PEFA Regional Government of Somali

Public Expenditure and Financial Accountability
Federal Democratic Republic of Ethiopia

(Somali Regional State Government)
Performance Assessment Report
Final Report
March 11, 2020
Funded by
European Union
0
Ethiopia PEFA Assessment 2018 Somali Regional State Government
Report No: AUS0001568
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Public Expenditure and Financial Accountability (PEFA) assessment
Ethiopia (Somali Regional State Government)

Final report
March 11, 2020
The PEFA Secretariat confirms that this report meets the PEFA quality assurance
requirements and is hereby awarded the ‘PEFA CHECK’.
PEFA Secretariat
April 23, 2020
ACRONYMS AND ABBREVIATIONS ................................................................................................ 1

EXECUTIVE SUMMARY .................................................................................................................. 4
1. INTRODUCTION ...................................................................................................................10
1.1 Background............................................................................................................................... 10
1.2 Rationale and purpose ............................................................................................................. 10
1.3 Assessment management, oversight, and quality assurance .................................................. 10
1.4 Assessment methodology ........................................................................................................ 12
1.5 Assessment coverage and timing ............................................................................................. 12
1.6 Fieldwork .................................................................................................................................. 12
1.7 Pilot: Service delivery ............................................................................................................... 13
2. REGIONAL GOVERNMENT BACKGROUND INFORMATION .....................................................14
2.1 Country economic situation ..................................................................................................... 14
2.2 Regional government economic situation ............................................................................... 15
2.3 Fiscal and budgetary trends ..................................................................................................... 16
2.4 Legal and regulatory arrangements for PFM ........................................................................... 17
2.5 Institutional arrangements for PFM ......................................................................................... 21
2.6 Other important features of PFM and its operating environment .......................................... 23
3. ASSESSMENT OF PFM PERFORMANCE ..................................................................................25
HGL-1 Transfers from a higher-level government ............................................................................. 25
PILLAR I. Budget reliability ................................................................................................................. 26
PI-1 Aggregate expenditure outturn............................................................................................. 26
PI-2 Expenditure composition outturn ......................................................................................... 26
PI-3 Revenue outturn .................................................................................................................... 28
PILLAR II. Transparency of public finances ......................................................................................... 29
PI-4 Budget classification .............................................................................................................. 29
PI-5 Budget documentation .......................................................................................................... 30
PI-6 Subnational government operations outside financial reports ............................................ 31
PI-7 Transfers to subnational governments.................................................................................. 32
PI-8 Performance information for service delivery ...................................................................... 34
PI-9 Public access to key fiscal information .................................................................................. 36
PILLAR III. Management of assets and liabilities ................................................................................ 37
PI-10 Fiscal risk reporting.............................................................................................................. 37
PI-11 Public investment management .......................................................................................... 38
PI-12 Public asset management.................................................................................................... 41
PI-13 Debt management ............................................................................................................... 42
PILLAR IV. Policy-based fiscal strategy and budgeting ....................................................................... 43
PI-14 Macroeconomic and fiscal forecasting ................................................................................ 43
PI-15 Fiscal strategy ...................................................................................................................... 44
PI-16 Medium-term perspective in expenditure budgeting ......................................................... 45

PI-17 Budget preparation process ................................................................................................ 47
PI-18 Legislative scrutiny of budgets ............................................................................................ 50
PILLAR V: Predictability and control in budget execution.................................................................. 52
PI-19 Revenue administration ...................................................................................................... 52
PI-20 Accounting for revenue ....................................................................................................... 55
PI-21 Predictability of in-year resource allocation ....................................................................... 57
PI-22 Expenditure arrears ............................................................................................................. 59
PI-23 Payroll controls .................................................................................................................... 60
PI-24 Procurement ........................................................................................................................ 62
PI-25 Internal controls on non-salary expenditure ....................................................................... 66
PI-26 Internal audit ....................................................................................................................... 68
PILLAR VI. Accounting and reporting ................................................................................................. 70
PI-27 Financial data integrity ........................................................................................................ 70
PI-28 In-year budget reports......................................................................................................... 71
PI-29 Annual financial reports ...................................................................................................... 73
PILLAR VII. External scrutiny and audit .............................................................................................. 75
PI-30 External audit....................................................................................................................... 75
PI-31 Legislative scrutiny of audit reports .................................................................................... 78
4. CONCLUSIONS OF THE ANALYSIS OF PFM SYSTEMS ..............................................................80
4.1 Integrated assessment of PFM performance ........................................................................... 80
4.2 Effectiveness of the internal control framework ..................................................................... 84
4.3 PFM strengths and weaknesses ............................................................................................... 85
4.4 Performance changes since the previous assessment ............................................................. 87
5. GOVERNMENT REFORM PROCESS ........................................................................................89
5.1 Approach to PFM reforms ........................................................................................................ 89
5.2 Recent and ongoing reform actions ......................................................................................... 89
5.3 Institutional considerations...................................................................................................... 90
ANNEX 1: PERFORMANCE INDICATOR SUMMARY ........................................................................93
ANNEX 2: SUMMARY OF OBSERVATIONS ON THE INTERNAL CONTROL FRAMEWORK ................. 103
ANNEX 3A: SOURCES OF INFORMATION ..................................................................................... 106
ANNEX 3B: LIST OF STAKEHOLDERS INTERVIEWED...................................................................... 113
ANNEX 4: TRACKING CHANGE IN PERFORMANCE BASED ON THE 2011 PEFA FRAMEWORK ......... 116
ANNEX 5: DATA USED FOR SCORING PI-1, 2, AND 3 (2016 METHODOLOGY) ................................ 129
ANNEX 6: DATA USED FOR SCORING PI-1, PI-2, AND PI-3 (2011 METHODOLOGY) ........................ 138
ANNEX 7: SERVICE DELIVERY PILOT ............................................................................................ 141
Acronyms and abbreviations

AFROSAI-E African Organization of English-Speaking Supreme Audit Institutions
BCC Budget Call Circular
BFSC Budget and Finance Standing Committee
BI Budget Institution
BoFED Bureau of Finance and Economic Development
CBE Commercial Bank of Ethiopia
CoA Chart of Accounts
COFOG Classification of Functions of Government
COPCD Channel One Projects Coordination Department
DFID U.K. Department for International Development
DHIS District Health Information System
DP Development Partner
EBU Extra-budgetary Unit
EC Ethiopian Calendar
EU European Union
EFY Ethiopian Fiscal Year
EMCP Expenditure Management and Control Program
EPSA Ethiopian Pharmaceuticals Supply Agency
GDP Gross Domestic Product
GC Gregorian Calendar
GEQIP General Education Quality Improvement Program
GFS Government Finance Statistics
GOFAMM Government-owned Fixed Assets Management Manual
GTP Growth and Transformation Plan
HR Human Resources
IBEX Integrated Budget and Expenditures System
ICT Information and Communication Technology
IDC International Development Corporation
IDA International Development Association
IFCD Inspection and Financial Control Directorate
IMF International Monetary Fund
IPSAS International Public Sector Accounting Standards
ISSAI International Standards for Supreme Audit Institutions
IT Information Technology
JFEDO Jigjiga Finance and Economic Development Office
MDAs Ministries, Departments, and Agencies
MEFF Macroeconomic and Fiscal Framework
MoF Ministry of Finance
MTEF Medium-term Expenditure Framework
NA Not Applicable
OFAD Office of the Federal Auditor General
ORAG Office of the Regional Auditor General
OT Oversight Team
PAC Public Accounts Committee
PBS Promotion of Basic Services
PE Public Enterprises
PEFA Public Expenditure and Financial Accountability
1
PFM Public Financial Management

PHCU Primary Health Care Unit
PIM Public Investment Management
PIP Public Investment Project
PPADD Public Procurement and Assets Disposal Department
PPPA Public Procurement and Property Administration Authority
PPP Public-Private Partnership
PPPDS Public Procurement and Property Disposal Service
REAC Regional Ethics and Anticorruption Commission
SAI Supreme Audit Institution
SDG Sustainable Development Goal
SIGTAS Standard Integrated Government Tax Administration System
SIRM System of Integrated Revenue Management
SNG Subnational Government
SNRS Somali National Regional State
SoE State-owned enterprise
SRG Somali Regional Government
SRRA Somali Regional Revenue Authority
TIN Taxpayer Identification Number
TSA Treasury Single Account
TTL Task Team Leader
TVET Technical and Vocational Education and Training
UNDP United Nations Development Programme
UNICEF United Nations Children’s Fund
VAT Value Added Tax
WEE Women’s Economic Empowerment
WoFED Woreda Finance Economic Development
2
Fiscal year:
Ethiopian fiscal year (EFY): July 8–July 7
EFY 2008, 2009, 2010 = Gregorian FY2015/2016, 2016/2017, 2017/2018 (July 1–June 30)
In this document, the term FY refers to the Gregorian fiscal year, unless described as EFY.
Currency unit = Ethiopian Birr (ETB)
US$1 = ETB 29.30 (as of November 22, 2019)
3
Executive summary
1. The objective of the Public Expenditure and Financial Accountability (PEFA) assessment is to
review the current performance of the public financial management (PFM) systems, processes, and
institutions of the Somali regional government since the last assessment in 2015. The assessment is
aimed at assisting the government in identifying PFM weaknesses that may inhibit effective delivery
of services to its citizens and the realization of its development objectives in general. Furthermore,
the findings of the PEFA assessment will assist the government in developing a PFM reform strategy
and provide the basis for a coherent PFM reform program that can be supported by development
partners (DPs), as well as through the government’s own initiatives.
2. The Somali assessment covered regional government budgeted units, extra-budgetary units
(EBUs), Office of the Regional Auditor General (ORAG), the regional council, public enterprises, and
the chamber of commerce. Annexes 3A and 3B provide a comprehensive list of information used and
people met (interviewed), respectively, during the assessment. Other reference material used were
the 2018 International Monetary Fund (IMF) Debt Sustainability Analysis for Ethiopia Federal
Government and Government Finance Statistics (GFS) Manual 2014, Chapter 2—definition of EBUs.
The fiscal years for the assessment are Ethiopian Calendar (EC) 2008, 2009, and 2010 (Gregorian
Calendar [GC] FY2015/2016, 2016/2017, and 2017/2018, respectively). The last budget submitted to
Parliament is the EC 2011 budget or Gregorian FY2018/2019 budget.
3. The assessment shows the state of PFM performance of the region at the time of the fieldwork
(November 2019 is the cutoff date). The period covered for each of the 971 dimensions (summarized
into 322 performance indicators) depends on the dimension and in accordance with the PEFA
measurement framework. Some dimensions were assessed at the time of the assessment (November
2019 is the cutoff date). Other dimensions were assessed at the relevant time, which is the last
completed fiscal year FY2017/2018 or FY2018/2019 for the last budget submitted to Parliament.
4. The assessment management framework, oversight, and quality assurance are summarized in
Box 1.1. The assessment was funded by the World Bank, Irish Aid, the U.K. Department for
International Development (DFID), the European Union (EU), the United Nations Children’s Fund
(UNICEF), and UN Women.3 It was managed by the World Bank. The task team leader (TTL) was Rafika
Chaouali (Lead Financial Management Specialist, Governance, World Bank) and Meron Tadesse
Techane (Senior Financial Management Specialist, Governance, World Bank) provided overall and
continued guidance.
Impact of PFM system performance on the three main fiscal and budgetary outcomes
Aggregate fiscal discipline
5. All proclamations promulgated by the regional government derive their sources from the
federal laws; these proclamations are quite robust for strengthening aggregate fiscal discipline, but
these laws must be enforced with a strong political will. The reliability of aggregate expenditures (PI-
1 ‘A’) coupled with a credible subsidy transfer from the federal government (HLG-1 ‘B+’) strengthens
fiscal discipline. The same cannot be said for domestic revenues; these are unreliable (PI-3 ‘D’). Fiscal
discipline is also weakened by the constant and continuous budget reallocations according to
administration and/or economic classifications and the excessive use of contingency vote (PI-2 ‘D+’).
1 94 regular dimensions plus 3 extra dimensions (HLG-1.1, HLG-1.2, and HLG-1.3) for the subnational government (SNG)
PEFA.
2 31 regular indicators plus 1 extra indicator (HLG-1) for the SNG PEFA. 4
3 United Nations Entity for Gender Equality and the Empowerment of Women.
The rules for in-year budget virements are clear but have no limits to the number and volume of
virements; this is a weakness as far as fiscal discipline is concerned. The good news is that revenues
and expenditures outside the regional government budgeting and reporting systems are less than 1
percent of total government revenues and expenditures. Also, the stock of expenditure arrears is
below 2 percent of total government expenditure. These provide a strengthened approach to fiscal
discipline. One particular strength is the fact that there are limits set out for budget spending units
which are articulated in advance (PI-21.3 ‘A’); this is a good practice of fiscal discipline. The
government does not spend beyond its approved budget without ex ante parliamentary approval; this
is also a good fiscal discipline practice and all three supplementary budgets were approved before
executive spending. Budget execution elements such as internal controls (PI-25 ‘B’) and internal audit
(PI-26 ‘C+’) are satisfactory for the attainment of fiscal discipline.
Strategic allocation of resources
6. The classification and comprehensiveness of the budget are satisfactory (PI-4 and PI-5 rated
‘B’ and ‘C’, respectively), providing a sound basis for the allocation of resources according to strategic
priorities and promoting transparency and easy tracking of government resources. These positive
elements are however affected by the continuous functional and economic budget reallocations (PI-2
‘D+’), thereby overriding government original policy intentions, leading to poor resource allocation,
which affects efficient service delivery. The government does not monitor total fiscal risks (both
explicit and implicit) of state-owned enterprises (SoEs) and other contingent liabilities; this is a
weakness as far as strategic resource allocation is concerned as scarce resources could be used to pay
off government contingent liabilities. The good performance of the government referencing policy-
based fiscal strategy and budgeting (PI-14 ‘A’; PI-16 ‘B’; PI-17 ‘A’; PI-18 ‘C+’), except for fiscal strategy
preparation (PI-15 ‘D+’), strengthens strategic resource allocation due to a multiyear perspective in
budgeting (Medium-term Expenditure Framework [MTEF]), a sound budget preparation process and
costing of sector strategic plans, and alignment of budget estimates to medium-term strategies but
for the absence of a fiscal strategy that will ensure proper alignment of fiscal targets to annual budget
estimates. The satisfactory performance of both revenue administration and accountability (PI-19 ‘B’
and PI-20 ‘C+’) coupled with the good performance of predictability in resource allocation (PI-21 ‘A’)
strengthens strategic resource allocation, but the fact that government continues to miss its aggregate
revenue targets (PI-3 ‘D’) raises concerns as to the effectiveness of these revenue administration
measures. The absence of standard guidelines for public investment management weakens strategic
resource allocation since it encourages selective approach to public investment appraisal, selection,
costing, and evaluation.
Efficient use of resources for service delivery
7. The satisfactory performance of actual transfers from the federal government to the regional
government (HLG-1 ‘B+’) and the reliability of aggregate expenditures (PI-1 ‘A’), in addition to the
timeliness and reliability of information on resource allocation to budget units (PI-21 ‘A’), strengthen
primary service delivery by making resources available for payment of goods and services on time,
thereby reducing the accumulation of expenditure arrears (PI-22.1 ‘A’). However, the poor
performance in expenditure composition outturns by economic and administrative classifications due
to the constant reallocation of budgets across votes and the excessive use of contingency budget (PI-
2 ‘D+’) weakens the efficiency in service delivery.
8. Efficient service delivery is also strengthened by the relatively strong PFM laws and
regulations on procurement, budgeting, and cash management. Revenue administration and
accounting show satisfactory performance (PI-19 ‘B’ and PI-20 ‘C+’), but this has very little impact on
the overall (aggregate) domestic revenue performance (PI-3 ‘D’), a key factor in terms of making
resources available for the effective and efficient execution of primary service to the citizens. Another
5
weakness observed relates to the transparency and public access to fiscal information (PI-9 ‘D’); most
information is not published, and if published at all, it is late. Performance information on service
delivery is also weak (PI-8 ‘D+’) mainly due to the nonexistence of a comprehensive and consolidated
report on resources received by primary service delivery units as well as the non-publication of
monitoring and evaluation reports. Internal audit functions have wide government coverage, and
similarly there is wide coverage for external audit as well (PI-30.1 ‘A’); these provide assurance to the
use of government resources for efficient service delivery. Legislative oversight is strong; this has a
positive impact on efficient service delivery since it holds the executive accountable.
Performance changes since the last assessment in 2015
9. Table 0.1 provides a summary of performance change since the last assessment in 2015. On
the basis of the 2011 methodology, there have been 8 improvements in performance and 2
deteriorations in performance, 19 performances remained unchanged, 1 indicator was not
comparable, and 2 indicators were not used as they were deemed irrelevant. Annex 4 provides a
detailed analysis of changes in performance since the 2015 assessment according to the 2011 PEFA
methodology.
Table 0.1: Changes in the ratings since 2015 using the 2011 framework
Deteriorations in ratings Improvements in ratings and
No change
and performance performance
Indicators Number Indicators Number Indicators Number
PI-2, PI-3 2 PI-5, PI-7, PI-8, PI-9, PI-10, PI- 19 PI-1, PI-4, PI-6, PI-12, PI- 8
11, PI-14, PI-15, PI-16, PI-18, 13, PI-17, PI-26, PI-27
PI-19, PI-20, PI-21, PI-22, PI-
23, PI-24, PI-25, PI-28, D-1
Not comparable Not used
HLG-1 1 D-2 and D-3 2
Fiscal discipline
10. Fiscal discipline shows mixed results. While it has been strengthened by the good performance
of aggregate expenditure outturn (PI-1 rated ‘A’ in 2018 compared to ‘B’ in 2015), it was negatively
affected by the poor performance in expenditure composition outturn and the use of contingency
vote which was on average a little above 8 percent (PI-2 rated ‘D+’ in 2018 compared to ‘C+’ in 2015).
Transfers from the federal government to the regional government could not be compared since HLG
1, which relates to earmarked grants, was not applicable in 2015. That said, available evidence
suggests that the federal government has consistently maintained its performance in terms of
ensuring that all budgeted subsidies are actually transferred on time to the regional government.
Fiscal discipline was also negatively affected by the poor performance of aggregate revenue outturns
due to its poor performance (PI-3 scored ‘D’ in 2018 compared to ‘B’ in 2015). The government has
maintained a tight control on expenditure arrears, ensuring that the stock remains below 2 percent of
total regional government expenditure, as well as the monitoring and reporting of these arrears (PI-4
rated ‘B+’ in 2015 and ‘A’ in 2018). This performance strengthens fiscal discipline by ensuring that only
budgeted and approved expenditure is paid. Another element that usually affects fiscal discipline
relates to payroll expenditure which has remained the same since 2015 although deterioration has
been noted in the internal controls over payroll which raises some doubt.
11. The government has maintained its strong performance in the predictability and allocation of
its scarce resources coupled with the effective cash management framework through the daily
6
consolidation of its cash/bank balances (PI-16 rated ‘A’ in 2015 and 2018; PI-17 improved from ‘B’ in
2015 to ‘A’ in 2018), all these having positive impact on strategic resource allocation needed for
efficient service delivery. The poor performance in expenditure composition outturn (PI-2.1 ‘C’ in 2015
compared to ‘D’ in 2018) has however more or less negated the encouraging performance of the
effective cash management system, thereby affecting strategic resource allocation negatively though
the legislative framework for budget reviews and approval has improved, setting the tone for budget
entities to spend within approved estimates on time (PI-27 rated ‘B+’ in 2018 compared to ‘C+’ in
2015). The comprehensiveness of the budget has seen improvement (PI-6 rated ‘B’ in 2018 compared
to ‘C’ in 2015) coupled with improvement in a multiyear perspective in the expenditure framework
(that is, MTEF; PI-12 rated ‘C+’ in 2018 compared with ‘D+’ in 2015) points to the government’s
commitment to strengthen strategic allocation of resources.
Efficient service delivery
12. The consistent performance of federal government subsidy transfers to the regional
government over the years (HLG-1 rated ‘B+’ in 2018 and ‘A’ in 2015 although not directly comparable
due to the inapplicability of earmarked grants in 2015) has had a positive impact on efficient service
delivery by ensuring that the needed resources are available on time to prosecute government policies
and programs. The good performance of predictability of resource allocation (PI-16 rated ‘A’ in 2018)
in addition to the effective cash management system (PI-17 also rated ‘A’ in 2018) has contributed
positively to the efficiency of service delivery. The government has also maintained strict controls on
the level of unreported operations (PI-7.1 rated ‘A’ in 2015 and 2018), except for donor-funded
projects that still have a challenge in terms of full reporting and disclosure. The poor performance of
domestic revenues (PI-3 rated ‘D’ in 2018 compared to ‘B’ in 2015) meant shortfalls in revenues badly
needed to improve service delivery despite the good performance of the tax administration system
(PI-13 rated ‘A’ in 2018 compared to ‘B+’ in 2015 and PI-14 rated B in 2015 and 2018). This situation
however raises questions as to the effectiveness of the tax administration system and/or the revenue
projection framework as the two are delinked. Improvement in external audit coverage (from ‘C+’ in
2015 to ‘B+’ in 2018) provides some assurance to the use of public funds for service delivery. The
absence of performance audits however limits the ability to measure efficiency and effectiveness of
service delivery
Overview of ongoing and planned PFM reforms and main weaknesses identified
13. The new PFM reform strategy, estimated at a cost of ETB 189.32 million over the five-year
period from EC 2010 to EC 2014 (GC 2017/2018 to GC 2021/2022), has nine components:
• Balance government revenues and expenditures over the medium term

• Make cost-effective budget allocations
• Modernize government treasury, cash management, and disbursement systems for
efficiency and cost-effectiveness
• Improve the timeliness and accuracy of government accounting and reporting
• Strengthen value for money by improving the internal audit and control systems
• Modernize government procurement and public asset management systems
• Modernize information technology (IT) systems that support government financial
administration
• Improve government financial administration that is participatory, transparent, and
accountable
7
• Improve staff technical capacity in government financial administration
14. The new PFM reform strategy fails to address issues relating to external audit (ORAG) and
domestic revenue mobilization even though Component 1 mentions ‘balance government revenues
and expenditures over the medium term’. The funding arrangements are also not well defined, but
the government intends to look for multiple sources of funding including from the federal government
and DPs.
15. Though there are no major ongoing PFM reform activities, PFM training and capacity-building
programs have been mainstreamed into the day-to-day activities of each sector bureau. Over the past
couple of years, the following elements have been achieved:
• Legal reforms on financial administration proclamation, procurement law, and

directives.
• Public Revenue and Expenditure Improvement Plan—tax revenue increased at an annual
average rate of 48.3 percent during the past five years, which is above the national
average of 33 percent.
• Training and capacity building on government budget preparation and management.
• Government cash management and payment systems—Treasury Single Account (TSA)
and daily consolidation of government bank accounts on TSA and closure of dormant
public bank accounts.
• Revision of government Chart of Accounts (CoA) consistent with international standards
(GFS-2001).
• Establishment of procurement complaints board.
• Training of internal auditors to conduct post-audit instead of pre-audit.
• Rollout of Integrated Budget and Expenditures System (IBEX) to all sector bureaus and
woredas plus training and capacity building.
Table 0.2: Overall summary of PFM performance scores, 2018

Dimension
Scoring Overall
PFM performance indicator ratings
method rating
i. ii. iii. iv.
HLG-1 Transfer from a higher-level government M1 A B A B+
Pillar I: Budget reliability
PI-1 Aggregate expenditure outturn M1 A A
PI-2 Expenditure composition outturn M1 D B C D+
PI-3 Revenue outturn M2 D D D
Pillar II. Transparency of public finances
PI-4 Budget classification M1 B B
PI-5 Budget documentation M1 C C
PI-6 Central government operations outside fiscal reports M2 A A NA A
PI-7 Transfers to subnational governments M2 A A A
PI-8 Performance information for service delivery M2 C C D D D+
PI-9 Public access to key fiscal information M1 D D
Pillar III. Management of assets and liabilities
PI-10 Fiscal risk reporting M2 D D D D
PI-11 Public investment management M2 C C C C C
PI-12 Public asset management M2 C D B C
8
Dimension
Scoring Overall
PFM performance indicator ratings
method rating
i. ii. iii. iv.
PI-13 Debt management M2 NA D NA D
Pillar IV. Policy-based fiscal strategy and budgeting
PI-14 Macroeconomic and fiscal forecasting M2 A A B A
PI-15 Fiscal Strategy M2 C D NA D+
PI-16 Medium-term perspective in expenditure budgeting M2 C A B C B
PI-17 Budget preparation process M2 A A A A
PI-18 Legislative scrutiny of budgets M1 B C A B C+
Pillar V. Predictability and control in budget execution
PI-19 Revenue administration M2 A C D A B
PI-20 Accounting for revenues M1 A A C C+
PI-21 Predictability of in-year resource allocation M2 A A A A A
PI-22 Expenditure arrears M1 A B B+
PI-23 Payroll controls M1 B A C B C+
PI-24 Procurement M2 A A C D B
PI-25 Internal controls on non-salary expenditure M2 A C B B
PI-26 Internal audit M1 A C A A C+
Pillar VI. Accounting and reporting
PI-27 Financial data integrity M2 B C C B C+
PI-28 In-year budget reports M1 A B C C+
PI-29 Annual financial reports M1 C A C C+
Pillar VII. External scrutiny and audit
PI-30 External audit M1 A A B A B+
PI-31 Legislative scrutiny of audit reports M2 A A C D B
9
1. Introduction
1.1 Background
1. On August 6, 2018,4 development partners (DPs) received an official request from the Ministry
of Finance (MoF) to conduct Public Expenditure and Financial Accountability (PEFA) assessments for
the federal government and selected regional governments, including the Somali regional government
(SRG), to track progress over time. The request was granted by DPs. The regional state of Somali
conducted a PEFA assessment in 2015. The current assessment is based on the 2016 PEFA framework
and applied the guidance for tracking performance change. Also, the supplementary guidance for
subnational government (SNG) assessment issued in December 2016 was used.
1.2 Rationale and purpose
2. Overall objectives. The objective of the PEFA assessment is to review the current performance
of the public financial management (PFM) systems, processes, and institutions of the SRG since the
2015 assessment and assist the government in identifying PFM weaknesses that may inhibit effective
service delivery to its citizens.
3. Specific objectives. The findings of the PEFA assessment are aimed at assisting the
government in refining the PFM reform strategy that it has already developed and provide the basis
for a coherent PFM reform program that can be supported by DPs, as well as through the
government’s own initiatives.
1.3 Assessment management, oversight, and quality assurance
4. The assessment management framework, oversight, and quality assurance are summarized in
Box 1.1. The assessment was funded by the World Bank, Irish Aid, U.K. Department for International
Development (DFID), European Union (EU), United Nations Children’s Fund (UNICEF), and UN
Women.5 It was managed by the World Bank. The task team leader (TTL) was Rafika Chaouli (Lead
Financial Management Specialist, Governance, World Bank) and Meron Tadesse Techane (Senior
Financial Management Specialist, Governance, World Bank) provided overall and continued guidance.
Finot Getachew Wondimagegnehu and Abiy Demissie Belay of the World Bank also provided
administrative and technical support to the assessment team.
5. A federal government PEFA task force was set up to monitor the assessments and provide
guidance throughout the process. The task force is led by the MoF Expenditure Management and
Control Program (EMCP), which is responsible for government PFM reforms and strategy, and
comprises a focused group of high-level representatives such as the Channel One Projects
Coordination Department (COPCD), central accounts of the government, budgeting and gender
directorates of the MoF, the Office of Auditor General, Ethiopia Revenue and Customs Authority
(ERCA), now the Ministry of Revenue, the Public Accounts Committee (PAC), and selected key line
ministries (education and health). Key donors of the task force include the World Bank, DFID, EU, Irish
Aid, UNICEF, and UN Women. A focal person, Mahamud Maelin, Channel 1 Coordinator of Somali
Bureau of Finance and Economic Development (BoFED), was responsible for arranging and
coordinating meetings and data gathering. Also, Abdikader Mohamed, Deputy Head of Somali BoFED,
was responsible for overall assessment implementation.
4 MoF letter reference number G/E/113/930.

5 United Nations Entity for Gender Equality and the Empowerment of Women.
10
PEFA Check
6. The quality assurance framework was reinforced as of January 1, 2018 (see PEFA Secretariat
Note: PEFA Check: Quality Endorsement of PEFA Assessments from January 1, 2018, www.pefa.org).
The quality assurance process of this report is shown in Box 1.1. The first draft report was submitted
for peer review on January 10, 2020.
Box 1.1: Assessment management and quality assurance arrangements

PEFA Assessment Management Organization
• Oversight Team (OT) - See the table below.
• Assessment Manager: Demissu Lemma Wondemgezahu, Director, MoF EMCP
• Assessment Team Leader: Charles Komla Hegbor
• Assessment Team Members: Elisaveta Teneva and Getnet Haile
• SRG Deputy Head of BoFED
• PEFA Secretariat
• Peer Reviewers (World Bank, EU, DFID, and Irish Aid)
Composition of the OT Members of the OT
Chairperson • State Minister, MoF
Ministry of Finance and Economic Development • Budget Director
• Director, EMCP
• Director, Treasury
• Director, Budget
• Director, Debt Management
• Director, Inspectorate Directorate
Somali BoFED • Deputy Head of BoFED
• Budget Director
• Channel 1 Coordinator
• Director, Treasury
• Director, Finance and Accounts
• Director, Inspectorate Directorate
• Director, Public Procurement
Somali Regional Auditor General • Somali Auditor General
Somali Revenue Authority • Deputy Director General
Somali Regional Council • Chairpersons of PAC and Finance Committee
Federal Public Procurement Authority • Director General
DPs • World Bank
• EU
• DFID
• Irish Aid
• UN Women
• UNICEF
Review of concept note and/or terms of reference
• Date of reviewed draft concept note by the PEFA Secretariat: November 13, 2018
11
• Other invited reviewers (names) who submitted written comments: Eric Brintet (Lead Financial
Management Specialist, GGOLF, World Bank); Emmanuel Cuvillier (Sr. Public Sector Specialist,
GGOMN, Word Bank); Clara Molera Gui (Governance, Delegation of the EU to Ethiopia); Misrak
Tamiru (Women’s Economic Empowerment [WEE] Program Specialist, UN Women); PEFA
Secretariat; Federal Government of Ethiopia; and Somali Regional State Government
Review of the assessment report
• Peer reviewers (names and institutions): Holy Tiana Rame (PEFA Secretariat); Jonathan Atkinson
(DFID); Clara Molera Gui (Governance, Delegation of the EU to Ethiopia); Meron Gezahegn (Irish
Aid); World Bank staff; Federal Government of Ethiopia; Somali Regional State Government
• Dates of the PEFA Secretariat’s review: First draft on February 14, 2020, and second draft on March
11, 2020
1.4 Assessment methodology
7. The 2016 PEFA methodology was applied. There are seven key pillars: (i) budget reliability, (ii)
transparency of public finances, (iii) management of assets and liabilities, (iv) policy-based fiscal
strategy and budgeting, (v) predictability and control in budget execution, (vi) accounting and
reporting, and (vii) external scrutiny and audit. In addition to the 2016 framework, the supplementary
guidance for subnational PEFA assessment issued by the PEFA Secretariat in December 2016 was used.
8. Meetings were held with key government officials and agencies as well as DPs (refer to the
list of people met in Annex 3B). The assessment reviewed and analyzed official government data (refer
to Annex 3A for a full list of documents consulted). As required by the PEFA guidelines on tracking
performance changes, the 2011 framework was used to ascertain PFM progress since the last
assessment in 2015. The results of this analysis are reported in Annex 4.
1.5 Assessment coverage and timing
9. Annex 3B provides a detailed list of institutions met during the assessment. Annex 3A also
provides a detailed list of information used for this assessment. Other reference material used were
the 2018 International Monetary Fund (IMF) Debt Sustainability Analysis for Ethiopia Federal
Government and Government Finance Statistics (GFS) Manual 2014, Chapter 2—definition of extra-
budgetary units (EBUs). The SRG PEFA assessment covered regional bureaus (specifically BoFED,
Bureau of Education, Bureau of Health, Bureau of Agriculture, and Bureau of Water, and Bureau of
Revenue); woredas (in so far as they affect regional government fiscal risk); public enterprises (in so
far as they affect regional government fiscal risk); the regional Auditor General; and the regional
council. There were no EBUs. Zones are excluded since they are part (branches) of the regional
government. The fiscal years for the assessments are Ethiopian Calendar (EC) 2008, 2009, and 2010
(Gregorian Calendar [GC] FY2015/2016, 2016/2017, and 2017/2018, respectively). The last budget
submitted to the regional council is the EC 2011 budget (Gregorian FY2018/2019 budget).
1.6 Fieldwork
10. The fieldwork began on November 4, 2019, with a kickoff meeting held at BoFED with the
regional government team. An exit meeting was held on November 22, 2019, to brief the regional
team on the preliminary findings. The cutoff date for this assessment is the end of November 2019.
Before the fieldwork, a PEFA training conference was held in Addis Ababa in December 2018 for two
days with a total of 115 participants, of whom 5 from SNNPR Region, 4 from Harari Region, 8 from
Oromia Region, 3 from Gambella Region, 7 from Amhara Region, 5 from Tigray Region, 4 from Afar
Region, and 3 from Benshangul Gumuz Region. The remaining participants came from Somali Region,
the city of Addis Ababa, the federal government, DFID, EU, Irish, UNICEF, UN Women, and the World
Bank.
12
11. On December 6, 2018, a meeting was organized between officials from the PEFA Secretariat,
the assessment team, and key stakeholders in the service delivery sector (education and health) and
gender-responsive budgeting, to discuss the methodology for the inclusion of some selected
indicators as pilots. To this end, additional meetings were held from November 18 to 22, 2019, with
Somali BoFED, the Jigjiga City Administration, the Jigjiga City Education and Health Offices to gather
more data on service delivery. It was agreed to drop the gender-responsive budgeting pilot due to the
cultural settings of Somali Region. The team visited four primary school and three health care centers
(two health centers and one health post) within Jigjiga City.
1.7 Pilot: Service delivery
12. The service delivery in the health and education sectors was assessed.
Service delivery
13. The indicators/dimensions selected to assess service delivery in the health and education
sectors are listed in Table 1.1. The team has also examined tracking mechanisms for the distribution
of textbooks and medical supplies at the primary service delivery level.
Table 1.1: Service delivery indicators/dimensions

Pillars Included Not included
HLG
I. Budget reliability PI-1 and PI-2 PI-3
II. Transparency of public finances PI-6, PI-7, PI-8, and PI-9 PI-5
III. Management of assets and liabilities PI-11 and PI-12.2 PI-10 and PI-13
IV. Policy-based fiscal strategy and PI-16.2, PI-16.3, and PI-17 PI-14, PI-15, and PI-
budgeting 18
V. Predictability and control in budget PI-21.3, PI-22, PI-23, PI-24, PI-25, and PI- PI-19 and PI-20
execution 26
VI. Accounting and reporting PI-29
VII. External scrutiny and audit PI-30 PI-31
13
2. Regional government background Information

2.1 Country economic situation
14. Ethiopia is a rapidly changing country with a total population of 94.351 million, growing at
2.32 percent per year (estimate of FY2017) and the second most populous country in Sub-Saharan
Africa. Ethiopia is a landlocked country and has an area of 1.1 million km2. The country’s democracy
has set up a federal structure devolving powers and mandates to regional states.
15. Ethiopia has registered an annual average growth rate of 10.1 percent in the first Growth and
Transformation Plan (GTP) I FY2010–2014/2015. The double-digit economic growth averaging 10.5
percent observed for the last 15 years was not only high and sustainable but inclusive with a significant
decline in poverty incidence from 44.2 percent in FY2000 to 23.5 percent in FY2016. The trend of the
GTP I has continued in the GTP II period (FY2015/2016–2019/2020) even in the midst of slow global
financial and economic development resulted in low commodity prices and demand as well as the
impact of ‘El Niño’-induced drought and political instability slowed down the economy. In this regard,
the economy continued to register impressive growth during the first two years of GTP II (FY
2015/2016–2016/2017).
16. The prudent fiscal policy pursued by the government stands out among the critical policy and
strategy anchors that contributed to the country’s impressive economic growth. Although most of the
macroeconomic and sectoral developments accounted for the sustainable and inclusive growth
realized over the past decade, some vital economic dynamics such as inflation, domestic revenue
mobilization, and export performance were not supportive.
17. The strong economic growth during the past years would hint at a further reduction in
poverty. Life expectancy rose from 52 to 65 years during FY2015/2016 and there were sizable
improvements in many of the human development indicators. Fertility rates have fallen while the
expectancy has continued to rise. The current fertility rate of 4.6 children per woman is down from
approximately 7 children per woman, and population growth rates are down from 3.1 percent to 2.5
percent in the current period and are projected to reach 1.3 percent by FY2045–2050 (World Bank
2017, the World Bank Country Partnership Framework for Ethiopia 2018–2022).
18. In FY2016/2017, gross domestic product (GDP) at current prices reached ETB 1,807 trillion,
registering an annual growth rate of 17.2 percent. As a result, per capita income reached US$863 up
from US$801 in FY2015/2016, indicating that Ethiopia’s vision of becoming a lower-middle-income
country by FY2025 is within reach with per capita income targeted to be US$1,025.
19. With regard to external debt, to augment available domestic financing options, the
government opted to finance its fiscal deficit from external sources on concessional terms. In
particular, the Government of Ethiopia finances its budget by assessing external loans on concessional
terms. As a rule of thumb, non-concessional loans cannot be used to finance the budgetary activities.
On the other hand, external non-concessional loans are used to finance projects that are run by state-
owned enterprises (SoEs).
20. Recognizing the impact of the debt burden on future generation and responsibility of each
citizen, any single loan is subject to the approval and oversight of the Ethiopian Peoples’
Representative Council (Parliament). Each loan is realized through efficient and effective project
preparation and implementation and a monitoring and evaluation mechanism.
21. According to the official data, the federal government’s fiscal deficit has shown an increasing
trend and this is demonstrated by an increase to 3.3 percent of GDP in FY2016/2017 from 2.3 percent
of GDP in FY2015/2016. Revenue decreased as a percentage of GDP mainly due to the slow pace of
14
tax reforms. The federal government fiscal deficit was financed through external—mainly
concessional—financing and domestic financing with large repayments of cash balances and residuals.
The 2018 IMF Debt Sustainability Analysis maintained that Ethiopia remains at ‘high risk’ of external
debt distress, as was the case in the 2017 assessment
2.2 Regional government economic situation

22. Somali, with its capital city Jigjiga, is one of the nine regions and two city administrations
making up the Federal Democratic Republic of Ethiopia. It has a total land area of 376,073 km2 and an
estimated population of 6 million with an annual population growth rate of 2.6 percent. Located in
the southeast of the country, Somali is inhabited mostly by pastoralists and agropastoralists. It shares
borders with Somalia to the east and southeast, Kenya to the south, and Djibouti to the north. To the
northwest and west, it borders with Afar and Oromia Regions, respectively. The region is divided into
11 zones, 93 rural woredas, and 6 city administrations.
23. Four generic livelihood types exist in the region: pastoralist (comprising 60 percent of the rural
population), agropastoralist farming (25 percent, livestock rearing and rain-fed crop production), and
sedentary and urban sector (15 percent). The average household consists of 6.3 persons. The main
source of income for rural population is livestock rearing, which constitutes 40 percent of the total
income, while crop production constitutes 26 percent, trade 14 percent, and gift (in-kind) 7 percent.
More than 90 percent of Somalis live in the rural area with high poverty levels.
24. The budget is usually allocated for basic services with priority on health, education, water,
agriculture, and roads. The economic development of the region is driven by GTP II (2016/2017–
2020/2021), which is a subset of the national GTP II, and a continuation of GTP I (2011/2012–
2015/2016). The region continued to register strong economic growth that has further increased since
Ethiopian fiscal year (EFY) 2008 (2017/2018). The economy grew on average 11.9 percent between
EFY 2005 and EFY 2008 (GC 2012/2013 to GC 2015/2016). The agriculture sector grew from 6.4 percent
in EC 2004 to 23.5 percent in EC 2007 but dropped suddenly to 6.4 percent in EC 2008 mainly due to
drought and poor rainfall patterns. The services sector on the other hand grew from 9.9 percent in EC
2004 to 24.4 percent in EC 2006 and then fell to 16.3 percent in EC 2008. The industry sector showed
resilience with a growth of 4.7 percent in EFY 2004 to 20.5 percent in EC 2008. Table 2.1 outlines the
real GDP growth rates between EFY 2004 and EFY 2008 (these figures are the most recent). As shown
in Table 2.2, the agricultural sector remains the largest contributor to the regional GDP with an
average share of 69.6 percent, followed by the services sector averaging 25.9 percent and then
industry at an average of 4.5 percent.
Table 2.1: Real GDP growth rate (%)

Sector EFY 2004 EFY 2005 EFY 2006 EFY 2007 EFY 2008 Average
Agriculture 6.4 6.6 9.8 23.5 6.4 10.5
Industry 4.7 2.0 7.1 11.5 20.5 9.2
Services 9.9 12.0 24.4 18.9 16.3 16.3
Total (regional GDP) 7.1 7.6 13.3 21.7 9.6 11.9
Source: Somali Planning and Budget Department.
Table 2.2: Share of sectors to Real GDP (%)
Sector EFY 2003 EFY 2004 EFY 2005 EFY 2006 EFY 2007 EFY 2008 Average
Agriculture 72.0 71.5 70.8 68.6 69.6 67.6 69.6
Industry 5.0 5.0 4.6 4.4 4.0 4.4 4.5
Services 23.0 23.6 24.6 27.0 26.4 28.0 25.9
Total 100.0 100.0 100.0 100.0 100.0 100.00 100.0
Source: Somali Planning and Budget Department.
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25. Investment is made across 22 sectors, with the greatest concentration in agriculture, real
estate, and education. The typical diaspora-funded investments are between US$5,000 and
US$100,000, with the majority being between US$5,000 and US$50,000. The regional government’s
particular focus is on investment in providing access to safe drinking water.
2.3 Fiscal and budgetary trends
26. The economy grew on average 11.9 percent between 2011/2012 and 2015/2016. Table 2.3
outlines aggregate fiscal trends. Growth in domestic revenue has been encouraging, increasing from
ETB 1.88 billion in 2015/2016 to ETB 2.59 billion in 2017/2018, indicating an increase of 37.7 percent
from the 2015/2016 figure. General purpose grants from the federal government also increased, from
ETB 6.94 billion in 2015/2016 to ETB 12.2 billion in 2017/2018, an increase of 75.8 percent from
2015/2016. The increase in revenues (domestic and grants from the federal government) has
contributed to improvement in primary service delivery, though still below expectation. Government
expenditures also increased from ETB 8.54 billion in 2015/2016 to ETB 14.8 billion in 2017/2018, an
increase of 73 percent. Continuous drought is a major concern in the region; this significantly affects
food security. It is estimated that 67 percent of the Somali population lives below the poverty line.
Table 2.3: Aggregate fiscal data (ETB, millions)

Indicator 2015/2016 2016/2017 2017/2018
Total revenue 8,854 11,166 14,849
Subsidy from the federal government 6,935 8,845 12,232
Tax and other domestic revenue 1,880 2,294 2,588
External assistance (grants) 39 27 29
Total expenditure 8,538 11,124 14,775
Aggregate surplus (deficit) 316 42 74
Source: Somali BoFED.
27. The sectors consistently having more allocations are water and education. General functions
such as security and general services also constitute a large part of the budget, indicating that
administrative costs are high. Allocations to construction fell sharply to 1 percent in 2017/2018 from
11 percent in 2015/2016. Budget allocation to the agricultural sector also fell from 14 percent in
2015/2016 to 0 percent in 2017/2018. The allocation of the expenditure for the past three years is
shown in Table 2.4.
Table 2.4: Budget allocation by function as a percentage of total expenditure

Functions 2015/2016 2016/2017 2017/2018
Organ of State 6 6 5
Justice and Security 6 4 4
Defense 0 0 0
Security Affairs Coordination 14 13 13
General Service 6 8 8
Agriculture and Natural Resources 14 18 0
Water Resources 12 12 21
Trade and Industry 1 1 14
Construction 11 9 1
Education 16 16 14
Culture and Sport 1 3 10
Health 8 8 1
Labour and Social Affairs 0 0 6
Prevention and Rehabilitation 0 1 0
City Service 2 1 1
Other 3 0 2
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Functions 2015/2016 2016/2017 2017/2018

Total 100 100 100
28. Table 2.5 shows budget allocation by economic classification. Fixed assets and construction
constitute a large part of the budget with allocations of between 41 percent and 47 percent. This is
followed by expenditure on compensation of between 27 percent and 29 percent. Goods and services
account for between 20 percent and 22 percent, followed by grants to woredas between 4 percent
and 8 percent.
Table 2.5: Budget allocation by economic classification (%)
Economic classification 2015/2016 2016/2017 2017/2018

Compensation of employees 29 29 27
Use of goods and services 22 20 21
Consumption of fixed capital 41 47 44
Interest 0 0 0
Subsidies and grants 8 4 8
Total 100 100 100
2.4 Legal and regulatory arrangements for PFM
Legal and regulatory arrangements for decentralization
29. The SRG is one of the nine autonomous regions in Ethiopia established by the Constitution in
1994. As per the federal government Constitution, regional governments have legislative, executive,
and judicial powers, and laws that fall into the jurisdiction of the region are enacted by the regional
council. Members of the regional council are directly elected by the people and the highest executive
organ is the regional cabinet (council of ministers) headed by the Regional President. All proclamations
are approved by the regional council and regulations by the regional cabinet. The respective bureaus
also issue internal directives.
30. The regional legal framework is largely based on the federal government legal framework for
PFM. The main legal and regulatory documents available in the region are the (a) Annual Budget
Proclamations including Supplementary Budget Proclamations; (b) budget preparation guideline; (c)
financial calendar; and (d) financial administration proclamation, its accompanying regulation, and 13
directives. Additionally, the Public Procurement and Property Administration Proclamation and its
accompanying directives and manuals are customized to the local context. There are fixed asset,
internal audit, and stock management manuals that are applied all levels.
31. The Financial Administration Proclamation No. 110/2012 and Regulations 11/2012 govern the
regional government financial administration. The proclamation defines the following:
• The responsibilities of BoFED and regional sector bureaus with respect to collection of
public money
• Forecasting and budget preparation process and documentation
• Disbursement of public money
• Cash management
• Debt management
17
• Financial reporting
• Internal audit
32. The main legal and regulatory frameworks that regulate public procurement and property
administration in Somali Region is the Somali Regional State Public Procurement and Property
Administration Proclamation No. 82/2002 EC and Public Procurement Directive No. 01/2002 EC. They
define the powers and functions of different organs involved in procurement and property
administration, the basic procurement methods and procedures, types of procurements and
conditions and procedures for each type, disposal procedures, public property administration
procedures, and appeal procedures.
33. Proclamation No. 979/2016 governs the regional government’s revenue collection functions.
It sets out the powers and duties of the Somali Bureau of Revenue. There are additional proclamations,
regulations, and directives adopted by the region with respect to the different taxes enacted by the
region such as income tax, value added tax (VAT), turnover tax, excise tax, and so on.
34. The Office of the Regional Auditor General (ORAG) derives its powers from Article 107 of the
1994 Constitution. Additionally, its functions are outlined in Proclamation No 182/2019, a
proclamation for the reestablishment of ORAG. This proclamation defines the power and duties of the
auditor general, the procedures for appointment and removal of the auditor general, budget approval
procedures of the office, duty to provide information, and so on.
35. The powers and duties of the executive organs of Somali are defined in the Financial
Administration Cabinet Council Regulation dated 2004. This regulation is issued by the Somali Regional
State Cabinet Council pursuant to Article 59(7) of the revised Constitution of Somali.
Table 2.6: Overview of Somali Region governance structure

Own Approves
Corporate Percentage Percentage Percentage
Government political own Number of Average
body of public of public funded by
level leadership budget jurisdictions population
(Yes/No) expenditure revenue transfers
(Yes/No) (Yes/No)
Regional Yes Yes Yes 1 6 million 13.5 17.5 80
Woreda No Yes Yes 99 No data No data No data No data
36. The following sections also describe the legal and regulatory arrangements for
decentralization.
• All federal government financial management and tax proclamations define the regional
government's PFM structure; these are
(a) Proclamation on the definition of power and duties of the executive organs
(04/1995);
(b) Proclamation establishing the Office of the Federal Auditor General No. 68/1997;
(c) Proclamation on the establishment of Ethics and Anti-corruption Commission (235-
2001);
(d) Financial Administration Proclamation No. 648/2009, August 6, 2009;
(e) Procurement and Property Administration Proclamation No. 649/2009, September
9, 2009;
(f) Proclamation No. 883/2015 Revised Federal Ethics and Anti-Corruption;
18
(g) Proclamation No. 970/2016 Federal Government of Ethiopia Financial

Administration (Amendment) Proclamation; and
(h) Proclamation No. 979/2016 Federal Income Tax Proclamation.
• There are two tiers of government under the regional government: (a) zones and (b)
woredas/city administration. There are 99 woredas (93 rural woredas and 6 urban or city
administrations). Zones are part of the regional government while woredas and cities
are SNGs. Together, they serve approximately 6 million Ethiopians.
• The Somali National Regional State (SNRS) was established by the Constitution of EFY
1994 (GC 2001)
• Somali Region is the second biggest in km2 in Ethiopia with a total population of
approximately 6 million. The region receives 9.98 percent of total federal grants to
regional governments.
37. The main functional responsibilities of the SRG are as follows:
• Zones are branches of the regional government and only supervise woredas/city
administration; woredas and city administration are important in terms of primary
service delivery. The SRG delegates its primary service delivery responsibilities to city
administration and woredas.
• The functions and responsibilities of zones and woredas/city administration are defined
in Article 6 of the Financial Management Proclamation No. 110/2012; these
responsibilities are delegated.
Legal and regulatory arrangements for PFM
Somali budgetary systems
• To a large extent, federal government laws guide Somali budget processes; for instance,
actual subsidies to zones and woredas are heavily dependent on actual transfers from
the federal government.
• The SRG has two main treasury accounts; these are maintained at the National Bank of
Ethiopia. With the approval of the regional Finance Bureau, most budget entities
maintain own revenue accounts with the Commercial Bank of Ethiopia (CBE).
• The SRG prepares its own budget. The budget is approved by the regional council without
federal government interference.
• The regional government has a separate (and independent) public procurement

authority; it is governed by Proclamation No. 82/2010 GC (or 82/2002 EC).
• The SRG can borrow directly; all borrowings must be approved by the federal
government. In most cases, loans are onlent from the federal government.
Somali institutional (political and administrative) structures
• The SRG has a regional government independent of the federal government legislature;
it approves its budgets and enacts laws and regulations for the region, but these laws
must be in tandem with federal government laws.
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• The regional government has the power to appoint its own executives, budget officers,
accounts, and treasury officers. The hiring and appointments are in accordance with
regional civil service rules and salary structure, which is independent from federal
government administration.
• The budget and financial management processes are adopted from federal government
systems.
PFM functions
• Payment. The regional government commits and pays for its expenditure without
federal government interference.
• Revenue administration. It raises its own revenues in line with regional government
revenue laws.
• Performance arrangements for service delivery involving the SNG. BoFED transfers
funds to woredas for service delivery in accordance with regional government policy.
• Monitoring of public corporations. The regional government has a duty to monitor
public corporations.
• Monitoring of lower tiers of SNGs. The regional government monitors woredas/city
administration through zones;6 it receives timely annual financial reports, but these are
not published.
• Public investment. Public investment management (PIM) is managed by the regional
government BoFED. It uses internal guidelines for public Investment projects (PIPs)
• The management, monitoring, and recording of fixed assets are decentralized, with
each budget unit and EBU responsible for managing and safeguarding its assets. Disposal
of fixed assets is done mostly centrally, through the Public Procurement and Property
Disposal Service (PPPDS).
• Debt management. The regional government has borrowing powers, but all borrowings
must be approved by the federal government.
• Macroeconomic forecasting. The regional government prepares macroeconomic
forecasts with its GDP assumptions; other assumptions such as interest and inflation
rates, are determined by the federal government.
• Internal control. The internal control processes for the various functions are included in
the different manuals such as Financial Manual, Procurement Manual, Government-
owned Fixed Assets Management Manual (GOFAMM), and directives.
• Cash monitoring and forecasting. Cash forecasting is done annually and updated
quarterly.
• Payroll is decentralized, with each budget unit managing its own payroll.
• Procurement. Public procurement is government by Public Procurement Proclamation
No. 82/2010. Each unit prepares procurement plans, but these are not published. Data
on procurement are available and generally complete and accurate.
6 Zones are branches of the regional government.

20
• Internal audit. Each budget unit has an internal audit unit; it prepares annual internal
audit plan. It also prepares quarterly internal audit reports, but conformity to
international standards is low.
• Financial reporting. Annual financial reports are prepared and submitted to ORAG for
audit.
2.5 Institutional arrangements for PFM
Structure of the public sector
38. Tables 2.5, 2.6, and 2.7 outline the structure of the public sector and regional government
operations. The regional government has 11 zones and 99 woredas (93 rural woredas and 6 city
administrations). There are 4 public corporations but no EBUs. An EBU is defined in accordance with
the IMF GFS 2014 definition, which is also reported in the Field Guide page 46, clarifications 6.1, 6.2,
and 6.3. According to the IMF GFS definition, EBUs are separate units that operate under the authority
or control of the central government (or in the case of an SNG assessment, the state or local
government). They may have their own revenue sources, which may be supplemented by grants
(transfers) from the general budget or from other sources. Even though their budgets may be subject
to approval by the legislature, EBUs have discretion over the volume and composition of their
spending. Such entities may be established to carry out specific government functions, such as road
construction, or the nonmarket production of health or education services. Budgetary arrangements
vary widely across countries, and various terms are used to describe these entities, but they are often
referred to as ‘extra-budgetary funds’ or ‘decentralized agencies’ (GFS Manual 2014, Chapter 2,
Section 2.82).
Table 2.7: Structure of the public sector (number of entities and financial turnover)
Public sector
Public corporation
Government subsector
subsector
2017/2018
Social Nonfinancial Financial
Budgetary
EBUs security public public
Units
funds corporations corporation
SNG (Somali) 537 NA NA 4 None
1st tier subnational (woreda) 99 NA NA NA NA
3rd tier subnational (kebele) NA NA NA NA NA
Table 2.8: Financial structure of regional government - budget estimates (ETB, millions)
Central government
2017/2018
Budgetary unit EBUs Social security funds Total aggregated
Revenue 15,265 NA NA 15,265
Expenditure 15,306 NA NA 15,306
Source: BoFED 2017/2018 budget.
Table 2.9: Financial structure of central government - actual expenditure (ETB, millions)
Regional government
2017/2018
Revenue 14,849 178 NA 14,866
Expenditure 14,775 17 NA 14,792
7 These are regional government sector bureaus.

8 This is revenue (and expenditure) received by the regional roads authority from the federal government road fund.
21
Regional government
2017/2018
Transfers to (-) and from (+) 1,4249 No data NA 1,424
other units of general
government
Liabilities 0.79 No data NA 0.79
Financial assets (cash + cash 59 No data NA 59
equivalent)
Nonfinancial assets No data No data NA No data
Source: BoFED 2017/2018 budget and consolidated annual accounts.
Institutional responsibilities for PFM
39. The regional government’s organs of power are (a) Regional President, (b) regional council, (c)
regional cabinet, (d) judiciary organ, and (e) ORAG. Members of the council are elected by the public
for a five-year term. The council has the power to levy taxes and duties as well as set service charges
referencing financial matters falling under the jurisdiction of the regional government in accordance
with the Constitution and approve the budget of the region and long-term and short-term economic
and social development plans of the region. It also has the power to allocate budgetary subsidy to
woredas and city administrations according to the adopted formula.
40. The President is the chief executive officer of the region and is accountable to the regional
council. The President is elected by the regional council from among the members for the same term
as the council. The cabinet is accountable to the President and is responsible for ensuring that
proclamations, regulations, resolutions, and standards adopted by the council and by the federal
government are implemented.
41. The judiciary of the regional state is organized such that it comprises the regional Supreme
Court, high courts, and first instance courts. The woreda court is the lowest subordinate first-instance
judicial organ of the regional state.
42. As per the Regional Financial Administration Proclamation No. 110/2012, BoFED has the
power to supervise and monitor the financial administration of the region and oversee the internal
audit functions of public bodies. The public bodies are responsible for managing the budgets allocated
to their sectors. There is an internal audit function at each public body reporting administratively to
BoFED. Taxes and duties are collected by the regional Revenue Bureau and all collections flow to the
consolidated fund account managed by BoFED. Organizational structures, manning, and pay schemes
are centralized and supervised by the Bureau of Public Service. Payroll and procurement are
decentralized to the budget institutions (BIs). Independent external audit is provided by ORAG, which
reports to the council.
Requirements for internal control
43. The concept of internal control involves the entire government legal framework, the
procurement rules, and formalized acts that control the various kinds of risks relevant to an
organization. The internal control objectives relate to the reliability of financial data and reporting,
timely feedback on the achievement of planned operational activities and strategic goals, and
compliance with laws and regulations at the organization level. The usual internal control procedures
in the area of PFM in the region are related to the budget and treasury operations and the accounting
procedures, which are designed to prevent fraud and identify weaknesses and errors. These
procedures are formalized in the financial proclamation of the region, which is the key PFM legal
9 This represents transfer from regional government to woredas.

22
framework, as well as in various internal provisions, manuals, and rules. These cover the following
requirements broken down into the five elements of internal control:
(a) Control environment. It is guided by regulatory frameworks including the Constitution

and the various PFM proclamations, regulations, and directives. Roles and
responsibilities of the various government organs have been clearly stipulated. Internal
audit is functional in all sector bureaus, and ORAG has been operating independently.
Though it is yet to be strengthened, the Regional Ethics and Anticorruption Commission
(REAC) is also functional. The legal framework clearly indicates separation of roles
between the executive government, judiciary, and regional council. However, it has been
reported that the check and balance system has been compromised during the previous
administration which was replaced a year ago.
(b) Risk assessment. A certain level of risk assessment is embedded in the internal audit,
external audit, and tax audit. Nonetheless, comprehensive entity-a level risk assessment,
risk-based auditing, and systemic audit practices are yet to be fully developed.
(c) Control activities. There is a clear segregation of duties in payroll, disbursement,

procurement, asset management, and other PFM activities. Internal control procedures
are supported by various PFM manuals and directives. Bank accounts are reconciled and
nonfinancial assets are counted once in a year. Disbursements are effected following a
budget clearance procedure and financial transactions are subject to auditing.
(d) Information and communication. The integrated budget and expenditure management
software called Integrated Budget and Expenditures System (IBEX) is the main system
used for processing financial transaction and producing financial reports. Each public
body is required to submit a monthly financial report to BoFED for quarterly
consolidation and submission to the regional cabinet. ORAG and internal audit units
submit periodic reports. The PAC also receives reports from ORAG. The extent of usage
of financial reports by the head of public bodies is yet to be developed.
(e) Monitoring. The external and internal auditors are supposed to prepare and submit
reports on compliance and regularity. The audit reports are to be submitted to the
regional council for discussion and further actions. Public participation at hearings is
limited as well as publication of the annual audit and PAC reports.
2.6 Other important features of PFM and its operating environment
44. The regional government has 53 sector bureaus, 11 zones, and 99 woredas (93 rural and 6
urban woredas/city administrations). Zones are part of the regional government and their role is
coordination between the regional sector bureaus and woredas. There is no council at the zonal level.
Woredas/city administrations have their own council. The financial management function at the
woreda/city administration level is centralized at woreda finance and economic development offices.
That means all woreda-level sector offices receive procurement, disbursement, payroll, and other PFM
services from the woreda finance and economic development offices. Each BI operates a zero-balance
bank account (‘Z’ account), a budget bank account (‘B’ account), and aid account (‘A’ account). The ‘Z’
account has a Treasury Single Account (TSA) structure which allows outstanding balances to be swept
into the main treasury bank account held at the National Bank of Ethiopia.
45. The accounting system of the region is in line with the Federal Government Financial manual
which is not in line with International Public Sector Accounting Standards (IPSAS). Modified cash basis
of accounting is in use where revenues are recognized when received. The financial reporting system
23
provides information on budget execution and some financial assets, but not information on
nonfinancial assets and contingent liabilities. IBEX has only two modules, budgeting and general ledger
accounting. At the regional sector bureau level, most of the public bodies use a payroll software which
has some features of attendance management. Disbursement, procurement, asset management,
bank reconciliation, and inventory management functions are nonautomated.
24
3. Assessment of PFM Performance

HGL-1 Transfers from a higher-level government
Summary scoring table
Indicator/Dimension Score Brief justification for score

HLG-1 Transfers from a B+ Scoring method M1
higher-level government
HLG-1.1 Outturn of transfer A Actual transfers of federal government subsidies were 100.5%,
from higher-level government 100.3%, and 100.2% in 2015/2016, 2016/2017, and 2017/2018,
respectively; these reflect deviations of −0.5% in 2015/2016, −0.3% in
2016/2017, and −0.2% in 2017/2018.
HLG-1.2 Earmarked grants B Transfers of earmarked grants deviated by more than 10% in one out
outturn of the three years under review. Actual deviations were 0.0% in
2015/2016, 12.7% in 2016/2017, and 0.0% in 2017/2018.
HLG-1.3 Timeliness of transfer A Actual disbursements of both recurrent and capital grants have been
from higher-level government evenly spread within each of the last three years under review. These
disbursements were done monthly.
HLG-1.1 Outturn of transfer from higher-level government
46. The federal government has shown significant commitment referencing, fulfilling its financial
obligations to the SRG. As shown in Table 3.1, the federal government marginally exceeded its budget
allocations in all three years under review by less than 1 percent. Actual transfers of federal
government subsidies were 100.5 percent, 100.3 percent, and 100.2 percent in 2015/2016,
2016/2017, and 2017/2018, respectively; these reflect deviations of −0.5 percent in 2015/2016, −0.3
percent in 2016/2017, and −0.2 percent in 2017/2018.
Table 3.1: Outturn of transfer from federal government

2015/2016 2016/2017 2017/2018
Original budget 6,901,075,153 8,818,489,127 12,203,680,019
Actual transfer 6,934,544,627 8,845,456,727 12,232,960,020
% outturn 100.5 100.3 100.2
% deviation −0.5 −0.3 −0.2
Dimension score: A
HLG-1.2 Earmarked grants outturn
47. As shown in Table 3.2, deviations in two out of the three years were 0 percent (2015/2016
and 2017/2018) and 12.7 percent in 2016/2017. This performance indicates that the federal
government transfer of earmarked grants was much more reliable. This reflects a positive sign in terms
of making resources available for primary service delivery.
Table 3.2: Outturn of transfer from earmarked grants

2015/2016 2016/2017 2017/2018
Original budget 974,400,000 974,400,000 698,600,000
Actual transfer 974,400,000 850,376,000 698,600,000
% outturn 100.0 87.3 100.0
% deviation 0.0 12.7 0.0
25
Dimension score: B
HLG-1.3 Timeliness of transfer from higher-level government
48. Evidence from BoFED shows an even disbursement of actual transfers from the federal
government over the last three completed fiscal years 2015/2016, 2016/2017, and 2017/2018. The
disbursements are categorized into recurrent (account code 1601) and capital (account code 1602).
For 2015/2016, actual recurrent disbursements were between ETB 343 million and ETB 345 million
over the 12 months period; capital disbursements were between ETB 225 million and ETB 230 million.
For 2016/2017, recurrent disbursements were between ETB 420 million and ETB 424 million for
recurrent and between ETB 309 million and ETB 311 million for capital budget. Actual transfers for
2017/2018 were exactly ETB 523 million for recurrent and between ETB 675 million and ETB 678
million for capital budget. These disbursements were done monthly.
Dimension score: A
PILLAR I. Budget reliability

PI-1 Aggregate expenditure outturn
49. This indicator measures the extent to which aggregate budget expenditure outturn reflects
the amount originally approved, as defined in government budget documentation and fiscal reports.
There is one dimension for this indicator.

PI-1 Aggregate A Scoring method M1
expenditure outturn
PI-1.1 Aggregate A Aggregate expenditure outturn was between 95% and 105% in two of the
expenditure outturn last three years; actual outturns were 100.4% in 2015/2016, 108.9% in
2016/2017, and 96.5% in 2017/2018).
PI-1.1 Aggregate expenditure outturn
50. Aggregate expenditure outturn for the last three completed fiscal years is generally reliable
with outturns between 95 percent and 105 percent in two of the last three completed fiscal years. As
shown in Table 3.3, actual outturns were 100.4 percent in 2015/2016 (EFY 2008), 108.9 percent in
2016/2017 (EFY 2009), and 96.5 percent in 2017/2018 (EFY 2010). The calculations upon which the
table is based are reported in Annex 5.
Table 3.3: Comparison of budgeted expenditure against actual outturn (ETB, thousands)
2015/2016 2016/2017 2017/2018
Original budget 8,503,441 10,218,987 15,305,430
Actual outturn 8,537,913 11,124,649 14,775,032
Actual outturn (%) 100.4 108.9 96.5
Source: BoFED’s 2015/2016 and 2016/2017 audited accounts and 2017/2018 draft account.
Dimension score: A
PI-2 Expenditure composition outturn
51. This indicator measures the extent to which reallocations between the main budget
categories during execution have contributed to variance in expenditure composition. Variations in
26
expenditure composition may indicate an inability to spend resources in accordance with the
government’s plans, as expressed in the originally approved budget.

PI-2 Expenditure composition D+ Scoring method M1
outturn
PI-2.1 Expenditure composition D Variance in expenditure composition by functional classification was
outturn by function less than 15% in only one of the last three years; actual variances
were 12.2% in 2015/2016 (EFY 2008), 16.5% in 2016/2017 (EFY
2009), and 20.8% in 2017/2018 (EFY 2010).
PI-2.2 Expenditure composition B Variance in expenditure composition by economic classification was
outturn by economic type less than 10% in at least two of the last three years; actual variances
were 9% in EFY 2008, 9.5% in EFY 2009, and 10.3% in EFY 2010.
PI-2.2 Expenditure from C Expenditure charged to contingency reserves for the last three years
contingency reserves averaged 7.4% of the total expenditure.
PI-2.1 Expenditure composition outturn by function
52. The detailed calculations upon which Table 3.4 is based are reported in Annex 5. As shown in
the table, variance in expenditure composition by administrative classification was 12.2 percent, 16.5
percent, and 20.8 percent in 2015/2016 (EFY 2008), 2016/2017 (EFY 2009), and 2017/2018 (EFY 2010),
respectively. These results indicate an unreliable functional resource allocation, pointing to
weaknesses in budget planning and formulation. Two supplementary budgets (in 2015/2016 and
2016/2017) also contributed to these significant outturns in expenditure composition by function.
Dimension score: D
PI-2.2 Expenditure composition outturn by economic type
53. As shown in Table 3.5, variance in expenditure composition by economic classification was 9.0
percent, 9.5 percent, and 10.3 percent in 2015/2016 (EFY 2008), 2016/2017 (EFY 2009), and
2017/2018 (EFY 2010), respectively. The calculations upon which Table 3.5 is based are reported in
Annex 5. The economic classification is compliant with the GFS standard (up to the 3 digits
classification). The financial administration proclamation of the region stipulates that budget transfers
from capital to recurrent budget are not allowed and BoFED is empowered to approve all transfers.
Transfers between public bodies are made mostly in the fourth quarter and upon approval of the
cabinet.
Dimension score: B
PI-2.3 Expenditure from contingency reserves
54. Actual expenditure charged to the contingency vote averaged 7.4 percent (refer to Table 3.5).
The calculations upon which the table is based are reported in Annex 5. The practice of the region is
that contingency budget is proclaimed at the BoFED level only and transfer is made to public bodies
on request. Contingency reserves are used to meet unforeseen expenditures. By law, there is no limit
on contingency vote as a percentage of total expenditure. Available evidence shows that the regional
government does not consistently adhere to the practice of not spending beyond the approved
contingency vote. For the fiscal year 2016/2017 (EFY 2009) the government spent ETB 1,129,500,000
as against approved contingency budget of ETB 501,000,000 resulting from increases in teachers’
remunerations.
27
Dimension score: C
Table 3.4: Result matrix PI-2 composition variance by economic classification (%)
Total expenditure deviation Composition variance by
Year
(less contingency) economic classification
2015/2016 100.4 12.2
2016/2017 108.9 16.5
2017/2018 96.5 20.8
Table 3.5: Result matrix PI-2.1 and PI-2.3 composition variance by functional classification and contingency
(%)
For PI-2 For PI-2.1 For PI-2.3
Year
Total expenditure deviation Composition variance by function Contingency share
2015/2016 100.4 9.0 7.4
2016/2017 108.9 9.5
2017/2018 96.5 10.3
PI-3 Revenue outturn
55. This indicator measures the change in revenue between the originally approved budget and
end-of-year outturn. Accurate revenue forecasts are a key input to the preparation of a credible
budget.

PI-3 Revenue outturn D Scoring method M2
PI-3.1 Aggregate revenue D Actual revenue outturns were 117% in 2015/2016 (EC 2008), 110% in
outturn 2016/2017 (EC 2009), and 85% in 2017/2018 (EC 2010).
PI-3.2 Revenue D Variance in revenue composition was more than 15% in all the last three
composition outturn years; actual outturns were 53% in 2015/2016 (EFY 2008), 55% in
2016/2017 (EFY 2009), and 56% in 2017/2018 (EFY 2010).
PI-3.1 Aggregate revenue outturn
56. The regional government revenue budget is not reliable as evidenced in Table 3.6. It was 117
percent in 2015/2016 (EC 2008), 110 percent in 2016/2017 (EC 2009), and 85 percent in 2017/2018
(EC 2010). The calculations upon which the table is based are reported in Annex 5. Transfers (subsidies)
from the federal government, which account for nearly 80 percent of the total revenue of the region,
are excluded from the calculation as required by the Supplementary Guidance for Subnational PEFA
Assessment. Apart from transfers, the major revenues that are collected by the region are domestic
taxes, external assistance (grants), and nontax and other revenues. The performance of tax revenues
against the budget was generally good in all three years. However, the nontax revenue such as
administrative fees and charges, government investment income, and sale of public goods and
services turned to be up to three times higher than planned, whereas the other revenues, mostly
municipality and capital revenues and customs on imported goods, were much below target in all the
three years. These deviations were not compensated by any other group of revenues. The external
assistance was disbursed exactly per plan in all the three years.
Dimension score: D
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Table 3.6: Comparison of budgeted revenue against actual outturn (ETB)

2015/2016 2016/2017 2017/2018
Original budget 1,609,485,191 2,076,967,600 3,061,481,788
Actual outturn 1,879,877,057 2,294,089,132 2,587,856,860
Actual outturn (%) 117 110 85
Source: BoFED’s 2015/2016 and 2016/2017 audited accounts and 2017/2018 draft accounts.
PI-3.2 Revenue composition outturn
57. The variances in revenue composition outturns were huge, more than 15 percent of the
approved original budget in all three years under review. Actual variances were 52.8 percent in
2015/2016 (EFY 2008), 55.1 percent in 2016/2017 (EFY 2009), and 56.4 percent in 2017/2018 (EFY
2010) (refer to Annex 5 for detailed calculations). The huge variances occurred because of low budget
performance of other revenues such as municipality revenue, sale of goods and services,
administrative fees, and investment income, among others.
Dimension score: D
PILLAR II. Transparency of public finances

PI-4 Budget classification
58. This indicator assesses the extent to which the government budget and accounts classification
is consistent with international standards. There is one dimension for this indicator.

PI-4 Budget classification B Scoring method M1
PI-4.1 Budget classification B Budget formulation, execution, and reporting are based on
administrative, economic, and functional classification using
GFS/Classification of Functions of Government (COFOG) standards.
This classification is the same as that of the federal government
except for some functions such as defense that are not applicable at
the regional government level.
PI-4.1 Budget classification
59. Budget classification is consistent with COFOG and follows GFS 2001; this classification is the
same as that of the federal government except for some functions such as defense that are not
applicable at the regional government level. The Chart of Accounts (CoA) for both revenue and
expenditure includes administrative, economic, and functional classifications. The revenue is classified
according to type (tax revenue, nontax revenue, and capital revenue). The expenditure component is
divided into recurrent expenditure, capital expenditure finance by the regional government, capital
expenditure financed by DPs (grants), and capital expenditure from loans onlent from the federal
government. There are subfunctions and subagency (sector/regional bureaus, zonal, and woreda)
classifications at the budget formulation stage. IBEX is used for budget execution, with the same
classification used for budget formulation and preparation, with at least 3 digits of GFS 2001 standard
for economic classification. At present, program budget is yet to be introduced at the regional
government level.
Dimension score: B
29
PI-5 Budget documentation
60. This indicator has one dimension to assess the comprehensiveness of the information
provided in the annual budget documentation presented by the executive to the regional council and
is measured using a list of ‘basic’ and ‘additional’ elements included in the last budget submitted to
Parliament, that is, the FY2018/2019 (2011 EC) budget.

PI-5 Budget documentation C Scoring method M1
PI-5.1 Budget documentation C As shown in Table 3.7, the regional government
budget meets at least three basic elements of the
PEFA requirements. It also meets two additional
elements.
Table 3.7: Budget documentation benchmarks
No. Budget documentation benchmarks Evidence used/Comment
Basic elements
1. Forecast of the fiscal deficit or surplus (or accrual No No, but any difference between its own
operating result) revenues and projected expenditure is
financed by the federal government as
subsidies (transfers/grants).
2. Previous year’s budget outturn, presented in the Yes Yes, budget document is submitted to the
same format as the budget proposal regional council present.
3. Current year’s budget (either the revised budget or Yes Yes, budget document is submitted to the
the estimated outturn), presented in the same regional council.
format as the budget proposal
4. Aggregated budget data for both revenue and Yes Yes, budget document is submitted to the
expenditure according to the main heads of the regional council.
classifications used (see PI-4), including data for the
current and previous year, in addition to the
detailed breakdown of revenue and expenditure
estimates
Additional elements
5. Deficit financing, describing anticipated composition No No, budget document does not describe
anticipated composition of deficit
financing. The financial administration
proclamation does not make mention of
deficit financing.
6. Macroeconomic assumptions, including at least Partial Partially, only GDP growth rate is applied,
estimates of GDP growth, inflation, interest rates, as all other assumptions are done by
and the exchange rate federal government.
7. Debt stock, including details at least for the No No, budget document provides no
beginning of the current year presented in information on debt stock.
accordance with GFS or other comparable standard
8. Financial assets, including details at least for the No No, but only cash is disclosed. There are
beginning of the current year presented in other financial assets (investments in
accordance with GFS or other comparable standard public enterprises) which are not
disclosed.
9. Summary information of fiscal risks including No No, this is not made available in any
contingent liabilities such as guarantees and official government document to the
contingent obligations embedded in structure legislature.
financing instruments such as public-private
partnership (PPP) contracts and so on
30
No. Budget documentation benchmarks Evidence used/Comment

10. Explanation of budget implications of new policy Yes Yes, budget speech, annual budget
initiatives and major new public investments, with document, and Macroeconomic and Fiscal
estimates of the budgetary impact of all major Framework (MEFF) submitted to the
revenue policy changes and/or major changes to regional council.
expenditure programs
11. Documentation on the medium-term framework Yes Yes, this is submitted to the legislature at
the time of budget submission.
12. Quantification of tax expenditures NA Not applicable at the regional
government level; tax exemption is the
remit of the federal government.
Source: Budget documents for EC 2011 (2018/2019 GC).
PI-5.1 Budget documentation
61. As shown in Table 3.7, the regional government meets five elements of the PEFA requirements
(three basic elements and two additional elements). The regional government usually prepares a
balanced budget where the expenditure is capped to the revenue. However, if estimates of
expenditure are more than revenues, any difference between its own revenues and projected
expenditure is financed by the federal government as subsidies (transfers/grants). Estimation of
macroeconomic assumptions such as inflation, interest rate, and exchange rate, except for GPD
growth, are the mandate of the federal government; however, the regional government applies these
when preparing the five-year revenue and spending forecast.
Dimension score: C
PI-6 Subnational government operations outside financial reports
62. This indicator measures the extent to which government revenue and expenditure are
reported outside government financial reports.

PI-6 Central government operations A Scoring method M2
outside financial reports
PI-6.1 Expenditure outside financial A There are no known EBUs at the SRG level except an inflow
reports from the federal government road fund directly to the
regional Bureau of Transport (BoT) for road maintenance. All
expenditures from this fund are not reported in the annual
financial statements of the regional government, but they
are less than 1% of total regional government expenditures.
6.2 Revenue outside financial reports A The revenue from the federal government road fund
transferred to BoT is not included in the financial report of
the SRG, but the amount of the fund received is less than 1%
of the total SNG revenues.
6.3 Financial reports of extra- NA There are no EBUs at the SRG level; therefore, this
budgetary units dimension is not applicable.
Background on sources of funds
63. There are three sources of funds: Channel 1, Channel 2, and Channel 3.
• Channel 1: Channel funds are mainly from the International Development Association
(IDA) and multi-donor trust funds. Most of these funds are proclaimed in the name of
31
the respective sector ministries. A dedicated department called Channel One

Programmes Coordinating Directorate at the MoF is in charge of cash management,
accounting and reporting. The MoF is responsible for transferring of the budget to
regions and implementing federal ministries. Regions also send to implementing sector
bureaus and woredas. Reports are pooled from woreda to regions and consolidated at
the national level. Financial reports are submitted to the entity, which is responsible for
providing the funding and managing the trust funds, usually the World Bank. Report
submission is often a mandatory requirement for the release of the next tranche.
• Channel 2: These funds are directly received from the donor agencies by the relevant
sector bureaus. These are project-oriented funds where ministries are responsible to
allocate the fund to implementing entities including regional sector bureaus. Regional
sector bureaus then channel the funds to woredas. The sector ministry is responsible for
the compilation and submission of the report to the donor. The MoF and Regional BoFED
do not have a role in receiving and transferring of Channel 2 funds.
• Channel 3: These are donor-funded projects where the donors are fully responsible for
the spending. No cash goes to government entities.
PI-6.1 Expenditure outside financial reports
64. There are no known EBUs at the SRG level except an inflow from the federal government road
fund directly to the regional BoT for road maintenance. All expenditures from this fund are not
reported in the annual financial statements of the regional government, but they are less than 1
percent of total regional government expenditures.
Dimension score: A
PI-6.2 Revenue outside financial reports
65. The BoT received funds from road fund, a federal government EBU. The BoT submits monthly
and annual reports to the federal government road fund. Both the revenue and expenditure from this
fund is not included in the financial report of the SRG, but the amount of the fund received is less than
1 percent of the total SNG revenues.10
Dimension score: A
PI-6.3 Financial reports of extra-budgetary units
66. There are no EBUs at the SRG level; therefore, this dimension is not applicable.
Dimension score: NA
PI-7 Transfers to subnational governments
67. This indicator assesses the transparency and timeliness of transfers from the regional
government to the first-tier SNGs along with fiscal relations with the regional government. It reviews
the basis for the transfers, including whether they receive timely information about their allocations
to facilitate fiscal planning.
10Road fund supports regions for the maintenance of roads. The BoT of the SRG received ETB 25 million in FY2017/2018,
ETB 17 million in 2016/2017, and ETB 12 million in 2015/2016. These amounts are less than 1 percent of total government
expenditure.
32

PI-7 Transfers to A Scoring method M2
subnational governments
PI-7.1 System for allocating A The horizontal allocation and actual transfer of all funds to woredas
transfers and city administrations from the regional government are
determined by a transparent and rule-based system. All transfers are
100% compliant with the approved grant distribution formula.
PI-7.2 Timeliness of A BoFED notifies woredas/city administrations and sector bureaus on
information on the the initial ceiling in March (as per its budget calendar), which allows
transfers them at least 8 weeks to prepare their budget estimates.
7.1 System for allocating transfers
68. The horizontal allocation formula is revised annually and approved by the regional council
after review by the Budget and Finance Standing Committee (BFSC). The horizontal allocation and
actual transfer of funds to woredas and city administrations are transparent and rule based. A unit
cost approach which was introduced in GC 2012 is operational. The unit cost approach is based on a
relationship of operating costs for service delivery inputs (for example, primary education and health
centers) with the objective of estimating the total recurrent expenditure by type of services. Hence,
projections involve estimation of the number of service beneficiaries (such as the number of
pupils/students) and cost of providing the services. The capital budget component of the block grant
is based on the estimated sectoral infrastructure deficit of the strategic sectors using various indices
in the education, agriculture, health, water, road, and revenue generation. As indicated in Table 3.8,
100 percent of general purpose grants and actual allocations to woredas/city administrations are
compliant with the approved grant distribution formula.
Table 3.8: Grants to woredas/city administration EFY 2010 (Gregorian 2017/2018)

Subsidies to woredas/city
% in line with approved distribution formula
administration (ETB)
5,829,232,008 100
Source: BoFED treasury.
Dimension score: A
PI-7.2 Timeliness of information on the transfers
69. The SRG receives an indicative ceiling on the regional subsidy from the federal government in
March.11 Based on this initial ceiling which provides clear and sufficient details, woredas/city
administrations are notified through the regular budget calendar framework, to prepare their budget
estimates in April, allowing about eight weeks to finalize their budget estimates. The woredas/city
administrations use the initial indicative ceilings to prepare their budgets. The final ceilings are
communicated to woredas/city administrations after the House of Representatives approves the
federal government annual budget in early July, providing actual grant allocation to the region. This
necessitates minor adjustments to woreda/city administration budgets around mid-July but does not
exceed 9 percent of the woreda's initial budget estimates.
Dimension score: A
11 Budget ceiling was issued on March 28, 2011 for the EFY 2012 (2018/2019) budget preparation.
33
PI-8 Performance information for service delivery
This indicator examines the service delivery performance information in the executive’s budget
proposal or its supporting documentation in year-end reports. It determines whether performance
audits or evaluations are carried out. It also assesses the extent to which information about resources
received by service delivery units is collected and recorded.

PI-8 Performance D+ Scoring method M2
information for service
delivery
PI-8.1 Performance C Information is published on the activities performed under the programs
information for service for the majority (61%) of regional sector bureaus. Performance indicators
delivery for outcome and outputs are incorporated in the annual
action/performance plans.
PI-8.2 Performance C Information on performance achieved on service delivery is published
achieved for service annually on the activities performed for the majority (61% by value) of
delivery public bodies.
PI-8.3 Resources received D IBEX tracks the financial resources transferred to the service delivery
by service delivery units. Though there is no consolidated report available on nonfinancial (in
kind) resources received by service delivery units, individual primary
service delivery units track and prepare their own reports on resources
received in kind.
PI-8.4 Performance D The Bureau of Health, representing 6% by value of the SRG expenditure,
evaluation for service conducted a midterm evaluation in 2018 to assess the efficiency and
delivery effectiveness of programs of its five-year strategy known as the ‘Health
Sector Growth and Transformation Plan II’. The evaluation report is not
published.
PI-8.1 Performance plans for service delivery
70. The Bureau of Health, Bureau of Water, Bureau of Education, Bureau of Agriculture, and BoT,
which jointly constitute about 61 percent of the SRG budget, prepared sector strategies covering five
years from EFY 2008 to EFY 2012. The sector strategies are linked to the national (federal) GTP as well
as the SRG five-year growth and strategy plan. Based on the strategy document, sector bureaus
prepare annual plans. Both the strategy and the annual plans contain the policy, program objectives,
key performance indicators (KPIs), and outputs to be produced and outcomes. Some of the KPIs are
as follows:
• Bureau of Health. Contraceptive acceptance rate, immunization rate, prevalence rate of

trachomatous, per capita outpatient utilization rate, and so on (published on the website
https://www.srshb.com)
• Bureau of Water. Number of boreholes, irrigations coverage, potable water supply

coverage, and so on (published on www.srswb.gov.et)
• Bureau of Education. Student-classroom ratio, teacher-student ratio, textbook-student

ratios, student enrolment rates, and so on (published on www.reb.gov.et)
• Bureau of Agriculture. Land rehabilitation in km, number of canal constructions,

pesticide utilization rate, crop yield loss percentage reduction, increase in the rate of
agricultural mechanization use, and so on (published on www.srslivestock.gov.et)
34
• BoT. Road length average travel time, road density, road per capita per 1,000 people,
and so on (published on www.srsroadauthority.gov.et)
71. The strategy plans and the annual work plans are posted on the website of the respective
sector bureaus.
Dimension score: C
PI-8.2 Performance achieved for service delivery
72. The Bureau of Health, Bureau of Water, Bureau of Education, Bureau of Agriculture, and BoT
produced annual performance reports for EFY 2009, EFY 2010, and EFY 2011 which show information
on output produced and outcome achieved. Actual results are consistent with the planned output and
outcomes indicated in the annual performance plans with explanations on any deviations. The reports
are published on the website of the respective sector bureaus. These performance reports cover about
61 percent of the SRG expenditure.
Dimension score: C
PI-8.3 Resources received by service delivery
73. IBEX tracks the financial resources transferred to the service delivery units from treasury
sources. Funds transfer from donor-funded projects (Channel 1 and Channel 2) are reported monthly
and annually by the recipient service delivery units and consolidated at the BoFED level. For example,
primary schools report the actual fund they received from General Education Quality Improvement
Program (GEQIP) school grants to their respective education offices, which consolidate and submit the
reports to their respective woreda finance offices, and they are finally consolidated at the BoFED level.
74. Books and medical supplies transferred to schools and health centers are registered in goods
received notes by the woreda finance. Also, primary schools and health centers maintain records of
in-kind resources distributed. Though there is no consolidated report available on nonfinancial (in-
kind) resources received by service delivery units, individual primary service delivery units track and
prepare their own reports on resources received in kind. The Health Management Information System
indicates the health services provided by health centers. The information system is web based and
accessible from the regional Health Bureau but has no consolidated information on medical supplies
received by the health facilities. The EFY 2010 educational statistic report provides basic statistics on
KPIs and performance accomplished but does not provide information on in-kind resources distributed
to schools.
Dimension score: D
PI-8.4 Performance evaluation for service delivery
75. The Bureau of Health, representing 6 percent by value of SRG expenditure, conducted a
midterm evaluation in 2018 to assess the efficiency and effectiveness of programs of its five-year
strategy known as the ‘Health Sector Growth and Transformation Plan II’. The evaluation report
indicated achievements by KPIs, challenges, gaps, and recommendations. This report is however not
published. All the visited sector bureaus (Agriculture, Education, Water, and Roads) also conduct
quarterly monitoring and evaluation through physical field visits in collaboration with the BoFED; they
also prepare quarterly monitoring and evaluation reports, but there is no evidence to suggest
comprehensive evaluation of the efficiency and effectiveness of their programs.
Dimension score: D
35
PI-9 Public access to key fiscal information

PI-9 Public access to key D Scoring method M1
fiscal information
PI-9.1 Public access to fiscal D As indicated in Table 3.9, the regional government only makes
information available 2 out of 4 basic elements; also, 3 of the additional elements
are made public within the specified time frame.
Table 3.9: Public access to key fiscal information
Availability
No. Fiscal information benchmarks Notes (Means of Availability)
(Yes/No)
Basic elements
1. Annual executive budget proposal No Budget proposals are not made
documentation: A complete set of executive public.
budget proposal documents (as assessed in PI-5) is
available to the public within one week of the
executive submitting them to the legislature.
2. Enacted budget: The annual budget law approved Yes The enacted budget is published in
by the legislature is publicized within two weeks of the regional gazette and posted on
passage of the law. the website of BoFED:
www.srbofed.gov.et and available
within a week.
3. In-year budget execution reports: The reports are No BoFED prepares consolidated
routinely made available to the public within one quarterly and six-monthly in-year
month of their issuance, as assessed in PI-28. budget execution reports. It only
published on its website the six-
monthly budget execution report
within 8 weeks.
4. Annual budget execution report: The report is Yes BoFED prepares consolidated
made available to the public within six months of annual financial statements. The
the fiscal year's end. financial statement is posted on
the website of BoFED within three
months after the end of the fiscal
year.
5. Audited annual financial report, incorporating or No The website of ORAG contains
accompanied by the external auditor’s report: The audit reports of various audited
reports are made available to the public within entities but does not contain the
twelve months of the fiscal year's end. audit report on the consolidated
financial statement.
Additional elements
6. Pre-budget statement: The broad parameters for No There is no pre-budget statement.
the executive budget proposal regarding
expenditure, planned revenue, and debt are made
available to the public at least four months before
the start of the fiscal year.
7. Other external audit reports: All non-confidential Yes The website of ORAG contains
reports on central government-consolidated other audit reports of audited
operations are made available to the public within entities within six months of its
six months of submission. receipt by ORAG.
8. Summary of the budget proposal: A clear, simple Yes A citizens’ budget is posted on the
summary of the executive’s budget proposal or the website of BoFED within two
enacted budget accessible to the non-budget weeks of budget approval.
experts, often referred to as a ‘citizens’ budget’,
36
Availability
No. Fiscal information benchmarks Notes (Means of Availability)
(Yes/No)
and where appropriate translated into the most
commonly spoken local language, is publicly
available within two weeks of the executive budget
proposal's submission to the legislature and within
one month of the budget’s approval.
9. Macroeconomic forecasts: The forecasts as Yes Macroeconomic forecast is posted
assessed in PI-14.1 are available within a week of on the website within a week of
its endorsement. budget approval.
PI-9.1 Public access to fiscal information
76. As indicated in Table 3.9, the regional government only makes available two out of four basic
elements. Also, three additional elements are made public within the specified time frame.
Dimension score: D
PILLAR III. Management of assets and liabilities

PI-10 Fiscal risk reporting
77. This indicator has three dimensions. Dimension 10.1 assesses the level of monitoring of fiscal
risk implications of public corporations on central government operations, dimension 10.2 examines
fiscal risk posed by SNGs, and dimension 10.3 measures the level of central government contingent
liabilities and other fiscal risks

PI-10 Fiscal risk reporting D Scoring method M2
PI-10.1 Monitoring of D The analysis in Table 3.10 indicates that 40.3% by value of public
public corporations enterprises submitted their annual financial statements to the regional
government (BoFED) within nine months after the end of the previous
fiscal year EC 2010 (GC FY2017/2018 ending June 30, 2018).
PI-10.2 Monitoring of D For FY2017/2018, all 99 woredas/city administrations submitted their
subnational governments annual financial statements to BoFED within three months after the end
of the fiscal year ending GC June 30, 2018 (or EC July 7, 2010). The annual
financial reports are however not published; the reports are also not
consolidated.
PI-10.3 Contingent D There are no known PPP arrangements. That said, the regional
liabilities and other fiscal government does not maintain records of explicit contingent liabilities
risk and other fiscal risks arising out of its programs and projects.
PI-10.1 Monitoring of public corporations
78. Four public enterprises were functional as of June 2018 (end of FY2017/2018): (a) Somali
Study Design and Supervision Works Enterprise, (b) Somali Roads Construction Enterprise, (c) Water
Works Construction Enterprise, and (d) Heavy Machinery Administration Renting Garage Services and
Procurement Enterprises. The analysis in Table 3.10 indicates that 40.3 percent by value of public
enterprises submitted their annual financial statements to the regional government (BoFED) within
nine months after the end of the previous fiscal year EC 2010 (GC FY2017/2018 ending June 30, 2018).
By implication, the annual financial statements of most of these public enterprises were audited late
and could not have been published within six months after the end of the fiscal year.
37
Table 3.10: Status of public enterprises FY2017/2018 ending June 2018 GC

Date of submission of
Total
annual financial % of total
No. Name of public enterprise expenditure
statements expenditure
(ETB)
(GC calendar)
1 Somali Study Design and Supervision 44,396,426 July 7, 2018 34.6
Works Enterprise
2 Somali Roads Construction Enterprise 3,539,019 July 14, 2018 2.8
3 Water Works Construction Enterprise 76,591,202 August 1, 2019 59.7
4 Heavy Machinery Administration Renting 3,726,714 February 7, 2019 2.9
Garage Services and Procurement
Enterprises
Total expenditure 128,253,361
Dimension score: D
PI-10.2 Monitoring of subnational governments
79. There are 6 city administrations and 93 rural woredas (total of 99 city and rural woredas). City
administrations and woredas have no borrowing powers and therefore do not generate fiscal risk for
the SRG. Article 50 (3) of the Somali Financial Administration Proclamation No. 11/2004 requires all
city administrations and woredas to prepare and submit annual financial reports to the regional
government (BoFED) within three months after the end of the preceding year. For FY2017/2018, all
99 woredas/city administrations submitted their annual financial statements to BoFED within three
months after the end of the fiscal year ending GC June 30, 2018 (or EC July 7, 2010). The annual
financial reports are however not published and the reports are also not consolidated.
Dimension score: D
PI-10.3 Contingent liabilities and other fiscal risks
80. There are no known PPP arrangements. That said, the regional government does not maintain
records of explicit contingent liabilities and other fiscal risks arising out of its programs and projects
including financial implications of court litigations.
Dimension score: D
PI-11 Public investment management
81. This indicator assesses the process of economic appraisal, selection, costing, and monitoring
of most significant PIPs by the government. This is a new indicator and has four dimensions.

PI-11 Public investment C Scoring method M2
management
PI-11.1 Economic analysis C There are no established guidelines for analyzing capital investment
of investment projects projects. That said, the Planning and Budgeting Directorate of BoFED uses
various project management tools such as environmental impact analysis
to assess capital investment projects. Implementing entities also use
rudimentary methods to conduct economic analysis of capital investment
projects. That said, political considerations take higher precedence for the
majority of these projects.
38

PI-11.2 Investment C Project selection for inclusion into the annual budget is largely based on
project selection the regional government’s priorities (which include water and irrigation,
health, education, agriculture and livestock, and rural roads), even though
some of these projects are selected purely based on the results of
feasibility studies conducted.
PI-11.3 Investment C The annual budget document includes projections of the total capital cost
project costing of investment projects as well as the capital cost for the ensuing fiscal year.
The annual budget also shows projected recurrent expenditure but only for
the subsequent fiscal year.
PI-11.4 Investment C Both BoFED and the regional sector implementing unit monitor investment
project monitoring projects through physical inspection and periodic (quarterly) financial
progress reports; these reports are submitted to the regional cabinet for
review and evaluation. The annual financial statements also report on
actual expenditure of the projects; annual physical inspection progress
reports are also prepared. There is no publication of either financial or
physical progress reports.
Table 3.11: List of major capital investment projects, FY2017/2018
Somali budget Economic
Project Cost (ETB) % of budget
(ETB) analysis
Industrial development program 88,000,000 15,305,430,020 0.6 Yes
Construction of Hadawe irrigation dam 79,000,000 15,305,430,020 0.5 Yes
Construction of Dawa bridge 68,000,000 15,305,430,020 0.4 Yes
Procurement of water tankers/trucks 187,000,000 15,305,430,020 1.2 Yes
Construction of 21 water reservoirs 73,000,000 15,305,430,020 0.5 Yes
Drilling of bore holes 96,000,000 15,305,430,020 0.6 Yes
Construction of Korahey asphalt road 126,000,000 15,305,430,020 0.8 Yes
Construction of Jigjiga-Samakab road 65,000,000 15,305,430,020 0.4 Yes
Construction of K/Dahar referral hospital 51,700,000 15,305,430,020 0.3 Yes
Construction of Gaashamo hospital 75,300,000 15,305,430,020 0.5 Yes
Total 909,000,000 15,305,430,020
PI-11.1 Economic analysis of investment projects
82. There is no specific definition referencing a ‘major investment project’ as far as the SRG is
concerned. Pages 37 and 84 of the PEFA Framework 2016 and the PEFA Field Guide 2018, respectively,
define major investment projects as “total investment cost of project amounting to 1 percent or more
of total annual budget expenditure” and these investment projects are “among the 10 largest projects
(by total investment cost) for each of the 5 largest central government units, measured by the units’
investment project expenditure.” Table 3.11 shows a list of 10 largest capital investment projects; only
one meets the PEFA definition.
83. There are no established standard guidelines for analyzing capital investment projects. That
said, for all the 10 projects listed in Table 3.11, the Planning and Budgeting Directorate of BoFED uses
various project management tools such as environmental impact analysis to conduct economic
analysis of these capital investment projects. In addition to this, central government entities use
rudimentary and nonsystematic practices to analyze investment projects. These methods include (a)
a predefined system of siting a school or hospital within a community considering the number of
residents and (b) a needs assessment. Before funding these projects, feasibility studies are carried out
by each of these central government institutions and reviewed by both BoFED and the regional
cabinet. That said, political considerations take much precedence for the majority of these projects.
Dimension score: C
39
PI-11.2 Investment project selection
84. The regional cabinet selects capital investment projects for inclusion into the annual budget;
this is largely based on the regional government’s priorities, as set and adopted by the regional cabinet
(which include water and irrigation, health, education, agriculture and livestock, and rural roads), even
though some of these projects are selected purely based on the results of feasibility studies
conducted.
85. Good practice suggests a number of project selection criteria, and key among them include,
but are not limited to, the following:
• Desirability. Project(s) ought to be in line with the overall government medium-term

strategic plan.
• Achievability. Whether the project can be delivered according to the plan considering
funding mechanisms and other environmental constraints and challenges.
• Viability. To consider the cost implications and potential revenue-generating streams,

management implications, financial sustainability, and project economic impact.
86. Currently, the selection of projects for inclusion into the budget does not systematically follow
the abovementioned criteria.
Dimension score: C
PI-11.3 Investment project costing
87. The annual budget document includes projections of the total capital cost of investment
projects as well as the capital cost for the ensuing fiscal year. The annual budget also shows projected
recurrent expenditure but only for the subsequent fiscal year. In addition to this, Project Appraisal
Documents provide information on total capital cost together with associated recurrent cost.
88. Good practice requires project costing to include both total investment cost and forward-
linked recurrent expenditure over the project life cycle. As fiscal space is usually limited, a
comprehensive costing framework contributes to effective decision making for new projects,
especially in cases where there are ongoing capital investment projects. This significantly reduces the
tendency of uncompleted government projects.
Dimension score: C
PI-11.4 Investment project monitoring
89. Both the regional sector implementing unit and BoFED Monitoring and Evaluation Directorate
monitor capital investment projects through physical inspection and periodic (quarterly) financial
progress reports. These periodic reports are submitted to the regional cabinet for review and
evaluation. The annual financial statements also report on actual expenditure of the projects. In
addition to the annual financial progress reports, annual physical inspection progress reports are
prepared. The regional sector bureaus (implementing units) do not publish or post project evaluation
reports either on the website or noticeboards.
Dimension score: C
40
PI-12 Public asset management
90. This indicator has three dimensions. Dimension 12.1 assesses the level at which financial
assets (government investments in public or private companies) are monitored and reported;
dimension 12.2 examines the extent to which nonfinancial assets (fixed assets) are monitored and
reported; and dimension 12.3 measures the level of transparency of asset disposal.
91. The assessment of this indicator covers SNG budget entities and EBUs.

PI-12 Public asset C Scoring method M2
management
PI-12.1 Financial asset C BoFED does not keep records of investments in public or private entities.
monitoring The annual financial statements disclose both cash and bank balances.
PI-12.2 Non-financial D Management of fixed assets is decentralized at the budget unit level. The
asset monitoring asset registers maintained by these budget units provide information on
the age and usage of assets. There are no records of government land,
buildings, and natural resources.
PI-12.3 Transparency of B Article 59 of the Somali Regional State Government Procurement and
asset disposal Property Administration Proclamation No. 82/2010 and Directive No.
1/2010 outline the legal and regulatory framework for fixed assets
disposal; furthermore, fixed asset transfer is governed by Article 61 of
the same proclamation. There are no legal provisions for the disposal
and transfer of financial assets. For the period under review, no fixed
assets were sold and/or transferred.
PI-12.1 Financial asset monitoring
92. The regional government represented by BoFED owns 100 percent of 4 public enterprises but
the number of shares and their corresponding values are not recorded and reported in the annual
financial statements. However, the consolidated annual financial statement discloses end-of-year cash
and bank balances, which stood at ETB 0.85 billion (unaudited) for FY2017/2018.
Dimension score: C
PI-12.2 Non-financial asset monitoring
93. Fixed asset management is decentralized; each budget entity maintains a fixed asset register
for vehicles, fixtures and fittings, computers, and office equipment, but the asset register does not
show the historical cost of asset, depreciation, and net book value. According to Article 57 (2) of the
Somali Procurement and Property Administration Proclamation No. 82/2010, all heads of BIs shall
record the date, description, quantity, and cost of acquisition and indicate the custody and usage of
fixed assets. In addition to the legal framework, a manual on fixed asset management, the GOFAMM,
stipulates control and safeguarding of public assets. There are however no records of buildings. The
asset registers at each budgetary unit provide information on their usage and age as well as the
custodian of the asset; the asset user card provides this useful information. There are also no records
of land and natural resources owned by the regional government.
Dimension score: D
41
PI-12.3 Transparency of asset disposal
94. Article 59 of the Somali Regional State Government Procurement and Property Administration
Proclamation No. 82/2010 and Directive No. 1/2010 outline the legal and regulatory framework for
fixed assets disposal; furthermore, fixed asset transfer is governed by Article 61 of the same
proclamation. The law stipulated that each fixed asset valued at ETB 10,000 or above and/or
cumulatively valued at ETB 100,000 or above shall be referred to the regional PPPDS for disposal.
Below this threshold, the budget unit shall dispose (sell or transfer) assets through public auction. The
PPPDS advertises in the national newspapers and conducts public auction, with the highest bidder
assuming the right of ownership. Article 59 (3) of the same law mandates all central government
institutions to deposit disposal proceeds directly into the main treasury (BoFED) account. For the
period (2017/2018) under review, there were no disposal and transfer of fixed assets. There are no
legal provisions on the disposal of financial assets.
Dimension score: B
PI-13 Debt management
95. There are three dimensions under this indicator. Dimension 13.1 assesses the integrity and
comprehensiveness of reporting federal government debt (both domestic and foreign debts as well
as guarantees); dimension 13.2 measures the legal and regulatory framework governing approval of
loans and guarantees; and dimension 13.3 assesses whether the government prepares a medium-
term debt strategy.

PI-13 Debt D Scoring method M2
management
PI-13.1 Recording and NA Article 43 of Financial Administration Proclamation No. 11/2004 allows the
reporting of debt and regional government to borrow domestically with the approval of the
guarantees regional council. At the time of assessment, the regional government has
not borrowed directly from the domestic market; it has also not issued any
guarantees to any central government institution or cooperative farmers
associations. Therefore, this dimension is not applicable.
PI-13.2 Approval of D BoFED is solely responsible for authorizing and approving debts and
debt and guarantees guarantees for all central government entities. Nonetheless, there are no
guidelines, policies, and procedures that guide the issuance of debts and
guarantees.
PI-13.3 Debt NA Even though the regional government has borrowing powers according to
management strategy Article 43 of Financial Administration Proclamation No. 11/2004, it
possesses no debt and therefore does not prepare a debt management
strategy. Therefore, this dimension is not applicable.
PI-13.1 Recording and reporting of debt and guarantees
96. Article 43 of Financial Administration Proclamation No. 11/2004 allows the regional
government to borrow domestically with the approval of the regional council. At the time of
assessment, the regional government has not borrowed directly from the domestic market; it has also
not issued any guarantees to any central government institution or cooperative farmers’ associations.
Therefore, this dimension is not applicable.
Dimension score: NA
42
PI-13.2 Approval of debt and guarantees
97. As stated under PI-13.1 above, the regional government has borrowing powers (according to
Article 43 of Financial Administration Proclamation No. 11/2004) but has since not exercised these
privileges. Article 44 of Financial Administration Proclamation No. 11/2004 mandates BoFED as solely
responsible for authorizing and approving debts and guarantees to all central government entities.
Nonetheless, there are no guidelines, policies, and procedures that guide the issuance of debts and
guarantees.
Dimension score: D
PI-13.3 Debt management strategy
98. Article 43 of Financial Administration Proclamation No. 11/2004 allows the regional
government to borrow. Furthermore, Article 42 of the same proclamation mandates BoFED to prepare
a debt management strategy. The regional government possesses no debt and therefore does not
prepare a debt management strategy. Therefore, this dimension is not applicable.
Dimension score: NA
PILLAR IV. Policy-based fiscal strategy and budgeting

PI-14 Macroeconomic and fiscal forecasting
99. This indicator measures the ability of the government to develop robust macroeconomic and
fiscal forecasts, which are crucial to developing a sustainable fiscal strategy and ensuring greater
predictability of budget allocations.

PI-14 Macroeconomic and fiscal A Scoring method M2
forecasting
PI-14.1 Macroeconomic forecasts A Over the last three completed fiscal years, the regional
government prepared forecasts of GDP and savings and
investment rates; it has no capacity to forecast exchange rate,
interest rate, and inflation. The forecasts are reviewed and
approved by the regional cabinet, with an annual update, and
sent to the regional council with the underlying assumptions as
part of budget documentation. The regional council also reviews
these forecasts.
PI-14.2 Fiscal forecasts A The Planning and Budget Directorate, over the last three
completed fiscal years, prepared the MEFF with forecasts of GDP
and savings and investments. The forecast includes aggregate
revenues and expenditures and the budget balance. There are
also explanations of differences between forecasts (and the
underlying assumptions) and the current year’s budget as part of
budget documentation submitted to the regional council.
PI-14.3 Macro-fiscal sensitivity B There is a qualitative evaluation of impact of various scenarios of
analysis macro-fiscal forecast; these are included in the annual budget
document submitted to the regional council. This has been the
case over the last three completed fiscal years. The analyses for
EFY 2010 and 2011 were published but not for EFY 2008 and EFY
2009.
43
PI-14.1 Macroeconomic forecasts
100. BoFED’s Planning and Budget Directorate is responsible for the preparation of an MEFF. Over
the last three completed fiscal years 2015/2016, 2016/2017, and 2017/2018, the directorate prepared
the MEFF which is part of the medium-term regional strategic plan. Chapter II of the medium-term
regional strategic plan (GTP II 2015/2016–2019/2020) dated December 2015 contains the MEFF. Also,
Section 2 of the budget document contains the macro forecast. The framework projects an average
growth rate of 11.0 percent and 13.2 percent on a base-case and a high-case scenario, respectively,
over the five-year period. It should however be noted that the region has the capacity to only forecast
GDP and investment rates; other macroeconomic indicators such as inflation, exchange rate, global
market price, and interest rate are projected by the federal government. The projections cover the
budget year and at least the two outer years; they are updated annually. These projections (both GDP
and investment rates) together with the underlying assumptions are part of the budget
documentation submitted to the regional council. Both the regional cabinet and the regional council
review these projections (MEFF and annual updates) plus the underlying assumptions.
Dimension score: A
PI-14.2 Fiscal forecasts
101. The Planning and Budget Directorate prepared, over the last three completed fiscal years
2015/2016, 2016/2017, and 2017/2018, a macro-fiscal forecast, with assumptions on GDP and savings
and investment rates. The forecast includes aggregate revenues and expenditures and the budget
balance; the regional government prepares a balanced budget, and even though it has borrowing
powers, it has yet to exercise this mandate. Any difference between its own revenues and projected
expenditure is financed by the federal government as subsidies (transfers/grants). It is projected that
while the regional government’s own revenue will hit ETB 4.6 billion by 2020/2021 from ETB 3.0 billion
in 2017/2018, total expenditure (capital and recurrent) will increase to ETB 21.5 billion during the
same period from ETB 15.02 billion; the difference will be financed by federal government subsidies.
The fiscal forecasts plus the underlying assumptions, which are part of the budget documentation
submitted to the regional council, provide an explanation of the differences of the main category of
revenues and expenditures from the current year’s budget estimates against the fiscal forecast of the
previous year.
Dimension score: A
PI-14.3 Macro-fiscal sensitivity analysis
102. Over the last three completed fiscal years, 2015/2016, 2016/2017, and 2017/2018, the macro-
fiscal forecast described an assessment of the impact of various scenarios (high-case and base-case
scenarios) and the implication on the budget and the regional economy. Also, the qualitative
evaluations or reviews were contained in the budget document submitted to the regional council. This
affords legislators the opportunity to critically ascertain the impact of government policies on each
sector of the economy, especially the impact on poverty reduction and service delivery sectors. These
sensitivity analyses were published for EC 2010 but not for EC 2008 and 2009; those for EC 2011 were
also published.
Dimension score: B
PI-15 Fiscal strategy
103. This indicator provides an analysis of the capacity to develop and implement a clear fiscal
strategy. It also measures the ability to develop and assess the fiscal impact of revenue and
44
expenditure policy proposals that support the achievement of the government’s fiscal goals. No fiscal
strategy is developed for the regional government.

PI-15 Fiscal strategy D+ Scoring method M2
PI-15.1 Fiscal impact of C The regional government prepares full explanation of budget implications
policy proposals on new policy initiatives and major new public investments. It also
prepares estimates of the budgetary impact of all major revenue policy
changes and major changes to expenditure programs but for the budget
year only.
PI-15.2 Fiscal strategy D The SRG does not produce a fiscal strategy.
adoption
PI-15.3 Reporting on NA The development of a fiscal strategy is the responsibility of the federal
fiscal outcomes government; therefore, this dimension is not applicable.
PI-15.1 Fiscal impact of policy proposals
104. As indicated under element 10 of PI-5 (see Table 3.7), the regional government prepares and
provides the regional council full explanation of budget implications on new policy initiatives and
major new public investments; these are included in the budget speech. It also prepares estimates of
the budgetary impact of all major revenue policy changes and major changes to expenditure programs
but for the budget year only.
Dimension score: C
PI-15.2 Fiscal strategy adoption
105. The SRG does not produce and adopt a fiscal strategy document. A fiscal strategy document
outlines broad (aggregate) government parameters on both revenues and expenditures and any fiscal
balances that could arise out of net spending.
Dimension score: D
PI-15.3 Reporting on fiscal outcomes
106. The development of a fiscal strategy is the responsibility of the federal government; therefore,
this dimension is not applicable.
Dimension score: NA
PI-16 Medium-term perspective in expenditure budgeting
107. This indicator examines the extent to which expenditure budgets are developed for the
medium term within explicit medium-term budget expenditure ceilings. It also examines the extent to
which annual budgets are derived from medium-term estimates and the degree of alignment between
medium-term budget estimates and strategic plans.
45

PI-16 Medium-term B Scoring method M2
perspective in expenditure
budgeting
PI-16.1 Medium-term C The SRG prepares a Medium-term Expenditure Framework (MTEF), that
expenditure estimates is, estimates of expenditure for the budget year and the two following
years according to administrative classification only.
PI-16.2 Medium-term A BoFED issued the first budget call circular (BCC) to all sector bureaus and
expenditure ceilings woredas/city administrations on February 15, 2019. Aggregate and
sector bureau expenditure ceilings for the budget year and the two
outer years were approved by the regional cabinet on December 27,
2018, before the first BCC was issued to budgetary units.
PI-16.3 Alignment of B The expenditure policies of 71% by value of sectors align with both the
strategic plans and budgets regional GTP II and the individual five-year sector strategies of the six
sectors indicated in Table 3.12.
PI-16.4 Consistency of C The budget document submitted to the regional council provides some
budgets with previous year explanation to changes to expenditure estimates (at the aggregate level
estimates only) between the current year’s budget and the second year of the last
MTEF.
PI-16.1 Medium-term expenditure estimates
108. The SRG prepares an MTEF, that is, estimates of expenditure for the budget year and the two
following years according to administrative classification only. Program budget has not yet been
introduced.
Dimension score: C
PI-16.2 Medium-term expenditure ceilings
109. For FY2018/2019 (EC 2011 - last budget submitted to the regional council), BoFED issued the
first BCC to all sector bureaus and woredas/city administrations on February 15, 2019, which was in
line with the budget calendar. The MEFF and the aggregate expenditure estimates were submitted to
the regional cabinet for approval, including budgetary units (sector bureaus) ceilings and woreda/city
administration ceilings; for 2018/2019, these were approved on December 27, 2018, before the
issuance of the first BCC.
Dimension score: A
PI-16.3 Alignment of strategic plans and budgets
Table 3.12: Sectors with costed medium-term strategies (EC 2010 figures)
% share % share % share
Capital (ETB, Recurrent (ETB, Total (ETB,
Basic service sectors from from from
thousands) thousands) thousands)
capital recurrent total
Total expenditure 6,533,892 2,739,729 9,273,621 90 27 71
Agriculture sector 589,459 90,876 680,335 9 3 7
Water and Irrigation 2,687,739 30,404 2,718,144 41 1 29
Education sector 322,758 246,520 569,279 5 9 6
Health sector 192,776 333,979 526,755 3 12 6
Rural roads 723,594 9,367 732,961 11 0 8
46
% share % share % share

Capital (ETB, Recurrent (ETB, Total (ETB,
Basic service sectors from from from
thousands) thousands) thousands)
capital recurrent total
Construction and 1,332,121 18,605 1,350,726 20 1 15
urban development
110. Table 3.12 outlines regional sectors with fully costed (both capital and recurrent) medium-
term strategies. Each of these sectors prepares five-year plans (which are approved by the regional
cabinet) for EC 2008–2012 (GC FY2015/2016–FY2019/2020). The expenditure policies of 71 percent
by value of sectors align with both the regional GTP II and the individual five-year sector strategies of
the six sectors indicated in Table 3.12.
Dimension score: B
PI-16.4 Consistency of budgets with previous year estimates
111. BoFED prepares an MTEF each year. The annual budget document submitted to the regional
council compares estimates of the budget year and the second year of the last MTEF, outlining both
the absolute and percentage changes in each expenditure estimate; it also outlines the aggregate
variance. For instance, there was an aggregate absolute difference of ETB 542.56 million between the
EC 2011 budget and the previous year’s MTEF, representing 29 percent higher than anticipated in the
MTEF. Nonetheless, the budget document only explains the reason for the aggregate change and not
the reasons for changes in the main (administrative) expenditure categories.
Dimension score: C
PI-17 Budget preparation process
112. This indicator assesses the budget formulation process that allows for an effective top-down
and bottom-up participation of the public bodies, including their political leadership represented by
cabinet. It also assesses the extent to which the annual budget preparation process supports the
linking of the draft budget to public policy objectives. Dimensions 17.1 and 17.2 are assessed using
the last budget submission, for FY2018/2019. Dimension 17.3 is assessed on the basis of the last three
approved budgets, that is, FY2016/2017, 2017/2018, and 2018/2019.

PI-17 Budget preparation A Scoring method M2
process
PI-17.1 Budget calendar A A clear annual budget calendar exists; it allows eight weeks for
budgetary units, from the receipt of the budget circular, to
complete their budget estimates. About 93% by value of the
budgetary units comply with it and meet the deadlines.
PI-17.2 Guidance on budget A BCC is issued to budgetary units with guidelines on preparation
preparation of recurrent and capital budgets for the full budget year. It
includes cabinet-approved annual ceilings for administrative
expenditure categories. The budget estimates are reviewed
and approved by the cabinet after they have been completed in
every detail by the budgetary units.
PI-17.3 Budget submission to A The executive has submitted the annual budget proposal to the
the legislature legislature two months before the start of the fiscal year in all
of the last three assessed years.
47
PI-17.1 Budget calendar
113. A clear budget calendar exists, which is included in the BCC. According to the dates in the
calendar (see Table 3.13), the budgetary units should have eight weeks to complete their budget
estimates. As shown in Table 3.14, 93 percent by value of budgetary units were able to complete their
detailed estimates on time for the preparation of the EC 2011 (2017/2018) budget.
Table 3.13: Budget calendar (SRG)

Activity Responsible body Timing
Executive preparation
1 Reviewing past performances and conducting MEFF Regional sector bureaus November–
and BoFED December
2 MEFF approval by the regional cabinet Cabinet December
3 Issue budget call to sector bureaus BoFED January 31–
February 15
4 Notify initial block grant budget to woredas and city BoFED March 30–April 15
administrations
5 Submit budget requests to BoFED Regional sector bureaus March 21–April 15
6 Review and recommend RSBs’ budget requests BoFED April 16–30
7 Submit recommended budget to the budget and BoFED May 01–15
finance committee of the council
Legislative adoption
8 Appropriation of approved budget Council July 7
Executive implementation
9 Notify approved budget to RSBs BoFED July 7–15
10 Notify approved block grant budget to woredas and city BoFED July 7–15
administrations
11 Allocate proclaimed budget BoFED and RSBs July 8–15
12 Prepare annual implementation action plan and cash BoFED and RSBs July 8–15
flow forecast
13 Consolidate budget using IBEX and submit JBAR to the BoFED July 16–August 30
Ministry of Finance
14 Budget adjustments BoFED and RSBs Ongoing
Source: Budget Department.
Note: JBAR =Joint Budget and Aid Review ; RSBs = Regional sector bureaus.
Table 3.14: Dates of submissions to the BCC for the preparation of the EC 2011 budget
Actual Submitte
Budget proposal
Expenditure for d on
No. Code Public body submission date
FY2010 EC time
(EC)
(2017/2018) ETB (Yes/No)
1 111 Regional Council 7/9/2009 30,803,475 Yes
2 113 Office of the Auditor General 7/1/2009 10,673,309 Yes
3 115 Office of Regional Administration 17/7/2009 241,506,267 No
4 117 Diaspora Agency 7/5/2009 17,215,547 Yes
5 119 Women and Children affairs Bureau 7/10/2009 11,921,337 Yes
6 121 Bureau of Justice 7/9/2009 36,674,401 Yes
7 122 Supreme Court 7/4/2009 43,683,888 Yes
8 123 Sharia Court 7/1/2009 27,658,782 Yes
9 124 Organs of Justice Professionals Training Centre 7/3/2009 3,911,834 Yes
10 126 Grievance and Compliance Handling 7/4/2009 5,020,759 Yes
Commission
11 127 Police Commission 7/2/2009 199,899,984 Yes
12 128 Anti-Corruption and Ethics Commission 7/3/2009 8,347,520 Yes
48
Actual Submitte
Budget proposal
Expenditure for d on
No. Code Public body submission date
FY2010 EC time
(EC)
(2017/2018) ETB (Yes/No)
13 129 Prison Administration 7/7/2009 59,801,934 Yes
14 133 Admin., Justice, and Security Affairs 7/5/2009 1,290,247,492 Yes
Coordination Office
15 135 Somali-Oromia Region Bilateral 18/7/2009 992,359 No
16 144 Border Affairs 7/9/2009 4,096,018 Yes
17 152 Bureau of Finance and Economic Development 7/4/2009 289,663,086 Yes
18 153 Government Communication Affairs Bureau 7/3/2009 34,373,669 Yes
19 154 Mass Media Agency 16/7/2009 88,592,868 No
20 155 Civil Service Bureau 7/4/2009 45,687,663 Yes
21 156 Revenue Authority 7/5/2009 37,762,830 Yes
22 157 Bureau of Culture and Tourism 7/6/2009 10,568,689 Yes
23 158 Vital Registration Agency 7/8/2009 5,802,972 Yes
24 211 Bureau of Agriculture and Rural Development 7/3/2009 251,570,849 Yes
25 212 Livestock Resources and Pastoralists 7/4/2009 378,579,512 Yes
Development Bureau
26 213 Pastoral and Agro-Pastoral Research Institute 7/2/2009 34,440,625 Yes
27 214 Environmental Protection, Mines, Energy, and 7/7/2009 6,587,485 Yes
Forestry Agency
28 215 Irrigation and Basin Development Bureau 7/2/2009 958,422,987 Yes
29 216 Cooperatives Promotion Agency 7/1/2009 9,156,479 Yes
30 221 Water Resource Development Bureau 7/5/2009 1,759,720,659 Yes
31 231 Bureau of Trade, Transport, Industry, and 26/7/2009 64,536,300 No
Communication
32 232 Micro and Small Enterprise Development 19/7/2009 7,238,466 No
Agency
33 235 Investment Agency 7/10/2009 5,537,578 Yes
34 272 Bureau of Works and Urban Development 7/9/2009 1,350,725,650 Yes
35 273 Rural Roads Authority 7/4/2009 732,961,193 Yes
36 311 Education Bureau 7/10/2009 300,405,120 Yes
37 312 Technical and Vocational Education and Training 17/7/2009 200,720,210 No
Agency
38 313 Centre of Competence Agency 7/4/2009 7,613,795 Yes
39 319 Regional Management Institute 7/10/2009 60,539,550 Yes
40 331 Youth and Sport Bureau 7/10/2009 32,525,579 Yes
41 341 Health Bureau 7/8/2009 514,711,682 Yes
42 342 Food, Medicine, and Health Care management 7/4/2009 4,984,968 Yes
Agency
43 345 HIV/AIDS Prevention and Protection Bureau 16/7/2009 7,058,373 No
44 351 Labor and Social Affairs Bureau 7/11/2009 21,868,476 Yes
45 361 Disaster Prevention and Preparedness Bureau 7/8/2009 57,354,890 Yes
Total expenditure for the year 9,272,167,109
Total expenditure for public bodies that answered late to 610,644,804 7%
the BCC (after Megabit 15, EC 2009)
Total expenditure of public bodies that answered on time to 8,661,522,270 93%
the BCC (before Megabit 11, EC 2009, March 21/ GC 2018)
Source: Budget Department.
114. The evidence provided in Tables 3.13 and 3.14 shows that a fixed budget calendar exists and
is adhered to by most of the budgetary units. They are given sufficient time (at least eight weeks) to
prepare their detailed budget estimates in compliance with the guidance issued by BoFED.
49
Dimension score: A
17.2 Guidance on budget preparation
115. A comprehensive and clear budget circular letter is issued to the budgetary units with
guidelines on preparation of capital and recurrent expenditure for the full fiscal year. The budget
circular includes annual budget ceilings (with prior approval in December 2018 by the regional cabinet
and issued in February 2019) by administrative (or ministry) expenditure category. The bureaus visited
by the assessment team (Health Bureau, Education Bureau, Road Authority, Water Bureau, and
Agriculture Bureau) confirmed that the guidelines in the circular were clear and complete. The budget
estimates are reviewed and approved by the cabinet after they have been completed in every detail
by the budgetary units.
Dimension score: A
17.3 Budget submission to the legislature
116. The executive has submitted the annual draft budget proposal to the regional council exactly
two months before the start of the fiscal year in all of the last three years assessed. Table 3.15 shows
the dates of budget submission to the legislature.
Table 3.15: Dates of submission of the budget to the regional council

EC GC GC dates of submission
2011 2018/2019 08/05/2018
2010 2017/2018 06/05/2017
2009 2016/2017 04/05/2016
Source: BoFED; confirmed by the regional council.
Dimension score: A
PI-18 Legislative scrutiny of budgets
117. This indicator assesses the legislative scrutiny and debate of the annual budget law as
described by the scope of the scrutiny, the internal procedures for scrutiny and debate, and the time
allocated to that process, in terms of the ability to approve the budget before the commencement of
a new fiscal year. The indicator also assesses the existence of rules for in-year amendments to the
budget without ex ante approval by the legislature.

PI-18 Legislative scrutiny of C+ Scoring method M1
budgets
PI-18.1 Scope of budget B The regional council’s budget scrutiny covers fiscal policy and aggregate
scrutiny for the coming year as well as details of expenditure and revenue, even
though it receives the MTEF.
PI-18.2 Legislative C The regional council’s procedures to review budget proposals are
procedures for budget approved by the legislature in advance of budget hearings and are
scrutiny adhered to. There are no arrangements for technical support and
negotiation procedures.
PI-18.3 Timing of budget A The regional council has approved the annual budget within one month
approval of the start of the fiscal year in all last three fiscal years.
50

PI-18.4 Rules for budget B Clear rules exist for in-year budget adjustments by the executive and
adjustments by the are adhered to in all cases, but the rules allow extensive administrative
executive reallocations as there are no limits. That said, the budget cannot be
expanded without the approval of the regional council.
PI-18.1 Scope of budget scrutiny
118. The package of budget documentation sent to the regional council consists of (a) the draft
budget estimates, (b) the budget speech, (c) subsidy allocation to woredas, (d) MTEF, and (e) MEFF.
For the EC 2011 budget, the regional council received the MEFF with GDP forecasts, and the underlying
assumptions for revenue and expenditure. The legislature’s budget scrutiny covers fiscal policies and
aggregates for the coming year only as well as details of expenditure and revenue. Even though the
regional council receives the MTEF, its review covers only the forthcoming budget year.
Dimension score: B
PI-18.2 Legislative procedures for budget scrutiny
119. The legislative budget review procedures are formalized. They are known as Directives on
Determination and Approval of the Budget of Somali Regional State, amended in EC 2010 (Order
Number 18/2010). Once the draft budget is received from BoFED, it is referred to the BFSC. It is a
specialized committee responsible for budget scrutiny and the review of public bodies’ performance
reports. It has five members including the chairperson, who is the only full-time member. Usually, it
takes 10 working days to carry out preliminary review of budget documentation for completeness
before the actual review of estimates and fiscal policies.
120. The committee prepares budget summaries and schedule for the budget hearing. The
proposed budget is discussed with specialists from all government sectors. There are public
consultations organized as a forum with the community. There is a procedure, still being formalized,
for consultation with civil societies. The regional council’s procedures to review budget proposal are
approved in advance of budget hearings and are adhered to as per Order No. 18/2010. The existing
processes for budget review do not include arrangements for negotiations and no procedures for
technical support.
Dimension score: C
PI-18.3 Timing of budget approval
121. The time of the budget scrutiny process indicates the ability of the legislature to approve the
budget well in advance of the budget year. The earlier the budget is approved, the better it is for the
budgetary units to know their resource allocation for the fiscal year. The budget proposal is usually
submitted to the regional council early May and the approval in early July. The fiscal year in Ethiopia
begins on July 8. Table 3.16 shows that the regional council approved the annual budget before the
start of the fiscal year in all last three fiscal years.
Table 3.16: Budget submission to the regional council and adoption (2016/2017–2018/2019)
Draft budget submitted to the Budget approved by the regional
Budget year regional council council
(GC dates) (GC dates)
FY2009 EC (2016/2017 GC) 04/05/2016 06/07/2016
FY2010 EC (2017/2018 GC) 06/05/2017 06/07/2017
51
Draft budget submitted to the Budget approved by the regional

Budget year regional council council
(GC dates) (GC dates)
FY2011 EC (2018/2019 GC) 08/05/2018 07/07/2018
Source: Budget Department and confirmed by the regional council.
Dimension score: A
PI-18.4 Rules for budget adjustments by the executive
122. The financial administration proclamation and the annual budget proclamations specify the
rules for in-year amendments to the budget. Reallocations between BIs can be made without approval
from the regional council. The financial administration proclamation stipulates that the executive
cannot increase total expenditure during the year without the regional council’s approval. Transfers
are not allowed from the capital to the recurrent budget. This provision gives BoFED the flexibility to
transfer budget allocations between sectors, programs, and economic items. Therefore, clear rules
exist for all in-year budget adjustments by the executive; however, they allow extensive administrative
reallocations as there are no limits for virements. Also, the budget cannot be increased without ex
ante legislative approval. Annual supplementary estimates may be requested and approved any time
except for the last month of the budget year in June. Any reallocations to be made in June are to be
exclusively approved by BoFED. The types of in-year adjustment stipulated in the legislation are as
follows:
• Adjustments within the budgetary units’ own budget ceilings that do not require prior
BoFED approval—the sector bureaus (line ministries) can reallocate only within the
economic classification category, for example, within operating expenditure and salaries
and wages
• Adjustments that require prior approval from BoFED but no legislative approval—
adjustment from one category of economic classification to another or from one sector
bureau to another
• Adjustments that require legislative approval—those made from one woreda to another
and the supplementary budget
Dimension score: B
PILLAR V: Predictability and control in budget execution

PI-19 Revenue administration
123. The indicator assesses the procedures used to collect and monitor central government
revenues. A government’s ability to collect revenue is an essential component of any PFM system.

PI-Revenue administration B Scoring method M2
19.1 Rights and obligations A All of the regional revenue (tax and nontax) is collected by the Somali
for revenue measures Regional State Revenue Bureau. It provides information through various
channels on main obligations to taxpayers and provides for complaints
resolution.
19.2 Revenue risk C The Somali Regional State Revenue Bureau administers all revenue of the
management region. The risk assessment and management function is undertaken by
52

the Tax Audit and Intelligence Department, which registers and monitors
the usual risks in tax registration, declaration, and payment. There is a
partly structured and systematic approach for assessing and prioritizing
risk covering category A and B taxpayers. There is no risk management
framework.
19.3 Revenue audit and D Revenue audit function is well established and is performed and
investigation managed in accordance with an annual audit plan with 56%
implementation of planned audits and investigations in FY2010. A
compliance improvement action plan is being developed.
19.4 Revenue arrears A The actual stock of revenue arrears for the year-end 2010 EC is 0.04% out
monitoring of total revenue and 0.22% out of the domestically collected revenue
(less than 10%). Previous year arrears are carried forward and collected
during the next fiscal year. The age of revenue arrears is not specifically
monitored, even if the data exist. The revenue arrears older than 12
months is 8%.
124. The Somali Regional State Revenue Bureau (established in GC 2002 as Somali Revenue
Authority) was a section of BoFED in 2012 and later upgraded into full-fledged authority with more
powers. There are 2,881 staff. Revenue collection centers are located in all administrations. The head
office structure is decentralized in all six city administrations. The same department and organizational
structures are mirrored down to all administrative structures of the city of Jigjiga and the woreda.
Article 92 of Proclamation No. 979/2016 governs the functions of the revenue bureau. The regional
revenue consists of (a) a block subsidy transferred by the Federal Government of Ethiopia and (b)
revenue collected by the Revenue Bureau—ETB 2.6 billion in EC 2010. The revenue collected for the
last completed fiscal year (EC 2010) is presented in Table 3.17. The total collection of Somali Region
represents 17 percent of the total revenue, which also represents 100 percent of all domestic revenue,
as the Revenue Bureau is solely responsible for collecting both tax and nontax revenues.
Table 3.17: Summary of total revenues for EC 2010 (2017/2018)

ETB Share (%)
Total revenue 14,791,536,880 100
Subsidy from the federal government 12,203,680,020 83
Total collection in Somali Region 2,587,856,860 17
PI-19.1 Rights and obligations for revenue measures
125. The Somali Regional State Revenue Bureau collects all revenues (tax and nontax). It has full
control over revenues and how the overall management is carried out including providing information
through various channels on obligations of taxpayers, assessment of tax compliance risk, tax audit and
investigation, complaints resolution, and revenue arrears monitoring. The taxpayers are grouped into
three categories: (a) category E (more than ETB 1 million); (b) category B (between ETB 0.5 and ETB 1
million); and (c) category C (below ETB 0.5 million).
126. The bureau has a functional website www.ddds.gov.et where it publishes tax proclamation
and regulations as well as comprehensive and current information on taxation. The Public Relations
and the Customer Handling and Training Departments deal with providing information to the
taxpayers about their tax obligations. There are leaflets circulated in public places and panel
discussions organized with the business community. There are tax-oriented videos and even street
plays on tax issues organized at marketplaces. Somali Region is populated by pastoralists who mostly
are informed by listening to news and going to market centers. There is also an annual conference on
tax visited by all woredas. There is a Tax Mobilization Committee with tax ambassadors who are active
on tax payment and awareness creation. Community religious leaders are also involved as well as the
53
Chamber of Commerce. There are tax education programs broadcasted on TV and radio, as well as
other topics focused on auditing, bookkeeping, and the use of VAT machine. There is a call center
operating at the Revenue Bureau, but this is not toll-free.
127. There is a redress mechanism with procedures and processes allowing tax claims filing and
complaint resolution. It is outside the general tax system and consists of the following structure: (a)
Internal Administrative Review Committee within the structure of the Revenue Bureau, (b) Tax Appeal
Committee operational since 2016, and (c) Legal Court of Appeal. The Tax Appeal Committee consists
of five independent members: one from the Chamber of Commerce, a private business lady, a law and
regulation expert, a certified accountant, and a tax expert. Over the last three years, there were 310
appeal cases of which 105 were rejected for lack of evidence and 165 were resolved.
128. Improvements in the political environment since 2018 has resulted in more business-friendly
atmosphere, thereby allowing all taxpayers to freely file their tax complaints. Again, due to awareness
creation by the Chamber of Commerce, more taxpayers and the general business community have
become active in demanding their rights to tax issues. According to the Chamber of Commerce, in
spite of the positive strive in tax education, more needs to be done in terms of taxpayer obligations
and the need to properly maintain good financial records for easy tax computation.
Dimension score: A
PI-19.2 Revenue risk management
129. The Somali Regional State Revenue Bureau is the only revenue administration entity in the
region that collects all regional government tax and nontax revenues. Currently, there is no revenue
risk management framework, which is being developed at the time of assessment. The risk analysis
function at the Somali Revenue Bureau is undertaken by the Tax Audit and Intelligence Department.
Risk assessment is carried out with some rudimentary guidelines developed by the department; this
is partly structured and systematic. It registers and monitors risks in the area of tax registration,
declaration, and payment, categorizing the taxpayers into four groups according to taxpayer risk
profile. Risk is identified as high, medium, and low depending on tax type and business type. There
are also questionnaires completed by taxpayers which are leveraged for taxpayer risk profiling.
130. The usual cases of high risks are business wholesalers’ presentation of fake documentation
for the export of livestock and green leaf (Khat). There are also many cases of tax and customs evasion.
The risk assessment is mostly focused on identifying taxpayers with the largest and medium risk of
noncompliance. There is an internal practice of assessing and prioritizing risk covering all groups of
taxpayers, but this is not fully structured and systematic; it is a partial system. Another way of reducing
tax leakages is the practice of taxpayers paying directly into the Revenue Bank Account held by the
treasury (BoFED). The tax registration system requires every taxpayer to have a Taxpayer Identification
Number (TIN) and this is incorporated in the tax administration software Standard Integrated
Government Tax Administration System (SIGTAS). The regional Revenue Bureau is now migrating to
the use of the System of Integrated Revenue Management (SIRM) to reduce tax evasion and improve
revenue collection.
Dimension score: C
PI-19.3 Revenue audit and investigation
131. The Tax Audit and Intelligence Department is responsible for tax audit and fraud
investigations. There are 195 auditors of whom 10 are in the head office. Only category ‘A’ and ‘B’
taxpayers are audited based on their annual financial reports but mainly focusing on category ‘A’
54
taxpayers. The tax audit findings are discussed with the taxpayer before they are made formal. The
head of the department reviews each audit report. There are 84,390 registered taxpayers as of end
October 2019 in 24 tax registration and administration centers. In EFY 2010, 100 tax audits were
planned of which 56 were completed, representing a completion rate of 56 percent. In EFY 2011, 69
were completed as against a plan of 150, representing a completion rate of 46 percent. Currently, a
documented approach on tax assessment is being developed. The idea is to have a comprehensive
assessment of the tax potential of the region. Based on this assessment, a compliance improvement
action plan will be developed.
Dimension score: D
PI-19.4 Revenue arrears monitoring
132. The end of the financial year in the EC is July 7. All taxes and nontax revenue due after this
date is recorded as revenue arrears by the Somali Regional State Revenue Bureau. There is a record
of annual plan and performance, as well as revenue arrears by main sources such as direct tax, indirect
tax, municipal, penalties, and so on. The arrears are classified into current period and those older than
12 months as per the ageing report.
Table 3.18: Tax arrears for EFY 2010 (2017/2018) (ETB)

Year Assessed arrears Paid arrears Current arrears % collected % outstanding
EFY 2010 70,400,410 64,844,496 5,555,914 92 8
Source: Somali Revenue Bureau.
133. As depicted in Table 3.18, the stock of revenue arrears at the end of EFY 2010 was ETB
5,555,914. The total revenue collections for the same year was ETB 14,791,536,880. Stock of revenue
arrears at the end of EFY 2010 stood at 0.04 percent (less than 1 percent). The arrears collected in EFY
2010 were ETB 64,844,496, representing 92 percent, and the revenue arrears older than 12 months
for the same period were ETB 5,555,914, representing 8 percent.
Dimension score: A
PI-20 Accounting for revenue
134. This indicator assesses procedures for recording and reporting revenue collections,
consolidating revenues collected, and reconciling tax revenue accounts. Accurate recording and
reporting of tax and nontax revenue collections is important to ensure that all revenue is collected in
accordance with relevant laws.

PI-20 Accounting for C+ Scoring method M1
revenue
PI-20.1 Information on A The BoFED treasury obtains revenue data every week from the Somali
revenue collections regional Revenue Bureau. The data are complete, indicating the type of
revenue and source. The data are consolidated into a weekly revenue
report.
PI-20.2 Transfer of A The Revenue Bureau collecting all government revenue transfers 100% of
revenue collections the collections directly into TSA controlled by the treasury within one
working day. The tax is paid directly to an account of the Somali Regional
Revenue Authority (SRRA) which is transferred to the treasury daily.
55

PI-20.3 Revenue C Complete accounts reconciliation between revenue collections and
accounts collections transfers to the treasury is performed quarterly within a time frame of
two months. Presently, there is no reconciliation between assessment,
collections, transfers, and arrears.
20.1 Information on revenue collections
135. The BoFED treasury obtains revenue data from Somali Regional State Revenue Bureau weekly,
which is uploaded onto IBEX via SIGTAS. The revenue collection account is part of the TSA. Table 3.19
shows the amount of budgeted and actual revenue for EFY 2011. The collection is presented by
revenue type as it appears in the IBEX system. The data are complete and consolidated into a weekly
report, indicating the type and source of revenue. The evidence provided is a report complied in Excel
(not generated from the SIGTAS database system) showing the consolidated revenue collections as
received by the treasury.
Table 3.19: Revenue collection by type for EC 2011 (GC 2018/2019) in ETB
Group (Description) Budget Actual revenue %
A. Tax revenue 2,401,214,168 1,470,072,558 61
1. Tax on income, profit, and capital gains 1,672,689,414 912,657,733 55
2. VAT 539,141,463 494,805,594 92
3. Excise Tax 1,640,538 169,360 10
4. Sales Turnover Tax 59,209,056 42,626,525 72
5. Turnover Tax on Services 102,338,190 18,478,085 18
6. Stamp sales and duty 26,195,507 1,334,261 5
7. Foreign trade tax — 1,000 —
B. Nontax revenue 242,726,347 758,167,566 312
1. Administrative fees and charges 71,785,532 14,569,612 20
2. Sales of public goods and services 42,257,240 5,406,284 13
3. Government investment income 80,382,365 599,632 1
4. Miscellaneous nontax 48,300,209 737,592,037 1,527
C. Capital revenues 66,451,974 351,094 1
D. Municipality revenue 451,089,294 237,749,163 53
Total (A + B + C + D) 3,161,481,783 2,466,340,381 78
Dimension score: A
PI-20.2 Transfer of revenue collections
136. The Revenue Bureau collecting all (100 percent) government revenue transfers 100 percent
of collections directly into TSA controlled by the treasury within one working day. The tax and duties
are paid either directly to a treasury-controlled account or to a CBE account, which are both reconciled
and transferred to the treasury daily.
Dimension score: A
PI-20.3 Revenue accounts collections
137. The Somali Regional State Revenue Bureau collecting all (100 percent) of SNG revenue
undertakes complete reconciliation of revenue collected and transferred to the BoFED treasury. The
complete reconciliation of revenue collections and transfers with the treasury is performed quarterly
within two months. The reconciliation process is facilitated by SIGTAX, which contains the arrears-
56
recording module. Presently, there is no reconciliation between assessment, collections, transfers,

and arrears.
Dimension score: C
PI-21 Predictability of in-year resource allocation
138. This indicator assesses the extent to which BoFED is able to forecast cash commitments and
requirements and to provide reliable information on the availability of funds to budgetary units for
service delivery. It contains four dimensions. Dimension 21.1 assesses the consolidation of cash
balances, dimension 21.2 examines cash forecasting and monitoring, dimension 21.3 assesses
existence of information on commitment charges, and dimension 21.4 assesses significance of in-year
budget adjustments.

PI-21 Predictability of in- A Scoring method M2
year resource allocation
PI-21.1 Consolidation of A Table 3.20 presents the cash position as of November 22, 2019, and only
cash balances the TSA (Z account) which represents 95.3% by value is consolidated daily.
PI-21.2 Cash forecasting A Available evidence (five sector bureaus visited were Agriculture Bureau,
and monitoring Health Bureau, Education Bureau , Water Bureau, and Road Authority)
indicates that BIs prepare and submit to BoFED annual cashflow plans once
the annual budget is approved by the regional council; BoFED consolidates
the respective cashflow forecasts. The annual cashflow plans are updated
monthly based on actual cash inflows and outflows.
PI-21.3 Information on A The Budget Department at BoFED provides a budget notification letter
commitment charges (expenditure commitment ceiling) to all budget entities once the budget is
approved by the regional council. The budget notification letter allows BIs
to commit for expenditure within a six-month horizon.
PI-21.4 Significance of in- A The largest in-year adjustment during EFY 2010, the last completed fiscal
year budget adjustments year, was 0.8% of total expenditure. In-year adjustment to budget
allocation took place only once a year and in a transparent and predictable
way, through vote of supplementary budget.
PI-21.1 Consolidation of cash balances
139. All bank accounts are kept only in local currency and in compliance with the financial
management regulations. They are opened only in the CBE. The financial proclamation stipulates that
both government and donor fund accounts must be reconciled monthly within one month after the
preceding month.
140. BoFED and BIs maintain the following types of accounts:
(a) Z account is a TSA account for disbursement of budget allocations allowing monthly cash
withdrawal to a limit set by BoFED on the basis of the monthly cash requirements of the
respective BIs. These cash requirements are made quarterly. These accounts are
reconciled daily with the CBE. BoFED monitors and consolidates the balances on the TSA
each day.
(b) B accounts are own revenue deposit accounts generated by the BIs and woredas, and
they are swept to the treasury monthly.
57
(c) Aid account (donor partner) is the Channel 1 donor fund account, and the number of
these accounts varies across all BIs depending on the type and nature of projects
supported in the respective sector. It is designated to fund capital expenditure and is not
part of the TSA. Disbursements are made based on performance and results into the
designated BI’s CBE account. The balance in these accounts is consolidated monthly but
is not part of the monthly regional government cash and bank balances.
(d) C account (Channel 2 or direct grant) is not part of the TSA or regional government cash
consolidation framework.
141. Table 3.20 presents the cash position as of November 22, 2019, and only the TSA (Z account)
which represents 95.3 percent by value is consolidated daily. The data (see Table 3.20) show that 95.4
percent of cash resources are in the TSA, 4.3 percent are outside the TSA, and 0.3 percent of cash is
in hand. The cash balances are consolidated at different intervals and frequencies. Whereas the Z
account is consolidated daily, the B and Aid accounts are consolidated monthly within five days after
the end of the month. The aid accounts differ in number from one BI to another.
Table 3.20: Volume of cash in and outside TSA in ETB as of end of October 2019 (EC 2012)
November 22, 2019, balances %
Total cash 969,733,031.59 100
Total cash balance in TSA (4105) - daily consolidation 924,664,643.07 95.4
Cash in other accounts not part of TSA (4103) 41,797,137.64 4.3
Cash in hand (4101) 3,271,250.88 0.3
Dimension score: A
PI-21.2 Cash forecasting and monitoring
142. The legal framework in relation to cashflow forecasting is Article 31 of the financial
management proclamation. According to this article and the subsidiary legislation No. 178/2011, no
disbursements shall be made out of the approved budget unless the head of the public body or his/her
authorized representative submits to the Bureau of Finance a cashflow plan. It also mandates all BIs
to prepare annual cashflow forecast based on their cash needs and respective procurement plans and
submit the same to BoFED. Available evidence (five sector bureaus visited were Agriculture Bureau
Health Bureau, Education Bureau, Water Bureau, and Road Authority) indicates that BIs prepare and
submit to BoFED annual cashflow plans once the annual budget is approved by the regional council;
BoFED consolidates the respective cashflow forecasts. The annual cashflow plans are updated monthly
based on actual cash inflows and outflows.
Dimension score: A
PI-21.3 Information on commitment ceilings
143. The Budget Department at BoFED provides a budget notification letter (expenditure
commitment ceiling) to all budget entities once the budget is approved by the regional council. The
budget notification letter allows BIs to commit for expenditure within a six-month horizon, that is,
from July to December and then January to June. The expenditure commitment ceilings are fixed into
IBEX through which BIs commit for their expenditures. For the last completed fiscal year EC 2010, the
budget notification letters (expenditure commitment ceilings) were issued on July 12, 2017, for the
2017/2018 budget.
58
Dimension score: A
PI-21.4 Significance of in-year budget adjustments
144. The financial management proclamation allows budget adjustments within one sector bureau
not exceeding 5 percent of original budget. The adjustments are made mostly close to the year-end in
the fourth quarter. There are no reallocations in the first six months of the fiscal year. The largest in-
year adjustment during EFY 2010, the last completed fiscal year, was 0.8 percent of total expenditure.
This is not significant even if there is no threshold of adjustment. Supplementary budget was voted by
the regional council during EFY 2010, allowing for an increase in total expenditure by ETB 209 million
for road construction and industrial development, among others. Therefore, in-year adjustment to
budget allocation took place only once a year and in a transparent and predictable way, through vote
of supplementary budget.
145. As indicated in PI-18.4, there are clear rules for in-year budget adjustments, but they allow for
extensive administrative reallocations. Generally, they stipulate that (a) the executive cannot increase
total expenditure during the year without the regional council’s approval and (b) reallocations are not
allowed from the capital to the recurrent budget. The rules are clearly defined in Article 23 of the
financial administration proclamation of the SRG; the regional government adheres to these rules. The
budgetary units were informed about the budget amendment.
Dimension score: A
PI-22 Expenditure arrears
146. This indicator has two dimensions. Dimension 22.1 assesses the level of stock of expenditure
arrears and dimension 22.2 examines the framework for monitoring expenditure payments arrears.

PI-22 Expenditure arrears B+ Scoring method M1
PI-22.1 Stock of expenditure A As shown in Table 3.21, the stock of expenditure arrears is less than 2%
arrears of total expenditure in all three years of assessment.
PI-22.2 Expenditure arrears B BoFED consolidates the stock and composition of expenditure arrears
monitoring quarterly within four weeks. The ageing analysis is however done
annually.
PI-22.1. Stock of expenditure arrears
147. There is no legal definition of expenditure arrears but rather a local concept which
acknowledges any outstanding payment more than 30 days as arrears. The system of budget
execution in Somali Region is decentralized. The accounts payable and the respective accumulation of
arrears are recorded by each budget entity. This information is consolidated and monitored by BoFED
quarterly. The expenditure arrears incurred relate to services rendered and goods purchased. The
expenditure arrears over the three years of assessment relate to procurement contract on capital
projects that have been completed. There are no arrears on salaries or pension payments. As shown
in Table 3.21, the stock of expenditure arrears is less than 2 percent of total expenditure in all three
years of assessment.
148. Generally, the timely payment of obligations is well respected and current expenditures are
paid from the current approved budget. Nevertheless, a grace period payables’ practice exists and is
applied mostly for unpaid procurement expenditure for capital Sustainable Development Goal (SDG)
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projects (account 5001 in the CoA). Thus, unpaid payment certificates/claims (usually received close
to the year-end) mostly related to procurement of capital projects are accrued as grace period
payables. This practice has been sustained for a long time.
Table 3.21: Analysis of stock of expenditure arrears

EFY 2008 EFY 2009 EFY 2010
(2015/2016) (2016/2017) (2017/2018)
Total expenditure (ETB, thousands) 8,537,913 11,124,649 14,775,032
Stock of arrears: Expenditure not paid at the end of the 133,415 150,213 170,148
budget year EFY June 30 (fiscal year ends on 7th July 7)
excluding retentions (ETB, thousands)
% of stock of arrears to total expenditure 1.56 1.35 1.15
Source: BoFED Accounts Directorate.
Dimension score: A
PI-22.2. Expenditure arrears monitoring
149. Every quarter within a month, BIs generate and report their stock and composition of
expenditure arrears to BoFED. The BIs register expenditure arrears on a form known as ‘Current
Liabilities Analysis Form’. The quarterly report, however, does not include an ageing analysis. BoFED
consolidates the stock and composition of expenditure arrears quarterly within four weeks. Ageing
analysis is done annually at the end of the fiscal year.
Dimension score: B
PI-23 Payroll controls
150. The indicator of payroll control is concerned with how the payroll is managed, how changes
to the payroll are controlled with responsibility, and how the personnel records are aligned to the
payroll to promote predictability of the available resources when requested. The indicator contains
four dimensions. Dimension 23.1 assesses the effectiveness of payroll control, dimension 23.2
examines the integration of payroll and personnel records, dimension 23.3 assesses the management
of payroll changes, and dimension 23.4 assesses the extent of payroll audits.

PI-23 Payroll controls C+ Scoring method M1
PI-23.1 Integration of B The majority of the regional government institutions use payroll software,
payroll and personnel with others using Microsoft Excel to process payroll. There is no direct link
records between the personnel (human resources [HR]) records and the payroll
database. The payroll is fully supported by personnel files and timesheets,
checked against the previous month’s payroll data.
PI-23.2 Management of A All staff changes such as hiring, termination, and promotion are managed
payroll changes by the HR Directorate and the database is immediately updated with
copies of correspondences to the Finance Directorate for payroll updates.
Changes are captured within the month they occurred and retroactive
adjustments are rare; adjustments represent 0.34% of total payroll
expenditure.
PI-23.3 Internal control C Sufficient controls are in place to support the integrity of payroll data.
of payroll However, with reference to PI-23.4, the incidence of ‘ghost’ workers
identified during the payroll audit raises doubts about the adequacy of
payroll controls.
60

PI-23.4 Payroll audit B A comprehensive payroll audit was conducted for the period July 2016 to
June 2018 with the final report issued in July 2019 by the Inspection
Directorate of BoFED. This was the first comprehensive payroll audit.
Background
151. The SRG Civil Service Bureau is responsible for setting and developing organizational
structures of the regional government institutions. It sets job standards, positions, compensation, and
pay schemes. Only approved organizational structures and positions are filled by personnel. The SRG
Civil Service Bureau is also responsible for the recruitment of administration staff for public bodies.
That said, public bodies recruit technical staff based on approved job positions. Each public body has
a human resource and finance unit. Human resource units are responsible for maintenance of
personnel records and issuing of basic employment documents including employment letter, transfer,
promotion, termination, change in salary, and attendance sheets. The finance unit is copied in writing
on changes in personnel records. Staff recruitment requests should get a prior approval of budget
clearance. Hence, there is no payroll prepared for personnel not supported by an approved budget.
Payroll procedures are generally similar between public bodies with few exceptions in the use of
payroll software. Hence, information on personnel and payroll control was collected from sample
public bodies which includes Bureau of Education, Bureau of Health, Bureau of Agriculture, BoT,
BoFED, Bureau of Water, ORAG, and the SRRA.
PI-23.1 Integration of payroll and personnel records
152. The majority of the regional government institutions use a bespoke payroll software, with
others using Microsoft Excel to process payroll. The region uses a decentralized personnel and payroll
system in which each SNG institution is responsible for managing its own personnel and payroll. The
staff structure, grading, and salary scale are approved by the Somali Civil Service Bureau; however,
hiring of staff based on the approved posts is the responsibility of each entity. There is no direct link
between the personnel (HR) records and the payroll database. Personnel database is maintained by
the HR Directorate of each entity. The Finance Directorate of each entity prepares monthly payrolls
based on monthly updated personnel data received from the HR Directorate; this is also checked
against the previous month’s data. Each employee signs daily attendance sheet (for those institutions
using manual staff attendance sheets) or biometric attendance checked by the head of the
department and submitted to the HR Directorate for vetting and approval before the payroll is
prepared. Based on this information, the Finance Directorate prepares the payroll and processes the
payments through direct bank transfers. Therefore, the personnel records provide full supporting
evidence for all changes to the payroll.
Dimension score: B
PI-23.2 Management of payroll changes
153. All payroll changes (new recruitment and promotion) are updated within the same month
provided those changes are triggered and approved before the 15th of the month. Terminations are
updated the same day that the termination letter is issued. New employees recruited after the 15th
of the month will be included in the payroll database of the following month. As indicated under PI-
23.1, the HR Directorate is responsible for updating the personnel software. The government
institutions using Excel update the record within a week from the date they receive the letters from
HR, which is often issued on the same day. Some of the government institutions use manual staff
attendance sheet, and others use biometric attendance system. There is no practice of cutting salary
for absenteeism. Instead, the HR Directorate issues a written reprimand to employees for
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absenteeism. Staff appointments are terminated following the issuance of the third warning letter for
absenteeism. Retroactive adjustments are rare. Based on the audit report of the Inspection
Directorate, retroactive adjustment was ETB 13.4 million, representing about 0.34 percent of the total
personnel expenditure in October 2019.
Dimension score: A
PI-23.3 Internal control of payroll
154. There is segregation of duties between request for vacant position for employment, review of
employment request for budget clearance, approval of employment, issuing of letters for
employment, payroll preparation, review of payroll, approval of monthly payroll, and transferring of
salary to the employees account based on approved payroll. As part of the routine financial audit, the
internal audit unit reviews all payroll for correctness against HR documents. The payroll software is
password protected, with only authorized personnel having access to it. The payroll software does not
have audit trail feature. Sufficient controls are in place to support the integrity of payroll data.
However, with reference to PI-23.4, the incidence of ‘ghost’ workers identified during the payroll audit
raises doubts about the adequacy of payroll controls.
Dimension score: C
PI-23.4 Payroll audit
155. A comprehensive payroll audit was conducted for the period from July 2016 to June 2018 with
the final report issued in July 2019 by the Inspection Directorate of BoFED. This was the first
comprehensive payroll audit. A total of 59 government entities were audited. The audit report
indicated that ETB 13,420,170 has been paid to 242 ‘ghost’ employees. In addition to the
comprehensive payroll audit, each internal audit unit of government institution conducts payroll audit
as part of regular financial audit; ORAG also conducts annual payroll audits as part of financial audit.
Dimension score: B
PI-24 Procurement
156. This indicator focuses on the management of procurement expenditure and promotes
predictably of resource availability. The indicator has four dimensions that focus on procurement
monitoring; transparency, openness, and competitiveness of procurement methods applied; public
access to procurement information; and the management of procurement complaints and redress
arrangements.

PI-24 Procurement B Scoring method M2
PI-24.1 Procurement A The procurement function is decentralized at sector bureaus and public
monitoring body levels. The Public Procurement and Assets Disposal Department
(PPADD) of BoFED collects, monitors, and audits annually the procurement
data provided by all regional bureaus. Procurement record is maintained
at all government institutions for all procurement methods. Data are
reported to BoFED and consolidated in an annual report. Data are accurate
and complete.
PI-24.2 Procurement A The value of contracts awarded through competitive procurement method
methods is at least 87% for all regional government institutions.
62

PI-24.3 Public access to C Three of the key procurement information elements are complete and
procurement information made available to the public.
PI-24.4 Procurement D The procurement complaint system does not meet elements (i) and (v) but
complaints management meets four others.
PI-24.1 Procurement monitoring
157. The main legal framework that regulates public procurement in Somali Region is the Somali
Regional State Public Procurement and Property Administration Proclamation No. 82/2002 EC. In
addition to this, there is a subsidiary legislation known as the Public Procurement Directive No.
01/2002 EC. Additionally, the Federal Procurement Manual, as well as the GOFAMM, is applicable.
158. The procurement function is largely decentralized at sector bureau and public body levels. The
PPADD within BoFED is responsible for monitoring and regulating public procurement, in addition to
providing technical support. It conducts annual audit of all procurement data provided by the regional
bureaus and public bodies.
159. For assessing the procurement practice, five sector bureaus were visited: (a) Education
Bureau, (b) Agriculture Bureau, (c) Water Bureau, (d) Road Authority, and (e) Health Bureau. They
represent the key industry sectors in Somali with 70.6 percent share. They all keep a regular Excel
sheet registers covering the following information items: (a) category (goods, services, works); (b)
contract number; (c) contract description; (d) procurement method; (e) supplier name; (f) contract
amount in ETB; (g) data of contract signing; (h) contract duration; and (i) status of completion.
160. The register is a standard form prepared by the PPADD at BoFED and it is maintained by all
visited sector bureaus. Based on the annual sector bureau procurement register, the PPADD compiles
an annual procurement register covering 14 central government budgetary institutions. In addition to
the sector bureaus, the annual 2010 register covers also the Parliament and the Revenue Authority.
The PPADD collects annually from all sector bureaus: the procurement plans and the contract registers
for monitoring and consolidation.
161. In summary, each SNG entity maintains a contract register and submits the contract register
containing procurement information on method of procurement, supplier, and contract sum and
other procurement details to the PPADD every year for consolidation into an Annual Procurement
Activity Report. The data used for the Annual Procurement Activity Report are accurate and complete
for all procurement methods as verified by the PPADD.
Dimension score: A
PI-24.2 Procurement methods
162. The default method of procurement of the regional government is open competitive bidding.
Other procurement methods are (a) restricted tendering, (b) two-stage bidding, (c) request for
proposal, (d) request for quotation, and (e) direct contracting. The procurement operation is
decentralized at the public body level. The reports prepared by the PPADD provide procurement
information of all regional government institutions. According to the report prepared by PPADD, the
share of competitive bidding in EFY 2010 (2017/2018) by all government institutions was 87.36
percent, as shown in Table 3.22.
163. The Chamber of Commerce however expressed its disappointment over the increase and
continuous use of the direct contracting procurement method mainly to favor quasigovernment
institutions as well as for cases of emergency, specialization, and/or for absence of multiple suppliers.
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Table 3.22: Procurement methods for EFY 2010 (2017/2018)

Type of procurement Amount (ETB) %
1. Open bidding (competitive) 2,039,760,348 87.36
2. Two-stage bidding (competitive) 0 0.00
3. Restricted tendering 4,731,200 0.20
4. Request for proposal (competitive) 0 0.00
5. Request for quotation 825,500 0.04
6. Direct procurement 289,698,879 12.41
Total procurement 2,335,015,927 100.00
Dimension score: A
PI-24.3 Public access to procurement information
164. This dimension reviews the level of public access to complete, reliable, and timely
procurement information. Table 3.23 shows the requirements or elements for public access and
whether these are met. Three key procurement information elements are made available to the
public. Annual procurement plans are prepared by the public bodies but are not accessible to the
public.
165. The assessment of this dimension has been made considering the specific local cultural
environment. Somali Region is a pastoral society where information is mostly transmitted by auditory
means (from person to person, more by radio than TV even though TV is also used) and rarely in
writing and on the Internet. The latter is not widely used and connectivity is generally very limited.
Table 3.23: Public access to procurement information

Met
No. Element/Requirements Evidence used/Comments
(Yes/No)
1. Legal and regulatory Yes The Public Procurement and Property Administration
framework for Proclamation No. 179/2011 and the regulation, the manuals,
procurement and guidance are available on the BoFED website:
https://srbofed.gov.et/.
2. Government procurement No All visited public bodies prepared annual procurement plans.
plan They are neither consolidated at BoFED nor shared with the
public.
3. Bidding opportunities Yes The open tender bidding opportunities are posted on the
noticeboards of the respective regional bureau and all
bidding opportunities are advertised in the national
newspaper called ‘Ethiopian Herald’ which has a wider
national coverage and on the regional TV channel. However,
the Chamber of Commerce claims that this newspaper can
be found only in the capital Addis Ababa and not in Jigjiga,
the capital of Somali Region.
4. Contract awards (purpose, Yes Contract awards are posted at the respective government
contractor, and value) entities’ noticeboards as well as public noticeboards placed
at vantage points. In addition, the award is communicated in
writing to the participating bidders.
5. Data on resolution of No Data on resolution of procurement complaints are not
procurement complaints published. Only the entity that filed the complaint would
receive the resolution in writing. There is no practice of
sharing the complaints resolutions with the public.
6. Annual procurement No An Annual Public Procurement Activity Report is prepared by
statistics BoFED, but it is not accessible to the public.
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Dimension score: C
PI-24.4 Procurement complaints management
166. According to Article 66 of the Public Procurement Proclamation No. 82/2002 EC (2010),
bidders must file their complaint to the head of the procuring entity within five days from the
notification of bid evaluation results. By law, the head of the procuring entity shall respond within 10
days. If the bidders did not receive a response or are not satisfied with the decision, they can lodge
their complaint to the Public Procurement Complaints Board. If the decision is not issued within 15
days or is not found to be satisfactory by the bidder, the next and last resort is the general court
system. The procuring entity shall suspend the procurement process until the complaint is resolved.
The number of complaints received in 2017/2018 is eight; four were resolved and four were rejected.
167. The Public Procurement Complaints Board consists of five members with a three-year two-
term mandate; the members are as follows: two from BoFED, one from Chamber of Commerce, one
from public enterprise, one from a sector bureau. As illustrated in Table 3.24, elements (i)and 9) are
not met.
Table 3.24: Elements of procurement complaints framework

Met
Elements/Requirements Evidence used/ Comments
(Yes/No)
Complaints are reviewed by a body
which
(i) Is not involved in any capacity in No The complaints body is not independent as majority of
procurement transactions or in the its members are directly or indirectly involved in
process leading to contract award procurement. Three out of five members are directly
decisions involved in the process leading to contract award. The
membership of the body includes
• BoFED (Chairperson);
• Chamber of Commerce (member);
• Budgeted entity (member);
• BoFED Public Procurement and Asset Disposal
Department (member); and
• Public enterprise or public body (member).
(ii) Does not charge fees that prohibit Yes Bidders are not required to pay service fee to lodge
access by concerned parties. their complaints.
(iii) Follows processes for submission Yes The process is clearly defined in the procurement
and resolution of complaints that are proclamation (Article 66).
clearly defined and publicly available
(iv) Exercises the authority to suspend Yes The proclamation indicates that the procurement
the procurement process process shall be suspended until a resolution is reached.
(v) Issues decisions within the time No Most of the visited procuring entities indicated that
frame specified in the rules/regulations decisions are made within the time frame. However, the
and publicly available decisions are communicated only to the complaining
bidder and are not publicly available.
(vi) Issues decisions that are binding on Yes The decisions are binding to every party. Parties also
every party (without) precluding have the right to proceed to the legal courts.
subsequent access to an external
higher authority
Dimension score: D
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PI-25 Internal controls on non-salary expenditure
168. This indicator measures the effectiveness of general internal controls for non-salary
expenditures. Specific expenditure controls on public service salaries are considered in PI-23. The
indicator assesses segregation of duties, the effectiveness of expenditure commitment controls, and
compliance with payment rules and procedures. The assessment of this indicator covers SNG
institutions.

PI-25 Internal B Scoring method M2
controls on non-
salary expenditure
PI-25.1 Segregation of A Each public body of the regional government has a clear organizational
duties structure and the functions of each employees are clearly segregated. The
various PFM directives provide clear segregation of duties for disbursement,
acquisition, use, and disposal of other resources, recording, reconciliation,
review and authorization on resources, and payment of expenditure.
PI-25.2 Effectiveness C IBEX has a commitment control feature, but this is not used; instead, public
of expenditure bodies use Microsoft Excel to control commitment, which is partially
commitment controls effective.
PI-25.3 Compliance B Internal control rules and procedures on payment are generally respected for
with payment rules majority of the payments. Most of the exceptions are properly authorized and
and procedures justified. According to ORAG, findings (noncompliance) represent 4.4% of
total government expenditure.
PI-25.1 Segregation of duties
169. The internal control procedures of the SRG are guided by the Financial Administration
Proclamation (110/2012) and Regulations (11/2012). The procurement and property administration
proclamation and the corresponding manuals guide the internal control procedures in procurement
and property administration (82/2010). The following directives also guide the detailed procedures on
cash management, inventory, property, accounting and reporting, internal control, financial
accountability, and transfers. The directives are adapted and translated into Somali language from the
Federal Government of Ethiopia directives issued by the MoF.
• Procurement Manual (2011)

• Procurement Directive (2010)
• The following were compiled in one booklet in July 2011:
o Prices for Goods and Services (2/2004)
o Property Administration Manual (9/2004)
o Government Fixed Asset Manual (2011)
o Stock Management Manual (2011)
o Financial Administration Directive (2/2004)
o Cash Disbursement Manual (3/2004)
o Accounting Procedure (5/2004)
o Financial Accountability (6/2004)
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o Internal Audit Guidelines (7/2004) and Internal Audit Manual

o Guideline for Guarantor for Employment (11/2004)
o Transfer between public bodies directive (10/2004)
170. The financial administration proclamation has been revised and is awaiting the approval of
the regional council. The new changes shall provide a mandate to BoFED to oversee internal audit
functions. Each public body of the regional government has a clear organizational structure and the
functions of each employees are clearly segregated. The various PFM directives described above
provide clear guidance on the segregation of duties for disbursement, acquisition, use, and disposal
of other resources, recording, reconciliation, review, and authorization on resources and payment of
expenditure.
Dimension score: A
PI-25.2 Effectiveness of expenditure commitment controls
171. Following the submission of the annual cash flow plan, public bodies are allowed to commit
for six months based on their approved budget. Public bodies also submit a revised (updated) cash
flow forecast to BoFED based on actual cash inflows and outflows. BoFED makes monthly cash releases
for payment of expenditure. IBEX has a commitment control feature, but this is not used; instead,
public bodies use Microsoft Excel to control commitment, which is partially effective. The half-year
budget (based on the cash flow) is entered into IBEX at the beginning of the fiscal year and at the
beginning of the second half of the fiscal year.
Dimension score: C
PI-25.3 Compliance with payment rules and procedures
172. Based on assessment of internal audit reports and discussions held with internal auditors,
common internal control irregularities in connection with payment are (a) incorrectly completed
travel advance request forms, (b) payments which are not supported by signature of authorizing
person, (c) improper use of petty cash and payment in cash instead of cheque, (d) not
settling/acquitting receivables timely, and (e) some payments which may not be supported by
appropriate invoices and payments made to people who are not on duty or left the organization.
Despite these limitations, internal control rules and procedures on payment are generally respected
for majority of the payments. Most of the exceptions are properly authorized and justified. According
to the audit reports of ORAG, major audit findings represent about 4.4 percent of the total expenditure
(EFY 2017/2018) as shown in Table 3.25.
Table 3.25: Major audit findings by ORAG

Audit Findings Amount (ETB, millions)
Cash shortages 0.16
Difference between records and cash count 0.03
Long outstanding receivables 107.00
uncollected tax revenue 13.00
Uncollected tax arrears 60.00
Unreported revenue 47.00
Disbursement without sufficient supporting documents 39.00
Spending overriding rules and procedures 0.82
Over payment 0.01
Procurement without competitive bidding while it should have been as per rules 24.60
and regulations
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Audit Findings Amount (ETB, millions)

Purchases not evidenced by goods receiving reports 36.00
Advance payments recorded as expenditure 89.00
Expenditure recorded as expense without supporting evidence 13.00
Construction expenditures paid with approval of ‘consultants’ without a consulting 22.00
license
Unrecorded expenditures 0.75
Long outstanding payables 196.00
Overspending from the approved budget limit without prior approval for budget 0.38
transfer in accordance with the rules and regulations
Total findings by value 648.75
Total government expenditure EFY 2017/2018 14,775.03
% findings 4.40
Dimension score: B
PI-26 Internal audit
173. International good practice in PFM looks for the operation of internal audit as a service to
management, with the function to identify ways of correcting and improving systems, to improve the
efficiency, economy, and effectiveness of the delivery of public services. This indicator assesses the
standards and procedures applied in internal audit and contains four dimensions dealing with the
coverage of internal audit, the nature of audits and standards applied, implementation of internal
audit plans, and the response to internal audit reports.
174. The assessment of this indicator covers SNG BIs and EBUs.

PI-26 Internal audit C+ Scoring method M1
PI-26.1 Coverage of A Except the Somali Bilateral Office and the Grievance Handling Commission
internal audit (two public bodies of the regional government) that do not have internal
audit units, all the remaining public bodies have functional internal audit
units. The two public bodies which do not have internal audit units constitute
0.06% of the total revenue and expenditure of the regional government.
PI-26.2 Nature of C The internal audit largely focuses on financial compliance audit with limited
audits and standards coverage on systemic audit.
applied
PI-26.3 A Out of a total of 582 audits planned by 48 regional government public bodies,
Implementation of 574 (98.6%) were implemented in 2017/2018 (EFY 2010). The
internal audits and accomplishment in terms of annual budget stood at 96.7%.
reporting
PI-26.4 Response to A According to the consolidated report of the Inspection Directorate of BoFED,
internal audits all the internal audit units reported a total of 479 audit findings and the
management of the audited entities responded to all of them within three to
six months of the issuance of the quarterly audit reports.
PI-26.1 Coverage of internal audit
175. According to Article 5 of the SRG’s Financial Administration Proclamation of 2009, BoFED is
mandated to oversee the internal audit functions of public bodies, develop appropriate standards of
work, develop internal control standards, and assist in building the capacity of internal auditors. The
Inspection and Financial Control Directorate (IFCD) is responsible for discharging these duties. SRG has
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201 internal auditors working in 48 public bodies and 93 woredas. Internal audit unit heads are
accountable to the head of their respective bureaus and to the IFCD.
176. Except the Somali Bilateral Office and the Grievance Handling Commission (two public bodies
of the regional government) that do not have internal audit units, all the remaining public bodies have
functional internal audit units. The two public bodies which do not have internal audit units constitute
0.06 percent of the total revenue and expenditure of the regional government. Each internal audit
unit has one to three internal auditors depending on its budget size.
Dimension score: A
PI-26.2 Nature of audits and standards applied
177. The internal audit function is guided by the internal audit manual issued by the MoF in GC
2004. An internal audit training module which was issued by the MoF in GC 2005 is also used by
internal audit units. The training module was translated into Somali language by the IFCD of BoFED in
January GC 2012. The internal audit unit prepares an annual audit plan, audit programs, and reports
and conducts exit interview with the management before issuing audit reports. Internal audit units
also follow up the implementation of internal audit recommendations. Annual internal audit plans and
actual audit works are not supported by a comprehensive risk assessment. The internal audit largely
focuses on financial compliance audit with limited coverage on systemic audit. The IFCD conducted a
comprehensive payroll audit (PI-23) and issued a report dated July 2019. It provides training to internal
auditors, and in GC 2018, it trained 110 internal auditors in two sessions across regional government
entities.
Dimension score: C
PI-26.3 Implementation of internal audit and reporting
178. Internal audit units prepare annual audit programs. All internal audit units are required to
submit four quarterly audit reports. Internal audit units submit their quarterly reports between 40 and
45 days from the end of each quarter. All of the internal audit units submitted four reports for EFY
2010 (2017/2018). Each quarterly report contains the programmed audits accomplished for the
quarter. Of a total of 582 audits planned by 48 regional government public bodies, 574 (98.6 percent)
were implemented in 2017/2018 (EFY 2010). The accomplishment in terms of annual budget stood at
96.7 percent. Except the Bureau of Health (70 percent), Road Authority (87 percent), and the Agency
for Drug Administration and Control (93 percent), all other audit units accomplished 100 percent.
Dimension score: A
PI-26.4 Response to internal audits.
179. According to the consolidated report of the IFCD of BoFED, all the internal audit units reported
a total of 479 audit findings and the management of the audited entities responded to all of them
within three to six months of the issuance of the quarterly audit reports. The PEFA team visited and
reviewed audit reports findings plus recommendations and management responses of the Bureaus of
Water, Education, Health, Agriculture, Revenue, and Transport; it was evidenced that management
provided official responses to all audit recommendations.
Dimension score: A
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PILLAR VI. Accounting and reporting

PI-27 Financial data integrity
180. This indicator assesses the extent to which treasury bank accounts, suspense accounts, and
advance accounts are regularly reconciled and how the processes in place support the integrity of
financial data. It contains four dimensions. Dimension 27.1 assesses the extent and frequency of bank
reconciliations for the central government accounts, dimension 27.2 examines reconciliation of
suspense accounts, dimension 27.3 measures the frequency of reconciling advance accounts, and
dimension 27.4 measures the financial data integrity processes.

PI-27 Financial data C+ Scoring method M2
integrity
PI-27.1 Bank account B All regional government public bodies reconcile bank accounts monthly
reconciliations within 10 days from the end of each month. Public bodies submit monthly
bank reconciliation reports to the BoFED treasury within 14 days from the
end of each month together with monthly financial reports.
PI-27.2 Suspense C Suspense account balances are reconciled annually within two months
accounts from the end of the year with no addition to the existing balance of ETB 54
million—a long-standing balance duly justified.
PI-27.3 Advance C Advance accounts are reconciled annually, within two months from the end
accounts of each year, but there are still significant outstanding balances.
PI-27.4 Financial data B Each user has a password and can change it as required, but not through an
integrity process automatic system prompt. Users have limited access to their area of usage
of the software. IBEX logs off if the user’s computer is idle for more than 10
minutes. IBEX also results in audit trails, but there is no operational body
responsible for verifying financial data integrity.
PI-27.1 Bank account reconciliations
181. Bank accounts are classified as zero balance account (Z accounts), revenue accounts (referred
as B accounts), treasury accounts (C accounts), and donor-funded projects accounts. There are 187 (Z
and C) bank accounts and 55 donor accounts in the region. Each public body has at least two bank
accounts including Z and B accounts. All regional government public bodies reconcile bank accounts
monthly within 10 days from the end of each month. Public bodies submit monthly bank reconciliation
reports to the BoFED treasury within 14 days from the end of each month together with monthly
financial reports.
Dimension score: B
PI-27.2 Suspense accounts
182. Suspense account (CoA code 4201) has a balance of ETB 63 million, ETB 60 million, and ETB 54
million as of the end of FY2015/2016, FY2016/2017, and FY2017/2018, respectively. The suspense
balances are attributed to long outstanding balances. The use of this account has been discontinued
since EC 2008 (2015/2016). From EC 2008, suspense account balances are reconciled annually within
two months from the end of the year with no additions to the existing outstanding balances. BoFED
submitted a request to the cabinet and the regional council for write-off of the long outstanding
balances in the suspense account (duly justified) as they are unlikely to be collected; the request is yet
to be granted.
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Dimension score: C
PI-27.3 Advance accounts
183. Advance accounts include staff salary advances, staff purchase advances, advances to
contractors and suppliers, and advances within government institutions. Public bodies prepare a
summary of receivable balances by the end of each fiscal year over the assessment period, but there
is no ageing report on receivables. Advance accounts are reconciled annually, within two months from
the end of each year, but there are still significant outstanding balances. For instance, the Bureau of
Education had an outstanding balance of ETB 49 million at the end of FY2017/2018, and the Bureau
of Health had an outstanding balance of ETB 29 million at the end of FY2017/2018.
Dimension score: C
PI-27.4 Financial data integrity process
184. IBEX is used to produce finance reports. All regional government budgeted public bodies are
connected to the BoFED IBEX database through a network platform called Woredanet. Of the 93
woredas, 23 are also connected to the BoFED database. Other woredas are using a stand-alone IBEX.
Those using a stand-alone IBEX send their monthly transaction generated from IBEX by email to BoFED
where the data are appended to BoFED database. Each user has a password and can change it as
required but not through an automatic system prompt. Users have access to the software as per their
area of responsibility. . IBEX logs off if the user’s computer is idle for more than 10 minutes. IBEX also
results in audit trails, but there is no operational body responsible for verifying financial data integrity.
Dimension score: B
PI-28 In-year budget reports
185. This indicator assesses the comprehensiveness, accuracy, and timeliness of information on
budget execution. In-year budget reports must be consistent with the budget coverage and
classification to allow monitoring of budget performance and, if necessary, timely use of corrective
measures. It contains three dimensions. Dimension 28.1 assesses coverage and compatibility of
reports, dimension 28.2 timing of in-year budget reports, and 28.3 accuracy of in-year budget reports.
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PI-28 In-year budget C+ Scoring method M1
reports
PI-28.1 Coverage and A The in-year budget execution reports include revenue and expenditure
compatibility of reports according to type; they allow direct comparison between approved budget
estimates and actual expenditure by detailed economic and administrative
classification (for both recurrent and capital expenditure) and source of
funds; the reports also show transfers to zones and woredas.
PI-28.2 Timing of in-year B Quarterly budget execution reports are prepared and issued to the
budget reports executives within four weeks from the end of each quarter.
PI-28.3 Accuracy of in- C Despite the concerns on data accuracy, the in-year financial reports
year budget reports provide useful analysis on budget execution. Expenditure is captured at
the payment stage only though IBEX has the functionality of capturing and
reporting expenditure at both payment and commitment stages.
PI-28.1 Coverage and compatibility of reports
186. Each budgeted public body of the regional government and woredas generate financial
reports from IBEX on a monthly basis. The budget execution reports allow direct comparison to the
original budget. The monthly report includes details of budget and actual revenue and expenditures
by public bodies in accordance with original budget classifications as well as transfer made to
deconcentrated units (zones12) within the regional government. The in-year financial report also
contains trial balances, bank reconciliation report (PI-27.1), and ageing reports for payables and
receivables. The quarterly consolidated reports (prepared by BoFED) also show the same
classifications (by detailed economic and administrative classifications for both recurrent and capital
expenditure and source of funds) as the monthly reports prepared and submitted by budgeted
institutions and are directly comparable with the original approved budget.
187. Donor-funded projects are reported by implementing sector bureaus to BoFED and are then
consolidated quarterly. The content and format of donor-funded project financial reports are as
agreed with donors. Donor reports also contain comparison of budgeted expenditure and transfer
against actual.
Dimension score: A
PI-28.2 Timing of in-year budget reports
188. As all regional government budgeted sector bureaus are interconnected with IBEX, budget
execution reports are available as processed at each public body. BoFED, after checking of the
accounts for completeness, reconciliation of transfers, and clearing of odd balances, prepares
quarterly reports. These quarterly budget execution reports are prepared and issued to the executives
within four weeks from the end of each quarter.
Dimension score: B
12Zones are branches of the regional government; therefore, the zone education office is a branch office (deconcentrated
unit) of the regional Education Bureau.
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PI-28.3 Accuracy of in-year budget reports
189. BoFED often does the reconciliation with public bodies to ensure data consistency including
clearing of odd balances, cash transfers to woredas, bank balance, and cash balance before issuing
quarterly reports. ORAG indicated that unreconciled differences between consolidated report and
public bodies’ report, the delay in settlement of advances and payables, and insufficient information
on ageing of receivables are concerns regarding the quality of in-year financial reports.13 The delay in
submission of reports by a few public bodies may also affect the completeness of consolidated in-year
reports. Despite the concerns on data accuracy, the in-year financial reports provide useful analysis
on budget execution. Expenditure is captured at the payment stage only though IBEX has the
functionality of capturing and reporting expenditure both at payment and commitment stages.
Dimension score: C
PI-29 Annual financial reports
190. This indicator assesses the extent to which annual financial statements are complete, timely,
and consistent with generally accepted accounting principles and standards. This is critical for
accountability and transparency in the PFM system. It contains three dimensions. Dimension 29.1
discusses completeness of annual financial reports, dimension 29.2 examines submissions of reports
for external audit, and dimension 29.3 assesses the accounting standards used to prepare financial
statements.

PI-29 Annual financial C+ Scoring method M1
reports
PI-29.1 Completeness of C The reports contain the budgeted amounts compared with actual outturns
annual financial reports for both revenues and expenditures. They also contain some financial
assets such as cash and bank balances, advances, and receivables.
However, the reports do not include tangible assets (fixed assets),
guarantees, contingent liabilities, and other financial assets such as shares
and investments in SoEs.
PI-29.2 Submissions of A As indicated in Table 3.27, the consolidated annual statements were
reports for external audit submitted to ORAG within three months of the end of the fiscal years in all
three years of assessment.
PI-29.3 Accounting C The financial reports are prepared based on the modified cash basis of
standards accounting and on a historical cost convention. These are in line with the
Ethiopian Federal Government Accounting Standards and the regional
government financial administration proclamation and were consistently
used in all three fiscal years of assessment.
PI-29.1 Completeness of annual financial reports
191. Financial reports (over the last three years 2015/2016 to 2017/2018) of the budgetary SNG
are prepared annually and are comparable with approved budget. As shown in Table 3.26, the reports
contain information on revenue, expenditure, receivables (including advances), some liabilities, and
assets. The reports also contain reconciled cash flow statement. However, the reports do not contain
information on tangible assets, other financial instruments such as investment in public enterprises,
contingent liabilities, and any long-term obligations.
13 ORAG report on the Audit of Consolidated Fund -EFY 2010, 2009 and 2008
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Table 3.26: Information contained in annual financial statement

Content of annual financial report (Yes/No)
Expenditures and Reconciled cash
Guarantees and
Financial Report revenues by Financial and nonfinancial flow statement
long-term
economic assets and liabilities (Yes/No)
obligations
classification
EFY 2008 Yes Financial assets (only cash) No Yes
(2015/2016) are available. Nonfinancial
assets are not available.
assets are not available.
assets are not available
Dimension score: C
PI-29.2 Submissions of reports for external audit
192. As indicated in Table 3.27, the consolidated annual statements were submitted to ORAG
within three months of the end of the fiscal years in all three years 2015/2016, 2016/2017, and
2017/2018.
Table 3.27: Timeliness of submission of annual financial statements by BoFED to ORAG

EFY 2008 EFY 2009 EFY 2010
(2015/2016) (2016/2017) (2017/2018)
Deadline for submission (3 months from the October 10, 2016 October 10, 2017 October 10, 2018
end of each fiscal year)
Annual financial statement received by ORAG September 23, September 27, October 8, 2018
2016 2017
Timespan from the end of the fiscal year Timely Timely Timely
2 months and 13 2 months and 17 3 months
days days
Sources: BoFED; confirmed by ORAG.
Dimension score: A
PI-29.3 Accounting standards
193. The financial reports are prepared based on the modified cash basis of accounting and on a
historical cost convention; these are in line with the Ethiopian Federal Government Accounting
Standards and the regional government financial administration proclamation and have been
consistently used for the last three completed fiscal years 2015/2016, 2016/2017, and 2017/2018. The
accounting standard in use largely differs from IPSAS in terms of measurement, recognition,
presentation, and disclosure of revenue; some of the expenditures; property, plant, and equipment;
inventories; financial instruments (including investment in public enterprises); employee benefits and
provision; contingent assets; and liabilities. Variations between international and national standards
are not disclosed and gaps are not explained, but the reports disclosed the use of the country’s
accounting standard.
Dimension score: C
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PILLAR VII. External scrutiny and audit

PI-30 External audit
194. This indicator assesses the quality of the external audit in terms of the scope and coverage of
the audit and adherence to appropriate audit standards (including independence of the external audit
institutions). The timeliness of submission of audit reports to the legislature is also important in
ensuring timely accountability of the executive to the legislature and the public, as much as it is for a
timely follow-up of the external audit recommendations. The assessment covers the central
government institutions including all agencies and extra-budgetary funds (where they exist) and
focuses on the last the financial years.

PI-30 External audit B+ Scoring method M1
PI-30.1 Audit coverage A As shown in Tables 3.28 and 3.29, audit coverage both by number of
and standards public bodies and by value is good. Within the last three completed fiscal
years, audit coverage by number of regional government institutions was
90.96%, 92.43%, and 90.4% in 2015/2016, 2016/2017, and 2017/2018,
respectively. By value, audit coverage was 90.1%, 97.4%, and 90.0% in
2015/2016, 2016/2017, and 2017/2018, respectively. Revenue coverage
was 100% for all three years under review. ORAG also conducts fixed
assets audit.
PI-30.2 Submission of A ORAG submitted the audited consolidated financial statements of the SRG
audit reports to the to the regional council within three months for the last three completed
legislature fiscal years as shown in Table 3.30.
PI-30.3 External audit B According to ORAG’s performance report, more than 80% (but below 90%)
follow-up of the audited entities completed and submitted a rectification plan within
the stipulated time to ORAG for the last three completed fiscal years as
shown in Table 3.31.
PI-30.4 Supreme Audit A ORAG operates independently from the executive with respect to
Institution (SAI) procedures for appointment and removal of the Auditor General, the
independence planning of audit engagements, arrangements for publicizing reports, and
the approval and execution of ORAG’s budget. This independence is
assured by law. ORAG has unrestricted and timely access to records,
documentation, and information.
PI-30.1 Audit coverage and standards
195. The legal framework for the establishment of the Office of the Auditor General of the SRG
(ORAG) is the revised 1994 Constitution (Article 107) and the reestablishment proclamation for ORAG
(Proclamation No. 182/2019). The Auditor General of the SRG is accountable to the regional council
and mandated to audit the annual accounts of public bodies of the regional government and submit
its reports to the regional council. ORAG uses the audit manuals issued by the Office of the Federal
Auditor General (OFAG) including the Regulatory Auditor Manual and Performance Audit Manual
issued 10 years ago. ORAG received updates from African Organization of English-Speaking Supreme
Audit Institutions (AFROSAI-E) annually for new standards. ORAG has 84 auditors. ORAG categorizes
audited entities based on their budget size, public interest, and prior period audit findings. It conducts
audit based on the International Standards for Supreme Audit Institutions (ISSAI).
196. The focus of ORAG’s audits is largely on financial and compliance audit with some systemic
issues. As shown in Tables 3.28 and 3.29, audit coverage both by number of public bodies and by value
is good. Within the last three completed fiscal years, audit coverage by number of regional
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government institutions was 90.96 percent, 92.43 percent, and 90.4 percent in 2015/2016,
2016/2017, and 2017/2018, respectively. By value, audit coverage was 90.1 percent, 97.4 percent,
and 90.0 percent in 2015/2016, 2016/2017, and 2017/2018, respectively. Revenue coverage was 100
percent for all three years under review. ORAG also conducts fixed assets audit even though these are
not reported in the annual financial statements.
Table 3.28: Audit coverage by number of public bodies

Planned
Executed in terms of number of public Percentage of coverage in terms of number
EFY public
bodies of public bodies
bodies
2010 198 179 90.40
2009 185 171 92.43
2008 155 141 90.96
Source: ORAG.
Table 3.29: Audit coverage by value (ETB, millions)
EFY 2008 EFY 2009 EFY 2010
Total approved expenditure 8,503.44 10,218.99 15,305.43
Audited amount 7,658.61 9,948.77 13,778.11
Coverage (%) 90.10 97.40 90.00
Source: ORAG.
Dimension score: A
PI-30.2 Submission of audit reports to the legislature
197. According to Article 13 (3) of Proclamation No. 182/2019, ORAG must submit the audit report
to the regional council within four months from the receipt of the consolidated financial statements
from BoFED. ORAG submitted all audited reports of the consolidated financial statements of the SRG
to the regional council within three months from the date of receipt from BoFED for the last three
completed fiscal years, as shown in Table 3.30.
Table 3.30: Timeliness of submission of audit reports to the regional council

EFY 2008 EFY 2009 EFY 2010
(2015/2016) (2016/2017) (2017/2018)
Date on which ORAG received consolidated financial September 27, October 8 October 8, 2018
statement from BoFED 2016 2017
Date on which ORAG completed and submitted the November 30, December 4, November 26,
audit of the consolidated fund to the regional council 2016 2017 2018
Time span 2 months and 3 26 days 1 month and 19
days days
Source: ORAG; confirmed by the regional council.
Dimension score: A
PI-30.3 External audit follow-up
198. According to Article 21 (3) of Proclamation No. 182/2019, audited entities should provide a
report on action taken based on the recommendation of the Auditor General within 15 days from the
date of receipt of the audit report. Available evidence indicates that ORAG follows up on audit
recommendations in subsequent audits. Audited entities completed a ‘Rectification Plan’ which shows
the action they took and their plan to execute the outstanding findings. According to ORAG’s
performance report, more than 80 percent (but below 90 percent) of the audited entities completed
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and submitted a rectification plan within the stipulated time to ORAG for the last three completed
fiscal years as shown in Table 3.31.
Table 3.31: Number of audited entities responded to audit findings

No. of auditees submitted % of auditees submitted
Year No. of auditees
action plan action plan
EFY 2010 198 174 88
(2017/2018)
EFY 2009 185 159 86
(2016/2017)
EFY 2008 155 127 82
(2015/2016)
Dimension score: B
30.4 Supreme Audit Institution independence
199. This dimension assesses the independence of the SAI from the executive. Table 3.32
summarizes the independence of ORAG based on the principles set out in ISSAI, as stipulated in the
Mexico Declaration on the SAI independence. ORAG operates independently from the executive with
regard to procedures for appointment and removal of the Auditor General, planning and audit
engagements, arrangement for publication of the audit report, and the approval and execution of its
budget as it is assured by law. ORAG has unrestricted and timely access to records, documentations,
and information.
Dimension score: A
Table 3.32: Independence of ORAG

Met
Element/Requirements Evidence used/ Comments
(Yes/No)
The existence of an appropriate and Yes Article 107 of the revised 1994 Constitution of the SRG
effective legal framework and de facto provides the legal framework for the establishment of
application provisions of this ORAG. Proclamation No. 182/2019 stipulates the scope
framework and mandate of ORAG and responsibilities of the audit
entities.
Independence of OFAG head and its Yes The Auditor General is independent of the executive and
members including security of tenure appointed by the regional council (Constitution 1994
and legal immunity Article 107(1)) with the recommendation of the President
of the SRG. According to Proclamation No. 182/2019, the
Auditor General is appointed for one term of six years and
may be appointed for another term. The Auditor General
may be removed from office due to inability to perform
his/her duties, incompetency, lack of commitment,
involvement in corruption, attainment of retirement age,
end of tenure, and a prolonged poor health condition.
However, termination is effected only if a committee
constituted by the regional council investigates and
confirms and the regional council decides based on a
majority vote.
Broad mandate and full discretion in Yes The Auditor General is mandated to audit the accounts of
delivering the tasks entrusted to the all public bodies. The scope of the audit includes the audit
SAI of books of accounts, information technology (IT),
donations, grants, and loans made to the regional
government. ORAG is also mandated to audit or cause
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Met
Element/Requirements Evidence used/ Comments
(Yes/No)
audit of private and public organizations to protect the
interest of the government and public interest (Article 6 of
Proclamation No. 182/2019).
Unrestricted access to information Yes ORAG has unrestricted access to information as stipulated
under Article 16 of Proclamation No. 182/2019.
The right and obligation to report its Yes ORAG has both the right and obligation to report its work
work as well as the freedom to decide with freedom to decide the date and timing of its audit as
the date and timing of audit reports stipulated in the 1994 Constitution and Proclamation No.
and to publish and disseminate them 182/2019.
The Auditor General has the freedom to decide the

content and timing of audit reports and to publish and
disseminate them. ORAG published audit reports on its
website https://srsbag.gov.et/.
Mechanism to follow up on OFAG Yes ORAG collects the rectification plan prepared by the
recommendation has been audited entities and follows up on the implementation in
implemented its next audit recommendations of the respective audited
entities.
Financial and Yes The Regulation No. 5/2019 on the Administration of
managerial/administrative autonomy Employees of ORAG entitled ORAG to have financial and
and availability of appropriate human, managerial autonomy. The regulation was issued on
material, and monetary resources February 9, 2019.
PI-31 Legislative scrutiny of audit reports
200. This indicator focuses on legislative scrutiny of the audited financial reports of the central
government, including institutional units, to the extent that either they are required by law to submit
audit reports to the legislature or their parent or controlling unit must answer questions and take
action on their behalf. The assessment of this indicator is based on the audit reports submitted to the
legislature within the last three years.

PI-31 Legislative scrutiny B Scoring method M2
of audit reports
PI-31.1 Timing of audit A The review of audit report is completed within one month of the receipt
report scrutiny of audit report; this has been the case over the last three completed
fiscal years 2015/2016, 2016/2017, and 2017/2018.
PI-31.2 Hearings on audit A PAC hearings, over the last three completed fiscal years, 2015/2016,
findings 2016/2017, and 2017/2018, have been conducted for all regional
government entities (in attendance are BoFED and all responsible
government officials) with qualified and adverse opinion. The hearings
are in-depth and cover all audit reports with qualified and adverse
opinion.
PI-31.3 Audit C Over the last three completed fiscal years 2015/2016, 2016/2017, and
recommendations by the 2017/2018, PAC issued its recommendations after completion of
legislature hearings. However, there is no evidence suggesting that PAC tracks the
implementation of its recommendations.
PI-31.4 Transparency of D Over the last three completed fiscal years 2015/2016, 2016/2017, and
legislative scrutiny of audit 2017/2018, PAC reports have not been published on the website or
reports through other accessible means. The hearings are however attended by
the public and also given some media coverage.
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PI-31.1 Timing of audit report scrutiny
201. Article 49 of the 1994 Constitution of the SRG mandates the regional council to establish a
PAC to scrutinize all audit reports received from ORAG. As shown in Table 3.33, the consolidated audit
reports were reviewed within one month after receipt from ORAG.
Table 3.33: Timeliness of regional council review of audit reports

EFY 2008 EFY 2009 EFY 2010
(2015/2016) (2016/2017) (2017/2018)
Date on which ORAG submitted the audit of the November 30, December 4, November 26,
consolidated fund to the regional council 2016 2017 2018
Date on which the PAC scrutinizes the audit report December 1–3, December 5–8, December 6–9,
2016 2017 2018
Time span between receiving and scrutiny of the 1 day 11 days 10 days
audit report
Source: Somali regional council.
Dimension score: A
PI-31.2 Hearings on audit findings
202. PAC hearings are in-depth and cover all audit reports with qualified and adverse opinion.
Following the review of audit reports of the consolidated annual financial statements, the PAC
determines the entities to visit for audit hearings. The hearings include all public bodies of the regional
government, zones, and woredas. The PAC splits into five teams and covers the hearing within three
months. ORAG assigns an auditor to attend the hearings and provides technical support to the PAC.
Over the last three completed fiscal years, 2015/2016, 2016/2017, and 2017/2018, PAC hearings were
conducted for all regional government entities (in attendance was BoFED and all responsible
government officials) with qualified and adverse opinion.14
Dimension score: A
PI-31.3 Audit recommendations by the legislature
203. Over the last three completed fiscal years, 2015/2016, 2016/2017, and 2017/2018, the PAC
issued its recommendations after completion of hearings. However, there is no evidence suggesting
that the PAC tracks the implementation of its recommendations. Nevertheless, ORAG audit reports
include the status of previous audit findings.
Dimension score: C
PI-31.4. Transparency of legislative scrutiny of audit reports
204. The head of the audited entities, representatives of mass organization (youth and women
forums), and elders attend the hearing. The SRG mass media also broadcast some of the hearings. The
PAC submits its report to the full chamber after completion of the hearings. The PAC reports have not
been published or made available to the public in any other accessible means. This was the practice
over the last three completed fiscal years, 2015/2016, 2016/2017, and 2017/2018.
Dimension score: D
14 133, 166, and 168 entities were received qualified audit opinion on the audit of EFY 2008, 2009, and 2010, respectively.
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4. Conclusions of the analysis of PFM systems

4.1 Integrated assessment of PFM performance
Budget reliability
205. General purpose grants as well as earmarked grants from the federal government were
reliable from 2015/2016 to 2017/2018. The actual disbursement schedules were equally good,
allowing a consistent inflow of funds from the federal government to the regional government to carry
out its policies and programs (HLG-1 ‘B+’). Likewise, the aggregate regional government expenditure
outturns showed impressive results where deviations were not more than 5 percent in 2015/2016 and
2017/2018 but at 8.9 percent higher than the originally approved budget in 2016/2017 (PI-1 ‘A’). The
results of HGL-1 and PI-1 indicate some level of budget reliability which has a positive impact on the
predictability and control in budget execution. However, budget reallocations, especially referencing
the administrative expenditure category (PI-2.1 ‘D’), coupled with the use of contingency vote at 7.4
percent, appear to reflect some level of budget credibility issues. Revenue budgeting was not left out
either (PI-3 ‘D’); aggregate revenue collections have consistently not met the targets, in addition to
high revenue composition variance (average for the three fiscal years being above 15 percent). The
poor performance in revenue outturns places considerable limitation in the overall reliability of the
budget with a negative consequence on the predictability of resources for service delivery.
Transparency of public finances
206. The assessment indicates that both budget classification and comprehensiveness are
satisfactory, pointing to adherence to budget transparency. The results show that budget formulation,
execution, and reporting are based on administrative, economic, and functional classification,
compliant with GFS standards (PI-4 ‘B’). Furthermore, information included in the budget
documentation meets five out of nine applicable elements of international standards; some of the
elements not met include (a) summary information of fiscal risks including contingent liabilities such
as guarantees and contingent obligations, (b) investments in public enterprises, and (c) forecast of the
fiscal deficit or surplus (PI-5 ‘C’). Another positive feature of the regional government operations is
the complete inclusion of all revenues and expenditures of its operations within its budgets and
financial reports, as there are no EBUs (PI-6 ‘A’). This practice indicates total control of government
revenues and expenditures, thereby eliminating misuse of public funds. This also improves budget
credibility. Good performance in budget transparency improves accountability and reporting.
207. The system of horizontal allocation of transfers to woredas/city administrations is rule based
and transparent. Also, information to these SNGs is done through the regular budget formulation and
preparation systems and allows sufficient time for the preparation of their budget estimates (PI-7
scored A). Overall performance referencing information on service delivery is poor (PI-8 ‘D+) basically
due to the absence of comprehensive and consolidated reports on resources received in kind (those
resources in cash are properly compiled and reported) and the non-publication of annual and midterm
evaluation reports on performance achieved for service delivery. That said, annual performance plans
with KPIs for the forthcoming year and the corresponding achievements are published for at least 61
percent by value of regional sector bureaus (PI-8.1 and PI-8.2 all rated ‘C’). One fundamental weakness
identified relates to public access to fiscal information on time (PI-9 ‘D’). This is poor and has negative
impact on accountability and reporting of public funds. It should be noted that all efforts by the
regional government to improve PFM through the production of budget estimates, in-year and annual
financial reports, and audited reports will amount to nothing if this fiscal information is not publicly
available on time.
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Management of assets and liabilities
208. Fiscal risk reporting is very weak (PI-10 ‘D’) as all three elements—(a) monitoring of public
corporations, (b) monitoring of SNGs, and (c) reporting on contingent liabilities—score ‘D’. Only 40
percent by value of public corporations submit annual financial reports to BoFED within nine months
of the end of financial year. Also, though woredas/city administrations do not pose fiscal risks in terms
borrowing to the regional government, their annual financial reports are not consolidated and
published. Furthermore, the regional government does not maintain any records of explicit contingent
liabilities and other fiscal risks arising out of its programs and projects. The PIM framework performs
on average (PI-11 ‘C’) but lacks a standardized PIM guideline and manual that will ensure consistency
in project feasibility analysis, costing, selection, monitoring, and evaluation. The absence of the
standardized PIM guideline means less economic analysis and more political influence in project
selection.
209. Government financial asset management is only limited to the recording and reporting of
cash. The annual financial reports do not disclose information of government investments in public
(and/or private) enterprises (PI-12.1 ‘C’). The management of nonfinancial assets (fixed assets) is
weak. Though public bodies maintain fixed asset registers, they do not contain information of land
and buildings (PI-12.2 ‘D’). The legal framework for disposal of fixed assets is quite good, but it fails to
take into account the sale of nonfinancial assets (PI-12.3 ‘B’). The regional government has borrowing
powers but has yet to exercise this mandate. The legal framework for borrowing and issuing
guarantees limits the approval authority to only BoFED, but there are no guidelines to support this
process (PI-13 ‘D’). Poor assets and liabilities management could lead to a drain on scarce public
resources; this could have repercussions on budget reliability.
Policy-based fiscal strategy and budgeting
210. The regional government’s MEFF is good, and it prepares forecasts of key macroeconomic
indicators for the budget year and the two following fiscal years (PI-14 ‘A’). In addition to the
preparation of macro-fiscal sensitivity analysis, the regional government prepares forecasts of GDP,
savings, and investment rates but no forecast of exchange rate, interest rate, and inflation. A good
MEFF provides an indication of the government’s revenue and expenditure credibility, but the
assessment of the aggregate revenue indicator (PI-3 ‘D’) brings to the fore some weaknesses in
revenue budgeting at it appears that the MEFF is a mere formality.
211. The government also prepares estimates of the budgetary impact of all major revenue policy
changes but only for the budget year (PI-15.1 ‘C’). Presently, it prepares no fiscal strategy. The absence
of fiscal strategy with specific quantitative and qualitative fiscal targets and constraints deprives the
PFM system of a framework against which the fiscal impact of revenue and expenditure policy
proposals can be assessed during the annual budget preparation process. Hence, budget policies tend
to have weak alignment to fiscal targets. The government’s medium-term perspective in expenditure
budgeting is satisfactory (PI-16 ‘B’); this provides a longer-term horizon in its expenditure proposals
to sufficiently plan on how to finance these expenditure programs for service delivery. The MTEF is
prepared on a three-year basis according to administrative classification only but with cabinet-
approved ceilings over three years.
212. Another good PFM system identified relates to the budget preparation process (PI-17 ‘A’),
which helps ensure that all budget estimates are formulated and prepared in line with broad
government policy proposals. A budget calendar exists and is respected and adhered to by most
budget entities. Budget ceilings are approved by the cabinet before the issuance of the BCC. Also, the
annual budget proposals are submitted to the regional council in good time (two months) before the
start of the new fiscal year. The timely submission of annual budget proposals to the legislature (PI-
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17.3 ‘A’) enables the regional council to pass the appropriation’s law before the start of the new fiscal
year (PI-18.3 ‘A’), thereby allowing budget entities to begin spending at the right time. The overall
legislative procedure for budget scrutiny is satisfactory (PI-18 ‘C+’) except that the process is limited
by the absence of public consultation and negotiation procedures. Sound budget preparation process
provides some assurance to BIs that resources will be released timely for expenditure commitment
and payment.
Predictability and control in budget execution
213. The assessment concludes that this pillar appears to be the most effective; the budget is
implemented within a system of fairly effective internal control standards and processes. This ensures
that the planned resources are obtained in good time and generally used as intended to execute
government strategies and programs.
214. Overall revenue administration and accounting show satisfactory results (PI-19 ‘B’ and PI-20
‘C+’) except for the inability of the regional revenue bureau to successfully accomplish planned annual
tax and fraud investigations (56 percent implementation of planned audits and investigations in
FY2010, hence PI-19.3 ‘D’). That said, tax laws are clear, comprehensive, and easily accessible to the
public including redress mechanisms. Also, revenue arrears exist, but they are insignificant (less than
1 percent of total revenue collections—PI-19.4 ‘A’). All domestic revenue is collected in accordance
with the relevant laws and reported timely. The information on revenue collection and transfer is daily
(both PI-20.1 and PI-20.2 rated ‘A’), thereby allowing to manage its cash position and execute the
budget in line with its plans. At present, the monthly revenue account reconciliation does not include
assessments and arrears but only collections and transfers to the treasury (PI-20.3 ‘C’).
215. Consolidation of government cash balances and cashflow forecasting and monitoring meet
international good practices (both PI-21.1 and PI-21.2 rated ‘A’). This good practice enables the
government to efficiently plan and allocate resources to fund its programs on time. Likewise,
information on expenditure commitment ceilings and in-year budget virements show good results (PI-
21.3 ‘A’ and PI-21.4 ‘A’). It is therefore not surprising that stock of expenditure arrears is less than 2
percent within the assessment period (PI-22.1 ‘A’). The frequency of monitoring these arrears is also
quarterly (PI-22.2 ‘B’), which indicates tight controls on expenditure arrears. The effective cash
management practices have largely contributed to the positive results referencing expenditure
arrears. Furthermore, tight controls on expenditure arrears improve budget credibility as resources
for planned policies and programs will not be diverted to pay for expenditure arrears.
216. The decentralized personnel and payroll management systems appear to be a contributing
factor in the effectiveness and efficiency of government payroll though both systems are not fully
integrated (PI-23.1 ‘B’). The overall performance of payroll controls is satisfactory (PI-23 ‘C+’). The
controls provide reliable assurance that limits the incidence of ghost workers even though not entirely
eliminated with marginal retroactive changes. One positive element is the completion of a
comprehensive payroll audit over the last three years (PI-23.4 ‘B’). Personnel cost is usually known to
be contributing factor to budget unreliability, but this is not the case as any supplementary budgets
in relation to government payroll did not affect aggregate budget reliability (hence PI-1 rated ‘A’).
217. The general procurement management framework is satisfactory and nearly meets
international good practices (PI-24 ‘B’), but this is weakened by the absence of an independent
functional procurement complaint system since majority of members on the complaints panel are
directly involved in procurement process and transactions (PI-24.4 ‘D’). That said, most government
procurements are competitive and well monitored through a comprehensive and consolidated
database management system (PI-24.1 ‘A’ and PI-24.2 ‘A’). Procurement information to the public is
not adequate (though average according to PEFA standards—PI-24.3 ‘C’), and only the legal
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framework and bidding opportunities are published. Internal controls on non-salary expenditures are
generally satisfactory (PI-25 ‘B’). Segregation of duties is formalized and well defined in laws and
regulations (PI-25.1 ‘A’). Whereas IBEX has an expenditure commitment functionality, it is not used
routinely. Microsoft Excel has become the day-to-day expenditure commitment functionality which is
not efficient (PI-25.2 ‘C’). Also, clear segregation of duties guarantees satisfactory compliance to PFM
rules and regulations (PI-25.3 ‘B’).
218. Internal audit coverage is good and it is across all government institutions (PI-26.1 ‘A’).
However, the function is limited to financial management compliance as opposed to systemic audit
(PI-26.2 ‘C’) mainly due to inadequate technical capacity and the use of outdated internal audit
standards. Both implementation of internal audit plans and management responses to audit findings
show good results (both PI-26.3 and PI-26.4 rated ‘A’), indicating strong government commitment
toward transparency and accountability.
Accounting and reporting
219. A key element to financial data integrity is the process and timeliness of accounts
reconciliations. Whereas all active regional government bank accounts are reconciled within a month
after the previous month (PI-27.1 ‘B’), the same cannot be said for suspense and advance accounts
(both rated ‘C’). Suspense accounts still exist, casting doubts regarding the accuracy of both in-year
and annual financial reports, and advances to staff remain unacquitted for more than 12 months,
raising concerns in terms of the government’s ability to effectively recover all receivables (and cash
equivalents) badly needed to fund its programs and projects. That said, the financial data integrity
process is quite resolute (PI-27.4 ‘B’), providing reasonable assurance of the security and safety
government financial records except for the absence of an automatic software (IBEX) prompt to
change user passwords.
220. The government prepares consolidated quarterly in-year budget execution reports within a
month of the end of the quarter (PI-28.2 ‘B’) as a useful financial management and accountability tool
to check budget execution. The reports allow easy and direct comparability between budgets and
actuals according to the same classifications (PI-28.1 ‘A’) but with data accuracy concerns alluded to
suspense accounts (PI-27.2 ‘C’) and advance accounts (PI-27.3 ‘C’) even though the financial data still
are useful for the analysis of budget execution (PI-28.3 ‘C’).
221. The completeness of annual financial reports is average as the reports lack a number of key
financial and fiscal information including tangible assets, investments in public enterprises, contingent
liabilities, and long-term obligations (PI-29.1 ‘C’). The annual financial reports are however submitted
to ORAG on time (PI-29.2 ‘A’), which has a positive impact on the timely completion and submission
of external audit reports to the regional council (PI-30.2 ‘A’). The regional government has consistently
applied (and disclosed) national accounting standards in preparing its annual financial reports, but
these standards largely do not conform to IPSAS.
External scrutiny and audit
222. ORAG adopts ISSAI in carrying out its audits. External audit coverage is good; at least 90
percent by value of revenue and expenditure is covered (PI-30.1 ‘A’). Available evidence suggests that
annual audit reports of the consolidated fund are submitted to the regional council on time, within
three months of their receipt from BoFED (PI-30.2 ‘A’). The financial accountability process is
strengthened by ORAG’s follow-up framework of its recommendations by ensuring that each audited
entity submits a formal, comprehensive, and timely response to all its audit findings with a remedial
action plan (PI-30.3 ‘B’). Again, financial accountability is reinforced by the independence of the
Auditor General and ORAG through the Regional Constitution as well as the external audit
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proclamation (PI-30.4 ‘A’). A wider external audit coverage improves accountability since accounting
officers become aware of the need to use public funds in accordance with PFM laws and regulations.
223. The timely receipt of ORAG’s audit reports guarantees an early legislative scrutiny process (PI-
31.1 ‘A’). The overall legislative scrutiny of external audit reports is satisfactory (PI-31 ‘B’), but this is
weakened by the non-publication of the PAC’s annual reports for easy access to the public (PI-31.4
‘D’) even though the regional council (through PAC) conducts in-depth hearings on all audit reports
with qualified or adverse findings (PI-31.2 ‘A’) and issues recommendations on remedial actions to be
taken by the executive (PI-31.3 ‘C’).
4.2 Effectiveness of the internal control framework
224. An effective internal control system plays a vital role across every pillar in addressing risks and
providing reasonable assurance that operations meet the four control objectives: (a) operations are
executed in an orderly, ethical, economical, efficient, and effective manner; (b) accountability
obligations are fulfilled; (c) applicable laws and regulations are complied with; and (d) resources are
safeguarded against loss, misuse, and damage.
225. Control environment. The Constitution of the SNRS and the various PFM and related
proclamations and regulations are the guiding frameworks for the control environment (PI-25). Public
bodies post their visions, missions, objectives, and the ethical values to be seen by the general public
and their own staff (PI-8 and PI-9). Annual budget and execution reports are generally posted on
billboards and websites (PI-29). The segregation of duties between organs of the government is clearly
demarcated by law (PI-25). Organizational structure, manning, and pay schemes are centralized and
regulated by the regional Civil Service Bureau.
226. However, the control environment appears to be ineffective due to the lack of check and
balances system within the organs of the government between 2016 and early 2018. A high level of
corruption, human right violations, and to a certain extent lawlessness were said to be widespread
until the change in leadership in mid-2018. REAC indicated that it was not effective because of
ineffective governance structure and political will. The assessment team observed the optimistic view
of the public to trust the governance system which has been reflected on more turnout for tax
payment, increasing interest to appeal for tax and public procurement complains. The Inspection
Director conducted a comprehensive payroll audit in 2019 and disclosed a significant number of
‘ghost’ workers (PI-26).
227. Risk assessment. An organizational-level risk assessment is a systematic and forward-looking

analysis to see whether the existing internal control procedures in place are effective and efficient to
support the achievement of organizational objectives within a stated time frame. ORAG and the
Revenue Authority have their own predefined classification of auditees to determine the extent and
frequency of audit. Internal control questionnaires are used to assess whether the established internal
control procedures are functioning. No comprehensive risk assessment has been conducted at any
public body. The recurring nature of certain findings by the internal and external audit bodies partly
reflects the weakness of certain control activities in place in procurement, property administration,
investment management, and asset management (PI-11, PI-12, PI-25, PI-26, and PI-30).
228. Control activities. The different manuals that stipulate the segregation of duties and
procedures for preparation, review, and approval of payments, procurement, and use of other
resources are generally comprehensive and instrumental as internal control tools (PI-25). Bank
accounts are reconciled monthly (PI-27.1). The timeliness of reconciliation and clearing of advances
and payables are areas that need improvement. The Revenue Authority reconciles revenue collection
and transfers to the treasury weekly (PI-20). Use of information and communication technology (ICT)
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is limited to accounting and budgetary control and payroll data processing. Other PFM functions such
as disbursement, procurement, property management, inventory, and HR management are not fully
automated. The BoFED treasury cannot determine the amount of cash available in the region but for
only active bank accounts on TSA (PI-21). The existing customer account management system at CBE
is not supportive in terms of allowing online access to BoFED for regional government bank accounts.
There is a high tendency of using cash payment instead of check payments. Most of the manuals are
old (issued between 2007 and 2012) and are not updated to reflect changes in operation, budget
management, and other PFM aspects. The recurring nature of audit findings partly indicates the
limitation with the effectiveness of the control activities in place.
229. Information and communication. PFM laws and guidelines are communicated to government
staff through training and distribution of printed materials. Tax and procurement laws are available to
the public in printed and soft copy (from the relevant public body website). Awareness events were
conducted and printed materials were distributed to educate the public on tax laws and public
procurement rules. Public bodies submit printed budget execution reports to BoFED. BoFED submits
quarterly financial reports to the regional cabinet (PI-28). OFAG presents its findings to the regional
council (PI-30). Internal audit units report their findings to the head of public bodies and BoFED (PI-
26).
230. The use of financial reports as a decision-making tool by public bodies’ management is yet to
be developed. The financial report does not provide analysis of assets and liabilities. Only 6.1 percent
of the financial reports of public bodies received unqualified audit opinion. The financial reports do
not meet international reporting standards and lack provision of pertinent disclosure in tangible assets
and certain financial assets. The websites of most of the visited public bodies were functioning and
contain strategic plans, annual plans, and annual performance reports (PI-8). Nonetheless, access to
basic PFM information is yet to be fulfilled (PI-9). Decision and recommendation of the regional council
following their public hearings were not published (PI-31). OFAG published some of the audit report
but not the audit report on the consolidated fund (PI-30).
231. Monitoring. Various monitoring mechanisms are in place to ensure the efficiency and
effectiveness of operations, fulfilment of accountability, compliances to rules and regulations, and
safeguarding of resources (PI-24, PI-26, and PI-30). The internal audit units and ORAG monitor whether
rules and regulations are complied with. The quality of internal audit plans and the manuals in use
need improvement (PI-25). Much of the audit works focus on compliance than monitoring on the
effectiveness and efficiency of the already established internal controls (PI-26). There is no quality
assurance exercise to monitor whether the internal audit and external audit functions are up to the
standards. ORAG follows up on the implementation of audit findings. The PAC conducts hearings and
provide recommendations. Public bodies conduct monitoring and evaluation quarterly in
collaboration with BoFED to see the performance of capital projects (PI-11). A monitoring system for
the transfer of resource in kind to service delivery unit is yet to be developed (PI-8.3).
4.3 PFM strengths and weaknesses
Fiscal discipline
232. One fundamental element that strengthens fiscal discipline is a robust legal and regulatory
regime. The 1995 Constitution of Ethiopia provides administrative autonomy to all regional
governments including the SRG. All proclamations promulgated by the regional government pick their
sources from the federal laws; these proclamations are quite strong for providing solid basis for
strengthening both PFM institutions and activities. Nonetheless, strong laws do not guarantee robust
PFM systems; this must be supported by solid political and public service systems.
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233. Fiscal discipline is strengthened by the formulation and preparation of a reliable budget for
both revenues and expenditures. Aggregate expenditure outturns (PI-1 ‘A’) and transfers from the
federal government to the regional government (HLG-1 ‘B+’) are good and credible. These two
elements contribute to strengthening fiscal discipline. The same cannot be said for domestic revenues,
which are unreliable (PI-3 ‘D’). Another element that weakens fiscal discipline is the constant and
continuous budget reallocations according to administration and/or economic classifications and the
excessive use of contingency vote. This also affects the strategic resource allocation since the original
government policies and programs may not be achieved (PI-2 ‘D+’). The rules for in-year budget
virements are clear but have no limits to the number and volume of virements. This is a weakness as
far as fiscal discipline is concerned.
234. There is some respite; revenues and expenditures outside the regional government budgeting
and reporting systems are less than 1 percent of total government revenues and expenditures. Also,
the stock of expenditure arrears is significantly low, currently below 2 percent of total government
expenditure. These two are essential elements for strengthening fiscal discipline. Supplementary
budget has been approved in each of the last three completed fiscal years but were done ex ante,
which shows a good sign of only spending before legislative approval, thereby having a positive impact
on fiscal discipline. Budget execution elements such as internal controls (PI-25 ‘B’) and internal audit
(PI-26 ‘C+’) are sufficiently sound for the attainment of fiscal discipline. A particular strength is the fact
that there are limits set out for budget spending units that are articulated in advance (PI-21.3 ‘A’),
which strengthens fiscal discipline.
235. The classification and comprehensiveness of the budget are satisfactory. It is generally in
accordance with international standards on administrative, economic, and functional classification of
GFS/COFOG and contains most information required in budget documentation (PI-4 and PI-5 rated ‘B’
and ‘C’, respectively). This allows transparency and easy tracking of government resources, which
strengthens the strategic allocation of resource. Strategic allocation of resources is negatively affected
by the continuous functional and economic budget reallocations (PI-2 ‘D+’). Frequent budget
reallocations override government original policy intentions, leading to poor resource allocation,
which affects efficient service delivery. Another major weakness is monitoring and reporting of fiscal
risk (PI-10 ‘D’). The government does not monitor total fiscal risks (both explicit and implicit) of SoEs
and other contingent liabilities. The effect of this is the use of scarce resources to pay off fiscal risks
that may arise, thereby depriving primary service delivery of the needed funds.
236. The regional government performed quite well as far as policy-based fiscal strategy and
budgeting are concerned. With the exception of the non-preparation of a fiscal strategy (the regional
government has no technical capacity to do so, hence PI-15 ‘D+’), all the remaining four indicators
score well (PI-14 ‘A’; PI-16 ‘B’; PI-17 ‘A’; and PI-18 ‘C+’). This is mostly due to the good practice in
macroeconomic and fiscal forecasting (PI-14) and the sound budget preparation process (PI-17). There
is an established process to allocate budgetary resources in accordance with regional government’s
declared strategic objectives (PI-16) with medium-term strategic plans prepared for 71 percent (by
value) of sector bureaus. These good practices have positive impact on resource allocation, thereby
improving the efficiency in service delivery. The key weakness in the budgeting process is the lack of
a fiscal strategy with specific quantitative and qualitative fiscal targets; hence, the alignment of budget
estimates to fiscal targets appears to be weak. This weakens allocation of resources to strategic
priorities. The PIM framework shows average results (PI-11 ‘C’), but the system is fraught with
weaknesses such as nonexistence of standardized guidelines and rules for PIM, majority of capital
projects being decided, prioritized, and selected on political grounds with less economic analysis. This
negatively affects strategic allocation of resources as investments in capital projects may not provide
the intended benefits. The satisfactory performance of both revenue administration and
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accountability (PI-19 ‘B’ and PI-20 ‘C+’) coupled with the good performance of predictability in
resource allocation (PI-21 ‘A’) strengthens strategic resource allocation.
237. Efficient service delivery is strengthened by the reliable and timely information on allocation
of resources to service delivery units. This area is strong due to the timeliness of actual transfers from
the federal government (HLG-1 ‘B+’), which has a positive impact on payment of goods and services,
thereby reducing the accumulation of expenditure arrears (PI-22.1 ‘A’). The relatively good PFM
proclamations and directives (procurement, budget, and cash management) coupled with the desire
of government officials to adhere to rules and regulations (though with some exceptions) have
contributed to improving primary service delivery through timely resource allocations as well as
monitoring the implementation of government policies and programs.
238. While efficient service delivery is positively affected by the reliability of the expenditure
budget at the aggregate level (PI-1 ‘A’), the continuous reallocation of approved budget both at
economic and administrative levels, in addition to the excessive use of contingency votes (PI-2 ‘D+’),
defeats the original government intent of delivering on its mandate to improve service delivery.
Revenue administration and accounting show satisfactory performance (PI-19 ‘B’ and PI-20 ‘C+’), but
this has very little impact on the overall (aggregate) domestic revenue performance (PI-3 ‘D’), a key
factor in terms of making resources available for the effective and efficient execution of primary
service to the citizens. This raises questions on the credibility of the macroeconomic forecasting
framework, which ironically performs well (PI-14 ‘A’).
239. The weak area is the lack of transparency and public access to fiscal information (PI-9 ‘D’);
most information is not published and if published at all, it is late. This is also true for the procurement
information (procurement plans, contract awards, procurement statistics, and resolution of
procurement complaints) as this is not accessible to the public, raising concerns about transparency
and competitiveness which are key elements to improving efficiency of service delivery. Performance
information on service delivery is also weak (PI-8 ‘D+’) mainly due to the nonexistence of
comprehensive and consolidated reports on resources received by primary service delivery units as
well as the non-publication of monitoring and evaluation reports. The oversight functions show
satisfactory results (PI-26 ‘C+’, PI-30 ‘B+’, and PI-31 ‘B’). Internal audit functions have wide
government coverage, and the same is the case for external audit with at least 90 percent coverage
in terms of value. Legislative oversight is strong, which has a positive impact on efficient service
delivery since it holds the executive accountable.
4.4 Performance changes since the previous assessment
240. The last PEFA assessment was conducted in 2015, using the 2011 methodology. In accordance
with the PEFA Secretariat’s Guidance Note on measurement of performance change, the 2011
framework was used to assess the situation at the time of assessment in 2018. This section provides
a detailed analysis of changes since 2015.
Fiscal discipline
241. While fiscal discipline was strengthened by the good performance of aggregate expenditure
outturn (PI-1 rated ‘A’ in 2018 compared to ‘B’ in 2015), the poor performance in expenditure
composition outturn coupled with the excessive use of contingency vote—averaging 8 percent over
the three-year period (PI-2 rated ‘D+’ in 2018 compared to ‘C+’ in 2015)—negatively affected fiscal
discipline. The performance of transfers from the federal government to the regional government has
largely remained constant (HLG-1 rated ‘B+’ in 2018) even though direct comparison was impossible
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because HLG-1.2 which relates to earmarked grants was not applicable in 2015 (hence, HLG-1 was
rated ‘A’ in 2015). Aggregate revenue performed poorly in 2018 (PI-3 scored ‘D’ in 2018 compared to
‘B’ in 2015), thereby negatively affecting fiscal discipline. The tight control of expenditure arrears and
the continuous monitoring of those arrears (PI-4 rated ‘B+’ in 2015 and now improved to ‘A’ in 2018)
point to the government’s commitment toward strengthening fiscal discipline. Presently, stock of
expenditure arrears is below 2 percent of total regional government expenditure over the three years
under review. Payroll controls have improved (PI-18 rated ‘B+’ in 2018 compared to ‘C+’ in 2015),
providing relatively good assurance of a strengthened approach to fiscal discipline.
242. The strong performance in the predictability and allocation of the government’s scarce
resources coupled with the effective cash management mechanism through the daily consolidation of
its bank balances (PI-16 rated ‘A’ in 2015 and 2018; PI-17 improved from ‘B’ in 2015 to ‘A’ in 2018) has
largely contributed to maintaining a resilient environment for the strategic allocation of resources,
which then positively affects efficient service delivery. Nevertheless, strategic resource allocation,
though the legislative framework for budget reviews and approval has improved (PI-27 rated ‘B+’ in
2018 compared to ‘C+’ in 2015), suffered from the poor performance in expenditure composition
outturn (PI-2.1 ‘C’ in 2015 to ‘D’ in 2018). This meant that the original government policies and
programs might have been affected by the reallocations in budget estimates. That said, the
improvement in the comprehensiveness of the budget (PI-6 rated ‘B’ in 2018 compared to ‘C’ in 2015)
coupled with improvement in multiyear perspective in the expenditure framework (that is, MTEF; PI-
12 rated ‘C+’ in 2018 compared with ‘D+’ in 2015) points to the government’s commitment to
strengthen strategic resource allocation.
243. Efficient service delivery has been strengthened by the consistent performance of federal
government subsidy transfers to the regional government (HLG-1 rated ‘B+’ in 2018 and ‘A’ in 2015
although not directly comparable due to the inapplicability of earmarked grants in 2015) by ensuring
that the needed resources are available on time to prosecute government policies and programs.
Efficient service delivery has also been positively affected by the good and sustained performance of
predictability of resource allocation (PI-16 rated ‘A’ in 2018) in addition to the effective cash
management system (PI-17 also rated ‘A’ in 2018). The government has also maintained strict controls
on the level of unreported operations (PI-7.1 rated ‘A’ in 2015 and 2018), which contributed to
efficiency in-service delivery, except for donor-funded projects that still have a challenge in terms of
full reporting and disclosure. The inability of the government to meet its revenue targets (PI-3 rated
‘D’ in 2018 compared to ‘B’ in 2015) indicates shortfalls in revenues required to shore up service
delivery even though available evidence suggests good performance of the tax administration system
(PI-13 rated ‘A’ in 2018 compared to ‘B+’ in 2015 and PI-14 rated B in 2015 and 2018). External audit
coverage has improved (PI -26 from ‘C+’ in 2015 to ‘B+’ in 2018), which ensures accountability in the
use of public funds for service delivery. The measurement of efficiency and effectiveness of service
delivery is limited by the absence of performance audits.
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5. Government reform process

244. The SRG developed and published a five-year stand-alone PFM reform strategy in May 2019
for the period EC 2010 to EC 2014 (Gregorian 2017/2018 to 2021/2022) anchored on the federal
government PFM reform strategy. This is the first comprehensive PFM reform strategy developed by
the regional government. The following sections describe the current strategy with its key
components.
5.1 Approach to PFM reforms
245. There are nine main components outlined in the current (new) PFM reform strategy:
• Balance government revenues and expenditures over the medium term

• Make cost-effective budget allocations
• Modernize government treasury, cash management, and disbursement systems for
efficiency and cost-effectiveness
• Improve the timeliness and accuracy of government accounting and reporting
• Strengthen value for money by improving the internal audit and control systems
• Modernize government procurement and public asset management systems
• Modernize IT systems that support government financial administration
• Improve government financial administration that is participatory, transparent, and
accountable
• Improve staff technical capacity in government financial administration
246. The new strategy, though commendable, fails to address issues relating to external audit
(ORAG) and domestic revenue mobilization even though Component 1 mentions ‘balance government
revenues and expenditures over the medium term’. The estimated cost of the new strategy is ETB
189.32 million over the five-year period from EC 2010 to EC 2014 (GC 2017/2018 to GC 2021/2022).
The funding arrangements are not well defined, but the government intends to look for multiple
sources of funding including from the federal government, DP support, and the regional government’s
own resources—which appears to be unrealistic considering the inadequate budget allocations for the
provision of basic/primary services.
5.2 Recent and ongoing reform actions
247. There are no major ongoing PFM reform initiatives besides the continuous provision of
training and capacity-building programs for sector bureau and woreda PFM officials in the area of
planning and budgeting (training on program budgeting has been provided but not yet implemented),
procurement and property management, treasury and expenditure management, internal audit and
controls, and accounting and reporting. Over the past couple of years, some major achievements have
been made in PFM reforms, including the following:
• Legal reforms. (a) Financial administration proclamation and its accompanying

regulation and 13 directives, (b) public procurement and property administration
proclamation and its accompanying directives and manuals, and (c) fixed asset and stock
management manuals.
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• Public Revenue and Expenditure Improvement Plan. The regional revenue which was
only ETB 203 million in EFY 2002 has improved to ETB 1.5 Billion in EFY 2007, showing an
increase by more than 650 percent. Tax revenue increased at an annual average rate of
48.3 percent during the past five years, which is above the national average of 33
percent.
• Government budget preparation and management. Training and capacity building for
all regional government planning and budget officers.
• Government cash management and payment systems. The Central Treasury Account
and the Z accounts constitute a TSA, and its balances are calculated on a daily basis.
Dormant bank accounts have been closed.
• Government accounting and reporting. The revised government CoA consistent with
international standards (GFS-2001) has been developed and implemented.
• Government procurement and asset management. Establishment of a procurement

complaints board (though it appears not to be independent based on the existing
membership and structure).
• Internal audit reform. Training of internal auditors to conduct postaudit instead of

preaudit.
• Financial information systems. Rollout of IBEX to all sector bureaus and woredas plus
training and capacity building.
• Transparency and accountability in financial management. Mainstreaming of financial

transparency and accountability in routine PFM functions through continuous citizens’
engagement.
Donor coordination
248. Donor coordination usually takes place at the federal government level, and the regional
government is involved where necessary. Coordination appears to be weak, as identified at the federal
government level, and it is likely to have an impact at the regional government.
5.3 Institutional considerations
Government leadership and ownership
249. The development of the PFM reform strategy was at the request of the head of BoFED with
support from key government officials and heads of sector bureaus. There are three levels of
institutional arrangement for the execution of the new PFM reform strategy:
(a) High-level regional steering committee which is made up of the head of BoFED, heads of
sector bureaus, the regional auditor general, the head of civil service, and heads of
woreda finance economic development (WoFED). The high-level steering committee is
scheduled to meet twice a year to review reform progress, challenges, and the way
forward.
(b) PFM steering committee composed of heads of BoFED, ORAG, Revenue Authority, and
Procurement. This committee will also meet twice a year to take stock of activities
undertaken by each component head within the PFM technical committee.
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(c) PFM technical committee composed of deputy heads of sector bureaus and heads of all
directorates in each sector bureau, plus the deputy auditor general. The technical
committee will meet once a month to evaluate progress of work under each PFM
component. The sub-technical committee will meet every week to address day-to-day
issues and report to the PFM technical committee.
Coordination across government
250. The Channel 1 Coordinator is responsible for coordinating all regional PFM training programs.
Training activities are part of the regular daily PFM functions of sector bureaus and woredas. Also, to
ensure peer review and idea sharing, the respective officials (PFM functional directors and their
deputies, plus technical staff) are grouped for joint training programs. There is also a high-level
biannual Joint Review and Implementation Support (JRIS) meetings of which regional government
officials participate.
Sustainable reform process
251. The estimated cost of the new strategy is ETB 189.32 million over the next five years. It is
expected to be funded from multiple sources such as the federal government, donors, and regional
government’s own resources. However, the current budget constraints and the macroeconomic
challenges both at the federal and regional government levels are likely to have a negative impact on
funding arrangements going forward.
Transparency of the PFM program
252. The new PFM reform strategy for 2017/2018–2021/2022 is published on the website
(www.srbofed.gov.et). It has a detailed action plan for the five-year period and the budget estimates.
There is however no evidence that suggests the involvement and/or consultation with civil society
organizations; this shows signs of less private sector participation and engagement.
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ANNEXES
92
Annex 1: Performance indicator summary

2018
No. Indicator Justification for 2018 Score
Score
HLG-1 Transfer from a B+
higher-level
government
HLG Outturn of transfer A Actual transfers of federal government subsidies were 100.5%,
1.1 from higher-level 100.3%, and 100.2% in 2015/2016, 2016/2017, and 2017/2018,
government respectively; these reflect deviations of −0.5% in 2015/2016,
−0.3% in 2016/2017, and −0.2% in 2017/2018.
HLG Earmarked grants B Transfers of earmarked grants deviated by more than 10% in one
1.2 outturn out of the three years under review. Actual deviations were 0.0%
in 2015/2016, 12.7% in 2016/2017, and 0.0% in 2017/2018.
HLG Timeliness of transfer A Actual disbursements of both recurrent and capital grants have
1.3 from higher-level been evenly spread within each of the last three years under
government review. These disbursements were done monthly.
Pillar I. Budget reliability
PI-1 Aggregate expenditure A Aggregate expenditure outturn was between 95% and 105% in
outturn two of the last three years; actual outturns were 100.4% in
2015/2016, 108.9% in 2016/2017, and 96.5% in 2017/2018).
PI-2 Expenditure D+
composition outturn
2.1 Expenditure D Variance in expenditure composition by functional classification
composition outturn was less than 15% in only one of the last three years; actual
by function variances were 12.2% in 2015/2016 (EFY 2008), 16.5% in
2016/2017 (EFY 2009), and 20.8% in 2017/2018 (EFY 2010).
2.2 Expenditure B Variance in expenditure composition by economic classification
composition outturn was less than 10% in at least two of the last three years; actual
by economic type variances were 9% in EFY 2008, 9.5% in EFY 2009, and 10.3% in
EFY 2010.
2.3 Expenditure from C Expenditure charged to contingency reserves for the last three
contingency reserves years averaged 7.4% of the total expenditure.
PI-3 Revenue outturn D
3.1 Aggregate revenue D Actual revenue outturns were 117% in 2015/2016 (EC 2008),
outturn 110% in 2016/2017 (EC 2009), and 85% in 2017/2018 (EC 2010).
3.2 Revenue composition D Variance in revenue composition was more than 15% in all the
variance last three years; actual outturns were 53% in 2015/2016 (EFY
2008), 55% in 2016/2017 (EFY 2009), and 56% in 2017/2018 (EFY
2010).
PI-4 Budget classification B Budget formulation, execution and reporting are based on
administrative, economic and functional classification using
GFS/COFOG standards. This classification is the same as that of
the federal government except for some functions such as
defense that are not applicable at the regional government level.
PI-5 Budget C As shown in Table 3.7, the regional government budget meets at
documentation least three basic elements of the PEFA requirements. It also
meets two additional elements.
PI-6 Central government A
operations outside
fiscal reports
6.1 Expenditure outside A There are no known EBUs at the level of the SRG except an inflow
financial reports from the federal government road fund directly to the regional
BoT for road maintenance. All expenditures from this fund are not
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2018
Score
reported in the annual financial statements of the regional
government but they are less than 1% of total regional
government expenditures.
6.2 Revenue outside A The revenue from the federal government road fund transferred
financial reports to the BoT is not included in the financial report of the SRG but
the amount of the fund received is less than 1% of the total SNG
revenues.
6.3 Financial reports of NA There are no EBUs at the level of the SRG; therefore, this
extra-budgetary units dimension is not applicable.
PI-7 Transfers to A
subnational
government
7.1 System for allocating A The horizontal allocation and actual transfer of all transfers to
transfers woredas and city administrations from the regional government
are determined by transparent and rule-based system. All
transfers are 100% compliant with the approved grant
distribution formula.
7.2 Timeliness of A BoFED notifies woredas/city administrations and sector bureaus
information on on the initial ceiling in March (as per its budget calendar), which
transfers allows them at least 8 weeks to prepare their budget estimates.
PI-8 Performance D+
information for
service delivery
PI-8.1 Performance plans for C Information is published on the activities performed under the
service delivery programs for the majority (61%) of regional sector bureaus.
Performance indicators for outcome and outputs are
incorporated in the annual action/performance plans.
PI-8.2 Performance achieved C Information on performance achieved on service delivery is
for service delivery published annually on the activities performed for the majority
(61% by value) of public bodies.
PI-8.3 Resources received by D IBEX tracks the financial resources transferred to the service
service delivery units delivery units. Though there is no consolidated report available
on non-financial (kind) resources received by service delivery
units, individual primary service delivery units track and prepare
their own reports on resources received in kind.
PI-8.4 Performance D The Bureau of Health, representing 6% by value of the SRG
evaluation for service expenditure, conducted a midterm evaluation in 2018 to assess
delivery the efficiency and effectiveness of programs of its five-year
strategy known as the ‘Health Sector Growth and Transformation
Plan II’. The evaluation report is not published.
PI-9 Public access to key D As indicated in Table 3.9, the regional government only makes
fiscal information available 2 out of 4 basic elements; also, 3 of the additional
elements are made public within the specified time frame.
PI-10 Fiscal risk reporting D
10.1 Monitoring of public D The analysis in Table 3.10 indicates that 40.3% by value of public
corporations enterprises submitted their annual financial statements to the
regional government (BoFED) within nine months after the end of
the previous fiscal year EC 2010 (GC FY2017/2018 ending June
30, 2018).
10.2 Monitoring of D For FY2017/2018, all 99 woredas/city administrations submitted
subnational their annual financial statements to BoFED within three months
governments after the end of the fiscal year ending GC June 30, 2018 (or EC July
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2018
Score
7, 2010). The annual financial reports are however not published;
the reports are also not consolidated.
10.3 Contingent liabilities D There are no known PPP arrangements. That said, the regional
and other fiscal risks government does not maintain records of explicit contingent
liabilities and other fiscal risks arising out of its programs and
projects.
PI-11 Public investment C
management
11.1 Economic analysis of C There are no established guidelines for analyzing capital
investment proposals investment projects. That said, the Planning and Budgeting
Directorate of BoFED uses various project management tools such
as environmental impact analysis to assess capital investment
projects. Implementing entities also use rudimentary methods to
conduct economic analysis of capital investment projects. That
said, political considerations take higher precedence for the
majority of these projects.
11.2 Investment project C Project selection for inclusion into the annual budget is largely
selection based on the regional government’s priorities (which include
water and irrigation, health, education, agriculture and livestock,
and rural roads), even though some of these projects are selected
purely based on the results of feasibility studies conducted.
11.3 Investment project C The annual budget document includes projections of the total
costing capital cost of investment projects as well as the capital cost for
the ensuing fiscal year. The annual budget also shows projected
recurrent expenditure but only for the subsequent fiscal year.
11.4 Investment project C Both BoFED and the regional sector implementing unit monitor
monitoring investment projects through physical inspection and periodic
(quarterly) financial progress reports; these reports are submitted
to the regional cabinet for review and evaluation. The annual
financial statements also report on actual expenditure of the
projects; annual physical inspection progress reports are also
prepared. There is no publication of either financial or physical
progress reports.
PI-12 Public asset C
management
12.1 Financial asset C BoFED does not keep records of investments in public or private
monitoring entities. The annual financial statements disclose both cash and
bank balances.
12.2 Nonfinancial asset D Management of fixed assets is decentralized at the budget unit
monitoring level. The asset registers maintained by these budget units
provide information on the age and usage of assets. There are no
records of government land, buildings, and natural resources.
12.3 Transparency of asset B Article 59 of the Somali Regional State Government Procurement
disposal and Property Administration Proclamation No. 82/2010 and
Directive No. 1/2010 outline the legal and regulatory framework
for fixed assets disposal; furthermore, fixed asset transfer is
governed by Article 61 of the same proclamation. There are no
legal provisions for the disposal and transfer of financial assets.
For the period under review, no fixed assets were sold and/or
transferred.
PI-13 Debt management D
13.1 Recording and NA Article 43 of the Financial Administration Proclamation No.
reporting of debt and 11/2004 allows the regional government to borrow domestically
guarantees with the approval of the regional council. At the time of
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2018
Score
assessment, the regional government has not borrowed directly
from the domestic market; it has also not issued any guarantees
to any central government institution or cooperative farmers
associations. Therefore, this dimension is not applicable.
13.2 Approval of debt and D BoFED is solely responsible for authorizing and approving debts
guarantees and guarantees for all central government entities. Nonetheless,
there are no guidelines, policies, and procedures that guide the
issuance of debts and guarantees.
13.3 Debt management NA Even though the regional government has borrowing powers
strategy according to Article 43 of the Financial Administration
Proclamation No. 11/2004, it possesses no debt and therefore
does not prepare a debt management strategy. Therefore, this
dimension is not applicable.
PI-14 Macroeconomic and A
fiscal forecasting
14.1 Macroeconomic A Over the last three completed fiscal years, the regional
forecasts government prepared forecasts of GDP and savings and
investment rates; it has no capacity to forecast exchange rate,
interest rate, and inflation. The forecasts are reviewed and
approved by the regional cabinet, with an annual update, and
sent to the regional council with the underlying assumptions as
part of budget documentation. The regional council also reviews
these forecasts.
14.2 Fiscal forecasts A The Planning and Budget Directorate, over the last three
completed fiscal years, prepared the MEFF with forecasts of GDP
and savings and investments. The forecast includes aggregate
revenues and expenditures and the budget balance. There are
also explanations of differences between forecasts (and the
underlying assumptions) and the current year’s budget as part of
budget documentation submitted to the regional council.
14.3 Macro-fiscal sensitivity B There is a qualitative evaluation of impact of various scenarios of
analysis macro-fiscal forecast; these are included in the annual budget
document submitted to the regional council. This has been the
case over the last three completed fiscal years. The analyses for
EC 2010 and EC 2011 were published but not for EC 2008 and EC
2009.
PI-15 Fiscal strategy D+
15.1 Fiscal impact of policy C The regional government prepares full explanation of budget
proposals implications on new policy initiatives and major new public
investments. It also prepares estimates of the budgetary impact
of all major revenue policy changes and major changes to
expenditure programs but for the budget year only.
15.2 Fiscal strategy D The SRG does not produce a fiscal strategy.
adoption
15.3 Reporting on fiscal NA The development of a fiscal strategy is the responsibility of the
outcomes federal government; therefore, this dimension is not applicable.
PI-16 Medium-term B
perspective in
expenditure budgeting
16.1 Medium-term C The SRG prepares MTEF—that is, estimates of expenditure for the
expenditure estimates budget year and the two following years according to
administrative classification only.
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2018
Score
16.2 Medium-term A BoFED issued the first BCC to all sector bureaus and woredas/city
expenditure ceilings administrations on February 15, 2019. Aggregate and sector
bureau expenditure ceilings for the budget year and the two
outer years were approved by the regional cabinet on December
27, 2018, before the first BCC was issued to budgetary units.
16.3 Alignment of strategic B The expenditure policies of 71% by value of sectors align with
plans and medium- both the regional GTP II and the individual five-year sector
term budgets strategies of the six sectors indicated in Table 3.12.
16.4 Consistency of budgets C The budget document submitted to the regional council provides
with previous year's some explanation on changes to expenditure estimates (at the
estimates aggregate level only) between the current year’s budget and the
second year of the last MTEF.
PI-17 Budget preparation A
process
17.1 Budget calendar A A clear annual budget calendar exists; it allows eight weeks for
budgetary units, from the receipt of the budget circular, to
complete their budget estimates. About 93% by value of the
budgetary units comply with it and meet the deadlines.
17.2 Guidance on budget A A BCC is issued to budgetary units with guidelines on preparation
preparation of recurrent and capital budgets for the full budget year. It
includes cabinet-approved annual ceilings for administrative
expenditure categories. The budget estimates are reviewed and
approved by the cabinet after they have been completed in every
detail by the budgetary units.
17.3 Budget submission to A The executive has submitted the annual budget proposal to the
the legislature legislature two months before the start of the fiscal year in all of
the last three assessed years.
PI-18 Legislative scrutiny of C+
budgets
18.1 Scope of budget B The regional council’s budget scrutiny covers fiscal policy and
scrutiny aggregate for the coming year as well as details of expenditure
and revenue, even though it receives the MTEF.
18.2 Legislative procedures C The regional council’s procedures to review budget proposals are
for budget scrutiny approved by the legislature in advance of budget hearings and are
adhered to. There are no arrangements for technical support and
negotiation procedures.
18.3 Timing of budget A The regional council has approved the annual budget within one
approval month of the start of the fiscal year in the last three fiscal years.
18.4 Rules for budget B Clear rules exist for in-year budget adjustments by the executive
adjustment by the and are adhered to in all cases, but the rules allow extensive
executive administrative reallocations as there are no limits. That said, the
budget cannot be expanded without the approval of the regional
council.
PI-19 Revenue B
administration
19.1 Rights and obligation A All of the regional revenue (tax and non-tax) is collected by
for revenue measures the Somali Regional State Revenue Bureau. It provides
information through various channels on main obligations
to taxpayers and provides for complaints resolution.
19.2 Revenue risk C The Somali Regional State Revenue Bureau administers all
management revenue of the region. The risk assessment and
management function is undertaken by the Tax Audit and
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2018
Score
Intelligence Department, which registers and monitors the
usual risks in tax registration, declaration, and payment.
There is a partly structured and systematic approach for
assessing and prioritizing risk covering category A and B
taxpayers. There is no risk management framework.
19.3 Revenue audit and D Revenue audit function is well established and is performed
investigation and managed in accordance with an annual audit plan, with
56% implementation of planned audits and investigations in
FY2010. A compliance improvement action plan is being
developed.
19.4 Revenue arrears A The actual stock of revenue arrears for the year-end 2010
monitoring EC is 0.04% out of total revenue and 0.22% out of the
domestically collected revenue (less than 10%). Previous
year arrears are carried forward and collected during the
next fiscal year. The age of revenue arrears is not
specifically monitored, even if the data exist. The revenue
arrears older than 12 months is 8%.
PI-20 Accounting for C+
revenues
20.1 Information on A The BoFED treasury obtains revenue data every week from
revenue collections the Somali Regional Revenue Bureau. The data are
complete, indicating the type of revenue and source. The
data are consolidated into a weekly revenue report.
20.2 Transfer of revenue A The Revenue Bureau collecting all government revenue
collections transfers 100% of the collections directly into the TSA
controlled by the treasury within one working day. The tax
is paid directly to an account of the SRRA and is transferred
to the treasury daily.
20.3 Revenue accounts C Complete accounts reconciliation between revenue
reconciliation collections and transfers to the Treasury is performed
quarterly within two months. Presently, there is no
reconciliation between assessment, collections, transfers,
and arrears.
PI-21 Predictability of in- A
year resource
allocation
21.1 Consolidation of cash A Table 3.20 presents the cash position as on November 22, 2019,
balances and only the TSA (Z account) which represents 95.3% by value is
consolidated daily.
21.2 Cash forecasting and A Available evidence (five sector bureaus visited were —Agriculture
monitoring Bureau, Health Bureau, Education Bureau, Water Bureau, and
Road Authority) indicates that BIs prepare and submit to BoFED
annual cashflow plans once the annual budget is approved by the
regional council; BoFED consolidates the respective cashflow
forecasts. The annual cashflow plans are updated monthly based
on actual cash inflows and outflows.
21.3 Information on A The Budget Department at BoFED provides a budget notification
commitment ceilings letter (expenditure commitment ceiling) to all budget entities
once the budget is approved by the regional council. The budget
notification letter allows BIs to commit for expenditure within a
six-month horizon.
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2018
Score
21.4 Significance of in-year A The largest in-year adjustment during EFY 2010, the last
budget adjustments completed fiscal year, was 0.8% of total expenditure. In-year
adjustment to budget allocation took place only once a year and
in a transparent and predictable way, through vote of
supplementary budget.
PI-22 Expenditure arrears B+
22.1 Stock of expenditure A As shown in Table 3.21, the stock of expenditure arrears is less
arrears than 2% of total expenditure in all three years of assessment.
22.2 Expenditure arrears B BoFED consolidates the stock and composition of expenditure
monitoring arrears quarterly within four weeks; ageing analysis is done
annually at the end of the fiscal year.
PI-23 Payroll controls C+
23.1 Integration of payroll B The majority of the regional government institutions use payroll
and personnel records software, with others using Microsoft Excel to process payroll.
There is no direct link between the personnel (HR) records and
the payroll database. The payroll is fully supported by personnel
files and timesheets and checked against the previous month’s
payroll data.
23.2 Management of A All staff changes such as hiring, termination, and promotion are
payroll changes managed by the HR Directorate and the database is immediately
updated with copies of correspondences to the Finance
Directorate for payroll updates. Changes are captured within the
month they occurred and retroactive adjustments are rare;
adjustments represent 0.34% of total payroll expenditure.
23.3 Internal control of C Sufficient controls are in place to support the integrity of payroll
payroll data. However, with reference to PI-23.4, the incidence of ‘ghost’
workers identified during the payroll audit raises doubts about
the adequacy of payroll controls.
23.4 Payroll audit B A comprehensive payroll audit was conducted for the period July
2016 to June 2018 with the final report issued in July 2019 by the
Inspection Directorate of BoFED. This was the first comprehensive
payroll audit.
PI-24 Procurement B
24.1 Procurement A The procurement function is decentralized at sector bureaus and
monitoring public body levels. The PPADD of BoFED collects, monitors, and
audits annually the procurement data provided by all regional
bureaus. Procurement record is maintained at all government
institutions for all procurement methods. Data are reported to
BoFED and consolidated in an annual report. Data are accurate
and complete.
24.2 Procurement methods A The value of contracts awarded through competitive
procurement method is at least 87% for all regional government
institutions.
24.3 Public access to C Three of the key procurement information elements are complete
procurement and made available to the public.
information
24.4 Procurement D The procurement complaint system does not meet elements (i)
complaints and (v) but meets four others.
management
PI-25 Internal controls on B
non-salary
expenditure
25.1 Segregation of duties A Each public body of the regional government has a clear
organizational structure and the functions of each employee are
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2018
Score
clearly segregated. The various PFM directives provide clear
segregation of duties for disbursement, acquisition, use and
disposal of other resources, recording, reconciliation, review and
authorization on resources, and payment of expenditure.
25.2 Effectiveness of C IBEX has a commitment control feature, but this is not used;
expenditure instead, public bodies use Microsoft Excel to control
commitment controls commitment, which is partially effective.
25.3 Compliance with B Internal control rules and procedures on payment are generally
payment rules and respected for majority of the payments. Most of the exceptions
procedures are properly authorized and justified. According to ORAG, findings
(noncompliance) represent 4.4% of total government expenditure.
PI-26 Internal audit C+
26.1 Coverage of the A Except the Somali Bilateral Office and the Grievance Handling
internal audit Commission (two public bodies of the regional government) that
do not have internal audit units, all the remaining public bodies
have functional internal audit units. The two public bodies which
do not have internal audit units constitute 0.06% of the total
revenue and expenditure of the regional government.
26.2 Nature of audits and C The internal audit largely focuses on financial compliance audit
standards applied with limited coverage on systemic audit.
26.3 Implementation of A Out of a total of 582 audits planned by 48 regional government
internal audits and public bodies, 574 (98.6%) were implemented in 2017/2018 (EFY
reporting 2010). The accomplishment in terms of annual budget stood at
96.7%.
26.4 Response to internal A According to the consolidated report of the Inspection Directorate
audits of BoFED, all the internal audit units reported a total of 479 audit
findings and the management of the audited entities responded to
all of them within three to six months of the issuance of the
quarterly audit reports.
PI-27 Financial data C+
integrity
27.1 Bank account B All regional government public bodies reconcile bank accounts
reconciliation monthly within 10 days from the end of each month. Public
bodies submit monthly bank reconciliation reports to the BoFED
Treasury within 14 days from the end of each month together
with monthly financial reports.
27.2 Suspense accounts C Suspense account balances are reconciled annually within two
months from the end of the year with no additions to the existing
outstanding balance of ETB 54 million duly justified.
27.3 Advance accounts C Advance accounts are reconciled annually, within two months
from the end of each year but there are still significant
outstanding balances.
27.4 Financial data integrity B Each user has a password and can change it as required but not
process through an automatic system prompt. Users have limited access
to the software. IBEX logs off if the user’s computer is idle for
more 10 minutes. The IBEX system also results in audit trails but
there is no operational body responsible for verifying financial
data integrity.
PI-28 In-year budget reports C+
28.1 Coverage and A The in-year budget execution reports include revenue and
comparability of expenditure according to type; they allow direct comparison
reports between approved budget estimates and actual expenditure by
detailed economic and administrative classification (for both
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2018
Score
recurrent and capital expenditure) and source of funds; the
reports also show transfers to zones and woredas.
28.2 Timing of in-year B Quarterly budget execution reports are prepared and issued to
reports the executives within four weeks from the end of each quarter.
28.3 Accuracy of in-year C Despite the concerns on data accuracy, the in-year financial
budget reports reports provide useful analysis on budget execution. Expenditure
is captured at payment stage only though IBEX has the
functionality of capturing and reporting expenditure at both
payment and commitment stages.
PI-29 Annual financial C+
reports
29.1 Completeness of C The reports contain the budgeted amounts compared with actual
annual financial outturns for both revenues and expenditures. They also contain
reports some financial assets such as cash and bank balances, advances,
and receivables. However, the reports do not include tangible
assets (fixed assets), guarantees, contingent liabilities, and other
financial assets such as shares and investments in SoEs.
29.2 Submission of reports A As indicated in Table 3.27, the consolidated annual statements
for external audit were submitted to ORAG within three months of the end of the
fiscal years in all three years of assessment.
29.3 Accounting standards C The financial reports are prepared based on the modified cash
basis of accounting and on a historical cost convention. These are
in line with the Ethiopian Federal Government Accounting
Standards and the regional government financial administration
proclamation and have been consistently used in all three fiscal
years of assessment.
PI-30 External audit B+
30.1 Audit coverage and A As shown in Tables 3.28 and 3.29, audit coverage both by number
standards of public bodies and by value is good. Within the last three
completed fiscal years, audit coverage by the number of regional
government institutions was 90.96%, 92.43%, and 90.4% in
2015/2016, 2016/2017, and 2017/2018, respectively. By value,
audit coverage was 90.1%, 97.4%, and 90.0% in 2015/2016,
2016/2017, and 2017/2018, respectively. Revenue coverage was
100% for all three years under review. ORAG also conducts fixed
assets audit.
30.2 Submission of audit A ORAG submitted the audited consolidated financial statements of
reports to the the SRG to the regional council within three months for the last
legislature three completed fiscal years, as shown in Table 3.30.
30.3 Extent of follow-up B According to ORAG’s performance report, more than 80% (but
below 90%) of the audited entities completed and submitted a
rectification plan within the stipulated time to ORAG for the last
three completed fiscal years, as shown in Table 3.31.
30.4 Supreme Audit A ORAG operates independently from the executive with respect to
Institution procedures for appointment and removal of the Auditor General,
independence the planning of audit engagements, arrangements for publicizing
reports, and the approval and execution of ORAG’s budget. This
independence is assured by law. ORAG has unrestricted and
timely access to records, documentation, and information.
PI-31 Legislative scrutiny of B
audit reports
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2018
Score
31.1 Timing of audit report A The review of audit report is completed within one month of the
scrutiny receipt of audit report; this has been the case over the last three
completed fiscal years, 2015/2016, 2016/2017, and 2017/2018.
31.2 Hearing on audit A PAC hearings, over the last three completed fiscal years,
findings 2015/2016, 2016/2017, and 2017/2018, have been conducted for
all regional government entities (in attendance are BoFED and all
responsible government officials) with qualified and adverse
opinion. The hearings are in-depth and cover all audit reports
with qualified and adverse opinion.
31.3 Recommendations on C Over the last three completed fiscal years, 2015/2016,
audit by the legislature 2016/2017, and 2017/2018, PAC issued its recommendations
after completion of hearings. However, there is no evidence
suggesting that PAC tracks the implementation of its
recommendations.
31.4 Transparency of the D Over the last three completed fiscal years, 2015/2016,
legislative scrutiny of 2016/2017, and 2017/2018, PAC reports have not been published
audit reports on the website or through other accessible means. The hearings
are however attended by the public and also given some media
coverage.
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Annex 2: Summary of observations on the internal control

framework
Internal control
components Summary of observations
and elements
1. Control The constitution of the SNRS stipulates the broader duties, responsibilities, and functions
environment of the various government organs and their relationship between them, with the federal
government, the judiciary, and the regional council. The Public Service Bureau is
responsible for ensuring that staffing, pay scheme, career rankings, and overall
organizational structures are clearly defined and implemented properly. The Public
Service Bureau is responsible for most of the administrative positions at the regional
bureau level. Employment and termination of technical staff are decentralized at public
bodies’ level.
The current administration of the regional government is new—just one year old. The
region experienced unrest which follows the imprisonment of the previous President of
the SRG. Multiple people were arrested in connection with corruption and other criminal
charges. There is however a new initiative of change following the change in government.
Internal audit is functional in almost all regional public bodies. The Inspection Directorate
at BoFED is responsible for guiding and supervising the internal audit functions
throughout the region. The Inspection Directorate also conducted a comprehensive
payroll audit. ORAG is an independent organ accountable to the regional council. ORAG
audit coverage is above 90% at the regional level and it submits the audit report on
consolidated fund within three months from receipt of the draft financial statements
from BoFED (PI-30). PAC conducts hearing based on the audit report of ORAG (PI-31).
REAC, accountable to the regional President, is responsible for awareness creation on
ethics and corruption prevention. It has prosecution and investigation departments.
REAC planned to conduct asset registration of government executives and selected
employees but this is yet to be realized. REAC performance was said to be weak because
of unsuitable leadership of the previous government. According to REAC, key areas of
corruption in the SNRS are public procurement, land administration, the judiciary system,
employing beyond necessity, and ‘ghost’ workers.
Mass-based organizations (also known as civil service organizations) are often invited to
attend audit scrutiny by the regional and woreda council; in addition, clan (or
community) leaders and elders are invited to attend. Mass-based organizations
contribute to the accountability process though some of the members (youth and
women organizations) are often said to be affiliated to the ruling political party and may
not take a strong stand against the executives.
Despite comprehensive legal frameworks, the overall control environment appears to be
less effective. The findings of the internal audit units did not reflect the widespread
limitation in good governance; this may be due to the fierce resistance against
transparency and accountability in the previous political regime. As the detailed audit
report is not submitted to the assessment team, it is not possible to tell how the external
audit findings were able to reflect the contexts of the last three completed fiscal years.
Based on the discussion with REAC, Chamber of Commerce, and Revenue Authority,
there is an overall confidence in the governance system of the new government and an
increase in tax compliance by the business community.
103
Internal control
and elements
2. Risk Risk assessment is not widely practiced. Organizational-level risk assessment is not
assessment conducted at the level of public bodies. Internal audit plans and external audit plans are
not based on a comprehensive risk assessment. The risk assessment, if any, is largely
focused on risks associated with compliance risks. It appears that the existing outdated
internal control procedures are not strong enough in ensuring the efficiency, quality of
reporting, and safeguarding of resources. That said, some elements of the risk
assessment framework appear to be functional. For instance,
• PI-11.1 Economic analysis of capital investment proposals is rated ‘C’. This
indicates average performance as there are no standardized PIM guidelines;
• PI-19.2 Revenue risk management is rated ‘C’. Average performance as there is no
comprehensive revenue risk management framework; the current practice is
rudimentary; and
• PI-21.2 Cash flow forecasting and monitoring is rated ‘A’. This is a good
performance, indicating that the government uses cashflow forecasting for
efficient cash management.
3. Control The various PFM proclamations, regulations, manuals, directives, and guidelines serve as
activities control activities. Manuals provide guidance on procurement, cash management,
budgetary control, payroll, inventory and asset management, the segregation of duties,
and other control activities (PI-25 and PI-27.1). Public bodies reconcile bank accounts
monthly. The accounting software, IBEX, is password protected. Receivables and
payables are reconciled at least once in a year. Ageing analysis is not conducted for
receivables and payables. Delay in settlement of advances (especially staff advances) is a
recurring issue in some of the public bodies. Fixed assets are registered and most of the
visited public bodies conducted annual count. Staff attendance system is in place (either
manual or electronic/biometric). Unlike other regions, staff salary is not cut for
absenteeism; rather repeated absenteeism leads to dismissal. The performance of some
indicators in relation to control activities are as follows:
• PI-27.4 Financial data integrity process is rated ‘B’. This shows satisfactory
performance as access and changes to all financial data/records are restricted and
results in audit trail but there is no unit responsible for verifying data integrity.
• PI-25.2 Effectiveness of expenditure commitment controls is rated ‘C’. This
reflects average performance as IBEX has a commitment control feature but this is
not used; instead, public bodies use Microsoft Excel to control commitment, which
is partially effective.
• PI-23.2 Management of payroll changes is rated ‘A’. This shows good performance
as all staff changes such as hiring, termination, and promotion are managed by the
HR Directorate and the database is immediately updated with copies of
correspondences to the Finance Directorate for payroll updates.
4. Information All of the PFM proclamations and regulations and most of the manuals are available in
and Somali language and distributed to public bodies. The websites of all visited public bodies
communication including BoFED and ORAG were functional. Plan and performance reports are accessible
from the website. Public bodies submit monthly financial reports to BoFED. The extent of
use of monthly and quarterly financial reports by the heads of public bodies is low.
BoFED communicates to woredas about their budget ceilings well ahead of time. Public
bodies and woredas communicate their annual and quarterly cashflow requirements to
BoFED.
Public bodies do not produce a consolidated report on the resources (financial and
nonfinancial) they received and spent from various sources. Public bodies produce
separate reports for donor-funded projects in a format prescribed in the grant
agreement entered into with donor partners. Though it is not significant, funds received
directly by public bodies (for example, road fund) may not be reported at BoFED level.
104
Internal control
and elements
The annual financial statement issued by BoFED provides comprehensive information on
annual approved budgeted revenue and expenditure at the regional, sector bureau,
zonal, and woreda levels. Financial reports do not provide information about tangible
assets and certain financial assets including investment on public enterprises. Financial
reports provide useful analyses on budget executions. The quality of financial reports is a
concern. Out of the 179 audited financial reports, 168 received qualified audit opinion.
The following are the ratings of some of the performance indicators related to
information and communication:
• PI-9 Public access to fiscal information is rated ‘D’. This reflects poor performance
as most fiscal information is not accessible to the public in a timely manner.
• PI-8.1 Performance plans for service delivery is rated ‘C’. This shows average
performance as at least 61% by value of public bodies publish their annual
performance plans with KPIs.
• PI-24.3 Public access to procurement information is rated ‘C’. This shows average
performance as three of the key procurement information elements (legal
framework, bidding opportunities, and contract awards) are complete and made
available to the public.
• PI-28.1 Coverage and comparability of reports is rated ‘A’. This reflects good
performance as in-year budget execution reports include revenue and expenditure
according to type; they allow direct comparison between approved budget
estimates and actual expenditure by detailed economic and administrative
classification (for both recurrent and capital expenditure) and source of funds; the
reports also show transfers to zones and woredas.
5. Monitoring The various management performance reports, financial statements, and audit reports
serve as a monitoring tool to see whether physical and financial performance targets are
achieved and resources are used efficiently and are safeguarded. Internal audit units
submit quarterly audit reports to the heads of public bodies. ORAG submits annual audit
reports and performance audit reports to the regional council. As indicated in this report,
a substantial part of monitoring activities of internal audit units and of ORAG focus on the
compliance of existing internal control procedures. Monitoring of nonfinancial assets,
investments, and certain financial assets needs improvement. The recurring nature of
audit findings is partly attributable to the inefficiency of the internal control procedures
in place, which have been in use in the recent past despite the changes within the public
bodies in terms of size, the budget involved, and contexts. Performances of some
indicators related to monitoring are as follows:
• PI-8.3 Resources received by service delivery is rated ‘D’. This reflects poor
performance as IBEX tracks the financial resources transferred to the service
delivery units. There is no consolidated report available on non-financial (in-kind)
resources received by service delivery units.
• PI-10.1 Monitoring of public corporations is rated ‘D’. This reflects poor
performance as 40.3% by value of public enterprises submitted their annual
financial statements to the regional government (BoFED) within nine months after
the end of the previous fiscal year EC 2010 (GC FY2017/2018 ending June 30,
2018).
• PI-10.3 Contingent liabilities and other fiscal risks is rated ‘D’. This shows poor
performance as the regional government does not maintain records of explicit
contingent liabilities and other fiscal risks arising out of its programs and projects.
• PI-12.2 Non-financial asset monitoring is rated ‘D’. This shows poor performance
as the asset registers maintained by budget units provide information on the age
and usage of assets. However, there are no records of government land, buildings,
and natural resources.
105
Annex 3A: Sources of information

Indicator Dimension Data used
Pillar I. Budget reliability
PI-1 Aggregate 1.1 Aggregate expenditure outturn Approved expenditure budgets and actual outturns for 2015/2016, 2016/2017, and
expenditure outturn 2017/2018; interview with BoFED budget officials
PI-2 Expenditure 2.1. Expenditure composition outturn by function Approved expenditure budgets and actual outturns for 2015/2016, 2016/2017, and
composition outturn 2017/2018; classification according to functions; interview with BoFED budget officials
2.2. Expenditure composition outturn by Approved budgets and actual outturns for 2015/2016, 2016/2017, and 2017/2018;
economic type classification according to economic type; interview with BoFED budget officials
2.3 Expenditure from contingency reserves Contingency budget and actual expenditure from contingency vote for 2015/2016,
2016/2017, and 2017/2018
PI-3 Revenue outturn 3.1 Aggregate revenue outturn Approved revenue budgets and actual outturns for 2015/2016, 2016/2017, and
2017/2018; interview with BoFED budget officials
3.2 Revenue composition outturn Approved revenue budgets and actual outturns according to revenue type for
2015/2016, 2016/2017, and 2017/2018; interview with BoFED budget officials
PI-4 Budget classification 4.1 Budget classification Budget documentation for 2017/2018; interview with budget officials
PI-5 Budget 5.1 Budget documentation Budget documentation for 2018/2019 submitted to the regional council; interview
documentation with budget officials
PI-6 Central government 6.1 Expenditure outside financial reports There are no EBUs.
operations outside 6.2 Revenue outside financial reports There are no EBUs.
financial reports 6.3 Financial reports of extra-budgetary units There are no EBUs.
PI-7 Transfers to 7.1 System for allocating transfers General purpose grants/subsidies distribution formula (EFY 2010) for woredas
Subnational approved by the regional council
Governments 7.2 Timeliness of information on transfers Approved budget with ceilings for FY2017/2018
8.1 Performance plans for service delivery • Websites
8.2 Performance achieved for service delivery o https://www.srshb.com
8.3 Resources received by service delivery units o www.srswb.gov.et
PI-8 Performance 8.4 Performance evaluation for service delivery o www.reb.gov.et
information for service o www.srsivestock.gov.et
delivery o www.srsroadauthority.gov.et
o www.srbofed.gov.et
• Annual performance plans for education, health, agriculture, water, and roads
sectors
106

• Annual performance reports for education, health, agriculture, water, and
roads sectors
• Education Sector Development Program
• Health Sector Development Strategy
• Annual education statistics abstract
• Education sector development program midterm review report
• Field visit reports in Education and Health Sectors
• Quarterly performance review meeting reports in visited public bodies
PI-9 Public access to 9.1 Public access to fiscal information • Amhara Regional Government website
fiscal information • https://www.srshb.com
• www.srswb.gov.et
• www.reb.gov.et
• www.srsivestock.gov.et
• www.srsroadauthority.gov.et
• www.srbofed.gov.et
PI-10 Fiscal risk 10.1 Monitoring of public corporations List of public enterprises and dates of submission of annual financial statements to
reporting BoFED
10.2 Monitoring of subnational government Annual financial statements from 99 woredas/city administrations and dates of
submission of annual financial statements to BoFED for 2017/2018
10.3 Contingent liabilities and other fiscal risks Interview with officials of BoFED budget department; consolidated annual financial
statements for FY2017/2018
PI-11 Public investment 11.1 Economic analysis of investment proposals Interview with officials from the Planning and Budget Directorate of BoFED ; data on 10
management largest capital investment projects for FY2017/2018
11.2 Investment project selection Interview with officials from the Planning and Budget Directorate of BoFED
11.3 Investment project costing Project documents on 10 largest investments for FY2017/2018
11.4 Investment project monitoring Progress and project completion report from Budget and Planning Commission of
BoFED
PI-12 Public asset 12.1 Financial asset monitoring Consolidated annual financial statements for 2017/2018
management 12.2 Nonfinancial asset monitoring Individual fixed assets register (decentralized) from sample regional sector bureaus
(education, health, agriculture, urban development, and water and irrigation)
12.3 Transparency of asset disposal Article 59 of the Somali Regional State Government Procurement and Property
Administration Proclamation No. 82/2010 and Directive No. 1/2010; there were no
disposals.
107

PI-13 Debt management 13.1 Recording and reporting of debt and Not applicable
guarantees
13.2 Approval of debt and guarantees No guidelines on borrowing
13.3 Debt management strategy Not applicable
PI-14 Macroeconomic 14.1 Macroeconomic forecasts Medium-term regional strategic plan (GTP II 2016/2017–2020/21) and MEFF document
and fiscal forecasting 14.2 Fiscal forecasts Medium-term regional strategic plan (GTP II 2016/2017–2020/21) and MEFF document
14.3 Macro-fiscal sensitivity analysis Scenario analysis for 2017/2018 contained in MEFF
PI-15 Fiscal strategy 15.1 Fiscal impact of policy proposals No fiscal strategy but annual budget and MTEF provides some explanation
15.2 Fiscal strategy adoption No fiscal strategy
15.3 Reporting on fiscal outcomes No fiscal strategy
PI-16 Medium-term 16.1 Medium-term expenditure estimates Budget documentation for 2018/2019
perspective in 16.2 Medium-term expenditure ceilings Budget documentation for 2018/2019
expenditure budgeting 16.3 Alignment of strategic plans and medium- Analysis of 5 pro-poor sectors (education, health, water and irrigation, urban
term budgets construction, and agriculture)
16.4 Consistency of budgets with previous year’s MTEF
estimates
PI-17 Budget 17.1 Budget calendar Budget calendar for 2018/2019, including the dates sectors responded to the BCC
preparation process 17.2 Guidance on budget preparation BCC for 2018/2019
17.3 Budget submission to the legislature Dates that budgets (2015/2016, 2016/2017, and 2017/2018) were submitted to the
regional council
PI-18 Legislative scrutiny 18.1 Scope of budget scrutiny Order No. 18/2010 (A Proclamation Enacted to Redefine Organizations, Duties,
of budgets Conduct of the Members and Meeting Procedures of the regional council); includes
interview with regional council budget and finance committee
18.2 Legislative procedures for budget scrutiny Order No. 18/2010 (A Proclamation Enacted to Redefine Organizations, Duties,
Conduct of the Members and Meeting Procedures of the regional council); includes
interview with regional council budget and finance committee
18.3 Timing of budget approval Budget approval dates for 2015/2016, 2016/2017, and 2018/2019
18.4 Rules for budget adjustments by the Financial Administration Proclamation (110/2012)
executive
PI-19 Revenue 19.1 Rights and obligations for revenue measures Somali tax laws, sample tax leaflets, Revenue Bureau website; interviews with Revenue
administration Bureau officials
19.2 Revenue risk management Interview with Revenue Bureau officials
108

19.3 Revenue audit and investigation Tax audit plan and actual performance for 2017/2018
19.4 Revenue arrears monitoring Tax arrears for 2017/2018
PI-20 Accounting for 20.1 Information on revenue collections Monthly revenue reports submitted to BoFED; most recent report dated October 2019
revenue 20.2 Transfer of revenue collections Daily bank transfer advice; confirmation from BoFED Treasury
20.3 Revenue accounts reconciliation Copy of 2017/2018 revenue reconciliation statement (only between collection and
transfer)
PI-21 Predictability of in- 21.1 Consolidation of cash balances Interview with BoFED Treasury; copy of consolidation report for November 15, 2019
year resource allocation 21.2 Cash forecasting and monitoring Sample cash flow forecasts from education, health, water, and agriculture; includes
consolidated cash flow forecast from BoFED
21.3 Information on commitment ceilings Copy of drawing limit 2017/2018
21.4 Significance of in-year budget adjustments Interview with Budget Directorate of BoFED; list and volume of virements for
2017/2018
PI-22 Expenditure 22.1 Stock of expenditure arrears Expenditure arrears for 2015/2016, 2016/2017, and 2017/2018
arrears 22.2 Expenditure arrears monitoring Copy of consolidated quarterly in-year budget execution report, including statement of
age-profiled expenditure arrears according to type
PI-23 Payroll controls 23.1 Integration of payroll and personnel records Sample personnel records from education, agriculture, water, health, and BoFED;
includes interviews with HR and Payroll Directorates of selected sector bureaus
23.2 Management of payroll changes A copy of October 2019 payroll run from BoFED and selected sector bureaus
23.3 Internal control of payroll Interview with HR heads of sector bureaus
23.4 Payroll audit Interview with HR heads of sector bureaus, ORAG, and internal audit units
PI-24 Procurement 24.1 Procurement monitoring Data/statistics on procurement for 2017/2018 at PPADD.
management Database of procurement for the (a) Education Bureau, (b) Agriculture Bureau, (c)
Water Bureau, (d) Road Authority, and (e) Health Bureau.
24.2 Procurement methods Data/statistics on procurement for 2017/2018
24.3 Public access to procurement information BoFED website
24.4 Procurement complaints management Article 52 of the Somali Regional State Government Procurement and Property
Administration Proclamation No. 82/2010 and Directive No. 1/2010; there were no
disposals
PI-25 Internal controls 25.1 Segregation of duties • Proclamation and manuals
on non-salary 25.2 Effectiveness of expenditure commitment o Procurement Manual (2011)
expenditure controls o Procurement Directive (2010)
25.3 Compliance with payment rules and The following are compiled in one booklet in July 2011
procedures o Prices for Goods and Services (2/2004)
o Property Administration Manual (9/2004)
109

o Government Fixed Asset Manual (2011)
o Stock Management Manual (2011)
o Financial Administration Directive (2/2004)
o Cash Disbursement Manual (3/2004)
o Accounting Procedure (5/2004)
o Financial Accountability (6/2004)
o Internal Audit Guidelines (7/2004) and Internal Audit Manual
o Guideline for Guarantor for Employment (11/2004)
o Transfer between public bodies directive (10/2004)
• Internal audit reports
• ORAG reports
Interview with ORAG, Inspection Directorate, internal audit units, and finance team of
visited public bodies
PI-26 Internal audit 26.1 Coverage of internal audit • Interview with internal audit units and Inspection Directorate
26.2 Nature of audits and standards applied • Financial Administration Proclamation (110/2012) and Regulations (11/2012)
26.3 Implementation of internal audits and • Internal audit reports and internal audit annual plans and sample management
reporting response letters on internal audit findings
26.4 Response to internal audits o Bureau of Education
o Bureau of Agriculture
o Bureau of Transport
o Audit plan and performance summary - issued by Inspection Directorate
o Summary of internal audit findings and implementation status - issued by
Inspection Directorate
o Audit Coverage report by Inspection Directorate
o Manuals
• Audit report preparation manual - 2016 /internal audit report writing procedure
2012
• Internal audit standards - 2016
Financial audit training manual - 2007
PI-27 Financial data 27.1 Bank account reconciliation • Financial Administration Proclamation (110/2012) and Regulations (11/2012)
integrity 27.2 Suspense accounts • Interview with Treasury Directorate at BoFED
27.3 Advance accounts • Internal audit
27.4 Financial data integrity processes • IBEX/IT Directorate
• Sample financial report and bank reconciliation statements of visited public bodies
110

PI-28 In-year budget 28.1 Coverage and comparability of reports • Treasury at BoFED
reports 28.2 Timing of in-year budget reports • Monthly Budget Execution Reports generated by IBEX system
28.3 Accuracy of in-year budget reports • Annual Consolidated Financial Reports for EC 2008–2010.
• Sample in-year financial reports of visited public bodies
• BoFED website: www.srbofed.gov.et
PI-29 Annual financial 29.1 Completeness of annual financial reports 2017/2018 consolidated annual financial statements
reports 29.2 Submission of the reports for external audit Dates of submission of 2017/2018 consolidated annual financial statements to ORAG
29.3 Accounting standards Review of consistency of accounting standards for 2015/2016, 2016/2017, and
2017/2018 consolidated annual financial statements
PI-30 External audit 30.1 Audit coverage and standards • ORAG website: https://srsbag.gov.et/
30.2 Submission of audit reports to the legislature • Standards and manuals
30.3 External audit follow-up o Manuals and standards
30.4 Supreme Audit Institution independence o The ISSAI standards/AFROSAI manuals (2010)
o Audit Standard (internally developed)
o Fraud Audit manual
o The Mexico declaration on independence
• Laws and regulations
o Constitution of SNRS 1994
o Proclamation No. 2182/2019 on the reestablishment of ORAG
• Annual audit report on the consolidated fund submitted by BoFED
o EFY 2010 (2017/2018)
o EFY 2009 (2016/2017)
o EFY 2008 (2015/2016)
• Summary note on the performance of ORAG
PI-31 Legislative scrutiny 31.1 Timing of audit report scrutiny Dates PAC received and reviewed ORAG audit reports
of audit reports 31.2 Hearings on audit findings Interview with PAC members
31.3 Recommendations on audit by the legislature Annual PAC reports
31.4 Transparency of legislative scrutiny of audit Interview with PAC members
reports
111
Other references used for this report
• GFS Manual 2014, chapter 2, section 2.82 - definition of ‘extra-budgetary units’

• Official federal government economic data for 2016/2017
• 2018 IMF Debt Sustainability Analysis for Ethiopia Federal Government
112
Annex 3B: List of stakeholders interviewed

Name Organization Position Telephone Email
Somali Bureau of Finance and Economic Development
Abdikader Mohamed Rasas BoFED Deputy Bureau Head +251-92-9239798 Caagane2009@gmail.com
Mahamud Yusuf BoFED Channel 1 coordinator +251-91-3832284 mahamudmaelin@gmail.com
Abdirahman Ahmed Matan BoFED Director, Planning & Budgeting +251-91-5741333 Mataan_2009@hotmail.com
Ahmed Wali Abdi BoFED Head, Finance +251-91-5739918 Axmedss61@gmail.com
Abdikadir Mohamed BoFED Channel 2 coordinator +251-91-5072295 abdikadir@mis@gmail.com
Foosi Dahir Doh BoFED Director, Human Resource +251-91-5012788 Fowzan121doh@gmail.com
Ali Yusuf Adan BoFED Head of Government Finance +251-91-5067040 Alidhuub2@gmai.com
Mohamed S. Ali BoFED Head, Internal Audit +251-91-2392049 maxedsharif@gmail.com
Tahir Abdi-Mohamed BoFED Internal Planning +251-91-5070417
Mohamed Omar BoFED FTA focal person +251-91-1071596 mohammodjjgg@gmail.com
Bashir Saleban BoFED Director PPPA +251-91-0040549 Aareyte4@hotmail.com
Abdinafin Mukedin BoFED +251-96-3935950
Abdikadir Maktal Sirad BoFED Director, ICT +251-93-7544444 Eng.layaab@gmail.com
Abdurahmen Muhamoud BoFED Procurement officer +251-91-5747760 Ruweyu114@gmail.com
Ahmed Abdi BoFED Team leader, finance +251-91-3404860 Ahmedboobe74@gmail.com
Hussein Abdulahi BoFED UN-Excom coordinator +251-91-1571636 Rooraaye74@gmail.com
Khalil Ibrahim BoFED UN-Excom officer +251-91-5741889 khalildhago@gmail.com
Abdulahi Omer BoFED UN-Excom officer +251-91-5741690 Abdulahi.omer7@gmial.com
Somali Revenue Bureau
Ibrahim Ahmed SRB Deputy Head of Bureau +251-91-5110505 qaahiraa@gmail.com
Bashir Hussein SRB Deputy Head of Bureau +251-91-1400982 Bhelmi2012@gmail.com
Elyas Mohamed SRB Tax audit, intelligence & investigations +251-91-5036527 Gadiidshe55@gmail.com
Abdukarim Mohamed SRB Case team leader +251-91-5330914 Deeqsi.sayid@gmail.com
Isyail Mohamed SRB Case team leader, ICT +251-91-1924858 Maygaagyare1@gmail.com
Abdinur Abdilahi SRB CRM case team leader +251-91-5050145 murrsalyare@gmail.com
Abdiradi Mohamed SRB Tax audit case team leader +251-91-9085418 Zakivsaed999@gmail.com
Hamda Allah Hassan SRB Public relations +251-91-5009767
Saed Yousuf SRB +251-91-5769262
Ibrahim Mohamed SRB Head of planning +251-91-1965771 Cakuule1@gmail.com
113

Abdikarim S. Mohamed SRB Internal Audit +251-91-5732755 Huways0009@gmail.com
Abdiaziz Mohamed SRB Finance & Logistics +251-91-5052860 Gabiib999@gmail.com
Mohamed Sheik Muhumed SRB Customer handling/client service +251-91-5606047 Abasheik47@gmail.com
Abdulahi Abdi SRB Tax assessment +251-92-9252610 Abdulahirays2610@gmail.com
Office of Regional Auditor General
Anbes Getahun ORAG Deputy Auditor General +251-91-5744521 0915744521a@gmail.com
Adem Jeh Dirir ORAG Director +251-91-5213171 ademjeh@gmail.com
Somali Regional Council
Mohamed Kahin Hoshi SRC Chairman, PAC +251-91-5330788 Mohamedkahin8971@gmail.com
Jamal Farah Warmoge SRC Chairman, Budget & Finance +251-91-5773897 Warmoge_j@yahoo.com
Committee
Somali Regional Health Bureau
Mohamed Ayanle RHB Director, Planning & Budgeting +251-91-0484566 Ayanle5710@gmail.com
Abdulahi Abdi Ibrahim RHB Director, Finance +251-91-1592018 Abdullahirays2018@gmail.com
Nimaan Abdi Ibrah RHB Director, ICT +251-91-5747909 mynaxwe@gmail.com
Hassan Mahenedduane RHB Head of Internal Audit +251-91-5059216 duwanehrs@gmail.com
Mahamed Harir RHB Head of Resource Mobilisation +251-91-0143578 Mameharir2013@gmail.com
Mohamed Hussein RHB Team leader, finance +251-91-5014709 Biste.esrhb@gmail.com
Mustafe Sraiif RHB Internal auditor +251-91-6748255 q.not2001@gmail.com
Zuber Ibrahim RHB PMU coordinator +251-91-5009417 Zsultan55@gmail.com
Abdinasir Ahmed RHB Internal auditor +251-91-5656709
Abdi Hussein RHB Head of HR +251-91-0152881 mattenvip@gmail.com
Abdiwahab Abdulahi RHB Planning officer +251-91-0168882 Abdiwahab267@gmail.com
Somali Bureau of Agriculture
Omer Bade BoA Head of Finance +251-91-5774440 Omerbade40@gmail.com
Bashir Abdi BoA HR Manager +251-91-5777721 Xagar114@gmail.com
Mohamed Ashikadir BoA Logistics coordinator +251-91-5744070 Mohamed-adi111@hotmail.com
Muhyadin Albraham BoA Internal Auditor +251-91-5748362 Muxsin8362@gmail.com
Osman Mohamed BoA Team leader, finance +251-91-5655665 Osman143@gmail.com
Sadik Abdi Hirsi BoA Head of planning and budgeting +251-91-1977798 Sadikhirsi50@gmail.com
Somali Education Bureau
Abdinasin Mohamed SEB Head of Finance +251-91-5741814 sdnasinsharif@gmail.com
Abdrahman Ahmed SEB Head of Planning & Budgeting +251-91-1839423 raabbiyare@gmail.com
114

Ifrah Ali Hussein SEB Team leader, planning +251-91-5058798 Ifrah218@gmail.com
Mohamed Mohamed SEB Finance case coordinator +251-91-5005751 mamedjoner@gmail.com
Mohamadir Alhassan SEB Internal auditor +251-91-5749525 yadinovichy@gmail.com
Abdi Mohamed Mohamed SEB Internal auditor +251-91-5747899 Madar4@hotmail.com
Jemal Yusuf SEB EMI Director +251-90-12036385 Jemican7@gmail.com
Mohamed Rashid SEB +251-91-0533275 Mameppsm14@gmail.com
Mohamed Rashid SEB HR Manager +251-91-5749247 sadiq@7492@gmail.com
Somali Water Bureau
Abdi Mohamed SWB Head of planning & budgeting +251-92-9369737
Deyr Abdi Aden SWB Budget team leader +251-96-8823712
Abdulahi Hukuu SWB HR Manager +251-92-9935720 abdulahihukuu@gmail.com
Mohamed Ahmed SWB Expenditure team leader +251-91-5077852 Maxamedamed99@gmail.com
Abdu Hamel SWB Monitoring and evaluation case team +251-91-5071571
leader
Bashir Hassen Aden SWB Nongovernmental organization +251-94-2099668 Bike2006@hotmail.com
coordinator
Abdurahman Ahmed Husein SWB Internal auditor +251-91-1912925 Cmccmc2925@gmail.com
Mowiid Mohamed SWB Internal auditor +251-92-92253407 Mowga1406@gmail.com
Abdi Harun SWB Finance case coordinator +251-91-5222212 Harun3518@gmail.com
Omer Ahmed SWB Head of Finance +251-92-9105528 Omaru02@gmail.com
Abdikadar Abdilahi SWB Procurement specialist +251-91-1294100 khadarxubiso@gmail.com
Somali Rural Roads Authority
Faysal Ismael Ahmed SRRA Head of Internal Audit +251-92-3986567 abuharar@gmail.com
Ahmed Nur Omar SRRA Head of planning and budgeting +251-91-5744761 bashkah@gmail.com
Mohamed Ali SRRA HR Manager +251-91-5748725 maamacalidheere@yahoo.com
Abdiwahab Muhamed SRRA Head of Finance +251-94-6651242 guure@gmail.com
Hibu Mohamed SRRA Head of Procurement +251-92-0438316
Quresh Hasan SRRA Finance officer +251-90-5021368
Somali Chamber of Commerce and Sectoral Association
Hassen Abdulahi SCC&SA Chairperson hassanbade@gmail.com
Abdi Haji Mohamed Warfa SCC&SA Vice Chairperson +251-91-2600537 abdiwarfa@gmail.com
115
Annex 4: Tracking change in performance based on the 2011 PEFA

Framework
Score Score Description of Explanation of
previous current requirements met in change (include
Indicator/Dimension
assessment assessment current assessment comparability
(2015) (2018) issues)
A. PFM-OUT-TURNS: Credibility of the budget
HLG-1 Transfers from a A B+ Not comparable;
higher-level government dimension (ii) in
2015 was NA
(i) Outturn of transfer A A Actual transfers of No change
from higher-level federal government
government subsidies were 100.5%,
100.3%, and 100.2% in
2015/2016, 2016/2017,
and 2017/2018
respectively; these reflect
deviations of −0.5% in
2015/2016, −0.3% in
2016/2017, and −0.2% in
2017/2018.
(ii) Earmarked grants NA B Transfers of earmarked Not comparable as
outturn grants deviated by more 2015 was NA (not
than 10% in one out of applicable)
the three years under
review. Actual deviations
were 0.0% in 2015/2016,
12.7% in 2016/2017, and
0.0% in 2017/2018.
(iii) Timeliness of transfer A A Actual disbursements of No change
from higher-level both recurrent and
government capital grants have been
evenly spread within
each of the last three
years under review.
These disbursements
were done monthly.
PI-1 Aggregate B A Actual expenditure Improvement in
expenditure outturn outturns were 98.4%, both score and
compared to original 114.5%, and 102.3% in performance
approved budget 2015/2016, 2016/2017,
and 2017/2018,
respectively.
PI-2 Composition of C+ D+ Overall
expenditure out-turn deterioration in
compared to original score and
approved budget performance due to
slippages in both
dimension (i) and
(ii)
(i) Extent of the variance C D Variance in expenditure Deterioration in
in expenditure composition exceeded both score and
composition during the 15% in two of the performance due to
116

Indicator/Dimension
(2015) (2018) issues)
last three years, assessed years (actual supplementary
excluding contingency variances were 12.2%, budgets and
items 16.5%, and 20.8% in massive budget
2015/2016, 2016/2017, reallocations
and 2017/2018,
respectively).
(ii) The average amount A C Expenditure charged to Slippage in both
of expenditure actually contingency reserves for score and
charged to the the last three years performance
contingency vote over averaged 8.2% of the
the last three years. total expenditure.
PI-3 Aggregate revenue B D The actual revenue Deterioration in
out-turn compared to outturn was below 92% both score and
original approved budget and above 116% in two performance
of the assessed years.
PI-4 Stock and B+ A Improvement in
monitoring of score and
expenditure payment performance
arrears
(i) Stock of expenditure A A Stock of expenditure No change
payment arrears and a arrears is below 2% of
recent change in the total regional
stock government expenditure.
(ii) Availability of data for B A BoFED only consolidates Improvement in
monitoring the stock of the stock and score and
expenditure payment composition of performance
arrears expenditure arrears
quarterly and age
annually at the end of the
fiscal year.
B. KEY CROSS-CUTTING ISSUES: Comprehensiveness and transparency
PI-5 Classification of the B B Budget formulation, No change
budget execution, and reporting
are based on
administrative,
economic, and functional
classification using
GFS/COFOG standards.
This classification is the
same as that of the
federal government
except for some
functions such as defense
that are not applicable at
the regional government
level.
PI-6 Comprehensiveness C B Budget documentation Improvement in
of information included contains at least five both score and
in budget documentation elements according to performance
old (2011) PEFA
framework.
117

Indicator/Dimension
(2015) (2018) issues)
PI-7 Extent of D+ D+ No change
unreported government
operations
(i) Level of unreported A A The level of unreported No change
government operations government operations
(the road fund) is less
than 1% of total regional
government
expenditures.
(ii) Income/expenditure D↑ D Information on donor- No change
information on donor- funded project is
funded projects seriously deficient
PI-8 Transparency of A A No change
inter-governmental fiscal
relations
(i) Transparency and A A The horizontal allocation No change
objectivity in the of all transfers to
horizontal allocation woredas and city
among subnational administrations is
governments determined by
transparent and rule-
based system. All
transfers are 100%
compliant with the
approved grant
distribution formula.
(ii) Timeliness and A A BoFED notifies No change
reliable information to woredas/city
subnational governments administrations and
on their allocations sector bureaus on the
initial ceiling in March (as
per its budget calendar),
which allows them at
least 8 weeks to prepare
their budget estimates.
(iii) Extent of A A BoFED prepares a No change
consolidation of fiscal consolidated fiscal report
data for general for all woredas/city
government according to administrations within 10
sectoral categories months of the end of the
fiscal year.
PI-9 Oversight of A C+ No real change;
aggregate fiscal risk from dimension (i) in
other public sector 2015 appears to be
entities overrated
(i) Extent of central A C Most public enterprises No real change;
government monitoring submit annual financial 2015 appears to be
of autonomous entities reports to BoFED but overrated based on
and public enterprises there is no consolidated the narrative
fiscal risk report. provided. 2015
score should have
118

Indicator/Dimension
(2015) (2018) issues)
been ‘C’ instead of
‘A’.
(ii) Extent of central A A Woredas/city No change
government monitoring administrations do not
of subnational generate fiscal risk since
government’s fiscal they have no borrowing
position powers.
PI-10 Public access to key C C The government makes No change
fiscal information available to the public
two (year-end financial
reports and contract
awards) out of the six
PEFA elements within
the specified time frame.
C. BUDGET CYCLE
C(i) Policy-based budgeting
PI-11 Orderliness and A A No change
participation in the
annual budget process
(i) Existence of, and A A A clear annual budget No change
adherence to, a fixed calendar exists (which is
budget calendar generally adhered to)
and allows the BIs more
than six weeks to
complete their detailed
budget estimates.
(ii) Guidance on the A A Clear and comprehensive No change
preparation of budget budget circular is issued
submissions to BIs with approved
budget ceilings, before its
distribution to Bis.
(iii) Timely budget A A The regional council No change
approval by the approved the budget
legislature before the start of the
fiscal year in the three
assessed years
PI-12 Multi-year D+ C+ Improvement in
perspective in fiscal both score and
planning, expenditure performance due to
policy and budgeting improvement in
dimensions (iii) and
(iv)
(i) Multiyear fiscal D D The SRG prepares an No change in score
forecasts and functional MTEF, that is, estimates but there is
allocations of expenditure for the improvement in
budget year and the two performance. MTEF
following years according is now prepared but
to administrative according to
classification only. administrative
classification only;
119

Indicator/Dimension
(2015) (2018) issues)
this was not the
case in 2015.
(ii) Scope and frequency NA NA Not applicable No change
of debt sustainability
analysis
(iii) Existence of costed C B At least 71% by value of Improvement in
sector strategies sector strategies are fully both score and
costed. performance
(iv) Linkages between C B Majority of government Improvement in
investment budgets and investments are selected both score and
forward expenditure based on sector performance
estimates strategies with recurrent
cost implications
included in forward
budget estimates.
C(ii) Predictability and control in budget execution
PI-13 Transparency of B+ A Overall
taxpayer obligations and improvement due
liabilities to improvement in
dimension (iii)
(i) Clarity and B B There is clear legislation No change in score;
comprehensiveness of and procedures for all however, the
tax liabilities major taxpayers. revenue bureau
Discretionary powers are (hitherto was an
fairly limited. authority) has been
elevated to a
budget entity with
more powers.
(ii) Taxpayer access to A A Taxpayers have user- No change
information on tax friendly and easy access
liabilities and to information on tax
administrative obligations; there are tax
procedures education campaigns.
(iii) Existence and B A A tax appeal system Improvement in
functioning of a tax exists with independent both score and
appeal mechanism structure; it is performance. The
operational and effective tax appeal
with most filed claims mechanism is more
being resolved. effective with more
claims resolved and
decisions acted
upon.
PI-14 Effectiveness of B B No change
measures for taxpayer
registration and tax
assessment
(i) Controls in the B B All taxpayers are No change
taxpayer registration registered in a database
system with links to SIGTAS and
the financial system
120

Indicator/Dimension
(2015) (2018) issues)
(opening of bank
accounts).
(ii) Effectiveness of B B There are penalties for No change
penalties for noncompliance of tax
noncompliance with obligations and they are
registration and generally effective but
declaration obligations not consistently applied.
(iii) Planning and C C There are tax audit No change
monitoring of tax audit programs but not based
and fraud investigation on a documented risk
programs assessment framework.
PI-15 Effectiveness in D+ D+ No change
collection of tax
payments
(i) Collection ratio for A A The total amount of tax No change
gross tax arrears arrears is insignificant,
less than 1%.
(ii) Effectiveness of B A All collected government Improvement due
transfer of tax collections revenues are transferred to daily transfer; in
to the Treasury by the directly into TSA 2015, transfers
revenue administration controlled by the were weekly.
Treasury within 24 hours.
(iii) Frequency of D D Complete accounts No change
complete accounts reconciliation of tax
reconciliation between assessments, collections,
tax assessments, arrears, and transfers to
collections, arrears the Treasury does not
records, and receipts by take place. The only
the Treasury reconciliation that takes
place is between
collections and transfers.
PI-16 Predictability in the A A No change
availability of funds for
commitment of
expenditures
(i) Extent to which cash A A Annual cashflow plans No change
flows are forecasted and are updated monthly
monitored based on actual cash
inflows and outflows.
(ii) Reliability and horizon A A Based on the budget No change
of periodic in-year notification letter, the BIs
information to MDAs 15on are able to plan and
ceilings for expenditure commit expenditure for
at least six months in
advance.
(iii) Frequency and A A In-year adjustment to No change
transparency of budget allocations took
adjustments to budget place only once and were
allocations above the
15 Ministries, departments, and agencies.
121

Indicator/Dimension
(2015) (2018) issues)
level of management of done in a transparent
MDAs and predictable way.
PI-17 Recording and B A Improvement in
management of cash both score and
balances, debt, and performance due to
guarantees improvement in
dimension (ii)
(i) Quality of debt data NA NA Not applicable No change
recording and reporting
(ii) Extent of B A Table 3.20 presents the Improvement in
consolidation of the cash position as of both score and
government’s cash November 22, 2019 and performance
balances only the TSA (Z account)
which represents 95.3%
by value is consolidated
daily.
(iii) Systems for NA NA Not applicable No change
contracting loans and
issuance of guarantees
PI-18 Effectiveness of C+ C+ No change in
payroll controls overall score
(i) Degree of integration B B Though there is no No change
and reconciliation direct link between
between personnel personnel and payroll
records and payroll data records, the payroll is
fully supported by
approved
documentation for all
changes and cross-
checked against the
previous month’s
payroll records.
(ii) Timeliness of changes A A Retroactive adjustments No change
to personnel records and are rare. Also, all
the payroll changes (where they
occur) are done within
the same month,
generally in time for
payment of the
following month’s
salaries.
(iii) Internal controls of A C Sufficient controls exist There is
changes to personnel to ensure the integrity of deterioration in
records and the payroll payroll data but the both score and
incidence of ‘ghost’ performance.
workers raises doubt
about the adequacy of
these controls.
(iv) Existence of payroll C B A comprehensive payroll Improvement in
audits to identify control audit covering all SNG both score and
entities was conducted performance
122

Indicator/Dimension
(2015) (2018) issues)
weaknesses and/or ghost for the period July 2016
workers to June 2018 with the
final report issued in July
2019.
PI-19 Competition, value C+ C+ No change in
for money and controls overall score in
in procurement spite of
deterioration in
dimension (ii)
(i) Transparency, B B Requirements 5 and 6, No change
comprehensiveness and being (v) public access to
competition in the legal procurement plans and
and regulatory statistics on resolution of
framework procurement complaints
and (vi) independent
procurement review
board, are still not met.
(ii) Use of competitive A B 87% (not all) of the total Deterioration. More
procurement methods value of contracts were than 90% were the
awarded through procured contracts
competitive methods. in 2015 assessment.
They are less than
90% in 2019.
(iii) Public access to C C Two of the required No change
complete, reliable, and items are met, namely
timely procurement bidding opportunities
information and contract awards,
and are available to the
public.
(iv) Existence of an D D Requirement (ii) is not No change
independent met; the procurement
administrative appeal board consists of
procurement complaints members from the
system regional government
who are directly
involved in
procurement
transactions.
PI-20 Effectiveness of B C+ No real change in
internal controls for non- overall score.
salary expenditure Dimension (i) in
2015 appears to be
overrated. There is
however
improvement in
dimension (iii).
(i) Effectiveness of B C IBEX has a commitment No real change; the
expenditure commitment control feature but this is narrative provided
controls not used; instead, public in 2015 suggests a
bodies use Microsoft score of ‘C’ rather
Excel to control than a ‘B’.
Therefore, this
123

Indicator/Dimension
(2015) (2018) issues)
commitment, which may dimension appears
not be effective. to be overrated.
(ii) Comprehensiveness, B B Internal control rules No performance
relevance and and procedures change
understanding of other incorporate a
internal control comprehensive set of
rules/procedures controls which are
widely understood.
(iii) Degree of compliance B A Compliance to PFM Improvement in
with rules for processing rules is very high; based both score and
and recording on available evidence, performance
transactions only 4.4% by value of
simplified procedure are
unjustified, which is
insignificant.
PI-21 Effectiveness of B C+ No real change;
internal audit both dimensions (i)
and (ii) appear to
be overrated in
2015
(i) Coverage and quality B C Internal audit is No real change. It
of the internal audit operational in all central appears 2015 was
function regional entities which overrated based on
covered more than 99% the narrative
of the expenditure; provided.
however, only about
20% of the time is
focused on systemic
issues.
(ii) Frequency and B C Reports are issues No real change as
distribution of reports quarterly. Audit reports the same system
are not submitted still exists. It
routinely to ORAG but appears 2015 was
are available on overrated.
request.
(iii) Extent of B B Prompt and No performance
management response to comprehensive action is change
internal audit function taken by most
management.
C(iii) Accounting, recording and reporting
PI-22 Timeliness and B B No change
regularity of accounts
reconciliation
(i) Regularity of bank A A Bank reconciliation for No change
reconciliation all regional government
bank accounts take
place at least monthly
within three weeks
from the end of each
month.
124

Indicator/Dimension
(2015) (2018) issues)
(ii) Regularity and C C Suspense and advance No change
clearance of suspense accounts are generally
accounts and advances reconciled at the end of
the financial year within
two months but there
are still significant
uncleared (outstanding)
balances.
PI-23 Availability of C C Though there is no No change
information on resources consolidated report
received by service available on nonfinancial
delivery units (in-kind) resources
received by service
delivery units, individual
primary service delivery
units track and prepare
their own reports on
resources received in
kind.
PI-24 Quality and C+ C+ No change in
timeliness of in-year overall score even
budget reports though dimension
(iii) in 2015 appears
to be overrated
(i) Scope of reports in C C Classification of data No change
terms of coverage and allows direct
compatibility with budget comparison to the
estimates original budget;
expenditures are
captured at payment
stage only.
(ii) Timeliness of the issue A A Reports are prepared No change
of reports quarterly and issued
within one month after
the end of the quarter.
(iii) Quality of information B C There are some concerns No real change;
on the quality of reports, 2015 appears to
which may not always be be overrated. The
highlighted but do not 2015 narrative is
fundamentally silent on whether
undermine their basic data concerns are
usefulness. highlighted, which
is one of the
requirements for a
‘B’ score.
PI-25 Quality and C+ C+ No change
timeliness of annual
financial statements
(i) Completeness of the B B Financial statements are No change
financial statements prepared annually. They
include information on
revenue, expenditure,
125

Indicator/Dimension
(2015) (2018) issues)
and some financial
assets (cash and
receivables) and
liabilities.
(ii) Timeliness of A A Financial reports are No change
submissions of the submitted to ORAG
financial statements within four months from
the end of the fiscal year.
(iii) Accounting standards C C Financial statements are No change
used presented in consistent
format over time based
on national standards.
C(iv) External scrutiny and audit
PI-26 Scope, nature, and C+ B+ Improvement in
follow-up of external overall score and
audit performance due
to improvements
in dimensions (i)
and (iii)
(i) Scope/nature of audit C B At least 90% by value is Improvement in
performed (including audited by ORAG. The both score and
adherence to auditing audits largely focus on performance
standards) financial and
compliance but also
with some systemic
issues.
(ii) Timeliness of A A Audit reports were No change
submission of audit submitted to the
reports to the Legislature regional council within
three months from
receipt of the financial
reports from BoFED.
(iii) Evidence of follow up C B There is a formal Improvement in
on audit response to most audit both score and
recommendations findings but there is performance.
little evidence of ORAG collected
systematic follow-up. ‘Rectification plan’
from audited
entities.
PI-27 Legislative scrutiny C+ B+ Improvement in
of the annual budget law both score and
performance due to
improvement in
dimensions (i) and
(iii)
(i) Scope of the C B The regional council’s Improvement in
legislature scrutiny budget review covers both score and
both detailed estimates performance
of revenue and
expenditure for the
126

Indicator/Dimension
(2015) (2018) issues)
budget year as well as
macro-fiscal policies.
(ii) Extent to which the B B Rules for review of No change
legislature’s procedures budget estimates are
are well established and simple and clear; they
respected are well respected.
(iii) Adequacy of time for C A The regional council has Improvement in
the legislature to provide two months (all stages both score and
a response to budget combined) to review and performance
proposals both the approve the annual
detailed estimates and, budget.
where applicable, for
proposals on macro-fiscal
aggregates earlier in the
budget preparation cycle
(time allowed in practice
for all stages combined)
(iv) Rules for in-year B B Rules for in-year budget No change
amendments to the reallocations are clear
budget without ex ante but have no limit and
approval by the therefore allow extensive
legislature budget reallocations.
PI-28 Legislative scrutiny B+ C+ No real change;
of external audit reports dimension (iii) in
2015 appears to be
overrated
(i) Timeliness of A A Scrutiny of the audit No change
examination of audit report is done within one
reports by the legislature month from the receipt
of the audit report.
(ii) Extent of hearing on B A In-depth hearing on key Improvement in
key findings undertaken findings is held for all both score and
by the legislature audited entities which performance
received qualified or
adverse audit opinion.
(iii) Issuance of B C PAC provides No real change. The
recommended actions by recommendations but narrative in 2015
the legislature and these are rarely acted does not support a
implementation by the upon by the executive. ‘B’ score.
executive
D-1 Predictability of NA NA Not applicable No change
direct budget support
(i) Annual deviation of NA NA Not applicable No change
actual budget support
from forecast
(ii) In-year timeliness of NA NA Not applicable No change
donor disbursements
D-2 Financial information D+ NU Deemed not relevant Not comparable
provided by donors for
budgeting and reporting
127

Indicator/Dimension
(2015) (2018) issues)
on projects and
programs
(i) Completeness and C NU Deemed not relevant Not comparable
timeliness of budget
estimates by donor for
project support
(ii) Frequency and D NU Deemed not relevant Not comparable
coverage of reporting by
donors on actual flows
for project support
D-3 Proportion of aid C NU Deemed not relevant Not comparable
that is managed by use
of national procedures
128
Annex 5: Data used for scoring PI-1, 2, and 3 (2016 methodology)

Analysis for PI-1:
Fiscal years for assessment
Year 1 = EC 2008 (GC 2015/2016)
Year 2 = EC 2009 (GC 2016/2017)
Year 3 = EC 2010 (GC 2017/2018)
Data for year = EC 2008 (2015/2016)
Administrative or functional head Budget Actual Adjusted budget Deviation Absolute deviation Percent
Organ of State 488,509 532,315 478,308.5 54,006.0 54,006.0 11.3
Justice and Security 468,609 478,570 458,824.7 19,745.5 19,745.5 4.3
Defence 2,380 2,756 2,330.2 425.4 425.4 18.3
Security Affairs Coordination 1,080,561 1,162,930 1,057,998.6 104,931.5 104,931.5 9.9
General Service 422,999 514,521 414,167.1 100,353.7 100,353.7 24.2
Agriculture and Natural Resources 1,389,610 1,205,994 1,360,595.2 −154,601.4 154,601.4 11.4
Water Resources 1,082,780 1,045,090 1,060,171.4 −15,081.6 15,081.6 1.4
Trade and Industry 48,958 58,753 47,936.2 10,816.6 10,816.6 22.6
Construction 851,962 947,852 834,172.6 113,679.5 113,679.5 13.6
Education 1,355,779 1,388,122 1,327,470.1 60,651.7 60,651.7 4.6
Culture and Sport 43,686 47,820 42,774.0 5,045.8 5,045.8 11.8
Health 779,523 700,586 763,246.7 −62,660.6 62,660.6 8.2
Labour and Social Affairs 6,320 6,519 6,187.9 331.1 331.1 5.4
Prevention and Rehabilitation 38,603 41,994 37,796.5 4,197.4 4,197.4 11.1
City Service 141,945 134,093 138,981.4 -4,888.6 4,888.6 3.5
Other 270,000 0.0 270,000.0 270,000.0 #DIV/0!
allocated expenditure 8,202,225 8,030,961 8,030,960.8 506,952.0 981,416.3
interests 0 0
contingency 301,217 506,952
total expenditure 8,503,441 8,537,913
aggregate outturn (PI-1) 100.4
composition (PI-2) variance 12.2
129
contingency share of budget 6.0
Data for year = EC 2009 (2016/2017)
Organ of State 621,862 710,837 639,597.5 71,239.5 71,239.5 11.14
Justice and Security 466,498 458,540 479,802.7 −21,262.9 21,262.9 4.43
Defence 2,819 3,123.41 2,899.2 224.2 224.2 7.73
General Service 633,844 836,625 651,921.3 184,703.4 184,703.4 28.33
Water Resources 816,059 1,344,424 839,333.6 505,089.9 505,089.9 60.18
Trade and Industry 69,416 61,273 71,395.6 −10,122.5 10,122.5 14.18
Construction 794,952 1,104,299 817,624.0 286,674.7 286,674.7 35.06
Education 1,564,474 1,830,595 1,609,093.3 221,501.7 221,501.7 13.77
Culture and Sport 367,952 346,814 378,445.8 −31,632.0 31,632.0 8.36
Health 863,461 852,248 888,087.1 −35,839.1 35,839.1 4.04
City Service 142,638 114,237 146,705.7 −32,468.3 32,468.3 22.13
Other 0.0 0.0 0.0 #DIV/0!
allocated expenditure 9,717,987 9,995,149 9,995,149 1,129,500 1,644,951
interests 0 0
contingency 501,000 1,129,500
Data for year = EC 2010 (2017/2018)
Absolute Percent
Administrative or functional head Budget Actual Adjusted budget Deviation
deviation
Organ of State 567,239 741,634 546,537.2 195,097.0 195,097.0 35.70
130
Absolute Percent
Administrative or functional head Budget Actual Adjusted budget Deviation
deviation
Defence 3,923 4,096 3,779.7 316.3 316.3 8.37
General Service 891,531 1,123,145 858,993.5 264,151.1 264,151.1 30.75
Science and Technology Bureau 0 1,454 0.0 1,454.2 1,454.2 #DIV/0!
Water Resources 1,819,071 2,009,461 1,752,680.8 256,779.9 256,779.9 14.65
Trade and Industry 107,008 103,800 103,102.7 696.8 696.8 0.68
Construction 1,538,937 2,083,687 1,482,771.0 600,915.8 600,915.8 40.53
Education 1,567,570 1,618,644 1,510,358.7 108,285.1 108,285.1 7.17
Health 972,318 1,035,670 936,831.5 98,838.2 98,838.2 10.55
Labour and Social Affairs 17,030 21,868 16,408.6 5,459.8 5,459.8 33.27
City Service 281,378 268,376 271,108.8 −2,732.7 2,732.7 1.01
Other 0.0 0.0 0 #DIV/0!
allocated expenditure 14,505,430 13,976,032 13,976,031.9 799,000.0 2,910,946.2
interests 0 0
Results matrix
For PI-1.1 For PI-2.1 For PI-2.3
Year
Total expenditure outturn Composition variance Contingency share
EC 2008 (2015/2016) 100.4% 12.2%
EC 2009 (2016/2017) 108.9% 16.5% 7.4%
EC 2010 (2017/2018) 96.5% 20.8%
131
Analysis for PI-2

Data for year = EC 2008 (2015/2016)
Economic head Budget Actual Adjusted budget Deviation Absolute deviation Percent
Compensation of employees 2,560,589,276 2,436,537,536 2,570,969,429 −134,431,893 134,431,893 0
Use of goods and services 1,844,840,420 1,880,776,669 1,852,319,060 28,457,608 28,457,608 0
Consumption of fixed capital 3,552,013,145 3,511,972,332 3,566,412,347 −54,440,014 54,440,014 0
Interest 0 0 0 0 0 #DIV/0!
Subsidies and grants 545,998,611 708,626,287 548,211,988 −548,211,988 548,211,988 1
Other expenses 0 0 0 #DIV/0!
Total expenditure 8,503,441,452 8,537,912,824 8,537,912,824 −708,626,287 765,541,504
composition variance 9.0%

Data for year = EC 2009 (2016/2017)
Compensation of employees 2,903,644,376 3,253,724,610 3,160,981,071 92,743,538 92,743,538 0
Consumption of fixed capital 4,452,292,795 5,173,226,435 4,846,879,103 326,347,332 326,347,332 0
Subsidies and grants 904,147,582 455,360,152 984,278,039 −528,917,887 528,917,887 1
Other expenses 0 0 0 0 0 #DIV/0!
Total expenditure 10,218,987,291 11,124,649,307 11,124,649,307 0 1,057,835,773
132
Data for year = EC 2010 (2017/2018)

Compensation of employees 4,048,720,440 3,959,674,784 3,908,287,404 51,387,380 51,387,380 0
Consumption of fixed capital 6,291,857,560 6,475,994,384 6,073,619,558 402,374,826 402,374,826 0
Subsidies and Grants 2,043,052,682 1,210,353,267 1,972,187,801 −761,834,534 761,834,534 0
Other expenses 0 0 0 0 0 #DIV/0!
Total expenditure 15,305,930,022 14,775,031,865 14,775,031,865 0 1,523,669,069

Results Matrix
Year Composition variance
EC 2008 (2015/2016) 9.0%
EC 2009 (2016/2017) 9.5%
EC 2010 (2017/2018) 10.3%
133
Analysis of revenue outturn - PI-3:

Year 1 = EC 2008 (2015/2016)
Year 2 = EC 2009 (2016/2017)
Year 3 = EC 2010 (2017/2018)
Data for year = EC 2008 (2015/2016)
Tax revenues
Taxes on income, profit and capital gains 954,370,270 835,725,846 1,114,703,500 −278,977,654 278,977,654 25.0
VAT Domestic 294,182,027 387,291,092 343,604,307 43,686,785 43,686,785 12.7
Excise Tax 880,012 2,150,366 1,027,853 1,122,513 1,122,513 109.2
Sales Turnover Tax on Domestically
Manufactured Goods 21,431,301 45,070,696 25,031,738 20,038,958 20,038,958 80.1
Turnover tax on Services 44,866,106 14,062,701 52,403,566 −38,340,865 38,340,865 73.2
Stamp sales & Duty 14,051,707 7,750,119 16,412,379 −8,662,260 8,662,260 52.8
Foreign trade taxes & duties 0 2,152,185 0 2,152,185 2,152,185 #DIV/0!
Grants
External Assistance (UNICEF and UNDP) 39,485,190 39,485,190 46,118,662 −6,633,472 6,633,472 14.4
Nontax revenue
Administrative fees and charges 38,626,788 14,518,225 45,116,049 −30,597,825 30,597,825 67.8
Sales of Public goods and services 23,554,499 11,187,000 27,511,631 −16,324,630 16,324,630 59.3
Government Investment income 43,118,440 594,741 50,362,294 −49,767,553 49,767,553 98.8
Miscellaneous nontax 26,015,520 457,219,560 30,386,100 426,833,460 426,833,460 1404.7
Other revenue
Capital Revenue 17,259,132 22,799,202 20,158,648 2,640,554 2,640,554 13.1
Municipality Revenue 91,644,197 39,823,034 107,040,329 −67,217,295 67,217,295 62.8
Contributions to pension fund 0 47,100 0 47,100 47,100 #DIV/0!
0 0 0 #DIV/0!
Sum of rest 0 0 0 #DIV/0!
Total revenue 1,609,485,191 1,879,877,057 1,879,877,057 0 993,043,108
overall variance 116.8
composition variance 52.8
Data for year = EC 2009 (2016/2017)
134
Tax revenues
Taxes on income, profit and capital gains 1,165,554,434 912,841,554 1,287,398,878 −374,557,325 374,557,325 29.1
VAT Domestic 400,530,025 538,432,114 442,400,535 96,031,579 96,031,579 21.7
Excise Tax 1,121,034 851,542 1,238,225 −386,683 386,683 31.2
Manufactured Goods 40,459,522 46,664,875 44,689,070 1,975,806 1,975,806 4.4
Stamp sales & Duty 17,900,264 4,423,871 19,771,517 −15,347,646 15,347,646 77.6
Grants
External Assistance (UNICEF) 26,967,600 26,967,600 29,786,732 −2,819,132 2,819,132 9.5

Non Tax Revenue
Government Investment income 54,927,950 10,486,984 60,669,994 −50,183,010 50,183,010 82.7
Other Revenue
Capital Revenue 23,896,294 1,216,500 26,394,359 −25,177,859 25,177,859 95.4
Foreign trade taxes & duties 0 723,700 0 723,700 723,700 #DIV/0!
Sum of rest 0 0
Total revenue 2,076,967,600 2,294,089,132 2,294,089,132 0 1,264,033,135
135
Data for year = EC 2010 (2017/2018)

Tax revenues
Taxes on income, profit and capital gains 1,622,689,415 1,064,055,374 1,371,652,103 −307,596,729 307,596,729 22.4
Value Added Tax on Domestically Manufactured
Goods 392,998,063 641,963,683 332,199,505 309,764,178 309,764,178 93.2
Value Added Tax on Services 96,143,436 183,328,066 81,269,617 102,058,449 102,058,449 125.6
Excise Tax 1,640,538 1,040,894 1,386,740 −345,845 345,845 24.9
Manufactured Goods 59,209,056 28,353,698 50,049,151 −21,695,452 21,695,452 43.3
Stamp sales & Duty 26,195,508 4,459,733 22,142,946 −17,683,212 17,683,212 79.9
Grants
External Assistance (UNICEF) 0 29,280,000 0 29,280,000 29,280,000 #DIV/0!

Nontax revenue
Government Investment income 80,382,365 1,641,849 67,946,854 −66,305,005 66,305,005 97.6
Other revenue
Capital Revenue 66,451,974 30,000 56,171,557 −56,141,557 56,141,557 99.9
Foreign trade taxes & duties 0 0 0 0 0 #DIV/0!
Customs Tax on Imported Goods 0 530 0 530 530 #DIV/0!
Value Added Tax on Imported Goods 0 662,971 0 662,971 662,971 #DIV/0!
Sum of rest 0 0 0 0 0 #DIV/0!
Total revenue 3,061,481,788 2,587,856,860 2,587,856,860.0 0.0 1,459,247,475.2
136
Results Matrix
Year Total revenue deviation Composition variance
EC 2008 (2015/2016) 116.8% 52.8%
EC 2009 (2016/2017) 110.5% 55.1%
EC 2010 (2017/2018) 84.5% 56.4%
137
Annex 6: Data used for scoring PI-1, PI-2, and PI-3 (2011 methodology)
Year 1 = EC 2008 (2015/2016)
Year 2 = EC 2009 (2016/2017)
Year 3 = EC 2010 (2017/2018)
Data for year = EC 2008 (2015/2016)
Organ of State 488,509 532,315 478,308.5 54,006.0 54,006.0 11.3
Defense 2,380 2,756 2,330.2 425.4 425.4 18.3
General Service 422,999 514,521 414,167.1 100,353.7 100,353.7 24.2
Water Resources 1,082,780 1,045,090 1,060,171.4 −15,081.6 15,081.6 1.4
Trade and Industry 48,958 58,753 47,936.2 10,816.6 10,816.6 22.6
Construction 851,962 947,852 834,172.6 113,679.5 113,679.5 13.6
Education 1,355,779 1,388,122 1,327,470.1 60,651.7 60,651.7 4.6
Culture and Sport 43,686 47,820 42,774.0 5,045.8 5,045.8 11.8
Health 779,523 700,586 763,246.7 −62,660.6 62,660.6 8.2
City Service 141,945 134,093 138,981.4 −4,888.6 4,888.6 3.5
Other 270,000 0.0 270,000.0 270,000.0 #DIV/0!
allocated expenditure 8,202,225 8,030,961 8,030,960.8 506,952.0 981,416.3
Grants (545,998.00) (708,626.00)
Interest on debt — —
138
Data for year = EC 2009 (2016/2017)
Organ of State 621,862 710,837 639,597.5 71,239.5 71,239.5 0.111382

Justice and Security 466,498 458,540 479,802.7 −21,262.9 21,262.9 0.044316
Defense 2,819 3,123.41 2,899.2 224.2 224.2 0.07732
General Service 633,844 836,625 651,921.3 184,703.4 184,703.4 0.283322
Water Resources 816,059 1,344,424 839,333.6 505,089.9 505,089.9 0.601775
Trade and Industry 69,416 61,273 71,395.6 −10,122.5 10,122.5 0.14178
Construction 794,952 1,104,299 817,624.0 286,674.7 286,674.7 0.350619
Education 1,564,474 1,830,595 1,609,093.3 221,501.7 221,501.7 0.137656
Health 863,461 852,248 888,087.1 −35,839.1 35,839.1 0.040355
City Service 142,638 114,237 146,705.7 −32,468.3 32,468.3 0.221316
Other 0.0 0.0 0.0 #DIV/0!
allocated expenditure 9,717,987 9,995,149 9,995,149 1,129,500 1,644,951
Grants -904,147 -455,360
Interest on debt 0 0
contingency 501,000 1,129,500
139
Data for year = EC 2010 (2017/2018)

Organ of State 567,239 741,634 546,537.2 195,097.0 195,097.0 0.356969

Defence 3,923 4,096 3,779.7 316.3 316.3 0.083693
General Service 891,531 1,123,145 858,993.5 264,151.1 264,151.1 0.307512
Science and Technology Bureau 0 1,454 0.0 1,454.2 1,454.2 #DIV/0!
Water Resources 1,819,071 2,009,461 1,752,680.8 256,779.9 256,779.9 0.146507
Trade and Industry 107,008 103,800 103,102.7 696.8 696.8 0.006758
Construction 1,538,937 2,083,687 1,482,771.0 600,915.8 600,915.8 0.405265
Education 1,567,570 1,618,644 1,510,358.7 108,285.1 108,285.1 0.071695
Health 972,318 1,035,670 936,831.5 98,838.2 98,838.2 0.105503
Labour and Social Affairs 17,030 21,868 16,408.6 5,459.8 5,459.8 0.332741
City Service 281,378 268,376 271,108.8 −2,732.7 2,732.7 0.01008
Other 0.0 0.0 0 #DIV/0!
allocated expenditure 14,505,430 13,976,032 13,976,031.9 799,000.0 2,910,946.2
Grants −2,043,052 −1,210,353
Interest on debt 0 0
aggregate outturn (PI−1) 102.3
composition (PI−2) variance 20.8
Results Matrix
for PI-1.1 for PI-2.1 for PI-2.2
Year Total exp. outturn Composition variance Contingency share
EC 2008 (2015/2016) 98.4% 12.2%
EC 2009 (2016/2017) 114.5% 16.5% 8.2%
EC 2010 (2017/2018) 102.3% 20.8%
140
Annex 7: Service delivery pilot

1. Context for the Assessment
1. Somali is one of the nine regions and two city administrations making up the Federal Democratic
Republic of Ethiopia. It is the second-largest region with an estimated population of 6 million16 in 2019. The
Bureau of Education and Bureau of Health are responsible for the implementation of the region’s
education and health policy, respectively. Both bureaus have a direct relationship with the respective
federal government line ministries when it comes to national-level policies and strategies. There are two
tiers of government under the regional government: (a) zones and (b) woredas. There are 11 zones and 99
woredas and city administrations (6 urban/cities and 93 rural). The zones are branches of the regional
government while woredas and city administrations have their own jurisdictional power in managing their
budget. Both education and health sectors are operational at all levels. The regional government receives
general purpose grants from the federal government and in turn allocates these block grant to woredas
and city administrations. Woredas approve their own budget and allocate their budget based on the
respective woreda policies in line with the regional priorities. Service delivery units do not have their own
bank accounts; therefore, the TSA does not cover them. Budgeting and financial management of service
delivery units is the mandate of the city administration; the respective city sector offices (education and
health) prepare their budgets, which take into account service delivery budgets. Payment of expenditure
is also done by the city administration, not directly by the service delivery units.
2. Institutional Arrangements
2.1. Health
2. The Ethiopian health service is structured in a three-tier system: primary, secondary, and
tertiary levels of care with defined catchment populations. The primary level of care includes primary
hospitals (serves 60,000–100,000 people), health centers (serves 25,000 people), and health posts
(3,000–5,000 people in rural areas). The primary hospitals, health centers, and health posts form a
Primary Health Care Unit (PHCU). Secondary-level health care or general hospitals serve 1–1.5 million
people. It provides inpatient and ambulatory services and helps as a referral center for primary
hospitals. The third-tier, tertiary-level health care or specialized hospitals serve 3.5–5.0 million people
and serve as referral center for general hospitals.
3. The Somali health administration structure follows the administrative structure of the region,
where there is Health Bureau at the regional level and woredas. The PHCUs, that is, the woreda health
centers, report to the woreda health offices while the secondary and tertiary heath care report to the
regional Health Bureau. Zonal health offices coordinate and support the woreda health offices. Table
A7.1 summarizes the structure.
16 According to ‘Development Indicators of Somali Regional State (2005–2009)’ issued in 2018.
141
Table A7.1: Health administration’s responsibilities in service delivery

No. Entity Role
1 Bureau of Health The bureau is responsible for development of a sector strategy for the
region. It is also responsible for capital projects including constriction of
health centers in the woreda.
2 Zonal health offices They coordinate the health services issues within the zone, ensure
implementation of health policies, and provide technical guidance to
woreda health offices.
3 Woreda health offices They provide technical advice and support to health centers including
supervision and coordination of health service delivery at their
jurisdiction.
4 Ethiopian This agency is an Federal Government of Ethiopia entity. It supplies
Pharmaceuticals Supply medical inputs to health facilities from its distribution hubs. It also
Agency (EPSA) supplies pharmaceutical products to health facilities (including health
centers and hospitals). Health centers and hospitals buy pharmaceutical
products from other private suppliers when such supplies are not
available at EPSA.
7 BoFED BoFED is responsible for the overall public planning, budgeting, treasury
management, accounting, and reporting of the region. It directly disburses
approved budget based on cash flow forecast and request of the Bureau
of Health, regional-level agencies, and zonal and woreda finance offices.
8 Zonal finance office Zonal finance offices are responsible for all financial management
functions of the zone. The financial management function is centralized
(pooled) for all the offices.
9 Woreda finance office Woreda finance offices are responsible for all financial management
functions of the woreda. The financial management, procurement, and
internal audit functions are centralized (pooled) for all the offices and
handled by the finance office.
10 Health centers They provide health services to the community. Their budgets and
financial management functions are handled by the woreda finance office.
They are also responsible for the procurement of medical supplies from
EPSA and private suppliers. Their revenue streams are the budget from
the woreda and their own source revenue.
4. Figure A7.1 shows the relationship across all levels of government in Somali Region. The thick
line shows the nonfinancial resource flows while the thin line shows the financial flow, and the broken
line shows technical support.
142
Figure A7.1: Health service delivery relationships across government
Somali Region - Health Service Delivery - Institutional Arrangement
Private Medical
EPSA supplies
Regional Cabinet Distributers
Somali
Regional
Government PFSA Outlets
NGOs
(hubs)
Bureau of
Bureau of Health
Finance
Hospitals
Zonal Health Zonal Finance

Zones Health Centers Health Centers Hospitals
Offices Office
Woreda Finance
Woreda Health Health Posts Offices / City
Woredas
Offices Finance Offices
Technical support / Financial flow

Non-Financial resource
flow Supervision
Sources: PEFA team drawing based on interview. At the zonal level, there is formal health sector structure, but
there is only one person as a zonal focal point.
Note: NGO = Nongovernmental organization; PFSA = Pharmaceutical Fund Supply Agency now named (EPSA)
5. The regional health sector budget proposal includes a budget for the Health Bureau, zonal and
woreda health offices, health-related agencies, and hospitals (which are under the regional
government) and health centers. Draft health budget consolidation starts at woreda, then at zonal,
and finally at regional level. The Health Bureau and other agencies submit their draft budget to BoFED.
BoFED is responsible for the transfer of cash resources to the Health Bureau. Woreda/city
administration finance offices provide a centralized (pooled) financial management services including
disbursement, procurement, and internal audit for woreda/city administration sector offices.
Woredas manage disbursements on behalf of the health centers and educational institutions, and
hence there is no actual cash transfer to health facilities and schools.
6. Actual expenditure outturn of the health sector was impressive compared to the approved
budget in the last three years between 96 percent and 108 percent. The share of health budget to the
entire regional budget was around 16 percent in 2015/2016 and 2016/2017 but dropped to a little
over 10 percent in 2017/2018. Table A7.2 shows the share of the health sector budget compared to
the regional budget.
Table A7.2: The regional health sector budget compared with the regional total budget (ETB, billions)
2015/2016 2016/2017 2017/2018
outturn (%)
outturn (%)
outturn (%)
health (%)
health (%)
health (%)
Share of
Share of
Share of
Budget
Budget
Budget
Budget
Budget
Budget
Actual
Actual
Actual
Region 8.50 8.54 n.a. 100.4 10.22 11.12 n.a. 108.9 15.31 14.77 n.a. 96.5
Health 1.43 1.39 16.8 96.8 1.69 1.83 16.5 108.2 1.68 1.62 10.9 96.3
143
Source: Budget execution report, annual accounts, BoFED, and team calculations.
2.2. Education
7. The education structure of Ethiopia is composed of three years of preprimary education, eight
years of primary education (first cycle: grades 1–4, second cycle: grades 5–8), two years of general
secondary education (grade 9-10), two years of preparatory secondary education, and higher
education (college or university). Implementation and management of primary education and (in most
cases) junior (general) secondary education are managed by woreda/city administration education
offices, accountable to the woreda cabinet and regional Education Bureau. Regions manage senior
(preparatory) secondary education, technical and vocational education and training (TVET), and
universities under their jurisdiction, as well as the institutions training teachers for primary and junior
secondary education. Regions are also responsible (within the framework of federal guidelines) for
curriculum development in primary education and the choice of the language of instruction and
textbook provision at the primary level.
8. At the regional level, there are two bodies responsible for education: (a) Technical and
Vocational Education and Training Agency, which is responsible for technical and vocational training,
and (b) Education Bureau, which is responsible for general education. There are also zonal and
woreda/city education offices under the Education Bureau. TVETs are managed by the Education
Bureau while secondary schools (general and preparatory schools) are managed by the zonal offices.
Preprimary and primary schools report to woreda education offices. Table A7.3 summarizes the
structure.
144
Table A7.3: Education administration’s responsibilities in service delivery
1 Bureau of Education The bureau is responsible for development of education sector

strategy for the region and setting of city-level education
standards and policies. It is also responsible for capital projects
including construction of schools.
2 Zonal education Zonal education offices coordinate and provide support to
offices woreda education offices under the zone.
3 Woreda education They provide technical advice and support to schools including
offices supervision and coordination of education services at their
jurisdiction.
4 BoFED BoFED is responsible for the overall public planning, budgeting,
treasury management, accounting, and reporting of the region. It
directly disburses approved budget based on cash flow forecast
and request of the Education of Bureau and zonal and woreda
finance offices.
5 Zonal finance office Zonal finance offices are responsible for all financial management
functions of the zone. The financial management function is
centralized (pooled) for all the offices.
6 Woreda finance Woreda finance offices are responsible for all financial
office management functions of the woreda. The financial
management, procurement, and internal audit functions are
centralized (pooled) for all the offices and handled by the finance
office.
7 Primary schools They provide primary school education to the community.
Financial management, procurement, and internal audit functions
are provided by the woreda finance office. Their revenue streams
are from budget allocated from the woreda and own revenue.
9. Figure A7.2 shows the relationship across all levels of government in the region. The thick line
shows the nonfinancial resource flows, while the thin line shows the financial flow, and the broken
line shows technical support.
145
Figure A7.2: Education service delivery relationships across government
Sources: PEFA team drawing based on interview.
10. Woredas/city administrations receive general purpose grants (subsidy) from the regional
government and allocate their budget based on their priority. There is also an educational grant from
the federal government known as the GEQIP with funding from the World Bank. This grant is
performance based, aimed at improving access and quality of primary education. Financial,
procurement, and internal audit functions are centralized (pooled) at zonal and woreda levels and
handled by the finance office. The woreda education office and schools are not involved in financial
management. BoFED transfers approved budgets to the Education Bureau, regional agencies, and
zonal and woreda finance offices.
11. Table A7.4 presents a general overview of education sector budget and actual expenditure.
The actual expenditure outturn of the education sector was good in all three years 2015/2016,
2016/2017, and 2017/2018 at 95–102 percent of the total regional budget. The share of the
educational budget compared with the regional total stood at 8.7 percent in 2015/2016 and
2016/2017 but fell sharply to 6.6 percent in 2017/2018.
146
Table A7.4: The Regional education sector budget compared with the regional total budget (ETB, billions)
2015/2016 2016/2017 2017/2018
Budget outturn (%)
Budget outturn (%)
Budget outturn (%)

Share of Education
Share of Education
Share of Education
Budget
Budget
Budget
Actual
Actual
Actual
(%)
(%)
(%)
Region 8.50 8.54 n.a. 100.4 10.22 11.12 n.a. 108.9 15.31 14.77 n.a. 96.5
Education 0.74 0.70 8.7 94.7 0.89 0.85 8.7 95.5 1.01 1.04 6.6 101.9
Source: Budget execution report, annual accounts, BoFED, and team calculations.
3. Objectives and scope
12. The entities selected for the standard PEFA assessment comprise the federal government, four
big regions, one emerging region, and Addis Ababa City Administration. The assessment covers the
seven key pillars in PEFA and two additional components pertaining to impact of the prevailing PFM
system on service delivery performance. The service delivery assessment, which is a pilot, is focused
on the health and education sectors in the Federal Government of Ethiopia and Addis Ababa City,
Oromia, and Somali regional governments. The pilot assessments review the flow and the efficiency
of the use of funds in these sectors and between the levels of government to identify PFM strengths
and weaknesses. This pilot assessment is on the SRG. The assessment covered FY2015/2016,
FY2016/2017, and FY2017/2018. For security reasons, the assessment team was advised to focus on
Jigjiga City Administration; zonal offices were also omitted due to security reasons. As such, the
findings could reveal a much better situation than would be the case if other service delivery units
were visited in other parts of the region.
13. The following service delivery units were visited:
i. Schools:
• Hussein Gire Primary School
• Fahr Mogol Primary School
• Will Waal Primary School
• Wanow Primary School
ii. Health Centers:
• Jigjiga Health Center
• Dawlada Health Center
• HP03 Health Post
14. A brief description of primary service delivery units visited is as follows:
(a) Due to the importance of primary education, the police is involved in enforcement and
compliance in terms of compulsory attendance to the extent that some parents are
denied social benefits. Hussein Gire Primary School was established in 1918. The school
currently has 2,217 students with a total of 15 classrooms with average students of 74
per class. The government standard requires a maximum of 50 students per classroom.
147
(b) Fahr Magol School was established in 2004. It has 2,324 students on two shifts. It has 27
teachers with a total of 11 classrooms. The student-classroom ratio is 105 students per
class.
(c) Will Waal Primary School was established in 1968. The school has 3,237 students on two
shifts with 22 classrooms and 64 teachers. The average student-classroom ratio is 77 and
desk to student ratio is 4.
(d) Wanow Primary School was established in 1996. It has 3,324 students on two shifts with
16 classrooms and 49 teachers. The textbook-to-student ratio is 1:3. The student-class
ratio is 107:1. It also receives school grants of ETB 154,000 from GEQIP fund.
(e) Jigjiga Health Center was established in 2000. It has 90 employees including 74 technical
staff. It has one medical doctor and six health officers. The total population that the
health center serves is estimated at 84,760. The clinic provides examination services
between 55 and 65 patients per day. The health center has the highest number of TB
outpatients in the SRG. The health center collects revenue from sales of medical supplies.
All revenues collected are transferred to the Jigjiga Finance and Economic Development
Office (JFEDO). The facility has a standby generator.
(f) Dawlada Health Center was established in 2013. The center covers about 40,000 people.
The health center also administers 13 health posts, of which 10 are urban and the
remaining 3 are rural health posts. Six of the health centers were not operational at the
time of this assessment. The health center has 96 staff, of which 64 are technical staff.
The health center has 24-hour access to electricity with a backup generator.
15. The team also visited the Jigjiga City Administration to have an expanded view of how service
delivery works especially in the area of capital projects, procurement, and performance information
for service delivery. The service delivery assessment focuses on the financial operations of the
education and health sectors and includes budgetary units as well as oversight and accountability
functions of mandated institutions. Whereas own revenues and expenditures of health centers are
budgeted and reported, those for primary schools are not. Table A7.5 shows the units covered by the
service delivery assessment.
16. Jigjiga City was founded in 1896; it became a municipality in 1944. Jigjiga is the capital city of
the SRG and is the social, economic, and cultural center of the region with estimated population of
250,000 (Central Statistics Agency GC 2015 data). Almost all the city population livelihood is based on
trading activities. Jigjiga is a vibrant city, which is expanding rapidly. A high level of unemployment and
contraband business is prime concern of the city administration due to the city’s proximity to Djibouti
and Somalia. Like many cities in Ethiopia, Jigjiga has huge infrastructure gaps.
17. JFEDO is responsible for managing the financial management operations of the city. It serves
24 sector offices within the city. It is responsible for procurement, disbursements, and payroll
processing. JFEDO is responsible for printing and distribution of school textbooks and medical supplies
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to service delivery units. Jigjiga City has 38 schools and 2 health centers. Four schools, two health
centers, and one health post were selected in Jigjiga City for the service delivery assessment:
Table A7.5: Main government and public sector units of the education and health sectors to be covered by the
service delivery assessment
Budgetary units EBUs Public corporationsa
Office of the regional government Not applicable. Internal Not applicable for service
Bureau of Finance revenues are reported and are delivery
Bureau of Education part of the budget.
Bureau of Health
Health centers
Primary schools
Health centers
Note: a. Only include institutional units within the scope of the assessment. For assessments of SNGs, such
units would only be those owned and controlled by the SNG.
4. Methodology
18. The approach employed for this service delivery module has been requested, discussed, and
agreed with the Task Team Leader Rafika Chaouali, Lead Governance Specialist, World Bank, and Ana
Bellver, Senior Public Sector and Governance Specialist, World Bank. The fieldwork and drafting of this
report were led by Charles Komla Hegbor (Team Leader - International PFM/PEFA Expert) and assisted
by Elisaveta Teneva (International PFM/PEFA Expert) and Getnet Haile (National PFM/PEFA Expert).
The team of independent consultants also developed the theoretical framework for the service
delivery module under the guidance of Ana Bellver and with feedback from Rafika Chaouali and Meron
Tadesse. The PEFA framework has been applied to review the PFM processes and their implications
for service delivery units in the health and education sectors in the SRG. This involved visits, interviews,
and document review in primary service delivery units in both sectors. This service delivery
assessment is focused on the financial operations with implication to services in the health and
education sectors. The assessment presents the facts relevant to service delivery units through the
application of selected PEFA performance indicators (as shown in Table A7.6) with appropriate
conclusions.
Table A7.6: PEFA performance indicators covered by the service delivery module
Pillars Included Not included
HLG
I. Budget reliability PI-1 and PI-2 PI-3
II. Transparency of public finances PI-6, PI-7, PI-8, and PI-9 PI-5
III. Management of assets and liabilities PI-11 and PI-12.2 PI-10 and PI-13
IV. Policy-based fiscal strategy and PI-16.2, PI-16.3, and PI-17 PI-14, PI-15, and PI-18
budgeting
V. Predictability and control in budget PI-21.3, PI-22, PI-23, PI-24, PI-25, PI-19 and PI-20
execution and PI-26
VI. Accounting and reporting PI-29
VII. External scrutiny and audit PI-30 PI-31
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5. Service delivery assessment
Higher-government level (HGL) - Transfer from a higher-level government
HLG-1.1 Outturn of transfer from higher-level government
19. As shown in Table A7.7, the SRG transfers more than 90 percent of the annual budgeted
general purpose grant (subsidy) to woredas/city administrations; actual outturns were 94.5 percent,
96 percent, and 94.4 percent in 2015/2016, 2016/2017, and 2017/2018, respectively. A further
analysis referencing transfers to the Jigjiga City Administration indicates that 100 percent of budgeted
general purpose grants are transferred to the city administration (see Table A7.8). This has significant
positive impact on service delivery in the woredas since their major source of revenue is from regional
grant.
Table A7.7: Outturn of transfer from regional government to woredas/city administrations

2015/2016 2016/2017 2017/2018
Original budget (ETB) 3,226,300,418.10 4,183,953,177.10 5,829,232,010.20
Actual transfer (ETB) 3,050,436,715.00 4,018,573,018.00 5,501,410,519.00
% outturn 94.5 96.0 94.4
Source: BoFED.
Table A7.8: Outturn of transfer from regional government to Jigjiga City Administration
2015/2016 2016/2017 2017/2018
Original budget (ETB) 49,613,887 51,138,100 23,169,129
Actual transfer (ETB) 49,613,887 51,138,100 23,169,129
% outturn 100 100 100
Source: Jigjiga City Administration Finance Office.
HLG-1.2 Earmarked grants outturn
20. Not applicable. There is no earmarked grant allocated to woredas from the regional
government.
HLG-1.3 Timeliness of transfer from higher-level government
21. Available evidence from BoFED as well as the Jigjiga City Administration Finance Office
indicates that there is an even disbursement of actual transfers throughout the year. City
administrations and woredas prepare and submit annual cash plans (which is a 12-equal-instalment
plan) to BoFED, based on which monthly cash releases are made.
PI-1 Aggregate expenditure outturn
Health
22. The aggregate expenditure outturn of the health sector was above the approved budget for
the first two years and below budget in the third year under assessment. As shown in Table A7.9, the
outturn was 110 percent, 107 percent, and 90 percent in 2015/2016, 2016/2017, and 2017/2018,
respectively. Outturn between 90 percent and 110 percent in at least two of the three assessed years
is considered a good performance.
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Table A7.9: Aggregate expenditure outturn of the health sector

Expenditure outturn 2008 (2015/2016) 2009 (2016/2017) 2010 (2017/2018)
Original budget 13,644,552.00 15,221,229.00 17,315,134.00
Actual 15,050,595.83 16,355,840.99 15,662,768.05
Outturn (%) 110.30 107.45 90.46
Source: Jigjiga City Administration Office.
23. Table A7.10 shows the expenditure outturn for all four primary service delivery units (two
health centers and two health posts). The data indicate realistic expenditure outturns at primary
service delivery levels indicating good performance.
Table A7.10: Aggregate expenditure outturn of the visited health centers

Expenditure Outturn 2008 (2015/2016) 2009 (2016/2017) 2010 (2017/2018)
Health Center 1 Jigjiga Health Center
Original budget 4,932,421.00 5,387,591.49 6,153,701.84
Actual expenditure 4,932,421.00 5,387,591.49 6,043,701.84
Outturn (%) 100.00 100.00 98.21
Health Center 2
Original budget 4,539,697.36 4,906,200.77 5,536,937.92
Actual 4,539,697.00 4,901,200.77 5,426,937.92
Outturn (%) 100.00 99.90 98.01
Health Post 1
Original budget 128,420.52 161,753.85 128,420.52
Actual 128,420.52 161,753.85 128,420.52
Outturn (%) 100.00 100.00 100.00
Source: Jigjiga Finance Office.
Education
24. The actual deviation of the expenditure outturn of the education sector from the original
budget was insignificant within 1 percent in all three assessed fiscal years. The link between budgets,
policies, and government priorities was observed to be good even if supplementary budgets were
approved to meet unforeseen expenditures. Table A7.11 shows the actual aggregate expenditure
outturn of the regional education sector for the three years under review.
Table A7.11: Actual aggregate expenditure outturn in the education sector

Expenditure Outturn 2008 (2015/2016) 2009 (2016/2017) 2010 (2017/2018)
Original budget 38,290,783 56,041,540.00 62,159,026.00
Actual expenditure 38,001,629 56,191,540.00 62,009,026.00
Outturn (%) 99.24 100.27 99.76
Source: Jigjiga City Administration Office.
25. Primary schools do not receive any transfers from the woreda/city administration. Once the
regional council approves the total budget of Somali Region, schools start preparing their own
budgets. The city administration revises the school budget after six months based on a letter of
proposal filed by the school. The budget is planned and prepared and can be reallocated based on a
ceiling. The ceiling for EFY 2012 was ETB 8 million for capital budget and in EFY 2011 it was ETB 7
million. Only ETB 4.5 million was used due to a shortfall of collection of revenue in 2011 affecting the
capital budget realization. Only 55 percent was the revenue collection in EFY 2011. The schools can
only prepare their budget need for the school grant, and the rest is prepared by the education office
of the city administration office.
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PI-2 Expenditure composition outturn
26. Budget transfers from one line item to another budget line item are common in all visited
institutions. Transfers from the capital budget to the recurrent budget are not allowed. Schools and
health centers do not have the access to the capital budget as they are managed by the woredas/city
administration. There is not much information to effectively access expenditure composition outturns
for primary service delivery units.
Pillar II: Transparency of public finance
PI-6 Central government operations outside financial reports
27. Primary schools and health centers budgets are prepared at the city education and health
offices, respectively, from a bottom-up approach. Approved budgets of primary service delivery units
are allocated and held at JFEDO. JFEDO is responsible for all financial management activities including
procurement, disbursement, payroll management, accounting, and reporting.
Education
28. Most of the schools visited do not have internal revenue. Will Waal School receives income
from rental of school facilities at down time of school activities, that is, during the evening and
weekends when premises are let out. Rental money is collected by the director and the parents’
community. There is no record of expenditure. School grant is reported, but the own source is not.
The amount collected in 2018/2019 was ETB 24,000. The revenue is not included in the JFEDO financial
report. The revenue is used to cover small maintenance costs and staff refreshments. A parent-teacher
association established in each school also collects and spends small funds. Expenditures from the
contribution of parents are not reported in the JFEDO financial statement. School grants received from
GEQIP are reported under Channel One Coordinating Unit at BoFED quarterly and annually. Out of the
four schools visited, only one—Will Waal Primary Schools—collected own revenues, which are not
accounted and reported as part of the city administration financial records. Even if it is assumed that
all 38 schools in Jigjiga collected an average of ETB 24,000 per year, the total own revenues will amount
to ETB 912,000; this is less than 1 percent of the city revenues. Also, it will not affect the score of PI-6
in the main PEFA report.
Health
29. Health centers collect revenue in connection with medical services, including sale of medicines
and laboratory services. Examination services, maternal-related services, and program-supported
drugs are provided for free. Revenue collected by health centers is deposited into a bank account
controlled by the Somali Revenue Bureau. This revenue is accounted and reported monthly.
PI-7 Transfers to subnational governments
PI-7.1 System for allocating transfers
30. The Regional Council Subcommittee on Decentralization is responsible for approving the grant
distribution formula for city administration/woredas. This is done after the regional cabinet endorses
the formula proposed by the Budget Directorate in collaboration with the Planning Commission. The
system of horizontal allocation of grants is transparent and rule based. The grant distribution formula
is based on four main criteria: (a) population size of the woreda/city administration (this is also
referred to as the number of beneficiaries of services in each woreda/city administration); (b)
infrastructure deficit; (c) the per capita (unit) cost approach in terms of services provided in the
woreda/city administration; and (d) the revenue generating potential of the woreda/city
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administration—the more revenue generated, the more grant is received—this is used as incentive.
Also, actual distribution of grant does not deviate from approved formula.
PI-7.2 Timeliness of information on the transfers
31. The annual budget calendar issued by the MoF (federal government) provides an indicative
ceiling of transfers to SNGs (regional governments) in early March. The SRG, based on the indicative
ceilings received from the federal government in March, notifies all city administrations/woredas of
their indicative ceilings in early April for the preparation of their draft budget estimates. This allows
woredas more than six weeks to prepare their budget estimates. The final ceilings are communicated
to woredas/city administrations after the House of Representatives approves the federal government
annual budget in early July, providing actual grant allocation to the region. This necessitates minor
adjustments to woreda/city administration budgets around mid-July but does not exceed 9 percent of
woreda's initial budget estimates.
PI-8 Performance information for service delivery
32. The Bureaus of Education and Health prepare five-year strategic plans. In line with the
strategic plan of the sector bureaus, the offices of health and education at Jigjiga City also develop
their own five-year strategic plans. Jigjiga City has a consolidated five-year strategic plan, which
includes strategic plans of each sector office. Primary schools and health centers do not prepare
medium-term strategic plans. The strategic plans show KPIs. The city communicates the strategy plan
to the public during annual public consultations. However, the strategic plan is not published or not
available to the public in any other means.
33. Schools prepare and submit performance reports to the education office. Health centers
report to the city health office on key performance achieved monthly. Health performance data at
health centers are captured using the District Health Information System (DHIS). Bureaus of health
and educations publish their performances achieved (consolidated for all primary service delivery
units) on their noticeboards.
34. Financial resources received by service delivery units are recorded and reported by JFEDO.
The financial report of the city shows the actual financial resources received by service delivery units.
Nonfinancial resources received by service delivery units are evidenced by the Goods Receiving Note
(Model 19) at JFEDO. Model 22 is used to record distribution of resources in kind to schools. Schools
maintain a distribution checklist for textbook distribution. Health centers use an inventory
management software (issued by EPSA) for tracking medical supplies. The software tracks stock
movement and alerts medical supplies nearing expiry as well as medical resources received,
distributed, and on hand. Resources received in kind by service delivery units from other donors are
not reported at the city level. At the time of assessment, the software was functional at Jigjiga Health
Center, but not at Dawlada Health Center. Budget execution reports at the aggregate level are posted
on public noticeboards.
35. The city administration conducts an evaluation visit to all schools and health centers quarterly
with the involvement of the city cabinet. The city cabinet evaluates performance achieved.
36. Some identified key performance ratios leave much to be desired.
• Average class-to-pupil ratio is 1:104.

• Average teacher-to-pupil ratio is 1:66.
• Average desk-to-pupil ration is between 1:4 and 1:8.
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• Average textbook-to-pupil ratio is 1:3.
37. A number of challenges have been identified that hamper efficient service delivery across
primary schools and health centers visited during this pilot assessment; these include, but are not
limited to, (a) inadequate medical block/rooms to treat patients, (b) low immunization coverage due
to inadequate personnel and drugs, (c) inadequate medical professionals, (d) no functional libraries at
schools, (e) no science laboratory at schools and inadequate textbooks at schools, (f) no pedagogical
center for teachers at schools, (g) inadequate school infrastructure, (h) inadequate classroom
furniture and teachers’ desks, (i) insufficient training for teachers, and (j) no teaching aid/materials
for kindergarten pupils, among others.
PI-9 Public access to fiscal information
38. The education and health offices within Jigjiga City Administration display information on
service delivery indicators as well as actual performance of their planned outputs/outcomes on their
noticeboards. Likewise, the primary service delivery units visited also display key performance
information on their noticeboards; these include the pupil-teacher ratio, pupil-textbook ratio, pupil-
desk ratio, pupil-classroom ratio, and performances of pupils.
39. As part of the Financial Transparency and Accountability Initiative, the city administration
conducts a public consultation in January and also in June before the approval of the draft budget. The
public noticeboards (a large billboard in front of Jigjiga City Administration Finance Office and others
mounted at vantage points within the city, such as the main central market) displayed the approved
budget allocated to each sector office and primary service delivery units. Also, each quarter, a
summarized copy of the quarterly budget execution report is posted on the noticeboard. The annual
financial statements are also posted. Audit reports are not posted on the noticeboards. Other
important fiscal information that is not made public includes procurement plans and data on
resolution of procurement complaints.
Pillar III: Management of assets and liabilities
PI-11 Public investment management
40. Primary service delivery units (primary schools and health centers) do not directly undertake
PIPs; all such projects are initiated and implemented either by the woreda/city administration or the
regional administration. Project feasibility studies, costing, selection, implementation, monitoring,
and evaluation are all done by the woreda/city finance and/or regional government authorities. Both
the regional administration and city administration do not have any training on the use of guidelines
on PIM; also, there are no standardized guidelines on PIM.
41. Tables A7.12, A7.13, A7.14, and A7.15 provide an analysis of budget allocation for recurrent
and capital expenditure over the last three completed fiscal years, 2015/2016 to 2017/2018, for the
education and health sectors.
42. In the regional education sector (refer to Table A7.12), the data show that capital budget and
actual expenditure are about 40 percent of the total budget, which reflects inadequate investment in
capital projects (construction and expansion of school infrastructure) needed for primary service
delivery. However, the capital budget utilization rate is 97.6 percent on average, reflecting a positive
trend. In the regional health sector on the other hand (refer to Table A7.13), capital budget is about
31 percent of the total budget, meaning woefully inadequate capital budget allocation but with an
average utilization rate of 97.2 percent which is good. As shown in Tables A7.14 and A7.15, capital
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budget allocated to primary schools and health centers visited is woefully inadequate; this has serious
repercussions on efficient service delivery.
Table A7.12: Recurrent versus capital expenditure for regional education sector for three years
Recurrent Capital
Budget
year (EC) Approved Actual % Approved Actual %
budget expenditure usage budget expenditure usage
2008 759,742,482 714,246,086 94.01 673,607,503 673,875,696 100.04
2009 855,001,747 994,919,197 116.4 836,689,506 835,675,737 99.8
2010 1,190,605,328 1,176,074,247 98.8 490,520,366 442,569,607 90.2
Total for three years
2008–2010 2,805,349,557 2,885,239,530 102.8% 2,000,817,375 1,952,121,040 97.6
Source: BoFED.
Table A7.13: Recurrent versus capital expenditure for regional health sector for three years
Recurrent Capital
Budget
year (EC) Actual Actual %
Approved % usage Approved
expenditure expenditure usage
2008 506,391,379 472,223,822 93.2 233,062,857 228,362,351 97.9
2009 576,835,107 577,665,991 100.1 315,591,691 274,581,992 87
2010 717,681,804 715,542,539 99.7 298,248,580 320,127,165 107.3
Total for three years
2008–2010 1,800,908,290 1,765,432,352 98.0 846,903,128 823,071,508 97.2
Source: BoFED.
Table A7.14: Capital budget outturn for primary schools visited
EC 2008
Capital budget outturn EC 2009 (2016/2017) EC 2010 (2017/2018)
(2015/2016)
School 1 Farah Magool
Original budget 415,000 32,700 38,000
Actual execution 406,028 32,700 —
Outturn 97.84% 100.00% 0.00%
School 2 Hussein Gire
Original budget 25,000 743,600 347,500
Actual expenditure 25,000 743,600 300,000
Outturn 100.00% 100.00% 86.33%
School 3 Will Waal
Original budget 30,000 43,600 47,500
Actual expenditure 30,000 43,600
Outturn 100.00% 100.00% 0.00%
School 4 Wanow
Original budget 20,000 43,600 38,000
Actual expenditure 20,000 43,600 0
Outturn 100.00% 100.00% 0.00%
Table A7.15: Capital budget outturn for health centers visited
Capital budget outturn EC 2008 (2015/2016) EC 2009 (2016/2017) EC 2010 (2017/2018)
Health Center 1
Original budget 1,015,000 650,000 696,025
Actual execution 1,015,000 729,499 760,524
Outturn (%) 100.00 112.23 109.27
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Capital budget outturn EC 2008 (2015/2016) EC 2009 (2016/2017) EC 2010 (2017/2018)

Health Center 2
Original budget 1,015,000 650,000 696,025
Actual expenditure 1,015,000 650,000 696,025
Outturn (%) 100.00 100.00 100.00
Health Post 1
Original budget 0 33,633 —
Actual expenditure 0 33,633 —
Outturn (%) 0 100.00 —
Source: Jigjiga Finance Office.
PI-12 Public asset management
43. The Jigjiga City Administration maintains a fixed asset register, but this does not include
information on land and buildings. The register shows the name of the asset, date of acquisition, serial
number, identification number, its location, and condition (good or bad); the cost of acquisition is not
indicated in the asset register. At the primary service delivery levels—schools: (a) Hussein Gire Primary
School, (b) Fahr Mogol Primary School, (c) Will Waal Primary School, and (d) Wanow Primary School
and health centers: (a) Jigjiga Health Center, (b) Dawlada Health Center, and (c) HP03 Health Post—a
fixed asset register exists with a list of assets but has no information on cost, age, and usage.
44. It is appalling to note that the maintenance budget for fixed assets is woefully inadequate;
presently, the maintenance budget mostly covers city sector offices but not primary service delivery
units. To make up for the shortfall, the primary service delivery units heavily rely on community
donations/contributions (which is very insignificant) to support the maintenance of fixed assets in
their custody; the breakdown of these fixed assets in most cases negatively affects primary service
delivery. The regional government’s guideline on fixed asset disposal also applies to woredas/city
administration and primary service delivery units; there were no disposals at the time of assessment
and within the assessment coverage.
Pillar IV: Policy-based fiscal strategy and budgeting
PI-16 Medium-term perspective in expenditure budgeting
45. The regional cabinet approves (in December of the previous year) the medium-term
expenditure ceilings before the issuance of the first BCC (issued in February of the following year) to
all budgeted entities (regional sector bureaus and city administrations/woredas). The Jigjiga City
Administration also prepares medium-term expenditure forecast, with ceilings approved by the city
council. As shown in Table A7.16, there are significant deviations between MTEF forecasts and
approved budget. Except for 2016/2017 where the education sector’s budget was 6 percent higher
than the MTEF forecast, deviations for the remaining fiscal years were between 35 percent and 93
percent lower than MTEF figures. This practice has serious repercussions on expenditure allocation
and subsequent actual transfer for the provision of primary service delivery.
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Table A7.16: MTEF forecast versus approved budget

2015/2016 2016/2017 2017/2018
Education
MTEF forecast 38,929,014.00 58,722,092.00 75,090,282.00
Approved budget 13,644,552.00 62,159,026.00 69,920,626.00
Deviation (absolute) 25,284,462.00 (3,436,934.00) 5,169,656.00
Deviation (%) 35 106 93
Health
MTEF forecast 25,374,510.26 27,125,462.00 35,740,908.00
Approved budget 15,221,229.00 15,221,229.00 24,695,022.00
Deviation (absolute) 10,153,281.26 11,904,233.00 11,045,886.00
Deviation (%) 60 56 69
PI-I7 Budget preparation process
PI-17.1 Budget calendar
46. The budget calendar for the Jigjiga City Education and Health Offices (and for all woredas) is
as shown in Table A7.17. It allows at least four weeks for the BIs to complete the submissions.
Table A7.17: The budget calendar (for woredas/city administration)

No Activity Responsible Body Timing
Executive preparation
1 Prepare annual physical work plan Sector offices September–February
2 Issue pre-ceiling notification to sector offices OoFED February 16–
February 29
3 Submit budget requests to OoFED Sector offices March 21–March 30
4 Review and recommend woreda budget request OoFED April 16–May 15
5 Approval of recommended budget Cabinet July 1–7
Legislative adoption
6 Appropriation of approved budget Council July 7
Executive implementation
7 Notify approved budget to sector offices OoFED July 8–July 15
8 Send budget notification forms to regional BoFED for OoFED July 8–15 July
processing in IBEX
9 Prepare implementation action plan and cash flow OoFED and sector July 15–22 July
forecast offices
10 Consolidate budget using IBEX and submit JBAR to OoFED July 23–August 15
BoFED
11 Budget utilization and adjustments OoFED and sector Ongoing
offices
Source: BoFED.
47. Both the city administration health and education offices submitted their budget proposal
before the deadline of March 30 as per the annual budget calendar; actual submission dates were on
March 26 and 28, 2018, respectively, for the budget year 2018/2019.
PI-17.2 Guidance on budget preparation
48. The Jigjiga Finance Office issues a BCC, covering both capital and recurrent expenditure for
the full fiscal year. The BCC is clear and comprehensive and includes ceilings approved by the city
cabinet.
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PI-17.3 Budget submission to the city council
49. In all three years under review, 2015/2016 to 2017/2018, the city council approved the city
budget after July 7 but within July. Actual approval dates were July 14, 2015, July 18, 2016, and July
20, 2017, for the budget years 2015/2016, 2016/2017, and 2017/2018, respectively.
Pillar V: Predictability and control in budget execution
PI-21 Predictability of in-year resource allocation
50. Primary service delivery units visited do not receive any cash from the respective woreda/city
administration finance office, and hence they do not maintain bank accounts. Except for health
centers, primary schools’ own revenue accounts are not part of the woreda/city administration
financial management system; they are neither budgeted nor reported. Woreda/city administration
bank accounts are consolidated monthly.
51. Preparation of annual cash flow plans is not undertaken by the primary service delivery units.
The finance office of the city administration prepares an annual consolidated cash flow forecast which
is updated monthly based on actual cash inflows and outflows. Transfers from the SRG are requested
monthly.
52. IBEX is used to manage the budget at the woreda/city administration finance offices. It limits
commitments only at the approved budget level but not in relation to actual cash available. The
woreda/city administration finance offices manage all primary service delivery expenses out of the
approved budget. Both health centers and primary schools are allowed to use their own revenues to
support their operations (usually for small repair work and stationery). However, only health centers
report the revenue to the Jigjiga City Administration Finance Office.
PI-22 Expenditure arrears
53. The team visited four primary schools and three health centers in Somali, that is, in Jigjiga City.
In all cases, there was no stock of expenditure arrears. The primary service delivery units do not
receive any cash from the finance office in their respective jurisdiction for payment of recurrent
expenditure. All recurrent and capital expenditures (which may accumulate arrears as a result of
insufficient funds) are the remit of the Jigjiga City Administration Office. All payments for primary
service delivery units are directly handled by the finance office of the city administration in
collaboration with the respective woreda sector offices for health and education. The records of Jigjiga
City Administration show that there are no outstanding payables to suppliers, and there are rather
receivables arrears not age-profiled but rather written off at discretion of BoFED.
PI-23 Payroll controls
54. Payroll preparation is centralized at JFEDO. Service delivery units are required to submit the
staff list monthly before the 25th of the month. A team of five people from the Bureau of Public Service
and Mayor Office travels to each service delivery unit to verify the staff list issued by the service
delivery unit before payroll is prepared. Payroll is paid timely and there was no incidence of delay of
salary payment to staff of service delivery units. Staff turnover is low in Jigjiga City.
55. Internal audit conducts a payroll audit as part of the monthly financial compliance audit mainly
focusing on the accuracy of payroll computation and sometimes including a random verification of
personnel records. ORAG also conducts audit of payroll as part of its annual financial audit. However,
no comprehensive payroll audit was conducted by external and internal audit staff. The internal audit
unit at JFEDO identified some ‘ghost’ workers. The audit report of ORAG on hospitals also revealed
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some ‘ghost’ workers. The effectiveness of payroll controls in place is not subject to audit. The manual
attendance system widely used does not guarantee that employees were on duty at the required time
for delivering services.
PI-24 Procurement
56. The legal framework for public procurement at the regional government level is still applicable
at the woreda and service delivery levels. Procurement process and statistics for the sampled service
delivery units is handled at Jigjiga City Administration Office. There is a contract register showing the
contracts awards, description of the procurement of goods or services, volume, and type of
procurement method applied. The data in table A7.18 show the procurement statistics for EFY 2010
for health and education sectors. The competitive procurement method is 81 percent and 88 percent
in the education sector and health sector, respectively. This makes open tender the predominant
procurement method used in Jigjiga City Administration. Request for quotation is the only other
method applied for sector-specific supplies.
57. Public access to procurement information is weak as very little information is made public.
Except for bidding opportunities that are advertised, procurement plans, contract awards, and data
on resolution of procurement complaints are not made public. Procurement complaints are filed and
processed at the city administration level by a specialized complaints management team. The next
level of appeal is at the regional level. Only five to seven days is allowed for complaints resolution,
which requires no fees. The procurement process is suspended until complaint resolution. The
decision is posted if it concerns more complainants. There were five complaints in EFY 2010 which
were resolved in favor of the complainants.
58. The visited health centers confirmed shortages of medical supplied from EPSA—stock out of
up to 25 percent. In such cases, the health centers purchase from the private sector where prices are
less competitive, especially when the medical needs become more urgent.
Table A7.18: Competitive procurement method in education and health sectors for EFY 2010
2010 (2017/2018) Share (%)
Education sector
1. Open Tender 1,150,000 81
2. Two-Stage Bidding — —
3. Restricted Tender — —
4. Request for Quotation 268,000 19
5. Request for Proposal — —
6. Direct Procurement — —
Total 1,418,000 100
Health sector
1. Open tender 1,420,000 88
2. Two-stage bidding — —
3. Restricted tender — —
4. Request for quotation 202,050 12
5. Request for proposal — —
6. Direct procurement — —
Total 1,622,050 100
Source: Jigjiga City Administration.
59. All visited primary schools confirmed lack of books and teaching materials. The usual items
procured for schools are stationery. The main challenge relevant for all schools is that textbooks are
159
not enough and that there are too many students per class. One textbook is shared by an average of
five students with an average of 90 students per class (see Table A7.19).
Table A7.19: Number of books per student and number of students per class
Book/student Students/class
Primary School Farah Magool 1 book for 5 students 105
Primary School Hussein Gire 1 book for 4 students 75
Primary School Wiil Waal 1 book for 8 students 74
Primary School Wanow 1 book for 2 students 107
Average 4.75 90.25
Source: Visited primary schools.
60. The fact that the number of students is increasing each year while the textbooks are printed
once in five years contributes to shortages of textbooks. There is a sporadic influx of students from
the countryside to the capital city, especially after the changes in the political scene in Somali Region.
This makes it difficult to estimate the number of students to be enrolled each year to accommodate
the needs of students and other educational materials.
PI-25 Internal control on non-salary expenditure
61. The internal control procedures are guided by the various PFM laws, manuals, and directives
issued by BoFED. The financial management function of the woreda/city administration is centralized
(pooled) at the finance office, and the budget control, expenditure management, recording, and
reporting are done by the finance office. The woreda/city finance office is responsible for ensuring
that the internal control procedures including cash management, disbursement, procurement, bank
reconciliation, advance clearances, asset management, and procurement are complied with. There is
clear segregation of duties at the service delivery unit level. Sector offices manage the expenditure
payment processed of primary service delivery units; primary service delivery units are not directly
involved in the financial management function.
62. Once the annual budget is approved by the woreda council, it is uploaded into IBEX (financial
management software). IBEX only limits expenditure commitment for most types of expenditure to
approved budget and also based on the cash flow forecast (projections) but not to actual available
cash. Requests for payment are submitted by the woreda/city administration sector offices (such as
education and health) on behalf of primary schools and clinics to woreda/city administration finance
office for processing and payment. The finance office checks the request for availability of budget
before processing. After checking for budget availability, the request is approved and payment is done.
Approval of payment is done by any two of the Head of Finance, Finance Director, and Disbursement
Coordinator.
63. According to ORAG’s annual audit report, all hospitals audited in EFY 2010 received qualified
audit opinions, mainly due to internal control gaps and misuse of resources in connection with medical
supply management and cash collection not properly accounted for.
PI-26 Internal audit
64. The internal audit function is centralized at the woreda/city administration finance offices.
The internal audit unit of Jigjiga City has four internal auditors. The unit is responsible for the audit of
the financial transactions at JFEDO, 24 sector offices, 2 health centers, and 38 schools. The internal
audit unit at the woreda/city administration level uses the same internal audit manuals issued by
BoFED. Internal audit units are accountable to their respective head of the woreda administration and
to the Inspection Directorate at BoFED. The responsibility of the internal auditor includes the audit of
160
all schools and health centers. The internal audit unit at Jigjiga City Administration conducts property
(fixed asset) audit at the service delivery unit in addition to the routine monthly financial compliance
audit. Available evidence suggests that in all three years under review, the internal audit completion
rate averaged 93 percent.
65. The internal audit findings are mostly related to the use of less competitive procurement
method, incomplete financial documentation, weak asset management ,and ‘ghost’ employees. These
findings are repetitive. Management responses from the city administration finance office are good
while the responses from the primary schools and health centers are low.
Pillar VI: Accounting and reporting
PI-29 Annual financial reports
66. Federal government accounting standards are applicable at the regional and woreda/city
administration levels. Primary service delivery units do not prepare financial statements. The
woreda/city administration finance office to which they belong is responsible for the preparation of
financial statements. The woreda/city administration prepares monthly financial statements. The
finance office uses IBEX to record and report the financial transactions. The woredas submit their
monthly reports to the respective zones and the zones consolidate the reports of the woredas and
submit on a quarterly basis to BoFED. Woreda financial reports includes revenue and expenditure;
these are directly comparable to the original budget. The report also includes balances of cash,
receivables, and payables.
67. Consolidated monthly, quarterly, and annual financial reports are prepared by the woreda
finance office for all the budget entities in the woreda/city administration. The reports contain the
budgeted amounts compared with actual outturns for both revenues and expenditures. The report
includes revenue collected by health centers. Revenues collected and spent by the parent-teacher
associations are not included in the report. School grants received from GEQIP are covered in a
separate report, consolidated at BoFED level on a quarterly basis.
Pillar VII: External scrutiny and audit
68. As indicated earlier, woredas accounts include financial transactions of schools and health
centers. Accordingly, procurement operations, disbursements, payroll, receivables, and payables in
connection with schools and health centers are covered in the audit of ORAG. However, the woreda
audits do not cover audit of fixed assets, inventories, comprehensive payroll audit (including
headcounts), and performance audits. ORAG audits hospitals, colleges, and boarding schools. Table
A7.20 shows the list of health and education sector entities audited during EFY 2010.
Table A7.20. External audit in education and health sectors, EFY 2010
Unqualified Qualified
Education and health entities Total Audited Adverse
opinion opinion
Bureau of Education 1 1 X
Bureau of Health 1 1 X
Hospitals 9 7 All 7
Colleges 17 15 10 5
Boarding schools 5 5 All 5
Source: ORAG.
161
69. Common audit findings from the audit of hospitals include incomplete asset registration and
maintenance system, poor internal control over revenue collection, cash shortages, poor
management of medical supplies, and ‘ghost’ workers.
6. Conclusions
70. The records of transfers from the regional government of Jigjiga City Administration and
woreda governments show an even monthly disbursement throughout the year. The approved
budgets are transferred as agreed at 100 percent for Jigjiga City Administration and on average at 95
percent to woreda governments. This enhances budget reliability.
71. The budget expenditure indicator shows different outturns in the health and education
sectors. The outturn of the health sector budget shows deviation between 90 percent and 110
percent. This indicates good and realistic budget even if capital budgeting may not be fully carried out
as planned. The outturn of the budget of all four primary health care service delivery units indicates
predictable budget with no deviation between the performance and the plan. This is because budget
expenditure ceilings are well defined and approved by the regional council. The planned budget in the
education sector is also realistic and the deviation is insignificant within 1 percent in all three years.
This is because primary schools plan only their school grant needs while the education office at the
woreda/city administration level prepares the overall education sector budget. The process of budget
planning appears to be stable and well managed at the woreda/city administration level. The schools
are not self-sufficient to prepare their own budget apart from the school grants. Community
participation for maintenance is resorted to for small repairs.
72. Transfers from the regional government to woredas/city administrations are reliable. The SRG
transferred all budgeted general-purpose grants as planned. This denotes that resources are available
on time for the delivery of primary services. Budget reliability positively affects Pillar V in terms of
predictability of resource allocation, a prerequisite for efficient service delivery.
Pillar II: Transparency of public finance
73. Usually, primary schools do not generate own revenues, apart from one of the visited schools
letting out premises to private colleges in the evening and at weekends. Rental money is collected,
but it is not formally reported. Such income is rather insignificant, amounting to ETB 24,000 per year;
this is spent on teaching staff refreshments and repair of school desks, but proper records are not kept
and also not reported. School grants received are properly accounted for and reported.
74. The practice with the health centers is different. All health centers collect own revenue in
connection with providing medical services, including sale of medicines and laboratory services. Some
medical services are provided free of charge; these are funded by donors. Also, program-supported
drugs are provided for free by the health centers to all patients in need. The revenue collected by the
health centers is deposited into a bank account controlled by the Somali Revenue Bureau. The revenue
generated by the health centers is accounted and reported monthly.
75. The system of allocation and the timeliness of transfers to city administrations/woredas are
good and support service delivery. The horizontal allocation of transfers to woredas is rule based and
transparent. Actual transfers also follow agreed procedures and rules. Woredas/city administrations
do not transfer funds to primary service delivery units; their budgets and actual expenditures are
directly covered by the respective SNG level. The SRG allows the SNGs more than six weeks to prepare
their budget estimates.
162
76. Health and education offices of the woreda/city administration prepare five-year strategic
plans. The strategic plans show KPIs based on which both health centers and primary schools report
achievements quarterly. The strategic plans are not published or not available to the public in any
other means.
77. The KPIs in the primary schools relate to the number of children in class, a teacher-pupil ratio,
a textbook-pupil ratio, and a desk-pupil ratio. Classes in all visited primary schools appear to be
overcrowded with an insufficient number of chairs or desks to accommodate all pupils. The need for
textbooks is very high, with an average of one textbook to three pupils. The lack of such basic facilities
negatively affects the quality of service delivery. One of the reasons for the higher demand on number
of textbooks, teachers, and classrooms is the increasing number of pupils each year. The political
turmoil and the enforced military presence in Jigjiga City has also had a devastating impact on the
schools’ facilities and depository of books when the city suffered severe material damages that are
still to be recovered.
78. Performance information on service delivery to the public is mainly through public
noticeboards and forums. Performance reports are also disseminated either through the noticeboards
or public forums. Public access to fiscal information covers the approved budget and the quarterly
budget execution reports posted on public noticeboards. The information which is not public is mostly
related to procurement plans and statistics. It is to be noted that Somali people are mostly pastoral
and the usual communication channel is oral from person to person or by auditory means.
Nevertheless, it is interesting to note that there is generally a good level of coverage of information
of service delivery units using noticeboards and public forums.
Pillar III: Management of assets and liabilities
79. Primary service delivery units do not manage public investments. This is the responsibility of
either the woreda/city administration and/or the SRG. All project feasibility studies, costing, selection,
implementation, monitoring, and evaluation are carried out by the woreda/city administration of
Jigjiga Finance Office. However, with no standardized guidelines on PIM, the risk of allocating spending
on activities of no immediate effect on service delivery is high.
80. The capital budget utilization rate averaged 97 percent in both health and education sectors,
which is good. This means that the planned capital expenditure projects are implemented. However,
both sectors, which are frontline service delivery units have an average share of capital investment
compared to the total budget of 40 percent in the education sector and 31 percent in the health
sector. The capital budget outturn in the visited primary schools indicates overall good performance
in the first two years. The exception is 14 percent variation in the third year for Primary School Hussein
Gire and the lack of data for the third year, which makes the overall assessment incomplete. The
capital budget allocation to Jigjiga Health Center shows higher spending than the plan in two of the
assessed years. For the second health center the performance compares favorably with the plan. Due
to lack of comprehensive data for the health posts, the overall performance of the visited health
centers cannot be determined.
81. Public assets management at the level of health and education sectors is poor; there is no
information on land and buildings. The common weakness includes the lack of cost of acquisition. The
visited primary service delivery units keep a fixed asset register with a list of assets but no data on
cost, age, and usage. The service delivery units lack technical capacity to maintain comprehensive
asset register on their own. They are usually supported by the respective woreda/city administration
finance office.
163
82. Weaknesses in public assets management place significant limitation on the quality of primary
service delivery. Resource allocation is also affected as more public funds appear to be wasted on fixed
assets.
Pillar IV: Policy-based fiscal strategy and budgeting
83. The primary service delivery units visited do not prepare medium-term strategic plans but only
annual action plans from which the annual budgets are prepared; there is no MTEF at the primary
service delivery unit level. The deviation between the MTEF and the actual approved budgets is high
in both health and education sectors with an average variation of 78 percent and 61 percent in
education and health, respectively. This indicates that there is low predictability in budget allocations
and expenditure planning.
84. The budget process is orderly and ensures that there is adequate time and information on
procedures to allow budget proposals to be developed by the health and education offices at Jigjiga
City Administration. They are allowed at least four weeks to prepare the budget before the beginning
of the fiscal year. The annual budget estimates of primary service delivery units are part of the health
and education sector budgets.
85. An orderly budget formulation and preparation system improves the timeliness of resource
transfer needed for improved service delivery.
Pillar V: Predictability and control in budget execution
86. Primary service delivery units do not prepare annual cashflows; cash management is handled
at the Jigjiga City Administration Finance Office. There were no expenditure arrears for recurrent and
capital expenditures at primary service delivery units. Payroll preparation is centralized at the Jigjiga
City Administration Finance Office based on monthly submission of the staff list by the service delivery
units. Salaries are paid on time and there was no incidence of delay.
87. On average, more than 80 percent of procurement at education and health sectors is carried
out through competitive means. Internal controls for non-salary expenditure are well designed and
highly complied with. This provides assurance that performance is as intended and the allocated
resources are used only with appropriate authority. Expenditure commitment controls exist through
IBEX (primary service delivery units do not have direct access to IBEX); it limits commitment to
approved budget but not to actual cash available. There is clear segregation of duties at the service
delivery unit level. Sector offices manage the expenditure payment processes of primary service
delivery units; primary service delivery units are not directly involved in the financial management
function.
88. Internal audit function is pooled (centralized) at the Jigjiga City Administration Finance Office
and is responsible for internal audit at primary service delivery units. There are only four internal
auditors located with the city administration responsible for internal audit functions; this limits audit
coverage of all service delivery units.
Pillar VI: Accounting and reporting
89. The same accounting standards used by the federal government applies to the SRG. Primary
service delivery units do not prepare financial statements. The woreda/city administration finance
office to which they belong is responsible for the preparation of financial statements. The financial
reports include revenue and expenditure, balances of cash, receivables, and payables. Only revenue
collected by health centers is reported; those collected by primary schools are not reported. The
absence of a reporting framework for all public funds affects transparency and accountability.
164
Pillar VII: External scrutiny and audit
90. The independence of the Auditor General is guaranteed in terms of appointment, termination,
and remuneration. ORAG has unlimited access to records, but publication of its audit report is limited.
The audit coverage in the health and education sector is high, at least 80 percent. There is no specific
external audit of the primary service delivery units. The usual audit findings include poor management
of medical supplies and ‘ghost’ workers.
91. The absence of external audits on primary service delivery units limits the ability of policy
makers to assess the viability and effectiveness of programs and activities at the level of primary
service delivery units. It also affects transparency of public finances.
165
Appendix to the service delivery pilot

People met for the service delivery assessment
Name Organizati Position Telephone Email
on
Jigjiga City Administration Finance and Economic Development
Muhyadin Ali CFED Head of City +251-91-5749669 calibuyo@gmail.com
Administration
Abdirahman Musse CFED Head of Finance +251-91-5749812 Qalile99@gmail.com
Mohamed Ader CFED Finance case team +251-91-5204577 kayetarawdel@hotmail
.com
Yusuf Mohamed CFED Head of procurement +251-91-5253871 hojiyusuf@gmail.com
Mohamed Abdi Ader CFED Head of planning & +251-91-5210421 Mabdi9272@gmail.co
budgeting m
Musa Ahmed Hussein CFED HR Manager +251-91-5107734
Nimco Mohamed CFED Head of internal +251-91-5068759 nimco@gmail.com
audit
Yusuf Muhumed Omer CFED Internal auditor +251-9180503865
Abdulahi Medi CFED - Head of city +251-93-0942188 Ammgeedi313@gmail.c
Education education office om
Abdi Muse Hussein CFED - Head of education +251-91-5745155
Education supervision
Abdikadir CFED - EMIS director +251-91-5151873 Renaisance10@gmail.c
Education om
Dr Mustafe Mahamud CFED - Head of city health +251-90-4242448 Guranjecle99@gmail.co
Health office m
Hussein Gire Primary School
Muktar Mohamed HGPS Director of School +251-91-5073050 Bushra.m@gmail.com
Ahmed
Fahr Mogol Primary School
Dahir Gedi FMPS Teacher +251-91-2783786
Lul Shek Abdi FMPS Director of School +251-91-5058810
Tesfau Kebede FMPS Supervisor +251-91-5768750
Will Waal Primary School
Abubakar Mohamed WWPS Director of School +251-91-5233321
Mohamud
Girma Beshah WWPS Planning officer +251-91-2016808
Wanow Primary School
Mahamoud Mohamed WPS Assistant Director of +251-91-5052371
the School
Tensey Tiruneh WPS Supervisor +251-91-5760790
Jigjiga Health Center
Hikam Muhumed Omer JHC Head of health +251-91-5068706
center
Abdilahi Ibrahim JHC HIV/AIDS team +251-91-1291515 Abdilahi7925@gmail.co
leader m
Dawlada Health Center
Abdifatah His Ibrahim DHC Head of health +251-91-5067448 Kaarime95@gmail.com
center
HP03 Health Post
Mwahab Ahmed Omer HP03HP Head of health post +251-91-5058781 Abdiw571@gmail.com
Ilham Hassan Mohamed HP03HP Clinical nurse +251-91-3458958 Azwanmohamed24@g
mail.com
166
Some relevant data

Preprimary gross enrolment rate (GER)
Child to child O’Class Kindergarten Total
Male Female Total Male Female Total Male Female Total Male Female Total
1,077 1,001 2,078 18,056 15,003 33,059 11,731 8,967 20,698 30,864 24,971 55,835
Preprimary gross enrolment rate (GER)
Population estimates
Preprimary enrolment GER
(age 4–6)
Male Female Total Male Female Total Male Female Total
51,711 51,221 88,195 30,864 24,971 55,835 59.70% 48.80% 63.30%
Number of primary school students by zone and grade, EC 2010
Zone Grade 1 Grade 2 Grade 3 Grade 4 Grade 5 Grade 6 Grade 7 Grade 8 Total
Total 151,821 124,792 109,705 95,097 72,757 54,864 40,532 31,273 680,841
Number of secondary school students by zone and grade, EC 2010
Zone Grade 9 Grade 10 Grade 11 Grade 12 Total
Total 24,547 18,423 12,069 10,146 65,185
167

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Public Expenditure and Financial Accountability

Federal Democratic Republic of Ethiopia

Performance Assessment Report

Report No: AUS0001568

© 2020 The World Bank

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Public Expenditure and Financial Accountability (PEFA) assessment

Ethiopia (Somali Regional State Government)

ACRONYMS AND ABBREVIATIONS ................................................................................................ 1

PI-16 Medium-term perspective in expenditure budgeting ......................................................... 45

Acronyms and abbreviations

PFM Public Financial Management

Aggregate fiscal discipline

Strategic allocation of resources

Efficient use of resources for service delivery

Performance changes since the last assessment in 2015

Strategic allocation of resources

Efficient service delivery

• Balance government revenues and expenditures over the medium term

• Improve staff technical capacity in government financial administration

• Legal reforms on financial administration proclamation, procurement law, and

Table 0.2: Overall summary of PFM performance scores, 2018

1.2 Rationale and purpose

1.3 Assessment management, oversight, and quality assurance

4 MoF letter reference number G/E/113/930.

Box 1.1: Assessment management and quality assurance arrangements

1.4 Assessment methodology

1.5 Assessment coverage and timing

1.7 Pilot: Service delivery

Table 1.1: Service delivery indicators/dimensions

2. Regional government background Information

2.2 Regional government economic situation

Table 2.1: Real GDP growth rate (%)

2.3 Fiscal and budgetary trends

Table 2.3: Aggregate fiscal data (ETB, millions)

Table 2.4: Budget allocation by function as a percentage of total expenditure

Functions 2015/2016 2016/2017 2017/2018

Table 2.5: Budget allocation by economic classification (%)

Economic classification 2015/2016 2016/2017 2017/2018

2.4 Legal and regulatory arrangements for PFM

Legal and regulatory arrangements for decentralization

Table 2.6: Overview of Somali Region governance structure

(g) Proclamation No. 970/2016 Federal Government of Ethiopia Financial

37. The main functional responsibilities of the SRG are as follows:

Legal and regulatory arrangements for PFM

Somali budgetary systems

• The regional government has a separate (and independent) public procurement

Somali institutional (political and administrative) structures

6 Zones are branches of the regional government.

2.5 Institutional arrangements for PFM

Structure of the public sector

7 These are regional government sector bureaus.

Institutional responsibilities for PFM

Requirements for internal control

9 This represents transfer from regional government to woredas.

(a) Control environment. It is guided by regulatory frameworks including the Constitution

(c) Control activities. There is a clear segregation of duties in payroll, disbursement,

2.6 Other important features of PFM and its operating environment

3. Assessment of PFM Performance