1 THE UNITED REPUBLIC OF TANZANIA PRIME MINISTER’S OFFICE REGIONAL ADMINSTRATION AND LOCAL GOVERNMENT IMPLEMENTATION OF THE GOVERNMENT DECISION TO REDUCE LOCAL GOVERNMENT AUTHORITIES’ BANK ACCOUNTS TO SIX ACCOUNTS Presentations for the meeting with Development Partners - DSM

2 OUTLINE Introduction Disadvantages of owning many bank account Government decision to reduce number of Bank account in LGAs Six Account of LGAs Guide line to operate six account by IFMS system Conclusion

3 BACKGROUND CONTINUED  Improving cash management by closing dormant Accounts;  Improving Planning and Budgeting system by Introducing Guidelines;  More money flows to LGs (fiscal decentralization) now accounts for 25% of total government expenditure.

4 LGAs’ SITUATION BEFORE INTRODUCTION OF SIX ACCOUNTS Historical reasons for many Bank accounts are:-  Central Government’s instructions  Agreements reached between Development Partners and the Government. Resulted into increased number of bank accounts ranged from 32 to 58 in one Council.

5 DISADVANTEGES OF OPERATING SEVERAL BANK ACCOUNTS  Time consuming in preparation of Bank Reconciliation;  Increased operational costs of bank accounts per month.  Reports not produced timely  Weak internal control system as transactions related to these Accounts were done manually.

6 EFFECTS OF OPERATING SEVERAL BANK ACCOUNTS CONTINUED  Most of the Accounts remained dormant in the event where projects are closed;  The Government could not have correct financial data or capture information of funds that are directly sent to LGAs’ projects by partners (off budget)  Vulnerable to fraud (Ineffective detective controls) High risk on financial management and control as fraud may occur undetected timely.

7 RELEVANCE OF GOVERNMENT DECISION OF REDUCING LGAs ACCOUNTS  As part of continuing implementing Reform Policy;  Recommendations and advices received from many fora between Government and Development Partners on reducing the accounts since 2008/09 to 2010/11;  Matching with the changing environment of advanced technology development where Accounting tasks can be easily done through computerized systems; Hence the Government decision to maintain 6 bank accounts for each 133 LGAs and the use of Intergrated Financial Management System-Epicor 9.05.

8 LOCAL GOVERNMENT AUTHORITIES SIX ACCOUNTS  The following are the LGAs Six Accounts :- 1. Council Own Source Revenue Collection Account 2.Personal Emoluments Account 3.Other Charges Expenditure Account 4.Development Account 5.Miscellaneous Deposit Account; and 6.Road Fund Account

9 1. Council Own Source collection Account 1.This account receives all LGAs’ Own Source Revenues collections; 2.Funds from this Account will be transferred to other Accounts for other charges, Personal Emoluments, Misc Deposit and/or development depending on the approved expenditure requirements ;

10 2. Personal Emoluments Account  This Account receives funds from monthly allocations from Own Source Revenue Collection Account and PE Grants from Central Government;  Payment of Salary to all Council employees will be made from this Account according to the approved budget of each department  Heads of Departments/Units, Council Treasurers and Council Directors are responsible for the management of the income and expenditure in respective sub votes.

11 3. Other Charges Expenditure Account  Funds received in this Accounts are monthly /quarterly allocations from Own Source Revenue Collection Account and Other charges Grants from Central Government;  Expenditures from this account are paid inline with the department approved budget.  Heads of Departments and Sections, are responsible for the management of funds that are allocated to respective sub votes.

12 4. Development Account  Funds received in this Accounts are from Own Source Revenue Collection Account and also from Development Grants from Central Government;  Payments to the implementation of development projects/programs are effected from this Account only for projects/programs as per the Councils’ approved plans and budgets.  Heads of Departments and Project coordinators, Council Treasurers and Council Directors are responsible for the management of funds that are allocated to respective sub votes’ projects and programs.

13 5. MISCELLANEOUS DEPOSIT ACCOUNT  Receives funds not belonging to Councils for temporary custody before being paid to the parties concerned. 6. ROAD FUND ACCOUNT  Receives funds from Central Government for roads activities.  Funds from this account will be paid for the approved road rehabilitation and repair activities.

14 LGAs GUIDELINES FOR OPERATING 6 ACCOUNTS The guidelines has three guiding sections:  First Section; provides guidance on closing the old Bank Accounts and operation of the Six new Bank Accounts,  Second Section; provides guidance to the operationalization of IFMS – Epicor 9.05;  Third Section; Council Directors’ obligations and responsibilities for the sustainable management and operationalisation of IFMS- Epicor 9.05.

15 Guidelines on closing of LGAs old Accounts.  Bank balances of each account established.  Timing for finalizing bank reconciliation of each bank account.  Transfer of funds determined in the first bullet above to Six Accounts  Roles and responsibilities of different stakeholders on closing of the accounts.

16 Guidelines on operating six bank accounts in IFMS - EPICOR  The system has been prepared to suit the operation of six accounts  Heads of Departments and Project coordinators have rights and mandate to authorize payments related to his/her department projects / program in the system.  Right of getting monthly financial income and expenditure reports related to their sub votes / development projects/programs  Approve payment vouchers related to their departments/ programs/projects.

17 Guidelines on operating six bank accounts in IFMS - EPICOR  Signatories to cheques have been properly considered to safeguard concerns of departments / projects or programs.  Approved Plans of Actions and Budgets are prerequisite to the operation of the system and six Accounts.  Auditing – bases for auditing financial transactions and performance of the system.

18 SPECIFIC ROLES OF COUNCIL DIRECTORS TO SUSTAIN THE IFMS - EPICOR  Over and above roles and responsibilities indicated in the LAFM 2009, Council Directors have the obligation of providing training to council staff on operating and maintaining the system and the use of the six Bank Accounts;  Principal Custodian and supervisor of the six Accounts and the System.

19 IMPORTANCE OF SIX ACCOUNTS  Increases and encourages transparency, accountability and discipline.  Reduces operation costs  Reduces management burden to the preparation of bank reconciliations and timely production of different financial reports.  Strengthening IPSAS compliance

20 WHY IFMS – EPICOR 9.05  Provide reliable control of expenditure not done outside the plan and budget (no over draft);  Availability of fund balances of each source  Enhances timely production of reports.  Reflects Fund allocation to cost centre, Fund Allocation / De-allocation by Accounts, Itemized Expenditure and Commitment, General Ledger Reports in the system.

21 WHY IFMS – EPICOR 9.05  Provides source of fund Identification codes.  Controls Sub warrant holders not spending funds outside their sub votes  Separation of duties to the users of the system. (entering, reviewing, approve & post on line).

22 CONSTRAINTS  Readiness of some stakeholders to accept utilization of the new system arrangement.  Few skilled Accountants with the knowledge of using computerized Accounting packages.  Availability of reliable fund for operating the system

23 MEASURES TAKEN  Organise awareness creation and information sharing with Stakeholders on the use of six Bank Accounts and IFMS system in LGAs  Continue to recruit and provide training to the Accountants on the system use.  Continue to build capacity to council staff and encourage them to have confidence, credibility and be honest in this era of fast growing technology.

24 CONCLUSION  Implementation of six Accounts and IFMS- Epicor 9.05 in LGAs is the GoT decision and its implementation became effective from July, 1 st, 2012;  If implemented in line with the guideline will meet the expectation of both GoT and DPs on improved LGAs financial management;  Continued cooperation among Sector Ministries, PMO-RALG Development Partners and other stakeholders is very vital for successful implementation of the system; and  Guaranteed availability of specific Bank Statement for particular project or programme implemented at the LGAs level.

25 ASANTENI SANA