Current Situation

1. In 2010 the Ministry of Planning and Development (MPD) prepared the new five-year government program (PQG) for 2010–15 and began drafting the third national poverty reduction strategy (Action Plan for the Reduction of Absolute Poverty—PARPA III). In 2010 the authorities published an assessment of PARPA II, which concluded that a new plan was needed. PARPA III is being formulated in consultation with Mozambique’s civil society and cooperation partners. Its approval is delayed, now envisaged for the first half of 2011.

2. The PQG was structured around five major strategic objectives: (i) consolidation of national unity, peace, and democracy; (ii) poverty reduction and promotion of the culture of work; (iii) good governance, decentralization, anti-corruption measures, and promotion of the culture of accountability; (iv) strengthening of sovereignty; and (v) enhancement of international cooperation. As regards public financial management (GFP) and public sector reform, the PQG establishes the following actions:

• Coordinate public investment projects in an integrated way;

• Formulate the strategy to reduce poverty in urban areas;

• Improve the monitoring and assessment of the government planning system;

• Adopt and implement electronic revenue collection and management systems, through e-Taxation;

• Adopt and implement the electronic single window (JUE) customs clearance mechanism, thereby facilitating foreign trade;

• Streamline the procedures for filing tax returns and paying taxes, so as to reduce their complexity and make them more understandable for taxpayers;

• Provide more assistance to economic agents and other taxpayers in the fulfillment of their fiscal obligations, by creating and expanding taxpayer services;

• Decentralize the tax payment system by opening up more revenue offices, including mobile collection units, to facilitate the payment of domestic taxes at border offices and the involvement of local administrative and community authorities in tax collection;

• Continue the process of implementing the revenue courts and customs courts, to ensure greater access by citizens to fiscal justice services;

• Expand implementation of the program-based planning and budget methodology to include all government institutions at the central, provincial, and district levels, with a view to improving coordination of the planning and budgeting tools;

• Disseminate information through the mass media on direct and timely payment, through e-SISTAFE, to providers of goods and services and other recipients of payments, including wages and salaries, pensions, and life annuities;

• Increase coordination with the development partners to reduce processing outside the budget system for projects and programs, with a view to making all external resources available through the treasury single account (CUT) and accounting in a timely way for all public financial resources;

• Build internal control capacity and transparency in the use of resources;

• Ensure that local communities and the areas where natural resources are being mined receive a share of the mining revenue;

• Consolidate the public sector to make it results-oriented and geared toward serving the citizens, by ensuring quality services and citizen involvement in monitoring the quality of the services provided to them;

• Enhance civil service professionalism, by staffing it with skilled, motivated, and experienced professionals with the spirit of serving the government and the citizens, in the context of a merit-based culture;

• Promote administrative and financial transparency, as well as the integrity of government management systems, by raising the level of individual accountability of civil servants and government employees as regards the provision of quality services;

• Strengthen and train local agencies, consolidating decentralization and devolution, ensuring the full performance of the tasks and competences of local agencies and growingly meeting the needs of local communities;

• Consolidate the culture of public transparency, exceptionality, integrity, and accountability, in the context of efforts to prevent and combat corruption;

• Promote good conduct, discipline, and integrity in the civil service, through rigorous compliance with the rules and procedures on the provision of services; and

• Consolidate the role of internal control in preventing and combating corruption.

3. PARPA III is being drafted, using the same budget programming classifier and the same strategies as in the PQG. This will facilitate support for PARPA III and greater clarity about the costs of the activities performed.

4. The implementation and monitoring of the PQG are concretely reflected in the Economic and Social Plan (PES) and in the Government Budget (OE), two key annual instruments. The PES describes how the program goals and actions for each year will be put into operation. The OE is the financial expression of the PES. Both generate periodic and annual audit reports, the basis for the system of monitoring the PQG. The implementation of the PES is assessed every six months. The 2011–13 medium-term fiscal framework (CFMP) defined the budget revenue and expenditure packages for the period. The OE is drafted on the basis of the CFMP.

5. The PES contains definitions of the annual objectives and goals for the outcomes and outputs of each program. In 2009, 584 government programs were created, including: 168 with a sectoral scope, covering the whole country; 22 with a provincial scope, providing institutional and administrative support as well as specific provincial activities; and 393 with a district scope. For example, in the health sector six programs were defined: (i) mother and child health and medical assistance, (ii) reduction of the impact of major endemic diseases and malnutrition, (iii) health promotion and disease prevention, (iv) health network development, (v) human resource development, (vi) institutional and administrative support, and (vii) HIV/AIDS in the public health program. However, performance indicators can be identified in only a few programs. In general, only the quantitative targets of actions (output) are identified.

6. The MPD is implementing the National Planning and Decentralized Finances Program to build the capacity of local agencies of the government. This program is structured in six main areas: (i) strategic planning for the drafting of land use plans; (ii) operational planning for the preparation of annual operational plans (POAs); (iii) budget and financial execution; (iv) management; (v) community involvement; and (vi) internal control. The program covers the period 2010–15. A specific capacity building package is planned to train local staff on using e-SISTAFE.

7. The International Monetary Fund (IMF) is providing support to Mozambique in the form of a three-year Policy Support Instrument (PSI) program. An IMF mission visited Mozambique during March 23-April 7, 2011 to carry out Article IV consultations and discussions in the context of the second assessment of the three-year program approved in June 2010. This mission supports the government’s medium-term development strategy that is contained in its economic program under the PSI. The strategy is based on increasing public investment in infrastructure and raising expenditure in the priority social sectors as well as on structural reforms in areas such as public financial management, tax policy and administration; debt management, economic good governance, and development and supervision of the financial sector. Included as measures in the PSI were three specific actions arising from the mission in support of the GFP, as follows:

• Expand the coverage of the budget: the e-SISTAFE rollout will continue, the objective being to complete it in the next few years. The government intends to adopt a rollout plan by end-September 2011, covering all entities outside the system. The only entities to be excluded will be those where the cost-effectiveness ratio does not justify such an expansion. The target for December 2011 is for direct execution to reach 45 percent and for the rollout to include 50 more entities;

• Integrate all the information systems: By end-August 2011 the government will adopt an IT blueprint to support e-SISTAFE and the other systems covered in the GFP. That blueprint should serve as a medium-term guide on IT priorities, define operational and hardware models, and assess the costs and risks associated with expanding the budget execution systems; and

• Make the government accounts consistent with international accounting standards: based on the technical assistance provided by the consultant, Joseph Cavanagh, the DNCP will conduct an exercise by end-August 2011 to generate the accounts in a format consistent with international standards. This exercise is intended to improve the accounting records, integrate flows and stocks, and include information from government entities. A study will be done on how to migrate gradually to international standards over the next few years.

Mission Notes

8. There is still a need for more realism in the proposals made in PARPA III, in light of Mozambique’s financial capacity. The PARPA still does not take account of the fiscal packages projected in the CFMP. It would be more appropriate if the PARPA goals were based on the resources actually expected.

9. Considerable progress was made in defining the government’s programs; however, performance indicators still have not been defined for most of those programs. As already mentioned in paragraph 5, the seven health programs have only output targets. For example, the program for reduction of the impact of major endemic diseases and malnutrition contains no definition or indicator of the expected outcome of the program. One of the concrete targets is to give “intermittent preventive treatment at least twice during pregnancy to at least 65 percent of pregnant women.” In the case of the program indicator, an alternative would, for example, be to measure the change in the mortality rate among pregnant women. Thus, for instance, the target for the program period could be “to achieve a 5 percent reduction in maternal mortality by 2014.” Similarly, on the concrete target of covering 65 percent of all women, information should be provided on the current performance, so as to clarify the impact expected with implementation of the program. Thus, the concrete target could be defined, for example, as “to increase from 55 percent to 65 percent the number of pregnant women receiving intermittent preventive treatment at least twice a year by 2014.” Another important factor is the existence of information. An attempt should be made to verify that indicators already exist and are routinely collected and, as far as possible, to use those that are available. Various indicators generally exist in the areas of health and education. In addition, the budget is still essentially focused on the administrative area, without the allocation of personnel costs, for example, to the programs. Table 2 shows the figures in the 2011 budget, by program, in the area of health. There is no operating expenditure allocated to the programs, and this has an extremely negative impact on the identification of their actual costs, mainly because this is a sector with high-intensity personnel use.

^{Table 2.}

2011 Budget for Health Sector Programs

(in thousands of meticais)

Source: 2011 Government Budget Note: (1) Includes all agencies and entities covered in the budget and not only the health sector.

^{Table 2.}

2011 Budget for Health Sector Programs

(in thousands of meticais)

Program	Internal Operations	Internal Investment	External Investment	Grand Total
Central government	20,824,354	-	3,899,152	24,723,506
HIV/AIDS			149,669	149,669
Administrative institutional support			20,017	20,017
Mother & child health, med. assistance			2,048,957	2,048,957
Reduction of endemic diseases & malnutrition			674,725	674,725
Health network development			701,025	701,025
Human resource development			304,759	304,759
Health promotion & disease prevention			-	-
Government system administration (1)	20,824,354		-	20,824,354
Provinces	12,965,043	178,112	202,148	13,345,303
HIV/AIDS				-
Administrative institutional support			202,148	202,148
Mother & child health, med. assistance		4,712		4,712
Reduction of endemic diseases & malnutrition				-
Health network development		173,400		173,400
Human resource development				-
Health promotion & disease prevention				-
Government system administration (1)	12,965,043			12,965,043
Grand total	33,789,397	178,112	4,101,300	38,068,809

Source: 2011 Government Budget Note: (1) Includes all agencies and entities covered in the budget and not only the health sector.

View Table

^{Table 2.}

2011 Budget for Health Sector Programs

(in thousands of meticais)

Program	Internal Operations	Internal Investment	External Investment	Grand Total
Central government	20,824,354	-	3,899,152	24,723,506
HIV/AIDS			149,669	149,669
Administrative institutional support			20,017	20,017
Mother & child health, med. assistance			2,048,957	2,048,957
Reduction of endemic diseases & malnutrition			674,725	674,725
Health network development			701,025	701,025
Human resource development			304,759	304,759
Health promotion & disease prevention			-	-
Government system administration (1)	20,824,354		-	20,824,354
Provinces	12,965,043	178,112	202,148	13,345,303
HIV/AIDS				-
Administrative institutional support			202,148	202,148
Mother & child health, med. assistance		4,712		4,712
Reduction of endemic diseases & malnutrition				-
Health network development		173,400		173,400
Human resource development				-
Health promotion & disease prevention				-
Government system administration (1)	12,965,043			12,965,043
Grand total	33,789,397	178,112	4,101,300	38,068,809

Source: 2011 Government Budget Note: (1) Includes all agencies and entities covered in the budget and not only the health sector.

10. Programs at the district level are defined by criteria of location rather than programming. Five major programming lines of action were identified in the districts, called strategic areas: (i) rural development, (ii) infrastructure development, (iii) management of the government system and in the education sector, (iv) institutional support, and (v) technical and professional education. Nor is there any allocation in these programs to cover personnel and administrative costs. It would be more appropriate if these five programs were included at the district level rather than the 393 defined in the PES and OE (Table 3).

^{Table 3.}

Budget of the Districts by Strategic Area or Program

(in thousands of meticais)

Source: 2011 Government Budget

^{Table 3.}

Budget of the Districts by Strategic Area or Program

(in thousands of meticais)

Strategic Area or Program		Internal Operations	Internal Investment	External Investment	Grand Total
Government system management		13,300,349	51,243		13,351,592
Rural development		-	794,206	1,233,687	2,027,893
Infrastructure development		-	1,149,310	27,704	1,177,014
Education		-	17,496	140,931	158,427
	- Institutional support	-	17,496	139,702	157,198
	- Tech. and professional education	-	-	1,229	1,229
Grand total/Districts		13,300,349	2,029,751	1,402,322	16,714,926

Source: 2011 Government Budget

View Table

^{Table 3.}

Budget of the Districts by Strategic Area or Program

(in thousands of meticais)

Strategic Area or Program		Internal Operations	Internal Investment	External Investment	Grand Total
Government system management		13,300,349	51,243		13,351,592
Rural development		-	794,206	1,233,687	2,027,893
Infrastructure development		-	1,149,310	27,704	1,177,014
Education		-	17,496	140,931	158,427
	- Institutional support	-	17,496	139,702	157,198
	- Tech. and professional education	-	-	1,229	1,229
Grand total/Districts		13,300,349	2,029,751	1,402,322	16,714,926

Source: 2011 Government Budget

Recommendations

• Gradually include performance indicators in all programs, starting with those in which indicators already available can be identified, in particular those in the areas of education and health (Table 1, item A.2.2.3.1).

• Prepare PARPA III, observing the existing fiscal ceilings so as to make the targets more realistic (Table 1, item A.2.2.1.1).

• Amend the programs at the district level to include only the five programs as described in paragraph 9 above rather than the 393 defined in the PES and OE (Table 1, item A.2.2.1.2).

Current Situation

11. The scope of the government budget (OE) is wide, but from the institutional standpoint it is still incomplete. The OE covers essentially government agencies and entities at the central, provincial, and district levels. In the context of decentralization, the coverage of the budget was expanded to include new, previously excluded, management units. However, there are entities at the central level with administrative and financial autonomy that are, however, not included in the OE. The SISTAFE law governs the budgetary processes of the autonomous institutions, but there are problems as regards its actual implementation. According to the SISTAFE law, for example, any institution whose own revenue exceed two thirds of its expenditure is deemed autonomous from the administrative and financial standpoint, but the inclusion of such institutions in the budget is not required.

12. The use of e-SISTAFE and the CUT as the main tools of public financial management is already a reality in Mozambique, but their scope is not total. In theory, all government agencies and entities are required to use them, but judging from the budget, the coverage is not complete.

13. As regards direct execution, an increasing number of agencies and entities execute operating and capital budgets in this way, facilitating the transfer of funds from the CUT to recipients’ bank accounts, using e-SISTAFE. For the execution of any expenditure, e-SISTAFE requires that the appropriation, liquidation, and payment phases occur consecutively and in accordance with the principle of the separation of functions. Various agencies and entities are still engaging in indirect execution; in other words, they are receiving advances of funds. Supporting documents for expenditure are included in the system subsequently, when the accounting records are being established.

14. E-SISTAFE is set up in such a way that each executing unit has to use a specific section classifier for internal management of the sectoral ministries, but not a single agency is already using this tool. The Ministry of Agriculture is in the final phase of approving its table of section classifiers. The section classifier has up to 21 positions for the details of the sectoral internal chart of accounts, which would make it possible to compile and extract quite specific reports. The classifier allows for classifications by project, operational area (cost center), or other expenditure category. It is noteworthy that there is no legal obligation to use the section classifier.

15. In the case of external financing, the foreign currency-denominated CUT (CUT-ME) is in place, and its use for projects financed by international partners has increased. The goal of the CUT-ME is to help broaden the scope of the budget, especially as relates to externally-funded expenditure; improve transparency; and facilitate supporting actions. An effort has been made to improve the coverage of the budgetary and financial execution of externally-funded projects in the CUT. In 2008, 19.41 percent of all external resources went through the CUT; this share rose to 20.14 percent in 2009 and 44 percent in 2010 (Table 4). The World Bank and other partners, such as Sweden, Belgium, the European Commission, the United Kingdom, Spain, Italy, Norway, Denmark, Finland, The Netherlands, Ireland, and the European Investment Bank, directly or through mutual funds, are already using the CUT and e-SISTAFE for all new projects. The United States, the African Development Bank, and a few other multilateral organizations are not yet using the CUT and e-SISTAFE, but they are expected to do so gradually.

^{Table 4.}

Share of External Resources Channeled through the CUT, 2008–10

(In millions of meticais)

Source: MF, 2008 and 2009 budget execution reports.

^{Table 4.}

Share of External Resources Channeled through the CUT, 2008–10

(In millions of meticais)

Item	2008	Percent	2009	Percent
Support to the budget	11,103	37.93	12,627	31.76
Project financing via CUT	5,682	19.41	8,008	20.14
Off-CUT project financing	10,457	35.72	14,682	36.92
Onlending agreements	2,034	6.95	4,444	11.18
Total external resources	29,275	100.00	39,761	100.00

Source: MF, 2008 and 2009 budget execution reports.

View Table

^{Table 4.}

Share of External Resources Channeled through the CUT, 2008–10

(In millions of meticais)

Item	2008	Percent	2009	Percent
Support to the budget	11,103	37.93	12,627	31.76
Project financing via CUT	5,682	19.41	8,008	20.14
Off-CUT project financing	10,457	35.72	14,682	36.92
Onlending agreements	2,034	6.95	4,444	11.18
Total external resources	29,275	100.00	39,761	100.00

Source: MF, 2008 and 2009 budget execution reports.

16. In general, the level of satisfaction with e-SISTAFE implementation is very high, and the benefits generated are quite considerable. The e-SISTAFE enables the MF to plan and control budget and financial execution in an integrated and timely way. However, some units having their own revenue and specific projects before the creation of the CUT-ME are still executing outside the CUT and e-SISTAFE. The agencies’ own revenue is in the budget, but collection takes place in their own bank accounts. Table 5 shows some performance indicators of the GFP reforms. There have been improvements in almost all the indicators.

^{Table 5.}

Performance Indicators for Assessment of the Reform Process

^{Table 5.}

Performance Indicators for Assessment of the Reform Process

Indicator		2006	2007	2008	2009	2010
Budget preparation and execution	Share of revenue not included in the government budget (OE)	NA	NA	NA	NA	NA
	Share of revenue not included in the OE	NA	NA	NA	NA	NA
	Number of executing units using e-SISTAFE for budget preparation and execution, out of a total of 884	0	12	301	320	438
Financial execution	Share of expenditure executed directly through the CUT	4.49%	11.49%	23.61%	31.40%	37.55%
	Number of off-CUT bank accounts maintained by public entities	6,410	6,428	5,438	5,433	4,390
	Number of funds of donors making payments abroad through the CUT-ME	0	1	1	-	6
	Number of donor funds using the CUT-ME				1	13
	CUT balance at year-end (in thousands of meticais)		2,009,463	2,808,995	4,195,992	5,632,264
	Total value of treasury banknotes issued (90-day securities)	3,100,000,000	-	-	-	20,000,000,000
e-SISTAFE	Number of entities that completed the e-SISTAFE rollout	88	245	301	320	438
	Number of e-SISTAFE responses to users through service desk (day)	11	13	26	39	20
	Number of sectoral ministries using the sectional classification	0	0	1	1	0
	Number of active e-SISTAFE users	1,570	4,463	4,074	4,173	6,478
	Share of wage expenditure executed directly	0.02%	2.73%	2.75%	3.47%	8.60% (40 sectors)
	Share of pension expenditure executed directly	0	0	0.88%	0.30%	0.30%

View Table

^{Table 5.}

Performance Indicators for Assessment of the Reform Process

Indicator		2006	2007	2008	2009	2010
Budget preparation and execution	Share of revenue not included in the government budget (OE)	NA	NA	NA	NA	NA
	Share of revenue not included in the OE	NA	NA	NA	NA	NA
	Number of executing units using e-SISTAFE for budget preparation and execution, out of a total of 884	0	12	301	320	438
Financial execution	Share of expenditure executed directly through the CUT	4.49%	11.49%	23.61%	31.40%	37.55%
	Number of off-CUT bank accounts maintained by public entities	6,410	6,428	5,438	5,433	4,390
	Number of funds of donors making payments abroad through the CUT-ME	0	1	1	-	6
	Number of donor funds using the CUT-ME				1	13
	CUT balance at year-end (in thousands of meticais)		2,009,463	2,808,995	4,195,992	5,632,264
	Total value of treasury banknotes issued (90-day securities)	3,100,000,000	-	-	-	20,000,000,000
e-SISTAFE	Number of entities that completed the e-SISTAFE rollout	88	245	301	320	438
	Number of e-SISTAFE responses to users through service desk (day)	11	13	26	39	20
	Number of sectoral ministries using the sectional classification	0	0	1	1	0
	Number of active e-SISTAFE users	1,570	4,463	4,074	4,173	6,478
	Share of wage expenditure executed directly	0.02%	2.73%	2.75%	3.47%	8.60% (40 sectors)
	Share of pension expenditure executed directly	0	0	0.88%	0.30%	0.30%

17. The CEDSIF and the treasury control the opening and the number of bank accounts by account type, but there is no strategic plan to encompass the accounts in a clear vision of which will be maintained, even after the system has been fully implemented. In 2010 there were about 4,390 public sector off-CUT bank accounts. There are 154 type-1, type-12, and type-16 revenue accounts that can be closed only after the collection network is implemented, when they can be replaced by “book” accounts in the accounting systems of financial institutions, functioning only as “gateway accounts.” Implementation in the case of all e-Payroll units will eliminate 1,679 type-4 accounts, used for the payment of wages. It is anticipated that all the expenditure accounts will be closed after the rollout. Meanwhile, there are currently 2,421 accounts for operating and capital expenditure but that are also used for management fund expenditure, which it will be difficult to close even after the rollout of e-SISTAFE. Among the type-2 accounts, there is currently no separation between normal expenditure and expenditure executed in accordance with management fund procedures.

^{Table 6.}

Statement of Bank Accounts by Type – December 2010

Source: CEDSIF

^{Table 6.}

Statement of Bank Accounts by Type – December 2010

Type	Description	Quantity
1	Central Revenue Office	70
2	Operating expenditure	2,034
3	Capital expenditure	387
4	Wage expenditure	1,679
5	Public and other enterprises	3
7	Program and project expenditure	129
8	Central treasury	1
9	Provincial treasuries	1
10	Debt service expenditure	2
12	Provincial revenue	62
15	Wage discounts	0
16	Revenue from third parties	22
Total		4,390

Source: CEDSIF

View Table

^{Table 6.}

Statement of Bank Accounts by Type – December 2010

Type	Description	Quantity
1	Central Revenue Office	70
2	Operating expenditure	2,034
3	Capital expenditure	387
4	Wage expenditure	1,679
5	Public and other enterprises	3
7	Program and project expenditure	129
8	Central treasury	1
9	Provincial treasuries	1
10	Debt service expenditure	2
12	Provincial revenue	62
15	Wage discounts	0
16	Revenue from third parties	22
Total		4,390

Source: CEDSIF

18. Budget execution has improved gradually, although recording of the appropriation, liquidation, and payment phases is yet to be fully implemented. Through 2009, expenditure payment was based on the annual cash flow plan, showing monthly accruals, that sectors prepared and sent to the DNT. Subsequently, the financial programming module was implemented, and programming was initially performed on a daily basis and then weekly. Financial programming has been performed monthly since 2010, and sectors are now able to indicate the period in which they intend to have funds disbursed.

19. A standardized single collection document (DUC) is not currently used in the process of revenue collection by the central government. Direct payment is still prevalent in the revenue offices of fiscal departments, including in cash, for subsequent transfer to the bank accounts of managing units in the banking system, followed by dispatch of the funds to the CUT. However, the volume of financial resources in those suspense accounts is high. The general rule should be for revenue to be transferred immediately to the CUT.

Mission Notes

20. Information on the accounting system is treated in detail in a separate report produced by the IMF consultant, Joseph Cavanagh (see summary in Annex 3). The consultant carried out his mission at the same time as the mission covered by this report, with emphasis on improvement of the general government account (CGE) and on the proposal to introduce a public accounting reform consisting of adopting international standards of public sector accounting by moving to a regime of accrual- and performance-basis accounting.

21. There are still government entities that are not covered in the OE, CUT, or, as a result, e-SISTAFE. This is the case for the INSS and various autonomous institutes’ own revenue. In addition, some entities covered by the OE do not have all the revenue and expenditure included in the budget. Table 7 shows the scope of the OE, CUT, and CGE.

^{Table 7.}

Level of Coverage of the Budget, CUT, and General Government Account

^{Table 7.}

Level of Coverage of the Budget, CUT, and General Government Account

Type of Entity	Treasury Resources	Own Resources	Treasury Single Account	General Government Account
	Budget-covered	Budget-covered
Central agencies	Yes	Yes	Yes	Yes
Autonomous institutes	Yes	Yes	Yes	Yes
Foundations	Yes	Yes	Yes	Yes
Public enterprises	No	No	No	No
Fully-owned enterprises	No	No	No	No
Partly-owned enterprises	No	No	No	No
Districts	Yes	Yes	Yes	Yes
Local governments	No	No	No	No
INSS	No	No	No	No
Funds	Yes	Yes	Yes	Yes
National Assembly	Yes	Yes	Yes	Yes
Judiciary	Yes	Yes	Yes	Yes
Administrative Court	Yes	Yes	Yes	Yes
Bank of Mozambique	No	No	No	No

View Table

^{Table 7.}

Level of Coverage of the Budget, CUT, and General Government Account

Type of Entity	Treasury Resources	Own Resources	Treasury Single Account	General Government Account
	Budget-covered	Budget-covered
Central agencies	Yes	Yes	Yes	Yes
Autonomous institutes	Yes	Yes	Yes	Yes
Foundations	Yes	Yes	Yes	Yes
Public enterprises	No	No	No	No
Fully-owned enterprises	No	No	No	No
Partly-owned enterprises	No	No	No	No
Districts	Yes	Yes	Yes	Yes
Local governments	No	No	No	No
INSS	No	No	No	No
Funds	Yes	Yes	Yes	Yes
National Assembly	Yes	Yes	Yes	Yes
Judiciary	Yes	Yes	Yes	Yes
Administrative Court	Yes	Yes	Yes	Yes
Bank of Mozambique	No	No	No	No

Regarding coverage, the authorities reported as follows:

• As a rule, all revenue and expenditure of the entities with the notation “Yes” are in the OE, including the own-generated revenue of autonomous institutes, funds, and districts. Enterprises, the INSS, and local governments are not included in the OE. The latter is therefore not yet really a general budget;

• All revenue of the entities included in the budget are in the CUT, except for a portion of the revenue used to finance the external component of investment. In addition, not all execute their expenditure directly as they do not all have access to e-SISTAFE, and in the latter case, execution occurs by advance of funds. In such instances, the system records the expenditure as if it were executed. The supporting documentation relating to the expenses for which it passed funds must be submitted subsequently;

• The external component of some projects is not covered in either the budget or the CUT. Thus, there are still projects whose external component is in the budget but not in the CUT;

• Public enterprises and local governments are covered in an annex to the CGE. Only a portion of the subsidy of some public enterprises and transfers to local governments are included in the budget; and

• The Ministry of Foreign Affairs centralizes the expenditure of embassies, which is included in the budget and executed through the CUT (transfers to embassies).

22. Those agencies and entities that execute expenditure in e-SISTAFE still have little knowledge about the reports available in the system. During the visit we made to the Ministries of Health and Agriculture and to the Marracuene District, we verified that they all assess the implementation of the system very positively and highlight the gain in productivity in budget and budget execution. They are all unanimous in stating that the system gave them greater security, facilitates quicker execution, and has better controls. Nevertheless, there is still little use and knowledge of the reports available in the system, one of the reasons being that there are lengthy delays before some reports can be generated. Before e-SISTAFE, there were generally various bank accounts that it was hard to reconcile. The closing of those accounts and the use of the CUT are seen as progress.

23. The budget is not executed as envisaged in the SISTAFE law and designed in e-SISTAFE: in practice, the appropriation, liquidation, and payment phases frequently occur at the same time. There are various reasons for this problem: (i) behavioral, considering that traditionally, execution was based on financial disbursements in twelfths, which discouraged the various sectors from planning their expenditure; (ii) managers’ perception that the financial rules take precedence (the pre-eminence of collected revenue), because the treasury sets budget ceilings equal to financial ceilings and does not allow for the appropriation, by more than the manager requests, of all expenditure already committed or of contracted totals; (iii) training: budget execution officials are still insufficiently trained to understand the importance of making entries in a timely way, even though more than 4,000 of them have already been trained; (iv) weak internal controls, with documentary compliance deemed to exist even when there is no documentation of the processes followed; and (v) the absence of other incentives that would make reporting more important, such as the requirement for financial programming to cover the entire fiscal year; the absence of charts showing, in budget execution reports, the volumes appropriated, liquidated, and paid; and the requirement that the number of the pertinent appropriation note should be shown on each contract. The authorities feel that care is needed during the current transition period to ensure that expenditure needs reported by the sectors actually match the expenditure budgeted for the period in question. The treasury is therefore currently investing in training to change the behavior of managers, so that expenditure planning can become a priority in expenditure execution. Figure 1 shows the flow of expenditure execution as it currently occurs, much like it always has been executed, despite the implementation of e-SISTAFE.

Flowchart of Existing Expenditure Execution Procedure

[Tr.: Text in table below is for insertion in Figure 1 as in source document.]

Citation: IMF Staff Country Reports 2023, 010; 10.5089/9798400230455.002.A001

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Flowchart of Existing Expenditure Execution Procedure

[Tr.: Text in table below is for insertion in Figure 1 as in source document.]

Citation: IMF Staff Country Reports 2023, 010; 10.5089/9798400230455.002.A001

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Flowchart of Existing Expenditure Execution Procedure

[Tr.: Text in table below is for insertion in Figure 1 as in source document.]

Citation: IMF Staff Country Reports 2023, 010; 10.5089/9798400230455.002.A001

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24. As a result, early payment transfers the financial risk of operations to the government, because payment occurs before the good or service is delivered. At the same time, the only guarantee that suppliers have at the moment is the payment order, whereas their guarantee should be the appropriation note. As appropriation proposals have not yet been issued during the request phase, suppliers remain uncertain that managers will have budgetary resources to honor commitments; hence, their reluctance to provide goods or services before payment.

25. To adjust working methods to what is envisaged in the SISTAFE, the most prudent action would be to issue the appropriation when a contract is awarded following the procurement process, before the signing of the contract or requisition, so as to ensure that the contract is covered in advance by an appropriation. ² When managers seek bids from suppliers, they should be able to inform the latter that budgetary resources exist for the expenditure in question. This gives assurances to suppliers that there would be resources for procurement of the good or service. Once awards have been made to successful bidders, managers sign the contract or make the requisition and, at the same time, where applicable, they should record the number of the pertinent appropriation note, guaranteeing that appropriation precedes contracting. Thus, it should be mandatory for the number of the appropriation note to be inserted on an official requisition and/or contract, as this would assure the supplier that there is budget support for the expenditure and would also make it necessary for appropriation to occur at the proper time.

26. The government’s efforts should be in the sense of guiding managers to observe the expenditure phases. There is currently no temporal separation between the phases. At this time, there is no document attesting, before payment, to the fact that the good or service was actually provided. Such a document should be an invoice from the supplier, duly certified by the manager. As the invoice is the valid document for tax purposes, it identifies the supplier (single taxpayer identification number—NUIT), the amount to be paid, and the goods and services supplied, it is sufficient a document that is proof of an expenditure. In turn, the attestation by the receiving manager, on the invoice itself, of having received the pertinent good or service, it is sufficient to report that the expenditure is ready for payment. It is at this time that the generating event occurs, establishing the government’s obligation to pay a given amount to a third party. This is the time closest to the accounting event of expenditure liquidation in an accrual-basis regime.

27. Thought should be given to the necessity/appropriateness of returning temporarily to the centralization of payments at the treasury on the basis of financial programming and depending on cash availability, if no other way is found to correct the current practice of paying for goods or services before they are supplied. Once informed by an executing manager, through the issuance of a liquidation note, that an obligation exists, the treasury is ready to issue the payment order. The issuance of payment orders in a centralized way would enable the treasury to plan the flow of payments in accordance with its cash flow plan. In general, treasuries try to keep the flow of expenditure as similar as possible to the flow of revenue. This reduces the need for a treasury to have to go to the market to meet short-term liquidity requirements. In addition, it enables the treasury to have temporary cash surpluses and to seek remuneration for them. Active investment of this type depends on the existence of various other factors, such as the forecasting of central bank remuneration for quick assets deposited daily in the single account.

28. The issuance of a payment order in e-SISTAFE makes it possible to eliminate the “receipt for payment,” insofar as the processed electronic bank order issued by the system is sufficient proof that the supplier was paid. The elimination of the “receipt” document is possible because there are two sound information systems behind this operation, namely, e-SISTAFE itself and the payment system of the financial institution involved. Figure 2 shows the operational flow in accordance with the e-SISTAFE design, except as relates to centralized payment at the treasury. We feel that such temporary centralization of payments at the treasury is advisable in terms of better liquidity management and as a way to break with the traditional execution procedure.

Flowchart of Expenditure Execution Using e-SISTAFE

[Tr.: Text in table below is for insertion in Figure 2 as in source document.]

Citation: IMF Staff Country Reports 2023, 010; 10.5089/9798400230455.002.A001

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Flowchart of Expenditure Execution Using e-SISTAFE

[Tr.: Text in table below is for insertion in Figure 2 as in source document.]

Citation: IMF Staff Country Reports 2023, 010; 10.5089/9798400230455.002.A001

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Flowchart of Expenditure Execution Using e-SISTAFE

[Tr.: Text in table below is for insertion in Figure 2 as in source document.]

Citation: IMF Staff Country Reports 2023, 010; 10.5089/9798400230455.002.A001

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29. E-SISTAFE makes it possible for financial programming to take place month by month for the entire year, but it has been the practice to release ceilings for appropriation and financial disbursements in the same amounts and only for the following month. The DNT feels that the authorization of monthly appropriation ceilings does not justify suppliers’ claims of payment uncertainty and delays, as it is the executing units that establish expenditure payment priorities by indicating when they intend to have funds available, and everything requested has been released. Nevertheless, there is still little tradition in the design of budget execution planning, and this causes expenditure bunching in the short term. As there is no proper recording of the time when the expenditure commitment (appropriation) occurs or when the service is actually provided or the good actually supplied (liquidation), this information has not been properly captured by e-SISTAFE. Thus, the DNT is unaware of the volume of commitments actually already assumed. In addition to strengthening the guidance given to managers as regards the proper use of events, and until internal controls are improved, it is important to create a clearer separation of responsibilities. For example, it should be mandatory to insert the number of the pertinent appropriation note on official requisitions and/or contracts. This would assure the supplier that the expenditure in question has budget support and would make timely appropriation mandatory. In turn, financial programming based on liquidated expenditure would force the recording of liquidation. To this end, managers must understand the importance of the liquidation phase. The CEDSIF believes that for the prevention of an abrupt reversal of the current process of gradual decentralization of the execution of budget operations, steps should first be taken to clarify to suppliers the change in the current situation, and only afterward, if still necessary, should there be a return to the centralization of payments at the DNT. Notwithstanding, to test the impact of the measure, some agency or entity such as the Ministry of Health, which demonstrated during the mission that it had superior knowledge of the expenditure process, could be used as a pilot. Centralizing payments at the DNT would ensure that suppliers are all treated in the same way. From the system standpoint, we envisage no problem with automating payments to suppliers; they could take place, for example, every 10 days and never more than 30 days after liquidation.

30. Although the CUT is operating fully from the standpoint of e-SISTAFE, the revenue accounts continue to carry balances at each day-end insofar as revenue is not classified. This observation had already been made during the mission of 2010. Although we are convinced that the daily electronic transfer of balances is possible immediately, we feel that the problem will be definitively resolved when the collection network is implemented. As can be seen in Table 8, there is a huge volume of financial resources deposited outside the CUT. This reduces the efficiency of financial management by the treasury.

^{Table 8.}

Cash Balances at Year-end

(in thousands of meticais)

Source: 2007, 2008, and 2009 CGE. The CUT balance in 2010 was Mt 5,532,264,000.

^{Table 8.}

Cash Balances at Year-end

(in thousands of meticais)

Type of Account	2007	2008	2009
Treasury single account	2,009,463	2,808,995	4,195,992
Recipients	2,578,049	2,992,592	3,118,423
Other treasury accounts	3,425,760	4,141,718	6,292,003
Other government accounts	10,249,156	9,093,184	7,990,684
Total	18,262,428	19,035,558	21,597,002

Source: 2007, 2008, and 2009 CGE. The CUT balance in 2010 was Mt 5,532,264,000.

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^{Table 8.}

Cash Balances at Year-end

(in thousands of meticais)

Type of Account	2007	2008	2009
Treasury single account	2,009,463	2,808,995	4,195,992
Recipients	2,578,049	2,992,592	3,118,423
Other treasury accounts	3,425,760	4,141,718	6,292,003
Other government accounts	10,249,156	9,093,184	7,990,684
Total	18,262,428	19,035,558	21,597,002

Source: 2007, 2008, and 2009 CGE. The CUT balance in 2010 was Mt 5,532,264,000.

31. An effort has been made to meet the cooperation partners’ requirements for specific controls, but there is a need to improve the quality of the information generated and facilitate consulting on execution. Considering that one of the goals of the PQG is to increase transparency in the GFP and foster the culture of accountability, it would be appropriate to study the advisability of creating a portal where each citizen can monitor budget and financial execution. The portal would therefore meet the monitoring requirements of the cooperation partners. In addition to increasing transparency considerably, this measure would encourage the cooperation partners to accelerate the input of projects into e-SISTAFE, insofar as they would be able to monitor their implementation. ³

32. It is essential for priority to be given to completion of the e-SISTAFE rollout. Only after the implementation of e-SISTAFE in all the entities covered by the budget will it be possible to consolidate the CUT and eliminate the various government bank accounts still maintained at financial institutions. To this end, it is important to stress and assure units that the flow of resources through the CUT, once supported by the accounting system (e-SISTAFE), does not take financial autonomy away from the entities.

33. Entities that receive resources from the treasury and have access to e-SISTAFE should execute the portion of resources from the treasury directly in the system. This is a partial approach until all execution can occur through the OE. In that case, the DNT would function like a bank for the financially autonomous entities, and e-SISTAFE would be used for the “home banking” of the entities that collect their own resources, so that no funds would remain outside the CUT. Currently, the treasury transfers own-generated financial resources to the accounts of the autonomous entities; however, the CUT is fully structured to operate as a financial institution for those entities. Payments can be made directly through the CUT to the accounts of suppliers (payment for goods and services) and civil servants (wages). Only in exceptional circumstances should off-CUT transfers be used.

34. A public debt control module has not yet been implemented in e-SISTAFE, but this is not a problem, as there is already a specific system in place for such control. The DNT’s debt department uses the Commonwealth system that is known and used in various countries. There is a plan to develop a public debt management functionality in e-SISTAFE, but the mission feels this is not a priority for the short term. In addition, consideration should be given in future, as one of the alternatives, to ensuring simple interoperability between the two systems, thus avoiding the development of yet another system from scratch, in circumstances where there is already a tested, fully functioning solution that meets the needs of the debt department. According to data from the DNT, there are two types of securities issued by the treasury to cover its financial needs. Treasury bills are securities to cover short-term expenditure and are deposited with the Bank of Mozambique. Treasury bonds are for medium- and long-term financing, are issued on the domestic market, and have the appeal of yielding, on average, 1 percent more than the key rate of the Bank of Mozambique. Nevertheless, steps are needed to ensure that increasingly more debt information (amounts, interest, and debt service payments) is recorded in the accounts in a timely way.

35. In the ongoing revenue control project based on the development of e-Taxation and the electronic single window (JUE), attempts should be made to introduce the DUC for the collection of all government revenue, including own-generated revenue. Perfecting the collection process should be considered in an integrated way, with the development of the revenue collection network module and the planning and budget module, in coordination with the budget execution module and the management of state assets module, all in the e-SISTAFE environment. The basic premise arises from the principle that revenue collection, understood in its broadest form as “all inflows to the public treasury,” should be executed through the banks, in strict observance of the cash unity principle. The basic conceptual model of revenue inflows to the CUT, maintained at the Bank of Mozambique, should generally be implemented in the following steps:

• Citizens in possession of the DUC make payments at accredited banking institutions;

• Banking institutions transfer to the Bank of Mozambique the full sums collected, within a given time frame established in the contract concluded between the administration and the banking institutions;

• The Bank of Mozambique credits the funds in question to the CUT;

• The details from all fields of the DUC are forwarded by the collecting banking institution, within the time frame established between the treasury and the banking institution, to the treasury and the revenue authority (AT), which will, on behalf of the entities responsible for collection, classify the revenue in e-SISTAFE, e-Taxation, and the JUE, for accounting, financial, budget, and fiscal purposes;

• The inflow of revenue into the CUT should be reconciled daily, through an offsetting entry on the “gross revenue for classification” liabilities account;

• In processing those details, the administration should ensure that the taxpayer information relating to fiscal secrecy does not go through e-SISTAFE; and

• As required with revenue classification, revenue recorded in each source goes, in e-SISTAFE, toward the cash assets of the treasury or of the managing unit responsible for the collection (Figure 3).

Flowchart of Revenue Entering the CUT – Integration of the Single Window, e-Taxation, and e-SISTAFE

Citation: IMF Staff Country Reports 2023, 010; 10.5089/9798400230455.002.A001

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Flowchart of Revenue Entering the CUT – Integration of the Single Window, e-Taxation, and e-SISTAFE

Citation: IMF Staff Country Reports 2023, 010; 10.5089/9798400230455.002.A001

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Flowchart of Revenue Entering the CUT – Integration of the Single Window, e-Taxation, and e-SISTAFE

Citation: IMF Staff Country Reports 2023, 010; 10.5089/9798400230455.002.A001

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36. Finally, it is necessary to improve coordination of the information produced by the budget, accounting, and fiscal statistics departments. The mission from the IMF’s African Department established that the data in the fiscal statistics were produced with lags and irregularities, coordination between the DNO and the DNCP was weak, and the financial position in the accounts of the central government was not properly reconciled with the monetary data.

Recommendations

• The OE should contain all the revenue and expenditure of the central government agencies, autonomous institutes, foundations, funds, the INSS, provinces, districts, the Legislature, and the Judiciary, which, in turn, should deposit all revenue into the CUT and execute all revenue and expenditure through e-SISTAFE (Table 1, items A.1.1.1, A.1.2.1, and A.1.3.1);

• The single budget, CUT, and e-SISTAFE are the core pillars of government revenue and expenditure control and should therefore all have the same scope. Action is needed to ensure that the tools used to control government revenue and expenditure have the same scope (Table 1, item B.2.2.1);

• The rules should clearly define the exceptions allowing for non-use of the CUT: for example, only entities in locations where there are no resources for using the system, foreign currency-denominated accounts in banks abroad (embassies, for example), and accounts for dealing with special situations that must be regulated by the treasury. Even in these situations, balances maintained outside the CUT should be small (Table 1, item B.2.1.1.2);

• Collect all the revenue and execute all the expenditure covered in the OE (except enterprises) through the banks, in the manner established by the MF, in strict observance of the cash unity principle, it being prohibited to create bank accounts without the authorization of the MF, which should establish a mechanism for checking whether financial institutions are complying with this rule. This premise is being implemented in Mozambique but is not yet an absolute truth (Table 1, item B.2.1.1.3);

• To raise the level of control over the entities’ bank accounts and streamline rollout efforts, the treasury should restrict the use of bank accounts, depending on the type of flows involved. There are still over 4,000 bank accounts of public entities. The large number notwithstanding, it is important to know for which type of flows these accounts were created. Thus, the accounts can be broken down, for example, into accounts of receiving entities (with no access to e-SISTAFE), management fund accounts, collection accounts, external project accounts, public enterprise accounts, and foreign currency-denominated accounts. The authorities should thus analyze the use of each type of account. For instance, it may not be a priority to close down the management accounts, as even after the full implementation of e-SISTAFE it will probably be necessary to maintain accounts of this type. Also, the collection accounts would be closed only after the collection network has been implemented, as the existing accounts would be mere entries in the accounting system of the financial institution involved for separating out resources in transit before their transfer to the CUT (Table 1, item B.2.1.1.1);

• In the classification of bank accounts, create a breakdown to identify accounts that are specifically for the expenditure of management funds and expenditure raised for the creation of those accounts;

• Generate quarterly reports on the balances of off-CUT accounts (Table 1, item B.2.1.1.4);

• Temporarily centralize the payment phase at the treasury and change the method of expenditure execution so as to record the appropriation phase at the same time as the procurement phase and the liquidation phase, when there is proof of the delivery of the good or service in question by the supplier (Table 1, item B.3.3.1.2); and

• Improve the reconciliation between the fiscal and monetary data, produce the fiscal statistics regularly, and better coordinate the work of the DNO, DNCP, and the monetary department (Table 1, item C.1.2.1.5).

Current Situation

37. Progress has been made in the improvement of transparency, internal controls, internal audit, and external audit. More and more fiscal information is available on the government web pages, and there are various projects under study and being implemented for increasing that information.

38. The IGF is introducing improvements in the training of its teams, the coordination of internal audit actions, and liaison with the TA, which represent considerable progress in the enhancement of controls. The IGF is in the final phase of recruiting new auditors. The IGF is staffed with about 130 persons, 90 of whom are auditors. Approximately 450 internal auditors carry out government internal audits. Coverage is deemed adequate in the central agencies but still insufficient in the provinces. The hiring is envisaged of 80 new technicians in 2011 to work in the IGF and the various government internal audit units. A 160-hour training course and on-the-job training will be provided. The Internal Control System Coordinating Board holds periodic meetings to discuss internal audit matters of interest. For the improvement of coordination, participants in these meetings of the board have included members of the Government Inspectorate General, the agency responsible for disciplinary administrative processes.

39. The IGF has improved liaison with the TA. The two agencies share annual audit plans. The IGF prepares reports on audits of the accounts of the municipalities in support of opinions by the TA on the accounts; its technicians have participated in training given by the TA; and it is currently involved in the preparation of an opinion, with information and in the appropriate format, to enable the TA to prepare a case for an assessment of managers’ accounts. Accordingly, whenever the IGF observes any irregularity that warrants a penalty, it will be able to use its own internal audit reports for assessing the pertinent managers’ accounts.

40. In examining the 2009 accounts, the TA observed that there had been expenditure processed without adequate supporting documentation, involving the sum of Mt 530 million. Based on this observation, the IGF performed an audit to ascertain the reasons for this occurrence. It found that the bulk of the amount in question related to inadequate training in the pertinent processes. Thus, the sum declined to about Mt 70 million. The IGF concluded that there was a need to improve the training of officials involved in budget and financial management. In addition, internal control staff had acted inefficiently, as they had not recorded documentary noncompliance in any of the irregular situations found. One of the reasons for the absence of records of noncompliance was that the recording of documentary noncompliance in e-SISTAFE blocks the payment of expenditure. In practice, therefore, a problem arises if internal control officers record such events. It would be advisable to change the documentary compliance mechanism to make it more effective.

41. A seminar was held in 2010 to establish a clearer definition of the roles of internal control and external control. At this seminar, organized by the World Bank, the IGF and the TA were able to discuss and clarify the roles of the various agencies that act in the area of internal control.

42. The IGF has tried to broaden the use of e-SISTAFE by the internal control agencies (OCIs). Procurement procedures were initiated in 2010 for the acquisition of facilities to install e-SISTAFE terminals in the OCIs. Programs were also developed for internal audit training in Mozambique and abroad for the OCIs.

43. Three administrative courts (TAs) were set up in 2010 in the provinces. The creation of four more is planned for 2011, to be followed by others over the next few years until there is a TA in each of the 11 provinces. The provincial TAs thus function as courts of first instance for proceedings on the accounts of provincial agencies, and the [central] TA operates as the audit court of second instance.

44. The TA is developing a vast training program. This training program is aimed at making it possible by 2014 to certify TA auditors in the areas of compliance, works, and performance, as well as, in the future, in environmental and IT audits. A manual is being compiled on the auditing of works. The process of certification will be covered by an international certifying body. Plans are already under way for international public bidding to hire a consultant to formulate a curriculum for certification in auditing.

45. The TA feels there is still a need to establish accounting records manually and to maintain written records of payments even when there is electronic proof of them in e-SISTAFE, because there are rules requiring this. The rules appear to be those in the ministerial instruction approving the SISTAFE manual and the regulations on administrative processes. The TA feels that the weaknesses of the internal controls explain the fears that written documents will no longer be required.

Mission Notes

46. The form and system of internal control used in the managing units have not been very efficient. The IGF observed that the way in which internal control officers act does not allow for the prevention of payments using improperly formalized processes. This is so because documentary compliance, such as it exists, blocks continuity of payment. In addition, internal control has not prevented expenditure from being paid before it has been liquidated. This mission verified, from the processes it studied at ministries and in a district, that in virtually all the processes for the supply of goods and services, payment for goods or services was made before delivery. We observed that execution officers did not have a clear understanding of the proper sequence of administrative actions and used e-SISTAFE merely as a register of payment orders. Internal control officers, either because they are not aware of the proper sequence or because they cannot alone change a traditional practice, end up not preventing payment in cases where the processes are poorly formalized or executed in an incorrect order. Very strong pressure is thus brought to bear on internal control officers linked hierarchically to the managers, so that even when the required documentation does not exist, they are not in a position to suspend the payment process. It is therefore necessary to change the way in which documentary compliance is processed. An alternative is for the internal control officer to identify the documents that should be part of the procedure but, where these are absent, does not block the execution of the subsequent phases. It should be up to the principal manager rather than to officers operating the system to decide whether or not to continue expenditure execution.

47. Documentary compliance should be changed so that it becomes more informative and enables the internal audit bodies to be alerted that a process was followed in another way than that envisaged in the rules and in the system. This mission suggests that questionnaires be included in the system itself so as to provide better guidance to internal control officers and give better indications of the information needed to support expenditure. Thus, for example, in the case of typical expenditure processes pertaining to the supply of goods or services, e-SISTAFE should produce a checklist on which the internal control officer is required to respond to questions such as the following:

- The invoice is part of the process:	Yes ( ) No ( ) Not applicable ( );
- The liquidated amount is equal to the invoice amount:	Yes ( ) No ( ) Not applicable ( );
-The recipient of the liquidation note is the invoice issuer:	Yes ( ) No ( ) Not applicable ( );
- Proof is given of delivery of the good or service:	Yes ( ) No ( ) Not applicable ( );
- TA clearance is necessary:	Yes ( ) No ( ) Not applicable ( ).

View Table

- The invoice is part of the process:	Yes ( ) No ( ) Not applicable ( );
- The liquidated amount is equal to the invoice amount:	Yes ( ) No ( ) Not applicable ( );
-The recipient of the liquidation note is the invoice issuer:	Yes ( ) No ( ) Not applicable ( );
- Proof is given of delivery of the good or service:	Yes ( ) No ( ) Not applicable ( );
- TA clearance is necessary:	Yes ( ) No ( ) Not applicable ( ).

For each type of expenditure a similar questionnaire should be prepared. The IGF can help in the preparation of these questionnaires, given its familiarity with the legal and normative obligations incumbent on each type of process.

48. As the general practice is to make payments before the pertinent expenditure has been liquidated, it would be important to conduct a detailed analysis of the reasons for the resistance to changes in the budget execution procedures. Several of the reasons are cultural, which is why a continuing process of training can help change behaviors over the long term. But others can be linked to external factors, such as the reluctance of suppliers to agree to supply a good or service before payment, the very way in which execution was decentralized, and the little action taken by other departments to align the operational payment procedures, as in the case of the budget and assets departments. The budget department should help guide and control the appropriation phase, and the assets department should help in the expenditure liquidation phase. Although there are signed contracts for expenditure execution throughout the year, the budget department is unable to ascertain the amount of budget funds already actually committed. On all contracts implemented over a period of more than a month, the pertinent appropriation number should be duly recorded. Similarly, upon the conclusion of each new contract for the purchase of durable goods, the assets department should take steps to monitor the implementation of the respective public bidding procedures and, in the phase of the liquidation of such a good, should require that it be inventoried upon its purchase. Table 9 shows some of the control points pertinent to each department where information from e-SISTAFE is underused.

^{Table 9.}

Budget and Financial Execution Control Points

^{Table 9.}

Budget and Financial Execution Control Points

Department	Appropriation	Liquidation	Payment	Control Points
Budget	Identifies how much of the budget is already committed. Very important for continuous contracts and investments.	Identifies that the budget is executed in the given amount.	Identifies that the obligation was paid.	May point to potential commitments of budget sources in volumes above the norms.	Signals the rate of budget execution, identifying if it was slower than desirable.
Finance	Signals the potential for possible payments in the future.	[Identifies the] timing of the obligation to pay.	Identifies the amounts to be withdrawn from the CUT.	A difference between the appropriation and liquidation identifies the amounts that will affect financial programming in subsequent periods.	A difference between the liquidation and payment identifies pending obligations. These are the so-called fluctuating debts.
Assets	Identifies the existence of procurement procedures for the purchase of goods and potential goods to be inventoried.	Identifies expenditure that should be reflected in the inventory in the case of durable goods.		A difference between the appropriated expenditure and the total expenditure in the bid indicates the potential absence of public bidding procedures.	A difference between the amount in the inventory and the liquidation amount identifies the potential absence of inventorying.
Internal audit	Identifies the existence of a requisition for expenditure and a contract awarded to a third party.	Identifies that there should be an invoice and certification by the manager that a good or service was provided.	Identifies the existence of a payment order to a third party.	Documentary noncompliance identifies the potential absence of legitimate backing for the execution of each of the phases.
Accounting	Identifies that budget funds should be earmarked for the expenditure in question.	Identifies an obligation for the government to make a payment and the receipt of a good to be inventoried in due course.	Identifies a flow on a bank account.	Identifies the existence of other accounting events arising from the transactions in question, such as a flow from a bank account, asset accounts, or debt accounts, as well as obligations payable.

View Table

^{Table 9.}

Budget and Financial Execution Control Points

Department	Appropriation	Liquidation	Payment	Control Points
Budget	Identifies how much of the budget is already committed. Very important for continuous contracts and investments.	Identifies that the budget is executed in the given amount.	Identifies that the obligation was paid.	May point to potential commitments of budget sources in volumes above the norms.	Signals the rate of budget execution, identifying if it was slower than desirable.
Finance	Signals the potential for possible payments in the future.	[Identifies the] timing of the obligation to pay.	Identifies the amounts to be withdrawn from the CUT.	A difference between the appropriation and liquidation identifies the amounts that will affect financial programming in subsequent periods.	A difference between the liquidation and payment identifies pending obligations. These are the so-called fluctuating debts.
Assets	Identifies the existence of procurement procedures for the purchase of goods and potential goods to be inventoried.	Identifies expenditure that should be reflected in the inventory in the case of durable goods.		A difference between the appropriated expenditure and the total expenditure in the bid indicates the potential absence of public bidding procedures.	A difference between the amount in the inventory and the liquidation amount identifies the potential absence of inventorying.
Internal audit	Identifies the existence of a requisition for expenditure and a contract awarded to a third party.	Identifies that there should be an invoice and certification by the manager that a good or service was provided.	Identifies the existence of a payment order to a third party.	Documentary noncompliance identifies the potential absence of legitimate backing for the execution of each of the phases.
Accounting	Identifies that budget funds should be earmarked for the expenditure in question.	Identifies an obligation for the government to make a payment and the receipt of a good to be inventoried in due course.	Identifies a flow on a bank account.	Identifies the existence of other accounting events arising from the transactions in question, such as a flow from a bank account, asset accounts, or debt accounts, as well as obligations payable.

49. The DNCP should amend the ministerial instructions that appear to be preventing an end to the requirement for the “receipt” and the “accounting book” in the case of expenditure executed directly in e-SISTAFE. The DNCP should amend the rule to make it clear that e-SISTAFE possesses other internal controls that make it unnecessary to keep those manual documents. In addition, managers should be amply informed that in cases of direct execution through the system, there is no need to include these documents in the expenditure processes. The proposal is to eliminate unnecessary manual steps and encourage managers to migrate to the system, with a view to making expenditure execution easier. Finally, the elimination of these processes frees up human resources to provide better control of the more important act of budget and accounting execution that is the proper substantiation of expenditure liquidation, that is, proof that the contracted good or service was actually supplied.

Recommendations

• Consider making changes as regards documentary compliance in e-SISTAFE with a view to providing better information on the documents that must be part of each type of budget and financial execution process. For example, questionnaires can be created that guide the internal control officer to identify more clearly which information and documents are to be part of the processes (Table 1, item D.2.2.1.1);

• Consider amending the ministerial instruction requiring the “receipt” in the case of payments made through e-SISTAFE and accounting book entries for executing units that use e-SISTAFE (Table 1, item C.1.4.1.1); and

• Take action concerning the culture of paying before receipt of a good or service, through a program of training and clarification (Table 1, item B.5.3.1.1).