PROGRAM IMPLEMENTATION PLAN

Transcription

1 Federal Democratic Republic of Ethiopia PROGRAM IMPLEMENTATION PLAN for PUBLIC SECTOR CAPACITY BUILDING PROGRAM (PSCAP) Volume II Draft Dated: October 28, 2004

2 Table of Contents PARTICIPATION AND PERFORMANCE AGREEMENTS... 4 PSCAP ANNUAL PERFORMANCE AGREEMENT MATRIX...Error! Bookmark not defined. FINANCIAL MANAGEMENT GUIDELINES... 4 Introduction... 4 Background... 4 Institutional Arrangement... 5 Funding Modalities... 6 Accounting Policies and Procedures... 6 Budget and Budgetary Control... 7 Budget Code17 Regions that are using single entry accounting code... Budget preparation and control... Chart of Account... Accounting Cycle... Receipt of Money... Transfer of Fund to Beneficiaries... Disbursements... Check Payments and Bank Transfers... Cash Payments... Journal Vouchers... Accounting Records... Transactions in Register... Budget Ledger Card... General Ledger... Subsidiary Ledger... Reporting Types and Frequency of Reporting... Report Preparation Responsibilities... Methods of Report Preparation... Monthly Reporting... Statement of Expenditures (SOE)... Financial Monitoring Reports (FMR)...

3 2 Quarterly Financial Reports... Annual Reports... Travel Expenses... Procurement... Receipt and Issuance of Goods... Management and Control of Program Assets... Internal Controls... Auditing... External Audit... Internal Audit... Retaining Documents... Revision of Financial Manual... Annex... Sample Financial Monitoring Report... Sample Procurement Status Report... SAMPLE PROCUREMENT TEMPLATES AND FORMS... Procurement Planning Template - Goods... Procurement Planning Template - Consultants... Sample Training Plan... Sample General Procurement Notice... Sample Request for Expressions of Interest - Consultants... Sample Invitation for Prequalification... Sample Standard Unit Rates... DETAILED PROGRAM DESCRIPTION... Subprogram 1 Civil service reform... Subprogram 2 District-level decentralization... Subprogram 3 Justice system reform... Subprogram 4 Urban management capacity building... Subprogram 5 Tax systems reform... Subprogram 6 Information and communications technologies... Mandatory activity Program support... SAMPLE TERMS OF REFERENCE CIVIL SERVICE REFORM SUBPROGRM... Report Card/Client Survey Consultancy... Route 1 Sub-project Proposal...

4 3 Route 1 Business Process Review (BPR) and Reengineering... Training of Frontline Staff for Route 1... Training in Strategic Planning for Route 2... Preparation of a Strategic Plan for Route 2... Training in core Civil Service Reform Activities for Route 2... Implementation Support for Route 2 Implementation... Job Classification, Grading, and Pay Policy Consultancy... Pay Reform Consultancy... Chief Technical Advisor. Civil Service Reform Program... Performance Tracking Facility Preparation of Operational Manual... SAMPLE TERMS OF REFERENCE DLDP & URBAN... Core Capacity for Local Governance... Medium Term Capacity Building Advisor. District Level Decentralisation Program... Pilot Local Government Fiscal/Financial Analyses... Assistance in Pilot Infrastructure Rehabilitation Design... SAMPLE TERMS OF REFERENCE PROGRAM SUPPORT... Planning & Programming Directorate (PPD)... Technical Team (TT)... Procurement Specialist (International)... Procurement Specialist (National)... Project Accountant... Information, Education & Communication Specialist... Audit of Project Account Statement... Program Management Assistance... Assistance in Project Design & Implementation...

5 4 Public Sector Capacity Building Program (PSCAP) PARTICIPATION AND PERFORMANCE AGREEMENTS Whereas the Ministry of Finance and Economic Development has entered into an agreement with the International Development Association (IDA) to be known as Development Credit Agreement of Public Sector Capacity Building Program (PSCAP) and whereas the Ministry of Finance and Economic Development has agreed to make finances available to the Ministry of Capacity Building for the provision of goods, training and services to Executing Agency (EA). Now therefore the Ministry of Capacity Building (hereinafter refereed to as the Ministry and the [insert official name the [Executing Agency (EA)] (hereinafter referred to as [insert official shortened form of name]); Agree as follows: That the Ministry has agreed to fund technical assistance services, training and goods (except vehicles) for the period [insert start date of TA, training and goods provision] to the [insert end date of TA, training and goods provision] on a non-reimbursable basis as outlined in [insert relevant section of DCA- Schedule 4: section 5 and 6] of the Development Credit Agreement of Public Sector Capacity Building Program (PSCAP) The funding made available may be used for supporting Technical Assistance, training and goods provision for EAs. The funding will be provided in the form of (----- cash transfers) based upon Annual Action Plan reviewed by (Regional Technical Team / the relevant sub-program directors), submitted by the [insert official shortened form of the name of EA] and approved by the PSCAP Federal Technical Team of the Federal Government of the Democratic Republic of Ethiopia. The [insert official shortened form of name of the EA] hereby agrees that the goods, consultants services and training to be financed from PSCAP shall be procured in accordance with procedures ensuring efficiency and economy and in accordance with the provisions made available in the PIP and shall be used exclusively in the carrying out of agreed program activities; and The [insert official shortened form of name of the EA] hereby agrees that the source of technical assistance, training and goods provided will only be from participating countries i.e. those countries that meet requirements set forth in Section 5(e) of Resolution No. IDA 184 of the Board of Governors of the International Development Association adopted on June 26, As at September 2002 the following countries are not eligible to supply technical assistance service, training and goods paid by Public Sector Capacity Building Program (PSCAP) Fund [insert list of countries Andora, cuba, Democratic People s Republic of Korea (North Korea), Liechtenstein, Monaco, Nauru, San Marino and Tuvalu]. The list will be updated from time to time. The [insert official shortened form of name of the EA] further certifies that:

6 5 The [insert official shortened form of name of the EA] desires to build capacity to contribute to the delivery of the overall PSCAP development objectives, namely improve the scale, efficiency and responsiveness of public service delivery at the (EA); empower citizens to participate more effectively in shaping their own development; and promote good governance and accountability. The EA has agreed to comply with the rules of access allocation and execution of the Program, as specifically set forth in the Program Implementation Plan, and commit to deliver on agreed performance outputs on a semi-annual basis summarized in the attached Performance Matrix. The EA has agreed to establish appropriate governance and implementation arrangements and secured adequate technical, financial management and procurement capacity to implement the proposed PSCAP activities in compliance with the guidelines set forth in the Program Implementation Plan, or has adopted a specific, time-bound plan of actions satisfactory to Federal Technical Team, to strengthen its capacity; The EA has committed to timely submission of endorsed and costed medium-term rolling plans, including technically sound, feasible annual implementation and procurement plans for the subsequent Fiscal Year and agreed to complete the minimum capacity building activities before engaging on others; and The EA has agreed to make adequate provision for carrying out an adequate evaluation of annual performance for the subsequent year, reporting on progress made to Federal PPD including evidence of dissemination of such evaluation to the public as part of consultative planning process. The EA has given Federal Technical Team to: (A) inspect by itself, or jointly with the donors, if the donors shall so request, the goods, services and training included in PSCAP activities and any relevant records and documents; and (B) obtain all information as it, or the donors, shall reasonably request regarding the administration, operation and financial conditions of PSCAP activities. The EA has attached the documentary evidence for provisions under b, c, d and e including the action plans, detailed description of the implementation arrangement and performance matirx In witness of whereof the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names as of the day and year first below written. The Minister of Capacity Building on behalf of the Federal Government of the Republic of Ethiopia:

7 [insert date of signature] 6 witnessed by: Witness 1 Witness 2 Name Title: Date: Signature: Name: Title: Date: Signature The [insert title of signee] on behalf of the [insert official shortened form of name of the EA] [insert date of signature] witnessed by: Witness 1 Witness 2 Name Title: Date: Signature: Name: Title: Date: Signature

8 7 PSCAP ANNUAL PERFORMANCE AGREEMENT MATRIX Contributing Performance Agreement Matrix with Targets (FY04-05) PSCAP Quarter 1 Quarter 2 Quarter 3 Quarter 4 Subprogram OUTPUTS Planned Actual Planned Actual Planned Actual Planned Actual BUDGET UTILIZED Outome (a): Improved Predictability and Transparency of Financial Resource Flows In Year and Across Years Indicators for verification: Reduced budget variance at each level TSRP C S R P Elimination of backlog accounts at regional and local levels Installation and training in BIS and BDA3 systems in all regional and woreda institutions Completion of annual turnover survey Reduced federal-regional and regional-local fiscal gaps Outcome (b): Greater inclusiveness and transparency of planning and prioritization processes Indicators for verification: Established practice of participatory budgeting and public reporting on budgets and performance at all levels Regular involvement of civil society in planning and policymaking, budgeting, and review processes

9 8 Contributing Performance Agreement Matrix with Targets (FY04-05) PSCAP Quarter 1 Quarter 2 Quarter 3 Quarter 4 Subprogram OUTPUTS Planned Actual Planned Actual Planned Actual Planned Actual D L D Finalization of strategy and action plan for gender sensitized community participation P CSRP Installation and training in medium term expenditure management procedures manual; Program Support Completion of training in PIP, procurement, financial management, and M&E Outcome (c): Enhanced fiscal autonomy and revenue performance Indicators for verification: Increased own revenues and unconditional transfers as a share of total expenditures at sub-national levels Increased tax effort at all levels

10 9 Contributing Performance Agreement Matrix with Targets (FY04-05) PSCAP Quarter 1 Quarter 2 Quarter 3 Quarter 4 Subprogram OUTPUTS Planned Actual Planned Actual Planned Actual Planned Actual TSRP Adoption of proclamations, regulations, and directives for income and TOT Completion of training on laws for DLDP tax administrators at regional and city administration levels Completion of review and preparation of decentralization legal framework, functional assignments, and structures Review for adoption of region s decentralization strategy document Technical assistance for implementation of region s woreda decentralization strategy and policy development, benchmarking and review of plans Development and adoption of region s urban development policy and strategy UMCBP Development and adoption of urban land legislation and the municipal proclamation

11 10 Contributing Performance Agreement Matrix with Targets (FY04-05) PSCAP Quarter 1 Quarter 2 Quarter 3 Quarter 4 Subprogram OUTPUTS Planned Actual Planned Actual Planned Actual Planned Actual Outcome (d): Enhanced incentive environment for public servants (gender disaggregated) Indicators for verification: CSRP UMCBP D L D P Completion of training in and adoption of result oriented performance evaluation (ROPE) system in all regional bureaus and woredas. Completion of assessments for human resource and training needs for woredas; and the required office infrastructure and equipment for woredas Development and adaptation for implementation of personnel management manuals for local government authorities Increased average civil service salary as percentage of living wage Private-public wage comparison Wage decompression ratios

12 11 Contributing Performance Agreement Matrix with Targets (FY04-05) PSCAP Quarter 1 Quarter 2 Quarter 3 Quarter 4 Subprogram OUTPUTS Planned Actual Planned Actual Planned Actual Planned Actual Outcome (d): Improved quality and efficiency of operations Indicators for verification: Improved service levels (access, responsiveness and cost efficiency) in priority sectors C S R P DLDP JSRP Completion of client score cards in 75% of regional bureaus Initiation of business process reengineering in 75% of regional bureaus Completion of top management training in Strategic Planning and Management, Change Management, Performance Management, and Leadership Development for agency heads of 75% of bureaus Review for adoption for prototype minimum service standards Installation of court case management and case recording & transcribing systems in all regional supreme & high courts Installation of color coded filing system in all woreda courts Reduced unit costs and processing time for essential rural, urban, social, and legal services in priority sectors

13 12 Contributing Performance Agreement Matrix with Targets (FY04-05) PSCAP Quarter 1 Quarter 2 Quarter 3 Quarter 4 Subprogram OUTPUTS Planned Actual Planned Actual Planned Actual Planned Actual ICT Initiation of in-service training and professional development of all judges, lawyers and court clerks Completion of technical training on network management and system administration for the Regional Date Center staff Completion of one round of bulk generic training to all relevant regional and municipal staff Initiate basic training (computing) for designated ICT focal persons from all woredas Outcome (d): Improved transparency and accountability Indicators for verification: Reduced incidence of corruption and arbitrariness in rule enforcement (as judged by economic agents) Increased access to justice, recourse and redress Enhanced independence of the judiciary Increased access to government information

14 13 Contributing Performance Agreement Matrix with Targets (FY04-05) PSCAP Quarter 1 Quarter 2 Quarter 3 Quarter 4 Subprogram OUTPUTS Planned Actual Planned Actual Planned Actual Planned Actual JSRP Establishment of information counters in all regional high courts and woreda courts TSRP Completion of 50% coverage for computerized tax payers identification number (TIN) ICT Establishment and strengthening of Regional Data Centers Program Support Preparation and dissemination of basic IEC materials on PSCAP

15 Financial management guidelines: 1. INTRODUCTION: The Public Sector Capacity Building Program, PSCAP is a large national program planned to be implemented by different government offices in different government structures. The MoFED will be responsible for the disbursement of program fund to the different beneficiaries and for the eventual gathering of financial reports, consolidating them and preparation of financial reports to the government, donors and other stakeholders. This will only be possible if uniform and agreed procedures are followed by all the concerned. Uniformity of action facilitates bottom -up consolidation of financial monitoring reports in relatively easy, accurate and speedy way, whic h in effect ensures full accountability to providers of the funds. The purpose of this manual is to provide simple and user-friendly reference material for all the people involved to help them in transactions processing from the initial identification of transactions to the final financial reporting. It discusses the detailed procedures in receiving fund (from all donors of PSCAP), keeping the fund, spending it, recording the expenditures, reporting to the appropriate body and in safeguarding the assets acquired using the fund. The basic policies of Financial Management are explained in the Operational Manual/PIP. This manual provides the procedures that will be followed to adhere to the broad policies stipulated in the PIP. In the section that follows, the background of the program, as relevant to the understanding of the manual, is explained. This is essential for the quick grasp of the nature of the program, the purpose and out put of the program especially for the people that will join the structure at a latter date. Auditors will only be involved after the start of the program. The background provided would be a tip to them to kick-off their job. Section three deals with the detail policies and procedures necessary for the management of the fund. Each and every item that will be encountered during the execution of the project are identified and explained in a clear and simple way. 14

16 2. BACK GROUND 2.1. PSCAP In May 2003, the Government launched a new state transformation agenda. Specifically, the MCB announced its intention to rapidly scale up support for the six, out of the fifteen National Capacity Building Programs, core public sector reform programs as subprograms under a consolidated five-year federal program called the PSCAP. 1 The fifteen programs are Civil service reform, Justice reform, Tax reform, District-level decentralization, Urban management, Information and communication technology, Cooperatives, Private sector, Textiles and garments, Construction sector, Banking sector, Agricultural training of vocational and technical levels, Industrial training of vocational and technical levels, Higher education, Civil society. The first six are those covered under PSCAP. The objective of PSCAP Support Project for Ethiopia is to improve the scale, efficiency, and responsiveness of public service delivery at the federal, regional, and local level; to empower citizens to participate more effectively in shaping their own development; and to promote good governance and accountability. This objective will be achieved by scaling up Ethiopia's ongoing capacity building and institutional transformation efforts in the six priority areas under PSCAP. 2 There are two main project components. Component 1, Federal PSCAP, supports federal level activities across each of the six subprograms including those capacity building activities for which there are scale and network economies including those activities that require national level prototyping. Component 2, Regional PSCAP, constitutes the bulk of the Program and is designed to empower regions to adapt and implement national reform and capacity building priorities envisaged under PSCAP's six subprograms in a manner that is efficient, accountable, and sustainable. 3 The components are required to include basic program support activities to ensure effective implementation INSTITUTIONAL ARRANGEMENT As mentioned above the PSCAP is a nation wide program involving different tiers of the government. The structure of PSCAP is fundamental to the financial mana gement of the program. Funds flow down the channel and reports flow up the channel. 1 Ibid 2 ban k.org/ 3 Ibid. 15

17 IDA credit account Washington DC (Foreign currency) IDA special account in USD in Special USD account in Ethiopia for each of the Government of Ethiopia s Contribution FEDERAL PSCAP Birr account for the pool at MoFED REGIONAL PSCAP Birr account for PSCAP at each federal executing Birr account for PSCAP at each Key Fund flow Report flow Figure 1 - PSCAP Fund and report flow chart The MCB, the MoFED, the MOR, the MFA, Federal Supreme Court, and ICTDA implement the Federal PSCAP. The BCB (BCB), the BoFED, Justice Bureau and the BoTIUD are the implementers of PSCAP at regional level. However, the financial management function will be fully carried out by BoFEDs of the respective regions. The overall coordinator of the program at national level is the MCB. The BCB in regions are the coordinators of the program in their respective regions. The MoFED (MoFED) is responsible for the overall financial management aspect of the program. It opens accounts for the program, receives funds from the donors, release funds to beneficiaries, collect reports from the beneficiaries and consolidate and report on the use of funds to donors, government and other stakeholders. At regional level, BoFED (BoFED) perform the same activity. The detail procedure is explained in the latter chapters. 16

18 2.3. FUNDING MODALITIES Funding modalities or disbursement modalities specify how funds flow from the donors to the government and/or to the relevant public body. They also specify the way reports on the spending of the funds are submitted to the donors. The MoFED has identified three Channels or instruments for the flow of donor funds. 4 CHANNEL I Aid and Loan funds that flow through the MoFED or BoFEDs are included here and the reporting system has to follow the same procedures. CHANNEL II This is one of the aid disbursement channels used by bilateral donors for releasing resources to beneficiary institutions under projects financed by them. The donors provide goods and/or funds to beneficiaries usually ministries. CHANNEL III Under this instrument, the donor directly controls all funds. The donors maintain their own bank account, pays invoices directly to contractors and/or suppliers. Channel I is the recommended funding modality for PSCAP. 4 MoF, Donor Fund Flow, Keeping, Recording and Reporting System (Amharic Version), Addis Ababa, Tir 5,

19 3. ACCOUNTING POLICIES AND PROCEDURES In the remaining part of this manual, detailed discussion of accounting procedures is presented. The first paragraph in each section is given in a box. The text in the box is the accounting policy on the basis of which the detailed procedures are provided. The financial management provisions in the PIP are taken as financial management policies as appropriate to ensure consistency between this manual and the PIP BUDGET AND BUDGETARY CONTROL Budget codes for PSCAP The budget for PSCAP shall be proclaimed under the name of MCB, MoFED, MFA, MOR, Federal Supreme Court and ICTDA. Once identified and used, the budget code for PSCAP shall remain unchanged through out the life of PSCAP. Budget calendar (as provided in the PIP) The federal lead institutions prepare their PSCAP budget and submit to the FTT) through the PPD no latter than 1 st March. The regional lead institutions prepare their PSCAP budget and submit to the RTT through the RPPD no latter than 22 nd February. RTT shall forward the regional PSCAP budget toftt no latter than 1 st March. FTT shall submit the annual regional and federal plan to IDA for no objection no later then 15 th March. FTT shall submit the annual regional and federal plan to cabinet no later then 22 nd March. Annual plan for PSCAP, along with the over all budget, shall be submitted to the Council of Ministers and, regional matching fund requirements in the regional budgets shall be submitted to regional council, no latter than 22 nd May. The Cabinets shall recommend PSCAP budget no latter than 2 nd June. Approval and adoption by federal legislature will be undertaken before 2 nd July. Execution of PSCAP budget begins at the start of the fiscal year on 8 th July Mid-year reallocation of budget shall be made between regions and between the federal lead institutions based on rules set out in the PIP by the FTT on or before 1 st February. MoFED issues final reallocations on or before 8 th February. Supplemental budget proposals shall be finalized by the MCB on or before 8 th February. 18

20 a) Budget Codes In the government accounting system, the coding system starts from budgeting. In the process of budget preparation, all the recipients of the fund from MoFED are identified with specific budget code. That code is basic to understand how much budget is allocated to a public body for the budget year. The public body is the institution that is entitled to request and receive a budget. A pubic body is an institution that has a legal mandate, receives budget directly from the concerned finance and planning body, submits its final accounts directly to the MoFED. The budget proclamation is the basic document. Transfer to the public body shall be made under the code identified in the budget proclamation and the recipient of the budget is responsible to account for the budget it has received.. Using that code, it is possible to produce a report for the transfer, expenditures and the fund balance of a recipient. Under PSCAP, the budget recipient shall be the MCB for the programs that will be implemented by it and all regional PSCAP. All expenditures incurred by the MCB and those incurred by regional BoFEDs shall be given similar code 318. However as MoFED shall make cash transfers direct to BoFEDs, for cash transfer purpose the code shall be the codes that are currently used by BoFEDs when receving cash from MoFED. This code is 154 for regions using the old single entry system: namely Afar, Somali and Gambela. All other regions and MoFED shall use 152 when recording the cash transfer. Five federal implementing agencies shall be recipients of funds for the program each of them will be implementing. These are the MFA, MoFED, MOR, Federal Supreme Court and ICTDA. PSCAP budget shall be proclaimed under the name of these five public bodies. The budget code that will appear in the budget proclamation and thence on each accounting document and report shall be the following. The budget code presented below shall remain the same through out the life of PSCAP, as change of codes from year to year shall hinder preparation of reports correctly. BUDGET CATAGORY CODE Public body MCB 15/318 MFA 15/118 MoFED 15/152 MOR 15/156 ICTDA 15/325 Federal Supreme Court 15/122 Program PSCAP 08 Sub- agency Plan and Program Department 01 Federal implementing agencies other than MCB 00 Sub-program PSCAP - Tigray 01 PSCAP Afar 02 19

21 PSCAP Amhara 03 PSCAP Oromia 04 PSCAP Sumali 05 PSCAP Benishangul gumuz 06 PSCAP SNNPR 07 PSCAP Gambela 08 PSCAP Harari 09 PSCAP Addis Ababa City 10 PSCAP DireDawa Administration Council 11 Federal implementing agencies 00 Project Civil Service Reform 001 Justice System Reform 002 Tax System Reform 003 Urban Management Reform 004 Information & Communication Technology Reform 005 District Level Decentralization Reform 006 Expenditure Management & Control Reform 007 Program Support 008 Figure 2- PSCAP account code A complete budget code can be written as follows: Example 1 Budget for Civil Service Reform sub program at federal level is identified as 15/318/08/01/00/001 Example 2 Budget for Urban Management and Reform Project in Gambella region is identified as 15/318/08/01/08/004 Example 3 Budget for Tax system reform at federal level is identified as 15/156/08/00/00/003 Note that in the above code, only the last three fields are variable. If the implementing agency is the MCB, the sub-agency code shall be 01. If the implementing agency is any of the federal lead institutes other than MCB, the sub-agency code shall be 00. Regions that are using single entry accounting code The budget for PSCAP shall be proclaimed as a federal project under the MCB. Hence the double entry budget coding system shall be used. However, those regions using single entry accounting cannot use the budget code because, firstly, the formats they are using are not designed to include all the information in the double entry system, secondly, the accountants may not be familiar with the double entry. New codes have to be identified so that it will be possible to identify PSCAP expenditure by both regional and federal users. 20

22 The account code under single entry accounting is organized to show three major elements: the location code, organization code and receipts and payments code. Location code has four fields, each field having two-digit code. The first field is standard, 01 for central government and 02 for regional government. The next field is also a standard two digit, which identifies regions. The third filed which has also two digits is to identify zones and the last filed having two digits is to identify woreda. E.g.: Ministry of Agriculture in the federal government is located as Organization code identifies the sector (the budget institution in the sector) and the Project or reporting unit. It has three fields. The first field has three digits the sector and the supervising institution. E.g. Ministry of Agriculture is in the Economic sector 200 and is number 11. So the code is 211. The second field has two digits and identifies the sub unit. The third field has also two digits identifying the sub-sub-unit. E.g.: To complete the above example Ministry of Agriculture Administration and General Services Section is identified by If the above budgetary institution is implementing a capital budget, another three fields shall be used to identify the project. The first field has three digits and identifies the sector. The next field has two digits and identifies program. The last field has two digits and identifies the specific project. E.g.: If the Ministry of Agriculture has a project at Gode under a program called Irrigation Development and the sector is Natural Resource Development the code can be If the payment in the above example is for land preparation and other construction the code can be The combined code can be presented as: The above structure can be used to identify a unique code that all the single entry using regions can use so that the program s expenditure can easily and effectively be identified. Since PSCAP has two components, the first two digits in the location code can be used to identify those. Federal PSCAP is 01 and regional PSCAP is 02. The next two digits are to identify regions. Under PSCAP these shall be used to identify the sub-programs, which are the regional PSCAPs. The list is as shown in the table for double entry budget codes. The zone and woreda digits will not be used. Egg: PSCAP Dire Dawa-Bureau of Urban & Works (BoTIUD) is identified as

23 The Public Body or the supervising institution in whose name the budget is proclaimed is the MCB. The Plan and Program Department of MCB is the sub units responsible for PSCAP. Subsub-units codes will not be used. Hence the second three fields can be written as The third group is to identify a capital project code. PSCAP is a capital project. The sector code cannot be used. The program code can be identified as 08. The project code under double entry accounting has three digits. Under single entry the first digit shall be dropped and the last two digits shall be used as follows: Project Civil Service Reform 01 Justice System Reform 02 Tax System Reform 03 Urban Management and Reform 04 Information & Communication Technology Reform 05 District Level Decentralization Reform 06 Expenditure Management & Control Reform 07 Program Support 08 The last group of code is the receipts and payments code. This code is more or less the same as the code under the double entry. The codes relevant for PSCAP are identified in the next section. The combined code for PSCAP under single entry can be written as follows. Take for example, the Dire Dawa- PSCAP has paid for land preparation and other cons truction the code being Assume the payment is made under Urban Management and Reform sub program The formats that shall be used under single entry shall be filled with the above codes. It will therefore be possible to identify transactions by source and it is also possible to summarize transactions as needed. Additional information box shall be added on the existing Ge/He/29/4, the Trial Balance, Ge/He/29/5, Monthly Transfer Summary and Ge/He/29/3, Capital Expenditure summary. The heading of, for example, the Ge/He/29/4 can be presented as follows. This is on the reports this will be added Reporting unit Central government/ region Zone Woreda Unit Sub-unit Sub-sub-unit Code Supervising unit Name of Public Body Name of Program Name of Sub-agency Name of Sub-program Name of Project Source of finance Bank account No Code 22

24 All the remaining details shall remain the same as in the existing Ge/He/29/xx. The above will enable the processing of accounts by CAD in an effective way. In addition, the regions that are not yet implementing the accounting reform shall start familiarizing themselves to the requirements of the double entry accounting. Codes to be used for cash and non-cash transfers As mentioned above, implementing agencies shall get transfer from MoFED. Hence, even if the budget is proclaimed in the name of MCB and that the expenditure code for regional PSCAP shall be 318, the cash transfer code will be different. The MoFED code as sender of the mone y and the BoFED code as recipient of the money shall be used. This is not a new requirement but the one that is being used currently. To illustrate: Example 1: MoFED transferred Birr 1 million to Tigray BoFED MoFED shall record the transaction as follows: Account code Debit Credit 01/000/00/152/01/ ,000,000 15/000/00/152/00/ ,000,000 Tigray BoFED shall record the transaction as follows: Account code Debit Credit 01/000/00/152/01/ ,000,000 15/000/00/152/00/ ,000,000 Example 1: MoFED transferred Birr 1 million to Somali BoFED Somali BoFED shall record the transaction on Ge/He 23 as follows: Account code Received 15/000/00/154/00/ ,000,000 MoFED shall record the transaction as follows: Account code Debit Credit 05/000/00/152/01/ ,000,000 15/000/00/152/00/ ,000,000 Note: that 4015 represents transfer and 4115 represents cash at bank accounts. b) Budget preparation and control The budget preparation at the implementing agency level starts before March 1 st of the year. The budget is the annual fiscal plan (annualised drawing rights) in monitory terms. The procedure for the preparation, Appraisal Adoption, Execution, and Re-allocation of budget is provided in the PIP. The relevant section of the PIP (section IV Resource allocation and Management) is attached at the end of this manual as Annex XXXIX. 23

25 It is very important that the accountants responsible for keeping the records of PSCAP and the budget section representatives in the implementing agencies are fully participated in the budget preparation process so that they can fully understand the budget and they will not be in problem when they perform the control function. The account codes that will be recommended in subsequent sections shall be used for the detailed budget purpose. Expenditure codes shall be assigned to each item in the budget based on the chart of account and that code must be used in keeping the accounting records to ensure comparison of budget with actual spending. The budget ledger card, as described in the following section, shall be used in the budget control exercise. The detail procedure is described in that section. The budget section shall prepare monthly budget tracking report. Preparation of this report is not a difficult task if the budget ledger is kept up-to-date at all time. The budget section shall extract the approved revised budget for each item of expenditure from the budget ledger card. Expenditure to date is also extracted from the same ledger and put in the budget tracking report. Comparison is made between the two and a third column showing the budget balance. The budget balance shall be normal, under spent or over spent. The budget section shall give comments on the budget balance in bullet points to give warnings to the budget users. The accountant shall agree the report by signing on the face of it. The report shall then be circulated to the procurement officer, the section that follows up the program and the head of the implementing agency on the basis of which they can take appropriate corrective action. In regions, BoFED is responsible for the financial management function. The preparation of budget tracking report is therefore the responsibility of BoFEDs. The circulation of the report will be to the above-identified three officers of the implementing agencies. Sample budget tracking report is given in annex I CHART OF ACCOUNT The Federal Government of Ethiopia s (FGE) financial management system shall be used in the overall management of the Program. A supplemental chart of account is provided. The purpose of the supplemental chart of account is to enable MOFED to capture and classify the funds received from donors by subprograms. The intent is to enable project costs to be directly related to specific work activities and outputs under PSCAP and to enable MOFED to monitor funds utilization across subprograms and to serve as one of the source of information for assessing performance by relevant entities. The FGE accounting system provides the FGE Chart of Accounts which is a system of coding government uses to identify and classify financial entities and events. 5 5 The Civil Service Reform Account Design Team of MoFED with the support of the Decentralisation Support Activity (DSA) Project, Manual 3 FGE Accounting System, Volume II, FGE Chart of Accounts, Version 1.0, January,

26 Under PSCAP, the final financial report that will be produced is the Statement of Cash Receipts and Payments. The Chart of Account that is recommended in this manual is sufficient to capture transactions in a way that enables the preparation of this statement. The account codes shall enable the preparation of the detailed budget, accounting for the transfers from donors and transfers to beneficiaries (receipt from MoFED), capturing the transactions that will occur, and preparation of periodic financial reports and the year-end financial statement. The Chart of Account is developed based on the accounts classification and coding system used in the FGE Accounting system for Modified Cash Basis transactions. The equivalent codes for those agencies that are using single entry bookkeeping is also provided. Under the Modified Cash Basis of accounting, the following accounts shall be used. CAD shall officially issue the final codes. PSCAP TRIAL BALANCE Implementing MoFED agencies Debit Credit Debit Credit Account code Cash on hand 4101 XXX XXX Cash at Bank Foreign Currency -IDA 4102 XXX Cash at Bank Foreign Currency XXX 4102 XXX Cash at Bank Foreign Currency - XXX 4102 XXX Cash at Bank Pooled Birr Account 4115 XXX Cash at Bank Implementing agencies 4103 XXX Cash shortage & overage 4202 XXX XXX Other advance within government 4210 XXX XXX Advance to consultants 4252 XXX Adva nce to suppliers 4253 XXX Due to MoFED 5027 XXX XXX Other payables within government 5028 XXX XXX Transfers - cash 4015 XXX XXX Transfers non cash 4050 XXX XXX Net asset equity 5601 XXX XXX Revenue - External assistance XXX Revenue - External loan XXX Expenditure XXX XXX XXX XXX XXX XXX NB: The specific codes for revenue, both assistance and loan, is given in the budget proclamation which will be available soon. Those codes shall be used by MoFED to open ledger accounts and record the income. For example, external loan from IDA is given a code number The chart of account shall be expanded as and when the new donors or lenders are identified. 25

27 Under the single entry booking, the following accounts shall be used: PSCAP TRIAL BALANCE Implementing MoFED agencies Account code Account code Cash Cash at bank Staff debtors Cash shortage Custom deposit Other paya ble Transfers capital Other cash transfers Expenditure The definition and purpose of the above accounts is as provided in the FGE Accounting System. The definition serves for both the single entry using entities and the double entry using entities. Cash: - Under PSCAP, MoFED shall maintain one special account each for the donors. A pooled local currency account shall be opened wherein transfer from the special accounts and from the treasury (the government contribution) shall be kept. Each of the implementing agencies at federal level and BoFEDs at regional level will have Birr accounts, type A which will not be closed at the end of the budget year, opened for PSCAP purpose to receive transfers from MoFED. BoFEDs shall have only one bank account although the fund they are going to handle is for all implementing agencies in the region. In addition each federal beneficiary and BoFEDs will have cash on hand account to handle petty cash. The definition for cash therefore embraces all this accounts. Receivables: - Included in this category are cash shortage, advances, prepayments and other receivables. Advances include prepayments to consultants and suppliers. Other receivable is to account for other kinds of advance that will not fall in the other categories. Payables: - Payables under PSCAP are expected to be short term. Only two accounts are suggested in the double entry, Due to MoFED and other payables within government. Similar purpose payables shall be identified in the single entry. Transfers: - This account is not a permanent account and is closed at the end of every year. During the year it will be used to record monthly transfer of money to implementing agencies at Federal level and the BoFED at region level. The implementing agencies and BoFED shall debit their respective bank account for PSCAP and credit the transfer account. The transfer in the single entry has the same purpose. The rule is that the total debit in the transfer account of MoFED shall equal the total of credits in all implementing agencies. In effect at the time of consolidation, the transfer account will have a balance of ZERO. The same rule applies for the single entry although the debits and credits are not there. 26

28 The accounting for non-cash transfers will be the same as above except that the implementing agency shall debited the appropriate expense account instead of the bank account. Revenue : - Only MoFED shall use this account, as the distinction of revenue by source (donor) in all the implementing agencies is irrelevant and impossible because transfer to the agencies will be made from one pooled Birr account. There are three categories of revenue under PSCAP: the transfer from central treasury being the Government s contribution shall be kept in the first revenue account. Income from IDA will be a credit and is categorized as external loan. A separate account shall be maintained for it. Income from other donors can be either external loan or external assistance. Separate account for each of the donor shall be kept according to the nature of the transfer, i.e., either loan or assistance. Expenditures: - The major and most important section of the Chart of Account is this section. Most of the expenditure types can be captured by the expenditure account codes being used in the accounting system at present. The expenditure codes have sufficient detail accounts and control accounts as well such that there is no need at all to create new codes. The expenditure codes have also control account and subsidiary account code system. Fore example 6200 is the general category for Goods and Services and accounts from 6210 to 6224 are the subsidiary ledgers. The control account shall be used to provide summary report by category for the donors purpose. Matching of the single entry code with the double entry code is very important and it is done like shown in the following table. As mentioned earlier PSCAP is a capital budget program. The capital budget expenditures under the single entry are in the 8000 group. It is also possible to establish major categories for donor reporting purpose so that the system can directly produce the donor report. Using the IDA s category, the chart of account can be designed as follows. Account title Donor Category Double entry Single entry Control account Goods and Services Goods 6200 Subsidiary accounts Office supplies Printing Food Fuel and lubricants Other material & supplies Miscellaneous equipment Research & development supplies Control account Fixed assets Goods 6310 Subsidiary accounts Purchase of equipment Purchase of building s, furnishings & fixture CONSULT Control account Contracted services ANT SERVICES

29 Subsidiary accounts Contracted professional services CONSULT Control account Personnel service ANT SERVICES 6100 Salaries to permanent staff Wages to contract staff Wages to external contract staff Allowance to permanent staff Allowances to contract staff Allowance to external contract Government contribution to permanent staff pension Control account Operating costs 6230 Contracted services Rent Advertising Insurance Fees and charges Electricity charges Telecommunication charges Water & other utilitie s Control account Travelling & official entertainment service Operating costs 6230 Subsidiary accounts Perdiem Transport fees Official entertainment Control account Training Training 6270 Subsidiary accounts Local training External training Training related Perdiem Training related transport fee Control account Personnel service Operating costs 6100 Subsidiary accounts Wages to causal staff Control account MAINTENANCE & REPAIR Operating costs 6240 Subsidiary accounts Maintenance & repair of vehicle Maintenance & repair of equipment Maintenance & repair of building, furnishings & fixtures Figure 3- PSCAP expenditure code The PSCAP expenditures are not fully known at this stage. The above codes and accounts categories are drawn using the information at hand at the time of writing this guide. It will be mandatory to revise the chart of accounts once the expenditure items are clearer. The responsibility to establish new codes as the need arises shall be of CAD. The new codes shall be identified, organized and communicated in writing to all implementing agencies. The chart of account discussed above is attached as an annex at the end of this manual in a summarized and detachable format. Refer annex XXXVIII. 28

30 3.3. ACOUNTING CYCLE The accounting cycle for PSCAP is not different from the government accounting cycle. It starts when money is received in the special accounts and ends when report of expenditures is presented to the CAD and CAD is closing the accounts. In the sections that follow we shall see the accounting process RECEIPT OF MONEY Foreign exchange (FOREX) account shall be opened to each donor with the national bank of Ethiopia by the Treasury Department of the MoFED. One of the accounts shall be the IDA special account. The others shall be used to keep funds received from other donors. One pooled Birr account shall be opened to keep transfers from the special accounts and from central treasury being government s contribution to the program. Transfers to the pooled Birr account shall be made monthly based on the approved annual plan. There are two concerned units of the MoFED that are relevant in the management of the PSCAP. These are the Counterpart fund unit (CFU) in the Treasury Department and the Central Accounts Department (CAD). The CFU is the one authorized to open special bank accounts for programs. It will be requested to open the special accounts mentioned above. The initial deposits to the special accounts will be the advance payments from each donor as agreed in the respective agreements signed with the donors. Subsequent deposits shall be based on Statement Of Expenditure (SOE) that will be presented to the donor. After a certain initial period, the Financial Monitoring Report (FMR) shall replace the SOE. These two reports are discussed further in subsequent sections. The CAD shall be responsible for the accounting function, i.e., to record the receipt transaction, to prepare donor reports and annual financial statements for reporting to donors and for the annual audit. The PSCAP program shall receive money from the two major sources, from donors and from the government. The receipt transaction shall be recorded when bank advice is received from the bank. The accounting entry to record the transfers shall be as follows. Note that only MoFED shall receive money from donors. Hence the entries are relevant for CAD only. 1. If receipt of money is from IDA Cash at Bank Foreign currency IDA Revenue External credit IDA Debit XXX Credit XXX 2. If receipt of money is other donors as assistance 29

31 Debit Credit Cash at Bank Foreign currency (donor name) XXX Revenue External Assistance - IDA XXX 3. If receipt of money is treasury Cash at Bank Pooled Birr account Transfer Debit XXX Credit XXX Transfer shall be made from the special accounts to the pooled Birr account whenever the pool account balance is low. The follow up of the bank account balance, like the special account balances, shall be made by CFU. The entry to record the transfer shall be: 4. Transfer from special accounts to the pooled Birr account. Assume that transfer is from IDA account Debit Credit Cash at Bank Pooled Birr account XXX Cash at Bank Foreign currency IDA XXX TRANSFER OF FUND TO BENEFICIERIES MoFED Treasury department shall make transfer from the pooled account to the federal beneficiaries and BoFED quarterly after the implementing agencies submit Disbursement Request approved and cleared by MCB and accompanied by Quarterly Report. The amount to be transferred to a beneficiary is calculated as the next quarter budget less procurement to be made centrally less any unused money from the previous quarter. Transfer to the beneficiaries and BoFED shall be made on the 12 th day of the quarter. Each federal beneficiary shall open a separate Birr account for PSCAP and transfer from MoFED shall be to the PSCAP account. At region level, BoFED shall open a separate Birr account for PSCAP in which transfer from MoFED shall be deposited. The bank account shall be the only PSCAP account in the region. Transfer account shall be used to record transfer to the beneficiaries and transfer from MoFED. Cash receipt Voucher shall be used to recognize cash transfers received. The equivalent document for regions that are using single entry is Ge/He/21/1. All institutions receiving PSCAP fund from the PSCAP Pooled Birr account shall open bank accounts of type A. This type of account is more appropriate for the nature of PSCAP of all the account types identified in Guideline No 16/2004, Guideline to Open and Administer Government Bank Account, of MoFED. Transfer of fund to federal implementing agencies and BoFED shall be made by the MoFED, upon receiving instruction from the MCB who is the responsible agency for the overall program. BoFEDs shall not transfer funds to regional implementing agencies. Rather, the BoFEDs will handle the fund and effect all payments related with PSCAP upon request from the implementing agencies. 30