Report No. 26332-SN Republic of Senegal Country Financial Accountability Assessment November 2003 Africa Region Operational Quality & Knowledge Services Unit Financial Management FOR OFFICIAL USE ONLY A Collaborative Exercise By the Republic of Senegal and a Multi-donor Task-Team Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ACRONYMS ADB African Development Bank AGETIP Agence de Gestion d'Equipement et de Travaux d'hfrastructure PublicsIUrban Public Works Management Agency AMD Agency for Municipal Development BCI Budget ConsolidCd'Investissement`ConsolidatedInvestmentBudget BCEAO Banque Centrale des Etats d'Afrique de I'OuestlCentral Bank of West African States CESAG Centre Africain d'Etudes Suptrieures en Gestion/AfricainCenter for Higher Management Studies CNDCL Conseil National pour le DCveloppementdes CollectivitCsLocaleshJational Council for Local Government Development CVCCEP Commission de VCrification et de ContrBle des Comptes des Entreprises PubliquesICommission for Verification and Audit of Public Enterprises CF ContrBleFinancier/Financial Comptroller CFAA Country Financial Accountability Assessment FCFA Francs de la Communautt Financiitre d'Afiique /Francs of African Financial Community CGE Centre de Grandes EntreprisedLarge Enterprises Center CGCPE Cellule de Gestion et de ContrBledu Portefeuille de 1`EtatIStatePortfolio Review Unit COF Contrbleur des OpCrationsFinancitres CREA Centre de Recherches Economiques AppliquCe+enter for Applied Economic Research DAGE Direction de 1'AdministrationGCnCraleet de I'EquipementlAdministrationand EquipmentDepartment DB Direction du Budgetmudget Department DCEF Direction de la CoopCrationEconomique et FinanciitreIEconomic and Financial CooperationDepartment DDI Direction de la Dette et de 1'InvestissemenVPublicDebt and Investment Department DGCPT Direction GCnCralede la ComptabilitCPublique et du TrCsorlPublic Accounting and Treasury Directorate DGD Direction GCnCraledes Douanes/Customs Directorate DGF Direction GCnCrale des FinanceslFinance Directorate DGID Direction GCnCrale des ImpBts etdes DomainedTax and Lands Directorate DIE Direction de I'Informatique de 1'EtatlStateInformationTechnology Department (President's Office) DPS Direction de la Prtvision et des Statistiques/Forecastingand StatisticsDepartment DSPRV Direction de la Solde, des Pensions et des Rentes Viagkres/Payroll,Pension and Annuities Department DTAI Direction du Traitement Automatique de l'Information/InformationTechnology Systems Department FDD Fond de Dotation de la Decentralisatioflecentralization Fund FECL Fond d'Equipment des Collectivites Locales/Local GovernmentInfrastructure Fund HIPC Highly Indebted Poor Countries IFAC InternationalFederation of Accountants IGE Inspection GCnCraled'Etat/State Inspector General'sOffice IGF Inspection GCnCraledes FinanceslFinance Inspector General's Office INTOSAI International Organization of Supreme Audit Institutions MDSSN Ministitre de DCveloppement Social et Solidaritt Nationale/Ministry of Social Development and National Solidarity MEF Ministitre de I'Economie et des Financeshiinistry of Finance and Economy MTEF Medium Term expenditure framework NIF NumCro d'Identification FiscallFiscal Identification Number OHADA Organisation pour I'Harmonisation du Droit des Affaires en AfiiqueI Organization for Harmonization of Commercial Law in Africa ONECCA Ordre National des Experts Comptables & ComptablesAgrCesNational Acounting Association PDEF Programme DCcennalde I'Education et de la Formation/Ten-yearProgram for Education and Training PDIS Programme de Dtveloppement IntCgrC de la SantCIIntegratedHealth Development Program PGT Paierie GCnCraledu TrCsorlTreasuryPaymaster PTIP Programme Triennal d'Investissements Publics/TriennialPublic Investment Program RGT Recette GCnkraledu TrCsorlTreasury Revenue Office SYSCOA Systtme Comptable Ouest Africain/West African Accounting System TOFE Tableau des Operations Financihresde 1'EtatlGovemmentfinancial Statements UEMOA Union Economique et MonCtaireOuest Africaine/WestAfrican Economic and Monetary Union Vice President: CallistoE. Madavo CountryDirector : John McIntire SectorDirector: John Roome Task TeamLeader: Iraj Talai 11 FOROFFICIAL USEONLY Republicof Senegal CountryFinancialAccountabilityAssessment Table of Contents ACRONYMS .................................................................................................................................. .. 11 PREFACE ...................................................................................................................................... v EXECUTIVE SUMMARY ........................................................................................................ viu ... 1. THE PUBLIC SECTOR ....................................................................................................... 1 1.1 LEGAL AND INSTITUTIONAL FRAMEWORK....................................................... 1 1.1.1 Legal Foundation for Public Financial Management................................................. 1 1.1.2 Annual Budget Act..................................................................................................... 1 1.1.3 Analysis o f Legal Framework for Budget.................................................................. 2 1.1.4 2 Analysis o f InstitutionalFramework.......................................................................... Institutional Framework............................................................................................ 1.1.5 3 1.2 BUDGETPREPARATION........................................................................................... 4 1.2.1 Budget Preparation..................................................................................................... 4 1.2.2 Revenue Estimates..................................................................................................... 7 1.2.3 8 Relationship o f MEFwith sectoral ministries.......................................................... Expenditure Estimates................................................................................................ 1.2.4 11 1.3 BUDGETEXECUTION.............................................................................................. 11 1.3.1 Overview.................................................................................................................. 11 1.3.2 Revenue Administration ................... ....................................................... 13 1.3.3 Budget execution............................... ..................................................... 17 1.3.4 Special Treasury Accounts..................... ..................................................... 24 1.3.5 Analysis o f special Treasury accounts ..................................................................... 25 1.4 CASH PLANNING AND DEBT MANAGEMENT................................................... 25 1.4.1 Cash Planning ................... .............................................. 1.4.2 Analysis o f Cash Planning ..................................................... 26 1.4.3 DebtManagement.................................................................................................... 27 1.5 ACCOUNTING AND Reporting................................................................................. 29 1.5.1 Accounting System .................................................................................................. 1S.2 Network o f public accounting officers 32 1.5.3 Goods and Asset Accounting..................................................... ........................................................................ .29 33 1.5.4 Budget Review Act .................................................................... ......................... 34 1.6 INTERNAL AND EXTERNALAUDIT..................................................................... 1.6.1 Administrative audit........................ ......................................... ..35 35 1.6.2 Jurisdictional audit ................................................................................................... 37 1.6.3 Legislative oversight ................................................................................................ 39 1.7 HUMANRESOURCES............................................................................................... 40 1.8 MANAGEMENT SYSTEMS ...................................................................................... 42 1.8.1 Information Technology .......................................................................................... 42 1.8.2 Archiving o f Financial Records ............................................................................... 45 1.9 LOCAL GOVERNMENTFINANCE ......................................................................... 46 This document hasa restricteddistributionandmay be used by recipients only in the performanceof their official duties I t s contents may not be otherwise disclosed without World Bank authorization . . 1.10 PUBLIC AND PARASTATAL ENTERPRISES ........................................................ 49 2 THE PRIVATE SECTOR .................................................................................................. 50 2.1 THEACCOUNTING PROFESSION.......................................................................... 2.2 ACCOUNTING WITHIN NON-GOVERNMENTALORGANIZATIONS ..............50 51 3 GOVERNANCEAND ANTI-CORRUPTIONMEASURES ......................................... 53 4 GOVERNMENT'SACTIONPLAN ................................................................................. 54 Listof Tables Table 1 : FinancialManagement RiskAssessment ........................................................................ ... x Table 2 : Summary o fHigh-Priority Recommendations .............................................................. xiii Table 3: Senegal :Dates o f adoption o fUEMOAbudget and accounting directives...................... 2 Table 4 : Budget preparation schedule............................................................................................. 4 Table 5: Actual as percentage o f estimatedrevenue, 1998-2001.................................................. 7 Table 6 : Annual budget estimates by expenditure category........................................................... 9 Table 7: Executionrate for total expenditures, 1998-2001........................................................... 10 Table 8 :Timetable for budget execution...................................................................................... 12 Table 9: Government revenue, 1999-2001.................................................................................... 14 Table 10: Landrevenues, 2000 - 2002......................................................................................... 16 Table 11:Phases, steps, and actions o f the expenditure process for equipment and investment financed with domestic funds................................................................................................ 18 Table 12 :Fundingo f National Pension Fund.............................................................................. 25 Table 13 : Senegal's external debt ................................................................................................ 28 Table 14 :Monthly centralization o f Treasury accounts and productiono f the consolidated Table 15 : Submission o f final accounts by Treasury accountants to the Court o f Audit.............30 balance o f Treasury accounts................................................................................................ 31 Table 16 :Regulatory legislationtaken up by Parliament, 1996-2001.......................................... 34 Table 17 : IGEand IGFactivities, 1999-2001............................................................................... 36 Table 18 : Senegal MEF Staff Levels, 1996-2003........................................................................ 40 Table 19 :MEF staff :Permanent (Fonctionnaire) and Non-permanent Status ........................... 41 Table 20 :Local Government Finance: Four Problems, Eight Underlying Weaknesses..............48 Table 21: Government's Action Plan to Improve Public FinancialManagement Systems..........55 iv PREFACE The main objective o f this assessment o f public financial management and o f accounting practices in the Republic o f Senegal, the Country Financial Accountability Assessment (CFAA), i s to describe the arrangements for financial management in the public and private sectors. The CFAA i s a diagnostic tool and not an audit. On the basis o f an examination and evaluation o f existing procedures and practices, the CFAA presents an indication o f the financial risks to public funds that such proceduresand practices may entail. Itprovides no assurance concerning the final use to which public resources are put.' Through its recommendations, the CFAA facilitates the development o f an action plan to reinforce Government's reforms for public financial management systems. This CFAA for Senegal examined arrangements for preparation of budget estimates ; the conditions for budget execution and analyzed arrangements for internal control and external control and audit o f the public sector budget. This CFAA also examined the financial information system and staffing o f the Ministry o f Economy and Finance (MEF), along with the mechanisms for Government supervision o f spending by public and parapublic enterprises and by Non- Governmental Organizations (NGOs) that receive public funds. This CFAA also assessed accounting practices in the private sector and the Government's plan for improving public financial management. Lastly, in response to the request o f the Minister o f Finance, the CFAA broadened its scope to examine the financial aspects o f administrative decentralization and the operations o f the land administration services within the Internal Revenue Department (services des Domaines et de la Conservation foncihre, Direction GCnerale des Imp8ts et des Domaines - DGID). The CFAA for Senegal contributes to the Country Assistance Strategy (CAS) framework which i s now beingjointly developed by the Government and the World Bank (WB), with the support o f Senegal's Technical and Financial Partners, who support implementation o f economic and financial reforms. This assessment also contributes to the monitoring o f Senegal's participation in the HighlyIndebtedPoor Countries initiative (HPC). Risk evaluation is a major concern o f the CFAA. The risks examined concern both public sector authorities (budget planning, preparation, execution, and monitoring) and the Partners in their role as funders o f development and poverty reduction operations. The objective i s to evaluate the probability that : (i)thebudgetdoesnotcoverallgovernmentactivities; (ii) fundsarenotspentinaccordancewiththeobjectivespresentedinthebudgetestimates public or that they are not used for the public good; (iii)accountinginformationrelatingtobudgetexecutionarenotaccurate, complete,orprovided inatimely manner. The risks identified underline the probability that, during past or future fiscal years, errors, omissions, or misuses o f public funds will have or are likely to occur. For this reason, it i s essential that all partners provide Government with the necessary support to implement an action plan that translate the recommendations o f this report into action. Standards proposed by the European Union (EU) complement those applied in this CFAA, in the sense that they provide concrete examples in the areas where either (i) the strengths o f the financial management system `The analysis of the final use of funds comes under the scope of the Public Expenditure Review (PER), another analytic instrument o f the WB. V have successfully compensated for the inherent risks, or (ii) risks identified have resulted in the deviations or have had a negative impact on the reliability o f accounting operations or financial reporting. The CFAA for Senegal was launched and conducted jointly by the Govemment, the African Development Bank (ADB), the WB, and other Partners in Senegal. The assessment was carried out in close coordination with the Country Procurement Assessment for Senegal and responds to Government's desire to improve public financial management and to create the conditions required for more efficient use o f public funds, inparticular, those directed towards the reduction o f poverty. Coordination between the CFAA and CPAR took the form o f joint missions and meetings, as well as close consultations between the CFAA and CPAR team members on their findings and conclusions. The CFAA team worked in close collaboration with all participants in this assessment o f public financial management and coordinated the work and the drafting o f the report. The team members were Abdoulaye Coulibaly (ADB), Iraj Talai, Anne Mondoloni, Emile Finateu, Fily Sissoko, Mamadou Yaro (BM), Franqoise Andre (EU), Lydia Montalti et Philippe Laparre (Netherlands), Jean-Pierre Foiny, Yvan Huart et Michel Huyghe (French bilateral aid), Esther Palacio (UN Development Programme). Mrs. Elisabeth Herczeg (WB) provided administrative support and formatted the report. Quality control was ensured through collaboration with the National Technical Group o f the Govemment o f Senegal described in the next paragraph, through intemal meetings at the WB, and by WB Financial Management Anchor David Shand (OPCFM) and peer reviewers Nancy Benjamin (AFTP4), Nezam Motabar, Pierre Messali (MNA), et Dominique Bouley (IMF-FAD). The Ministryo f Economy and Finance (MEF)has ledthe CFAA work from its inception untilthe production o f this final report. For this purpose, the ministry created a national team, called the National Technical Group, led by Mamadou Dkme, technical advisor (CTMEF), and composed o f Franqois Collin, Inspector General's Office/Secretariat o f the Office o f the President o f Senegal (SOPS); Assane Yade, Financial Manager (SOPS); M. Niane, Judge o f the Court o f Audit; Mme Gnagna Diop Sow (CT/MEF), Youssou Diop (CTMEF), Amadou Diallo, Inspector General's Office; Sidy Ben Amar Gueye, Office o f Public Sector Accounting and Treasury; Serigne M. Sougou, Internal Revenue Service and Land Office; Ameth Faye, Office o f Economic and Financial Cooperation; Sakhaly Ndiaye et Mamadou Ba, Office o f Extemal Debt and Investment; M o r Sall, Budget Director and Mme Khady Ndao Niane, Budget Office; Mme Koura Kane-Wane, Office o f Automated Information System; Mme Wade, M.Alioune B.Diagne et M. Alphousseynou Niang, Office o f Civil Service Payroll, Pensions and Annuities ; and Cheikh Wague, Comptroller. The preparation o f this CFAA also benefited from the support o f Country Director John McIntire, Regional Financial Management Manager Anthony Hegarty, and Country Economist, Mrs Nancy Benjamin. The CFAA team wishes to thank the Minister o f Economy and Finance o f Senegal and his entire organization for their support and readiness to make themselves available throughout the period o f preparation of the CFAA. The team's thanks are echoed by all donors working in Senegal who conveyed their observations to the team during the exercise, and especially those Technical and Financial Partners who participatedmost actively in the work by financing specialist consultants or direct staff participation : France, the Netherlands, the European Union and the UN Development Program. vi The CFAA report consists o f two volumes. The first volume, translate in English, contains the main report and the second, the report's annexes only in a French version. The main report describes and analyzes public financial management in Senegal and the private sector accounting profession and Non-Governmental Organizations. These report concludes with an analysis of govemance and o f anti-conuption measures in Senegal. Each topic addressed by the CFAA concludes with Government's Action Plan. Key priority areas requiring improvement from the Action Plan are described inthe executive summary. vii EXECUTIVESUMMARY The system of public financial management currently in use inthe Republic o f Senegal is based on Frenchlaw governing public revenue, budget, and expenditure that was establishedinSenegal prior to the country's independence in 1960. The underlying legislation predates independence and was revised a number o f times over the ensuing three decades. Since the mid-l990s, major changes have been made to the system inresponse to a new institutional structure flowing from the 2001 Constitution and to financial directives adopted by the West African Economic and Monetary Union (UEMOA) since 1996. The Govemment o f Senegal has made a concerted effort to adapt the legal framework governing public financial management to the new institutional structure. Important reforms have been made, such as reform o f customs and tax systems (modernization o f customs services, creation o f a Center for Large Enterprises), and the creation o f a Supreme Audit Institution (Court o f Audit). Other reforms are still underway, inparticularregarding the monitoring and supervision o f budget execution (introduction o f a new type o f internal audit) and the modemization o f the financial information system. At the time o f preparation o f this CFAA, further urgent improvements and adjustments are urgently needed, not only to maintain past achievements, but also to overcome obstacles encountered in Govemment's efforts to improve public financial management and to accelerate the implementation o f reform measures. Overall improvements in public sector financial management will become visible once urgently needed improvements and adjustments have been carried out infive important areas: @externalaudit @budgetpreparation and execution and internal control @publicsector accounting and reporting @Treasuryand cash management @civilservice payroll management This CFAA found evidence o f important shortcomings in the external control function exercised by the National Assembly (legislative oversight) andby the Court o fAudit on the public finances. The National Assembly receives draft budget review acts far too late to give its views on budget execution; the Court, recently established, does not receive public accounts in time to examine them. The National Assembly lacks sufficient capacity and expertise to assess the draft budget acts, which in any case are difficult to understand and to access. The delegates receive the draft budgets very late in the budget cycle, which leads them to adopt them without having received proper information on budget execution results for the previous years. These shortcomings hinder their ability to exercise legislative oversight over the executive on behalf of their constituents. The Court of Audit, while now being strengthened, still lacks the capacity to examine the full range o f public accounts in sufficient depth. Furthermore, the final accounts are not submitted within the requisite six months after the closing o f the fiscal year, but with major delays. The Court has so far managed to carry out only one jurisdictional audit o f the Government's accounts through simple verification o f line items for years preceding 1998. It would appear difficult to expect achievement o f the UEMOA goal o f eliminating the backlog and updating the budget review acts by December 31,2003. ... Vlll Budget preparation and execution are deficient. The preparation o f the budget act allows publication o f the budget but the estimates do not reflect any medium-term plan and do not cover all expenditure categories. Budget execution procedures appear complex and time-consuming, intemal control is weak, and exceptional procedures are overused. The annual budget act i s prepared without full knowledge o f outtums from the previous year's exercise, and expenditure allocations do not fully take into account expenditures made by externally financed projects and programs. The sector ministries receive no budget guidelines from the Ministryo f Finance that would allow them to better frame their budget. The preparation of annual budget requires expenditure and revenue projections for a longer time period that are directly linked to the medium-term objectives of the Govemment's economic and development policies. Budget authority i s centralized at the Ministryo f Finance, which prevents the spending ministries from taking ownership o f their own budgets. Furthermore, the rules and regulations assigning responsibility to the various actors inthe spending cycle are not yet clearly defined. The spending process is encumbered by some procedures that do not add value, and the accounting phase does not include sufficient independent checks and controls. Inorder to bypass this system, budget authorities tend to overuse exceptional procedures (advance payments and imprest accounts). These practices create a high financial risk and a perception o f lack of transparency. Public sector accounting does not cover all budget transactions. The accounting function also does not provide budget execution information within the timeframe required in the legal framework. Public sector accounting i s not comprehensive in two respects: public sector accounts do not include externally financed investment expenditures, and public sector accounting does not include certain opening balances, which impairs the accuracy o f public accounts. Furthermore, major delays in the submission o f final accounts to the Court o f Audit impair the reporting function; in effect, government accounts have not been reviewed by the Court o f Audit since 1996 and the last one preparedwas for the 1999 fiscal year. Overall, these practices lead to a lack o f effective oversight over public financial management and create a risk o f major deviations in the execution o f annual budget acts. The treasury function represents a major challenge for public financial management. It is carried out without full information on the availability o f funds in the various bank accounts held by public entities. Cash management i s not based on forecasts that take into account the information supplied by the revenue and spending offices. The absence o f monitoring o f these offices creates a perception o f lack o f transparency and risk o f underreporting o f revenue collections and o funjustifiedpayments. The civil service payroll system, last of the five areas in need o f improvement, appears to be obsolete from the point o f view o f both operations and oversight. The systemwould have suffered serious problems without heroic efforts on the part o f the entities responsible. Computer systems are archaic and the mechanisms for certifying the list o f civil servants are weak. The current likelihood o f computer system failure and the inaccuracy o f the payroll are so serious that even the current level o f heroic efforts to keep the system going and track paylist accuracy may no longer be enough to reduce the risks to an acceptable level. ix A sixthcrosscutting area of concern, equally important as the mainfive listed above, involves the disparity and fragmentation o f financial information systems, which are inadequate to ensure due diligence or an adequate level o f security required for financial operations. Multiple computer- based systems have been developed with no regard for government-wide integration or coordination. An integrated financial information system that made use o f currently available technology would improve coordination o f entities responsible for revenue collection and would allow capture o f data to constitute a tax roll for domestic taxpayers and those paying customs duties. Such a system would also simplify expenditure procedures, reduce the risk o f inaccurate data entry, and at the same time, produce financial data within the requiredtimeframes. Archival storage o f financial documents is handled in an archaic manner by the offices o f the Finance Ministry,who have neither clear instructions about archiving nor the staff or equipment required to do the job. Inthe absence o f systematic filing and conservation o f data and supporting documentation, it i s not possible to carry out an objective external audit. In each of the six key areas, this CFAA proposes recommendations and specific actions to be undertaken. Priority recommendations are presented in the matrix at the end o f this summary; their implementation, which will require capacity building for both staff and equipment, i s the responsibility o f the Government o f Senegal. Most actions also concern the Technical and Financial Partners (donors), in particular for the management o f funds during implementation o f investment projects that they finance. This CFAA also highlights the need for better coordination among donors, in order to harmonize and refocus their assistance so that external investment funding can be integrated into the budget and the regular public expenditure process, and to increase o f level o f donor support to public sector budget and to Sector-Wide Approaches (SWAps). This CFAA also includes an assessment of the financial management risk to funds flowing through the public financial management system in Senegal. The risk assessment does not relate to overall performance for each aspect o f public financial management listed in the table below, but rather to the financial consequences o f observed weaknesses resulting from the presence or absence o f specific practices inthat area. The potentialrisk i s assessedas follows inSenegal: Table 1:Financial Management Risk Assessment Aspect Level of Risk Comments Budget formulation : Moderate Although expenditure estimates do not fully Expenditures cover all government activities and are not entirely realistic, the financial risk resulting from these practices remains moderate. Budget formulation : Revenue Substantial to Revenue services lack comprehensive High knowledge o f the potential tax base and the visibility o f expected revenue collections is thereby reduced. The resulting risk o f revenue shortfall i s substantial to high. Budget execution : Moderate Although procedures are time-consuming and Commitment, verification, checks sometimes redundant, the procedures in payment order (administrative place are complete and reduce the financial risk phase) to a moderate level. Nonetheless, the absence o f monitoring o f expenditure performance presents the risk that government i s not obtaining good value for money. X Budget execution : Payment High The financial risko f this phase o f the budget (accounting phase) cycle i s inherently high.ktemal controls to reduce this risk are not inplace. Payroll execution High Heroic efforts expendedby the payroll office to ensure regular paychecks for civil servants despite obsolete computer systems cannot guarantee the reliability o f government payroll expenditures. The recurrent riskrelating to payroll management thus appears to be high. Revenue administration Substantial The financial riski s inherent and is not offset ~ by intemal control within the offices responsible for tax billing and collection. The riskofrevenue shortfalls thus appears substantial. Exceptional expenditure High Although legislative and regulatory procedures mechanisms for exceptional expenditure procedures appear to be inorder, overuse o f these procedures (advance payment and imm-est accounts) creates a highfinancial risk. Public Accounting High Time-consuming preparation o fmonthly ~ statements, due essentially to the use o f manual processing methods, creates a highriskto management o f public funds Financial reporting High The combined impact of a lack o f internal control mechanisms and long delays inthe preparation o f final accounts create a high financial riskthat errors and inappropriate use o f funds will not be detected. Treasury and cash Very high The inherent financial risk i s highdue to the management absence o f independent internal controls inthe services responsible for handling o f public r----- funds. Delays inthe reconciliationo faccounts create a highrisk inthe management o f public funds. Debtmanagement L o w Lack o f oversight o f public sector debt at the Treasury does not appear to create significant riskinthis area. State-owned enterprises and Very high Lack o f coordination insupervision o f state parastatal entities enterprises, the absence o f any effective systematic monitoring represents a major financial risk inthe use o fDublic funds. The actions proposed in the matrix on the next pages consolidate the recommendations made throughout the main report concerning institutional, organizational and procedure measures. They do not constitute new activities but rather constitute an integrated plan whose implementation requires coordinated and comprehensive planning. This action plan contains the specific activities required to implement the high-priority recommendations presented in the CFAA and as such, need to be taken inconsideration inthe preparation o f the government action plan (table 21). xi Insupport of this process, the Minister of Economy and Finance is planning to create a specific body to monitor the implementation o f this action plan and to be responsible for coordinating the reforms to be undertaken. The first task o f this body will be to prepare technical worksheets detailed task descriptions and defining the critical path for fulfilling each recommendation and ensuring a logical and consistent sequence o f steps leading to the efficient achievement o f the desired objective or outcome. Preparation o f these technical worksheets, certain o f which may require outside expertise, will include identification o f performance indicators relating to each recommendation. Table 21 indicates where these technical worksheets are required and which entity i s responsible for drafting them. xii X x x x x x x x x a X I. X x x x X X X > X ~ N 0 X < < x X X 1. THE PUBLICSECTOR 1.1 LEGAL AND INSTITUTIONAL FRAMEWORK 1.1.1 LegalFoundationforPublicFinancialManagement Internally, the management o f Senegal's public finances i s based on a body o f laws that derive from provisions in the country's Constitution, which refers in its preamble to the principles o f (i) transparency in the conduct o f govemment's affairs, (ii)f good governance and (iii)f access by all o o citizens to the exercise o f power. The Constitution, revised in 2001, assigns to Govemment the responsibility for management o f public finances, which it assumes in executing the annual budget act prepared by its staff. The National Assembly i s responsible for approving the budget law and the Constitution recognizes the Assembly's right to amend the budget law. The Assembly must exercise its right to vote on the budget law within 60 days after it receives the draft budget act; inthe absence o f a vote prior to the January 1start o f the new budget year, the President o f the Republic i s authorized to extend by decree spending authorization based on the previous year's budget act. The Constitution also provides for a Court o f Audit to assist the executive and legislative authorities inthe oversight o f budget execution. Externally, as a member state o f the West African Economic and Monetary Union (UEMOA), Senegal must also ensure that its management o f public finance is in accordance with UEMOA's directives, which set out a framework o f regulations to be followed. These directives in turnrefer to the principles stated inthe French law o f 1959. 1.1.2 ThelegalframeworkoftheannualBudgetAct Senegalese budget law i s based on the organic law o f October 15, 2001 (No. 2001-09), adapted from the provisions o f the UEMOA Directive o f December 16, 1997 (No. 05/97/CM/UEMOA). The organic law sets out the financial resources and responsibilities o f the State and specifies that expenditure lines opened by the annual budget acts are assigned to a specific office and grouped by chapter specifying their nature or function. Revenues inthe budget are classified by nature. The 2001 organic law also sets out the general procedures for recording accounting transactions on cash basis for revenues and accrual for expenditures, prohibiting offsetting o f revenue and expenditures, and limiting assignment o f revenue use to certain expenditures. This law has been supplemented by financial regulations, in particular by a decree o f November 7, 2001, which incorporates the provisions o f the UEMOA Directive (No. 04/98/CM/UEMOA) for budget nomenclature. The new budget categories were first used for the 2002 budget for Senegal. In 2003, the Government o f Senegal further reinforced the legal framework through three decrees signed March 13 and 28 that incorporate three other UEMOA directives and resulted inthe adoption o f Public Sector Accounting Regulations, a public sector Chart o f Accounts, and a public sector Govemment Financial Statements (Tableau des OpCrations Financieres de 1'Etat or TOFE). The 2001 organic law designates the Minister o f Finance as the sole expenditure authorizing body and establishes under him a Financial Comptroller (Contrdeur des Ope`rutionsFinunci2res or COF). The law (1) requires the Minister to provide Parliament with all information required for them to carry out 1 their oversight responsibilities, (2) requires the Government to report on its management o f the budget by submittingthe draft final accounts prior to the end o f the following budget year, and (3) simplifies the legislative budget approval process by providing for a single vote for the income section o f the main budget, and a single vote for the expenditure side o f each ministry'sbudget; new programs are voted on one title at a time within each ministry. The law also provides for modification to the annual budget duringthe fiscal year throughpassage of an amended budget act. 1.1.3 AnalysisofLegalFrameworkforBudget Although an analysis o f the UEMOA framework falls outside the scope o f this report, the CFAA team notes that the UEMOA framework i s not completely up to date regarding current public sector financial management practice, which recommends use o f medium-term budgeting framework and results-based budgeting. Annex 4, in the second volume, presents the structural weaknesses o f the U E M O A framework that currently constraint the scope o fpublic financial management inSenegal. The legal framework for budget preparation and execution inSenegal i s now complete, though it is only recently that the Government o f Senegal actually put into effect the three UEMOA directives for public sector accounting regulations: the Chart o f Accounts and Government Financial Statements-four years after UEMOAissuedthe relevant directives.2 This delay i s partly due to the absence o f a mechanism for monitoring the implementationo f the UEMOA directives. Senegal's Ministry o f Economy and Finance (MEF) hasjust established a sector assessment and monitoring committee for UEMOA directives, and this committee shouldbe stepping up the pace o fits activities to ensure that the necessary implementing regulations are put into effect. Table 3: Senegal :Dates of adoption of UEMOA budget and accqunting directives. UEMOA Directives Senegaleselaw No. 05/97 o f November 16, 1997, on annual budget Law No. 2001-09 o f October 15,s 2001 laws No. 06/97 o fDecember 16, 1997, on regulation o f public sector accounting procedures Decree No. 2002-101 ofMarch 13,2003 No. 04/98 o f December 22, 1998, onpublic sector budget nomenclature Decree No. 2001-857 o f November 7,2001 No. 05/98 o f December 22, 1998, onpublic sector Chart o f Accounts Decree No. 2002-162 o f March 28,2003 No. 06/98 o f December22, 1998, on Government Financial Statements (TOFE'l Decree No. 2002-163 o f March 28.2003 1.1.4 InstitutionalFramework The framework established by the 2001 organic law involves Parliament, the Court o f Audit, and the executive branch o f Govemment. Concerning legislative authority, Parliament has two specialized commissions : the Legal Commission, which examines all legal aspects o f financial text, and the Finance Commission, charged with reviewing Government's financial proposals and the budget expenditure reports. The Court o f Audit represents the judicial branch and i s responsible for audit o f budget execution and for producing a report for Parliament (see section 1.6). The decrees putting these directives into effect inSenegal were publishedinNo. 6094 ofthe Official Bulletin on March 29, 2003. 2 Because the MEFrepresents the executive inits role as sole authorizing body for the budget, the CFAA focuses primarily on its functions. MEF's institutional structure i s aligned with the provisions o f the decree regulating its organization that has been in effect since 1995. This ministry's primary functions are the preparation and execution o f annual budget acts and providing the revenue to finance Govemment's operations. In order to carry out these functions, MEF i s composed o f four main directorates, 21departments, 45 offices, about 20 divisions and a dozen specialized units. 1.1.5 Analysis ofInstitutionalFramework The institutional framework for public financial management i s weakened by the shortage o f human and financial resources, which hinders its capacity to perform. Although in the last few years, MEF has instituted specific reform measures intended to strengthen financial performance (in particular, within the Customs Directorate, DGD), a number o f organizational gaps constitute real handicaps inthe effort to exercise efficient and transparent management o fpublic finance. With the notable exception o f the Customs Directorate (DGD), The Treasury and Accounting Directorate (DGCPT), and the Tax and Lands Directorate (DGID), certain o f MEF's administrative entities are operating with no legal provision for their missions. The missions o f these entities also suffered from the instability o f government reorganization. The 1995 decree that set out the structure o f MEF was never followed up with administrative implementation orders (arret&) and has not been subject to comprehensive review and revision, despite numerous internalreassignments o f authority. As a result the relevant orders covering the organizational structure o f the departments and divisions have never been drafted. MEF staff must refer simultaneously to the orders issued in 1980 and 1982, adjusting the old organization chart to reflect assignment o f functions specified in the 1995 decree and subsequent regulatory and technological changes. Again with the exception o f the revenue directorates (DGD, DGCPT, DGID), the many current conflicts in the assignment o f responsibilities within MEF, the fragmentation o f functions and task assignments, the duplication o f structures, and the unsystematic naming o f organizational units have a negative impact on the quality o f governance. For example, the many new small units (cellules) are in effect administrative substitutes created in response to specific immediate problems. Their creation has often stemmed from a realization that existing entities would not able to deal adequately with new circumstances. Whatever form they take and whatever the justification, the creation o f such ad hoc units runs the risk o f duplicating functions already assigned to regular structures and consequently demoralizing them. Very often, the new units are created with no consideration o f whether they should be permanent, or rather eventually transferred to an existingpart o f the ministry,and if so, which part. The structure o f the Tax and Lands Directorate (DGID) reflects MEF's concems regarding fiscal resource mobilization, the registration o f private land and the management o f state lands. However, DGID's organization fails to consider the gap between the importance o f these concerns and the resources allocated to achieve the desired objectives; it also reveals a fragmentation o f activities that i s accentuated by inadequate information and communication systems. The performance o f the Treasury and Accounting Directorate (DGTCP) i s fundamentally handicapped by over centralization o f authority not subject to efficient external oversight and the absence o f procedures manuals and a lack o f operational documentation. Last but not least, the administrative structures o f review and audit o f public finance continue to be characterizedby poorly defined functions, frequent duplication inareas o f responsibility, multiplicity o f actors, frequent reassignments, insufficient autonomy o f action, and a lack o f human and material resources (see section 1.6) 3 1.2 BUDGET PREPARATION Senegal's fiscal year runs from January 1 to December 31. Budgetpreparation begins inFebruary and i s carried out by central and deconcentrate entities. 1.2.1 BudgetPreparation The preparation o f the budget i s coordinated by the Budget Department, with a staff o f 83, o f which 15 are top management (A-level civil servants) and 12are middle management and professionals (B-level). The income division and expenditure division have six staff each, and 44 staff work inthe nine regional offices. Schedule andprocedures Budget preparation follows the schedule shown below. Table4 :Budget preparationschedule Vote on Budget Act Launch o fwork to prepare draft budget act (revenue) Submissionofdrai? budget act to Parliament Note onthe economic situation and govemment financial requirements DraR budgetact adoptedby Council o f Ministers October Endof arbitration I\ MEFmemoto sectoral (MEF -PM) May / ministries (expenditures) Beginningo fbudget arbitration (DGF) Revenue forecasts set Budgetconferenc meetings(expenditures) Analysis of budget scheduleand procedures The budget preparation schedule i s based on arrangements spelled out in the Constitution and i s intended to allow time for the Government to examine the draft budget and adopt an annual budget act 4 prior to the start o f the fiscal year. Nonetheless, the more than two months allowed for DGFto complete arbitrations of budget content prior to the adoption o f the draft budget act by the Cabinet o f Ministers (from mid-Augustto the second half o f October) appears to impinge on the time Parliament has left for review and the quality o f their review. In 2002, due to delays stemming from the crisis following the sinlung o f the Joola, the draft budget was submitted to Parliament only in early November, which forced a rapid review that compromised the proper exercise o f legislative oversight. This lack o f time for proper budget review i s one o f the reasons that members o f Parliament have lost interest and simply failed to be present for budget review meeting^.^ MEF communications conceming budget preparation do not inform the sector ministries about overall budget limits. Whatever the justification, the absence o f budget guidelines creates three kinds o f problems: (i) theministrieslackasenseofthefinancialcontext,theirbudgetproposalsarenotrealisticand since this leads to difficult budgetmeetings ; (ii) freeinteractionbetweenthesectorministriesandtheMEFduringthesemeetings,noreal despite debate takes place conceming overall allocation or tradeoffs among sectors because the Budget Department insists on maintainingpreviously fixed sector spending limits; (iii) aresult,thesectorministriesdonotfullyengageinthebudgetestimatesexercise, whichthey as consider to be beyond their scope o f influence. Finally, the preparation o f budget estimates i s o f little concern to the deconcentrated (regional and local) offices o f the sector ministries, which are in fact inthe best position to set out budget proposals that correspond to the needs o f the communities they serve. Should the deconcentrated offices be given a role inbudget preparation, the sector ministries would also need to be able to present realistic overall spending levels, and would need to strengthen their own capacity for program analysis. Otherwise the focus remains on spending rather than on service delivery. Recommendation: 9 Include a requirement for budget guidelines as part of the process for preparing draft budget estimates. BudgetPresentation The draft budget i s presented in the form o f documents that include government income, operating expenses and capital (investment) expenditures. The operating budget i s presented ingreat detail and is voluminous. The new budget classification system, first used for the 2002 budget, i s one reason for this level o f detail. The investment budget i s detailed by project and within each project, by type o f expenditure according to the source o f financing (whether intemal or external), by subvention, or by borrowing. The annual public debt payment i s taken into account inthe operating budget. Analysisof budgetpresentation The voluminous form o f the budget document, due inlarge part to a very detailed budget classification system, does not make it easily accessible and makes it difficult to read. This lack o f accessibility (i) has a negative impact on the quality of legislative oversight by members o f Parliament, who are often not very familiar with the technicalities o f public finance; (ii) does not provide sufficient transparency concerning Government's actions vis-a-vis the interested external parties, such as citizen watchdog Letter of December 28 from Senegal's NationalOrganization of Civil Rights. 5 organizations and international technical and financial partners; and (iii)fails to clearly lay out Government's objectives inpriority areas. Budget documents are not distributed widely enough, either to the people who need to use them intheir work or to external parties, inparticular to the Senegalesepublic. The CFAA team recommends that the budget be presented in more easily readable form and that it be made more widely accessible, by making it available on MEF's website: www.minfinances.sn. Budgetingby objectivein two pilot ministries MEFhas preparedpilot objective-based budgets for two ministries, Health andNational Education. The two pilot budgets take distinctly different approaches. The Ministry o f Health budget i s based on the Integrated Health Development Program negotiated with external technical and financial partners (PDIS 1998-2002).4 Annual objective-based budget programming i s meant to be on a rolling multi-year basis, but since the PDIS comes to an end in 2002, the pilot objective-based budget for 2003 was not prepared under a medium-term expenditure framework. The pilot objective-based budget for the Education Ministry i s based on a Ten-Year Program for Education and Training (PDEF 1998-2008) prepared by the Center for Research and Applied Economics (CREA), part o f the University o f Dakar, which made use o f custom software that rearrangedprogram expenses according to government budget classification ~ategories.~ Analysis of budgetimplementationfor objective-based budgets The pilot effort to introduce objective-based budgeting in the public sector is in a very early stage and its influence on the management o f the health and education sectors has been very limited. The fact that these pilot budgets were producedby MEF and not by the concerned ministries is a clear indication o f their ad hoc character and o f their lack o f linkage with the internalplanningprocesses used within these ministries. The Health Ministry, for example, attaches great importance to the annual review o f the PDIS, organized with the program's donors, duringwhich activities for the coming year are agreed. Moreover, these pilot documents cover just one year and thus are not conceived within a dynamic medium-term, multi-year rolling framework. It i s also clear that the hierarchy o f objectives needs some refinement. The indicators included in this first exercise reflect a blend o f quantifiable outputs (or targets), less quantifiable ambitions or outcomes, and required actions. Despite the weakness o f these pilot objective-based budgets, the exercise itself has had promising results. Certainly it i s clear that there is a growing desire and the beginnings o f a culture for management by objectives and results, and that that these ministries are seeking to develop an overall vision o f the financial position for public service delivery within their sectors. The Health Ministryhas begun producing an annual report on the use o f financial resources from all sources (central government, private patients, local government, and external donors). Still, the implementation of such an overall vision runs counter to the tradition o f financial management based on detailed oversight o f data entry and consolidated cash management (unite` de caisse). The next step in developing along these lines will require confronting the constraints imposed by the current Twenty-three(23)donors are financingabout 30 percentof atotal five-yearprogramcost ofCFAF 229 billion. For the 2003 budgetdraft, CREA presentedthe objective-basedbudget document two days prior to the budget conferencefor the Ministry of Education.Its contractwith the ministry expiredon December3 1, 2002. 6 system o f financial management. Without fundamental reform o f the current system, the benefits o f objective-based budgetingwill remainvery limited. Meanwhile, the two ministries will need to take another look at the program-related structure proposed in the two budget documents, along with the definition of program monitoring indicators, which will give them at least the benefits that arigorously logical framework can offer. Recommendation : P Define and implement a strategy for putting into practice results-based budget within a medium-term expenditure framework (MTEF). 1.2.2 RevenueEstimates Revenue estimates in the annual budget act are based on forecasts o f growth in the tax base and anticipated improvements intax recovery performance. These forecasts are provided by the Forecasting and Statistics Department (DPS), with the support o f the Budget Department and the various revenue authorities (DGID, DGD,DGCPT). DPShas assembled an Excel database that can be regularly updated to yield a national macroeconomic spreadsheet. Tax revenues amounted to CFAF 576.8 billion in 2001 (equivalent to US$825 million at CFAF 700 to the dollar), or 95.7 percent o f total revenues. Income from non-tax sources i s less predictable, mostly because o f the variability o f dividends coming from national public enterprises and o f income derived from fishing agreements with the European Union. The amounts o f such income are relatively small, amountingto CFAF 25.9 billion in2001, or about 5 percent o f total revenues. Actual revenue collections are quite close to initial forecasts, as shown intable 5. Table 5: Actualpercentage of estimated revenue, 1998-2001. 1998 1999 2000 2001 Tax revenue 98.9% 103.1% 101.7% 97.4% Non-tax income 124.7% 100% 116.8% 141.5% Total revenue 99.8% 103% 102.3% 98.7% (excluding loans and grants) Source: MEF DPS relies on its staff o f 115 to produce these revenue estimates and forecasts, which are presented in timely manner for inclusion in the annual budget estimates, along with the cover memorandum that accompanies the draft budget act. Analysis of revenue estimates The accuracy o f revenue forecasts reflects the transparency o f the methodology used to calculate them but also raises questions regarding their reliability, since one would normally expect at least some variation over a period o f several years.6The consistency o f estimates and actual receipts could suggest that the tax recovery operations have some elbow room or potential for improving collections performance. Experience with revenue forecasts shows that over a period o f four or five years, actual collections will normally differ significantly from estimates on occasion due to unpredictable exogenous (poor harvests, bad weather) or endogenous events (political and social unrest). 7 The CFAA team learned that the discussions on revenue forecasts focused on the overall annual levels without any prior definition o f hypotheses. The result is that there are difficult arbitration decisions among the different revenue authorities. The revenue directorates lack sufficient human and material resources to undertake field surveys or prepare professional monographs on the main sectors o f economic activity inSenegal. These constraints (1) lead to real difficulties in grasping the extent o f fiscal potential, (2) mask the actual current performance o f tax collection services, and (3) maintain the existing tax burden, which falls primarily on a few business enterprises.' There continues to be a problem with the transparence o f revenue forecasts as presented in the information provided in the statement o f objectives (exposk des motif) that introduces the annual budget act. For example, the statement mentions, "the consolidation and reinforcement o f the efficiency o f tax and customs administration," and "the approach o f closing dates for certain [external] loans." But members o f Parliament need more specific information in order to understand the differences in revenue due to underlying gradual growth in the number or income o f taxpayers, versus those due to action taken by tax authorities (higher rates, new categories). Better information on such fundamental tax issues would improve both the transparence o f public policy vis-&vis the civil society and Govemment's credibility. DPS staff are quite well trained and well equipped, in particular with a good computer system that i s adapted to their needs, networked, and connected to the Internet. DPS' statistical output i s posted to the MEFwebsite, and DPS is currently working with Afristat under bilateral financing to launchtheir own website during2003. However, DPS i s not linked to other MEF departments or with the BCEAO, with whom DPS compiles the macroeconomic forecast. The computer system i s also vulnerable to serious virus problems that threaten the security o f their worksheets. Furthermore, although DPS macroeconomic forecasts are summarized in spreadsheet format, they are not automatically calculated using customized software but rather based on hypotheses derived from national accounts forecasts for the main components o f growth for the forthcoming year (consumption, investment, trade, inflation). 1.2.3 ExpenditureEstimates Equipment expenditures Estimates o f operating expenditures for the coming fiscal year are prepared by the sector ministries and assembled by the Budget Department, which has two divisions o f six staff each, one each for revenue and expenditures. Its estimates are presented in the annual budget act under budget lines carried over from the previous year and new expenditure items. Personnel expenditures The Payroll, Pension and Annuities Department (DSPRV) i s responsible for estimates and management o f personnel expenditure, except for personnel paid through project budgets and equipment purchases. This department reviews and presents its views on draft legislation and regulation that impact Government's payroll and handles payroll and pension disputes. DSPRV works from a computerized personnel list that it checks and verifies but which i s actually maintained by DTAI. Its staff levels have The disproportionately large share o f tax paid by large firms has recently been accentuated by the creation o f specific units for the billing and recovery o f taxes from large firms. 8 fallen by 20 percent over the last five years to 96 total staff, o f which only four at the professional level (see section 1.8 on computerized payroll database). Personnel expenditures estimate inthe annual budget act are based on budget lines that must be created prior to funds allocation. The Budget Department, where only four staff are responsible for all estimates and monitoring o f personnel expenditures-though these expenditures account for around a quarter o f the entire budget-also i s asked to review and present its views on all decisions affecting payroll expenditures. Requests for new staff positions originate with the ministries and staffing limits are set by the Staff and Payroll Monitoring Unit, which reports directly to the Minister o f Finance; the final decision rests with the Prime Minister. Since 1998, actual personnel expenditures (for permanent civil servants and contract staff, excluding retirement benefits) have normally been 98 percent o f estimated levels. For 2002, personnel expenditures were projected to be CFAF 198 billion, 11.7 percent higher than for 2001. Since staff levels have been stable at around 66,000 for the last ten years or so, and salary and contract labor payments amount to 30.7 percent o f tax revenue, well below the 35 percent convergence criteria threshold indicatedby UEMOA, they do not raise any specific issues for public financial management. Investment expenditure framework Inprinciple, the Triennial Public Investment Program(PTIP) is basedonprojectproposals presentedby the sector ministries to the Economic and Financial Cooperation Department (DCEF) inthe framework o f the national planning system. DCEF, which has a staff o f 34 including 24 professional operational staff, reproduces the first year o f the PTIP to form the annual Consolidated Investment Budget (BCI) Analysis of expenditure estimates The preparation o f expenditure estimates i s based on the availability o f resources and not on desired outcomes, with the emphasis on the level o f spending rather than on objectives. For this reason, the expenditure estimates are subject to rigidities that interfere with a modem and dynamic approach to public financial management. Nor does the automatic carryover o f funding levels from year to year facilitate new initiatives from the sector ministriesor the definition o f sector policy. Table 6 :Annualbudgetestimatesby expenditure category. (CFAF billions) Natureof expenditure 2001 2001 2002 2002 2003 2003 amount YO amount YO amount YO Personnel 186 20% 198 20% 207.4 18% Purchase of goods and 1 - I I I I I I services 240.3 25% 110.2 12% 129.9 11% Transfers 56.8 6% 111.5 12% 301.8 26% 9 Overall, the budget execution rate (ratio o f actual to estimated expenditure) during the 1998-2001 period was over 95 percent. The execution rate fell to 90 percent in 2001 because o f a lower level o f debt payments than planned. Equipment expenditure estimates have been the least accurate, with an overall execution rate over the four-year period that exceeds 100 percent, which corresponds to expenditure overruns. Still, there has been a steady reduction in the equipment execution rate from 111.6 percent in 1998to 97.5 percent in2001. Table 7: Execution rate for total expenditures, 1998-2001. 1998 1999 2000 2001 Execution rate for total expenditures - - personnel 96% 96.1% 90.7% 98% 98% 98.2% 98% - equipment & supplies -- public 111.6% 102.8% 101.8% 97.5% investments N C N C N C 87.5% debt 93.2% 104.6% 75% Source :MEF.NC=Not Communicated. Personnel expenditures have remained remarkably stable during the four-year period and seem to be under control. They represent about 30 percent o f tax revenue, the lowest share o f any UEMOA member state. An study on WAEMU countries carried out by Principal Economist M. Lubin Doe, indicates that this share averaged 58 percent during the 1980-93 period, ranging from 51to 64 percent8 The figure for 1980 was 53 percent and in 1993, 60 percent. This share has thus fallen dramatically over the last ten years and it would be worthwhile to update the study. The DSPRV does not manage the entirety o f Government personnel expenditures; it does not handle personnel costs covered by equipment purchases, which run contrary to the principle o f budget specificity (each budget entry must specify the nature o f the expenditure). The CFAA team found that personnel expenditures in the 2002 budget that were included under equipment purchases by the University o f Dakar had substantially increased-nearly doubled, in fact-which introduces a misleadingpresentation for this category o f expenditure. Because they are based on data entries and output from the Civil Service Ministry's database, the Payroll and Budget Departments' tools for framing personnel expenditure estimates are rudimentary. The staff available in these departments i s insufficient to carry out forecasting exercises or comparative studies o f civil service salary spending. These departments are far from being able to anticipate how payroll spending may change in the future or to propose a medium-term strategy for civil service employment. Conceming investment expenditures, the only available figure indicates an exceptionally highexecution rate o f 87.5 percent. This figure i s very different from the overall rate o f execution o f externally financed investments in sub-Saharan African generally (22 percent) and even more so from the implementation rate o f WB-financed projects in Senegal (9 percent). Lacking information to the contrary, implementationo f internally financed investments must be unusually efficient in Senegal. The sector ministries are minimally involved in the preparation o f investment expenditure estimates because they have little capacity to identify, assess, and monitor public projects and programs. Their capacity i s limited because o f the abolition o f all sector planning offices within the sector ministries duringthe 1990s. The DCEF has few effective tools for project assessment, selection, or programming. * Article published inthe Intemational Social Science Joumal, UNESCO,no155 of March 1998. 10 The CFAA team recommends strengthening o f project and programplanning capacity within the sector ministries and the DCEF. Moreover, the ministries do not include all externally financed projects in their budget estimates, which violates the budget principle o f universality and limits the comprehensiveness and transparence o f the investment budget. Recommendations: 9 Strengthenprojectandprogramplanningcapacity withinthe sector ministriesandthe DCEF. 9 Require all ministries to include all externally financed projects and programs intheir budget estimates inorder to achieve comprehensive coverage o f the annual budget act. 1.2.4 Relationship ofMEF withsector ministries The preparation o f the annual draft budget act i s officially the responsibility o f the Minister o f Finance and the current exercise of this responsibility allows the MEF to produce the draft budget in a timely fashion so that Parliament can review it. In order to achieve this result, MEF sends out a memorandum to the sector ministries directing them to submit their estimates and attend the budget conference meetings. This circular however, as already mentioned, does not provide any overall financial orientation to the ministries that would guide them inpreparing realistic budget estimates. Analysis of MEF-Ministryrelations While this procedure allows MEF to produce the draft budget act within the desired timeframe, the institutional architecture relies on MEF having sole responsibility and everything takes place within a centralized system. This setup, which stems from a concern to maintain financial discipline, does not favor deconcentration of responsibility for budget preparation that would allow the sector ministries to participate, and leaves them little room for them to take the initiative. This applies equally to the Health and Education Ministries, whose budget meetings are no different from those o f other ministries, despite the pilot use of objective-based budgeting in these two ministries (see section 1.2.1) The result i s that they have little interest inthe budget preparation process. 1.3 BUDGETEXECUTION 1.3.1 Overview The minister o f finance, who i s the sole authorizing body for government funds, i s responsible for the execution of the budget. The first step in the execution of the budget i s the allocation decree that notifies government offices of the funds made available to them according to the budget act as voted. This decree, which indicates the funds allocated to each ministry, signals the opening o f allocated funds.The ministries may then initiate spending according to the procedures for the use o fpublic funds (see details in section 1.3.3). The organic budget law provides two procedures to be followed for reallocating funds during the budget year, one through legislation, the other through regulatory decree, both under MEF supervision. The legislative procedure involves passing a supplementary budget act that authorizes adjustments in 11 the estimates for revenue and expenditure, and inthe closing balance. The regulatory procedure i s more flexible and allows for transfers and reallocation (virement) o f funds from one budget head to another butdoes not allow introduction o fnew items.' Fundstransfers can also be authorizedby an order (arrete) o fthe Ministry o fFinance, which can change the spending entity without changingthe nature o fthe expenditure. Incontrast, areallocation (virement) changes the nature o f the expenditure but i s allowed only within the same budget head (chapitre) o f a ministryandmay not exceed a tenth o fthe total allocation to that head. A reallocationrequires a decree (dCcret) unless it involves a shift o f funds within the same budget line (article), in which case a ministerial order i s sufficient. Table 8 :Timetable for budget execution. Beginningof the fiscal year Supplemental periodbegins (January I,Year N) Funds allocation decree (Two monthsafter Jan. I ofYear N+l) Supplementatl period ends; end of budget execution (February 28, Year N+l) (November 30, Year ovember 1 (Year N j /Budget / execution (Year N) Deadline for public accountants to submit final accounts(May 3 1, Year N+l) Analysis of budget execution overview The current setup for budget execution in Senegal, involving a single authorizing body, i s not the most effective one for public financial management. This centralized setup concentrates all authority for managing the Government's budget inthe hands o f the minister o f finance, and results ina rigid system where procedures can easily become stalled. Moreover, despite the issuing o f the allocation decree in the first month o f the budget year, budget execution tends to get a slow start. The sector ministries interviewed by the CFAA team said that the actual delivery o f the decree to them i s often delayed, a situation the CFAA team finds worrisome, as it The 2002 operating budget was subject to 64 transfers and 84 reallocations (amounts not specified). 12 effectively delays the startup o f budget execution until April or May." The slow startup leads to a bunching o f commitments at the end o f the fiscal year, and the financial units are overloaded with work from November (commitment deadline) to February o f the next year (supplementary period or journCe complCmentaire" ), when most o f the spending actually takes place. This bunching has a negative effect on the budget execution rate andreduces absorptive capacity. Supplementary budget acts were voted in 1999 and 2001 to authorize spending o f unusually high revenues from Senegal's participationinthe Highly Indebted Poor Countries (HIPC) initiative and from privatization o f public sector enterprises ;there was no supplementary budget act in2002. Recommendation: P Develop a strategy for deconcentrating budget execution authority and test its implementation in a few key ministries by shifting authority for all administrative stages of the expenditure process (commitment, verification, and processing and issuing o f payment orders) to the sector ministries, while leaving oversight authority with MEF. 1.3.2 RevenueAdministration Proceduresfor revenueadministration Three directorates within MEFhandle government revenues : 0 DGIDis incharge o ftax rolls andbilling and o fthe landregistryand state lands management; 0 DGDcollects customs fees and indirecttaxes ;and DGCPT collects fiscal and non-fiscal revenue. Accounting for both central and local government revenues i s cash based, that is, the fund transactions are not recorded until the funds are received. Revenue collected in the Dakar region i s deposited in a Treasury revenue account (Recette GCnCrale du TrCsor or RGT), and those collected inthe other regions are deposited in regional Treasury accounts; all revenue deposits are registered in the Central Bank (BCEAO) account managedby the Treasury. DGID is the only MEF department with a properly equipped training center. A-level top management staff in DGD, DGCPT, and DGID are trained in a specialized section o f the National School o f Administration; B-level middle management and professional staff are trained at the Customs School (1'Ecole des Douanes). DGID employs 452 staff, o f which 150 are A-level and 90 B-level; 90 percent o f DGID'sA- and B-level staff work in the Dakar region. DGD employs 1,617 staff, o f which 113 are A-level and 185 B-level; 98 percent o f A- and B-level DGD staff work inthe Dakar region. DGDhas a human resources management system that provides for internal transfers every three years. It i s facing major attrition problems because o f the large number o f staff approaching retirement age: average age o f DGD staff i s 45 and retirement i s at 52. loAt the beginning of the CFAA validation mission (February 7, 2003) the Administration and Equipment Departments (DAGE) of the sectoral ministriesinterviewedby the CFAA teamhad yet to receive authorizationof funds for the 2003 fiscal year. The supplementary periodruns from January 1 to February 28 followingthe end of the budget year, and in practice simply extends the end of the budget year fromDecember31. 13 1999 2000 2001 (prel.) Fiscalrevenue 492.1 537.3 592.1 Non-fiscal revenue 15.6 25.O 18.3 Total revenue 506.8 562.3 610.4 Analysis of revenueadministration The revenue administration process in Senegal is in line with the UEMOA guidelines which recommend separation o f responsibility for billing and collections. However, for those few taxes not collected on the basis o f rolls, as for example the value added tax, DGID does in fact handle both the administration and the collections. This joint function runs contrary to the principle o f separation o f functions and increases the risk o f collusion that the principle o f separation seeks to avoid. The risk could be minimized through introduction of strict internal audit within DGID, reinforced through the use o f a Tax Identification Number (NE)for each taxpayer that could be used for all transactions with government (taxes, customs, Treasury, budget). DGID also manages the Large Enterprises Center (CGE), which administers tax cases by enterprise (and not by type o f tax as previously). The CGE, located in Dakar, facilitates relations between the Government's tax administration and the largest taxpayers, intended to foster the development o f the private sector. CGE has played a major role inthe collection o f indirect taxes, achieving a recovery rate o f 82 percent, or CFAF 169.3 billion o f a total o f 206.1 billion.'* The CFAA team found that DGID staff have not carried out research or published any monographs analyzing the tax potential o f different sectors, and recommends that such studies be launched. The CFAA team also finds that the focus on the largest industrial and commercial taxpayers has had the unfortunate result o f drawing staff and other resources away from the majority o f taxpayers, which is contrary to the principle o f tax equity. Delays inthe completion o f tax rolls disrupt the rest o f the revenue collection process and impact on the level o f funds collected and available for use. The resulting lag in availability o f funds i s aggravated by the fact that there i s no provision for cash advances for local governments, except for the payment o f mandatory expenditures (salaries). For example, in the county (commune) o f Thiks, one o f the more prosperous counties (communes), lags inthe issuingo f tax rolls holds uprevenue collection to the point where county spending i s limited to only 70 percent o f the voted budget, limiting the scope o f local officials' actions.13 DGIDdata. l3 During their visit to Thiks, the CFAA team found that tax rolls dated May 31, 2002, were received by the officer responsible for tax collection o n August 7, 2002. Taxpayers could no longer be charged the 10 percent surcharge for late payment (since it was not their fault that tax bills arrived well after the due date), and late payment notices can take more than two months to be delivered, so the county tax collector pragmatically (or tactfully) allowed taxpayers three months after receipt o f the late bills to pay. 14 None o f the tax authorities has an internal audit cadre to monitor adherence to rules and procedures. Furthermore, although tax department heads attend meetings chaired by the Finance Minister's staff, there i s no interdepartmental coordination at the regional level. This lack o f collaboration impacts negatively on overall recovery performance, because the problems underlying the late delivery o f tax rolls, identification o f taxpayers, and information exchange can only be dealt with through regularly scheduled working meetings among DGID, DGD, and DGCPT staff.14 Close coordination i s all the more necessary since existing computer network connections between the three tax authorities do not work properly, and inany case exclude local government and regional offices o f the sector ministries. The very stability o f the revenue figures from year to year i s evidence of a lack o f initiative on the part o f revenue authorities. The fact that the ratio o f revenue to GDP has remain static over the last few years points to a needto examine the reasons why it has not progressed. Recommendation: 9 Carry out anin-depthstudywithaview to thereformoftax administration. Land administration The Minister o f Finance requested that the CFAA team assess the activities o f the land registry and state lands management offices within DGID.The team accepted this request since it felt that property and land taxes held a strong fiscal potential (see table 10 below) and because o f the importance o f land managementpolicy for private sector economic activity. Land rights in Senegal have a complex legal history. In 1960, land ownership was subject to three parallel sets o f rules: customary tenure, the Civil Code voted by Parliament, and the mortgage registration system. The first major reform in land rights was embodied in the law on public lands o f June 17, 1964, which laid the foundation for land rights in Senegal. The law o f July 2, 1976 (State Lands Code) covered both public and private land rights. Within DGID, two offices administer the provisions o f these laws: the Land Registry, with a staff o f 104 (23 A-level and 42 B-level) ,and the State Lands Office, with 64 (20 A-level and 15 B-level). State Lands staff in the regional offices are also involved intax administration. Senegalese law recognizes three types o f land: (i) private property, (ii) lands, and (iii) land, state public consisting o f untitled land managed mostly by rural communities. Senegalese law governing private property is similar to that in OECD member countries. Only private property and state lands are surveyed and registered. Procedures for leasing, occupying, and alienating state or public land are lengthy and involve many stages. Hearings before the Lands Commission are required for any transaction involving state lands. Procedures for alienation o f public lands (transfer to private ownership) involve a registration period lasting at least four months and a decree i s required to effect the transfer. The records o f the land registry system for recording title and property rights are inneed o f updatingto ensure the legal validity o f real estate transactions and mortgage arrangements. The proper functioning o f land administration i s crucial to ensuring the legality o f land transactions and fostering investment in residential and commercial property and infrastructure. l4Theweeklyrevenueupdatemeetingsat TOFE are not a substitutefor regularworkinglevelmeetings. 15 Analysis of landadministration Despite efforts to make the system work, no statistics o f any kind are available regarding the size nor number o f registered properties, nor the extent o f the backlog o f requests for registration, leases, or other land transactions. Thus it i s not known where the land administration offices stand with regard to their workload. Requests for permissionto subdivide are handled not inthe order receivedbut rather in response to who i s on duty when the request i s submitted, or to "intervention" by the interested parties. Itis not rare to find subdivision requests filed in 1996 still waiting to be processed inJanuary 2003. The backlog inprocessing title requests then holds up the work o f the land registry, which cannot recordthe deed until the property has been surveyed and titled. By the same token, the Government i s unable to collect fees on unprocessed property transactions. The CFAA team recommends organizing a major catch-up operation to mop up the accumulated backlog and bringrecords up to date. The current massive backlog has forced land officers to carry out provisional registrations. The validity o f the title records i s seriously weakened because changes in ownership are not entered in the land registry. Landrevenues over the last few years are shown intable 10 Table 10: Land revenues,2000-2002 2000 2001 2002 Rental o f state buildings 453.2 758.9 884.8 Concessions onpublic land 34.3 253.6 74.3 1Sale o f state buildings " I 499.9 I 495.5 I 1490.0 I Subtotal 987.4 1,508 2 ,449.1 Sale o f moveable property 165.9 60.6 0.3 TOTAL 1,153.4 1,568.6 2,449.4 Due to the unreliability o f land records and lack o f supervision and oversight of the land administration offices, the CFAA team i s unable to comment on the quality o f the data in table 10 nor on the performance o f the Land Registry or the State Lands Office. Nonetheless, the growth in land revenues over the 2000-02 period suggests that there i s a potential for revenue development that should be explored. It would be worthwhile to support these offices with substantial technical assistance and to plan for their reorganization and modernization. The State Lands Office lacks any real-time operational monitoring information on land revenues at the national level, and this i s a tool that the CFAA team would recommend developing. There i s also no systematic monitoring o f collection o f state land use fees. The absence o f any kind o f computerized database must be seen as a major handicap intracking performance and collections and an obstacle to the introduction o frealistic revenue estimates. The two land administration offices conduct their work with little relation to economic realities. The rents and lease charges for state lands remain set at the levels established in 1988, a far cry from those found in today's real estate market, especially in the Dakar area. But the lack o f any kind o f computerized digital mapping makes it very difficult to propose a new set o f charges. Although the Land Registry has a procedural guide that describes the analytic basis for the work, without performance indicators, the land administration offices cannot know their real costs nor effectively manage their work. And neither office has any specialized software. 16 Overall, the shortcomings in land administration significantly weaken the Government's ability to collect land-related fees and taxes and this loss o frevenue certainly contributes to the budget deficit. Recommendations: 9 Carry out an in-depthassessmentofthe LandRegistryand State Lands Offices with a view to their restructuring and to introducing computerized databases and mapping capability. 9 Create a computerized inventory of state lands and establish a comprehensive cadastral numbering system. 1.3.3 Budget execution Expenditures are handled differently depending on the source o f funds, whether domestic or from external financing. Budgetexecution :Domesticfunds Public spending for equipment and investment that i s financed from internal resources i s carried out according to a common set o f procedures for public expenditure; personnel expenditures are subject to another specific procedure. The common procedure involves an administrative phase covering commitment, verification, and payment order, and an accounting phase involving the actual payment. As inother francophone countries, there is a dual control over commitments: administrative control via the line ministry and financial control by the Ministry o f Finance, as shown in table 1l.l5 The administrative phase i s handledby the spending ministry's authorizing officer and by MEF staff within the office o f the Financial Comptroller (COF) and the Finance Directorate (DGF). The accounting phase i s handled by the accounting officer and MEF's Budget Department (Direction du Budget or DB) for equipment expenditures, and by MEF's Debt and Investment Department (Direction de la Dette et de 1'Investissement or DDI) for investment expenditures. l5See pp. 36-40 and Table 2, Guidelines for Public Expenditure Management, by Barry Potter and Jack Diamond (IMF, 1999). 17 Table 11:Phases,steps, and actions ofthe expenditureprocessfor equipment and investmentfinancedwith domesticfunds. v1 2 ACTORS ACTIONS rA 1-Administrative Phase A. COMMITTMENT & VERIFICATION 1. Spending ministry's Funds Prepares commitment voucher (bon d'engagement or BE) inthe Administrator (Administrateur supplier's name and transmits BE to Cog along with written de credits) justification for the expenditure, contained in a commitment file.`' MEFiCOFMail Room 0 Receives and registers the commitment file and forwards to ComputerInputRoom. 2 MEF COF Computer Input Inputs the BE information into the computer system, which Room reierves funds for this use; forwards the file^ to the COF Verifying officer. 3 MEFiCOFVerifying Officer Verifies that the expenditure is in accordance with the budget (Verificateur) (regularit6 et legalite de la dkpense) and forwards file to CF. 4 MEF/Financial Comptroller 0 Signs the BE and forwards the file to the Budget officer inthe MEF'sFinance Directorate (DGF). Confirms that funds have been reserved inthe computer system. 5 MEFDGFBudget officer Prepares the letter o f credit (Titre de Creance or TC) and the (Agent d'tdition) expenditure certification (Certification or C). Returns the TC and C to COF for distribution to (a) the supplier _ _ and (b) the Funds administrator inthe spending ministry. B. PAYMENT AUTHORIZATION(LIQUIDATION) 6 Spending ministry's Funds Prepares the payment file including all required documentation. Administrator (Administrateur 0 Recommends payment authorization and forwards file to COF. . - I de credits) MEFiCOFMail Room Receives and registers the payment file and forwards to Computer Input Room. 7 MEF COF Computer Input Inputsthe file and for\\,ards to Verifying officer. Room 8 MEFKOFVerifying officer Checks that the authorization i s in accordance with the budget (Vtrificateur) and that the equipment has been received in compliance with the terms and conditions inthe contract (rkgularitt et legalit6 de la liquidation) and forwards the file to CF. 9 MEFiFinancial Comptroller 0 Signs the TC and C and forwards the file to the authorizing officer (ordonnateur). and Investment Director issuance o f money order and payment slip l6Thisprocedure is inaccordance with the procurement rules analyzed inthe Country Procruement Assessment Report (CPAR) for Senegal (DATE?) 18 Y9 s ACTORS ACTIONS -1/1 12 MEFiDGFBudget officer Checks money order and payment slip (mandat et bordereau) (Agent d'tdition) and forwards file to Budget Director (equipment) or Debt and - Investment Director (investment). 13 MEFiBudget Director or Debt Signs money order and payment slip (mandat et bordereau). and In\,estment Director I - . MEF/DB/DDIMail Room Fonvards the file to CF for stamp of approval. 14 MEFiFinancial Comutroller Stamnq the manrlat -__--- - __-- ~~ MEF/DB/DDIMailRoom Forwards the file to the accounting officer. II-AccountingPhase III1 -.._ . -- D. PAYMENT D MEF/DGCPT/Expenditure Records the payment file and checks the money order (mandat). Office Contacts the Treasury Paymaster (PGT) and forwards the file to - DGCPT Expenditure Office for verification. 15 MEF DGCPT Expenditure Verifies the file and rules the file either approved or rejected ; - OfficeNerificition forwards the file to Treasury Paymaster (PG?). 16 Treasury Paymaster (PGT) Stamps the mandat or initials the rejection notice ; forwards payment file to PGT Expenditure Office. 17 PGT Expenditure Office Records and forwards (i) rejected files to the authorizing officer (Bureau de la Depense). (ordonnateur), (ii) approved money order (mandat) to PGT's - Accounting Office. 18 PGTAccounting Office Accepts and files money order and checks for any applicable deductions (Value added tax, notification to third party holding). Prepares the payment order (l'Ordre de Paiement or OP) and applies funds stamp (Avis de Crtdit or AC) required for funds transfer (virement) or forwards the payment delivery slip (bordereau) to the Treasury Revenue Office (RGT), then forwards the OP and AC to BCEAO, which carries out the funds transfer. - Posts entry inthe accounts. The 2001 organic budget law provides for the legislative approval and execution o f operating expenditures on a strictly annual basis; inprinciple, unused funds expire at the end o f the budget year. It also provides for investment expenditures to be managed by program authorizations (autorisation de programme) lasting a maximum o f six years through annual payment funds (credit de paiement). Program authorizations allow investments to be plannedover several years inorder to complete a phase o f civil works independently from the annual budget framework. Incontrast, the annual payment funds are included inthe annual budget in order to cover the costs o f that year's work program. In order for this system for financing multi-year investment programs to work, it relies on the mechanism o f selective carrying forward o f unused funds. The 2001 budget included CFAF 8.7 billion in such funds carried forward from the 2000 budget, the equivalent of about 1 percent o f the 2000 budget ;the 2002 budget included funds equivalent to about 3 percent o fthe 2001budget, primarily due to the carrying forward o f HIPC expenditures. Analysis ofBudgetexecutionwith domesticfunds Notwithstanding the problems of centralizing expenditure authority in MEF discussed above, the expenditure process in Senegal does clearly separate the functions of payment authorization 19 (ordonnateur) and actual release o f funds (comptable). Nonetheless, as indicated in table 11, the administrative phase o f budget execution requires 14 steps, including multiple independent verifications by MEFstaff o fthe actions o fthe sector ministrystaff. The accounting phase requires four steps within DGCPT in order to finalize internal documents (OP and AC) with no internal audit oversight. The process thus suffers from two major defects: (i) the administrative phase i s too long and (ii) i s no there internal audit o f the accounting phase. The excessive length o f the administrative phase leads to a loss o f efficiency and slowness in the execution o f the budget. The CFAA team carried out tests to assess the length o f processing time and found that it takes on average four months from the initial commitment voucher to the final release o f funds. The amount o f time required is partly due to redundant steps, inparticular inthe back-and-forth o f paperwork between the DB/DDI and the COF. There i s some question as to whether some o f the forms are really relevant or necessary (TC, C). The problems during the accounting phase relate to transparence and reliability in the absence o f any internal audit function and o f timely information. As covered in the audit section o f this report (see section 1.6 ), the external audit function in Senegal i s not very effective and as far as the CFAA team could determine, the internal audit function i s not carried out at all during the accounting phase o f budget execution. Moreover, the internal audit function i s also lacking within Treasury and there i s no oversight o f Treasury operations inthe absence o f any unit assigned to carry it out. The CFAA mission was informed by PGT that the accounting phase lasted about a week or two ; the mission examined a few expenditure files but was not given access to a broader sample. Thus its review cannot be considered conclusive, particularly since the payments being issued during the extended budget year when the mission was in Senegal (January-February 2003) were dated December 3 1,2002. The CFAA team considers that the risk inthis area i s very high,but i s not ina position to confirm if the riskresults inerrors, omissions, or weak management. Since the CFAA is not an audit, such ajudgment falls outside its scope." Inany case, no legalor regulatoryrequirement bindsthe Government o f Senegal to pay money owedto suppliers within a given time period nor to pay interest ifpayment is late, except inthe case o f a public procurement contract. Overall, the CFAA team finds that despite the principle o f separation o f payment authorization and funds transfer and the many verifications that are required, the long and complicated expenditure process does not reduce the financial risk duringbudget execution. Recommendations : 9 Simplify the expenditureprocess andclearly define the specific responsibilities ofeachactor in the process. 9 Set a fixed timetable for the payment of invoices not covered by procurement contracts and require interest penalties on overdue payments. l7The European Union proposes that the compliance test should seek to determine the length of the accounting phase and the appropriatenesslrelevance of the payments. 20 PayrollandPensions At the beginning o f the year, the Payroll, Pension, and Annuities Department (DSPRV), to which MEF delegates authority for payments to individuals, establishes funding for these payments and tracks them on a monthly basis. Other personnel expenditures that are not identified as such in the Government Financial Statements (TOFE), are funded under investment expenditure categories and are not listed separately. DSPRV i s also responsible for managing the National Pension Fund, the largest o f the Special Treasury Accounts. AnalysisofPayrollandPensionExpenditures While DSPRV succeeds in avoiding any delays in the payment o f civil servant salaries through heroic efforts to ensure their timely payment, government payroll administration i s subject to two serious constraints that jeopardize its operations: (i)staff departures over the last several years have weakened DSPRV's ability handle payroll functions, (ii) DSPRV lacks any kindo f effective tools for tracking and oversight o f personnel expenditures, since most o f its activity i s carried out using manual procedures; the computer equipment and software that it does have i s out o f date and constantly subject to breakdown and failure. The only computer connection that DSPRV has i s to the IT Department (DTAI) which maintains the payroll database. DSPRV has no links with PGT which actually makes the payroll payments, nor with the employing ministries, nor even with the Civil Service Ministry which maintains personnel records and manages personnel. Overall, payroll execution i s carried out usingprocedures that appear not to be very secure and that present a risk o f inaccuracies, with no way o f carrying out any kind o f reasonable cross-check. The inherent risk associated with any payroll operation requires regular technical and financial audit. In Senegal, the weakness o f audit functions and the awareness on the part o f financial staff o f the system's weaknesses underline the need for such regular audits. An audit o f payroll management was carried out in1994,butitsrecommendations were never putintopractice. Recommendation: 9 Launch a technical and financial audit of civil service payroll management, andmodernizethe system for salary and pension payments (organization, audit, and computer systems). Budgetexecution:externalfunds Externally financed investment expenditures, which represent on average 70 percent o f the total investment budget, are executed by project directors following an extra-budgetary procedure, under DDI's supervision. DDIis involved as the entity to which MEF has delegated spending authority and also as the disbursement authority for project accounts that receive fund advances from certain donors seeking a faster disbursement procedure for their projects. The expenditure process inthis case i s simplified: payments are made from a special bank account held by DDIwithout entering Government accounts. DDI checks for continuity (rCgularitC) and payability (exigibilitk) by chechng the expenditure file submitted by the project directors. Monitoring o f physical results i s not DDI's responsibility but rather that o f the audit entities such as the Inspector General (IGE) and Finance Inspector General (IGF). The accounts are kept by the project directors and DDI, which also oversees the fund advances from donors. 21 Prior to the end o f the month following the close o f each quarter, DDIsends DCEF, DPS, and DGCPT the statistics on project funds withdrawn. The balances are integrated into the TOFEby DGCPT. Analysis of budget execution for externalfunds The procedures for execution o f investment expenditures financed with external resources do not always follow the principle o f separating authority for payment authorization from the authority for paying out funds. The Debt and Investment Department (DDI) i s responsible for both commitment /authorization o f project expenditures, and for the release o f funds for projects that use a commercial bank account for payments. This arrangement results ina highfinancial risk. The CFAA team also found that there are important deficiencies in the execution o f investment expenditures that are externally financed: (i)thereisnosystematicoversightofthematerialityof theexpensepriortopaymentauthorization, which makes it impossible to know whether the goods and services purchased were actually received ; still, the donors who provide the funds have established their own monitoring systems which offset this shortcoming to some extent ; (ii)information on payments made directly by the donors are not always received by DDI in a timely fashion, which prevents accurate tracking o f public debt ; (iii) consolidatedaccountsdonotincludesuchpayments; the (iv)accounts maintained by project leaders and by DDI are not subject to regular reconciliation, which bringsinto question the reliability o fthese accounts; (v) payments made out special project accounts are not entered in the Treasury's accounts, which prevents DGCPT from producinga comprehensive cash balance for public funds. The reliability o f DDIstatistics i s weakened by their reliance on manual methods. Its oversight function i s weakened by lack o f sufficient staff and inadequate technical capacity, mainly incomputer capability. MEFneeds to give special attention to strengtheninghumanandtechnical resources for DDI. Recommendation : 9 Establish a single standard institutional framework for Public Investment Projects (legal, financial, and accounting). 22 Development Projects inSenegal Despite the simplification o f procedures established specifically for development projects, the portfolio o f development projects in Senegal i s characterized by a low level oj absorption o f the resources available to them. To give one example, the disbursement ratio for projects funded by the World Bank (WB) is 9 percent, compared to 22 percent for WB projects in sub-Saharan Afnca as a whole. In comparison, the rate o f execution o f investment expenditures financed by internalresources i s given as 87.5 percent (see section 1.2.3). Thus it would appear that the simplification of procedures is not justified, since the increased risks have not been offset by faster disbursement, which was the goal o f the special procedures. Insum, the CFAA team found nojustification for continuing the parallel procedure. Furthermore, many development projects are carried out by a project unit and not by the sector ministry.The conditions under which these units are set up, organized, and operate pose a number o fproblems: -they have no standardized legal status; -their staff lacks the necessary familiarity with procedures for procurement, financial management, and disbursement, despite the specific training they have received and considerable expense invested for this purpose; -the slow pace of mobilization o f counterpart funding for investment projects has slowed the pace o fproject implementation; -finally, the absence o f a standard set o f rules and regulations across the project units o f the different donors creates a major obstacle when it comes to accounting and financial reporting. For all these reasons, it i s time to begin progressively strengthening public financial management to integrate externally financed activities into the national budget. The CFAA team recommends a progressive dismantling o f the existing separate financial system for externally financed projects. Exceptionalexpenditure procedures Financial regulations in Senegal allow for certain public expenditures to be paid following exceptional procedures that waive the requirement for prior authorization (advanced payment and imprest accounts -vkgies d'avance -).Suchpayments, which may oicur for operating or investment expenses, are carried out without Treasury authorization o f an expenditure based on a Budget Department or DDI commitment voucher. They normally cover priority expenditures o f a specific and urgent nature, such as certain kinds o f social and educational expenditures (scholarship funds) but also other kinds o f less well-established urgent expenditures, such as those funded as Decentralization Grants. Imprest account payments are inprinciple intended to facilitate minor incidental expenditures. Analysis of exceptional procedures The legal framework (organic budget law, public sector accounting regulations) contains rules that are well structured to ensure proper management and oversight o f these exceptional procedures. However, the use o f these procedures has become so frequent and the amounts so large-between 20 and 25 percent o f total budget expenditures-that it has created a major structural problem. Limitation of their use would constitute a positive signal o f intent to return to more conventional expenditure management practices. 23 In2001, there were 1,353 ofthese advance payments, or five for every working day totaling CFAF 107 billion; while the number remained stable between 1999 and 2001, the amount so authorized increased substantially, by 22 percent." The amounts authorizedthrough advance payment represented23 percent o f total budget expenditures in 1999 and 17 percent in2001. The picture i s the same for imprest account payments, meant inprinciple to be usedfor minor expenses. During the execution o f the 2001 budget, the amount of imprest account payments was CFAF 18.4 billions and on September 30, 2002, 339 imprest account payments had been made.Ig Again, the number is stable between 1999 and 2002, but the amounts increased by 23 percent during these two years. In 2002, such payments amounted to around 3 percent o f total budget expenditures;2028.5 percent o f imprest account payments through the month o f July 2002 had not been registered in the books by November 21,2002. Payments made through such exceptional procedures should be booked no later than by the close o f the budget year. The authorities in Senegal did confirm that they had taken care o f the entry o f all such advances by the end o f the 2001 fiscal year. For the 2002 fiscal year, the amounts of such advances remaining unbooked as at September 30,2002, totaled CFAF 48 billion.*l The delays in booking these charges renders any audit o f these expenditures meaningless and make it more difficult to produce final accounts based on accounting officers' records. Finally, the ministerial letter authorizing such advances (lettre ministLrielle d'octroi) sets no deadline for booking them; the CFAA team recommends adding this specification to the authorizing letter. Recommendation: 9 Restrictthe useofexceptionalprocedures for advance payments andimprestaccount payments. 1.3.4 Special TreasuryAccounts The legal basis for special Treasury accounts i s provided for in the 2001 Budget Law, which covers seven categories of accounts: for special allocations, for commercial operations, for payments to foreign governments, for foreign exchange operations, for loans, for advances, and for guarantees and endorsements. The law specifies that funds to cover expenditures carried out through special accounts mustbe specifically identified, with Government budget funds beingallowed to cover no more than 20 percent o f such expenditures. For the 2003 budget, 20 special Treasury accounts were opened for a total o f CFAF 42.3 billion amounting to nearly 4 percent o f the total budget. The books for these accounts are updated manually but no opening balance has been made since 2001. The two most important special Treasury accounts are the National Pension Fund and the account for payment o f advances to individuals (compte d'avances aux particuliers). In1999,1,315 advance payments were made for a total of87.76 billion; the number was 3 percent higher in 2001 (1,353) butthe amount rose 22 percent to 106.95 billion. l 9In 1999, imprest account payments totaled CFAF 15 billion and during the 2000 budget year, 352 such payments were made. 2o Observed practice inmany other countries indicates that imprest account payments do not exceed one percent o f total budget expenditures. 21 The compliance test of the EuropeanUnion should allow for verification o f the standing of these balances. 24 The National Pension Fund i s specifically charged with reporting the payment o f pensions to civil servants and retired military personnel. This special account i s financed by deductions from civil servants' salaries and by Government contributions. The account ran a surplus in 2002 following the introduction o f reform measures that changed the legal retirement age from 55 to 60, increase the contribution base, and revise the formulae for calculating pension benefits. Table 12 :FundingofNationalPensionFund. (CFAF billion) 1997 1998 1999 2000 2001 (a) 2002 (b) Openingbalance 0.2 2.3 -1.6 -5.5 Income 24.4 19.8 20.9 NA NA 35.4 Expenditure 22.3 23.7 24.8 NA NA 31.7 Closingbalance 2.3 -1.6 -5.5 The account for payment o f advances to individuals i s mainly used to fund the CFAF 50,000 advance to civil servants for the traditional Tabaski Celebration; it i s to be paid back within eight months. 1.3.5 Analysis ofspecial Treasuryaccounts Although the specific legal and accounting basis for special Treasury accounts adequately provides for their monitoring and for a monthly description o f their financial position to be included in the consolidated Treasury balance, the manual bookkeeping methods used with no trial balance reduces the transparency o f their management and throws doubt on their validity. Moreover, the current lack o f revision from opening balances for the these accounts constitutes a major failure that should be corrected as soon as possible, before proceeding to the modernization o f accounting procedures for them, which should be integrated into the computerized expenditure information system. Despite the reduction in their numbers over the last three years, following an IMF study, the existence o f certain special Treasury accounts remains questionable, in particular the one for auditing parastatals and wholly or partially state-owned companies, which in fact should be treated as a normal current expenditure. Recommendation: P Continue to reduce the number of special Treasury accounts, inparticular for special purpose allocations. 1.4 CASHPLANNINGAND DEBTMANAGEMENT 1.4.1 CashPlanning Under Senegal's regulations, DGCPT i s responsible for Government treasury functions for both central and local govemments and for the Single Treasury Account, held by the Central Bank (BCEAO). The regulations allocate duties as follows: 25 0 DGCPT's AccountingDivision develops operating procedures ; 0 Its Division o f Economic Studies and Statistics ensures short- and medium-term oversight o f cash position by preparing provisional cash accounts that incorporate all Treasury financing requirements; 0 The Treasury consolidates all public sector banking transactions (including postal accounts) through the network o f public accounting officers for which accounts are "zeroed" daily in its favor; Treasury manages the Treasury account at BCEAO and develops a statement o f reconciliation o f its own accounting position with that o f the BCEAO Treasury account. 1.4.2 Analysis ofCashPlanning Inpractice, the preliminary cash position assembled at the central level is not worked out prior to the execution o f cash transactions, but rather Under these conditions, there i s no direct link between the preliminary position and TG's daily cash balances. Furthermore, the TG's reconciliation o f balances does not constitute the principal reference for funds availability at Treasury, which i s based rather on the account positionprepared daily by the CentralBank. The cash management system reveals a disconnect within the Treasury where the cash table i s prepared independently o f cash management operations. Communications between the offices involved are not well established and the lack o f coordination detracts from the usefulness of the preliminary cash balance. As presently carried out by DGCPT, this exercise in cash management appears purely pro forma. Treasury does not itself carry out monthly cash programming, though it i s the central entity that records incoming and outgoing funds and has sight o f funds flows. By the same token, PFT does not prepare any monthly plan for settling incoming payment orders (bordereaux de mandats), which would provide greater transparence in the execution o f public expenditures. Preparation o f such a monthly cash plan would appear all the more necessary because the CFAA team was unable to verify that the expenditure amounts were actually transferred to the proper payee, in the absence o f any specific oversight arrangement^.^^ The principle o f a single Treasury account (unite` de caisse), reiterated in the UEMOA directive that requires centralization o f all public funds in the Treasury, i s violated due to numerous exceptions resulting from accounts held inprime commercial banks.24While there are specific investment projects (Road Fund, Urban Public Works Fund or AGETIP) that have opened special deposit accounts in the Treasury, most other [externally financed] projects, including the largest ones such as the Integrated Health Program (PDIS) and the Ten-Year Program for Education and Training (PDEF), work directly from cash accounts inthe private banking system.2s Moreover, under an agreement with MEF, imprest administrators are permitted to deposit substantial sums o f money in commercial bank accounts to cover payments-CFAF 15 billion in 1999. DGCPT 22 The CFAA validation mission ofJanuary 27-February 7, 2003, was able to determinethat the preliminary (previsionnelle) cashpositionfor the first quarter o f 2003 hadnot yet beenassembled.The preliminary position for December 2002 was providedto the CFAA team on February 5,2003. 23 The compliance test ofthe EuropeanUnion should allow for verification o fthe standing ofthese transfers. 24 A 2000 study(Cauneau Report) found 352 such accounts. The CFAA missionrequestedanupdated inventory o f these accounts. 25The CFAA teamwas not able to obtain quantitative informationon the amounts heldininvestment project accounts inthe private banks. 26 has little capacity to oversee these advance payments and this creates a major problem regarding security o f funds. The current system o f cash management i s subject to notable exceptions to the principle o f single Treasury account, which creates obstacles to comprehensive knowledge o f cash position and leads to risk inthe transparence of public financial operation. These exceptions are harmful to the conduct of public financial management. Regarding the issue o f security o f payments, the assignment o f Fiscal Identification Numbers (mentioned in section 1.3.2 inconnection with revenue management) should be adopted to ensure that payments are made to the proper payee. The use o f the same number by the authorizing officers inthe Budget Department and spending ministries and the Treasury accounting officers would go a long ways to bringingtransparency to cash operations. Recommendations: 9 PrepareprovisionalTreasury positioninatimely fashion andinany caseonaquarterly basis. 9 Prepare an inventory of all accounts incommercial banks where public funds are being held and monitor transactions inthese accounts. 1.4.3 DebtManagement DDIis incharge o f managing external debt in Senegal, and it shares with DCEF the responsibility for obtaining financing for investment projects carried out within the framework o f the national planning system. Investment projects are prepared and assessedfirst by the sector ministries, which then submit them to MEF's Planning Department. MEF's Planning Department checks for duplication and overlap and then forwards proposals to DCEF, which records them in the Consolidated Investment Budget (BCI) and seeks loan or grant financing for them. Any loans must fall within the annual envelope approved by Parliament. N o loan may be acceptedby the Government o f Senegal unless at least 35 percent o f the amount comes in grant form. The loan agreements are reviewed by the High Administrative Court (Conseil d'Etat) which verifies that they are in compliance with Senegalese law and regulations. Parastatals and public enterprises are allowed to borrow directly from the commercial banks and may also receive Government loans. The level o f external public debt is high (61.7 percent of GDP in 2002). Senegal's eligibility for HIPC funds should make this level o f debt sustainable since two-thirds o fit is owed to multilateral institutions (CFAF 1.426 billion as at June 30, 2002). Outstanding amounts owed to the WB and IMF represent 68 percent and 11 percent respectively o f multilateral debt. Nonetheless, since more than half o f the outstanding debt i s inthe form o f Special DrawingRights(DTS) and 11percent inUSD, fluctuations in the CFAF exchange rate have a major impact on the level o f debt. The current high level of debt i s expected to decrease to less than 60 percent of GDP in 2003, thanks to HIPC and the current strengthening o f the Euro, to which the CFAF i s tied. 27 Table 13 :Senegal's externaldebt 1999 2000 2001 2002 Outstanding debt (CFAF billion) 2.085.6 2.158 2.200.2 2.237 Ratio of outstanding/GDP 71.3% 69.3% 65.1% 61.7% Ratio debt service/exports 10.3% 10.9% 8.1% 9.5% Ratio debt service/Totalrevenue(net 17.7% 18.6% 14.6% 15.5% of grants) Analysis of publicsector debt management DDIenters loan agreement informationinto a computer databaseusingdedicatedsoftware. Onthe other hand, loan withdrawals are made by project directors as needed, under DDI supervision. Nonetheless, DDIstill inputs the withdrawal informationmanual and the recording ofpayment authorizations inthe accounts (comptabilite` des ordonnancements) i s not done by computer. As a result, the only status report on loans and subventions received i s prepared by DDI in statistical form and distributed to DCEF, DPS, the Budget Director, and DGCPT, in order to be reflected in the Government Financial Statements (TOFE). DDIis also responsible for authorizing debt payments to extemal creditors. On each due date, DDI issues a payment order and forwards it to Treasury, which delivers the funds through the Treasury account at the Central Bank (BCEAO). Treasury then notifies DDIthat the payment has been made. As a result, DDI does not have an adequate picture o f the composition o f extemal public debt because it has no access to the schedule o f withdrawals made by the project directors. Furthermore, while DGCPT is responsible for recording debt transactions in the public accounts (class 1) as they take place, DGCPT has no access to the debt files and thus i s unable to track these transactions. Lacking this information, DGCPT cannot effect the required oversight o f debt payment, nor afortiori o f the payment orders it receives from DDI. Despite past training efforts, the DDI's position remains weak due to the lack o f appropriate technical training for its staff, and because it i s one o f the Government departments most affected by the program o f voluntary early retirement for civil servants. DDI staff have not had procedural manuals, and the CFAA team strongly encourages the completion o f the manuals now being developed for execution o f public investment expenditures and management o f public debtz6 Recommendations: 9 Introduce a sharedinformationsystemfor public debt for usebyDDIandDGCPT ; 9 Reorganize arrangements for managementofloanwithdrawalsto provide for automatic transfer o f withdrawal data to the public debt database. 26The financing of a number ofproceduralmanuals is inprinciplebeing ensuredby the European Union. 28 The HIPC InitiativeinSenegal Senegal became eligible for the HighlyIndebted Poor Countries (HIPC) Initiative on June 22, 2000, and should receive funds amounting to CFAF 400 billion over a ten-year period. The first use o f HIPC funds was through a budget amendment adding CFAF 23.4 billion to the 2001 budget. HIPC funds are authorized by DDI and the Budget Department following the usual procedures for budget funds. Social investment expenditures take priority in allocating the resulting savings inrepayment o f external debt OnDecember 31,2002, the implementationo fHIPC was as follows : -- funds paid received : CFAF 38.65 billion encaissements : 38.65 milliards de F.CFA, funds out : CFAF 14.48 billion, for an overall implementation ratio o f 37.5 percent. The share o f HIPC funds paid out i s low because arrangements for administrative and financial monitoring were recently finalized and were not yet operational at the time o f the preparation o f the report. Furthermore, there were no eligible projects in the targeted social sectors, and the ministerial order setting out the role and functioning o f the HIPC monitoring committee within MEF was also not yet in force. Finally the software designed to support the monitoring o f HIPC funds was still inthe final stages o f development within DDI's IT unit. lRecommendation: P Establish an integratedmechanism for programming, auditing, andmonitoring the use of I HIPCresources. 1.5 ACCOUNTING AND REPORTING 1.5.1 AccountingSystem Senegal's current public sector accounting system i s inspired by the French model and governed by Decree No. 2003-162 o f March 28, 2003, which includes the Chart o f Accounts for central and local governments. This new chart o f accounts i s based on the UEMOA Directive 05/98/CM/UEMOA o f December 22, 1998, which in turn i s based on the West African Accounting System (SystBme Comptable Ouest Africain or SYSCOA). It will be put to the test during the 2003 budget year and will become fully operational from January 2004. Key elements of the new system are that (i) Ituses double-entry bookkeeping ; (ii) Iti s accrual-based for expenditures and cash-based for revenues ; (iii) It requires patrimonial (accrual) accounting: the government chart o f accounts includes a category (9) reflecting the daily status o f budget execution, whereas the details o f transactions are recorded in auxiliary ledgers (sub-accounts), but these are not sufficient to allow for asset accounting. 29 The closing and centralization o f accounts i s carried out on a monthly basis by the network o f accounting officers to allow the Treasury to produce the consolidated Treasury accounts.*' According to the records that the Treasury staff provided to the CFAA team, the consolidated monthly balance is produced about 45 days after the closing date. It i s incomplete because it does not incorporate all opening balances. Table 14 :Monthly centralization of Treasury accounts and production of the consolidated balanceof Treasury accounts. Monthly closing of accounts by subordinate accounting clerks Regional centralization of accounts by Regional Treasuries I 10 days National centralization of accounts by Treasury +20days I Preparation of consolidatedbalance by Treasury Treasury accountants are allowed a supplementary period (journke complkmentaire) or extension o f two months to close the annual accounts before the preparation and submission o f consolidated final accounts to the Court o f Audit, which must receive them within five months after the close of the budget year. According to the organic budget law, the consolidated final accounts for each year must be produced within five months after the close o f the year, or latest M a y 31 o f the next year. The CFAA team found that no consolidated annual balance had been produced nor submitted to the Court o f Audit since the 2000 fiscal year. *'Thisbalancedoes not include operational or investment operations carried out under extemally financed projects. 30 Table 15 :Submissionof final accountsby Treasury accountantsto the Courtof Audit Annual accounts produced 1997 1998 1999 2000 2001 1.basedon line item Yes Yes No No No entries 2. based on Yes No No No No documentation Analysis of accountingsystem The chart o f accounts usedin Senegal, like that o f UEMOA, i s complicated to use because it includes a category for analytic accounting (group 9), whose use i s no longer justified because it duplicates the ancillary Treasury accounts, which are sufficient for monitoring budget execution. Suppression o f group 9 would allow: a. recording inrealtime o f budget operations regarding assets (groups 1and 2) and the revenue and expenditure statements (groups 6 and 7) ; b. identification ofthe items that increase or diminishnationalnet worth, classifiedbynature; c. to establish the public sector income statement and a statement o f its assets and financial transactions. Furthermore, the use o f a cash accounting basis for revenue accounting does not allow revenue officers to track overdue taxes in their accounts. When following a cash accounting basis, the accountant does not record taxes due at the time he receives the tax rolls from the Tax Department, but only at the time they are actually paid in by the taxpayer (debiting the financial account and reediting the budget account). Follow-up o f overdue/outstanding taxes i s handled outside the accounting system (extra- comptable), since the actual issuing and follow-up o f the tax bills i s handled by tax collection staff outside the accounting system. The outstanding balance figures they produce are o f a statistical nature and are not reliable from an accounting perspective. The recording o f financial information in the consolidated Treasury balance i s neither comprehensive nor sufficiently reliable. 0 The consolidated balance does not incorporate expenditures under externally financed investment projects ; 0 Itdescribes debt payments butnot commitments ; 0 It leaves substantial sums in suspense accounts due to budget operations that have not been regularized (especially on the expenditure side),28 which prevents the closing o f accounts and contributes to the delay in submission o f the final accounts to the Court o f Audit. Despite Treasury's obsolete computerized accounting system, which in any case offers only partial coverage (see 1.8 above), Treasury staff does manage to produce consolidated monthly balances for Treasury accounts within 45 days. The delay could be reduced to less than 30 days by shortening the accounting phase at the central and regional levels, primarily by making it possible to handle all procedures and the centralization o f accounts usingcomputer systems. 28The generalaccount balanceshows as openingbalanceadebit for miscellaneousexpendituresto be regularized(expenditure account 471-09) of CFAF 10.6 billion. Duringthe 2002 budgetyear, provisionaldebit charges-which correspondto spending made without prior authorization-are responsiblefor adding more than CFAF 5 billion to the deficit, which as of August 31, 2002, stoodat CFAF 16 billion. 31 The two-month supplementary period for completing accounting operations (journde comptable compl6mentaire) creates real problems because it again serves to delay the preparation o f the final accounts. The length o f this extension period should be progressively reduced and ultimately eliminated. The production o f the annual consolidated balance o f Treasury accounts involves a more important problem: at the end o f January 2003, no consolidated balances for the 2000 and 2001 fiscal years had yet been closed, much less forwarded to the Court o f Audit, mostly because o f a failure to settle outstanding suspense accounts. Thus it is clear that accounting balances may be subject to modification for some considerable period following the end o f the fiscal year. In order to avoid this kind o f dysfunction, the CFAA team recommends that the lag in producing the final consolidated Treasury account be reduced. Furthermore, this still leaves the problem o f the faithful representation o f the consolidated accounting balance, since not all opening balances are based on meaningful closing balances for the previous year (see also 1.3.4 above concerning the Special Treasury Accounts for which entry balances have not been based on the previous years accounts since 2001). This situation leads to questioning the reliability o f Treasury accounts and creates opportunity to hide errors and improper charges. When combined with the absence o f any final accounts with Parliamentary approval since 1996, it reveals a complete failure o f extemal audit o f public spending. Preparation o f final accounts by Treasury accountants for the Court o f Audit i s very laborious. The long delays in their submission are a serious matter, since they prevents any effective extemal audit, on which assessment and improvement o f service delivery must be based. The Court o f Audit and MEF present quite different explanations for these delays. Whatever the reason, it i s time now to get to the bottom o f whatever i s holding things up, which tamishes the reputation o f all parties involved and damages the overall credibility o f public financial management in Senegal. Overall, the budgetary outturns are not made available within a reasonable timeframe to the economic and social actors who are involved and this situation damages the transparence o fpublic accounts. Recommendations: 9 The legal deadlines for closingbudget expenditure accounts (December 31) and for preparing final accounts (end o f February) should be respected. 9 Establisha time-boundplan for eliminating the backloginthe productionof final accounts, in accordance with UEMOAdirectives. 9 Publishthe annualbudgetary outtums every year. 9 Incorporate into Treasury operations all financial operations that are not handled by public accounting officers. 1.52 Network ofpubIic accounting officers Public accounting operations are carried out by a network o f public accounting officers under the authority o f DGCPT. This department has its own specialized office charged with coordinating accounting administration and the computerized accounting system with other offices that handle studies, regulations, and with defining public accounting rules and procedures. DGCPT i s also responsible for oversight o f spending by local government and state institutions, and for advances payments and revenue holding accounts. 32 DGCPT is also involved in the production o f financial and economic statistics for the TOFE and inthe preparation o f budget forecasts and the macroeconomic guidelines for the annual budget act. It i s in charge o f monitoring public cash availability, both its planning and execution, and o f state financial programs. DGCPT has its own continuing education and training center (Centre de Pevfectionnement et de Formation Professionnelle). The network o f public accounting officers i s runby o f 12 principal accountants who head PGT, RGT, the Treasury, and the nine regional treasuries, coming under the jurisdiction o f the Court o f Audit. T o these 12report subordinate accounting clerks, also under the Court's jurisdiction, who handle accounts for the local governments. DGCPT itself employs 371 agents, o f which 74 work at the central office and the remaining 297 in the regions; 60 percent o f these staff are concentrated in the Dakar region, which includes the central office. Supervision o f this staff on occupies 40 percent o f its managerial and professional staff, which consists o f 63 A-Level and 82 B-Level staff. The accounting staff proper i s often supported by other staff assigned to accounting work by the local governments. Analysis of network of publicaccountants The public sector accounting officers do not generally get any guidelines or procedural memoranda from DGCPT. Each head accounting officer manages independently whatever partial or incomplete documentation i s under his authority. The CFAA team invites the DGCPT to assemble a compilation o f all accounting guidelines into a Procedural Manual that would be distributed to all Treasury accounting offices. Many regional accounting officers carry out their work under difficult physical conditions and MEF should make an effort to improve working conditions by a program to renovate the regional Treasury offices.29Moreover, staff are often provided and paidby the mayor's office, which weakens accounting heads' authority to manage them and can affect their degree o f independence in oversight functions. The proportion o f staff coming from outside the Treasury i s sometimes so great that it gives rise to the question as to whether indeedthey are part o f the Treasury network at aL3' Despite the existence o f software specially designed for local government financial management (COLLOC), Treasury staff continue to post entries manually and then enter these figures in the computerized system so they may be centralized on a monthly basis (see 1.8 above on computerized accounting within DGCPT). 1.5.3 GoodsandAssetAccounting MEF's Equipment Department (DMTA) handles purchasing o f equipment, in particular office equipment, furniture for the ministry offices and official lodgings, vehicles and for clearing such State- owned items (butnot computer hardware) through customs, transporting, and storing them. As in any administrative setting, DMTA's goods receiving commission is made up o f the goods administrator, the DMTA supplies office head, the goods accountant, plus a COF representative. The commission meets to receive any shipment valued at CFAF 300,000 or over. The delivery slips and minutes o f the commission meetings are recorded by the goods accountant in the daily and general ledgers. 29During its visit to Thiks, regional prefecture seat, the CFAA team found the poor physical condition of the office where the Treasury staff must work, which is not physically secure and is poorly suited to cawing out work at modem financial management standards. 30Eighty percent of staff working in the regional treasury office in Thiks is paid by the local mayor's office, 93 percent in Kaolack, and 97.5 percent inthe Dakarregional office. 33 Goods dispatch follows a different procedure : the goods administrator, the goods accountant and the receiving authority (Z'uyunt droit) co-sign a requisition order made out by the goods administrator to the receiving authority. A stock card or inventory form i s then filled out by the goods accountant, who records the dispatch inthe daily and general ledgers. At the end o f the fiscal year, the goods accountant closes the general ledger, carries out a physical inventory o f goods under his authority and issues a memorandum and inventory list. DMTA is planning to acquire goods management software for its already networked computers, and is drafting an administrative and accounting procedures manual. DMTA has large-capacity warehouses for storing administrative equipment and supplies and has made them available to other govemment departments for archives storage. Analysis of goods accounting Goods accounting information i s not centralized and the law does not provide for the transmission of the goods accounts to the Court o f Audit. Ineffect, no physical inventory i s carried out at the regional or local govemment level, so this information i s not available for consolidation into the accounts. Moreover, many ministries procure supplies and materials without informing DMTA. And finally, the accounting o f goods receipt and dispatch i s still done manually. These shortcomings are due to the lack o f the following elements, which need to be provided: 0 regulation on the centralization o f accounting information and o f the procedure for submitting goods memoranda to the Court o f Audit; 3' 0 training and refresher training ingoods and computer hardware management ; 0 specialized software for goods accounting and management; 0 a document management and archives plan. Recommendations : 9 Introducecomputerized systems for trackingpublic assets (furniture andbuildings); 9 Updatethelegislationcoveringgoods accounting. 1.5.4 BudgetReviewAct Budget review acts are not being regularly produced in Senegal. The budget review act for the 1997 fiscal year was still being reviewed by the Court o fAudit as o f August 2003. Table 16 :Regulatory legislationtaken up by Parliament, 1996-2001. 1996 1997 1998 1999 2000 2001 Final audited accounts Yes Pending Pending No No No I Budget review act dated 01/09/2000 Note :final accounts Yes Yes Entry No No No submitted to Court of 1 data only I I I 1 Audit I 31The March 8, 1988, General Instructions does not mention centralization o f goods accounts. 34 The 2001 organic budget law expresses a strong resolve to increase the executive branch's diligence in carrying out its obligation to account for the execution o f budget allocations; the law requires the submission and distribution o f the draft budget review act no later than the end o f the following fiscal year. The draft must be accompanied by a report from the Court o f Audit and the Court's general declaration o f agreement between the final accounts kept by public accounting officers and the administrative accounts kept by the authorizing officers on behalf o f the Minister o f Finance in his capacity as central disbursement authority for government funds. Inorder to allow the executive authorityto catch upwiththe backlog, the Parliamenthasdeferreduntil December 31, 2003, the submission o f final audited accounts prior to the 2002 budget year. This provision, specified in the next-to-last article o f the 2002 Finance Law, inpractice grants the Minister o f Finance a grace perioduntilDecember 31,2003, to submit these final accounts. Analysis of BudgetReview Acts As o f February 7, 2002, the end o f the validation mission for this CFAA, the Government o f Senegal confirmed that no arrangements had been made by the financial authorities to enable work to be completed by the December 31, 2003, deadline. Given the absence o f consolidated Treasury accounts and o f the final accounts from the public accounting officers, and the limited extent o f human and material resources at the disposition o f the Court o f Audit, there i s a concem that an exceptional measure o f global adoption o f the past budget execution reports be sought solely in order to comply with the requirements o f the law and with international commitments to UEMOA and the IMF. However, such a shortcut would deprive the Court o f the ability to carry out its jurisdictional audit mission. 1.6 INTERNAL AND EXTERNALAUDIT Budget execution i s subject to a triple audit administrative (internal audit), jurisdictional and legislative (external audit). Intemal audit i s carried out administratively either prior to payment or afterwards. External audit i s carried out by the Court o f Audit ('jurisdictional) and by Parliament (legislative oversight). 1.6.1 Administrativeaudit Administrative audit i s carried out prior to payment by the Financial Comptroller, the authorizing officer (ordonnateur), and the public sector accounting officer, whose functions have been presented in section 1.3. There i s an additional internal audit carried out after payment by Intemal Audit (Contr6Ze Financier or CF), the Inspector General (Inspection G&n&raZed'Etat or IGE), and by the internal auditors within the ministries, in particular the Finance Inspector General within MEF (Inspection Gine'raZedes Finances or IGF). A description o f administrative audit procedures i s presented in annex 8 inthe second volume. Analysis of administrative audit The IGE, IGF and CF carry out their work independently and with no formal coordination, which does not allow for consistent and effective oversight. All three agencies have authority to audit the same entities with the same objectives, the only difference being that IGE and CF report to the President and IGF reports to the Minister o f Finance. A mechanism for joint coordination o f these various audit activities should be formally established. The way these agencies are now organized does not allow for an overall analysis o f risk levels and results in a lack o f transparence in a posteriori audit o f public 35 finance. Moreover, the reports issued by these three agencies are classified as confidential, even for members o f Parliament. Overseeing transfers o f authority within public entities i s an important responsibility o f IGEand IGF in 2000 and 2001 due to the change o f government. Such activities, required when new heads o f public bodies, including parastatals take up their posts, accounted for two-thirds o f IGEAGF workload in2000 and 2001. Apart from transfer activities, statistics show that the number o f other assignments completed by IGE and IGFis low, about a dozen a year between 1999 and 2001.As a result, a significant number o f entities subject to public audit can go several years between audits. The consequent financial risk i s very high. Table 17 :IGE and IGF activities, 1999-2001. NC = Information not provided. Operational oversight o f public services, such as organizational audits and audits of efficiency and service delivery performance, are not carried out insufficient number by the audit agencies. Such work, when properly carriedout, has a strong positive impact on public financial management. There i s no specific mechanism in place for ensuring a posteriori audit o f expenditures financed by external resources. As a result, certain entities that manage these resources may not be audited either by Senegalese audit agencies nor by those o f the private sector. For externally financed projects that are audited by private sector auditors, the resulting reports are not systematically reviewed nor are their recommendations taken into consideration by central authorities. Government has made no formal arrangements to make sure they receive nor to analyze project audit reports. When such analysis does take place, it happens within the concerned sectoral ministryor department which may not necessarily have the requiredexpertise and inany case has little incentive to follow through onrecommendations. Human resources available for intemal audit work are notably scarce. Entry-level auditors receive no training to help them master auditing techniques. The few refresher training courses offered fall far short of what i s needed. Some administrative audit staff lack any kind o f methodological guidelines. As a result, verification standards are not consistently applied. To rectify this situation, staff should be provided with tools and documentation in line with intemational standards and their technical capacity should be strengthened. Most audit assignments are carried out using procedures that fail to conform to independence and 36 ethical principles required by intemational standards. Finally, the revenue-collecting bodies (Treasury, Tax Department, Customs) lack any internalaudit function. Recommendations : 9 Rationalize the assignment of tasks among the various administrative and judicial bodies, following a study o f current practices; 9 Reestablishformal coordinationamongthe various auditbodies; 9 EstablishinternalmanagementauditunitswithinDGID,DGD,andDGCPT; 9 Formalizethe organization andaudit objectivesofCOF ; 9 Consolidate humanandmaterialcapacities ofthe various auditbodies ; 9 Strengthen the capacity to audit performance or results of both intemally and externally financed expenditures by the sector ministries ; 9 Require distributionofexternalaudit reports to Parliamentandto CourtofAccountjudges. 1.62 Jurisdictionalaudit Jurisdictional audit i s carried out by the Court o f Audit, which was created in 1999. It i s composed o f three permanent chambers, a non-permanent chamber o f financial discipline, and a Commission o f Verification and Audit o f Public Enterprises (CVCCEP). The Court o f Audit exercises jurisdictional audit o f government accounts and o f those o f local governments and o f public enterprises. To be precise, every year it is supposed to examine 470 sets o f public accounts: 12 prepared by the principal accountants (Treasury, RGT, PGT and nine regional Treasuries), 10 regional accounts, 424 communal accounts, and 24 public enterprises. Public sector procurement is not normally audited by the Court. The Constitution also charges the Court to assist Parliament in financial matters. The Parliament or the executive can also request the Court to carry out investigations, and the Court may accept or decline these requests. One o f the Courts specific institutional prerogatives i s to transform CVCCEP recommendations into Presidential directives. Inits capacity as a public institution, the Court of Audit receives its own budget. In2000, its budget amounted to CFAF 239.6 million, o f which CFAF 115.8 for personnel and CFAF 123.8 million for operations. Court o f Account magistrates are covered by a specific statute that provides penalties for failure to maintain the ethical rules that apply to them. For example, the Court's 1999-2000 annual report indicates that "any magistrate i s required prior to his swearing-in to declare in writing and under oath all personal property and real estate that he, his wife, and his children own." Magistrates are recruited through a rigorous competitive procedure. The official maximum number o f magistrates i s 60 and the actual number in post i s 32, o f which nine conseillers, nine conseillers rkfkrendaires, and a single conseiller maitre. The Court otherwise relies on audit staff composed o f verification commissioners, private reporters who advise when outside expertise i s required, and verification assistants. The level o f pay falls inthe upper half o f civil service salary levels. As for the fight against corruption, the Court has stronger ties with the Ministryo f Justice thanwith the court system. The'Court may in effect refer any illicit behavior it detects to the Ministry o f Justice and ifnecessary request a response. While they consider that they have standing to participate inthe fight 37 against corruption, the Court authorities feel that they lack sufficient means to do so. For this reason, the Court i s not active inthis area. Analysis ofjurisdictionalaudit Senegal's Court o f Audit i s a recently created institution that i s still being set up. While the legal framework for the exercise o f its audit work i s satisfactory, the Court lacks procedural manuals for the verification o f public accounts, except in the area o f public enterprise audit, where it has accumulated some experience. A procedural manual i s needed for those areas o f the Court's work which are not covered by existing manuals. The essential work o f auditing the execution o fthe budget i s currently under construction in Senegal by the Court o f Account. It has succeeded in liquidating a huge backlog o f work covering final accounts for fiscal years 1987-96. Currently it i s working on the 1997 accounts and its draft report has been submitted for commentary by MEF. As for the audit o f public sector accounts, the deadlines for submitting the final accounts are not respected and work i s lagging several years behind (see table 14 above). The legal penalties are not being enforced and only in 2002 was a penalty procedure launched for the first time. At UEMOA's request, a massive accelerated jurisdictional auditing catch-up operation was carried out for the 12 principal central accounts through line item final accounts; by the end o f 2002, 100 such accounts had been received for the 1997 fiscal year. These delays in the final submission o f accounts for audit are essentially explained by a lack o f diligence on the part o f the accountants, but also to the embryonic nature o f financial archives and o f court records, for lack o f capacity to register the receipt o f accounts that have arrived and store them untilthey canbe reviewed. The Court o f Audit establishes its own work program, but because o f its participation inthe drafting o f presidential directives concerning the management o f public enterprises, the Court has a link with the executive branch that could be considered too close. This historic quirk does not seem to harm the Court's institutional position; ineffect, it seems that the presidential directives are not always enforced. On the other hand, although the Constitution requires the Court to advise and support the Parliament and Parliament has asked it to do so, the Court does not really fulfill this function. As for its financial independence, while the Court does draw up its own budget, its autonomy appears to be at risk, since itstotal annual budget is set inconsultation with MEF.The Court's budget has not been sufficient to cover investment needs, particularly for accounts registry and storage space and supplies. The tems o f employment o f Court magistrates guarantees their independence and irrevocability. Concerning measures to guard against corruption, the wealth declaration requirement i s more systematically observed for the magistrates themselves than for their family members, which weakens its effectiveness. Moreover, this declaration i s required only at the time they first take office and not on a regular basis. The conditions for recruiting magistrates are strict and ensure a high general level o f competence. A temporary provision lasting ten years applies to the recruitment o f former civil servants who have previously served in a range o f different jobs. The job classification and job descriptions should be reassessed, along with the requirements for entry at the different levels. 38 Finally, the Court o f Audit is itself subject to no external audit provision, either for administrative or financial management or for its performance. Recommendations: 9 Accelerate the modernization andcapacitybuildingofthe CourtofAudit ; 9 Enforcethe penaltyprovisionsincase oflate submission ofaccounts ; 9 Establish an acceptable timetable for liquidating the audit backlog and prevent the buildup of any new backlog; P Strengthenthe Court's capacity to ensure audit o fextemally financedprojects; 9 Review the qualifying conditions for recruitment of Court staff and establish career planning that encourages recruitmento f younger applicants. 1.6.3 Legislative oversight The Constitution charges the Parliament with the responsibility o f financial oversight over government spending through the annual vote to approve the budget act for the forthcoming year and the final accounts o f the previous year's budget execution. The Parliament's Finance Commission, with the support o f the Law Commission, is charged with reviewing the draft budget act and then to query cabinet and administrative authorities concerning its content. The members o f Parliament have 60 days to review the draft budget act, which in principle should be preceded by a vote on the budget review act for the preceding fiscal year. The most recent vote on final accounts in Senegal took place in 2000 regarding fiscal years 1987/1988 through 1996. The draft budget review acts for fiscal years 1997 et 1998 are currently under review by the Court o f Audit (see table 15 above). Analysisof legislativeoversight The absence o f a vote on budget review acts for more than three years running amounts to a major breakdown in the arrangements for budget audit in Senegal. The law postponing the deadline for submission o f draft budget review acts until December 31, 2003, can in no way be considered an adequate response, given the insufficient practical measures taken since the law's adoption to reestablish normal processing times after 2003. This situation reveals a major risk o f perpetuation o f this dysfunction andcreates conditions ofpoor public financial management. Members o f Parliament receive no support in terms o f human resources that would assist them in actually carrying out their oversight function, nor do they benefit from the support they rightly expect from the Court o f Audit. Moreover, the short time available for reviewing the draft budget review act, due to exceptional circumstances in 2002, and the lack o f capacity for doing so, led to a purely cursory formal review o f public financial management. The CFAA team would like to draw Govemment's attention to this worrisome state o f affairs, which i s accentuated by poor readability and limited accessibility o f the budget documents as presented. Inthe absence of a thorough discussion o f budget documents, and lacking access to the administrative audit reports (in particular, from IGE) on the various public sector entities, even in summary form, individual members o f Parliament tend to focus on the parts o f the budget o f direct interest to them, rather than on the objectives o f Government policy and how the budget contributes to these objectives. 39 Although the Parliamentary Finance Commission i s representative o f the Parliament's overall composition and i s headed by a member o f the majority, the opposition also has a voice through commissionmembers representing the opposition. Finally, the record o f floor debates on the annual draft budget act i s not broadly distributed or made available to the general public to the degree requiredto allow the public to follow the positions taken by the members they have elected, to see for themselves what is inthe budget, and to allow them to offer their own commentary on Government's objectives. Recommendations: 9 Strengthen the Parliamentary Finance Committee's capacity for economic and financial analysis; 9 Enforcetherequirement for submission offinal accounts withinthetimeframerequiredbylaw; 9 StrengtheninteractionbetweenParliament andthe Court ofAudit. 1.7 HUMANRESOURCES The main legal texts pertaining to management o f government employees in general, and MEF staff in particular, are Law No. 61-33 o f June 1961 dealing with government employees having permanent (fonctionnaire) status and Decree No. 74-347 o f April 12, 1974, dealing with non-permanent (non- fonctionnaire) employees. Supplementing these are Law No. 97-14 o f July 7, 1997, which sets up a system for recording and evaluating government employee performance, and the decree o f January 1, 2002, which changed the age o f mandatory retirement from 55 to 60. MEFstaffnumbered 3,257 at the end o f2002. MEFstaffnumbers had fallen by 200 over the 1996-200 period, risen by 49 in 2001, and then were reduced again by 56 in 2002. The 2003 estimates indicate a furtherreductiono f74 stafffrom 2002 levels. Table 18 :SenegalMEFStaffLevels, 1996-2003. 1996 1997 1998 1999 2000 2001 2002 2003 3,462 3,440 3,423 3,371 3,264 3,3 13 3,257 3,183 The average age o f MEF staff i s 47 and about half o f staff i s permanent, apart from DGID.32 Thirty percent o f all staff are non-permanent secretarial or lower-level officers (level D/E) and 20 percent o f A-level staff are non-permanent. 32 Source :DAGE, MEF. 40 Table 19 :MEFstaff: Permanent (Fonctionnaire) and Non-permanent Status Permanent (fonctionnaire) Non-permanent A 321 77 B 399 31 C 88 248 D/E 0 292 Secretarial 0 189 Total 808 837 Each MEF department is responsible for training o f its own staff and develops its own action plan for all personnel. DGCPT, DGD, and DGIDhave designed annual training activities within the context o f a multi-year training program, though the results are uneven; DGD's plan i s more well developed. Analysis of MEFstaffinglevels and staff management MEFstaff in Senegal (see also annex 12 involume 11)is structured as follows: 0 The units responsible for planning, forecasting, and macroeconomic framework and for financing o f development programs outside the national budget have the largest number o f A- level staff (136). 0 Tax and customs fee collection staff number 2,069, o f which 26 percent are inspectors and auditors (A- and B-levels). Around 78 percent o f DGD staff (1,213) are assigned to the Customs Service; staff assigned to DGD's main office have been severely reduced over the last few years. 0 The Budget Office and DDIhave a total o f 109 staff, o f which 21 at Level A and 32 at Level B. 0 The Finance Minister's personal staff and other units that report directly to the ministry total 125, o f which nearly 61 percent are at Levels A and B. The CFAA team recommends staff reassignment and new recruitmentto correct staff imbalances, both qualitative and quantitative, which are revealed through comparison o f staffing levels across MEF's different units, and comparison o f Senegal's MEF staffing pattems with those o f other finance ministries in the subregion (Burkina Faso, Mali, Mauritania). The most important deficit, in both numbers and qualifications, occurs in DGCPT: its staffing level in Senegal i s 371, less than a third o f that inMali and Burkina Faso, and equivalent to that inMauritania. MEF has chronic problems in managing its staff. It failed to anticipate the staff changes needed for policy changes underway and has not yet adapted staffing pattems to reflect these changes. Current staffing gaps are the result o f the lack o f forward planning for staffing levels, skills, and assignments. MEFdivisions and unitsare not on top o fhumanresource management andproceed from day to day in response to changing circumstances and structures. There i s little thought or effort given to assessing medium-term administrative needs arising from the ageing o f the Ministry's workforce and changing technology. The practice o f seconding staff and granting leave without pay to staff wishing to pursue an outside assignment has accelerated due to the stagnation o f civil servant salary levels and new opportunities offered by employment in the private sector and intemational organizations. Takmg leave without pay has become a way o f life and a widely used practice that has gotten out of control. The proliferation o f externally financed project execution agencies, 80 percent o f whose staff has been seconded from 41 Senegal's ministries, has in effect created a parallel administrative structure that has compromised the transparence o f public policy. The end result has been to strip govemment o f its best people, destroying institutional memory and severely reducing the return to staff training in terms o f expected payoff in improved MEFperformance. Despite the praiseworthy efforts o f DGD, DGCTP, and DGID, staff training, whether through courses leading to qualification or to a diploma, exists more as a concept and shared expectation than as an actual concrete program based on a policy designed to strengthen staff performance. MEF has no staff position dedicated to managing training that takes place informally with no institutional record (due to lack o f a human resources directorate). The same qualification-oriented training can be given several times and the potential for hiringnew staff basedon specific qualifications or skills i s ignored. Recommendations : 9 Drawupanorganization chart for MEF. 9 Frame institutionalchange within MEF inthe context of a forward-looking staff management plan that takes into account both numbers, qualifications, and skills needed to carry out a planned work program. 9 Developa stafftrainingplanfor eachMEFunit. P Reinforce staff management skills within MEF management and stabilize the number o f staff and managers. 1.8 MANAGEMENTSYSTEMS 1.8.1 Information Technology MEFcomputer systems Since the 1960s, MEF has been very aware o f the importance o f information technology for its work, and established an IT department that later became the Information Technology Systems Department (Direction du Traitement Automatique de 1'Information or DTAI). At the time, MEF signed a contract with a private company to develop the first computer software for govemment use, with the option of using a centralized structure. The decentralization o f computer systems is a policy option now being proposed by DTAI,basedthe following justifications: -The understandable desire o f unitsto be incharge o f their own systems ; - Technological developments, inparticular the development o f the client-server architecture; ---- A Existence o f proper skill at the managerial level; Budget constraints; Departure o f computer services staff from DTAIfor more remunerativejobs outside government; desire to facilitate greater ownership o f their core missions by the individual units. At the presenttime, implementationo f computer capability inMEFhas slowedsignificantly (see annex 13 involume 11) .No standards have been developed regardingcomputer software, which has led to the uncoordinated purchase o f mismatchedIT products. IT standards should be set by MEF authorities. Nor i s there any link between accounting software and other software used for deposits, tax collection, and 42 municipal accounts, which means that there i s much tedious manual data comparison and multiple opportunities for errors in data entry. DTAI, whose mission was redefined by the 1995 decree that reorganized MEF, is no longer able to carry out its coordinating role. Inpractice, activities that should be coordinated are instead carried out with no prior consideration o f the different users' needs, with the obvious risk o f inconsistency and duplication. Different software i s being used in different units, and there i s no long-term vision o f how systems should work together or o f the consequences o f the lack o f coordination and standards. Hardware purchasing and basic technological choices take place without any guiding framework. Even more fundamentally, the organization suffers from the lack o f any kind o f master plan or network diagram that could guide the development o f the network. In such an environment, there i s no way to identify a long-term vision. In the Modernization o f Information Systems Project (Projet de Modernisation des SystBmes d 'Information de 1'Administration or PMSIA), which has been underway for nearly four years with World Bank financing, the State IT Department within the President's office (Direction de 1'Informatique de I 'Etat or DIE), has analyzed the current status o f hardware and software being used for administrative purposes within government offices. This project has contributed to the improvement o f high-level computer systems within MEF, in particular within DTIA and DGD, following a diagnostic to prepare for the changeover to the year 2000 (Y2K). The project i s now supporting the creation o f an interministerial Intranet and the introduction o f several linked software packages (for human resource management, management o f national assets, archives, e-mail), which could eventually be shared by all government offices. Still, MEF's computer network does not cover all offices within MEF. Because some divisions have hired their own cabling services, DTAI has some difficulty staying abreast o f the network's actual structure. Regarding software, DGD's successful design and adoption o f a consistent suite o f programs i s a noteworthy exception. Other offices lack a complete set o f necessary software (tax administration authorities and Treasury) or the ones inuse are obsolete (as inthe case o f government payroll). The fact that each unit operates on its own means that there are multiple e-mail systems and Internet connections, and also that there are multiple staff duplicating functions in each unit. It i s absolutely essential that a single central purchasing office for hardware and software and a central maintenance unit be formed so that common standards can be followed and computer network resources can be properly managed. There does not seem to be any problem recruiting well qualified computer staff within Senegal generally. The current labor market allows for easy recruitment to fill even the most qualified jobs. However, few computer specialists are attracted to government jobs. Turnover i s frequent and recruitment for government jobs i s more difficult. High-level skills are scarce in key areas o f network management, systems, and security. Staff training has not been a solution to these recruitment problems and more training would doubtless lead simply to more loss o f staff to the private sector where salaries are much higher. The overall solution will require reassessment o f the salary scales for computer specialists in civil service, along with a formal training plan and a career development path for such staff. Recommendations: 9 Reorganize the computer service functionwithinMEF. 9 ConsolidateMEFITinventories ofhardware, software, networks, and staff. 9 Developandimplementacomputer services networkdiagramanddevelopmentplanfor MEF. 43 DGCPT Computer Systems DGCPThas several types o f computer software that are usedto carry out its mainmissions : 0 For bookkeeping : COMPERCE, used by deconcentrated field offices and COMCENTR, used at the central office; 0 Tax bills and revenue: mCOUVREMENT ; 0 Oversighto f deposits :DEPOTS ; 0 Municipal accounts : COLLOC. On the other hand, it has limited staffresources : four people runthe DGCPT computer center, o f which two have programming skills. Transfer o f accounting data between the field offices and headquarters i s carried out via diskette. Online data transfers are possible only within the headquarters buildingover a network with no data server, and also between DGCPT and DGID via a remote workstation. Work i s currently underway to install a live direct connection between DGCPT-DGID-DGD ; hardware was recently delivered and staff have been trained. This project will also create a data warehouse for all financial administrationdata. Analysis of DGCPT Computer Systems While software in use does cover all DGCPT's main activities, there are gaps in the transfer o f data from one software to another that require manual input. COMCENTR automatically transfers COMPERC transaction data from the diskettes received from the field at the end o f each month, but during the month, transactions are entered manually. The consolidated balance, completed within 45 days after the month's end, i s prepared in several stages as the balance information i s received. This seems longer than necessary and full computer automationshould allow the consolidated balances to be ready more quickly. DGCPT has a computer service center that takes care o f software maintenance, technical assistance to users, and software and hardware installation, along with some programming. Backup protocols are in place and a maintenance agreement has been signed with an outside consultant. A setup for sharing DGD's database with the accounting office inthe port ofDakar, although imperfectly deployed for lack o f a direct link with accounting software, has without a doubt led to major improvement in cooperation between the two offices. Software used for accounting, tax billing, revenue deposits, and municipal accounts i s written either in an old computer language (Clipper) or has been prepared using CLARION, a rapid application development toolkit, for which DGCPT does not own a current license. The functionality and performance o f the software in use are not satisfactory to users. The actual users are not sufficiently involved inthe preparatory studies that define product requirements, and user manuals are not provided. Budget expenditure transactions are currently recorded and managed manually. The software for budget expenditure management has recently been installed, but the automatic checking o f spending by budget line has not yet become operational. Inpractice, Treasury staff are the ones who check for the required approvals by COF and authorizing officers within DB and DDI. Special Treasury accounts and advance payments are also still manually recorded. The advantages anticipated from the live direct connection among the different financial offices responsible for tax receipts have yet to be realized despite the improvements mentioned. The link between DGCPT, DGID and DGD i s not yet really optimal and the field offices (revenue collection, tax centers, and customs offices inDakar and elsewhere) remain outside the network. 44 Hardware in place i s spare but seems to meet current needs. On the other hand, new hiring for direct data entry will require purchase o f additional workstations. Lack o f a dedicated local area network within the DGCPT headquarters buildingis a real handicap. A data server would greatly facilitate data sharing and consolidation functions. Manual procedures currently duplicate computerized transactions, but these remain parallel activities: the work done manually duringthe month i s not checked against the automatic computer records at the end o f the month, nor are the manual books o f account then destroyed. Thus the users o f accounting information have yet to grasp the relevance o f the new computer tools and their use o f them i s therefore partial, if they use them at all. To them, the manual accounts seem more reliable and thus the productivity gains and streamlining o f work procedures that automation can bring to accounting have not been optimized. So far, computerization is still seen as creating additional work33. Recommendations: Inorder to improveDGCPT's use ofcomputer systems, the following measures shouldbetaken : - Implementation o f expenditure management software should be accelerated, given the advanced stage o f the project that supports this effort and the improvement intransparency that - this software would bringto the reportingfunction for public finance. An accounting module that can handle accounting for Treasury receipts should be developed in - DGD. The COMCENTR software treatment o f supplier and contractor accounts (comptes de tiers) - should be improvedby adding the capability to provide details o f the account balances. User technical assistance should be made available to staff in accounting offices located outside - Dakar. Software should be changed to allow deposit account information to be shared by accountants - located inDGCPT headquarters building. The "Teller" software should be further developed to allow for electronic receipts to be issued - instead o f the paper ones currently inuse. Accounting staff in offices outside Dakar should receive further training inthe use o f computer accounting systems. 1.8.2 ArchivingofFinancialRecords MEF archival practices are subject to the provisions enacted by law. UEMOA directive 06/97/CM leaves the means o f preserving goods and stores, along with rules for proper filing o f documents, to be determined by each state according to its own practices. At the national level, the National Archives (Direction des Archives Nationah) within the Prime Minister's office i s responsible for setting regulations concerning preservation o f public documents, with eachministrybeingresponsible for applyingthem. There is also an instituteo fhigher learningthat trains librarians and archivists, whose graduates have become well-respected specialists throughout the region for more than 40 years. 33See annex 9 inthe volume I1 45 Analysis of FinancialArchives Management The management o f public finance archives in Senegal i s deficient. The Finance Ministryhas issued no instructions regarding document archiving ;even the Education Ministry,and probably other ministries as well, lacks any archive services unit. The fact that the initiative i s left to the lowest administrative level and that there i s no oversight has resulted over time in a virtual abandonment o f the principle o f responsible document management in the public sector. The result i s one o f inestimable loss for the administrative units responsible for cadastre and management o f state lands and property. An effort to introduce a computer-based system for managing document archives has recentlybeen started as part o f the Information System ModernizationProject mentioned above. Lacking any instructions from above, each MEF office deals independently with its own records management in the complete absence o f any rules or assignment o f responsibility. For example, the order that created DGCPT does not assign responsibility for records management to any central unit. There i s a general lack o f human and material resources assigned to this function and this only reinforces the lack o f incentives. Except for DGD and DSPRV, there i s no buildingspace allocated for document storage. Documents fill the available cabinet space and then are piled up on the floor. This has given rise to public health concems, with some staff complaining o f the danger to their health o f document piles which crowd their workspace. DGID is one o f the few departments that has set up, six years ago, a documents and archives office employing a qualified archivist, but there i s no office space specifically set aside to store tax documents. The performance o f the land registry and state lands offices within DGID i s compromised to the point where they are no longer able to fulfill their responsibilities. 0 The land registry i s incapable o f producing a reliable land ownership map. Not only i s its topographic equipment outdated and the registry itself continues to be manually maintained, but land registry books are kept in an unsuitable, unsecured, and unhealthy environment, where they have slowly disintegrated. Pre-1935 land books can be considered lost to practical use, turningto dust a significantportiono f Senegal's history. 0 The records management crisis in the state lands office (Direction des Domaines) i s compounded by the disastrous state o f records filing.. Furthermore, the lack o f communication and working relations between the staff in DGID's different unitsmakes any kindof transparent management of state property impossible and completely obscures any understanding o f the status o fpublic lands. Recommendations: 9 Carry out a comprehensive study to define the most urgent records management needs within MEFandthe Court o fAudit. 9 Implementmeasures inresponseto thepriority requirements definedbythe studyfor managing MEFandCourt records. 1.9 LOCAL GOVERNMENTFINANCE Senegal's current administrative hierarchy i s composed o f 400 local government units: 10 regions, 110 communes (of which 67 individual town governments or communes de dvclit commun, and 43 city wards or communes d'avrondissement), and 320 rural communities. The regions are administered by a regional council and have no authority over the communes or communities; they are financed entirely 46 out o f the national budget and have no other sources o f income. The communes receive income from local taxes, land use fees, a share o f centrally collected taxes, and from two national funds, the DecentralizationFund (Fonds de Dotation de la Dkcentralisation or FDD) and the Local Government Intrastructure Fund (Fonds d 'Equipement de Collectivitks Locales or FECL). Rural communities have more limited revenues from the rural tax and other local taxes, and also receive some funds from the FDDet duFECL. In2002, local governments received 35 % oftheir income from their ownresources (about CFAF 24 billion), 20 percent from central government (CFAF 12 billion from FECL and FDD) - See annex 10 for central government transfers to local government between 1995 and 2003 - ,and 40 percent from external sources (about CFAF 30 billion).34 Public funds for local development in the context o f administrative decentralization o f powers to lower levels o f government, subject to conditions that may or may not involve guarantee funds, has substantially increased since the decentralization laws, increasing from CFAF 1 billion a year in 1995-96 to around 30 billion a year at present. There i s currently a need to establish a means o f regional coordination for donor funds going into local communities. The Interior Minister i s responsible for defining the objectives and implementation o f decisions regarding local government development. The National Council for Local Development (Conseil National pour le Dkveloppement des Collectivitks Locales or CNDCL) set the criteria for distribution o f funds from the FDD, while FECL sets is own criteria through its management committee ;these two sets o f criteria must then be harmonized inorder to justify any increase inthe level o f these funds. MEF manages domestic and external (budget and extra-budget) funds for decentralization and also collects local taxes and manages financial resources for the local governments. An office within DGCPT's Public Accounting Division i s assigned with oversight o f local government financing. The primary support agency for town and city communes i s the Agency for Municipal Development (Agence de Dkveloppement Municipal or ADM), created in 1997 under the Commune Support Program (Programme d 'Appui aux Communes) cofinanced by the World Bank and the French Development Agency. This agency supports the implementation o f partnership policies defined in city agreements cosigned by the agency and the communes. At the rural community level, the main support institutionis the Multipurpose Rural Expansion Center whose mission i s to help rural councils prepare and carry out local projects, help them implement central government regulations and directives, support agricultural soil management and village infrastructure development, and to support improvements in rural education, adult literacy, health, housing, sanitation and home economics. Analysis of Local GovernmentExpenditures Withinthe sphere of financial decentralization, local government operations are subject to four types of problems: (1) 10- to 12-month delays in the implementation o f activities and programs funded by central government, (2) leakage o f funds from both domestic and external sources; (3) failure to follow certain CNDCL rules; (4) inefficient management as indicated by excessive numbers o f support staff and failure to follow systematic work procedures and to use appropriate technical support. These problems inturn were found to arise from eight areas o f weakness, shown inTable 20. 34Source : Franqois Cazottes, Study on the financial capacity o f local govemments (Etude sur la capacite'financi2re des collecfivif& locales), Ministry o f Local Govemment, July 2002. 47 Table 20 :LocalGovernmentFinance:Four Problems,EightUnderlyingWeaknesses. Problems : Delays, FundsLeakage, Informal Procedures, Lack o f Efficiency 2/ '3 14 ` 5 `8 Weak Lack o f Delayed Opaque Weak and Lack o f Lack o f Weak or analytical clarity and budget local power in- resources : information nonexistent framework o f cycle and structure appropriate people, and oversight instructions lengthy financial equipment, monitoring and inthe legal procedures base and enforcement framework technical support Furthermore, local government investment capacity continues to be weak because their income i s static and they have limited ability for self-financing. They could certainly benefit from budgetary support from external donors, for example, HIPC funds could be used at the local government level. Central government transfers to local governments are essentially for recurrent costs and the financing o f capital expenditures are not well known by the local authorities. The 1996 decentralization reforms led to a major increase intransfers from central to local governments in 1997. However, while the absolute levels o ftransfers have increasedfrom CFAF 8.39 billion in 1997 to 14.72 billion in 2003, their relative increase has been minimal, with the local government share o f central government's budget remaining constant at around 1.7 to 2 percent o f total expenditures and less than 1.4 percent o f total revenue. The planned regionalization o f the investment budget i s expected to leadto a more efficient selection and execution o f investment projects. With regard to extemal financing, due to the lack o f sufficient information, the CFAA team was not able to ascertain whether donor-financed local programs are appropriately targeted or whether they in fact duplicate or overlap with domestically financed programs being carried out by the sector ministries. Infact, there is no monitoring or oversight, nor is any information being collected by either central or local authorities on the outcome o f local government expenditure, nor i s there any comprehensive database about the programs currently underway in any given locality-so any analysis o f budget perfomance is impossible. In this context, it would be advisable to move towards developing a watchdog capability at the community and NGO level, which would drive a demand for greater public access to such information and would empower residents themselves to monitor and demand accountability inthe use o f public funds. While the local governments themselves lack few qualified staff, they often employ large numbers o f staff, often assigned to deconcentrated sector ministry field offices, as in the case o f municipal staff mentioned in section 1.5.2. Rural communities have few staff o f any kind and have recently struggled to recruit a community secretary, whose role i s not clearly defined inthe smallest rural communities. The decentralization policy has been carried out without any prior assessment o f its advantages and risks and with no long-term strategic vision on the final sharing o f roles. The CNDCL i s not in fact in charge o fthe decentralization effort. 48 Recommendations: 9 Restructure the coordination framework for the decentralization effort and harmonize the process o f decentralization with national development policies. 9 Prepareregionalinfrastructureanddevelopment plans. 1.10 PUBLICAND PARASTATALENTERPRISES The legal framework governing public enterprises and state-owned entities i s set out in Law 90-07 (January 26, 1990), which specifies their organization, operation, and oversight. Public and parastatal enterprises are subject to MEF scrutiny regarding their finances, and to a technical ministry designated by decree regarding their operations. They may be called to account at any time by the Financial Comptroller but are not requiredto seek approval inadvance. A State Portfolio Review Unit (Cellule de Gestion et de Contrhle du Portefeuille de 1'Etat or CGCPE) has been established within MEF whose mission i s to oversee management policy o f public and parastatal entities. Analysis of Public EnterpriseSector The CFAA team was not able to obtain any information on the level o f state funds transfers and subsidies for public and parastatal enterprises and was therefore unable to assess either the relative importance o f state support nor the identity o f its recipients, much less the overall contribution o f the Senegalese taxpayer to the support o f these national enterprises' operations. The quality o f oversight and supervision o f public sector enterprises and parastatals suffers from the absence o f coordination between the administrators who represent national interests on the managing boards o f these entities and the DGCPT and CGCPE, which i s neither formalized nor defined. CGCPE should be copied on all correspondence between these administrators and these public entities. There i s no database that records the scheduled dates o f board and committee meetings and when they actually took place, and no minutesrecordingwhat was discussed and decided, nor any record o f follow-up. The weakness or absence o f any formal management procedures makes it impossible for CGCPE or the relevant ministries to carry out their legal responsibility for oversight. The CFAA team recommends that such formal procedures for oversight o f public and parastatal enterprises be redefined and officially published inan operational manual. The Organization for Harmonization o f Commercial Law in Africa (Ovganisation pour 1'Harmonisation du Droit des Affaires en Afrique or OHADA) recommends that governments designate one or more statutory auditors to be assigned to state-owned and state-funded companies. There seems to be no systematic monitoring o f the work o f these auditors nor any follow-up o f their recommendations. Some financial officers whose duty it i s to oversee public companies within specialized supervision arrangements seem to be laclung any appropriate qualification or training that would enable to them to properly carry out their duties. Recommendations: 9 Definethe format andthe schedule offinancialreports that public andparastatal enterprises are requiredto submit to the authorities charged with monitoring them. 9 Define specific criteria for designating individuals to represent government interests within public enterprises. 49 2 THE PRIVATE SECTOR 2.1 THE ACCOUNTINGPROFESSION Senegal's National Order o f Public and Chartered Accountants (L'Ordre National des Experts- Comptables et ComptablesAgrdds or ONECCA) i s a newbody that was established in2000.35 ONECCA i s administered by a council and it carries out its functions through a National Commission on Financial Statements, a Disciplinary Committee, a Qualifications Committee, a Standardization Committee and a Professional Training Committee. As o f December 31,2002, ONECCA had 88 individual and 35 business members. Inorder to become a public accountant or chartered accountant member, the candidate must present an accounting diploma recognized by the authorities or the equivalent as certified by the Qualifications Committee. UEMOA Regulation 12/2000/CM (November 22, 2000) created a Public Financial Accounting Diploma and designated the African Center for Higher Management Studies (Centre Africain d 'Etudes Suphiewes en Gestion or CESAG) in Senegal's capital, Dakar, as the institution accredited to award this degree for a transitional period o f three years. As a transitional measure, all individual and business members o f the predecessor organization, ONEEAS (Ordre national des Experts et Evaluateurs agrdds du Sdndgal) as o f April 12, 2001, when the corresponding decree went into effect in Senegal, were automatically made members o f ONECCA. Current ONECCA members hold a wide variety o f diplomas and equivalent qualifications, such as the higher accounting diploma (diplhe supdrieur de comptabilite? or the fact o f having previously held the position o f tax officer. Professional training requirements for new members are set out in the law and formalized in ONECCA's Code o f Professional Duties. Training requirements are also prescribed for public accountant interns. The current accounting system in use in the private sector in Senegal i s the West African Accounting System (SYSCOA), which i s consistent with the OHADA accounting system. Senegal has also created a National Accounting Council, whose role as specified by decree i s to ensure the coordination and synthesis o f accounting standardization efforts and to monitor the proper use and interpretation o f accounting norms and standards. ONECCA has a Code of Professional Duties approved by an MEF order. Audit standards and standards for internal and extemal audit have not yet been prepared. ONECCA's financial resources are its membership fees and it receives no subsidy from the government. Analysis ofPrivateSector AccountingProfession ONECCA was established in conformity to UEMOA directives, however, it i s not yet a member of the International Federation o f Accountants and has not yet developed professional standards that would guarantee the quality o f accounting services performed by its members and ensure public recognition o f their professional competence. ONECCA has no quality control mechanism for guaranteeing the quality of accounting services, assessing adherence to professional standards by accounting firms, standardizing professional performance, or improving accounting firms' working practices. Also, Senegal's National Accounting Council has yet to operate at a satisfactory level. 35Law 2000-05 (January 10,2000) put into effect in Senegalthe UEMOA DirectiveNo. 02/97/CMby creating an Order of Public and CharteredAccountants in Senegal. 50 There i s no national organization for auditors nor any audit norms, nor has ONECCA's Qualifications Committee become operational. Anyone holding the title o f public accountant is automatically eligible to act as an internal auditor (commissaireaux comptes). Even so, the number o f public accountants who are members o f ONECCA i s vastly inferior to the level o f demand within the economy o f Senegal. The level o f basic training i s woefully inadequate; U E M O A recently charged CESAG with developing a sound curriculum for a higher diploma in accounting but much remains to be done. The CFAA team recommends that this course o f study also be made available to students in other UEMOA member countries through accreditation o f other schools by CESAG, and also that ONECCA be involved in developingthe new curriculum. Although professional continuing education and training i s in principle carried out by ONECCA's Training Committee, there are no records o f training courses held. It i s essential that this committee become operational and begin to publish statistics on annual training received each year by its members. Recommendations : 9 Publishprofessional accounting guidelines. 9 Implementa systemofqualityperformancereview. 2.2 ACCOUNTINGWITHINNON-GOVERNMENTALORGANIZATIONS The operating framework for Non-governmental Organizations (NGOs) are defined by Decree No. 96- 103 (February 8, 1996), which defines NGOs as non-profit associations or private entities whose purpose i s to support development in Senegal. They are overseen by the Ministry o f Social Development and National Solidarity (MDSSN). NGOs are an essential vehicle for the fight against poverty, especially in rural areas. The most recent estimate sets the number o f NGOs in Senegal at 360 in2002. NGOs invested CFAF 77 billion between 1996 and 2001. They receive outside support mainly inthe form o f donor funds. The procedure o f being recognized as an NGO and the specific fiscal regime i s defined by another decree. The commission that decides on NGO status i s composed o f representatives from MDSSN, MEF,InteriorMinistry,ForeignMinistryand fromNGOassociations. WithinDDI,NGOs are overseen by a separate administrative section. NGO status carries tax exemption privileges, except for taxes on petroleumproducts, and the right to employ non-Senegalese staff. NGOs are asked to submit an investment program covering two years at most, with their request for recognition as an NGO. They are required to submit annual reports to MDSSN within three months after the end o f their fiscal year; they are reviewed on the basis o f their investment program every two years. They are required to follow SYSCOA rules and may not distribute any surpluses without risking reclassification as private enterprises. Analysis ofNGOs While the number and scope o f involvement o f NGOs has greatly increased, the regulations governing their operations have not been updated since 1996.NGOs in Senegal do not in fact follow the SYSCOA requirements and do not usually produce financial statements. The government should undertake a review o f the legal framework governing NGOs, incoordinationwith all concernedparties. 51 The supervisory capacity o fNGO oversight bodies i s weak. 0 Oversight i s limited to the physical execution o f their investment programs and does not cover their financial activities. 0 MDSSNhas few supervision tools and lacks information about the resources being channeled through NGOs; at the same time, DDI, which has set up a manual oversight system, i s not able to provide reliable data on their resources or their use o f funds. 0 There i s no provision whatsoever for determining whether NGOs satisfy audit requirements or for financial oversight. 0 There i s no policy in place to promote NGO performance quality or sharing o f experience and lessons learned. Recommendations: 9 NGOsshouldbemonitoredto ensure that they follow the accountingandfinancialmanagement standards and that apply to them. 9 The bodies that oversee NGOs should be strengthened through the provision of computerized databases andthe means to maintainthem. 52 3 GOVERNANCE AND ANTI-CORRUPTION MEASURES The scope o f action to fight corruption in Senegal i s based on articles 159-1 and 160 o f the Criminal Code (July 21, 1965) and on Law 81-53 (July 10, 1981) concerning prevention o f fraud and illegal enrichment. More than 20 years old, this legal framework has ceased to function and has been obsolete since 1983. The U E M O A Council o f Ministers adopted a directive instituting a Transparency Code for Public Financial Management (02/200/CM/UEMOA) but this code has not yet been transposed into law in Senegal. UNDP has begun implementing a program for good governance in Senegal that aims to establish public administration and management practices that are inline with this objective. Concerning practices potentially conducive to corruption, MEF has not yet put in place any particular anti-corruption arrangements. With the exception of DGD, no MEF department has adopted a professional code o f ethics designed to eliminate corrupt behavior. Public financial management relies on individual ethics, and the basic legal texts on which they base the execution o f their duties (the tax code for DGID, the accounting regulations for DGCPT) contain no anti-corruption provisions. MEF would certainly benefit from regular communications campaigns to remind MEF and line ministry staff, as well as taxpayers, o f the principles o f good governance. DGDis the only MEFdepartment to have issued a Code o fEthics and Good Conduct for the use of its officers and has reviewed at the central office level, the 12 recommendations o f the Arusha Declaration concerning ethics in customs operation^.^^ DGD has also taken the initiative o f implementing a number of measures designed to limit corrupt practices, inparticular: 0 Automatic reassignment o f staff after three years inpost; 0 Automation o f customs billing 0 Introduction o f internal audit o f management performance; 0 Setting up a toll-free hotline for customs clients who feel they have been victims o f corrupt treatment. Recommendations : 9 Updatethe legislative framework for combating corruption. 9 Formulate, publish,and disseminateinMEFdepartments responsible for tax administration and collection (DGID, DGCPT) a code o f ethics directed to their operations, equivalent to the code adoptedby DGD. P Increase transparency o fpublic financial managementby disseminating within government and to the public, ethical guidelines for public financial management. 36This declaration by the World Customs Organization, adopted in 1993, set the international standard for combating corruption incustomsoperations. 53 4 GOVERNMENT'S ACTION PLAN The Government of Senegal has been closely involved throughout the CFAA exercise and has produced an actionplanbased on the recommendations of the CFAA. Discussion and dissemination of the action plan took place duringa workshop organized by the government with the participationof the public and private sector actors and international donors, held inDakar in2003 The action plan has been submitted and approved by the InterministerialCommittee. 54 f Y cM L00 ; E b 3 333. Ei E 8a 0 0 0 I . I. I 2 F 2 E sx ' I. 9 x , 5 5 % c - o w I ?I B U a2 x Z U Q C B Y ?I Q I - > E, 5e, % * s o - 0 .r * N L L O I . 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