The United Republic of Tanzania Ministry of Finance. Memorandum of Understanding. Between. The Government of the United Republic of Tanzania
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1 The United Republic of Tanzania Ministry of Finance Memorandum of Understanding Between The Government of the United Republic of Tanzania And Development Partners In Support of The Public Finance Management Reform programme Phase IV (2012/ /17) Through the Basket Fund Modality 1
2 The Government has implemented PFM reforms over the past two decades with significant successes including: the enactment of Public Audit Act No. 11 of 2008 to enhance operational independence of the National Audit Office; enactment of Public Finance Act No. 6 of 2001 and its amendment 2010 and Public Procurement Act No.21 of 2004 as amended 2011 to enhance transparency and accountability; strengthening the capacity of Parliamentary Accounts Committees to execute oversight function; and capacity building to staff involved in public financial management. Despite the achievements recorded in PFMRP implementation there are still a number of challenges to be addressed in the next phase of the programme. The Government has therefore developed PFMRP Phase IV strategy, covering the period July 2012 to June 2017 and aimed at strengthening and improving public financial management systems in a comprehensive manner. PFMRP Phase IV will focus on: revenue management; planning and budget management; budget execution transparency and accountability; budget control and oversight and program management, monitoring and communication including change management. A. This Memorandum of Understanding (MOU) sets out the principles of cooperation between the Government of the United Republic of Tanzania and the undersigned development partners providing financial support though the basket fund modality in support of Phase IV of the Public Financial Management Reform Programme. The MOU comprises the following sections: (key provision) I. Principles and Objectives: This section defines the principles and objectives of the Memorandum of Understanding including accession and withdrawal provisions. II. III. IV. Cooperation and Administration: This section defines the programme s management structures between the Government of Tanzania and Development partners and the objectives of the meeting. Contribution and Obligation of Development Partners: This section provides that development partners will provide in a certain month the amount of assistance to be delivered the following year based on the needs articulated in the MTEF, to align policies among development partners. The section also notes that the bilateral agreements prevail over the Memorandum of Understanding. Procurement Arrangements: This section briefly outlines the procurement arrangements; 2
3 V. Auditing Arrangements: This section briefly outlines auditing arrangements; VI. VII. Reporting Requirement: This section specifies the types of monitoring and evaluation reports that GoT will provide to Development Partners Non-compliance to the MoU: This section outlines the process for managing non-compliance to the MoU. B. The following documents form an integral part of this MoU: PFMRP Phase IV Strategy Document. The PFMRP IV - Operations Manual C. For the purposes of this MOU the following terms have the following meanings: a) Development Partners mean the representatives of development partners that have signed this MOU. b) GoT mean the Government of the United Republic of Tanzania; c) PFM mean Public Financial Management d) PFMRP mean the GoT s Public Financial Management Reform Programme set out in Annex A e) PFMRP Activities mean the activities and associated expenditures of PFM RP Phase IV as specified in the Work Plan and Budget as eligible for financing in the respective GoT financial year; f) Signatories mean the GoT and the Development Partners; g) AWPB mean plan and budget prepared and approved in accordance with this MoU D. Now therefore, the Government and the undersigned Development Partners have reached the following understandings: I. Principles and Objectives 1. The Government of Tanzania and the Development Partners recognize that respect for human rights, the rule of law, good governance, and sound financial management are the fundamental principles on which the cooperation amongst the signatories rests and constitute essential elements of the MOU 3
4 2. This MoU sets forth the basic roles and responsibilities of the Government Ministries, Departments and Agencies implementing PFM reforms and the Development Partners providing financial support for the implementation of PFMRP (PFM reforms) and outlines the general principles and objectives of the partnership between Government of Tanzania and Development Partners. Details of institutional, planning, budgeting, disbursement, procurement, financial management and monitoring and evaluation arrangements and documentation formats for implementation of the PFM reforms are further detailed in the Operations Manual under Annex B of this MoU. 3. The MoU is neither a binding legal agreement nor does it constitute an international treaty and it is not intended to create any legal commitments. It is understood by the Signatories that any matter that is not expressly provided for in this MoU will be governed by the Bi-Lateral agreement that the Development Partners have signed with the GoT. In the event of any conflict between the provisions of this MoU and the bilateral agreements, the latter will prevail. 4. To advance the spirit of harmonisation and alignment, the Development Partners will strive to ensure that all PFM reform activities and associated expenditures, procurement and other fiduciary actions approved or carried out under this MOU are consistent with the provisions of such bilateral agreements. 5. Should a dispute arise between the signatories on interpretation, application or performance of this MOU, it will be settled through dialogue and consultation. Unilateral actions by all signatories should be avoided. The Joint Steering Committee ( JSC ) and the Programme Management Committee ( PMC ), referred to in paragraphs 10 and 13 respectively will in the first instance, be used as the forum for such discussion. In the unlikely event that a problem cannot be resolved at the JSC, the Ministry of Finance ( MOF ) will convene a special meeting at any higher level needed to achieve a satisfactory outcome for the Signatories. 6. This MOU will come into effect on the date of signature by the GoT and one or more Development Partners, and will supersede any previous MOU relating to PFMRP executed by the GOT and any Development Partner. 7. This MOU covers the Phase IV PFMRP Strategic Plan, which will be implemented over a five year period from 2012/ /17 unless it is earlier terminated or extended by the JSC in accordance with its terms. 8. Any of the undersigned Development Partners may withdraw from this MoU, following consultation with the Government and other Basket Funding Development Partners by submitting a minimum of 6 months written notice to the Government and the other undersigned Development Partners. If there 4
5 are financial implications from such a withdrawal, these will be discussed and resolved on a case-by-case basis. 9. Any entity that is not currently a party to this MoU and wishes to fund the programme through the PFMRP Basket Fund may, with the consent of the GoT and in consultation with the undersigned Development Partners, become an additional party to this MoU upon confirming in writing on its acceptance of the provisions of the MoU. 10. This MoU may be revised as needed by written acceptance of such revision by all of the parties to this MoU, provided that such a revision will not contradict the bilateral agreements and the Laws of the United Republic of Tanzania. 11. The Signatories will cooperate on preventing corruption within and through the programme and the Government will require that its staff and consultants or assignees; involved in the implementation of the PFM reforms shall refrain from offering third parties, or seeking, accepting or being promised from or by third parties, for themselves or for any other party, any gift, remuneration, compensation or benefit of any kind whatsoever, which could be interpreted as an illegal or corrupt practice. The Signatories will promptly inform each other of any instances of corruption as referred to in this paragraph. The Signatories will take swift legal action to stop investigate and prosecute in accordance to applicable law any person suspected of misuse of resources or corruption. II. Cooperation and Administration 1. The arrangements that have been put in place for GoT s leadership and coordination of the PFM reforms build on the existing arrangements for policy formulation and implementation of public sector reforms. In particular: 2. Joint Steering Committee a. The Joint Steering committee ( JSC ) is the formal decision making organ. The JSC is chaired by the Ministry of Finance s Permanent Secretary- Treasury. It is composed of MoF s Deputy Permanent Secretary, Deputy Permanent Secretary-Prime Minister s Office Regional Administration and Local Government, MoF s Programme Manager, the Reform Coordination Unit and the designated chair of the PFM Development Partner Group and representatives from the development partners who are signatories to this MoU. b. Representatives from the GoT and DPs PFMRP Secretariats will also be present to provide a supportive role only. Other representatives from GoT and DPs will participate on invitation. 5
6 c. The main mandate of the JSC is to provide strategic oversight, guidance and direction to the implementation of PFMRP IV. d. JSC meetings shall be held not less than 3 times per year with the schedule of such meetings coordinated with the government s budget cycle and the dates of semi- annual and annual reviews. e. The JSC will review and approve the Annual Work Plan and Budget, the Annual Procurement Plan, Program Cash Flow Plans, Progress and Financial Reports. It will also review and decide on all recommendations made by the PMC related to the programme s strategic direction to ensure that expected results are achieved as agreed in the M&E framework. f. The JSC will also endorse any PFMRP documents that have been proposed for publication. g. The JSC will receive and respond to audit procurement and financial audit reports on the programme and can direct component managers to provide action plans that address any irregularities identified in the audit reports. h. Any Signatory, in consultation with other signatories, may request for an extraordinary meeting of the JSC and the GoT will convene such a meeting conveniently. 3. Programme Management Committee a. The Programme Management Committee (PMC) is co-chaired by Ministry of Finance s Deputy Permanent Secretary and the designated chair of the PFM DPG. It is composed of representatives from the PFMRP IV Components, DPs who are signatories to the MoU, and DPs who are supporting PFM Reforms, Programme Manager, and the Government and DPG Secretariats. b. The main mandate of the PMC is to provide regular direction to guide the implementation of the programme, ensuring that the results are delivered efficiently and effectively at good value-for-money. PMC meetings shall be not less than quarterly. 4. Technical Working Groups Technical Working Groups ( TWGs ) are formed within each of the five Key Result Areas to link the component managers with their DP counterparts. The main mandate of the TWGs is to provide a forum for detailed technical discussions in order to build consensus on implementation issues prior to, and in order to inform the PMC meetings. TWG meetings will be arranged according to the need and issues arising during implementation but will be 6
7 scheduled not less than quarterly to consistent with the dates of the PMC meetings. 5. Deputy Permanent Secretary The Ministry of Finance s Deputy Permanent Secretary will be responsible for managing the programme on behalf of the Permanent Secretary, Treasury. DPS will assess whether the programme s objectives are met and ensuring efficient use of available funds and resources. In this task DPS will be supported by Programme Manager - MoF s Director of Planning Division. 6. The Programme Manager The Programme Manager is responsible for managing the programme on a day-to-day basis. The Programme Manager is supported by Component Managers who are responsible for ensuring that their planned activities are delivered on time, to the required quality, within budgeted resources and achieves the results specified. 7. Programme Coordination Secretariat Programme Coordination Secretariat, housed within the MoF and reporting to MoF s Director of Planning Division is responsible for supporting GoT in the coordination of PFMRP implementation. 8. Component Managers Component Managers are the most senior officers within a division, department, agency or office responsible for implementation of the PFMRP IV activities within the Key Result Areas. 9. External Audit To respect the independence and autonomy of the National Audit Office and the CAG, the External Audit Services component will be managed by a deputy from the NAO appointed by the CAG. In line with GoT legislation, the External Audit Services component will be subject to audit by a private sector firm. 10. Financial Management Arrangement PFMRP financial management arrangements comply with all the laws of the United Republic of Tanzania and their regulations. 7
8 III. Contributions and Obligation of Development Partners and the Government 1. The Development partners commit to make known the amount available for coming financial year in line with the Budget calendar and it s timetable. The commitment is based on the assumption that all other terms and conditions as stipulated in agreements with relevance to PFM reforms are fulfilled and that required documents to enable commitments to be made are produced on time and to an acceptable quality. 2. Funds provided by the DP Signatories will be used exclusively to finance eligible expenditures for PFMRP Activities, as specified in Annual Work-plans and the Operations Manual. While implementing the programme, Government will strictly apply value for money principles according to the respective budget guidelines. Development Partners contributions will not be used to pay the cost of any import duties, customs duties or domestic taxes imposed directly or indirectly by the GoT, nor any salaries of civil servants of the GoT or allowances other than Per Diem. 3. In line with GoT rules and regulations, at the end of each GoT financial year, nonutilised PFMRP Basket Fund balances will be returned to the basket fund account and, subject to approval by the JSC may be used to finance PFMRP activities for the following financial year. 4. The GoT and DPs will endeavour to ensure that reasonable efforts, both in relation to funding and non-funding aspects, are made to facilitate the successful implementation of the PFMRP Phase IV. The GoT and DPs will promptly inform each other of any condition which interferes or threatens the successful implementation of the Programme. 5. Commitments and Foreign Fund Deposits a. Development Partners shall deposit the funds to the PFMRP Basket Fund Holding Account maintained at the Bank of Tanzania. Deposits are made within the GoT s financial year, and where possible, front-loaded within the first quarter. b. On making a deposit, development partners will comply with the 2001 Treasury Circular Channelling Project Funds through the Exchequer System. This involves informing the Accountant General and Permanent Secretary Treasury PST in writing of any deposits made into the basket fund account. BoT notifies the Accountant General of any deposits to the Basket Fund account by sending a bank credit advice. On receipt of this advice, the Accountant General update the cash book accordingly. The ACGEN will promptly acknowledge receipt of the foreign funds in writing to the DP in question. 8
9 IV. Procurement Arrangements 1. All procurement shall be done in accordance to the Public Procurement Act No. 7 of 2011 and its respective regulations. The PFMRP procurement of works, goods and services will be in accordance with procedures and methods and maximum limits for various methods of procurement outlined in the Operational Manual, Section 4. To ensure value-for-money, programme procurement will be guided by a Procurement Plan, which will be prepared on the basis of an Annual Work Plan for the Programme. The Procurement Plan will be approved by the JSC. DPs will review Terms of Reference for consistency with the approved budget and annual work plan, the procurement plan, in line with eligible expenses and the Monitoring and Evaluation framework. 2. Procurement audits that assess compliance and value-for-money will be undertaken semi-annually by PPRA or an Independent Auditor to be selected by PPRA. The Terms of Reference, including the sample size for this exercise will be determined by the PMC and approved by the JSC. Where necessary, any development partner may also be allowed by JSC to undertake on own special review of PFMRP procurement and provide results to the Government for action. V. Auditing Arrangements 1. The Controller and Auditor General (CAG) has legal responsibility to undertake financial and physical performance audits of all Government Institutions including various programs in accordance to the Public Audit Act No. 11 of 2008 and give auditor s opinion within nine months after financial year end. In addition the audits will be conducted in accordance with International Standards on Auditing (ISAs). 2. The CAG is authorised to appoint independent auditing firm to undertake audits on his/her behalf. 3. The audit of PFMRP will include verifying the accuracy of and giving an opinion on the Receipts from Donors and Disbursements to Components in the holding account, the opening and closing balances reported in the holding account and for each component, and that the funds disbursed have been used for the purposes prescribed in the approved work plan and budget. 4. The auditor will prepare a management letter which comments on identified weaknesses and actions taken on previous audit recommendations. 5. If concerns arise, DPs, after due consultation with GoT, reserve the right to conduct a special audit of the funds provided to the PFMRP basket at any point in time and at their own cost. 9
10 VI. Reporting Arrangements 1. The following plans and budget will be prepared by the GoT and submitted to the PFMRP, PMC by March 31 st of each year. a. 5 year Work Plan and Budget - updated annually b. Annual work plan and budget c. Annual procurement plan d. Annual Cash Flow plan 2. The PMC will review, discuss and amend these reports for submission to and approval by the JSC by 15 th April of each fiscal year. 3. The following performance reports will be produced by GoT and submitted to the PFMRP PMC within 45 days of the end of each period as appropriate: a. Semi-Annual Progress Report by Feb 15 of each year b. Annual Progress Report by August 15 of each year 4. These reports will include: a. The details of the implementation progress against the Annual Work Plan and the multi-year M&E Framework. This report should include both qualitative and quantitative information that based on the achievements against actual milestones and indicators. b. Discussion of any identified challenges or risks that might impact on the achievement of agreed results from the annual work plan. c. Details of the actual expenditures against the approved budget for each activity and milestone. d. Comments on Procurement management. 5. All Progress Reports will be submitted to the PMC by the dates set out above. The PMC will review and comment on these report as required, agree, and forward the final version to the JSC within 15 days after the meeting. After approval by the JSC they will be circulated to a wider group of stakeholders. 6. During the period of implementation of the PFMRP IV, an independent midterm review will be conducted in September of 2014 and end of programme review in August The specific purpose and terms of reference for these reviews will be submitted for endorsement by the JSC. 7. In addition to reviews outlined in Operation Manual, at any time throughout the validity period of this MOU, the Development Partners may request the GoT to commission an independent assessment of the PFMRP IV performance. To instigate an independent assessment, the concerned Development Partners will declare their concerns and intentions in writing to the Chair of the JSC. 10
11 The request will either be incorporated into the JSC s agenda for the next meeting or decided upon by written procedure, whichever occurs earliest. 8. The Signatories commit to fully cooperate with each other on all matters relating to the execution of the PFMRP IV with a view of achieving a full and free exchange of all relevant information. VII. Non-Compliance to the MoU 1. In the event of serious non-compliance with the terms of this MOU or violation of the principles set out in this MOU on the part of the GoT, or in the event that extraordinary circumstances have arisen which make it improbable that the PFMRP or a significant part of it will be carried out, the Development Partners may, in accordance with their respective bilateral agreements or arrangements with the GoT, suspend or terminate in full or in part further disbursements to the PFMRP, and reclaim any funds already transferred that have been used in a manner inconsistent with the provisions of this MOU. If a Development Partner intends to suspend or terminate disbursements, the Development Partner will either call for a meeting of the JSC in order to reach a joint position on the measures, remedial or otherwise, required or inform the other Signatories of its intentions regarding the continuation or discontinuation of support. Suspensions of disbursements by the Development Partners may be lifted when the circumstances which gave rise to the suspension have ceased to exist and/or appropriate actions satisfactory to the Development Partners have been implemented by the Government 2. In the event of violation of the procurement rules or arrangements specified or referred to in this MOU and/or Operations manual during the procurement or execution of a contract funded by PFMRP Phase IV, the funding Development Partner after reference to JSC and consultation with other Partners and subject to the applicable remedies under their respective bilateral agreements, may cancel an amount equivalent to the contract amount. Entry into Effect This MoU will come into effect for each signatory on the date of signature by the signatory. The signatories to this MoU agree to cooperate and support the implementation as outlined in the PFMRP IV strategy document June 2012, in the spirit of this MoU unless it is revoked earlier or revised by the signatories. 11
12 SIGNED: FOR THE GOVERNMENT OF THE UNITED REPUBLIC OF TANZANIA: By: Signature: Title: Date: FOR THE DEVELOPMENT PARTNERS GOVERNMENT OF CANADA. By: Signature: Title: Date: GOVERNMENT OF DENMARK By: Signature: Title: Date: GERMAN DEVELOPMENT COOPERATION By: Signature: Title: Date: 12
13 DEPARTMENT FOR INTERNATIONAL DEVELOPMENT OF THE GOVERNMENT OF THE UNITED KINGDOM By: Signature: Title: Date: GOVERNMENT OF IRELAND By: Signature: Title: Date: 13
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