Kuwait 2010

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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)

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Deviations are largest for relatively small allocations. (P. 12)

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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)

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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)

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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)

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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)

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Budget documentation fulfils 6 benchmarks. The Budget documents are fairly comprehensive. (P. 16)

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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)

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Budget is entirely own-funded. (P. 16)

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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)

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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)

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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)

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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)

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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)

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Five of the six listed elements of information are made available to the public access via the web and other means. (P. 19)

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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)

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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)

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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)

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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)

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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)

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Sector strategies are not prepared other than for project submission purposes. (P. 21)

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The recurrent budget does not reflect recurrent cost implications emanating out of forward investment budget estimates. (P. 21)

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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)

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KTD shares this information with taxpayers. (P. 22)

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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)

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Corporate taxpayers are registered in databases for income tax and levies. (P. 22)

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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)

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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)

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Overall arrears are very small, but there is a backlog in dealing with some complex tax files. (P. 23)

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Immediate. (P. 23)

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Monthly. (P. 23)

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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)

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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)

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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)

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Comprehensive monthly accounts of securities and debit balances at banks. (P. 24)

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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)

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All central government loans and guarantees must be approved by the Minister of Finance. However, KIA guarantees may be offered separately. (P. 24)

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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)

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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)

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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)

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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)

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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)

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There are no clear criteria for use of less competitive methods. (P. 26)

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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)

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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)

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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)

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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)

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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)

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Internal Audit reports are prepared on a regular basis against annual audit work plans. Reports are submitted to the State Audit Bureau. . (P. 28)

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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)

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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)

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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)

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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)

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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)

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Reports are prepared monthly by MDAs and submitted to the Treasury within 30 days of the close of the month. (P. 29)

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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)

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Annual reports provide comprehensive coverage of revenues and expenditures but not assets and liabilities. (P. 30)

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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)

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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)

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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)

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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)

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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)

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The procedures have been routinized, although timelines have slipped in recent years (see below). (P. 32)

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A significant backlog of MDA budget proposals has built up in recent years well past the beginning of the new fiscal year. (P. 32)

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In-year amendments are difficult, but quasi-budgetary measures (e.g. special allowances) can be accomplished by Amiri decree. (P. 32)

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The Public Accounts Committee examinations of audit reports are typically completed within 12 months from receipt of the audit reports in October (P. 32)

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In depth hearings on key findings take place on occasion covering only selected audit entities. (P. 32)

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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)

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