I. Credibility of the Budget
Scores by Dimension
Overall Indicator Score
1. Aggregate expenditure out-turn compared to original approved budget
C
Notes:
1.1 The difference between actual primary expenditure and the originally budgeted primary expenditure (i.e. excluding debt service charges, but also excluding externally financed project expenditure)
C
Notes:
Actual primary expenditure deviated from expenditure estimates by 14% in one of the three years considered. Deviations were -5%, -5% and -14% respectively. (P. 12)
2. Composition of expenditure out-turn compared to original approved budget
B
Notes:
2.1 Extent of the variance in expenditure composition during the last three years, excluding contingency items (the methodolodgy to rate this dimension is set out in the footnote of the PFM PMF booklet)
B
Notes:
Deviations are largest for relatively small allocations. (P. 12)
2.2 The average amount of expenditure actually charged to the contingency vote over the last three years
NU
Notes:
3. Aggregate revenue out-turn compared to original approved budget
A
Notes:
3.1 Actual domestic revenue collection compared to domestic revenue in the originally approved budget
A
Notes:
Domestic revenue collection exceeded 97% in all three of the last three budget years. The ratio of aggregate revenue out-turn to original approved budget were 298%, 182% and 129% respectively. (P. 13)
4. Stock and monitoring of expenditure payment arrears
D+
Notes:
4.1 Stock of expenditure payment arrears (as a percentage of actual total expenditure for the corresponding fiscal year) and any recent change in the stock
D
Notes:
The ratio of expenditure arrears to total expenditure for two of the three years was above 10%. The data shows an increasing trend over the three years. (P. 14)
4.2 Availability of data for monitoring the stock of expenditure payment arrears
A
Notes:
As part of the routine financial reporting a suspense account is maintained to report on outstanding payments. The stock of expenditure arrears is reported on a monthly basis which permits an extraction of an aggregate ageing report. (P. 14)
II. Comprehensiveness and Transparency
Scores by Dimension
Overall Indicator Score
5. Classification of the budget
C
Notes:
5.1 The classification system used for formulation, execution and reporting of the central government's budget
C
Notes:
The budget formulation and execution is based on economic and administrative classifications. Using a mapping table these can produce consistent documentation according to GFS standards. (P. 14)
6. Comprehensiveness of information included in budget documentation
B
Notes:
6.1 Share of the listed information under PI-6 in the PFM PMF booklet in the budget documentation most recently issued by the central government (in order to count in the assessment, the full specification of the information benchmark must be met)
B
Notes:
Budget documentation fulfils 6 benchmarks. The Budget documents are fairly comprehensive. (P. 16)
7. Extent of unreported government operations
A
Notes:
7.1 The level of extra-budgetary expenditure (other than donor funded projects) which is unreported i.e. not included in fiscal reports.
A
Notes:
While the Kuwait Investment Authority does not report on its investment portfolio, all of its expenditures are reflected within the budget. All revenues generated directly by the MDAs are transferred to the Consolidated Fund. Intelligence and security agency budgets are reported on, if not in detail. There is no evidence of off balance sheet debt instruments being used to finance subsidies. The consolidation process of the final accounts includes an aggregate reconciliation process that would reveal any gaps in the sources and uses of funds. The level of unreported extra-budgetary expenditure remains insubstantial. (P. 16)
7.2 Income/expenditure information on donor-funded projects which is included in fiscal reports.
NR
Notes:
Budget is entirely own-funded. (P. 16)
8. Transparency of inter-governmental fiscal relations
B+
Notes:
8.1 Transparent and rules based systems in the horizontal allocation among SN governments of unconditional and conditional transfers from central government (both budgeted and actual allocations);
A
Notes:
The transfers to local authorities are transparent and are based upon a budget process that is fully integrated into the central budget process. The successful cash management implemented by the Treasury assures predictable disbursements to the SNG entities. Disbursements to SNG entities are made monthly (P. 17)
8.2 Timeliness of reliable information to SN governments on their allocations from central government for the coming year;
C
Notes:
The SNG entities are not provided budget ceilings as part of the budget call circular at the start of the budget preparation cycle. They are only provided with their allocations shortly before printing of the proposed budget and so too late for significant budget changes to be made. (P. 18)
8.3 Extent to which consolidated fiscal data (at least on revenue and expenditure) is collected and reported for general government according to sectoral categories.
A
Notes:
The SNG entities prepare budgets which are integrated into the national budget documentation and submitted before parliament as part of the budget approval process. They also prepare financial reports consistent with the National Budget and which is consolidated into a financial report within 4 months of the end of the fiscal year. (P. 18)
9. Oversight of aggregate fiscal risk from other public sector entities.
A
Notes:
9.1 Extent of central government monitoring of AGAs and PEs.
A
Notes:
All Public Enterprises submit audited financial statements to the central government. Also quarterly operational and financial statements are reported on. These remain an internal document. (P. 19)
9.2 Extent of central government monitoring of SN government's fiscal position
A
Notes:
SNGs cannot on their own authority generate fiscal liabilities for the central government. Any loan that binds the Consolidated Fund requires the written approval of the Minister of Finance. (P. 19)
10. Public access to key fiscal information
A
Notes:
10.1 Number of the above listed elements of public access to information that is fulfilled (in order to count in the assessment, the full specification of the information benchmark must be met)
A
Notes:
Five of the six listed elements of information are made available to the public access via the web and other means. (P. 19)
III. Policy-Based Budgeting
Scores by Dimension
Overall Indicator Score
11. Orderliness and participation in the annual budget process
C+
Notes:
11.1 Existence of and adherence to a fixed budget calendar;
A
Notes:
A clear annual budget calendar exists that is generally adhered to and the calendar allows eight weeks for MDAs to meaningfully complete their detailed estimates of revenue and expenditure. (P. 20)
11.2 Clarity/comprehensiveness of and political involvement in the guidance on the preparation of budget submissions (budget circular or equivalent);
D
Notes:
The Ministry of Finance issues comprehensive and clear budget circulars but without ceilings. MDAs are guided by previous year’s amounts. MDAs are not informed of the budget allocations at the close of the budget cycle immediately before the submission of the detailed estimates to the Council of Ministers. Consequently they so are provided no opportunities for the adjustment of departmental budgets (P. 20)
11.3 Timely budget approval by the legislature or similarly mandated body (within the last three years);
C
Notes:
In two out of years reviewed under this assessment, the budget was signed into law prior to the start of the fiscal year. In one of the years it was approved three months after the start of the fiscal year. (P. 20)
12. Multi-year perspective in fiscal planning, expenditure policy and budgeting
D
Notes:
12.1 Preparation of multi -year fiscal forecasts and functional allocations
D
Notes:
Forecasts of fiscal aggregates are prepared, however Kuwait does not adopt a multi-year perspective to its budget formulation process. These fiscal forecasts are done on the basis of the economic classifications but are not linked to the budget aggregates. (P. 21)
12.2 Scope and frequency of debt sustainability analysis
D
Notes:
Neither the Ministry of Finance nor the Central Bank of Kuwait carry out regular DSAs for either domestic or domestic debt. It should be noted that the debt portfolio (limited to monetary instruments) remains very small. (P. 21)
12.3 Existence of sector strategies with multi-year costing of recurrent and investment expenditure;
D
Notes:
Sector strategies are not prepared other than for project submission purposes. (P. 21)
12.4 Linkages between investment budgets and forward expenditure estimates.
D
Notes:
The recurrent budget does not reflect recurrent cost implications emanating out of forward investment budget estimates. (P. 21)
IV. Predictability and Control in Budget Execution
Scores by Dimension
Overall Indicator Score
13. Transparency of taxpayer obligations and liabilities
B+
Notes:
13.1 Clarity and comprehensiveness of tax liabilities
A
Notes:
For all major taxes the obligations are well specified in the Acts and in regulations. There is some discretion in the area of penalties applied. These are not yet guided by policy documents or guidelines even though this was the practice in the past. (P. 22)
13.2 Taxpayer access to information on tax liabilities and administrative procedures.
A
Notes:
KTD shares this information with taxpayers. (P. 22)
13.3 Existence and functioning of a tax appeals mechanism.
C
Notes:
The Ministry applies an administrative appeal mechanism. The Objections unit, separate and independent of the audit unit, is responsible for the timely resolution of objections. Transparent administrative procedures have been developed. (P. 22)
14. Effectiveness of measures for taxpayer registration and tax assessment
B
Notes:
14.1 Controls in the taxpayer registration system.
B
Notes:
Corporate taxpayers are registered in databases for income tax and levies. (P. 22)
14.3 Planning and monitoring of tax audit and fraud investigation programs.
B
Notes:
In the case of income tax, audit and fraud investigation are based upon informal risk assessment criteria undertaken by a tax department audit unit. A rules-based selection of tax audits and fraud investigation is not yet fully implemented. (P. 22)
14.2 Effectiveness of penalties for non-compliance with registration and declaration obligations
B
Notes:
Penalties are moderate (1%) however once an assessment has been made, compliance procedures are fairly persistent and government contracting procedures can be used to enforce payment. (P. 22)
15. Effectiveness in collection of tax payments
A
Notes:
15.1 Collection ratio for gross tax arrears, being the percentage of tax arrears at the beginning of a fiscal year, which was collected during that fiscal year (average of the last two fiscal years).
A
Notes:
Overall arrears are very small, but there is a backlog in dealing with some complex tax files. (P. 23)
15.2 Effectiveness of transfer of tax collections to the Treasury by the revenue administration.
A
Notes:
Immediate. (P. 23)
15.3 Frequency of complete accounts reconciliation between tax assessments, collections, arrears records and receipts by the Treasury.
A
Notes:
Monthly. (P. 23)
16. Predictability in the availability of funds for commitment of expenditures
C+
Notes:
16.2 Reliability and horizon of periodic in-year information to MDAs on ceilings for expenditure commitments
C
Notes:
MDAs are provided with a monthly forecast of budget releases that reflect the updated annual pro forma cash flows. These allocations are updated on a monthly rolling basis. (P. 24)
16.3 Frequency and transparency of adjustments to budget allocations, which are decided above the level of management of MDAs.
A
Notes:
Due to effective budgetary allocation controls, all budget head virements are made subject to the approval of MDA minister. Any re-allocations above this require the approval of the Assembly. (P. 24)
16.1 Extent to which cash flows are forecast and monitored
A
Notes:
Draw down schedules (cash flow forecasts) are prepared annually by the Departments. The Ministry informed by the pro forma cash flows and cash availability projections allocates funds on an annual basis by entering Draw Down Schedules at the vote, and programme level. These are updated monthly based upon updated cash flow projections. It is not clear that across all Departments the pro forma cash flows are prepared on the basis of detailed procurement plans. (P. 24)
17. Recording and management of cash balances, debt and guarantees
A
Notes:
17.1 Quality of debt data recording and reporting
A
Notes:
Comprehensive monthly accounts of securities and debit balances at banks. (P. 24)
17.2 Extent of consolidation of the government’s cash balances
A
Notes:
The consolidated fund is operated as a treasury single account and daily balances of the government’s cash position are calculated on a daily basis. (P. 24)
17.3 Systems for contracting loans and issuance of guarantees.
A
Notes:
All central government loans and guarantees must be approved by the Minister of Finance. However, KIA guarantees may be offered separately. (P. 24)
18. Effectiveness of payroll controls
B+
Notes:
18.1 Degree of integration and reconciliation between personnel records and payroll data.
A
Notes:
The payroll management system, allows for a direct link between the establishment and personal roll and the payroll databases. The system limits amendments to the personnel database with new hires requiring accounting officer approval. (P. 25)
18.2 Timeliness of changes to personnel records and the payroll
B
Notes:
Payrolls are controlled monthly and changes are effected within the next month pay period. Retroactive changes are occasional and typically are addressed within three months.(P. 25)
18.3 Internal controls of changes to personnel records and the payroll.
A
Notes:
The types of changes that can be made are restricted. Only authorised persons are granted access through passwords. All entries create an audit trail. (P. 25)
18.4 Existence of payroll audits to identify control weaknesses and/or ghost workers.
B
Notes:
All payrolls have to be verified monthly by the employee’s supervisor. Payroll audits are carried out on an annual basis with complete coverage occurring at least one every three years. (P. 25)
19. Transparency, competition and complaints mechanisms in procurement
D+
Notes:
19.1 Transparency, comprehensiveness and competition in the legal and regulatory framework
D
Notes:
Monetary thresholds set in the Public Tenders Law are outdated and artificial splitting of procurement is common. Certain key procuring entities have been granted partial or complete exclusion of their procurement from the application of the Law. Some mega-projects appear to be allocated directly, bypassing the normal procedures. (P. 26)
19.2 Use of competitive procurement methods
D
Notes:
There are no clear criteria for use of less competitive methods. (P. 26)
19.3 Public access to complete, reliable and timely procurement information
C
Notes:
A complaints procedure exists, but is not formalized, and complaints are first seen by the Central Tenders Committee, which would have approved the original award. (P. 26)
19.4 Existence of an independent administrative procurement complaints system
NU
Notes:
20. Effectiveness of internal controls for non-salary expenditure
C+
Notes:
20.1 Effectiveness of expenditure commitment controls.
A
Notes:
All payments are made through an automated payments system that has an effective built in commitment control that limit commitments to approved budget allocations. (P. 27)
20.2 Comprehensiveness, relevance and understanding of other internal control rules/ procedures
B
Notes:
The other control rules and procedures incorporate a comprehensive set of controls that are widely understood. In some cases there appears to be unnecessary duplication that leads to inefficiency. (P. 27)
20.3 Degree of compliance with rules for processing and recording transactions
C
Notes:
Although compliance to rules is generally considered high there are concerns about the occasional use of informal procurement procedures that bypass controls such as the use of slicing. (P. 27)
21. Effectiveness of internal audit
D+
Notes:
21.1 Coverage and quality of the internal audit function.
D
Notes:
Internal audit is operational in all of the MDAs. However, for the most part internal audit is limited to financial audits and compliance checking carried out in a pre-audit mode. There is very little staff time (less than 20%) allocated to systemic issues. . (P. 28)
21.2 Frequency and distribution of reports
B
Notes:
Internal Audit reports are prepared on a regular basis against annual audit work plans. Reports are submitted to the State Audit Bureau. . (P. 28)
21.3 Extent of management response to internal audit findings.
B
Notes:
Reports are prepared regularly with recommendations made for corrective actions to be taken, these recommendations are in most cases responded to comprehensively and in a timely fashion. (P. 28)
V. Accounting, Recording and Reporting
Scores by Dimension
Overall Indicator Score
22. Timeliness and regularity of accounts reconciliation
B+
Notes:
22.1 Regularity of bank reconciliations
A
Notes:
All treasury managed bank accounts are reconciled to the cash book on a monthly basis within 4 weeks of the close of the month. (P. 28)
22.2 Regularity of reconciliation and clearance of suspense accounts and advances.
B
Notes:
As part of the year end closing procedures all suspense accounts (expenditure) are force closed within 2 months of the close of each year to facilitate the issuance of the annual financial statements. (P. 28)
23. Availability of information on resources received by service delivery units
D
Notes:
23.1 Collection and processing of information to demonstrate the resources that were actually received (in cash and kind) by the most common front-line service delivery units (focus on primary schools and primary health clinics) in relation to the overall
D
Notes:
No reporting on the resources (in cash or in kind) disbursed to the front-line service delivery units are carried out on a routine basis. There have been neither Public Expenditure Tracking Surveys (PETS) nor any other special surveys carried out in Kuwait nor are there any planned to be carried out in the near future. (P. 29)
24. Quality and timeliness of in-year budget reports
A
Notes:
24.1 Scope of reports in terms of coverage and compatibility with budget estimates
A
Notes:
Comparison to the main budget is available at the vote and main economic classifications reported for all five chapters. Information includes all items of expenditure at the payment level and at the commitment level. (P. 29)
24.2 Timeliness of the issue of reports
A
Notes:
Reports are prepared monthly by MDAs and submitted to the Treasury within 30 days of the close of the month. (P. 29)
24.3 Quality of information
A
Notes:
There are no major concerns on data integrity or accuracy. This is assured by a full consolidation and reconciliation process (against bank statements) carried out monthly (P. 29)
25. Quality and timeliness of annual financial statements
B+
Notes:
25.1 Completeness of the financial statements
B
Notes:
Annual reports provide comprehensive coverage of revenues and expenditures but not assets and liabilities. (P. 30)
25.2 Timeliness of submission of the financial statements
A
Notes:
A consolidated statement of revenues and expenditures is usually available one month of the end of the fiscal year. This is considered preliminary due to late reporting of some expenditure. Final accounts are usually issued in June. (P. 30)
25.3 Accounting standards used
NU
Notes:
VI. External Scrutiny and Audit
Scores by Dimension
Overall Indicator Score
26. Scope, nature and follow-up of external audit
B
Notes:
26.1 Scope/nature of audit performed (incl. adherence to auditing standards).
A
Notes:
The State Audit Bureau audits all Ministries, Departments and Agencies on an annual basis covering revenue, expenditure, debts and financial assets. SAB performs a wide range of audits including systems, financial, compliance. Value for money audits are rarer. The audit manual is based upon INTOSAI Standards. (P. 31)
26.2 Timeliness of submission of audit reports to legislature.
B
Notes:
Audit reports are combined with certified audited financial statements. In the three years reviewed were submitted to the legislature 7 months after the close of the fiscal year and 3 months after receipt of financial statements submitted by the MoF. The Audit Reports are submitted to the legislature within seven months from the fiscal year-end. (P. 31)
26.3 Evidence of follow up on audit recommendations
B
Notes:
Although a formal response is made in timely manner in the majority of MDAs, there is no systematic evidence of follow up on corrective measures taken by the Executive in response to the State Audit Bureau recommendations. (P. 31)
27. Legislative scrutiny of the annual budget law
B+
Notes:
27.1 Scope of the legislature’s scrutiny.
A
Notes:
Virtually all aspects of the budget can be examined by the relevant committees before being presented to the full Assembly for a vote. (P. 32)
27.2 Extent to which the legislature’s procedures are well-established and respected.
A
Notes:
The procedures have been routinized, although timelines have slipped in recent years (see below). (P. 32)
27.3 Adequacy of time for the legislature to provide a response to budget proposals both the detailed estimates and, where applicable, for proposals on macro-fiscal aggregates earlier in the budget preparation cycyle (time allowed in practice for all stag
B
Notes:
A significant backlog of MDA budget proposals has built up in recent years well past the beginning of the new fiscal year. (P. 32)
27.4 Rules for in-year amendments to the budget without ex-ante approval by the legislature.
B
Notes:
In-year amendments are difficult, but quasi-budgetary measures (e.g. special allowances) can be accomplished by Amiri decree. (P. 32)
28. Legislative scrutiny of external audit reports
B
Notes:
28.1 Timeliness of examination of audit reports by the legislature (for reports received within the last three years).
B
Notes:
The Public Accounts Committee examinations of audit reports are typically completed within 12 months from receipt of the audit reports in October (P. 32)
28.2 Extent of hearings on key findings undertaken by the legislature.
B
Notes:
In depth hearings on key findings take place on occasion covering only selected audit entities. (P. 32)
28.3 Issuance of recommended actions by the legislature and implementation by the executive.
C
Notes:
Actions are recommended but there is little evidence of follow up on corrective measures in response to such recommendations being carried out by the MDAs. (P. 32)
Donor Practices
Scores by Dimension
Overall Indicator Score
D-1 Predictability of Direct Budget Support
NU
Notes:
D-1.1 Annual deviation of actual budget support from the forecast provided by the donor agencies at least six weeks prior to the government submitting its budget proposals to the legislature (or equivalent approving body).
NU
Notes:
D-1.2 In-year timeliness of donor disbursements (compliance with aggregate quarterly estimates)
NU
Notes:
D-2 Financial information provided by donors for budgeting and reporting on project and program aid
NU
Notes:
D-2.1 Completeness and timeliness of budget estimates by donors for project support.
NU
Notes:
D-2.2 Frequency and coverage of reporting by donors on actual donor flows for project support.
NU
Notes:
D-3 Proportion of aid that is managed by use of national procedures
NU
Notes:
D-3.1 Overall proportation of aid funds to central government that are managed through national procedures
NU
Notes: