and sound management in respect of revenue, expenditure, assets and liabilities of the Government. 3.4 Responsibilities of the Minister Responsible for Planning Section 11 of the BA clarifies that the Minister responsible for planning will be responsible on the following issues:- (i) To prepare and submit the National Development Plan to the cabinet for approval. (ii) To submit the approved NDP for approval to the National Assembly. (iii) To coordinate the implementation of the NDP. (iv) To submit the statement of the state of the economy to the National Assembly. 16

36 3.5 Powers and Functions of the Permanent Secretary and Pay Master General Section 12 of the BA expounds powers and functions of the Minister to be: (i) PST and PMG shall be responsible to the Minister. (ii) To ensure timely and effective preparation of estimates of revenue and expenditure; (iii) To ensure effective use of Government resources; (iv) To control the issue of public funds Government and Public Entities. (v) To request for information that is necessary for preparing any report under this Act from any Public Entities. (vi) Any public officer who fails to provide information requested, commits a disciplinary offense and is liable to disciplinary penalty; (vii) To Conduct periodic review of revenue and expenditure ofpublicentities; and (viii) In the cause of periodic review PST and PMG may order any amount of funds to be included in the General National Budget. 3.6 Powers and Functions of the Planning Commission Section 13 of the BA illustrates powers and functions of the Minister to be:- (i) To assess thestate of national resources for development and advise efficient utilization; (ii) To Monitor the implementation of Government decisions on planning and management of the economy; (iii) To analyze the projects for inclusion in the development budget and; 17

37 (iv) To issue guidelines for formulation of the NDP and monitor the preparation process of Long Term Plan, Medium Term Plan and Annual Plan. These Powers and functions are elaborated further in Regulation 14 [(1)(a-h)] as follows: the Planning Commission shall assess the state of national resources for development and advise the Government on the efficient utilization of those resources by: conducting research and analyze countries resources potentials in order to spend up the provision of the basic conditions of broad based economic growth and poverty reduction. The regulation elaborate further that the Planning Commission shall prepare Medium and Long Term Development plans; annual development plan focusing on advising the Government to strategic investment for unleashing growth in infrastructure development, agriculture, industry, human resources development; tourism, trade and financial services; advising the Government in investing and improving social services which include provision of clean and safe water, improvement of health services and provision of quality education at all levels; advising on efficient measures of improving resource mobilization and collection strategies. Additionally, the regulations expounds that Planning Commission has to advise on the measures of scaling up the role and participation of private Sector in economic growth by improving business environment; preparing annual national economic survey report for analyzing socio economic achievements and challenges of economic status of a country and toconduct 18

38 monitoring and evaluation on implementation of the National Development Plan regularly in collaboration with Ministry of Finance, implementing sectors and submit a report semiannually to the Cabinet for approval. 3.7 Responsibility of the Commissioner for Budget Section 14 of the BA clarifies that the Commissioner for Budget will be responsible on the following issues: (i) There shall be the Commissioner for Budget; (ii) CB under the direction of PS shall be responsible for the preparation, execution, monitoring, evaluation and reporting of the budget; (iii) Review budgetary policies and provide guidelines; (iv) Analyze votes estimates during the process of budget scrutinization; (v) Oversee and manage the implementation of the governmentand publicentities budget; (vi) Prepare reallocation to the budget; (vii) Consolidate and manage cash flow plan and performance based disbursement; and (viii) Advise on budgetary commitments of the governmentand financialobligations. These Powers and functions are elaborated in Regulation15 [(1)(a-c)] as follows: The commissioner for Budget shall first, monitor the implementation of the Budget through scrutiny of progress reports submitted by Government and public entities and take necessary measures to address any abnormalities; second undertake periodic public expenditure tracking and projects inspection activities and third, 19

39 advice the PMG on budgetary commitments of the Government and decisions having financial obligations in respect of Other Charges, PE and development budget of the Government for consideration in the budget management process. 3.8 Powers, Functions and Responsibilities of the National Plan and Budget Guidelines Committee Section 14 of the BA clarifies that the National Plan and Budget Guidelines Committee will be responsible on the following issues: (i) To advise the government in the preparation of the National budget; (ii) To prepare the Plan andbudget Guidelines; and (iii) To request for information from Government or Public entities for purposes of preparing PBG. Composition of PBG is elaborated in Regulation 16 [(1)(a-q)] and it is composed of: Deputy Executive Secretary of the Planning Commission; the Commissioner for Budget; the Commissioner for Policy Analysis; the Commissioner for External Finance, the Commissioner for Public Private Partnership; Assistant Commissioners for Policy Analysis; Assistant Commissioners for Budget; Other Deputy Executive Secretaries Planning Commission; Coordinator from Reforms Coordinating Unit, President s Office, state House; the Director for Coordination of Government Business from Prime Minister s Office; the Director of Policy and Planning from Prime Minister s Office, Regional Administration and Local Governments; the Director of Policy Development from President s Office, Public Services Management; the Accountant General; the Treasury Registrar; a representative from Bank of Tanzania; arepresentative from Tanzania Revenue Authority; and any other 20

40 members to be co-opted from time to time by Permanent Secretary as and when necessary. 3.9 Responsibilities of the Commissioner for Policy Analysis Section 16 of the BA explains that the Commissioner for Policy Analysis will be responsible on the following issues: (i) To provide expertise in Policy issues concerning fiscal matters including revenue mobilization, expenditu reallocation and sources of financing and regional and international economic cooperation; and (ii) To provide expertise on macroeconomic issues regarding to policy formulation, implementation, data base management and periodical reporting Powers and Functions of Treasury Registrar Section 17 of the BA illustrates powers and functions of the Treasury Registrar to be: (i) To review, approve strategies, annual plans and budgets of public entities which are under the supervision of TR and incorporate into the NDP; (ii) To supervise public entities investment funds; (iii) To ensure that surplus, contributions and dividends from public entities are paid when due; (iv) To director approve the adoption, application or amendment of financial regulation to ensure proper accounting of the income and expenditure of public entities; (v) To monitor capital grants, subsidies, capital reserves or retained earnings, earned by a corporation and other public investments; and 21

41 (vi) To examine and approve organization structure, salary structure, scheme of service in publicentities; (vii) To manage and control privatization funds received from divesture process of public entities assets and shares;and (viii) To ensure review and signing of every public corporation performance contract geared towards revenue improvement Powers and Functions of Accounting Officers Section 18 of the BA explains powers and functions of the Accounting Officers to be: (i) To ensure budget of votes and public entities are prepared as per PBG; (ii) To ensure public funds and resource are properly managed and safeguarded; and (iii) To ensure arrangements for collection of revenue from the public are conducive to its collection; and (iv) AO of respective ministries and public entities shall establish a budget committee. These have been elaborated further in regulation 17[(1),(2)(a-e)] as follows: AO shall each establish budget committee; whereby, the composition of the budget committee shall be as follows: At Ministerial level, Permanent Secretary shall be the chair, Director of Planning and Policy shall be the secretary and Heads of departments, sections and unit shall be members. At the independent department level: Head of Independent Department shall be the chair; head of Planning shall be the secretary and Heads of department, sections and units shall be members. At Regional Secretariats level: Regional Administrative Secretary shall be the chairman; Head of Planning and Coordination department shall be the secretary and 22

42 Heads of department, section and unit shall be members. At local government level: Local Government Authority s Director shall be the chairman; Local Government Authority s head of Planning shall be the secretary and Heads of department, section, and unit shall be members. In respect of other public entities: Chief Executive Officers shall be the chairman; Head of Planning as secretary and Heads of Department, section and unit shall be members. (v) The functions of budgetcommittee areelaboratedinregulation 17 [(3)(a-d)] as follows: The functions of the budget committees shall be to review revenues collection measures; allocate resources based on strategic plan and national priorities without exceeding the ceiling provided by the PMG; evaluate budget performance and perform other functions as described in the PBG, Treasury Registrars circular and directives. 23

43 CHAPTER FOUR BUDGET PREPARATION AND APPROVAL PROCESS 4.0 INTRODUCTION The chapter presents key issues and the actors responsible for the Budget preparation and approval process. It covers the following sections of the BA: section 19 describes Stages in the Budget Process; section 20 is about National Development Plan; section 21 explains Plan and Budget Guidelines; section 22 describes Budget of Public Entities; section 23 expounds submission of budget estimates and related documents for Approval; section 24 explains submission of Other Documents to the National Assembly; section 25 describes National Assembly to consider budget estimates and section 26 is about approval of the National Budget by the National Assembly. Other sections include section 27 which explains expenditure appropriation; Section 28 describes where Appropriation Act is Not Yet in Force; section 29 explains appropriation to lapse at the end of Financial Year; section 30 expounds duration of appropriations and Warrants; section 31 explains submission of Budget Policy Highlights; section 32 describes submission of Finance Bill; Section 33 is about Withholding of Approval; Section 34 clarifies Government Deviation from Financial Objectives. Other sections are Section 35 which describes Sources of Contingency Fund; Section 36 explains Minister to Administer Contingency Fund; section 37 clarifies on Advances from the Contingency Fund; Section 38 is about Parliamentary Approval for Payments made from contingency fund; section 39 deals with Financial Statements in Respect of 24

44 Contingency Fund; Section 40 concerns with Accruals and Investment; section 41 is about Reallocation of Funds; Section 42 deals with Excess Revenues and section 43 clarifies on submission of Supplementary Budget. 4.1 Stages in the Budget Process The budget process is comprised of various stages, which feed into one another in a circular process. The various phases of the budget process are interrelated. At any given point in the year, there may be multiple phases of the budget process occurring the PBG highlights these stages and has put in place a budget calendar to be observed in budget management process. Section 19(1) of BA clarifies thatthe budget process in any financial year shall comprise of the following stages: (i) Integrated development planning process which shall include long term and medium term planning; (ii) Planning and determining financial and economic policies and priorities at national level over the medium term; (iii) Approval of Plan and Budget Guidelines by Cabinet; (iv) Adoption of Plan and Budget Guidelines by National Assembly as a basis for future deliberations; (v) Approval of the revenue measures by Cabinet; (vi) Preparing budget estimates of the government for the approval by the Cabinet; (vii) Submitting budget estimates to the National Assembly for approval; (viii) preparing the Appropriation Bill, the Finance Bill and subsidiary legislation required to implement Government s budgetary proposals; and 25