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:
Only in 2007 has the actual expenditure deviated from budgeted expenditure by an amount equivalent to more than 10% of the budgeted expenditure. (P. 13)
2. Composition of expenditure out-turn compared to original approved budget
C
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)
C
Notes:
Variance in expenditure composition exceeded overall deviation in primary expenditure by 10 percent only in 2007. (P. 14)
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:
Actual domestic revenue collection was never below, but well above the defined threshold of 97% of budgeted domestic revenue estimates in all of the past three years. (P. 15)
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 stock of expenditure arrears is above 2% and increased in the past year. Due to incomplete information on the stock of arrears, a default score D is given. (P. 16)
4.2 Availability of data for monitoring the stock of expenditure payment arrears
D
Notes:
No monitoring system for expenditure payment arrears is in place. (P. 16)
II. Comprehensiveness and Transparency
Scores by Dimension
Overall Indicator Score
5. Classification of the budget
B
Notes:
5.1 The classification system used for formulation, execution and reporting of the central government's budget
B
Notes:
The revised classification system that is used for budget formulation and execution is based on administrative, economic and functional (but not sub-functional) classification applying GFS/COFOG standards. (P. 17)
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:
Out of 9 elements, the budget documentation includes 7 elements. Only information on financial assets is missing and the one on previous year’s budget is incomplete. The budget documentation is not presented in a user-friendly format. (P. 18)
7. Extent of unreported government operations
D
Notes:
7.1 The level of extra-budgetary expenditure (other than donor funded projects) which is unreported i.e. not included in fiscal reports.
D
Notes:
The level of unreported extra-budgetary expenditure, originating from the Social Fund and quasi-fiscal operations, constitute about 16% of total expenditure (P. 20)
7.2 Income/expenditure information on donor-funded projects which is included in fiscal reports.
D
Notes:
he PIP is not consolidated with the Republican Budget and presented in a different format. In the period of 2006 – 2008, there was no formalized reporting on PIP expenditures. (P. 20)
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);
C
Notes:
The equalization grant formula is not consistently applied. The criteria for distributing matching grants allow substantial discretion. Categorical grants are paid on the basis of actual costs with no formulae in place (P. 21)
8.2 Timeliness of reliable information to SN governments on their allocations from central government for the coming year;
B
Notes:
LSGs received reliable information on allocations from general republican taxes, size of categorical and equalization grants ahead of completing their budget proposal. Approval of theLSGs received reliable information on allocations from general republican taxes, size of categorical and equalization grants ahead of completing their budget proposal. Approval of the LSG budget has been well within the fiscal year because of late approval of the Republican Budget. (P. 22)
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 budget execution report of MoF, which includes LSG figures, is published by 15 May and thereby well within 10 months of the end of the fiscal year. (P. 22)
9. Oversight of aggregate fiscal risk from other public sector entities.
C+
Notes:
9.1 Extent of central government monitoring of AGAs and PEs.
C
Notes:
AGAs and PEs submit financial statements on a quarterly basis and produce annual reports for each fiscal year. However, the information is not consolidated. (P. 26)
9.2 Extent of central government monitoring of SN government's fiscal position
A
Notes:
LSGs cannot generate fiscal liabilities for central government. The consolidated financial position of LSGs is part of the annual budget execution report (P. 26)
10. Public access to key fiscal information
C
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)
C
Notes:
Out of 6 listed types of information the government made only in-year budget execution reports publicly available. (P. 27)
III. Policy-Based Budgeting
Scores by Dimension
Overall Indicator Score
11. Orderliness and participation in the annual budget process
B
Notes:
11.1 Existence of and adherence to a fixed budget calendar;
B
Notes:
A clear annual budget calendar exists, but for MDAs the four weeks period for preparing the draft budget is often too short and therefore not always (P. 28)
11.2 Clarity/comprehensiveness of and political involvement in the guidance on the preparation of budget submissions (budget circular or equivalent);
A
Notes:
A comprehensive and clear budget circular is issued to MDAs with already approved ceilings (P. 28)
11.3 Timely budget approval by the legislature or similarly mandated body (within the last three years);
D
Notes:
In 2007 and 2008, the annual budget law was signed by the President with more than two months delay. (P. 28)
12. Multi-year perspective in fiscal planning, expenditure policy and budgeting
C+
Notes:
12.1 Preparation of multi -year fiscal forecasts and functional allocations
C
Notes:
The links between the MTBFs of sub-sequent years are weak and the MTBF are not presented in the form of the economic classification.
12.2 Scope and frequency of debt sustainability analysis
A
Notes:
DSA are undertaken annually in collaboration with IMF and WB. (P. 30)
12.3 Existence of sector strategies with multi-year costing of recurrent and investment expenditure;
C
Notes:
Costed sector strategies exist for six ministries, but the estimates are largely inconsistent with fiscal forecasts (P. 30)
12.4 Linkages between investment budgets and forward expenditure estimates.
D
Notes:
Budgeting for investment and recurrent expenditures largely remain separate processes. (P. 30)
IV. Predictability and Control in Budget Execution
Scores by Dimension
Overall Indicator Score
13. Transparency of taxpayer obligations and liabilities
C
Notes:
13.1 Clarity and comprehensiveness of tax liabilities
C
Notes:
Frequently changing taxes and uncertain rules and application by the tax authorities (P. 32)
13.2 Taxpayer access to information on tax liabilities and administrative procedures.
C
Notes:
Access to information was limited and has only improved recently ( Scoring based on 2006 Code). (P. 32)
13.3 Existence and functioning of a tax appeals mechanism.
C
Notes:
A system of appeals was provided for in the Tax Code but its operation was cumbersome and time-consuming. (P. 32)
14. Effectiveness of measures for taxpayer registration and tax assessment
C+
Notes:
14.1 Controls in the taxpayer registration system.
C
Notes:
The taxpayer registration system operated by the regional tax offices is not linked and there are no linkages to other registration/licensing systems (P. 34)
14.3 Planning and monitoring of tax audit and fraud investigation programs.
C
Notes:
Tax audits were not based on a targeted riskbased approach; organisations could be repeatedly visited (P. 34)
14.2 Effectiveness of penalties for non-compliance with registration and declaration obligations
B
Notes:
The 2006 Code provided for a range of penalties but these were not administered consistently (P. 34)
15. Effectiveness in collection of tax payments
D+
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).
D
Notes:
Arrears collection is below 60% and arrears average 14%. (P. 36)
15.2 Effectiveness of transfer of tax collections to the Treasury by the revenue administration.
A
Notes:
Revenue is paid directly to the Treasury with details then passed to the tax bodies on a daily basis (P. 36)
15.3 Frequency of complete accounts reconciliation between tax assessments, collections, arrears records and receipts by the Treasury.
A
Notes:
Tax authority and Treasury cash collection records are reconciled monthly. Information on net aggregate arrears is provided monthly but includes overpayments. (P. 36)
16. Predictability in the availability of funds for commitment of expenditures
D
Notes:
16.2 Reliability and horizon of periodic in-year information to MDAs on ceilings for expenditure commitments
D
Notes:
Realistically MDAs operate on a monthly time horizon. (P. 38)
16.3 Frequency and transparency of adjustments to budget allocations, which are decided above the level of management of MDAs.
D
Notes:
Adjustments are made by the Ministry of Finance, with a large proportion in the fourth quarter of the year, but they do not consider the process is transparent. (P. 38)
16.1 Extent to which cash flows are forecast and monitored
D
Notes:
Annual and quarterly planning is of poor quality because it is subordinate to monthly allocations with cash rationing affecting non-protected items owing to the unpredictability of cash inflows. (P. 38)
17. Recording and management of cash balances, debt and guarantees
B
Notes:
17.1 Quality of debt data recording and reporting
A
Notes:
A computerised debt recording system is in use (P. 42)
17.2 Extent of consolidation of the government’s cash balances
C
Notes:
Cash balances are not consolidated though the two major accounts used for daily purposes are (P. 42)
17.3 Systems for contracting loans and issuance of guarantees.
B
Notes:
Only the Ministry of Finance with the approval of the Jogorku Kenesh may enter into loans or issue guarantees. However there are weaknesses in policy and data analysis and in the co-ordination between institutions involved in decisions (P. 43)
18. Effectiveness of payroll controls
D+
Notes:
18.1 Degree of integration and reconciliation between personnel records and payroll data.
D
Notes:
All systems are currently manual and highly decentralised with no reconciliation at either Ministry of Finance or MDA level (P. 46)
18.2 Timeliness of changes to personnel records and the payroll
D
Notes:
Administrative orders passing through the HR and payroll sections should ensure changes are made timeously but the procedures are decentralised so that no monitoring is possible. Data on retroactive changes are not available (P. 46)
18.3 Internal controls of changes to personnel records and the payroll.
C
Notes:
A supervisor, the HR section and the payroll section should all be involved in changes to personnel records and payroll but the extent of decentralisation, the large number of small organisations, and the complexity of salary calculations weakens the control. There is no clear audit trail. (P. 46)
18.4 Existence of payroll audits to identify control weaknesses and/or ghost workers.
D
Notes:
No specific payroll audits are undertaken and no reviews of system weaknesses. Some reports of ghost workers (P. 46)
19. Transparency, competition and complaints mechanisms in procurement
D+
Notes:
19.1 Transparency, comprehensiveness and competition in the legal and regulatory framework
D
Notes:
No separate statistics are maintained for contracts that must be subject to open competition. Statistics for all contracts above a minimum, when a number of methods are available shows around 20% are subject to open competition. These statistics do not relate directly to the scoring criteria as they include cases where other methods can legitimately be chosen. (2005 incorrectly scored) (P. 49)
19.2 Use of competitive procurement methods
D
Notes:
The law prescribes when less competitive methods of procurement may be used. However, methods other than full open competition are the default position if below the mandatory ceiling. The interpretation of the law does not make open competition the preferred method (P. 49)
19.3 Public access to complete, reliable and timely procurement information
C
Notes:
A complaints mechanism that allows for appeal to a body independent of the procuring organisation but is not operating effectively (P. 49)
19.4 Existence of an independent administrative procurement complaints system
NU
Notes:
20. Effectiveness of internal controls for non-salary expenditure
D+
Notes:
20.1 Effectiveness of expenditure commitment controls.
D
Notes:
There are no effective expenditure commitment controls (P. 52)
20.2 Comprehensiveness, relevance and understanding of other internal control rules/ procedures
C
Notes:
Rules relate almost entirely to payment controls. Accounting recording is highly structured though in a manual form which is cumbersome (P. 52)
20.3 Degree of compliance with rules for processing and recording transactions
C
Notes:
In general rules are complied with though internal control checks regularly find instances of non-compliance (P. 52)
21. Effectiveness of internal audit
D
Notes:
21.1 Coverage and quality of the internal audit function.
D
Notes:
No internal audit in the international sense of the activity is undertaken (P. 54)
21.2 Frequency and distribution of reports
D
Notes:
Reports of control and compliance checking are produced irregularly (P. 54)
21.3 Extent of management response to internal audit findings.
D
Notes:
Line management is sometimes required to make corrections but senior management takes no active part in rectifying systemic weaknesses (P. 54)
V. Accounting, Recording and Reporting
Scores by Dimension
Overall Indicator Score
22. Timeliness and regularity of accounts reconciliation
A
Notes:
22.1 Regularity of bank reconciliations
A
Notes:
Balances are agreed between the Treasury and the National Bank daily with reconciliation of expenditures on a daily basis. Other accounts are also reconciled daily (P. 56)
22.2 Regularity of reconciliation and clearance of suspense accounts and advances.
A
Notes:
Detailed monthly reconciliations are prepared of expenditures and revenues with suspense items posted to a “non-identified amounts” account that is subject to a quarterly scrutiny to clear it to the minimum possible (P. 56)
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:
Information on resources received by service delivery units is not available (P. 57)
24. Quality and timeliness of in-year budget reports
C+
Notes:
24.1 Scope of reports in terms of coverage and compatibility with budget estimates
C
Notes:
Quarterly reports with comparative budget data are prepared but no commitments are included (P. 58)
24.2 Timeliness of the issue of reports
A
Notes:
Quarterly reports are issued by the 25th of the following month, but Treasury reports are not distributed to line ministries or other budgetary organisations. (P. 58)
24.3 Quality of information
C
Notes:
The execution data is probably complete as it is based on actual payments made but there are concerns (not material) about the accuracy of coding by budget organisations (P. 58)
25. Quality and timeliness of annual financial statements
D+
Notes:
25.1 Completeness of the financial statements
B
Notes:
The annual budget execution report is on a cash basis presented in accordance with the classification system of GFS 2001 and includes all revenue and expenditure flows, but does not disclose outstanding debt (P. 59)
25.2 Timeliness of submission of the financial statements
A
Notes:
The execution report is submitted to the Jogorku Kenesh by 15th May, i.e. within 6 months (P. 59)
25.3 Accounting standards used
D
Notes:
Information is presented in a consistent way. However, there are no formal accounting standards disclosed.. (P. 59)
VI. External Scrutiny and Audit
Scores by Dimension
Overall Indicator Score
26. Scope, nature and follow-up of external audit
D+
Notes:
26.1 Scope/nature of audit performed (incl. adherence to auditing standards).
D
Notes:
The Chamber of Accounts has a degree of independence. The consolidated accounts of the Ministry of Finance are audited annually but the strategy for audit coverage of other bodies is unclear. (P. 61)
26.2 Timeliness of submission of audit reports to legislature.
B
Notes:
In 2007 the report was submitted around five months after being submitted to the Jogorku Kenesh by the government (P. 61)
26.3 Evidence of follow up on audit recommendations
D
Notes:
Arrangements appear to vary depending on the particular circumstances but there is no clear evidence of effective follow-up by the Jogorku Kenesh (P. 61)
27. Legislative scrutiny of the annual budget law
C+
Notes:
27.1 Scope of the legislature’s scrutiny.
B
Notes:
There is an opportunity for the legislature to give directions on the main priorities prior to the detailed budget being submitted by the government. The scrutiny appears to cover fiscal issues as well as detailed review of expenditure and income but not medium term fiscal framework
27.2 Extent to which the legislature’s procedures are well-established and respected.
A
Notes:
There is a specialised committee that follows a structured approach with three separate reading of the draft budget in the Jogorku Kenesh
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
A
Notes:
The Jogorku Kenesh has three months in which to review the draft budget, although the internal timetable for review by specialist committees is considered to be too short. In the years 2006-8 the budget was not adopted until March at the earliest
27.4 Rules for in-year amendments to the budget without ex-ante approval by the legislature.
C
Notes:
The law on main principles of the budget sets out the extent of changes that are possible without the consent of the legislature but these are regarded as unclear. Changes requiring the approval of the legislature are often made after the event
28. Legislative scrutiny of external audit reports
D+
Notes:
28.1 Timeliness of examination of audit reports by the legislature (for reports received within the last three years).
D
Notes:
Formal approval of Budget Execution report more than 12 months after submission. No formal plans for hearing reports within defined timescales appear to exist. (P. 66)
28.2 Extent of hearings on key findings undertaken by the legislature.
C
Notes:
In depth hearings include officials on some occasions but it is not clear all reports are considered, or how those reviewed are selected (P. 66)
28.3 Issuance of recommended actions by the legislature and implementation by the executive.
D
Notes:
It is unclear that there is any follow up to determine if recommendations are implemented (P. 66)
Donor Practices
Scores by Dimension
Overall Indicator Score
D-1 Predictability of Direct Budget Support
NR
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).
A
Notes:
Only in 2008 has direct budget support outturn fallen short of the forecast by more than 5%. (P. 67)
D-1.2 In-year timeliness of donor disbursements (compliance with aggregate quarterly estimates)
NR
Notes:
D-2 Financial information provided by donors for budgeting and reporting on project and program aid
D+
Notes:
D-2.1 Completeness and timeliness of budget estimates by donors for project support.
D
Notes:
Not all major donors provide budget estimates for disbursement of project aid for the government’s coming fiscal year. (P. 68)
D-2.2 Frequency and coverage of reporting by donors on actual donor flows for project support.
C
Notes:
Quarterly reports are received by donors covering more than 50% of externally financed project estimates, but information is inconsistent with the government budget classification (P. 68)
D-3 Proportion of aid that is managed by use of national procedures
D
Notes:
D-3.1 Overall proportation of aid funds to central government that are managed through national procedures
D
Notes:
Aid funds continue to be managed outside government procedures (P. 69)
