Jordan Greater Amman Municipality 2017
Purpose and management of the assessment
The overall objective of this PEFA assessment was to draft a comprehensive “PFM Performance Report” according to the upgraded PEFA Performance Measurement Framework Methodology of 2016 to provide an analysis of the overall performance of the PFM systems of the Greater Amman Municipality (GAM) and to provide a baseline against which future progress can be measured.
Assessment coverage and timing
This assessment covered the City Government of GAM, and most of the fieldwork took place in October 2016, with a follow-up visit in February 2017: most of the indicators were assessed using data from 2016 and the two previous completed FYs. The first draft of the assessment and the ratings were discussed in detail with GAM, at a workshop in February 2017. The draft was revised, based on comments from the workshop, translated into Arabic and shared with GAM in April 2017. GAM reviewed the Arabic draft and provided further comments which have been addressed, and this updated draft was shared with GAM in June 2017. This report is the finalized version that now addresses all comments and suggestions received from GAM.
Impact of PFM Systems on the three main budgetary outcomes
Aggregate fiscal discipline
Overall, fiscal discipline in GAM is reasonable, at least when viewed in the context of the annual budget process currently in place: however, the lack of multi-year fiscal planning is an issue in need of consideration, particularly in the light of the risks that may arise from the various public-private partnership arrangements in place.
Most elements in the overall PFM system that contribute to achieving short-term fiscal discipline appear to be sound, as witnessed, for example, by the fact that the aggregate outturns of both revenue and expenditure are close to those in the original budget, although there is an issue about the variance in the composition of revenue (PI-3.2, rated ‘D’). In addition, the stock of payment arrears is declining (PI-22), and there are few unreported operations (PI-6, rated ‘B’).
While there are risks to fiscal discipline (beyond the concern mentioned above about ‘PPPs’), such as the lack of a debt management strategy (PI-13.3, rated ‘D’) and the absence of conventional oversight arrangements (PI-29.2, rated ‘D’), it should be noted that these risks are, to a certain extent, mitigated by the fact that various elements of the system concerned with budget execution work well. So, for example, predictability in the availability of resources, most aspects of procurement, the low level of expenditure arrears, and at least a basic operation of internal controls, all contribute to achieving aggregate fiscal discipline.
Strategic allocation of resources
The three indicators concerned with ‘policy-based fiscal strategy and budgeting’, (PIs 14 to 16) received poor ratings, as current legislation does not require medium-term budgeting, and hence it is difficult to demonstrate that the (annual) process to allocate budgetary resources is in accordance with GAM’s declared strategic objectives. However, there is a new indicator relevant to this budgetary outcome: ‘Public Investment Management’ (PI-11). Fortunately, given that almost half of the resources available through the budget go to capital projects, this indicator is rated overall as ‘C+’, which represents sound practice.
The otherwise-sound budget preparation process is weakened by the absence of ceilings to guide units when compiling their estimates (PI-17.2, rated ‘D’), and also by the limited scope of the scrutiny undertaken by the GAM council (PI-18.1 & 2, both rated ‘C’). On the positive side, the budget is approved before the start of the financial year, and the council does have oversight of any amendments made during the year.
GAM performs reasonably well in administering its own revenues. Both indicators concerned with the collection of revenue are under the control of GAM, and while PI 19 is rated ‘C’ overall, there are weaknesses in some elements where procedures are not formally documented, and the monitoring of arrears (PI-19.4) is relatively weak. On the other hand, ‘Accounting for revenues’ (PI-20) is rated ‘A’.
Most of the other indicators that relate to the strategic allocation of resources function at a satisfactory level. An exception is that while the budget documentation (PI-5, ‘B’) meets all the ‘basic’ requirements, its classification in accordance with international standards does not (PI-4, ‘D’).
Efficient use of resources for service delivery
Financial management is not an end but rather a tool to assist a government to deliver services to its citizens. From this standpoint, GAM's PFM system appears to work reasonably well. This can be seen in the rating for ‘performance information’ (PI-8, ‘B+’), which demonstrates the efficiency with which services are delivered. Of course, services cannot be delivered in the absence of funds, and in this respect, there may be some concerns associated with the rating for predictability in the availability of funds to support expenditure (PI-21, ‘C+’). On the other hand, most of the mechanisms in place to reduce possible leakages in the system, such as internal controls, procurement, and controls over payroll (PIs 25, 24 and 23 respectively) are at least reasonable, although ‘Public Asset Management’ (PI-12) shows a poor level of performance. The ‘Internal Control and Audit Department’ is some way from performing according to the modern concept of Internal Audit (PI-26; ‘C+’), but this weakness is offset to a significant extent by the good ratings for the basic accounting controls in place (PI 27, rated ‘B+’).
Lastly, the oversight arrangements (addressed in PIs 30-31) are unusual, in that the Audit law (amended in 2002) and the Municipal Law both require the Audit Bureau to audit GAM (although no deadline is specified), but the report of the audit goes not to the GAM council but to Parliament, with copies to the Prime Minister and Minister of Finance. In addition, GAM has hired a private auditor to report on an annual ‘statement of revenues and expenses’ – the report for 2015 was submitted to the GAM Council at the beginning of February 2017.
In summary, and given the legal restrictions requiring an annual budget process, most aspects of GAM’s PFM system function at a satisfactory level, and should allow GAM to attain its short-term fiscal and budgetary objectives. This said, there remain areas for improvement, although it must always be borne in mind that any sub-national government.
Performance changes since last assessment
This is the first assessment of GAM.
Overview of on-going and planned PFM reforms and main weaknesses identified
The Ministry of Municipal Affairs has been working in accordance with its reform strategy 2015-2020 which was approved by the Council of Ministers. The strategy contains six national objectives:
(i) develop the performance of municipal sector and enhance its efficiency,
(ii) enhance service delivery to local community,
(iii) contribute to the fight against poverty and employment,
(iv) contribute towards the achievement of balanced development among governorates and districts,
(v) solve environmental problems that lays within the responsibility of municipalities and joint services councils, and,
(vi) contribute to solving traffic problems in the Kingdom. The strategy aims at significant reforms in the municipal work through concentrating on three themes: legislative reform, financial reform, and administrative reform.
On the legislative front, major reform has been achieved by the enactment of the Municipal Law no 41 of 2015 and the Decentralization Law no. 49 of 2015. MoMA had prepared these two laws with the objective of widening public participation in decision making at the local government level and thereby strengthening decentralization.
The Municipal law is intended to strengthen municipalities’ independence and widen their functions and responsibilities and to embody the principle of decentralization through the establishment of local councils. The Decentralization Law is intended to materialize the national vision to expand the adoption of democratic elections at the local level, to increase public participation in decision making and implementation, especially regarding sustainable development, and to implement administrative decentralization. The municipal elections on August 15, 2017 which were held for the first time in Jordan will put the decentralization principle to practice with the hope of addressing the real needs of the people and improving the service delivery and standards of living in the governorates and districts.
he financial reform included strengthening the government support to municipalities by increasing transfers from oil revenues and other channels of support. In this same vein, on August 13, 2017 the government decided to distribute JD 100 million to municipalities to help them settle a proportion of their debts. In addition, MoMA is providing municipalities with vehicles and equipment in cooperation with MoPIC and international donors.
The administrative reform includes the amendments of legislation to assign appointment to the Civil Service Bureau and stop random appointments. There are plans for capacity building and training programs, and the set-up of new structures to implement decentralization.